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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________
FORM 10-K
ý    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
or
o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 1-13953
W. R. GRACE & CO.
Delaware
 
65-0773649
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
7500 Grace Drive, Columbia, Maryland 21044-4098
(Address of principal executive offices) (Zip code)
(410) 531-4000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, $.01 par value
 
New York Stock Exchange, Inc.
Preferred Stock Purchase Rights
 
 
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o    No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
 
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý
The aggregate market value of W. R. Grace & Co. voting and non-voting common equity held by non-affiliates as of June 30, 2013 (the last business day of the registrant's most recently completed second fiscal quarter) based on the closing sale price of $84.04 as reported on the New York Stock Exchange was $6,435,601,758.
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ý    No o
At January 31, 2014, 77,063,385 shares of W. R. Grace & Co. Common Stock, $.01 par value, were outstanding.
DOCUMENTS INCORPORATED BYREFERENCE
None.
 

Table of Contents

TABLE OF CONTENTS
PART I
 
 
PART II
 
 
PART III
 
 
PART IV
 
 
Grace®, Grace® logo and, except as otherwise indicated, the other trademarks, service marks or trade names used in the text of this report are trademarks, service marks or trade names of operating units of W. R. Grace & Co. or its affiliates and/or subsidiaries. RESPONSIBLE CARE® is a trademark, registered in the United States and/or other countries, of the American Chemistry Council. UNIPOL® is a trademark, registered in the United States and/or other countries, of The Dow Chemical Company or an affiliated company of Dow. W. R. Grace & Co.-Conn. and/or its affiliates are licensed to use the UNIPOL® and UNIPOL UNIPPAC® trademarks in the area of polypropylene.
Unless the context otherwise indicates, in this document the terms "Grace," "we," "us," "our" or "the Company" mean W. R. Grace & Co. and/or its consolidated subsidiaries and affiliates. Unless otherwise indicated, the contents of websites mentioned in this report are not incorporated by reference or otherwise made a part of this Report.


Table of Contents

PART I

Item 1.    BUSINESS
BUSINESS OVERVIEW
W. R. Grace & Co. is engaged in the production and sale of specialty chemicals and specialty materials on a global basis through three operating segments: Grace Catalysts Technologies, which includes catalysts and related products and technologies used in refining, petrochemical and other chemical manufacturing applications; Grace Materials Technologies, which includes packaging technologies and engineered materials used in consumer, industrial, and pharmaceutical applications; and Grace Construction Products, which includes specialty construction chemicals and specialty building materials used in commercial, infrastructure and residential construction. We entered the specialty chemicals industry in 1954, when we acquired both the Dewey and Almy Chemical Company and the Davison Chemical Company. Grace is the successor to a company that began in 1854 and originally became a public company in 1953.
In 2001, Grace and 61 of its United States subsidiaries and affiliates 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. On February 3, 2014, the joint plan of reorganization filed by Grace and certain other parties became effective, concluding Grace’s status as a debtor under Chapter 11.
On December 2, 2013, we completed the acquisition of the assets of the polypropylene licensing and catalysts business of The Dow Chemical Company for a cash purchase price of $500 million, subject to customary working capital and post-closing adjustments.
Our principal executive offices are located at 7500 Grace Drive, Columbia, Maryland 21044, telephone (410) 531-4000. As of December 31, 2013, we had approximately 6,700 global employees.
Grace Catalysts Technologies produces and sells catalysts and related products and technologies used in refining, petrochemical and other chemical manufacturing applications including:
•
Fluid catalytic cracking catalysts, also called FCC catalysts, that help to "crack" the hydrocarbon chain in distilled crude oil to produce transportation fuels, such as gasoline and diesel fuels, and other petroleum-based products; and FCC additives used to reduce sulfur in gasoline, maximize propylene production from refinery FCC units, and reduce emissions of sulfur oxides, nitrogen oxides and carbon monoxide from refinery FCC units;
•
Hydroprocessing catalysts, most of which are marketed through our Advanced Refining Technologies LLC, or ART, joint venture with Chevron Products Company in which we hold a 50% economic interest, that are used in process reactors to upgrade heavy oils into lighter, more useful products by removing impurities such as nitrogen, sulfur and heavy metals, allowing less expensive feedstocks to be used in the petroleum refining process (ART is not consolidated in our financial statements, so ART's sales are excluded from our sales);
•
Polyolefin catalysts and catalyst supports, for the production of polypropylene and polyethylene thermoplastic resins, which can be customized to enhance the performance of a wide range of industrial and consumer end-use applications including high pressure pipe, geomembranes, food packaging, automotive parts, medical devices, and textiles; and chemical catalysts used in a variety of industrial, environmental and consumer applications; and
•
Gas-phase polypropylene process technology which provides our licensees with a reliable capability to manufacture polypropylene products for a broad array of end-use applications.
Grace Materials Technologies produces and sells specialty materials, coatings and sealants and related products used in coatings, consumer, industrial, pharmaceutical, and packaging applications including:
•
Silica-based engineered materials, including silica-based and silica-alumina-based materials, used in:
•
Coatings and print media applications, including functional additives that provide matting effects and corrosion protection for industrial and consumer coatings and media and paper products to enhance quality in ink jet coatings;

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•
Consumer applications, as a free-flow agent, carrier or processing aid in food and personal care products; as a toothpaste abrasive and thickener; and for the processing and stabilization of edible oils and beverages;
•
Industrial applications, such as tires and rubber, precision investment casting, refractory, insulating glass windows, biofuels, and drying applications, fulfilling various functions such as reinforcement, high temperature binding and moisture scavenging;
•
Pharmaceutical, life science and related applications including silica-based separation media, excipients and pharmaceutical intermediates; complementary purification products, chromatography consumables, and instruments; and CO2 adsorbents used in anesthesiology and mine safety applications; and
•
Packaging materials, including can and closure sealants used to seal and enhance the shelf life of can and bottle contents; coatings for cans and closures that prevent metal corrosion, protect package contents from the influence of metal and ensure proper adhesion of sealing compounds; and scavenging technologies designed to reduce off-taste and extend the shelf-life of packaged products.
Grace Construction Products produces and sells specialty construction chemicals and specialty building materials, including:
•
Construction chemicals including concrete admixtures and fibers used to modify the rheology, improve the durability and enhance various other properties of concrete, mortar, masonry and other cementitious construction materials; and additives used in cement processing to improve energy efficiency in manufacturing, enhance the characteristics of finished cement and improve ease of use; and
•
Building materials used in both new construction and renovation/repair projects. The products protect buildings and civil engineering structures from water, vapor and air penetration. The portfolio includes waterproofing membranes for commercial and residential buildings, specialty grouts for use in waterproofing and soil stabilization applications, air and vapor barriers, and other products to solve the specialized needs of preventative and repair applications.
Global Scope
We operate our business on a global scale with approximately 71% of our 2013 sales outside the United States. We conduct business in over 40 countries and in more than 50 currencies. We manage our operating segments on a global basis, to serve global markets. Currency fluctuations affect our reported results of operations, cash flows, and financial position.
Strategy Overview
Our strategy is to increase enterprise value by profitably growing our specialty chemicals and specialty materials businesses in the global marketplace and achieving high levels of efficiency and cash flow. To meet these objectives, we plan to:
•
invest in research and development activities, with the goal of introducing new high-performance, technically differentiated products and services and enhancing manufacturing processes and operations;
•
expand sales and manufacturing into emerging regions, including China, India, other economies in Asia, Eastern Europe, the Middle East and Latin America;
•
pursue selected acquisitions and alliances that complement our current product offerings or provide opportunities for faster penetration of desirable market or geographic segments; and
•
continue our commitment to process and productivity improvements and cost-management, such as rigorous controls on working capital and capital spending, integration of functional support services worldwide, and programs for improving operations and supply chain management.
CHAPTER 11 CASES
On April 2, 2001, Grace, along with 61 of our United States subsidiaries and affiliates, filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The cases were jointly administered

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under case number 01-01139. Our non-U.S. subsidiaries and certain of our U.S. subsidiaries were not included in the bankruptcy filing.
On February 3, 2014 (the “Effective Date”), the joint plan of reorganization (the “Joint Plan”) filed by Grace and certain other parties became effective, concluding Grace’s status as a debtor under Chapter 11.
Under the Joint Plan, two asbestos trusts have been established and funded under Section 524(g) of the Bankruptcy Code. The order of the Bankruptcy Court confirming the Joint Plan contains a channeling injunction which provides that all pending and future asbestos-related personal injury claims and demands 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 property damage claims related to Grace’s former attic insulation product, ZAI, are to be channeled to a separate asbestos property damage trust, the PD Trust. The PD Trust has two accounts (the two accounts have separate trustees and their assets may not be commingled), the PD Account, in respect of non-ZAI PD Claims, and the ZAI PD Account, in respect of ZAI PD Claims.
The trusts are the sole recourse for holders of asbestos-related claims; the channeling injunctions prohibit them from asserting such claims directly against Grace.
Under the Joint Plan, Grace is obligated to make future payments to the PI Trust, the PD Trust in respect of PD Claims, and the PD Trust in respect of ZAI PD Claims.
The amounts that Grace is obligated to pay to the PI Trust are fixed, and include only deferred payments of $110 million per year for 5 years beginning in 2019, and $100 million per year for 10 years beginning in 2024. Grace has recorded a liability for these deferred payments.
The amounts that Grace is obligated to pay to the PD Trust in respect of non-ZAI PD Claims are not fixed. Grace is obligated to make payments to the PD Trust every six months in the amount of any non-ZAI PD Claims allowed by the Bankruptcy Court during the preceding six months plus interest (if applicable) and the amount of PD Trust expenses. 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.
The amounts that Grace is obligated to pay to the PD Trust in respect of ZAI PD Claims include a fixed amount and a capped contingent amount. Grace is obligated to make a fixed payment of $30 million to the ZAI PD Account on the third anniversary of the Effective Date, i.e., February 3, 2017. Grace is also obligated to make up to 10 contingent 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. Grace has recorded a liability for the fixed deferred payment but has not recorded a liability for the contingent payments as it does not currently believe these payments are probable.
These obligations to the asbestos trusts are secured by Grace's obligation to issue 77,372,257 shares of Grace common stock to the asbestos trusts in the event of default.
See disclosure in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 2 (Chapter 11 and Joint Plan of Reorganization) to the Consolidated Financial Statements for a detailed description of the Chapter 11 cases and the Joint Plan.
PRODUCTS AND MARKETS
Specialty Chemicals and Materials Industry Overview
Specialty chemicals and specialty materials are high value-added products used as catalysts, intermediates, components, protectants or additives in a wide variety of products and applications. They are generally produced in relatively small volumes (compared with commodity chemicals) and must satisfy well-defined performance requirements and specifications. Specialty chemicals and specialty materials are often critical components of end products, catalysts for the production of end products and components used in end products. Consequently, they are tailored to meet customer needs, which generally results in a close relationship between the producer and the customer.
We focus our business on the following, which we believe are important competitive factors in the specialty chemicals and specialty materials industry:

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•
value-added products, technologies and services, sold at competitive prices;
•
customer service, including rapid response to changing customer needs;
•
technological leadership (resulting from investment in research and development and technical customer service); and
•
reliability of product and supply.
We believe that our focus on these competitive factors enables us to deliver increased value to customers and competitive operating margins notwithstanding the increased customer service and research and development costs that this focus entails.
Grace Catalysts Technologies Operating Segment
Catalysts Technologies principally applies alumina, zeolite and inorganic support technologies in the design and manufacture of products to create significant value for our diverse customer base. Our customers include major oil refiners and plastics and chemicals manufacturers. We believe that our technological expertise provides a competitive advantage, allowing us to quickly design products that help our customers create value in their markets.
The following table sets forth Catalysts Technologies sales of similar products as a percentage of Grace total revenue.
 
2013
 
2012
 
2011
(In millions)
Sales
 
% of Grace Revenue
 
Sales
 
% of Grace Revenue
 
Sales
 
% of Grace Revenue
Refining Catalysts
$
832.4

 
27.2
%
 
$
986.8

 
31.3
%
 
$
1,077.5

 
33.5
%
Polyolefin and Chemical Catalysts
291.6

 
9.5
%
 
281.3

 
8.9
%
 
269.8

 
8.4
%
Total Catalysts Technologies Revenue
$
1,124.0

 
36.7
%
 
$
1,268.1

 
40.2
%
 
$
1,347.3

 
41.9
%
The following table sets forth Catalysts Technologies sales by region as a percentage of Catalysts Technologies total revenue.
 
2013
 
2012
 
2011
(In millions)
Sales
 
% of Catalysts Technologies Revenue
 
Sales
 
% of Catalysts Technologies Revenue
 
Sales
 
% of Catalysts Technologies Revenue
North America
$
359.8

 
32.0
%
 
$
382.1

 
30.1
%
 
$
462.4

 
34.3
%
Europe Middle East Africa
459.2

 
40.9
%
 
543.5

 
42.8
%
 
600.2

 
44.5
%
Asia Pacific
223.0

 
19.8
%
 
256.9

 
20.3
%
 
216.4

 
16.1
%
Latin America
82.0

 
7.3
%
 
85.6

 
6.8
%
 
68.3

 
5.1
%
Total Catalysts Technologies Revenue
$
1,124.0

 
100.0
%
 
$
1,268.1

 
100.0
%
 
$
1,347.3

 
100.0
%
Grace Catalysts Technologies—Refining Catalysts
FCC Catalysts
We are a global leader in developing and manufacturing fluid catalytic cracking, or FCC, catalysts and additives that enable petroleum refiners to increase profits by improving product yields, value and quality. Our FCC products also enable refiners to reduce emissions from their FCC units and reduce sulfur content in the gasoline that they produce.
Oil refining is a highly specialized discipline, and FCC catalysts must be tailored to meet local variations in crude oil and a refinery's product mix. We work regularly with our customers to identify the most appropriate catalyst formulations for their changing needs. We are dependent on the economics of the petroleum industry, specifically, the impacts of demand for transportation fuels and petrochemical products and crude oil supply, which affect the extent to which our customers utilize the available capacity of their refinery FCC units. In general, as a refinery utilizes more of its capacity, it needs a greater amount of FCC catalyst. In recent years global economic growth,

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especially in emerging regions, has increased the demand for transportation fuels, and our FCC catalysts and additives. Other factors may reduce the demand for petroleum-based transportation fuels such as weak economic conditions and high retail gasoline and diesel fuel prices. In addition, government policy that encourages the use of non-petroleum-based fuels, discourages the use of diesel fuel or encourages greater vehicular fuel economy may negatively affect demand for our FCC catalysts and additives.
Refinery feedstocks vary in quality from light to heavy, sweet to sour crude oil. Sweet crude feedstocks are typically more expensive than heavy crude and yield a greater proportion of high-value petroleum products. They also yield a lower proportion of residual oil, or "resid," which is generally the lowest-value feedstock contained in crude oil. Although heavy crude feedstocks with high resid content are typically less expensive than higher quality feedstocks, the processing of high-resid feedstocks is more difficult because of their relatively high metals, nitrogen and sulfur contamination and higher boiling points. We have designed our MIDAS® catalyst, IMPACT® catalyst, NEKTOR™ catalyst, and GENESIS® catalyst product portfolios to enable our customers to increase the efficiency and yield of high-resid feedstock refining.
During 2010, the People's Republic of China reduced its quotas on exports of the rare earths that we use in the manufacture of FCC catalysts, causing significant increases in global prices of rare earths in 2010 and early 2011. In response to these price increases, we developed our RESIDULTRA™ low-rare earth FCC catalyst and our REPLACER® product line of no-rare earth FCC catalysts to mitigate the higher cost of rare earths without sacrificing performance. Starting in the third quarter of 2011, global prices of rare earths declined rapidly and significantly. Since then, we have added rare earth to some of our FCC catalyst formulations because it improves the performance and value of the catalyst.
Many U.S. petroleum refiners have entered into consent decrees with the U.S. Environmental Protection Agency (EPA) under which the refiners have agreed to reduce emissions of nitrogen oxides and sulfur oxides. The European Union has also imposed requirements on refineries with respect to nitrogen oxides and sulfur oxides emissions. FCC units are generally the largest emitters of these pollutants in a refinery. Our additives are designed to assist refineries in meeting their obligations to reduce these pollutants. Our Super DESOX® additive reduces sulfur oxides emissions from commercial FCC units. During 2011, we also launched our two low rare earth versions of Super DESOX® additive. Our DENOX® additives are designed to achieve reductions in nitrogen oxides emissions comparable to those obtained from capital intensive alternatives available to a refinery, while our non-platinum-based combustion promoters XNOX® and CP®P enable refiners to control carbon monoxide emissions without increasing NOx.
Global economic growth, especially in emerging regions, has increased the demand for plastics. As a result, our refinery customers have sought increased profits from petrochemicals by increasing the yield of propylene from their FCC units. Our ZSM-5-based technology, including our OLEFINSMAX® and OLEFINSULTRA® additive products, is designed to maximize the propylene output of FCC units.
In recent years, many countries and regions, including the U.S., European Union, Russia, India and China have imposed or increased the regulatory limitations on the sulfur content of gasoline and diesel fuel. We have developed a portfolio of products designed to assist refiners in meeting their gasoline sulfur reduction targets including our D-PRISM® and GSR® additives and our SURCA® catalyst family.
Competition in FCC catalysts and additives is based on technology, product performance, customer service and price. Our principal global FCC catalyst competitors are Albemarle Corp. and BASF which, with Johnson Matthey, are also principal global competitors in FCC additives. We also have multiple regional competitors for FCC catalysts and additives.
Hydroprocessing Catalysts
We market hydroprocessing catalysts, primarily through ART, our joint venture with Chevron. We established ART to combine our technology with that of Chevron and to develop, market and sell hydroprocessing catalysts to customers in the petroleum refining industry worldwide.
As discussed above, our business is dependent on the economics of the petroleum industry. Refineries increasingly use feedstocks that have high resid content. We are a leading supplier of hydroprocessing catalysts designed for processing these feedstocks. We offer products for fixed-bed resid hydrotreating, on-stream catalyst replacement and ebullating-bed resid hydrocracking processes.

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We also offer a full line of catalysts, customized for individual refiners, used in distillate hydrotreating to produce ultra-low sulfur content gasoline and diesel fuel, including our SMART CATALYST SYSTEM® and APART® catalyst system. As discussed above, regulatory limitations on the sulfur content of gasoline and diesel fuel are becoming more common. These products are designed to help refiners to reduce the sulfur content of their products.
In early 2013, ART announced that it had obtained rights to sell hydrocracking and lubes hydroprocessing catalysts to licensees of Chevron Lummus Global and other petroleum refiners for unit refills. This arrangement is intended to streamline hydroprocessing catalyst supply and improve technical service for refining customers by establishing ART as the single point of contact for all their hydroprocessing catalyst needs.
Competition in the hydroprocessing catalyst industry is based on technology, product performance, customer service and price. Criterion, Albemarle, Haldor Topsoe, UOP and Axens are our leading global competitors in hydroprocessing catalysts. We also have multiple regional competitors.
Grace Catalysts Technologies—Polyolefin Catalysts, Catalyst Supports and Polypropylene Process Technology
We are a leading provider of catalyst systems and catalyst supports to the polyolefins industry for a variety of polyethylene and polypropylene process technologies. These types of catalysts are used for the manufacture of polyethylene and polypropylene thermoplastic resins used in products such as plastic film, high-performance plastic pipe, automobile parts, household appliances and household containers. We use a combination of proprietary catalyst and support technology, as well as technology licensed from third parties, to provide unique catalyst-based solutions to industry, and to provide a broad technology portfolio for enhancing collaboration opportunities with technology leaders.
Our MAGNAPORE® polymerization catalyst is used to produce high performance polyethylene in the slurry loop process for pipe and film applications. Our POLYTRAK® polymerization catalyst is designed to achieve improved polypropylene performance, particularly for impact resistant applications such as automobile bumpers and household appliances.
Our DAVICAT® standard and customized catalysts offer a wide range of chemical and physical properties based on our material science technology for supported catalysts, polystyrene, herbicide, neutriceuticals and on purpose olefins. Our RANEY® nickel, cobalt and copper hydrogenation and dehydrogenation catalysts are used for the synthesis of organic compounds for the fibers, polyurethanes, engineered plastics, pharmaceuticals, sweeteners and petroleum industries.
Our non-phthalate CONSISTA® and traditional SHAC® catalysts along with CONSISTA® and ADT donors have been designed for the UNIPOL® gas-phase polypropylene process technology but are also adaptable to a variety of other polypropylene gas-phase and slurry-phase polymerization processes.
The polyolefin catalyst and supports industry is technology-intensive and suppliers must provide products formulated to meet customer specifications. There are many manufacturers of polyolefin catalysts and supports including PQ/INEOS, Albemarle, LyondellBasell, Univation and BASF, and most sell their products worldwide.
We are also a leading licensor of gas-phase polypropylene process technology to polypropylene manufacturers. Our UNIPOL® technology, acquired in 2013, is designed to have fewer moving parts and require less equipment than other competing technologies in order to reduce operating costs. This technology provides our licensees with a reliable capability to manufacture products for a broad array of end-use applications. The polypropylene process licensing industry is technology-intensive and licensors must adapt the technology and the related licenses to meet individual customer needs. The major competing polypropylene process licensor is LyondellBasell.
Grace Catalysts Technologies—Manufacturing, Marketing and Raw Materials
Our Catalysts Technologies products are manufactured by a network of globally coordinated plants. Our integrated planning organization is responsible for the effective utilization of our manufacturing capabilities.
We use a global organization of technical professionals with extensive experience in refining processes, catalyst development, and catalyst applications to market our refining catalysts and additives. These professionals work to tailor our technology to the needs of each specific customer. We generally negotiate prices for our refining catalysts because our formulations are specific to the needs of each customer and each customer receives individual attention and technical service. We sell a significant portion of our hydroprocessing catalysts through multiple-year supply agreements with our geographically diverse customer base.

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We use a global direct sales force for our polyolefin catalysts, supports and technologies and chemical catalysts that seeks to maintain close working relationships with our customers. These relationships enable us to cooperate with major polymer and chemical producers to develop catalyst technologies that complement their process or application developments. We have geographically distributed our sales and technical service professionals to make them responsive to the needs of our geographically diverse customers. We typically operate under long-term contracts with our customers.
Seasonality does not have a significant overall effect on our Catalysts Technologies operating segment. However, sales of FCC catalysts tend to be lower in the first calendar quarter prior to the shift in production by refineries from home heating oil for the winter season to gasoline production for the summer season. FCC catalysts and ebullating-bed hydroprocessing catalysts are consumed at a relatively steady rate and are replaced regularly. Fixed-bed hydroprocessing catalysts are consumed over a period of years and are replaced in bulk in an irregular pattern. Since our customers periodically shut down their refining processes to replace fixed-bed hydroprocessing catalysts in bulk, our hydroprocessing catalyst sales to any customer can vary substantially over the course of a year and between years based on that customer's catalyst replacement schedule.
The principal raw materials for Catalysts Technologies products include rare earths, molybdenum, caustic soda, aluminum, sodium aluminate, nickel, alumina, kaolin and cobalt. Multiple suppliers are generally available for each of these materials; however, some of our raw materials may be provided by single sources of supply. We seek to mitigate the risk of using single source suppliers by identifying and qualifying alternative suppliers or, for unique materials, by using alternative formulations from other suppliers or by passing price increases on to customers. In some instances, we produce our own raw materials and intermediates.
Prices for many of our raw materials, including metals and petroleum-based specialty and commodity materials such as resins and solvents, have been volatile in recent years. In response to increases in raw material costs, we generally take actions to mitigate the effect of higher costs including increasing prices, developing alternative formulations for our products and increasing productivity. In particular, during 2010, the People's Republic of China reduced its quotas on exports of the rare earths that we use in the manufacture of FCC catalysts, which significantly increased global prices. In response, in late 2010, we implemented rare earth surcharges on certain FCC catalysts that subsequently were removed in mid-2013 when the prices of these materials returned to stable levels. Rare earth surcharges increased sales by approximately $15 million, $110 million and $280 million in years 2013, 2012 and 2011, respectively. We also have taken other actions to reduce the impact of higher raw material costs on us and our customers.
As in many chemical businesses, we consume significant quantities of natural gas in the production of Catalysts Technologies products. World events and other economic factors have caused volatility in the price of natural gas. Increases or decreases in the cost of natural gas and raw materials can have a significant impact on our operating margins.
Grace Materials Technologies Operating Segment
Materials Technologies principally applies specialty silica, zeolite and resin technologies in the design and manufacture of products to create significant value for our diverse customer base. Our customers include coatings manufacturers, consumer product manufacturers, plastics manufacturers, producers of rigid food and beverage packaging, and pharmaceutical companies. We believe that our technological expertise provides a competitive advantage, allowing us to quickly design products that help our customers create value in their markets.
The following table sets forth Materials Technologies sales of similar products as a percentage of Grace total revenue.
 
2013
 
2012
 
2011
(In millions)
Sales
 
% of Grace Revenue
 
Sales
 
% of Grace Revenue
 
Sales
 
% of Grace Revenue
Engineered Materials
$
494.4

 
16.2
%
 
$
478.3

 
15.1
%
 
$
500.5

 
15.6
%
Packaging Products
384.1

 
12.5
%
 
384.3

 
12.2
%
 
372.1

 
11.6
%
Total Materials Technologies Revenue
$
878.5

 
28.7
%
 
$
862.6

 
27.3
%
 
$
872.6

 
27.2
%

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The following table sets forth Materials Technologies sales by region as a percentage of Materials Technologies total revenue.
 
2013
 
2012
 
2011
(In millions)
Sales
 
% of Materials Technologies Revenue
 
Sales
 
% of Materials Technologies Revenue
 
Sales
 
% of Materials Technologies Revenue
North America
$
176.7

 
20.1
%
 
$
174.0

 
20.2
%
 
$
173.1

 
19.8
%
Europe Middle East Africa
367.8

 
41.9
%
 
362.4

 
41.9
%
 
378.6

 
43.4
%
Asia Pacific
197.4

 
22.5
%
 
185.9

 
21.6
%
 
184.1

 
21.1
%
Latin America
136.6

 
15.5
%
 
140.3

 
16.3
%
 
136.8

 
15.7
%
Total Materials Technologies Revenue
$
878.5

 
100.0
%

$
862.6

 
100.0
%
 
$
872.6

 
100.0
%
Grace Materials Technologies—Silica-based Materials
We provide enabling technologies that are silica- and silica-alumina-based functional additives and process aids, such as silica gel, colloidal silica, zeolitic adsorbents, precipitated silica and silica-aluminas, for a wide variety of applications. Our product portfolio includes:
Application
 
Use
 
Key Brands
Coatings and Print Media
 
Matting agents, anticorrosion pigments, TiO2 extenders and moisture scavengers for paints and lacquers
 
SYLOID®, SHIELDEX®, SYLOSIV®, SYLOWHITE™
 
 
Additives and formulations for matte, semi-glossy and glossy ink receptive coatings on high performance ink jet papers, photo paper, and commercial wide-format print media
 
SYLOJET®, DURAFILL®, LUDOX®
 
 
Paper retention aids, functional fillers, paper frictionizers
 
DURAFILL®, LUDOX®
Consumer
 
Toothpaste abrasives and thickening agents, free-flow agents, anticaking agents, tabletting aids, cosmetic additives and flavor carriers
 
SYLOID® FP, SYLODENT®, SYLOID®, SYLOBLANC®, ELFADENT®, SYLOSIV®
 
 
Edible oil refining agents, beer stabilizers and clarification aids for beer, juices and other beverages
 
DARACLAR®, TRISYL®
Industrial
 
Reinforcing agents for rubber and tires
 
PERKASIL®
 
 
Inorganic binders and surface smoothening aids for precision investment casting and refractory applications
 
LUDOX®
 
 
Adsorbents for dual pane windows and industrial applications, desiccant granules, beads, powders and bags and polyurethane moisture scavengers
 
PHONOSORB®, SYLOBEAD®, SYLOSIV®, CRYOSIV®, SAFETYSORB®
 
 
Chemical metal polishing aids and formulations for chemical mechanical planarization/electronics applications
 
LUDOX®, POLIEDGE®
 
 
Polymer additives for producers and processors of plastic products that prevent layers of polymer film from sticking together, improve dispersal of pigments and ease removal from molds
 
SYLOBLOC®
 
 
Process adsorbents used in petrochemical and natural gas processes for such applications as ethylene-cracked-gas-drying, natural gas drying and sulfur removal
 
SYLOBEAD®
Discovery Sciences
 
Flash chromatography systems and consumables
 
REVELERIS®, REVEALX™, GRACERESOLV™
 
 
Preparative scale purification products including media, column hardware, and equipment
 
DAVISIL®, VYDAC®, MODCOL®, SPRING®, MULTIPACKER®
 
 
Pharmaceutical excipients and intermediates
 
SYLOID® FP
 
 
Analytical scale high performance liquid chromatography (HPLC) columns and detectors
 
VISIONHT®, VYDAC®, ALLTECH®, ALLTIMA®
 
 
CO2 adsorbents for anesthesiology and re-breathing applications
 
SODASORB®
 
 
Fine chemical intermediates
 
SYNTHETECH®

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Our silica-based engineered materials are integrated into our customers' manufacturing processes and, when combined with our technical support, increase the efficiency and performance of their products. By working closely with our customers, we help them to respond quickly to the changing needs of brand owners and consumers. We focus on high-growth segments and seek to develop and introduce new products that add additional value to the current and future needs of our customers. For example, our customers have incorporated our products into higher resolution print media, less abrasive high cleaning toothpastes and technologies that are friendly to the environment such as water-based and VOC-compliant coatings, green tires with lower roll resistance and non-toxic anticorrosion protection. Our discovery sciences products are used in a wide range of applications, including drug discovery and purification for the healthcare, pharmaceutical and biotechnology industries, environmental analysis, forensics, petrochemical analysis and the manufacture of food, cosmetics, vitamins and biofuels. We also market chromatography consumables and analytical and preparative columns packed with our specialty media. We can modify the base silica and surface chemistry for analytical, preparative and process-scale customers in order to enhance our product performance for their unique applications.
Our silica-based engineered materials sales are global. There are many manufacturers of engineered materials that market their products on a global basis including Evonik, PQ/INEOS, and UOP. Competition is generally based on product performance, technical service and reliability, price, and additional value-added features to address the needs of our customers, end-users and brand owners. Our discovery sciences products compete on the basis of product quality, distinct technology and customer support. Competition for these products is highly fragmented with a large number of companies that sell their products on a global and regional basis, although a number of companies, such as Waters Corporation, Agilent Technologies and Thermo-Fisher, have a substantial global position and a relatively large installed customer base.
Grace Materials Technologies—Packaging Products
We are a global leader in can and closure sealants that, along with our specialized can and closure coatings, we supply to the packaging industry. Our product portfolio includes:
Products
 
Key Brands
Can sealants for rigid containers that ensure a hermetic seal between the lid and the body of beverage, food, aerosol and other cans
 
DAREX®
Sealants for metal and plastic bottle closures that are used on pry-off and twist-off metal crowns, as well as roll-on pilfer-proof and plastic closures to seal and enhance the shelf life of food and beverages in glass and plastic bottles and jars
 
DAREX®, DARAFORM®, DARASEAL®, DARABLEND®, SINCERA®, CELOX®
Coatings for metal packaging that are used in the manufacture of cans and closures to protect the metal against corrosion, protect the contents against the influences of metal, ensure proper adhesion of sealing compounds to metal surfaces, and provide base coats for inks and for decorative purposes
 
DAREX®, APPERTA®, SISTIAGA®
Our packaging products are designed to address major industry trends such as lighter weight packaging, lower energy consumption, personal convenience, and highly individualized packaging. Our growth is driven by innovation of higher performing products, continuous development of new applications, increasing demand for sustainability and rising disposable income in emerging regions. We seek to capitalize upon our technical customer service, global infrastructure and expertise in global regulatory compliance (including food law compliance) to enhance our growth, especially in emerging regions. We also seek to develop and introduce new products that add additional value to the current and future needs of our customers, such as our introduction of products with oxygen scavenging functionality.
Our packaging products sales are global. There are many manufacturers of packaging products that market their products on a global basis including Altana, Akzo Nobel, PPG and Valspar. Competition is generally based on product performance, technical service and reliability, price and additional value-added features to address the needs of our customers, end-users and brand owners.
Grace Materials Technologies—Manufacturing, Marketing and Raw Materials
Our Materials Technologies products are manufactured by a network of globally integrated plants that are positioned to service our customers regionally. Our packaging products are manufactured in both large facilities to permit economies of scale and a network of smaller operations that enable customization to local market conditions. Our integrated planning organization is responsible for the effective utilization of our manufacturing capabilities.

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We use country-based direct sales forces that are dedicated to each product line and backed by application-specific technical customer service teams to market our Materials Technologies products. Our sales force seeks to develop long-term relationships with our customers and focuses on consultative sales, technical support and key account growth programs. To ensure full geographic coverage, our direct sales organization is further supplemented by a network of agents and distributors.
Seasonality does not have a significant overall effect on our Materials Technologies operating segment; however, our packaging products and some of our construction-related products such as insulated glass desiccants are affected by seasonal and weather-related factors including the consumption of beverages, the size and quality of food crops and the level of construction activity. These impacts are mitigated by the global scope of our business.
The principal raw materials for Materials Technologies products include sodium silicate, solvents, resins, latexes (including certain food-grade raw materials) and rubber. Multiple suppliers are generally available for each of these materials; however, some of our raw materials may be provided by single sources of supply. We seek to mitigate the risk of using single source suppliers by identifying and qualifying alternative suppliers or, for unique materials, by using alternative formulations from other suppliers or by passing price increases on to customers. In some instances, we produce our own raw materials and intermediates.
Prices for many of our raw materials, including specialty and commodity materials such as latex, rubbers, pigments, resins and solvents, have been volatile in recent years. In response to increases in raw material costs, we generally take actions to mitigate the effect of higher costs including increasing prices, developing alternative formulations for our products and increasing productivity.
As in many chemical businesses, we consume significant quantities of natural gas in the production of Materials Technologies products. World events and other economic factors have caused volatility in the price of natural gas. Increases or decreases in the cost of natural gas and raw materials can have a significant impact on our operating margins.
Since we manufacture a substantial portion of our packaging products in emerging regions using raw materials from suppliers in the U.S., Europe and other advanced economies, changes in the values of the currencies of these emerging regions versus the U.S. dollar and the euro may adversely affect our raw material costs and the prices we may charge for our products.
Grace Construction Products Operating Segment
Construction Products produces and sells specialty construction chemicals and specialty building materials. We are a supplier to the nonresidential (commercial and infrastructure) construction industry, and to a lesser extent, the residential construction and repair and restoration industries.
The following table sets forth Construction Products sales of similar products as a percentage of Grace total revenue.
 
2013
 
2012
 
2011
(In millions)
Sales
 
% of Grace Revenue
 
Sales
 
% of Grace Revenue
 
Sales
 
% of Grace Revenue
Specialty Construction Chemicals
$
688.0

 
22.5
%
 
$
680.7

 
21.6
%
 
$
656.6

 
20.5
%
Specialty Building Materials
370.2

 
12.1
%
 
344.1

 
10.9
%
 
335.4

 
10.4
%
Total Construction Products Revenue
$
1,058.2

 
34.6
%
 
$
1,024.8

 
32.5
%
 
$
992.0

 
30.9
%

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The following table sets forth Construction Products sales by region as a percentage of Construction Products total revenue.
 
2013
 
2012
 
2011
(In millions)
Sales
 
% of Construction Products Revenue
 
Sales
 
% of Construction Products Revenue
 
Sales
 
% of Construction Products Revenue
North America
$
423.2

 
39.9
%
 
$
411.5

 
40.2
%
 
$
406.3

 
41.0
%
Europe Middle East Africa
260.9

 
24.7
%
 
269.7

 
26.3
%
 
281.6

 
28.4
%
Asia Pacific
233.7

 
22.1
%
 
217.5

 
21.2
%
 
198.8

 
20.0
%
Latin America
140.4

 
13.3
%
 
126.1

 
12.3
%
 
105.3

 
10.6
%
Total Construction Products Revenue
$
1,058.2

 
100.0
%
 
$
1,024.8

 
100.0
%
 
$
992.0

 
100.0
%
Grace Construction Products—Specialty Construction Chemicals
We supply concrete admixtures and fibers used to modify the rheology, improve the durability and enhance various other properties of concrete, mortar, masonry and other cementitious construction materials; and additives used in cement processing to improve energy efficiency in manufacturing, enhance the characteristics of finished cement and improve ease of use, including the following products:
Products
 
Uses
 
Customers
 
Key Brands
Concrete admixtures
 
Concrete admixtures and polymeric fibers used to reduce the production and in-place costs of concrete, increase the performance of concrete and improve the life cycle cost of the structure
 
Ready-mix and precast concrete producers, engineers and specifiers
 
ADVA®, STRUX®, MIRA®, POLARSET®, ECLIPSE®
Additives for cement processing
 
Cement additives added to the grinding stage of the cement manufacturing process to improve the energy efficiency of the plant and enhance the performance of the finished cement. Chromium reducing additives help cement manufacturers in Europe meet environmental regulations
 
Cement manufacturers
 
CBA®, SYNCHRO®, HEA2®, TDA®
Products for architectural concrete
 
Products for architectural concrete include surface retarders, coatings, pigments and release agents used by concrete producers and contractors to enhance the surface appearance and aesthetics of concrete
 
Precast concrete producers and architects
 
PIERI®
Admixtures for masonry concrete
 
Products for masonry concrete used by block and paver producers for process efficiency and to improve the appearance, durability and water resistance of finished concrete masonry units
 
Masonry block manufacturers
 
DRY-BLOCK®, OPTEC®, QUANTEC®
Process control solutions for ready mix concrete
 
Electro-mechanical devices, sensors and other technologies that assist concrete producers in controlling product quality and production costs
 
Ready mix concrete manufacturers
 
VERIFI®
Grace Construction Products—Specialty Building Materials
We supply building materials used in both new construction and renovation/repair projects. The products protect buildings and civil engineering structures from water, vapor and air penetration. The portfolio includes waterproofing membranes for commercial and residential buildings, specialty grouts for use in waterproofing and soil stabilization applications, air and vapor barriers, and other products to solve the specialized needs of preventative and repair applications including the following:

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Products
 
Uses
 
Customers
 
Key Brands
Structural waterproofing, vapor and air barrier systems
 
Structural waterproofing and air barrier systems to prevent water, vapor and/or air infiltration in commercial structures, including self-adhered sheet and liquid membranes, joint sealing materials, drainage composites and waterstops.
 
Architects and structural engineers; specialty waterproofing and general contractors; specialty waterproofing distributors
 
BITUTHENE®, PROCOR®, PREPRUFE®, ADPRUFE®, HYDRODUCT®, PERM-A-BARRIER®, ADCOR®ES, SILCOR®
Residential building materials
 
Specialty roofing membranes and flexible flashings for windows, doors, decks and detail areas, including fully adhered roofing underlayments, synthetic underlayments and self-adhered flashing.
 
Roofing contractors, home builders and remodelers; specialty roofing distributors, lumberyards and home centers; homeowners; architects and specifiers
 
ICE & WATER SHIELD®, TRI-FLEX®, VYCOR®
Remedial waterproofing
 
Products for repair and remediation in waterproofing applications and soil stabilization
 
Contractors, municipalities and other owners of large infrastructure facilities
 
DENEEF® HYDRO ACTIVE® Cut, DENEEF® AC-400, DENEEF® SWELLSEAL® WA, DENEEF® MC-500™
Fire protection
 
Fire protection products spray-applied to the structural steel frame, encasing and insulating the steel and protecting the building in the event of fire.
 
Local contractors and specialty subcontractors and applicators; building materials distributors; industrial manufacturers; architects and structural engineers
 
MONOKOTE®
Grace Construction Products—Manufacturing, Marketing and Raw Materials
In view of our diversity of customers and customer requirements, and because specialty construction chemicals and specialty building materials require intensive sales and customer service efforts, we maintain a direct sales and technical support team with sales personnel based in approximately 40 countries worldwide. This sales and support team sells products under global contracts, under U.S. or regional contracts, and on a job-by-job basis. We also use distributors in both U.S. and non-U.S. markets. We compete globally with several large construction materials suppliers, and regionally and locally with numerous smaller competitors. Competition for our construction products is based on product performance, technical support and service, brand name recognition in the construction industry and price. Our major global specialty construction chemicals competitors are BASF and Sika.
In recent years, the cement and concrete industry has experienced some consolidation, thereby increasing the importance of serving well our global customers. For some customer groups, such as producers and contractors, operational efficiency and total applied cost are key factors in making purchasing decisions, while for others, such as architects and engineers, product performance and design versatility are more important.
We seek to improve our products, adapt them for new applications and add new products through our growth and innovation processes that focus on understanding the needs of our customers, key performance indicators and research and development.
In addition to new product introductions and product enhancements, we look for growth opportunities in emerging regions where increasing construction activity, improvement in building codes, and sophistication of construction practices can accelerate demand for our construction products. We continue to expand our commercial and manufacturing capabilities in these geographic areas.
The key raw materials used in our specialty construction products are obtained from a variety of suppliers, including basic chemical and petrochemical producers. The majority of our raw materials are organic chemicals derived from olefins. We also make significant purchases of inorganic materials such as gypsum, as well as specialty materials including specialty films, papers and fibers. In most instances, these materials are available from multiple sources. Global supply and demand factors, changes in currency exchange rates, and petroleum prices have significantly impacted the price and availability of key raw materials in recent years.
Since we manufacture a substantial portion of our construction products in emerging regions using raw materials from suppliers in the U.S., Europe and other advanced economies, changes in the values of the currencies of these emerging regions versus the U.S. dollar and the euro may adversely affect our raw material costs and the prices we may charge for our products.

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The construction business is cyclical in response to economic conditions and construction demand. The construction business is also seasonal and dependent on favorable weather conditions, with a decrease in construction activity during the winter months. Demand for our specialty construction products is primarily driven by global non-residential construction activity and U.S. residential construction activity. We seek to increase profitability and minimize the impact of cyclical downturns in regional economies by introducing technically advanced high-performance products and expanding geographically. Although these strategies have been successful in reducing the impact of cyclicality, the decline in U.S. and European construction activity since 2007 has had a negative impact on our sales.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
Disclosure of financial information about industry segments and geographic areas for 2013, 2012 and 2011 is provided in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 20 (Operating Segment Information) to the Consolidated Financial Statements, which disclosure is incorporated herein by reference. Disclosure of risks attendant to our foreign operations is provided in this Report in Item 1A (Risk Factors).
BACKLOG OF ORDERS
While at any given time there may be some backlog of orders, this backlog is not material in respect to our total annual sales, nor are the changes, from time to time, significant.
INTELLECTUAL PROPERTY; RESEARCH ACTIVITIES
Competition in the specialty chemicals and specialty materials industry is often based on technological superiority and innovation. Our ability to maintain our margins and effectively compete with other suppliers depends on our ability to introduce new products based on innovative technology, as well as our ability to obtain patent or other intellectual property protection. Our research and development programs emphasize development of new products and processes, improvement of existing products and processes and application of existing products and processes to new industries and uses. We conduct research in all regions, with North America and Europe accounting for the most activity.
We routinely file and obtain patents in a number of countries around the world that are significant to our businesses in order to protect our investments in innovation, research, and product development. Numerous patents and patent applications protect our products, formulations, manufacturing processes, equipment, and improvements. We also benefit from the use of trade secret information, including know-how and other proprietary information relating to many of our products and processing technologies. There can be no assurance, however, that our patents, patent applications and precautions to protect trade secrets and know-how will provide sufficient protection for our intellectual property. In addition, other companies may independently develop technology that could replicate, and thus diminish the advantage provided by, our trade secrets. Other companies may also develop alternative technology or design-arounds that could circumvent our patents or may acquire patent rights applicable to our business which might interpose some limitation on expansion of the business in the future.
Research and development expenses were approximately $65 million in 2013 and 2012 and $69 million in 2011. These amounts include depreciation and amortization expenses related to research and development and expenses incurred in funding external research projects. The amount of research and development expenses relating to government- and customer-sponsored projects (rather than projects that we sponsor) was not material during these periods. Grace also conducts research and development activities with our ART joint venture, which is not included in the amounts above.
ENVIRONMENT, HEALTH AND SAFETY MATTERS
We are subject, along with other manufacturers of specialty chemicals, to stringent regulations under numerous U.S. federal, state and local and foreign environment, health and safety laws and regulations relating to the generation, storage, handling, discharge, disposition and stewardship of hazardous wastes and other materials. Environmental laws require that certain responsible parties, as defined in the relevant statute, fund remediation actions regardless of legality of original disposal or ownership of a disposal site. We are involved in remediation actions to address hazardous wastes or other materials as required by U.S. federal, state and local and foreign laws.
We have expended substantial funds to comply with environmental laws and regulations and expect to continue to do so in the future. The following table sets forth our expenditures in the past three years, and our

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estimated expenditures in 2014 and 2015, for (i) the operation and maintenance of manufacturing facilities and the disposal of wastes; (ii) capital expenditures for environmental control facilities; and (iii) site remediation:
Year
(In millions)
 
Operation of
Facilities and
Waste Disposal
 
Capital
Expenditures
 
Site
Remediation
 
2011
 
$
58

 
$
6

 
$
12

 
2012
 
61

 
9

 
13

 
2013
 
59

 
17

 
14

 
2014
 
59

 
19

 
18

*
2015
 
60

 
10

 
7

*
_______________________________________________________________________________
*
Amounts are based on site remediation matters for which sufficient information is available to estimate remediation costs. We do not have sufficient information to estimate all of Grace's possible future remediation costs. As we receive new information, our estimate of remediation costs may change materially.
Additional information about our environmental remediation activities is provided in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 13 (Commitments and Contingent Liabilities) to the Consolidated Financial Statements.
We continuously seek to improve our environmental, health and safety performance. To the extent applicable, we extend the basic elements of the American Chemistry Council's RESPONSIBLE CARE® program to all our locations worldwide, embracing specific performance objectives in the key areas of management systems, product stewardship, employee health and safety, community awareness and emergency response, distribution, process safety and pollution prevention. We have implemented key elements of the RESPONSIBLE CARE® Security Code for our operations and systems. We have completed a review of our existing security (including cyber-security) vulnerability and have taken actions to enhance our security systems and protect our assets. We have undertaken certain activities to comply with the Department of Homeland Security (DHS) Chemical Facility Anti-Terrorism Standards, including identifying facilities subject to the standards, conducting security vulnerability assessments and developing site security plans, as necessary.
EMPLOYEE RELATIONS
As of December 31, 2013, we employed approximately 6,700 persons, of whom approximately 2,700 were employed in the United States. Of our total employees, approximately 4,700 were salaried and 2,000 were hourly.
Approximately 750 of our manufacturing employees in the United States are represented for collective bargaining purposes by nine different local collective bargaining groups. We have operated without a labor work stoppage for more than 10 years.
We have works councils representing the majority of our European sites serving approximately 1,400 employees.
AVAILABILITY OF REPORTS AND OTHER DOCUMENTS
We maintain an Internet website at www.grace.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission, or SEC. These reports may be accessed through our website's investor information page.
In addition, the charters for the Audit, Compensation, Nominating and Governance, and Corporate Responsibility Committees of our Board of Directors, our corporate governance guidelines and code of ethics are available, free of charge, on our website at www.grace.com/About/Leadership/Governance/. Printed copies of the charters, governance guidelines and code of ethics may be obtained free of charge by contacting Grace Shareholder Services at 410-531-4167.
The information on our website is not, and shall not be deemed to be, a part of this report or incorporated into any other filings we make with the SEC.

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Our Chief Executive Officer and Chief Financial Officer have submitted certifications to the SEC pursuant to the Sarbanes Oxley Act of 2002 as exhibits to this Report.
EXECUTIVE OFFICERS
See Part III, Item 10 of this Report for information about our Executive Officers.
Item 1A.    RISK FACTORS
This Report, including the Financial Supplement, contains, and our other public communications may contain, forward-looking statements; that is, information related to future, not past, events. Such statements generally include the words "believes," "plans," "intends," "targets," "will," "expects," "suggests," "anticipates," "outlook," "continues" or similar expressions. Forward-looking statements include, without limitation, all statements regarding: our Chapter 11 case; expected financial positions; results of operations; cash flows; financing plans; business strategy; budgets; capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost reduction initiatives; plans and objectives; and markets for securities. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Like other businesses, we are subject to risks and uncertainties that could cause our actual results to differ materially from our projections or that could cause other forward-looking statements to prove incorrect. Factors that could cause actual events to materially differ from those contained in the forward-looking statements include those factors set forth below and elsewhere in this Annual Report on Form 10-K. Our reported results should not be considered as an indication of our future performance. Readers are cautioned not to place undue reliance on our projections and forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to the projections and forward-looking statements contained in this document, or to update them to reflect events or circumstances occurring after the date of this document. In addition to general economic, business and market conditions, we are subject to other risks and uncertainties, including, without limitation, the following:
The length and depth of product and industry business cycles in our segments may result in periods of reduced sales, earnings and cash flows, and portions of our business are subject to seasonality and weather-related effects.
Our operating segments are sensitive to the cyclical nature of the industries they serve. Our construction business is cyclical in response to economic conditions and construction demand and is also seasonal and dependent on favorable weather conditions, with a decrease in construction activity during the winter months. Sales of our FCC catalysts tend to be lower in the first calendar quarter prior to the shift in production by refineries from home heating oil for the winter season to gasoline production for the summer season. Our packaging products are affected by seasonal and weather-related factors including the consumption of beverages and the size and quality of food crops.
The global scope of our operations subjects us to the risks of doing business in foreign countries, which could adversely affect our business, financial condition and results of operations.
We operate our business on a global scale with approximately 71% of our 2013 sales outside the United States. We conduct business in over 40 countries and in more than 50 currencies. We currently have many production facilities, research and development facilities and administrative and sales offices located outside North America, including facilities and offices located in Europe, the Middle East, Africa, Asia and Latin America. We expect non-U.S. sales to continue to represent a substantial majority of our revenue. Accordingly, our business is subject to risks related to the differing legal, political, social and regulatory requirements and economic conditions of many jurisdictions. Risks inherent in non-U.S. operations include the following:
•
commercial agreements may be more difficult to enforce and receivables more difficult to collect;
•
intellectual property rights may be more difficult to enforce;
•
increased shipping costs, disruptions in shipping or reduced availability of freight transportation;
•
we may have difficulty transferring our profits or capital from foreign operations to other countries where such funds could be more profitably deployed;
•
we may experience unexpected adverse changes in export duties, quotas and tariffs and difficulties in obtaining export licenses;
•
some foreign countries have adopted, and others may impose, additional withholding taxes or adopt other restrictions on foreign trade or investment, including currency exchange and capital controls;


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•
foreign governments may nationalize private enterprises;
•
our business and profitability in a particular country could be affected by political or economic repercussions on a domestic, country specific or global level from terrorist activities and the response to such activities;
•
we may be affected by unexpected adverse changes in foreign laws or regulatory requirements; and
•
unanticipated events, such as geopolitical changes, could adversely affect these operations.
Our success as a global business will depend, in part, upon our ability to succeed in differing legal, regulatory, economic, social and political conditions by developing, implementing and maintaining policies and strategies that are effective in each location where we do business.
We are exposed to currency exchange rate changes that impact our profitability.
We are exposed to currency exchange rate risk through our U.S. and non-U.S. operations. Changes in currency exchange rates may materially affect our operating results. For example, changes in currency exchange rates may affect the relative prices at which we and our competitors sell products in the same region and the cost of materials used in our operations. A substantial portion of our net sales and assets are denominated in currencies other than the U.S. dollar. When the U.S. dollar strengthens against other currencies, at a constant level of business, our reported sales, earnings, assets and liabilities are reduced because the non-U.S. currencies translate into fewer U.S. dollars.
We incur a currency transaction risk whenever one of our operating subsidiaries enters into either a purchase or a sales transaction using a currency different from the operating subsidiary's functional currency. Given the volatility of exchange rates, we may not be able to manage our currency transaction risks effectively, or volatility in currency exchange rates may expose our financial condition or results of operations to a significant additional risk.
Prices for certain raw materials and energy are volatile; we may not be able to pass through increases in costs for raw materials and energy or maintain our current pricing levels, which may hurt our profitability.
We use petroleum-based materials, metals, natural gas and other materials in the manufacture of our products. Prices for these materials are volatile and can have a significant effect on our pricing, sales, manufacturing and supply chain strategies as we seek to maximize our profitability. In 2012 and 2011, our Grace Catalysts Technologies sales were affected by significant increases in the prices of the rare earths used in the manufacture of our FCC catalysts. In response, we implemented surcharges on our FCC catalysts. In the 2011 third quarter, rare earth prices reached a peak and have since declined significantly. As a result, the amount of our surcharges has decreased with a corresponding decrease in sales. In 2013 and 2012, respectively, the negative effect of lower rare earth surcharges on sales was approximately $97 million and $170 million compared with the respective prior year. Our ability to successfully adjust strategies in response to volatile raw material and energy prices is a significant factor in maintaining or improving our profitability. If we are unable to successfully adjust our strategies in response to volatile prices, such volatility could have a negative effect on our sales and earnings in future periods.
A substantial portion of our raw materials are commodities whose prices fluctuate as market supply and demand fundamentals change.
We attempt to manage exposure to price volatility of major commodities through:
•
long-term supply contracts;
•
contracts with customers that permit adjustments for changes in prices of commodity-based materials and energy;
•
forward buying programs that layer in our expected requirements systematically over time; and
•
limited use of financial instruments.
Although we regularly assess our exposure to raw material price volatility, we cannot always predict the prospects of volatility and we cannot always cover the risk in a cost effective manner.
We have a policy of maintaining, when available, multiple sources of supply for raw materials. However, certain of our raw materials may be provided by single sources of supply. We may not be able to obtain sufficient raw materials due to unforeseen developments that would cause an interruption in supply. Even if we have multiple sources of supply for raw materials, these sources may not make up for the loss of a major supplier.

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If we are not able to continue our technological innovation and successful introduction of new products, our customers may turn to other suppliers to meet their requirements.
The specialty chemicals industry and the end-use markets into which we sell our products experience ongoing technological change and product improvements. A key element of our business strategy is to invest in research and development activities with the goal of introducing new high-performance, technically differentiated products.  We may not be successful in developing new technology and products that successfully compete with products introduced by our competitors, and our customers may not accept, or may have lower demand for, our new products. If we fail to keep pace with evolving technological innovations or fail to improve our products in response to our customers’ needs, then our business, financial condition and results of operations could be adversely affected as a result of reduced sales of our products.
We spend large amounts of money for environmental compliance in connection with our current and former operations.
As a manufacturer of specialty chemicals and specialty materials, we are subject to stringent regulations under numerous U.S. federal, state, local and foreign environmental, health and safety laws and regulations relating to the generation, storage, handling, discharge, disposition and stewardship of hazardous wastes and other materials. We have expended substantial funds to comply with such laws and regulations and have established a policy to minimize our emissions to the environment. Nevertheless, legislative, regulatory and economic uncertainties (including existing and potential laws and regulations pertaining to climate change) make it difficult for us to project future spending for these purposes and if there is an acceleration in new regulatory requirements, we may be required to expend substantial additional funds to remain in compliance.
We are subject to environmental clean-up costs, fines, penalties and damage claims that have been and continue to be costly.
Grace is subject to lawsuits and regulatory actions, in connection with current and former operations (including divested businesses), for breaches of environmental laws that seek clean-up or other remedies. Grace is also subject to lawsuits and investigations by public and private parties under various environmental laws in connection with our current and former operations in various states, including with respect to off-site disposal at facilities where Grace has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, commonly referred to as CERCLA. We are also subject to similar risks outside of the U.S.
Grace operated a vermiculite mine in Libby, Montana, until 1990. Some of the vermiculite ore that was mined at the Libby mine contained natural occurrences of asbestos. Grace is cooperating with EPA to investigate the Libby vermiculite mine and the surrounding bodies of water and forest lands and determine a final remedy. During 2010, EPA began reinvestigating up to 105 facilities where vermiculite concentrate from the Libby mine was processed. We are cooperating with EPA on this reinvestigation. EPA has requested that we conduct additional remediation at eight of these facilities. It is probable that EPA will request additional remediation at other facilities. We do not have sufficient information to identify either the sites that might require additional remediation or estimate the cost of any additional remediation. We will evaluate our estimated remediation liability for other sites as we receive additional information from EPA.
We have established accounting accruals for all environmental matters for which a loss is considered to be probable and sufficient information is available to reasonably estimate the loss. We do not have sufficient information to accrue for all of Grace's environmental risks. These accruals do not include the cost to remediate the Libby vermiculite mine or costs related to any additional EPA claims, whether resulting from EPA's reinvestigation of vermiculite facilities or otherwise, which may be material but are not currently estimable. Due to these vermiculite-related matters, it is probable that Grace's ultimate liability for environmental matters will exceed Grace's current estimates by material amounts.
We require liquidity to service our debt and to fund operations, capital expenditures, research and development efforts, acquisitions and other corporate expenses.
Our ability to fund operations, capital expenditures, research and development efforts, acquisitions and other corporate expenses, including repayment of our debt, depends on our ability to generate cash through future operating performance, which is subject to economic, financial, competitive, legislative, regulatory and other factors. Many of these factors are beyond our control. We cannot be certain that our businesses will generate sufficient cash or that future borrowings will be available to us in amounts sufficient to fund all of our requirements. If we are unable

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to generate sufficient cash to fund all of our requirements, we may need to pursue one or more alternatives, such as to:
•
reduce or delay planned capital expenditures, research and development spending or acquisitions;
•
obtain additional financing or restructure or refinance all or a portion of our debt on or before maturity;
•
sell assets or businesses; and
•
sell additional equity.
Any reduction or delay in planned capital expenditures, research and development spending or acquisitions or sale of assets or businesses may materially and adversely affect our future revenue prospects. In addition, we cannot be certain that we will be able to raise additional equity capital, restructure or refinance any of our debt or obtain additional financing on commercially reasonable terms or at all.
Our indebtedness may adversely affect our business, financial condition and operating results.
Our indebtedness may have material adverse effects on our business, including to:
•
require us to dedicate a substantial portion of our cash to payments on our debt, thereby reducing the availability of cash to fund working capital, capital expenditures and other general operating requirements;
•
restrict us from making strategic acquisitions or taking advantage of favorable business opportunities;
•
limit our flexibility to plan for, or react to, changes in our business and the industries in which we operate, which may adversely affect our operating results and ability to meet our debt service obligations with respect to our outstanding debt; and
•
increase our vulnerability to adverse general economic and industry conditions, including recessions.
If we incur additional debt, the risks related to our indebtedness may intensify.
We have unfunded and underfunded pension plan liabilities. We will require future operating cash flow to fund these liabilities. We have no assurance that we will generate sufficient cash to satisfy these obligations.
We maintain U.S. and non-U.S. defined benefit pension plans covering current and former employees who meet or met age and service requirements. Our net pension liability and cost is materially affected by the discount rate used to measure pension obligations, the longevity and actuarial profile of our workforce, the level of plan assets available to fund those obligations and the actual and expected long-term rate of return on plan assets. Significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets or in a change in the expected rate of return on plan assets. Assets available to fund the pension benefit obligation of the U.S. advance-funded pension plans at December 31, 2013, were approximately $1,145 million, or approximately $52 million less than the measured pension benefit obligation on a U.S. GAAP basis. In addition, any changes in the discount rate could result in a significant increase or decrease in the valuation of pension obligations, affecting the reported funded status of our pension plans as well as the net periodic pension cost in the following years. Similarly, changes in the expected return on plan assets can result in significant changes in the net periodic pension cost in the following years.
Our obligation to make payments to the PD Trust in respect of asbestos PD Claims (other than ZAI PD Claims) is not capped and we may be obligated to make additional payments.
Under the Joint Plan, an asbestos property damage trust has been established and funded under Section 524(g) of the Bankruptcy Code. The order of the Bankruptcy Court confirming the Joint Plan contains a channeling injunction which provides that all pending and future asbestos-related property damage claims and demands, PD Claims, can only be brought against the PD Trust. The PD Trust contains two accounts. One of these accounts, the PD Account, is funded solely in respect of PD Claims other than those PD Claims related to our former ZAI attic insulation product. Unresolved and future non-ZAI PD Claims are to be litigated pursuant to procedures to be approved by the Bankruptcy Court and, to the extent such PD claims are determined to be allowed claims, are to be paid in cash by the PD Trust. We are 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 any) and, except for the first six months, the amount of PD Trust expenses for the preceding six months (the "PD Obligation"). The aggregate amount we are required to pay under the PD Obligation is not capped so we may have to make additional payments to the PD Account in respect of the PD Obligation. We are also obligated to make up to 10 contingent deferred payments to the PD Trust of $8 million during the 20-year period beginning on the fifth anniversary of the effective date, i.e. February 3, 2019, in respect of ZAI PD Claims in the event the ZAI PD Account's assets fall below $10 million in the preceding year. We have accrued liabilities for probable PD Claims expected to be resolved after

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emergence from bankruptcy, but have not accrued any liability for the contingent ZAI PD payments as we do not believe they are probable.
Our ability to use tax deductions to reduce future tax payments may be limited if there is a change in ownership of Grace or if Grace does not generate sufficient U.S. taxable income.
Our ability to use future tax deductions, including net operating losses and deductions for the payments required by the Joint Plan (including the deferred payments), may be limited by Section 382 of the Internal Revenue Code of 1986, as amended, if we undergo an ownership change as a result of future changes in the ownership of outstanding Grace common stock. In addition, our ability to use future tax deductions is dependent on our ability to generate sufficient future taxable income in the U.S. Our certificate of incorporation provides that under certain circumstances, our Board of Directors would have the authority to impose restrictions on the transfer of Grace common stock with respect to certain 5% shareholders in order to preserve these future tax deductions.
We intend to pursue acquisitions, joint ventures and other transactions that complement or expand our businesses. We may not be able to complete proposed transactions and even if completed, the transactions may involve a number of risks that may materially and adversely affect our business, financial condition and results of operations.
We have recently completed a number of acquisitions that we believe will contribute to our future success. We intend to continue to pursue opportunities to buy other businesses or technologies that could complement, enhance or expand our current businesses or product lines or that might otherwise offer us growth opportunities. We may have difficulty identifying appropriate opportunities or, if we do identify opportunities, we may not be successful in completing transactions for a number of reasons. Any transactions that we are able to identify and complete may involve a number of risks, including:
•
the diversion of management's attention from our existing businesses to integrate the operations and personnel of the acquired or combined business or joint venture;
•
possible adverse effects on our operating results during the integration process;
•
failure of the acquired business to achieve expected operational objectives; and
•
our possible inability to achieve the intended objectives of the transaction.
In addition, we may not be able to successfully or profitably integrate, operate, maintain and manage our newly acquired operations or their employees. We may not be able to maintain uniform standards, controls, procedures and policies, which may lead to operational inefficiencies.
We work with dangerous materials that can injure our employees, damage our facilities and disrupt our operations.
Some of our operations involve the handling of hazardous materials that may pose the risk of fire, explosion, or the release of hazardous substances. Such events could result from terrorist attacks, natural disasters, or operational failures, and might cause injury or loss of life to our employees and others, environmental contamination, and property damage. These events might cause a temporary shutdown of an affected plant, or portion thereof, and we could be subject to penalties or claims as a result. A disruption of our operations caused by these or other events could have a material adverse effect on our results of operations.
Some of our employees are unionized, represented by workers' councils or employed subject to local laws that are less favorable to employers than the laws in the United States.
As of December 31, 2013, we had approximately 6,700 global employees. Approximately 750 of our approximately 2,700 U.S. employees are unionized. In addition, a large number of our employees are employed in countries in which employment laws provide greater bargaining or other rights to employees than the laws in the United States. Such employment rights require us to work collaboratively with the legal representatives of the employees to effect any changes to labor arrangements. For example, most of our employees in Europe are represented by workers' councils that have co-determination rights on any changes in conditions of employment, including salaries and benefits and staff changes, and may impede efforts to restructure our workforce. A strike, work stoppage or slowdown by our employees or significant dispute with our employees, whether or not related to these negotiations, could result in a significant disruption of our operations or higher ongoing labor costs.

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We may be subject to claims of infringement of the intellectual property rights of others, which could hurt our business.
From time to time, we face infringement claims from our competitors or others alleging that our processes or products infringe on their proprietary technologies. Any claims that our products or processes infringe the intellectual property rights of others, regardless of the merit or resolution of the claims, could cause us to incur significant costs in responding to, defending and resolving the claims, and may divert the efforts and attention of our management and technical personnel from our business. If we are found to be infringing on the proprietary technology of others, we may be liable for damages, and we may be required to change our processes, redesign our products, pay others to use the technology or stop using the technology or producing the infringing product. Even if we ultimately prevail, the existence of the lawsuit could prompt our customers to switch to products that are not the subject of infringement suits.
We do not pay cash dividends on our common stock.
We have not paid a dividend on our common stock since 1997. Our Board of Directors has made no determination as to whether or when we will begin paying cash dividends. Until we begin paying dividends on our common stock, investors will have to rely on stock appreciation for a return on their investment.
Item 1B.    UNRESOLVED STAFF COMMENTS
None.
Item 2.    PROPERTIES
We operate manufacturing plants and other facilities (including office, warehouse, labs and other service facilities) throughout the world. Some of these plants and facilities are shared by our operating segments. We consider our major operating properties to be in good operating condition and suitable for their current use. We believe that, after taking planned expansion into account, the productive capacity of our plants and other facilities is generally adequate for current operations. The table below summarizes our facilities by operating segment and region:
 
Number of Facilities*
 
North America
 
Europe Middle East Africa
 
Asia Pacific
 
Latin America
 
Total
Catalysts Technologies
9

 
3

 
1

 
—

 
13

Materials Technologies
7

 
10

 
8

 
4

 
29

Construction Products
17

 
14

 
24

 
10

 
65

______________________________________________________________________________
*    Shared facilities are counted in all applicable operating segments. The total number of facilities included in the above table, without regard to sharing amongst operating segments, is 94.
Our largest Catalysts Technologies facilities are located in Baltimore, Maryland; Lake Charles, Louisiana; and Worms, Germany.
Our largest Materials Technologies facilities are located in Baltimore, Maryland, and Worms, Germany.
Our largest Construction Products facilities are located in Cambridge, Massachusetts, and Mount Pleasant, Tennessee. Because this operating segment's products generally have short shelf lives and must be delivered to numerous job sites, Construction Products requires a greater number of facilities to service our customers than Catalysts Technologies and Materials Technologies. Also, these facilities are generally smaller and less capital intensive than our Catalysts Technologies and Materials Technologies facilities. For information on our net properties and equipment by region and country, see disclosure set forth in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 20 (Operating Segment Information) to our Consolidated Financial Statements, which disclosure is incorporated herein by reference.
Our corporate headquarters is in Columbia, Maryland, and we also lease and operate a shared services facility in Manila, Philippines.

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We own all of our major manufacturing plants. As for the remainder of our facilities, we either own, lease or hold them under a land lease arrangement. By number of facilities on a regional basis: in North America, we primarily own our facilities; in Europe, Middle East and Africa, we have a relatively even distribution between owned and leased facilities; and in Asia Pacific and Latin America, we lease the majority of our facilities.
In connection with our credit agreement, we have agreed to execute security agreements with respect to certain of our larger United States facilities in the following locations: Chicago, Illinois; Lake Charles, Louisiana; Baltimore and Columbia, Maryland; Albany, Oregon; and Mount Pleasant, Tennessee. For a description of our credit agreement see Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 8 (Debt) to the Consolidated Financial Statements.
Item 3.    LEGAL PROCEEDINGS
CHAPTER 11 PROCEEDINGS
Disclosure provided in this Report in Item 1 (Business) under the caption "Chapter 11 Cases" and in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 1 (Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies under the caption "Chapter 11 Proceedings") and Note 2 (Chapter 11 and Joint Plan of Reorganization) to the Consolidated Financial Statements is incorporated herein by reference.
ASBESTOS LITIGATION
Disclosure provided in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 2 (Chapter 11 and Joint Plan of Reorganization) to the Consolidated Financial Statements is incorporated herein by reference.
ENVIRONMENTAL INVESTIGATIONS AND CLAIMS
Disclosure provided in this Report in Item 1 (Business) under the caption "Environment, Health and Safety Matters" and Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 13 (Commitments and Contingent Liabilities under the caption "Environmental Remediation") to the Consolidated Financial Statements is incorporated herein by reference.
SETTLEMENT RELATED TO FORMER PACKAGING AND MEDICAL CARE BUSINESSES
In September 2000, Grace was named in a purported class action suit filed in California Superior Court for the County of San Francisco alleging that the 1996 reorganization involving a predecessor of Grace and Fresenius Medical Care Holdings, Inc. and the 1998 reorganization involving a predecessor of Grace and Sealed Air Corporation were fraudulent transfers (Abner, et al., v. W. R. Grace & Co., et al.). The suit is alleged to have been brought on behalf of all individuals who then had lawsuits on file asserting personal injury or wrongful death claims against any of the defendants. After Abner, and prior to the Chapter 11 filing, two other similar class actions were filed. These lawsuits had been stayed as a result of Grace's Chapter 11 filing. The Bankruptcy Court authorized the Official Committee of Asbestos Personal Injury Claimants and the Official Committee of Asbestos Property Damage Claimants to proceed with claims against Sealed Air and Fresenius on behalf of Grace's bankruptcy estate. In November 2002, Sealed Air and Fresenius each announced that they had reached agreements in principle with these committees to settle asbestos, successor liability and fraudulent transfer claims related to such transactions. On the Effective Date, under the terms of the Joint Plan and the Fresenius settlement and the Sealed Air settlement, Fresenius and Cryovac, Inc., a wholly-owned subsidiary of Sealed Air, made payments to the asbestos trusts as described in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 2 (Chapter 11 and Joint Plan of Reorganization) to the Consolidated Financial Statements which description is incorporated herein by reference. Under the terms of the Joint Plan and the settlement agreements, the class action lawsuits have been dismissed with prejudice.
TAX CLAIMS
Disclosure provided in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 10 (Income Taxes) to the Consolidated Financial Statements is incorporated herein by reference.

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OTHER CLAIMS RECEIVED PRIOR TO THE CHAPTER 11 CLAIMS BAR DATE
Disclosure provided in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 2 (Chapter 11 and Joint Plan of Reorganization) to the Consolidated Financial Statements is incorporated herein by reference.
Item 4.    MINE SAFETY DISCLOSURES
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this Report.

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PART II

Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Except as provided below, the disclosure required by this Item appears in this Report in: Item 6 (Selected Financial Data); under the heading "Selected Financial Data" opposite the caption "Other Statistics—Common shareholders of record" in the Financial Supplement; Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement in Note 17 (Shareholders' Equity) and Note 23 (Quarterly Summary and Statistical Information (Unaudited) opposite the caption "Market price of common stock") to the Consolidated Financial Statements; and Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters) under the caption "Equity Compensation Plan Information", and such disclosure is incorporated herein by reference.
SHAREHOLDER RIGHTS AGREEMENT
On March 31, 1998, we paid a dividend of one Preferred Stock Purchase Right on each share of Grace common stock. Subject to our prior redemption for $.01 per right, rights will become exercisable on the earlier of:
•
10 days after an acquiring person, comprised of an individual or group, has acquired beneficial ownership of 20% or more of the outstanding Grace common stock or
•
10 business days (or a later date fixed by the Board of Directors) after an acquiring person commences (or announces the intention to commence) a tender offer or exchange offer for beneficial ownership of 20% or more of the outstanding Grace common stock.
Until these events occur, the rights will automatically trade with the Grace common stock, and separate certificates for the rights will not be distributed. The rights do not have voting or dividend rights.
Generally, each right not owned by an acquiring person:
•
will initially entitle the holder to buy from Grace one hundredth of a share of the Grace Junior Participating Preferred Stock, at an exercise price of $100, subject to adjustment;
•
will entitle such holder to receive upon exercise, in lieu of shares of Grace junior preferred stock, that number of shares of Grace common stock having a market value of two times the exercise price of the right; and
•
may be exchanged by Grace for one share of Grace common stock or one hundredth of a share of Grace junior preferred stock, subject to adjustment.
Generally, if there is an acquiring person and we are acquired, each right not owned by an acquiring person will entitle the holder to buy a number of shares of common stock of the acquiring company having a market value equal to twice the exercise price of the right.
Each share of Grace junior preferred stock will be entitled to a minimum preferential quarterly dividend payment of $1.00 per share but will be entitled to an aggregate dividend equal to 100 times the dividend declared per share of Grace common stock whenever such dividend is declared. In the event of liquidation, holders of Grace junior preferred stock will be entitled to a minimum preferential liquidation payment of $100 per share but will be entitled to an aggregate payment equal to 100 times the payment made per share of Grace common stock. Each share of Grace junior preferred stock will have 100 votes, voting together with the Grace common stock. Finally, in the event of any business combination, each share of Grace junior preferred stock will be entitled to receive an amount equal to 100 times the amount received per share of Grace common stock. These rights are protected by customary antidilution provisions.
The terms of the rights may be amended by the Board of Directors without the consent of the holders of the rights. The rights expire on March 30, 2018.
This summary of the rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which has been filed with the SEC.

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DIVIDENDS ON GRACE COMMON STOCK
We have not paid a dividend on our common stock since 1997. Our Board of Directors has made no determination as to whether or when we will begin paying cash dividends. Although our Credit Agreement (as described in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 8 (Debt) to the Consolidated Financial Statements and filed as an exhibit to this Report), our deferred payment agreements with the asbestos trusts (as described in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 2 (Chapter 11 and Joint Plan of Reorganization) to the Consolidated Financial Statements and filed as exhibits to this Report) and our guarantee agreements with the asbestos trusts (filed as exhibits to this Report) contain certain restrictions on the payment of dividends on, and redemptions of, equity interests and other restricted payments, we believe that such restrictions do not currently materially limit our ability to pay dividends and we do not believe that such restrictions are likely to limit materially our future payment of dividends.
Share Repurchase Program
On February 4, 2014, we announced that the Board of Directors has authorized a share repurchase program of up to $500 million expected to be completed over the next 12 to 24 months at the discretion of management. Repurchases under the program may be made through one or more open market transactions at prevailing market prices; unsolicited or solicited privately negotiated transactions; accelerated share repurchase programs; or through any combination of the foregoing, or in such other manner as determined by management. The timing of the repurchases and the actual amount repurchased will depend on a variety of factors, including the market price of Grace’s shares and general market and economic conditions. Repurchased shares will be held in treasury. There is no guarantee as to the number of shares that will be repurchased and the share repurchase program may be extended, suspended or discontinued at any time without notice.
STOCK TRANSFER RESTRICTIONS
Under the terms of our Certificate of Incorporation, as approved by the Bankruptcy Court as part of the confirmation of the Joint Plan, in order to preserve significant tax benefits which are subject to elimination or limitation, the Board of Directors has the authority to impose restrictions on the transfer of Grace common stock with respect to certain 5% shareholders. Imposing such restrictions requires at least a 25% ownership shift to occur (as determined under Internal Revenue Code regulations) and at least a two-thirds vote of all of the directors. These restrictions would generally not limit the ability of a person that holds less than 5% of Grace common stock after emergence to either buy or sell stock on the open market.
This summary does not purport to be complete and is qualified in its entirety by reference to the Certificate of Incorporation, which has been filed with the SEC as Exhibit 3.1 to this Report.
Item 6.    SELECTED FINANCIAL DATA
The disclosure required by this Item appears in the Financial Supplement under the heading "Selected Financial Data" which disclosure is incorporated herein by reference.
Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The disclosure required by this Item appears in the Financial Supplement under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" which disclosure is incorporated herein by reference.
Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Our global operations, raw materials and energy requirements, and debt obligations expose us to various market risks. We use derivative financial instruments to mitigate certain of these risks. The following is a discussion of our primary market risk exposures, how those exposures are managed, and certain quantitative data pertaining to our market risk-sensitive instruments.

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Currency Exchange Rate Risk
Because we do business in over 40 countries, our results of operations are exposed to changes in currency exchange rates. We seek to minimize exposure to these changes by matching revenue streams in volatile currencies with expenditures in the same currencies, but it is not always possible to do so. From time to time, we use financial instruments such as currency forward contracts, options, or combinations of the two to reduce the risk of certain specific transactions. However, we do not have a policy of hedging all exposures, because management does not believe that such a level of hedging would be cost-effective. We do not hedge translation exposures that are not expected to affect cash flows in the near-term. Significant uses of derivatives to mitigate the effects of changes in currency exchange rates are as follows:
In November 2007, we executed intercompany loans in the aggregate amount of €250 million between our principal U.S. operating subsidiary and a newly established German subsidiary as part of a legal restructuring. In conjunction with the loans, our U.S. subsidiary entered into a series of currency forward contracts in order to fix the dollar/euro exchange rate that will apply to convert the euro principal payments to dollars. The total amount outstanding under the intercompany loans was €194.5 million as of December 31, 2013 (approximately $268.2 million). Currency fluctuations on these loans and the related forward contracts are recorded as components of operating results. The intercompany loans were repaid, and the related forward contracts were settled, when we emerged from bankruptcy.
The following tables provide information about our significant currency forward exchange agreements as of December 31, 2013 and 2012, specifically, the notional, or contract, amounts (in millions of U.S. dollars), and weighted average exchange rates (U.S. dollars to euros) by expected (contractual) maturity dates. These notional amounts generally are used to calculate the contractual payments to be exchanged under the contract. The fair values represent the fair value of the derivative contracts, and are presented as other assets or other liabilities and allocated between current and non-current, as appropriate, in the Consolidated Balance Sheets.
 
Euro Forward Contracts—December 31, 2013 Expected Maturity Date
Currency Forward Exchange Agreements
2014
 
Fair Value
Contract amount
$
261.3

 
$
(6.9
)
Average contractual exchange rate
1.34

 
N/A


 
Euro Forward Contracts—December 31, 2012 Expected Maturity Date
Currency Forward Exchange Agreements
2013
 
Fair Value
Contract amount
$
252.5

 
$
(4.9
)
Average contractual exchange rate
1.30

 
N/A

Commodity Price Risk
We operate in markets where the prices of raw materials and energy are commonly affected by cyclical movements of the economy and other economic factors. The principal raw materials used in our products include rare earths, molybdenum, sodium silicate, olefins, resins, caustic, aluminum, sodium aluminate, rubber, alumina, nickel, cobalt carbonate, kaolin, gypsum and latices. Natural gas is the largest single energy source that we purchase. These commodities are generally available to be purchased from more than one supplier. In order to minimize the risk of increasing prices on certain raw materials and energy, we use a centralized supply chain organization for procurement in order to improve purchasing activities. We have a risk management committee to review proposals to hedge purchases of raw materials and energy.
We have implemented a risk management program under which our goal is to hedge natural gas and aluminum supply in a way that provides protection against price volatility of the natural gas and aluminum markets. In order to mitigate volatile natural gas prices, we have entered into both fixed price swaps and options contracts to hedge a portion of our U.S. natural gas requirements. Additionally, in order to mitigate volatile aluminum prices, we have entered into fixed price swaps to hedge a portion of our U.S. aluminum requirements.
The following tables provide information about our commodity derivatives. For natural gas commodity derivatives, contract volumes, or notional amounts, are presented in millions of MMBtu (million British thermal units), weighted average contract prices are presented in U.S. dollars per million MMBtu, and the total contract amount and fair value are presented in millions of U.S. dollars. For aluminum commodity derivatives, contract

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volumes, or notional amounts, are presented in millions of pounds, weighted average contract prices are presented in U.S. dollars per pound, and the total contract amount and fair value are presented in millions of U.S. dollars. The fair values of the commodity derivative contracts represent the excess of the variable price (market price) over the fixed price (pay price) multiplied by the nominal contract volumes. All commodity derivative instruments mature within 12 months.
 
Commodity Derivatives—December 31, 2013
Type of Contract
Contract Volumes
 
Weighted Average Price
 
Total Contract Amount
 
Fair Value
Natural gas swaps
0.3

 
$
4.44

 
$
1.2

 
$
—

Aluminum swaps
1.4

 
$
0.89

 
$
1.2

 
$
(0.1
)

 
Commodity Derivatives—December 31, 2012
Type of Contract
Contract Volumes
 
Weighted Average Price
 
Total Contract Amount
 
Fair Value
Natural gas swaps
2.8

 
$
3.60

 
$
10.2

 
$
(0.3
)
Aluminum swaps
3.0

 
$
0.96

 
$
2.8

 
$
0.1

The fair value of commodity derivative contracts is presented as other assets or other liabilities and allocated between current and non-current, as appropriate, in the Consolidated Balance Sheets.
The following tables provide information about our natural gas option contracts. Contract volumes, or notional amounts, are presented in millions of MMBtu (million British thermal units), both strike prices and futures trading prices are presented in U.S. dollars per million MMBtu, and the fair value is presented in millions of U.S. dollars. The fair values of the natural gas option contracts represent the excess of the futures trading price (market price) over the strike price multiplied by the nominal contract volumes. All natural gas option contracts mature within 18 months.
 
Natural Gas Option Contracts—December 31, 2013
Type of Contract
Contract Volumes
 
Strike Price
 
Futures Trading Price
 
Fair Value
Natural gas options
7.1

 
$
5.00

 
$ 4.01 - 4.41
 
$
—

The fair value of the natural gas option contracts is presented as other assets or other liabilities and allocated between current and non-current, as appropriate, in the Consolidated Balance Sheets. The premium paid for the call options is presented at amortized cost in other assets and allocated between current and non-current, as appropriate, in the Consolidated Balance Sheets. As of December 31, 2013, the unamortized call option premium was $0.8 million.
We have also entered into forward contracts for natural gas and aluminum that qualify for the normal purchases and normal sales exception from Accounting Standards Codification ("ASC") 815 "Derivatives and Hedging" as they do not contain net settlement provisions and result in physical delivery of natural gas and aluminum from suppliers. Therefore, the fair values of these contracts are not recorded in our Consolidated Balance Sheets.
Interest Rate Risk
Interest rate fluctuations directly affect interest expense on our variable-rate debt.
As of December 31, 2013, we did not use derivative instruments to mitigate interest rate risk. However, in connection with our emergence financing, we entered into an interest rate swap beginning on February 3, 2015, and maturing on February 3, 2020, fixing $250 million of term debt at 4.643%.
See Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 9 to the Consolidated Financial Statements for additional disclosure around market risk, which disclosure is incorporated herein by reference.

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Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The disclosure required by this Item appears in the Financial Supplement which disclosure is incorporated herein by reference.
Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A.    CONTROLS AND PROCEDURES
Except as provided below, the disclosure required by this Item appears in the Financial Supplement under the heading "Management's Report on Financial Information and Internal Controls" which disclosure is incorporated herein by reference.
There was no change in Grace's internal control over financial reporting during the quarter ended December 31, 2013, that has materially affected, or is reasonably likely to materially affect, Grace's internal control over financial reporting.
Item 9B.    OTHER INFORMATION
None.

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PART III

Item 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our directors and executive officers as of December 31, 2013, are listed below. Our Certificate of Incorporation provides for the division of the Board of Directors into three classes, each to serve for a three-year term or until their respective successors are elected. Executive officers are elected to serve until the next annual meeting of the Board of Directors or until their respective successors are elected.
Name and Age*
 
Office
 
First
Elected
 
Current Term Ends at Annual Meeting in:
H. Furlong Baldwin (82)
 
Class III Director
 
01/16/02
 
2017

Ronald C. Cambre (75)
 
Class II Director
 
09/01/98
 
2016

Alfred E. Festa (54)
 
Class III Director
Chairman of the Board
Chief Executive Officer
 
09/08/04
01/01/08
06/01/05
 
2017

Marye Anne Fox (66)
 
Class I Director
 
05/10/96
 
2015

Janice K. Henry (62)
 
Class I Director
 
01/18/12
 
2015

Jeffry N. Quinn (55)
 
Class II Director
 
11/07/12
 
2016

Christopher J. Steffen (72)
 
Class III Director
Lead Independent Director
 
11/01/06
06/28/12
 
2017

Mark E. Tomkins (58)
 
Class I Director
 
09/06/06
 
2015

Hudson La Force III (49)
 
Senior Vice President & Chief Financial Officer
 
04/01/08
 
—

Gregory E. Poling (58)
 
President and Chief Operating Officer
 
11/03/11
 
—

Mark A. Shelnitz (55)
 
Vice President, General Counsel & Secretary
 
04/27/05
 
—

Pamela K. Wagoner (50)
 
Vice President & Chief Human Resources Officer
 
07/13/09
 
—

Keith N. Cole (55)
 
Vice President, Government Relations and Environment, Health and Safety
 
02/10/14
 
—

_______________________________________________________________________________
*    Mr. John F. Akers resigned from the Board of Directors and all committees effective January 17, 2014.
Mr. Baldwin served as a director of Mercantile Bankshares Corporation from 1970 to 2003, as Chairman of the Board from 1984 to 2003 and as President and Chief Executive Officer from 1976 to 2001. Mr. Baldwin served as Chairman of NASDAQ OMX Group, Inc. until 2012 and served as a director of Platinum Underwriters Holdings, Ltd. and Allegheny Energy Inc. until 2011. Mr. Baldwin brings to the Board the management and governance knowledge he developed as a banking chief executive and public company board member and his extensive experience in banking and finance including significant knowledge of the business development, acquisitions, capital raising, operations and financial issues facing large corporations.
Mr. Cambre is retired Chairman of the Board and Chief Executive Officer of Newmont Mining Corporation. He joined Newmont as Vice Chairman and CEO in 1993 and retired as CEO in 2000 and as Chairman in 2001. Mr. Cambre served as Chairman of the Board of McDermott International, Inc. and as a director of Cliffs Natural Resources Inc. until 2011. Mr. Cambre brings to the Board his extensive background in leadership and management at the most senior level in major corporations, his deep understanding of international business and global energy issues and his governance and oversight experience developed as a director of multiple public companies.
Mr. Festa joined Grace in 2003 and was elected Chief Executive Officer in 2005 and Chairman in 2008. He served as President from 2003 to 2011 and Chief Operating Officer from 2003 to 2005. Prior to joining Grace, Mr. Festa was a partner of Morganthaler Private Equity Partners, a venture capital and buyout firm, from 2002 to 2003. From 2000 to 2002, he was with ICG Commerce, Inc., a private company providing on-line procurement services, where he last served as President and Chief Executive Officer. Prior to that, he served as Vice President and General Manager of AlliedSignal's (now Honeywell) performance fibers business. Mr. Festa is a director of NVR, Inc., a publicly held home builder. Mr. Festa brings to the Board his substantial leadership, sales and

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marketing, international business and venture capital experience. As CEO, Mr. Festa brings to the Board his intimate knowledge of all aspects of Grace's operations and strategy.
Dr. Fox served as Chancellor of the University of California San Diego (UCSD) and Distinguished Professor of Chemistry at that institution from 2004 until her retirement in 2012. She currently serves as Chancellor Emeritus and Distinguished Professor of Chemistry and Biotechnology at UCSD. She was previously Chancellor of North Carolina State University and Distinguished University Professor of Chemistry. Dr. Fox has served as the Co-Chair of the National Academy of Sciences' Government-University-Industry Research Roundtable and she served on President Bush's Council of Advisors on Science and Technology. She has served as the Vice Chair of the National Science Board. Dr. Fox is a director of Bridgepoint Education, Inc. and Red Hat, Inc. and served as a director of Pharmaceutical Product Development, Inc. until 2008 and Boston Scientific Corporation until 2010. With her chemistry background, strong financial and operational experience leading large and successful educational institutions and service as an outside director to public and private boards, Dr. Fox brings to the Board a full understanding of Grace's products and research and development efforts, substantial experience in overseeing corporate management and finance and high-level knowledge of operations and strategic planning for large institutions.
Ms. Henry served as Senior Vice President and Treasurer until 2006 and Chief Financial Officer until 2005 of Martin Marietta Materials, Inc.; after her retirement in 2006, she provided consulting services to Martin Marietta Materials, Inc. until 2009. Ms. Henry is also a director of Cliffs Natural Resources Inc. Ms. Henry served as a director of North American Galvanizing and Coatings, Inc. until its acquisition in 2010 by AZZ Incorporated and as a director and chair of the audit committee of Inco Limited until its acquisition in 2006 by CVRD. Ms. Henry brings to the Board her substantial experience in financial and accounting leadership, including acquisitions and capital structuring, gained as an officer of a chemicals and materials manufacturer. She also has significant governance and oversight experience from her service on public and private corporate boards.
Mr. Quinn is Chairman and Chief Executive Officer of The Quinn Group LLC, a diversified holding company with investments in the industrial, active lifestyle, and entertainment sectors, and Quinpario Partners LLC, an investment and operating firm in the performance materials and specialty chemical sectors, each of which he formed in July 2012. Since May 2013, Mr. Quinn has served as President, Chief Executive Officer and Chairman of the Board of Quinpario Acquisition Corp., a blank check company formed in 2013. Mr. Quinn served as President and Chief Executive Officer from 2004 and Chairman from 2006 of Solutia Inc., a global leader in specialty chemicals until its sale in July 2012 to Eastman Chemical Company. Mr. Quinn joined Solutia as an executive officer in January 2003, serving as Senior Vice President, General Counsel, Secretary and, from June 2003, Chief Restructuring Officer. Solutia filed for Chapter 11 bankruptcy protection in December 2003 and emerged from bankruptcy protection in February 2008. Prior to that, Mr. Quinn served as Executive Vice President of Premcor, Inc. and Senior Vice President, General Counsel and Secretary of Arch Coal Inc. Mr. Quinn is also a director of Tronox Limited and Ferro Corporation. Mr. Quinn brings to the board his extensive senior level executive leadership experience in diverse industries and his broad experience in a wide range of functional areas, including strategic planning, mergers and acquisitions, human resources, and legal and governmental affairs. He also has extensive experience in board processes and governance.
Mr. Steffen most recently served as Vice Chairman of Citicorp and its principal subsidiary, Citibank N.A., until 1996. He is currently a private investor. Mr. Steffen is a director of Viasystems Group, Inc. and Platinum Underwriters Holdings, Ltd. and until 2012, served as a director of Accelrys, Inc. Mr. Steffen has served as Senior Vice President and Chief Financial Officer of Eastman Kodak and Executive Vice President and Chief Financial and Administrative Officer and director of Honeywell. As Lead Independent Director, Mr. Steffen presides at all executive sessions of the Board. With his background as a financial and operational leader with companies with global operations in various industries, Mr. Steffen brings to the Board his extensive international business expertise and knowledge of financial matters and financial reporting. Mr. Steffen also has substantial governance and oversight experience developed as a director of multiple public companies.
Mr. Tomkins most recently served as Senior Vice President and Chief Financial Officer of Innovene, a petrochemical and oil refining company controlled by BP that is now part of the INEOS Group, from 2005 until 2006. He served as Chief Financial Officer of Vulcan Materials Company from 2001 to 2005 and CFO of Great Lakes Chemical (now Chemtura) from 1998 to 2001. Prior to joining Great Lakes Chemical, Mr. Tomkins held various mid- and upper-level financial positions with AlliedSignal (now Honeywell) and Monsanto Company. Mr. Tomkins is a certified public accountant. Mr. Tomkins is a director of Elevance Renewable Sciences Inc., a privately held renewable polymer and energy company and, until 2012, he served as a director of CVR Energy, Inc. He is currently a private investor. With his background as a Chief Financial Officer of multiple public companies,

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Mr. Tomkins brings to the Board his intimate knowledge of the global chemicals and petroleum industry and his experience overseeing finance and business development in major corporations. Mr. Tomkins also has substantial governance and oversight experience developed as a director of multiple public companies.
Messrs. Poling, La Force and Shelnitz have been actively engaged in Grace's business for the past five years.
Ms. Wagoner joined Grace in 2009 as Vice President and Chief Human Resources Officer. From 2003 until she joined Grace, she was Senior Vice President, Human Resources at Host Hotels & Resorts, Inc.
Mr. Cole joined Grace in 2014 as Vice President, Government Relations and EHS. From 2002, until he joined Grace, he held leadership positions in government relations and public policy for General Motors Corporation.
Audit Committee
We have a standing Audit Committee established in accordance with the provisions of the Securities Exchange Act of 1934, as amended. The Committee members are H. Furlong Baldwin, Ronald C. Cambre, Marye Anne Fox, Janice K. Henry, Jeffry N. Quinn, Christopher J. Steffen and Mark E. Tomkins, each of whom meets the independence standards of the SEC and New York Stock Exchange. Mr. Tomkins serves as Chair of the Audit Committee. The Board of Directors has determined that all Audit Committee members are audit committee financial experts as defined by SEC regulations. A complete description of the responsibilities of the Audit Committee is set forth in the Grace Audit Committee Charter which is available on the Internet at www.grace.com/About/Leadership/Governance/.
Other Committees
We have standing Nominating and Governance, Compensation and Corporate Responsibility Committees. The members of each of these committees are H. Furlong Baldwin, Ronald C. Cambre, Marye Anne Fox, Janice K. Henry, Jeffry N. Quinn, Christopher J. Steffen and Mark E. Tomkins, each of whom meets the independence standards of the New York Stock Exchange. Mr. Steffen serves as Chair of the Nominating and Governance Committee, Mr. Quinn serves as Chair of the Compensation Committee and Dr. Fox serves as Chair of the Corporate Responsibility Committee. A complete description of the responsibilities of the Board committees is set forth in their respective committee charters which are available on the Internet at www.grace.com/About/Leadership/Governance/.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16 of the Securities Exchange Act of 1934, as amended, our directors, certain of our officers, and beneficial owners of more than 10% of the outstanding Grace common stock are required to file reports with the SEC concerning their ownership of and transactions in Grace common stock or other Grace securities; these persons are also required to furnish us with copies of these reports. Based upon the reports and related information furnished to us, we believe that all such filing requirements were complied with in a timely manner during and with respect to 2013.
Code of Ethics for Principal Officers
The Board of Directors and the Audit Committee have adopted Business Ethics and Conflicts of Interest policies, which apply to all of our directors, officers, and employees, including our principal officers. These policies are accessible through our Internet website, www.grace.com/About/Leadership/Governance/, and are available in hard copy, free of charge, by contacting Grace Shareholder Services at 410-531-4167. We granted no waivers to these policies during 2013. We intend to promptly post on our website any amendments or waivers to these policies affecting any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Item 11.    EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Summary
The Committee looks to reward strong business performance with pay that will continue to attract, retain and motivate a qualified management team. We believe that this pay for performance link is an attractive component of our compensation and one that we strengthened in 2013.

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Compensation Changes for 2013
•
Performance Based Units-We revised our long-term incentive program, which was made up entirely of stock options in 2012, such that 50% of the award value is made up of shares of Grace common stock that are subject to both time-based and performance-based vesting criteria and 50% of the award value is made up of stock options. This change was made to provide a stronger link between Grace performance and executive pay.

•
Stock Ownership Guidelines-We implemented guidelines that Grace directors and certain Grace executives maintain an ownership position in Grace common stock that is a multiple of their cash retainer for Grace directors or pay for officers.

•
Director Compensation-We revised our director compensation program to better align pay with shareholder interests by eliminating meeting fees and including a recurring annual grant of Grace common stock as a portion of the annual retainer that was previously paid entirely in cash.
The principal components of pay under our executive compensation program are annual base salary, annual cash incentive awards and long-term incentive awards, which consisted of both stock options and performance based units, or PBUs, in 2013. We use this mix of fixed and variable pay components with different payout forms (cash, stock and stock options) to reward annual and sustained performance. These components afford the Committee the necessary flexibility to recognize management.
The measures used by the Grace Compensation Committee to assess our performance for purposes of determining annual cash incentive awards for executive officers are based on our annual operating plan goals and are directly tied to the pay outcomes of our executive officers. For the 2013 Annual Incentive Compensation Plan (AICP), we used the following metrics to quantify performance:
•
Adjusted Earnings Before Interest and Taxes (Adjusted EBIT) (weighted 75%) This metric is the primary performance measure for the AICP and has been over the past several years.
•
Working Capital Days (weighted 25%) This metric measures the change in the average Working Capital Days for the three months ending December 31, 2013, from the average Working Capital Days for the prior year quarter. Working Capital Days is the sum of the average days that accounts receivable from sales are outstanding before collection and the average days inventory is held before sale less the average days accounts payable are outstanding before payment. This metric is designed to assess operational excellence and improvements in working capital management as Grace continues to integrate its operations on a global basis.
Based on our 2013 business model and operational and growth initiatives, we believe these measures best reflect our ability to grow our businesses profitably and maximize operational efficiency and cash flow. They also allow us to provide meaningful incentives that are competitive in our industry, encouraging our executives to drive sustained results and long-term shareholder value.
CEO Pay At-A-Glance
Mr. Festa's Total Direct Compensation (TDC) for 2013 was $5,049,669, a decrease of (24.2)% compared with the prior year. The chart below shows the components of pay awarded compared with the prior year. For more details about the structure of Mr. Festa's compensation, see "Summary Compensation Table."


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Compensation Element
 
2013
($)
 
2012
($)
 
Percentage Increase (Decrease)
in Compensation Element
(%)
Base Salary
 
975,000
 
975,000

 
—

Annual Cash Incentive
 
243,750
 
848,250

 
(71.3
)
Long-term Cash Incentive
 
—

 
1,499,985

 
—

Fair Market Value of Option Grant
 
1,761,324
 
2,381,400

 
(26.0
)
Fair Market Value of PBU Grant
 
1,849,992
 
—

 
—

Increase in Pension Value
 
57,000
 
798,000

 
(92.9
)
Other Compensation
 
162,603
 
162,811

 
(0.1
)
Total
 
5,049,669
 
6,665,446

 
(24.2
)
Overview
The Board of Directors has designated the five officers named in the Summary Compensation Table as executive officers. The executive officers include our Chief Executive Officer (CEO), Chief Operating Officer (COO), Chief Financial Officer (CFO) and vice presidents in charge of principal functions or who have policy-making authority. The Board of Directors has delegated authority for approving and administering the compensation plans for executive officers and other members of senior management to the Compensation Committee. The Board has appointed all of the independent members of the Board to serve as members of the Compensation Committee.
A complete description of the responsibilities of the Compensation Committee, referred to as the committee in this Compensation Discussion and Analysis, is set forth in our Compensation Committee Charter, which is available on the Internet at www.grace.com/About/Leadership/Governance/. The committee and the Board review the charter annually and revise it as necessary.
The committee is responsible for reviewing and approving the compensation of all executive officers, including:
•
base salary;
•
annual incentive compensation;
•
long-term incentive compensation;
•
employment agreements;
•
severance arrangements;
•
change-in-control agreements; and
•
any special or supplemental benefits not generally available to salaried employees.
The committee also reviews and approves all corporate goals and objectives used in determining the incentive compensation of each executive officer.
The committee receives advice and legal and administrative assistance from our human resources department, legal services group and the Board's outside counsel in meeting its responsibilities. The committee also has authority to retain other outside advisors. During 2013, the committee retained the services of Towers Watson, a human resources consulting firm, after reviewing its independence from management, and we expect the committee to continue working with Towers Watson during 2014. During 2012, the committee instructed Towers Watson to compile competitive compensation data and, based upon such data, to recommend ranges of annual and long-term compensation that are consistent with the committee's compensation philosophy and objectives as discussed below. In its independence review, the committee noted no conflicts of interest related to the work of Towers Watson. Specific services provided by Towers Watson to the committee during 2013 included:
•
participation in selected committee meetings;
•
preparation of market compensation data for executives and outside directors;
•
input on current market trends and practices; and
•
assessment of the competitiveness of our executive compensation.
In addition to services provided to the committee in respect of executive and director compensation, Towers Watson provided additional services to Grace in an amount that was less than $120,000 during 2013. The committee expects Towers Watson and our executive officers, including our CEO, our General Counsel and our

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Chief Human Resources Officer, and their respective subordinates, to meet, exchange information and otherwise cooperate in the performance of their respective duties outside committee meetings.
Compensation Elements
The following table outlines the major elements of compensation in 2013 for the executive officers named in the Summary Compensation Table, referred to generally as the named executive officers:
Compensation Element
 
Definition
 
Rationale
Base Salary
 
Fixed cash compensation paid twice monthly
 
Payment for completion of day-to-day responsibilities
Annual Incentive Compensation Plan
 
Variable cash compensation earned by annual personal performance and achievement of pre-established annual corporate financial performance goals
 
Builds accountability for achieving annual financial and business results and personal performance goals
Long-Term Incentive Compensation Plan (Stock Options)
 
Equity compensation with staggered vesting that increases in value with increases in share price; value is equivalent to 50% of executive officer's long-term incentive
 
Aligns long-term interests of executive officers and shareholders
Encourages executive retention
Long-Term Incentive Compensation Plan (Performance-Based Units)
 
Equity compensation subject to both time-based and performance-based vesting criteria; value is equivalent to 50% of executive officer's long-term incentive
 
Builds accountability for sustained financial results and accurate planning
Aligns long-term interests of executive officers and shareholders
Encourages executive retention
U. S. Defined Contribution Retirement Plans
 
Savings and Investment Plan (401(k))—Standard tax-qualified defined contribution retirement benefit subject to limitations on compensation and benefits under the Internal Revenue Code
 
Provides U.S. employees with opportunity to save for retirement on tax-advantaged basis with matched contributions from Grace
 
 
Savings and Investment Plan Replacement Payment Plan
(nonqualified)
 
Highly-paid U.S. employees made eligible for the same level of Grace match as all other participants in the Savings and Investment Plan notwithstanding Internal Revenue Code limitations
U. S. Defined Benefit Retirement Plans
 
Pension Plan—Standard tax-qualified pension plan subject to limitations on compensation and benefits under the Internal Revenue Code
 
Provides U.S. employees with retirement income
 
 
Supplemental Executive Retirement Plan(nonqualified)
 
Highly-paid U.S. employees made eligible for the same benefit formula as all other participants in the Pension Plan notwithstanding Internal Revenue Code limitations
Executive Compensation Philosophy and Objectives
The key objective of the Grace executive compensation program is to reward our executives for our financial performance and to enable us to compete effectively with other firms in attracting, motivating and retaining executives. The committee intends the incentive compensation portion of the program to align closely the financial interests of our executives with those of our shareholders. Because senior executives have a substantial ability to influence business success, the committee believes that the portion of compensation that is at-risk based on corporate performance should increase as the level of responsibility of the executive increases. The committee also expects the executive compensation program to be consistent with a culture of ethical conduct, personal integrity and compliance with our policies and applicable law. We require executives to set an example for our employees and our other business associates in emphasizing the Grace Core Values in their daily business conduct. The Grace Core Values consist of a commitment to teamwork, performance, integrity, speed and innovation, which, with our overall commitment to safety, are the foundation of our corporate culture.
Our executive compensation program is designed to reward executives for the achievement of corporate, operating segment and functional goals and objectives, taking into account both individual performance and contributions to our overall success. The individual performance evaluation is based on the input received from, and the recommendation provided by, the CEO. This assessment is based on the officer’s leadership, technical skill, management, operational performance and potential to contribute to Grace’s overall success. The CEO proposes compensation levels for the other executive officers and, although not a member of the committee, the CEO attends committee meetings and participates in committee deliberations regarding compensation levels for the other executive officers. In addition, since the number of executive officers is small, the committee is able to spend considerable time with each executive officer outside committee meetings and is able to develop a more intimate familiarity. The CEO is excused from deliberations regarding his own compensation and from the "executive

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session" portion of each meeting when the committee meets alone or alone with its outside advisors. The CEO is also excused when the committee meets separately with internal advisors from our human resources group.
Periodically the committee consults with Towers Watson for an assessment of the competitiveness of our executive officer compensation relative to certain benchmark companies in the chemicals, materials and specialty chemicals industry that the committee deems our peer group for compensation purposes, and relative to certain broad industry data. The committee selected the benchmark companies as our compensation peer group based upon their size and global scope, the quality of their executive talent, the likelihood that we compete with them for executive talent and the availability of public information regarding their compensation practices. The committee periodically reviews the composition of our compensation peer group to ensure that it remains relevant. For 2013 compensation, the peer group consisted of:
Albemarle Corp.
 
Olin Corp.
Axiall Corp.
 
OM Group Inc.
Cabot Corp.
 
PolyOne Corp.
Celanese Corp.
 
Rockwood Holdings Inc.
Cytec Industries Inc.
 
RPM International Inc.
Eastman Chemical Co.
 
A. Schulman Inc.
Ferro Corp.
 
Sigma-Aldrich Corp.
FMC Corp.
 
Valspar Corp.
International Flavors & Fragrances Inc.
 
Westlake Chemcial Corp.
The broad industry data that the committee generally reviews is included in studies produced by Towers Watson, Mercer and AonHewitt (all of whom are also nationally recognized compensation and benefits consulting firms) for any given compensation year. The committee used the chemicals and non-durable goods sections of these surveys. These data are used as a secondary reference for executive officer compensation, largely as a check on the peer group compensation levels, as well as to determine if there are any identifiable non-industry trends in compensation.
Once the committee has completed an evaluation of an executive officer's overall performance, the committee reviews the executive officer's existing compensation. This information, presented in the form of a "tally sheet," reflects all compensation payable or potentially payable to the executive officer under our compensation plans. For each executive officer, the committee compares the tally sheet to the peer group information provided by Towers Watson and the broad industry data to provide context to its compensation decisions. The committee then makes the compensation determination based on its individual evaluation of each executive officer.
In setting an executive officer's compensation level the committee does not target a specific percentile at which pay levels should be set, as the members believe the market for executive talent includes a wide range of practices. Instead, the committee reviews the distribution of peer group pay practices and broad industry data and determines the appropriate positioning of each executive officer's pay based on factors including, but not limited to, the roles and responsibilities of the executive officer, the executive officer's performance, experience, the depth of the market data available and internal equity with other Grace salaried employees. In the case of incentive compensation, if performance objectives are exceeded, the committee believes that incentive compensation should be at or above targeted levels and when performance objectives are not achieved, incentive compensation should be below targeted levels. Grace executives are generally eligible for periodic compensation reviews.
In order to ensure that the long-term financial interests of our directors and senior executives are fully aligned with the long-term interests of our shareholders, in 2013 the Board implemented stock ownership guidelines. The guidelines are as follows:
Category of Executive
 
Ownership Guideline
Directors (other than CEO)
 
5 times cash portion of annual retainer
Chief Executive Officer
 
5 times base salary
Members of the Grace Leadership Team
 
3 times base salary
Presidents of Operating Segments
 
2 times base salary
Certain Key Vice Presidents
 
1 times base salary

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Current directors and executives subject to the stock ownership guidelines generally have five years to comply with the relevant guideline.
As a result of the Chapter 11 filing, we have not held an annual meeting of shareholders and, accordingly, have not obtained a say-on-pay advisory vote of the shareholders under Section 14A of the Securities Exchange Act of 1934, as amended. At such time as we hold say-on-pay advisory votes, we expect the committee will consider the results of such votes in making future compensation decisions for the named executive officers.
Chief Executive Officer
The committee's process for determining the compensation of the CEO is similar to the process it applies to other executive officers. The committee reviews and approves corporate goals and objectives used in determining the compensation of the CEO. The committee evaluates the CEO's performance in light of those goals and objectives and has sole authority to determine the CEO's compensation based on this evaluation. The terms of the CEO's employment agreement are discussed below in this Compensation Discussion and Analysis and under the Summary Compensation Table and Potential Payments Upon Termination or Change-In-Control Table. The CEO plays no part in the committee's deliberations or approval of his own compensation.
The committee believes the CEO's compensation should be higher than the compensation of other executive officers because the CEO is uniquely positioned to influence all aspects of our operations and performance and the resulting return to our shareholders. In addition, the committee believes there exists a robust competition for effective CEO talent among companies of our size and, in this environment, a competitive compensation package is essential for retention. The committee's view is consistent with the practices of the compensation peer group companies and the broad industry data that it has reviewed.
Compensation Elements
Base Salary
In 2013, based on its review of competitive compensation information described above, the committee increased base salaries for certain named executive officers as set forth in the following table:
Named Executive Officer
 
Base Annual Salary Rate as of 12/31/2013
($)
 
Base Annual Salary Rate as of 12/31/2012
($)
 
Percentage Increase
in Base Annual Salary Rate
(%)
A. E. Festa
 
975,000
 
975,000
 
—
H. La Force III
 
470,000
 
430,000
 
9.3
G. E. Poling
 
600,000
 
550,000
 
9.1
M. A. Shelnitz
 
390,000
 
375,000
 
4.0
P. K. Wagoner
 
335,000
 
325,000
 
3.1
Annual Incentive Compensation
The Annual Incentive Compensation Plan, or AICP, is a cash-based pay-for-performance incentive plan. Its purpose is to motivate and reward upper- and middle-level employees, including executive officers, for their contributions to our performance. The amount of an individual incentive award payment under the AICP is based upon:
•
the individual's AICP target amount;
•
the funding of the AICP incentive pool based on our performance; and
•
the individual's personal performance.
The Board of Directors established our 2013 AICP targets on February 26, 2013, after considering its objectives for the company and the general economic environment in which we expected to be operating during the year. As in 2012, the Board of Directors focused on the dual objectives of growing earnings commensurate with the business opportunities we have and the investments we have made, and improving our working capital performance.
The committee established objective annual incentive targets based on the performance targets in our 2013 operating plans. The committee evaluated the difficulty of achieving the performance targets in light of uncertainties

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in the general economy and the chemicals industry and ongoing economic weakness in Europe, and concluded that achievement of such targets would constitute good to outstanding Grace financial performance.
While emphasizing both earnings and working capital performance in setting our annual incentive compensation plan goals, the committee gave substantially more weight to earnings performance than working capital performance because the committee believed that for 2013, earnings performance remained the most important indicator of Grace's business performance.
For earnings, the committee continued with the Adjusted EBIT measure for earnings (as such term is described in this Report in Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations) in the Financial Supplement) used in 2012.
For working capital, the committee used the "Working Capital Days" metric that it established in 2012. This metric measures the change in the average Working Capital Days for the three months ending December 31, 2013, from the average Working Capital Days for the prior year quarter. Generally, the lower the number of Working Capital Days, the more efficient the business is in its operations, generating cash and freeing up capital for other corporate purposes.
These metrics ensure the continuing alignment of the economic interests of our executives with our annual operating plans and the interests of our shareholders. The AICP targets for our named executive officers are as follows:
Named Executive Officer
 
AICP Target as Percent of
Base Salary Paid
During 2013
 
AICP Target as Percent of
Base Salary Paid
During 2012
A. E. Festa
 
100
%
 
100
%
H. La Force III
 
80
%
 
80
%
G. E. Poling
 
90
%
 
90
%
M. A. Shelnitz
 
70
%
 
70
%
P. K. Wagoner
 
70
%
 
70
%
Actual awards for executive officers may range from $0 to an amount equal to 200% of the target amount, based on the factors described above.
The target AICP incentive pool is the sum of the target awards of all participants in the AICP. For 2013, 75% of the available AICP incentive pool was established based on our performance in respect of Adjusted EBIT and 25% on performance in respect of Working Capital Days, which aligns the funded amount of our AICP incentive pool with our actual performance. We refer to the relevant targets as the Adjusted EBIT Target and the Working Capital Days Target, respectively.
2013 AICP Performance Targets
Adjusted EBIT
(75% of Available Incentive Pool)
(in $ millions)*
 
Working Capital Days
(25% of Available Incentive Pool)
(in days)
 
Portion of Incentive
Pool funded in
respect of Target
Less than $492
 
More than 64.2
 
—%
$492
 
64.2
 
25%
$615
 
53.5
 
100%
$738 or More
 
42.8 or Less
 
200%
*
Adjusted to reflect Grace’s adoption of mark-to-market pension accounting in the 2013 fourth quarter as described in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 1 (Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies) to the Consolidated Financial Statements.

In setting the actual amount of the AICP incentive pool, the committee has discretion to adjust the performance objectives, adjust the calculation of each performance measure or adjust the size of the AICP incentive pool irrespective of the achievement of performance objectives. The committee believes that AICP participants generally

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should not benefit from or be penalized by items not considered when the performance targets are set that result in large unexpected variances from annual operating plan assumptions.

For 2013, the committee made no changes in the calculation of Working Capital Days for use in the AICP calculation. Actual 2013 Working Capital Days (representing 25% of Available Incentive Pool) were 53.6 days, the target level.

For 2013, the committee made no changes in the calculation of Adjusted EBIT for use in the AICP calculation. The committee did adjust the Adjusted EBIT performance targets to reflect Grace’s adoption of mark-to-market pension accounting in the 2013 fourth quarter as shown in the table above. Actual 2013 Adjusted EBIT (representing 75% of Available Incentive Pool) was $550.8 million. On the recommendation of management, reflecting the fact that 2013 Adjusted EBIT was less than 2012 Adjusted EBIT of $558.2 million, the committee exercised its discretion and did not fund the AICP incentive pool for the named executive officers in respect of the Adjusted EBIT target. The total AICP incentive pool for the named executive officers was established at 25% of the aggregate target amounts for the named executive officers.

Actual 2013 AICP payments to the named executive officers are as set forth below:
Name
 
Actual AICP Payment
($)
A. E. Festa
 
243,750
H. La Force III
 
94,000
G. E. Poling
 
135,000
M. A. Shelnitz
 
68,250
P. K. Wagoner
 
58,625
Long-Term Incentive Compensation
Our Long-Term Incentive Plans, or LTIPs, are designed to motivate and reward our key employees, including our named executive officers, for their contributions to our performance over a multi-year period and align their financial interests with those of our shareholders by making a significant portion of their total compensation variable and dependent upon our sustained financial performance. The target value of the LTIP award for each LTIP participant, with the exception of the CEO, was determined by the committee based on the recommendation of the CEO. The target value of the CEO’s LTIP award was determined by the committee. These target award values were determined by reviewing current market compensation data (as discussed earlier in this report), historical long-term incentive target values, the total number of available options and shares to be granted and internal pay equity considerations. Aggregate LTIP awards under the 2013 LTIP were approved by the Bankruptcy Court.
Fifty percent of the target award value of the 2013 LTIP is awarded in options to purchase Grace common stock and 50% is awarded in performance based units, or PBUs. The committee generally grants LTIP awards during the first year of the performance period.
Stock Options
Stock options represent 50% of the value of our LTIP awards. The value of stock options is directly related to the increase in value of our stock, so stock options provide direct alignment between the interests of our executives and shareholders. In determining the value of stock option awards, the committee used an analysis of stock option value based on an adjusted Black-Scholes option pricing model and reviewed this analysis with Towers Watson. The committee approved the stock option grants included in the 2013 LTIP on May 2, 2013, after approval of the 2013 LTIP by the Bankruptcy Court on April 16, 2013. The exercise price of the options was $76.655, which was the average of the high and low trading prices of Grace common stock on the New York Stock Exchange on May 2, 2013. The term of the options is five years and they vest over three years in equal annual installments commencing the year after the date of grant.
Performance Based Units
Performance based units, or PBUs, represent 50% of the value of our LTIP awards. The value of PBUs is directly related to the achievement of specified business performance objectives and the increase in value of our stock, so PBUs also provide direct alignment between the interests of our executives and shareholders. Specifically, the amount of an individual payout under a PBU is based upon:

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•
the individual’s PBU target share amount;
•
the growth in our LTIP Adjusted EBIT over the three-year performance period; and
•
the value of Grace common stock on the payout date.
    
Payouts to executives who are subject to our stock ownership guidelines are payable in shares of Grace common stock. Payouts to other participants are payable in cash.
LTIP Adjusted EBIT
Adjusted EBIT was selected as the performance measure for the PBUs as the committee believed that it was the best measure given our our focus on long-term operational excellence and quality of earnings. In determining cumulative LTIP Adjusted EBIT growth, Adjusted EBIT for the final year of the performance period may be adjusted in the discretion of the committee to eliminate the effect of changes in accounting, like our adoption of mark-to-market pension accounting, or significant changes in our business, like a significant acquisition or divestment. In order to earn the target payout, our cumulative annual LTIP Adjusted EBIT growth from the 2012 baseline performance to 2015 actual performance must be 30%, to earn the maximum of 200% of the target payout, growth must be 45% and no payout is earned if growth is 15% or less as reflected in the following table:
3-Year Cumulative LTIP Adjusted EBIT Growth
(%)
2015 LTIP Adjusted EBIT
(in millions)
Number of PBU Shares Paid Out
(# Shares)
Greater than 45%
Greater than $750.2
200% of PBU Award
45%
$750.2
200% of PBU Award
30%
$672.6
100% of PBU Award
15%
$595.0
50% of PBU Award
Less than 15%
Less than $595.0
—
Pension Plan/Supplemental Executive Retirement Plan
As described below under "Pension Benefits," payments under our tax-qualified pension plan are calculated using annual compensation, including base salary and AICP awards, and years of credited Grace service. For 2013, federal income tax law limits to $255,000 the annual compensation on which benefits under the tax-qualified pension plan may be based. As a result, the committee has implemented a Supplemental Executive Retirement Plan, generally referred to as a SERP, that currently applies to approximately 85 upper level employees, including the executive officers, whose annual compensation exceeds that amount. Under this plan, each such employee will receive the full pension to which that employee would be entitled in the absence of the limitations described above and other limitations imposed under federal income tax law. The SERP is unfunded and is not qualified for tax purposes.
Savings and Investment Plan/Replacement Payment Plan
We generally offer a tax-qualified 401(k)-type Savings and Investment Plan, or S&I Plan, to employees under which they may save a portion of their annual compensation in investment accounts on a pre- or post-tax basis. We currently match 100% of employee savings under the S&I Plan up to 6% of the employee's base salary and annual incentive compensation. The committee believes that a 401(k)-type plan with a meaningful company match is an effective recruiting and retention tool for our employees, including our executive officers. For 2013, federal income tax law limits qualifying annual compensation for 401(k) plan purposes to $255,000. As a result, the committee has implemented an S&I Plan Replacement Payment Plan that currently applies to approximately 60 of our employees, including our executive officers, whose annual compensation exceeds that amount. Under this plan, each such employee will receive the full matching payments to which that employee would be entitled in the absence of the limitations described above and other limitations imposed under federal income tax law.
Executive Personal Benefits
The committee believes that executives generally should not be treated differently than the general employee population when it comes to personal benefits and therefore, the committee has limited executive personal benefits. Executive officers are eligible to participate in an executive physical examination program that offers executives an annual comprehensive physical examination within a compressed time period. Mr. Festa has access to corporate

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aircraft for reasonable personal travel, though he is responsible for paying income taxes on the value of such travel as determined by the Internal Revenue Service.
Change-In-Control Severance Agreements
As described below under "Termination and Change-in-Control Arrangements-Change-In-Control Severance Agreements," we have entered into change-in-control severance agreements with each of the named executive officers. The provisions in these agreements are based on competitive practice and are designed to ensure that the executive officers' interests remain aligned with the interests of our shareholders if a potential change in control occurs. Payments under these agreements are triggered by the involuntary termination of the executive officer's employment without cause (including constructive termination caused by a material reduction in his or her authority or responsibility or by certain other circumstances) following a "change in control." A change in control situation often undermines an executive officer's job security, and it is to our benefit and our shareholders' benefit to encourage our executive officers to seek out beneficial transactions and to remain employed through the closing of any transaction, even though their future employment at Grace may be uncertain. The change-in-control severance agreements are designed to reinforce and encourage the continued attention and dedication of the executive officers to their assigned duties without distraction in the face of potentially adverse circumstances arising from the possibility of a change in control of Grace. Certain terms of these agreements are described below under the Potential Payments Upon Termination or Change-In-Control Table.
Severance Arrangements
As described below under "Termination and Change-in-Control Arrangements-Other Executive Officer Severance Arrangements," we have entered into severance arrangements with each of the named executive officers. Payments under these arrangements are triggered by involuntary termination of employment under most circumstances. Our severance arrangements are designed to encourage and reinforce the continued attention and dedication of our executive officers to their assigned duties without undue concern regarding their job security. In the case of Mr. La Force and Ms. Wagoner, the severance arrangements are contained in agreements that were negotiated on an arms-length basis prior to the time they joined Grace. The payments required by these agreements were designed to encourage Mr. La Force and Ms. Wagoner to join and remain with Grace in lieu of other employment opportunities available to them. Certain terms of these arrangements are described below under the Potential Payments Upon Termination or Change-In-Control Table.
Executive Salary Protection Plan
As described below under "Termination and Change-in-Control Arrangements-Executive Salary Protection Plan," our Executive Salary Protection Plan provides payments to our named executive officers, or their respective beneficiaries, in the event of their disability or death prior to age 70 while employed by Grace. The plan is designed to encourage the continued attention and dedication of our executive officers to their assigned duties without undue concern regarding their ability to earn a living and support their families in the event of death or disability. Certain terms of this plan are described below under the Potential Payments Upon Termination or Change-In-Control Table.
Chapter 11 Emergence Bonus

On February 3, 2014, the Joint Plan became effective, concluding our status as a debtor under Chapter 11.  The Joint Plan as confirmed by the Bankruptcy Court provides $6 million for the payment of special cash bonuses to our executives, including the executive officers named in the Summary Compensation Table. On February 25, 2014, the Committee determined to pay emergence bonuses to the Named Executive Officers in the following amounts:
Name
 
Emergence Bonus
($)
A. E. Festa
 
1,500,000
H. La Force III
 
750,000
G. E. Poling
 
750,000
M. A. Shelnitz
 
1,000,000
P. K. Wagoner
 
250,000
These emergence bonuses were paid in recognition by the Committee of the outstanding performance and leadership of our executive team in managing the Chapter 11 process to a successful conclusion. Grace expects that the emergence bonuses will be paid in March 2014.

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Deductibility of Executive Compensation
Under the Omnibus Budget Reconciliation Act of 1993, provisions were added to the Internal Revenue Code of 1986, as amended, under Section 162(m) that limit the tax deduction for compensation expense in excess of $1 million paid to certain executive officers unless such compensation is "performance-based" and satisfies certain other conditions. The committee believes that compensation payable to executive officers should generally meet the conditions required for full deductibility under Section 162(m). Tax deductibility is one criterion the committee considers when establishing compensation plans. The AICP and LTIPs are structured with the intention that the compensation payable thereunder will generally qualify as deductible "performance-based" compensation. While the committee believes that it is important to preserve the ability to structure compensation plans to meet a variety of corporate objectives even if the compensation is not deductible, due to the committee's focus on performance-based compensation plans, the committee expects that, despite its power to exercise positive discretion in establishing payments under the AICP, the vast majority of compensation paid to the named executive officers will be tax deductible.
Compensation Committee Report
We, the undersigned members of the Compensation Committee of the Board of Directors of Grace, have reviewed Grace's Compensation Discussion and Analysis for 2013 and have discussed it with Grace management. Based on our review and this discussion, we recommend to the Board that the Compensation Discussion and Analysis be included in Grace's Annual Report on Form 10-K.
COMPENSATION COMMITTEE

Jeffry N. Quinn, Chair
H. Furlong Baldwin
Ronald C. Cambre
Marye Anne Fox
Janice K. Henry
Christopher J. Steffen
Mark E. Tomkins



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Summary Compensation Table
The following table sets forth the compensation we paid for the periods indicated to our Chief Executive Officer, our Chief Financial Officer and each of our other three most highly compensated executive officers who were executive officers as of December 31, 2013, determined by reference to the total compensation earned by such individuals for 2013 (reduced by the amount set forth in the table below under the caption "Change in Pension Value and Nonqualified Deferred Compensation Earnings").
Name and
Principal Position
 
Year
 
Salary
($)
 
Bonus
($)
 
Stock
Awards(a)
($)
 
Option
Awards(a)
($)
 
Non-Equity
Incentive Plan
Compensation
($)
 
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(c)
($)
 
All
Other
Compensation(d)
($)
 
Total
($)
 
 
 
 
 
 
AICP(b)
LTIP(b)
 
 
 
A. E. Festa
 
2013
 
975,000
 
-—-
 
1,849,992
 
1,761,324
 
243,750
-—-
 
57,000
 
162,603
 
5,049,669
Chairman & Chief
 
2012
 
975,000
 
-—-
 
-—-
 
2,381,400
 
848,250
1,499,985
 
798,000
 
162,811
 
6,665,446
Executive Officer
 
2011
 
968,500
 
-—-
 
-—-
 
4,087,685
 
1,350,000
2,156,005
 
646,000
 
157,805
 
9,365,995
H. La Force III
 
2013
 
453,333
 
-—-
 
399,986
 
380,834
 
94,000
-—-
 
64,000
 
46,572
 
1,438,725
Senior Vice President & Chief
 
2012
 
430,000
 
-—-
 
-—-
 
587,990
 
299,280
309,997
 
170,000
 
53,275
 
1,850,542
Financial Officer
 
2011
 
430,000
 
-—-
 
-—-
 
773,333
 
435,000
352,001
 
119,000
 
50,700
 
2,160,034
G. E. Poling
 
2013
 
579,167
 
-—-
 
749,993
 
714,046
 
135,000
-—-
 
(41,000)
 
62,004
 
2,199,210
President & Chief
 
2012
 
550,000
 
-—-
 
-—-
 
1,190,700
 
430,650
382,496
 
1,222,000
 
70,375
 
3,846,221
Operating Officer
 
2011
 
466,667
 
-—-
 
-—-
 
1,073,933
 
600,000
482,502
 
1,017,000
 
61,900
 
3,702,002
M. A. Shelnitz
 
2013
 
383,750
 
-—-
 
275,038
 
261,820
 
68,250
-—-
 
(114,000)
 
38,143
 
913,001
Vice President,
 
2012
 
375,000
 
-—-
 
-—-
 
396,900
 
228,375
239,998
 
571,000
 
41,875
 
1,853,148
General Counsel &
 
2011
 
375,000
 
-—-
 
-—-
 
541,333
 
300,000
280,001
 
522,000
 
39,000
 
2,057,334
Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
P. K. Wagoner
 
2013
 
330,833
 
-—-
 
224,982
 
214,218
 
58,625
-—-
 
48,000
 
33,141
 
909,799
Vice President &
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Chief Human
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Resources Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_______________________________________________________________________________
(a)
Amounts reflect the aggregate grant date fair value of performance-based unit awards (in the “Stock Awards” column) and option awards (in the “Option Awards” column), in each case computed in accordance with FASB ASC Topic 718, "Compensation-Stock Compensation." In the case of performance-based units, the amounts shown in the Stock Awards column are based on the probable outcome of performance conditions, consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures. The values of the performance-based unit awards at the grant date if the highest level of performance conditions were to be achieved would be as follows: Mr. Festa - $3,699,984; Mr. La Force - $799,972; Mr. Poling - $1,499,985; Mr. Shelnitz - $550,076; and Ms. Wagoner - $449,965. The assumptions used to calculate the compensation expense reported for 2013 are described in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 18 (Stock Incentive Plans) to the Consolidated Financial Statements and are incorporated herein by reference.
(b)
The 2013 amount consists of payments that we expect to make in March 2014 pursuant to the 2013 Annual Incentive Compensation Plan (AICP). Since the 2010-2012 LTIP, for which a final payment was made in March 2013, we have not awarded cash LTIPs.
(c)
The 2013 amount consists of the aggregate change in the actuarial present value of the individual's accumulated benefit under the Grace Pension Plan and Grace Supplemental Executive Retirement Plan (SERP) from December 31, 2012, to December 31, 2013, assuming a 4.76% discount rate and retirement at age 62 with benefits payable on a straight life annuity basis and other assumptions used for financial reporting purposes under generally accepted accounting principles as described in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 11 (Pension Plans and Other Postretirement Benefits Plans) to the Consolidated Financial Statements as follows:
Name
 
Change in Pension Plan Value
($)
 
Change In SERP Value
($)
 
Total Change in Pension Value
($)
A. E. Festa
 
11,000

 
46,000

 
57,000

H. La Force III
 
12,000

 
52,000

 
64,000

G. E. Poling
 
(5,000
)
 
(36,000
)
 
(41,000
)
M. A. Shelnitz
 
(22,000
)
 
(92,000
)
 
(114,000
)
P. K. Wagoner
 
22,000

 
26,000

 
48,000


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(d)
The 2013 amount consists of the following:
Name
 
Personal Benefits*
($)
 
S&I Plan Matching Payments
($)
 
S&I Plan Replacement Payments
($)
 
Liability Insurance
($)
 
Total
($)
A. E. Festa
 
51,793
**
15,300
 
94,095
 
1,415
 
162,603
H. La Force III
 
n/a
 
15,300
 
29,857
 
1,415
 
46,572
G. E. Poling
 
n/a
 
15,300
 
45,289
 
1,415
 
62,004
M. A. Shelnitz
 
n/a
 
15,300
 
21,428
 
1,415
 
38,143
P. K. Wagoner
 
n/a
 
15,300
 
16,426
 
1,415
 
33,141
_______________________________________________________________________________
*
Consists of our aggregate incremental cost of providing personal benefits if the aggregate amount of personal benefits provided to the individual equaled or exceeded $10,000.
**
Consists of personal use of Grace-provided aircraft, calculated based on personal-use flight hours as a percentage of total flight hours charged to Grace, ($49,673) and participation in the executive physical examination program ($2,120).
Grants of Plan-Based Awards in 2013
The following table provides information regarding grants under our Annual Incentive Compensation Plan, or AICP, and Long Term Incentive Plan, or LTIP, to the executive officers named in the Summary Compensation Table during 2013.
 
Name
 
Plan
Grant
Date
Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards(a)
 
Estimated Future Payouts Under Equity Incentive Plan Award(s)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(d)
 
Exercise
or Base
Price of
Option
Awards
($/Sh)(e)
 
Closing Price on Grant Date
($/Sh)
 
Grant Date
Fair Value
of Stock and Option
Awards
($)(f)
 
 
Threshold
($)(b)
Target
($)(b)
Maximum
($)(b)
Threshold
(#)(c)
Target
(#)(c)
Maximum (#)(c)
 
A. E. Festa
 
2013 AICP
n/a
243,750
975,000
1,950,000
 
-—-
-—-
-—-
-—-
 
-—-
 
-—-
 
-—-
 
 
 
2013 LTIP (Option)
5/2/2013
-—-
-—-
-—-
 
-—-
-—-
-—-
90,986
 
76.655
 
77.480
 
1,761,324
 
 
 
2013 LTIP (PBU)
5/2/2013
-—-
-—-
-—-
 
12,067
24,134
48,268
-—-
 
-—-
 
-—-
 
1,849,992
 
H. La Force III
 
2013 AICP
n/a
94,000
376,000
752,000
 
-—-
-—-
-—-
-—-
 
-—-
 
-—-
 
-—-
 
 
 
2013 LTIP (Option)
5/2/2013
-—-
-—-
-—-
 
-—-
-—-
-—-
19,673
 
76.655
 
77.480
 
380,834
 
 
 
2013 LTIP (PBU)
5/2/2013
-—-
-—-
-—-
 
2,609
5,218
10,436
-—-
 
-—-
 
-—-
 
399,986
 
G. E. Poling
 
2013 AICP
n/a
135,000
540,000
1,080,000
 
-—-
-—-
-—-
-—-
 
-—-
 
-—-
 
-—-
 
 
 
2013 LTIP (Option)
5/2/2013
-—-
-—-
-—-
 
-—-
-—-
-—-
36,886
 
76.655
 
77.480
 
714,046
 
 
 
2013 LTIP (PBU)
5/2/2013
-—-
-—-
-—-
 
4,892
9,784
19,568
-—-
 
-—-
 
-—-
 
749,993
 
M. A. Shelnitz
 
2013 AICP
n/a
68,250
273,000
546,000
 
-—-
-—-
-—-
-—-
 
-—-
 
-—-
 
-—-
 
 
 
2013 LTIP (Option)
5/2/2013
-—-
-—-
-—-
 
-—-
-—-
-—-
13,525
 
76.655
 
77.480
 
261,820
 
 
 
2013 LTIP (PBU)
5/2/2013
-—-
-—-
-—-
 
1,794
3,588
7,176
-—-
 
-—-
 
-—-
 
275,038
 
P. K. Wagoner
 
2013 AICP
n/a
58,625
234,500
469,000
 
-—-
-—-
-—-
-—-
 
-—-
 
-—-
 
-—-
 
 
 
2013 LTIP (Option)
5/2/2013
-—-
-—-
-—-
 
-—-
-—-
-—-
11,066
 
76.655
 
77.480
 
214,218
 
 
 
2013 LTIP (PBU)
5/2/2013
-—-
-—-
-—-
 
1,468
2,935
5,870
-—-
 
-—-
 
-—-
 
224,982
_______________________________________________________________________________
(a)
Actual payments pursuant to the 2013 AICP that we expect to pay in March 2014 have been determined and are reflected in the Summary Compensation Table.
(b)
Amounts are based upon base salary actually paid during 2013.
(c)
The number of performance-based units that are earned, if any, will be based on performance for fiscal years 2013 to 2015 and will be determined after the close of fiscal year 2015.
(d)
Options are exercisable in one-third increments on May 2, 2014, May 1, 2015 and May 2, 2016.
(e)
The exercise price was determined based on the average of the high and low trading prices of Grace common stock on the New York Stock Exchange on the grant date.
(f)
The grant date fair value is generally the amount that Grace would expense in its financial statements over the award's service period, but does not include a reduction for forfeitures.

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2013 Annual Incentive Compensation Plan (AICP)
The AICP is a cash-based pay-for-performance incentive plan. Awards under the AICP are allocated from the incentive pool, the amount of which is determined by the extent to which business performance objectives are achieved. The committee has discretion to establish or increase the size of the incentive pool even if performance objectives are not achieved. Once the incentive pool is established, an executive officer's award payment is determined based on the individual's target award, performance and other factors determined by the committee.
In order to receive an AICP award payment for a specific calendar year, employees generally must be actively employed by Grace through the payout date, which is typically in March of the following year. See "Potential Payments Upon Termination or Change-In-Control—Termination and Change-in-Control Arrangements" for a description of the circumstances under which AICP payments would be made upon termination of an executive's employment with Grace.
Long-Term Incentive Plan (LTIP)
Our long-term incentive plans are multi-year, pay-for-performance incentive plans. Awards under our 2013-2015 LTIP consisted of a performance-based unit award and an award of stock options under our Amended and Restated 2011 Stock Incentive Plan.
Outstanding Equity Awards at Fiscal Year End 2013
The following table provides information regarding outstanding stock options held by the executive officers named in the Summary Compensation Table as of December 31, 2013.

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Option Awards
 
Stock Awards
 
Name
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
 
Option
Exercise
Price
($)
 
Option
Expiration
Date
 
Equity incentive plan awards: number of unearned units that have not vested
(#)
 
Equity incentive plan awards: payout value of unearned units that have not vested
(#)
 
A. E. Festa
 
—

 
—

 
—

 
—

 
24,134

 
2,386,129

(a)
 
 
—

 
90,986

(b)
76.655
 
5/2/2018

 
—

 
—

 
 
 
54,000

 
108,000

(c)
48.450
 
6/28/2017

 
—

 
—

 
 
 
176,193

 
88,097

(d)
42.255
 
5/5/2016

 
—

 
—

 
 
 
262,500

 
—

 
27.745
 
5/5/2015

 
—

 
—

 
 
 
108,236

 
—

 
9.785
 
5/7/2014

 
—

 
—

 
H. La Force III
 
—

 
—

 
—

 
—

 
5,218

 
515,904

(a)
 
 
—

 
19,673

(b)
76.655
 
5/2/2018

 
—

 
—

 
 
 
13,336

 
26,664

(c)
48.450
 
6/28/2017

 
—

 
—

 
 
 
33,333

 
16,667

(d)
42.255
 
5/5/2016

 
—

 
—

 
 
 
54,250

 
—

 
27.745
 
5/5/2015

 
—

 
—

 
 
 
34,744

 
—

 
9.785
 
5/7/2014

 
—

 
—

 
G. E. Poling
 
—

 
—

 
—

 
—

 
9,784

 
967,344

(a)
 
 
—

 
36,886

(b)
76.655
 
5/2/2018

 
—

 
—

 
 
 
27,000

 
54,000

(c)
48.450
 
6/28/2017

 
—

 
—

 
 
 
6,667

 
3,333

(e)
41.250
 
11/3/2016

 
—

 
—

 
 
 
40,001

 
19,999

(d)
42.255
 
5/5/2016

 
—

 
—

 
 
 
66,938

 
—

 
27.745
 
5/5/2015

 
—

 
—

 
M. A. Shelnitz
 
—

 
—

 
—

 
—

 
3,588

 
354,746

(a)
 
 
—

 
13,525

(b)
76.655
 
5/2/2018

 
—

 
—

 
 
 
9,000

 
18,000

(c)
48.450
 
6/28/2017

 
—

 
—

 
 
 
23,333

 
11,667

(d)
42.255
 
5/5/2016

 
—

 
—

 
 
 
42,000

 
—

 
27.745
 
5/5/2015

 
—

 
—

 
 
 
40,590

 
—

 
9.785
 
5/7/2014

 
—

 
—

 
P. K. Wagoner
 
—

 
—

 
—

 
—

 
2,935

 
290,183

(a)
 
 
—

 
11,066

(b)
76.655
 
5/2/2018

 
—

 
—

 
 
 
7,669

 
15,331

(c)
48.450
 
6/28/2017

 
—

 
—

 
 
 
20,001

 
9,999

(d)
42.255
 
5/5/2016

 
—

 
—

 
 
 
35,000

 
—

 
27.745
 
5/5/2015

 
—

 
—

 
_______________________________________________________________________________
(a)
Market value of performance-based units that have not been earned is based on the December 31, 2013 closing market price of Grace common stock of $98.87 per share. The performance-based units will be earned or forfeited based on Grace performance from fiscal year 2013 through fiscal year 2015. Performance for fiscal year 2013 was at a level in excess of one-third of the performance threshold; therefore, the target amounts are shown.
(b)
Options are exercisable in one-third increments on May 2, 2014, May 1, 2015 and May 2, 2016.
(c)
Options are exercisable in one-third increments on June 28, 2013, June 28, 2014 and June 28, 2015.
(d)
Options are exercisable in one-third increments on May 4, 2012, May 3, 2013 and May 5, 2014.
(e)
Options are exercisable in one-third increments on November 2, 2012, November 1, 2013 and November 3, 2014.

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Option Exercises and Stock Vested in 2013
The following table provides information regarding the exercise of options held by the executive officers named in the Summary Compensation Table during 2013.
 
 
Option Awards
 
Stock Awards
Name
 
Number of
Shares
Acquired on
Exercise
(#)
 
Value
Realized on
Exercise
($)
 
Number of
Shares
Acquired on
Vesting
(#)
 
Value
Realized on
Vesting
($)
A. E. Festa
 
312,964
 
21,813,410
 
—

 
—

H. La Force III
 
61,186
 
3,856,979
 
—

 
—

G. E. Poling
 
71,030
 
4,711,402
 
—

 
—

M. A. Shelnitz
 
31,710
 
1,802,427
 
—

 
—

P. K. Wagoner
 
0
 
0
 
—

 
—

Pension Benefits
The following table provides information regarding benefits under our Retirement Plan for Salaried Employees, or Pension Plan, our Supplemental Executive Retirement Plan, or SERP, and any supplemental pension arrangements under employment agreements for the executive officers named in the Summary Compensation Table.
Name
 
Plan Name
 
Number of Years Credited Service
(years)
 
Present Value of Accumulated Benefit*
($)
 
Payments During
Last Fiscal Year
($)
A. E. Festa
 
Pension Plan
 
10.08

 
314,000

 
—

 
 
SERP
 
10.08

 
2,658,000

 
—

H. La Force III
 
Pension Plan
 
5.75

 
145,000

 
—

 
 
SERP
 
5.75

 
352,000

 
—

G. E. Poling
 
Pension Plan
 
34.42

 
1,300,000

 
—

 
 
SERP
 
34.42

 
4,315,000

 
—

M. A. Shelnitz
 
Pension Plan
 
30.17

 
1,003,000

 
—

 
 
SERP
 
30.17

 
1,823,000

 
—

P. K. Wagoner
 
Pension Plan
 
4.42

 
122,000

 
—

 
 
SERP
 
4.42

 
143,000

 
—

_______________________________________________________________________________
*
Amounts comprise the actuarial present value of the executive officer's accumulated benefit under the Pension Plan and SERP as of December 31, 2013, assuming a 4.76% discount rate and retirement at age 62 with benefits payable on a straight life annuity basis and other assumptions used for financial reporting purposes under generally accepted accounting principles as described in this Report in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 11 (Pension Plans and Other Postretirement Benefits Plans) to the Consolidated Financial Statements. The Pension Plan and SERP provide for a reduction in pension benefits to employees that elect early retirement ranging from a 17% reduction for retirement at age 55 to no reduction for retirement at age 62.
Retirement Plan for Salaried Employees
Full-time salaried employees who are 21 or older and who have one or more years of service are eligible to participate in our Retirement Plan for Salaried Employees, or Pension Plan. Under this basic retirement plan, pension benefits are based upon (a) the employee's average annual compensation for the 60 consecutive months in which his or her compensation is highest during the last 180 months of continuous participation, and (b) the number of years of the employee's credited Grace service. At age 62, a participant is entitled to full benefits under the Pension Plan but a participant may elect reduced payments upon early retirement beginning at age 55. For purposes of the Pension Plan, compensation generally includes base salary and AICP awards; however, for 2013, federal income tax law limits to $255,000 the annual compensation on which benefits under the Pension Plan may be based. The Pension Plan is further described in Item 8 (Financial Statements and Supplementary Data) in the

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Financial Supplement under Note 11 (Pension Plans and Other Postretirement Benefits Plans) to the Consolidated Financial Statements and in Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations under the caption "Financial Condition, Liquidity, and Capital Resources—Employee Benefit Plans—Defined Benefit Pension Plans") in the Financial Supplement.
Supplemental Executive Retirement Plan
We also have an unfunded, nonqualified Supplemental Executive Retirement Plan, or SERP, under which an employee will receive the full pension to which he or she would be entitled in the absence of the limitations described above and other limitations imposed under federal income tax law. In addition, the SERP recognizes deferred base salary, deferred annual incentive compensation awards and, in some cases, periods of employment during which an employee was ineligible to participate in the basic retirement plan. In respect to payments, the SERP generally operates in the same manner as the Pension Plan. Since 2001, we have not permitted deferrals of base salary or incentive compensation. The SERP is further described in Item 8 (Financial Statements and Supplementary Data) in the Financial Supplement under Note 11 (Pension Plans and Other Postretirement Benefits Plans) to the Consolidated Financial Statements and in Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations under the caption "Financial Condition, Liquidity, and Capital Resources—Employee Benefit Plans—Defined Benefit Pension Plans") in the Financial Supplement.
Non-Qualified Deferred Compensation Plan
The following table summarizes the compensation deferred by the named executive officer pursuant to the provisions of Grace's incentive compensation plan in 1998, under which certain employees were permitted to voluntarily defer receipt of shares of Grace common stock. Such deferred shares were contributed to a "rabbi trust" held for the benefit of the deferred compensation plan participants. Shares held in the plan are fully vested and may be distributed to the plan beneficiary upon retirement or termination of service with us. Since 1998, executives may no longer defer receipt of shares under the plan, although existing balances remain in place.
Fiscal Year 2013 Non-Qualified Deferred Compensation
Name
 
Executive
Contributions
in Fiscal Year
2013
($)
 
Registrant
Contributions
in Fiscal
Year 2013
($)
 
Aggregate
Earnings in Fiscal
Year 2013
($)
 
Aggregate
Withdrawals/
Distributions
in Fiscal
Year 2013
($)
 
Aggregate
Balance at
Fiscal Year
2013 End
($)
 
M. A. Shelnitz
 
—

 
—

 
298,075

(a)
—

 
931,439

(b)
_______________________________________________________________________________
(a)
Amount represents the increase in value of 9,420.8496 shares of Grace common stock held in the plan based on the closing prices of Grace common stock on December 31, 2012, of $67.23 and December 31, 2013, of $98.87. Amounts reflected are not included in the "Summary Compensation Table" because the earnings are not "above market."
(b)
Amount represents the value of 9,420.8496 shares of Grace common stock held in the plan based on the closing price of Grace common stock on December 31, 2013, of $98.87.
Potential Payments Upon Termination or Change-In-Control
The following table sets forth potential payments to executive officers named in the Summary Compensation Table in the event of the listed events, calculated under the assumption that employment terminated on the last day of 2013. The following table does not include payments pursuant to contracts, agreements, plans and arrangements that do not discriminate in scope, terms or operation, in favor of executive officers and that are available generally to all salaried employees. The value of payments to be made following termination of employment pursuant to the Grace Retirement Plan and the Grace SERP are described above under the caption "Pension Benefits." The value of payments to be made following termination of employment pursuant to Mr. Shelnitz's deferred shares arrangement are described above under the caption "Non-Qualified Deferred Compensation Plan."

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Name
 
Involuntary
Termination
Without Cause
($)(a)
 
Change-in-Control
($)(b)
 
Involuntary
Termination
Without Cause
Following
Change-in-
Control
($)(c)(d)
 
Death
($)(c)(e)
 
Disability
($)(c)(f)
A. E. Festa
 
3,412,500

 
12,454,226
 
7,620,376

 
1,770,376

 
1,102,876

H. La Force III
 
705,000

 
2,725,037
 
3,085,968

 
641,968

 
344,301

G. E. Poling
 
1,200,000

 
4,866,393
 
4,282,448

 
922,448

 
442,448

M. A. Shelnitz
 
780,000

 
1,868,545
 
2,380,249

 
508,249

 
215,749

P. K. Wagoner
 
502,500

 
1,584,914
 
2,039,728

 
431,728

 
208,385

_______________________________________________________________________________
(a)
Consists: (i) in the case of Mr. Festa, of minimum severance payments pursuant to his employment agreement as described below under "—Termination and Change-in-Control Arrangements—CEO Severance Arrangements;" and (ii) in the case of the other executive officers, minimum severance payments pursuant to severance agreements as described below under "—Termination and Change-in-Control Arrangements—Other Executive Officer Severance Arrangements." Amount excludes cash LTIP payments (in amounts set forth below in footnote (c)) and/or AICP payments that executive officers may receive in the discretion of the Compensation Committee as described below under "—Termination and Change-in-Control Arrangements."
(b)
Upon change-in-control, stock options immediately become fully vested and exercisable. Amount shown represents the in-the-money value of unvested stock options as of December 31, 2013.
(c)
Includes payments under the 2013-2015 Performance-based Units (PBUs) calculated as described below under "--Termination and Change-in-Control Arrangements--Long Term Incentive Program (PBU Awards)" under the assumption that the 2013 PBUs pay out at the target amount as follows:
    
Name
 
2013-2015
PBUs
($)
A. E. Festa
 
795,376

H. La Force III
 
171,968

G. E. Poling
 
322,448

M. A. Shelnitz
 
118,249

P. K. Wagoner
 
96,728

(d)
Includes contractual payments pursuant to each executive's respective Change-in-Control Severance Agreement calculated under the assumption that no excise tax will apply as follows:
Name
 
Change-in-Control
Severance Payments
($)
A. E. Festa
 
6,825,000

H. La Force III
 
2,914,000

G. E. Poling
 
3,960,000

M. A. Shelnitz
 
2,262,000

P. K. Wagoner
 
1,943,000

(e)
Includes the sum of payments under the Grace Executive Salary Protection Plan (ESPP) during the first year following death. Amount excludes AICP payments executive officers may receive under certain circumstances in the discretion of the Compensation Committee as described below under "—Termination and Change-in-Control Arrangements." During subsequent years after death until the specified termination year (reflecting the executive officer's age as of December 31, 2013), the sum of payments each year would be as follows:

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Name
 
ESPP Payments
Each Year Following
Year of Death
($)
 
Year of Termination of Payments*
A. E. Festa
 
487,500

 
2024
H. La Force III
 
235,000

 
2024
G. E. Poling
 
300,000

 
2021
M. A. Shelnitz
 
195,000

 
2024
P. K. Wagoner
 
167,500

 
2024
_______________________________________________________________________________
*
Payments terminate 10 years following death; provided however, if the executive officer is over age 55 at the time of death, the duration of payments is reduced.
(f)
Includes sum of payments under the Grace Executive Salary Protection Plan during the first year following disability, assuming the executive officer remains disabled for at least 12 consecutive months. Amounts reflect the offset of expected payments under Grace's long-term and short-term disability plans that are based, in part, on the duration of the executive officer's employment. Amount excludes AICP payments they may receive under certain circumstances in the discretion of the Compensation Committee as described below under "—Termination and Change-in-Control Arrangements—Annual Incentive Compensation Plan." During subsequent years after disability until the specified termination year or earlier death or end of disability, the sum of payments each year would be:
Name*
 
ESPP Payments
Each Year Following
Year of Disability
($)
 
Year of Termination of Payments
A. E. Festa
 
225,000

 
2024
H. La Force III
 
47,000

 
2029
M. A. Shelnitz
 
39,000

 
2023
_______________________________________________________________________________
*
Due to the offset of expected payments under Grace's long-term and short-term disability plans, Grace expects that the other named executive officers would not receive any additional payments under the ESPP after the first year of disability.
Termination and Change-in-Control Arrangements
Change-in-Control Severance Agreements.    We have entered into severance agreements with all of our executive officers, which renew automatically unless the Board elects not to renew them. These agreements generally provide that in the event of the involuntary termination of the individual's employment without cause (including constructive termination caused by a material reduction in his or her authority or responsibility or by certain other circumstances) following a "change in control," he or she will generally receive a severance payment equal to three times the sum of his or her annual base salary plus target annual incentive compensation, subject to reduction, pro rata in the case of an executive officer who is within 36 months of normal retirement age (65) or, under certain circumstances, to minimize the effect of certain excise taxes if applicable. For purposes of the severance agreements, "change in control" means the acquisition of 20% or more of the outstanding Grace common stock (but not if such acquisition is the result of the sale of common stock by Grace that has been approved by the Board), the failure of Board-nominated directors to constitute a majority of any class of the Board of Directors, the occurrence of a transaction in which the Grace shareholders immediately preceding such transaction do not own more than 50% of the combined voting power of the entity resulting from such transaction, or the liquidation or dissolution of Grace. The severance amount would be paid in a single lump-sum after termination. The description of the severance agreements in Item 11 of this Report does not purport to be complete and is qualified in its entirety by reference to the form of such agreement, which has been filed with the SEC.
CEO Severance Arrangements.    Under the terms of Mr. Festa's employment agreement, if we terminate Mr. Festa's employment without cause, or he terminates his employment as a result of constructive discharge, he would be entitled to a severance payment equal to two times a dollar amount equal to 175% of his annual base salary at the time of his termination. The severance amount would be paid in installments over a period of 24 months; however, at Mr. Festa's option, as approved by the Compensation Committee, the entire severance amount may be paid in a single lump-sum after termination. The provisions of Mr. Festa's employment agreement pertaining to this severance amount survived the expiration of the agreement on May 31, 2013. Severance

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payments under Mr. Festa's employment agreement are contingent upon Mr. Festa's execution of an agreement releasing Grace from liabilities related to Mr. Festa's employment by Grace. The description of Mr. Festa's employment agreement in Item 11 of this Report does not purport to be complete and is qualified in its entirety by reference to the agreement, which has been filed with the SEC.
Other Executive Officer Severance Arrangements.    We have entered into severance agreements with Messrs. La Force (included in his employment agreement), Poling and Shelnitz and Ms. Wagoner (included in her employment Agreement). Under the terms of the severance arrangements applicable to these named executive officers, in the event of the involuntary termination of the executive officer's employment under circumstances that would qualify the executive officer for severance pay under the severance plan that generally covers our salaried employees, the executive officer would be entitled to severance pay equal to two times his annual base salary, in the case of Messrs. Poling and Shelnitz, or one and one-half times his or her annual base salary, in the case of Mr. La Force and Ms. Wagoner. The severance amount would be paid in installments in the form of salary continuation, provided that an executive officer could elect to receive the entire severance amount as a single lump sum after termination in conjunction with the termination of certain employee benefit coverage. Severance payments are contingent upon the named executive officer's execution of an agreement releasing Grace from liabilities related to his or her employment by Grace. Other than with respect to the amount of severance, the severance arrangements for these named executive officers are the same. The description of the severance arrangements in Item 11 of this Report does not purport to be complete and is qualified in its entirety by reference to Mr. La Force's employment agreement, Ms. Wagoner's employment agreement, the form of executive severance agreement and the Grace Severance Pay Plan for Salaried Employees, each of which has been filed with the SEC.
Executive Salary Protection Plan.    All executive officers participate in the Executive Salary Protection Plan which provides that, in the event of a participant's disability or death prior to age 70, we will continue to pay all or a portion of base salary to the participant or a beneficiary for a period based on the participant's age at the time of disability or death. Payments under the plan may not exceed 100% of base salary for the first year and 60% thereafter in the case of disability (50% in the case of death). Any payment under the plan as a result of disability would be reduced by the amount of disability income received under Grace's long-term and short-term disability plans that are generally applicable to U.S. salaried employees. The payments would be paid in installments in the form of salary continuation. The description of the plan in Item 11 of this Report does not purport to be complete and is qualified in its entirety by reference to the text of the Executive Salary Protection Plan, as amended, which is filed with the SEC.
Annual Incentive Compensation Plan.    An employee whose employment terminates prior to an AICP payout date will generally not receive an AICP payment. However, in the discretion of the Compensation Committee, an employee whose employment terminates prior to the payout date may receive an AICP award payment if the employee has more than three months' service under the AICP and employment terminates for any of the following reasons: retirement under a Grace retirement plan; death; disability; divestment; or other termination of employment by Grace that is not for cause. If an employee whose employment terminates prior to the end of a year receives an AICP award payment for that year, the amount of the AICP award payment will generally be prorated for the period of the employee's service during the year and paid at the time the award is paid to active Grace employees. The description of the AICP in Item 11 of this Report does not purport to be complete and is qualified in its entirety by reference to the text of the AICP which is filed with the SEC.
Long Term Incentive Plan (Amended and Restated 2011 Stock Incentive Plan--Performance-based Unit (PBU) Awards).    An employee whose employment terminates prior to the payout date will forfeit any unpaid PBU award payment if employment terminates for any of the following reasons:
•
voluntary termination without the consent of the Compensation Committee;
•
retirement under a Grace retirement plan prior to age 62 without the consent of the Compensation Committee; or
•
termination for cause.
An employee whose employment terminates prior to the payout date will receive a PBU award payment if employment terminates for any of the following reasons:
•
retirement under a Grace retirement plan either at or after age 62;
•
death or disability; or

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•
involuntary termination after a change in control of Grace ("change in control" means that a person beneficially owns 20% or more of the outstanding Grace common stock (but not if such ownership is the result of the sale of Grace common stock by Grace that has been approved by the Board or pursuant to a plan of reorganization that is confirmed and effective), the failure of Board-nominated directors to constitute a majority of any class of the Board of Directors, the occurrence of a corporate transaction in which the Grace shareholders immediately preceding such transaction do not own more than 50% of the combined voting power of the entity resulting from such transaction, or the liquidation or dissolution of Grace).
In the discretion of the Compensation Committee, an employee whose employment terminates for a reason that is not described above (i.e. involuntary termination not for cause or transfer to the buyer of a Grace business unit) prior to the payout date may receive a PBU award payment. If an employee whose employment terminates prior to the end of a PBU performance period receives a PBU award payment for that performance period, the amount of the PBU award payment will be prorated for the period of the employee's service during the performance period and paid at the time the award is paid to active Grace employees. The description of the Amended and Restated 2011 Stock Incentive Plan--Performance-based Unit (PBU) Awards in Item 11 of this Report does not purport to be complete and is qualified in its entirety by reference to the text of the Amended and Restated 2011 Stock Incentive Plan and the Form of Performance-based Unit Grant Agreement which are filed with the SEC.
Long Term Incentive Plan (2000, 2011 and Amended and Restated 2011 Stock Incentive Plans--Stock Option Awards).    Any stock option held by an employee whose employment terminates prior to exercise will terminate:
•
when employment terminates, if employment terminates voluntarily, without the consent of the Compensation Committee, or for cause;
•
three years after employment terminates, if employment terminates due to death or incapacity;
•
three years after employment terminates, if employment terminates due to retirement under a Grace retirement plan, provided the employee continues to serve Grace until the first installment of the stock option becomes exercisable; or
•
three months (subject to extension by the Compensation Committee for up to three years) after employment terminates, if employment terminates for another reason; provided however, if the holder dies or becomes incapacitated during the three-month period (or such longer period as the Compensation Committee approves) the option shall terminate three years after employment termination.
In the event of a Change in Control, any stock options outstanding under the 2000, 2011 and Amended and Restated Stock Incentive Plans, that are not exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant. For purposes of the 2000, 2011 and Amended and Restated 2011 Stock Incentive Plans, "change in control" means:
•
the acquisition of 20% or more of the outstanding Grace Common Stock (but not if such acquisition is the result of the sale of Grace common stock by Grace that has been approved by the Board);
•
the failure of Board-nominated directors to constitute a majority of any class of the Board of Directors;
•
the occurrence of a transaction in which the Grace shareholders immediately preceding such transaction do not own more than 50% of the combined voting power of the entity resulting from such transaction; or
•
the liquidation or dissolution of Grace.
The description of the 2000, 2011 and Amended and Restated 2011 Stock Incentive Plan--Stock Option Awards in Item 11 of this Report does not purport to be complete and is qualified in its entirety by reference to the text of the 2000, 2011 and Amended and Restated 2011 Stock Incentive Plans and the Form of Stock Option Grant Agreement which are filed with the SEC.
Director Compensation for 2013
Under the compensation program for nonemployee directors in effect during 2013, each nonemployee director received an annual retainer that is split between cash (44%) and equity (56%). Under this program, each nonemployee director received: an annual retainer of $80,000 in cash, 50% of which was paid in January and 50% of which was paid in December; and an annual award of approximately $100,000 of Grace common stock which

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was issued in May. Additional annual cash retainers were paid in December as follows: the Lead Independent Director received $20,000; the Audit Committee Chair received $15,000; and the Chairs of the Compensation and the Nominating and Governance Committees each received $10,000. We reimburse directors for expenses they incur in attending Board and committee meetings and other activities incidental to their service as directors. Our directors, and all Grace employees, are entitled to participate in the Grace Foundation's Matching Grants Program. We also maintain business travel accident insurance coverage for our directors. Mr. Festa's compensation is described above in the Summary Compensation Table and he receives no additional compensation for serving as a member of the Board of Directors.
The following table sets forth amounts that we paid to our nonemployee directors in connection with their services to Grace during 2013.
Name
 
Fees
Earned
or Paid
in Cash
($)(b)
 
Stock
Awards
($)
 
Option
Awards
($)
 
Non-Equity
Incentive Plan
Compensation
($)
 
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
 
All Other
Compensation
($)(c)
 
Total
($)
J. F. Akers(a)
 
85,000
 
100,035

 
—

 
—

 
—

 
—

 
185,035
H. F. Baldwin
 
80,000
 
100,035

 
—

 
—

 
—

 
—

 
180,035
R. C. Cambre
 
80,000
 
100,035

 
—

 
—

 
—

 
2,000

(d)
182,035
M. A. Fox
 
80,000
 
100,035

 
—

 
—

 
—

 
—

 
180,035
J. K. Henry
 
80,000
 
100,035

 
—

 
—

 
—

 
—

 
180,035
J. N. Quinn
 
85,000
 
100,035

 
—

 
—

 
—

 
—

 
185,035
C. J. Steffen
 
110,000
 
100,035

 
—

 
—

 
—

 
3,000

(d)
213,035
M. E. Tomkins
 
95,000
 
100,035

 
—

 
—

 
—

 
—

 
195,035
_______________________________________________________________________________
(a)
John F. Akers resigned from the Board of Directors and all committees effective January 17, 2014.
(b)
Amount consists of annual cash retainer in the amount of $80,000 and additional payments to: Mr. Akers and Mr. Quinn for serving as Chair of the Compensation Committee in the amounts of $5,000; Mr. Tomkins for serving as Chair of the Audit Committee in the amount of $15,000; and Mr. Steffen for serving as Chair of the Nominating and Governance Committee and Lead Independent Director in the amount of $30,000.
(c)
Grace paid an aggregate of $1,909 in premiums for business travel accident insurance coverage for all directors during 2013.
(d)
Consists of charitable contributions paid during 2013 to academic institutions at the request of the director pursuant to the Grace Foundation's Matching Grants Program.
Compensation Policies and Practices Relating to Risk Management
We do not believe that risks arising from our compensation policies and practices for our employees are reasonably likely to have a material adverse effect on Grace through excessive risk taking incentives or otherwise. Our compensation program, though tailored to our specific needs, is generally similar to compensation programs used by other companies in our industry. We have many years of experience with the various components of our compensation program, including our incentive plans under which payments may vary based on the performance of the business. We believe these plans, backed by our corporate ethics program and the Grace Core Values, have been successful in aligning the interests of our executives and senior employees with the interests of our stakeholders and in encouraging the responsible pursuit of corporate objectives by our employees.
Compensation Committee Interlocks and Insider Participation
During 2013, the Compensation Committee of the Board was composed of Messrs. Akers (Chair until May 2, 2013), Baldwin, Cambre, Quinn (Chair, effective May 2, 2013), Tomkins and Steffen, Dr. Fox and Ms. Henry. None of these persons is a current or former Grace officer or employee, nor did we have any reportable transactions with any of these persons. None of our executive officers serves or in the past has served as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving on our Board of Directors or our Compensation Committee.

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Item 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP
The following table sets forth the amount of Grace common stock beneficially owned, directly or indirectly, as of January 31, 2014, by:
•
each person that we know is the beneficial owner of more than 5% of the outstanding shares of Grace common stock;
•
each current director;
•
each of the executive officers named in the Summary Compensation Table set forth in Item 11 above; and
•
all directors and all executive officers as a group.
Name and Address of Beneficial Owner(1)(2)
 
Shares of
Common
Stock
Beneficially
Owned(3)
 
Percent(4)
WRG Asbestos PI Trust(5)
 
10,000,000

(W)
13.0
%
1100 North Market Street
Wilmington, Delaware 19890-1625W
 
 
 
 
Trust Advisory Committee
c/o Caplin & Drysdale Chartered
One Thomas Circle, N.W., Suite 1100
Washington, D.C. 20005-5802
Roger Frankel
c/o Frankel Wyron LLP
2101 L Street, N.W., Suite 800
Washington, D.C. 20037
 
 
 
 
Iridian Asset Management LLC(6)
 
4,774,915

 
6.2
%
David L. Cohen
Harold J. Levy
 
 
 
 
276 Post Road West
Westport, CT 06880-4704
 
 
 
 
The Vanguard Group, Inc.(7)
 
4,139,329

 
5.4
%
100 Vanguard Blvd.
Malvern, PA 19355
 
 
 
 
FMR LLC(8)
 
4,080,235

 
5.3
%
Edward C. Johnson 3d
 
 
 
 
245 Summer Street
Boston, Massachusetts 02109
 
 
 
 
H. F. Baldwin
 
23,223

 
 

 
 
15,000

(T)
 

 
 
38,223

 
*

R. C. Cambre
 
10,000

 
*

A. E. Festa
 
150,517

 
 

 
 
600,929

(O)
 

 
 
751,446

 
1.0
%
M. A. Fox
 
56,651

 
 

 
 
8,942

(T)
 

 
 
65,593

 
*

J. K. Henry
 
1,305

 
*

J. N. Quinn
 
1,305

 
*

 
 
 
 
 

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Name and Address of Beneficial Owner(1)(2)
 
Shares of
Common
Stock
Beneficially
Owned(3)
 
Percent(4)
C. J. Steffen
 
11,305

 
*

M. E. Tomkins
 
12,000

 
*

H. La Force III
 
50,000

 
 

 
 
135,663

(O)
 

 
 
185,663

 
*

G. E. Poling
 
140,606

(O)
 

 
 
18,000

(T)
 

 
 
158,606

 
*

M. A. Shelnitz
 
53,500

 
 

 
 
114,923

(O)
 

 
 
9,421

(T)
 

 
 
177,844

 
*

P. K. Wagoner
 
62,670

(O)
*

Directors and executive officers as a group (12 persons)
 
369,806

 
 
 
 
1,054,791

(O)
 

 
 
51,363

(T)
 

 
 
1,475,960

 
1.9
%
_______________________________________________________________________________
*    Indicates less than 1%
(W)
Shares covered by warrant exercisable in the event a tender offer, or other proposed transaction that would result in a change in control of the Grace, is announced.
(O)
Shares covered by stock options exercisable on or within 60 days after January 31, 2014.
(T)
Shares owned by trusts and other entities as to which the person has the power to direct voting and/or investment.
(1)
The address of each of our directors and executive officers is c/o Secretary, W. R. Grace & Co., 7500 Grace Drive, Columbia, MD 21044.
(2)
John F. Akers resigned from the Board of Directors and all committees effective January 17, 2014.
(3)
Except as otherwise indicated, to our knowledge, each individual, along with his or her spouse, has sole voting and investment power over the shares.
(4)
Based on 77,063,385 shares of Grace common stock outstanding on January 31, 2014.
(5)
The ownership information set forth is based in its entirety on material contained in a Schedule 13D filed with the SEC by the WRG Asbestos PI Trust (the “PI Trust”), the Trust Advisory Committee (the “TAC”) and Roger Frankel, the Asbestos PI Future Claimants’ Representative (the “FCR”) on February 11, 2014. The Trust is the holder of a warrant to acquire 10 million shares of Common Stock at an exercise price of $17.00 per share, expiring February 3, 2015 (the “PI Warrant”). Grace has entered into an agreement to settle the PI Warrant in cash on or prior to February 3, 2015. The settlement 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 Grace, is announced on or prior to February 3, 2015. In such event, the PI Warrant would be settled in shares of Common Stock. The PI Trust is administered through three trustees, Harry Huge, Lewis Sifford and Dean M. Trafelet. The TAC is a four member advisory committee made up of Russell W. Budd, John D. Cooney, Joseph F. Rice and Perry Weitz. The PI Trust (acting through its trustees) has sole investment power over the shares held by the PI Trust. Under its trust agreement, the PI Trust must obtain the consent of the TAC (acting through its members) and the FCR to vote shares held by the PI Trust solely for purposes of electing members of the Grace Board of Directors. For additional information regarding the PI Warrant and the warrant settlement, see disclosure provided in this Report in Item 8 (Financial Statements and Supplementary Data)

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in the Financial Supplement under Note 2 (Joint Plan of Reorganization) to the Consolidated Financial Statements.
(6)
The ownership information set forth is based in its entirety on material contained in a Schedule 13G/A filed with the SEC by Iridian Asset Management LLC ("Iridian"), David L. Cohen and Harold J. Levy on February 4, 2014. Iridian is majority owned by Arovid Associates LLC. Arovid is owned and controlled by the following: 12.5% by Mr. Cohen, 12.5% by Mr. Levy, 37.5% by LLMD LLC and 37.5% by ALHERO LLC. LLMD LLC is owned 1% by Mr. Cohen and 99% by a family trust controlled by Mr. Cohen. ALHERO LLC is owned 1% by Mr. Levy and 99% by a family trust controlled by Mr. Levy. Iridian has shared voting and investment power with respect to 4,774,915 shares held in accounts for which it serves as the investment adviser. Messrs. Cohen and Levy may be deemed to possess beneficial ownership of the shares of Common Stock beneficially owned by Iridian by virtue of their indirect controlling ownership of Iridian and having the shared voting and investment power over shares of Common Stock owned by Iridian as joint Chief Investment Officers of Iridian. Messrs. Cohen and Levy disclaim beneficial ownership of such shares.
(7)
The ownership information set forth is based in its entirety on material contained in a Schedule 13G filed with the SEC by The Vanguard Group, Inc. ("VGI") on February 12, 2014. VGI has sole voting power over 47,794 shares and sole and shared investment power over 4,096,435 and 42,894 shares, respectively. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of VGI, is the beneficial owner of 42,894 shares as a result of serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of VGI, is the beneficial owner of 4,900 shares as a result of its serving as investment manager of Australian investment offerings.
(8)
The ownership information set forth is based in its entirety on material contained in a Schedule 13G filed with the SEC jointly by FMR LLC ("FMR") and Edward C. Johnson 3d ("Mr. Johnson") on February 14, 2014. FMR and Mr. Johnson have sole voting power with respect to 27,133 shares and sole investment power with respect to 4,080,235 shares. Mr. Johnson is Chairman of FMR and members of Mr. Johnson's family may be deemed a controlling group with respect to FMR due to their ownership of FMR voting shares and their entry into a voting agreement with respect to such shares. Fidelity Management & Research Company ("Fidelity") 245 Summer Street, Boston MA 02210 and Fidelity SelectCo, LLC (“SelectCo”) 1225 17th Street, Suite 1100, Denver, Colorado 80202 are each wholly-owned subsidiaries of FMR. Mr. Johnson and FMR, through its control of Fidelity and SelectCo, respectively, each has sole investment power over 2,866,650 shares and 1,181,370 shares owned by various investment companies for which Fidelity and SelectCo, respectively, serves as investment advisor. Strategic Advisors, Inc. ("SAI") 245 Summer Street, Boston MA 02210, is a wholly-owned subsidiary of FMR. Mr. Johnson and FMR, through its control of SAI, each has beneficial ownership of 1,624 shares owned by accounts managed by SAI. Pyramis Global Advisors, LLC ("PGA"), 900 Salem Street, Smithfield, Rhode Island 02917, is a wholly-owned indirect subsidiary of FMR. Mr. Johnson and FMR, through its control of PGA, each has sole investment power over 440 shares owned by accounts or funds advised by PGATC. Pyramis Global Advisors Trust Company ("PGATC"), 900 Salem Street, Smithfield, Rhode Island 02917, is a wholly-owned indirect subsidiary of FMR. Mr. Johnson and FMR, through its control of PGATC, each has sole investment power over 21,981 shares and sole voting power over 17,291 shares owned by institutional accounts managed by PGATC. Mr. Johnson is Chairman of FIL Limited ("FIL"), Pembroke Hall, 42 Crow Lane, Hamilton, Bermuda, and partnerships controlled predominantly by members of Mr. Johnson's family, or trusts for their benefit, own FIL shares representing between 25% and 50% of the total votes which may be cast by all holders of FIL voting stock. FMR and FIL disclaim that they are acting as a "group" for purposes of Section 13(d) under the Securities Exchange Act of 1934. FIL and various foreign-based subsidiaries provide investment advisory and management services to a number of non-U.S. investment companies and certain institutional investors. FIL is the beneficial owner of 8,170 shares.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2013, with respect to our compensation plans under which shares of Grace common stock are authorized for issuance upon the exercise of options, warrants or other rights. The only such compensation plans in effect are stock incentive plans providing for the issuance of stock options, restricted stock and other equity awards.

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Plan Category
Number of securities
to be issued upon
exercise of
outstanding options, warrants and rights
(#)(2)
 
Weighted-average
exercise price of
outstanding options, warrants and rights
($)(2)(3)
 
Number of securities remaining available for future issuance under equity compensation plans (excluding securities to be issued upon exercise of outstanding options, warrants and rights)
(#)(2)
Equity compensation plans approved by security holders (1)
2,998,504
 
42.59
 
269,506
_______________________________________________________________________________
(1)
The 2000 Stock Incentive Plan was approved by stockholders at an annual meeting of Grace stockholders on May 10, 2000. The 2011 Stock Incentive Plan and the Amended and Restated 2011 Stock Incentive Plan were approved on behalf of Grace stockholders by the Official Committee of Equity Security Holders in the Grace Chapter 11 case and by the U.S. Bankruptcy Court for the District of Delaware on April 8, 2011 and April 16, 2013, respectively.
(2)
Under the 2000 Plan, there are 898,467 shares of Grace common stock to be issued upon the exercise of outstanding options, the weighted-average exercise price of outstanding options is $22.68 and no shares of Grace common stock are available for future issuance (excluding shares to be issued upon exercise of outstanding options). Under the 2011 Plan, there are 1,585,983 shares of Grace common stock to be issued upon the exercise of outstanding options, the weighted-average exercise price of outstanding options is $45.28 and no shares of Grace common stock are available for future issuance (excluding shares to be issued upon exercise of outstanding options). Under the Amended 2011 Plan, there are 399,252 shares of Grace common stock to be issued upon the exercise of outstanding options and 114,802 shares to be issued upon completion of the performance period for stock-settled performance-based unit awards (PBUs) (assuming the maximum number of shares are earned in respect of outstanding PBUs), the weighted-average exercise price of outstanding options is $76.70 and 269,506 shares of Grace common stock are available for future issuance (excluding shares to be issued upon exercise of outstanding options and completion of the performance period for PBUs).
(3)
The calculation of weighted-average exercise price does not take outstanding PBUs into account.
 
Item 13.    CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
BOARD INDEPENDENCE
The Board has determined that all directors, other than Mr. Festa (who is also Chief Executive Officer), but including Mr. Akers (who resigned from the Board and all committees effective January 17, 2014) are independent under New York Stock Exchange rules because none of such directors has any direct or indirect material relationship with Grace or our affiliates, other than through his or her service as a director and as an owner of less than 1% of Grace common stock. In addition to the application of the New York Stock Exchange rules, this determination was based on a number of factors, principal among them were the following:
•
none of these directors, nor any member of their immediate families is (or at any time during the last three years was) a Grace executive officer or employee and none of these directors is an employee, and no member of their immediate families is an executive officer of any other entity with whom we do any material amount of business;
•
none of these directors or any member of their immediate families has, during the last three years, received more than $50,000 in direct compensation from Grace (other than director and committee fees); and
•
none of these directors serve, or within the last three years served, as an executive officer, director, trustee or fiduciary of any charitable organization to which we made any material charitable donation.
Only independent directors serve on our Audit, Nominating and Governance, Compensation and Corporate Responsibility Committees. Mr. Steffen has been appointed Lead Independent Director and, in this capacity, presides at executive sessions of independent directors. Interested parties may communicate with Mr. Steffen by writing him at the following address: Christopher J. Steffen—Lead Independent Director, c/o W. R. Grace & Co., 7500 Grace Drive, Columbia, Maryland 21044.

55
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REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PARTIES
The Board recognizes that transactions involving related persons in which Grace is a participant can present conflicts of interest, or the appearance thereof, so the Board has adopted a written policy as part of the Grace Corporate Governance Guidelines (which are available on our website at www.grace.com/About/Leadership/Governance/) with respect to related person transactions. The policy applies to transactions involving related persons that are required to be disclosed pursuant to SEC regulations, which are generally transactions in which:
•
Grace is a participant;
•
the amount involved exceeds $120,000; and
•
any related person, such as a Grace executive officer, director, director nominee, 5% stockholder or any of their respective family members, has a direct or indirect material interest.
Each such related person transaction shall be reviewed, determined to be in, or not inconsistent with, the best interests of Grace and its stockholders and approved or ratified by:
•
the disinterested members of the Audit Committee, if the disinterested members of the Audit Committee constitute a majority of the members of the Audit Committee; or
•
the disinterested members of the Board.
In the event a related person transaction is entered into without prior approval and, after review by the Audit Committee or the Board, as the case may be, the transaction is not ratified, we will make all reasonable efforts to cancel the transaction.
Item 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Audit Committee of the Board of Directors selected PricewaterhouseCoopers LLP, or PwC, to act as our principal independent accountants for 2013. The following table sets forth the fees that we incurred for the services of PwC for the year ended December 31, 2012, and our estimate of the fees that we incurred for the year ended December 31, 2013:
Fee Description
 
2013*
 
2012
Audit Fees
 
$
5,200,900

 
$
4,591,900

Audit-Related Fees
 
92,100

 
167,600

Tax Fees
 
195,000

 
352,500

All Other Fees
 
44,000

 
25,900

Total Fees
 
$
5,532,000

 
$
5,137,900

_______________________________________________________________________________
*
For 2013, amounts are current estimates in respect of services received for which final invoices have not been submitted.
Audit Services consisted of the audit of our Consolidated Financial Statements and our internal controls over financial reporting (as required under Section 404 of the Sarbanes-Oxley Act of 2002), the review of our consolidated quarterly financial statements and statutory audits of certain of Grace's non-U.S. subsidiaries and affiliates.
Audit-Related Services primarily consisted of audits of employee benefit plans and review procedures that are not required by statute or regulation and were performed at the request of the Company.
Tax Services consisted of tax advice and compliance for non-U.S. subsidiaries, including preparation of tax returns, and advice and assistance with transfer pricing compliance.
All Other Fees consisted of license fees for access to accounting, tax, and financial reporting literature and non-financial agreed-upon procedures.
The Audit Committee has adopted a preapproval policy that requires the Audit Committee to specifically preapprove the annual engagement of the independent accountants for the audit of our Consolidated Financial Statements and internal controls. The policy also provides for general preapproval of certain audit-related, tax and other services provided by the independent accountants. Any other services must be specifically preapproved by

56
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the Audit Committee. However, the Chair of the Audit Committee has the authority to preapprove services requiring immediate engagement between scheduled meetings of the Audit Committee. The Chair must report any such preapproval decisions to the full Audit Committee at its next scheduled meeting. During 2013 and 2012, no audit-related, tax, or other services were performed by PwC without specific or general approval as described above.


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PART IV

Item 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements and Schedules.    The required information is set forth in the Financial Supplement under the heading "Table of Contents" which is incorporated herein by reference.
Exhibits.    The exhibits to this Report are listed below. Other than exhibits that are filed herewith, all exhibits listed below are incorporated by reference.
In reviewing the agreements included as exhibits to this and other Reports filed by Grace with the Securities and Exchange Commission, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Grace or other parties to the agreements. The agreements generally contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement. These representations and warranties:
•
are not statements of fact, but rather are used to allocate risk to one of the parties if the statements prove to be inaccurate;
•
may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
•
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
•
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and do not reflect more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Grace may be found elsewhere in this report and Grace's other public filings, which are available without charge through the Securities and Exchange Commission's website at http://www.sec.gov.
Exhibit No.
 
Exhibit
 
Location
2.1
 
Joint Plan of Reorganization of W. R. Grace & Co. and its Debtor Subsidiaries.
 
Exhibit 2.01 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
2.2
 
Order Confirming Joint Plan of Reorganization.
 
Exhibit 2.02 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
2.3
 
Asbestos Insurance Transfer Agreement dated as of February 3, 2014, by and between W. R. Grace & Co., W. R. Grace & Co.-Conn. and the other insurance contributors identified therein and the Asbestos PI Trust.
 
Exhibit 2.03 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
2.4
 
Sale and Purchase Agreement dated October 10, 2013 between The Dow Chemical Company and W. R. Grace & Co.-Conn.
 
Filed herewith
3.1
 
Amended and Restated Certificate of Incorporation.
 
Exhibit 3.01 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
3.2
 
Amended and Restated By-laws.
 
Exhibit 3.02 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
4.1
 
Amended and Restated Rights Agreement dated as of March 25, 2008 between W. R. Grace & Co. and Mellon Investor Services LLC, as Rights Agent.
 
Exhibit 4.1 to Form 10/A (filed 3/25/08) SEC File No.: 001-13953
4.2
 
Receivables Purchase Agreement dated as of January 23, 2007 between Grace GmbH & Co. KG and Coface Finanz GmbH.
 
Exhibit 4.10 to Form 10-K (filed 3/02/07) SEC File No.: 001-13953
4.3
 
Credit Agreement dated as of February 3, 2014 by and among W. R. Grace & Co., W. R. Grace & Co.-Conn., Grace GmbH & Co. KG, a Federal Republic of Germany limited partnership, each lender from time to time party thereto, and Goldman Sachs Bank USA, as Administrative Agent.
 
Exhibit 4.01 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
4.4
 
Deferred Payment Agreement (PI) dated as of February 3, 2014 by and between W. R. Grace & Co.-Conn. and the WRG Asbestos PI Trust.
 
Exhibit 4.02 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953

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Exhibit No.
 
Exhibit
 
Location
4.5
 
Guarantee Agreement (PI) dated as of February 3, 2014 by and between W. R. Grace & Co. and the WRG Asbestos PI Trust.
 
Exhibit 4.03 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
4.6
 
Deferred Payment Agreement (PD) dated as of February 3, 2014 by and between W. R. Grace & Co.-Conn. and the WRG Asbestos PD Trust.
 
Exhibit 4.04 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
4.7
 
Guarantee Agreement (PD) dated as of February 3, 2014 by and between W. R. Grace & Co. and the WRG Asbestos PD Trust.
 
Exhibit 4.05 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
4.8
 
Deferred Payment Agreement (PD-ZAI) dated as of February 3, 2014 by and between W. R. Grace & Co.-Conn. and the WRG Asbestos PD Trust.
 
Exhibit 4.06 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
4.9
 
Guarantee Agreement (PD-ZAI) dated as of February 3, 2014 by and between W. R. Grace & Co. and the WRG Asbestos PD Trust.
 
Exhibit 4.07 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
4.10
 
Share Issuance Agreement dated as of February 3, 2014 by and among W. R. Grace & Co., the WRG Asbestos PD Trust and the WRG Asbestos PI Trust.
 
Exhibit 4.08 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
4.11
 
Warrant Agreement dated as of February 3, 2014 by and among W. R. Grace & Co., the WRG Asbestos PI Trust and Computershare.
 
Exhibit 4.09 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
4.12
 
[Warrant] Implementation Letter dated as of October 25, 2012 by and between W. R. Grace & Co., the Official Committee of Asbestos Personal Injury Claimants, the Asbestos PI Future Claimants’ Representative and the Official Committee of Equity Security Holders.
 
Exhibit 4.10 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
4.13
 
[Warrant] Registration Rights Agreement dated as of February 3, 2014 by and between W. R. Grace & Co. and the WRG Asbestos PI Trust.
 
Exhibit 4.11 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
10.1
 
WRG Asbestos PI Trust Agreement dated as of February 3, 2014 by and between W. R. Grace & Co., the Asbestos PI Future Claimants’ Representative, the Official Committee of Asbestos Personal Injury Claimants, the Asbestos PI Trustees, the Wilmington Trust Company, and the members of the Trust Advisory Committee.
 
Exhibit 10.01 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
10.2
 
WRG Asbestos Property Damage Settlement Trust Agreement dated as of February 3, 2014 by and between W. R. Grace & Co., the Asbestos PD Future Claimants’ Representative, the Official Committee of Asbestos Property Damage Claimants, the Asbestos PD Trustees, Wilmington Trust Company, and the members of the Zonolite Attic Insulation Trust Advisory Committee.
 
Exhibit 10.02 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953
10.3
 
Settlement Agreement dated December 23, 2013 by and between W. R. Grace & Co. and the other debtors named therein and the holders of Grace's pre-petition credit facilities named therein.
 
Filed herewith
10.4
 
W. R. Grace & Co. 2000 Stock Incentive Plan, as amended.
 
Exhibit 10 to Form 10-Q (filed 8/14/00) SEC File No.: 001-13953*
10.5
 
W. R. Grace & Co. 2011 Stock Incentive Plan.
 
Exhibit 10.1 to Form 8-K (filed 4/13/11) SEC File No.: 001-13953*
10.6
 
W. R. Grace & Co. Amended and Restated 2011 Stock Incentive Plan.
 
Exhibit 10.1 to Form 8-K (filed 5/01/13) SEC File No.: 001-13953*
10.7
 
W. R. Grace & Co. 2014 Stock Incentive Plan.
 
Exhibit 10.03 to Form 8-K (filed 2/07/14) SEC File No.: 001-13953*
10.8
 
Form of Performance-based Unit Agreement.
 
Exhibit 10.2 to Form 10-Q (filed 8/02/13) SEC File No.: 001-13953*
10.9
 
Form of Stock Option Award Agreement.
 
Exhibit 10.2 to Form 8-K (filed 4/13/11) SEC File No.: 001-13953*
10.10
 
W. R. Grace & Co. Supplemental Executive Retirement Plan, as amended.
 
Exhibit 10.7 to Form 10-K (filed 3/28/02) SEC File No.: 001-13953*
10.11
 
W. R. Grace & Co. Executive Salary Protection Plan, as amended.
 
Exhibit 10.8 to Form 10-K (filed 3/28/02) SEC File No.: 001-13953*


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Exhibit No.
 
Exhibit
 
Location
10.12

 
Form of Executive Severance Agreement between Grace and certain officers.
 
Exhibit 10.17 to Form 10-K (filed 3/13/03) SEC File No.: 001-13953*
10.13

 
Severance Pay Plan for Salaried Employees.
 
Exhibit 10.17 to Form 10-K (filed 3/02/07) SEC File No.: 001-13953*
10.14

 
Form of Retention Agreement between Grace and certain officers (includes enhanced severance provision).
 
Exhibit 10.28 to Form 10-K (filed 4/16/01) SEC File No.: 001-13953*
10.15

 
Annual Incentive Compensation Program.
 
Exhibit 10.1 to Form 10-Q (filed 5/3/13) SEC File No.: 001-13953*
10.16

 
Letter Agreement dated May 27, 2009 between John F. Akers, on behalf of Grace, and Fred Festa (includes enhanced severance provision).
 
Exhibit 10.1 to Form 8-K (filed 5/29/09) SEC File No.: 001-13953*
10.17

 
Letter Agreement dated February 28, 2008 between Fred Festa, on behalf of Grace, and Hudson La Force III (includes enhanced severance provision)
 
Exhibit 10.1 to Form 8-K (filed 3/07/08) SEC File No.: 001-13953*
10.18

 
Letter Agreement dated June 19, 2009 between Fred Festa, on behalf of Grace, and Pamela Wagoner (includes enhanced severance provision).
 
Filed herewith*
12

 
Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Stock Dividends.
 
Filed herewith
18.1

 
Preferability Letter from PricewaterhouseCoopers LLP
 
Filed herewith
21

 
List of Subsidiaries of W. R. Grace & Co.
 
Filed herewith
23

 
Consent of Independent Accountants.
 
Filed herewith
24

 
Powers of Attorney.
 
Filed herewith
31.(i).1

 
Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
 
Filed herewith
31.(i).2

 
Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
 
Filed herewith
32

 
Certification of Periodic Report by Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002
 
Filed herewith
95

 
Mine Safety Disclosure Exhibit
 
Filed herewith
101.INS

 
XBRL Instance Document
 
Filed herewith
101.SCH

 
XBRL Taxonomy Extension Schema
 
Filed herewith
101.CAL

 
XBRL Taxonomy Extension Calculation Linkbase
 
Filed herewith
101.DEF

 
XBRL Taxonomy Extension Definition Linkbase
 
Filed herewith
101.LAB

 
XBRL Taxonomy Extension Label Linkbase
 
Filed herewith
101.PRE

 
XBRL Taxonomy Extension Presentation Linkbase
 
Filed herewith
_______________________________________________________________________________
*
Management contracts and compensatory plans, contracts or arrangements required to be filed as exhibits to this Report.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
W. R. GRACE & CO.
 
By:
/s/ ALFRED E. FESTA
 
 
Alfred E. Festa
(Chairman and Chief Executive Officer)
 
By:
/s/ HUDSON LA FORCE III
 
 
Hudson La Force III
(Senior Vice President and
Chief Financial Officer)
 
By:
/s/ WILLIAM C. DOCKMAN
 
 
William C. Dockman
(Vice President and Controller)
Dated: February 27, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 27, 2014.
Signature
 
 
 
Title
H. F. Baldwin*
 
}
 
 
R. C. Cambre*
 
}
 
 
M. A. Fox*
 
}
 
 
J. K. Henry*
 
}
 
Directors
J. N. Quinn*
 
}
 
 
C. J. Steffen*
 
}
 
 
M. E. Tomkins*
 
}
 
 

/s/ ALFRED E. FESTA
 
Chairman, Chief Executive Officer and Director (Principal Executive Officer)
(Alfred E. Festa)
 
/s/ HUDSON LA FORCE III
 
Senior Vice President and Chief Financial Officer (Principal Financial Officer)
(Hudson La Force III)
 
/s/ WILLIAM C. DOCKMAN
 
Vice President and Controller
(Principal Accounting Officer)
(William C. Dockman)
 
___________________________________________________________________________________________________________________
*
By signing his name hereto, Mark A. Shelnitz is signing this document on behalf of each of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission.
 
By:
/s/ MARK A. SHELNITZ
 
 
Mark A. Shelnitz
(Attorney-in-Fact)


61
Table of Contents

FINANCIAL SUPPLEMENT
W. R. GRACE & CO.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2013



F-1
Table of Contents

TABLE OF CONTENTS
 
 
___________________________________________________________
The Financial Statement Schedule should be read in conjunction with the Consolidated Financial Statements and Notes thereto. Financial statements of less than majority-owned persons and other persons accounted for by the equity method have been omitted as provided in Rule 3-09 of the United States Securities and Exchange Commission's (SEC) Regulation S-X. Financial Statement Schedules not included have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto.


F-2
Table of Contents

Management's Report on Financial Information and Internal Controls
Responsibility For Financial Information—We are responsible for the preparation, accuracy, integrity and objectivity of the Consolidated Financial Statements and the other financial information included in this report. Such information has been prepared in conformity with accounting principles generally accepted in the United States of America and accordingly, includes certain amounts that represent management's best estimates and judgments. Actual amounts could differ from those estimates.
Responsibility For Internal Controls—We and our management are also responsible for establishing and maintaining adequate internal controls over financial reporting. These internal controls consist of policies and procedures that are designed to assess and monitor the effectiveness of the control environment including risk identification, governance structure, delegations of authority, information flow, communications and control activities. A chartered Disclosure Committee oversees Grace's public financial reporting process and key managers are required to confirm their compliance with Grace's policies and internal controls quarterly. While no system of internal controls can ensure elimination of all errors and irregularities, Grace's internal controls, which are reviewed and modified in response to changing conditions, have been designed to provide reasonable assurance that assets are safeguarded, policies and procedures are followed, transactions are properly executed and reported, and appropriate disclosures are made. The concept of reasonable assurance is based on the recognition that there are limitations in all systems of internal control and that the costs of such systems should be balanced with their benefits. The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly with Grace's senior financial management, internal auditors and independent registered public accounting firm to review audit plans and results, as well as the actions taken by management in discharging its responsibilities for accounting, financial reporting and internal controls. The Audit Committee is responsible for the selection and compensation of the independent registered public accounting firm. Grace's financial management, internal auditors and independent registered public accounting firm have direct and confidential access to the Audit Committee at all times.
Report On Internal Control Over Financial Reporting—We and our management have evaluated Grace's internal control over financial reporting as of December 31, 2013. This evaluation was based on criteria for effective internal control over financial reporting set forth in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, we and our management have concluded that Grace's internal control over financial reporting is effective as of December 31, 2013. Grace's independent registered public accounting firm that audited our financial statements included in Item 15 has also audited the effectiveness of Grace's internal control over financial reporting as of December 31, 2013, as stated in their report, which appears on the following page.
Report On Disclosure Controls And Procedures—As of December 31, 2013, we and our management carried out an evaluation of the effectiveness of the design and operation of Grace's disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based upon that evaluation, we concluded that Grace's disclosure controls and procedures are effective in ensuring that information required to be disclosed in Grace's periodic filings and submissions under the Exchange Act is accumulated and communicated to us and our management to allow timely decisions regarding required disclosures, and such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
/s/ A. E. FESTA
 
/s/ HUDSON LA FORCE III
A. E. Festa
 Chief Executive Officer
 
Hudson La Force III
 Senior Vice President and
Chief Financial Officer
February 27, 2014
 
 


F-3
Table of Contents

Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of W. R. Grace & Co.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income, of equity (deficit), and of cash flows present fairly, in all material respects, the financial position of W. R. Grace & Co. and its subsidiaries (the “Company”) at December 31, 2013 and December 31, 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As discussed in Note 2 to the consolidated financial statements, the Company emerged from bankruptcy on February 3, 2014. As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for defined benefit pension plans in 2013.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
McLean, Virginia
February 27, 2014

F-4
Table of Contents

Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Forms S‑8 (No. 333-173785, 333-37024 ) of W.R. Grace & Co. of our report dated February 27, 2014 relating to the financial statements, financial statement schedules, and the effectiveness of internal control over financial reporting, which appears in this Form 10‑K.  
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
McLean, Virginia
February 27, 2014


F-5
Table of Contents

W. R. Grace & Co. and Subsidiaries
Consolidated Statements of Operations
 
Year Ended December 31,
(In millions, except per share amounts)
2013
 
2012
 
2011
Net sales
$
3,060.7

 
$
3,155.5

 
$
3,211.9

Cost of goods sold
1,918.6

 
2,041.1

 
2,099.0

Gross profit
1,142.1

 
1,114.4

 
1,112.9

Selling, general and administrative expenses
505.7

 
635.2

 
659.9

Research and development expenses
65.2

 
64.5

 
68.5

Interest expense and related financing costs
43.8

 
46.5

 
43.3

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

 
—

Equity in earnings of unconsolidated affiliate
(22.9
)
 
(18.5
)
 
(15.2
)
Other expense, net
23.5

 
6.1

 
29.4

Total costs and expenses
781.5

 
1,135.0

 
805.9

Income (loss) before income taxes
360.6

 
(20.6
)
 
307.0

Benefit from (provision for) income taxes
(102.9
)
 
61.6

 
(87.9
)
Net income
257.7

 
41.0

 
219.1

Less: Net loss (income) attributable to noncontrolling interests
(1.6
)
 
(1.0
)
 
0.6

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

 
$
40.0

 
$
219.7

Earnings Per Share Attributable to W. R. Grace & Co. Shareholders
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
$
3.35

 
$
0.53

 
$
2.99

Weighted average number of basic shares
76.4

 
74.9

 
73.6

Diluted earnings per share:
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
$
3.30

 
$
0.52

 
$
2.91

Weighted average number of diluted shares
77.7

 
76.3

 
75.5




The Notes to Consolidated Financial Statements are an integral part of these statements.
 
F-6
Table of Contents

W. R. Grace & Co. and Subsidiaries
Consolidated Statements of Comprehensive Income
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Net income
$
257.7

 
$
41.0

 
$
219.1

Other comprehensive income (loss):
 
 
 
 
 
Defined benefit pension and other postretirement plans, net of income taxes
4.6

 
2.3

 
6.2

Currency translation adjustments
(23.6
)
 
5.5

 
(11.3
)
Gain (loss) from hedging activities, net of income taxes
(0.2
)
 
2.4

 
(2.1
)
Gain on securities available for sale
0.1

 
—

 
—

Total other comprehensive income (loss) attributable to noncontrolling interests
(0.9
)
 
0.8

 
1.8

Total other comprehensive income (loss)
(20.0
)
 
11.0

 
(5.4
)
Comprehensive income
237.7

 
52.0

 
213.7

Less: comprehensive income attributable to noncontrolling interests
(0.7
)
 
(1.8
)
 
(1.2
)
Comprehensive income attributable to W. R. Grace & Co. shareholders
$
237.0

 
$
50.2

 
$
212.5



The Notes to Consolidated Financial Statements are an integral part of these statements.
 
F-7
Table of Contents

W. R. Grace & Co. and Subsidiaries
Consolidated Statements of Cash Flows
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
OPERATING ACTIVITIES
 
 
 
 
 
Net income
$
257.7

 
$
41.0

 
$
219.1

Reconciliation to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
123.1

 
119.0

 
120.0

Equity in earnings of unconsolidated affiliate
(22.9
)
 
(18.5
)
 
(15.2
)
Chapter 11 expenses, net of interest income
15.3

 
16.6

 
20.0

Chapter 11 expenses paid
(15.0
)
 
(15.5
)
 
(20.6
)
Asbestos and bankruptcy-related charges, net
21.9

 
384.6

 
—

Provision for (benefit from) income taxes
102.9

 
(61.6
)
 
87.9

Income taxes paid, net of refunds
(60.4
)
 
(82.6
)
 
(44.7
)
Excess tax benefits from stock-based compensation
35.4

 
(36.8
)
 
—

Interest accrued on pre-petition liabilities subject to compromise
38.1

 
40.4

 
39.0

Default interest settlement
129.0

 
—

 
—

Defined benefit pension (income) expense
(23.2
)
 
149.6

 
139.9

Payments under defined benefit pension arrangements
(68.3
)
 
(126.8
)
 
(265.1
)
Expenditures for environmental remediation
(14.0
)
 
(13.0
)
 
(11.8
)
Changes in assets and liabilities, excluding effect of currency translation and businesses acquired:
 
 
 
 
 
Trade accounts receivable
13.5

 
(3.0
)
 
(80.6
)
Inventories
8.6

 
53.2

 
(67.9
)
Accounts payable
4.2

 
(11.7
)
 
52.6

All other items, net
(30.0
)
 
18.7

 
46.8

Net cash provided by operating activities
515.9

 
453.6

 
219.4

INVESTING ACTIVITIES
 
 
 
 
 
Capital expenditures
(156.2
)
 
(138.5
)
 
(144.0
)
Businesses acquired, net of cash acquired
(526.2
)
 
(80.0
)
 
(55.8
)
Transfer to restricted cash and cash equivalents
(197.8
)
 
(61.1
)
 
(38.8
)
Proceeds from sales of product lines
1.8

 
—

 
10.0

Other investing activities
(2.3
)
 
(0.7
)
 
7.7

Net cash used for investing activities
(880.7
)
 
(280.3
)
 
(220.9
)
FINANCING ACTIVITIES
 
 
 
 
 
Borrowings under credit arrangements
49.8

 
60.7

 
40.9

Repayments under credit arrangements
(64.5
)
 
(24.8
)
 
(19.3
)
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
7.3

 
5.4

 
6.0

Net cash (used for) provided by financing activities
(8.4
)
 
110.3

 
39.7

Effect of currency exchange rate changes on cash and cash equivalents
1.1

 
5.0

 
(5.6
)
(Decrease) increase in cash and cash equivalents
(372.1
)
 
288.6

 
32.6

Cash and cash equivalents, beginning of period
1,336.9

 
1,048.3

 
1,015.7

Cash and cash equivalents, end of period
$
964.8

 
$
1,336.9

 
$
1,048.3


The Notes to Consolidated Financial Statements are an integral part of these statements.
 
F-8
Table of Contents

W. R. Grace & Co. and Subsidiaries
Consolidated Balance Sheets
(In millions, except par value and shares)
December 31, 2013
 
December 31, 2012
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
964.8

 
$
1,336.9

Restricted cash and cash equivalents
395.4

 
197.6

Trade accounts receivable, less allowance of $6.0 (2012—$5.2)
469.5

 
474.8

Accounts receivable—unconsolidated affiliate
12.3

 
15.6

Inventories
295.3

 
283.6

Deferred income taxes
58.1

 
58.3

Other current assets
99.0

 
78.4

Total Current Assets
2,294.4

 
2,445.2

Properties and equipment, net of accumulated depreciation and amortization of $1,876.8 (2012—$1,785.1)
829.9

 
770.5

Goodwill
457.5

 
196.7

Technology and other intangible assets, net
315.5

 
82.7

Deferred income taxes
845.9

 
953.2

Asbestos-related insurance
500.0

 
500.0

Overfunded defined benefit pension plans
16.7

 
32.1

Investment in unconsolidated affiliate
96.2

 
85.5

Other assets
40.0

 
24.5

Total Assets
$
5,396.1

 
$
5,090.4

LIABILITIES AND EQUITY
 
 
 
Liabilities Not Subject to Compromise
 
 
 
Current Liabilities
 
 
 
Debt payable within one year
$
76.6

 
$
83.4

Debt payable—unconsolidated affiliate
4.5

 
3.6

Accounts payable
249.5

 
249.4

Accounts payable—unconsolidated affiliate
13.0

 
2.6

Other current liabilities
292.0

 
307.3

Total Current Liabilities
635.6

 
646.3

Debt payable after one year
5.3

 
13.4

Debt payable—unconsolidated affiliate
24.3

 
22.4

Deferred income taxes
18.2

 
27.1

Underfunded and unfunded defined benefit pension plans
299.6

 
396.5

Other liabilities
65.8

 
45.0

Total Liabilities Not Subject to Compromise
1,048.8

 
1,150.7

Liabilities Subject to Compromise—Note 2
 
 
 
Debt plus accrued interest
1,137.8

 
973.3

Income tax contingencies
76.6

 
87.6

Asbestos-related contingencies
2,092.4

 
2,065.0

Environmental contingencies
134.5

 
140.5

Postretirement benefits
176.3

 
190.9

Other liabilities and accrued interest
158.5

 
162.6

Total Liabilities Subject to Compromise
3,776.1

 
3,619.9

Total Liabilities
4,824.9

 
4,770.6

Commitments and Contingencies—Note 13

 

Equity
 
 
 
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 77,046,143 (2012—75,565,409)
0.8

 
0.8

Paid-in capital
533.4

 
536.5

Retained earnings (accumulated deficit)
15.8

 
(240.3
)
Treasury stock, at cost: shares: 0 (2012—1,414,351)
—

 
(16.8
)
Accumulated other comprehensive income
10.6

 
29.7

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

 
309.9

Noncontrolling interests
10.6

 
9.9

Total Equity
571.2

 
319.8

Total Liabilities and Equity
$
5,396.1

 
$
5,090.4


The Notes to Consolidated Financial Statements are an integral part of these statements.
 
F-9
Table of Contents

W. R. Grace & Co. and Subsidiaries
Consolidated Statements of Equity (Deficit)
(In millions)
Common
Stock and
Paid-in
Capital
 
Retained
Earnings
(Accumulated
Deficit)
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income
 
Noncontrolling
Interests
 
Total
Equity
(Deficit)
Balance, December 31, 2010
$
456.6

 
$
(500.0
)
 
$
(45.9
)
 
$
26.7

 
$
6.9

 
$
(55.7
)
Net income (loss)
—

 
219.7

 
—

 
—

 
(0.6
)
 
219.1

Stock-based compensation
14.0

 
—

 
—

 
—

 
—

 
14.0

Exercise of stock options
3.0

 
—

 
9.1

 
—

 
—

 
12.1

Other comprehensive income (loss)
—

 
—

 
—

 
(7.2
)
 
1.8

 
(5.4
)
Balance, December 31, 2011
473.6

 
(280.3
)
 
(36.8
)
 
19.5

 
8.1

 
184.1

Net income
—

 
40.0

 
—

 
—

 
1.0

 
41.0

Stock-based compensation
14.7

 
—

 
—

 
—

 
—

 
14.7

Exercise of stock options
12.2

 
—

 
20.0

 
—

 
—

 
32.2

Tax benefit related to stock plans
36.8

 
—

 
—

 
—

 
—

 
36.8

Other comprehensive income
—

 
—

 
—

 
10.2

 
0.8

 
11.0

Balance, December 31, 2012
537.3

 
(240.3
)
 
(16.8
)
 
29.7

 
9.9

 
319.8

Net income
—

 
256.1

 
—

 
—

 
1.6

 
257.7

Stock-based compensation
13.4

 
—

 
—

 
—

 
—

 
13.4

Exercise of stock options
17.6

 
—

 
16.8

 
—

 
—

 
34.4

Tax benefit related to stock plans
(35.4
)
 
—

 
—

 
—

 
—

 
(35.4
)
Shares issued
1.3

 
—

 
—

 
—

 
—

 
1.3

Other comprehensive loss
—

 
—

 
—

 
(19.1
)
 
(0.9
)
 
(20.0
)
Balance, December 31, 2013
$
534.2

 
$
15.8

 
$
—

 
$
10.6

 
$
10.6

 
$
571.2


The Notes to Consolidated Financial Statements are an integral part of these statements.
 
F-10
Table of Contents

Notes to Consolidated Financial Statements

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies
W. R. Grace & Co., through its subsidiaries, is engaged in specialty chemicals and specialty materials businesses on a global basis through three operating segments: Grace Catalysts Technologies, which includes catalysts and related products and technologies used in refining, petrochemical and other chemical manufacturing applications; Grace Materials Technologies, which includes packaging technologies and engineered materials used in consumer, industrial, coatings, and pharmaceutical applications; and Grace Construction Products, which includes specialty construction chemicals and specialty building materials used in commercial, infrastructure and residential construction.
W. R. Grace & Co. conducts substantially all of its business through a direct, wholly owned subsidiary, W. R. Grace & Co.-Conn. ("Grace-Conn."). Grace-Conn. owns substantially all of the assets, properties and rights of W. R. Grace & Co. on a consolidated basis, either directly or through subsidiaries.
As used in these notes, the term "Company" refers to W. R. Grace & Co. The term "Grace" refers to the Company and/or one or more of its subsidiaries and, in certain cases, their respective predecessors.
Chapter 11 Proceedings    During 2000 and the first quarter of 2001, Grace experienced several adverse developments in its asbestos-related litigation, including: a significant increase in personal injury claims, higher than expected costs to resolve personal injury and certain property damage claims, and class action lawsuits alleging damages from Zonolite® Attic Insulation ("ZAI"), a former Grace attic insulation product.
After a thorough review of these developments, Grace's Board of Directors concluded that a federal court-supervised bankruptcy process provided the best forum available to achieve fairness in resolving these claims and on April 2, 2001 (the "Filing Date"), Grace and 61 of its United States subsidiaries and affiliates filed voluntary petitions for reorganization (the "Filing") under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court").
Under Chapter 11, Grace operated its businesses under court supervision, while using the Chapter 11 process to develop and implement a plan for addressing the asbestos-related claims.
In September 2008, Grace and other parties filed a joint plan of reorganization with the Bankruptcy Court to address all pending and future asbestos-related claims and all other pre-petition claims as outlined therein (as subsequently amended, the "Joint Plan"). Following the confirmation of the Joint Plan in 2011 by the Bankruptcy Court and in 2012 by a U.S. District Court, and the resolution of all appeals, Grace emerged from bankruptcy on February 3, 2014. (See Note 2 for Chapter 11 information.)
Principles of Consolidation    The Consolidated Financial Statements include the accounts of Grace and entities as to which Grace exercises control over operating and financial policies. Grace consolidates the activities of variable interest entities in circumstances where management determines that Grace is the primary beneficiary of the variable interest entity. Intercompany transactions and balances are eliminated in consolidation. Investments in affiliated companies in which Grace can significantly influence operating and financial policies are accounted for under the equity method, unless Grace's investment is deemed to be temporary, in which case the investment is accounted for under the cost method.
Noncontrolling Interests in Consolidated Entities    Grace conducts certain of its business through joint ventures with unaffiliated third parties. For joint ventures in which Grace has a controlling financial interest, Grace consolidates the results of such joint ventures in the Consolidated Financial Statements. Grace recognizes a liability for cumulative amounts due to the third parties based on the financial results of the joint ventures, and deducts the amount of income attributable to noncontrolling interests in the measurement of its consolidated net income.
Operating Segments    Grace reports financial results of each of its operating segments that engage in business activities that generate revenues and expenses, and whose operating results are regularly reviewed by Grace's Chief Executive Officer.
Use of Estimates    The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of revenues and expenses for the periods presented. Actual amounts could differ from those estimates, and the differences could be material. Changes in estimates are

F-11
Table of Contents
Notes to Consolidated Financial Statements (Continued)

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Continued)

recorded in the period identified. Grace's accounting measurements that are most affected by management's estimates of future events are:
•
Contingent liabilities, which depend on an assessment of the probability of loss and an estimate of ultimate resolution cost, such as asbestos-related matters and litigation (see Note 2), income taxes (see Note 10), and environmental remediation (see Note 13);
•
Pension and postretirement liabilities that depend on assumptions regarding participant life spans, future inflation, discount rates and total returns on invested funds (see Note 11);
•
Realization values of net deferred tax assets, which depend on projections of future taxable income; and
•
Recoverability of goodwill, which depends on assumptions used to value reporting units, such as observable market inputs, projections of future cash flows and weighted average cost of capital.
Revenue Recognition    Grace recognizes revenue when all of the following criteria are satisfied: risk of loss and title transfer to the customer; the price is fixed and determinable; persuasive evidence of a sales arrangement exists; and collectability is reasonably assured. Risk of loss and title transfers to customers are based on individual contractual terms which generally specify the point of shipment. Terms of delivery are generally included in customer contracts of sale, order confirmation documents and invoices.
Certain customer arrangements include conditions for volume rebates. Grace accrues a rebate allowance and reduces recorded sales for anticipated selling price adjustments at the time of sale. Grace regularly reviews rebate accruals based on actual and anticipated sales patterns.
Cash Equivalents    Cash equivalents consist of liquid instruments and investments with maturities of three months or less when purchased. The recorded amounts approximate fair value.
Inventories    Inventories are stated at the lower of cost or market. The method used to determine cost is first-in/first-out, or "FIFO." Market values for raw materials are based on current cost and, for other inventory classifications, net realizable value. Inventories are evaluated regularly for salability, and slow moving and/or obsolete items are adjusted to expected salable value. Inventory values include direct and certain indirect costs of materials and production. Abnormal costs of production are expensed as incurred.
Long Lived Assets    Properties and equipment are stated at cost. Depreciation of properties and equipment is generally computed using the straight-line method over the estimated useful life of the asset. Estimated useful lives range from 20 to 40 years for buildings, 3 to 7 years for information technology equipment, 3 to 10 years for operating machinery and equipment, and 5 to 10 years for furniture and fixtures. Interest is capitalized in connection with major project expenditures. Fully depreciated assets are retained in properties and equipment and related accumulated depreciation accounts until they are removed from service. In the case of disposals, assets and related accumulated depreciation are removed from the accounts and the net amount, less any proceeds from disposal, is charged or credited to earnings. Obligations for costs associated with asset retirements, such as requirements to restore a site to its original condition, are accrued at net present value and amortized along with the related asset.
Other intangible assets with finite lives consist of technology, customer lists, trademarks and other intangibles and are amortized over their estimated useful lives, ranging from 1 to 30 years.
Grace reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. No impairment charge was required in 2013 or 2012; however, there were impairment charges related to certain restructuring activities in 2011 (see Note 14).
Goodwill    Goodwill arises from certain business combinations. Grace reviews its goodwill for impairment on an annual basis at October 31 and whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Recoverability is assessed at the reporting unit level most directly associated with the business combination that generated the goodwill. For the purpose of measuring impairment under the provisions of ASC 350 "Intangibles—Goodwill and Other", Grace has identified its reporting units at one level below its operating segments. Grace has evaluated its goodwill annually with no impairment charge required in any of the periods presented.

F-12
Table of Contents
Notes to Consolidated Financial Statements (Continued)

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Continued)

Financial Instruments    Grace uses commodity forward, swap and/or option contracts and currency forward and/or option contracts to manage exposure to fluctuations in commodity prices and currency exchange rates. Grace does not hold or issue derivative financial instruments for trading purposes. Derivative instruments are recorded in the Consolidated Balance Sheets as either assets or liabilities at their fair value. For derivative instruments designated as fair value hedges, changes in the fair values of the derivative instruments closely offset changes in the fair values of the hedged items in "other expense, net" in the Consolidated Statements of Operations. For derivative instruments designated as cash flow hedges, if the derivative instruments qualify for hedge accounting pursuant to ASC 815, the effective portion of any hedge is reported as "accumulated other comprehensive income" in the Consolidated Balance Sheets until it is cleared to earnings during the same period in which the hedged item affects earnings. The ineffective portion of all hedges, and changes in the fair values of derivative instruments that are not designated as hedges, are recorded in current period earnings. Cash flows from derivative instruments are reported in the same category as the cash flows from the items being hedged.
Income Taxes    Deferred tax assets and liabilities are recognized with respect to the expected future tax consequences of events that have been recorded in the Consolidated Financial Statements. If it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is provided against such deferred tax assets. The assessment of realization of deferred tax assets is performed based on the weight of the positive and negative evidence available to indicate whether the asset is recoverable, including tax planning strategies that are prudent and feasible.
Grace records a liability for income tax contingencies when it is more likely than not that a tax position it has taken will not be sustained upon audit. Grace evaluates such likelihood based on relevant facts and tax law. Grace adjusts its recorded liability for income tax matters due to changes in circumstances or new uncertainties, such as amendments to existing tax law. Grace's ultimate tax liability depends upon many factors, including negotiations with taxing authorities in the jurisdictions in which it operates, outcomes of tax litigation, and resolution of disputes arising from federal, state, and foreign tax audits. Due to the varying tax laws in each jurisdiction senior management, with the assistance of local tax advisors as necessary, assesses individual matters in each jurisdiction on a case-by-case basis. Grace researches and evaluates its income tax positions, including why it believes they are compliant with income tax regulations, and these positions are documented internally.
Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. Tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.
Stock-Based Compensation    The Company recognizes expenses related to stock-based compensation payment transactions in which it receives employee services in exchange for (a) equity instruments of the Company or (b) liabilities that are based on the fair value of the Company’s equity instruments or that may be settled by the issuance of equity instruments. Stock-based compensation cost for restricted stock units (RSUs) and share settled performance based units (PBUs) are measured based on the high/low average of the Company’s common stock on the date of grant. Cash settled performance based units (CSPBU) are remeasured at the end of each reporting period based on the closing fair market value of the Company’s common stock. Stock-based compensation cost for stock options is estimated at the grant date based on each option’s fair value as calculated by the Black-Scholes-Merton ("BSM") option pricing model. The Company recognizes stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period.
Currency Translation    Assets and liabilities of foreign subsidiaries (other than those located in countries with highly inflationary economies) are translated into U.S. dollars at current exchange rates, while revenues, costs and expenses are translated at average exchange rates during each reporting period. The resulting translation adjustments are included in "accumulated other comprehensive loss" in the Consolidated Balance Sheets. The financial statements of any subsidiaries located in countries with highly inflationary economies are remeasured as if the functional currency were the U.S. dollar; the remeasurement creates translation adjustments that are reflected in net income in the Consolidated Statements of Operations.
On February 8, 2013, the Venezuelan government announced that, effective February 13, 2013, the official exchange rate of the bolivar to U.S. dollar would devalue from 4.3 to 6.3. As a result of this currency devaluation,

F-13
Table of Contents
Notes to Consolidated Financial Statements (Continued)

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Continued)

Grace incurred a charge to net income of $8.5 million in the 2013 first quarter. Of this amount, $1.6 million is included in segment operating income.
Reclassifications and Revisions    Certain amounts in prior years' Consolidated Financial Statements have been reclassified to conform to the current year presentation. Such reclassifications have not materially affected previously reported amounts in the Consolidated Financial Statements.
Certain pension costs previously reported as a separate line item in the Consolidated Statements of Operations are now reported in "cost of goods sold" and in "selling, general and administrative expenses” based upon the functions of the employees to which the pension costs relate. Grace has revised its accounting such that a portion of the defined benefit pension expense has been and will continue to be capitalized into inventories prior to being reported in "cost of goods sold." See "Change in Accounting Principle Regarding Pension Benefits" for further discussion related to the change in pension accounting.
Certain prior period amounts related to borrowings and repayments under credit arrangements reported as financing activities on the Consolidated Statements of Cash Flows have been revised. These amounts were originally presented on a net basis and are now being presented on a gross basis. Grace concluded that these revisions were not material to the prior-year Consolidated Financial Statements.
Change in Accounting Principle Regarding Pension Benefits    The Company changed its method of accounting for actuarial gains and losses relating to its global defined benefit pension plans to a more preferable method under U.S. generally accepted accounting principles (“GAAP”). The Company’s new method of accounting is referred to as "mark-to-market accounting" and includes immediate recognition of actuarial gains and losses in the period in which they occur. Under the Company's previous accounting method, such amounts were deferred and amortized. In addition, the Company will no longer update the balance sheet funded status of its pension plans each quarter for changes in discount rates and actual returns on assets, but rather will perform such update annually as of the end of each year. Should a significant event occur, the Company's pension obligation and plan assets would be remeasured at an interim period, and the gains or losses on remeasurement would be recognized in that period. This new accounting method was adopted in the 2013 fourth quarter, and retrospectively applied to the Company’s financial results for all periods presented.
Under mark-to-market accounting, the Company’s pension costs consist of two elements: 1) ongoing costs recognized quarterly, which include service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; and 2) mark-to-market gains and losses recognized annually in the fourth quarter resulting from changes in actuarial assumptions, such as discount rates and the difference between actual and expected returns on plan assets. Grace believes that the mark-to-market accounting method is preferable as it better aligns the economics of the defined benefit pension plans with their accounting measures, eliminates delays in recognizing gains and losses in operating results, and improves transparency in Grace's operating results by immediately recognizing the effects of economic and interest rate trends on plan investments and assumptions in the year these effects actually occur.
As a result of the retrospective application of the new accounting method, accumulated actuarial losses have been reclassified from "accumulated other comprehensive income" to "retained earnings (accumulated deficit)." In addition, in order to better reflect the nature of pension costs in the Company's operating results, the Company retrospectively revised the classification of defined benefit pension expense. Pension costs previously reported as a separate line item in the Consolidated Statements of Operations are now reported in "cost of goods sold" and in "selling, general and administrative expenses" based upon the functions of the employees to which the pension costs relate. Finally, the Company has revised its accounting such that a portion of the defined benefit pension expense has been and will continue to be capitalized into inventories prior to being reported in "cost of goods sold." The Company believes that the change in classification of defined benefit pension costs and the change to inventory capitalization are not material to all prior periods.
The Company continues to manage its defined benefit pension plans at the corporate level. Accordingly, defined benefit pension expense is excluded from segment operating income. Profitability performance measures for the business segments are unchanged from amounts previously reported. Mark-to-market adjustments are excluded from the Company’s non-GAAP Adjusted EBIT measure.

F-14
Table of Contents
Notes to Consolidated Financial Statements (Continued)

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Continued)

These changes have been reported through retrospective application of the new policies to all periods presented. The impacts of all adjustments made to the financial statements are summarized below:
Consolidated Statements of Operations
 
Year Ended December 31, 2013
(In millions, except per share amounts)
Previous Method
 
As Reported
 
Effect of Change
Cost of goods sold
$
1,925.3

 
$
1,918.6

 
$
(6.7
)
Gross profit
1,135.4

 
1,142.1

 
6.7

Selling, general and administrative expenses
522.2

 
505.7

 
(16.5
)
Defined benefit pension expense
73.4

 
—

 
(73.4
)
Total costs and expenses
871.4

 
781.5

 
(89.9
)
Income (loss) before income taxes
264.0

 
360.6

 
96.6

Provision for income taxes
(72.9
)
 
(102.9
)
 
(30.0
)
Net income
191.1

 
257.7

 
66.6

Net income attributable to W. R. Grace & Co. shareholders
189.5

 
256.1

 
66.6

Basic earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
2.48

 
3.35

 
0.87

Diluted earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
2.44

 
3.30

 
0.86

 
Year Ended December 31, 2012
(In millions, except per share amounts)
Previously Reported
 
Revised
 
Effect of Change
Cost of goods sold
$
1,989.2

 
$
2,041.1

 
$
51.9

Gross profit
1,166.3

 
1,114.4

 
(51.9
)
Selling, general and administrative expenses
537.5

 
635.2

 
97.7

Defined benefit pension expense
71.2

 
—

 
(71.2
)
Total costs and expenses
1,108.5

 
1,135.0

 
26.5

Income (loss) before income taxes
57.8

 
(20.6
)
 
(78.4
)
Benefit from income taxes
37.3

 
61.6

 
24.3

Net income
95.1

 
41.0

 
(54.1
)
Net income attributable to W. R. Grace & Co. shareholders
94.1

 
40.0

 
(54.1
)
Basic earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
1.26

 
0.53

 
(0.72
)
Diluted earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
1.23

 
0.52

 
(0.71
)

F-15
Table of Contents
Notes to Consolidated Financial Statements (Continued)

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Continued)

 
Year Ended December 31, 2011
(In millions, except per share amounts)
Previously Reported
 
Revised
 
Effect of Change
Cost of goods sold
$
2,050.6

 
$
2,099.0

 
$
48.4

Gross profit
1,161.3

 
1,112.9

 
(48.4
)
Selling, general and administrative expenses
568.4

 
659.9

 
91.5

Defined benefit pension expense
63.4

 
—

 
(63.4
)
Total costs and expenses
777.8

 
805.9

 
28.1

Income before income taxes
383.5

 
307.0

 
(76.5
)
Benefit from (provision for) income taxes
(114.7
)
 
(87.9
)
 
26.8

Net income
268.8

 
219.1

 
(49.7
)
Net income attributable to W. R. Grace & Co. shareholders
269.4

 
219.7

 
(49.7
)
Basic earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
3.66

 
2.99

 
(0.68
)
Diluted earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
3.57

 
2.91

 
(0.66
)
Consolidated Balance Sheets
 
December 31, 2013
(In millions)
Previous Method
 
As Reported
 
Effect of Change
Inventories
$
294.7

 
$
295.3

 
$
0.6

Total current assets
2,293.8

 
2,294.4

 
0.6

Deferred income taxes
846.1

 
845.9

 
(0.2
)
Overfunded defined benefit pension plans
16.7

 
16.7

 
—

Total assets
5,395.7

 
5,396.1

 
0.4

Underfunded and unfunded defined benefit pension plans
299.6

 
299.6

 
—

Total Liabilities Not Subject to Compromise
1,048.8

 
1,048.8

 
—

Postretirement benefits
176.3

 
176.3

 
—

Total Liabilities Subject to Compromise
3,776.1

 
3,776.1

 
—

Total Liabilities
4,824.9

 
4,824.9

 
—

Accumulated other comprehensive income (loss)
(558.7
)
 
10.6

 
569.3

Retained earnings
584.7

 
15.8

 
(568.9
)
Total W. R. Grace & Co. Shareholders' Equity
560.2

 
560.6

 
0.4

Total Equity
570.8

 
571.2

 
0.4



F-16
Table of Contents
Notes to Consolidated Financial Statements (Continued)

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Continued)

 
December 31, 2012
(In millions)
Previously Reported
 
Revised
 
Effect of Change
Inventories
$
278.6

 
$
283.6

 
$
5.0

Total current assets
2,440.2

 
2,445.2

 
5.0

Deferred income taxes
956.3

 
953.2

 
(3.1
)
Overfunded defined benefit pension plans
33.8

 
32.1

 
(1.7
)
Total assets
5,090.2

 
5,090.4

 
0.2

Underfunded and unfunded defined benefit pension plans
400.6

 
396.5

 
(4.1
)
Total Liabilities Not Subject to Compromise
1,154.8

 
1,150.7

 
(4.1
)
Postretirement benefits
188.1

 
190.9

 
2.8

Total Liabilities Subject to Compromise
3,617.1

 
3,619.9

 
2.8

Total Liabilities
4,771.9

 
4,770.6

 
(1.3
)
Accumulated other comprehensive income (loss)
(607.3
)
 
29.7

 
637.0

Retained earnings
395.2

 
(240.3
)
 
(635.5
)
Total W. R. Grace & Co. Shareholders' Equity
308.4

 
309.9

 
1.5

Total Equity
318.3

 
319.8

 
1.5

Consolidated Statements of Cash Flows
 
Year Ended December 31, 2013
(In millions)
Previous Method
 
As Reported
 
Effect of Change
Cash flows from operating activities:
 

 
 

 
 

Net income
$
191.1

 
$
257.7

 
$
66.6

(Benefit from) provision for income taxes
72.9

 
102.9

 
30.0

Defined benefit pension expense
73.4

 
(23.2
)
 
(96.6
)
Inventories
4.2

 
8.6

 
4.4

All other items, net(1)
(25.6
)
 
(30.0
)
 
(4.4
)
 
Year Ended December 31, 2012
(In millions)
Previously Reported
 
Revised
 
Effect of Change
Cash flows from operating activities:
 

 
 

 
 

Net income
$
95.1

 
$
41.0

 
$
(54.1
)
(Benefit from) provision for income taxes
(37.3
)
 
(61.6
)
 
(24.3
)
Defined benefit pension expense
71.2

 
149.6

 
78.4

Inventories
53.9

 
53.2

 
(0.7
)
All other items, net(1)
29.2

 
29.9

 
0.7

 
Year Ended December 31, 2011
(In millions)
Previously Reported
 
Revised
 
Effect of Change
Cash flows from operating activities:
 

 
 

 
 

Net income
$
268.8

 
$
219.1

 
$
(49.7
)
(Benefit from) provision for income taxes
114.7

 
87.9

 
(26.8
)
Defined benefit pension expense
63.4

 
139.9

 
76.5

Inventories
(66.9
)
 
(67.9
)
 
(1.0
)
All other items, net(1)
17.4

 
18.4

 
1.0

_______________________________________________________________________________
(1)
Includes only those items which relate to the change in accounting method to mark-to-market accounting.

F-17
Table of Contents
Notes to Consolidated Financial Statements (Continued)

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Continued)

Consolidated Statements of Equity (Deficit) and Comprehensive Income
 
December 31, 2013
 
Previous Method
 
As Reported
 
Effect of Change
Retained earnings
 

 
 

 
 

Beginning balance
$
395.2

 
$
(240.3
)
 
$
(635.5
)
Net income
189.5

 
256.1

 
66.6

Ending balance
584.7

 
15.8

 
(568.9
)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
Beginning balance
$
(607.3
)
 
$
29.7

 
$
637.0

Other comprehensive income (loss)
48.6

 
(19.1
)
 
(67.7
)
Ending balance
(558.7
)
 
10.6

 
569.3

 
 
 
 
 
 
Total equity
$
570.8

 
$
571.2

 
$
0.4

 
 
 
 
 
 
Comprehensive income
 
 
 
 
 
Net income
$
191.1

 
$
257.7

 
$
66.6

Defined benefit pension and other postretirement plans net of income taxes
72.3

 
4.6

 
(67.7
)
Currency translation adjustments
(23.6
)
 
(23.6
)
 
—

Total other comprehensive income (loss)
47.7

 
(20.0
)
 
(67.7
)
Comprehensive income
238.8

 
237.7

 
(1.1
)
Comprehensive income attributable to W. R. Grace & Co. shareholders
238.1

 
237.0

 
(1.1
)
 
December 31, 2012
 
Previously Reported
 
Revised
 
Effect of Change
Retained earnings
 

 
 

 
 

Beginning balance
$
301.1

 
$
(280.3
)
 
$
(581.4
)
Net income
94.1

 
40.0

 
(54.1
)
Ending balance
395.2

 
(240.3
)
 
(635.5
)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
Beginning balance
$
(578.5
)
 
$
19.5

 
$
598.0

Other comprehensive income (loss)
(28.8
)
 
10.2

 
39.0

Ending balance
(607.3
)
 
29.7

 
637.0

 
 
 
 
 
 
Total equity
$
318.3

 
$
319.8

 
$
1.5

 
 
 
 
 
 
Comprehensive income
 
 
 
 
 
Net income
$
95.1

 
$
41.0

 
$
(54.1
)
Defined benefit pension and other postretirement plans net of income taxes
(36.6
)
 
2.3

 
38.9

Currency translation adjustments
5.4

 
5.5

 
0.1

Total other comprehensive income (loss)
(28.0
)
 
11.0

 
39.0

Comprehensive income
67.1

 
52.0

 
(15.1
)
Comprehensive income attributable to W. R. Grace & Co. shareholders
65.3

 
50.2

 
(15.1
)

F-18
Table of Contents
Notes to Consolidated Financial Statements (Continued)

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Continued)

 
December 31, 2011
 
Previously Reported
 
Revised
 
Effect of Change
Retained earnings
 

 
 

 
 

Beginning balance
$
31.7

 
$
(500.0
)
 
$
(531.7
)
Net income
269.4

 
219.7

 
(49.7
)
Ending balance
301.1

 
(280.3
)
 
(581.4
)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
Beginning balance
$
(518.1
)
 
$
26.7

 
$
544.8

Other comprehensive income (loss)
(60.4
)
 
(7.2
)
 
53.2

Ending balance
(578.5
)
 
19.5

 
598.0

 
 
 
 
 
 
Total equity
$
167.5

 
$
184.1

 
$
16.6

 
 
 
 
 
 
Comprehensive income
 

 
 

 
 
Net income
$
268.8

 
$
219.1

 
$
(49.7
)
Defined benefit pension and other postretirement plans net of income taxes
(46.7
)
 
6.2

 
52.9

Currency translation adjustments
(11.6
)
 
(11.3
)
 
0.3

Total other comprehensive income (loss)
(58.6
)
 
(5.4
)
 
53.2

Comprehensive income
210.2

 
213.7

 
3.5

Comprehensive income attributable to W. R. Grace & Co. shareholders
209.0

 
212.5

 
3.5

Effect of New Accounting Standards    In June 2011, the FASB issued ASU 2011-05 "Presentation of Comprehensive Income". This update is intended to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The new disclosure requirements are effective for fiscal years beginning after December 15, 2011, and for interim periods within those fiscal years, with early adoption permitted. In December 2011, the FASB issued ASU 2011-12 "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05". This update defers certain paragraphs of ASU 2011-05 pertaining to reclassification adjustments out of accumulated other comprehensive income. This deferral is effective for fiscal years beginning after December 15, 2011, and for interim periods within those fiscal years, with early adoption permitted. Grace continues to report its Consolidated Statement of Other Comprehensive Income as a separate financial statement, immediately following the Consolidated Statement of Operations to comply with the updates that have not been deferred. In February 2013, the FASB issued ASU 2013-02 "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income", which further clarifies these disclosure requirements. This update is effective for fiscal years beginning after December 15, 2012, and for interim periods within those fiscal years, with early adoption permitted. Grace adopted this update in the 2013 first quarter, and it did not have a material effect on the Consolidated Financial Statements.
In December 2011, the FASB issued ASU 2011-11 "Disclosures about Offsetting Assets and Liabilities". This update is intended to improve the comparability of statements of financial position prepared in accordance with U.S. GAAP and IFRS, requiring both gross and net information about offsetting assets and liabilities. The new requirements are effective for fiscal years beginning on or after January 1, 2013, and for interim periods within those fiscal years. In January 2013, the FASB issued ASU 2013-01 "Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities", which clarifies these disclosure requirements. These standards are effective for fiscal years beginning on or after January 1, 2013, and for interim periods within those fiscal years. Grace adopted these standards for the 2013 first quarter, and they did not have a material effect on the Consolidated Financial Statements.
In July 2012, the FASB issued ASU 2012-02 "Testing Indefinite-Lived Intangible Assets for Impairment". This update is intended to simplify how entities test indefinite-lived intangible assets for impairment, by allowing an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. The

F-19
Table of Contents
Notes to Consolidated Financial Statements (Continued)

1. Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Continued)

new requirements are effective for fiscal years beginning after September 15, 2012, and for interim periods within those fiscal years, with early adoption permitted. Grace adopted this standard for the 2012 fourth quarter, and it did not have a material effect on the Consolidated Financial Statements.
In July 2013, the FASB issued ASU 2013-11 "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". This update is intended to improve the consistency surrounding the presentation of an unrecognized tax benefit when a net operating loss carryforward exists, requiring the unrecognized tax benefit to be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The new requirements are effective for fiscal years beginning after December 15, 2013, and for interim periods within those fiscal years, with early adoption permitted. Grace will adopt this standard for the 2014 first quarter, and does not expect it to have a material effect on the Consolidated Financial Statements.
2. 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 Grace’s 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);

F-20
Table of Contents
Notes to Consolidated Financial Statements (Continued)

2. Chapter 11 and Joint Plan of Reorganization (Continued)


•
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 Grace’s 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,

F-21
Table of Contents
Notes to Consolidated Financial Statements (Continued)

2. Chapter 11 and Joint Plan of Reorganization (Continued)


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

F-22
Table of Contents
Notes to Consolidated Financial Statements (Continued)

2. Chapter 11 and Joint Plan of Reorganization (Continued)


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.

F-23
Table of Contents
Notes to Consolidated Financial Statements (Continued)

2. Chapter 11 and Joint Plan of Reorganization (Continued)


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.

F-24
Table of Contents
Notes to Consolidated Financial Statements (Continued)

2. Chapter 11 and Joint Plan of Reorganization (Continued)


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

F-25
Table of Contents
Notes to Consolidated Financial Statements (Continued)

2. Chapter 11 and Joint Plan of Reorganization (Continued)


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


F-26
Table of Contents
Notes to Consolidated Financial Statements (Continued)

2. Chapter 11 and Joint Plan of Reorganization (Continued)


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



F-27
Table of Contents
Notes to Consolidated Financial Statements (Continued)

2. Chapter 11 and Joint Plan of Reorganization (Continued)


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.

F-28
Table of Contents
Notes to Consolidated Financial Statements (Continued)

3. Subsequent Event—Chapter 11 Emergence


Grace emerged from bankruptcy on February 3, 2014. Grace paid approximately $1,900 million in emergence-related claims and other costs. This included payments to the PI Trust and the PD Trust, pre-petition bank debt, drawn letters of credit, environmental settlements, income tax settlements, amounts due to vendors, and other non-asbestos claims, plus accrued interest for certain of these items as well as other emergence costs. Grace will satisfy all other liabilities previously subject to compromise as they become due and payable after emergence.
Grace funded these payments through a combination of approximately $1,360 million of cash on hand and approximately $900 million in exit financing. The exit financing consisted of a $700 million term loan and a €150 million term loan. See Note 8 for a discussion of Grace's exit financing.
Pro forma Information (Unaudited)    The below table presents the pro forma consolidated balance sheet of Grace as of December 31, 2013, reflecting the accounting effects of the Joint Plan as if it became effective on that date. The income tax effects of the pro forma adjustments have been computed at a 37.41% U.S. Federal and state income tax rate. Grace is not required to adopt fresh-start accounting at emergence since existing shareholders continue to retain a majority interest in the Company on the Effective Date, and Grace is not balance sheet insolvent. Following is a description of the pro forma adjustments:
1.
Borrowings Under New Credit Agreements—Reflects $900 million of debt borrowed on the Effective Date. Cash proceeds were approximately $873 million after approximately $27 million of origination fees and other costs of the exit financing, including original issue discount.
2.
Consideration to the Asbestos Trusts—Reflects the transfer by Grace to the PI Trust and the PD Trust of (i) cash (including restricted cash) of approximately $512 million, (ii) the PI Deferred Payment Obligations, (iii) the PD Deferred Payment Obligation, (iv) the warrant, and (v) rights to proceeds from Grace's asbestos-related insurance coverage. See Note 2 for a discussion of this consideration. The related deferred income tax assets are reclassified from temporary differences to NOL carryforward.
Grace expects to recognize income tax deductions on the Deferred Payments when cash payments are made. Grace has determined that payments of the U.S. ZAI contingent payments are not probable, and no such payments are included in this pro forma.
3.
Payment of Remaining Pre-Petition Liabilities and Adjustment for Additional Expenses—Reflects the payment of pre-petition bank debt, drawn letters of credit, environmental settlements, income tax settlements, amounts due to vendors and other non-asbestos claims, accrued interest for certain of these items, and other emergence costs on the Effective Date. The related deferred income tax assets are reclassified from temporary differences to NOL carryforward. Also reflects approximately $12 million of emergence costs, which are assumed fully deductible for tax purposes.
4.
NOLs and Future Tax Deductions—Reflects U.S. Federal and state income tax deductions attributable to the payment of certain bankruptcy claims. U.S. Federal and state NOL carryforwards are assumed to increase to approximately $670 million (tax effected at approximately $252 million). In addition, under current U.S. Federal and state income tax law, future deductions are expected in the amount of $1,580 million when the deferred payments are made and $490 million when the warrant is settled.
These future payments are expected to create additional NOL carryforwards in the years paid. It is expected that use of these U.S. Federal tax benefits will be unrestricted and that a valuation allowance will not be established. U.S. state tax benefits associated with these future payments may have some restrictions and a partial valuation allowance may be recorded. The realization of the tax benefits depends on the amount and timing of future U.S. taxable income and the avoidance of limitation events that would apply in the event that Grace undergoes an "ownership change" (as defined by the Internal Revenue Code).
5.
Reclassification of Liabilities Subject to Compromise—Reflects certain items that were classified as Liabilities Subject to Compromise as of December 31, 2013, and were not paid at emergence, which were reclassified to the appropriate liability accounts at emergence. This includes income tax contingencies, postretirement benefits, and environmental contingencies that will be paid as they come due after emergence.

F-29
Table of Contents
Notes to Consolidated Financial Statements (Continued)

3. Subsequent Event—Chapter 11 Emergence (Continued)

W. R. Grace and Co. and Subsidiaries
Pro forma Consolidated Balance Sheet (unaudited)
 
 
 
Pro forma Adjustments
 
 
(In millions, except par value and shares)
December 31, 2013
Reported
 
Borrowings Under New Credit Agreements
 
Consideration to the Asbestos Trusts
 
Payment of Remaining Pre-Petition Liabilities and Adjustment for Additional Expenses
 
Reclassifications at Emergence
 
December 31, 2013
Pro forma
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
964.8

 
$
873.0

 
$
(269.6
)
 
$
(1,370.6
)
 
$
153.2

 
$
350.8

Restricted cash and cash equivalents
395.4

 
—

 
(242.2
)
 
—

 
(153.2
)
 
—

Trade accounts receivable, less allowance of $6.0
469.5

 
—

 
—

 
—

 
—

 
469.5

Accounts receivable—unconsolidated affiliate
12.3

 
—

 
—

 
—

 
—

 
12.3

Inventories
295.3

 
—

 
—

 
—

 
—

 
295.3

Deferred income taxes
58.1

 
—

 
—

 
—

 
—

 
58.1

Other current assets
99.0

 
—

 
—

 
—

 
—

 
99.0

Total Current Assets
2,294.4

 
873.0

 
(511.8
)
 
(1,370.6
)
 
—

 
1,285.0

Properties and equipment, net of accumulated depreciation and amortization of $1,876.8
829.9

 
—

 
—

 
—

 
—

 
829.9

Goodwill
457.5

 
—

 
—

 
—

 
—

 
457.5

Technology and other intangible assets, net
315.5

 
—

 
—

 
—

 
—

 
315.5

Deferred income taxes:
 
 
 
 
 
 
 
 
 
 


Net operating loss carryforward
—

 
—

 
111.0

 
141.2

 
—

 
252.2

Temporary differences
845.9

 
—

 
(111.0
)
 
(134.1
)
 
—

 
600.8

Asbestos-related insurance
500.0

 
—

 
(500.0
)
 
—

 
—

 
—

Overfunded defined benefit pension plans
16.7

 
—

 
—

 
—

 
—

 
16.7

Investment in unconsolidated affiliate
96.2

 
—

 
—

 
—

 
—

 
96.2

Other assets
40.0

 
27.0

 
—

 
—

 
—

 
67.0

Total Assets
$
5,396.1

 
$
900.0

 
$
(1,011.8
)
 
$
(1,363.5
)
 
$
—

 
$
3,920.8

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
Liabilities Not Subject to Compromise
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
 
 
 
Debt payable within one year
$
76.6

 
$
9.0

 
$
—

 
$
—

 
$
—

 
$
85.6

Debt payable—unconsolidated affiliate
4.5

 
—

 
—

 
—

 
—

 
4.5

Accounts payable
249.5

 
—

 
—

 
—

 
—

 
249.5

Accounts payable—unconsolidated affiliate
13.0

 
—

 
—

 
—

 
—

 
13.0

PI warrant liability
—

 
—

 
490.0

 
—

 
—

 
490.0

Other current liabilities
292.0

 
—

 
—

 
7.2

 
38.8

 
338.0

Total Current Liabilities
635.6

 
9.0

 
490.0

 
7.2

 
38.8

 
1,180.6

Debt payable after one year
5.3

 
891.0

 
—

 
—

 
—

 
896.3

Debt payable—unconsolidated affiliate
24.3

 
—

 
—

 
—

 
—

 
24.3

Deferred payment obligations
—

 
—

 
594.5

 
—

 
—

 
594.5

Deferred income taxes
18.2

 
—

 
—

 
—

 
—

 
18.2

Income tax contingencies
—

 
—

 
—

 
—

 
76.6

 
76.6

Underfunded defined benefit pension plans
66.2

 
—

 
—

 
—

 
—

 
66.2

Unfunded pay-as-you-go defined benefit pension plans
233.4

 
—

 
—

 
—

 
95.9

 
329.3

Other liabilities
65.8

 
—

 
—

 
—

 
105.2

 
171.0

Total Liabilities Not Subject to Compromise
1,048.8

 
900.0

 
1,084.5

 
7.2

 
316.5

 
3,357.0

Liabilities Subject to Compromise
 
 
 
 
 
 
 
 
 
 
 
Debt plus accrued interest
1,137.8

 
—

 
—

 
(1,135.7
)
 
(2.1
)
 
—

Income tax contingencies
76.6

 
—

 
—

 
—

 
(76.6
)
 
—

Asbestos-related contingencies
2,092.4

 
—

 
(2,084.1
)
 
—

 
(8.3
)
 
—

Environmental contingencies
134.5

 
—

 
—

 
(77.5
)
 
(57.0
)
 
—

Postretirement benefits
176.3

 
—

 
—

 
(27.7
)
 
(148.6
)
 
—

Other liabilities and accrued interest
158.5

 
—

 
(12.2
)
 
(122.4
)
 
(23.9
)
 
—

Total Liabilities Subject to Compromise
3,776.1

 
—

 
(2,096.3
)
 
(1,363.3
)
 
(316.5
)
 
—

Total Liabilities
4,824.9

 
900.0

 
(1,011.8
)
 
(1,356.1
)
 
—

 
3,357.0

Equity
 
 
 
 
 
 
 
 
 
 
 
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 77,046,143 (2012—75,565,409)
0.8

 
—

 
—

 
—

 
—

 
0.8

Paid-in capital
533.4

 
—

 
—

 
—

 
—

 
533.4

Retained earnings
15.8

 
—

 
—

 
(7.4
)
 
—

 
8.4

Treasury stock, at cost: shares: 0 (2012—1,414,351)
—

 
—

 
—

 
—

 
—

 
—

Accumulated other comprehensive loss
10.6

 
—

 
—

 
—

 
—

 
10.6

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

 
—

 
—

 
(7.4
)
 
—

 
553.2

Noncontrolling interests
10.6

 
—

 
—

 
—

 
—

 
10.6

Total Equity
571.2

 
—

 
—

 
(7.4
)
 
—

 
563.8

Total Liabilities and Equity
$
5,396.1

 
$
900.0

 
$
(1,011.8
)
 
$
(1,363.5
)
 
$
—

 
$
3,920.8


F-30
Table of Contents
Notes to Consolidated Financial Statements (Continued)

4. Inventories


Inventories are stated at the lower of cost or market, and cost is determined using FIFO. Inventories consisted of the following at December 31, 2013 and 2012:
 
December 31,
(In millions)
2013
 
2012
Raw materials
$
69.7

 
$
66.5

In process
41.8

 
46.1

Finished products
152.4

 
138.8

Other
31.4

 
32.2

 
$
295.3

 
$
283.6


5. Properties and Equipment
 
December 31,
(In millions)
2013
 
2012
Land
$
20.0

 
$
19.9

Buildings
524.3

 
500.3

Information technology and equipment
172.0

 
146.7

Machinery, equipment and other
1,883.2

 
1,786.8

Projects under construction
107.2

 
101.9

Properties and equipment, gross
2,706.7

 
2,555.6

Accumulated depreciation and amortization
(1,876.8
)
 
(1,785.1
)
Properties and equipment, net
$
829.9

 
$
770.5

Capitalized interest costs amounted to $1.2 million, $0.1 million, and $0.1 million in 2013, 2012, and 2011, respectively. Depreciation and lease amortization expense relating to properties and equipment amounted to $108.6 million, $108.2 million, and $110.0 million in 2013, 2012, and 2011, respectively. Grace's rental expense for operating leases amounted to $28.4 million, $26.1 million, and $20.5 million in 2013, 2012, and 2011, respectively.
At December 31, 2013, minimum future non-cancelable payments for operating leases are:
 
(In millions)
2014
$
22.8

2015
17.3

2016
13.4

2017
7.9

2018
4.8

Thereafter
18.7

 
$
84.9

The above minimum non-cancelable lease payments are net of anticipated sublease income of $0.8 million in 2014, $0.7 million in 2015, $0.4 million in 2016, $0.2 million in 2017, $0.1 million in 2018 and $0.1 million thereafter.

F-31
Table of Contents
Notes to Consolidated Financial Statements (Continued)

6. Acquisitions


In 2013, Grace completed two business combinations for total consideration of $526.2 million as follows:
•
In April 2013, Grace acquired the assets of Chemind Construction Products, a privately held specialty manufacturer and distributor of waterproofing coatings technologies and materials for the design and construction industry.
•
In December 2013, Grace acquired the assets of the UNIPOL® Polypropylene Process Technology Licensing and Catalysts business of The Dow Chemical Company. The acquisition is complementary to Grace's specialty catalysts business and significantly enhances the company’s position as a leading supplier of polyolefin catalysts and technologies.
The purchase price for the acquisitions was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date in accordance with ASC 805 "Business Combinations".
 
(In millions)
Tangible assets
$
55.8

Goodwill
262.9

Intangible assets
247.6

Liabilities assumed
(40.1
)
Net assets acquired, net of cash acquired
$
526.2

The table below presents the assets acquired and liabilities assumed as part of the acquisition of the UNIPOL® licensing and related catalyst business. The excess of the purchase price over the fair value of the tangible net assets and intangible assets acquired was recorded as goodwill. The goodwill recognized is attributable to the expected growth and operating synergies that Grace expects to realize from this acquisition. Goodwill generated from the acquisition will be deductible for tax purposes.
 
(In millions)
Trade accounts receivable
$
10.5

Inventories
22.6

Properties and equipment
18.4

Goodwill
253.2

Intangible assets
243.0

Current deferred revenue
(14.3
)
Noncurrent deferred revenue
(23.0
)
The table below presents the intangible assets acquired as part of the acquisition of the UNIPOL® licensing and related catalyst business and the periods over which they will be amortized.
 
Amount
(In millions)
 
Weighted Average Amortization Period
(in years)
Technology
$
205.3

 
20.9
Trademarks
11.9

 
30.0
Customer Lists
10.6

 
20.0
Other
15.2

 
17.0
Total
$
243.0

 
20.9

F-32
Table of Contents
Notes to Consolidated Financial Statements (Continued)

6. Acquisitions (Continued)

Pro forma information is not presented for the UNIPOL® licensing and related catalyst business as the acquisition is not material to the Company. In the month of December, Grace recorded $5.2 million in sales related to the acquisition and earnings of $0.6 million before $8.6 million of acquisition, integration, and transition costs.
7. Goodwill and Other Intangible Assets
The carrying amount of goodwill attributable to each operating segment and the changes in those balances during the year ended December 31, 2013, are as follows:
(In millions)
Grace Catalysts Technologies
 
Grace Materials Technologies
 
Grace
Construction
Products
 
Total
Grace
Balance, December 31, 2012
$
39.5

 
$
40.5

 
$
116.7

 
$
196.7

Goodwill acquired during the year
253.2

 
—

 
9.7

 
262.9

Foreign currency translation/other adjustments
0.7

 
0.7

 
(3.5
)
 
(2.1
)
Balance, December 31, 2013
$
293.4

 
$
41.2

 
$
122.9

 
$
457.5


Grace's net book value of other intangible assets at December 31, 2013 and 2012, was $315.5 million and $82.7 million, respectively, detailed as follows:
 
As of December 31, 2013
(In millions)
Gross Carrying
Amount
 
Accumulated
Amortization
Technology
$
260.0

 
$
37.8

Customer lists
94.9

 
43.7

Trademarks
36.9

 
14.0

Other
22.4

 
3.2

Total
$
414.2

 
$
98.7


 
As of December 31, 2012
(In millions)
Gross Carrying
Amount
 
Accumulated
Amortization
Customer lists
$
81.6

 
$
37.9

Technology
54.6

 
32.6

Trademarks
24.6

 
12.2

Other
8.8

 
4.2

Total
$
169.6

 
$
86.9

Total indefinite-lived trademarks, included above, at December 31, 2013 and 2012, were $4.9 million and $4.8 million, respectively. Amortization expense related to intangible assets amounted to $12.7 million, $10.7 million, and $10.0 million in 2013, 2012, and 2011, respectively.

F-33
Table of Contents
Notes to Consolidated Financial Statements (Continued)

7. Goodwill and Other Intangible Assets (Continued)

At December 31, 2013, estimated future annual amortization expenses for intangible assets are:
 
(In millions)
2014
$
24.0

2015
22.4

2016
18.6

2017
17.3

2018
17.0

Thereafter
211.3

Total estimated amortization expenses
$
310.6


8. Debt
Components of Debt
(In millions)
2013
 
2012
Debt payable within one year(1)
$
76.6

 
$
83.4

Debt payable after one year
$
5.3

 
$
13.4

Debt Subject to Compromise(2)
 
 
 
Bank borrowings(3)
$
500.0

 
$
500.0

Accrued interest on bank borrowings
471.0

 
437.2

Default interest settlement(4)
129.0

 
—

Drawn letters of credit(5)
26.7

 
26.5

Accrued interest on drawn letters of credit
11.1

 
9.6

 
$
1,137.8

 
$
973.3

Full-year weighted average interest rates on total debt
3.6
%
 
3.5
%
_______________________________________________________________________________
(1)
Represents borrowings under various lines of credit and other borrowings, primarily by non-U.S. subsidiaries. At December 31, 2013, the fair value of Grace's debt payable within one year not subject to compromise approximated the recorded value of $76.6 million.
(2)
At December 31, 2013, the carrying value of Grace's bank debt subject to compromise plus interest was $1,137.8 million. The estimated fair value of the bank debt approximates the carrying value and is estimated using Level 2 inputs. These amounts were paid in full on February 3, 2014.
(3)
Under bank revolving credit agreements in effect prior to the Filing, Grace could borrow up to $500 million at interest rates based upon the prevailing prime, federal funds and/or Eurodollar rates. Of that amount, $250 million was available under short-term facilities that expired in May 2001, and $250 million was available under a long-term facility that expired in May 2003. As a result of the Filing, Grace was not permitted to make payments under the bank revolving credit agreements, and accordingly, the balance as of the Filing Date was reclassified to debt subject to compromise in the Consolidated Balance Sheets.
(4)
On December 31, 2013, Grace entered into an agreement to settle the final appeal pending in its Chapter 11 bankruptcy with the holders of the company’s pre-petition bank debt (the “Bank Lenders”). The settlement calls for Grace to pay the Bank Lenders $129.0 million, plus interest from December 31, 2013, in addition to the distributions provided in the Joint Plan.
(5)
Amounts drawn on letters of credit pursuant to settled but unpaid claims.
Fair value is determined based on expected future cash flows (discounted at market interest rates), quotes from financial institutions and other appropriate valuation methodologies.

F-34
Table of Contents
Notes to Consolidated Financial Statements (Continued)

8. Debt (Continued)

On February 3, 2014, Grace entered into a Credit Agreement (the "Credit Agreement") in connection with its exit financing. The Credit Agreement provides for:
(a)
a $400 million revolving credit facility due in 2019, with interest at LIBOR +175 bps;
(b)
a $700 million term loan due in 2021, with interest at LIBOR +225 bps with a 75 bps floor;
(c)
a €150 million term loan due in 2021 with interest at EURIBOR +250 bps with a 75 bps floor; and
(d)
a $250 million delayed draw term loan facility available for 12 months, with amounts drawn due in 2021, with interest at LIBOR +225 bps with a 75 bps floor.
The term loans will amortize in equal monthly installments in aggregate annual amounts equal to 1.00% of the original principal amount thereof.
The Credit Agreement contains customary affirmative covenants, including, but not limited to (i) maintenance of legal existence and compliance with laws and regulations; (ii) delivery of consolidated financial statements and other information; (iii) payment of taxes; (iv) delivery of notices of defaults and certain other material events; and (v) maintenance of adequate insurance. The Credit Agreement also contains customary negative covenants, including but not limited to restrictions on (i) dividends on, and redemptions of, equity interests and other restricted payments; (ii) liens; (iii) loans and investments; (iv) the sale, transfer or disposition of assets and businesses; (vi) transactions with affiliates; and (vii) a maximum total leverage ratio.
Events of default under the Credit Agreement include, but are not limited to: (i) failure to pay principal, interest, fees or other amounts under the Credit Agreement when due, taking into account any applicable grace period; (ii) any representation or warranty proving to have been incorrect in any material respect when made; (iii) failure to perform or observe covenants or other terms of the Credit Agreement subject to certain grace periods; (iv) a cross-default and cross-acceleration with certain other material debt; (v) bankruptcy events; (vi) certain defaults under ERISA; and (vii) the invalidity or impairment of security interests.
To secure its obligations under the Credit Agreement, the Company has granted security interests in the shares of its Grace-Conn. and Alltech Associates subsidiaries, substantially all of its U.S. non-real estate assets and property, and certain U.S. real estate.
This summary of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such agreement, a copy of which has been filed with the SEC.
9. Fair Value Measurements and Risk
Certain of Grace's assets and liabilities are reported at fair value on a gross basis. ASC 820 defines fair value as the value that would be received at the measurement date in the principal or "most advantageous" market. Grace uses principal market data, whenever available, to value assets and liabilities that are required to be reported at fair value.
Grace has identified the following financial assets and liabilities that are subject to the fair value analysis required by ASC 820:
Fair Value of Debt and Other Financial Instruments
See Note 8 for a discussion of the fair value of Grace's debt. At December 31, 2013, the recorded values of other financial instruments such as cash equivalents and trade receivables and payables approximated their fair values, based on the short-term maturities and floating rate characteristics of these instruments.
Derivatives
From time to time, Grace enters into commodity derivatives such as fixed-rate swaps or options with financial institutions to mitigate the risk of volatility of prices of natural gas or other commodities. Under fixed-rate swaps, Grace locks in a fixed rate with a financial institution for future purchases, purchases its commodity from a supplier at the prevailing market rate, and then settles with the bank for any difference in the rates, thereby "swapping" a variable rate for a fixed rate.
The valuation of Grace's fixed-rate natural gas swaps was determined using a market approach, based on natural gas futures trading prices quoted on the New York Mercantile Exchange. Commodity fixed-rate swaps with

F-35
Table of Contents
Notes to Consolidated Financial Statements (Continued)

9. Fair Value Measurements and Risk (Continued)

maturities of not more than 12 months are used and designated as cash flow hedges of forecasted purchases of natural gas. Current open contracts hedge forecasted transactions until March 2014. The effective portion of the gain or loss on the commodity contracts is recorded in "accumulated other comprehensive income" and reclassified into income in the same period or periods that the underlying commodity purchase affects income. At December 31, 2013, the contract volume, or notional amount, of the commodity contracts was 0.3 million MMBtu (million British thermal units) with a total contract value of $1.2 million.
The valuation of Grace's natural gas call options was determined using a market approach, based on the strike price of the options and the natural gas futures trading prices quoted on the New York Mercantile Exchange. Commodity option contracts with maturities of not more than 24 months are used and designated as cash flow hedges of forecasted purchases of natural gas. Current open option contracts hedge forecasted transactions until June 2015. The effective portion of the gain or loss on the commodity contracts is recorded in "accumulated other comprehensive income" and reclassified into income in the same period or periods that the underlying purchases affect income. At December 31, 2013, the contract volume, or notional amount, of the commodity option contracts was 7.1 million MMBtu and the natural gas futures trading price of option contracts was less than the strike price.
The valuation of Grace's fixed-rate aluminum swaps was determined using a market approach, based on aluminum futures trading prices quoted on the London Metal Exchange. Commodity fixed-rate swaps with maturities of not more than 12 months are used and designated as cash flow hedges of forecasted purchases of aluminum. Current open contracts hedge forecasted transactions until December 2014. The effective portion of the gain or loss on the commodity contracts is recorded in "accumulated other comprehensive income" and reclassified into income in the same period or periods that the underlying commodity purchase affects income. At December 31, 2013, the contract volume, or notional amount, of the commodity contracts was 1.4 million pounds with a total contract value of $1.2 million.
Because Grace does business in over 40 countries and in more than 50 currencies, results are exposed to fluctuations in currency exchange rates. Grace seeks to minimize exposure to these fluctuations by matching sales in volatile currencies with expenditures in the same currencies, but it is not always possible to do so. From time to time Grace will use financial instruments such as currency forward contracts, options, or combinations of the two to reduce the risk of certain specific transactions. However, Grace does not have a policy of hedging all exposures, because management does not believe that such a level of hedging would be cost-effective.
The valuation of Grace's currency exchange rate forward contracts is determined using both a market approach and an income approach. Inputs used to value currency exchange rate forward contracts consist of: (1) spot rates, which are quoted by various financial institutions; (2) forward points, which are primarily affected by changes in interest rates; and (3) discount rates used to present value future cash flows, which are based on the London Interbank Offered Rate (LIBOR) curve or overnight indexed swap rates.
In November 2007, Grace purchased currency forward contracts to mitigate the effect of currency risk with respect to intercompany loans between its principal U.S. subsidiary and a German subsidiary. As of December 31, 2013, the total notional amount related to the remaining outstanding currency forward contracts was €194.5 million. These derivatives are not designated as hedging instruments under ASC 815. These contracts were settled upon Grace's emergence from bankruptcy.

F-36
Table of Contents
Notes to Consolidated Financial Statements (Continued)

9. Fair Value Measurements and Risk (Continued)

The following tables present the fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and 2012:
 
Fair Value Measurements at December 31, 2013 Using
Items Measured at Fair Value on a Recurring Basis
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Currency derivatives
$
2.1

 
$
—

 
$
2.1

 
$
—

Commodity derivatives
—

 
—

 
—

 
—

Total Assets
$
2.1

 
$
—

 
$
2.1

 
$
—

Liabilities
 
 
 
 
 
 
 
Currency derivatives
$
6.9

 
$
—

 
$
6.9

 
$
—

Commodity derivatives
0.1

 
—

 
0.1

 
—

Total Liabilities
$
7.0

 
$
—

 
$
7.0

 
$
—


 
Fair Value Measurements at December 31, 2012 Using
Items Measured at Fair Value on a Recurring Basis
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Currency derivatives
$
1.2

 
$
—

 
$
1.2

 
$
—

Commodity derivatives
0.2

 
—

 
0.2

 
—

Total Assets
$
1.4

 
$
—

 
$
1.4

 
$
—

Liabilities
 
 
 
 
 
 
 
Currency derivatives
$
5.1

 
$
—

 
$
5.1

 
$
—

Commodity derivatives
0.4

 
—

 
0.4

 
—

Total Liabilities
$
5.5

 
$
—

 
$
5.5

 
$
—


The following tables present the location and fair values of derivative instruments included in the Consolidated Balance Sheets as of December 31, 2013 and 2012:
 
Asset Derivatives
 
Liability Derivatives
Fair Values of Derivative Instruments at December 31, 2013
(In millions)
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Derivatives designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$
—

 
Other current liabilities
 
$
0.1

Currency contracts
Other current assets
 
1.0

 
Other current liabilities
 
—

Currency contracts
Other assets
 
1.0

 
Other liabilities
 
—

Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Currency contracts
Other current assets
 
0.1

 
Other current liabilities
 
6.9

Total derivatives
 
 
$
2.1

 
 
 
$
7.0



F-37
Table of Contents
Notes to Consolidated Financial Statements (Continued)

9. Fair Value Measurements and Risk (Continued)

 
Asset Derivatives
 
Liability Derivatives
Fair Values of Derivative Instruments at December 31, 2012
(In millions)
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Derivatives designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$
0.2

 
Other current liabilities
 
$
0.4

Currency contracts
Other current assets
 
1.2

 
Other current liabilities
 
0.2

Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Currency contracts
Other current assets
 
—

 
Other current liabilities
 
4.9

Total derivatives
 
 
$
1.4

 
 
 
$
5.5


The following tables present the location and amount of gains and losses on derivative instruments included in the Consolidated Statements of Operations or, when applicable, gains and losses initially recognized in other comprehensive income (loss) ("OCI") for the years ended December 31, 2013, 2012, and 2011:
The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Year Ended December 31, 2013
(In millions)
Amount of Gain
or (Loss)
Recognized in
OCI on Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
 
Currency contracts
$
2.0

 
Other expense
 
$
2.4

Currency contracts
(0.2
)
 
Cost of goods sold
 
(0.2
)
Commodity contracts
(0.3
)
 
Cost of goods sold
 
(0.4
)
Total derivatives
$
1.5

 
 
 
$
1.8

 
 
 
 
 
 
 
 
Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
 
Amount of Gain
or (Loss)
Recognized in
Income on
Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
(10.9
)

The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Year Ended December 31, 2012
(In millions)
Amount of Gain
or (Loss)
Recognized in
OCI on Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
 
Currency contracts
$
1.4

 
Other expense
 
$
1.6

Currency contracts
0.2

 
Cost of goods sold
 
(0.1
)
Commodity contracts
(2.3
)
 
Cost of goods sold
 
(5.9
)
Total derivatives
$
(0.7
)
 
 
 
$
(4.4
)
 
 
 
 
 
 
 
 
Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
 
Amount of Gain
or (Loss)
Recognized in
Income on
Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
(4.4
)


F-38
Table of Contents
Notes to Consolidated Financial Statements (Continued)

9. Fair Value Measurements and Risk (Continued)

The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Year Ended December 31, 2011
(In millions)
Amount of Gain
or (Loss)
Recognized in
OCI on Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
 
Currency contracts
$
(0.2
)
 
Cost of goods sold
 
$
0.1

Commodity contracts
(5.7
)
 
Cost of goods sold
 
(2.8
)
Total derivatives
$
(5.9
)
 
 
 
$
(2.7
)
 
 
 
 
 
 
 
 
Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
 
Amount of Gain
or (Loss)
Recognized in
Income on
Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
9.0


Debt and Interest Rate Swap Agreements
Grace was not a party to any debt or interest rate swaps at December 31, 2013 and 2012. However, in connection with emergence financing, Grace entered into an interest rate swap beginning on February 3, 2015, and maturing on February 3, 2020, fixing $250 million of term debt at 4.643%.
Credit Risk
Grace is exposed to credit risk in its trade accounts receivable. Customers in the petroleum refining and construction industries represent the greatest exposure. Grace's credit evaluation policies, relatively short collection terms and history of minimal credit losses mitigate credit risk exposures. Grace does not generally require collateral for its trade accounts receivable, but may require a bank letter of credit in certain instances, particularly when selling to customers in cash restricted countries.
Grace may also be exposed to credit risk in its derivatives contracts. Grace monitors counterparty credit risk and currently does not anticipate nonperformance by its derivatives counterparties. Grace's derivatives contracts are with internationally recognized commercial financial institutions.

F-39
Table of Contents
Notes to Consolidated Financial Statements (Continued)

10. Income Taxes


Provision for Income Taxes
The components of income from consolidated operations before income taxes and the related provision for income taxes for 2013, 2012, and 2011 are as follows:
Income Taxes—Consolidated Operations
(In millions)
2013
 
2012
 
2011
Income (loss) before income taxes:
 
 
 
 
 
Domestic
$
141.4

 
$
(170.3
)
 
$
107.7

Foreign
219.2

 
149.7

 
199.3

Total
$
360.6

 
$
(20.6
)
 
$
307.0

Benefit from (provision for) income taxes:
 
 
 
 
 
Federal—current
$
1.4

 
$
(51.2
)
 
$
16.7

Federal—deferred
(73.1
)
 
82.0

 
(49.3
)
State and local—current
(0.7
)
 
(4.4
)
 
(2.3
)
State and local—deferred
38.2

 
70.2

 
—

Foreign—current
(83.5
)
 
(43.1
)
 
(52.5
)
Foreign—deferred
14.8

 
8.1

 
(0.5
)
Total
$
(102.9
)
 
$
61.6

 
$
(87.9
)
The preceding allocation of income between jurisdictions does not reflect $25.9 million, $22.1 million, and $30.1 million of domestic income resulting from repatriated earnings in 2013, 2012, and 2011, respectively.
The difference between the provision for income taxes at the U.S. federal income tax rate of 35% and Grace's overall income tax provision is summarized as follows:
Income Tax Provision Analysis
(In millions)
2013
 
2012
 
2011
Tax benefit (provision) at U.S. federal income tax rate
$
(126.2
)
 
$
7.2

 
$
(107.4
)
Change in benefit (provision) resulting from:
 
 
 
 
 
Release of state valuation allowance
24.4

 
44.0

 
—

Effect of tax rates in foreign jurisdictions
16.6

 
14.9

 
17.6

Benefits from domestic production activities
—

 
14.0

 
0.9

Nontaxable income/non-deductible expenses
(9.7
)
 
(8.1
)
 
(7.3
)
U.S. taxes on repatriated foreign earnings
3.7

 
(2.2
)
 
(1.1
)
State and local income taxes, net of federal income tax
(0.7
)
 
0.1

 
(1.5
)
Adjustments to uncertain tax positions and other items
(11.0
)
 
(8.3
)
 
10.9

Benefit from (provision for) income taxes
$
(102.9
)
 
$
61.6

 
$
(87.9
)


F-40
Table of Contents
Notes to Consolidated Financial Statements (Continued)

10. Income Taxes (Continued)

Deferred Tax Assets and Liabilities
At December 31, 2013 and 2012, the tax attributes giving rise to deferred tax assets and liabilities consisted of the following items:
Deferred Tax Analysis
(In millions)
2013
 
2012
Deferred tax assets:
 
 
 
Liability for asbestos-related litigation
$
657.1

 
$
717.5

Federal tax credit carryforwards
16.9

 
2.4

Foreign net operating loss carryforwards
18.0

 
22.7

Deferred state taxes
90.3

 
88.4

Liability for environmental remediation
47.1

 
49.2

Other postretirement benefits
18.2

 
22.9

Pension liabilities
96.7

 
133.1

Reserves and allowances
60.4

 
51.6

Research and development
32.6

 
34.0

Accrued interest on pre-petition debt
66.7

 
121.9

Other
16.3

 
20.8

Total deferred tax assets
$
1,120.3

 
$
1,264.5

Deferred tax liabilities:
 
 
 
Asbestos-related insurance receivable
$
(175.0
)
 
$
(175.0
)
Pension assets
(3.7
)
 
(14.9
)
Properties and equipment
(30.3
)
 
(35.3
)
Other
(7.3
)
 
(14.7
)
Total deferred tax liabilities
$
(216.3
)
 
$
(239.9
)
Valuation allowance:
 
 
 
Deferred state taxes
$
(13.6
)
 
$
(40.3
)
Federal credits
(4.4
)
 
—

Foreign net operating loss carryforwards
(0.3
)
 
(0.5
)
Total valuation allowance
(18.3
)
 
(40.8
)
Net deferred tax assets
$
885.7

 
$
983.8

U.S. Federal deferred tax assets decreased year over year by $123.8 million. The $98.1 million reduction in net deferred tax assets was primarily the result of Grace's ability to accelerate the deductibility of certain emergence deductions, including the utilization of a qualified settlement fund. This overall reduction was partially offset by an increase in state deferred tax assets, mostly the result of a valuation allowance release.
Grace has recorded a valuation allowance to reduce its net deferred tax assets to the amount that is more likely than not to be realized. Grace has considered forecasted earnings, recent past and future taxable income, the mix of earnings in the jurisdictions in which it operates and prudent and feasible tax planning strategies in determining the need for these valuation allowances. The valuation allowance decreased $22.5 million from December 31, 2012, to December 31, 2013. In the 2013 fourth quarter, Grace determined that it is more likely than not that its deductions generated at emergence will be used before their expiration. Accordingly, Grace recorded a $24.4 million release of its valuation allowance on its state deferred tax assets. Further decreases in Grace's deferred tax assets resulted from the utilization and expiration of state net operating losses ("NOLs") in the current year, and the reduction of NOLs resulting from prior-year adjustments to taxable income. These decreases were partially offset by the recording of valuation allowances on deferred tax assets associated with certain U.S. federal foreign tax credits.

F-41
Table of Contents
Notes to Consolidated Financial Statements (Continued)

10. Income Taxes (Continued)

The realization of deferred tax assets is dependent on the generation of sufficient taxable income in the appropriate tax jurisdictions. Although realization is not assured, Grace believes it is more likely than not that the remaining deferred tax assets will be realized. If Grace were to determine that it would not be able to realize a portion of its net deferred tax assets in the future, for which there is currently no valuation allowance, an adjustment to the net deferred tax assets would be charged to earnings in the period such determination was made. Conversely, if Grace were to make a determination that it is more likely than not that deferred tax assets, for which there is currently a valuation allowance, would be realized, the related valuation allowance would be reduced and a benefit to earnings would be recorded.
The U.S. Federal tax credit carryforwards at December 31, 2013, were $65.2 million. Grace has recorded a valuation allowance of $4.4 million against the credit carryforwards because they are expected to expire unused by 2018 while Grace continues to be in an NOL position. Grace expects to use $52.4 million of the credits that would otherwise expire in the years 2019 through 2028, as well as the remaining $8.4 million, which do not expire. In addition, as a result of certain realization requirements, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2013 and 2012, that arose directly from tax deductions related to equity compensation in excess of compensation recognized for financial reporting. Equity will be increased by $57.7 million if and when such deferred tax assets are ultimately realized.
U.S. Federal Net Operating Losses
At emergence from bankruptcy, Grace generated approximately $670 million in U.S. Federal net operating losses, which were previously recorded as deferred tax assets for temporary differences, that will be available to reduce U.S. Federal taxable income in 2014 and future years. In addition, Grace expects to receive a U.S. Federal income tax deduction of $490 million upon settlement of the warrant held by one of the asbestos trusts and $1,580 million upon payment of deferred payment obligations. Grace expects to carryforward most of its NOLs. Under U.S. Federal income tax law, a corporation is generally permitted to carryforward NOLs for a 20-year period for deduction against future taxable income. Grace believes that it will generate sufficient domestic taxable income to use all available future tax deductions prior to expiration. Grace has generally not paid U.S. Federal income taxes in cash in recent years since available tax deductions and credits have fully offset U.S. taxable income.
Unrepatriated Foreign Earnings
Grace has not provided for U.S. federal, state and foreign deferred income taxes on $1,126.5 million of undistributed earnings of foreign subsidiaries. Grace expects that these earnings will be permanently reinvested by such subsidiaries except in certain instances where repatriation attributable to current earnings results in minimal or no U.S. tax consequences. The unrecorded deferred tax liability associated with these earnings is $149.7 million. Since 2001, Grace has repatriated cash and promissory notes from foreign subsidiaries to support its Chapter 11 funding requirements. Grace repatriated earnings of $25.9 million, $22.1 million, and $30.1 million from its non-U.S. subsidiaries in 2013, 2012, and 2011, respectively, incurring an insignificant amount of U.S. income tax expense.
Uncertain Tax Positions
The amount of unrecognized tax benefits at December 31, 2013, was $84.4 million ($80.3 million excluding interest and penalties). The amount of unrecognized tax benefits at December 31, 2012, was $88.6 million ($83.1 million excluding interest and penalties). The amount of unrecognized tax benefits at December 31, 2011, was $69.3 million ($62.4 million excluding interest and penalties). A reconciliation of the unrecognized tax benefits, excluding interest and penalties, for the three years ended December 31, 2013, follows:

F-42
Table of Contents
Notes to Consolidated Financial Statements (Continued)

10. Income Taxes (Continued)

Rollforward of Uncertain Tax Positions
(In millions)
Unrecognized
Tax Benefits
Balance as of January 1, 2011
$
79.2

Additions for current year tax positions
0.6

Additions for prior year tax positions
0.5

Reductions for prior year tax positions and reclassifications(1)(2)
(17.8
)
Reductions for expirations of statute of limitations
(0.1
)
Balance as of December 31, 2011
62.4

Additions for current year tax positions
3.4

Additions for prior year tax positions
22.0

Reductions for prior year tax positions and reclassifications
(0.8
)
Reductions for expirations of statute of limitations
(2.9
)
Settlements(3)
(1.0
)
Balance as of December 31, 2012
83.1

Additions for current year tax positions
6.3

Additions for prior year tax positions
6.4

Reductions for prior year tax positions and reclassifications(4)
(9.6
)
Reductions for expirations of statute of limitations
(5.9
)
Balance as of December 31, 2013
$
80.3

_______________________________________________________________________________
(1)
On November 3, 2011, Grace received notice from the Canadian Revenue Agency that they had completed a review of Grace's Canadian transfer pricing for the years 2002, 2003, and 2004. As a result, Grace reversed $10.6 million of uncertain tax positions because they were effectively settled pursuant to ASC 740-10-25. A tax matter is effectively settled through examination when the taxing authority has completed an examination; the entity does not intend to appeal or litigate any aspect of a particular tax position for the completed examination; and based on a tax authority's widely understood policy, the entity considers it remote that the taxing authority would subsequently examine or reexamine any of the positions once the examination process is completed.
(2)
In 2011, $6.7 million of uncertain tax positions representing pre-petition federal and state settlements were reclassified to income taxes payable.
(3)
In 2012, $1.0 million of uncertain tax positions representing withholding taxes due were paid as a result of the completion of Grace's Canadian audit for the years 2002, 2003, and 2004.
(4)
In 2013, $9.6 million of uncertain tax positions representing agreed adjustments resulting from the 2007-2009 IRS examination were reclassified to income taxes payable.
The balance of unrecognized tax benefits as of December 31, 2013, 2012, and 2011 of $79.5 million (net of $0.8 million that would be indemnified by a third party), $82.1 million (net of $1.0 million that would be indemnified by a third party), and $62.4 million, respectively, if recognized, would affect the effective tax rate. Grace accrues potential interest and any associated penalties related to uncertain tax positions in "benefit from (provision for) income taxes" in the Consolidated Statements of Operations. The balances of unrecognized tax benefits in the preceding table do not include accrued interest and penalties. The total amount of interest and penalties accrued on uncertain tax positions as of December 31, 2013, 2012, and 2011 was $4.1 million, $5.5 million and $6.9 million, respectively, net of applicable federal income tax benefits.
Grace files U.S. Federal income tax returns as well as income tax returns in various state and foreign jurisdictions. Grace's uncertain tax positions are related to income tax returns for tax years that remain subject to examination by the relevant taxing authorities. The following table summarizes these open tax years by major jurisdiction:

F-43
Table of Contents
Notes to Consolidated Financial Statements (Continued)

10. Income Taxes (Continued)

Tax Jurisdiction(1)
Examination in Progress
 
Examination Not Yet Initiated
United States—Federal
2007-2009
 
2010-2012
United States—State
2007-2012
 
2010-2012
Germany
None
 
2009-2012
Italy
None
 
2008-2012
France
2010-2011
 
2012
Canada
None
 
2006-2012
_______________________________________________________________________________
(1)
Includes federal, state, provincial or local jurisdictions, as applicable.
Grace notes that there are attributes generated in prior years that are otherwise closed by statute and were carried forward into years that are open to examination. Those attributes may still be subject to adjustment to the extent utilized in open years.
As a multi-national taxpayer, Grace is under continual audit by the various tax authorities on open-year tax positions. Based on the status of current examinations in various taxing jurisdictions and applicable judicial decisions applied to Grace's fact pattern, Grace believes it is reasonably possible that in the next 12 months the amount of the liability for unrecognized tax benefits could decrease by as much as $68 million.
11. Pension Plans and Other Postretirement Benefit Plans
Pension Plans    
As discussed in Note 1, the Company elected to change its method of accounting for deferred actuarial gains and losses relating to its global defined benefit pension plans in 2013. The new accounting method, referred to as mark-to-market accounting, was adopted in the 2013 fourth quarter and retrospectively applied to the Company's financial results for all periods presented in this report. See Note 1 under the caption "Change in Accounting Principle Regarding Pension Benefits" for additional information.
The following table presents the funded status of Grace's fully-funded, underfunded, and unfunded pension plans:
(In millions)
December 31, 2013
 
December 31, 2012
Overfunded defined benefit pension plans
$
16.7

 
$
32.1

Underfunded defined benefit pension plans
(66.2
)
 
(175.1
)
Unfunded defined benefit pension plans
(233.4
)
 
(221.4
)
Total underfunded and unfunded defined benefit pension plans
(299.6
)
 
(396.5
)
Unfunded defined benefit pension plans included in liabilities subject to compromise
(123.6
)
 
(131.2
)
Pension liabilities included in other current liabilities
(15.0
)
 
(14.0
)
Net funded status
$
(421.5
)
 
$
(509.6
)
Fully-funded plans include several advance-funded plans where the fair value of the plan assets exceeds the projected benefit obligation ("PBO"). This group of plans was overfunded by $16.7 million as of December 31, 2013, and the overfunded status is reflected as "overfunded defined benefit pension plans" in the Consolidated Balance Sheets. Underfunded plans include a group of advance-funded plans that are underfunded on a PBO basis. Unfunded plans include several plans that are funded on a pay-as-you-go basis, and therefore, the entire PBO is unfunded. The combined balance of the underfunded and unfunded plans was $438.2 million as of December 31, 2013.
Grace maintains defined benefit pension plans covering current and former employees of certain business units and divested business units who meet age and service requirements. Benefits are generally based on final average salary and years of service. Grace funds its U.S. qualified pension plans ("U.S. qualified pension plans") in accordance with U.S. federal laws and regulations. Non-U.S. pension plans ("non-U.S. pension plans") are funded under a variety of methods, as required under local laws and customs.

F-44
Table of Contents
Notes to Consolidated Financial Statements (Continued)

11. Pension Plans and Other Postretirement Benefit Plans (Continued)

Grace also provides, through nonqualified plans, supplemental pension benefits in excess of U.S. qualified pension plan limits imposed by federal tax law. These plans cover officers and higher-level employees and serve to increase the combined pension amount to the level that they otherwise would have received under the U.S. qualified pension plans in the absence of such limits. The nonqualified plans are unfunded and Grace pays the costs of benefits as they are due to the participants.
At the December 31, 2013, measurement date for Grace's defined benefit pension plans, the PBO was $1,873.2 million as measured under U.S. GAAP compared with $1,954.9 million as of December 31, 2012. The PBO basis reflects the present value (using a 4.76% discount rate for U.S. plans and a 4.25% weighted average discount rate for non-U.S. plans as of December 31, 2013) of vested and non-vested benefits earned from employee service to date, based upon current services and estimated future pay increases for active employees.
On an annual basis a full remeasurement of pension assets and pension liabilities is performed based on the Company's estimates and actuarial valuations. These valuations reflect the terms of the plan, and use participant-specific information as well as certain key assumptions provided by management.
Postretirement Benefits Other Than Pensions    Grace provides postretirement health care and life insurance benefits for retired employees of certain U.S. business units and certain divested business units. The postretirement medical plan provides various levels of benefits to employees hired before 1993 who retire from Grace after age 55 with at least 10 years of service. These plans are unfunded and Grace pays a portion of the costs of benefits under these plans as they are incurred. Grace applies ASC 715 to these plans, which requires that the future costs of postretirement health care and life insurance benefits be accrued over the employees' years of service. Actuarial gains and losses are recognized in the Consolidated Balance Sheets as a component of Shareholders’ Equity, with amortization of the net actuarial gains and losses that exceed 10 percent of the accumulated postretirement benefit obligation recognized each quarter in the Consolidated Statements of Operations over the average future service period of active employees.
Retirees and beneficiaries covered by the postretirement medical plan are required to contribute a minimum of 40% of the calculated premium for that coverage. During 2002, per capita costs under the retiree medical plans exceeded caps on the amount Grace was required to contribute under a 1993 amendment to the plan. As a result, for 2003 and future years, retirees will bear 100% of any increase in premium costs.
For 2013 measurement purposes, per capita costs, before retiree contributions, were assumed to initially increase at a rate of 8.25%. The rate of increase is assumed to decrease gradually to 5% through 2020 and remain at that level thereafter. A one percentage point increase or decrease in assumed health care medical cost trend rates would not materially change Grace's postretirement benefit obligations (impact of less than $1 million) and would have a negligible impact on the aggregate of the service and interest cost components of net periodic benefit cost.
Defined Contribution Retirement Plan    Grace sponsors a defined contribution retirement plan for its employees in the United States. This plan is qualified under section 401(k) of the U.S. tax code. Currently, Grace contributes an amount equal to 100% of employee contributions, up to 6% of an individual employee's salary or wages. Grace's cost related to this benefit plan was $13.2 million, $12.6 million, and $12.3 million for the years ended December 31, 2013, 2012, and 2011, respectively.

F-45
Table of Contents
Notes to Consolidated Financial Statements (Continued)

11. Pension Plans and Other Postretirement Benefit Plans (Continued)

Analysis of Plan Accounting and Funded Status    The following table summarizes the changes in benefit obligations and fair values of retirement plan assets during 2013 and 2012:
 
Defined Benefit Pension Plans
 
Other Post-
Retirement Plans
Change in Financial Status of Retirement Plans
(In millions)
U.S.
 
Non-U.S.
 
Total
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Change in Projected Benefit Obligation (PBO):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
1,425.6

 
$
1,282.3

 
$
529.3

 
$
452.8

 
$
1,954.9

 
$
1,735.1

 
$
63.9

 
$
64.6

Service cost
25.2

 
21.5

 
11.1

 
8.9

 
36.3

 
30.4

 
0.2

 
0.2

Interest cost
51.9

 
55.9

 
20.6

 
21.4

 
72.5

 
77.3

 
2.2

 
2.5

Plan participants' contributions
—

 
—

 
0.6

 
0.6

 
0.6

 
0.6

 
—

 
—

Amendments
—

 
—

 
—

 
—

 
—

 
—

 
(1.7
)
 
—

Actuarial (gain) loss
(96.7
)
 
132.3

 
(2.4
)
 
58.2

 
(99.1
)
 
190.5

 
(4.3
)
 
(2.1
)
Medicare subsidy receipts
—

 
—

 
—

 
—

 
—

 
—

 
1.4

 
3.3

Benefits paid
(79.2
)
 
(66.4
)
 
(22.1
)
 
(23.1
)
 
(101.3
)
 
(89.5
)
 
(4.5
)
 
(4.6
)
Currency exchange translation adjustments
—

 
—

 
9.3

 
10.5

 
9.3

 
10.5

 
—

 
—

Benefit obligation at end of year
$
1,326.8

 
$
1,425.6

 
$
546.4

 
$
529.3

 
$
1,873.2

 
$
1,954.9

 
$
57.2

 
$
63.9

Change in Plan Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
$
1,131.7

 
$
955.3

 
$
313.6

 
$
295.1

 
$
1,445.3

 
$
1,250.4

 
$
—

 
$
—

Actual return on plan assets
37.1

 
127.9

 
0.8

 
20.8

 
37.9

 
148.7

 
—

 
—

Employer contributions
55.6

 
114.9

 
12.7

 
11.9

 
68.3

 
126.8

 
3.1

 
1.3

Plan participants' contributions
—

 
—

 
0.6

 
0.6

 
0.6

 
0.6

 
—

 
—

Medicare subsidy receipts
—

 
—

 
—

 
—

 
—

 
—

 
1.4

 
3.3

Benefits paid
(79.2
)
 
(66.4
)
 
(22.1
)
 
(23.1
)
 
(101.3
)
 
(89.5
)
 
(4.5
)
 
(4.6
)
Currency exchange translation adjustments
—

 
—

 
0.9

 
8.3

 
0.9

 
8.3

 
—

 
—

Fair value of plan assets at end of year
$
1,145.2

 
$
1,131.7

 
$
306.5

 
$
313.6

 
$
1,451.7

 
$
1,445.3

 
$
—

 
$
—

Funded status at end of year (PBO basis)
$
(181.6
)
 
$
(293.9
)
 
$
(239.9
)
 
$
(215.7
)
 
$
(421.5
)
 
$
(509.6
)
 
$
(57.2
)
 
$
(63.9
)
Amounts recognized in the Consolidated Balance Sheets consist of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncurrent assets
$
—

 
$
—

 
$
16.7

 
$
32.1

 
$
16.7

 
$
32.1

 
$
—

 
$
—

Current liabilities
(5.8
)
 
(5.8
)
 
(9.2
)
 
(8.2
)
 
(15.0
)
 
(14.0
)
 
(4.5
)
 
(4.3
)
Noncurrent liabilities
(175.8
)
 
(288.1
)
 
(247.4
)
 
(239.6
)
 
(423.2
)
 
(527.7
)
 
(52.7
)
 
(59.6
)
Net amount recognized
$
(181.6
)
 
$
(293.9
)
 
$
(239.9
)
 
$
(215.7
)
 
$
(421.5
)
 
$
(509.6
)
 
$
(57.2
)
 
$
(63.9
)
Amounts recognized in Accumulated Other Comprehensive Income consist of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated actuarial gain
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(5.0
)
 
$
(0.3
)
Prior service cost (credit)
1.5

 
2.2

 
(0.3
)
 
(0.3
)
 
1.2

 
1.9

 
(1.7
)
 
—

Net amount recognized
$
1.5

 
$
2.2

 
$
(0.3
)
 
$
(0.3
)
 
$
1.2

 
$
1.9

 
$
(6.7
)
 
$
(0.3
)
 
Defined Benefit Pension Plans
 
Other Post-
Retirement Plans
Change in Financial Status of Retirement Plans
(In millions)
U.S.
 
Non-U.S.
 
Total
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Weighted Average Assumptions Used to Determine Benefit Obligations as of December 31:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
4.76
%
 
3.75
%
 
4.25
%
 
4.06
%
 
NM
 
NM
 
4.26
%
 
3.50
%
Rate of compensation increase
4.70
%
 
4.30
%
 
3.41
%
 
3.37
%
 
NM
 
NM
 
NM

 
NM

Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
3.75
%
 
4.50
%
 
4.06
%
 
4.83
%
 
NM
 
NM
 
3.50
%
 
4.00
%
Expected return on plan assets
6.00
%
 
6.25
%
 
4.66
%
 
4.98
%
 
NM
 
NM
 
NM

 
NM

Rate of compensation increase
4.30
%
 
4.30
%
 
3.37
%
 
3.40
%
 
NM
 
NM
 
NM

 
NM

_______________________________________________________________________________
NM—Not meaningful

F-46
Table of Contents
Notes to Consolidated Financial Statements (Continued)

11. Pension Plans and Other Postretirement Benefit Plans (Continued)

Components of Net Periodic Benefit (Income) Cost and Other Amounts Recognized in Other Comprehensive (Income) Loss
(In millions)
2013
 
2012
 
2011
U.S.
 
Non-U.S.
 
Other
 
U.S.
 
Non-U.S.
 
Other
 
U.S.
 
Non-U.S.
 
Other
Net Periodic Benefit (Income) Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
25.2

 
$
11.1

 
$
0.2

 
$
21.5

 
$
8.9

 
$
0.2

 
$
18.2

 
$
8.7

 
$
0.3

Interest cost
51.9

 
20.6

 
2.2

 
55.9

 
21.4

 
2.5

 
60.3

 
22.7

 
3.2

Expected return on plan assets
(68.0
)
 
(14.0
)
 
—

 
(63.3
)
 
(14.8
)
 
—

 
(66.1
)
 
(16.2
)
 
—

Amortization of prior service cost (credit)
0.7

 
—

 
—

 
0.9

 
(0.1
)
 
—

 
1.1

 
—

 
—

Annual mark-to-market adjustment
(65.8
)
 
11.0

 
—

 
67.7

 
52.2

 
—

 
99.1

 
13.1

 
—

Amortization of net deferred actuarial loss
—

 
—

 
0.4

 
—

 
—

 
0.6

 
—

 
—

 
0.6

Net curtailment and settlement loss
—

 
(0.1
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Net periodic benefit (income) cost
$
(56.0
)
 
$
28.6

 
$
2.8

 
$
82.7

 
$
67.6

 
$
3.3

 
$
112.6

 
$
28.3

 
$
4.1

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net deferred actuarial gain
$
—

 
$
—

 
$
(4.3
)
 
$
—

 
$
—

 
$
(2.1
)
 
$
—

 
$
—

 
$
(7.3
)
Net prior service credit
—

 
—

 
(1.7
)
 
—

 
—

 
—

 
—

 
(0.4
)
 
—

Amortization of prior service cost (credit)
(0.7
)
 
—

 
—

 
(0.9
)
 
0.1

 
—

 
(1.1
)
 
—

 
—

Amortization of net deferred actuarial loss
—

 
—

 
(0.4
)
 
—

 
—

 
(0.6
)
 
—

 
—

 
(0.6
)
Total recognized in other comprehensive (income) loss
(0.7
)
 
—

 
(6.4
)
 
(0.9
)
 
0.1

 
(2.7
)
 
(1.1
)
 
(0.4
)
 
(7.9
)
Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss
$
(56.7
)
 
$
28.6

 
$
(3.6
)
 
$
81.8

 
$
67.7

 
$
0.6

 
$
111.5

 
$
27.9

 
$
(3.8
)
The estimated prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit (income) cost over the next fiscal year is $0.7 million. The estimated net deferred actuarial gain and prior service credit for the other postretirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit (income) cost over the next fiscal year are $0.9 million and $0.3 million, respectively.
Funded Status of U.S. Pension Plans
(In millions)
Fully-Funded U.S. Qualified
Pension Plans(1)
 
Underfunded U.S.
Qualified Pension Plans(1)
 
Unfunded Pay-As-You-Go
U.S. Nonqualified Plans(2)
2013

2012

2011

2013

2012

2011

2013

2012

2011
Projected benefit obligation
$
—

 
$
—

 
$
—

 
$
1,197.4

 
$
1,288.6

 
$
1,157.5

 
$
129.4

 
$
137.0

 
$
124.8

Fair value of plan assets
—

 
—

 
—

 
1,145.2

 
1,131.7

 
955.3

 
—

 
—

 
—

Funded status (PBO basis)
$
—

 
$
—

 
$
—

 
$
(52.2
)
 
$
(156.9
)
 
$
(202.2
)
 
$
(129.4
)
 
$
(137.0
)
 
$
(124.8
)
Benefits paid
$
—

 
$
—

 
$
—

 
$
(73.6
)
 
$
(60.7
)
 
$
(59.9
)
 
$
(5.6
)
 
$
(5.7
)
 
$
(5.6
)
Funded Status of Non-U.S. Pension Plans
(In millions)
Fully-Funded Non-U.S.
Pension Plans(1)
 
Underfunded Non-U.S.
Pension Plans(1)
 
Unfunded Pay-As-You-Go
Non-U.S. Pension Plans(2)
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Projected benefit obligation
$
247.3

 
$
237.1

 
$
213.3

 
$
56.5

 
$
62.6

 
$
53.1

 
$
242.6

 
$
229.6

 
$
186.4

Fair value of plan assets
264.0

 
269.2

 
255.8

 
42.5

 
44.4

 
39.3

 
—

 
—

 
—

Funded status (PBO basis)
$
16.7

 
$
32.1

 
$
42.5

 
$
(14.0
)
 
$
(18.2
)
 
$
(13.8
)
 
$
(242.6
)
 
$
(229.6
)
 
$
(186.4
)
Benefits paid
$
(10.0
)
 
$
(11.8
)
 
$
(10.2
)
 
$
(4.2
)
 
$
(3.6
)
 
$
(2.2
)
 
$
(7.9
)
 
$
(7.7
)
 
$
(8.8
)
_______________________________________________________________________________
(1)
Plans intended to be advance-funded.
(2)
Plans intended to be pay-as-you-go.
The accumulated benefit obligation for all defined benefit pension plans was approximately $1,772 million and $1,849 million as of December 31, 2013 and 2012, respectively.

F-47
Table of Contents
Notes to Consolidated Financial Statements (Continued)

11. Pension Plans and Other Postretirement Benefit Plans (Continued)

Pension Plans with Underfunded or
Unfunded Accumulated Benefit Obligation
(In millions)
U.S.
 
Non-U.S.
 
Total
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Projected benefit obligation
$
347.8

 
$
1,425.6

 
$
259.2

 
$
280.3

 
$
607.0

 
$
1,705.9

Accumulated benefit obligation
344.1

 
1,371.2

 
230.7

 
242.0

 
574.8

 
1,613.2

Fair value of plan assets
201.1

 
1,131.7

 
8.9

 
35.5

 
210.0

 
1,167.2

Estimated Expected Future Benefit Payments Reflecting Future Service and Medicare Subsidy Receipts for the Fiscal Years Ending
(In millions)
Pension Plans
 
Other
Postretirement Plans
 
Total
Payments
Net of
Subsidy
U.S.(1)
 
Non-U.S.(2)
 
Benefit
Payments
 
Medicare
Subsidy
Receipts
 
Benefit
Payments(3)
 
Benefit
Payments
 
 
 
2011 (actual)
$
65.5

 
$
21.2

 
$
3.6

 
$
(1.9
)
 
$
88.4

2012 (actual)
66.4

 
23.1

 
4.6

 
(3.3
)
 
90.8

2013 (actual)
79.2

 
22.1

 
4.5

 
(1.4
)
 
104.4

2014(3)
108.6

 
23.0

 
6.2

 
(1.7
)
 
136.1

2015
82.2

 
22.7

 
6.0

 
(0.5
)
 
110.4

2016
83.5

 
24.4

 
5.8

 
(0.1
)
 
113.6

2017
84.9

 
25.1

 
5.6

 
(0.1
)
 
115.5

2018
86.3

 
26.0

 
5.3

 
(0.1
)
 
117.5

2019 - 2023
446.5

 
146.7

 
22.1

 
(0.3
)
 
615.0

_______________________________________________________________________________
(1)
Effective January 1, 2008, lump sum distributions from certain U.S. qualified pension plans were restricted based on the provisions of the Pension Protection Act of 2006 (the "Act"). The Act prohibited the distribution of lump sums to retiring participants while the Company was operating under Chapter 11 of the U.S. Bankruptcy Code and when the plan was less than 100% funded. After emergence from Chapter 11, the plan is permitted to distribute lump sums to retiring participants under the Act when the plan is at least 80% funded.
(2)
Non-U.S. estimated benefit payments for 2014 and future periods have been translated at the applicable December 31, 2013, exchange rates.
(3)
Includes approximately $28 million of benefit payments from nonqualified plans that were previously restricted by the Bankruptcy Court while the Company was in Chapter 11 and are expected to be paid in 2014.
Discount Rate Assumption    The assumed discount rate for pension plans reflects the market rates for high-quality corporate bonds currently available and is subject to change based on changes in overall market interest rates. For the U.S. qualified pension plans, the assumed discount rate of 4.76% as of December 31, 2013, was selected by Grace, in consultation with its independent actuaries, based on a yield curve constructed from a portfolio of high quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan.
As of December 31, 2013 and 2012, the United Kingdom pension plan and German pension plans combined represented approximately 86% and 84%, respectively, of the benefit obligation of the non-U.S. pension plans. The assumed discount rates as of December 31, 2013, for the United Kingdom (4.34%) and Germany (3.76%) were selected by Grace, in consultation with its independent actuaries, based on yield curves constructed from a portfolio of sterling- and euro-denominated high quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plans. The assumed discount rates for the remaining non-U.S. pension plans were determined based on the nature of the liabilities, local economic environments and available bond indices.
Investment Guidelines for Advance-Funded Pension Plans    The investment goal for the U.S. qualified pension plans subject to advance funding is to earn a long-term rate of return consistent with the related cash flow profile of the underlying benefit obligation. The plans are pursuing a well-defined risk management strategy designed to reduce investment risks as their funded status improves.

F-48
Table of Contents
Notes to Consolidated Financial Statements (Continued)

11. Pension Plans and Other Postretirement Benefit Plans (Continued)

The U.S. qualified pension plans have adopted a diversified set of portfolio management strategies to optimize the risk reward profile of the plans:
•
Liability hedging portfolio: primarily invested in intermediate-term and long-term investment grade corporate bonds in actively managed strategies.
•
Growth portfolio: invested in a diversified set of assets designed to deliver performance in excess of the underlying liabilities with controls regarding the level of risk.
•
U.S. equity securities: the portfolio contains domestic equities that are passively managed to the S&P 500 and Russell 2000 benchmark and an allocation to an active portfolio benchmarked to the Russell 2000.
•
Non-U.S. equity securities: the portfolio contains non-U.S. equities in an actively managed strategy. Currency futures and forward contracts may be held for the sole purpose of hedging existing currency risk in the portfolio.
•
Other investments: may include (a) high yield bonds: fixed income portfolio of securities below investment grade including up to 30% of the portfolio in non-U.S. issuers; and (b) global real estate securities: portfolio of diversified REIT and other liquid real estate related securities. These portfolios combine income generation and capital appreciation opportunities from developed markets globally.
•
Liquidity portfolio: invested in short-term assets intended to pay periodic plan benefits and expenses.
For 2013, the expected long-term rate of return on assets for the U.S. qualified pension plans was 6.00%. Average annual returns over one-, three-, five-, and ten-year periods were approximately 4%, 8%, 11%, and 6%, respectively.
The expected return on plan assets for the U.S. qualified pension plans for 2013 was selected by Grace, in consultation with its independent actuaries, using an expected return model. The model determines the weighted average return for an investment portfolio based on the target asset allocation and expected future returns for each asset class, which were developed using a building block approach based on observable inflation, available interest rate information, current market characteristics, and historical results.
The target allocation of investment assets at December 31, 2013, and the actual allocation at December 31, 2013 and 2012, for Grace's U.S. qualified pension plans are as follows:
 
Target
Allocation
 
Percentage of Plan Assets
December 31,
U.S. Qualified Pension Plans Asset Category
2013
 
2013
 
2012
U.S. equity securities
10
%
 
10
%
 
16
%
Non-U.S. equity securities
6
%
 
6
%
 
7
%
Short-term debt securities
10
%
 
10
%
 
6
%
Intermediate-term debt securities
28
%
 
28
%
 
31
%
Long-term debt securities
44
%
 
44
%
 
35
%
Other investments
2
%
 
2
%
 
5
%
Total
100
%
 
100
%
 
100
%


F-49
Table of Contents
Notes to Consolidated Financial Statements (Continued)

11. Pension Plans and Other Postretirement Benefit Plans (Continued)

The following tables present the fair value hierarchy for the U.S. qualified pension plan assets measured at fair value as of December 31, 2013 and 2012.
 
Fair Value Measurements at December 31, 2013 Using
Assets Measured at Fair Value—U.S. Qualified Pension Plans
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
U.S. equity group trust funds
$
111.5

 
$
—

 
$
111.5

 
$
—

Non-U.S. equity group trust funds
67.1

 
—

 
67.1

 
—

Corporate bond group trust funds—intermediate-term
322.6

 
—

 
322.6

 
—

Corporate bond group trust funds—long-term
502.3

 
—

 
502.3

 
—

Other fixed income group trust funds
22.9

 
—

 
22.9

 
—

Common/collective trust funds
102.3

 
—

 
102.3

 
—

Annuity and immediate participation contracts
16.5

 
—

 
16.5

 
—

Total Assets
$
1,145.2

 
$
—

 
$
1,145.2

 
$
—


 
Fair Value Measurements at December 31, 2012 Using
Assets Measured at Fair Value—U.S. Qualified Pension Plans
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
U.S. equity group trust funds
$
178.8

 
$
—

 
$
178.8

 
$
—

Non-U.S. equity group trust funds
79.2

 
—

 
79.2

 
—

Corporate bond group trust funds—intermediate-term
348.4

 
—

 
348.4

 
—

Corporate bond group trust funds—long-term
399.4

 
—

 
399.4

 
—

Other fixed income group trust funds
36.9

 
—

 
36.9

 
—

REIT group trust funds
15.0

 
—

 
15.0

 
—

Common/collective trust funds
58.1

 
—

 
58.1

 
—

Annuity and immediate participation contracts
15.9

 
—

 
15.9

 
—

Total Assets
$
1,131.7

 
$
—

 
$
1,131.7

 
$
—


Non-U.S. pension plans accounted for approximately 21% and 22% of total global pension assets at December 31, 2013 and 2012, respectively. Each of these plans, where applicable, follows local requirements and regulations. Some of the local requirements include the establishment of a local pension committee, a formal statement of investment policy and procedures, and routine valuations by plan actuaries.
The target allocation of investment assets for non-U.S. pension plans varies depending on the investment goals of the individual plans. The plan assets of the United Kingdom pension plan represent approximately 83% and 82% of the total non-U.S. pension plan assets at December 31, 2013 and 2012, respectively. In determining the expected rate of return for the U.K. pension plan, the trustees' strategic investment policy has been considered together with long-term historical returns and investment community forecasts for each asset class. The expected return by sector has been combined with the actual asset allocation to determine the 2013 expected long-term return assumption of 4.25%.

F-50
Table of Contents
Notes to Consolidated Financial Statements (Continued)

11. Pension Plans and Other Postretirement Benefit Plans (Continued)

The target allocation of investment assets at December 31, 2013, and the actual allocation at December 31, 2013 and 2012, for the U.K. pension plan are as follows:
 
Target
Allocation
 
Percentage of Plan Assets
December 31,
United Kingdom Pension Plan Asset Category
2013
 
2013
 
2012
Diversified growth funds
12
%
 
13
%
 
12
%
U.K. gilts
41
%
 
40
%
 
41
%
U.K. corporate bonds
47
%
 
47
%
 
47
%
Total
100
%
 
100
%
 
100
%

The plan assets of the Canadian pension plan represent approximately 9% and 8% of the total non-U.S. pension plan assets at December 31, 2013 and 2012, respectively. The expected long-term rate of return on assets for the Canadian pension plan was 6.5% for 2013.
The target allocation of investment assets at December 31, 2013, and the actual allocation at December 31, 2013 and 2012, for the Canadian pension plan are as follows:
 
Target
Allocation
 
Percentage of Plan Assets
December 31,
Canadian Pension Plan Asset Category
2013
 
2013
 
2012
Equity securities
33
%
 
34
%
 
61
%
Bonds
49
%
 
48
%
 
39
%
Other investments
18
%
 
18
%
 
—
%
Total
100
%
 
100
%
 
100
%

The plan assets of the other country plans represent approximately 8% and 10% in the aggregate (with no country representing more than 3% individually) of total non-U.S. pension plan assets at December 31, 2013 and 2012, respectively.
The following tables present the fair value hierarchy for the non-U.S. pension plan assets measured at fair value as of December 31, 2013 and 2012.
 
Fair Value Measurements at December 31, 2013 Using
Assets Measured at Fair Value—Non-U.S. Pension Plans
(In millions)
Total
 
Quoted Prices
in Active
Markets for
Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Common/collective trust funds
$
294.8

 
$
—

 
$
294.8

 
$
—

Government and agency securities
2.4

 
—

 
2.4

 
—

Corporate bonds
1.3

 
—

 
1.3

 
—

Insurance contracts and other investments
6.3

 
—

 
6.3

 
—

Cash
1.7

 
1.7

 
—

 
—

Total Assets
$
306.5

 
$
1.7


$
304.8

 
$
—



F-51
Table of Contents
Notes to Consolidated Financial Statements (Continued)

11. Pension Plans and Other Postretirement Benefit Plans (Continued)

 
Fair Value Measurements at December 31, 2012 Using
Assets Measured at Fair Value—Non-U.S. Pension Plans
(In millions)
Total
 
Quoted Prices
in Active
Markets for
Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Common/collective trust funds
$
301.3

 
$
—

 
$
301.3

 
$
—

Government and agency securities
2.4

 
—

 
2.4

 
—

Corporate bonds
1.2

 
—

 
1.2

 
—

Insurance contracts and other investments
8.0

 
—

 
8.0

 
—

Cash
0.7

 
0.7

 
—

 
—

Total Assets
$
313.6

 
$
0.7

 
$
312.9

 
$
—


Plan Contributions and Funding    Grace intends to satisfy its funding obligations under the U.S. qualified pension plans and to comply with all of the requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"). For ERISA purposes, funded status is calculated on a different basis than under U.S. GAAP. In March 2013, Grace made an accelerated contribution to the trusts that hold assets of the U.S. qualified pension plans of approximately $50 million. Based on the U.S. qualified pension plans' status as of December 31, 2013, there are no minimum required payments under ERISA for 2014.
Grace intends to fund non-U.S. pension plans based on applicable legal requirements and actuarial and trustee recommendations. Grace expects to contribute approximately $18 million to its non-U.S. pension plans and approximately $6 million (excluding any Medicare subsidy receipts) to its other postretirement plans in 2014.
Grace plans to pay benefits as they become due under the pay-as-you-go plans and to maintain compliance with federal funding laws for its U.S. qualified pension plans.
12. Other Balance Sheet Accounts
(In millions)
December 31, 2013
 
December 31, 2012
Other Current Liabilities
 
 
 
Accrued compensation
$
62.4

 
$
84.5

Income tax payable
32.0

 
44.8

Customer volume rebates
33.3

 
32.5

Deferred revenue
14.3

 
—

Pension liabilities
15.0

 
14.0

Accrued commissions
6.9

 
12.9

Accrued Chapter 11 reorganization expenses
6.9

 
6.6

Fair value of currency forward and commodity contracts
7.0

 
5.5

Restructuring liability
4.4

 
3.0

Deferred tax liability
0.1

 
0.6

Other accrued liabilities
109.7

 
102.9

 
$
292.0

 
$
307.3

Accrued compensation in the table above includes salaries and wages as well as estimated current amounts due under the annual and long-term incentive programs. Deferred revenue in the above table is related to the UNIPOL® polypropylene process licensing business.


F-52
Table of Contents
Notes to Consolidated Financial Statements (Continued)

13. Commitments and Contingent Liabilities


Asbestos-Related Liability    See Note 2 for a discussion of Grace's asbestos-related liability and future obligations and contingencies following the effectiveness of the Joint Plan.
Environmental Remediation    Grace is subject to loss contingencies resulting from extensive and evolving federal, state, local and foreign environmental laws and regulations relating to the generation, storage, handling, discharge, disposition and stewardship of hazardous wastes and other materials. Grace accrues for anticipated costs associated with investigative and remediation efforts where an assessment has indicated that a probable liability has been incurred and the cost can be reasonably estimated. These accruals do not take into account any discounting for the time value of money.
Grace's environmental liabilities are reassessed whenever circumstances become better defined or remediation efforts and their costs can be better estimated. These liabilities are evaluated based on currently available information, including the progress of remedial investigation at each site, the current status of discussions with regulatory authorities regarding the method and extent of remediation at each site, existing technology, prior experience in contaminated site remediation and the apportionment of costs among potentially responsible parties.
Estimated Investigation and Remediation Costs
At December 31, 2013, Grace's estimated liability for environmental investigation and remediation costs (non-asbestos and asbestos-related) totaled $135.9 million, compared with $141.5 million at December 31, 2012. These amounts are based on funding and/or remediation agreements in place, including the Multi-Site Agreement described below, and Grace's estimate of costs for sites not subject to a formal remediation plan for which sufficient information is available to estimate investigation and remediation costs. These amounts do not include environmental response costs for the Libby vermiculite mine area or vermiculite expansion facilities, which may be material but are not currently estimable. Due to these vermiculite-related matters, it is probable that Grace's actual investigation and remediation costs will exceed Grace's current estimates by material amounts.
Grace recorded pre-tax charges of $8.2 million, $3.6 million, and $17.8 million for environmental matters in 2013, 2012, and 2011, respectively. Net cash expenditures charged against previously established reserves in 2013, 2012, and 2011 were $14.0 million, $13.0 million, and $11.8 million, respectively.
Vermiculite-Related Matters
Grace purchased a vermiculite mine in Libby, Montana, in 1963 and operated it until 1990. Vermiculite concentrate from the Libby mine was used in the manufacture of attic insulation and other products. Some of the vermiculite ore that was mined at the Libby mine contained naturally occurring asbestos. EPA has investigated sites, including some owned by Grace, which used, stored or processed vermiculite concentrate from the Libby mine. EPA, Grace, and/or other potentially responsible parties have conducted investigations and/or remedial actions at those sites identified by EPA as requiring remedial action.
During 2010, EPA began reinvestigating certain facilities on a list of 105 facilities where vermiculite concentrate from the Libby mine may have been processed. Grace is cooperating with EPA on this reinvestigation. EPA has requested that Grace perform remediation at eight of these facilities. In 2011, Grace performed preliminary evaluations to estimate the cost of remediating these sites based on the revised criteria and recorded an aggregate charge of $16.0 million. It is probable that EPA will request additional remediation at other facilities. Grace does not have sufficient information to identify either the sites that might require additional remediation or the cost of any additional remediation. Grace will continue to monitor EPA's reinvestigation of the remaining sites and assess any information received from EPA. A liability will be recorded in the future should Grace determine that an obligation is probable and reasonably estimable.
Grace's total estimated liability for asbestos remediation studies and other estimable matters related to its former vermiculite operations in Libby, as well as the cost of remediation at vermiculite processing sites outside of Libby, at December 31, 2013 and 2012, was $60.4 million and $60.8 million, respectively, excluding interest where applicable. It is probable that Grace's ultimate liability will exceed current estimates by material amounts. Grace's current recorded liability will be adjusted as Grace receives new information and amounts become reasonably estimable.

F-53
Table of Contents
Notes to Consolidated Financial Statements (Continued)

13. Commitments and Contingent Liabilities (Continued)

Non-Vermiculite-Related Matters
At December 31, 2013 and 2012, Grace's estimated liability for remediation of sites not related to its former vermiculite mining and processing activities was $75.5 million and $80.7 million, respectively. This liability relates to Grace's current and former operations, including its share of liability for off-site disposal at facilities where it has been identified as a potentially responsible party. Grace's estimated liability is based upon an evaluation of claims for which sufficient information is available, regulatory requirements, and environmental conditions at each site. As Grace receives new information and continues its claims evaluation process, its estimated liability may change materially.
Settlement of Environmental Claims in Chapter 11
EPA filed proofs of claim with respect to potential contamination at 38 sites, including vermiculite-related claims and non-vermiculite-related claims. In June 2008, Grace entered into a settlement agreement (the "Multi-Site Agreement") with the U.S. Government, on behalf of EPA and other federal agencies. Under the Multi-Site Agreement, Grace agreed to pay approximately $44 million, which is included in the liabilities described above, to the U.S. Government and other parties in settlement of 35 of these outstanding claims and the U.S. Government has agreed not to take action against Grace under the Comprehensive Environmental Response, Compensation, and Liability Act with respect to these sites. The settlement amount under the Multi-Site Agreement was paid, with interest, following the effective date of the Joint Plan in February 2014. Grace is implementing remediation at two of the remaining sites. With respect to the third remaining site, Libby, Montana, EPA's claims have been resolved except for claims related to the Grace-owned Libby vermiculite mine and the surrounding area. EPA is engaged in a remedial investigation of these areas to determine an appropriate cleanup standard. Grace is cooperating with EPA in this investigation.
Purchase Commitments    Grace uses purchase commitments to ensure supply and to minimize the volatility of major components of direct manufacturing costs including natural gas, certain metals, rare earths, asphalt, amines and other materials. Such commitments are for quantities that Grace fully expects to use in its normal operations.
Guarantees and Indemnification Obligations    Grace is a party to many contracts containing guarantees and indemnification obligations. These contracts primarily consist of:
•
Product warranties with respect to certain products sold to customers in the ordinary course of business. These warranties typically provide that products will conform to specifications. Grace generally does not establish a liability for product warranty based on a percentage of sales or other formula. Grace accrues a warranty liability on a transaction-specific basis depending on the individual facts and circumstances related to each sale. Both the liability and annual expense related to product warranties are immaterial to the Consolidated Financial Statements.
•
Licenses of intellectual property by Grace to third parties in which Grace has agreed to indemnify the licensee against third party infringement claims.
•
Contracts providing for the sale of a former business unit or product line in which Grace has agreed to indemnify the buyer against liabilities arising prior to the closing of the transaction, including environmental liabilities.
•
Guarantees of real property lease obligations of third parties, typically arising out of (a) leases entered into by former subsidiaries of Grace, or (b) the assignment or sublease of a lease by Grace to a third party.
Financial Assurances    Financial assurances have been established for a variety of purposes, including insurance and environmental matters, asbestos settlements and appeals, trade-related commitments and other matters. At December 31, 2013, Grace had gross financial assurances issued and outstanding of $258.2 million, composed of $108.5 million of surety bonds issued by various insurance companies and $149.7 million of standby letters of credit and other financial assurances issued by various banks; $80.6 million of these financial assurances have been issued under the letter of credit facility.
Accounting for Contingencies    Although the outcome of each of the matters discussed above cannot be predicted with certainty, Grace has assessed its risk and has made accounting estimates as required under

F-54
Table of Contents
Notes to Consolidated Financial Statements (Continued)

13. Commitments and Contingent Liabilities (Continued)

U.S. GAAP. Claims related to certain of the items discussed above were addressed as part of Grace's Chapter 11 proceedings. Accruals recorded for such contingencies have been included in "liabilities subject to compromise" in the accompanying Consolidated Balance Sheets.
14. Restructuring Expenses and Related Asset Impairments
In 2013, Grace incurred costs from restructuring actions as a result of changes in the business environment and business structure. Grace incurred $12.5 million ($6.1 million in Grace Construction Products, $4.0 million in Grace Catalysts Technologies, $0.4 million in Grace Materials Technologies and $2.0 million in Corporate) of restructuring expenses and related asset impairments during 2013, compared with $6.9 million in 2012 ($2.0 million in Grace Construction Products, $0.2 million in Grace Catalysts Technologies, $1.0 million in Grace Materials Technologies and $3.7 million in Corporate). Substantially all costs related to the 2012 programs were paid as of December 31, 2013, while substantially all costs related to the 2013 restructuring programs are expected to be paid by December 31, 2014.
Restructuring Expenses and Related Asset Impairments
(In millions)
Year Ended December 31,
2013
 
2012
 
2011
Severance and other employee-related costs
$
6.7

 
$
5.6

 
$
3.8

Asset impairments and other restructuring costs
5.8

 
1.3

 
3.1

Total restructuring expenses and related asset impairments
$
12.5

 
$
6.9

 
$
6.9

Restructuring Liability
(In millions)
December 31,
2013
 
2012
 
2011
Balance, December 31, 2012
$
3.0

 
$
5.9

 
$
9.6

Accruals for severance and other costs
7.6

 
5.6

 
3.8

Payments
(6.4
)
 
(8.4
)
 
(7.2
)
Currency translation adjustments and other
0.2

 
(0.1
)
 
(0.3
)
Balance, December 31, 2013
$
4.4

 
$
3.0

 
$
5.9


15. Other Expense, net
Components of other expense, net are as follows:
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Restructuring expenses and related asset impairments
$
12.5

 
$
6.9

 
$
6.9

Provision for environmental remediation
8.2

 
3.6

 
17.8

Translation effects—intercompany loans
(11.9
)
 
(5.6
)
 
11.7

Value of currency forward contracts—intercompany loans
10.9

 
3.7

 
(9.3
)
Currency transaction loss in Venezuela
8.5

 
—

 
—

Other currency transaction effects
5.0

 
2.2

 
3.2

Interest income of non-Debtor subsidiaries
(1.0
)
 
(1.0
)
 
(1.2
)
Net (gain) loss on sales of investments and disposals of assets
0.5

 
0.7

 
(3.0
)
Other miscellaneous (income) expense
(9.2
)
 
(4.4
)
 
3.3

Total other expense, net
$
23.5

 
$
6.1

 
$
29.4



F-55
Table of Contents
Notes to Consolidated Financial Statements (Continued)

16. Other Comprehensive Income (Loss)


The following tables present the pre-tax, tax, and after-tax components of Grace's other comprehensive income (loss) for the years ended December 31, 2013, 2012, and 2011:
Year Ended December 31, 2013
(In millions)
Pre-Tax
Amount
 
Tax
Benefit/
(Expense)
 
After-Tax
Amount
Defined benefit pension and other postretirement plans:
 
 
 
 
 
Amortization of net prior service cost included in net periodic benefit cost
$
0.7

 
$
(0.2
)
 
$
0.5

Amortization of net deferred actuarial loss included in net periodic benefit cost
0.4

 
(0.1
)
 
0.3

Net prior service credit arising during period
1.7

 
(0.6
)
 
1.1

Net deferred actuarial gain arising during period
4.3

 
(1.6
)
 
2.7

Benefit plans, net
7.1

 
(2.5
)
 
4.6

Currency translation adjustments
(23.6
)
 
—

 
(23.6
)
Loss from hedging activities
(0.3
)
 
0.1

 
(0.2
)
Gain on securities available for sale
0.1

 
—

 
0.1

Other comprehensive loss attributable to W. R. Grace & Co. shareholders
$
(16.7
)
 
$
(2.4
)
 
$
(19.1
)

Year Ended December 31, 2012
(In millions)
Pre-Tax
Amount
 
Tax
Benefit/
(Expense)
 
After-Tax
Amount
Defined benefit pension and other postretirement plans:
 
 
 
 
 
Amortization of net prior service cost included in net periodic benefit cost
$
0.8

 
$
(0.3
)
 
$
0.5

Amortization of net deferred actuarial loss included in net periodic benefit cost
0.6

 
(0.2
)
 
0.4

Net deferred actuarial gain arising during period
2.1

 
(0.7
)
 
1.4

Benefit plans, net
3.5

 
(1.2
)
 
2.3

Currency translation adjustments
5.5

 
—

 
5.5

Gain from hedging activities
3.7

 
(1.3
)
 
2.4

Other comprehensive income attributable to W. R. Grace & Co. shareholders
$
12.7

 
$
(2.5
)
 
$
10.2


Year Ended December 31, 2011
(In millions)
Pre-Tax
Amount
 
Tax
Benefit/
(Expense)
 
After-Tax
Amount
Defined benefit pension and other postretirement plans:
 
 
 
 
 
Amortization of net prior service cost included in net periodic benefit cost
$
1.1

 
$
(0.4
)
 
$
0.7

Amortization of net deferred actuarial loss included in net periodic benefit cost
0.6

 
(0.2
)
 
0.4

Net prior service credit arising during period
0.4

 
(0.1
)
 
0.3

Net deferred actuarial gain arising during period
7.3

 
(2.5
)
 
4.8

Benefit plans, net
9.4

 
(3.2
)
 
6.2

Currency translation adjustments
(11.3
)
 
—

 
(11.3
)
Loss from hedging activities
(3.2
)
 
1.1

 
(2.1
)
Other comprehensive loss attributable to W. R. Grace & Co. shareholders
$
(5.1
)
 
$
(2.1
)
 
$
(7.2
)

F-56
Table of Contents
Notes to Consolidated Financial Statements (Continued)

16. Other Comprehensive Income (Loss) (Continued)

The following tables present the changes in accumulated other comprehensive income, net of tax, for the years ended December 31, 2013, 2012, and 2011:
Year Ended December 31, 2013
(In millions)
Defined Benefit Pension and Other Postretirement Plans
 
Currency Translation Adjustments
 
Gains and Losses from Hedging Activities
 
Unrealized Loss on Investment
 
Gain on Securities Available for Sale
 
Total
Beginning balance
$
2.0

 
$
28.8

 
$
(0.3
)
 
$
(0.8
)
 
$
—

 
$
29.7

Other comprehensive income (loss) before reclassifications
3.8

 
(23.6
)
 
1.2

 
—

 
0.1

 
(18.5
)
Amounts reclassified from accumulated other comprehensive income
0.8

 
—

 
(1.4
)
 
—

 
—

 
(0.6
)
Net current-period other comprehensive income (loss)
4.6

 
(23.6
)
 
(0.2
)
 
—

 
0.1

 
(19.1
)
Ending balance
$
6.6

 
$
5.2

 
$
(0.5
)
 
$
(0.8
)
 
$
0.1

 
$
10.6


Year Ended December 31, 2012
(In millions)
Defined Benefit Pension and Other Postretirement Plans
 
Currency Translation Adjustments
 
Gains and Losses from Hedging Activities
 
Unrealized Loss on Investment
 
Total
Beginning balance
$
(0.3
)
 
$
23.3

 
$
(2.7
)
 
$
(0.8
)
 
$
19.5

Other comprehensive income (loss) before reclassifications
1.4

 
5.5

 
(0.3
)
 
—

 
6.6

Amounts reclassified from accumulated other comprehensive income
0.9

 
—

 
2.7

 
—

 
3.6

Net current-period other comprehensive income
2.3

 
5.5

 
2.4

 
—

 
10.2

Ending balance
$
2.0

 
$
28.8

 
$
(0.3
)
 
$
(0.8
)
 
$
29.7


Year Ended December 31, 2011
(In millions)
Defined Benefit Pension and Other Postretirement Plans
 
Currency Translation Adjustments
 
Gains and Losses from Hedging Activities
 
Unrealized Loss on Investment
 
Total
Beginning balance
$
(6.5
)
 
$
34.6

 
$
(0.6
)
 
$
(0.8
)
 
$
26.7

Other comprehensive income (loss) before reclassifications
5.1

 
(11.3
)
 
(3.9
)
 
—

 
(10.1
)
Amounts reclassified from accumulated other comprehensive income
1.1

 
—

 
1.8

 
—

 
2.9

Net current-period other comprehensive income (loss)
6.2

 
(11.3
)
 
(2.1
)
 
—

 
(7.2
)
Ending balance
$
(0.3
)
 
$
23.3

 
$
(2.7
)
 
$
(0.8
)
 
$
19.5


Accumulated other comprehensive income related to the defined benefit pension and other postretirement plans at December 31, 2013, 2012, and 2011, respectively, represents the accumulation of net deferred actuarial gains of $6.3 million, $3.3 million, and $1.5 million as well as net prior service credits (costs) of $0.3 million, $(1.3) million, and $(1.8) million. These amounts are net of tax and are amortized as a component of net periodic benefit cost.
Grace is a global enterprise operating in over 40 countries with local currency generally deemed to be the functional currency for accounting purposes. The currency translation amount represents the adjustments

F-57
Table of Contents
Notes to Consolidated Financial Statements (Continued)

16. Other Comprehensive Income (Loss) (Continued)

necessary to translate the balance sheets valued in local currencies to the U.S. dollar as of the end of each period presented, and to translate revenues and expenses at average exchange rates for each period presented.
See Note 9 for a discussion of hedging activities.
17. Shareholders' Equity
Under its Certificate of Incorporation, the Company is authorized to issue 300,000,000 shares of common stock, $0.01 par value. As of December 31, 2013, the W. R. Grace & Co. 2011 Stock Incentive Plan had 800,000 shares of unissued stock reserved for issuance in the event of the exercise of stock options under the Plan. Historically all stock options exercised were covered by reissuing treasury stock. During 2013, stock options exercises exceeded the shares available in treasury stock and therefore the Company issued new shares, which were reserved for issuance under the Plans. For the years ended December 31, 2013, 2012, and 2011, 1,464,294, 1,679,359, and 765,693 stock options were exercised for aggregate proceeds of $34.4 million, $32.2 million, and $12.1 million, respectively. Additionally in 2013, 10,440 common shares were issued to members of the Board of Directors and 6,000 restricted common shares were issued to certain key employees.
The following table sets forth information relating to common stock activity for 2013 and 2012:
Balance of Outstanding Shares, December 31, 2011
73,886,050

Stock options exercised
1,679,359

Balance of Outstanding Shares, December 31, 2012
75,565,409

Stock options exercised
1,464,294

Shares Issued
16,440

Balance of Outstanding Shares, December 31, 2013
77,046,143


18. Stock Incentive Plans
The Company has granted nonstatutory stock options to certain key employees under the Plans. The Plans are administered by the Compensation Committee of the Board of Directors. Stock options are generally non-qualified and are at exercise prices not less than 100% of the per share fair market value on the date of grant. Stock-based compensation awards granted under the Company's stock incentive plans are generally subject to a vesting period from the date of the grant ranging from 1 - 3 years. Currently outstanding options expire on various dates through November 2018.

F-58
Table of Contents
Notes to Consolidated Financial Statements (Continued)

18. Stock Incentive Plans (Continued)

The following table sets forth information relating to such options during 2013, 2012, and 2011:
Stock Option Activity
Number Of
Shares
 
Average
Exercise
Price
 
Weighted-
Average
Grant Date
Fair Value
Balance, January 1, 2011
4,468,341

 
$
18.48

 
 
Options exercised
(765,693
)
 
15.76

 
 
Options forfeited
(45,369
)
 
22.30

 
 
Options terminated
(7,011
)
 
8.03

 


Options granted
1,287,152

 
42.18

 
$
15.44

Balance, December 31, 2011
4,937,420

 
25.08

 
 
Options exercised
(1,679,359
)
 
19.14

 
 
Options forfeited
(51,573
)
 
37.67

 
 
Options terminated
(10,995
)
 
15.74

 
 
Options granted
828,991

 
49.01

 
16.67

Balance, December 31, 2012
4,024,484

 
32.33

 
 
Options exercised
(1,464,294
)
 
23.46

 
 
Options forfeited
(95,139
)
 
52.17

 
 
Options terminated
(1,381
)
 
42.26

 
 
Options granted
421,385

 
76.70

 
19.26

Balance, December 31, 2013
2,885,055

 
42.60

 



The following is a summary of non-vested option activity for the year ended December 31, 2013:
Stock Option Activity
Number Of
Shares
 
Weighted-
Average
Grant Date
Fair Value
Non-vested options outstanding at beginning of year
2,067,673

 
$
14.90

Granted
421,385

 
19.26

Vested / exercised
(1,101,080
)
 
12.83

Forfeited
(105,053
)
 
16.44

Non vested options outstanding at end of year
1,282,925

 


As of December 31, 2013, the intrinsic value (the difference between the exercise price and the market price) for options outstanding was $160.5 million and for options exercisable was $105.9 million. The total intrinsic value of all options exercised during the years ended December 31, 2013, 2012 and 2011 was $83.2 million, $65.3 million and $21.9 million, respectively. A summary of our stock options outstanding and exercisable at December 31, 2013, follows:

F-59
Table of Contents
Notes to Consolidated Financial Statements (Continued)

18. Stock Incentive Plans (Continued)

Exercise Price Range
Number
Outstanding
 
Number
Exercisable
 
Outstanding Weighted-
Average
Remaining
Contractual
Life (Years)
 
Exercisable
Weighted-
Average
Exercise
Price
$0 - $10
253,551

 
253,551

 
0.35
 
$
9.79

$20 - $30
644,916

 
644,916

 
1.34
 
27.75

$30 - $40
11,192

 
5,794

 
2.61
 
37.06

$40 - $50
1,550,004

 
689,602

 
2.84
 
44.07

$60 - $70
24,787

 
8,267

 
3.93
 
66.57

$70 - $80
398,380

 
—

 
4.33
 
—

$80 - $90
2,225

 
—

 
4.49
 
—

 
2,885,055

 
1,602,130

 
 
 
 
At December 31, 2013, the weighted-average remaining contractual term of all options outstanding and exercisable was 2.50 years.
Options Granted    The Company granted approximately 0.4 million, 0.8 million, and 1.3 million nonstatutory stock options in 2013, 2012, and 2011, respectively, under the Plans.
For the years ended December 31, 2013, 2012 and 2011, Grace recognized non-cash stock-based compensation expense of $12.7 million, $14.7 million and $14.0 million, respectively, which is included in selling, general and administrative expense.
Grace values options using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of traded options. The risk-free rate is based on the U.S. Treasury yield curve published as of the grant date, with maturities approximating the expected term of the options. The expected term of the options is estimated using the simplified method as allowed by ASC 718-20, whereby the average between the vesting period and contractual term is used. The expected volatility was estimated using both actual stock volatility and the volatility of an industry peer group. Grace believes its actual stock volatility in the last several years may not be representative of expected future volatility. The following summarizes the assumptions used for estimating the fair value of stock options granted during 2013, 2012 and 2011, respectively.
 
2013
 
2012
 
2011
Expected volatility
32.3% - 34.3%
 
35.8% - 46.4%
 
46.5% -50.7%
Weighted average expected volatility
33.3%
 
40.6%
 
48.7%
Expected term
3.00 - 4.00 years
 
3.00 - 4.00 years
 
3.00 - 4.00 years
Risk-free rate
0.61%
 
0.55%
 
1.43%
Dividend yield
—%
 
—%
 
—%
Total unrecognized stock-based compensation expense at December 31, 2013, was $6.3 million and the weighted-average period over which this expense will be recognized is 0.7 years.
Performance Based Units    During 2013 the Company granted 111,770 Performance Based Units (PBUs) under the Company's Long-term Incentive Plan (LTIP), of which 5,513 were forfeited. The awards cliff vest on December 31, 2015, and have a weighted average grant date fair value of $76.66. The Company anticipates that approximately 54% of the PBUs will be settled in common stock and approximately 46% will be settled in cash, assuming full vesting. PBUs are recorded at fair value at the date of grant. The estimated grant date fair value is based on the expected payout of the award, which may range from 0% to 200% of the payout target. The common stock settled portion is considered an equity award with the payout being valued based on the Company’s stock price on the grant date. The cash settled portion of the award is considered a liability award with payout being remeasured each reporting period based on the Company’s current stock price. Both equity and cash awards are remeasured each reporting period based on anticipated attainment of the payout target; therefore these portions of the awards are subject to volatility until the payout is established. During 2013 the Company recognized $1.7 million in compensation expense for these awards. As of December 31, 2013, $5.3 million of total unrecognized

F-60
Table of Contents
Notes to Consolidated Financial Statements (Continued)

18. Stock Incentive Plans (Continued)

compensation expense related to the PBUs is expected to be recognized over the remaining weighted-average service period of 2 years.
19. Earnings Per Share
The following table shows a reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share.
(In millions, except per share amounts)
2013
 
2012
 
2011
Numerators
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
$
256.1

 
$
40.0

 
$
219.7

Denominators
 
 
 
 
 
Weighted average common shares—basic calculation
76.4

 
74.9

 
73.6

Dilutive effect of employee stock options
1.3

 
1.4

 
1.9

Weighted average common shares—diluted calculation
77.7

 
76.3

 
75.5

Basic earnings per share
$
3.35

 
$
0.53

 
$
2.99

Diluted earnings per share
$
3.30

 
$
0.52

 
$
2.91

There were approximately 0.3 million, 0.4 million and 1.3 million anti-dilutive options outstanding for the years ended December 31, 2013, 2012 and 2011, respectively. The effect of the warrant for 10 million shares issued under the Joint Plan, as discussed in Note 2, is not included in diluted earnings per share.
20. Operating Segment Information
Grace is a global producer of specialty chemicals and specialty materials. Grace manages its business through three operating segments: Grace Catalysts Technologies, Grace Materials Technologies, and Grace Construction Products. Grace Catalysts Technologies includes catalysts and related products and technologies used in refining, petrochemical and other chemical manufacturing applications. Grace's Advanced Refining Technologies (ART) joint venture is managed in this segment. ART is an unconsolidated affiliate, and Grace accounts for ART using the equity method as discussed in Note 21. Grace Materials Technologies includes packaging technologies and engineered materials, coatings and sealants used in consumer, industrial, and pharmaceutical applications. Grace Construction Products includes specialty construction chemicals and specialty building materials used in commercial, infrastructure and residential construction. Intersegment sales are eliminated in consolidation. The table below presents information related to Grace's operating segments. Only those corporate expenses directly related to the operating segments are allocated for reporting purposes. All remaining corporate items are reported separately and labeled as such.
Grace also excludes defined benefit pension expense from the calculation of segment operating income. Grace believes that the exclusion of defined benefit pension expense provides a better indicator of its operating segment performance as defined benefit pension expense is not managed at an operating segment level.
Grace defines Adjusted EBIT (a non-GAAP financial measure) to be net income adjusted for interest income and expense, income taxes, costs related to Chapter 11, asbestos-related costs, restructuring expenses and related asset impairments, pension costs other than service and interest costs, expected returns on plan assets and amortization of prior service costs/credits, certain income and expense items related to divested businesses, product lines and certain other investments, and gains and losses on sales of businesses, product lines and certain other investments. In the 2013 first quarter, Grace also adjusted for the currency transaction loss incurred on our Venezuelan cash balances of $6.9 million before taxes.

F-61
Table of Contents
Notes to Consolidated Financial Statements (Continued)

20. Operating Segment Information (Continued)

Operating Segment Data
(In millions)
2013
 
2012
 
2011
Net Sales
 
 
 
 
 
Catalysts Technologies
$
1,124.0

 
$
1,268.1

 
$
1,347.3

Materials Technologies
878.5

 
862.6

 
872.6

Construction Products
1,058.2

 
1,024.8

 
992.0

Total
$
3,060.7

 
$
3,155.5

 
$
3,211.9

Adjusted EBIT
 
 
 
 
 
Catalysts Technologies segment operating income
$
327.5

 
$
393.8

 
$
388.8

Materials Technologies segment operating income
181.8

 
162.0

 
158.7

Construction Products segment operating income
151.7

 
125.2

 
97.3

Corporate costs
(82.8
)
 
(92.4
)
 
(102.8
)
Certain pension costs
(27.4
)
 
(30.4
)
 
(28.7
)
Total
$
550.8

 
$
558.2

 
$
513.3

Depreciation and Amortization
 
 
 
 
 
Catalysts Technologies
$
54.2

 
$
54.0

 
$
52.5

Materials Technologies
31.4

 
29.5

 
30.9

Construction Products
31.8

 
32.9

 
34.0

Corporate
5.7

 
2.6

 
2.6

Total
$
123.1

 
$
119.0

 
$
120.0

Capital Expenditures
 
 
 
 
 
Catalysts Technologies
$
58.7

 
$
70.8

 
$
74.5

Materials Technologies
33.0

 
27.1

 
32.3

Construction Products
32.8

 
26.5

 
19.5

Corporate
31.7

 
14.1

 
17.7

Total
$
156.2

 
$
138.5

 
$
144.0

Total Assets
 
 
 
 
 
Catalysts Technologies
$
1,361.8

 
$
794.8

 
$
804.5

Materials Technologies
508.9

 
494.9

 
481.1

Construction Products
609.1

 
616.0

 
545.9

Corporate
2,916.3

 
3,184.7

 
2,664.1

Total
$
5,396.1

 
$
5,090.4

 
$
4,495.6

Corporate costs include corporate support function costs and other corporate costs such as non-asbestos environmental remediation, insurance premiums and professional fees.
Grace Adjusted EBIT for the years ended December 31, 2013, 2012 and 2011 is reconciled below to income before income taxes presented in the accompanying Consolidated Statements of Operations.

F-62
Table of Contents
Notes to Consolidated Financial Statements (Continued)

20. Operating Segment Information (Continued)

Reconciliation of Operating Segment Data to Financial Statements
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Grace Adjusted EBIT
$
550.8

 
$
558.2

 
$
513.3

Chapter 11-related costs, net
(16.4
)
 
(15.6
)
 
(23.9
)
Asbestos-related costs
(11.9
)
 
(7.6
)
 
(20.8
)
Asbestos and bankruptcy-related charges, net
(21.9
)
 
(384.6
)
 
—

Default interest settlement
(129.0
)
 
—

 
—

Pension MTM adjustment and other related costs, net
50.6

 
(119.2
)
 
(111.2
)
Restructuring expenses and related asset impairments
(12.5
)
 
(6.9
)
 
(6.9
)
Loss on sale of product line
(1.0
)
 
(0.2
)
 
(0.4
)
Income and expense related to divested businesses
—

 
(0.2
)
 
(0.4
)
Interest expense and related financing costs
(43.8
)
 
(46.5
)
 
(43.3
)
Currency transaction loss on cash in Venezuela
(6.9
)
 
—

 
—

Interest income of non-Debtor subsidiaries
1.0

 
1.0

 
1.2

Net income (loss) attributable to noncontrolling interests
1.6

 
1.0

 
(0.6
)
Income (loss) before income taxes
$
360.6

 
$
(20.6
)
 
$
307.0


F-63
Table of Contents
Notes to Consolidated Financial Statements (Continued)

20. Operating Segment Information (Continued)

The table below presents information related to the geographic areas in which Grace operates. Sales are attributed to geographic areas based on customer location.
Geographic Area Data
(In millions)
2013
 
2012
 
2011
Net Sales
 
 
 
 
 
United States
$
886.0

 
$
878.9

 
$
945.0

Canada and Puerto Rico
73.7

 
88.7

 
96.8

Total North America
959.7

 
967.6

 
1,041.8

Europe Middle East Africa
1,087.9

 
1,175.6

 
1,260.4

Asia Pacific
654.1

 
660.3

 
599.3

Latin America
359.0

 
352.0

 
310.4

Total
$
3,060.7

 
$
3,155.5

 
$
3,211.9

Properties and Equipment, net
 
 
 
 
 
United States
$
497.8

 
$
438.4

 
$
421.1

Canada and Puerto Rico
19.1

 
19.8

 
19.5

Total North America
516.9

 
458.2

 
440.6

Europe Middle East Africa
212.4

 
210.3

 
202.1

Asia Pacific
70.9

 
72.1

 
53.8

Latin America
29.7

 
29.9

 
27.0

Total
$
829.9

 
$
770.5

 
$
723.5

Goodwill, Intangibles and Other Assets
 
 
 
 
 
United States
$
589.7

 
$
91.5

 
$
110.3

Canada and Puerto Rico
8.6

 
7.3

 
7.3

Total North America
598.3

 
98.8

 
117.6

Europe Middle East Africa
106.4

 
105.2

 
108.9

Asia Pacific
52.4

 
40.1

 
12.4

Latin America
55.9

 
59.8

 
17.9

Total
$
813.0

 
$
303.9

 
$
256.8


21. Unconsolidated Affiliate
Grace accounts for its 50% ownership interest in ART using the equity method of accounting. Grace's investment in ART amounted to $96.2 million and $85.5 million as of December 31, 2013 and 2012, respectively, and the amount included in "equity in earnings of unconsolidated affiliate" in the Consolidated Statements of Operations totaled $22.9 million, $18.5 million and $15.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. ART is a private company and accordingly does not have a quoted market price available. The following summary lists ART's assets, liabilities and results of operations.

F-64
Table of Contents
Notes to Consolidated Financial Statements (Continued)

21. Unconsolidated Affiliate (Continued)

 
December 31,
(In millions)
2013
 
2012
Summary of Balance Sheet information:
 
 
 
Current assets
$
187.9

 
$
136.7

Noncurrent assets
62.5

 
65.9

Total assets
$
250.4

 
$
202.6

 
 
 
 
Current liabilities
$
62.6

 
$
37.8

Noncurrent liabilities
0.6

 
0.1

Total liabilities
$
63.2

 
$
37.9


 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Summary of Statement of Operations information:
 
 
 
 
 
Net sales
$
377.6

 
$
325.0

 
$
339.0

Costs and expenses applicable to net sales
318.4

 
276.0

 
296.3

Income before income taxes
46.6

 
38.9

 
32.8

Net income
45.6

 
37.8

 
31.2

Grace and ART transact business on a regular basis and maintain several agreements in order to support the joint venture. These agreements are treated as related party activities with an unconsolidated affiliate. The table below presents summary financial data related to transactions between Grace and ART.
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Grace sales of catalysts to ART
$
232.0

 
$
206.9

 
$
171.4

Charges for fixed costs, research and development and selling, general and administrative services to ART
28.8

 
28.5

 
27.8

Grace and Chevron provide lines of credit in the amount of $15 million each at a commitment fee of 0.1% of the credit amount. These agreements expire on February 28, 2014. No amounts were outstanding at December 31, 2013 and 2012.
22. Noncontrolling Interests in Consolidated Affiliates
Grace conducts certain business activities in various countries through joint ventures with unaffiliated third parties. In certain cases, the financial results and financial position of these joint ventures are fully included in Grace's consolidated financial statements with the partner's interest reflected in noncontrolling interests in the Consolidated Statements of Operations and Consolidated Balance Sheets. The following tables present summary financial information for Grace's consolidated affiliates for which there is a noncontrolling interest:
Statements of Operations
(In millions)
Year Ended December 31,
2013
 
2012
 
2011
Sales
$
101.5

 
$
108.8

 
$
86.3

Income (loss) before taxes
2.7

 
0.8

 
(0.1
)
Net income (loss)
3.4

 
1.1

 
(0.9
)
Noncontrolling interests in net income (loss)
1.6

 
1.0

 
(0.6
)


F-65
Table of Contents
Notes to Consolidated Financial Statements (Continued)

22. Noncontrolling Interests in Consolidated Affiliates (Continued)

Balance Sheets
(In millions)
December 31,
2013
 
2012
 
2011
Cash
$
5.1

 
$
5.7

 
$
6.7

Other current assets
33.4

 
41.6

 
34.7

Total assets
71.1

 
73.8

 
53.0

Total liabilities
48.9

 
46.1

 
30.1

Shareholders' equity
22.2

 
27.7

 
22.9

Noncontrolling interests in shareholders' equity
10.6

 
9.9

 
8.1


23. Quarterly Summary and Statistical Information (Unaudited)
(In millions, except per share amounts)
March 31(1)
 
June 30(2)
 
September 30(3)
 
December 31
2013
 
 
 
 
 
 
 
Net sales
$
709.9

 
$
802.8

 
$
771.3

 
$
776.7

Gross profit
259.0

 
300.9

 
282.4

 
299.8

Net income
59.1

 
90.3

 
77.0

 
29.7

Net income per share:(4)
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Net income
$
0.78

 
$
1.18

 
$
1.00

 
$
0.39

Diluted earnings per share:
 
 
 
 
 
 
 
Net income
0.77

 
1.16

 
0.99

 
0.38

Market price of common stock:(5)
 
 
 
 
 
 
 
High
$
79.14

 
$
85.43

 
$
89.80

 
$
101.72

Low
68.23

 
72.00

 
74.46

 
85.06

Close
77.51

 
84.04

 
87.40

 
98.87

_______________________________________________________________________________
(1)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in first quarter 2013 decrease to Gross profit of $4.8 million, and increases to Net income of $6.2 million, Basic earnings per share of $0.08 and Diluted earnings per share of $0.08.
(2)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in second quarter 2013 decrease to Gross profit of $2.4 million, and increases to Net income of $7.5 million, Basic earnings per share of $0.10 and Diluted earnings per share of $0.10.
(3)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in third quarter 2013 decrease to Gross profit of $2.3 million, and increases to Net income of $7.6 million, Basic earnings per share of $0.10 and Diluted earnings per share of $0.10.
(4)
Per share results for the four quarters may differ from full-year per share results, as a separate computation of the weighted average number of shares outstanding is made for each quarter presented.
(5)
Principal market: New York Stock Exchange.

F-66
Table of Contents
Notes to Consolidated Financial Statements (Continued)

23. Quarterly Summary and Statistical Information (Unaudited) (Continued)

(In millions, except per share amounts)
March 31(1)
 
June 30(2)
 
September 30(3)
 
December 31(4)
2012
 
 
 
 
 
 
 
Net sales
$
754.4

 
$
826.7

 
$
776.6

 
$
797.8

Gross profit
272.5

 
301.4

 
282.2

 
258.3

Net income (loss)
66.8

 
75.4

 
82.1

 
(184.3
)
Net income per share:(5)
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Net income (loss)
$
0.90

 
$
1.01

 
$
1.09

 
$
(2.44
)
Diluted earnings per share:
 
 
 
 
 
 
 
Net income (loss)
0.87

 
0.98

 
1.07

 
(2.44
)
Market price of common stock:(6)
 
 
 
 
 
 
 
High
$
58.89

 
$
61.08

 
$
61.58

 
$
68.86

Low
45.39

 
47.40

 
48.14

 
58.40

Close
57.80

 
50.45

 
59.08

 
67.23

_______________________________________________________________________________
(1)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in first quarter 2012 decrease to Gross profit of $4.6 million, and increases to Net income of $5.9 million, Basic earnings per share of $0.08 and Diluted earnings per share of $0.08.
(2)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in second quarter 2012 decrease to Gross profit of $2.7 million, and increases to Net income of $6.1 million, Basic earnings per share of $0.08 and Diluted earnings per share of $0.08.
(3)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in third quarter 2012 decrease to Gross profit of $2.6 million, and increases to Net income of $6.6 million, Basic earnings per share of $0.09 and Diluted earnings per share of $0.09.
(4)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in a fourth quarter 2012 decreases to Gross profit of $42.0 million,, Net income of $72.7 million, Basic earnings per share of $0.96 and Diluted earnings per share of $0.96.
(5)
Per share results for the four quarters may differ from full-year per share results, as a separate computation of the weighted average number of shares outstanding is made for each quarter presented.
(6)
Principal market: New York Stock Exchange.

F-67
Table of Contents

SELECTED FINANCIAL DATA(1)(2)
(In millions, except per share amounts)
2013
 
2012
 
2011
 
2010
 
2009
Statement of Operations
 
 
 
 
 
 
 
 
 
Net sales
$
3,060.7

 
$
3,155.5

 
$
3,211.9

 
$
2,675.0

 
$
2,825.0

Income before income taxes(3)
360.6

 
(20.6
)
 
307.0

 
220.3

 
104.4

Net income
257.7

 
41.0

 
219.1

 
194.1

 
86.3

Net loss (income) attributable to noncontrolling interests
(1.6
)
 
(1.0
)
 
0.6

 
(0.3
)
 
(10.0
)
Net income attributable to W. R. Grace & Co. shareholders
256.1

 
40.0

 
219.7

 
193.8

 
76.3

Financial Position
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
964.8

 
$
1,336.9

 
$
1,048.3

 
$
1,015.7

 
$
893.0

Property and equipment, net
829.9

 
770.5

 
723.5

 
702.5

 
690.1

Total assets
5,396.1

 
5,090.4

 
4,495.6

 
4,243.2

 
3,942.5

Total liabilities
4,824.9

 
4,770.6

 
4,311.4

 
4,298.9

 
4,219.7

Liabilities subject to compromise (a subset of total liabilities)
3,776.1

 
3,619.9

 
3,191.5

 
3,171.9

 
3,146.9

Shareholders' equity (deficit)
571.2

 
319.8

 
184.2

 
(55.7
)
 
(277.2
)
Cash Flow
 
 
 
 
 
 
 
 
 
Operating activities
$
515.9

 
$
453.6

 
$
219.4

 
$
325.9

 
$
433.4

Investing activities
(880.7
)
 
(280.3
)
 
(220.9
)
 
(243.1
)
 
26.1

Financing activities
(8.4
)
 
110.3

 
39.7

 
41.5

 
(41.3
)
Net cash flow
(372.1
)
 
288.6

 
32.6

 
122.7

 
432.9

Data Per Common Share (Diluted)
 
 
 
 
 
 
 
 
 
Net income
$
3.30

 
$
0.52

 
$
2.91

 
$
2.61

 
$
1.05

Average common diluted shares outstanding
77.7

 
76.3

 
75.5

 
74.4

 
72.6

Other Statistics
 
 
 
 
 
 
 
 
 
Capital expenditures
$
156.2

 
$
138.5

 
$
144.0

 
$
111.1

 
$
93.8

Common stock price range
68.23-101.72

 
45.39-68.86

 
30.25-52.50

 
19.63-36.27

 
4.07-26.17

Common shareholders of record
7,077

 
7,591

 
8,063

 
8,270

 
8,505

Number of employees (approximately)
6,700

 
6,500

 
6,300

 
6,000

 
5,900

_______________________________________________________________________________
(1)
Certain prior-year amounts have been reclassified to conform to the 2013 presentation.
(2)
Amounts have been revised as a result of our fourth quarter change to mark-to-market pension accounting. See Note 1 to the Consolidated Financial Statements for more information.
(3)
Adjustments related to our asbestos-related liability, Chapter 11, and pension mark-to-market accounting are included in and affect the period-to-period comparability of Income before income taxes. See Note 20 to the Consolidated Financial Statements for a detail of these items.

F-68
Table of Contents

Management's Discussion and Analysis of Financial Condition and Results of Operations
See "Analysis of Operations" for a discussion of our non-GAAP performance measures. Our references to "advanced economies" and "emerging regions" refer to classifications established by the International Monetary Fund.
Results of Operations
2013 Performance Summary
Following is a summary of our financial performance for the year ended December 31, 2013, compared with the prior year.
•
Net sales decreased 3.0% to $3,060.7 million, as improved base pricing and higher sales volumes were offset by lower rare earth surcharges and unfavorable currency translation.
•
Segment Gross Margin increased 10 basis points to 37.1%.
•
Adjusted EBIT decreased 1.3% to $550.8 million.
•
Grace net income increased to $256.1 million or $3.30 per diluted share primarily due to a favorable mark-to-market pension adjustment in 2013 compared with an unfavorable adjustment in the prior year, and a reduction in the amount of asbestos and bankruptcy-related charges, partially offset by a $129.0 million charge in 2013 related to the default interest settlement.
Summary Description of Business
We are engaged in specialty chemicals and specialty materials businesses on a worldwide basis through our three operating segments, Grace Catalysts Technologies, Grace Materials Technologies, and Grace Construction Products. See Item 1 (Business—Business Overview) of this Report for a summary description of our core business.
Analysis of Operations
We have set forth in the table below our key operating statistics with percentage changes for the years ended December 31, 2013, 2012, and 2011. Please refer to this Analysis of Operations when reviewing this Management's Discussion and Analysis of Financial Condition and Results of Operations.
In 2013 we elected to change our method of accounting for deferred actuarial gains and losses relating to our global defined benefit pension plans. The new accounting method, referred to as mark-to-market accounting, was adopted in the 2013 fourth quarter and retrospectively applied to our financial results for all periods presented in this report. See Note 1 to the Consolidated Financial Statements under the caption "Change in Accounting Principle Regarding Pension Benefits" for additional information.
We define Adjusted EBIT (a non-GAAP financial measure) to be net income adjusted for interest income and expense, income taxes, costs related to Chapter 11, asbestos-related costs, restructuring expenses and related asset impairments, pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits, certain income and expense items related to divested businesses, product lines, and certain other investments and gains and losses on sales of businesses, product lines and certain other investments. In the 2013 first quarter, we also adjusted for the currency transaction loss incurred on our Venezuelan cash balances of $6.9 million before taxes.
We define Adjusted EBITDA (a non-GAAP financial measure) to be Adjusted EBIT adjusted for depreciation and amortization.
We define Adjusted Earnings Per Share (EPS) (a non-GAAP financial measure) to be Diluted EPS adjusted for costs related to Chapter 11, asbestos-related costs, restructuring expenses and related asset impairments, pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits, certain income and expense items related to divested businesses, product lines, and certain other investments, gains and losses on sales of businesses, product lines and certain other investments, and certain discrete tax items. In the 2013 first quarter, we also adjusted for the currency transaction loss incurred on our Venezuelan cash balances of $0.09 per share.

F-69
Table of Contents

We define Adjusted EBIT Return On Invested Capital (a non-GAAP financial measure) to be Adjusted EBIT (on a trailing four quarters basis) divided by the sum of net working capital, properties and equipment and certain other assets and liabilities.
We define Segment Gross Margin (a non-GAAP financial measure) to be Gross Margin adjusted for pension-related costs included in cost of goods sold.
We use Adjusted EBIT as a performance measure in significant business decisions and in determining certain incentive compensation. We use Adjusted EBIT as a performance measure because it provides improved period-to-period comparability for decision making and compensation purposes, and because it better measures the ongoing earnings results of our strategic and operating decisions by excluding the earnings effects of our Chapter 11 proceedings, asbestos liabilities, restructuring activities, and divested businesses.
Adjusted EBIT, Adjusted EBITDA, Adjusted EPS, Adjusted EBIT Return On Invested Capital and Segment Gross Margin do not purport to represent income measures as defined under U.S. GAAP, and should not be used as alternatives to such measures as an indicator of our performance. These measures are provided to investors and others to improve the period-to-period comparability and peer-to-peer comparability of our financial results, and to ensure that investors understand the information we use to evaluate the performance of our businesses. We have provided in the following tables a reconciliation of these non-GAAP measures to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
Adjusted EBIT has material limitations as an operating performance measure because it excludes Chapter 11- and asbestos-related costs and may exclude income and expenses from restructuring activities and divested businesses, which historically have been material components of our net income. Adjusted EBITDA also has material limitations as an operating performance measure because it excludes the impact of depreciation and amortization expense. Our business is substantially dependent on the successful deployment of capital, and depreciation and amortization expense is a necessary element of our costs. We compensate for the limitations of these measurements by using these indicators together with net income as measured under U.S. GAAP to present a complete analysis of our results of operations. Adjusted EBIT and Adjusted EBITDA should be evaluated together with net income measured under U.S. GAAP for a complete understanding of our results of operations.

F-70
Table of Contents

Analysis of Operations
(In millions, except per share amounts)
2013
 
2012
 
% Change
 
2011
 
% Change
Net sales:
 
 
 
 
 
 
 
 
 
Catalysts Technologies
$
1,124.0

 
$
1,268.1

 
(11.4
)%
 
$
1,347.3

 
(5.9
)%
Materials Technologies
878.5

 
862.6

 
1.8
 %
 
872.6

 
(1.1
)%
Construction Products
1,058.2

 
1,024.8

 
3.3
 %
 
992.0

 
3.3
 %
Total Grace net sales
$
3,060.7

 
$
3,155.5

 
(3.0
)%
 
$
3,211.9

 
(1.8
)%
Net sales by region:
 
 
 
 
 
 
 
 
 
North America
$
959.7

 
$
967.6

 
(0.8
)%
 
$
1,041.8

 
(7.1
)%
Europe Middle East Africa
1,087.9

 
1,175.6

 
(7.5
)%
 
1,260.4

 
(6.7
)%
Asia Pacific
654.1

 
660.3

 
(0.9
)%
 
599.3

 
10.2
 %
Latin America
359.0

 
352.0

 
2.0
 %
 
310.4

 
13.4
 %
Total net sales by region
$
3,060.7

 
$
3,155.5

 
(3.0
)%
 
$
3,211.9

 
(1.8
)%
Profitability performance measures:
 
 
 
 
 
 
 
 
 
Adjusted EBIT(A):
 
 
 
 
 
 
 
 
 
Catalysts Technologies segment operating income
$
327.5

 
$
393.8

 
(16.8
)%
 
$
388.8

 
1.3
 %
Materials Technologies segment operating income
181.8

 
162.0

 
12.2
 %
 
158.7

 
2.1
 %
Construction Products segment operating income
151.7

 
125.2

 
21.2
 %
 
97.3

 
28.7
 %
Corporate costs
(82.8
)
 
(92.4
)
 
10.4
 %
 
(102.8
)
 
10.1
 %
Certain pension costs(B)
(27.4
)
 
(30.4
)
 
9.9
 %
 
(28.7
)
 
(5.9
)%
Adjusted EBIT
550.8

 
558.2

 
(1.3
)%
 
513.3

 
8.7
 %
Costs related to Chapter 11
(16.4
)
 
(15.6
)
 
NM

 
(23.9
)
 
NM

Asbestos-related costs, net
(11.9
)
 
(7.6
)
 
NM

 
(20.8
)
 
NM

Asbestos and bankruptcy-related charges, net
(21.9
)
 
(384.6
)
 
NM

 
—

 
NM

Default interest settlement
(129.0
)
 
—

 
NM

 
—

 
NM

Pension MTM adjustment and other related costs, net
50.6

 
(119.2
)
 
NM

 
(111.2
)
 
NM

Restructuring expenses and related asset impairments
(12.5
)
 
(6.9
)
 
NM

 
(6.9
)
 
NM

Loss on sale of product line
(1.0
)
 
(0.2
)
 
NM

 
(0.4
)
 
50.0
 %
Income and expense items related to divested businesses
—

 
(0.2
)
 
NM

 
(0.4
)
 
50.0
 %
Interest expense and related financing costs
(43.8
)
 
(46.5
)
 
5.8
 %
 
(43.3
)
 
(7.4
)%
Currency transaction loss on cash in Venezuela
(6.9
)
 
—

 
NM

 
—

 
NM

Interest income of non-Debtor subsidiaries
1.0

 
1.0

 
—
 %
 
1.2

 
(16.7
)%
Benefit from (provision for) income taxes
(102.9
)
 
61.6

 
NM

 
(87.9
)
 
NM

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

 
$
40.0

 
NM

 
$
219.7

 
(81.8
)%
Diluted EPS (GAAP)
$
3.30

 
$
0.52

 
NM

 
$
2.91

 
(82.1
)%
Adjusted EPS (non-GAAP)
$
4.39

 
$
4.53

 
(3.1
)%
 
$
4.25

 
6.6
 %


F-71
Table of Contents

Analysis of Operations
(In millions)
2013
 
2012
 
% Change
 
2011
 
% Change
Profitability performance measures:
 
 
 
 
 
 
 
 
 
Gross margin:
 
 
 
 
 
 
 
 
 
Catalysts Technologies
40.1
%
 
41.0
 %
 
(0.9) pts

 
39.8
 %
 
1.2 pts

Materials Technologies
34.6
%
 
33.1
 %
 
1.5 pts

 
33.2
 %
 
(0.1) pts

Construction Products
36.0
%
 
35.2
 %
 
0.8 pts

 
33.8
 %
 
1.4 pts

Segment Gross Margin
37.1
%
 
37.0
 %
 
0.1 pts

 
36.2
 %
 
0.8 pts

Certain pension costs in cost of goods sold
0.2
%
 
(1.6
)%
 
1.8 pts

 
(1.5
)%
 
(0.1) pts

Total Grace
37.3
%
 
35.3
 %
 
2.0 pts

 
34.6
 %
 
0.7 pts

Adjusted profitability performance measures:
 
 
 
 
 
 
 
 
 
Adjusted EBIT:
 
 
 
 
 
 
 
 
 
Catalysts Technologies
$
327.5

 
$
393.8

 
(16.8
)%
 
$
388.8

 
1.3
 %
Materials Technologies
181.8

 
162.0

 
12.2
 %
 
158.7

 
2.1
 %
Construction Products
151.7

 
125.2

 
21.2
 %
 
97.3

 
28.7
 %
Corporate
(110.2
)
 
(122.8
)
 
10.3
 %
 
(131.5
)
 
6.6
 %
Total Grace
550.8

 
558.2

 
(1.3
)%
 
513.3

 
8.7
 %
Depreciation and amortization:
 
 
 
 
 
 
 
 
 
Catalysts Technologies
$
54.2

 
$
54.0

 
0.4
 %
 
$
52.5

 
2.9
 %
Materials Technologies
31.4

 
29.5

 
6.4
 %
 
30.9

 
(4.5
)%
Construction Products
31.8

 
32.9

 
(3.3
)%
 
34.0

 
(3.2
)%
Corporate
5.7

 
2.6

 
119.2
 %
 
2.6

 
—
 %
Total Grace
123.1

 
119.0

 
3.4
 %
 
120.0

 
(0.8
)%
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
Catalysts Technologies
$
381.7

 
$
447.8

 
(14.8
)%
 
$
441.3

 
1.5
 %
Materials Technologies
213.2

 
191.5

 
11.3
 %
 
189.6

 
1.0
 %
Construction Products
183.5

 
158.1

 
16.1
 %
 
131.3

 
20.4
 %
Corporate
(104.5
)
 
(120.2
)
 
13.1
 %
 
(128.9
)
 
6.7
 %
Total Grace
673.9

 
677.2

 
(0.5
)%
 
633.3

 
6.9
 %
Operating margin:
 
 
 
 
 
 
 
 
 
Catalysts Technologies
29.1
%
 
31.1
 %
 
(2.0) pts

 
28.9
 %
 
2.2 pts

Materials Technologies
20.7
%
 
18.8
 %
 
1.9 pts

 
18.2
 %
 
0.6 pts

Construction Products
14.3
%
 
12.2
 %
 
2.1 pts

 
9.8
 %
 
2.4 pts

Total Grace
18.0
%
 
17.7
 %
 
0.3 pts

 
16.0
 %
 
1.7 pts

Adjusted EBITDA margin:
 
 
 
 
 
 
 
 
 
Catalysts Technologies
34.0
%
 
35.3
 %
 
(1.3) pts

 
32.8
 %
 
2.5 pts

Materials Technologies
24.3
%
 
22.2
 %
 
2.1 pts

 
21.7
 %
 
0.5 pts

Construction Products
17.3
%
 
15.4
 %
 
1.9 pts

 
13.2
 %
 
2.2 pts

Total Grace
22.0
%
 
21.5
 %
 
0.5 pts

 
19.7
 %
 
1.8 pts



F-72
Table of Contents

Analysis of Operations
(In millions)
2013
 
2012
 
2011
Calculation of Adjusted EBIT Return On Invested Capital (trailing four quarters):
 
 
 
 
 
Adjusted EBIT
$
550.8

 
$
558.2

 
$
513.3

Invested Capital:
 
 
 
 
 
Trade accounts receivable
481.8

 
490.4

 
473.0

Inventories
295.3

 
283.6

 
333.2

Accounts payable
(262.5
)
 
(252.0
)
 
(257.6
)
 
514.6

 
522.0

 
548.6

Other current assets (excluding income taxes)
81.2

 
62.4

 
82.6

Properties and equipment, net
829.9

 
770.5

 
723.5

Goodwill
457.5

 
196.7

 
148.2

Technology and other intangible assets, net
315.5

 
82.7

 
70.6

Investment in unconsolidated affiliate
96.2

 
85.5

 
70.8

Other assets
40.0

 
24.5

 
32.7

Other current liabilities (excluding income taxes, Chapter 11, and restructuring)
(248.6
)
 
(252.3
)
 
(254.0
)
Other liabilities (including non-asbestos environmental remediation)
(77.7
)
 
(56.5
)
 
(60.9
)
Total invested capital
$
2,008.6

 
$
1,435.5

 
$
1,362.1

Adjusted EBIT Return On Invested Capital
27.4
%
 
38.9
%
 
37.7
%
_______________________________________________________________________________
Amounts may not add due to rounding.
(A)
Grace's segment operating income includes only Grace's share of income of consolidated and unconsolidated joint ventures.
(B)
Certain pension costs include only ongoing costs recognized quarterly, which include service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits. Catalysts Technologies, Materials Technologies, and Construction Products segment operating income and corporate costs do not include any amounts for pension expense. Other pension related costs including annual mark-to-market adjustments and actuarial gains and losses are excluded from Adjusted EBIT. These amounts are not used by management to evaluate the performance of Grace's businesses and significantly affect the peer-to-peer and period-to-period comparability of our financial results. Mark-to-market adjustments and actuarial gains and losses relate primarily to changes in financial market values and actuarial assumptions and are not directly related to the operation of Grace's businesses.
NM—Not Meaningful

F-73
Table of Contents

Grace Overview
Following is an overview of our financial performance for the years ended December 31, 2013, 2012, and 2011.
Net Sales and Gross Margin
The following tables identify the year-over-year increase or decrease in sales attributable to changes in sales volume and/or mix, product price, and the impact of currency translation.
 
2013 as a Percentage Increase (Decrease) from 2012
Net Sales Variance Analysis
Volume
 
Price
 
Currency
Translation
 
Total
Catalysts Technologies
(3.2
)%
 
(9.0
)%
 
0.8
 %
 
(11.4
)%
Materials Technologies
0.8
 %
 
2.1
 %
 
(1.1
)%
 
1.8
 %
Construction Products
3.7
 %
 
1.9
 %
 
(2.3
)%
 
3.3
 %
Net sales
0.2
 %
 
(2.4
)%
 
(0.8
)%
 
(3.0
)%
By Region:
 
 
 
 
 
 
 
North America
3.3
 %
 
(4.0
)%
 
(0.1
)%
 
(0.8
)%
Europe Middle East Africa
(6.5
)%
 
(2.5
)%
 
1.5
 %
 
(7.5
)%
Asia Pacific
4.4
 %
 
(3.5
)%
 
(1.8
)%
 
(0.9
)%
Latin America
6.0
 %
 
4.0
 %
 
(8.0
)%
 
2.0
 %
Sales for 2013 decreased 3.0% overall compared with the prior year. The sales decrease was due to lower pricing (-2.4%) and unfavorable currency translation (-0.8%), partially offset by higher sales volumes (+0.2%).

F-74
Table of Contents

 
2012 as a Percentage Increase (Decrease) from 2011
Net Sales Variance Analysis
Volume
 
Price
 
Currency
Translation
 
Total
Catalysts Technologies
2.5
 %
 
(5.4
)%
 
(3.0
)%
 
(5.9
)%
Materials Technologies
1.7
 %
 
1.8
 %
 
(4.6
)%
 
(1.1
)%
Construction Products
4.6
 %
 
1.9
 %
 
(3.2
)%
 
3.3
 %
Net sales
2.9
 %
 
(1.2
)%
 
(3.5
)%
 
(1.8
)%
By Region:
 
 
 
 
 
 
 
North America
(2.8
)%
 
(4.2
)%
 
(0.1
)%
 
(7.1
)%
Europe Middle East Africa
1.1
 %
 
(1.5
)%
 
(6.3
)%
 
(6.7
)%
Asia Pacific
9.7
 %
 
2.2
 %
 
(1.7
)%
 
10.2
 %
Latin America
16.7
 %
 
3.9
 %
 
(7.2
)%
 
13.4
 %
Sales for 2012 decreased 1.8% overall compared with the prior year. The sales decrease was due to lower pricing (-1.2%), primarily in North America and EMEA, and unfavorable currency translation (-3.5%), partially offset by higher sales volumes (+2.9%).
Adjusted EBIT
Adjusted EBIT was $550.8 million for 2013, a decrease of 1.3% compared with the prior year. The decrease was primarily due to lower segment operating income in Catalysts Technologies and unfavorable currency translation, partially offset by higher segment operating income in Materials Technologies and Construction Products and lower corporate costs. Segment Gross Margin was 37.1% for 2013 compared with 37.0% for the prior year. The increase in Segment Gross Margin was primarily due to lower raw material costs, partially offset by lower pricing related to lower rare earth surcharges.
Adjusted EBIT was $558.2 million for 2012, an increase of 8.7% compared with the prior year. The increase was primarily due to higher segment operating income in all three operating segments, a reduction in operating expenses resulting from previously announced restructuring activities, reduced incentive compensation accruals and expense controls, partially offset by unfavorable currency translation and higher pension expense. Segment Gross Margin was 37.0% for 2012 compared with 36.2% for the prior year. The increase in Segment Gross Margin was primarily due to improved pricing and productivity gains, partially offset by higher raw materials costs and the impact of lower rare earth costs and volumes on capitalized inventory values.

F-75
Table of Contents

Grace Net Income
Grace net income was $256.1 million for 2013 compared with $40.0 million for the prior year. The increase was primarily due to a favorable mark-to-market pension adjustment in 2013 compared with an unfavorable adjustment in the prior year, and a reduction in the amount of asbestos and bankruptcy related charges, partially offset by a $129 million charge related to the default interest settlement.
Grace net income was $40.0 million for 2012, a decrease of 81.8% compared with $219.7 million for the prior year. The decrease was primarily due to the $365.0 million adjustment to the recorded asbestos-related liability, partially offset by improved segment operating income.
We recorded charges of $27.4 million and $365.0 million in the 2013 and 2012 fourth quarters, respectively, to adjust our recorded asbestos-related liability. These adjustments to the previously recorded amounts were necessary to reflect the increased estimates of the value of the warrants and deferred payment obligation payable to the PI Trust under the Joint Plan.
We recorded a charge of $16.2 million in the 2011 fourth quarter primarily related to our estimate of the cost of required remediation at seven facilities that formerly processed vermiculite concentrate from the Libby mine. During the 2011 fourth quarter, EPA requested that we conduct additional remediation at these seven facilities (now eight, including an additional site added by EPA during the 2012 fourth quarter) based on revised risk-based criteria developed by EPA. We estimated the cost of remediating these sites to be approximately $16 million. See Note 13 to the Consolidated Financial Statements for additional information regarding our estimated liability for environmental investigation and remediation costs.

F-76
Table of Contents

Adjusted EPS
The following table reconciles our Diluted EPS (GAAP) to our Adjusted EPS (non-GAAP):
 
2013
(In millions, except per share amounts)
Pre-
Tax
 
Tax at
Actual
Rate
 
After-
Tax
 
Per
Share
Diluted Earnings Per Share (GAAP)
 

 
 

 
 

 
$
3.30

Costs related to Chapter 11
$
16.4

 
$
6.0

 
$
10.4

 
0.13

Asbestos-related costs
11.9

 
4.5

 
7.4

 
0.10

Asbestos and bankruptcy-related charges, net
21.9

 
8.2

 
13.7

 
0.18

Default interest settlement
129.0

 
48.3

 
80.7

 
1.04

Pension MTM adjustment and other related costs, net
(50.6
)
 
(20.0
)
 
(30.6
)
 
(0.39
)
Restructuring expenses and related asset impairments
12.5

 
3.5

 
9.0

 
0.12

Currency transaction loss on cash in Venezuela
6.9

 
—

 
6.9

 
0.09

Loss on sale of divested businesses
1.0

 
0.4

 
0.6

 
0.01

Discrete tax items:
 
 
 
 
 
 
 
Release of valuation allowances
 
 
24.4

 
(24.4
)
 
(0.31
)
Discrete tax items, including adjustments to uncertain tax positions
 

 
(9.4
)
 
9.4

 
0.12

Adjusted EPS (non-GAAP)
 

 
 

 
 

 
$
4.39


 
2012
(In millions, except per share amounts)
Pre-
Tax
 
Tax at
Actual
Rate
 
After-
Tax
 
Per
Share
Diluted Earnings Per Share (GAAP)
 

 
 

 
 

 
$
0.52

Costs related to Chapter 11
$
15.6

 
$
3.8

 
$
11.8

 
0.15

Asbestos-related costs
7.6

 
2.8

 
4.8

 
0.06

Asbestos and bankruptcy-related charges, net
384.6

 
142.3

 
242.3

 
3.18

Pension MTM adjustment and other related costs, net
119.2

 
37.9

 
81.3

 
1.07

Restructuring expenses and related asset impairments
6.9

 
2.0

 
4.9

 
0.06

Loss on sale of divested businesses
0.2

 
—

 
0.2

 
—

Discrete tax items:
 
 
 
 
 
 
 
Release of valuation allowances
 
 
44.0

 
(44.0
)
 
(0.58
)
Discrete tax items, including adjustments to uncertain tax positions
 

 
(5.3
)
 
5.3

 
0.07

Adjusted EPS (non-GAAP)
 

 
 

 
 

 
$
4.53


 
2011
(In millions, except per share amounts)
Pre-
Tax
 
Tax at
Actual
Rate
 
After-
Tax
 
Per
Share
Diluted Earnings Per Share (GAAP)
 

 
 

 
 

 
$
2.91

Costs related to Chapter 11
23.9

 
$
6.6

 
$
17.3

 
0.23

Asbestos-related costs
20.8

 
7.3

 
13.5

 
0.18

Pension MTM adjustment and other related costs, net
111.2

 
38.3

 
72.9

 
0.97

Restructuring expenses and related asset impairments
6.9

 
1.9

 
5.0

 
0.07

Loss on sale of divested businesses
0.8

 
0.3

 
0.5

 
0.01

Discrete tax items:
 
 
 
 
 
 
 
Discrete tax items, including adjustments to uncertain tax positions
 

 
9.5

 
(9.5
)
 
(0.12
)
Adjusted EPS (non-GAAP)
 

 
 

 
 

 
$
4.25



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Adjusted EBIT Return On Invested Capital
Adjusted EBIT Return On Invested Capital for 2013 was 27.4% on a trailing four quarters basis, a decrease from 38.9% on the same basis for 2012 and 37.7% for 2011. The decrease was primarily due to lower segment operating income in Catalysts Technologies and higher invested capital related to the acquisition of the UNIPOL® polypropylene process licensing and related catalyst business. We manage our operations with the objective of maximizing sales, earnings and cash flow over time. Doing so requires that we successfully balance our growth, profitability and working capital and other investments to support sustainable, long-term financial performance. We use Adjusted EBIT Return On Invested Capital as a performance measure in evaluating operating results, in making operating and investment decisions and in balancing the growth and profitability of our operations. Generally, we favor those businesses and investments that provide the highest return on invested capital.
Operating Segment Overview—Grace Catalysts Technologies
Following is an overview of the financial performance of Catalysts Technologies for the years ended December 31, 2013, 2012, and 2011.
Net Sales—Grace Catalysts Technologies
Sales were $1,124.0 million for 2013, a decrease of 11.4% compared with the prior year. The decrease was due to lower pricing (-9.0%) and lower sales volumes (-3.2%), partially offset by favorable currency translation (+0.8%). The decrease in pricing was due to lower rare earth surcharges and lower refinery products base pricing, partially offset by higher pricing in specialty catalysts. The decrease in sales volumes was due to lower sales volumes of FCC catalysts. During the year, FCC catalyst sales volumes decreased 7.9% from the 2013 second quarter to the 2013 third quarter and then increased 5.8% from the 2013 third quarter to the 2013 fourth quarter. The decrease in sales volumes in the 2013 third quarter resulted primarily from customer trials of competitive products following our announcement of an increase in FCC catalyst base pricing in the 2013 first quarter. Sales volumes recovered in the 2014 fourth quarter as customer trials concluded and customers began purchasing new products introduced in the 2013 third and fourth quarters designed specifically for shale oil and heavy resid feedstocks.

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On December 2, 2013, we acquired the UNIPOL® polypropylene process licensing and related catalyst business for a cash purchase price of $500 million, before customary working capital and post-closing adjustments. This acquisition is complementary to our specialty catalysts business and enhances our position as a leading supplier of polyolefin catalysts and technologies. Integration activities are on track and we expect to complete integration in the 2014 second quarter.
Sales were $1,268.1 million for 2012, a decrease of 5.9% compared with the prior year. The decrease was due to lower pricing (-5.4%), and unfavorable currency translation (-3.0%), partially offset by higher sales volumes (+2.5%). Sales of our FCC catalysts increased in the emerging regions, partially offset by refinery closures in North America and Europe, which impacted sales by approximately $48 million, or 4%. In our specialty catalysts business, sales of polypropylene catalysts continued to grow, increasing by double digits compared with 2011 and offsetting decreased sales of polyethylene catalysts due to continued weakness in Europe and slower growth in China.
Segment Operating Income (SOI) and Margin—Grace Catalysts Technologies
Gross profit was $450.5 million for 2013, a decrease of 13.3% compared with the prior year. Segment gross margin was 40.1% compared with 41.0% for the prior year. The decrease in gross profit and gross margin was primarily due to lower sales of our FCC catalyst products, including the effects of lower rare earth surcharges and lower operating leverage.
Segment operating income was $327.5 million for 2013, a decrease of 16.8% compared with the prior year. Segment operating margin for 2013 decreased to 29.1%, a decline of 200 basis points compared with the prior year, primarily due to lower gross margin, partially offset by lower operating expenses and higher earnings from the ART joint venture.
Gross profit was $519.8 million for 2012, a decrease of 3.1% compared with the prior year. Segment gross margin was 41.0% compared with 39.8% for the prior year. The increase in gross margin was primarily due to improved pricing and productivity, partially offset by the impact of lower rare earth costs and volumes on capitalized inventory values and higher raw materials costs, particularly caustic soda and alumina.
Segment operating income was $393.8 million for 2012, an increase of 1.3% compared with the prior year. Segment operating margin for 2012 increased to 31.1%, an improvement of 220 basis points compared with the prior year, primarily due to improved gross margin and lower operating expenses.
In 2012 and 2011, Catalysts Technologies sales were affected by significant volatility in the prices of the rare earths used in the manufacture of our FCC catalysts. During 2010, the People's Republic of China reduced its quotas on exports of rare earths causing significant increases in global prices. In response to these price increases, we implemented surcharges on our FCC catalysts and developed new low- and no-rare earth products to mitigate the higher cost of rare earths without sacrificing performance. These new products have higher base prices than the products they replaced, reflecting improvements in their technology and value to our customers. The surcharges and higher base prices significantly increased sales in 2011 compared to 2010. In the 2011 third quarter, rare earth prices peaked and have since declined significantly. As a result, the amount of our surcharges has decreased with a corresponding decrease in sales. In 2013, the negative effect of lower rare earth surcharges on sales was

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approximately $97 million compared with 2012. In 2012, the negative effect of lower rare earth surcharges on sales was approximately $170 million compared with 2011. The higher base prices on the new products increased gross margin and segment operating income in 2011 and 2012.
Operating Segment Overview—Grace Materials Technologies
Following is an overview of the financial performance of Materials Technologies for the years ended December 31, 2013, 2012, and 2011.
Net Sales—Grace Materials Technologies
Sales were $878.5 million for 2013, an increase of 1.8% compared with the prior year. The increase was due to improved pricing (+2.1%) and higher sales volumes (+0.8%), partially offset by unfavorable currency translation (-1.1%). We increased pricing to reflect the value of new, higher performance products and to offset certain currency impacts and higher raw material costs. Sales in emerging regions increased 4.5% primarily due to growth in China and other emerging regions. Sales in mature markets were flat.
Sales were $862.6 million for 2012, a decrease of 1.1% compared with the prior year. The decrease was due to unfavorable currency translation (-4.6%), partially offset by improved pricing (+1.8%) and higher sales volumes (+1.7%). Sales of packaging products increased compared with the prior year due to improved pricing and increased sales volume. Engineered materials volumes were down compared with the prior year as lower sales volumes in the first half of 2012, from lower demand in Asia and Europe, more than offset second-half volume growth.

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Segment Operating Income (SOI) and Margin—Grace Materials Technologies
Gross profit was $304.2 million for 2013, an increase of 6.5% compared with the prior year. Segment gross margin was 34.6% compared with 33.1% for the prior year. The increase in gross margin was due primarily to improved pricing and lower raw material costs.
Segment operating income was $181.8 million for 2013, an increase of 12.2% compared with the prior year. Segment operating margin for 2013 increased to 20.7%, an improvement of 190 basis points compared with the prior year, primarily due to improved gross margin.
Gross profit was $285.5 million for 2012, a decrease of 1.4% compared with the prior year. Segment gross margin was 33.1% compared with 33.2% for the prior year.
Segment operating income was $162.0 million for 2012, an increase of 2.1% compared with the prior year. Segment operating margin for 2012 increased to 18.8%, an improvement of 60 basis points compared with the prior year, primarily due to reduced operating expenses, partially offset by lower gross margin.
Operating Segment Overview—Grace Construction Products
Following is an overview of the financial performance of Construction Products for the years ended December 31, 2013, 2012, and 2011.
Net Sales—Grace Construction Products
Sales were $1,058.2 million for 2013, an increase of 3.3% compared with the prior year. The increase was due to higher sales volumes (+3.7%) and improved pricing (+1.9%), partially offset by unfavorable currency translation (-2.3%). Sales in emerging regions, which represented 35.4% of sales for 2013, increased 5.9% due to strong sales

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in Latin America, emerging Asia, and Eastern Europe. Sales in North America increased 2.9% compared with the prior year primarily due to growth in specialty building materials and specialty construction chemicals. Sales in Western Europe declined 1.8% compared with the prior year, primarily due to our decision to focus on higher-margin sales in the region.
Sales were $1,024.8 million for 2012, an increase of 3.3% compared with the prior year. The increase was due to higher sales volumes (+4.6%) and improved pricing (+1.9%), partially offset by unfavorable currency translation (-3.2%).
Segment Operating Income (SOI) and Margin—Grace Construction Products
Gross profit was $380.7 million for 2013, an increase of 5.5% compared with the prior year. Segment gross margin was 36.0% compared with 35.2% for the prior year. The increase was primarily due to improved pricing and productivity gains.
Segment operating income was $151.7 million for 2013, an increase of 21.2% compared with the prior year. Segment operating margin for 2013 increased to 14.3%, an improvement of 210 basis points compared with the prior year. These increases were primarily due to improved gross margin and lower operating expenses.
Gross profit was $361.0 million for 2012, an increase of 7.8% compared with the prior year. Segment gross margin was 35.2% compared with 33.8% for the prior year. The increase was primarily due to improved pricing, better operating leverage from higher sales volumes and a favorable sales mix comparison between acquired and divested businesses.
Segment operating income was $125.2 million for 2012, an increase of 28.7% compared with the prior year. Segment operating margin for 2012 increased to 12.2%, an improvement of 240 basis points compared with the prior year. These increases were primarily due to improved gross margin, lower operating expenses and higher sales volumes.

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Corporate Overview
Corporate costs include corporate functional costs and other corporate costs such as non-asbestos environmental remediation, insurance premiums and professional fees.
Corporate costs for 2013 decreased 10.4% compared with the prior year primarily due to the impact of lower performance-based incentive compensation and other expenses.
Corporate costs for 2012 decreased 10.1% compared with the prior year primarily due to the impact of lower performance-based incentive compensation and restructuring initiatives announced in the 2012 first quarter.
Defined Benefit Pension Expense
Defined benefit pension expense includes costs under U.S. and non-U.S. defined benefit pension plans that provide benefits to business segment and corporate employees, as well as retirees and former employees of divested businesses where we retained these obligations.
Under mark-to-market accounting, our pension costs consist of two elements: 1) "certain pension costs"—ongoing costs recognized quarterly, which include service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; and 2) "pension mark-to-market adjustment and other related costs, net"—mark-to-market gains and losses recognized annually in the fourth quarter, or at an interim period should a significant event occur, resulting from changes in actuarial assumptions, such as discount rates and the difference between actual and expected returns on plan assets.
As a result of the retrospective application of the new accounting method, accumulated actuarial losses have been reclassified from "accumulated other comprehensive income" to "retained earnings (accumulated deficit)." In addition, in order to better reflect the nature of pension costs in our operating results, we retrospectively revised the classification of defined benefit pension expense. Pension costs previously reported as a separate line item in the Consolidated Statements of Operations are now reported in "cost of goods sold" and in "selling, general and administrative expenses" based upon the functions of the employees to which the pension costs relate. Finally, we have revised our accounting such that a portion of the defined benefit pension expense has been and will continue to be capitalized into inventories prior to being reported in "cost of goods sold." We believe that the change in classification of defined benefit pension costs and the change to inventory capitalization are not material to all prior periods.
Certain pension costs were $27.4 million, $30.4 million and $28.7 million for 2013, 2012 and 2011, respectively.
The pension mark-to-market adjustment and other related income (expense), net was $50.6 million, $(119.2) million and $(111.2) million for 2013, 2012 and 2011, respectively. The 2013 mark-to-market pension income of $50.6 million was primarily due to higher discount rates in 2013 used to value the projected benefit obligations of our plans, partially offset by the impact of adopting new mortality assumptions in the U.S. and lower than expected return on assets in the U.S. The 2012 mark-to-market pension expense of $119.2 million was primarily due to lower

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discount rates in the U.S. and Germany, partially offset by higher than expected return on assets in the U.S. The 2011 mark-to-market pension expense of $111.2 million was primarily due to lower discount rates in the U.S. and Germany.
Costs Related to Chapter 11
The following table presents costs related to Chapter 11:
(In millions)
2013
 
2012
 
2011
Chapter 11 expenses, net of interest income
$
15.3

 
$
16.6

 
$
20.0

D&O insurance costs related to Chapter 11
0.2

 
0.3

 
0.3

Translation effects—intercompany loans(A)
(11.9
)
 
(5.6
)
 
11.7

Value of currency forward contracts—intercompany loans(A)
10.9

 
3.7

 
(9.3
)
Certain other currency translation costs, net(A)
1.9

 
0.6

 
1.2

Costs related to Chapter 11
$
16.4

 
$
15.6

 
$
23.9

_______________________________________________________________________________
(A)
During the bankruptcy, we had significant intercompany loans between our non-U.S. subsidiaries and our U.S. debtor subsidiaries that were not related to our operating activities. In addition, we accumulated significant cash during bankruptcy. Accordingly, income and expense items related to the intercompany loans and the cash balances are categorized as costs related to Chapter 11. These intercompany loans were paid in full when we emerged from bankruptcy, and the excess cash balances were used to fund a significant portion of our emergence from bankruptcy.
The increase in costs related to Chapter 11 for 2013 compared with 2012 was primarily due to the effects of currency exchange rate changes on the value of intercompany loans and related currency forward contracts and the value of cash balances held in foreign currencies.
The decrease in costs related to Chapter 11 for 2012 compared with 2011 was primarily due to the effects of currency exchange rate changes on the value of intercompany loans and related currency forward contracts.
We present the net costs of our reorganization under Chapter 11 as "Chapter 11 expenses, net of interest income," a separate caption in our Consolidated Statements of Operations.
Interest Expense
Interest expense was $43.8 million for 2013, a decrease of 5.8% compared with 2012. Interest expense was $46.5 million for 2012, an increase of 7.4% compared with 2011.
The average effective interest rates on pre-petition obligations for 2013, 2012 and 2011 were 3.5%, 3.5%, and 3.5%, respectively. All pre-petition interest was paid in February 2014.
Income Taxes
Income tax expense (benefit) for 2013, 2012 and 2011 was $102.9 million, $(61.6) million and $87.9 million, respectively, on income (loss) from consolidated operations before income taxes of $360.6 million, $(20.6) million and $307.0 million in 2013, 2012 and 2011, respectively.
Our 2013 effective tax rate of approximately 29% was lower than the 35% U.S. statutory rate primarily due to benefits recognized during the year including $24.4 million related to the partial release of the valuation allowance on state deferred tax assets, $16.6 million due to lower taxes in non-U.S. jurisdictions, and $3.7 million related to repatriated foreign earnings, partially offset by $11.0 million related to uncertain tax positions and other discrete items, and $9.7 million related to non-deductible expenses.
Our 2012 effective tax rate of approximately (299)% was lower than the 35% U.S. statutory rate primarily due to benefits recognized during the year including $44.0 million related to the partial release of the valuation allowance on state deferred tax assets, $14.9 million due to lower taxes in non-U.S. jurisdictions, and $14.0 million related to domestic production incentives, partially offset by expenses of $8.2 million related to uncertain tax positions and other discrete items, $2.2 million related to repatriated foreign earnings and $8.1 million related to non-deductible expenses.
Our 2011 effective tax rate of approximately 29% was lower than the 35% U.S. statutory rate primarily due to benefits recognized during the year of $9.3 million from the resolution of uncertain tax positions and the expiration

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of the statute of limitations in certain domestic and foreign jurisdictions, and $17.6 million due to lower taxes in non-U.S. jurisdictions, partially offset by expenses of $1.1 million related to repatriated foreign earnings and $7.3 million related to non-deductible expenses.
See Note 10 to the Consolidated Financial Statements for additional information regarding income taxes.
Financial Condition, Liquidity, and Capital Resources
Following is an analysis of our financial condition, liquidity and capital resources at December 31, 2013, together with a description of our emergence financing and post-emergence liquidity. For additional information regarding our Chapter 11 cases and our asbestos-related litigation, see Note 2 to the Consolidated Financial Statements. For additional information regarding environmental matters, see Note 13 to the Consolidated Financial Statements.
Funding Emergence from Chapter 11
On February 3, 2014, we emerged from Chapter 11. We paid approximately $1,900 million in claims and other costs. We funded these payments through a combination of approximately $1,360 million in cash on hand and $900 million in exit financing. Total liquidity under the exit financing consists of:
(a)
a $400 million revolving credit facility due in 2019, with interest at LIBOR +175 bps;
(b)
a $700 million term loan due in 2021, with interest at LIBOR +225 bps with a 75 bps floor;
(c)
a €150 million term loan due in 2021 with interest at EURIBOR +250 bps with a 75 bps floor; and
(d)
a $250 million delayed draw term loan facility available for 12 months, with amounts drawn due in 2021, with interest at LIBOR +225 bps with a 75 bps floor.
Approximately $100 million of the revolving credit facility will be used to replace an existing cash-collateralized letter of credit facility in effect during the bankruptcy. After payment of claims at emergence, total liquidity was approximately $910 million, consisting of approximately $360 million in cash on hand, $300 million in revolver availability and the $250 million delayed draw term loan. In addition, we continue to maintain our non-U.S. credit facilities (see below) which total approximately $194 million to support the trade activity and working capital requirements of our foreign subsidiaries. We entered into an interest rate swap beginning on February 3, 2015, and maturing on February 3, 2020, fixing $250 million of the term loan at 4.643%.
The emergence financing amount includes financing for the acquisition of the UNIPOL® polypropylene process licensing and related catalyst business in December 2013 and the settlement of the default interest claim on our pre-petition bank debt of $129 million.
The revolving credit facility and delayed draw term loan facility, together with cash we expect to generate during 2014, provide the liquidity required to cash settle the warrant issued to the PI Trust, currently expected to cost $490 million, and to settle shares repurchased pursuant to the $500 million share repurchase program authorized by our Board of Directors following emergence.
We believe that these credit facilities, together with cash we expect to generate during 2014 and thereafter, are sufficient to finance our operations and support our business strategy.
Cash Resources and Available Credit Facilities
At December 31, 2013, we had available liquidity of $1,036.9 million, consisting of $964.8 million in cash and cash equivalents ($600.5 million in the U.S.), and $72.1 million of available liquidity under various non-U.S. credit facilities.
At December 31, 2013, we maintained a $100 million cash-collateralized letter of credit facility to support existing and new financial assurances and cash collateral accounts that secure the obligations arising from letters of credit and foreign currency and commodity transactions and derivatives. At December 31, 2013, we held $85.0 million in restricted cash and cash equivalents to support this facility. At emergence, we replaced the cash-collateralized letter of credit facility with a $400 million revolving credit facility with a $150 million sublimit for letters of credit.
Our non-U.S. credit facilities are extended to various subsidiaries that use them primarily to issue bank guarantees supporting trade activity and to provide working capital during occasional cash shortfalls. The credit facility in Germany is secured by third-party accounts receivable, with availability determined on the basis of eligible outstanding receivables. We generally renew these credit facilities as they expire.

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The following table summarizes our non-U.S. credit facilities as of December 31, 2013:
Credit Facilities
(In millions)
Maximum
Borrowing
Amount
 
Available
Liquidity
 
Expiration Date
Country
 
 
 
 
 
Germany
$
69.3

 
$
12.9

 
12/31/2014
Other countries
37.6

 
19.2

 
Various through 2015
Other countries—cash collateralized(A)
87.5

 
40.0

 
6/30/2014
Total
$
194.4

 
$
72.1

 
 
_______________________________________________________________________________
(A)
Cash collateral related to these facilities is included in restricted cash in the Consolidated Balance Sheets.
Analysis of Cash Flows
The following table summarizes our cash flows for the years ended December 31, 2013, 2012, and 2011:
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Net cash provided by operating activities
$
515.9

 
$
453.6

 
$
219.4

Net cash used for investing activities
(880.7
)
 
(280.3
)
 
(220.9
)
Net cash (used for) provided by financing activities
(8.4
)
 
110.3

 
39.7

Effect of currency exchange rate changes on cash and cash equivalents
1.1

 
5.0

 
(5.6
)
(Decrease) increase in cash and cash equivalents
(372.1
)
 
288.6

 
32.6

Cash and cash equivalents, beginning of period
1,336.9

 
1,048.3

 
1,015.7

Cash and cash equivalents, end of period
$
964.8

 
$
1,336.9

 
$
1,048.3

Net cash provided by operating activities in 2013 was $515.9 million, compared with $453.6 million in the prior year. Net cash provided by operating activities benefited from improved working capital performance and lower pension contributions. In addition, in 2013 we reported an operating cash flow benefit of $35.4 million from excess tax benefits from stock-based compensation compared with an operating cash flow use of $36.8 million in 2012. This change results from our decision to accelerate the use of certain other tax attributes for U.S. Federal income tax purposes and to preserve the excess tax benefits from stock-based compensation.
Net cash provided by operating activities in 2012 was $453.6 million, compared with $219.4 million in the prior year. The change in cash provided by operating activities is primarily due to lower pension plan contributions and reduced working capital requirements.
Net cash used for investing activities in 2013 was $880.7 million, compared with $280.3 million in the prior year. Net cash used for investing activities primarily includes the net cash paid for businesses acquired and capital expenditures. We acquired the UNIPOL® polypropylene process licensing and related catalyst business for $510.4 million (including post-closing adjustments) in the 2013 fourth quarter. Our capital expenditures include investments in new capacity, improved productivity and maintenance of our manufacturing and office facilities. We expect to fund our capital expenditures from net cash provided by operating activities.
Net cash used for financing activities in 2013 was $8.4 million, compared with net cash provided by financing activities of $110.3 million in the prior year. The change in cash provided by financing activities is primarily due to the effect of the tax benefits from stock-based compensation and the net repayments under credit facilities.
Net cash provided by financing activities in 2012 was $110.3 million, compared with $39.7 million in the prior year. The change in cash provided by financing activities is primarily due to the increase in proceeds from the exercise of stock options and tax benefits from stock-based compensation.
Included in net cash provided by operating activities are accelerated defined benefit pension plan contributions of $50.0 million, $83.4 million and $180.0 million, Chapter 11 expenses paid of $15.0 million, $15.5 million and $20.6 million, and expenditures for asbestos-related environmental remediation of $5.0 million, $7.2 million and $2.4 million for 2013, 2012 and 2011, respectively. These cash flows totaled $70.0 million, $106.1 million

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and $203.0 million for 2013, 2012 and 2011, respectively. We do not include these cash flows when evaluating the performance of our businesses.
Debt and Other Contractual Obligations
Total debt outstanding at December 31, 2013, was $1,219.7 million, including $482.1 million of accrued interest on pre-petition debt and the default interest settlement of $129.0 million. As a result of the Chapter 11 filing, we were in default on $526.7 million of pre-petition debt, which, together with accrued interest thereon, has been included in "liabilities subject to compromise" as of December 31, 2013. The automatic stay provided under the U.S. Bankruptcy Code prevented our lenders from taking any action to collect the principal amounts as well as related accrued interest. However, we continued to accrue and report interest in accordance with the Joint Plan on such debt during the Chapter 11 proceedings.
Set forth below are our contractual obligations as of December 31, 2013:
 
Payments Due by Period
Contractual Obligations(1)
(In millions)
Total
 
Less than
1 Year
 
1-3
Years
 
4-5
Years
 
More Than 5 Years
Operating commitments(2)
$
42.3

 
$
12.1

 
$
16.1

 
$
8.6

 
$
5.5

Debt
81.9

 
76.6

 
5.3

 
—

 
—

Capital leases
1.7

 
0.9

 
0.8

 
—

 
—

Operating leases
84.9

 
22.8

 
30.7

 
12.7

 
18.7

Pension funding requirements per ERISA(3)
17.7

 
—

 
5.2

 
12.5

 
—

Pension funding requirements for non-U.S. pension plans(4)
75.1

 
17.8

 
27.6

 
29.7

 
—

Total Contractual Obligations
$
303.6

 
$
130.2

 
$
85.7

 
$
63.5

 
$
24.2

_______________________________________________________________________________
(1)
Excludes liabilities subject to compromise, which were paid as described in Note 2 to the Consolidated Financial Statements. Also excludes debt borrowed on February 3, 2014, in conjunction with our exit from bankruptcy, and the interest thereon, as described in Note 8 to the Consolidated Financial Statements.
(2)
Amounts do not include open purchase commitments, which are routine in nature and normally settle within 90 days, or obligations to employees under annual or long-term incentive programs.
(3)
Based on the U.S. qualified pension plans' status as of December 31, 2013, minimum funding requirements under ERISA have been estimated for the next five years. Amounts in subsequent years or additional payments have not yet been included.
(4)
Based on the non-U.S. pension plans' status as of December 31, 2013, funding requirements have been estimated for the next five years. Amounts in subsequent years have not yet been determined.
See Note 13 to the Consolidated Financial Statements for a discussion of Financial Assurances.
Employee Benefit Plans
See Note 11 to the Consolidated Financial Statements for further discussion of Pension Plans and Other Postretirement Benefit Plans.
Defined Contribution Retirement Plan
We sponsor a defined contribution retirement plan for our employees in the United States. This plan is qualified under section 401(k) of the U.S. tax code. Currently, we contribute an amount equal to 100% of employee contributions, up to 6% of an individual employee's salary or wages. Our costs related to this benefit plan were $13.2 million, $12.6 million and $12.3 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Defined Benefit Pension Plans
We sponsor defined benefit pension plans for our employees in the U.S., Canada, the U.K., Germany and a number of other countries, and fund government-sponsored programs in other countries where we operate. Certain of our defined benefit pension plans are advance-funded and others are pay-as-you-go. The advance-funded plans are administered by trustees who direct the management of plan assets and arrange to have obligations paid when due. Our most significant advance-funded plans cover current and former salaried employees in the U.S. and U.K.

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and employees covered by collective bargaining agreements at certain of our U.S. facilities. Our U.S. advance-funded plans are qualified under the U.S. tax code.
The following table presents the funded status of our fully-funded, underfunded, and unfunded pension plans:
Funded Status of Pension Plans
Fully-Funded
Pension Plans(1)
 
Underfunded
Pension Plans(1)
 
Unfunded
Pension Plans(2)
(In millions)
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Projected benefit obligation
$
247.3

 
$
237.1

 
$
213.3

 
$
1,253.9

 
$
1,351.2

 
$
1,210.6

 
$
372.0

 
$
366.6

 
$
311.2

Fair value of plan assets
264.0

 
269.2

 
255.8

 
1,187.7

 
1,176.1

 
994.6

 
—

 
—

 
—

Funded status (PBO basis)
$
16.7

 
$
32.1

 
$
42.5

 
$
(66.2
)
 
$
(175.1
)
 
$
(216.0
)
 
$
(372.0
)
 
$
(366.6
)
 
$
(311.2
)
Benefits paid
$
(10.0
)
 
$
(11.8
)
 
$
(10.2
)
 
$
(77.8
)
 
$
(64.3
)
 
$
(62.1
)
 
$
(13.5
)
 
$
(13.4
)
 
$
(14.4
)
_______________________________________________________________________________
(1)
Plans intended to be advance-funded.
(2)
Plans intended to be pay-as-you-go.
Fully-funded plans include several advance-funded plans where the fair value of the plan assets exceeds the projected benefit obligation, or PBO. This group of plans was overfunded by $16.7 million as of December 31, 2013, and the overfunded status is reflected as "overfunded defined benefit pension plans" in the Consolidated Balance Sheets. Underfunded plans include a group of advance-funded plans that are underfunded on a PBO basis by a total of $66.2 million as of December 31, 2013. Additionally, we have several plans that are funded on a pay-as-you-go basis, and therefore, the entire PBO of $372.0 million at December 31, 2013, is unfunded. The combined balance of the underfunded and unfunded plans was $438.2 million as of December 31, 2013, and is presented as a liability on the Consolidated Balance Sheets as follows: $15.0 million in "other current liabilities"; $299.6 million included in "underfunded and unfunded defined benefit pension plans"; and $123.6 million in "liabilities subject to compromise."
At the December 31, 2013, measurement date for the U.S. advance-funded plans, the PBO was approximately $1,197 million as measured under U.S. GAAP. The PBO is measured as the present value (using a 4.76% discount rate as of December 31, 2013) of vested and non-vested benefits earned from employee service to date, based upon current services and estimated future pay increases for active employees. Of the participants in the U.S. advance-funded plans, approximately 84% are retired or former employees or employees of our former businesses, which shortens the duration of the PBO. Assets available to fund the PBO for the U.S. advance-funded plans at December 31, 2013, were approximately $1,145 million, or approximately $52 million less than the measured obligation.
The following table presents the components of cash contributions for the advance-funded and pay-as-you-go plans:
Cash Contributions to Defined Benefit Pension Plans
(In millions)
2013
 
2012
 
2011
U.S. advance-funded plans
$
50.0

 
$
109.3

 
$
245.8

U.S. pay-as-you-go plans
5.6

 
5.6

 
5.6

Non-U.S. advance-funded plans
4.8

 
4.2

 
4.8

Non-U.S. pay-as-you-go plans
7.9

 
7.7

 
8.9

Total Cash Contributions
$
68.3

 
$
126.8

 
$
265.1

Based on the U.S. advance-funded plans' status as of December 31, 2013, there are no minimum required payments under ERISA for 2014.
We intend to fund non-U.S. pension plans based upon applicable legal requirements and actuarial and trustee recommendations. We contributed $12.7 million to these plans in 2013.
Postretirement Benefits Other Than Pensions
We provide certain health care and life insurance benefits for retired employees in the U.S., a large majority of whom are retirees of divested businesses. These plans are unfunded, and we pay the costs of benefits under these plans as they are incurred. Our share of the net cost of benefits under this program was $4.5 million in 2013, compared with $4.6 million in 2012. We received Medicare subsidy payments of $1.4 million and $3.3 million in

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2013 and 2012, respectively. Our recorded liability for postretirement benefits of $57.2 million at December 31, 2013, is stated at net present value discounted at 4.26%.
Tax Matters
At emergence from bankruptcy, Grace generated approximately $670 million in U.S. Federal net operating losses, that were previously recorded as deferred tax assets for temporary differences, that will be available to reduce U.S. Federal taxable income in 2014 and future years. In addition, Grace expects to receive a U.S. Federal income tax deductions of $490 million upon settlement of the warrant held by one of the asbestos trusts and $1,580 million upon settlement of the deferred payment obligations to the asbestos trusts over the 2019 - 2033 period.
See Note 10 to the Consolidated Financial Statements and "Income Taxes" above for further discussion of our tax accounting and tax contingencies.
Other Contingencies
See Note 13 to the Consolidated Financial Statements for a discussion of our other contingent matters.
Inflation
We recognize that inflationary pressures may have an adverse effect on us through higher asset replacement costs and higher raw materials and other operating costs. We try to minimize these impacts through effective control of operating expenses and productivity improvements as well as price increases to customers.
We estimate that the cost of replacing our property and equipment today is greater than its historical cost. Accordingly, our depreciation expense would be greater if the expense were stated on a current cost basis.
Highly Inflationary Economy
Effective January 1, 2010, we began to account for Venezuela as a highly inflationary economy. As a result, the functional currency of our Venezuelan subsidiary became the U.S. dollar; therefore, all translation adjustments are reflected in net income in the Consolidated Statements of Operations. The exchange rate of 4.3 was used to remeasure our financial statements from bolivars to U.S. dollars upon Venezuela's designation as a highly inflationary economy.
On February 8, 2013, the Venezuelan government announced that, effective February 13, 2013, the official exchange rate of the bolivar to the U.S. dollar would devalue from 4.3 to 6.3. As a result of this currency devaluation, we incurred a charge to net income of $8.5 million in the 2013 first quarter. Of this amount, $1.6 million is included in Adjusted EBIT.
On March 18, 2013, the Venezuelan government announced the creation of a new foreign exchange mechanism called the “Complimentary System of Foreign Currency Acquirement” (or SICAD, which stands for Sistema Complimentario de Administración de Divisas). The SICAD operates similar to an auction system and allows entities in specific sectors to bid for U.S. dollars to be used for specified import transactions.
In December 2013, the regulation that created the SICAD mechanism was amended to require the Central Bank of Venezuela to include on its website the weekly average exchange rate implied by transactions settled via the SICAD auction mechanism. For the week of December 30, 2013, the SICAD rate posted on the website of the Central Bank of Venezuela was 11.3 Bolivars per 1.0 U.S. dollar.
We have not been eligible to participate in the SICAD auction process since its creation in March 2013; therefore, we have not exchanged Bolivars for U.S. dollars through this foreign exchange mechanism. If we do become eligible to participate in the SICAD auction process in the future, we may choose to do so.
There have been no changes in the official exchange rate of the Bolivar to the U.S. dollar since February 13, 2013. As of December 31, 2013, our bolivar-denominated net monetary asset position was $33.6 million, and Bolivar-denominated sales were approximately 1% of 2013 sales.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires that we make estimates and assumptions affecting the assets and liabilities reported at the date of the Consolidated Financial Statements, and the revenues and expenses reported for the periods presented. We believe that our accounting estimates are appropriate and the related balances are reasonable; however, actual amounts could differ from the original

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estimates, requiring adjustments in future periods. Changes in estimates are recorded in the period in which the change is identified. Our accounting policies are described in Note 1 to the Consolidated Financial Statements. Critical accounting estimates are described in this section.
An accounting estimate is considered critical if the estimate requires management to make assumptions and judgments about matters that were highly uncertain at the time the estimate was made, if different estimates reasonably could have been used, or if changes in the estimate are reasonably likely to occur from period to period that could have a material impact on our financial condition or results of operations. As part of our quarterly disclosure controls and procedures, management has discussed the development, selection and disclosure of the critical accounting estimates with the Audit Committee of the Board of Directors.
Contingent Liabilities
We have recorded a liability for the resolution of contingencies related to asbestos lawsuits, environmental remediation, income taxes and litigation. We record a liability if we have determined that a loss is probable and we are able to reasonably estimate the amount of the loss or have another reasonable basis for recording a liability. We have determined that each of the contingencies discussed below involves an accounting judgment that is material to our Consolidated Financial Statements.
Asbestos-related Lawsuits
We were a defendant in property damage and personal injury lawsuits relating to previously sold asbestos-containing products. As discussed in Note 2 to the Consolidated Financial Statements, we emerged from Chapter 11 on February 3, 2014. We have recorded a liability as of December 31, 2013, for our asbestos-related obligations as discussed below.
Our liability for asbestos-related matters has had a material impact on our financial condition and results of operations. The resolution of this obligation under the Joint Plan had a material impact on our liquidity and capital resources.
As discussed in Note 2 to the Consolidated Financial Statements, the Joint Plan established two asbestos trusts under Section 524(g) of the U.S. Bankruptcy Code as follows:
All asbestos-related personal injury claims and demands will be channeled for resolution to the PI Trust. We are not obligated to make additional payments to the PI Trust beyond the payments discussed in Note 2. We have recorded a liability for these payments.
Following the Effective Date, unresolved and any future non-ZAI PD Claims are to be litigated pursuant to procedures to be approved by the Bankruptcy Court and, to the extent such PD claims are determined to be allowed claims, are to be paid in cash by the PD Trust. We are 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 we may be obligated to make additional payments to the PD account of the PD Trust in respect of the PD Obligation. We have accrued for PD Claims that we believe are probable and estimable.
We are obligated to make a payment of $30 million in cash to the ZAI PD Account on the third anniversary of the Effective Date and we are 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 we will be obligated to pay to the ZAI PD Account under the Joint Plan are capped amounts. We are not obligated to make additional payments to the PD Trust in respect of the ZAI PD Account beyond the payments described above. We have accrued for the $30 million payment due on the third anniversary of the Effective Date, but have not accrued for the 10 additional payments since we do not currently believe they are probable.
The recorded asbestos-related liability as of December 31, 2013, and December 31, 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. We increased the asbestos-related liability by $27.4 million in the 2013 fourth quarter to reflect an updated estimate of the value of the consideration payable to the PI Trust and the PD Trust (the "Trusts") under the Joint Plan, reflecting emergence from bankruptcy during the 2014 first quarter.
The warrant to acquire 10 million shares of the Company's common stock for $17.00 per share was recorded at estimated value of $490 million on the effective date of the Joint Plan.

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The deferred payment obligation of $110 million per year for five years beginning January 2, 2019, and of $100 million per year for ten years beginning January 2, 2024, was recorded at estimated value on the effective date of the Joint Plan. The recorded estimated value of the deferred payment obligation of $567 million is within the reasonable range of possible valuations of this obligation as of emergence. The value of the deferred payment obligation assumes a discount rate of approximately 10% and is affected by (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 us to issue shares of Company common stock; and (v) the subordination provisions of the deferred payment agreement.
See Note 3 to the Consolidated Financial Statements for a pro forma balance sheet reflecting the effects of our emergence as if it occurred on December 31, 2013. We also provided pro forma information on February 24, 2012, and February 27, 2013.
The value of the warrants is expected to be treated as a deductible expense for tax purposes in the year of settlement. The deferred payments are expected to be deductible at the time of each payment. Due to the payment of these and other deductible bankruptcy claims, we anticipate generating significant future tax deductions beginning in 2014. See Note 10 to the Consolidated Financial Statements for a discussion of future tax deductions that we may generate in connection with emergence from Chapter 11.
Environmental Remediation
We are obligated under applicable law to remediate certain properties related to our business or former businesses. At some sites we outsource all or a portion of the remediation to third parties and at others, we perform the required remediation ourselves. Our environmental remediation obligation has a significant impact on our Consolidated Financial Statements. See disclosure in this Report in Item 1 (Business—Environment, Health and Safety Matters) and in Note 13 to the Consolidated Financial Statements for a discussion of our environmental remediation liabilities.
At sites where third parties conduct remediation, we estimate our obligations from information available to us, including actual costs incurred, expected future costs and time to completion. At sites where we conduct remediation, we work with regulatory authorities to define compliance requirements and then estimate the cost required to meet those requirements. We base our estimates on our historical knowledge and engineering assessments specific to conditions at each site, and we update our estimates as necessary.
Our estimates can fluctuate significantly due to the extended duration of some remediation projects. The accuracy of our estimates is dependent on the validity of assumptions regarding such matters as labor rates, indirect costs and capital costs (such as building materials), which are difficult to forecast over extended periods. We cannot estimate the impact on our Consolidated Financial Statements of using other reasonably possible assumptions because we primarily rely on the assumptions and estimates of the applicable regulatory authorities. Future changes in estimates, if required, will more than likely lead to material adjustments to our Consolidated Financial Statements, and we expect the ultimate resolution of these obligations to have a material impact on our liquidity and capital resources.
We operated a vermiculite mine in Libby, Montana, until 1990. Some of the vermiculite ore that was mined at the Libby mine contained naturally occurring asbestos. We are working in cooperation with EPA to investigate the Libby vermiculite mine and the surrounding area. We do not have sufficient information to estimate the cost of any required remediation of the Libby mine. During 2010, EPA began reinvestigating up to 105 facilities where vermiculite concentrate from the Libby mine was processed. We are cooperating with EPA on this reinvestigation. During the 2011 fourth quarter, EPA requested that we conduct additional remediation at seven of these facilities (now eight, including an additional site added by EPA during the 2012 fourth quarter). It is probable that EPA will request additional remediation at other facilities. We do not have sufficient information to identify either the sites that might require additional remediation or estimate the cost of any additional remediation. We will evaluate our estimated remediation liability for other sites as we receive additional information from EPA. Our estimates of our environmental remediation obligations do not include the cost to remediate the Libby vermiculite mine or costs related to any additional EPA claims, whether resulting from EPA's reinvestigation of vermiculite facilities or otherwise, which may be material but are not currently estimable. Due to these vermiculite-related matters, it is probable that our ultimate liability for environmental remediation will exceed our current estimates by material amounts.

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Litigation
We are subject to legal proceedings and claims arising out of the normal course of business.
To estimate the cost to resolve our legal obligations, we review the facts of each matter to determine the merits of the case and the corresponding probability of a loss. If we determine that a loss is probable, we determine if there is sufficient information to make a reasonable estimate of the loss amount. Our estimates regarding the outcome of our legal proceedings and claims involve substantial uncertainties that could cause our actual losses to differ materially from our estimates. In estimating the likely outcome of a legal proceeding, we consider the nature of the specific claim (or unasserted claim), our experience with similar claims, the jurisdiction in which the proceeding is filed, court rulings, the status of any settlement negotiations, the likelihood of resolution through settlement or alternative dispute resolution, the proceeding's current status and other relevant information and events. We adjust our recorded liability for litigation contingencies as necessary to reflect our current evaluation of these and other factors.
Goodwill
We review our goodwill for impairment on an annual basis at October 31 and whenever events or a change in circumstances indicate that the carrying amount may not be fully recoverable. We test our goodwill for impairment at the reporting unit level which is one level below an operating segment. At October 31, 2013, our reporting units were defined as follows. Our Catalysts Technologies operating segment has two reporting units for goodwill impairment testing referred to as Refining Technologies and Specialty Catalysts. Our Materials Technologies operating segment has three reporting units for goodwill impairment testing referred to as Engineered Materials, Packaging Technologies, and Discovery Sciences. Our Construction Products operating segment has three reporting units referred to as GCP Americas, GCP Europe and GCP Asia Pacific.
We performed a quantitative analysis for all of our reporting units as of October 31, 2013, and concluded that none of our reporting units were impaired. Effective January 1, 2014, we realigned our Construction Products operating segment reporting units to Specialty Construction Chemicals and Specialty Building Materials, reflecting changes to the businesses’ organization structure. We do not expect this realignment to have an impact on our assessment of goodwill impairment.
Pension and Other Postretirement Benefits Expenses and Liabilities
We sponsor defined benefit pension plans for our employees in the United States and a number of other countries, including Canada, the United Kingdom and Germany, and fund government-sponsored programs in other countries where we operate. See Note 11 to the Consolidated Financial Statements for a detailed discussion of our pension plans and other postretirement benefit plans.
In order to estimate our pension and other postretirement benefits expenses and liabilities we evaluate the range of possible assumptions to be used in the calculation of pension and other postretirement benefits expenses and liabilities. We select the assumptions that we believe to be most indicative of factors such as participant demographics, past experiences and market indices, and provide the assumptions to independent actuaries. These assumptions are updated annually and primarily include factors such as discount rates, health care cost trend rates, expected return on plan assets, mortality rates, retirement rates, and rate of compensation increase. The independent actuaries review our assumptions for reasonableness, and use the assumptions to calculate our estimated liability and future pension expense. We review the actuarial reports for reasonableness and adjust our expenses, assets and liabilities to reflect the amounts calculated in the actuarial reports.
The two key assumptions used in determining our pension benefit obligations and pension expense are the discount rate and expected return on plan assets. Our most significant pension assets and pension liabilities relate to U.S. pension plans.
The assumed discount rate for pension plans reflects the market rates for high-quality corporate bonds currently available and is subject to change based on changes in overall market interest rates. For the U.S. pension plans, the assumed discount rate was selected in consultation with our independent actuaries, based on a yield curve constructed from a portfolio of high quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan.
We selected the expected return on plan assets for the U.S. qualified pension plans for 2013 in consultation with our independent actuaries, using an expected return model. The model determines the weighted average return for an investment portfolio based on the target asset allocation and expected future returns for each asset

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class, which were developed using a building block approach based on observable inflation, available interest rate information, current market characteristics, and historical results.
The following table reflects the sensitivity of 2014 pre-tax expense (excluding the effects of the annual mark-to-market adjustment) and our year-end projected benefit obligation, or PBO, to a change in the discount rate and expected rate of return on plan assets assumptions for the U.S. pension plans:
Change in Assumption
(In millions)
Effect on 2014
Pre-Tax Pension
Expense
 
Effect on December 31, 2013 PBO
25 basis point decrease in discount rate
$
(1
)
 
$
38

25 basis point increase in discount rate
1

 
(36
)
25 basis point decrease in expected return on plan assets
3

 
—

25 basis point increase in expected return on plan assets
(3
)
 
—


Income Taxes
We are a global enterprise with operations in more than 40 countries. This global reach results in a complexity of tax regulations, which require assessments of applicable tax law and judgments in estimating our ultimate income tax liability. See Note 10 to the Consolidated Financial Statements for a detailed discussion of our estimates used in accounting for income taxes and income tax contingencies.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. We measure tax benefits in our financial statements from such a position as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in our tax returns that do not meet these recognition and measurement standards.
We record a liability for income tax contingencies when it is more likely than not that a tax position we have taken will not be sustained upon audit. We evaluate such likelihood based on relevant facts and tax law. We adjust our recorded liability for income tax matters due to changes in circumstances or new uncertainties, such as amendments to existing tax law. Our ultimate tax liability depends upon many factors, including negotiations with taxing authorities in the jurisdictions in which we operate, outcomes of tax litigation, and resolution of disputes arising from federal, state, and foreign tax audits. Due to the varying tax laws in each jurisdiction, senior management, with the assistance of local tax advisors as necessary, assesses individual matters in each jurisdiction on a case-by-case basis. We research and evaluate our income tax positions, including why we believe they are compliant with income tax regulations, and these positions are documented internally.
Deferred income taxes result from the differences between the financial and tax basis of our assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. If it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is provided for such deferred tax assets. As of December 31, 2013, we have recorded net deferred tax assets before valuation allowances of $904.0 million and a valuation allowance on net deferred tax assets of $18.3 million, of which $13.6 million is related to U.S. state NOLs, $4.4 million to U.S. federal credits, and $0.3 million to foreign deferred tax assets. The net deferred tax assets were $885.7 million.
We considered forecasted earnings, future taxable income and the mix of earnings in the jurisdictions in which we operate, as well as prudent and feasible tax planning strategies in assessing the need for a valuation allowance. In determining a need for a valuation allowance, we have considered both positive and negative evidence, giving more weight to objective evidence, to determine whether enough income would be generated to utilize the future deductions associated with the deferred tax assets. U.S. Federal deferred tax assets associated with certain credit carryforwards have expiration dates through 2018 and are projected to expire before they can be utilized. We have recorded a valuation allowance of $4.4 million on these credits. We concluded that a valuation allowance is not required with respect to the remaining U.S. Federal deferred tax assets of $775.7 million because we believe we will have sufficient U.S. taxable income to realize all future available tax deductions and remaining credits prior to their expiration.
We also considered the need for a valuation allowance on state deferred tax assets. We have considered forecasted earnings, recent past and future taxable income and allowable carryforward periods of net operating

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losses in each state taxing jurisdiction in which we operate. We believe that we will generate sufficient domestic income in most state and local jurisdictions to utilize future deductions.
In the 2013 fourth quarter, we determined that it is more likely than not that, with the exception of certain state NOLs that were generated in prior years, future taxable income will be sufficient to enable us to utilize our remaining state deferred tax assets. Accordingly, we recorded a $24.4 million release in our valuation allowance on our state deferred tax assets. The valuation allowance was also reduced by, to a lesser extent, the utilization and expiration of state net operating losses in the current year and the reduction of net operating losses resulting from prior year adjustments to taxable income. There are certain states where a portion of the NOLs generated in prior years will not be utilized prior to their expiration and for which a valuation allowance in aggregate of $13.6 million remains in place.
The realization of deferred tax assets is dependent on the generation of sufficient taxable income in the appropriate tax jurisdictions. Although realization is not assured, we believe it is more likely than not that the remaining deferred tax assets will be realized. If we were to determine that we would not be able to realize a portion of our net deferred tax assets in the future, for which there is currently no valuation allowance, an adjustment to the net deferred tax assets would be charged to earnings in the period such determination was made. Conversely, if we were to make a determination that it is more likely than not that deferred tax assets, for which there is currently a valuation allowance, would be realized, the related valuation allowance would be reduced and a benefit to earnings would be recorded.
Recent Accounting Pronouncements
See Note 1 of Consolidated Financial Statements for a discussion of recent accounting pronouncements and their effect on us.


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W. R. GRACE & CO. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In millions)

For the Year Ended December 31, 2013
Description
Balance at beginning of period
 
Additions charged to costs and expenses
 
Deductions
 
Other,
net(1)
 
Balance at end of period
Valuation and qualifying accounts deducted from assets:
 
 
 
 
 
 
 
 
 
Allowances for notes and accounts receivable
$
6.9

 
$
2.2

 
$
(1.6
)
 
$
0.1

 
$
7.6

Valuation allowance for deferred tax assets(2)
40.8

 
4.4

 
(24.4
)
 
(2.5
)
 
18.3

Reserves:
 
 
 
 
 
 
 
 
 
Reserves for asbestos-related litigation
2,065.0

 
27.4

 
—

 
—

 
2,092.4

Reserves for environmental remediation
140.5

 
8.0

 
(14.0
)
 
—

 
134.5

Reserves for retained obligations of divested businesses
34.2

 
0.8

 
—

 
—

 
35.0


For the Year Ended December 31, 2012
Description
Balance at beginning of period
 
Additions charged to costs and expenses
 
Deductions
 
Other,
net(1)
 
Balance at end of period
Valuation and qualifying accounts deducted from assets:
 
 
 
 
 
 
 
 
 
Allowances for notes and accounts receivable
$
9.8

 
$
1.9

 
$
(4.8
)
 
$
—

 
$
6.9

Valuation allowance for deferred tax assets
100.8

 
—

 
(60.0
)
 
—

 
40.8

Reserves:
 
 
 
 
 
 
 
 
 
Reserves for asbestos-related litigation
1,700.0

 
365.0

 
—

 
—

 
2,065.0

Reserves for environmental remediation
149.9

 
3.6

 
(13.0
)
 
—

 
140.5

Reserves for retained obligations of divested businesses
33.7

 
0.7

 
(0.2
)
 
—

 
34.2


For the Year Ended December 31, 2011
Description
Balance at beginning of period
 
Additions charged to costs and expenses
 
Deductions
 
Other,
net(1)
 
Balance at end of period
Valuation and qualifying accounts deducted from assets:
 
 
 
 
 
 
 
 
 
Allowances for notes and accounts receivable
$
8.7

 
$
2.9

 
$
(2.0
)
 
$
0.2

 
$
9.8

Valuation allowance for deferred tax assets
104.6

 
—

 
(3.8
)
 
—

 
100.8

Reserves:
 
 
 
 
 
 
 
 
 
Reserves for asbestos-related litigation
1,700.0

 
—

 
—

 
—

 
1,700.0

Reserves for environmental remediation
144.0

 
17.8

 
(11.8
)
 
(0.1
)
 
149.9

Reserves for retained obligations of divested businesses
33.9

 
0.4

 
(0.6
)
 
—

 
33.7

_______________________________________________________________________________
(1)
Various miscellaneous adjustments against reserves and effects of currency translation.
(2)
The valuation allowance decreased $22.5 million from December 31, 2012, to December 31, 2013. In the 2013 fourth quarter, Grace determined that it is more likely than not that its deductions generated at emergence will be used before their expiration. Accordingly, Grace recorded a $24.4 million release of its valuation allowance on its state deferred tax assets. Further decreases in Grace’s deferred tax assets resulted from the utilization and expiration of state net operating losses ("NOLs") in the current year, and the reduction of NOLs resulting from prior-year adjustments to taxable income. These decreases were partially offset by the recording of valuation allowance on deferred tax assets associated with certain U.S. federal foreign tax credits. The reduction in the valuation allowance during 2012 related in part to a $44.0 million release of the valuation allowance as Grace determined that it is more likely than not that a substantial portion of its state net operating losses will be used before their expiration; the remainder of the release related to the utilization and expiration of state net operating losses in the current year, and the reduction of net operating losses resulting from prior-year adjustments made to income by the Internal Revenue Service. The reduction in 2011 primarily related to the utilization and expiration of state net operating losses.

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W. R. GRACE & CO. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(1)(2)(3)
(In millions, except ratios)
(Unaudited)

 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
2010
 
2009
Net income attributable to W. R. Grace & Co. shareholders
 
$
256.1

 
$
40.0

 
$
219.7

 
$
193.8

 
$
76.3

Provision for (benefit from) income taxes
 
102.9

 
(61.6
)
 
87.9

 
26.2

 
18.1

Equity in earnings of unconsolidated affiliate
 
(22.9
)
 
(18.5
)
 
(15.2
)
 
(17.8
)
 
(1.7
)
Distributed income of earnings of unconsolidated affiliates
 
2.8

 
6.3

 
10.9

 
0.5

 
—

Interest expense and related financing costs, including amortization of capitalized interest, less interest capitalized
 
43.9

 
46.8

 
43.6

 
41.7

 
38.8

Estimated amount of rental expense deemed to represent the interest factor
 
8.8

 
7.5

 
6.9

 
6.9

 
6.7

Income as adjusted
 
$
391.6

 
20.5

 
353.8

 
251.3

 
138.2

Combined fixed charges and preferred stock dividends:
 
 
 
 
 
 
 
 
 
 
Interest expense and related financing costs, including capitalized interest
 
$
45.0

 
46.9

 
43.6

 
41.3

 
38.9

Estimated amount of rental expense deemed to represent the interest factor
 
8.8

 
7.5

 
6.9

 
6.9

 
6.7

Fixed charges
 
53.8

 
54.4

 
50.5

 
48.2

 
45.6

Combined fixed charges and preferred stock dividends
 
$
53.8

 
54.4

 
50.5

 
48.2

 
45.6

Ratio of earnings to fixed charges
 
7.28

 
—

 
7.01

 
5.21

 
3.03

Ratio of earnings to fixed charges and preferred stock dividends
 
7.28

 
—

 
7.01

 
5.21

 
3.03

_______________________________________________________________________________
(1)
Grace did not have preferred stock from 2009 through 2013.
(2)
The 2012 ratio of earnings to fixed charges is below a one-to-one ratio. An additional $33.9 million in earnings would be needed to attain a one-to-one ratio.
(3)
Amounts have been revised as a result of our fourth quarter change to mark-to-market pension accounting. See Note 1 to the Consolidated Financial Statements for more information.

Table of Contents

EXHIBIT 31.(i).1
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, A. E. Festa, certify that:
1.
I have reviewed this annual report on Form 10-K of W. R. Grace & Co.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 27, 2014
 
 
/s/ A. E. FESTA
 
 
A. E. Festa
Chief Executive Officer


Table of Contents

EXHIBIT 31.(i).2
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Hudson La Force III, certify that:
1.
I have reviewed this annual report on Form 10-K of W. R. Grace & Co.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 27, 2014
 
 
/s/ HUDSON LA FORCE III
 
 
Hudson La Force III
Senior Vice President and Chief Financial Officer


Table of Contents

EXHIBIT 32
CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
        Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), the undersigned certifies that (1) this Annual Report of W. R. Grace & Co. (the "Company") on Form 10-K for the period ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (this "Report"), fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ A. E. FESTA
 
 
Chief Executive Officer
 
 
 
 
 
/s/ HUDSON LA FORCE III
 
 
Senior Vice President and Chief Financial Officer
 
 
Date: 2/27/2014
 
 
        A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.


EXHIBIT 2.4

SALE AND PURCHASE AGREEMENT
Between
THE DOW CHEMICAL COMPANY
and
W. R. GRACE & CO.‑CONN.
Dated as of October 10, 2013




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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms    1
SECTION 1.02 Definitions    13
SECTION 1.03 Interpretation and Rules of Construction    14
ARTICLE II
SALE AND PURCHASE
SECTION 2.01 Sale and Purchase of Assets    15
SECTION 2.02 Assumption and Exclusion of Liabilities    18
SECTION 2.03 Procedures for the Transfer of Transferred Assets    19
SECTION 2.04 Purchase Price; Allocation of Purchase Price    19
SECTION 2.05 Closing    19
SECTION 2.06 Closing Deliveries by the Seller    20
SECTION 2.07 Closing Deliveries by the Purchaser    20
SECTION 2.08 Adjustment of the Purchase Price    20
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
SECTION 3.01 Organization, Authority and Qualification of the Seller    23
SECTION 3.02 No Conflict    23
SECTION 3.03 Governmental Consents and Approvals    24
SECTION 3.04 Financial Information    24
SECTION 3.05 No Material Adverse Effect    24
SECTION 3.06 Litigation    24
SECTION 3.07 Compliance with Laws    25
SECTION 3.08 Intellectual Property    25
SECTION 3.09 Real Property    25
SECTION 3.10 Employee Benefit Matters    26
SECTION 3.11 Labor Matters    26
SECTION 3.12 Taxes    27
SECTION 3.13 Material Contracts    27
SECTION 3.14 Environmental Matters    28
SECTION 3.15 Sufficiency of Assets    28
SECTION 3.16 Brokers    28
SECTION 3.17 Disclaimer of the Seller    28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
SECTION 4.01 Organization, Authority and Qualification of the Purchaser    29

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SECTION 4.02 No Conflict    30
SECTION 4.03 Governmental Consents and Approvals    30
SECTION 4.04 Necessary Funds    30
SECTION 4.05 Bankruptcy Court Approval    31
SECTION 4.06 Litigation    31
SECTION 4.07 Brokers    31
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Conduct of Business Prior to the Closing    31
SECTION 5.02 Access to Information    33
SECTION 5.03 Confidentiality    34
SECTION 5.04 Regulatory and Other Authorizations; Notices and Consents    34
SECTION 5.05 Retained Names and Marks    36
SECTION 5.06 Updates    37
SECTION 5.07 Insurance    37
SECTION 5.08 Release from Seller Credit Support Instruments    37
SECTION 5.09 Apportionment of Periodic Payments and Receipts    38
SECTION 5.10 Privileged Matters    38
SECTION 5.11 Further Covenants    39
SECTION 5.12 Further Action    40
ARTICLE VI
EMPLOYEE MATTERS
ARTICLE VII
TAX MATTERS
SECTION 7.01 Tax Indemnities    42
SECTION 7.02 Tax Refunds and Tax Benefits    43
SECTION 7.03 Contests    44
SECTION 7.04 Preparation of Tax Returns    44
SECTION 7.05 Tax Cooperation and Exchange of Information    45
SECTION 7.06 Conveyance Taxes    45
SECTION 7.07 Tax Covenants    46
SECTION 7.08 Miscellaneous    46
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01 Conditions to Obligations of the Seller    46
SECTION 8.02 Conditions to Obligations of the Purchaser    47
ARTICLE IX
INDEMNIFICATION
SECTION 9.01 Survival of Representations, Warranties and Covenants    48
SECTION 9.02 Indemnification by the Seller    49
SECTION 9.03 Indemnification by the Purchaser    49

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SECTION 9.04 Limitations on Indemnification    49
SECTION 9.05 Notice of Loss; Third‑Party Claims    51
SECTION 9.06 Remedies    53
SECTION 9.07 Further Environmental Provisions    53
SECTION 9.08 Tax Matters    53
SECTION 9.09 No Right to Set Off    56
ARTICLE X
TERMINATION
SECTION 10.01 Termination    57
SECTION 10.02 Effect of Termination    58
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 Expenses    58
SECTION 11.02 Notices    58
SECTION 11.03 Public Announcements    59
SECTION 11.04 Severability    59
SECTION 11.05 Entire Agreement    59
SECTION 11.06 Assignment    59
SECTION 11.07 Amendment    59
SECTION 11.08 Waiver    60
SECTION 11.09 No Third‑Party Beneficiaries    60
SECTION 11.10 Specific Performance    60
SECTION 11.11 Governing Law    60
SECTION 11.12 Waiver of Jury Trial    61
SECTION 11.13 Counterparts    61


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EXHIBITS
A    Form of Asset Transfer Agreement
B    Form of Intellectual Property Assignment Agreement
C    Intellectual Property License Agreement
D    Trademark License Agreement
E    Occupancy Agreement
F    Contract Manufacturing Agreement (Donor)
G    Contract Manufacturing Agreement (MagTi)
H    Conventional Catalyst Manufacturing Agreement
I    Pilot Plant Services Agreement
J    Transition Services Agreement
SCHEDULES
1.01(a)
Contract Manufacturing Sites
1.01(b)
Financial Statements
1.01(c)
Freeport R&D Assets
1.01(d)
In‑Scope Products
1.01(e)
Leased Real Property
1.01(f)
Owned Intellectual Property
1.01(g)
Partially Transferred Contracts
1.01(h)
Permitted Encumbrances
1.01(i)
Seller Credit Support Instruments
1.01(j)
Seller’s Knowledge
1.01(k)
Transaction Documents
1.01(l)
Transferred Contracts
1.01(m)
Transferred Environmental Regulatory Information
1.01(n)
Transferred Inventory
1.01(o)
Transferred IP Agreements
2.01
Certain Excluded Assets
2.03
Procedures for the Transfer of Transferred Assets
2.04
Accounts Payable Amount
2.08
Closing Date ARI Amount
5.02
Pre‑Closing IT Matters
6
Employee Matters
SELLER DISCLOSURE SCHEDULE
3.01
Organization, Authority and Qualification of the Covered Dow Entities
3.02
No Conflict
3.03
Governmental Consents and Approvals
3.04
Financial Information
3.05
No Material Adverse Effect
3.06
Litigation
3.07
Compliance with Laws

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3.08
Intellectual Property
3.09
Real Property
3.10
Employee Benefit Matters
3.11
Labor Matters
3.12
Taxes
3.13
Material Contracts
3.14
Environmental Matters
3.15
Sufficiency of Assets
3.16
Brokers
5.01
Conduct of Business Prior to the Closing
PURCHASER DISCLOSURE SCHEDULE
4.01
Organization, Authority and Qualification of the Covered Purchaser Entities
4.02
No Conflict
4.03
Governmental Consents and Approvals
4.04
Necessary Funds
4.05
Bankruptcy Court Approval
4.06
Litigation
4.07
Brokers

[Copies of schedules will be furnished supplementally to the Securities and Exchange Commission upon request.]



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SALE AND PURCHASE AGREEMENT, dated as of October 10, 2013, between THE DOW CHEMICAL COMPANY, a Delaware corporation (the “Seller”) and W. R. GRACE & CO.‑CONN., a Connecticut corporation (the “Purchaser”).
WHEREAS, the Seller, directly and through its subsidiaries, is engaged in the Business (as hereinafter defined); and
WHEREAS, the Seller (as principal and as agent for certain of its Subsidiaries (as hereinafter defined)) wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Seller, the Transferred Assets (as hereinafter defined), and in connection therewith the Purchaser is willing to assume from the Seller and such Subsidiaries the Assumed Liabilities (as hereinafter defined), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the respective representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the Seller and the Purchaser hereby agree as follows:
Article I
DEFINITIONS
SECTION 1.01    Certain Defined Terms. For purposes of this Agreement:
“Action” means any claim, action, suit, inquiry, condemnation proceeding or other proceeding or investigation by or before any Governmental Authority, or any arbitration.
“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.
“Agreement” means this Sale and Purchase Agreement among the parties hereto (including the Schedules hereto) and all amendments hereto made in accordance with the provisions of Section 11.07.
“Ancillary Locations” means, the offices and other locations to be shared pursuant to an occupancy agreement between a Dow Entity and a Purchaser Entity.
“APC Software” means the advanced process control software used in Polypropylene manufacturing processes.
“Appurtenant Real Property” means, with respect to the Leased Real Property, all of the easements and servitudes that are related to such Leased Real Property.
“Business” means (a) the business of developing and licensing the UNIPOL™ Polypropylene Process technology; (b) the business of developing and licensing the APC Software; and (c) the business of developing, licensing, manufacturing, distributing marketing, using or selling catalysts or donor products, used in, or developed or, under development for use in, gas phase or slurry phase Polypropylene manufacturing processes, including, but not limited

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to, the In‑Scope Products; in each case, as conducted by Dow and excluding the Excluded Assets (except for purposes of determining Tangible Property or as otherwise expressly set forth in this Agreement).
“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in the City of New York.
“Business Employee” means each employee of Dow included on the list of employees of the Business attached as Appendix I to Schedule 6.
“Business Intellectual Property” means the Owned Intellectual Property and the In‑Licensed Intellectual Property.
“Closing Date Payment” means an amount equal to (a) the Accounts Payable Amount; plus (b) the Purchase Price adjusted for the Estimated Closing Date ARI Amount as follows (i) if the Estimated Closing Date ARI Amount exceeds the Target Closing Date ARI Amount, the Closing Date Payment shall be increased by such amount; and (ii) if the Target Closing Date ARI Amount exceeds the Estimated Closing Date ARI Amount, the Closing Date Payment shall be reduced by such amount; minus (c) the New License Amount, if any.
“Closing Date ARI Amount” means the amount determined in accordance with Schedule 2.08 as of close of business on the day immediately prior to the Closing Date.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Confidential Information Memorandum” means the Confidential Information Memorandum provided to the Purchaser in connection with the transactions contemplated by this Agreement.
“Contract Manufacturing Sites” means the real property identified on Schedule 1.01(a), at which Dow will perform, after the Closing Date, contract manufacturing for the Purchaser Entities.
“control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract or otherwise.
“Conveyance Taxes” means any sales, use, transfer, conveyance, ad valorem, stamp, stamp duty, recording or other similar tax, fee or charge imposed by any Governmental Authority upon the sale, transfer or assignment of real, personal, tangible or intangible property or any interest therein pursuant to this Agreement, or upon the recording of any such sale, transfer or assignment, together with any interest, additions or penalties in respect thereof.

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“Disclosure Schedules” means the Seller Disclosure Schedule and the Purchaser Disclosure Schedule.
“Dow” means, collectively, the Seller and its Subsidiaries.
“Dow Entity” means the Seller or any of its Subsidiaries.
“Employee Records” means all records relating to the employment of the Business Employees.
“Encumbrance” means any security interest, pledge, hypothecation, mortgage, lien or encumbrance, other than any license of, option to license, or covenant not to assert claims of infringement, misappropriation or other violation with respect to, Intellectual Property.
“Environmental Law” means any Law, consent decree or judgment, in each case in effect as of the date hereof, relating to (a) pollution or the protection of the environment; or (b) human exposure to any Hazardous Material.
“Environmental Permit” means any material permit, approval, identification number or license that the Business is required to possess pursuant to any applicable Environmental Law.
“Excluded Claim” means all claims related to any Action that Dow has or may have against third parties in respect of the Business (including the Excluded Assets) or any of the Transferred Assets, in each case to the extent such claim is arising from, or relating to, the conduct of the Business (including the Excluded Assets) prior to the Closing Date.
“Excluded Taxes” means (a) Taxes of the Business (including the Excluded Assets) for any Pre‑Closing Period; or (b) with respect to Straddle Periods, Taxes imposed with respect to the income, profit, gain, business, property or operations of the Business (including the Excluded Assets) which are allocable, pursuant to Section 7.01(c), to the portion of such period ending prior to the Closing Date; provided, however, that Excluded Taxes shall not include Taxes (i) resulting from any act, transaction or omission of the Purchaser occurring after the Closing; or (ii) attributable to the Purchaser’s failure to satisfy any of its obligations pursuant to this Agreement.
“Final Adjustment Statement” means the final and binding statement prepared pursuant to Schedule 2.08 setting forth the Closing Date ARI Amount.
“Financial Statements” means the financial statements that are attached hereto as Schedule 1.01(b).
“Fixed Cost Fees” means the fixed cost fees as set forth in Section 3 of Schedule 1 to the Catalysts Plant Electricity Services Agreement, effective November 1, 2004, by and between Shell Chemical LP and Union Carbide Corporation.
“Freeport R&D Assets” means the assets listed on Schedule 1.01(c).

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“GAAP” means United States generally accepted accounting principles.
“Goodwill” means the goodwill of Dow associated with or attributable to the Business.
“Governmental Authority” means any federal, national, foreign, supranational, state, provincial, local or other government, governmental, regulatory or administrative authority, agency, commission or any court, in each case of competent jurisdiction.
“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
“Hazardous Material” means (a) petroleum and petroleum products, by‑products or breakdown products, radioactive materials and polychlorinated biphenyls; and (b) any other chemicals, materials or substances defined or regulated as toxic or hazardous or as a contaminant under any applicable Environmental Law (other than chemicals, materials or substances referenced in Section 2.02(b)(i)).
“HSR Act” means the Hart‑Scott‑Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
“Implementation Employees” means employees of Dow’s pre‑closing implementation team.
“In‑Licensed Intellectual Property” means all Intellectual Property that Dow is licensed or otherwise authorized to use pursuant to the Transferred IP Agreements.
“In‑Scope Products” means each of the products set forth on Schedule 1.01(d).
“Indemnified Party” means a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be.
“Indemnifying Party” means the Seller pursuant to Section 9.02 or the Purchaser pursuant to Section 9.03, as the case may be.
“Independent Valuation” means a valuation of the Transferred Assets prepared by KPMG LLP or another independent nationally recognized valuator reasonably acceptable to the Seller and the Purchaser.
“Initial Adjustment Statement” means a statement prepared pursuant to Schedule 2.08 setting forth the Seller’s determination of the Closing Date ARI Amount.
“Intellectual Property” means all of the following rights in any jurisdiction throughout the world: (a) patents and patent applications; (b) trademarks, service marks, trade names, trade dress, and internet domain names, together with the goodwill associated therewith; (c) copyrights, including copyrights in computer software; (d) registrations and applications for registration of any of the foregoing under subclauses (a) – (c) of this definition; and

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(e) confidential information that has actual or potential business value due to the fact that it is generally unknown to the third parties that do not have free lawful access, including customer lists, know‑how, formulae, methods, techniques and processes.
“Interest Rate” means the per annum rate for “bank prime loan” as published by the Federal Reserve Board in its daily statistical release “Select Interest Rates” ‑ H.15 on the last Business Day immediately prior to any payment that is required to be made pursuant to this Agreement.
“Law” means any federal, national, foreign, supranational, state, provincial or local statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).
“Leased Real Property” means the real property to which Dow has rights under the lease agreements and servitude agreements identified on Schedule 1.01(e).
“Leased Real Property Rights” means the rights of Dow to the real property under the lease agreements and servitude agreements identified on Schedule 1.01(e).
“Liabilities” means any and all debts, liabilities and obligations, whether accrued or unaccrued, fixed or variable, known or unknown, absolute or contingent, matured or unmatured or determined or determinable, including those arising under any Law, Action or Governmental Order and those arising under any contract, lease, agreement, arrangement, commitment or undertaking.
“Local Conveyances” means asset transfer agreements, in substantially the form of Exhibit A (modified as agreed by the parties to the extent required by applicable Law in the relevant jurisdictions), the Intellectual Property Assignment Agreement in substantially the form of Exhibit B, bills of sale, acts of sale, assignment and assumption agreements and other documents between one or more of the Dow Entities, on the one hand, and one or more of the Purchaser Entities, on the other hand, pursuant to which Transferred Assets and Assumed Liabilities will be transferred to, or assumed by, the relevant Purchaser Entity.
“MagTi” means a spherical magnesium/titanium catalyst precursor.
“MagTi CMA” means the Contract Manufacturing Agreement (MagTi) to be entered into at the Closing Date between a Dow Entity and a Purchaser Entity, a form of which is attached hereto as Exhibit G.
“MagTi Facility” means the Contract Manufacturing Site located in Seadrift, Texas.
“Material Adverse Effect” means any event, circumstance, change in or effect on the Business or the Transferred Assets, that is, or would reasonably be expected to be, materially adverse to the results of operations or the financial condition of the Business, taken as a whole or the Transferred Assets, taken as a whole; provided, however, that none of the following, either

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alone or in combination, shall be deemed to constitute a “Material Adverse Effect”, or taken into account in determining, whether a “Material Adverse Effect” has occurred or would reasonably be expected to occur, or whether there has been a breach of a representation, warranty, covenant or agreement that is qualified by the term “Material Adverse Effect”: (a) events, circumstances, changes or effects that generally affect the industries or segments thereof in which the Business operates, including legal and regulatory changes and changes in the price of commodities or raw materials; (b) general business, economic or political conditions (or changes therein); (c) events, circumstances, changes or effects affecting the financial, credit or securities markets in the United States or in any other country or region in the world, including changes in interest rates or foreign exchange rates; (d) events, circumstances, changes or effects arising out of, or attributable to, the announcement of the execution of, or the consummation of the transactions contemplated by, this Agreement or any other Transaction Document, the identity of the Purchaser, any actions or inactions required or permitted by this Agreement or any other Transaction Document, actions taken or not taken at the request of the Purchaser or any of its Representatives or any communication by the Purchaser or any of its Representatives (including in respect of plans or intentions with respect to the Business or Business Employees), including (i) any actions of competitors, (ii) any actions taken by or losses of employees, customers, distributors, suppliers, financing sources, landlords, licensors, licensees, sub‑licensees or co‑promotion or joint venture partners or any similar Persons, (iii) any delays or cancellations of orders for products or services, or (iv) any actions or inactions required or permitted by this Agreement in connection with obtaining regulatory consents or approvals, or any Action, event, circumstance, change or effect resulting therefrom or with respect thereto; (e) events, circumstances, changes or effects arising out of, or attributable to, strikes, slowdowns, lockouts or work stoppages; (f) events, circumstances, changes or effects arising out of, or attributable to, any reduction in the price of services or products offered by the Business in the ordinary course of the Business; (g) events, circumstances, changes or effects arising out of, or attributable to, acts of armed hostility, sabotage, terrorism or war (whether or not declared), including any escalation or worsening thereof; (h) events, circumstances, changes or effects arising out of, or attributable to, earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides or other natural disasters, weather‑related conditions, explosions or fires, or any force majeure events in any country or region in the world; (i) events, circumstances, changes or effects arising out of, or attributable to, changes (or proposed changes) or modifications in GAAP, other applicable accounting standards or applicable Law or the interpretation or enforcement thereof; (j) events, circumstances, changes or effects to the extent arising out of, or attributable to, the failure by the Business to meet any internal or other estimates, expectations, forecasts, plans, projections or budgets for any period (excluding the facts and circumstances underlying any such failure); (k) events, circumstances, changes or effects arising out of, or attributable to, any change in Seller’s stock price or trading volume; or (l) events, circumstances, changes or effects arising out of, or attributable to, an Excluded Liability or any matter disclosed in the Seller Disclosure Schedule (excluding the worsening of such items); with respect to clauses (a) and (b), which do not materially disproportionately affect the Transferred Assets or the Business, in each case, taken as a whole, relative to other Persons operating in the same industries in which the Business operates; and with respect to clause (h), which do not materially disproportionately affect the Transferred Assets or the Business, in each case, taken as a whole, relative to other Persons’ manufacturing facilities operating in the same region; provided, however, notwithstanding

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anything to the contrary set forth in this “Material Adverse Effect” definition, that a significant destruction of the Norco Facility or the MagTi Facility shall be deemed to be a Material Adverse Effect.
“Neutral Accountant” means KPMG LLP (or, if such firm shall decline or is unable to act, another nationally recognized firm with expertise in accounting matters reasonably acceptable to the Seller and the Purchaser).
“New License Agreement” means a UNIPOL™ Polypropylene Process technology license entered into by a Dow Entity between the date hereof and December 31, 2013.
“New License Amount” means an amount equal to 50% of the payments that are due under a New License Agreement between the date hereof and December 31, 2013.
“Non U.S. Employee” means any Business Employee who is employed primarily outside (or, in the case of any expatriate Business Employee, whose home country is outside) the United States immediately prior to the Closing.
“Norco Agreements” means the PP Catalyst Plant Agreement and Grant of Personal Servitudes, dated January 19, 1996, by and between Shell Oil Company and Union Carbide Corporation, a Dow Entity, and the Bill of Sale of Movables and Improvements recorded in the conveyance records in the Parish of St. Charles, Louisiana as Entry No. 199311.
“Norco Facility” means the catalyst plant of the Business that is located in the Parish of St. Charles, Norco, Louisiana.
“Norco Facility Area” means the catalyst plant of the Business and nearby surrounding area that is bounded by Seventh Street, “C” Street, Fifth Street and “B” Street in the Parish of St. Charles, Norco, Louisiana.
“Norco Property” means the real property to which Dow has rights under the Norco Agreements that are within the Norco Facility Area.
“Objection Deadline Date” means the date that is 45 days after delivery by the Seller to the Purchaser of the Initial Adjustment Statement.
“Other Business Facilities” means Dow’s facilities at Freeport, Texas, Seadrift, Texas, and Charleston, West Virginia.
“Owned Intellectual Property” means the Registered Intellectual Property owned by Dow that relates exclusively to the Business, including that identified on Schedule 1.01(f), and the unregistered Intellectual Property owned by Dow that relates exclusively to the Business.
“Partially Transferred Contracts” means, to the extent they relate to the Business, the rights of Dow under the contracts, commitments and other agreements identified on Schedule 1.01(g).

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“Permitted Encumbrances” means (a) statutory liens for current Taxes not yet due or delinquent (or which may be paid without interest or penalties) or the validity or amount of which is being contested in good faith by appropriate proceedings; (b) Encumbrances approved in writing by the Purchaser; (c) mechanics’, materialmens’, carriers’, workers’, repairers’, landlords’ and other Encumbrances or security obligations arising by operation of Law, but not arising by failure to make any payment in a timely manner, or pledges, deposits or other Encumbrances securing the performance of bids, trade contracts, leases or statutory obligations (including workers’ compensation, unemployment insurance or other social security legislation); (d) Encumbrances identified on Schedule 1.01(h) and other similar imperfections of title that do not materially impair the use of the property subject thereto; (e) Encumbrances arising under conditional sales contracts and equipment leases with third parties and other Encumbrances arising on assets and products sold in the ordinary course of business; (f) Encumbrances on leases, subleases, easements, non intellectual property licenses, rights of use, rights to access and rights of way arising therefrom or benefiting or created by any superior estate, right or interest that do not materially impair the use of the property subject thereto; (g) such state of facts as would be shown on an accurate ALTA/ACSM survey that do not materially impair the use of the property subject thereto or by physical inspection of the real property and any zoning, entitlement, conservation restriction and other land use by Governmental Authorities; (h) minor encroachments, including foundations and retaining walls; (i) standard survey and title exceptions; (j) minor variations, if any, between tax lot lines and property lines; (k) deviations, if any, of fences or shrubs from designated property lines; (l) Encumbrances that will be released at or prior to the Closing; (m) Encumbrances identified in the Financial Statements; and (n) any other Encumbrance on the Transferred Assets reserved for the benefit of Dow pursuant to a Transaction Document.
“Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
“Polypropylene” means polypropylene Homopolymers, Random Copolymers and Impact Copolymers wherein:
(a)    “Homopolymer” means polypropylene polymers that have been polymerized into isotactic sequences of repeating propylene monomer units with essentially no repeating units of a monomer other than propylene;
(b)    “Random Copolymer” means polypropylene polymers that have been polymerized into isotactic sequences of repeating propylene monomer units occasionally interrupted by incorporation of one or more hydrocarbon monomer units other than propylene, and that contain at least 65 weight percent monomer units derived from propylene; and
(c)    “Impact Copolymer” means a Homopolymer or Random Copolymer that has been modified with the addition of an in‑reactor polymerized ethylene‑propylene

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rubber, and that contains at least 65 weight percent monomer units derived from propylene.
“Post‑Closing Product Liabilities” means any Liability to the extent arising out of, or resulting from: (i) the products or inventory of the Business manufactured by the Purchaser Entities on or after the Closing Date, including the manufacture, design, development, testing, importation, distribution, delivery, transport, storage, ownership, possession, marketing, labeling, packaging, sale, purchase, consignment or leasing, or the provision of services with respect to such products or inventory, in each case, on or after the Closing Date; (ii) the remanufacture by the Purchaser Entities or any damage caused by transport or storage of the Transferred Inventory by the Purchaser Entities, in each case, on or after the Closing Date; or (iii) the sale, lease or consignment of Transferred Inventory by the Purchaser Entities to any Person on or after the Closing Date (A) that is not, and has not been a customer of the Business in the three (3) years prior to the Closing Date; (B) on terms and conditions that are materially different from the terms and conditions of the Material Contracts described in Section 3.13(a)(ii); or (C) that is marketed, labeled or packaged by the Purchaser Entities for any use other than the manufacture of Polypropylene.
“Pre‑Closing Period” means any taxable period ending prior to the Closing Date.
“Pre‑Closing Product Liabilities” means any Liability that is not a Post‑Closing Product Liability, to the extent arising out of, or resulting from, the products or inventory of the Business (including the Excluded Assets) manufactured before the Closing Date, including the manufacture, design, development, testing, importation, distribution, delivery, transport, storage, ownership, possession, marketing, labeling, packaging, sale, purchase, consignment or leasing, or the provision of services with respect to the Business (including the Excluded Assets), its products or its inventory, in each case, before the Closing Date other than the Post-Closing Product Liabilities.
“Purchase Price Bank Account” means a bank account or accounts in the United States to be designated by the Seller in a written notice to the Purchaser at least two (2) Business Days prior to the Closing Date.
“Purchaser Disclosure Schedule” means the Disclosure Schedule, dated as of the date of this Agreement, delivered by the Purchaser to the Seller in connection with this Agreement.
“Purchaser Entity” means the Purchaser or any of its Subsidiaries that own Transferred Assets, are party to any of the Transaction Documents, or operate the Business on or after the Closing Date.
“Purchaser Environmental Liabilities” means any Liability to the extent arising out of, or resulting from, (a) any Releases of Hazardous Materials subsequent to the Closing by any Purchaser Entity at, in, on or from any Leased Real Property; (b) any Releases of Hazardous Materials at any third‑party site to which such Hazardous Materials were sent subsequent to the Closing by any Purchaser Entity from any Leased Real Property; (c) any exposure to Hazardous

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Materials in connection with any Purchaser Entity’s operation of the Business at any Leased Real Property and any exposure to any Hazardous Material included in any product or material sent or distributed by any Purchaser Entity from any Leased Real Property subsequent to the Closing; (d) any violation of or noncompliance with Environmental Laws or Environmental Permits occurring subsequent to the Closing by any Purchaser Entity at any Leased Real Property; and (e) any Actions based upon any post‑Closing violation of or post‑Closing Liability under any Environmental Law or Environmental Permit brought with respect to any Purchaser Entity’s operation of the Business at any Leased Real Property, except for (i) any post‑Closing environmental obligation specifically imposed on Dow in any of the documents identified on Schedule 1.01(k), (ii) any Seller Environmental Liabilities, (iii) any Liability arising out of or resulting from any continuation, for up to six (6) months post‑Closing, of any violation of or non‑compliance with such Laws or Permits prior to Closing which the Purchaser discovers within such six (6) months and notifies the Seller thereof in accordance with Section 9.05, or (iv) any Liabilities referenced in Section 2.02(b)(i).
“Registered” means issued by, registered or filed with, renewed by or the subject of a pending application before any Governmental Authority or Internet domain name registrar.
“Regulations” means the Treasury Regulations (including Temporary Regulations) promulgated by the United States Department of Treasury with respect to the Code or other federal tax statutes.
“Release” means disposing, discharging, injecting, spilling, leaking, pumping, pouring, leaching, dumping, emitting, escaping or emptying into or upon any soil, sediment, subsurface strata, surface water or groundwater.
“Remedial Action” means any action required to investigate, clean up, remove or remediate, or conduct remedial or corrective actions with respect to, any Release of Hazardous Materials.
“Representatives” means with respect to any Person, such Person’s Affiliates and its and their respective directors, officers, employees, agents and advisors.
“Retained Accounts Payable” means accounts payable of Dow accrued, whether or not in the ordinary course, prior to the Closing Date in connection with the conduct of the Business, that are not transferred to a Purchaser Entity or that are otherwise retained by a Dow Entity.
“Seller Credit Support Instruments” means all obligations of a Dow Entity under any contract, instrument or other commitment, arrangement or other obligation in existence as of the Closing Date to the extent relating to the Business for which such Dow Entity is or may be liable as guarantor, original tenant, primary obligor, person required to provide financial support or collateral in any form whatsoever, or otherwise (including by reason of performance guarantees), including those obligations arising under the instruments that are set forth on Schedule 1.01(i).

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“Seller Disclosure Schedule” means the Disclosure Schedule, dated as of the date of this Agreement, delivered by the Seller to the Purchaser in connection with this Agreement.
“Seller Environmental Liabilities” means any Liability (except for Liabilities referenced in Section 2.02(b)(i)) to the extent arising out of, or resulting from, (a) any Releases of Hazardous Materials prior to the Closing by Dow at, in, on or from any Leased Real Property or Other Business Facility; (b) any Releases of Hazardous Materials at any third‑party site to which such Hazardous Materials were sent prior to the Closing by Dow from any Leased Real Property or Other Business Facility; (c) any exposure to Hazardous Materials in connection with Dow’s operation of the Business at any Leased Real Property or Other Business Facility, prior to the Closing and any exposure to any Hazardous Material included in any product or material sent by Dow from any Leased Real Property or other Business Property prior to the Closing; (d) any violation of or noncompliance with Environmental Laws or Environmental Permits occurring or existing prior to the Closing by Dow at any Leased Real Property or Other Business Facility, including any continuation of such violation or noncompliance, for up to six (6) months subsequent to the Closing, which the Purchaser discovers within such six (6) months and notifies the Seller thereof in accordance with Section 9.05; and (e) any Actions based upon any pre‑Closing violation of or pre‑Closing Liability under any Environmental Law or Environmental Permit brought with respect to Dow’s operation of the Business at any Leased Real Property or Other Business Facility, except, in each case, for Purchaser Environmental Liabilities.
“Seller’s Knowledge” or “Knowledge of the Seller” means the actual (but not constructive or imputed) knowledge of the Persons identified on Schedule 1.01(j) after due inquiry of their direct reports.
“Shared Intellectual Property” means the Intellectual Property owned by Dow and licensed by Seller or its Affiliates to Purchaser pursuant to the Intellectual Property License Agreement (attached hereto as Exhibit C) and the Trademark License Agreement (attached hereto as Exhibit D).
“Straddle Period” means any taxable period beginning prior to the Closing Date and ending on or after the Closing Date.
“Subsidiary” of any Person means any corporation, partnership, limited liability company or other organization, whether incorporated or unincorporated, which is controlled by such Person.
“Tangible Property” means the tangible machinery, buildings, other constructions permanently attached to the ground, equipment, vehicles, wires and other tangible property that is owned by Dow and primarily or exclusively related to the Business and, in the case of tangible property owned by Dow and primarily or exclusively used by the Business at the Leased Real Property, fixtures, in each case, excluding real property (other than fixtures) and excluding all assets or other properties located at the Contract Manufacturing Sites other than the Freeport R&D Assets.

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“Target Closing Date ARI Amount” means $25,500,000.00.
“Tax” or “Taxes” means all income, capital gain, gross receipts, windfall profits, severance, property, production, license, excise, net worth, franchise, capital, employment, withholding, social security contributions, transfer, conveyance, stamp, stamp duty, recording, occupational, premium and other similar taxes, duties and similar imposts, however denominated, together with any interest, additions or penalties in respect thereof, imposed by any Taxing Authority (but excluding any Conveyance Taxes and, to the extent they are non-refundable, including any sales, use or ad-valorem taxes).
“Tax Returns” means any and all returns, reports and forms (including elections, declarations, amendments, schedules, information returns or attachments thereto) required to be filed with a Governmental Authority with respect to Taxes or Conveyance Taxes.
“Taxing Authority” means any Governmental Authority that is responsible for the administration or imposition of any Tax or Conveyance Tax, including any federal, national, international, supranational, state, provincial, local or other government, governmental, regulatory or administrative authority, agency or commission and any court, tribunal or judicial or arbitral body empowered to issue binding decisions.
“Transaction Documents” means this Agreement, the Local Conveyances and each of the documents identified on Schedule 1.01(k), and any other agreements entered into by and between Dow and any Purchaser Entity and instruments or documents entered into by any Dow Entity or any Purchaser Entity, in each case, in connection with this Agreement.
“Transferred Accounts Receivable” means all accounts receivable arising in connection with the conduct of the Business that are transferred to a Purchaser Entity on the Closing Date.
“Transferred Contracts” means the rights of Dow under the contracts, commitments and other agreements identified on Schedule 1.01(l), including the Transferred IP Agreements.
“Transferred Environmental Regulatory Information” means the information described in Schedule 1.01(m).
“Transferred Information” means sales and promotional literature, customer lists and other sales‑related materials, in each case to the extent used or held for use in the Business and in the possession of Dow; provided, that the Seller may redact any information not related to the Business and may retain a copy of any Transferred Information.
“Transferred Inventory” means the inventories of raw materials, packaging materials, semi‑finished and finished goods, purchased supplies, other supplies and spare parts and materials used for maintaining production machinery and equipment, in each case, to the extent such inventories are held by Dow for use in the Business or identified on Schedule 1.01(n), excluding all inventories for raw materials used in the production of MagTi products

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(including MagTi Developmental, MagTi Precursor 2200 and MagTi Blend) located at the Contract Manufacturing Site at Seadrift, Texas.
“Transferred IP Agreements” means the licenses of Intellectual Property identified on Schedule 1.01(o).
“Transferred Permits” means the municipal, state and federal permits, licenses, agreements and authorizations to the extent held and used by Dow (a) at the Norco Facility, or (b) exclusively in connection with the Business.
“Transferred Records” means all Employee Records that are required to be transferred to the Purchaser Entities by applicable Law or as necessary to comply with Schedule 6, and all other books of account, financial records, invoices, shipping records, supplier lists, Tax records, correspondence and other documents, records and files, including those relating to trade secrets, processes, know how, and technical data, to the extent related to the Business; provided, that the Seller may redact information not related to the Business from the Transferred Records prior to the delivery of the Transferred Records to the Purchaser and may retain a copy of any Transferred Records.
“UNIPOL™ Polypropylene Process” means the UNIPOL™ low pressure gas phase fluidized bed process used in the manufacture of Polypropylene.
“Unresolved Objections” means the objections set forth on the Notice of Disagreement delivered to the Seller pursuant to Section 2.08 that remain unresolved pursuant to Section 2.08(d)(iii).
“U.S. Employee” means any Business Employee who is employed primarily in (or, in the case of any expatriate Business Employee, whose home country is) the United States immediately prior to the Closing.
SECTION 1.02    Definitions. The following terms have the meanings set forth in the Sections set forth below:
Definition
Location
“Accounts Payable Amount”
2.04(a)
“Allocation”
2.04(b)
“Amended Electricity Services Agreement”
5.11(c)
“Approval Order”
4.05(a)
“Assumed Liabilities”
2.02(a)
“Assumed HR Liabilities”
Schedule 6
“Auction Agreements”
5.12(d)
“Claim”
7.03(a)
“Closing”
2.05(a)
“Closing Date”
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“Closing Overpayment”
2.08(e)(ii)
“Closing Underpayment”
2.08(e)(i)
“Confidentiality Agreement”
5.03
“Contest”
7.03(b)
“Covered Dow Entity”
3.01
“Covered Period”
5.11(c)
“Covered Purchaser Entity”
4.01
“Disputed Items”
2.08(c)
“Electricity Services Agreement”
5.11(c)
“Estimated Closing Date ARI Amount”
2.05(b)
“Excluded Assets”
2.01(b)
“Excluded Liabilities”
2.02(c)
“Existing Stock”
5.05(b)
“Expansion Servitude”
5.11(b)
“Investigations”
9.05(b)
“Loss”
9.02
“Material Contracts”
3.13(a)
“Most Cost‑Effective Manner”
9.08(a)(vi)
“Non U.S. Dow Plans”
3.10(b)
“Notice of Acceptance”
2.08(c)
“Notice of Disagreement”
2.08(c)
“Purchase Price”
2.04(a)
“Purchaser”
Preamble
“Purchaser Indemnified Party”
9.02
“Retained Names and Marks”
5.05(a)
“Seller”
Preamble
“Seller Indemnified Party”
9.03
“Service Provider”
5.11(c)
“Termination Date”
10.01(a)
“Third‑Party Claim”
9.05(b)
“Transferred Assets”
2.01(a)
“U.S. Dow Plans”
3.10(a)

SECTION 1.03    Interpretation and Rules of Construction. (a) In this Agreement, except to the extent otherwise provided or that the context otherwise requires:
(i)    when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement;
(ii)    the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

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(iii)    whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;
(iv)    the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;
(v)    all terms defined in this Agreement have the defined meanings when used in any certificate or other document delivered or made available pursuant hereto, unless otherwise defined therein;
(vi)    where used with respect to information, the phrases “delivered” or “made available” shall mean that the information referred to has been physically or electronically delivered to the relevant parties or their respective Representatives, including, in the case of “made available” to the Purchaser, material that has been posted in a “data room” (virtual or otherwise) established by the Seller and to which the Purchaser has been given access;
(vii)    references to “day” or “days” are to calendar days;
(viii)    the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;
(ix)    references to a Person are also to its successors and permitted assigns;
(x)    when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is not a Business Day, the period in question shall end on the next succeeding Business Day; and
(xi)    references to sums of money are expressed in lawful currency of the United States of America, and “$” refers to U.S. dollars.
(b)    Notwithstanding anything to the contrary contained in the Disclosure Schedules, in this Agreement or in the other Transaction Documents, the information and disclosures contained in any Section of a Disclosure Schedule shall be deemed to be disclosed and incorporated by reference in each other Section of such Disclosure Schedule as though fully set forth in such other Section to the extent the relevance of such information to such other Section is reasonably apparent notwithstanding the omission of a reference or a cross‑reference with respect thereto and notwithstanding any reference to a Section of such Disclosure Schedule in this Agreement. Certain items and matters are listed in the Disclosure Schedules for informational purposes only and may not be required to be listed therein by the terms of this Agreement. In no event shall the listing of items or matters in a Disclosure Schedule be deemed or interpreted to broaden, or otherwise expand the scope of, the representations and warranties or

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covenants and agreements contained in this Agreement. No reference to, or disclosure of, any item or matter in any Section of this Agreement or any Section of a Disclosure Schedule shall be construed as an admission or indication that such item or matter is material or that such item or matter is required to be referred to or disclosed in this Agreement or in such Disclosure Schedule. Without limiting the foregoing, no reference to, or disclosure of, a possible breach or violation of any contract or agreement, Law or Governmental Order shall be construed as an admission or indication that a breach or violation exists or has actually occurred.
ARTICLE II    
SALE AND PURCHASE
SECTION 2.01    Sale and Purchase of Assets. (a) Upon the terms and subject to the conditions of this Agreement, at the Closing, the Seller shall, or shall cause its relevant Subsidiaries to, sell, assign, transfer, convey and deliver, to the Purchaser, and the Purchaser shall purchase from the Seller and each such Subsidiary, subject to Sections 2.01(b) and 2.03 and Schedule 2.03, and to the extent transferable, all of Dow’s right, title and interest in and to the following assets (the “Transferred Assets”):
(i)    the Leased Real Property Rights, the Appurtenant Real Property and to the extent it is considered real property under the laws of the State of Louisiana, Dow’s right, title and interest to the Norco Facility;
(ii)    the Owned Intellectual Property;
(iii)    the Tangible Property;
(iv)    the Transferred Inventory;
(v)    the Transferred Contracts and the Partially Transferred Contracts;
(vi)    the Transferred Accounts Receivable;
(vii)    the Transferred Permits;
(viii)    the Transferred Records;
(ix)    the Transferred Information;
(x)    the Transferred Environmental Regulatory Information; and
(xi)    the Goodwill.
(b)    Notwithstanding anything in this Agreement (including Section 2.01(a)) to the contrary, the Seller shall not sell, convey, assign, transfer or deliver, nor cause any of its Subsidiaries to sell, convey, assign, transfer or deliver, to the Purchaser, the Purchaser shall not purchase, and the Transferred Assets shall not include, Dow’s right, title and interest to any assets

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of the Seller or of any Affiliate of the Seller not expressly included in the Transferred Assets (the “Excluded Assets”), including:
(xii)    all cash and cash equivalents, including checks, money orders, securities (whether or not marketable), short‑term instruments, negotiable instruments, funds in time and demand deposits or similar accounts of Dow on hand, in lock boxes, in financial institutions or elsewhere, including all cash residing in any collateral cash account securing any obligation or contingent obligation of Dow, other than cash or cash equivalents that have been reflected in the calculation of the Final Adjustment Statement;
(xiii)    any rights of Dow to Tax refunds, credits or other Tax benefits, apart from Tax incentives or other Tax benefits to the extent related to the Business or the Transferred Assets that are attributable to any taxable period ending on or after the Closing Date;
(xiv)    all rights of Dow under any contracts, commitments and other agreements, except for Dow’s rights under (A) the Transferred Contracts; and (B) to the extent they relate to the Business, the Partially Transferred Contracts;
(xv)    the company seal, minute books, charter documents, stock or equity record books and such other books and records pertaining to the organization, existence or capitalization of any Dow Entity;
(xvi)    any real property of Dow other than (A) the Leased Real Property Rights; (B) the Appurtenant Real Property; and (C) the Norco Facility to the extent it is considered real property under the laws of the State of Louisiana;
(xvii)    the Contract Manufacturing Sites and any assets located at the Contract Manufacturing Sites (other than the Transferred Inventory identified on Schedule 1.01(n));
(xviii)    all rights, title and interest of the Seller under this Agreement and the rights of Dow under the other Transaction Documents, and any documents delivered or received in connection herewith or therewith;
(xix)    all Excluded Claims;
(xx)    all Tax Returns and other Tax records of Dow, other than those relating solely to the Transferred Assets or the Business;
(xxi)    all current and prior insurance policies of Dow and all rights of any nature with respect thereto, including all insurance recoveries thereunder and rights to assert claims with respect to any such insurance recoveries;
(xxii)    all rights, title and interest of Dow in and to the Retained Names and Marks, other than as expressly provided in Section 5.05;

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(xxiii)    the Purchase Price Bank Account and any other bank accounts of any Dow Entity;
(xxiv)    all accounts receivable of Dow that are not Transferred Accounts Receivable;
(xxv)    all rights and interest of Dow under credit support instruments and any similar instruments (including letters of credit, consignments, setoff rights, indemnities, guarantees, liens, security arrangements, any other documents or rights intended to secure payment);
(xxvi)    all customer credit files of Dow, including information related to credit risk assessment processes and methodologies;
(xxvii)    all rail cars owned by Dow or interest or right of Dow in any rail car;
(xxviii)    all personnel, discipline, performance, employee compensation, medical and benefits and labor relations records relating to the Business Employees, other than those Employee Records required to be provided to the Purchaser by Law or as necessary to comply with Schedule 6 (Employee Matters);
(xxix)    all assets related to Seller defined benefit pension plans;
(xxx)    in respect of Owned Intellectual Property, Intellectual Property that is not exclusively used in the Business; and
(xxxi)    the assets identified on Schedule 2.01.
SECTION 2.02    Assumption and Exclusion of Liabilities. (a) At the Closing, upon the terms and subject to the conditions set forth in this Agreement, the Purchaser shall assume, and agree to pay, perform and discharge when due, the following Liabilities of Dow (the “Assumed Liabilities”):
(i)    all Liabilities (including any Liabilities of Dow arising from any Action against Dow or the Business) to the extent arising out of or resulting from, the conduct of the Business and the use of the Transferred Assets by a Purchaser Entity after the Closing Date; other than (A) Liabilities governed by clauses (ii)‑(v) below; (B) Liabilities described in Section 2.02(b); and no Liabilities of Dow arising from any other Action;
(ii)    All Liabilities, other than the Retained Accounts Payable, of Dow to the extent arising out of or resulting from, the Transferred Contracts and, to the extent transferred to Purchaser, the Partially Transferred Contracts that, in each case, do not result from (A) any material failure to perform any Transferred Contract or Partially Transferred Contract by any Dow Entity prior to the Closing Date; or (B) any material breach, material default or material violation of any Transferred Contract or Partially

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Transferred Contract by any Dow Entity prior to the Closing Date, including any material breach of any warranty;
(iii)    all Post‑Closing Product Liabilities;
(iv)    all Taxes arising from or with respect to the Transferred Assets or the Business other than Excluded Taxes;
(v)    all of the Assumed HR Liabilities; and
(vi)    all Purchaser Environmental Liabilities.
(c)    For the avoidance of doubt, Assumed Liabilities shall not include (i) any Liabilities of Dow or any of its Affiliates arising, or allegedly arising, from, resulting from, or attributable to, directly or indirectly, in whole or in part, the installation, application, use, manufacture, consumption, storage, design, assembly, mining, processing, purchase, sale, repair, replacement, supply, production, distribution, transportation, disposal or the presence of, or exposure to, asbestos or asbestos containing materials of any type or nature, by Dow or any of its Affiliates before the Closing Date, including damages (including medical, legal, and other expenses) or any other remedy for personal or bodily injury, disease, sickness, death, wrongful death, loss of consortium, survivorship, medical monitoring, cost of removal, diminution of value, or any other type of personal injury (whether physical, emotional, or otherwise) or property damage, based on any legal theory of law or equity; (ii) any Seller Environmental Liabilities; (iii) any Pre‑Closing Product Liabilities, (iv) any Liabilities for Retained Accounts Payable; or (v) any Excluded Taxes; all of which, in each case of clauses (i) through (v) above, shall be Excluded Liabilities.
(d)    Dow shall retain, and shall be responsible for paying, performing and discharging when due, and the Purchaser shall not assume or have any responsibility for, any Liabilities of Dow other than the Assumed Liabilities (collectively, the “Excluded Liabilities”).
SECTION 2.03    Procedures for the Transfer of Transferred Assets. (a) The Seller and Purchaser shall, and shall cause their respective Subsidiaries and Affiliates to, effect on the Closing Date the transfer or assignment of the Transferred Assets and the Assumed Liabilities from Dow to the Purchaser Entities pursuant to the Local Conveyances.
(b)    Notwithstanding anything to the contrary contained in this Agreement, the provisions of Schedule 2.03 shall apply with respect to the transfer of the Transferred Assets to, and the assumption of the Assumed Liabilities by, the Purchaser Entities and the other matters set forth thereon.
SECTION 2.04    Purchase Price; Allocation of Purchase Price. (a) Subject to the adjustment set forth in Section 2.08, the purchase price for the Transferred Assets shall be $500,000,000.00 (five hundred million) (the “Purchase Price”) and the amount set forth on Schedule 2.04) (the “Accounts Payable Amount”).

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(b)    The Seller shall provide the Purchaser with an allocation of the Purchase Price (together with the Accounts Payable Amount and the portion of the Assumed Liabilities, if any, that constitutes proceeds of disposition for U.S. federal income tax purposes) among the Transferred Assets (the “Allocation”), which will comply with the requirements of Code Section 1060 and applicable Regulations promulgated thereunder. If the Purchaser does not provide any comments to the Seller in writing within ten (10) Business Days following delivery by the Seller of the Allocation, then the Allocation shall be deemed to be final and binding. If, however, the Purchaser submits comments to the Seller within such ten (10) Business Day period, the Seller shall in good faith consider such comments and negotiate with the Purchaser to resolve any differences prior to Closing. Except as otherwise provided below, or as required by Law, the Seller and the Purchaser shall report, act, and file all Tax Returns (including, but not limited to, IRS Form 8594 and all Tax Returns relating to Conveyance Taxes) in all respects and for all purposes consistent with the Allocation (as adjusted pursuant to the immediately preceding sentence); provided, however, that, unless the Purchaser has not provided any comments to the Seller, or to the extent the Seller and the Purchaser have agreed prior to the Closing to modify the Allocation, no more than $15 million of the Purchase Price (together with the Accounts Payable Amount and the portion of the Assumed Liabilities, if any, that constitutes proceeds of disposition for U.S. federal income tax purposes) shall be allocated to Transferred Assets held by Dow Entities organized in countries other than the United States; and, provided, further, that each of the Seller and the Purchaser shall be free to prepare and file I.R.S. Form 8594 (Asset Acquisition Statement) in a manner consistent with any Independent Valuation it receives. To the extent that there is any change in the proceeds of disposition for U.S. federal income or other relevant tax purposes subsequent to the Closing Date, each of the Seller and the Purchaser agree that such change shall be reflected in a manner consistent with the methodology used in otherwise determining the allocation of such proceeds among the Transferred Assets.
SECTION 2.05    Closing. (a) Subject to the terms and conditions of this Agreement, the sale and purchase of the Transferred Assets and the assumption of the Assumed Liabilities contemplated by this Agreement shall take place at a closing (the “Closing”) to be held at the offices of Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York at 10:00 a.m. New York time on (i) the third (3rd) Business Day following the satisfaction or waiver of the conditions to the obligations of the parties hereto set forth in Article VIII (other than conditions that by their nature are to be satisfied at the Closing, and subject to the satisfaction or waiver of such conditions) unless the Seller provides notice pursuant to clause (ii); (ii) the last Business Day of the calendar month during which such conditions have been satisfied or waived (other than conditions that by their nature are to be satisfied at the Closing, and subject to the satisfaction or waiver of such conditions) or the first Business Day of the calendar month immediately following such month, in each case only if the Seller so requests (at its sole discretion) in a written notice to the Purchaser; or (iii) at such other place or at such other time or on such other date as the Seller and the Purchaser may mutually agree upon in writing (the day on which the Closing takes place being the “Closing Date”).
(b)    No later than two (2) Business Days prior to the scheduled Closing Date, the Seller shall deliver to the Purchaser a notice that sets forth the Seller’s good faith estimate of the Closing Date ARI Amount (the “Estimated Closing Date ARI Amount”).

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SECTION 2.06    Closing Deliveries by the Seller. At the Closing, the Seller shall deliver or cause to be delivered to the Purchaser:
(a)    executed counterparts of (i) each Local Conveyance; and (ii) each other Transaction Document that is to be executed at the Closing and, in each case, to which a Dow Entity is a party;
(b)    a receipt for the Closing Date Payment;
(c)    the certificate referenced in Section 8.02(a)(vi); and
(d)    a certificate as to the non‑foreign status of the Seller pursuant to Section 1.1445‑2(b)(2) of the Regulations.
SECTION 2.07    Closing Deliveries by the Purchaser. At the Closing, the Purchaser shall deliver to the Seller:
(a)    the Closing Date Payment by wire transfer in immediately available funds to the Purchase Price Bank Account;
(b)    executed counterparts of (i) each Local Conveyance; and (ii) each other Transaction Document that is to be executed at the Closing and, in each case, to which a Purchaser Entity is a party; and
(c)    the certificate referenced in Section 8.01(a)(iii).
SECTION 2.08    Adjustment of the Purchase Price.
(a)    Within ninety (90) days after the Closing Date, the Seller shall prepare and deliver to the Purchaser the Initial Adjustment Statement. The Purchaser shall provide the Seller and its Representatives with access to the books, records and personnel of the Business necessary for the Seller to prepare the Initial Adjustment Statement.
(b)    At all reasonable times during the forty‑five (45) day period immediately following the Purchaser’s receipt of the Initial Adjustment Statement, the Purchaser and its Representatives shall be permitted to review the records of the Seller relating to the Initial Adjustment Statement that are reasonably requested by the Purchaser, and the Seller shall make reasonably available to the Purchaser and its Representatives the individuals employed by the Seller and responsible for the preparation of the Initial Adjustment Statement in order to respond to the inquiries of the Purchaser related thereto.
(c)    The Purchaser shall deliver to the Seller on or before the Objection Deadline Date either a notice indicating that the Purchaser accepts the Initial Adjustment Statement (“Notice of Acceptance”) or a detailed statement describing each objection (with reference to the applicable account description and item number as set forth on Schedule 2.08) to the Initial Adjustment Statement and specifying the amount that the Purchaser reasonably believes is the correct amount for each applicable account description and item number (“Notice

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of Disagreement”); provided, that any objections must be on the basis that the amounts set forth in the Initial Adjustment Statement (i) were not determined in accordance with Schedule 2.08; or (ii) were arrived at based on mathematical or clerical error. The Purchaser may only object to the amounts set forth in the Initial Adjustment Statement to the extent the amount disputed with respect to any item number contained in the Initial Adjustment Statement exceeds $50,000. If the Purchaser delivers to the Seller a Notice of Acceptance, or if the Purchaser does not deliver a Notice of Disagreement in accordance with this Section 2.08(c) on or before the Objection Deadline Date, then, effective as of the earlier of the date of delivery of such Notice of Acceptance and the Objection Deadline Date, the Initial Adjustment Statement shall be deemed to be the Final Adjustment Statement. If the Purchaser timely delivers a Notice of Disagreement in accordance with this Section 2.08(c), only those matters specified in accordance with this Section 2.08(c) in such Notice of Disagreement shall be deemed to be in dispute (the “Disputed Items”), and all other matters included in the Initial Adjustment Statement shall be final, binding and conclusive upon the parties hereto.
(d)    The Disputed Items shall be resolved as follows:
(i)    The Seller and the Purchaser shall first use commercially reasonable efforts to resolve such Disputed Items.
(ii)    Any resolution by the Seller and the Purchaser as to such Disputed Items shall be set forth in a written agreement, which agreement shall be final and binding on the parties hereto.
(iii)    If the Seller and the Purchaser do not reach a resolution of all Disputed Items within sixty (60) days after delivery of the Notice of Disagreement, the Seller and the Purchaser shall, within sixty (60) days following the expiration of such sixty (60) day period, engage the Neutral Accountant, pursuant to an engagement agreement executed by the Seller, the Purchaser and the Neutral Accountant, to resolve any Unresolved Objections. Unless the parties hereto agree otherwise, all communications between the Seller and the Purchaser or any of their respective Representatives, on the one hand, and the Neutral Accountant, on the other hand, shall be in writing with copies simultaneously delivered to the non‑communicating party.
(iv)    The Neutral Accountant shall be instructed to resolve the Unresolved Objections in accordance with Schedule 2.08 and shall be instructed not to independently investigate any other matters. The Seller and the Purchaser shall request that the Neutral Accountant make a final determination (which determination shall set forth the reasons for such determination) of the Closing Date ARI Amount within thirty (30) days from the date the Unresolved Objections were submitted to the Neutral Accountant, and such final determination shall be deemed the Final Adjustment Statement. During the thirty (30)‑day review by the Neutral Accountant, the Seller and the Purchaser shall each make available to the Neutral Accountant such individuals and such information, books and records as may be reasonably required by the Neutral Accountant to make its final determination.

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(v)    The resolution by the Neutral Accountant of the Unresolved Objections shall be conclusive and binding upon the parties hereto. The parties hereto agree that the procedure set forth in this Section 2.08(d) for resolving disputes with respect to the Initial Adjustment Statement and the Closing Date ARI Amount shall be the sole and exclusive method for resolving any such disputes.
(vi)    The Seller and the Purchaser shall share the fees and expenses of the Neutral Accountant equally.
(e)    The Initial Adjustment Statement, including any modifications resulting from the resolution of any Disputed Items set forth in the Notice of Disagreement, shall be deemed to be the Final Adjustment Statement and be binding on the parties hereto for the purposes of this Section 2.08 upon the earliest to occur of (i) the delivery by the Purchaser of the Notice of Acceptance or the failure of the Purchaser to deliver the Notice of Disagreement by the Objection Deadline Date pursuant to Section 2.08(c); (ii) the resolution of all Disputed Items by the Seller and the Purchaser pursuant to Section 2.08(d)(ii); and (iii) the resolution of all Disputed Items pursuant to Section 2.08(d)(iv) by the Neutral Accountant. Within five (5) Business Days after the Final Adjustment Statement becomes or is deemed final and binding on the parties hereto, an adjustment to the Purchase Price and a payment by wire transfer in respect thereof described below shall be made as follows:
(i)    If the Closing Date ARI Amount as shown on the Final Adjustment Statement exceeds the Estimated Closing Date ARI Amount (such difference, the “Closing Underpayment”), the Purchaser shall pay to the Seller within five (5) Business Days of the final determination of the Closing Date ARI Amount an amount equal to such Closing Underpayment by wire transfer of immediately available funds to the Purchase Price Bank Account.
(ii)    If the Closing Date ARI Amount as shown on the Final Adjustment Statement is less than the Estimated Closing Date ARI Amount (such difference, the “Closing Overpayment”), the Seller shall pay to the Purchaser within five (5) Business Days of the final determination of the Closing Date ARI Amount an amount equal to such Closing Overpayment by wire transfer of immediately available funds to a bank account designated in writing by the Purchaser (such designation to be made at least three (3) Business Days prior to the day on which such payment is due).
(f)    Any payment required to be made pursuant to this Section 2.08 shall bear interest from the Closing Date through and including the date of payment at the Interest Rate.
(g)    To the extent that any of the parties hereto or any of their respective Affiliates have any obligation under this Agreement or any of the other Transaction Documents to indemnify or to make any other payment, no amount with respect to a matter to which such obligation or payment relates shall be included in the calculation of the Closing Date ARI Amount. No amount with respect to a matter shall be included more than once in the calculation of the Closing Date ARI Amount.

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ARTICLE III    
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
The Seller hereby represents and warrants to the Purchaser, subject to such exceptions as are disclosed in the Seller Disclosure Schedule, as follows:
SECTION 3.01    Organization, Authority and Qualification of the Covered Dow Entities. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Seller and each Dow Entity that is a party to a Transaction Document (a “Covered Dow Entity”) is a legal entity, duly organized, validly existing and in good standing under the applicable laws of the jurisdiction of its formation (to the extent such concept is recognized under the applicable laws of the jurisdiction of its formation). Each of the Seller and each Covered Dow Entity has all necessary corporate power and authority to enter into this Agreement and each Transaction Document, to which it is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Seller of this Agreement and by each Covered Dow Entity of the other Transaction Documents, to which it is a party, the performance by the Seller of its obligations hereunder and by each Covered Dow Entity thereunder, and the consummation by the Seller and each Covered Dow Entity of the transactions contemplated hereby and thereby have been duly authorized by all requisite action on the part of the Seller or such Covered Dow Entity. This Agreement has been, and upon their execution, the other Transaction Documents, to which the Seller or a Covered Dow Entity is a party, will be, duly executed and delivered by the Seller or such Covered Dow Entity, and (assuming due authorization, execution and delivery by a Covered Purchaser Entity) this Agreement constitutes, and upon their execution, each of the other Transaction Documents, to which the Seller or a Covered Dow Entity is a party, will constitute, a legal, valid and binding obligation of the Seller or such Covered Dow Entity, enforceable against the Seller or such Covered Dow Entity in accordance with their respective terms, subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to or affecting creditors’ rights generally and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity).
SECTION 3.02    No Conflict. Assuming that all consents, approvals, authorizations and other actions described in Section 3.03 below or set forth in Section 3.03 of the Seller Disclosure Schedule have been obtained, all filings and notifications listed in Section 3.03 below or in Section 3.03 of the Seller Disclosure Schedule have been made, any applicable waiting period has expired or been terminated, and except as may result from any facts or circumstances relating solely to the Purchaser or its Affiliates, the execution, delivery and performance by the Seller of this Agreement and by each of the Covered Dow Entities of the other Transaction Documents to which it is a party, do not (a) violate, conflict with, or result in the breach of any provision of the certificate of incorporation or bylaws (or similar organizational documents) of the Seller or such Covered Dow Entity; (b) conflict with or violate any Law or Governmental Order applicable to the Seller or such Covered Dow Entity; or (c) conflict with, result in any breach of, constitute a default (or an event which, with the giving

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of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, acceleration or cancellation of, any Material Contract, to which Dow is a party, except, in the case of clauses (b) and (c), as would not (i) materially and adversely affect the ability of the Seller to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement; or (ii) otherwise have a Material Adverse Effect.
SECTION 3.03    Governmental Consents and Approvals. The execution, delivery and performance by the Seller of this Agreement does not require any consent, approval, authorization or other order or declaration of, action by, filing with or notification to, any Governmental Authority, other than (a) compliance with, and filings under, the HSR Act and any other applicable antitrust Laws; (b) where the failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not prevent or materially delay the consummation by the Seller of the transactions contemplated by this Agreement, is not reasonably likely to materially and adversely affect the Purchaser’s ability to operate the Business after the Closing and would not have a Material Adverse Effect; or (c) consents, approvals, authorizations or other orders or declarations of, actions by, filings with, or notifications to, any Governmental Authority as a result of any facts or circumstances relating to the Purchaser or any of its Affiliates.
SECTION 3.04    Financial Information. (c) True and complete copies of the Financial Statements have been made available by the Seller to the Purchaser and are set forth on Schedule 1.01(b).
(d)    The Financial Statements, which shall be deemed to include the notes thereto, (i) present fairly, in all material respects, the combined financial position of the Business as of the dates thereof and the results of operations and cash flows of the Business for the periods covered thereby; and (ii) were prepared in accordance with GAAP.
SECTION 3.05    No Material Adverse Effect. Since December 31, 2012, there has not occurred any Material Adverse Effect.
SECTION 3.06    Litigation. As of the date of this Agreement, there is no Action by or against Dow pending or, to the Seller’s Knowledge, threatened in writing before any Governmental Authority that would have a Material Adverse Effect, would materially and adversely affect the legality, validity or enforceability of this Agreement or would prevent or materially delay the consummation of the transactions contemplated hereby or which, if determined adversely to Dow, would reasonably be expected to materially adversely affect the ability of the Purchaser to conduct the Business after the Closing.
SECTION 3.07    Compliance with Laws. As of the date of this Agreement, Dow conducts, in all respects, the Business in accordance with all Laws and Governmental Orders applicable to the Business and the Excluded Assets, the benefit of which is conveyed to Purchaser by the other Transaction Documents; in each case except where the failure to so conduct the Business would not materially and adversely affect the Business.

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SECTION 3.08    Intellectual Property. (a) To the Seller’s Knowledge, (i) the use of the Business Intellectual Property and the conduct of the Business by Dow does not infringe, any valid or unexpired Intellectual Property of any other Person in any country; (ii) a Dow Entity is the sole and exclusive owner of each item of Registered Owned Intellectual Property, free and clear of any Encumbrances other than Permitted Encumbrances; and (iii) no Person is engaging, in any activity that, in any material respect, infringes any Owned Intellectual Property.
(b)    As of the date of this Agreement, there is no Action initiated by any other Person pending or, to the Seller’s Knowledge, threatened in writing against Dow concerning the matters described in Section 3.08(a)(i); provided, that any Action that has been initiated but with respect to which process or other comparable notice has not been served on or delivered to Dow shall be deemed to be “threatened” rather than “pending”.
(c)    To the Seller’s Knowledge, all Registered Owned Intellectual Property and Registered Shared Intellectual Property are in full force and effect and have not been declared invalid or unenforceable by any court of competent jurisdiction, and all pending patent, trademark and copyright applications of the Owned Intellectual Property are actively pending with the applicable governmental agency.
(d)    To the Seller’s Knowledge, there are no pending oppositions, cancellations, invalidity proceedings, interferences or reexamination proceedings with respect to the Registered Owned Intellectual Property, and to the Knowledge of the Seller, no such proceedings are threatened.
(e)    To the Seller’s Knowledge, no Person that is not an Affiliate of the Seller, has been granted any right or license under any Owned Intellectual Property or Shared Intellectual Property by the Seller or its Affiliates to manufacture and sell catalysts or donor products used in, developed or under development for use in, Polypropylene manufacturing processes, including the In‑Scope Products.
(f)    Notwithstanding anything in this Agreement to the contrary, the representations and warranties contained in this Section 3.08 are the only representations and warranties being made by the Seller in this Agreement with respect to the validity of, the right to register, or any activity that constitutes, or otherwise relates to, infringement, misappropriation or other violation of, Intellectual Property.
SECTION 3.09    Real Property. (a) Schedule 1.01(e) sets forth the address of each parcel of Leased Real Property and the identity of the lessor, lessee and current occupant (if different from lessee) of each such parcel of Leased Real Property. Assuming good fee title was vested in the applicable lessor at the time of the creation of the lease, a Dow Entity has a valid and binding leasehold interest in each parcel of Leased Real Property (other than the Norco Property, which is covered by Section 3.09(c)), free and clear of all Encumbrances other than Permitted Encumbrances. The Leased Real Property and the Norco Facility has direct access to a public road or street or has access to a public road or street via a servitude, easement, right-of-

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way or other interest in favor of a Dow Entity or benefitting the Leased Real Property or Norco Facility.
(b)    A Dow Entity is the tenant, the licensor or the owner of each of the Ancillary Locations.
(c)    Immediately prior to the Closing, assuming that good fee title was vested in the applicable grantor at the time of the creation of such interest, Dow will have good and valid title to, ownership interest in, servitude interest in, rights to use or licenses in, the Transferred Assets (other than assets that are insignificant in relation to the operation of the catalyst plant) that are located at the Norco Facility (including Tangible Property, Norco Property and Leased Real Property) and in each case, free and clear of Encumbrances except for Permitted Encumbrances.
SECTION 3.10    Employee Benefit Matters. (a) U.S. Dow Plans and Material Documents. Section 3.10(a) of the Seller Disclosure Schedule lists all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended), all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other material benefit plans, programs or arrangements, and all employment, termination, severance or other material contracts or agreements, to which a Dow Entity is a party, with respect to which a Dow Entity has any obligation or which are maintained, contributed to or sponsored by a Dow Entity for the benefit of any U.S. Employee (collectively, the “U.S. Dow Plans”). The Seller has made available to the Purchaser a true and complete copy of each U.S. Dow Plan.
(b)    Non U.S. Dow Plans and Material Documents. Section 3.10(b) of the Seller Disclosure Schedule lists all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other material benefit plans, programs or arrangements, and all employment, termination, severance or other material contracts or agreements, to which a Dow Entity is a party, with respect to which a Dow Entity has any obligation or which are maintained, contributed to or sponsored by a Dow Entity for the benefit of any Non U.S. Employee (other than statutory plans) (collectively, the “Non U.S. Dow Plans”). A true and complete copy of each Non U.S. Dow Plan has been made available to the Purchaser.
SECTION 3.11    Labor Matters. Section 3.11 of the Seller Disclosure Schedule lists each collective bargaining agreement that is applicable to the current Business Employees to which a Dow Entity is a party. With respect to the Business and the Business Employees, (a) there are no strikes or lockouts with respect to any Business Employees pending, or to the Knowledge of the Seller, threatened; (b) to the Knowledge of the Seller, there is no union organizing effort pending or threatened against the Business; (c) there is no material unfair labor practice, labor dispute (other than routine individual grievances) or labor arbitration proceeding pending or, to the Knowledge of the Seller, threatened against the Business; and (d) there is no material slowdown, or work stoppage in effect or, to the Knowledge of the Seller, threatened with respect to the Business Employees.

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SECTION 3.12    Taxes. (a) all material Tax Returns required to have been filed by, or with respect to, the Business have been timely filed (taking into account any extension of time to file granted or obtained); (b) all material Taxes shown to be payable on such Tax Returns have been paid or will be timely paid; (c) no deficiency for any material amount of Tax has been asserted or assessed by a Governmental Authority in writing against the Seller to the extent related to the Business that has not been satisfied by payment, settled or withdrawn; and (d) there are no material Tax liens on any of the Transferred Assets (other than Permitted Encumbrances).
SECTION 3.13    Material Contracts. (a) Section 3.13(a) of the Seller Disclosure Schedule lists each of the following Transferred Contracts and Partially Transferred Contracts (such contracts and agreements being “Material Contracts”):
(i)    contracts for the purchase of products or for the receipt of services, the performance of which: (A) involved consideration or payments by Dow in excess of $500,000 in the calendar year ended December 31, 2011 or December 31, 2012, or (B) would reasonably be expected to involve consideration or payments by Dow in excess of $500,000 in the calendar year ended December 31, 2013;
(ii)    contracts for the furnishing of products or services by Dow, the performance of which (A) involved consideration or payments by such customers in excess of $500,000 in the calendar year ended December 31, 2011 or December 31, 2012, or (B) would reasonably be expected to involve consideration or payments by such customers in excess of $500,000 in the calendar year ended December 31, 2013;
(iii)    Transferred IP Agreements;
(iv)    contracts concerning the establishment or operation of a partnership, joint venture or limited liability company or other legal entity;
(v)    contracts under which there has been imposed a security interest on any of the assets, tangible or intangible, of the Business; and
(vi)    the lease agreements and service and servitude agreements of the Business that pertain to each parcel of Leased Real Property.
(b)    Each Material Contract, is valid and binding on the applicable Dow Entity and, to the Knowledge of the Seller, the counterparty thereto, and is in full force and effect, subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to or affecting creditors’ rights generally and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity) except to the extent a Material Contract expires after the date hereof in accordance with its terms or is after the date hereof terminated or cancelled by the counterparty thereto in accordance with its terms. No Dow Entity is in material breach of, or material default under, any Material Contract to which it is a party.

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SECTION 3.14    Environmental Matters. (a) (i) In all material respects, Dow is conducting the Business in compliance with Environmental Law; (ii) in connection with the Business, Dow has obtained and is in compliance in all material respects with all Environmental Permits that are necessary to conduct the Business; (iii) in connection with the Business, Dow has not, to the Seller’s Knowledge, Released any Hazardous Materials that require any Remedial Action; and (iv) there is no Action pending or, to the Seller’s Knowledge, threatened, in connection with the Business, against Dow that relates to any violation or alleged violation of, or any Liability or alleged Liability under, any Environmental Law.
(b)    Notwithstanding anything in this Agreement to the contrary, the representations and warranties contained in this Section 3.14 are the only representations and warranties being made by the Seller in this Agreement with respect to compliance with or Liability under Environmental Laws or Environmental Permits or with respect to any environmental, health or safety matter related in any way to the Business, the Leased Real Property or this Agreement or its subject matter.
SECTION 3.15    Sufficiency of Assets. (a) The Transferred Assets and the employment of the Business Employees, together with the services and assets to be provided, the licenses to be granted and the other arrangements contemplated by the Transaction Documents, shall, in the aggregate, constitute all of the rights, property and assets necessary to conduct the Business immediately after the Closing in all material respects as conducted by Dow as of the date of this Agreement (including for purposes of determining the Business as conducted by Dow as of the date of this Agreement, the portion of the Excluded Assets that is used by the Business as of the date of this Agreement).
(b)    The Tangible Property is in good working order in all material respects except for ordinary wear and tear and routine maintenance, repairs and turnarounds.
SECTION 3.16    Brokers. Except for Citigroup Global Markets Inc., no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the other Transaction Documents based upon arrangements made by or on behalf of the Seller. The Seller shall be solely responsible for the fees and expenses of Citigroup Global Markets Inc.
SECTION 3.17    Disclaimer of the Seller. (a) NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE III, NONE OF THE SELLER OR ITS REPRESENTATIVES MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE BUSINESS, ANY OF THE TRANSFERRED ASSETS OR THE ASSUMED LIABILITIES. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE III, THE SELLER AND ITS REPRESENTATIVES HAVE NOT MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO (I) THE EXCLUDED ASSETS OR THE EXCLUDED LIABILITIES; (II) MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE OR PURPOSE AND ALL OTHER WARRANTIES ARISING UNDER THE UNIFORM COMMERCIAL CODE

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(OR SIMILAR LAWS); (III) THE OPERATION OF THE BUSINESS BY THE PURCHASER AFTER THE CLOSING; OR (IV) THE PROBABLE SUCCESS, PROFITABILITY OR PROSPECTS OF THE BUSINESS AFTER THE CLOSING AND ANY SUCH REPRESENTATION OR WARRANTY IS HEREBY EXPRESSLY DISCLAIMED.
(b)    NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, EXCEPT FOR INFORMATION TO THE EXTENT PROVIDED IN THIS ARTICLE III, NONE OF THE SELLER OR ITS REPRESENTATIVES WILL HAVE OR BE SUBJECT TO ANY LIABILITY OR INDEMNIFICATION OBLIGATION TO THE PURCHASER, ITS REPRESENTATIVES OR TO ANY OTHER PERSON RESULTING FROM THE DISTRIBUTION TO THE PURCHASER OR ITS REPRESENTATIVES, OR THE PURCHASER’S OR ITS REPRESENTATIVES’ USE OF, ANY INFORMATION RELATING TO THE BUSINESS, INCLUDING THE CONFIDENTIAL INFORMATION MEMORANDUM AND ANY INFORMATION, DOCUMENTS, PROJECTIONS, FORECASTS, BUSINESS PLANS, OFFERING MATERIALS OR OTHER MATERIAL MADE AVAILABLE TO THE PURCHASER OR ITS REPRESENTATIVES OR POTENTIAL FINANCING SOURCES, WHETHER ORALLY OR IN WRITING, IN CERTAIN “DATA ROOMS,” MANAGEMENT PRESENTATIONS, FUNCTIONAL “BREAK‑OUT” DISCUSSIONS, “EXPERT SESSIONS,” SITE TOURS OR VISITS, DILIGENCE CALLS OR MEETINGS OR RESPONSES TO QUESTIONS SUBMITTED ON BEHALF OF THE PURCHASER OR ITS REPRESENTATIVES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
ARTICLE IV    
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller, subject to such exceptions as are disclosed in the Purchaser Disclosure Schedule, as follows:
SECTION 4.01    Organization, Authority and Qualification of the Covered Purchaser Entities. The Purchaser is a corporation duly organized, validly existing and, to the extent such concept is recognized in Connecticut, in good standing under the laws of Connecticut. Each of the Purchaser and each Purchaser Entity that is a party to a Transaction Document (a “Covered Purchaser Entity”) is a legal entity, duly organized, validly existing and in good standing under the applicable laws of the jurisdiction of its formation (to the extent such concept is recognized under the applicable laws of the jurisdiction of its formation). The Purchaser and each Covered Purchaser Entity has all necessary corporate power and authority to enter into this Agreement and each Transaction Document, to which it is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Purchaser of this Agreement and by each Covered Purchaser Entity of the other Transaction Documents, to which it is a party, the performance by the Purchaser of its obligations hereunder and by each Covered Purchaser Entity thereunder and the consummation by the Purchaser and each Covered Purchaser Entity of the transactions contemplated hereby and thereby have been duly authorized by all requisite action

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on the part of the Purchaser or such Covered Purchaser Entity. This Agreement has been, and upon their execution, the other Transaction Documents, to which the Purchaser or a Covered Purchaser Entity is a party, will be, duly executed and delivered by the Purchaser or such Covered Purchaser Entity, and (assuming due authorization, execution and delivery by a Covered Dow Entity) this Agreement constitutes, and upon their execution, each of the other Transaction Documents, to which the Purchaser or a Covered Purchaser Entity is a party, will constitute, a legal, valid and binding obligation of the Purchaser or such Covered Purchaser Entity, enforceable against the Purchaser or such Covered Purchaser Entity in accordance with their respective terms, subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to or affecting creditors’ rights generally and subject to the effect of general principles of equity (regardless of whether considered in a proceeding at law or in equity).
SECTION 4.02    No Conflict. Assuming that all consents, approvals, authorizations and other actions described in Section 4.03 below or set forth in Section 4.03 of the Purchaser Disclosure Schedule have been obtained, all filings and notifications listed in Section 4.03 below or in Section 4.03 of the Purchaser Disclosure Schedule have been made, any applicable waiting period has expired or been terminated, and except as may result from any facts or circumstances relating solely to the Seller or its Affiliates, the execution, delivery and performance by the Purchaser of this Agreement and by each of the Covered Purchaser Entities of the Transaction Documents to which it is a party, do not (a) violate, conflict with or result in the breach of any provision of the certificate of incorporation or bylaws (or similar organizational documents) of the Purchaser or such Covered Purchaser Entity; (b) conflict with or violate any Law or Governmental Order applicable to the Purchaser or such Covered Purchaser Entity; or (c) conflict with, result in any breach of, constitute a default (or an event which, with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, acceleration or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which the Purchaser is a party, except, in the case of clauses (b) and (c), as would not materially and adversely affect the ability of the Purchaser to carry out its obligations under, and to consummate the transactions contemplated by, this Agreement.
SECTION 4.03    Governmental Consents and Approvals. The execution, delivery and performance by the Purchaser of this Agreement does not require any consent, approval, authorization or other order or declaration of, action by, filing with or notification to, any Governmental Authority, other than (a) compliance with, and filings under, the HSR Act and any other applicable antitrust Laws; (b) where the failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not prevent or materially delay the consummation by the Purchaser of the transactions contemplated by this Agreement; or (c) as a result of any facts or circumstances relating to the Seller or any of its Affiliates.
SECTION 4.04    Necessary Funds. The Purchaser has and will have available on the Closing Date all funds necessary to (a) pay the Purchase Price and all other amounts payable hereunder and under any other Transaction Document; (b) pay any fees and

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expenses payable by the Purchaser in connection with the transactions contemplated hereby and by any other Transaction Document; and (c) satisfy any of its other payment obligations hereunder and under any other Transaction Document.
SECTION 4.05    Bankruptcy Court Approval. (b) On August 27, 2013, the United States Bankruptcy Court for the District of Delaware entered an order (the “Approval Order”) authorizing the Purchaser to enter into this Agreement and the other Transaction Documents and to consummate all transactions contemplated by this Agreement and the other Transaction Documents. No creditor, stakeholder, or party in interest objected to the entry of the Approval Order and the Approval Order is now a final order. The Purchaser is in compliance with the terms of the Approval Order and no further bankruptcy court authorization or official committee or future claims representative approval is necessary to enter into and to consummate the transactions contemplated by this Agreement and the other Transaction Documents.
(c)    Except for matters related to In re: W. R. Grace & Co., et al., under chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware, Case No. 01 01139 (JKF) (Jointly Administered), upon the consummation of the transactions contemplated by this Agreement and the other Transaction Documents (i) the Purchaser will not be insolvent; (ii) the Purchaser will not be left with unreasonably small capital; (iii) the Purchaser will not have incurred debts or other Liabilities beyond its ability to pay such debts or other Liabilities as they mature; and (iv) the capital of the Purchaser will not be impaired.
SECTION 4.06    Litigation. As of the date of this Agreement, there is no Action by or against the Purchaser or any of its Affiliates pending or, to the knowledge of the Purchaser, threatened in writing before any Governmental Authority, that would materially and adversely affect the legality, validity or enforceability of this Agreement or would prevent or materially delay the consummation of the transactions contemplated hereby.
SECTION 4.07    Brokers. Except for Blackstone Advisory Partners L.P., no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or the other Transaction Documents based upon arrangements made by or on behalf of the Purchaser. The Purchaser shall be solely responsible for the fees and expenses of Blackstone Advisory Partners L.P.
ARTICLE V    
ADDITIONAL AGREEMENTS
SECTION 5.01    Conduct of Business Prior to the Closing. From the date of this Agreement and until the occurrence of either the Closing Date or the date on which this Agreement is terminated pursuant to Section 10.01, except as set forth in Section 5.01 of the Seller Disclosure Schedule, as contemplated, permitted or required by this Agreement, the other Transaction Documents or required by applicable Law, as required by the terms of any Material Contract or as the Purchaser shall otherwise consent to in writing (such consent not to be unreasonably withheld, delayed or conditioned), (a) the Seller shall, and shall cause its

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Subsidiaries to, use commercially reasonable efforts to (i) conduct the Business and operate the assets and properties used in conducting the Business in the ordinary course in all material respects; and (ii) preserve intact in all material respects the business organization, assets, rights and goodwill of the Business; and (b) the Seller shall not, and shall cause its Subsidiaries not to, to the extent relating to the Business:
(i)    sell, lease, transfer or otherwise dispose of (other than, in the ordinary course of business, inventory, or obsolete or replaced assets) or permit or allow any of the material Transferred Assets (whether tangible or intangible) to be subjected to any new Encumbrance, other than Permitted Encumbrances;
(ii)    change any method of accounting or accounting practice or policy used by the Seller as it relates to the Business, other than such changes as are required by GAAP or a Governmental Authority;
(iii)    other than in the ordinary course of business, grant or announce any increase in the salaries, bonuses or other benefits payable by Dow to any of the Business Employees, other than (A) as required by Law, or (B) pursuant to any plans, programs or agreements existing on the date hereof;
(iv)    fail to exercise any rights of renewal with respect to any Leased Real Property or any Environmental Permit that by its terms would otherwise expire;
(v)    terminate or cancel any Material Contract including any UNIPOL Polypropylene Process technology license;
(vi)    make any material modification of royalty terms including the acceleration of any payment, conversion of any royalty obligations to a lump sum or buy out of any UNIPOL Polypropylene Process technology license under any Material Contract, including any UNIPOL Polypropylene Process technology license;
(vii)    other than in the ordinary course of business, enter into any UNIPOL Polypropylene Process technology license, Material Contract or agreement which, if entered into prior to the date hereof, would have been a Material Contract;
(viii)    discharge, compromise, satisfy, waive or settle, or offer or propose to discharge, compromise, satisfy, waive or settle, any Action that is material to the conduct of the Business, taken as a whole;
(ix)    provide any material confidential information regarding the Business to any third party, except in the ordinary course of business consistent with past practice;

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(x)    grant any rights to retention, severance or termination pay to, or enter into any material new (or materially amend any existing) employment, retention, severance or other agreement or arrangement with any director, officer, employee, agent or consultant of the Business; or
(xi)    agree to take any of the actions specified in Sections 5.01(i) – (x).
Notwithstanding anything to the contrary in this Agreement, (A) Dow shall be permitted to declare and pay any dividends or make distributions or cash transfers (including in connection with any “cash sweep” arrangements) prior to the Closing Date; (B) nothing contained in this Agreement shall be construed to give to the Purchaser directly or indirectly, rights to control or direct the Business’ operations prior to the Closing; and (C) prior to the Closing, Dow shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of the operations of the Business.
SECTION 5.02    Access to Information. (e) From the date of this Agreement until the Closing, upon reasonable notice, the Seller shall (i) afford the Purchaser and its authorized Representatives reasonable access to the offices, Implementation Employees, properties and books and records of the Business; (ii) furnish to the Representatives of the Purchaser such additional available information regarding the Business (or copies thereof), as the Purchaser may from time to time reasonably request; and (iii) provide the additional access and information provided for in Schedule 5.02; provided, that (A) each party hereto shall bear its own out of pocket expenses in connection with any such access or furnishing of information and any such access or furnishing of information shall be conducted during normal business hours, under the supervision of Dow’s personnel and in such a manner as not to interfere with the normal operations of the Business; (B) all requests for access pursuant to this Section 5.02 shall be made in writing and shall be directed to and coordinated with a person or persons designated by the Seller in writing; and (C) the Purchaser shall not, and shall cause its Representatives not to, contact any of the employees customers, distributors or suppliers of any Dow Entity in connection with the transactions contemplated by this Agreement and the other Transaction Documents, whether in person or by telephone, mail, or other means of communication, without the specific prior written authorization of the Seller, which shall not be unreasonably withheld. Notwithstanding anything to the contrary in this Agreement, the Seller shall not be required to provide any access or disclose any information to the Purchaser or its Representatives if such disclosure could, in the Seller’s sole discretion, (w) cause competitive harm to the Business or Dow; (x) jeopardize, or result in a loss or waiver of, any attorney‑client or other legal privilege; (y) contravene any applicable Law, fiduciary duty or agreement; or (z) result in disclosure of any proprietary information or trade secrets of any Dow Entity or third parties. When accessing any of Dow’s properties, the Purchaser shall cause its Representatives to, comply with all of Dow’s safety and security requirements for the applicable property. Notwithstanding anything to the contrary in this Agreement, (I) in no event shall Dow be required to provide any information (other than the Transferred Environmental Regulatory Information) relating to any Excluded Assets or any Excluded Liabilities; and (II) neither the Purchaser nor any of its Representatives shall be allowed to sample or analyze any soil or groundwater or other environmental media, or

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any building material, without the prior written consent of the Seller, which consent may be withheld in the sole discretion of the Seller.
(f)    The Seller shall provide written notice to the Purchaser of any New License Agreement within ten (10) Business Days of Dow’s entry into such New License Agreement, but in any event, prior to the Closing Date.
(g)    In order to facilitate the resolution of any claims made against or incurred by Dow relating to the Business and for purposes of compliance with securities, environmental, employment and other Laws, until the later of the seventh anniversary of the Closing or the expiration of the relevant period of the applicable statute of limitations (including any extension thereof), the Purchaser shall, and shall cause the Purchaser Entities to, (i) retain the books and records and financial and operational data relating to the Business for periods prior to the Closing; and (ii) upon reasonable notice, afford the Representatives of Dow reasonable access (including the right to make, at Dow’s expense, copies), during normal business hours, to such books and records.
(h)    In order to facilitate the resolution of any claims made against, or incurred by, any of the Purchaser Entities relating to the Business and for purposes of compliance with securities, environmental, employment and other Laws, until the later of the seventh anniversary of the Closing or the expiration of the relevant period of the applicable statute of limitations (including any extension thereof), the Seller shall (i) retain the books and records and financial and operational data relating to the Business relating to periods prior to the Closing which are not Transferred Assets and shall not otherwise have been made available to any of the Purchaser Entities; and (ii) upon reasonable notice, afford the Representatives of the Purchaser reasonable access (including the right to make, at the Purchaser’s expense, copies), during normal business hours, to such books and records.
SECTION 5.03    Confidentiality. The terms of the letter agreement, dated as of June 23, 2013 (the “Confidentiality Agreement”), between the Seller and the Purchaser are hereby incorporated herein by reference and shall continue in full force and effect until the Closing and shall survive the Closing and remain in full force and effect until their expiration in accordance with the terms of the Confidentiality Agreement; provided, however, that, upon the Closing, the confidentiality obligations contained in the Confidentiality Agreement shall terminate in respect of that portion of the Evaluation Material (as defined in the Confidentiality Agreement) exclusively relating to the Business and the transactions contemplated by this Agreement. If this Agreement is, for any reason, terminated prior to the Closing, the Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with its terms.
SECTION 5.04    Regulatory and Other Authorizations; Notices and Consents. (d) The parties shall, and shall cause their Affiliates to, (i) promptly seek to obtain all authorizations, consents, orders and approvals of all Governmental Authorities that are or may become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the other Transaction Documents; (ii) cooperate fully with each other in seeking to obtain all such authorizations, consents, orders and approvals; and

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(iii) provide such other information to any Governmental Authority as such Governmental Authority may reasonably request in connection herewith. Each party hereto agrees to, and shall cause its respective Affiliates to, promptly make its filing pursuant to the HSR Act with respect to the transactions contemplated by this Agreement and the other Transaction Documents and to supply as promptly as practicable to the appropriate Governmental Authorities any additional information and documentary material that may be requested pursuant to the HSR Act. Each party hereto agrees to, and shall cause its respective Affiliates to, make as promptly as practicable its respective filings and notifications, if any, under any other applicable antitrust, competition or trade regulation Law and to supply as promptly as practicable to the appropriate Governmental Authorities any additional information and documentary material that may be requested pursuant to the applicable antitrust, competition or trade regulation Law. Without limiting the generality of the foregoing, if the Purchaser concludes that a filing in Korea is required, the Purchaser may make such filing, and the Seller shall provide any reasonable assistance requested by the Purchaser in the preparation of such filing. The Purchaser shall, or shall cause its Subsidiaries to, pay all fees or make other payments required by applicable Law to any Governmental Authority in order to obtain any such authorizations, consents, orders or approvals.
(e)    Without limiting the generality of the Purchaser’s undertaking pursuant to Section 5.04(a), the Purchaser shall, and shall cause each of its Affiliates to, take any and all steps necessary to avoid or eliminate each and every impediment under any antitrust, competition or trade regulation Law that may be asserted by any antitrust or competition Governmental Authority or any other party so as to enable the parties hereto to close the transactions contemplated hereby and by the other Transaction Documents as promptly as practicable, and in any event prior to the Termination Date, including proposing, negotiating, committing to and effecting, by consent decree, hold separate orders or otherwise, the sale, divestiture or disposition of its assets, properties or businesses or of the assets, properties or businesses to be acquired by it pursuant hereto, and the entrance into such other arrangements, as are necessary or advisable in order to effect the dissolution of, any injunction, temporary restraining order or other order in any suit or proceeding, which would otherwise have the effect of materially delaying or preventing the consummation of the transactions contemplated hereby and by the other Transaction Documents. In addition, the Purchaser shall, and shall cause its Affiliates to, defend through litigation on the merits any Action by any party in order to avoid entry of, or to have vacated or terminated, any decree, order or judgment (whether temporary, preliminary or permanent) that would prevent the Closing prior to the Termination Date; provided, however, that (i) the obligation of the Purchaser set forth in this sentence shall in no way limit the obligation of the Purchaser to take any and all steps necessary to eliminate each and every impediment under any antitrust, competition or trade regulation Law to close the transactions contemplated hereby prior to the Termination Date, and (ii) nothing in this Section 5.04(b) shall prevent the Purchaser from opposing any Action by any antitrust or competition Governmental Authority or other party challenging the transactions contemplated by this Agreement and the other Transaction Documents.
(f)    Each party to this Agreement shall promptly notify the other party of any communication it or any of its Representatives receives from any Governmental Authority

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relating to the matters that are the subject of this Agreement and permit the other party to review in advance any proposed communication by such party to any Governmental Authority. None of the parties to this Agreement shall agree to participate in any meeting with any Governmental Authority in respect of any filings, investigation (including any settlement of an investigation), litigation or other inquiry unless it consults with the other party in advance and, to the extent permitted by such Governmental Authority, gives the other party the opportunity to attend and participate at such meeting. Each party hereto shall, and shall cause its Representatives to, coordinate and cooperate fully with the other party in exchanging such information and providing such assistance as the other party hereto may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods, including under the HSR Act. Each party to this Agreement shall, and shall cause its Representatives to, provide the other party with copies of all correspondence, filings or communications between them or any of their respective Representatives, on the one hand, and any Governmental Authority or members of its staff, on the other hand, with respect to this Agreement and the transactions contemplated by this Agreement and the other Transaction Documents; provided, however, that materials may be redacted (i) to remove references concerning the valuation of the Business; (ii) as necessary to comply with contractual arrangements or applicable Law; and (iii) as necessary to address reasonable attorney‑client or other privilege or confidentiality concerns.
(g)    The Purchaser shall not, and shall cause its Affiliates not to, enter into any transaction, or any agreement to effect any transaction (including any merger or acquisition) that might reasonably be expected to make it more difficult, or to increase the time required, to (i) obtain the expiration or termination of the waiting period under the HSR Act, or any other applicable antitrust, competition or trade regulation Law, applicable to the transactions contemplated by this Agreement and the other Transaction Documents; (ii) avoid the entry of, the commencement of litigation seeking the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order that would materially delay or prevent the consummation of the transactions contemplated hereby and by the other Transaction Documents; or (iii) obtain all authorizations, consents, orders and approvals of Governmental Authorities necessary for the consummation of the transactions contemplated by this Agreement.
SECTION 5.05    Retained Names and Marks. (h) The Purchaser hereby acknowledges that all right, title and interest in and to the “DOW”, “DOW CHEMICAL”, “THE DOW CHEMICAL COMPANY”, “ROHM AND HAAS”, “UNION CARBIDE” and “UNION CARBIDE CORPORATION” names, together with all variations and acronyms thereof and all trademarks, service marks, Internet domain names, trade names, trade dress, company names and other identifiers of source or goodwill containing, incorporating or associated with any of the foregoing, including the Dow Diamond logo (i.e., ) (collectively, the “Retained Names and Marks”), are owned exclusively by the Seller or its Affiliates, and that, except as expressly provided below, any and all right of the Business to use the Retained Names and Marks shall terminate as of the Closing and shall immediately revert to the Seller, along with any and all goodwill associated therewith. Each of the Purchaser and its Affiliates further acknowledge that neither the Purchaser nor any of its Affiliates is acquiring any rights, to use the Retained Names and Marks, except for the rights expressly provided herein.

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(i)    The Purchaser Entities shall, for a period of 180 days after the date of the Closing, be entitled to use, solely in connection with the operation of the Business as operated immediately prior to the Closing, all of the existing stocks of signs, letterheads, labels, office forms, packaging, invoice stock, advertisements and promotional materials, inventory and other documents and materials (“Existing Stock”) that are included in the Transferred Assets and contain the Retained Names and Marks, after which period the Purchaser shall, and shall cause each Purchaser Entity to, remove or obliterate all Retained Names and Marks from such Existing Stock or cease using such Existing Stock.
(j)    Except as expressly provided in this Section 5.05, no other right to use the Retained Names and Marks is granted hereunder by Dow to the Purchaser or any of its Affiliates whether by implication or otherwise, and nothing hereunder permits the Purchaser or any of its Affiliates to use the Retained Names and Marks in any manner other than in connection with Existing Stock. The Purchaser shall, and shall cause each Purchaser Entity to, ensure that all uses of the Retained Names and Marks as provided in this Section 5.05 shall be only with respect to goods and services of a level of quality equal to or greater than the quality of goods and services with respect to which the Retained Names and Marks were used in the Business prior to the Closing. Any and all goodwill generated by the use of the Retained Names and Marks under this Section 5.05 shall inure solely to the benefit of Dow. In no event shall the Purchaser or any of its Affiliates use the Retained Names and Marks hereunder in any manner that may damage or tarnish the reputation of Dow or the goodwill associated with the Retained Names and Marks.
(k)    The Purchaser agrees that Dow shall have no responsibility for claims by third parties arising out of, or relating to, the use by the Purchaser and its Affiliates of any Retained Names and Marks after the Closing. In addition to any and all other available remedies, the Purchaser shall indemnify and hold harmless Dow and its Representatives, successors and assigns, from and against any and all such claims that may arise out of the use of the Retained Names and Marks by the Purchaser or any of its Affiliates (i) in accordance with the terms and conditions of this Section 5.05, other than such claims that the Retained Names and Marks infringe the Intellectual Property rights of any third party; or (ii) in violation of or outside the scope permitted by this Section 5.05. Notwithstanding anything in this Agreement to the contrary, the Purchaser hereby acknowledges that in the event of any breach or threatened breach of this Section 5.05, the Seller, in addition to any other remedies available to it, shall be entitled to a preliminary injunction, temporary restraining order or other equivalent relief restraining the Purchaser or any of its Affiliates from any such breach or threatened breach.
SECTION 5.06    [Reserved].
SECTION 5.07    Insurance. From and after the Closing Date, the Transferred Assets and the Business shall cease to be insured by Dow’s insurance policies or by any of its self‑insured programs. For the avoidance of doubt, Dow shall retain all rights to control its insurance policies and programs, including the right to exhaust, settle, release, commute, buy back or otherwise resolve disputes with respect to any of its insurance policies and programs notwithstanding whether any such policies or programs apply to any Liabilities of the Purchaser Entities. The Purchaser agrees to arrange for its own insurance policies with respect to

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the Business and the Purchaser Entities covering all periods and agrees not to seek, through any means, to benefit from any Dow Entity’s insurance policies that may provide coverage for claims relating in any way to the Business or the Transferred Assets prior to the Closing.
SECTION 5.08    Release from Seller Credit Support Instruments. The parties shall, and shall cause their Subsidiaries to, take or cause to be taken all reasonable best efforts to secure as of the Closing the unconditional release of each Dow Entity from the Seller Credit Support Instruments, including effecting such release by the Purchaser Entities providing guarantees or other credit support, so that the applicable Purchaser Entity shall be solely responsible for the obligations of the replacement for such Seller Credit Support Instruments; provided, however, that any such release or substitution must be effected pursuant to documentation reasonably satisfactory in form and substance to the Seller. If such release cannot be obtained as of the Closing, the parties hereto shall continue to use reasonable best efforts to obtain such release. The Purchaser shall not permit any Purchaser Entity to (a) renew or extend the term of; or (b) increase its obligations under, or transfer to a third party, any loan, contract or other obligation for which Dow is or could reasonably be expected to be liable under any Seller Credit Support Instrument. To the extent that Dow has performance obligations under any Seller Credit Support Instrument, the Purchaser shall, and shall cause a Purchaser Entity to, (i) if requested by the Seller, perform such obligations on behalf of Dow; and (ii) otherwise take such action as requested by the Seller so as to put the Seller or the applicable Dow Entity in the same position as if the Purchaser, or such Purchaser Entity, and not Dow, had performed or was performing such obligations. All out‑of‑pocket costs and expenses incurred in connection with the release or substitution of the Seller Credit Support Instruments shall be borne by the Purchaser Entities. From and after the Closing, the Purchaser shall indemnify the Seller and its Representatives for any and all Losses arising from, or relating to, the Seller Credit Support Instruments.
SECTION 5.09    Apportionment of Periodic Payments and Receipts. All periodic cash payments and receipts of the Business or related to the Transferred Assets or Assumed Liabilities, including rents, rates, royalties, refunds, commissions, expenses and other payments or receipts, shall be apportioned on a time basis, except with respect to (a) gas, electricity, telephone, water and other utilities charges, which shall be apportioned on a usage basis; and (b) rebates, which shall be apportioned based on sales quantities or other factors on which the value of the respective rebate is based, so that the part of the relevant payment or receipt that is attributable to the period ending on the Closing Date shall be for the account of Dow and such part of the relevant amount attributable to the period commencing immediately following the Closing Date shall be for the account of the applicable Purchaser Entity. No payment shall be made under this Section 5.09 to the extent the amount to which such payment relates (i) has been taken into account in the calculation of the Closing Date ARI Amount under Section 2.08; or (ii) is an amount payable or indemnifiable under any other provision of this Agreement, including Article VII or Article IX, or under any provision of the other Transaction Documents.
SECTION 5.10    Privileged Matters. (a) Each of the parties hereto acknowledges and agrees that the other party’s and its Subsidiaries’ attorney‑client privilege,

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attorney work‑product protection and expectation of client confidence involving any proposed sale of the Business or any other transaction contemplated by this Agreement or any of the Transaction Documents, and all information and documents covered by such privilege, protection or expectation shall be retained and controlled by the other party and its Subsidiaries, and may be waived only by the other party and its Subsidiaries, and the parties hereto further acknowledge that (i) such rights shall not be affected by consummation of the Closing; and (ii) in the event of a dispute between a party hereto or any of its Subsidiaries and a third party or any other circumstance in which a third party requests or demands that a party or any of its Subsidiaries produce privileged materials or attorney work‑product of the other party or any of its Subsidiaries (including the privileged materials and attorney work‑product covered by clause (ii) above), the party or Subsidiary receiving such demand or request shall assert, or cause its Subsidiary to assert, such attorney‑client privilege on behalf of the other party or its Subsidiary as applicable to prevent disclosure of privileged materials or attorney work‑product to such third party.
(b)    The parties hereto acknowledge and agree that the attorney‑client privilege, attorney work‑product protection and expectation of client confidence involving general business matters related to the Business and the Transferred Assets and arising prior to the Closing for the benefit of both Dow and the Purchaser Entities shall be subject to a joint privilege and protection between Dow, on the one hand, and the Purchaser Entities, on the other hand, and Dow and the Purchaser Entities shall have equal right to assert all such joint privilege and protection and no such joint privilege or protection may be waived by (i) Dow without the prior written consent of the Purchaser Entities; or (ii) by any of the Purchaser Entities without the prior written consent of Dow; provided, however, that any such privileged materials or protected attorney‑work product information, whether arising prior to, or after the Closing Date, with respect to any matter for which a party hereto has an indemnification obligation hereunder (that has not been waived), shall be subject to the sole control of such party, which shall be solely entitled to control the assertion or waiver of the privilege or protection, whether or not such information is in the possession of or under the control of such party. Notwithstanding the foregoing, the parties hereto acknowledge and agree that (A) Shearman & Sterling LLP and in‑house counsel of Dow represented only Dow and not the Purchaser and that any advice given by or communications with Shearman & Sterling LLP or in‑house counsel of Dow shall not be subject to any joint privilege and shall be owned solely by Dow, and (B) any outside counsel engaged by any Purchaser Entity and in‑house counsel of the Purchaser Entities represented only the Purchaser Entities and not Dow and that any advice given by, or communications with, any outside counsel engaged by the Purchaser Entities and in‑house counsel of the Purchaser Entities shall not be subject to any joint privilege and shall be owned solely by the Purchaser Entities.
SECTION 5.11    Further Covenants. (a) If elected by the Purchaser, the Purchaser may order and obtain a preliminary title report or title commitment for the Leased Real Property and shall thereupon deliver copies of the same to the Seller. The Seller shall provide all reasonable cooperation to the Purchaser (at no cost to the Seller) in the Purchaser’s efforts to obtain for the benefit of the Purchaser a title insurance policy for the Leased Real Property. The cost of obtaining the preliminary title report, the title commitment and the title insurance policy shall be borne by the Purchaser.

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(b)    After the date hereof and prior to the Closing Date, the Seller shall use commercially reasonable efforts, and after the Closing Date, the Purchaser shall use commercially reasonable efforts, to obtain from Shell Chemical Company or its assignee the exclusive personal servitude contemplated by Section 2 of the Catalyst Plant Expansion Servitude Issues Agreement, dated February 23, and March 2, 1999, between Union Carbide Corporation and Shell Oil Company the “Expansion Servitude”; provided, however, that notwithstanding anything herein to the contrary, the sole right of the Purchaser with respect to this Section 5.11(b), or related to the matters set forth in this Section 5.11(b) (including the absence of such Expansion Servitude), shall be the right to be indemnified for Expansion Servitude Losses pursuant to Section 9.02(d) and the Seller shall have no other Liabilities (including indemnification obligations) hereunder with respect thereto. Expansion Servitude Losses means Losses of the Purchaser incurred within the five (5) years after the Closing Date; provided, that Expansion Servitude Losses shall exclude any Losses that result from the non-compliance by the Purchaser with the covenants contained in this Section 5.11.
(c)    If after the Closing the Purchaser enters into an extension or amendment of the Catalysts Plant Electricity Services Agreement, effective November 1, 2004, by and between Shell Chemical LP (“Service Provider”) and Union Carbide Corporation (the “Electricity Services Agreement”), and the fixed cost fees set forth and as escalated or otherwise adjusted under such amended agreement (such amended agreement, the “Amended Electricity Services Agreement”) are greater than the Fixed Cost Fees as set forth and as escalated or otherwise adjusted prior to the effective date of the Amended Electricity Services Agreement in accordance with Schedule 1 to the Electricity Services Agreement, the Seller shall during the period from the date of such amendment until July 1, 2016 (the “Covered Period”) reimburse the Purchaser monthly (i) for the difference between such fixed cost fees; and (ii) for all reasonable costs incurred by the Purchaser during the Covered Period up to an amount of $1,000,000 if no electricity is provided to the Norco Facility solely because (A) the term of the Electricity Services Agreement has expired; (B) the applicable Purchaser Entity has not entered into an Amended Electricity Services Agreement; and (C) the Purchaser has not obtained electricity with respect to the Norco Facility from another service provider; provided, however, that notwithstanding anything herein to the contrary, (w) the reimbursement obligation set forth herein shall be the sole remedy of the Purchaser with respect to this Section 5.11(c), the Electricity Services Agreement, the Amended Electricity Services Agreement (or the absence thereof), and the other matters set forth in this Section 5.11(c) and the Seller shall have no other Liabilities (including indemnification obligations) under this Agreement with respect thereto, (x) after the Closing, (I) the Seller and its Representatives shall be entitled to participate in all negotiations (including meetings) (A) between the applicable Purchaser Entity and the Service Provider with respect to the amendment of the Electricity Services Agreement, or any alternative arrangement with a third party; or (B) in respect of the Expansion Servitude; (II) such amendment described in clauses (x)(I)(A) or (B) shall be made pursuant to documentation reasonably satisfactory to the Seller; and (III) the Purchaser shall, and shall cause its Representatives to, consult with the Seller and shall keep the Seller at all times informed with respect to all matters related to the Electricity Services Agreement, the amendment thereof, the Expansion Servitude and the other matters covered by this Section 5.11(c), (y) the Purchaser shall not be entitled to any payment under this Section 5.11(c), if the Purchaser has not used its

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reasonable best efforts to enter into the Amended Electricity Services Agreement prior to the expiration of the current term of the Electricity Services Agreement or to enter into a similar arrangement with an alternative service provider (such amendment or alternative arrangement shall include a term that expires no earlier than the end of the Covered Period and be on terms reasonably acceptable to the Seller), (z) nothing set forth in this Agreement shall prohibit or restrict the Seller from entering into an amendment to the Electricity Services Agreement or from obtaining the Expansion Servitude prior to the Closing.
SECTION 5.12    Further Action. (c) Except as otherwise provided in this Agreement, the parties hereto shall, and shall cause their respective Affiliates to, use commercially reasonable efforts to take, or cause to be taken, all appropriate action, to do, or cause to be done, and to assist and cooperate with the other party hereto in doing, all things necessary, proper or advisable under applicable Law (other than with respect to the matters covered in Section 5.04) to execute and deliver the Transaction Documents and such other documents and other papers as may be required to carry out the provisions of this Agreement and to consummate and make effective the transactions contemplated by this Agreement. The parties hereto hereby acknowledge and agree that the Transaction Documents, that are identified on Schedule 1.01(k), are in agreed form and shall not be the subject of further change or negotiation, except to correct manifest errors or to ensure consistency of terms of Transaction Documents dealing with the same subject matter and the creation or completion of exhibits or schedules thereto, and none of such changes will alter fundamental economic terms, including the scope, consideration, liabilities or risk allocation.
(d)    The parties hereto shall, and shall cause their respective Affiliates to, use commercially reasonable efforts to take, or cause to be taken, all appropriate action to transfer, and to assist and cooperate with the other party hereto in so transferring, any Transferred Permit or Environmental Permit from the Seller to the Purchaser and with respect to any such permit that by its terms or pursuant to applicable Environmental Law may not be transferred, the Seller shall cooperate, at the Purchaser’s expense, with the Purchaser in obtaining a replacement permit.
(e)    Subject to Section 2.03(b), from time to time after the Closing, without additional consideration, each party hereto shall, and shall cause its Affiliates to, execute and deliver such further instruments and take such other action as may be necessary or is reasonably requested by the other party hereto to make effective the transactions contemplated by this Agreement and the other Transaction Documents. Without limiting the foregoing, upon reasonable request of a party hereto, the other party shall, and shall cause its Affiliates to, execute, acknowledge and deliver all such further assurances, deeds, assignments, powers of attorney and other instruments and papers as may be required for the transfer to the Purchaser Entities ownership of the Transferred Assets, subject to Permitted Encumbrances, and the assumption by the Purchaser Entities of the Assumed Liabilities, as contemplated by this Agreement.
(f)    To the extent the confidentiality agreements entered into by the Seller during the six (6) month period prior to the date hereof in connection with the potential sale of

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the Business (the “Auction Agreements”) relate to the Business, the Seller shall, after the Closing Date and as reasonably requested by the Purchaser, use commercially reasonable efforts (including commencing litigation at the Purchaser’s expense) to enforce the provisions of such confidentiality agreements. After the Closing Date, and only to the extent permitted by each such Auction Agreement as determined in good faith by the Seller, the Seller shall provide the names of the counterparties to the Auction Agreements that received access to the electronic data room that was established in connection with the potential sale of the Business.
(g)    Dow shall provide the Purchaser with such available information and documentation of Dow relating to the Business and the Transferred Assets as the Purchaser may reasonably request in connection with the preparation of the audited financial statements of W. R. Grace & Co. and its Subsidiaries as at and for the year ended December 31, 2013. Dow shall make its employees reasonably available on a mutually convenient basis to provide explanations of any documents or information provided under this Section 5.12(e).  The Purchaser will reimburse the Seller for any reasonable out-of-pocket expenses incurred in connection with the foregoing.
(h)    After the date hereof and prior to the Closing, the Seller shall provide the Purchaser Entities with such cooperation, information and documentation of Dow (provided, that the Seller may redact such information and documentation or establish a “clean room” or similar environment) to assist the Purchaser in its assessment as to whether the Purchaser Entities are required to file audited financial statements for the year ended December 31, 2012. Dow shall make its employees reasonably available on a mutually convenient basis to provide explanations of any documents or information provided under this Section 5.12(f). If the Purchaser is required to include financial statements of the Business in a current report filed on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, (i) the Seller shall engage its independent auditor (at the Purchaser’s expense) to audit the financial statements of the Business for the year ended December 31, 2012; and (ii) use commercially reasonable efforts to cooperate with the Purchaser in preparation by the Purchaser of such additional financial statements as a Purchaser Entity requires, including by providing information and documents that are reasonably requested by the Purchaser; provided, however, that, for each of clauses (i) and (ii) such audit or preparation of financial statements shall only be performed to the extent required by Regulation S-X promulgated by the U.S. Securities and Exchange Commission in order to permit the Purchaser to include such financial statements in such Form 8-K filing after obtaining the necessary consent of the independent auditor. Other than for the obligations expressly set forth in this Section 5.12(f) and notwithstanding anything herein to the contrary, the Seller shall have no Liability (including any indemnification obligation under Article IX) with respect to the matters arising out of this Section 5.12(f), including in connection with the provision of cooperation, information or documentation, delivery of financial statements pursuant hereto or Purchaser’s filing or other use of any of the foregoing. The Purchaser shall reimburse the Seller for any reasonable out-of pocket expenses incurred by the Seller in connection with this Section 5.12(f).
SECTION 5.13    IP Docket. Prior to the Closing, the Seller shall provide the Purchaser with a schedule that lists all of the registration, maintenance, annuity and renewal fees

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that must be paid, and documents, applications and certificates that must be filed with the applicable Governmental Authority in order to maintain the Registered Owned Intellectual Property for ninety (90) days following the Closing.
ARTICLE VI    
EMPLOYEE MATTERS
The provisions of Schedule 6 shall apply with respect to employee and benefit matters.
ARTICLE VII    
TAX MATTERS
SECTION 7.01    Tax Indemnities. (b) The Seller shall indemnify the Purchaser and its Affiliates for, and hold them harmless from and against, any and all Excluded Taxes.
(c)    From and after the Closing Date, the Purchaser shall indemnify the Seller and its Affiliates for, and hold them harmless from and against, all Taxes relating to the Business other than Excluded Taxes.
(d)    In the case of Taxes that are payable with respect to a Straddle Period, the portion of any such Tax that is allocable to the portion of the taxable period ending prior to the Closing Date shall be:
(i)    in the case of Taxes that are either (A) based upon or related to income or receipts; or (B) imposed in connection with any sale or other transfer or assignment of property (real or personal, tangible or intangible) (other than Conveyance Taxes covered by Section 7.06), deemed equal to the amount which would be payable (after giving effect to amounts which may be deducted from or offset against such Taxes) if the taxable period ended immediately prior to the Closing Date;
(ii)    in the case of Taxes imposed on a periodic basis with respect to the assets of the Business, or otherwise measured by the level of any item, deemed to be the amount of such Taxes for the entire Straddle Period (after giving effect to amounts which may be deducted from or offset against such Taxes) (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding period), multiplied by a fraction the numerator of which is the number of days in the period ending immediately prior to the Closing Date and the denominator of which is the number of days in the entire Straddle Period; and
(iii)    Any credit or refund resulting from an overpayment of Taxes for a Straddle Period shall be prorated based upon the method employed in this paragraph (c) taking into account the type of Tax to which the refund relates and the amount of Taxes paid prior to the Closing Date. In the case of any Tax based upon or measured by capital (including net worth or long‑term debt) or intangibles, any amount thereof required to be

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allocated under this Section 7.01(c) shall be computed by reference to the level of such items immediately prior to the Closing Date. All determinations necessary to effect the foregoing allocations shall be made in a manner consistent with prior practices of the Seller as relating to the Business.
(e)    Payment by the indemnifying party of any amount due under this Section 7.01 shall be made within ten (10) days following written notice by the indemnified party that payment of such amounts to the appropriate Taxing Authority is due; provided, however, that, in the case of paragraph (a) of this Section 7.01, the Purchaser shall have complied with its obligation to promptly notify the Seller under Section 7.03(a); provided, further, that the indemnifying party shall not be required to make any payment earlier than two (2) Business Days before it is due to the appropriate Taxing Authority. Notwithstanding anything to the contrary herein, if the Seller receives an assessment or other notice of Taxes due with respect to the Business for which the Seller is not responsible, in whole or in part, pursuant to paragraph (a) of this Section 7.01, then the Purchaser shall pay such Taxes, or if the Seller pays such Taxes, then the Purchaser shall pay to the Seller the amount of such Taxes for which the Seller is not responsible within five (5) days following such payment. In the case of a Tax that is contested in accordance with the provisions of Section 7.03, payment of the Tax to the appropriate Taxing Authority will be considered to be due no earlier than the date a final determination to such effect is made by the appropriate Taxing Authority or court.
SECTION 7.02    Tax Refunds and Tax Benefits. (h) Any Tax refund, credit or similar benefit (including any interest paid or credited with respect thereto) relating to Excluded Taxes shall be the property of the Seller, and if received by the Purchaser, shall be paid over promptly to the Seller. The Purchaser shall, if the Seller so requests and at the Seller’s expense, file for and use its reasonable best efforts to obtain and expedite the receipt of any refund to which the Seller is entitled under this Section 7.02. The Purchaser shall permit the Seller to participate (at the Seller’s expense) in the prosecution of any such refund claim.
(i)    Any amount otherwise payable by the Seller under Section 7.01 shall be reduced by any tax benefit actually realized by the Purchaser Entities that arises in connection with any underlying adjustment resulting in the obligation any of the Purchaser Entities to pay Taxes or other amounts for which the Seller is responsible under Section 7.01 or the accrual or payment of such Taxes.
SECTION 7.03    Contests. (l) After the Closing, the Purchaser shall promptly notify the Seller in writing of the proposed assessment or the commencement of any tax audit or administrative or judicial proceeding or of any demand or claim on the Purchaser Entities which, if determined adversely to the taxpayer or after the lapse of time, could be grounds for indemnification by the Seller under Section 7.01 (a “Claim”). Such notice shall contain factual information (to the extent known to the Purchaser or its Affiliates) describing the Claim in reasonable detail and shall include copies of any notice or other document received from any Taxing Authority in respect of any such Claim. If the Purchaser fails to give the Seller prompt notice of a Claim as required by this Section 7.03, then the Seller shall not have any

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obligation to indemnify for any loss arising out of such Claim, but only to the extent that failure to give such notice results in a detriment to the Seller.
(m)    In the case of a tax audit or administrative or judicial proceeding (a “Contest”) that relates to taxable periods ending on or prior to the Closing Date, the Seller shall have the sole right, at its expense, to control the conduct of such Contest.
(n)    With respect to Straddle Periods, the Seller may elect to direct and control, through counsel of its own choosing, any Contest involving any asserted tax liability with respect to which indemnity may be sought from the Seller pursuant to Section 7.01. If the Seller elects to direct a Contest, the Seller shall, within sixty (60) days of receipt of the notice of tax liability, notify the Purchaser of its intent to do so, and the Purchaser shall fully cooperate, at the Seller’s expense, in each phase of such Contest. If the Seller elects not to direct the Contest, the Purchaser may assume control of such Contest (at the Purchaser’s expense). However, in such case, the Purchaser may not settle or compromise any asserted liability without prior written consent of the Seller. In any event, the Seller may participate, at its own expense, in the Contest.
(o)    The Purchaser and the Seller agree to cooperate in the defense against or compromise of any Claim or Contest.
SECTION 7.04    Preparation of Tax Returns. (g) The Seller shall prepare and file (or cause its Affiliates to prepare and file) all Tax Returns relating to the Business for Pre‑Closing Periods.
(h)    The Purchaser shall prepare and file (or cause its Affiliates to prepare and file) all Tax Returns that relate solely to the Business for any Straddle Periods, it being understood that all Taxes shown as due and payable on such Tax Returns shall be the responsibility of the Purchaser, except for such Taxes which are the responsibility of the Seller pursuant to Section 7.01(a) which the Seller shall pay in accordance with this Article VII. Such Tax Returns shall be prepared on a basis consistent with those prepared for prior taxable periods unless a different treatment of any item is required by an intervening change in Law. With respect to any Tax Return required to be filed with respect to the Business after the Closing Date and as to which the Taxes due (or a portion thereof) are Excluded Taxes, the Purchaser shall provide the Seller and its authorized representative with a copy of such completed Tax Return and a statement (with which the Purchaser will make available supporting schedules and information) certifying the amount of Tax shown on such Tax Return that is included in Excluded Taxes pursuant to Section 7.01 at least thirty (30) Business Days prior to the due date (including any extension thereof) for filing of such Tax Return, and the Seller and its authorized representative shall have the right to review and comment on such Tax Return and statement prior to the filing of such Tax Return. The Seller and the Purchaser agree to consult and to attempt in good faith to resolve any issues arising as a result of the review of such Tax Return and statement by the Seller or its authorized representative.
SECTION 7.05    Tax Cooperation and Exchange of Information. The Seller and the Purchaser shall provide each other, and the Purchaser shall cause each Purchaser Entity to provide the Seller, with such cooperation and information as either of them reasonably may

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request of the other in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to a refund of Taxes or participating in or conducting any audit or other proceeding in respect of Taxes relating to the Transferred Assets or the Business. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with related work papers and documents relating to rulings or other determinations by taxing authorities. The Seller and the Purchaser shall make themselves (and their respective employees) reasonably available on a mutually convenient basis to provide explanations of any documents or information provided under this Section 7.05. Notwithstanding anything to the contrary in Section 5.02, each of the Seller and the Purchaser shall retain all Tax Returns, work papers and all material records or other documents in its possession (or in the possession of its Affiliates) relating to Tax matters relevant to the Transferred Assets or the Business for any taxable period that includes the Closing Date and for all prior taxable periods until the later of (i) the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, or (ii) six (6) years following the due date (without extension) for such Tax Returns. After such time, before the Seller or the Purchaser shall dispose of any such documents in its possession (or in the possession of its Affiliates), the other party shall be given an opportunity, after ninety (90) days prior written notice, to remove and retain all or any part of such documents as such other party may select (at such other party’s expense). Any information obtained under this Section 7.05 shall be kept confidential, except as may be otherwise necessary in connection with the filing of Tax Returns or claims for refund or in conducting an audit or other proceeding.
SECTION 7.06    Conveyance Taxes. Any Conveyance Taxes imposed upon, or payable or collectible or incurred in connection with, this Agreement or the transactions contemplated hereby shall be paid by either the Seller or the Purchaser, based upon which such taxes are imposed, and the other party shall indemnify the party paying such Taxes for an amount equal to fifty percent (50%) of such Taxes; such indemnification to be made not less than two (2) Business Days before the date payment of the Conveyance Taxes is due to the applicable Governmental Authority. The Purchaser and the Seller agree to cooperate in the execution and delivery of all instruments and certificates necessary to enable the appropriate party to comply with any pre‑Closing filing requirements.
SECTION 7.07    Tax Covenants. (a) The Purchaser shall not, and shall cause the Purchaser Entities not to, take any action outside the ordinary course of business or omit to take any action which the Purchaser could reasonably expect to materially increase the Seller’s or any of its Affiliates’ liability for or with respect to Taxes with the exception of any action taken or omission to take any action with respect to matters covered under Section 2.04(b) or any other provision of this Agreement. The Purchaser shall not, and shall cause the Purchaser Entities not to, amend, refile or otherwise modify any Tax election or Tax Return with respect to any taxable period (or portion of any taxable period), ending on or prior to the Closing Date without the prior written consent of the Seller where so doing could reasonably be expected to materially increase the Seller’s or any of its Affiliate’s liability for and with respect to Taxes.

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SECTION 7.08    Miscellaneous. (c) For Tax purposes, the parties hereto agree to treat all payments made pursuant to any indemnification obligation under this Agreement (including pursuant to this Article VII) as adjustments to the Purchase Price.
(d)    This Article VII shall be the sole provision governing indemnities for Taxes and Conveyance Taxes under this Agreement.
(e)    For purposes of this Article VII, all references to the Purchaser, the Seller and any of their respective Affiliates include successors.
(f)    Notwithstanding any provision in this Agreement to the contrary, the covenants and agreements of the parties hereto contained in this Article VII shall survive the Closing and shall remain in full force until thirty (30) days after the expiration of the applicable statutes of limitations for the Taxes in question (taking into account any extensions or waivers thereof).
(g)    Payments by the Seller under this Article VII shall be limited to the amount of any liability or damage that remains after deducting therefrom any indemnity, contribution or other similar payment recoverable by the Purchaser or any Affiliates of the Purchaser from any third party with respect thereto.
(h)    For purposes of this Article VII, all references to the Seller or the Purchaser shall be deemed to include its designee as designated from time to time or for certain purposes.
(i)    The representations and warranties set forth in Section 3.12 (Taxes) shall terminate as of the Closing.
ARTICLE VIII    
CONDITIONS TO CLOSING
SECTION 8.01    Conditions to Obligations of the Seller. The obligations of the Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:
(a)    Representations, Warranties and Covenants. (i) The representations and warranties of the Purchaser contained in this Agreement (A) that are not qualified by a “materiality” qualification shall be true and correct in all material respects as though such representations and warranties had been made on and as of the Closing Date; and (B) that are qualified by a “materiality” qualification shall be true and correct in all respects as so qualified as though such representations and warranties had been made on and as of the Closing Date (except to the extent such representations and warranties are, by their terms, made as of a specific date, in which case such representations and warranties shall be true and correct in the manner set forth in the foregoing clauses (A) or (B), as applicable, as of such date); (ii) the covenants and agreements contained in this Agreement to be complied with by the Purchaser on or prior to the Closing shall have been complied with in all

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material respects; and (iii) the Seller shall have received a certificate of the Purchaser signed by a duly authorized representative thereof dated as of the Closing Date certifying the matters set forth in clauses (i) and (ii) above;
(b)    Governmental Approvals. Any waiting period (and any extension thereof) under the HSR Act shall have expired or shall have been terminated; and
(c)    No Order. There shall not be in effect in the United States of America or the People’s Republic of China any Governmental Order issued by a Governmental Authority of competent jurisdiction that permanently enjoins the consummation of the purchase of the Transferred Assets contemplated by this Agreement.
SECTION 8.02    Conditions to Obligations of the Purchaser. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:
(a)    Representations, Warranties and Covenants. (i) The representations and warranties of the Seller contained in this Agreement (other than the representations set forth in Section 3.01 (Organization, Authority and Qualification of the Seller), Section 3.09(c) (Real Property), Section 3.15(a) (Sufficiency of Assets)) (A) that are qualified by a “Material Adverse Effect” qualification shall be true and correct in all respects as so qualified as though such representations and warranties had been made on and as of the Closing Date; and (B) that are not qualified by a “Material Adverse Effect” qualification (read for purposes of this Section 8.02(a)(i)(B) without respect to any references to the terms “material”, “materiality” or other similar qualifications applicable to such representations and warranties) shall be true and correct as though such representations and warranties had been made on and as of the Closing Date, except for such failures to be true and correct as would not have, individually or in the aggregate, a Material Adverse Effect (except to the extent such representations and warranties are, by their terms, made as of a specific date, in which case such representations and warranties shall be true and correct in the manner set forth in the foregoing clauses (A) or (B), as applicable, as of such date); (ii) the representations and warranties of the Seller set forth in Section 3.01 (Organization, Authority and Qualification of the Seller) shall be true and correct, in all material respects, as of the date hereof and as though such representations and warranties had been made on and as of the Closing Date; (iii) the representations and warranties of the Seller set forth in Section 3.09(c) (Real Property) shall be true and correct, in all respects, as though such representations and warranties had been made on and as of the Closing Date; (iv) the representations and warranties of the Seller set forth in Section 3.15(a) (Sufficiency of Assets) shall be true and correct, (read for purposes of this Section 8.02(a)(iv) without respect to any references to the terms “material”, “materiality” or other similar qualifications applicable to such representations and warranties) (A) in all material respects, as of the date hereof, and (B) as though such representations and warranties had been made on and as of the Closing Date, except for such failures to be true and correct as would not have, individually or in the aggregate, a

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Material Adverse Effect; (v) the covenants and agreements contained in this Agreement to be complied with by the Seller on or prior to the Closing shall have been complied with in all material respects; and (vi) the Purchaser shall have received a certificate of the Seller signed by a duly authorized representative thereof dated as of the Closing Date certifying the matters set forth in clauses (i) through (vi) above;
(b)    Governmental Approvals. Any waiting period (and any extension thereof) under the HSR Act shall have expired or shall have been terminated;
(c)    No Order. There shall not be in effect in the United States of America or the People’s Republic of China any Governmental Order issued by a Governmental Authority of competent jurisdiction that temporarily or permanently enjoins the consummation of the purchase of the Transferred Assets contemplated by this Agreement;
(d)    No Material Adverse Effect. Since December 31, 2012, there has not occurred any Material Adverse Effect; and
(e)    MagTi CMA. Immediately following the Closing, the Dow Entity that is a party to the MagTi CMA, shall not be entitled under the MagTi CMA to notify the Purchaser Entity party thereto that a Force Majeure Event (as defined in the MagTi CMA) shall have occurred; provided, that the condition set forth in this Section 8.02(e) shall be deemed satisfied if (i) the MagTi Facility is not reasonably expected to be inoperable for more than three (3) months after the Closing Date; or (ii) immediately after the Closing Date, Dow is able, or it is reasonably likely that Dow will be able to, supply Products (as defined in the MagTi CMA) to the applicable Purchaser Entity.
ARTICLE IX    
INDEMNIFICATION
SECTION 9.01    Survival of Representations, Warranties and Covenants. (a) The representations and warranties of the parties hereto contained in this Agreement or in any certificates delivered pursuant to this Agreement shall survive the Closing for a period of fifteen (15) months after the Closing except as set forth in Section 7.08(g) and the representations and warranties set forth in Section 3.14 (Environmental Matters), which shall terminate as of the Closing; and (b) none of the covenants or agreements contained in this Agreement shall survive the Closing, other than (i) the Seller covenants set forth in Section 5.01, which shall survive for a period of three (3) months after the Closing Date; and (ii) those covenants which by their terms contemplate performance after the Closing which shall survive the Closing only until the expiration of the term of the undertaking set forth in such covenants and agreements; provided, that, if such covenants and agreements contemplated by clause (ii) do not contain a specific term, they shall expire when the statute of limitation applicable to such covenants expires; provided further, that any claim made with reasonable specificity (to the extent known at the time such claim is made) by the party seeking to be indemnified within the time periods set forth in this Section 9.01 shall survive until such claim is finally resolved.

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SECTION 9.02    Indemnification by the Seller. The Purchaser and its Affiliates, officers, directors, employees and agents (and solely with respect to the Liabilities referenced in Section 2.02(b)(i), any of the Purchaser’s insurers in their capacity as such, or any trust established under Purchaser’s plan of reorganization) (each a “Purchaser Indemnified Party”) shall from and after the Closing be indemnified and held harmless by the Seller for and against all losses, damages, claims, costs and expenses, interest, awards, settlements, judgments and penalties (including reasonable attorneys’ fees and expenses) actually suffered or incurred by them whether or not arising out of any Third Party Claims (hereinafter a “Loss”), to the extent arising out of, or resulting from, (a) the breach of any representation or warranty made by the Seller contained in this Agreement (as of the date hereof or as of the Closing Date as if made as of the Closing Date (or, to the extent made as of a specific date, as of such date)) or in the certificate delivered pursuant to Section 8.02(a)(vi); (b) the breach of any covenant or agreement by the Seller contained in this Agreement (other than the covenants and agreements set forth in Sections 5.11(b) and (c)); (c) the Excluded Liabilities; or (d) Expansion Servitude Losses.
SECTION 9.03    Indemnification by the Purchaser. Dow, its officers, directors, employees and agents (each a “Seller Indemnified Party”) shall from and after the Closing be indemnified and held harmless by the Purchaser for and against any and all Losses, to the extent arising out of, or resulting from, (a) the breach of any representation or warranty made by the Purchaser contained in this Agreement (as of the date hereof or as of the Closing Date as if made as of the Closing Date (or, to the extent made as of a specific date, as of such date)) or in the certificate delivered pursuant to Section 8.01(a)(iii); (b) the breach of the representation or warranty made by the Purchaser set forth in Section 4.05 (Bankruptcy Court Approval) (as of the date hereof or as of the Closing Date) or in the certificate delivered pursuant to Section 8.01(a)(iii) (to the extent such certificate relates to Section 4.05); (c) the breach of any covenant or agreement by the Purchaser contained in this Agreement; (d) the Assumed Liabilities; or (e) (other than with respect to Liabilities that are Excluded Liabilities) the conduct of the Business from and after the Closing Date and the use, ownership, possession, operation or occupancy of the Transferred Assets by the Purchaser Entities after the Closing Date.
SECTION 9.04    Limitations on Indemnification. (c) No claim may be asserted nor may any Action be commenced against a party hereto for breach of any representation, warranty, covenant or agreement contained herein, unless written notice of such claim or Action is received by such party describing in reasonable detail (to the extent known at the time of such notice) the facts and circumstances with respect to the subject matter of such claim or Action on or prior to the date on which the representation, warranty, covenant or agreement on which such claim or Action is based ceases to survive as set forth in Section 9.01.
(d)    Notwithstanding anything to the contrary contained in this Agreement, (i) the Seller shall not be liable for any Losses pursuant to Section 9.02(a) and the Purchaser shall not be liable for any Losses pursuant to Section 9.03(a) unless and until the aggregate amount of indemnifiable Losses which may be recovered from the Seller or the Purchaser, as the case may be, exceeds $5,000,000 (five million) whereupon the Purchaser or the Seller, as the case may be, shall be entitled to indemnification for the amount of such Losses in excess of such amount; (ii) no Losses may be claimed under Section 9.02(a) or Section 9.03(a) or shall be reimbursable by

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or shall be included in calculating the aggregate Losses set forth in clause (i) above other than Losses in excess of $200,000 resulting from any single claim or series of related claims arising out of the same facts, events or circumstances; (iii) the maximum amount of indemnifiable Losses which may be recovered from the Seller arising out of, or resulting from, the causes set forth in Section 9.02(a) or from the Purchaser arising out of, or resulting from, the causes set forth in Section 9.03(a) shall be an amount equal to $75,000,000 (seventy-five million); (iv) the parties hereto acknowledge and agree that the Seller Indemnified Parties shall not have any Liability under any provision of this Agreement for any Loss, if such Loss relates to (A) any action or inaction of the Seller or any of its Representatives at the written request, at the written direction, or with the written consent, of the Purchaser, or (B) any action, that the Seller was required to take or not to take pursuant to the terms of this Agreement or any Transaction Document; (v) the parties hereto acknowledge and agree that the Purchaser Indemnified Parties shall not have any Liability under any provision of this Agreement for any Loss, to the extent that such Loss arises from (A) any action or inaction of the Purchaser or any of its Representatives at the written request, at the written direction, or with the written consent, of the Seller, or (B) any action, that the Purchaser was required to take or not to take pursuant to the terms of this Agreement or any Transaction Document; and (vi) for purposes of this Article IX, any breach or inaccuracy of any representation or warranty shall be determined, and the amount of Losses resulting from breaches of the representations and warranties set forth in this Agreement (except for the representations and warranties set forth in Section 3.04 (Financial Information), shall be determined and calculated, without respect to any references to the terms “material”, “materiality”, “Material Adverse Effect”, or other similar qualifications applicable to such representations and warranties. The knowledge of the Purchaser of a breach by the Seller of a representation, warranty or covenant of the Seller set forth herein prior to the Closing Date shall not limit the rights of the Purchaser to indemnification under this Article IX for such breach.
(e)    Notwithstanding anything to the contrary contained in this Agreement, after the Closing, none of the parties hereto and none of their respective Affiliates shall have any liability under any provision of this Agreement or any Local Conveyance for any punitive, incidental, consequential, special or indirect damages, including loss of future profits, revenue or income, diminution in value or loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement or any Local Conveyance, regardless of whether such damages were foreseeable; provided, that the limitations set forth in this Section 9.04(c) shall not apply to Losses arising from Third‑Party Claims.
(f)    For all purposes of this Article IX, “Losses” shall be net of (i) any recovery or benefit (including insurance and indemnification) payable to the Indemnified Party or any of its Affiliates in connection with the facts giving rise to the right of indemnification and, if the Indemnified Party or any of its Affiliates receive such recovery or benefit after receipt of payment from the Indemnifying Party, then the amount of such recovery or benefit, net of reasonable expenses incurred in obtaining such recovery or benefit, shall be paid to the Indemnifying Party; and (ii) any tax benefit available to the Indemnified Party or any of its Affiliates arising in connection with the accrual, incurrence or payment of any such Losses but

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only when and to the extent that such tax benefit is realized by Indemnified Party or any of its Affiliates.
(g)    Each party hereto shall, and shall cause its respective Affiliates to, take all reasonable steps to mitigate its Losses upon and after becoming aware of any event that could reasonably be expected to give rise to any Losses and indemnification shall not be available with respect to any Loss to the extent such Loss is attributable to a failure by a party to take (or cause its Affiliates to take) reasonable steps to mitigate such Loss. No party hereto shall be entitled to any payment, adjustment or indemnification more than once with respect to the same matter. Notwithstanding anything to the contrary contained in this Agreement, to the extent that an adjustment is made to or taken into account in determining the Purchase Price or any payments are made in respect of any matter relating to, or arising out of, this Agreement, no party shall be entitled to any indemnification or any other payment with respect to such matter to the extent of such adjustment or payment and such matter will not, to the extent of such adjustment or other payment, constitute a breach of any representation, warranty, covenant or agreement contained herein.
(h)    The parties hereto agree that the Seller Indemnified Parties shall be indemnified pursuant to Section 9.03 regardless of whether Dow provides any type of raw materials, products or services to the Purchaser Entities after the Closing Date. The parties hereto agree that the Purchaser Indemnified Parties shall be indemnified pursuant to Section 9.02 regardless of whether the Purchaser and its Affiliates provide any type of raw materials, products or services to Dow after the Closing Date.
SECTION 9.05    Notice of Loss; Third‑Party Claims. (b) An Indemnified Party shall, promptly after such determination is made, give the Indemnifying Party written notice in reasonable detail of any matter other than a Third‑Party Claim which an Indemnified Party has determined has given, or could give, rise to a right of indemnification under this Agreement, stating the amount of the Loss, if known, and showing computation of such known Loss, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises; provided, however, that any failure to give such notice shall not relieve the Indemnifying Party of its indemnification obligations, except to the extent that the Indemnifying Party can demonstrate it is actually prejudiced thereby.
(c)    If an Indemnified Party shall receive notice of any Action, audit, demand or assessment against it from a third party (each, a “Third‑Party Claim”), which would give rise to a claim for Loss under this Article IX, the Indemnified Party shall promptly give the Indemnifying Party written notice in reasonable detail (to the extent known) of such Third‑Party Claim, stating the amount of the Loss, if known, and method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises, together with copies of all notices and documents served on or received by the Indemnified Party and its Representatives in respect thereof. A failure by the Indemnified Party to give notice in a timely manner pursuant to this Section 9.05(b) shall not limit the obligation of the Indemnifying Party under this Agreement, except to the extent such Indemnifying Party can demonstrate it is prejudiced thereby. The Indemnifying Party shall be

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entitled to assume and control the defense of such Third‑Party Claim at its expense and through counsel of its choice, if (i) the Indemnifying Party gives written notice of its intention to do so to the Indemnified Party within thirty (30) days of the receipt of such notice from the Indemnified Party; and (ii) the Indemnifying Party conducts the defense of the Third‑Party Claim actively and diligently, it being understood that such election shall be without prejudice to the rights of the Indemnifying Party to dispute whether such claim involves recoverable or indemnifiable Losses under this Agreement. If the Indemnifying Party elects to undertake any such defense against a Third‑Party Claim, the Indemnified Party may participate in such defense at its own expense, provided, that if (i) there are legal defenses available to an Indemnified Party that are different from or additional to those available to the Indemnifying Party; or (ii) there exists a conflict of interest between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel to the Indemnified Party (to the extent such fees and expenses constitute indemnifiable losses). The Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnified Party’s expense (except for reasonable out‑of‑pocket expenses, which shall by paid or reimbursed by the Indemnifying Party), all witnesses who are employees of a Purchaser Entity, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto (or in the possession or control of any of its Representatives) as is reasonably requested by the Indemnifying Party. If the Indemnifying Party elects to undertake the defense of any such Third‑Party Claim, the Indemnified Party shall not pay, or permit to be paid, any part of such Third‑Party Claim unless (i) the Indemnifying Party consents in writing to such payment (which consent shall not be unreasonably withheld or delayed); (ii) the Indemnifying Party withdraws from or ceases to pursue the defense of such Third‑Party Claim; or (iii) a final judgment from which no appeal may be taken is entered against the Indemnified Party for such Third‑Party Claim. If the Indemnified Party assumes the defense of any such Third‑Party Claim pursuant to this Section 9.05 and proposes to settle such Third‑Party Claim prior to a final and unappealable judgment thereon or to forgo any appeal with respect thereto, then the Indemnified Party shall give the Indemnifying Party prompt written notice thereof and the Indemnifying Party shall have the right to participate in the settlement or assume or reassume the defense of such Third‑Party Claim. The Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge any Third‑Party Claim without the Indemnifying Party’s prior written consent (such consent with respect to settlement, compromise or discharge not to be unreasonably withheld, conditioned or delayed). The Indemnifying Party shall have the right to compromise, pay or settle any Third‑Party Claim (including settling such Third Party Claim before a final judgment or forgoing any appeal) if such settlement, compromise or discharge involves solely payment of monetary damages and provides a full and unconditional release of the Indemnified Party in respect of such Third-Party Claim or to which settlement the Indemnified Party consents in writing (such consent not to be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third‑Party Claim to the extent such claim relates to or arises in connection with any criminal Action. With respect to investigations by a Governmental Authority which would give rise to a claim for Loss under this Article IX (“Investigations”), (x) that relate to facts and circumstances that have occurred prior to the Closing Date, the Seller shall control of the defense in respect of such Investigation, (y) that relate to facts and circumstances that have occurred on

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or after the Closing Date, the Purchaser shall control the defense in respect of such Investigation, and (z) that relate to facts and circumstances that have occurred both prior to and after the Closing Date, the Seller and the Purchaser shall jointly control the defense of such Investigation; provided, that the Indemnifying Party shall, for purposes of clauses (x), (y) and (z) reimburse the Indemnified Party for reasonable attorneys fees and expenses.
SECTION 9.06    Remedies. Each of the parties hereto acknowledges and agrees that following the Closing (a) except with respect to matters covered by Section 2.08 and other than as provided in Section 11.10, (i) the indemnification provisions of Article VII and this Article IX shall be the sole and exclusive remedies of the parties hereto and the parties to the Local Conveyances, as applicable, for any breach of the representations and warranties contained in this Agreement, in any certificate delivered pursuant to this Agreement or in any Local Conveyance and for any failure to perform and comply with any covenant or agreement in this Agreement or in any Local Conveyance; (ii) none of the parties hereto or their respective Affiliates will bring a claim under any Local Conveyance; and (iii) any and all claims arising out of, or in connection with, the Transferred Assets, the Assumed Liabilities, the Business or the transactions contemplated in this Agreement must be brought under and in accordance with the terms of this Agreement; and (b) notwithstanding anything herein to the contrary, no breach of any representation, warranty, covenant or agreement contained herein or in any Local Conveyance shall give rise to any right on the part of any party hereto or thereto, after the consummation of the transactions contemplated by this Agreement, to rescind this Agreement, any Local Conveyance or any of the transactions contemplated hereby or thereby. Each party hereto shall cause its Affiliates to comply with this Section 9.06.
SECTION 9.07    Tax Matters. Notwithstanding anything in this Article IX to the contrary, the rights and obligations of the parties hereto with respect to indemnification for any and all tax matters shall be governed solely by Article VII and shall not be subject to the provisions of this Article IX (other than Section 9.06 and this Section 9.07).
SECTION 9.08    Further Environmental Provisions. (a) With respect to any Remedial Action that is required to satisfy the Seller’s indemnification obligations under Section 9.02(c) for any Seller Environmental Liabilities, and without diminution of the parties’ rights and responsibilities under Section 9.05:
(i)    the Seller shall have the right, but not the obligation, to conduct and control the Remedial Action it being understood that Seller’s election to conduct and control a Remedial Action shall be without prejudice to the rights of the parties hereto to dispute whether such Remedial Action involves recoverable or indemnifiable Losses under this Agreement; provided, however, that within twenty (20) Business Days of receipt of notification from Purchaser of such Remedial Action, Seller shall notify Purchaser in writing that it will conduct and control such Remedial Action;
(ii)    if the Seller opts to conduct such Remedial Action, the Seller shall do so without unreasonably interfering with the Purchaser’s operations;

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(iii)    the Purchaser shall, and shall cause its Representatives to, cooperate with the Seller, including by providing access to the subject site, including access to install, maintain, replace and operate wells and remove impacted soil and/or groundwater;
(iv)    the parties shall consult and cooperate with each other in all material respects in connection with undertaking the Remedial Action, shall provide each other with copies of all material correspondence submitted to and received from any Governmental Authority relating to the Remedial Action, and shall provide each other with reasonable opportunity to provide comments to any material submissions to any Governmental Authority with respect thereto;
(v)    the parties shall, and shall cause their Representatives to, provide each other with reasonable notice of all planned meetings and telephone conferences with the applicable Governmental Authority, and the Parties and their Representatives shall have the right to attend and participate in such meetings and telephone conferences; and
(vi)    whichever party conducts the Remedial Action shall use commercially reasonable efforts to conduct such Remedial Action in the most cost‑effective manner (“Most Cost‑Effective Manner”). The Most Cost‑Effective Manner shall incorporate (A) the least stringent clean‑up standards that, based upon the use classification (industrial, commercial or residential) of a subject site, as of the Closing Date, are allowed under applicable Environmental Law; and (B) the least‑costly methods that are allowed under applicable Environmental Law and that are approved by or otherwise acceptable to applicable Governmental Authorities to achieve such standards, including the use of engineering and institutional controls to eliminate or minimize exposure pathways, provided that such methods do not unreasonably interfere with conduct of Purchaser’s operations. Upon request by the Seller, the Purchaser in its discretion may, and may cause another Purchaser Entity to, be responsible for any operation and maintenance with respect to any such institutional or engineering controls subsequent to completion of their initial installation, and Seller shall fully compensate Purchaser or Purchaser Entity for the cost of such post‑installation operation and maintenance; provided, however, that the Seller shall remain responsible for the operation and maintenance of any such control that entails removing and treating groundwater contaminated with Hazardous Materials until such removal and treatment is no longer required.
(i)    With respect to any action (other than any such action that is a Remedial Action) to correct a violation of or a noncompliance with any Environmental Law or Environmental Permit that is required to satisfy the Seller’s indemnification obligations under Section 9.02(c) for any Seller Environmental Liabilities, and without diminution of the parties’ rights and responsibilities under Section 9.05:
(i)    the Purchaser shall have the right, but not the obligation, to control the conduct of such corrective action; it being understood that Seller’s election to conduct and control a Remedial Action shall be without prejudice to the rights of the parties to

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dispute whether such Remedial Action involves recoverable or indemnifiable Losses under this Agreement
(ii)    the parties shall consult and cooperate with each other in all material respects in connection with undertaking the corrective action, shall provide each other with copies of all material correspondence submitted to and received from any Governmental Authority relating to the corrective action or to the associated violation or noncompliance, and shall provide each other with reasonable opportunity to provide comments to any material submissions to any Governmental Authority with respect thereto, including to any corrective action plans or proposals;
(iii)    the parties shall, and shall cause their Representatives to, provide each other with reasonable notice of all planned meetings and telephone conferences with the applicable Governmental Authority, and the Seller and its Representatives shall have the right to attend and participate in such meetings and telephone conferences;
(iv)    the Seller shall not be obligated to indemnify any Purchaser Indemnified Party for capital costs incurred in connection with the implementation of a corrective action that are in excess of the minimum amount required to achieve compliance with any applicable Environmental Law or Environmental Permit in effect as of the Closing Date, and, for the avoidance of doubt, the parties hereto acknowledge that the Seller shall under no circumstances be responsible for any corrective action that is required or recommended pursuant to any internal standards, policies or guidelines of the Seller or any of its Affiliates to the extent that such corrective action exceeds the minimum requirements of any such Environmental Law or Environmental Permit; provided, however, that the corrective action shall be sufficient to allow the Purchaser to operate in a manner and at a level of production that is consistent with the subject facility’s operations conducted during the twelve (12)‑month period prior to the date of this Agreement;
(v)    the Seller shall under no circumstances be responsible for any operating costs related to compliance with any Environmental Law or Environmental Permit subsequent to the Closing, including any operating costs related to any capital upgrade made as, or in connection with any, such corrective action;
(vi)    the Seller shall under no circumstances be responsible for any removal, abatement, encapsulation or maintenance of any Hazardous Materials included in any building material or equipment, including any such Hazardous Materials discovered, encountered or disturbed pursuant to any demolition, renovation or construction, unless such demolition, renovation or construction was commenced prior to the Closing; and
(vii)    for the sake of clarity, the Parties acknowledge that this Section 9.08(b) does not in any way limit, condition or otherwise affect the Seller’s right to control the defense of any Third‑Party Claim, including any Third‑Party Claim

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seeking fines or penalties for any pre‑Closing violation of or noncompliance with any Environmental Law or Environmental Permit.
(j)    With respect to the Seller’s indemnification obligations under Section 9.02(c) for any Seller Environmental Liability, the Seller shall not be responsible for Losses to the extent they are caused, triggered, increased or have their timing accelerated exclusively by (i) any act or omission of the Purchaser or one of its Representatives subsequent to the Closing; (ii) any changes in Environmental Law coming into effect subsequent to the Closing, provided, however, that, in connection with any Remedial Action that is the subject of Seller’s indemnity obligations hereunder, Seller shall satisfy the clean‑up standards that are in effect when the Remedial Action is conducted; (iii) any change in use classification of a subject Leased Real Property, subsequent to the Closing from industrial to commercial or residential or from commercial to residential; and (iii) any sampling and analysis of any environmental media conducted subsequent to the Closing by or on behalf of the Purchaser or one of its Representatives unless such sampling and analysis is (A) required by Environmental Law or by a Governmental Authority; (B) required to be conducted in response to a Third‑Party Claim alleging that Hazardous Materials have migrated offsite from a subject Leased Real Property; or (C) permitted by Section 5.02(a).
(k)    The Purchaser acknowledges that its sole and exclusive remedy against the Seller or any Affiliate of the Seller for any Losses arising from Seller Environmental Liabilities, is under Section 9.02(c). As to any such Seller Environmental Liabilities, the Purchaser hereby waives, on its behalf and on behalf of its Affiliates, predecessors, successors and assigns, officers, directors, employees, agents and partners, to the fullest extent permitted under applicable Law, any claim or remedy against the Seller Indemnified Parties now or hereafter available under any applicable Environmental Law, including the Comprehensive Environmental Response, Compensation and Liability Act or any similar Law, whether or not in existence on the date hereof.
(l)    Notwithstanding anything to the contrary contained in this Agreement, none of the Seller or any of its Affiliates shall be liable for any claim for indemnification for any Seller Environmental Liability that is made after the tenth anniversary of the Closing Date; provided, however, that (i) this limitation shall not apply to Seller Environmental Liabilities arising from matters occurring in, at or from the Other Business Facilities; and (ii) any claim made with reasonable specificity by the Purchaser prior to the tenth anniversary of the Closing Date shall survive until such claim is finally and fully resolved. For the avoidance of doubt, this Section 9.08(e) does not apply to Liabilities referenced in Section 2.02(b)(i). No Losses may be claimed under Section 9.02(c) for any Excluded Liability that is a Seller Environmental Liability or shall be reimbursable by Seller other than Losses in excess of $100,000 resulting from (A) any single claim or (B) any series of related claims arising out of the same facts, events or circumstances. The maximum amount of indemnifiable Losses which may be recovered from the Seller arising out of or resulting from any Seller Environmental Liability shall be an amount equal to $125,000,000.00 (one hundred and twenty-five million).

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SECTION 9.09    No Right to Set Off. No party hereto shall have any right to set off any Losses under this Article IX against any payments to be made by such party pursuant to this Agreement or any other agreement between the parties hereto, including any Transaction Document.
ARTICLE X    
TERMINATION
SECTION 10.01    Termination. This Agreement may be terminated at any time prior to the Closing:
(a)    by either the Seller or the Purchaser if the Closing shall not have occurred by July 10, 2014 (the “Termination Date”); provided, that (i) if the condition set forth in Section 8.01(b) shall not have been satisfied by the Termination Date, then Purchaser may not terminate this Agreement and Seller may extend the Termination Date to the closing of business New York City time on October 10, 2014 by giving written notice of such extension to the Purchaser, and (ii) if the condition set forth in Section 8.02(b) shall not have been satisfied by the Termination Date, then Seller may not terminate this Agreement and Purchaser may extend the Termination Date to the closing of business New York City time on October 10, 2014 by giving written notice of such extension to the Seller; and provided, further, that the right to terminate this Agreement under this Section 10.01(a) shall not be available to any party hereto whose action or failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date;
(b)    by either the Seller or the Purchaser in the event that any Governmental Authority of competent jurisdiction in the United States of America or the People’s Republic of China shall have issued a Governmental Order that permanently enjoins the consummation of the purchase of the Transferred Assets contemplated by this Agreement and such Governmental Order shall have become final and non‑appealable; provided, however, that the right to terminate this Agreement under this Section 10.01(b) shall not be available to any party whose action or failure to fulfill any obligation under this Agreement has been the cause of, or has resulted in, the issuance of such Governmental Order or other action;
(c)    by the Seller if a breach of any covenant or agreement on the part of the Purchaser set forth in this Agreement (including an obligation to consummate the Closing) shall have occurred that would, if occurring or continuing on the Closing Date, cause the condition set forth in Section 8.01(a) not to be satisfied, and such breach is not cured, or is incapable of being cured, within thirty (30) days (but no later than the Termination Date) of receipt of written notice by the Seller to the Purchaser of such breach; provided, that the Seller is not then in breach of this Agreement so as to cause any of the conditions set forth in Section 8.02 not to be satisfied;
(d)    by the Purchaser if a breach of any covenant or agreement on the part of the Seller set forth in this Agreement (including an obligation to consummate the

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Closing) shall have occurred that would, if occurring or continuing on the Closing Date, cause the condition set forth in Section 8.02(a) not to be satisfied, and such breach is not cured, or is incapable of being cured, within thirty (30) days (but no later than the Termination Date) of receipt of written notice by the Purchaser to the Seller of such breach; provided, that the Purchaser is not then in breach of this Agreement so as to cause any of the conditions set forth in Section 8.01 not to be satisfied; or
(e)    by the written consent of the Seller and the Purchaser.
SECTION 10.02    Effect of Termination. In the event of termination of this Agreement as provided in Section 10.01, this Agreement shall forthwith become void and have no effect and there shall be no liability on the part of any party hereto or any of their respective Representatives; provided, that (a) Section 5.03, this Section 10.02 and Article XI shall survive any termination; and (b) nothing herein shall relieve any party hereto from liability for any intentional breach of this Agreement occurring prior to such termination.
ARTICLE XI    
GENERAL PROVISIONS
SECTION 11.01    Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial and other advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be borne by the party incurring such costs and expenses, whether or not the Closing shall have occurred.
SECTION 11.02    Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, or by facsimile (with a confirmatory copy sent by an internationally recognized overnight courier service) to the respective parties hereto at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11.02):
(a)    if to the Seller:
The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674
Facsimile: (989) 638‑9397
Attention: Executive Vice President and General Counsel
with a copy to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022‑6069

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Facsimile: (212) 848‑7179
Attention: George A. Casey, Esq.
(b)    if to the Purchaser:
W. R. Grace & Co.‑Conn.
7500 Grace Drive
Columbia, Maryland 21044
Facsimile: (410) 531‑4545
Attention: Corporate Secretary
SECTION 11.03    Public Announcements. None of the parties to this Agreement shall make, or cause to be made, any press release or public announcement in respect of this Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby or otherwise communicate with any news media regarding this Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby without the prior written consent of the other party, unless such press release or public announcement is required by Law or applicable stock exchange regulation, in which case the parties to this Agreement shall, to the extent practicable, consult with each other as to the timing and contents of any such press release, public announcement or communication; provided, however, that the prior written consent of the other party shall not be required hereunder with respect to any press release, public announcement or communication that is substantially similar to a press release, public announcement or communication previously issued with the prior written consent of such other party.
SECTION 11.04    Severability. If any term or other provision of this Agreement is declared invalid, illegal or incapable of being enforced by any Governmental Authority, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.
SECTION 11.05    Entire Agreement. This Agreement, the Disclosure Schedules, the other Transaction Documents and the Confidentiality Agreement constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, among the parties hereto with respect to the subject matter hereof and thereof.
SECTION 11.06    Assignment. This Agreement and the rights and obligations hereunder may not be assigned by operation of Law or otherwise without the express written consent of the Seller and the Purchaser (which consent may be granted or withheld in the

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sole discretion of the Seller or the Purchaser), as the case may be, and any attempted assignment that is not in accordance with this Section 11.06 shall be null and void.
SECTION 11.07    Amendment. This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, the Seller and the Purchaser that expressly references the Section of this Agreement to be amended; or (b) by a waiver in accordance with Section 11.08.
SECTION 11.08    Waiver. Any party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party; (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered by the other party pursuant to this Agreement; or (c) waive compliance with any of the agreements of the other party or conditions to such obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the parties to be bound thereby. Notwithstanding the foregoing, no failure or delay by any party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or future exercise of any other right hereunder. Any waiver of any term or condition hereof shall not be construed as a waiver of any subsequent breach or as a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement.
SECTION 11.09    No Third‑Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of, and be enforceable by, only the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to, or shall confer upon, any other Person any right, benefit or remedy of any nature whatsoever, including any rights of employment for any specified period, under or by reason of this Agreement.
SECTION 11.10    Specific Performance. The parties hereto acknowledge and agree that the parties hereto would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached and that any non‑performance or breach of this Agreement by either party hereto could not be adequately compensated by monetary damages alone and that the parties hereto would not have any adequate remedy at law. Accordingly, in addition to any other right or remedy to which any party hereto may be entitled, at law or in equity (including monetary damages), such party shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking. Without limiting the generality of the foregoing, the parties hereto agree that the Seller shall be entitled to enforce specifically (a) the Purchaser’s obligations under Section 5.04; and (b) the Purchaser’s obligation to consummate the transactions contemplated by this Agreement (including the obligation to consummate the Closing and to pay the Purchase Price), if the conditions set forth in Section 8.02 have been satisfied (other than those conditions that by their nature are to be satisfied at the Closing) or waived. The parties hereto agree that they will not contest the appropriateness of specific performance as a remedy.

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SECTION 11.11    Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware. Except as provided in Section 2.08, all Actions, directly or indirectly, arising out of, relating to, or in connection with, this Agreement shall be heard and determined exclusively in the Court of Chancery of the State of Delaware; provided, however, that if such court does not have jurisdiction over such Action, such Action shall be heard and determined exclusively in any Delaware state court or United States federal court sitting in the State of Delaware. Consistent with the preceding sentence, each of the parties hereto hereby (a) submits to the exclusive jurisdiction of any federal or state court sitting in the State of Delaware for the purpose of any Action, directly or indirectly, arising out of, relating to, or in connection with this Agreement brought by any party hereto; (b) agrees that service of process will be validly effected by sending notice in accordance with Section 11.02; (c) irrevocably waives and releases, and agrees not to assert by way of motion, defense, or otherwise, in or with respect to any such Action, any claim, whether actual or potential, known or unknown, suspected or unsuspected, based upon past or future events, now existing or coming into existence in the future, that (A) such Action is not subject to the subject matter jurisdiction of at least one of the above‑named courts; (B) its property is exempt or immune from attachment or execution in the State of Delaware; (C) such Action is brought in an inconvenient forum; (D) that the venue of such Action is improper; or (E) this Agreement or the transactions contemplated by this Agreement may not be enforced in or by any of the above‑named courts; and (d) agrees not to move to transfer any such Action to a court other than any of the above‑named courts.
SECTION 11.12    Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION OR LIABILITY, DIRECTLY OR INDIRECTLY, ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY SUCH ACTION OR LIABILITY, SEEK TO ENFORCE THE FOREGOING WAIVER; AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.12.
SECTION 11.13    Counterparts. This Agreement may be executed and delivered (including by facsimile or other means of electronic transmission, such as by electronic mail in “pdf” form) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first written above by its respective officers thereunto duly authorized.
THE DOW CHEMICAL COMPANY
By:
/s/ THOMAS D. MACPHEE Name:   Thomas D. Macphee
Title:     Vice President, M&A

[Signature Page to Sale and Purchase Agreement]    

EXHIBIT 2.4


W.R. GRACE & CO.‑CONN.
By:
/s/ JEREMY ROHEN    
Name: Jeremy Rohen
Title:    Vice President, Business Development



[Signature Page to Sale and Purchase Agreement]

EXHIBIT 10.3

SETTLEMENT AGREEMENT WITH RESPECT TO SETTLEMENT OF THE BANK LENDER APPEALS BETWEEN AND AMONG W. R. GRACE & CO., ON BEHALF OF ITSELF AND THE GRACE DEBTORS, AND THE BANK LENDER GROUP
This SETTLEMENT AGREEMENT, entered into as of December 23, 2013 between W. R. Grace & Co. (“Grace”) and the Grace Debtors1 in the chapter 11 bankruptcy cases consolidated for administrative purposes as In re W. R. Grace & Co., et al., Debtors, Case No. 01-1139 (the “Bankruptcy Case”), in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) and certain holders of claims under the Pre-petition Credit Facilities (collectively, the “Bank Lender Group”).2 
____________________________________________________________ 
1 The Grace Debtors consist of the following 62 entities: W. R. Grace & Co. (f/k/a Grace Specialty     Chemicals, Inc.), W. R. Grace & Co.‑Conn., A‑1 Bit & Tool Co., Inc., Alewife Boston Ltd., Alewife Land Corporation, Amicon, Inc., CB Biomedical, Inc. (f/k/a Circe Biomedical, Inc.), CCHP, Inc., Coalgrace, Inc., Coalgrace II, Inc., Creative Food N Fun Company, Darex Puerto Rico, Inc., Del Taco Restaurants,     Inc., Dewey and Almy, LLC (f/k/a Dewey and Almy Company), Ecarg, Inc., Five Alewife Boston Ltd., G C Limited Partners I, Inc. (f/k/a Grace Cocoa Limited Partners I, Inc.), G C Management, Inc. (f/k/a Grace Cocoa Management, Inc.), GEC Management Corporation, GN Holdings, Inc., GPC Thomasville Corp., Gloucester New Communities Company, Inc., Grace A‑B Inc., Grace A‑B II Inc., Grace Chemical Company of Cuba, Grace Culinary Systems, Inc., Grace Drilling Company, Grace Energy Corporation, Grace Environmental, Inc., Grace Europe, Inc., Grace H‑G Inc., Grace H‑G II Inc., Grace Hotel Services Corporation, Grace International Holdings, Inc. (f/k/a Dearborn International Holdings, Inc.), Grace Offshore Company, Grace PAR Corporation, Grace Petroleum Libya Incorporated, Grace Tarpon Investors, Inc., Grace Ventures Corp., Grace Washington, Inc., W. R. Grace Capital Corporation, W. R. Grace Land Corporation, Gracoal, Inc., Gracoal II, Inc., Guanica‑Caribe Land Development Corporation, Hanover Square Corporation, Homco International, Inc., Kootenai Development Company, L B Realty, Inc., Litigation Management, Inc. (f/k/a GHSC Holding, Inc., Grace JVH, Inc., Asbestos Management, Inc.), Monolith Enterprises, Incorporated, Monroe Street, Inc., MRA Holdings Corp. (f/k/a Nestor‑BNA Holdings Corporation), MRA Intermedco, Inc. (f/k/a Nestor‑BNA, Inc.), MRA Staffing Systems, Inc. (f/k/a British Nursing Association, Inc.), Remedium Group, Inc. (f/k/a Environmental Liability Management, Inc., E&C Liquidating Corp., Emerson & Cuming, Inc.), Southern Oil, Resin & Fiberglass, Inc., Water Street Corporation, Axial Basin Ranch Company, CC Partners (f/k/a Cross Country Staffing), Hayden‑Gulch West Coal Company and H‑G Coal Company.
2 The Bank Lender Group includes the following institutions: Bank of America, N.A.; Glendon Capital Management LP (f/k/a Barclays Bank PLC); BBT Fund, L.P.; BBT Master Fund, L.P.; Caspian Capital Partners, L.P.; Caspian Select Credit Master Fund, Ltd.; Caspian Solitude Master Fund, L.P.; Consumer Program Administrators, Inc.; Farallon Capital Management LLC (as investment manager of AFC Investors Trust, BFC Investors Trust, CFC Investors Trust, EFC Investors Trust, HFC Investors Trust, MFC Investors Trust and VFC Investors Trust); Halcyon Loan Trading Fund LLC; HCN LP; HLF LP; HLTS Fund II LLP; Intermarket Corp.; JPMorgan Chase Bank, N.A.; LLT Ltd.; LMA SPC for and on behalf of the MAP98 Segregated Portfolio; Loeb Arbitrage Offshore Partners, Ltd.; Macquarie Bank Limited; Mariner LDC; MSD Credit Opportunity Master Fund, L.P.; Nomura Waterstone Market Neutral Fund; Oceana Master Fund Ltd.; OCP Investment Trust; Onex Debt Opportunity Fund, Ltd.; Onex Senior Credit II, LP; Onex Senior Credit Fund, L.P.; Pentwater Equity Opportunities Master Fund Ltd.; Prime Capital Master SPC, GOT WAT MAC Segregated Portfolio; PWCM Master Fund Ltd.; Royal Bank of Scotland, PLC; SOLA Ltd.; Solus Core Opportunities L.P.; Solus Core Opportunities Master Fund Ltd.; Taconic Master Fund 1.5 L.P.; Taconic Opportunity Master Fund L.P.; Thracia LLC; Ultra Master Ltd.; Visium Asset Management, LP; Waterstone Distressed Opportunities Fund, Ltd.; Waterstone Market Neutral Mac51, Ltd.; Waterstone Market Neutral Master Fund, Ltd.; Waterstone MF Fund, Ltd.; Waterstone Offshore AD Fund, Ltd.; and Waterstone Offshore ER Fund, Ltd., together with certain funds affiliated with or managed by such entities (collectively, the “Bank Lender Group.” Other than HLTS Fund II LLP and Farallon Capital Management LLC, all of the current members of the Bank Lender Group were also members as of the filing of the Bank Lender Group’s opening brief in the Third Circuit.

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WHEREAS, on March 28, 2003 the administrative agent under the Pre-petition Credit Facilities3 (the “Agent”) timely filed Claim Nos. 9159 and 9168 (the “Proofs of Claim”) in the Bankruptcy Case for amounts due under the Pre-Petition Credit Facilities. On June 13, 2008 the Debtors filed their Objection to the Unsecured Claims Asserted Under the Debtors’ Credit Agreements Dated as of May 14, 1998 and May 5, 1999 [Docket No. 18922]. On May 19, 2009 the Bankruptcy Court issued its Memorandum Opinion and Order with respect to Debtors’ Objection to the Unsecured Claims Asserted Under the Debtors’ Credit Agreements Dated as of May 14, 1998, and May 5, 1999 [Docket No. 21747] (the “Claims Order”); and
WHEREAS on May 29, 2009 the Bank Lender Group filed its Notice of Appeal of the Claims Order [Docket No. 21911] (the “Claims Order Appeal”) which was docketed in the District Court as Case No. 09-807; and
WHEREAS, the Plan Proponents filed the First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code of W. R. Grace & Co., et al., the Official Committee of Asbestos Personal Injury Claimants, the Asbestos PI Future Claimants’ Representative, and the Official Committee of Equity Security Holders as Modified Through December 23, 2010 [Docket No. 26368] (the “Plan”); and;
WHEREAS, on January 31, 2011, the Bankruptcy Court issued its Memorandum Opinion Regarding Objections to Confirmation of First Amended Joint Plan of Reorganization and Recommended Supplemental Findings of Fact and Conclusions of Law [Docket No. 26154] and Recommended Findings of Fact, Conclusions of Law and Order Regarding Confirmation of First Amended Joint Plan of Reorganization as Modified Through December 23, 2010 [Docket No. 26155]. On February 15, 2011 (the “Confirmation Date,” see Plan, § 1.1.88) the Bankruptcy Court issued its Order Clarifying Memorandum Opinion and Order Confirming Joint Plan as Amended Through December 23, 2010 [Docket No. 26289] (collectively with Docket Nos. 26154 and 26155, the “Confirmation Order”); and
WHEREAS, the Confirmation Order was timely appealed to the District Court for the District of Delaware, Case No. 11-199 (the “Lead District Court Appeal Case”); and
____________________________________________________________ 
3 As defined in the Plan, “Pre-Petition Credit Facilities” mean (i) the Credit Agreement, dated as of May 14,     1998, among Grace-Conn., the Parent, the several banks from time to time parties thereto, the co-agents thereto, The Chase Manhattan Bank as administrative agent, and Chase Securities Inc. as arranger; and (ii) the 364-Day Credit Agreement, dated as of May 5, 1999, as amended by the First Amendment dated as of May 3, 2000, among Grace-Conn., the Parent, the several banks from time to time parties thereto, Bank of America National Trust and Savings Association as syndication agent, The Chase Manhattan Bank as administrative agent, Chase Securities Inc. as book manager, and First Union National Bank as documentation agent.

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WHEREAS, on March 28, 2011 the District Court entered an order in the Claims Order Appeal [Case No. 09-807, Docket No. 5], consolidating the Claims Order Appeal with the Lead District Court Appeal Case; and
WHEREAS, on January 30, 2012, the District Court issued its Memorandum Opinion [Docket No. 165] and Order [Docket No. 166] denying or overruling all objections to the Plan and Confirmation Order, among other actions, and confirming the Plan in its entirety; and
WHEREAS, on June 11, 2012, the District Court issued its Consolidated Order Regarding Motions for Reconsideration [Docket No. 215] granting the motions of several parties to clarify or amend its Memorandum Opinion.  In conjunction with its consolidated order, the District Court issued its Amended Memorandum Opinion [Docket No. 217] and Order [Docket No. 218] clarifying and expanding the discussion in its prior opinion and, once more, denying or overruling all objections to the Plan and Confirmation Order and confirming the Plan in its entirety; and
WHEREAS, certain parties appealed the Confirmation Order to the United States Court of Appeals for the Third Circuit (the “Third Circuit”),4 including certain appeals filed by the Bank Lender Group (the “Bank Lender Appeals”);5 and
WHEREAS, the Plan provides that the Bank Lender Group shall be paid, on the Effective Date, the principal amount of their claims (the “Principal”), plus outstanding and undisputed pre-petition interest, plus post-petition interest calculated at the rate prescribed by § 3.1.9(b)(i)(A) of the Plan (the “Plan Rate”) (the “Undisputed Interest”); and
WHEREAS, the main dispute in the Bank Lender Appeals is whether the holders of claims under the Pre-petition Credit Facilities are entitled to postpetition interest at the contract default rate provided under the Pre-petition Credit Facilities (the “Contract Default Rate”), as opposed to postpetition interest arising from the Pre-petition Credit Facilities at the Plan Rate; and
WHEREAS, the Plan acknowledges that the claims of the Bank Lender Group are subject to a pending objection and litigation concerning the amount of post-petition interest to which they are entitled (Plan, § 3.1.9(d)(i)); and
WHEREAS, Grace and the Bank Lender Group desire to resolve the Bank Lender Appeals, including the Proofs of Claim and the Claims Order Appeal (the “Settlement”).
BASED ON THE FOREGOING, Grace (on behalf of itself and the other Grace Debtors) and the Bank Lender Group hereby agree on the following terms of the Settlement:
____________________________________________________________ 
4 Third Circuit case nos. 12-1402, 12-1403, 12-1404, 12-1405, 12-1521, 12-2807, 12-2904, 12-2917, 12-    2923, 12-2924, 12-2966, 12-2967, and 12-3143.
5Third Circuit case nos. 12-1402, 12-1403, 12-1404, 12-1405 and 12-2924.

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I ADDITIONAL DEFINITIONS
A.    “Final Order” shall mean an order, the operation or effect of which has not been stayed, reversed, or amended and as to which order the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or rehearing shall then be pending or as to which any right to appeal, petition for certiorari, reargue, or rehear shall have been waived in writing by all entities possessing such right, or, in the event that an appeal, writ of certiorari, or reargument or rehearing thereof has been sought, such order shall have been affirmed by the highest court to which such order was appealed, or from which reargument or rehearing was sought or certiorari has been denied, and the time to take any further appeal, petition for certiorari, or move for reargument or rehearing shall have expired; provided, however, that the possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure or any analogous rule under the Federal Rules of Bankruptcy Procedure may be filed with respect to such order shall not cause such order not to be a Final Order.
B.    “Parties” shall mean, collectively, each of Grace, the Grace Debtors and the Bank Lender Group (each, a “Party”).
C.    “Settlement Approval Order” shall mean an order entered by the Bankruptcy Court approving the Settlement as the result of the Motion described in Section II.C. below.
D.    “Settlement Effective Date” shall mean the day on which the Settlement Approval Order entered by the Bankruptcy Court has become a Final Order.

II.    THE SETTLEMENT AND THE PARTIES’ OBLIGATIONS WITH RESPECT THERETO
A.    Grace’s Settlement Payment
On the effective date of the Plan (the “Plan Effective Date”), Grace shall transfer the following sums in Cash (as defined in the Plan) to the Agent: (a) $971 million of Principal/Undisputed Interest through December 31, 2013 (the “Plan Payment”), (b) $129 million, which includes reimbursement of the Bank Lenders Group’s legal fees (the “Settlement Payment”), and (c) interest on the Plan Payment and the Settlement Payment for the period from January 1, 2014 to the Plan Effective Date in accordance with Section II.B below ((a), (b) and (c) collectively, the “Lender Payment”). The Lender Payment shall be in full and final satisfaction of all amounts due and owing under the Pre-petition Credit Facilities, the Proofs of Claim, the Plan, or otherwise.

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B.    Grace’s Obligation to Pay Interest on the Plan Payment and the Settlement Payment
(a) Beginning on January 1, 2014 and continuing until the earlier of February 1, 2014 or the Plan Effective Date, simple interest shall accrue on the Plan Payment and the Settlement Payment at the rate of 3.25% per annum.
(b) If the Plan Effective Date has not occurred by January 31, 2014, then beginning on February 1, 2014 and continuing until the Plan Effective Date, simple interest shall accrue on the Plan Payment and the Settlement Payment at the rate of 5.0% per annum.
(c) To the extent the interest paid pursuant to this Section II.B exceeds the Plan Rate, such supplemental interest is paid by the Debtors in settlement of the Debtors’ objection to the Proofs of Claim, the Claims Order Appeal and the Bank Lender Appeals.
C.    Settlement Approval Motion
As soon as practicable after the execution of this Settlement Agreement by the Parties, Grace shall file a motion and proposed order in the Bankruptcy Court approving the Settlement (the “Motion”), provided, however, that such Motion shall be in a form reasonably satisfactory to the Bank Lender Group. Such Motion shall include a request that the Bankruptcy Court waive the stay provided for in Rule 6004(h) of the Federal Rules of Bankruptcy Procedure. Grace shall in good faith use its commercially reasonable efforts to obtain, and the other Parties shall support, entry of the Settlement Approval Order at the earliest possible date in light of applicable notice requirements. The Bank Lender Group shall support Grace’s efforts to obtain entry of the Settlement Approval Order.
D.    Bank Lender Group’s Obligations
Within three (3) business days of the Settlement Effective Date the Bank Lender Group shall file such documents as are appropriate in the Third Circuit to cause the Bank Lender Appeals to be withdrawn with prejudice and without costs.
E.    Obligations of the Parties with Respect to the Bank Lender Appeals
As soon as practicable after the execution of this Settlement Agreement by the Parties, the Parties shall jointly communicate the fact of the Settlement to the Third Circuit, and request that the Third Circuit not rule on the Bank Lender Appeal.

III.    MISCELLANEOUS

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A.    Retention of Jurisdiction by Bankruptcy Court
The Bankruptcy Court shall retain exclusive jurisdiction to hear any matters or disputes arising from or relating to this Settlement Agreement.
B.    Entire Agreement
This Settlement Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions between Parties. This Settlement Agreement cannot be amended, modified, or waived except by a writing signed by the Parties.
C.    Counterparts
This Settlement Agreement may be executed in several counterparts, each of which, when so executed, shall be deemed an original, but all of which together shall constitute one and the same instrument, and facsimile or electronic signatures transmitted to the other party shall be binding.
D.    Joint Drafting
For purposes of interpretation of this Settlement Agreement, the Parties shall be deemed to have jointly drafted this Settlement Agreement and this Settlement Agreement shall not be interpreted in favor or against any of the Parties because such Party or its counsel drafted this Settlement Agreement or any provision of this Settlement Agreement.
E.    Authorization of Signatories
The persons executing this Settlement Agreement represent that they are authorized to execute this Settlement Agreement on behalf of the Parties for whom they are signing.
F.    Further Assurances
In connection with this Settlement Agreement and the transactions contemplated hereby, each Party may execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform its obligations hereunder.

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G.    Termination
This Settlement Agreement may not be terminated unless (a) the Third Circuit rules on the Bank Lender Appeal despite this Settlement Agreement or (b) the Bankruptcy Court denies entry of the Settlement Approval Order.  If either of these events occur, any Party may terminate the Settlement Agreement by written notice to the other Parties, in which case this Settlement Agreement shall be of no force and effect; provided, however, that the Parties shall confer within 10 days after entry of any such order, and no termination notice may be given until after such conference has occurred, but such notice must be given within 14 days after such conference.
H.    Cooperation
The Parties shall cooperate with each other in good faith in all respects to effectuate the purposes of this Settlement Agreement.
I.    Costs
Each Party shall bear its own fees and costs in connection with this Settlement Agreement and the Proofs of Claim, Bank Lender Appeals and Claims Order Appeal which are being resolved by this Settlement Agreement, including attorney’s fees.





Dated: December 23, 2013
W. R. GRACE & CO. on behalf of itself and the Grace Debtors 

 
By   /s/ MARK A. SHELNITZ    
   Name: Mark A. Shelnitz    
   Title: V. P. and General Counsel   



Dated: December 23, 2013
BANK LENDER GROUP 

 
By   /s/ ANDREW ROSENBERG    
   Name: Andrew Rosenberg    
   Title:   


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W. R. Grace & Co.    T 410.531-4574        
7500 Grace Drive    F 410.531-4414
Columbia, MD 21044    E fred.festa@grace.com
W grace.com

Fred Festa
Chairman, President and Chief Executive Officer

Exhibit 10.18


June 19, 2009



Ms. Pamela Kaufman Wagoner


Dear Pamela:

This letter agreement specifies the terms of your employment with W. R. Grace & Co. (the “Company”), which will be presented for approval to the Board of Directors (the “Board”) of the Company and/or the Compensation Committee of the Board, as applicable, on July 1, 2009. I am extremely pleased that you have agreed to join the Company and believe that you will make a valuable contribution to the Company’s future.

If you agree with the terms of this letter agreement, please sign where indicated below and return one fully executed copy to me. An additional copy is also enclosed for your records.

Position and Responsibilities

At its July 1, 2009, meeting, I will recommend that the Board elect you to the position of Vice President & Chief Human Resources Officer of the Company (and of its subsidiary, W. R. Grace & Co. - Conn.), to be effective as of your commencement of employment with the Company. If the Board, as expected, follows my recommendation, then the following terms of this letter agreement will apply.

Your employment with the Company will commence on July 13, 2009. Your title will be “Vice President & Chief Human Resources Officer”, and you will be regarded as an “executive officer” of the Company. (As all other Company employees, you will actually be employed by W. R. Grace & Co. - Conn., a 100% owned subsidiary of the Company, but will be elected an officer of both W. R. Grace & Co. and W. R. Grace & Co. - Conn.)

You will be an employee of the Company “at will” with no definite term of employment, and you will be subject to the same requirements as other salaried employees of the Company, except as provided under this letter agreement.

You will be head of, and responsible for, the corporate human resources functions of the Company, and you will report directly to me, in my capacity as Chairman, President and Chief Executive Officer, of the Company. Your office will be located at the Company headquarters in Columbia, Maryland.

Compensation



2    June 19, 2009






1.
Your initial annual base salary as Vice President & Chief Human Resources Officer will be $310,000.00. Thereafter, your base salary will be subject to periodic reviews on the same basis and at the same intervals as are applicable to other officers of the Company.
    
Your salary will cease to accrue immediately upon your termination of employment with the Company, regardless of the reason for such termination. (Note, however, the provisions under “Severance Pay Arrangement”.)

2.
You will participate in the Company's Annual Incentive Compensation Program (the “AICP”). For the 2009 calendar year, your targeted award under the Program will be 60 percent of your base salary earnings during 2009, based on the applicable financial performance of the Company and your personal achievement during that year, subject to the terms of the following paragraphs. The cash payment you actually receive under the Program for 2009 (your “2009 AICP Payment”) will be paid to you in March 2010 at the same time other Program participants receive their payments for 2009.

Under the Program, there are two financial performance targets that affect the calculation of the 2009 AICP payments for all Program participants. First, in order for any such payment to be made to any participant, the Company must achieve a specific “earnings before income tax” target for 2009 (the “EBIT Target”). Second, if the EBIT Target is achieved, then the amount available to be distributed to participants as 2009 AICP payments will be determined by the degree that certain cash flow targets for 2009 are achieved. (You will receive further information concerning these targets in a separate letter.)

The amount of your 2009 AICP Payment will be pro-rated, to reflect the portion of the 2009 calendar year during which you are employed by the Company. (Since your employment will commence on July 13, 2009, the amount of your 2009 AICP Payment will be adjusted by multiplying that amount by the following fraction 5.5 / 12 (i.e., 5.5 months / 12 months.) Also, regardless of the results of this pro-ration, you will be paid a 2009 AICP Payment of no less than $125,000, provided that the EBIT Target (and the minimum cash flow target to produce any AICP payment) is achieved for 2009. If that Target is not achieved, you will not receive any 2009 AICP Payment, nor will any other Program participant.

Finally, the other terms governing your 2009 AICP Payment, will be the same as the terms governing the 2009 AICP payments to other Program participants. In accordance with those terms (and notwithstanding any other provision of this letter agreement), you will only receive a 2009 AICP Payment if you are employed by the Company on the date in March 2010 when the 2009 AICP payments are made to Program participants. You will not be entitled to that Payment if you terminate your employment with the Company, or are terminated by the Company, prior to that March 2010 payment date.



3    June 19, 2009





Please note that, with respect to future AICP awards, the Program design and incentive targets are reviewed and adjusted from time to time, as appropriate, based on Company goals and competitive practice. These and the other provisions of the Program will apply to you in the same manner as applicable to other Program participants.

3.
You will be eligible for a targeted award under the Company’s Long-Term Incentive Plan (the “LTIP”) for the 2009 - 2011 performance period and for the 2008-2010 performance period, as described in this section. Under each LTIP, 50 percent of the total targeted award will be in the form of a cash incentive opportunity, and 50 percent will be in the form of a stock option grant. Your targeted award value under the 2009-2011 LTIP will be $300,000; awarded as a targeted cash incentive opportunity of $150,000; and a stock option grant of 30,440 shares of Company common stock; each of which will be pro-rated for your actual time of active employment during the LTIP’s performance period. Your targeted award value under the 2008-2010 LTIP will be $400,000; awarded as a targeted cash incentive opportunity of $200,000; and a stock option grant of 40,590 shares; each of which will be pro-rated for your actual time of active employment during the LTIP’s performance period. The “strike price” of those options will be the market price of a share of Company common stock on the date the grant is approved by the Board – anticipated to be July 1, 2009 – or the market price on your date of hire, whichever is later.

The terms of your award under these LTIPs, will be the same as the terms governing the awards to the other participants under the applicable LTIP, including vesting schedule for the stock options and the requirement of active employment with the Company on the date an LTIP cash payment is made to the LTIP participants, in order to be entitled to such a payment. (You will receive further information regarding the LTIPs in a separate memo.)
4.
Consistent with your election as an officer of the Company, the Board will be requested to authorize the Company to enter into a written Executive Severance Agreement, or a so-called “golden parachute”, with you. In general, the terms of that agreement will provide for a severance payment of 3.00 times the sum of your annual base salary plus your targeted annual incentive compensation award (adjusted in accordance with the terms of that agreement), and certain other benefits, in the event your employment terminates under certain conditions following a change-in-control of the Company. The form and provisions of your Executive Severance Agreement will be the same as applicable to other elected officers of the Company. Please refer to the Executive Severance Agreement itself for definition of “change in control”, “employment termination” and other particulars of this arrangement.
    
Severance Pay Arrangement

If you are involuntarily terminated by the Company [without just cause or] under circumstances in which you would qualify for severance pay under the terms of the Grace Severance Pay Plan for Salaried Employees (the “Grace Severance Plan”), then you will be entitled to a severance payment


4    June 19, 2009





of 1.5 times a dollar amount equal to your annual base salary at the time your employment is terminated. This severance pay arrangement shall be governed by the terms of the Grace Severance Plan, except of course for the calculation of the amount of severance pay. Under that Plan, the total severance payment would be made to you in installments, at the same time and in the same manner as salary continuation payments, over a period of 18 months beginning as of the date you are terminated. However, at your option, under the current terms of the Grace Severance Plan, the entire severance payment may be paid to you in a single lump sum as soon as practical after your termination.

You will not, in any event, however, be entitled to the severance payment described above if, at the time your employment terminates, your employment terminates as the result of your death, or you are entitled to payments under your Executive Severance Agreement described above, or to disability income payments under the Grace “LTD Plan” and/or “ESP Plan” mentioned below. Also, if you receive the severance payment described above in this letter, you will not be entitled to any other severance pay from the Company.

409A Provisions. Notwithstanding any other provision of this letter agreement to the contrary, if you become entitled to severance pay under this agreement, at a time that the Company determines that you are a “specified employee”, within the meaning of section 409A(a)(2)(B) of the Internal Revenue Code (the “Code”), you will not be paid any of that pay prior to a date that is 6 months after your “separation from service” (within the meaning of section 409A(2)(A)(i)) from the Company or your date of death if sooner; provided, however, if your employment is terminated involuntarily and you become entitled to such severance pay, then you may receive, prior to that date, an amount of severance pay under this agreement (when added to the severance benefits you receive under any other plan or program of the Company, which is deemed to be a “nonqualified deferred compensation plan” (as defined by section 409A(d)(1) of the Code), that does not exceed an amount that is 2-times the compensation limit under Code section 401(a)(17) at the time of your termination, or 2-times your annual compensation at that time, if lesser. It is quite likely that you would be a “specified employee” if and when you become entitled to severance pay hereunder. Pamela, please note that the provisions under this paragraph do not grant you any additional benefits, but instead these provisions are solely intended to help assure that your severance benefits described above will be paid in a manner that does not violate the provisions of Code section 409A.

Finally, please note that all payments and benefits under this letter agreement (as well as under the other agreements, programs, policies and plans of the Company) are intended to be exempt from Code section 409A or, with respect to any such payments and benefits that are not so exempt, to be in compliance with that Code section; and the provisions of this letter agreement (and those other agreements, programs, policies and plans) shall be interpreted and administered in that manner.

Sign-on Bonus



5    June 19, 2009





The Company will pay you a sign-on bonus of $225,000 on July 24, 2009 (which is the first regular Company pay date immediately following your employment start date of July 13, 2009), subject to the repayment provisions specified in the next sentence. You agree to repay to the Company the full amount of this bonus if you voluntary terminate your employment with the Company within the first 12 months of your employment, i.e., anytime prior to July 12, 2010. In that event, such repayment must be made in full, no later than your last day of active employment with the Company.

Executive Physical

You will also be eligible for an annual “executive physical” performed at Johns Hopkins Hospital in Baltimore, at Company expense. The terms of the physical will be the same as applicable to other elected officers of the Company based in Maryland.

Other Benefit Programs

As an officer of the Company, you will also be eligible to participate in the following benefit plans and programs (subject to the continuation and the actual provisions of the plans and programs, as amended from time to time):

•
The W. R. Grace & Co. Retirement Plan for Salaried Employees (“Grace Salaried Retirement Plan”)
•    The W. R. Grace & Co. Supplemental Executive Retirement Plan
•    The W. R. Grace & Co. Salaried Employee Savings & Investment Plan
•
The W. R. Grace & Co. Savings & Investment Plan Replacement Payment Program
•    The W. R. Grace & Co. Long-Term Disability Income Plan (“LTD Plan”)
•    Executive Salary Protection Plan (“ESP Plan”)
•    The W. R. Grace & Co. Voluntary Group Accident Insurance Plan
•    The W. R. Grace & Co. Business Travel Accident Insurance Plan
•    The W. R. Grace & Co. Group Term Life Insurance Program
•    Personal Excess Liability Insurance (with a current limit of $6 million)
•    The W. R. Grace & Co. Group Medical Plan
•    The W. R. Grace & Co. Dental Plan
•    Retiree Medical Coverage

In addition, during your employment with the Company, you shall also be entitled to participate in all other employee/executive perquisites, pension and welfare benefit plans and programs made available to the Company's executives or to its employees generally, as such plans or programs may be in effect, and amended, from time to time.

Vacation



6    June 19, 2009





As an officer of the Company, you will be entitled to four weeks paid vacation per full calendar year.

Indemnification

The Company shall, to the extent permitted by applicable law, indemnify you and hold you harmless from and against any and all losses and liabilities you may incur as a result of your performance of your duties as an officer or employee of the Company. In addition, the Company shall indemnify and hold you harmless against any and all losses and liabilities that you may incur, directly or indirectly, as a result of any third party claims brought against you (other than by any taxing authority) with respect to the Company's performance of (or failure to perform) any commitment made to you under this agreement. The Company shall obtain such policy or policies of insurance as it reasonably may deem appropriate to effect this indemnification.

Confidentiality and Non-Compete Agreements

As a condition of employment, you will be required to sign the Company’s standard employment agreement (the “Standard Agreement” copy attached), which includes agreements regarding the confidentiality of Company information and non-competition, and similar provisions. To the extent that the terms of the Standard Agreement differ from the terms of this letter agreement, the terms of this letter agreement (and not the Standard Agreement) shall control your employment relationship with the Company. In addition, the provisions of item 5 of the Standard Agreement are not applicable to the terms of this letter agreement, in that the Standard Agreement does not supersede any terms of this agreement.

Miscellaneous

You and the Company acknowledge this letter agreement, and the other written agreements referred to herein, contain the entire understanding of the parties concerning the subject matter hereof. You and the Company acknowledge that this agreement supersedes any prior agreement between you and the Company concerning the subject matter hereof. Except as expressly otherwise provided herein, this agreement shall not adversely affect your rights to participate in, or receive any benefit under, any incentive, severance or other benefit plan or program in which you may from time to time participate.

If any provision of this agreement is held invalid or unenforceable in whole or in part, such provision, to the extent it is invalid or unenforceable, shall be revised to the extent necessary to make the provision, or part hereof, valid and enforceable, consistent with the intentions of the parties hereto. Any provision of this agreement that is held invalid or unenforceable, in whole or in part, shall not affect the validity and enforceability of the other provisions of this agreement, which shall remain in full force and effect.
    


7    June 19, 2009





This letter agreement may be amended, superseded or canceled only by a written instrument specifically stating that it amends, supersedes or cancels this letter, executed by you and the Company.

If you have any specific questions regarding the compensation programs and benefits noted above, please call Brian McGowan.



Pamela, again, I am very excited about your decision to join Grace and look forward to a productive and rewarding relationship.

Sincerely,

/s/ Fred

Alfred E. Festa
Chairman, President & Chief Executive Officer
W. R. Grace & Co.

Attachment

cc:    W. Brian McGowan


AGREED AND ACCEPTED:


/s/ Pamela K. Wagoner


Date:    6/19/09    



EXHIBIT 12

W. R. GRACE & CO. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(1)(2)(3)
(In millions, except ratios)
(Unaudited)

 
 
Year Ended December 31,
 
 
2013
 
2012
 
2011
 
2010
 
2009
Net income attributable to W. R. Grace & Co. shareholders
 
$
256.1

 
$
40.0

 
$
219.7

 
$
193.8

 
$
76.3

Provision for (benefit from) income taxes
 
102.9

 
(61.6
)
 
87.9

 
26.2

 
18.1

Equity in earnings of unconsolidated affiliate
 
(22.9
)
 
(18.5
)
 
(15.2
)
 
(17.8
)
 
(1.7
)
Distributed income of earnings of unconsolidated affiliates
 
2.8

 
6.3

 
10.9

 
0.5

 
—

Interest expense and related financing costs, including amortization of capitalized interest, less interest capitalized
 
43.9

 
46.8

 
43.6

 
41.7

 
38.8

Estimated amount of rental expense deemed to represent the interest factor
 
8.8

 
7.5

 
6.9

 
6.9

 
6.7

Income as adjusted
 
$
391.6

 
20.5

 
353.8

 
251.3

 
138.2

Combined fixed charges and preferred stock dividends:
 
 
 
 
 
 
 
 
 
 
Interest expense and related financing costs, including capitalized interest
 
$
45.0

 
46.9

 
43.6

 
41.3

 
38.9

Estimated amount of rental expense deemed to represent the interest factor
 
8.8

 
7.5

 
6.9

 
6.9

 
6.7

Fixed charges
 
53.8

 
54.4

 
50.5

 
48.2

 
45.6

Combined fixed charges and preferred stock dividends
 
$
53.8

 
54.4

 
50.5

 
48.2

 
45.6

Ratio of earnings to fixed charges
 
7.28

 
—

 
7.01

 
5.21

 
3.03

Ratio of earnings to fixed charges and preferred stock dividends
 
7.28

 
—

 
7.01

 
5.21

 
3.03

_______________________________________________________________________________
(1)
Grace did not have preferred stock from 2009 through 2013.
(2)    The 2012 ratio of earnings to fixed charges is below a one-to-one ratio. An additional $33.9 million in
earnings would be needed to attain a one-to-one ratio.
(3)    Amounts have been revised as a result of our fourth quarter change to mark-to-market pension accounting.
See Note 1 to the Consolidated Financial Statements for more information.

1

EXHIBIT 18.1






February 27, 2014


Board of Directors
W.R. Grace & Co.
7500 Grace Drive
Columbia, MD 21044

Dear Directors:

We are providing this letter to you for inclusion as an exhibit to your Form 10-K filing pursuant to Item 601 of Regulation S-K.

We have audited the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and issued our report thereon dated February 27, 2014. Note 1 to the financial statements describes a change in accounting principle related to the method of accounting for pension benefits. It should be understood that the preferability of one acceptable method of accounting over another for pension benefits has not been addressed in any authoritative accounting literature, and in expressing our concurrence below we have relied on management’s determination that this change in accounting principle is preferable. Based on our reading of management’s stated reasons and justification for this change in accounting principle in the Form 10-K, and our discussions with management as to their judgment about the relevant business planning factors relating to the change, we concur with management that such change represents, in the Company’s circumstances, the adoption of a preferable accounting principle in conformity with Accounting Standards Codification 250, Accounting Changes and Error Corrections.

Very truly yours,


/s/PricewaterhouseCoopers LLP
McLean, Virginia



EXHIBIT 21

W. R. GRACE & CO., a Delaware corporation
U.S. SUBSIDIARIES
12/31/13




SUBSIDIARY NAME

STATE OF INCORPORATION
Alltech Associates, Inc.
IL
AP Chem Incorporated
MD
Construction Products Dubai, Inc.
DE
Darex Puerto Rico, Inc.
DE
De Neef Construction Chemicals (US) Inc.
TX
Dewey and Almy, LLC
DE
Gloucester New Communities
     Company, Inc.
NJ
Grace Asia Pacific, Inc.
DE
Grace Chemicals, Inc.
DE
Grace Chemical Company of
     Cuba
IL
Grace Collections, Inc.
DE
Grace Energy Corporation
DE
Grace Europe, Inc.
DE
Grace International Holdings, Inc.
DE
Grace Management Services
DE
Grace PAR Corporation
DE
Guanica-Caribe Land
     Development Corporation
DE
Hanover Square Corporation
DE
Kootenai Development Company
MT
Remedium Group, Inc.
DE
Verifi LLC (f/k/a GR 2008 LLC)
DE
Water Street Corporation
DE
W. R. Grace Capital Corporation
NY
W. R. Grace & Co.-Conn.
CT
W. R. Grace Land Corporation
NY


NON-U.S. SUBSIDIARIES


 

COUNTRY/
SUBSIDIARY NAME
AUSTRALIA
 
Alltech Associates (Australia) Pty. Ltd.
 
Grace Australia Pty. Ltd.
 
BELGIUM
 
De Neef Construction Chemicals BVBA (Belgium)
 
Grace Construction Products N.V.
 
Grace N.V.\S.A.
 
Grace Silica N.V.
 
Inverco Benelux N.V.
 
BRAZIL
 
Grace Brasil Ltda.
 
Grace Davison Ltda.
 
CANADA
 
GEC Divestment Corporation Ltd.
 
Grace Canada, Inc.
 
W. R. Grace Finance (NRO) Ltd.
 
CHILE
 
Grace Quimica Compania Limitada
 
CHINA - PEOPLE’S REPUBLIC OF
 
Grace China Ltd.
 
Grace Trading (Shanghai) Co. Ltd.
 
Grace Catalysts (Qingdao) Company Limited
 
COLOMBIA
 
Grace Colombia S.A.
 
CUBA
 
Envases Industriales y Comerciales, S.A.
 
Papelera Camagueyana, S.A.
 
FRANCE
 
Alltech France S.A.R.L.
 
De Neef France SARL
 
Grace Produits de Construction SAS
 
W. R. Grace S.A.
 
GERMANY
 
Alltech Grom GmbH
 
De Neef Deutschland
 
Grace Bauprodukte GmbH
 
Grace Darex GmbH
 
Grace Germany GmbH (f/k/a Grace Energy GmbH)
 
Grace Europe Holding GmbH
 
Grace GmbH & Co. KG
 
Grace GP GmbH
 


 

COUNTRY/
SUBSIDIARY NAME
Grace Management GP GmbH
 
Grace Silica GmbH
 
GREECE
 
Grace Hellas E.P.E.
 
HONG KONG
 
Alltech Applied Science Labs (HK) Limited
 
Alltech Scientific (China) Limited
 
De Neef Construction Chemicals (China) Limited.
 
W. R. Grace (Hong Kong) Limited
 
HUNGARY
 
Grace Értékesito Kft.
 
INDIA
 
Grace Davison Chemicals India Pvt. Ltd.
(f/k/a Flexit Laboratories Private Ltd.) 
 
W. R. Grace & Co. (India) Private Limited
 
INDONESIA
 
PT. Grace Specialty Chemicals Indonesia
 
IRELAND
 
Amicon Ireland Limited
 
Grace Construction Products (Ireland) Limited
 
Grace European Finance (Dublin) Limited
 
ITALY
 
Advanced Refining Technologies S.r.l.
 
Alltech Italia S.R.L.
 
W. R. Grace Italiana S.p.A.
 
JAPAN
 
Grace Chemicals Kabushiki Kaisha
 
Grace Japan Kabushiki Kaisha
 
KOREA
 
Grace Korea Inc.
 
LUXEMBOURG
 
Grace Luxembourg S.a.r.l.
 
MALAYSIA
 
W. R. Grace (Malaysia) Sendiran Berhad
 
W. R. Grace Specialty Chemicals (Malaysia) Sdn. Bhd.
 
MEXICO
 
Grace Container, S. A. de C. V.
 
W. R. Grace Holdings, S. A. de C. V.
 
NETHERLANDS
 
Alltech Applied Science B.V.
 
Denac Nederland B.V.
 
Grace Netherlands B.V.
 
LC Service B.V.
 
NETHERLANDS ANTILLES
 


 

COUNTRY/
SUBSIDIARY NAME
W. R. Grace N.V.
 
NEW ZEALAND
 
Grace (New Zealand) Limited
 
PANAMA
 
W. R. Grace (Panama) S.A.
 
PHILIPPINES
 
W. R. Grace (Philippines), Inc.
 
W.R. Grace Operations Center, Inc.
 
POLAND
 
Grace Sp. z o.o.
 
PORTUGAL
 
Grace Portugal, LDA
 
RUSSIA
 
Grace CIS LLC
 
SINGAPORE
 
De Neef Asia Pte. Ltd. (Singapore)
 
W. R. Grace (Singapore) Private Limited
 
SOUTH AFRICA
 
Grace Davison (Proprietary) Limited
 
W. R. Grace Africa (Proprietary) Limited
 
SPAIN
 
De Neef Technologies S. L.
 
Grace, S.A.
 
SWEDEN
 
De Neef Scandinavia AB
 
Grace AB
 
Grace Catalyst AB
 
Grace Sweden AB
 
SWITZERLAND
 
De Neff (CH) AG
 
Grace Construction Products S.A.
(f/k/a Pieri S.A.)
 
Union Financiere SA
 
TAIWAN
 
W. R. Grace Taiwan, Inc.
 
THAILAND
 
W. R. Grace (Thailand) Limited
 
UNITED KINGDOM
 
A.A. Consultancy & Cleaning Company Limited
 
Alltech Associates Applied Science Limited
 
Borndear 1 Limited
 
Borndear 2 Limited
 
Borndear 3 Limited
 
Cormix Limited
 


 

COUNTRY/
SUBSIDIARY NAME
Darex UK Limited
 
De Neef UK Ltd.
 
Emerson & Cuming (Trading) Ltd.
 
Emerson & Cuming (UK) Ltd.
 
Exemere Limited
 
Grace Construction Products Limited
 
Pieri U.K. Limited
 
Servicised Ltd.
 
W. R. Grace Limited
 
VENEZUELA
 
Grace Venezuela, S.A.
 
VIETNAM
 
W. R. Grace Vietnam Company Limited
 




EXHIBIT 23

Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-37024 & 333-173785) of W.R. Grace & Co. of our report dated February 27, 2013 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
McLean, Virginia
February 27, 2013


1

EXHIBIT 24

POWER OF ATTORNEY


The undersigned hereby appoints HUDSON LA FORCE III, MARK A. SHELNITZ, and MICHAEL W. CONRON as his/her true and lawful attorneys-in-fact for the purpose of signing the Annual Report on Form 10-K of W. R. GRACE & CO. for the year ended December 31, 2013, and all amendments thereto, to be filed with the Securities and Exchange Commission. Each of such attorneys-in-fact is appointed with full power to act without the other.






H. Furlong Baldwin
/s/ H. Furlong Baldwin
Ronald C. Cambre
/s/ Ronald C. Cambre
Marye Anne Fox
/s/ Marye Anne Fox
Janice K. Henry
/s/ Janice K. Henry
Jeffry N. Quinn
/s/ Jeffry N. Quinn
Christopher J. Steffen
/s/ Christopher J. Steffen
Mark E. Tomkins
/s/ Mark E. Tomkins


Dated: February 25, 2014



EXHIBIT 31.(i).2
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Hudson La Force III, certify that:
1.
I have reviewed this annual report on Form 10-K of W. R. Grace & Co.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 27, 2014
 
 
/s/ HUDSON LA FORCE III
 
 
Hudson La Force III
Senior Vice President and Chief Financial Officer






EXHIBIT 31.(i).1
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, A. E. Festa, certify that:
1.
I have reviewed this annual report on Form 10-K of W. R. Grace & Co.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 27, 2014
 
 
/s/ A. E. FESTA
 
 
A. E. Festa
Chief Executive Officer






EXHIBIT 32
CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
        Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), the undersigned certifies that (1) this Annual Report of W. R. Grace & Co. (the "Company") on Form 10-K for the period ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (this "Report"), fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ A. E. FESTA
 
 
Chief Executive Officer
 
 
 
 
 
/s/ HUDSON LA FORCE III
 
 
Senior Vice President and Chief Financial Officer
 
 
Date: 2/27/2014
 
 
        A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.



EXHIBIT 95

MINE SAFETY DISCLOSURES

The following table provides information about citations, orders and notices issued from the Mine Safety and Health Administration (the “MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) during fiscal year 2013.

Mine
§104 S&S*
Citations
(#)
§104(b) Orders
(#)
§104(d) Citations and Orders
(#)
§110(b)(2) Violations
(#)
§107(a) Orders
(#)
Total Dollar Value of MSHA Assessments Proposed
($)
Total Number of Mining-Related Fatalities
(#)
Received Written Notice of Pattern of S&S* Violations under §104(e)
(yes/no)
Received Notice of Potential to have Pattern of S&S* Violations under §104(e)
(yes/no)

Clay Mine Aiken, SC
2
-0-
-0-
-0-
-0-
$200
-0-
No
No
Ezell Vermiculite Mine Mt. Olive, SC
-0-
-0-
-0-
-0-
-0-
-0-
-0-
No
No
Davis-Dewwitt Vermiculite Mine Enoree, SC
-0-
-0-
-0-
-0-
-0-
-0-
-0-
No
No
Goodwin Vermiculite Mine Laurens County, SC
-0-
-0-
-0-
-0-
-0-
-0-
-0-
No
No

*
S&S refers to violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard under §104 of the Mine Act.

The following tables provide information about legal actions before the Federal Mine Safety and Health Review Commission (the “FMSHRC”) during fiscal year 2013.

Mine
Pending as of
December 31, 2013
(#)
Instituted during fiscal year 2013
(#)
Resolved during fiscal year 2013
(#)
Clay Mine
Aiken, SC
-0-
-0-
-0-
Ezell Vermiculite Mine
Mt. Olive, SC
-0-
-0-
-0-
Davis-Dewwitt Vermiculite Mine
Enoree, SC
-0-
-0-
-0-
Goodwin Vermiculite Mine
Laurens County, SC
-0-
-0-
-0-





With Respect to Legal Actions Pending as of December 31, 2013
Mine
Contests of Citations and Orders per Subpart B*
(#)
Contests of Proposed Penalties per Subpart C*
(#)
Complaints for Compensation per Subpart D*
(#)
Complaints of Discharge, Discrimination or Interference per Subpart E*
(#)
Applications for Temporary Relief per Subpart F*
(#)
Appeals of Judge’s Decisions or Orders to the FMSHRC per Subpart H*
(#)
Clay Mine
Aiken, SC
-0-
-0-
-0-
-0-
-0-
-0-
Ezell Vermiculite Mine Mt. Olive, SC
-0-
-0-
-0-
-0-
-0-
-0-
Davis-Dewwitt Vermiculite Mine Enoree, SC
-0-
-0-
-0-
-0-
-0-
-0-
Goodwin Vermiculite Mine Laurens County, SC
-0-
-0-
-0-
-0-
-0-
-0-

*    29 CFR part 2700.

COVER

February 27, 2014



Securities and Exchange Commission
Attention: File Desk
100 F Street, NE
Washington, D.C. 20549

Re:    W. R. Grace & Co.
2013 Annual Report on Form 10-K
SEC File No.: 001-13953

Ladies and Gentlemen:

We have transmitted electronically for filing, pursuant to the Securities Exchange Act of 1934, as amended, the Annual Report on Form 10-K (the “2013 Form 10-K”) for the year ended December 31, 2013 of W. R. Grace & Co. (the “Registrant”)

The financial statements included in this Form 10-K reflect changes from the preceding year in accounting principles or practices, or in the method of applying any such principles or practices. Specifically, Note 1 to the financial statements describes a change in accounting principle related to the Registrant’s adoption of “mark-to-market” pension accounting.

The Registrant’s new method of accounting includes immediate recognition of actuarial gains and losses in the period in which they occur. Under the Registrant's previous accounting method, such amounts were deferred and amortized. In addition, the Registrant will no longer update the balance sheet funded status of its pension plans each quarter for changes in discount rates and actual returns on assets, but rather will perform such update annually as of the end of each year. Should a significant event occur, the Registrant's pension obligation and plan assets would be remeasured at an interim period, and the gains or losses on remeasurement would be recognized in that period. This new accounting method was adopted in the 2013 fourth quarter, and retrospectively applied to the Registrant’s financial results for all periods presented.

The Registrant has included as Exhibit 18.1 to the 2013 Form 10-K a letter that it has received from its independent registered public accounting firm, PricewaterhouseCoopers LLP, addressing the conformity of the change with Accounting Standards Codification 250, Accounting Changes and Error Corrections.

If you have any questions or comments regarding the Form 10-K, please contact me at (410) 531-4558.

Very truly yours,

W. R. GRACE & CO.


By: /s/ WILLIAM C. DOCKMAN
William C. Dockman
Vice President and Controller

cc: Hudson La Force



v2.4.0.8
Goodwill and Other Intangible Assets (Tables)
 12 Months Ended
Dec. 31, 2013
Goodwill and Intangible Assets Disclosure [Abstract]  
Summary of carrying amount of goodwill attributable to each operating segment and the changes in those balances during the period
The carrying amount of goodwill attributable to each operating segment and the changes in those balances during the year ended December 31, 2013, are as follows:
(In millions)
Grace Catalysts Technologies
 
Grace Materials Technologies
 
Grace
Construction
Products
 
Total
Grace
Balance, December 31, 2012
$
39.5

 
$
40.5

 
$
116.7

 
$
196.7

Goodwill acquired during the year
253.2

 
—

 
9.7

 
262.9

Foreign currency translation/other adjustments
0.7

 
0.7

 
(3.5
)
 
(2.1
)
Balance, December 31, 2013
$
293.4

 
$
41.2

 
$
122.9

 
$
457.5
Summary of net book value of other intangible assets
Grace's net book value of other intangible assets at December 31, 2013 and 2012, was $315.5 million and $82.7 million, respectively, detailed as follows:
 
As of December 31, 2013
(In millions)
Gross Carrying
Amount
 
Accumulated
Amortization
Technology
$
260.0

 
$
37.8

Customer lists
94.9

 
43.7

Trademarks
36.9

 
14.0

Other
22.4

 
3.2

Total
$
414.2

 
$
98.7


 
As of December 31, 2012
(In millions)
Gross Carrying
Amount
 
Accumulated
Amortization
Customer lists
$
81.6

 
$
37.9

Technology
54.6

 
32.6

Trademarks
24.6

 
12.2

Other
8.8

 
4.2

Total
$
169.6

 
$
86.9
Summary of estimated amortization expenses
At December 31, 2013, estimated future annual amortization expenses for intangible assets are:
 
(In millions)
2014
$
24.0

2015
22.4

2016
18.6

2017
17.3

2018
17.0

Thereafter
211.3

Total estimated amortization expenses
$
310.6

v2.4.0.8
Quarterly Summary and Statistical Information (Unaudited) (Tables)
 12 Months Ended
Dec. 31, 2013
Quarterly Financial Information Disclosure [Abstract]  
Schedule of Quarterly Summary and Statistical Information (Unaudited)
(In millions, except per share amounts)
March 31(1)
 
June 30(2)
 
September 30(3)
 
December 31
2013
 
 
 
 
 
 
 
Net sales
$
709.9

 
$
802.8

 
$
771.3

 
$
776.7

Gross profit
259.0

 
300.9

 
282.4

 
299.8

Net income
59.1

 
90.3

 
77.0

 
29.7

Net income per share:(4)
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Net income
$
0.78

 
$
1.18

 
$
1.00

 
$
0.39

Diluted earnings per share:
 
 
 
 
 
 
 
Net income
0.77

 
1.16

 
0.99

 
0.38

Market price of common stock:(5)
 
 
 
 
 
 
 
High
$
79.14

 
$
85.43

 
$
89.80

 
$
101.72

Low
68.23

 
72.00

 
74.46

 
85.06

Close
77.51

 
84.04

 
87.40

 
98.87

_______________________________________________________________________________
(1)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in first quarter 2013 decrease to Gross profit of $4.8 million, and increases to Net income of $6.2 million, Basic earnings per share of $0.08 and Diluted earnings per share of $0.08.
(2)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in second quarter 2013 decrease to Gross profit of $2.4 million, and increases to Net income of $7.5 million, Basic earnings per share of $0.10 and Diluted earnings per share of $0.10.
(3)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in third quarter 2013 decrease to Gross profit of $2.3 million, and increases to Net income of $7.6 million, Basic earnings per share of $0.10 and Diluted earnings per share of $0.10.
(4)
Per share results for the four quarters may differ from full-year per share results, as a separate computation of the weighted average number of shares outstanding is made for each quarter presented.
(5)
Principal market: New York Stock Exchange.
(In millions, except per share amounts)
March 31(1)
 
June 30(2)
 
September 30(3)
 
December 31(4)
2012
 
 
 
 
 
 
 
Net sales
$
754.4

 
$
826.7

 
$
776.6

 
$
797.8

Gross profit
272.5

 
301.4

 
282.2

 
258.3

Net income (loss)
66.8

 
75.4

 
82.1

 
(184.3
)
Net income per share:(5)
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Net income (loss)
$
0.90

 
$
1.01

 
$
1.09

 
$
(2.44
)
Diluted earnings per share:
 
 
 
 
 
 
 
Net income (loss)
0.87

 
0.98

 
1.07

 
(2.44
)
Market price of common stock:(6)
 
 
 
 
 
 
 
High
$
58.89

 
$
61.08

 
$
61.58

 
$
68.86

Low
45.39

 
47.40

 
48.14

 
58.40

Close
57.80

 
50.45

 
59.08

 
67.23

_______________________________________________________________________________
(1)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in first quarter 2012 decrease to Gross profit of $4.6 million, and increases to Net income of $5.9 million, Basic earnings per share of $0.08 and Diluted earnings per share of $0.08.
(2)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in second quarter 2012 decrease to Gross profit of $2.7 million, and increases to Net income of $6.1 million, Basic earnings per share of $0.08 and Diluted earnings per share of $0.08.
(3)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in third quarter 2012 decrease to Gross profit of $2.6 million, and increases to Net income of $6.6 million, Basic earnings per share of $0.09 and Diluted earnings per share of $0.09.
(4)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in a fourth quarter 2012 decreases to Gross profit of $42.0 million,, Net income of $72.7 million, Basic earnings per share of $0.96 and Diluted earnings per share of $0.96.
(5)
Per share results for the four quarters may differ from full-year per share results, as a separate computation of the weighted average number of shares outstanding is made for each quarter presented.
(6)
Principal market: New York Stock Exchange.

v2.4.0.8
Shareholders' Equity (Deficit) (Tables)
 12 Months Ended
Dec. 31, 2013
Equity [Abstract]  
Schedule of information relating to common stock activity
The following table sets forth information relating to common stock activity for 2013 and 2012:
Balance of Outstanding Shares, December 31, 2011
73,886,050

Stock options exercised
1,679,359

Balance of Outstanding Shares, December 31, 2012
75,565,409

Stock options exercised
1,464,294

Shares Issued
16,440

Balance of Outstanding Shares, December 31, 2013
77,046,143

v2.4.0.8
Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income before income taxes:      
Domestic $ 141.4 $ (170.3) $ 107.7
Foreign 219.2 149.7 199.3
Income before income taxes 360.6 (20.6) 307.0
Provision for income taxes:      
Federal-current 1.4 (51.2) 16.7
Federal-deferred (73.1) 82.0 (49.3)
State and local-current (0.7) (4.4) (2.3)
State and local - deferred 38.2 70.2   
Foreign-current (83.5) (43.1) (52.5)
Foreign-deferred 14.8 8.1 (0.5)
Benefit from (provision for) income taxes (102.9) 61.6 (87.9)
Domestic income resulting from repatriated earnings 25.9 22.1 30.1
U.S. federal income tax rate (as a percent) 35.00%    
Income tax provision analysis      
Tax provision at U.S. federal income tax rate (126.2) 7.2 (107.4)
Change in provision resulting from:      
Release of state valuation allowance 24.4 44.0   
Effect of tax rates in foreign jurisdictions 16.6 14.9 17.6
Benefits from domestic production activities    14.0 0.9
Nontaxable income/non-deductible expenses (9.7) (8.1) (7.3)
Provision for U.S. taxes on repatriated foreign earnings 3.7 (2.2) (1.1)
State and local income taxes, net of federal income tax benefit (0.7) 0.1 (1.5)
Adjustments to uncertain tax positions and other discrete items (11.0) (8.3) 10.9
Benefit from (provision for) income taxes (102.9) 61.6 (87.9)
Deferred tax assets:      
Liability for asbestos-related litigation 657.1 717.5  
Deferred Tax Assets, Tax Credit Carryforwards 16.9 2.4  
Federal tax credit carryforwards 65.2    
Foreign net operating loss carryforwards 18.0 22.7  
Deferred state taxes 90.3 88.4  
Liability for environmental remediation 47.1 49.2  
Other postretirement benefits 18.2 22.9  
Pension liabilities 96.7 133.1  
Reserves and allowances 60.4 51.6  
Research and development 32.6 34.0  
Accrued interest on pre-petition debt 66.7 121.9  
Other 16.3 20.8  
Total deferred tax assets 1,120.3 1,264.5  
Deferred tax liabilities:      
Asbestos-related insurance receivable (175.0) (175.0)  
Pension assets (3.7) (14.9)  
Properties and equipments (30.3) (35.3)  
Other (7.3) (14.7)  
Total deferred tax liabilities (216.3) (239.9)  
Valuation allowance:      
Future Adjustments To Additional Paid In Capital Tax Effect From Share Based Compensation 57.7    
Total valuation allowance (18.3) (40.8)  
Net deferred tax assets 885.7 983.8  
Decrease in valuation allowance 22.5    
Deferred state taxes
      
Valuation allowance:      
Total valuation allowance (13.6) (40.3)  
Deferred Tax Asset Deferred Federal Credits [Member] [Member]
      
Valuation allowance:      
Total valuation allowance (4.4)     
Foreign net operating loss carryforward
      
Valuation allowance:      
Total valuation allowance $ (0.3) $ (0.5)  

v2.4.0.8
Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
segment
entity
Dec. 31, 2012
Dec. 31, 2011
Organization, Consolidation and Presentation of Financial Statements [Abstract]      
Number of operating segments 3    
Number of United States subsidiaries and affiliates filed voluntary petitions for reorganization 61    
Cash Equivalents      
Maximum original maturity period of cash equivalents (in months) 3 months    
Foreign Currency Transaction [Abstract]      
Venezuela currency exchange rate, point in time 4.3    
Venezuela currency exchange rate, future 6.3    
Exchange Rate Net Charges $ 8.5 $ 0 $ 0
Exchange rate charges included in operating segment income 8.5    
Minimum
      
Long-lived assets      
Finite lived intangible assets, estimated useful life 1 year    
Minimum | Building [Member]
      
Long-lived assets      
Long lived assets, estimated useful life 20 years    
Minimum | Information technology and equipment [Member]
      
Long-lived assets      
Long lived assets, estimated useful life 3 years    
Minimum | Operating machinery and equipment [Member]
      
Long-lived assets      
Long lived assets, estimated useful life 3 years    
Minimum | Furniture and fixtures [Member]
      
Long-lived assets      
Long lived assets, estimated useful life 5 years    
Maximum
      
Long-lived assets      
Finite lived intangible assets, estimated useful life 30 years    
Maximum | Building [Member]
      
Long-lived assets      
Long lived assets, estimated useful life 40 years    
Maximum | Information technology and equipment [Member]
      
Long-lived assets      
Long lived assets, estimated useful life 7 years    
Maximum | Operating machinery and equipment [Member]
      
Long-lived assets      
Long lived assets, estimated useful life 10 years    
Maximum | Furniture and fixtures [Member]
      
Long-lived assets      
Long lived assets, estimated useful life 10 years    
Reportable Segment [Member]
      
Foreign Currency Transaction [Abstract]      
Exchange Rate Net Charges $ 1.6    

v2.4.0.8
Commitments and Contingent Liabilities (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Environmental remediation      
Estimated liability for environmental investigative and remediation costs $ 135.9 $ 141.5  
Pre-tax charges for environmental matters 8.2 3.6 17.8
Net cash expenditures 14.0 13.0 11.8
Vermiculite Related Matters
      
Environmental remediation      
Estimated liability for environmental investigative and remediation costs 60.4 60.8 16.0
Maximum number of operating plants under U.S. Environmental Protection Agency (EPA) reinvestigation 105    
Number of facilities that expanded Libby vermiculite 8    
Non-Vermiculite Related Matters
      
Environmental remediation      
Estimated liability for environmental investigative and remediation costs 75.5 80.7  
Number of sites for potential contamination claims under U.S. Environmental Protection Agency (EPA) investigation 38    
Amount agreed to pay in settlement of outstanding claims $ 44    
Number of outstanding claims settled 35    
Number of remaining sites for remediation 2    

v2.4.0.8
Other Expense, net (Tables)
 12 Months Ended
Dec. 31, 2013
Other Income and Expenses [Abstract]  
Components of other (income) expense, net
Components of other expense, net are as follows:
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Restructuring expenses and related asset impairments
$
12.5

 
$
6.9

 
$
6.9

Provision for environmental remediation
8.2

 
3.6

 
17.8

Translation effects—intercompany loans
(11.9
)
 
(5.6
)
 
11.7

Value of currency forward contracts—intercompany loans
10.9

 
3.7

 
(9.3
)
Currency transaction loss in Venezuela
8.5

 
—

 
—

Other currency transaction effects
5.0

 
2.2

 
3.2

Interest income of non-Debtor subsidiaries
(1.0
)
 
(1.0
)
 
(1.2
)
Net (gain) loss on sales of investments and disposals of assets
0.5

 
0.7

 
(3.0
)
Other miscellaneous (income) expense
(9.2
)
 
(4.4
)
 
3.3

Total other expense, net
$
23.5

 
$
6.1

 
$
29.4

v2.4.0.8
Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies Schedule of Pension Recasting (Tables)
 12 Months Ended
Dec. 31, 2013
New Accounting Pronouncements or Change in Accounting Principle [Line Items]  
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]
These changes have been reported through retrospective application of the new policies to all periods presented. The impacts of all adjustments made to the financial statements are summarized below:
Consolidated Statements of Operations
 
Year Ended December 31, 2013
(In millions, except per share amounts)
Previous Method
 
As Reported
 
Effect of Change
Cost of goods sold
$
1,925.3

 
$
1,918.6

 
$
(6.7
)
Gross profit
1,135.4

 
1,142.1

 
6.7

Selling, general and administrative expenses
522.2

 
505.7

 
(16.5
)
Defined benefit pension expense
73.4

 
—

 
(73.4
)
Total costs and expenses
871.4

 
781.5

 
(89.9
)
Income (loss) before income taxes
264.0

 
360.6

 
96.6

Provision for income taxes
(72.9
)
 
(102.9
)
 
(30.0
)
Net income
191.1

 
257.7

 
66.6

Net income attributable to W. R. Grace & Co. shareholders
189.5

 
256.1

 
66.6

Basic earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
2.48

 
3.35

 
0.87

Diluted earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
2.44

 
3.30

 
0.86

 
Year Ended December 31, 2012
(In millions, except per share amounts)
Previously Reported
 
Revised
 
Effect of Change
Cost of goods sold
$
1,989.2

 
$
2,041.1

 
$
51.9

Gross profit
1,166.3

 
1,114.4

 
(51.9
)
Selling, general and administrative expenses
537.5

 
635.2

 
97.7

Defined benefit pension expense
71.2

 
—

 
(71.2
)
Total costs and expenses
1,108.5

 
1,135.0

 
26.5

Income (loss) before income taxes
57.8

 
(20.6
)
 
(78.4
)
Benefit from income taxes
37.3

 
61.6

 
24.3

Net income
95.1

 
41.0

 
(54.1
)
Net income attributable to W. R. Grace & Co. shareholders
94.1

 
40.0

 
(54.1
)
Basic earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
1.26

 
0.53

 
(0.72
)
Diluted earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
1.23

 
0.52

 
(0.71
)
 
Year Ended December 31, 2011
(In millions, except per share amounts)
Previously Reported
 
Revised
 
Effect of Change
Cost of goods sold
$
2,050.6

 
$
2,099.0

 
$
48.4

Gross profit
1,161.3

 
1,112.9

 
(48.4
)
Selling, general and administrative expenses
568.4

 
659.9

 
91.5

Defined benefit pension expense
63.4

 
—

 
(63.4
)
Total costs and expenses
777.8

 
805.9

 
28.1

Income before income taxes
383.5

 
307.0

 
(76.5
)
Benefit from (provision for) income taxes
(114.7
)
 
(87.9
)
 
26.8

Net income
268.8

 
219.1

 
(49.7
)
Net income attributable to W. R. Grace & Co. shareholders
269.4

 
219.7

 
(49.7
)
Basic earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
3.66

 
2.99

 
(0.68
)
Diluted earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
3.57

 
2.91

 
(0.66
)
Consolidated Balance Sheets
 
December 31, 2013
(In millions)
Previous Method
 
As Reported
 
Effect of Change
Inventories
$
294.7

 
$
295.3

 
$
0.6

Total current assets
2,293.8

 
2,294.4

 
0.6

Deferred income taxes
846.1

 
845.9

 
(0.2
)
Overfunded defined benefit pension plans
16.7

 
16.7

 
—

Total assets
5,395.7

 
5,396.1

 
0.4

Underfunded and unfunded defined benefit pension plans
299.6

 
299.6

 
—

Total Liabilities Not Subject to Compromise
1,048.8

 
1,048.8

 
—

Postretirement benefits
176.3

 
176.3

 
—

Total Liabilities Subject to Compromise
3,776.1

 
3,776.1

 
—

Total Liabilities
4,824.9

 
4,824.9

 
—

Accumulated other comprehensive income (loss)
(558.7
)
 
10.6

 
569.3

Retained earnings
584.7

 
15.8

 
(568.9
)
Total W. R. Grace & Co. Shareholders' Equity
560.2

 
560.6

 
0.4

Total Equity
570.8

 
571.2

 
0.4


 
December 31, 2012
(In millions)
Previously Reported
 
Revised
 
Effect of Change
Inventories
$
278.6

 
$
283.6

 
$
5.0

Total current assets
2,440.2

 
2,445.2

 
5.0

Deferred income taxes
956.3

 
953.2

 
(3.1
)
Overfunded defined benefit pension plans
33.8

 
32.1

 
(1.7
)
Total assets
5,090.2

 
5,090.4

 
0.2

Underfunded and unfunded defined benefit pension plans
400.6

 
396.5

 
(4.1
)
Total Liabilities Not Subject to Compromise
1,154.8

 
1,150.7

 
(4.1
)
Postretirement benefits
188.1

 
190.9

 
2.8

Total Liabilities Subject to Compromise
3,617.1

 
3,619.9

 
2.8

Total Liabilities
4,771.9

 
4,770.6

 
(1.3
)
Accumulated other comprehensive income (loss)
(607.3
)
 
29.7

 
637.0

Retained earnings
395.2

 
(240.3
)
 
(635.5
)
Total W. R. Grace & Co. Shareholders' Equity
308.4

 
309.9

 
1.5

Total Equity
318.3

 
319.8

 
1.5

Consolidated Statements of Cash Flows
 
Year Ended December 31, 2013
(In millions)
Previous Method
 
As Reported
 
Effect of Change
Cash flows from operating activities:
 

 
 

 
 

Net income
$
191.1

 
$
257.7

 
$
66.6

(Benefit from) provision for income taxes
72.9

 
102.9

 
30.0

Defined benefit pension expense
73.4

 
(23.2
)
 
(96.6
)
Inventories
4.2

 
8.6

 
4.4

All other items, net(1)
(25.6
)
 
(30.0
)
 
(4.4
)
 
Year Ended December 31, 2012
(In millions)
Previously Reported
 
Revised
 
Effect of Change
Cash flows from operating activities:
 

 
 

 
 

Net income
$
95.1

 
$
41.0

 
$
(54.1
)
(Benefit from) provision for income taxes
(37.3
)
 
(61.6
)
 
(24.3
)
Defined benefit pension expense
71.2

 
149.6

 
78.4

Inventories
53.9

 
53.2

 
(0.7
)
All other items, net(1)
29.2

 
29.9

 
0.7

 
Year Ended December 31, 2011
(In millions)
Previously Reported
 
Revised
 
Effect of Change
Cash flows from operating activities:
 

 
 

 
 

Net income
$
268.8

 
$
219.1

 
$
(49.7
)
(Benefit from) provision for income taxes
114.7

 
87.9

 
(26.8
)
Defined benefit pension expense
63.4

 
139.9

 
76.5

Inventories
(66.9
)
 
(67.9
)
 
(1.0
)
All other items, net(1)
17.4

 
18.4

 
1.0

_______________________________________________________________________________
(1)
Includes only those items which relate to the change in accounting method to mark-to-market accounting.
Consolidated Statements of Equity (Deficit) and Comprehensive Income
 
December 31, 2013
 
Previous Method
 
As Reported
 
Effect of Change
Retained earnings
 

 
 

 
 

Beginning balance
$
395.2

 
$
(240.3
)
 
$
(635.5
)
Net income
189.5

 
256.1

 
66.6

Ending balance
584.7

 
15.8

 
(568.9
)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
Beginning balance
$
(607.3
)
 
$
29.7

 
$
637.0

Other comprehensive income (loss)
48.6

 
(19.1
)
 
(67.7
)
Ending balance
(558.7
)
 
10.6

 
569.3

 
 
 
 
 
 
Total equity
$
570.8

 
$
571.2

 
$
0.4

 
 
 
 
 
 
Comprehensive income
 
 
 
 
 
Net income
$
191.1

 
$
257.7

 
$
66.6

Defined benefit pension and other postretirement plans net of income taxes
72.3

 
4.6

 
(67.7
)
Currency translation adjustments
(23.6
)
 
(23.6
)
 
—

Total other comprehensive income (loss)
47.7

 
(20.0
)
 
(67.7
)
Comprehensive income
238.8

 
237.7

 
(1.1
)
Comprehensive income attributable to W. R. Grace & Co. shareholders
238.1

 
237.0

 
(1.1
)
 
December 31, 2012
 
Previously Reported
 
Revised
 
Effect of Change
Retained earnings
 

 
 

 
 

Beginning balance
$
301.1

 
$
(280.3
)
 
$
(581.4
)
Net income
94.1

 
40.0

 
(54.1
)
Ending balance
395.2

 
(240.3
)
 
(635.5
)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
Beginning balance
$
(578.5
)
 
$
19.5

 
$
598.0

Other comprehensive income (loss)
(28.8
)
 
10.2

 
39.0

Ending balance
(607.3
)
 
29.7

 
637.0

 
 
 
 
 
 
Total equity
$
318.3

 
$
319.8

 
$
1.5

 
 
 
 
 
 
Comprehensive income
 
 
 
 
 
Net income
$
95.1

 
$
41.0

 
$
(54.1
)
Defined benefit pension and other postretirement plans net of income taxes
(36.6
)
 
2.3

 
38.9

Currency translation adjustments
5.4

 
5.5

 
0.1

Total other comprehensive income (loss)
(28.0
)
 
11.0

 
39.0

Comprehensive income
67.1

 
52.0

 
(15.1
)
Comprehensive income attributable to W. R. Grace & Co. shareholders
65.3

 
50.2

 
(15.1
)
 
December 31, 2011
 
Previously Reported
 
Revised
 
Effect of Change
Retained earnings
 

 
 

 
 

Beginning balance
$
31.7

 
$
(500.0
)
 
$
(531.7
)
Net income
269.4

 
219.7

 
(49.7
)
Ending balance
301.1

 
(280.3
)
 
(581.4
)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
Beginning balance
$
(518.1
)
 
$
26.7

 
$
544.8

Other comprehensive income (loss)
(60.4
)
 
(7.2
)
 
53.2

Ending balance
(578.5
)
 
19.5

 
598.0

 
 
 
 
 
 
Total equity
$
167.5

 
$
184.1

 
$
16.6

 
 
 
 
 
 
Comprehensive income
 

 
 

 
 
Net income
$
268.8

 
$
219.1

 
$
(49.7
)
Defined benefit pension and other postretirement plans net of income taxes
(46.7
)
 
6.2

 
52.9

Currency translation adjustments
(11.6
)
 
(11.3
)
 
0.3

Total other comprehensive income (loss)
(58.6
)
 
(5.4
)
 
53.2

Comprehensive income
210.2

 
213.7

 
3.5

Comprehensive income attributable to W. R. Grace & Co. shareholders
209.0

 
212.5

 
3.5

v2.4.0.8
Commitments and Contingent Liabilities (Details 2) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2013
Financial Guarantee
  
Financial assurances  
Gross financial assurances issued and outstanding $ 258.2
Surety Bonds
  
Financial assurances  
Gross financial assurances issued and outstanding 108.5
Standby Letters of Credit
  
Financial assurances  
Gross financial assurances issued and outstanding 149.7
Letters of Credit
  
Financial assurances  
Gross financial assurances issued and outstanding $ 80.6

v2.4.0.8
Pension Plans and Other Postretirement Benefit Plans (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Funded status of fully funded, underfunded, and unfunded pension plans:      
Overfunded defined benefit pension plans $ 16.7 $ 32.1  
Total underfunded and unfunded defined benefit pension plans (299.6) (396.5)  
Unfunded defined benefit pension plans included in liabilities subject to compromise (176.3) (190.9)  
Pension liabilities included in other current liabilities (438.2)    
Defined benefit pension plans, projected obligation 1,873.2 1,954.9  
Postretirement Benefits Other Than Pensions      
Percent of Net Actuarial Gains and Losses Over Accumulated Postretirement Benefit Obligation Recognized in Statement of Operations 10.00%    
Defined contribution retirement plan      
Percentage that the employer contributes of employee contributions under 401(k) plan 100.00%    
Maximum percentage of employee compensation match by employer to defined contribution plan 6.00%    
Costs related to defined contribution retirement plan 13.2 12.6 12.3
Pension Plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Overfunded defined benefit pension plans 16.7 32.1  
Unfunded defined benefit pension plans included in liabilities subject to compromise (123.6) (131.2)  
Pension liabilities included in other current liabilities (15.0) (14.0)  
Net funded status (421.5) (509.6)  
Defined benefit pension plans, projected obligation 1,873.2 1,954.9 1,735.1
Pension Plans | Overfunded pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Overfunded defined benefit pension plans 16.7 32.1  
Pension Plans | Underfunded and Unfunded pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Total underfunded and unfunded defined benefit pension plans (299.6) (396.5)  
Pension Plans | Underfunded pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Total underfunded and unfunded defined benefit pension plans (66.2) (175.1)  
Pension Plans | Unfunded pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Total underfunded and unfunded defined benefit pension plans (233.4) (221.4)  
U.S. qualified pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Overfunded defined benefit pension plans    0  
Net funded status (181.6) (293.9)  
Defined benefit pension plans, projected obligation 1,326.8 1,425.6 1,282.3
Defined benefit pension plans, discount rate 4.76%    
U.S. qualified pension plans | Overfunded pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Net funded status    [1]    [1]    [1]
Defined benefit pension plans, projected obligation    [1]    [1]    [1]
Defined benefit pension plans, discount rate 4.76% 3.75%  
U.S. qualified pension plans | Underfunded pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Net funded status (52.2) [1] (156.9) [1] (202.2) [1]
Defined benefit pension plans, projected obligation 1,197.4 [1] 1,288.6 [1] 1,157.5 [1]
Defined benefit pension plans, discount rate 4.76%    
Non-U.S. pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Overfunded defined benefit pension plans 16.7 32.1  
Net funded status (239.9) (215.7)  
Defined benefit pension plans, projected obligation 546.4 529.3 452.8
Defined benefit pension plans, discount rate 4.25% 4.06%  
Non-U.S. pension plans | Overfunded pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Net funded status 16.7 [1] 32.1 [1] 42.5 [1]
Defined benefit pension plans, projected obligation 247.3 [1] 237.1 [1] 213.3 [1]
Defined benefit pension plans, discount rate 4.25%    
Non-U.S. pension plans | Underfunded pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Net funded status (14.0) [1] (18.2) [1] (13.8) [1]
Defined benefit pension plans, projected obligation 56.5 [1] 62.6 [1] 53.1 [1]
Non-U.S. pension plans | Unfunded pension plans
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Net funded status (242.6) [2] (229.6) [2] (186.4) [2]
Defined benefit pension plans, projected obligation 242.6 [2] 229.6 [2] 186.4 [2]
Postretirement Benefits Other Than Pensions
      
Funded status of fully funded, underfunded, and unfunded pension plans:      
Overfunded defined benefit pension plans        
Net funded status (57.2) (63.9)  
Defined benefit pension plans, projected obligation 57.2 63.9 64.6
Defined benefit pension plans, discount rate 4.26% 3.50%  
Postretirement Benefits Other Than Pensions      
Minimum eligible age for medical plan benefits (in years) 55 years    
Minimum eligible tenure of service for medical plan benefits (in years) 10 years    
Minimum required contribution by retirees and beneficiaries, as percentage of the calculated premium 40.00%    
Percentage contribution by retirees for any increase in premium costs 100.00%    
Initially assumed increase in per capita costs (as a percent) 8.25%    
Ultimate health care cost rate (as a percent) 5.00%    
Maximum impact of one percentage point increase (decrease) in assumed health care medical cost trend rate on postretirement benefit obligations $ 1    
[1] Plans intended to be advance-funded.
[2] Plans intended to be pay-as-you-go.

v2.4.0.8
Operating Segment Information (Details 2) (USD $)
In Millions, unless otherwise specified
 3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Geographic Area Data                      
Consolidated Exchange Rate Net Charges                 $ 6.9    
Exchange Rate Net Charges                 (8.5) 0 0
Certain Pension Costs                 27.4 30.4 28.7
Restructuring expenses and related asset impairments                 12.5 6.9 6.9
Net sales 776.7 771.3 802.8 709.9 797.8 776.6 826.7 754.4 3,060.7 3,155.5 3,211.9
Properties and equipment, net 829.9       770.5       829.9 770.5 723.5
Goodwill and other assets 813.0       303.9       813.0 303.9 256.8
Total North America
                      
Geographic Area Data                      
Net sales                 959.7 967.6 1,041.8
Properties and equipment, net 516.9       458.2       516.9 458.2 440.6
Goodwill and other assets 598.3       98.8       598.3 98.8 117.6
United States
                      
Geographic Area Data                      
Net sales                 886.0 878.9 945.0
Properties and equipment, net 497.8       438.4       497.8 438.4 421.1
Goodwill and other assets 589.7       91.5       589.7 91.5 110.3
Canada and Puerto Rico
                      
Geographic Area Data                      
Net sales                 73.7 88.7 96.8
Properties and equipment, net 19.1       19.8       19.1 19.8 19.5
Goodwill and other assets 8.6       7.3       8.6 7.3 7.3
Europe Middle East Africa
                      
Geographic Area Data                      
Net sales                 1,087.9 1,175.6 1,260.4
Properties and equipment, net 212.4       210.3       212.4 210.3 202.1
Goodwill and other assets 106.4       105.2       106.4 105.2 108.9
Asia Pacific
                      
Geographic Area Data                      
Net sales                 654.1 660.3 599.3
Properties and equipment, net 70.9       72.1       70.9 72.1 53.8
Goodwill and other assets 52.4       40.1       52.4 40.1 12.4
Latin America
                      
Geographic Area Data                      
Net sales                 359.0 352.0 310.4
Properties and equipment, net 29.7       29.9       29.7 29.9 27.0
Goodwill and other assets 55.9       59.8       55.9 59.8 17.9
Unallocated Amount to Segment [Member]
                      
Geographic Area Data                      
Exchange Rate Net Charges       $ 6.9           $ 0 $ 0

v2.4.0.8
Chapter 11 Information (Details)
 1 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 4 Months Ended 12 Months Ended
Feb. 28, 2014
USD ($)
Dec. 31, 2013
USD ($)
claim
entity
committees
Dec. 31, 2012
USD ($)
Dec. 31, 2011
USD ($)
Feb. 03, 2014
USD ($)
Jan. 31, 2014
Dec. 31, 2005
Dec. 31, 2013
Personal Injury Litigation [Member]
USD ($)
claim
Dec. 31, 2013
Personal Injury Trust [Member]
USD ($)
Dec. 31, 2013
Personal Damage Trust [Member]
USD ($)
payment
Dec. 31, 2013
Personal Injury and Personal Damage Trusts [Member]
Dec. 31, 2013
Sealed Air Corporation [Member]
USD ($)
Dec. 31, 2013
Cryovac, Inc. (Cryovac)
USD ($)
Dec. 31, 2013
Fresenius Medical Care Holdings, Inc.
USD ($)
Dec. 31, 2013
Fresenius Medical Care Holdings, Inc.
Personal Injury Trust [Member]
USD ($)
Dec. 31, 2013
Fresenius Medical Care Holdings, Inc.
Personal Damage Trust [Member]
USD ($)
Dec. 31, 2013
Canada
CAD
Dec. 31, 2013
UNITED STATES
Personal Damage Trust [Member]
Oct. 31, 2008
UNITED STATES
Zonolite Attic Insulation [Member]
Property Damage Litigation [Member]
claim
Dec. 31, 2013
UNITED STATES
Zonolite Attic Insulation [Member]
Property Damage Litigation [Member]
claim
Chapter 11 information                                        
Bankruptcy Proceedings, Number of Entities Included in Bankruptcy Filing   61                                    
Number of Asbestos Trusts Joint Plan   2                                    
Liabilities Subject to Compromise, Asbestos Obligations   $ 2,092,400,000 $ 2,065,000,000                                  
Adjustment for Asbestos Related Liability Increase   27,400,000                                    
Deferred Payments, Each Year for Five Years                 110,000,000                      
Five Year Period in Which PI Trust Deferred Payments Will be Made   5 years                                    
Deferred Payments, Each Year for Ten Years                 100,000,000                      
Ten Year Period in Which PI Trust Deferred Payments Will be Made   10 years                                    
Loss Contingency, Pending Claims, Number               129,191                        
Grace Cash Used to Fund PI Trust               557,700,000                        
Portion of PI Trust Funding from Grace Cash               464,100,000                        
Portion of PI Trust Funding from Grace Insurance Proceeds in Escrow               93,600,000                        
Asbestos related settlement in cash                           115,000,000 42.1          
ZAI initial payment                               30,000,000        
Interest rate on pre-petition bank credit facilities   3.25% 3.25%     5.00% 6.09%                          
Compound interest rate on unsecured claims (as a percent)   4.19%                                    
Post-petition interest sought by general unsecured creditors   210,000,000                                    
Default interest settlement on prepetition debt   129,000,000 0 0                                
Number of claims filed                                     17,960  
Number of Trust Accounts                   2                    
Bankruptcy Claims, Number Additional Claims Filed                                       1,310
Cash-collateralized letter of credit facility   100,000,000                                    
Line of Credit Facility, Amount Outstanding         400,000,000                              
Letters of Credit Sublimit in Revolving Credit Facility         150,000,000                              
Estimated fair value available under the settlement   1,653,000,000                                    
Asbestos related settlement in cash and stock                       0 1,538,000,000              
Number of Common Stock Shares Held in Trust                       18,000,000                
Class of Warrant or Right, Outstanding               10,000,000                        
Class of Warrant or Right, Exercise Price of Warrants or Rights               17.00                        
Deferred Payment Obligation Per Year for Five Years               110,000,000                        
Deferred Payment Obligation Per Year for Ten Years               100,000,000                        
Common Stock, Shares, Issued   10,440                 77,372,257                  
Estimated Deferred Payment Obligation   567,000,000                                    
Recorded Unconditional Purchase Obligation Due in Third Year                               27,500,000        
Warrants Issued to Fund Trust                 10,000,000                      
Common Stock Purchase Price Under Warrant Agreement                 $ 17.00                      
Fair Value of Warrant Issued                 490,000,000                      
Insurance Settlement for Payment of PI Trust   396,100,000                                    
Asbestos-related insurance   500,000,000 500,000,000                                  
Period of Warrant Settlement after Effective Date of Joint Plan   1 year                                    
Number of Shares Issuable under Warrant   10,000,000                                    
Exercise Price of Warrant   170,000,000                                    
Common Stock Closing Price under Condition 1   $ 54.50                                    
Warrant Repurchase Price under Condition 1   375,000,000                                    
Common Stock Closing Price under Condition 2   $ 66.00                                    
Warrant Repurchase Price under Condition 2   490,000,000                                    
Duration After Effective Date in Which Claims Payments Were Made   0 years 0 months 10 days                                    
Payments of Other Allowed Pre-petition and Other Claims 1,361,600,000                                      
Payment of Pre-Petition Credit Facilities 1,103,500,000                                      
Bankruptcy Claims, Non Asbestos Related Filed by Employees, Number   62                                    
Bankruptcy Claims, Non Asbestos Related Filed by Non Employees, Number   70                                    
Bankruptcy Proceedings, Number of Committees   4                                    
Proceeds from Joint Plan Funds                   39,900,000           111,400,000        
ZAI Property Damage Claims Fund                                 8,600,000      
ZAI PD Account Funding                               34,400,000        
ZAI P D Account, Payment on Third Anniversary of Effective Date of Joint Plan                               30,000,000        
ZAI P D Account, Maximum Number of Contingent Deferred Payments                   10                    
ZAI P D Account, Deferred Payments, Each Year for Twenty Years                   8,000,000                    
Period in Which ZAI PD Contingent Deferred Payments Will be Made   20 years                                    
Minimum ZAI P D Account Assets for Condition in Relation to Contingent Obligation Payments                 10,000,000                      
ZAI Property Damage, Qualified Claimed Amount, Percentage                                   55.00%    
Maximum Resolved Amount, Per Claim                   $ 7,500                    

v2.4.0.8
Pension Plans and Other Postretirement Benefit Plans (Details 4) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Feb. 21, 2012
Dec. 31, 2011
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value    [1]    [1]      [1]
Pension Plans
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 1,451.7 1,445.3   1,250.4
Plan contributions and funding        
Employer contribution 68.3 126.8    
U.S. qualified pension plans
        
Pension plans and other postretirement benefit plans        
Defined Benefit Plan, Restriction on Lumpsum Distributions Funding Status Percentage Less, than 100.00%      
Target Allocation 100.00%      
Percentage of Plan Assets 100.00% 100.00%    
Assets Measured at Fair value 1,145.2 1,131.7   955.3
Expected return on plan assets 6.00% 6.25%    
Plan contributions and funding        
Employer accelerated contribution to fund minimum required payments, approved by Bankruptcy Court     50  
Employer contribution 55.6 114.9    
U.S. qualified pension plans | U.S. equity securities
        
Pension plans and other postretirement benefit plans        
Target Allocation 10.00%      
Percentage of Plan Assets 10.00% 16.00%    
U.S. qualified pension plans | Non-U.S. equity securities
        
Pension plans and other postretirement benefit plans        
Target Allocation 6.00%      
Percentage of Plan Assets 6.00% 7.00%    
U.S. qualified pension plans | Short-term debt securities
        
Pension plans and other postretirement benefit plans        
Target Allocation 10.00%      
Percentage of Plan Assets 10.00% 6.00%    
U.S. qualified pension plans | Intermediate-term debt securities
        
Pension plans and other postretirement benefit plans        
Target Allocation 28.00%      
Percentage of Plan Assets 28.00% 31.00%    
U.S. qualified pension plans | Long-term debt securities
        
Pension plans and other postretirement benefit plans        
Target Allocation 44.00%      
Percentage of Plan Assets 44.00% 35.00%    
U.S. qualified pension plans | Other investments
        
Pension plans and other postretirement benefit plans        
Target Allocation 2.00%      
Percentage of Plan Assets 2.00% 5.00%    
U.S. qualified pension plans | U.S. equity group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 111.5 178.8    
U.S. qualified pension plans | Non-U.S. equity group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 67.1 79.2    
U.S. qualified pension plans | Corporate bond group trust funds - intermediate-term
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 322.6 348.4    
U.S. qualified pension plans | Corporate bond group trust funds - long-term
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 502.3 399.4    
U.S. qualified pension plans | Other fixed income group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 22.9 36.9    
U.S. qualified pension plans | REIT group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value   15.0    
U.S. qualified pension plans | Common/collective trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 102.3 58.1    
U.S. qualified pension plans | Annuity and immediate participation contracts
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 16.5 15.9    
U.S. qualified pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Other investments
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value         
U.S. qualified pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | U.S. equity group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Non-U.S. equity group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Corporate bond group trust funds - intermediate-term
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Corporate bond group trust funds - long-term
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value         
U.S. qualified pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Other fixed income group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | REIT group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value         
U.S. qualified pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Common/collective trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Annuity and immediate participation contracts
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Significant Other Observable Inputs (Level 2)
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 1,145.2 1,131.7    
U.S. qualified pension plans | Significant Other Observable Inputs (Level 2) | U.S. equity group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 111.5 178.8    
U.S. qualified pension plans | Significant Other Observable Inputs (Level 2) | Non-U.S. equity group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 67.1 79.2    
U.S. qualified pension plans | Significant Other Observable Inputs (Level 2) | Corporate bond group trust funds - intermediate-term
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 322.6 348.4    
U.S. qualified pension plans | Significant Other Observable Inputs (Level 2) | Corporate bond group trust funds - long-term
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 502.3 399.4    
U.S. qualified pension plans | Significant Other Observable Inputs (Level 2) | Other fixed income group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 22.9 36.9    
U.S. qualified pension plans | Significant Other Observable Inputs (Level 2) | REIT group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value   15.0    
U.S. qualified pension plans | Significant Other Observable Inputs (Level 2) | Common/collective trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 102.3 58.1    
U.S. qualified pension plans | Significant Other Observable Inputs (Level 2) | Annuity and immediate participation contracts
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 16.5 15.9    
U.S. qualified pension plans | Significant Unobservable Inputs (Level 3)
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Significant Unobservable Inputs (Level 3) | Other investments
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value         
U.S. qualified pension plans | Significant Unobservable Inputs (Level 3) | U.S. equity group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Significant Unobservable Inputs (Level 3) | Non-U.S. equity group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Significant Unobservable Inputs (Level 3) | Corporate bond group trust funds - intermediate-term
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Significant Unobservable Inputs (Level 3) | Corporate bond group trust funds - long-term
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value         
U.S. qualified pension plans | Significant Unobservable Inputs (Level 3) | Other fixed income group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Significant Unobservable Inputs (Level 3) | REIT group trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value         
U.S. qualified pension plans | Significant Unobservable Inputs (Level 3) | Common/collective trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
U.S. qualified pension plans | Significant Unobservable Inputs (Level 3) | Annuity and immediate participation contracts
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 306.5 313.6   295.1
Percentage of foreign plan assets to global pension assets 21.00% 22.00%    
Expected return on plan assets 4.66% 4.98%    
Plan contributions and funding        
Employer contribution 12.7 11.9    
Expected employer contribution for 2012 18      
Non-U.S. pension plans | Common/collective trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 294.8 301.3    
Non-U.S. pension plans | Government and agency securities
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 2.4 2.4    
Non-U.S. pension plans | Corporate bonds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 1.3 1.2    
Non-U.S. pension plans | Insurance contracts and other investments
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 6.3 8.0    
Non-U.S. pension plans | Cash
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 1.7 0.7    
Non-U.S. pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 1.7 0.7    
Non-U.S. pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Common/collective trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Government and agency securities
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Corporate bonds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Insurance contracts and other investments
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Cash
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 1.7 0.7    
Non-U.S. pension plans | Significant Other Observable Inputs (Level 2)
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 304.8 312.9    
Non-U.S. pension plans | Significant Other Observable Inputs (Level 2) | Common/collective trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 294.8 301.3    
Non-U.S. pension plans | Significant Other Observable Inputs (Level 2) | Government and agency securities
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 2.4 2.4    
Non-U.S. pension plans | Significant Other Observable Inputs (Level 2) | Corporate bonds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 1.3 1.2    
Non-U.S. pension plans | Significant Other Observable Inputs (Level 2) | Insurance contracts and other investments
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 6.3 8.0    
Non-U.S. pension plans | Significant Other Observable Inputs (Level 2) | Cash
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | Significant Unobservable Inputs (Level 3)
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | Significant Unobservable Inputs (Level 3) | Common/collective trust funds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | Significant Unobservable Inputs (Level 3) | Government and agency securities
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | Significant Unobservable Inputs (Level 3) | Corporate bonds
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | Significant Unobservable Inputs (Level 3) | Insurance contracts and other investments
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | Significant Unobservable Inputs (Level 3) | Cash
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value          
Non-U.S. pension plans | United Kingdom
        
Pension plans and other postretirement benefit plans        
Target Allocation 100.00%      
Percentage of Plan Assets 100.00% 100.00%    
Defined Benefit Plan Percentage of Certain Specified foreign Plan Assets to Total Foreign Plan Assets 83.00% 82.00%    
Expected return on plan assets 4.25%      
Non-U.S. pension plans | United Kingdom | Diversified growth funds
        
Pension plans and other postretirement benefit plans        
Target Allocation 12.00%      
Percentage of Plan Assets 13.00% 12.00%    
Non-U.S. pension plans | United Kingdom | U.K. gilts
        
Pension plans and other postretirement benefit plans        
Target Allocation 41.00%      
Percentage of Plan Assets 40.00% 41.00%    
Non-U.S. pension plans | United Kingdom | U.K. corporate bonds
        
Pension plans and other postretirement benefit plans        
Target Allocation 47.00%      
Percentage of Plan Assets 47.00% 47.00%    
Non-U.S. pension plans | Canada
        
Pension plans and other postretirement benefit plans        
Target Allocation 100.00%      
Percentage of Plan Assets 100.00% 100.00%    
Defined Benefit Plan Percentage of Certain Specified foreign Plan Assets to Total Foreign Plan Assets 9.00% 8.00%    
Expected return on plan assets 6.50%      
Non-U.S. pension plans | Canada | Equity securities
        
Pension plans and other postretirement benefit plans        
Target Allocation 33.00%      
Percentage of Plan Assets 34.00% 61.00%    
Non-U.S. pension plans | Canada | Bonds
        
Pension plans and other postretirement benefit plans        
Target Allocation 49.00%      
Percentage of Plan Assets 48.00% 39.00%    
Non-U.S. pension plans | Canada | Other Investments [Member]
        
Pension plans and other postretirement benefit plans        
Target Allocation 18.00%      
Percentage of Plan Assets 18.00%       
Non-U.S. pension plans | Other country
        
Pension plans and other postretirement benefit plans        
Defined Benefit Plan Percentage of Certain Specified foreign Plan Assets to Total Foreign Plan Assets 8.00% 10.00%    
Percentage of individual foreign plan to total foreign plan assets 3.00% 3.00%    
Postretirement Benefits Other Than Pensions
        
Pension plans and other postretirement benefit plans        
Assets Measured at Fair value 0 0   0
Plan contributions and funding        
Employer contribution 3.1 1.3    
Expected employer contribution for 2012 $ 6      
[1] Plans intended to be pay-as-you-go.

v2.4.0.8
Stock Incentive Plans (Details 2) (USD $)
In Millions, except Share data, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Options, additional information      
Total unrecognized stock-based compensation expense $ 6.3    
Weighted-average period over which this expense will be recognized 8 months 24 days    
Employee nonstatutory stock options
      
Stock Incentive Plans      
Number Outstanding (in shares) 2,885,055    
Number Exercisable (in shares) 1,602,130    
Weighted-average remaining contractual term of exercisable options (in years) 2 years 6 months 0 days    
Options Granted      
Number of nonstatutory stock options granted (in shares) 421,385 828,991 1,287,152
Assumptions used for estimating the fair value of stock options      
Volatility rate, minimum 35.80% 46.50% 44.70%
Volatility rate, maximum 46.40% 50.70% 51.20%
Weighted average expected volatility (as a percent) 33.30% 40.60% 48.70%
Risk-free rate 0.61% 0.55% 1.43%
Dividend yield 0.00% 0.00% 0.00%
Options, additional information      
Stock-based compensation expense recognized 12.7 14.7 14.0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value $ 19.26 $ 16.67 $ 15.44
Employee nonstatutory stock options | Minimum
      
Assumptions used for estimating the fair value of stock options      
Expected term 3 years 3 years 3 years
Employee nonstatutory stock options | Maximum
      
Assumptions used for estimating the fair value of stock options      
Expected term 4 years 4 years 4 years
Employee nonstatutory stock options | Exercise Price Range One [Member]
      
Stock Incentive Plans      
Exercise price, low end of range (in dollars per share) $ 0    
Exercise price, high end of range (in dollars per share) $ 10    
Number Outstanding (in shares) 253,551    
Number Exercisable (in shares) 253,551    
Weighted-Average Exercise Price (in dollars per share) $ 9.79    
Employee nonstatutory stock options | $10 - $20
      
Stock Incentive Plans      
Exercise price, low end of range (in dollars per share) $ 10    
Exercise price, high end of range (in dollars per share) $ 20    
Employee nonstatutory stock options | Exercise Price Range Three [Member]
      
Stock Incentive Plans      
Exercise price, low end of range (in dollars per share) $ 20    
Exercise price, high end of range (in dollars per share) $ 30    
Number Outstanding (in shares) 644,916    
Number Exercisable (in shares) 644,916    
Weighted-Average Exercise Price (in dollars per share) $ 27.75    
Employee nonstatutory stock options | Exercise Price Range Four [Member]
      
Stock Incentive Plans      
Exercise price, low end of range (in dollars per share) $ 30    
Exercise price, high end of range (in dollars per share) $ 40    
Number Outstanding (in shares) 11,192    
Number Exercisable (in shares) 5,794    
Weighted-Average Exercise Price (in dollars per share) $ 37.06    
Employee nonstatutory stock options | Exercise Price Range Five [Member]
      
Stock Incentive Plans      
Exercise price, low end of range (in dollars per share) $ 40    
Exercise price, high end of range (in dollars per share) $ 50    
Number Outstanding (in shares) 1,550,004    
Number Exercisable (in shares) 689,602    
Weighted-Average Exercise Price (in dollars per share) $ 44.07    
Employee nonstatutory stock options | $50 - $60
      
Stock Incentive Plans      
Exercise price, low end of range (in dollars per share) $ 50    
Exercise price, high end of range (in dollars per share) $ 60    
Employee nonstatutory stock options | Exercise Price Range Seven [Member]
      
Stock Incentive Plans      
Exercise price, low end of range (in dollars per share) $ 60    
Exercise price, high end of range (in dollars per share) $ 70    
Number Outstanding (in shares) 24,787    
Number Exercisable (in shares) 8,267    
Weighted-Average Exercise Price (in dollars per share) $ 66.57    
Employee nonstatutory stock options | Exercise Price Range Eight [Member] [Member]
      
Stock Incentive Plans      
Number Outstanding (in shares) 398,380    
Number Exercisable (in shares)       
Weighted-Average Exercise Price (in dollars per share)       
Employee nonstatutory stock options | Exercise Price Range Nine [Member]
      
Stock Incentive Plans      
Number Outstanding (in shares) 2,225    
Number Exercisable (in shares)       
Weighted-Average Exercise Price (in dollars per share)       
Performance Based Units [Member]
      
Stock Incentive Plans      
Weighted-Average Remaining Contractual Term (in years) 2 years    
Options, additional information      
Stock-based compensation expense recognized 1.7    
Stock or Unit Option Plan Expense, Unrecognized $ 5.3    
Performance Based Units Granted 111,770    
Performance Based Units, Forfeitures 5,513    
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value $ 76.66    
Percent of Units Expected to Settle in Common Stock 54.00%    
Percent of Units Expected to Settle in Cash 46.00%    
Performance Based Units [Member] | Minimum
      
Options, additional information      
Performance Based Compensation Payout Target 0.00%    
Performance Based Units [Member] | Maximum
      
Options, additional information      
Performance Based Compensation Payout Target 200.00%    

v2.4.0.8
Other Expense, net (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Other Income and Expenses [Abstract]      
Restructuring expenses and related asset impairments $ 12.5 $ 6.9 $ 6.9
Translation effects-intercompany loans (11.9) (5.6) 11.7
Value of currency forward contracts-intercompany loans 10.9 3.7 (9.3)
Exchange Rate Net Charges 8.5 0 0
Provision for environmental remediation 8.2 3.6 17.8
Other currency transaction effects 5.0 2.2 3.2
Interest income (1.0) (1.0) (1.2)
Net loss (gain) on sales of investments and disposals of assets 0.5 0.7 (3.0)
Other miscellaneous (income) expense (9.2) (4.4) 3.3
Total other (income) expense, net $ 23.5 $ 6.1 $ 29.4

v2.4.0.8
Earnings Per Share (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
 3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Numerators                      
Net income (loss) $ 29.7 $ 77.0 $ 90.3 $ 59.1 $ (184.3) $ 82.1 $ 75.4 $ 66.8 $ 256.1 $ 40.0 $ 219.7
Denominators                      
Weighted average common shares-basic calculation                 76.4 74.9 73.6
Dilutive effect of employee stock options (in shares)                 1.3 1.4 1.9
Weighted average common shares-diluted calculation                 77.7 76.3 75.5
Basic earnings per share (in dollars per share) $ 0.39 [1] $ 1.00 [1] $ 1.18 [1] $ 0.78 [1] $ (2.44) [1] $ 1.09 [1] $ 1.01 [1] $ 0.90 [1] $ 3.35 $ 0.53 $ 2.99
Diluted earnings per share (in dollars per share) $ 0.38 [1] $ 0.99 [1] $ 1.16 [1] $ 0.77 [1] $ (2.44) [1] $ 1.07 [1] $ 0.98 [1] $ 0.87 [1] $ 3.30 $ 0.52 $ 2.91
Stock options excluded from computation of diluted earnings per share (in shares)                 0.3 0.4 1.3
Number of warrants not included in diluted earnings per share 10               10    
[1] Per share results for the four quarters may differ from full-year per share results, as a separate computation of the weighted average number of shares outstanding is made for each quarter presented.

v2.4.0.8
Other Balance Sheet Accounts (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Other Current Liabilities        
Accrued compensation $ 62.4 $ 84.5    
Income tax payable 32.0 44.8    
Customer volume rebates 33.3 32.5    
Deferred Revenue 14.3 0    
Pension liabilities 15.0 14.0    
Accrued commissions 6.9 12.9    
Accrued Chapter 11 reorganization expenses 6.9 6.6    
Fair value of currency forward and commodity contracts 7.0 5.5    
Restructuring liability 4.4 3.0 5.9 9.6
Deferred tax liability 0.1 0.6    
Other accrued liabilities 109.7 102.9    
Other Liabilities, Current $ 292.0 $ 307.3    

v2.4.0.8
Income Taxes (Details 2) (USD $)
In Millions, unless otherwise specified
 1 Months Ended 12 Months Ended
Nov. 30, 2011
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Income Tax Disclosure [Abstract]        
Unrecognized Tax Benefits, Decreases Resulting from Prior Period Tax Positions $ 10.6 $ 9.6 $ 0.8 [1],[2] $ 17.8 [3],[4]
Tax Credit Carryforwards Before Valuation Allowances on Federal Tax Credits   65.2    
Valuation Allowance, Amount   4.4    
Deferred Tax Assets, Net of Valuation Allowance, Expected to Use   52.4    
Deferred Tax Assets, Tax Credit Carryforwards With No Expiration   8.4    
Adjustments to Additional Paid in Capital, Income Tax Benefit from Share-based Compensation   57.7    
Deferred Tax Assets, Tax Credit Carryforwards   16.9 2.4  
Period permitted to carryforward NOLs under federal income tax law (in years)   20 years    
Unrepatriated Foreign Earnings        
Undistributed foreign earnings   1,126.5    
Unrecorded deferred tax liability   149.7    
Repatriation of cash from foreign entities   25.9 22.1 30.1
Amount of Uncertain Tax Position Reclassified to Income Taxes Payable       $ 6.7
[1] In 2012, $1.0 million of uncertain tax positions representing withholding taxes due were paid as a result of the completion of Grace's Canadian audit for the years 2002, 2003, and 2004.
[2] In 2013, $9.6 million of uncertain tax positions representing agreed adjustments resulting from the 2007-2009 IRS examination were reclassified to income taxes payable.
[3] On November 3, 2011, Grace received notice from the Canadian Revenue Agency that they had completed a review of Grace's Canadian transfer pricing for the years 2002, 2003, and 2004. As a result, Grace reversed $10.6 million of uncertain tax positions because they were effectively settled pursuant to ASC 740-10-25. A tax matter is effectively settled through examination when the taxing authority has completed an examination; the entity does not intend to appeal or litigate any aspect of a particular tax position for the completed examination; and based on a tax authority's widely understood policy, the entity considers it remote that the taxing authority would subsequently examine or reexamine any of the positions once the examination process is completed.
[4] In 2011, $6.7 million of uncertain tax positions representing pre-petition federal and state settlements were reclassified to income taxes payable.

v2.4.0.8
Stock Incentive Plans
 12 Months Ended
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Incentive Plans
Stock Incentive Plans
The Company has granted nonstatutory stock options to certain key employees under the Plans. The Plans are administered by the Compensation Committee of the Board of Directors. Stock options are generally non-qualified and are at exercise prices not less than 100% of the per share fair market value on the date of grant. Stock-based compensation awards granted under the Company's stock incentive plans are generally subject to a vesting period from the date of the grant ranging from 1 - 3 years. Currently outstanding options expire on various dates through November 2018.
The following table sets forth information relating to such options during 2013, 2012, and 2011:
Stock Option Activity
Number Of
Shares
 
Average
Exercise
Price
 
Weighted-
Average
Grant Date
Fair Value
Balance, January 1, 2011
4,468,341

 
$
18.48

 
 
Options exercised
(765,693
)
 
15.76

 
 
Options forfeited
(45,369
)
 
22.30

 
 
Options terminated
(7,011
)
 
8.03

 


Options granted
1,287,152

 
42.18

 
$
15.44

Balance, December 31, 2011
4,937,420

 
25.08

 
 
Options exercised
(1,679,359
)
 
19.14

 
 
Options forfeited
(51,573
)
 
37.67

 
 
Options terminated
(10,995
)
 
15.74

 
 
Options granted
828,991

 
49.01

 
16.67

Balance, December 31, 2012
4,024,484

 
32.33

 
 
Options exercised
(1,464,294
)
 
23.46

 
 
Options forfeited
(95,139
)
 
52.17

 
 
Options terminated
(1,381
)
 
42.26

 
 
Options granted
421,385

 
76.70

 
19.26

Balance, December 31, 2013
2,885,055

 
42.60

 




The following is a summary of non-vested option activity for the year ended December 31, 2013:
Stock Option Activity
Number Of
Shares
 
Weighted-
Average
Grant Date
Fair Value
Non-vested options outstanding at beginning of year
2,067,673

 
$
14.90

Granted
421,385

 
19.26

Vested / exercised
(1,101,080
)
 
12.83

Forfeited
(105,053
)
 
16.44

Non vested options outstanding at end of year
1,282,925

 



As of December 31, 2013, the intrinsic value (the difference between the exercise price and the market price) for options outstanding was $160.5 million and for options exercisable was $105.9 million. The total intrinsic value of all options exercised during the years ended December 31, 2013, 2012 and 2011 was $83.2 million, $65.3 million and $21.9 million, respectively. A summary of our stock options outstanding and exercisable at December 31, 2013, follows:
Exercise Price Range
Number
Outstanding
 
Number
Exercisable
 
Outstanding Weighted-
Average
Remaining
Contractual
Life (Years)
 
Exercisable
Weighted-
Average
Exercise
Price
$0 - $10
253,551

 
253,551

 
0.35
 
$
9.79

$20 - $30
644,916

 
644,916

 
1.34
 
27.75

$30 - $40
11,192

 
5,794

 
2.61
 
37.06

$40 - $50
1,550,004

 
689,602

 
2.84
 
44.07

$60 - $70
24,787

 
8,267

 
3.93
 
66.57

$70 - $80
398,380

 
—

 
4.33
 
—

$80 - $90
2,225

 
—

 
4.49
 
—

 
2,885,055

 
1,602,130

 
 
 
 

At December 31, 2013, the weighted-average remaining contractual term of all options outstanding and exercisable was 2.50 years.
Options Granted    The Company granted approximately 0.4 million, 0.8 million, and 1.3 million nonstatutory stock options in 2013, 2012, and 2011, respectively, under the Plans.
For the years ended December 31, 2013, 2012 and 2011, Grace recognized non-cash stock-based compensation expense of $12.7 million, $14.7 million and $14.0 million, respectively, which is included in selling, general and administrative expense.
Grace values options using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of traded options. The risk-free rate is based on the U.S. Treasury yield curve published as of the grant date, with maturities approximating the expected term of the options. The expected term of the options is estimated using the simplified method as allowed by ASC 718-20, whereby the average between the vesting period and contractual term is used. The expected volatility was estimated using both actual stock volatility and the volatility of an industry peer group. Grace believes its actual stock volatility in the last several years may not be representative of expected future volatility. The following summarizes the assumptions used for estimating the fair value of stock options granted during 2013, 2012 and 2011, respectively.
 
2013
 
2012
 
2011
Expected volatility
32.3% - 34.3%
 
35.8% - 46.4%
 
46.5% -50.7%
Weighted average expected volatility
33.3%
 
40.6%
 
48.7%
Expected term
3.00 - 4.00 years
 
3.00 - 4.00 years
 
3.00 - 4.00 years
Risk-free rate
0.61%
 
0.55%
 
1.43%
Dividend yield
—%
 
—%
 
—%

Total unrecognized stock-based compensation expense at December 31, 2013, was $6.3 million and the weighted-average period over which this expense will be recognized is 0.7 years.
Performance Based Units    During 2013 the Company granted 111,770 Performance Based Units (PBUs) under the Company's Long-term Incentive Plan (LTIP), of which 5,513 were forfeited. The awards cliff vest on December 31, 2015, and have a weighted average grant date fair value of $76.66. The Company anticipates that approximately 54% of the PBUs will be settled in common stock and approximately 46% will be settled in cash, assuming full vesting. PBUs are recorded at fair value at the date of grant. The estimated grant date fair value is based on the expected payout of the award, which may range from 0% to 200% of the payout target. The common stock settled portion is considered an equity award with the payout being valued based on the Company’s stock price on the grant date. The cash settled portion of the award is considered a liability award with payout being remeasured each reporting period based on the Company’s current stock price. Both equity and cash awards are remeasured each reporting period based on anticipated attainment of the payout target; therefore these portions of the awards are subject to volatility until the payout is established. During 2013 the Company recognized $1.7 million in compensation expense for these awards. As of December 31, 2013, $5.3 million of total unrecognized compensation expense related to the PBUs is expected to be recognized over the remaining weighted-average service period of 2 years.

v2.4.0.8
Earnings Per Share (Tables)
 12 Months Ended
Dec. 31, 2013
Earnings Per Share [Abstract]  
Schedule of reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share
The following table shows a reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share.
(In millions, except per share amounts)
2013
 
2012
 
2011
Numerators
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
$
256.1

 
$
40.0

 
$
219.7

Denominators
 
 
 
 
 
Weighted average common shares—basic calculation
76.4

 
74.9

 
73.6

Dilutive effect of employee stock options
1.3

 
1.4

 
1.9

Weighted average common shares—diluted calculation
77.7

 
76.3

 
75.5

Basic earnings per share
$
3.35

 
$
0.53

 
$
2.99

Diluted earnings per share
$
3.30

 
$
0.52

 
$
2.91

v2.4.0.8
Income Taxes (Tables)
 12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
Schedule of income from consolidated operations before income taxes and the related provision for income taxes
The components of income from consolidated operations before income taxes and the related provision for income taxes for 2013, 2012, and 2011 are as follows:
Income Taxes—Consolidated Operations
(In millions)
2013
 
2012
 
2011
Income (loss) before income taxes:
 
 
 
 
 
Domestic
$
141.4

 
$
(170.3
)
 
$
107.7

Foreign
219.2

 
149.7

 
199.3

Total
$
360.6

 
$
(20.6
)
 
$
307.0

Benefit from (provision for) income taxes:
 
 
 
 
 
Federal—current
$
1.4

 
$
(51.2
)
 
$
16.7

Federal—deferred
(73.1
)
 
82.0

 
(49.3
)
State and local—current
(0.7
)
 
(4.4
)
 
(2.3
)
State and local—deferred
38.2

 
70.2

 
—

Foreign—current
(83.5
)
 
(43.1
)
 
(52.5
)
Foreign—deferred
14.8

 
8.1

 
(0.5
)
Total
$
(102.9
)
 
$
61.6

 
$
(87.9
)
Summary of difference between the provision for income taxes at the U.S. federal income tax rate and overall income tax provision
The difference between the provision for income taxes at the U.S. federal income tax rate of 35% and Grace's overall income tax provision is summarized as follows:
Income Tax Provision Analysis
(In millions)
2013
 
2012
 
2011
Tax benefit (provision) at U.S. federal income tax rate
$
(126.2
)
 
$
7.2

 
$
(107.4
)
Change in benefit (provision) resulting from:
 
 
 
 
 
Release of state valuation allowance
24.4

 
44.0

 
—

Effect of tax rates in foreign jurisdictions
16.6

 
14.9

 
17.6

Benefits from domestic production activities
—

 
14.0

 
0.9

Nontaxable income/non-deductible expenses
(9.7
)
 
(8.1
)
 
(7.3
)
U.S. taxes on repatriated foreign earnings
3.7

 
(2.2
)
 
(1.1
)
State and local income taxes, net of federal income tax
(0.7
)
 
0.1

 
(1.5
)
Adjustments to uncertain tax positions and other items
(11.0
)
 
(8.3
)
 
10.9

Benefit from (provision for) income taxes
$
(102.9
)
 
$
61.6

 
$
(87.9
)
Summary of tax attributes giving rise to deferred tax assets and liabilities
At December 31, 2013 and 2012, the tax attributes giving rise to deferred tax assets and liabilities consisted of the following items:
Deferred Tax Analysis
(In millions)
2013
 
2012
Deferred tax assets:
 
 
 
Liability for asbestos-related litigation
$
657.1

 
$
717.5

Federal tax credit carryforwards
16.9

 
2.4

Foreign net operating loss carryforwards
18.0

 
22.7

Deferred state taxes
90.3

 
88.4

Liability for environmental remediation
47.1

 
49.2

Other postretirement benefits
18.2

 
22.9

Pension liabilities
96.7

 
133.1

Reserves and allowances
60.4

 
51.6

Research and development
32.6

 
34.0

Accrued interest on pre-petition debt
66.7

 
121.9

Other
16.3

 
20.8

Total deferred tax assets
$
1,120.3

 
$
1,264.5

Deferred tax liabilities:
 
 
 
Asbestos-related insurance receivable
$
(175.0
)
 
$
(175.0
)
Pension assets
(3.7
)
 
(14.9
)
Properties and equipment
(30.3
)
 
(35.3
)
Other
(7.3
)
 
(14.7
)
Total deferred tax liabilities
$
(216.3
)
 
$
(239.9
)
Valuation allowance:
 
 
 
Deferred state taxes
$
(13.6
)
 
$
(40.3
)
Federal credits
(4.4
)
 
—

Foreign net operating loss carryforwards
(0.3
)
 
(0.5
)
Total valuation allowance
(18.3
)
 
(40.8
)
Net deferred tax assets
$
885.7

 
$
983.8
Summary of information about uncertain tax positions
Rollforward of Uncertain Tax Positions
(In millions)
Unrecognized
Tax Benefits
Balance as of January 1, 2011
$
79.2

Additions for current year tax positions
0.6

Additions for prior year tax positions
0.5

Reductions for prior year tax positions and reclassifications(1)(2)
(17.8
)
Reductions for expirations of statute of limitations
(0.1
)
Balance as of December 31, 2011
62.4

Additions for current year tax positions
3.4

Additions for prior year tax positions
22.0

Reductions for prior year tax positions and reclassifications
(0.8
)
Reductions for expirations of statute of limitations
(2.9
)
Settlements(3)
(1.0
)
Balance as of December 31, 2012
83.1

Additions for current year tax positions
6.3

Additions for prior year tax positions
6.4

Reductions for prior year tax positions and reclassifications(4)
(9.6
)
Reductions for expirations of statute of limitations
(5.9
)
Balance as of December 31, 2013
$
80.3

_______________________________________________________________________________
(1)
On November 3, 2011, Grace received notice from the Canadian Revenue Agency that they had completed a review of Grace's Canadian transfer pricing for the years 2002, 2003, and 2004. As a result, Grace reversed $10.6 million of uncertain tax positions because they were effectively settled pursuant to ASC 740-10-25. A tax matter is effectively settled through examination when the taxing authority has completed an examination; the entity does not intend to appeal or litigate any aspect of a particular tax position for the completed examination; and based on a tax authority's widely understood policy, the entity considers it remote that the taxing authority would subsequently examine or reexamine any of the positions once the examination process is completed.
(2)
In 2011, $6.7 million of uncertain tax positions representing pre-petition federal and state settlements were reclassified to income taxes payable.
(3)
In 2012, $1.0 million of uncertain tax positions representing withholding taxes due were paid as a result of the completion of Grace's Canadian audit for the years 2002, 2003, and 2004.
(4)
In 2013, $9.6 million of uncertain tax positions representing agreed adjustments resulting from the 2007-2009 IRS examination were reclassified to income taxes payable.
Schedule of open tax years by major jurisdiction
The following table summarizes these open tax years by major jurisdiction:
Tax Jurisdiction(1)
Examination in Progress
 
Examination Not Yet Initiated
United States—Federal
2007-2009
 
2010-2012
United States—State
2007-2012
 
2010-2012
Germany
None
 
2009-2012
Italy
None
 
2008-2012
France
2010-2011
 
2012
Canada
None
 
2006-2012
_______________________________________________________________________________
(1)
Includes federal, state, provincial or local jurisdictions, as applicable.

v2.4.0.8
Pension Plans and Other Postretirement Benefit Plans (Details 3) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Funded Status of Pension Plans      
Projected benefit obligation $ 1,873.2 $ 1,954.9  
Fair value of plan assets    [1]    [1]    [1]
Estimated Expected Future Benefit Payments Reflecting Future Service and Medicare Subsidy Receipts      
Total payments net of subsidy 104.4 90.8 88.4
Total Payments Net of Subsidy      
2013 136.1    
2014 110.4    
2015 113.6    
2016 115.5    
2017 117.5    
2018 - 2022 615.0    
Pension Plans
      
Funded Status of Pension Plans      
Projected benefit obligation 1,873.2 1,954.9 1,735.1
Fair value of plan assets 1,451.7 1,445.3 1,250.4
Net funded status (421.5) (509.6)  
Benefits paid (101.3) (89.5)  
Defined Benefit Plan, Accumulated Benefit Obligation 1,772 1,849  
Pension Plans with Underfunded or Unfunded Accumulated Benefit Obligation      
Projected benefit obligation 607.0 1,705.9  
Accumulated benefit obligation 574.8 1,613.2  
Fair value of plan assets 210.0 1,167.2  
Estimated Expected Future Benefit Payments Reflecting Future Service and Medicare Subsidy Receipts      
Medicare Subsidy Receipts        
U.S. qualified pension plans
      
Funded Status of Pension Plans      
Projected benefit obligation 1,326.8 1,425.6 1,282.3
Fair value of plan assets 1,145.2 1,131.7 955.3
Net funded status (181.6) (293.9)  
Benefits paid (79.2) (66.4)  
Pension Plans with Underfunded or Unfunded Accumulated Benefit Obligation      
Projected benefit obligation 347.8 1,425.6  
Accumulated benefit obligation 344.1 1,371.2  
Fair value of plan assets 201.1 1,131.7  
Estimated Expected Future Benefit Payments Reflecting Future Service and Medicare Subsidy Receipts      
Benefit Payments, actual 79.2 66.4 65.5
Medicare Subsidy Receipts        
Benefit Payments      
2013 108.6    
2014 82.2    
2015 83.5    
2016 84.9    
2017 86.3    
2018 - 2022 446.5    
Total Payments Net of Subsidy      
Funded status less than specified percentage, restriction on lump sum distribution to retiring participants 100.00%    
Minimum percentage of plan to be funded and no longer in chapter 11 for lump sum distribution to retiring participants 80.00%    
Estimated future benefit payments, amount excluded 28    
Discount rate 4.76%    
Percentage of high yield bonds in foreign issuers portfolio 30.00%    
Expected return on plan assets 6.00% 6.25%  
Average annual returns over one year (as a percent) 4.00%    
Average annual returns over three years (as a percent) 8.00%    
Average annual returns over five years (as a percent) 11.00%    
Average annual returns over ten years (as a percent) 6.00%    
U.S. qualified pension plans | Fully-Funded pension plans
      
Funded Status of Pension Plans      
Projected benefit obligation    [2]    [2]    [2]
Fair value of plan assets    [2]    [2]    [2]
Net funded status    [2]    [2]    [2]
Benefits paid    [2]    [2]    [2]
Total Payments Net of Subsidy      
Discount rate 4.76% 3.75%  
U.S. qualified pension plans | Underfunded pension plans
      
Funded Status of Pension Plans      
Projected benefit obligation 1,197.4 [2] 1,288.6 [2] 1,157.5 [2]
Fair value of plan assets 1,145.2 [2] 1,131.7 [2] 955.3 [2]
Net funded status (52.2) [2] (156.9) [2] (202.2) [2]
Benefits paid (73.6) [2] (60.7) [2] (59.9) [2]
Total Payments Net of Subsidy      
Discount rate 4.76%    
U.S. Nonqualified pension plans | Unfunded pension plans
      
Funded Status of Pension Plans      
Projected benefit obligation 129.4 [1] 137.0 [1] 124.8 [1]
Fair value of plan assets    [1]    [1]    [1]
Net funded status (129.4) [1] (137.0) [1] (124.8) [1]
Benefits paid (5.6) [1] (5.7) [1] (5.6) [1]
Non-U.S. pension plans
      
Funded Status of Pension Plans      
Projected benefit obligation 546.4 529.3 452.8
Fair value of plan assets 306.5 313.6 295.1
Net funded status (239.9) (215.7)  
Benefits paid (22.1) (23.1)  
Pension Plans with Underfunded or Unfunded Accumulated Benefit Obligation      
Projected benefit obligation 259.2 280.3  
Accumulated benefit obligation 230.7 242.0  
Fair value of plan assets 8.9 35.5  
Estimated Expected Future Benefit Payments Reflecting Future Service and Medicare Subsidy Receipts      
Benefit Payments, actual 22.1 23.1 21.2
Medicare Subsidy Receipts        
Benefit Payments      
2013 23.0    
2014 22.7    
2015 24.4    
2016 25.1    
2017 26.0    
2018 - 2022 146.7    
Total Payments Net of Subsidy      
Discount rate 4.25% 4.06%  
Percentage of United Kingdom and German pension plans to total non-U.S. pension plans 86.00% 84.00%  
Expected return on plan assets 4.66% 4.98%  
Non-U.S. pension plans | Fully-Funded pension plans
      
Funded Status of Pension Plans      
Projected benefit obligation 247.3 [2] 237.1 [2] 213.3 [2]
Fair value of plan assets 264.0 [2] 269.2 [2] 255.8 [2]
Net funded status 16.7 [2] 32.1 [2] 42.5 [2]
Benefits paid (10.0) [2] (11.8) [2] (10.2) [2]
Total Payments Net of Subsidy      
Discount rate 4.25%    
Non-U.S. pension plans | Underfunded pension plans
      
Funded Status of Pension Plans      
Projected benefit obligation 56.5 [2] 62.6 [2] 53.1 [2]
Fair value of plan assets 42.5 [2] 44.4 [2] 39.3 [2]
Net funded status (14.0) [2] (18.2) [2] (13.8) [2]
Benefits paid (4.2) [2] (3.6) [2] (2.2) [2]
Non-U.S. pension plans | Unfunded pension plans
      
Funded Status of Pension Plans      
Projected benefit obligation 242.6 [1] 229.6 [1] 186.4 [1]
Net funded status (242.6) [1] (229.6) [1] (186.4) [1]
Benefits paid (7.9) [1] (7.7) [1] (8.8) [1]
Non-U.S. pension plans | United Kingdom
      
Pension plans and other postretirement benefit plans      
Defined Benefit Plan Percentage of Certain Specified foreign Plan Assets to Total Foreign Plan Assets 83.00% 82.00%  
Total Payments Net of Subsidy      
Discount rate (4.34%)    
Expected return on plan assets 4.25%    
Non-U.S. pension plans | Germany
      
Total Payments Net of Subsidy      
Discount rate (3.76%)    
Postretirement Benefits Other Than Pensions
      
Pension plans and other postretirement benefit plans      
Defined Benefit Plan, Amortization of Net Gains (Losses) (0.9)    
Funded Status of Pension Plans      
Projected benefit obligation 57.2 63.9 64.6
Fair value of plan assets 0 0 0
Net funded status (57.2) (63.9)  
Benefits paid (4.5) (4.6)  
Estimated Expected Future Benefit Payments Reflecting Future Service and Medicare Subsidy Receipts      
Benefit Payments, actual 4.5 4.6 3.6
Medicare Subsidy Receipts (1.4) (3.3) (1.9)
Benefit Payments      
2013 6.2    
2014 6.0    
2015 5.8    
2016 5.6    
2017 5.3    
2018 - 2022 22.1    
Medicare Subsidy Receipts      
2013 (1.7)    
2014 (0.5)    
2015 (0.1)    
2016 (0.1)    
2017 (0.1)    
2018 - 2022 $ (0.3)    
Total Payments Net of Subsidy      
Discount rate 4.26% 3.50%  
[1] Plans intended to be pay-as-you-go.
[2] Plans intended to be advance-funded.

v2.4.0.8
Properties and Equipment (Tables)
 12 Months Ended
Dec. 31, 2013
Property, Plant and Equipment [Abstract]  
Schedule of properties and equipment
 
December 31,
(In millions)
2013
 
2012
Land
$
20.0

 
$
19.9

Buildings
524.3

 
500.3

Information technology and equipment
172.0

 
146.7

Machinery, equipment and other
1,883.2

 
1,786.8

Projects under construction
107.2

 
101.9

Properties and equipment, gross
2,706.7

 
2,555.6

Accumulated depreciation and amortization
(1,876.8
)
 
(1,785.1
)
Properties and equipment, net
$
829.9

 
$
770.5
Schedule of minimum future payments under operating leases
At December 31, 2013, minimum future non-cancelable payments for operating leases are:
 
(In millions)
2014
$
22.8

2015
17.3

2016
13.4

2017
7.9

2018
4.8

Thereafter
18.7

 
$
84.9

v2.4.0.8
Unconsolidated Affiliate Unconsolidated Affiliate (Tables)
 12 Months Ended
Dec. 31, 2013
Equity Method Investments and Joint Ventures [Abstract]  
Summary of financial information of equity method investee
The following summary lists ART's assets, liabilities and results of operations.
 
December 31,
(In millions)
2013
 
2012
Summary of Balance Sheet information:
 
 
 
Current assets
$
187.9

 
$
136.7

Noncurrent assets
62.5

 
65.9

Total assets
$
250.4

 
$
202.6

 
 
 
 
Current liabilities
$
62.6

 
$
37.8

Noncurrent liabilities
0.6

 
0.1

Total liabilities
$
63.2

 
$
37.9


 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Summary of Statement of Operations information:
 
 
 
 
 
Net sales
$
377.6

 
$
325.0

 
$
339.0

Costs and expenses applicable to net sales
318.4

 
276.0

 
296.3

Income before income taxes
46.6

 
38.9

 
32.8

Net income
45.6

 
37.8

 
31.2
Summary of related party transactions
The table below presents summary financial data related to transactions between Grace and ART.
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Grace sales of catalysts to ART
$
232.0

 
$
206.9

 
$
171.4

Charges for fixed costs, research and development and selling, general and administrative services to ART
28.8

 
28.5

 
27.8

v2.4.0.8
Fair Value Measurements and Risk (Details)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
country
Dec. 31, 2013
Recurring basis
Total
USD ($)
Dec. 31, 2012
Recurring basis
Total
USD ($)
Dec. 31, 2013
Recurring basis
Significant Other Observable Inputs (Level 2)
USD ($)
Dec. 31, 2012
Recurring basis
Significant Other Observable Inputs (Level 2)
USD ($)
Dec. 31, 2013
Fixed Rate Natural Gas Swaps [Member]
USD ($)
MMBTU
Dec. 31, 2013
Fixed Rate Natural Gas Swaps Call Option [Member]
MMBTU
Dec. 31, 2013
Fixed-rate aluminum swaps
USD ($)
lb
Dec. 31, 2013
Currency forward contracts
EUR (€)
Items measured at Fair Value on a Recurring Basis                  
Maximum period of cash flow hedging           12 months 0 years 24 months 12 months  
Nonmonetary Notional Amount of Price Risk Derivative Instruments Not Designated as Hedging Instruments           300,000 7,100,000 1,400,000  
Total contract value           $ 1.2   $ 1.2  
Total notional amount related to the remaining outstanding currency forward contracts                 194.5
Number of countries where company does business, greater than 40                
Number of Currencies in Which Entity Operates, Greater Than 50                
Assets                  
Currency derivatives   2.1 1.2 2.1 1.2        
Commodity derivatives   0 0.2 0 0.2        
Total Assets   2.1 1.4 2.1 1.4        
Liabilities                  
Currency derivatives   6.9 5.1 6.9 5.1        
Commodity derivatives   0.1 0.4 0.1 0.4        
Total Liabilities   $ 7.0 $ 5.5 $ 7.0 $ 5.5        

v2.4.0.8
Properties and Equipment (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Properties and Equipment      
Properties and equipment, gross $ 2,706.7 $ 2,555.6  
Accumulated depreciation and amortization (1,876.8) (1,785.1)  
Properties and equipment, net 829.9 770.5 723.5
Depreciation and lease amortization expense related to properties and equipment 108.6 108.2 110.0
Rental expense for operating leases 28.4 26.1 20.5
Land
      
Properties and Equipment      
Properties and equipment, gross 20.0 19.9  
Building [Member]
      
Properties and Equipment      
Properties and equipment, gross 524.3 500.3  
Information technology and equipment [Member]
      
Properties and Equipment      
Properties and equipment, gross 172.0 146.7  
Machinery, equipment and other
      
Properties and Equipment      
Properties and equipment, gross 1,883.2 1,786.8  
Projects under construction
      
Properties and Equipment      
Properties and equipment, gross 107.2 101.9  
Capitalized interest cost
      
Properties and Equipment      
Properties and equipment, net $ 1.2 $ 0.1 $ 0.1

v2.4.0.8
Other Comprehensive Income (Loss) (Tables)
 12 Months Ended
Dec. 31, 2013
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]  
Tabular disclosure of pre-tax, tax, and after-tax components of other comprehensive income (loss)
The following tables present the pre-tax, tax, and after-tax components of Grace's other comprehensive income (loss) for the years ended December 31, 2013, 2012, and 2011:
Year Ended December 31, 2013
(In millions)
Pre-Tax
Amount
 
Tax
Benefit/
(Expense)
 
After-Tax
Amount
Defined benefit pension and other postretirement plans:
 
 
 
 
 
Amortization of net prior service cost included in net periodic benefit cost
$
0.7

 
$
(0.2
)
 
$
0.5

Amortization of net deferred actuarial loss included in net periodic benefit cost
0.4

 
(0.1
)
 
0.3

Net prior service credit arising during period
1.7

 
(0.6
)
 
1.1

Net deferred actuarial gain arising during period
4.3

 
(1.6
)
 
2.7

Benefit plans, net
7.1

 
(2.5
)
 
4.6

Currency translation adjustments
(23.6
)
 
—

 
(23.6
)
Loss from hedging activities
(0.3
)
 
0.1

 
(0.2
)
Gain on securities available for sale
0.1

 
—

 
0.1

Other comprehensive loss attributable to W. R. Grace & Co. shareholders
$
(16.7
)
 
$
(2.4
)
 
$
(19.1
)

Year Ended December 31, 2012
(In millions)
Pre-Tax
Amount
 
Tax
Benefit/
(Expense)
 
After-Tax
Amount
Defined benefit pension and other postretirement plans:
 
 
 
 
 
Amortization of net prior service cost included in net periodic benefit cost
$
0.8

 
$
(0.3
)
 
$
0.5

Amortization of net deferred actuarial loss included in net periodic benefit cost
0.6

 
(0.2
)
 
0.4

Net deferred actuarial gain arising during period
2.1

 
(0.7
)
 
1.4

Benefit plans, net
3.5

 
(1.2
)
 
2.3

Currency translation adjustments
5.5

 
—

 
5.5

Gain from hedging activities
3.7

 
(1.3
)
 
2.4

Other comprehensive income attributable to W. R. Grace & Co. shareholders
$
12.7

 
$
(2.5
)
 
$
10.2


Year Ended December 31, 2011
(In millions)
Pre-Tax
Amount
 
Tax
Benefit/
(Expense)
 
After-Tax
Amount
Defined benefit pension and other postretirement plans:
 
 
 
 
 
Amortization of net prior service cost included in net periodic benefit cost
$
1.1

 
$
(0.4
)
 
$
0.7

Amortization of net deferred actuarial loss included in net periodic benefit cost
0.6

 
(0.2
)
 
0.4

Net prior service credit arising during period
0.4

 
(0.1
)
 
0.3

Net deferred actuarial gain arising during period
7.3

 
(2.5
)
 
4.8

Benefit plans, net
9.4

 
(3.2
)
 
6.2

Currency translation adjustments
(11.3
)
 
—

 
(11.3
)
Loss from hedging activities
(3.2
)
 
1.1

 
(2.1
)
Other comprehensive loss attributable to W. R. Grace & Co. shareholders
$
(5.1
)
 
$
(2.1
)
 
$
(7.2
)
Schedule of components of accumulated other comprehensive loss
The following tables present the changes in accumulated other comprehensive income, net of tax, for the years ended December 31, 2013, 2012, and 2011:
Year Ended December 31, 2013
(In millions)
Defined Benefit Pension and Other Postretirement Plans
 
Currency Translation Adjustments
 
Gains and Losses from Hedging Activities
 
Unrealized Loss on Investment
 
Gain on Securities Available for Sale
 
Total
Beginning balance
$
2.0

 
$
28.8

 
$
(0.3
)
 
$
(0.8
)
 
$
—

 
$
29.7

Other comprehensive income (loss) before reclassifications
3.8

 
(23.6
)
 
1.2

 
—

 
0.1

 
(18.5
)
Amounts reclassified from accumulated other comprehensive income
0.8

 
—

 
(1.4
)
 
—

 
—

 
(0.6
)
Net current-period other comprehensive income (loss)
4.6

 
(23.6
)
 
(0.2
)
 
—

 
0.1

 
(19.1
)
Ending balance
$
6.6

 
$
5.2

 
$
(0.5
)
 
$
(0.8
)
 
$
0.1

 
$
10.6


Year Ended December 31, 2012
(In millions)
Defined Benefit Pension and Other Postretirement Plans
 
Currency Translation Adjustments
 
Gains and Losses from Hedging Activities
 
Unrealized Loss on Investment
 
Total
Beginning balance
$
(0.3
)
 
$
23.3

 
$
(2.7
)
 
$
(0.8
)
 
$
19.5

Other comprehensive income (loss) before reclassifications
1.4

 
5.5

 
(0.3
)
 
—

 
6.6

Amounts reclassified from accumulated other comprehensive income
0.9

 
—

 
2.7

 
—

 
3.6

Net current-period other comprehensive income
2.3

 
5.5

 
2.4

 
—

 
10.2

Ending balance
$
2.0

 
$
28.8

 
$
(0.3
)
 
$
(0.8
)
 
$
29.7


Year Ended December 31, 2011
(In millions)
Defined Benefit Pension and Other Postretirement Plans
 
Currency Translation Adjustments
 
Gains and Losses from Hedging Activities
 
Unrealized Loss on Investment
 
Total
Beginning balance
$
(6.5
)
 
$
34.6

 
$
(0.6
)
 
$
(0.8
)
 
$
26.7

Other comprehensive income (loss) before reclassifications
5.1

 
(11.3
)
 
(3.9
)
 
—

 
(10.1
)
Amounts reclassified from accumulated other comprehensive income
1.1

 
—

 
1.8

 
—

 
2.9

Net current-period other comprehensive income (loss)
6.2

 
(11.3
)
 
(2.1
)
 
—

 
(7.2
)
Ending balance
$
(0.3
)
 
$
23.3

 
$
(2.7
)
 
$
(0.8
)
 
$
19.5

v2.4.0.8
Chapter 11 Information
 12 Months Ended
Dec. 31, 2013
Reorganizations [Abstract]  
Chapter 11 Information
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 Grace’s 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 Grace’s 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.

v2.4.0.8
Properties and Equipment (Details 2) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2013
Property, Plant and Equipment [Abstract]  
2013 $ 22.8
2014 17.3
2015 13.4
2016 7.9
2017 4.8
Thereafter 18.7
Total 84.9
Anticipated sublease income in 2013 0.8
Anticipated sublease income in 2014 0.7
Anticipated sublease income in 2015 0.4
Anticipated sublease income in 2016 0.2
Anticipated sublease income in 2017 0.1
Anticipated sublease income thereafter $ 0.1

v2.4.0.8
Pension Plans and Other Postretirement Benefit Plans (Tables)
 12 Months Ended
Dec. 31, 2013
Pension plans and other postretirement benefit plans  
Schedule of Changes in Benefit Obligation and Fair Value of Plan Assets Amounts Recognized in Balance Sheet and Assumptions Used [Table Text Block]
 The following table summarizes the changes in benefit obligations and fair values of retirement plan assets during 2013 and 2012:
 
Defined Benefit Pension Plans
 
Other Post-
Retirement Plans
Change in Financial Status of Retirement Plans
(In millions)
U.S.
 
Non-U.S.
 
Total
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Change in Projected Benefit Obligation (PBO):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
1,425.6

 
$
1,282.3

 
$
529.3

 
$
452.8

 
$
1,954.9

 
$
1,735.1

 
$
63.9

 
$
64.6

Service cost
25.2

 
21.5

 
11.1

 
8.9

 
36.3

 
30.4

 
0.2

 
0.2

Interest cost
51.9

 
55.9

 
20.6

 
21.4

 
72.5

 
77.3

 
2.2

 
2.5

Plan participants' contributions
—

 
—

 
0.6

 
0.6

 
0.6

 
0.6

 
—

 
—

Amendments
—

 
—

 
—

 
—

 
—

 
—

 
(1.7
)
 
—

Actuarial (gain) loss
(96.7
)
 
132.3

 
(2.4
)
 
58.2

 
(99.1
)
 
190.5

 
(4.3
)
 
(2.1
)
Medicare subsidy receipts
—

 
—

 
—

 
—

 
—

 
—

 
1.4

 
3.3

Benefits paid
(79.2
)
 
(66.4
)
 
(22.1
)
 
(23.1
)
 
(101.3
)
 
(89.5
)
 
(4.5
)
 
(4.6
)
Currency exchange translation adjustments
—

 
—

 
9.3

 
10.5

 
9.3

 
10.5

 
—

 
—

Benefit obligation at end of year
$
1,326.8

 
$
1,425.6

 
$
546.4

 
$
529.3

 
$
1,873.2

 
$
1,954.9

 
$
57.2

 
$
63.9

Change in Plan Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
$
1,131.7

 
$
955.3

 
$
313.6

 
$
295.1

 
$
1,445.3

 
$
1,250.4

 
$
—

 
$
—

Actual return on plan assets
37.1

 
127.9

 
0.8

 
20.8

 
37.9

 
148.7

 
—

 
—

Employer contributions
55.6

 
114.9

 
12.7

 
11.9

 
68.3

 
126.8

 
3.1

 
1.3

Plan participants' contributions
—

 
—

 
0.6

 
0.6

 
0.6

 
0.6

 
—

 
—

Medicare subsidy receipts
—

 
—

 
—

 
—

 
—

 
—

 
1.4

 
3.3

Benefits paid
(79.2
)
 
(66.4
)
 
(22.1
)
 
(23.1
)
 
(101.3
)
 
(89.5
)
 
(4.5
)
 
(4.6
)
Currency exchange translation adjustments
—

 
—

 
0.9

 
8.3

 
0.9

 
8.3

 
—

 
—

Fair value of plan assets at end of year
$
1,145.2

 
$
1,131.7

 
$
306.5

 
$
313.6

 
$
1,451.7

 
$
1,445.3

 
$
—

 
$
—

Funded status at end of year (PBO basis)
$
(181.6
)
 
$
(293.9
)
 
$
(239.9
)
 
$
(215.7
)
 
$
(421.5
)
 
$
(509.6
)
 
$
(57.2
)
 
$
(63.9
)
Amounts recognized in the Consolidated Balance Sheets consist of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncurrent assets
$
—

 
$
—

 
$
16.7

 
$
32.1

 
$
16.7

 
$
32.1

 
$
—

 
$
—

Current liabilities
(5.8
)
 
(5.8
)
 
(9.2
)
 
(8.2
)
 
(15.0
)
 
(14.0
)
 
(4.5
)
 
(4.3
)
Noncurrent liabilities
(175.8
)
 
(288.1
)
 
(247.4
)
 
(239.6
)
 
(423.2
)
 
(527.7
)
 
(52.7
)
 
(59.6
)
Net amount recognized
$
(181.6
)
 
$
(293.9
)
 
$
(239.9
)
 
$
(215.7
)
 
$
(421.5
)
 
$
(509.6
)
 
$
(57.2
)
 
$
(63.9
)
Amounts recognized in Accumulated Other Comprehensive Income consist of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated actuarial gain
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(5.0
)
 
$
(0.3
)
Prior service cost (credit)
1.5

 
2.2

 
(0.3
)
 
(0.3
)
 
1.2

 
1.9

 
(1.7
)
 
—

Net amount recognized
$
1.5

 
$
2.2

 
$
(0.3
)
 
$
(0.3
)
 
$
1.2

 
$
1.9

 
$
(6.7
)
 
$
(0.3
)

 
Defined Benefit Pension Plans
 
Other Post-
Retirement Plans
Change in Financial Status of Retirement Plans
(In millions)
U.S.
 
Non-U.S.
 
Total
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Weighted Average Assumptions Used to Determine Benefit Obligations as of December 31:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
4.76
%
 
3.75
%
 
4.25
%
 
4.06
%
 
NM
 
NM
 
4.26
%
 
3.50
%
Rate of compensation increase
4.70
%
 
4.30
%
 
3.41
%
 
3.37
%
 
NM
 
NM
 
NM

 
NM

Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
3.75
%
 
4.50
%
 
4.06
%
 
4.83
%
 
NM
 
NM
 
3.50
%
 
4.00
%
Expected return on plan assets
6.00
%
 
6.25
%
 
4.66
%
 
4.98
%
 
NM
 
NM
 
NM

 
NM

Rate of compensation increase
4.30
%
 
4.30
%
 
3.37
%
 
3.40
%
 
NM
 
NM
 
NM

 
NM


_______________________________________________________________________________
NM—Not meaningful
Schedule of Net Benefit Cost and Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block]
Components of Net Periodic Benefit (Income) Cost and Other Amounts Recognized in Other Comprehensive (Income) Loss
(In millions)
2013
 
2012
 
2011
U.S.
 
Non-U.S.
 
Other
 
U.S.
 
Non-U.S.
 
Other
 
U.S.
 
Non-U.S.
 
Other
Net Periodic Benefit (Income) Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
25.2

 
$
11.1

 
$
0.2

 
$
21.5

 
$
8.9

 
$
0.2

 
$
18.2

 
$
8.7

 
$
0.3

Interest cost
51.9

 
20.6

 
2.2

 
55.9

 
21.4

 
2.5

 
60.3

 
22.7

 
3.2

Expected return on plan assets
(68.0
)
 
(14.0
)
 
—

 
(63.3
)
 
(14.8
)
 
—

 
(66.1
)
 
(16.2
)
 
—

Amortization of prior service cost (credit)
0.7

 
—

 
—

 
0.9

 
(0.1
)
 
—

 
1.1

 
—

 
—

Annual mark-to-market adjustment
(65.8
)
 
11.0

 
—

 
67.7

 
52.2

 
—

 
99.1

 
13.1

 
—

Amortization of net deferred actuarial loss
—

 
—

 
0.4

 
—

 
—

 
0.6

 
—

 
—

 
0.6

Net curtailment and settlement loss
—

 
(0.1
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Net periodic benefit (income) cost
$
(56.0
)
 
$
28.6

 
$
2.8

 
$
82.7

 
$
67.6

 
$
3.3

 
$
112.6

 
$
28.3

 
$
4.1

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net deferred actuarial gain
$
—

 
$
—

 
$
(4.3
)
 
$
—

 
$
—

 
$
(2.1
)
 
$
—

 
$
—

 
$
(7.3
)
Net prior service credit
—

 
—

 
(1.7
)
 
—

 
—

 
—

 
—

 
(0.4
)
 
—

Amortization of prior service cost (credit)
(0.7
)
 
—

 
—

 
(0.9
)
 
0.1

 
—

 
(1.1
)
 
—

 
—

Amortization of net deferred actuarial loss
—

 
—

 
(0.4
)
 
—

 
—

 
(0.6
)
 
—

 
—

 
(0.6
)
Total recognized in other comprehensive (income) loss
(0.7
)
 
—

 
(6.4
)
 
(0.9
)
 
0.1

 
(2.7
)
 
(1.1
)
 
(0.4
)
 
(7.9
)
Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss
$
(56.7
)
 
$
28.6

 
$
(3.6
)
 
$
81.8

 
$
67.7

 
$
0.6

 
$
111.5

 
$
27.9

 
$
(3.8
)
Schedule of Net Funded Status Benefits Paid and Discount Rate [Table Text Block]
Funded Status of U.S. Pension Plans
(In millions)
Fully-Funded U.S. Qualified
Pension Plans(1)
 
Underfunded U.S.
Qualified Pension Plans(1)
 
Unfunded Pay-As-You-Go
U.S. Nonqualified Plans(2)
2013

2012

2011

2013

2012

2011

2013

2012

2011
Projected benefit obligation
$
—

 
$
—

 
$
—

 
$
1,197.4

 
$
1,288.6

 
$
1,157.5

 
$
129.4

 
$
137.0

 
$
124.8

Fair value of plan assets
—

 
—

 
—

 
1,145.2

 
1,131.7

 
955.3

 
—

 
—

 
—

Funded status (PBO basis)
$
—

 
$
—

 
$
—

 
$
(52.2
)
 
$
(156.9
)
 
$
(202.2
)
 
$
(129.4
)
 
$
(137.0
)
 
$
(124.8
)
Benefits paid
$
—

 
$
—

 
$
—

 
$
(73.6
)
 
$
(60.7
)
 
$
(59.9
)
 
$
(5.6
)
 
$
(5.7
)
 
$
(5.6
)
Funded Status of Non-U.S. Pension Plans
(In millions)
Fully-Funded Non-U.S.
Pension Plans(1)
 
Underfunded Non-U.S.
Pension Plans(1)
 
Unfunded Pay-As-You-Go
Non-U.S. Pension Plans(2)
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Projected benefit obligation
$
247.3

 
$
237.1

 
$
213.3

 
$
56.5

 
$
62.6

 
$
53.1

 
$
242.6

 
$
229.6

 
$
186.4

Fair value of plan assets
264.0

 
269.2

 
255.8

 
42.5

 
44.4

 
39.3

 
—

 
—

 
—

Funded status (PBO basis)
$
16.7

 
$
32.1

 
$
42.5

 
$
(14.0
)
 
$
(18.2
)
 
$
(13.8
)
 
$
(242.6
)
 
$
(229.6
)
 
$
(186.4
)
Benefits paid
$
(10.0
)
 
$
(11.8
)
 
$
(10.2
)
 
$
(4.2
)
 
$
(3.6
)
 
$
(2.2
)
 
$
(7.9
)
 
$
(7.7
)
 
$
(8.8
)
_______________________________________________________________________________
(1)
Plans intended to be advance-funded.
(2)
Plans intended to be pay-as-you-go.
Schedule of Benefit Obligations in Excess of Fair Value of Plan Assets [Table Text Block]
Pension Plans with Underfunded or
Unfunded Accumulated Benefit Obligation
(In millions)
U.S.
 
Non-U.S.
 
Total
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Projected benefit obligation
$
347.8

 
$
1,425.6

 
$
259.2

 
$
280.3

 
$
607.0

 
$
1,705.9

Accumulated benefit obligation
344.1

 
1,371.2

 
230.7

 
242.0

 
574.8

 
1,613.2

Fair value of plan assets
201.1

 
1,131.7

 
8.9

 
35.5

 
210.0

 
1,167.2


Estimated Expected Future Benefit Payments Reflecting Future Service and Medicare Subsidy Receipts for the Fiscal Years Ending
(In millions)
Pension Plans
 
Other
Postretirement Plans
 
Total
Payments
Net of
Subsidy
U.S.(1)
 
Non-U.S.(2)
 
Benefit
Payments
 
Medicare
Subsidy
Receipts
 
Benefit
Payments(3)
 
Benefit
Payments
 
 
 
2011 (actual)
$
65.5

 
$
21.2

 
$
3.6

 
$
(1.9
)
 
$
88.4

2012 (actual)
66.4

 
23.1

 
4.6

 
(3.3
)
 
90.8

2013 (actual)
79.2

 
22.1

 
4.5

 
(1.4
)
 
104.4

2014(3)
108.6

 
23.0

 
6.2

 
(1.7
)
 
136.1

2015
82.2

 
22.7

 
6.0

 
(0.5
)
 
110.4

2016
83.5

 
24.4

 
5.8

 
(0.1
)
 
113.6

2017
84.9

 
25.1

 
5.6

 
(0.1
)
 
115.5

2018
86.3

 
26.0

 
5.3

 
(0.1
)
 
117.5

2019 - 2023
446.5

 
146.7

 
22.1

 
(0.3
)
 
615.0
Schedule of Benefit Payments Net of Medicare Subsidy Receipts [Table Text Block]
Estimated Expected Future Benefit Payments Reflecting Future Service and Medicare Subsidy Receipts for the Fiscal Years Ending
(In millions)
Pension Plans
 
Other
Postretirement Plans
 
Total
Payments
Net of
Subsidy
U.S.(1)
 
Non-U.S.(2)
 
Benefit
Payments
 
Medicare
Subsidy
Receipts
 
Benefit
Payments(3)
 
Benefit
Payments
 
 
 
2011 (actual)
$
65.5

 
$
21.2

 
$
3.6

 
$
(1.9
)
 
$
88.4

2012 (actual)
66.4

 
23.1

 
4.6

 
(3.3
)
 
90.8

2013 (actual)
79.2

 
22.1

 
4.5

 
(1.4
)
 
104.4

2014(3)
108.6

 
23.0

 
6.2

 
(1.7
)
 
136.1

2015
82.2

 
22.7

 
6.0

 
(0.5
)
 
110.4

2016
83.5

 
24.4

 
5.8

 
(0.1
)
 
113.6

2017
84.9

 
25.1

 
5.6

 
(0.1
)
 
115.5

2018
86.3

 
26.0

 
5.3

 
(0.1
)
 
117.5

2019 - 2023
446.5

 
146.7

 
22.1

 
(0.3
)
 
615.0


_______________________________________________________________________________
(1)
Effective January 1, 2008, lump sum distributions from certain U.S. qualified pension plans were restricted based on the provisions of the Pension Protection Act of 2006 (the "Act"). The Act prohibited the distribution of lump sums to retiring participants while the Company was operating under Chapter 11 of the U.S. Bankruptcy Code and when the plan was less than 100% funded. After emergence from Chapter 11, the plan is permitted to distribute lump sums to retiring participants under the Act when the plan is at least 80% funded.
(2)
Non-U.S. estimated benefit payments for 2014 and future periods have been translated at the applicable December 31, 2013, exchange rates.
(3)
Includes approximately $28 million of benefit payments from nonqualified plans that were previously restricted by the Bankruptcy Court while the Company was in Chapter 11 and are expected to be paid in 2014.
Pension Plans
  
Pension plans and other postretirement benefit plans  
Schedule of Net Funded Status [Table Text Block]
The following table presents the funded status of Grace's fully-funded, underfunded, and unfunded pension plans:
(In millions)
December 31, 2013
 
December 31, 2012
Overfunded defined benefit pension plans
$
16.7

 
$
32.1

Underfunded defined benefit pension plans
(66.2
)
 
(175.1
)
Unfunded defined benefit pension plans
(233.4
)
 
(221.4
)
Total underfunded and unfunded defined benefit pension plans
(299.6
)
 
(396.5
)
Unfunded defined benefit pension plans included in liabilities subject to compromise
(123.6
)
 
(131.2
)
Pension liabilities included in other current liabilities
(15.0
)
 
(14.0
)
Net funded status
$
(421.5
)
 
$
(509.6
)
U.S. qualified pension plans
  
Pension plans and other postretirement benefit plans  
Schedule of Allocation of Plan Assets [Table Text Block]
The target allocation of investment assets at December 31, 2013, and the actual allocation at December 31, 2013 and 2012, for Grace's U.S. qualified pension plans are as follows:
 
Target
Allocation
 
Percentage of Plan Assets
December 31,
U.S. Qualified Pension Plans Asset Category
2013
 
2013
 
2012
U.S. equity securities
10
%
 
10
%
 
16
%
Non-U.S. equity securities
6
%
 
6
%
 
7
%
Short-term debt securities
10
%
 
10
%
 
6
%
Intermediate-term debt securities
28
%
 
28
%
 
31
%
Long-term debt securities
44
%
 
44
%
 
35
%
Other investments
2
%
 
2
%
 
5
%
Total
100
%
 
100
%
 
100
%
Schedule of Fair Value of Plan Asset [Table Text Block]
The following tables present the fair value hierarchy for the U.S. qualified pension plan assets measured at fair value as of December 31, 2013 and 2012.
 
Fair Value Measurements at December 31, 2013 Using
Assets Measured at Fair Value—U.S. Qualified Pension Plans
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
U.S. equity group trust funds
$
111.5

 
$
—

 
$
111.5

 
$
—

Non-U.S. equity group trust funds
67.1

 
—

 
67.1

 
—

Corporate bond group trust funds—intermediate-term
322.6

 
—

 
322.6

 
—

Corporate bond group trust funds—long-term
502.3

 
—

 
502.3

 
—

Other fixed income group trust funds
22.9

 
—

 
22.9

 
—

Common/collective trust funds
102.3

 
—

 
102.3

 
—

Annuity and immediate participation contracts
16.5

 
—

 
16.5

 
—

Total Assets
$
1,145.2

 
$
—

 
$
1,145.2

 
$
—



 
Fair Value Measurements at December 31, 2012 Using
Assets Measured at Fair Value—U.S. Qualified Pension Plans
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
U.S. equity group trust funds
$
178.8

 
$
—

 
$
178.8

 
$
—

Non-U.S. equity group trust funds
79.2

 
—

 
79.2

 
—

Corporate bond group trust funds—intermediate-term
348.4

 
—

 
348.4

 
—

Corporate bond group trust funds—long-term
399.4

 
—

 
399.4

 
—

Other fixed income group trust funds
36.9

 
—

 
36.9

 
—

REIT group trust funds
15.0

 
—

 
15.0

 
—

Common/collective trust funds
58.1

 
—

 
58.1

 
—

Annuity and immediate participation contracts
15.9

 
—

 
15.9

 
—

Total Assets
$
1,131.7

 
$
—

 
$
1,131.7

 
$
—
Non-U.S. pension plans
  
Pension plans and other postretirement benefit plans  
Schedule of Fair Value of Plan Asset [Table Text Block]
The following tables present the fair value hierarchy for the non-U.S. pension plan assets measured at fair value as of December 31, 2013 and 2012.
 
Fair Value Measurements at December 31, 2013 Using
Assets Measured at Fair Value—Non-U.S. Pension Plans
(In millions)
Total
 
Quoted Prices
in Active
Markets for
Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Common/collective trust funds
$
294.8

 
$
—

 
$
294.8

 
$
—

Government and agency securities
2.4

 
—

 
2.4

 
—

Corporate bonds
1.3

 
—

 
1.3

 
—

Insurance contracts and other investments
6.3

 
—

 
6.3

 
—

Cash
1.7

 
1.7

 
—

 
—

Total Assets
$
306.5

 
$
1.7


$
304.8

 
$
—



 
Fair Value Measurements at December 31, 2012 Using
Assets Measured at Fair Value—Non-U.S. Pension Plans
(In millions)
Total
 
Quoted Prices
in Active
Markets for
Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Common/collective trust funds
$
301.3

 
$
—

 
$
301.3

 
$
—

Government and agency securities
2.4

 
—

 
2.4

 
—

Corporate bonds
1.2

 
—

 
1.2

 
—

Insurance contracts and other investments
8.0

 
—

 
8.0

 
—

Cash
0.7

 
0.7

 
—

 
—

Total Assets
$
313.6

 
$
0.7

 
$
312.9

 
$
—
Non-U.S. pension plans | United Kingdom
  
Pension plans and other postretirement benefit plans  
Schedule of Allocation of Plan Assets [Table Text Block]
The target allocation of investment assets at December 31, 2013, and the actual allocation at December 31, 2013 and 2012, for the U.K. pension plan are as follows:
 
Target
Allocation
 
Percentage of Plan Assets
December 31,
United Kingdom Pension Plan Asset Category
2013
 
2013
 
2012
Diversified growth funds
12
%
 
13
%
 
12
%
U.K. gilts
41
%
 
40
%
 
41
%
U.K. corporate bonds
47
%
 
47
%
 
47
%
Total
100
%
 
100
%
 
100
%
Non-U.S. pension plans | Canada
  
Pension plans and other postretirement benefit plans  
Schedule of Allocation of Plan Assets [Table Text Block]
The target allocation of investment assets at December 31, 2013, and the actual allocation at December 31, 2013 and 2012, for the Canadian pension plan are as follows:
 
Target
Allocation
 
Percentage of Plan Assets
December 31,
Canadian Pension Plan Asset Category
2013
 
2013
 
2012
Equity securities
33
%
 
34
%
 
61
%
Bonds
49
%
 
48
%
 
39
%
Other investments
18
%
 
18
%
 
—
%
Total
100
%
 
100
%
 
100
%

v2.4.0.8
Noncontrolling Interests in Consolidated Affiliates
 12 Months Ended
Dec. 31, 2013
Noncontrolling Interest [Abstract]  
Noncontrolling Interests in Consolidated Affiliates
Noncontrolling Interests in Consolidated Affiliates
Grace conducts certain business activities in various countries through joint ventures with unaffiliated third parties. In certain cases, the financial results and financial position of these joint ventures are fully included in Grace's consolidated financial statements with the partner's interest reflected in noncontrolling interests in the Consolidated Statements of Operations and Consolidated Balance Sheets. The following tables present summary financial information for Grace's consolidated affiliates for which there is a noncontrolling interest:
Statements of Operations
(In millions)
Year Ended December 31,
2013
 
2012
 
2011
Sales
$
101.5

 
$
108.8

 
$
86.3

Income (loss) before taxes
2.7

 
0.8

 
(0.1
)
Net income (loss)
3.4

 
1.1

 
(0.9
)
Noncontrolling interests in net income (loss)
1.6

 
1.0

 
(0.6
)


Balance Sheets
(In millions)
December 31,
2013
 
2012
 
2011
Cash
$
5.1

 
$
5.7

 
$
6.7

Other current assets
33.4

 
41.6

 
34.7

Total assets
71.1

 
73.8

 
53.0

Total liabilities
48.9

 
46.1

 
30.1

Shareholders' equity
22.2

 
27.7

 
22.9

Noncontrolling interests in shareholders' equity
10.6

 
9.9

 
8.1

v2.4.0.8
Unconsolidated Affiliate
 12 Months Ended
Dec. 31, 2013
Equity Method Investments and Joint Ventures [Abstract]  
Unconsolidated Affiliate
Unconsolidated Affiliate
Grace accounts for its 50% ownership interest in ART using the equity method of accounting. Grace's investment in ART amounted to $96.2 million and $85.5 million as of December 31, 2013 and 2012, respectively, and the amount included in "equity in earnings of unconsolidated affiliate" in the Consolidated Statements of Operations totaled $22.9 million, $18.5 million and $15.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. ART is a private company and accordingly does not have a quoted market price available. The following summary lists ART's assets, liabilities and results of operations.
 
December 31,
(In millions)
2013
 
2012
Summary of Balance Sheet information:
 
 
 
Current assets
$
187.9

 
$
136.7

Noncurrent assets
62.5

 
65.9

Total assets
$
250.4

 
$
202.6

 
 
 
 
Current liabilities
$
62.6

 
$
37.8

Noncurrent liabilities
0.6

 
0.1

Total liabilities
$
63.2

 
$
37.9


 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Summary of Statement of Operations information:
 
 
 
 
 
Net sales
$
377.6

 
$
325.0

 
$
339.0

Costs and expenses applicable to net sales
318.4

 
276.0

 
296.3

Income before income taxes
46.6

 
38.9

 
32.8

Net income
45.6

 
37.8

 
31.2


Grace and ART transact business on a regular basis and maintain several agreements in order to support the joint venture. These agreements are treated as related party activities with an unconsolidated affiliate. The table below presents summary financial data related to transactions between Grace and ART.
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Grace sales of catalysts to ART
$
232.0

 
$
206.9

 
$
171.4

Charges for fixed costs, research and development and selling, general and administrative services to ART
28.8

 
28.5

 
27.8


Grace and Chevron provide lines of credit in the amount of $15 million each at a commitment fee of 0.1% of the credit amount. These agreements expire on February 28, 2014. No amounts were outstanding at December 31, 2013 and 2012.

v2.4.0.8
Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies Schedule of Pension Recasting (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
 3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                        
Other Comprehensive Income (Loss), Net of Tax                 $ (20.0) $ 11.0 $ (5.4)  
Cost of Goods and Services Sold                 1,918.6 2,041.1 2,099.0  
Inventory, Net 295.3       283.6       295.3 283.6    
Assets, Current 2,294.4       2,445.2       2,294.4 2,445.2    
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent 845.9       953.2       845.9 953.2    
Overfunded defined benefit pension plans 16.7       32.1       16.7 32.1    
Assets 5,396.1       5,090.4       5,396.1 5,090.4 4,495.6  
Defined Benefit Pension Plan, Liabilities, Noncurrent 299.6       396.5       299.6 396.5    
Total Liabilities Not Subject to Compromise 1,048.8       1,150.7       1,048.8 1,150.7    
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations 176.3       190.9       176.3 190.9    
Total Liabilities Subject to Compromise 3,776.1       3,619.9       3,776.1 3,619.9    
Total Liabilities 4,824.9       4,770.6       4,824.9 4,770.6    
Accumulated Other Comprehensive Income (Loss), Net of Tax 10.6       29.7       10.6 29.7    
Retained Earnings (Accumulated Deficit) 15.8       (240.3)       15.8 (240.3)    
Total W. R. Grace & Co. Shareholders' Equity 560.6       309.9       560.6 309.9    
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest 571.2       319.8       571.2 319.8 184.1 (55.7)
Gross Profit 299.8 282.4 300.9 259.0 258.3 282.2 301.4 272.5 1,142.1 1,114.4 1,112.9  
Selling, general and administrative expenses                 505.7 635.2 659.9  
Defined Benefit Pension Expense                 (23.2) 149.6 139.9  
Defined Benefit Pension Expense, Revised                 0 0 0  
Total Costs and Expenses                 781.5 1,135.0 805.9  
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest                 360.6 (20.6) 307.0  
(Benefit from) provision for income taxes                 102.9 (61.6) 87.9  
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest                 257.7 41.0 219.1  
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax, Portion Attributable to Parent                 4.6 2.3 6.2  
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent                 (23.6) 5.5 (11.3)  
Net income (loss) 29.7 77.0 90.3 59.1 (184.3) 82.1 75.4 66.8 256.1 40.0 219.7  
Basic earnings per share (in dollars per share) $ 0.39 [1] $ 1.00 [1] $ 1.18 [1] $ 0.78 [1] $ (2.44) [1] $ 1.09 [1] $ 1.01 [1] $ 0.90 [1] $ 3.35 $ 0.53 $ 2.99  
Net income attributable to W. R. Grace & Co. shareholders (in dollars per share) $ 0.38 [1] $ 0.99 [1] $ 1.16 [1] $ 0.77 [1] $ (2.44) [1] $ 1.07 [1] $ 0.98 [1] $ 0.87 [1] $ 3.30 $ 0.52 $ 2.91  
Increase (Decrease) in Inventories                 8.6 53.2 (67.9)  
Other Operating Activities, Cash Flow Statement                 (30.0) 18.7 46.8  
Other Operating Activities Cash Flow Statement Adjusted for Pension Revision                 (30.0) 29.9 18.4  
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax                 (0.8) (0.8) (0.8) (0.8)
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest                 237.7 52.0 213.7  
Comprehensive Income (Loss), Net of Tax, Attributable to Parent                 237.0 50.2 212.5  
Scenario, Previously Reported [Member]
                        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                        
Other Comprehensive Income (Loss), Net of Tax                 47.7 (28.0) (58.6)  
Cost of Goods and Services Sold                 1,925.3 1,989.2 2,050.6  
Inventory, Net 294.7       278.6       294.7 278.6    
Assets, Current 2,293.8       2,440.2       2,293.8 2,440.2    
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent 846.1       956.3       846.1 956.3    
Overfunded defined benefit pension plans 16.7       33.8       16.7 33.8    
Assets 5,395.7       5,090.2       5,395.7 5,090.2    
Defined Benefit Pension Plan, Liabilities, Noncurrent 299.6       400.6       299.6 400.6    
Total Liabilities Not Subject to Compromise 1,048.8       1,154.8       1,048.8 1,154.8    
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations 176.3       188.1       176.3 188.1    
Total Liabilities Subject to Compromise 3,776.1       3,617.1       3,776.1 3,617.1    
Total Liabilities 4,824.9       4,771.9       4,824.9 4,771.9    
Accumulated Other Comprehensive Income (Loss), Net of Tax (558.7)       (607.3)       (558.7) (607.3)    
Retained Earnings (Accumulated Deficit) 584.7       395.2       584.7 395.2    
Total W. R. Grace & Co. Shareholders' Equity 560.2       308.4       560.2 308.4    
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest 570.8       318.3       570.8 318.3 167.5  
Gross Profit                 1,135.4 1,166.3 1,161.3  
Selling, general and administrative expenses                 522.2 537.5 568.4  
Defined Benefit Pension Expense                 73.4 71.2 63.4  
Total Costs and Expenses                 871.4 1,108.5 777.8  
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest                 264.0 57.8 383.5  
(Benefit from) provision for income taxes                 72.9 (37.3) 114.7  
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest                 191.1 95.1 268.8  
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax, Portion Attributable to Parent                 (72.3) (36.6) (46.7)  
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent                 (23.6) 5.4 (11.6)  
Net income (loss)                 189.5 94.1 269.4  
Basic earnings per share (in dollars per share)                 $ 2.48 $ 1.26 $ 3.66  
Net income attributable to W. R. Grace & Co. shareholders (in dollars per share)                 $ 2.44 $ 1.23 $ 3.57  
Increase (Decrease) in Inventories                 (4.2) 53.9 (66.9)  
Other Operating Activities, Cash Flow Statement                 (25.6) 29.2 17.4  
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax                 238.8 67.1 210.2  
Comprehensive Income (Loss), Net of Tax, Attributable to Parent                 238.1 65.3 209.0  
Scenario, Adjustment [Member]
                        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                        
Other Comprehensive Income (Loss), Net of Tax                 (67.7) 39.0 53.2  
Cost of Goods and Services Sold                 (6.7) 51.9 48.4  
Inventory, Net 0.6       5.0       0.6 5.0    
Assets, Current 0.6       5.0       0.6 5.0    
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent (0.2)       (3.1)       (0.2) (3.1)    
Overfunded defined benefit pension plans 0       (1.7)       0 (1.7)    
Assets 0.4       0.2       0.4 0.2    
Defined Benefit Pension Plan, Liabilities, Noncurrent 0       (4.1)       0 (4.1)    
Total Liabilities Not Subject to Compromise 0       (4.1)       0 (4.1)    
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations 0       2.8       0 2.8    
Total Liabilities Subject to Compromise 0       2.8       0 2.8    
Total Liabilities 0       (1.3)       0 (1.3)    
Accumulated Other Comprehensive Income (Loss), Net of Tax 569.3       637.0       569.3 637.0    
Retained Earnings (Accumulated Deficit) (568.9)       (635.5)       (568.9) (635.5)    
Total W. R. Grace & Co. Shareholders' Equity 0.4       1.5       0.4 1.5    
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest 0.4       1.5       0.4 1.5 16.6  
Gross Profit   2.3 2.4 4.8 42.0 2.6 2.7 4.6 6.7 (51.9) (48.4)  
Selling, general and administrative expenses                 (16.5) 97.7 91.5  
Defined Benefit Pension Expense Effect of Change                 (73.4) (71.2) (63.4)  
Defined Benefit Pension Expense Effect of Change                 (96.6) 78.4 76.5  
Total Costs and Expenses                 (89.9) 26.5 28.1  
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest                 96.6 (78.4) (76.5)  
(Benefit from) provision for income taxes                 30.0 (24.3) (26.8)  
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest                 66.6 (54.1) (49.7)  
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax, Portion Attributable to Parent                 (67.7) 38.9 52.9  
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent                 0 0.1 0.3  
Net income (loss)   7.6 7.5 6.2 72.7 6.6 6.1 5.9 66.6 (54.1) (49.7)  
Basic earnings per share (in dollars per share)   $ 0.10 $ 0.10 $ 0.08 $ 0.96 $ 0.09 $ 0.08 $ 0.08 $ 0.87 $ (0.72) $ (0.68)  
Net income attributable to W. R. Grace & Co. shareholders (in dollars per share)   $ 0.10 $ 0.10 $ 0.08 $ 0.96 $ 0.09 $ 0.08 $ 0.08 $ 0.86 $ (0.71) $ (0.66)  
Increase (Decrease) in Inventories                 4.4 (0.7) (1.0)  
Other Operating Activities, Cash Flow Statement                 (4.4) 0.7 1.0  
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax                 (1.1) (15.1) 3.5  
Comprehensive Income (Loss), Net of Tax, Attributable to Parent                 (1.1) (15.1) 3.5  
Retained Earnings (Accumulated Deficit)
                        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                        
Other Comprehensive Income (Loss), Net of Tax                 0 0 0  
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest 15.8       (240.3)       15.8 (240.3) (280.3) (500.0)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest                 256.1 40.0 219.7  
Retained Earnings (Accumulated Deficit) | Scenario, Previously Reported [Member]
                        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                        
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest 584.7       395.2       584.7 395.2 301.1 31.7
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest                 189.5 94.1 269.4  
Retained Earnings (Accumulated Deficit) | Scenario, Adjustment [Member]
                        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                        
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest (568.9)       (635.5)       (568.9) (635.5) (581.4) (531.7)
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest                 66.6 (54.1) (49.7)  
Accumulated Other Comprehensive Loss
                        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                        
Other Comprehensive Income (Loss), Net of Tax                 (19.1) 10.2 (7.2)  
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest 10.6       29.7       10.6 29.7 19.5 26.7
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest                 0 0 0  
Accumulated Other Comprehensive Loss | Scenario, Previously Reported [Member]
                        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                        
Other Comprehensive Income (Loss), Net of Tax                 48.6 (28.8) (60.4)  
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest (558.7)       (607.3)       (558.7) (607.3) (578.5) (518.1)
Accumulated Other Comprehensive Loss | Scenario, Adjustment [Member]
                        
New Accounting Pronouncements or Change in Accounting Principle [Line Items]                        
Other Comprehensive Income (Loss), Net of Tax                 (67.7)   53.2  
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest $ 569.3       $ 637.0       $ 569.3 $ 637.0 $ 598.0 $ 544.8
[1] Per share results for the four quarters may differ from full-year per share results, as a separate computation of the weighted average number of shares outstanding is made for each quarter presented.

v2.4.0.8
Other Balance Sheet Accounts (Tables)
 12 Months Ended
Dec. 31, 2013
Other Balance Sheet Accounts  
Schedule of other balance sheet accounts
(In millions)
December 31, 2013
 
December 31, 2012
Other Current Liabilities
 
 
 
Accrued compensation
$
62.4

 
$
84.5

Income tax payable
32.0

 
44.8

Customer volume rebates
33.3

 
32.5

Deferred revenue
14.3

 
—

Pension liabilities
15.0

 
14.0

Accrued commissions
6.9

 
12.9

Accrued Chapter 11 reorganization expenses
6.9

 
6.6

Fair value of currency forward and commodity contracts
7.0

 
5.5

Restructuring liability
4.4

 
3.0

Deferred tax liability
0.1

 
0.6

Other accrued liabilities
109.7

 
102.9

 
$
292.0

 
$
307.3

v2.4.0.8
Quarterly Summary and Statistical Information (Unaudited)
 12 Months Ended
Dec. 31, 2013
Quarterly Financial Information Disclosure [Abstract]  
Quarterly Summary and Statistical Information (Unaudited)
Quarterly Summary and Statistical Information (Unaudited)
(In millions, except per share amounts)
March 31(1)
 
June 30(2)
 
September 30(3)
 
December 31
2013
 
 
 
 
 
 
 
Net sales
$
709.9

 
$
802.8

 
$
771.3

 
$
776.7

Gross profit
259.0

 
300.9

 
282.4

 
299.8

Net income
59.1

 
90.3

 
77.0

 
29.7

Net income per share:(4)
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Net income
$
0.78

 
$
1.18

 
$
1.00

 
$
0.39

Diluted earnings per share:
 
 
 
 
 
 
 
Net income
0.77

 
1.16

 
0.99

 
0.38

Market price of common stock:(5)
 
 
 
 
 
 
 
High
$
79.14

 
$
85.43

 
$
89.80

 
$
101.72

Low
68.23

 
72.00

 
74.46

 
85.06

Close
77.51

 
84.04

 
87.40

 
98.87

_______________________________________________________________________________
(1)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in first quarter 2013 decrease to Gross profit of $4.8 million, and increases to Net income of $6.2 million, Basic earnings per share of $0.08 and Diluted earnings per share of $0.08.
(2)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in second quarter 2013 decrease to Gross profit of $2.4 million, and increases to Net income of $7.5 million, Basic earnings per share of $0.10 and Diluted earnings per share of $0.10.
(3)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in third quarter 2013 decrease to Gross profit of $2.3 million, and increases to Net income of $7.6 million, Basic earnings per share of $0.10 and Diluted earnings per share of $0.10.
(4)
Per share results for the four quarters may differ from full-year per share results, as a separate computation of the weighted average number of shares outstanding is made for each quarter presented.
(5)
Principal market: New York Stock Exchange.
(In millions, except per share amounts)
March 31(1)
 
June 30(2)
 
September 30(3)
 
December 31(4)
2012
 
 
 
 
 
 
 
Net sales
$
754.4

 
$
826.7

 
$
776.6

 
$
797.8

Gross profit
272.5

 
301.4

 
282.2

 
258.3

Net income (loss)
66.8

 
75.4

 
82.1

 
(184.3
)
Net income per share:(5)
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Net income (loss)
$
0.90

 
$
1.01

 
$
1.09

 
$
(2.44
)
Diluted earnings per share:
 
 
 
 
 
 
 
Net income (loss)
0.87

 
0.98

 
1.07

 
(2.44
)
Market price of common stock:(6)
 
 
 
 
 
 
 
High
$
58.89

 
$
61.08

 
$
61.58

 
$
68.86

Low
45.39

 
47.40

 
48.14

 
58.40

Close
57.80

 
50.45

 
59.08

 
67.23

_______________________________________________________________________________
(1)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in first quarter 2012 decrease to Gross profit of $4.6 million, and increases to Net income of $5.9 million, Basic earnings per share of $0.08 and Diluted earnings per share of $0.08.
(2)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in second quarter 2012 decrease to Gross profit of $2.7 million, and increases to Net income of $6.1 million, Basic earnings per share of $0.08 and Diluted earnings per share of $0.08.
(3)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in third quarter 2012 decrease to Gross profit of $2.6 million, and increases to Net income of $6.6 million, Basic earnings per share of $0.09 and Diluted earnings per share of $0.09.
(4)
The retrospective application of the change in method of accounting relating to our global defined benefit pension plans in fourth quarter 2013, resulted in a fourth quarter 2012 decreases to Gross profit of $42.0 million,, Net income of $72.7 million, Basic earnings per share of $0.96 and Diluted earnings per share of $0.96.
(5)
Per share results for the four quarters may differ from full-year per share results, as a separate computation of the weighted average number of shares outstanding is made for each quarter presented.
(6)
Principal market: New York Stock Exchange.

v2.4.0.8
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 12 Months Ended
Dec. 31, 2013
Valuation and Qualifying Accounts [Abstract]  
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FINANCIAL STATEMENT SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In millions)

For the Year Ended December 31, 2013
Description
Balance at beginning of period
 
Additions charged to costs and expenses
 
Deductions
 
Other,
net(1)
 
Balance at end of period
Valuation and qualifying accounts deducted from assets:
 
 
 
 
 
 
 
 
 
Allowances for notes and accounts receivable
$
6.9

 
$
2.2

 
$
(1.6
)
 
$
0.1

 
$
7.6

Valuation allowance for deferred tax assets(2)
40.8

 
4.4

 
(24.4
)
 
(2.5
)
 
18.3

Reserves:
 
 
 
 
 
 
 
 
 
Reserves for asbestos-related litigation
2,065.0

 
27.4

 
—

 
—

 
2,092.4

Reserves for environmental remediation
140.5

 
8.0

 
(14.0
)
 
—

 
134.5

Reserves for retained obligations of divested businesses
34.2

 
0.8

 
—

 
—

 
35.0


For the Year Ended December 31, 2012
Description
Balance at beginning of period
 
Additions charged to costs and expenses
 
Deductions
 
Other,
net(1)
 
Balance at end of period
Valuation and qualifying accounts deducted from assets:
 
 
 
 
 
 
 
 
 
Allowances for notes and accounts receivable
$
9.8

 
$
1.9

 
$
(4.8
)
 
$
—

 
$
6.9

Valuation allowance for deferred tax assets
100.8

 
—

 
(60.0
)
 
—

 
40.8

Reserves:
 
 
 
 
 
 
 
 
 
Reserves for asbestos-related litigation
1,700.0

 
365.0

 
—

 
—

 
2,065.0

Reserves for environmental remediation
149.9

 
3.6

 
(13.0
)
 
—

 
140.5

Reserves for retained obligations of divested businesses
33.7

 
0.7

 
(0.2
)
 
—

 
34.2


For the Year Ended December 31, 2011
Description
Balance at beginning of period
 
Additions charged to costs and expenses
 
Deductions
 
Other,
net(1)
 
Balance at end of period
Valuation and qualifying accounts deducted from assets:
 
 
 
 
 
 
 
 
 
Allowances for notes and accounts receivable
$
8.7

 
$
2.9

 
$
(2.0
)
 
$
0.2

 
$
9.8

Valuation allowance for deferred tax assets
104.6

 
—

 
(3.8
)
 
—

 
100.8

Reserves:
 
 
 
 
 
 
 
 
 
Reserves for asbestos-related litigation
1,700.0

 
—

 
—

 
—

 
1,700.0

Reserves for environmental remediation
144.0

 
17.8

 
(11.8
)
 
(0.1
)
 
149.9

Reserves for retained obligations of divested businesses
33.9

 
0.4

 
(0.6
)
 
—

 
33.7

_______________________________________________________________________________
(1)
Various miscellaneous adjustments against reserves and effects of currency translation.
(2)
The valuation allowance decreased $22.5 million from December 31, 2012, to December 31, 2013. In the 2013 fourth quarter, Grace determined that it is more likely than not that its deductions generated at emergence will be used before their expiration. Accordingly, Grace recorded a $24.4 million release of its valuation allowance on its state deferred tax assets. Further decreases in Grace’s deferred tax assets resulted from the utilization and expiration of state net operating losses ("NOLs") in the current year, and the reduction of NOLs resulting from prior-year adjustments to taxable income. These decreases were partially offset by the recording of valuation allowance on deferred tax assets associated with certain U.S. federal foreign tax credits. The reduction in the valuation allowance during 2012 related in part to a $44.0 million release of the valuation allowance as Grace determined that it is more likely than not that a substantial portion of its state net operating losses will be used before their expiration; the remainder of the release related to the utilization and expiration of state net operating losses in the current year, and the reduction of net operating losses resulting from prior-year adjustments made to income by the Internal Revenue Service. The reduction in 2011 primarily related to the utilization and expiration of state net operating losses.
For the Year Ended December 31, 2013
Description
Balance at beginning of period
 
Additions charged to costs and expenses
 
Deductions
 
Other,
net(1)
 
Balance at end of period
Valuation and qualifying accounts deducted from assets:
 
 
 
 
 
 
 
 
 
Allowances for notes and accounts receivable
$
6.9

 
$
2.2

 
$
(1.6
)
 
$
0.1

 
$
7.6

Valuation allowance for deferred tax assets(2)
40.8

 
4.4

 
(24.4
)
 
(2.5
)
 
18.3

Reserves:
 
 
 
 
 
 
 
 
 
Reserves for asbestos-related litigation
2,065.0

 
27.4

 
—

 
—

 
2,092.4

Reserves for environmental remediation
140.5

 
8.0

 
(14.0
)
 
—

 
134.5

Reserves for retained obligations of divested businesses
34.2

 
0.8

 
—

 
—

 
35.0


For the Year Ended December 31, 2012
Description
Balance at beginning of period
 
Additions charged to costs and expenses
 
Deductions
 
Other,
net(1)
 
Balance at end of period
Valuation and qualifying accounts deducted from assets:
 
 
 
 
 
 
 
 
 
Allowances for notes and accounts receivable
$
9.8

 
$
1.9

 
$
(4.8
)
 
$
—

 
$
6.9

Valuation allowance for deferred tax assets
100.8

 
—

 
(60.0
)
 
—

 
40.8

Reserves:
 
 
 
 
 
 
 
 
 
Reserves for asbestos-related litigation
1,700.0

 
365.0

 
—

 
—

 
2,065.0

Reserves for environmental remediation
149.9

 
3.6

 
(13.0
)
 
—

 
140.5

Reserves for retained obligations of divested businesses
33.7

 
0.7

 
(0.2
)
 
—

 
34.2


For the Year Ended December 31, 2011
Description
Balance at beginning of period
 
Additions charged to costs and expenses
 
Deductions
 
Other,
net(1)
 
Balance at end of period
Valuation and qualifying accounts deducted from assets:
 
 
 
 
 
 
 
 
 
Allowances for notes and accounts receivable
$
8.7

 
$
2.9

 
$
(2.0
)
 
$
0.2

 
$
9.8

Valuation allowance for deferred tax assets
104.6

 
—

 
(3.8
)
 
—

 
100.8

Reserves:
 
 
 
 
 
 
 
 
 
Reserves for asbestos-related litigation
1,700.0

 
—

 
—

 
—

 
1,700.0

Reserves for environmental remediation
144.0

 
17.8

 
(11.8
)
 
(0.1
)
 
149.9

Reserves for retained obligations of divested businesses
33.9

 
0.4

 
(0.6
)
 
—

 
33.7

_______________________________________________________________________________
(1)
Various miscellaneous adjustments against reserves and effects of currency translation.
(2)
The valuation allowance decreased $22.5 million from December 31, 2012, to December 31, 2013. In the 2013 fourth quarter, Grace determined that it is more likely than not that its deductions generated at emergence will be used before their expiration. Accordingly, Grace recorded a $24.4 million release of its valuation allowance on its state deferred tax assets. Further decreases in Grace’s deferred tax assets resulted from the utilization and expiration of state net operating losses ("NOLs") in the current year, and the reduction of NOLs resulting from prior-year adjustments to taxable income. These decreases were partially offset by the recording of valuation allowance on deferred tax assets associated with certain U.S. federal foreign tax credits. The reduction in the valuation allowance during 2012 related in part to a $44.0 million release of the valuation allowance as Grace determined that it is more likely than not that a substantial portion of its state net operating losses will be used before their expiration; the remainder of the release related to the utilization and expiration of state net operating losses in the current year, and the reduction of net operating losses resulting from prior-year adjustments made to income by the Internal Revenue Service. The reduction in 2011 primarily related to the utilization and expiration of state net operating losses.

v2.4.0.8
Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies
 12 Months Ended
Dec. 31, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies
Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies
W. R. Grace & Co., through its subsidiaries, is engaged in specialty chemicals and specialty materials businesses on a global basis through three operating segments: Grace Catalysts Technologies, which includes catalysts and related products and technologies used in refining, petrochemical and other chemical manufacturing applications; Grace Materials Technologies, which includes packaging technologies and engineered materials used in consumer, industrial, coatings, and pharmaceutical applications; and Grace Construction Products, which includes specialty construction chemicals and specialty building materials used in commercial, infrastructure and residential construction.
W. R. Grace & Co. conducts substantially all of its business through a direct, wholly owned subsidiary, W. R. Grace & Co.-Conn. ("Grace-Conn."). Grace-Conn. owns substantially all of the assets, properties and rights of W. R. Grace & Co. on a consolidated basis, either directly or through subsidiaries.
As used in these notes, the term "Company" refers to W. R. Grace & Co. The term "Grace" refers to the Company and/or one or more of its subsidiaries and, in certain cases, their respective predecessors.
Chapter 11 Proceedings    During 2000 and the first quarter of 2001, Grace experienced several adverse developments in its asbestos-related litigation, including: a significant increase in personal injury claims, higher than expected costs to resolve personal injury and certain property damage claims, and class action lawsuits alleging damages from Zonolite® Attic Insulation ("ZAI"), a former Grace attic insulation product.
After a thorough review of these developments, Grace's Board of Directors concluded that a federal court-supervised bankruptcy process provided the best forum available to achieve fairness in resolving these claims and on April 2, 2001 (the "Filing Date"), Grace and 61 of its United States subsidiaries and affiliates filed voluntary petitions for reorganization (the "Filing") under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court").
Under Chapter 11, Grace operated its businesses under court supervision, while using the Chapter 11 process to develop and implement a plan for addressing the asbestos-related claims.
In September 2008, Grace and other parties filed a joint plan of reorganization with the Bankruptcy Court to address all pending and future asbestos-related claims and all other pre-petition claims as outlined therein (as subsequently amended, the "Joint Plan"). Following the confirmation of the Joint Plan in 2011 by the Bankruptcy Court and in 2012 by a U.S. District Court, and the resolution of all appeals, Grace emerged from bankruptcy on February 3, 2014. (See Note 2 for Chapter 11 information.)
Principles of Consolidation    The Consolidated Financial Statements include the accounts of Grace and entities as to which Grace exercises control over operating and financial policies. Grace consolidates the activities of variable interest entities in circumstances where management determines that Grace is the primary beneficiary of the variable interest entity. Intercompany transactions and balances are eliminated in consolidation. Investments in affiliated companies in which Grace can significantly influence operating and financial policies are accounted for under the equity method, unless Grace's investment is deemed to be temporary, in which case the investment is accounted for under the cost method.
Noncontrolling Interests in Consolidated Entities    Grace conducts certain of its business through joint ventures with unaffiliated third parties. For joint ventures in which Grace has a controlling financial interest, Grace consolidates the results of such joint ventures in the Consolidated Financial Statements. Grace recognizes a liability for cumulative amounts due to the third parties based on the financial results of the joint ventures, and deducts the amount of income attributable to noncontrolling interests in the measurement of its consolidated net income.
Operating Segments    Grace reports financial results of each of its operating segments that engage in business activities that generate revenues and expenses, and whose operating results are regularly reviewed by Grace's Chief Executive Officer.
Use of Estimates    The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of revenues and expenses for the periods presented. Actual amounts could differ from those estimates, and the differences could be material. Changes in estimates are recorded in the period identified. Grace's accounting measurements that are most affected by management's estimates of future events are:
•
Contingent liabilities, which depend on an assessment of the probability of loss and an estimate of ultimate resolution cost, such as asbestos-related matters and litigation (see Note 2), income taxes (see Note 10), and environmental remediation (see Note 13);
•
Pension and postretirement liabilities that depend on assumptions regarding participant life spans, future inflation, discount rates and total returns on invested funds (see Note 11);
•
Realization values of net deferred tax assets, which depend on projections of future taxable income; and
•
Recoverability of goodwill, which depends on assumptions used to value reporting units, such as observable market inputs, projections of future cash flows and weighted average cost of capital.
Revenue Recognition    Grace recognizes revenue when all of the following criteria are satisfied: risk of loss and title transfer to the customer; the price is fixed and determinable; persuasive evidence of a sales arrangement exists; and collectability is reasonably assured. Risk of loss and title transfers to customers are based on individual contractual terms which generally specify the point of shipment. Terms of delivery are generally included in customer contracts of sale, order confirmation documents and invoices.
Certain customer arrangements include conditions for volume rebates. Grace accrues a rebate allowance and reduces recorded sales for anticipated selling price adjustments at the time of sale. Grace regularly reviews rebate accruals based on actual and anticipated sales patterns.
Cash Equivalents    Cash equivalents consist of liquid instruments and investments with maturities of three months or less when purchased. The recorded amounts approximate fair value.
Inventories    Inventories are stated at the lower of cost or market. The method used to determine cost is first-in/first-out, or "FIFO." Market values for raw materials are based on current cost and, for other inventory classifications, net realizable value. Inventories are evaluated regularly for salability, and slow moving and/or obsolete items are adjusted to expected salable value. Inventory values include direct and certain indirect costs of materials and production. Abnormal costs of production are expensed as incurred.
Long Lived Assets    Properties and equipment are stated at cost. Depreciation of properties and equipment is generally computed using the straight-line method over the estimated useful life of the asset. Estimated useful lives range from 20 to 40 years for buildings, 3 to 7 years for information technology equipment, 3 to 10 years for operating machinery and equipment, and 5 to 10 years for furniture and fixtures. Interest is capitalized in connection with major project expenditures. Fully depreciated assets are retained in properties and equipment and related accumulated depreciation accounts until they are removed from service. In the case of disposals, assets and related accumulated depreciation are removed from the accounts and the net amount, less any proceeds from disposal, is charged or credited to earnings. Obligations for costs associated with asset retirements, such as requirements to restore a site to its original condition, are accrued at net present value and amortized along with the related asset.
Other intangible assets with finite lives consist of technology, customer lists, trademarks and other intangibles and are amortized over their estimated useful lives, ranging from 1 to 30 years.
Grace reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. No impairment charge was required in 2013 or 2012; however, there were impairment charges related to certain restructuring activities in 2011 (see Note 14).
Goodwill    Goodwill arises from certain business combinations. Grace reviews its goodwill for impairment on an annual basis at October 31 and whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Recoverability is assessed at the reporting unit level most directly associated with the business combination that generated the goodwill. For the purpose of measuring impairment under the provisions of ASC 350 "Intangibles—Goodwill and Other", Grace has identified its reporting units at one level below its operating segments. Grace has evaluated its goodwill annually with no impairment charge required in any of the periods presented.
Financial Instruments    Grace uses commodity forward, swap and/or option contracts and currency forward and/or option contracts to manage exposure to fluctuations in commodity prices and currency exchange rates. Grace does not hold or issue derivative financial instruments for trading purposes. Derivative instruments are recorded in the Consolidated Balance Sheets as either assets or liabilities at their fair value. For derivative instruments designated as fair value hedges, changes in the fair values of the derivative instruments closely offset changes in the fair values of the hedged items in "other expense, net" in the Consolidated Statements of Operations. For derivative instruments designated as cash flow hedges, if the derivative instruments qualify for hedge accounting pursuant to ASC 815, the effective portion of any hedge is reported as "accumulated other comprehensive income" in the Consolidated Balance Sheets until it is cleared to earnings during the same period in which the hedged item affects earnings. The ineffective portion of all hedges, and changes in the fair values of derivative instruments that are not designated as hedges, are recorded in current period earnings. Cash flows from derivative instruments are reported in the same category as the cash flows from the items being hedged.
Income Taxes    Deferred tax assets and liabilities are recognized with respect to the expected future tax consequences of events that have been recorded in the Consolidated Financial Statements. If it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is provided against such deferred tax assets. The assessment of realization of deferred tax assets is performed based on the weight of the positive and negative evidence available to indicate whether the asset is recoverable, including tax planning strategies that are prudent and feasible.
Grace records a liability for income tax contingencies when it is more likely than not that a tax position it has taken will not be sustained upon audit. Grace evaluates such likelihood based on relevant facts and tax law. Grace adjusts its recorded liability for income tax matters due to changes in circumstances or new uncertainties, such as amendments to existing tax law. Grace's ultimate tax liability depends upon many factors, including negotiations with taxing authorities in the jurisdictions in which it operates, outcomes of tax litigation, and resolution of disputes arising from federal, state, and foreign tax audits. Due to the varying tax laws in each jurisdiction senior management, with the assistance of local tax advisors as necessary, assesses individual matters in each jurisdiction on a case-by-case basis. Grace researches and evaluates its income tax positions, including why it believes they are compliant with income tax regulations, and these positions are documented internally.
Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. Tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.
Stock-Based Compensation    The Company recognizes expenses related to stock-based compensation payment transactions in which it receives employee services in exchange for (a) equity instruments of the Company or (b) liabilities that are based on the fair value of the Company’s equity instruments or that may be settled by the issuance of equity instruments. Stock-based compensation cost for restricted stock units (RSUs) and share settled performance based units (PBUs) are measured based on the high/low average of the Company’s common stock on the date of grant. Cash settled performance based units (CSPBU) are remeasured at the end of each reporting period based on the closing fair market value of the Company’s common stock. Stock-based compensation cost for stock options is estimated at the grant date based on each option’s fair value as calculated by the Black-Scholes-Merton ("BSM") option pricing model. The Company recognizes stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period.
Currency Translation    Assets and liabilities of foreign subsidiaries (other than those located in countries with highly inflationary economies) are translated into U.S. dollars at current exchange rates, while revenues, costs and expenses are translated at average exchange rates during each reporting period. The resulting translation adjustments are included in "accumulated other comprehensive loss" in the Consolidated Balance Sheets. The financial statements of any subsidiaries located in countries with highly inflationary economies are remeasured as if the functional currency were the U.S. dollar; the remeasurement creates translation adjustments that are reflected in net income in the Consolidated Statements of Operations.
On February 8, 2013, the Venezuelan government announced that, effective February 13, 2013, the official exchange rate of the bolivar to U.S. dollar would devalue from 4.3 to 6.3. As a result of this currency devaluation, Grace incurred a charge to net income of $8.5 million in the 2013 first quarter. Of this amount, $1.6 million is included in segment operating income.
Reclassifications and Revisions    Certain amounts in prior years' Consolidated Financial Statements have been reclassified to conform to the current year presentation. Such reclassifications have not materially affected previously reported amounts in the Consolidated Financial Statements.
Certain pension costs previously reported as a separate line item in the Consolidated Statements of Operations are now reported in "cost of goods sold" and in "selling, general and administrative expenses” based upon the functions of the employees to which the pension costs relate. Grace has revised its accounting such that a portion of the defined benefit pension expense has been and will continue to be capitalized into inventories prior to being reported in "cost of goods sold." See "Change in Accounting Principle Regarding Pension Benefits" for further discussion related to the change in pension accounting.
Certain prior period amounts related to borrowings and repayments under credit arrangements reported as financing activities on the Consolidated Statements of Cash Flows have been revised. These amounts were originally presented on a net basis and are now being presented on a gross basis. Grace concluded that these revisions were not material to the prior-year Consolidated Financial Statements.
Change in Accounting Principle Regarding Pension Benefits    The Company changed its method of accounting for actuarial gains and losses relating to its global defined benefit pension plans to a more preferable method under U.S. generally accepted accounting principles (“GAAP”). The Company’s new method of accounting is referred to as "mark-to-market accounting" and includes immediate recognition of actuarial gains and losses in the period in which they occur. Under the Company's previous accounting method, such amounts were deferred and amortized. In addition, the Company will no longer update the balance sheet funded status of its pension plans each quarter for changes in discount rates and actual returns on assets, but rather will perform such update annually as of the end of each year. Should a significant event occur, the Company's pension obligation and plan assets would be remeasured at an interim period, and the gains or losses on remeasurement would be recognized in that period. This new accounting method was adopted in the 2013 fourth quarter, and retrospectively applied to the Company’s financial results for all periods presented.
Under mark-to-market accounting, the Company’s pension costs consist of two elements: 1) ongoing costs recognized quarterly, which include service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; and 2) mark-to-market gains and losses recognized annually in the fourth quarter resulting from changes in actuarial assumptions, such as discount rates and the difference between actual and expected returns on plan assets. Grace believes that the mark-to-market accounting method is preferable as it better aligns the economics of the defined benefit pension plans with their accounting measures, eliminates delays in recognizing gains and losses in operating results, and improves transparency in Grace's operating results by immediately recognizing the effects of economic and interest rate trends on plan investments and assumptions in the year these effects actually occur.
As a result of the retrospective application of the new accounting method, accumulated actuarial losses have been reclassified from "accumulated other comprehensive income" to "retained earnings (accumulated deficit)." In addition, in order to better reflect the nature of pension costs in the Company's operating results, the Company retrospectively revised the classification of defined benefit pension expense. Pension costs previously reported as a separate line item in the Consolidated Statements of Operations are now reported in "cost of goods sold" and in "selling, general and administrative expenses" based upon the functions of the employees to which the pension costs relate. Finally, the Company has revised its accounting such that a portion of the defined benefit pension expense has been and will continue to be capitalized into inventories prior to being reported in "cost of goods sold." The Company believes that the change in classification of defined benefit pension costs and the change to inventory capitalization are not material to all prior periods.
The Company continues to manage its defined benefit pension plans at the corporate level. Accordingly, defined benefit pension expense is excluded from segment operating income. Profitability performance measures for the business segments are unchanged from amounts previously reported. Mark-to-market adjustments are excluded from the Company’s non-GAAP Adjusted EBIT measure.
These changes have been reported through retrospective application of the new policies to all periods presented. The impacts of all adjustments made to the financial statements are summarized below:
Consolidated Statements of Operations
 
Year Ended December 31, 2013
(In millions, except per share amounts)
Previous Method
 
As Reported
 
Effect of Change
Cost of goods sold
$
1,925.3

 
$
1,918.6

 
$
(6.7
)
Gross profit
1,135.4

 
1,142.1

 
6.7

Selling, general and administrative expenses
522.2

 
505.7

 
(16.5
)
Defined benefit pension expense
73.4

 
—

 
(73.4
)
Total costs and expenses
871.4

 
781.5

 
(89.9
)
Income (loss) before income taxes
264.0

 
360.6

 
96.6

Provision for income taxes
(72.9
)
 
(102.9
)
 
(30.0
)
Net income
191.1

 
257.7

 
66.6

Net income attributable to W. R. Grace & Co. shareholders
189.5

 
256.1

 
66.6

Basic earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
2.48

 
3.35

 
0.87

Diluted earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
2.44

 
3.30

 
0.86

 
Year Ended December 31, 2012
(In millions, except per share amounts)
Previously Reported
 
Revised
 
Effect of Change
Cost of goods sold
$
1,989.2

 
$
2,041.1

 
$
51.9

Gross profit
1,166.3

 
1,114.4

 
(51.9
)
Selling, general and administrative expenses
537.5

 
635.2

 
97.7

Defined benefit pension expense
71.2

 
—

 
(71.2
)
Total costs and expenses
1,108.5

 
1,135.0

 
26.5

Income (loss) before income taxes
57.8

 
(20.6
)
 
(78.4
)
Benefit from income taxes
37.3

 
61.6

 
24.3

Net income
95.1

 
41.0

 
(54.1
)
Net income attributable to W. R. Grace & Co. shareholders
94.1

 
40.0

 
(54.1
)
Basic earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
1.26

 
0.53

 
(0.72
)
Diluted earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
1.23

 
0.52

 
(0.71
)
 
Year Ended December 31, 2011
(In millions, except per share amounts)
Previously Reported
 
Revised
 
Effect of Change
Cost of goods sold
$
2,050.6

 
$
2,099.0

 
$
48.4

Gross profit
1,161.3

 
1,112.9

 
(48.4
)
Selling, general and administrative expenses
568.4

 
659.9

 
91.5

Defined benefit pension expense
63.4

 
—

 
(63.4
)
Total costs and expenses
777.8

 
805.9

 
28.1

Income before income taxes
383.5

 
307.0

 
(76.5
)
Benefit from (provision for) income taxes
(114.7
)
 
(87.9
)
 
26.8

Net income
268.8

 
219.1

 
(49.7
)
Net income attributable to W. R. Grace & Co. shareholders
269.4

 
219.7

 
(49.7
)
Basic earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
3.66

 
2.99

 
(0.68
)
Diluted earnings per share
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
3.57

 
2.91

 
(0.66
)
Consolidated Balance Sheets
 
December 31, 2013
(In millions)
Previous Method
 
As Reported
 
Effect of Change
Inventories
$
294.7

 
$
295.3

 
$
0.6

Total current assets
2,293.8

 
2,294.4

 
0.6

Deferred income taxes
846.1

 
845.9

 
(0.2
)
Overfunded defined benefit pension plans
16.7

 
16.7

 
—

Total assets
5,395.7

 
5,396.1

 
0.4

Underfunded and unfunded defined benefit pension plans
299.6

 
299.6

 
—

Total Liabilities Not Subject to Compromise
1,048.8

 
1,048.8

 
—

Postretirement benefits
176.3

 
176.3

 
—

Total Liabilities Subject to Compromise
3,776.1

 
3,776.1

 
—

Total Liabilities
4,824.9

 
4,824.9

 
—

Accumulated other comprehensive income (loss)
(558.7
)
 
10.6

 
569.3

Retained earnings
584.7

 
15.8

 
(568.9
)
Total W. R. Grace & Co. Shareholders' Equity
560.2

 
560.6

 
0.4

Total Equity
570.8

 
571.2

 
0.4


 
December 31, 2012
(In millions)
Previously Reported
 
Revised
 
Effect of Change
Inventories
$
278.6

 
$
283.6

 
$
5.0

Total current assets
2,440.2

 
2,445.2

 
5.0

Deferred income taxes
956.3

 
953.2

 
(3.1
)
Overfunded defined benefit pension plans
33.8

 
32.1

 
(1.7
)
Total assets
5,090.2

 
5,090.4

 
0.2

Underfunded and unfunded defined benefit pension plans
400.6

 
396.5

 
(4.1
)
Total Liabilities Not Subject to Compromise
1,154.8

 
1,150.7

 
(4.1
)
Postretirement benefits
188.1

 
190.9

 
2.8

Total Liabilities Subject to Compromise
3,617.1

 
3,619.9

 
2.8

Total Liabilities
4,771.9

 
4,770.6

 
(1.3
)
Accumulated other comprehensive income (loss)
(607.3
)
 
29.7

 
637.0

Retained earnings
395.2

 
(240.3
)
 
(635.5
)
Total W. R. Grace & Co. Shareholders' Equity
308.4

 
309.9

 
1.5

Total Equity
318.3

 
319.8

 
1.5

Consolidated Statements of Cash Flows
 
Year Ended December 31, 2013
(In millions)
Previous Method
 
As Reported
 
Effect of Change
Cash flows from operating activities:
 

 
 

 
 

Net income
$
191.1

 
$
257.7

 
$
66.6

(Benefit from) provision for income taxes
72.9

 
102.9

 
30.0

Defined benefit pension expense
73.4

 
(23.2
)
 
(96.6
)
Inventories
4.2

 
8.6

 
4.4

All other items, net(1)
(25.6
)
 
(30.0
)
 
(4.4
)
 
Year Ended December 31, 2012
(In millions)
Previously Reported
 
Revised
 
Effect of Change
Cash flows from operating activities:
 

 
 

 
 

Net income
$
95.1

 
$
41.0

 
$
(54.1
)
(Benefit from) provision for income taxes
(37.3
)
 
(61.6
)
 
(24.3
)
Defined benefit pension expense
71.2

 
149.6

 
78.4

Inventories
53.9

 
53.2

 
(0.7
)
All other items, net(1)
29.2

 
29.9

 
0.7

 
Year Ended December 31, 2011
(In millions)
Previously Reported
 
Revised
 
Effect of Change
Cash flows from operating activities:
 

 
 

 
 

Net income
$
268.8

 
$
219.1

 
$
(49.7
)
(Benefit from) provision for income taxes
114.7

 
87.9

 
(26.8
)
Defined benefit pension expense
63.4

 
139.9

 
76.5

Inventories
(66.9
)
 
(67.9
)
 
(1.0
)
All other items, net(1)
17.4

 
18.4

 
1.0

_______________________________________________________________________________
(1)
Includes only those items which relate to the change in accounting method to mark-to-market accounting.
Consolidated Statements of Equity (Deficit) and Comprehensive Income
 
December 31, 2013
 
Previous Method
 
As Reported
 
Effect of Change
Retained earnings
 

 
 

 
 

Beginning balance
$
395.2

 
$
(240.3
)
 
$
(635.5
)
Net income
189.5

 
256.1

 
66.6

Ending balance
584.7

 
15.8

 
(568.9
)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
Beginning balance
$
(607.3
)
 
$
29.7

 
$
637.0

Other comprehensive income (loss)
48.6

 
(19.1
)
 
(67.7
)
Ending balance
(558.7
)
 
10.6

 
569.3

 
 
 
 
 
 
Total equity
$
570.8

 
$
571.2

 
$
0.4

 
 
 
 
 
 
Comprehensive income
 
 
 
 
 
Net income
$
191.1

 
$
257.7

 
$
66.6

Defined benefit pension and other postretirement plans net of income taxes
72.3

 
4.6

 
(67.7
)
Currency translation adjustments
(23.6
)
 
(23.6
)
 
—

Total other comprehensive income (loss)
47.7

 
(20.0
)
 
(67.7
)
Comprehensive income
238.8

 
237.7

 
(1.1
)
Comprehensive income attributable to W. R. Grace & Co. shareholders
238.1

 
237.0

 
(1.1
)
 
December 31, 2012
 
Previously Reported
 
Revised
 
Effect of Change
Retained earnings
 

 
 

 
 

Beginning balance
$
301.1

 
$
(280.3
)
 
$
(581.4
)
Net income
94.1

 
40.0

 
(54.1
)
Ending balance
395.2

 
(240.3
)
 
(635.5
)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
Beginning balance
$
(578.5
)
 
$
19.5

 
$
598.0

Other comprehensive income (loss)
(28.8
)
 
10.2

 
39.0

Ending balance
(607.3
)
 
29.7

 
637.0

 
 
 
 
 
 
Total equity
$
318.3

 
$
319.8

 
$
1.5

 
 
 
 
 
 
Comprehensive income
 
 
 
 
 
Net income
$
95.1

 
$
41.0

 
$
(54.1
)
Defined benefit pension and other postretirement plans net of income taxes
(36.6
)
 
2.3

 
38.9

Currency translation adjustments
5.4

 
5.5

 
0.1

Total other comprehensive income (loss)
(28.0
)
 
11.0

 
39.0

Comprehensive income
67.1

 
52.0

 
(15.1
)
Comprehensive income attributable to W. R. Grace & Co. shareholders
65.3

 
50.2

 
(15.1
)
 
December 31, 2011
 
Previously Reported
 
Revised
 
Effect of Change
Retained earnings
 

 
 

 
 

Beginning balance
$
31.7

 
$
(500.0
)
 
$
(531.7
)
Net income
269.4

 
219.7

 
(49.7
)
Ending balance
301.1

 
(280.3
)
 
(581.4
)
 
 
 
 
 
 
Accumulated other comprehensive income (loss)
 
 
 
 
 
Beginning balance
$
(518.1
)
 
$
26.7

 
$
544.8

Other comprehensive income (loss)
(60.4
)
 
(7.2
)
 
53.2

Ending balance
(578.5
)
 
19.5

 
598.0

 
 
 
 
 
 
Total equity
$
167.5

 
$
184.1

 
$
16.6

 
 
 
 
 
 
Comprehensive income
 

 
 

 
 
Net income
$
268.8

 
$
219.1

 
$
(49.7
)
Defined benefit pension and other postretirement plans net of income taxes
(46.7
)
 
6.2

 
52.9

Currency translation adjustments
(11.6
)
 
(11.3
)
 
0.3

Total other comprehensive income (loss)
(58.6
)
 
(5.4
)
 
53.2

Comprehensive income
210.2

 
213.7

 
3.5

Comprehensive income attributable to W. R. Grace & Co. shareholders
209.0

 
212.5

 
3.5


Effect of New Accounting Standards    In June 2011, the FASB issued ASU 2011-05 "Presentation of Comprehensive Income". This update is intended to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The new disclosure requirements are effective for fiscal years beginning after December 15, 2011, and for interim periods within those fiscal years, with early adoption permitted. In December 2011, the FASB issued ASU 2011-12 "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05". This update defers certain paragraphs of ASU 2011-05 pertaining to reclassification adjustments out of accumulated other comprehensive income. This deferral is effective for fiscal years beginning after December 15, 2011, and for interim periods within those fiscal years, with early adoption permitted. Grace continues to report its Consolidated Statement of Other Comprehensive Income as a separate financial statement, immediately following the Consolidated Statement of Operations to comply with the updates that have not been deferred. In February 2013, the FASB issued ASU 2013-02 "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income", which further clarifies these disclosure requirements. This update is effective for fiscal years beginning after December 15, 2012, and for interim periods within those fiscal years, with early adoption permitted. Grace adopted this update in the 2013 first quarter, and it did not have a material effect on the Consolidated Financial Statements.
In December 2011, the FASB issued ASU 2011-11 "Disclosures about Offsetting Assets and Liabilities". This update is intended to improve the comparability of statements of financial position prepared in accordance with U.S. GAAP and IFRS, requiring both gross and net information about offsetting assets and liabilities. The new requirements are effective for fiscal years beginning on or after January 1, 2013, and for interim periods within those fiscal years. In January 2013, the FASB issued ASU 2013-01 "Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities", which clarifies these disclosure requirements. These standards are effective for fiscal years beginning on or after January 1, 2013, and for interim periods within those fiscal years. Grace adopted these standards for the 2013 first quarter, and they did not have a material effect on the Consolidated Financial Statements.
In July 2012, the FASB issued ASU 2012-02 "Testing Indefinite-Lived Intangible Assets for Impairment". This update is intended to simplify how entities test indefinite-lived intangible assets for impairment, by allowing an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. The new requirements are effective for fiscal years beginning after September 15, 2012, and for interim periods within those fiscal years, with early adoption permitted. Grace adopted this standard for the 2012 fourth quarter, and it did not have a material effect on the Consolidated Financial Statements.
In July 2013, the FASB issued ASU 2013-11 "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". This update is intended to improve the consistency surrounding the presentation of an unrecognized tax benefit when a net operating loss carryforward exists, requiring the unrecognized tax benefit to be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The new requirements are effective for fiscal years beginning after December 15, 2013, and for interim periods within those fiscal years, with early adoption permitted. Grace will adopt this standard for the 2014 first quarter, and does not expect it to have a material effect on the Consolidated Financial Statements.

v2.4.0.8
Basis of Presentation and Summary of Significant Accounting and Financial Reporting Policies (Policies)
 12 Months Ended
Dec. 31, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Share-based Compensation, Option and Incentive Plans
The Company recognizes expenses related to stock-based compensation payment transactions in which it receives employee services in exchange for (a) equity instruments of the Company or (b) liabilities that are based on the fair value of the Company’s equity instruments or that may be settled by the issuance of equity instruments. Stock-based compensation cost for restricted stock units (RSUs) and share settled performance based units (PBUs) are measured based on the high/low average of the Company’s common stock on the date of grant. Cash settled performance based units (CSPBU) are remeasured at the end of each reporting period based on the closing fair market value of the Company’s common stock. Stock-based compensation cost for stock options is estimated at the grant date based on each option’s fair value as calculated by the Black-Scholes-Merton ("BSM") option pricing model. The Company recognizes stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Grace and entities as to which Grace exercises control over operating and financial policies. Grace consolidates the activities of variable interest entities in circumstances where management determines that Grace is the primary beneficiary of the variable interest entity. Intercompany transactions and balances are eliminated in consolidation. Investments in affiliated companies in which Grace can significantly influence operating and financial policies are accounted for under the equity method, unless Grace's investment is deemed to be temporary, in which case the investment is accounted for under the cost method.
Operating Segments
Grace reports financial results of each of its operating segments that engage in business activities that generate revenues and expenses, and whose operating results are regularly reviewed by Grace's Chief Executive Officer.
Noncontrolling Interests in Consolidated Entities
Grace conducts certain of its business through joint ventures with unaffiliated third parties. For joint ventures in which Grace has a controlling financial interest, Grace consolidates the results of such joint ventures in the Consolidated Financial Statements. Grace recognizes a liability for cumulative amounts due to the third parties based on the financial results of the joint ventures, and deducts the amount of income attributable to noncontrolling interests in the measurement of its consolidated net income.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements, and the reported amounts of revenues and expenses for the periods presented. Actual amounts could differ from those estimates, and the differences could be material. Changes in estimates are recorded in the period identified. Grace's accounting measurements that are most affected by management's estimates of future events are:
•
Contingent liabilities, which depend on an assessment of the probability of loss and an estimate of ultimate resolution cost, such as asbestos-related matters and litigation (see Note 2), income taxes (see Note 10), and environmental remediation (see Note 13);
•
Pension and postretirement liabilities that depend on assumptions regarding participant life spans, future inflation, discount rates and total returns on invested funds (see Note 11);
•
Realization values of net deferred tax assets, which depend on projections of future taxable income; and
•
Recoverability of goodwill, which depends on assumptions used to value reporting units, such as observable market inputs, projections of future cash flows and weighted average cost of capital.
Revenue Recognition
Grace recognizes revenue when all of the following criteria are satisfied: risk of loss and title transfer to the customer; the price is fixed and determinable; persuasive evidence of a sales arrangement exists; and collectability is reasonably assured. Risk of loss and title transfers to customers are based on individual contractual terms which generally specify the point of shipment. Terms of delivery are generally included in customer contracts of sale, order confirmation documents and invoices.
Certain customer arrangements include conditions for volume rebates. Grace accrues a rebate allowance and reduces recorded sales for anticipated selling price adjustments at the time of sale. Grace regularly reviews rebate accruals based on actual and anticipated sales patterns.
Cash Equivalents
Cash equivalents consist of liquid instruments and investments with maturities of three months or less when purchased. The recorded amounts approximate fair value.
Inventories
Inventories are stated at the lower of cost or market. The method used to determine cost is first-in/first-out, or "FIFO." Market values for raw materials are based on current cost and, for other inventory classifications, net realizable value. Inventories are evaluated regularly for salability, and slow moving and/or obsolete items are adjusted to expected salable value. Inventory values include direct and certain indirect costs of materials and production. Abnormal costs of production are expensed as incurred.
Long Lived Assets
Properties and equipment are stated at cost. Depreciation of properties and equipment is generally computed using the straight-line method over the estimated useful life of the asset. Estimated useful lives range from 20 to 40 years for buildings, 3 to 7 years for information technology equipment, 3 to 10 years for operating machinery and equipment, and 5 to 10 years for furniture and fixtures. Interest is capitalized in connection with major project expenditures. Fully depreciated assets are retained in properties and equipment and related accumulated depreciation accounts until they are removed from service. In the case of disposals, assets and related accumulated depreciation are removed from the accounts and the net amount, less any proceeds from disposal, is charged or credited to earnings. Obligations for costs associated with asset retirements, such as requirements to restore a site to its original condition, are accrued at net present value and amortized along with the related asset.
Other intangible assets with finite lives consist of technology, customer lists, trademarks and other intangibles and are amortized over their estimated useful lives, ranging from 1 to 30 years.
Grace reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. No impairment charge was required in 2013 or 2012; however, there were impairment charges related to certain restructuring activities in 2011 (see Note 14).
Goodwill
Goodwill arises from certain business combinations. Grace reviews its goodwill for impairment on an annual basis at October 31 and whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Recoverability is assessed at the reporting unit level most directly associated with the business combination that generated the goodwill. For the purpose of measuring impairment under the provisions of ASC 350 "Intangibles—Goodwill and Other", Grace has identified its reporting units at one level below its operating segments. Grace has evaluated its goodwill annually with no impairment charge required in any of the periods presented.
Income Taxes
Deferred tax assets and liabilities are recognized with respect to the expected future tax consequences of events that have been recorded in the Consolidated Financial Statements. If it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is provided against such deferred tax assets. The assessment of realization of deferred tax assets is performed based on the weight of the positive and negative evidence available to indicate whether the asset is recoverable, including tax planning strategies that are prudent and feasible.
Grace records a liability for income tax contingencies when it is more likely than not that a tax position it has taken will not be sustained upon audit. Grace evaluates such likelihood based on relevant facts and tax law. Grace adjusts its recorded liability for income tax matters due to changes in circumstances or new uncertainties, such as amendments to existing tax law. Grace's ultimate tax liability depends upon many factors, including negotiations with taxing authorities in the jurisdictions in which it operates, outcomes of tax litigation, and resolution of disputes arising from federal, state, and foreign tax audits. Due to the varying tax laws in each jurisdiction senior management, with the assistance of local tax advisors as necessary, assesses individual matters in each jurisdiction on a case-by-case basis. Grace researches and evaluates its income tax positions, including why it believes they are compliant with income tax regulations, and these positions are documented internally.
Tax benefits from an uncertain tax position are recognized only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. Tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.
Currency Translation
Assets and liabilities of foreign subsidiaries (other than those located in countries with highly inflationary economies) are translated into U.S. dollars at current exchange rates, while revenues, costs and expenses are translated at average exchange rates during each reporting period. The resulting translation adjustments are included in "accumulated other comprehensive loss" in the Consolidated Balance Sheets. The financial statements of any subsidiaries located in countries with highly inflationary economies are remeasured as if the functional currency were the U.S. dollar; the remeasurement creates translation adjustments that are reflected in net income in the Consolidated Statements of Operations.
On February 8, 2013, the Venezuelan government announced that, effective February 13, 2013, the official exchange rate of the bolivar to U.S. dollar would devalue from 4.3 to 6.3. As a result of this currency devaluation, Grace incurred a charge to net income of $8.5 million in the 2013 first quarter. Of this amount, $1.6 million is included in segment operating income.
Financial Instruments
Grace uses commodity forward, swap and/or option contracts and currency forward and/or option contracts to manage exposure to fluctuations in commodity prices and currency exchange rates. Grace does not hold or issue derivative financial instruments for trading purposes. Derivative instruments are recorded in the Consolidated Balance Sheets as either assets or liabilities at their fair value. For derivative instruments designated as fair value hedges, changes in the fair values of the derivative instruments closely offset changes in the fair values of the hedged items in "other expense, net" in the Consolidated Statements of Operations. For derivative instruments designated as cash flow hedges, if the derivative instruments qualify for hedge accounting pursuant to ASC 815, the effective portion of any hedge is reported as "accumulated other comprehensive income" in the Consolidated Balance Sheets until it is cleared to earnings during the same period in which the hedged item affects earnings. The ineffective portion of all hedges, and changes in the fair values of derivative instruments that are not designated as hedges, are recorded in current period earnings. Cash flows from derivative instruments are reported in the same category as the cash flows from the items being hedged.
Investment
Certain amounts in prior years' Consolidated Financial Statements have been reclassified to conform to the current year presentation. Such reclassifications have not materially affected previously reported amounts in the Consolidated Financial Statements.
Certain pension costs previously reported as a separate line item in the Consolidated Statements of Operations are now reported in "cost of goods sold" and in "selling, general and administrative expenses” based upon the functions of the employees to which the pension costs relate. Grace has revised its accounting such that a portion of the defined benefit pension expense has been and will continue to be capitalized into inventories prior to being reported in "cost of goods sold." See "Change in Accounting Principle Regarding Pension Benefits" for further discussion related to the change in pension accounting.
Certain prior period amounts related to borrowings and repayments under credit arrangements reported as financing activities on the Consolidated Statements of Cash Flows have been revised. These amounts were originally presented on a net basis and are now being presented on a gross basis. Grace concluded that these revisions were not material to the prior-year Consolidated Financial Statements.
New Accounting Pronouncements
In June 2011, the FASB issued ASU 2011-05 "Presentation of Comprehensive Income". This update is intended to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The new disclosure requirements are effective for fiscal years beginning after December 15, 2011, and for interim periods within those fiscal years, with early adoption permitted. In December 2011, the FASB issued ASU 2011-12 "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05". This update defers certain paragraphs of ASU 2011-05 pertaining to reclassification adjustments out of accumulated other comprehensive income. This deferral is effective for fiscal years beginning after December 15, 2011, and for interim periods within those fiscal years, with early adoption permitted. Grace continues to report its Consolidated Statement of Other Comprehensive Income as a separate financial statement, immediately following the Consolidated Statement of Operations to comply with the updates that have not been deferred. In February 2013, the FASB issued ASU 2013-02 "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income", which further clarifies these disclosure requirements. This update is effective for fiscal years beginning after December 15, 2012, and for interim periods within those fiscal years, with early adoption permitted. Grace adopted this update in the 2013 first quarter, and it did not have a material effect on the Consolidated Financial Statements.
In December 2011, the FASB issued ASU 2011-11 "Disclosures about Offsetting Assets and Liabilities". This update is intended to improve the comparability of statements of financial position prepared in accordance with U.S. GAAP and IFRS, requiring both gross and net information about offsetting assets and liabilities. The new requirements are effective for fiscal years beginning on or after January 1, 2013, and for interim periods within those fiscal years. In January 2013, the FASB issued ASU 2013-01 "Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities", which clarifies these disclosure requirements. These standards are effective for fiscal years beginning on or after January 1, 2013, and for interim periods within those fiscal years. Grace adopted these standards for the 2013 first quarter, and they did not have a material effect on the Consolidated Financial Statements.
In July 2012, the FASB issued ASU 2012-02 "Testing Indefinite-Lived Intangible Assets for Impairment". This update is intended to simplify how entities test indefinite-lived intangible assets for impairment, by allowing an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. The new requirements are effective for fiscal years beginning after September 15, 2012, and for interim periods within those fiscal years, with early adoption permitted. Grace adopted this standard for the 2012 fourth quarter, and it did not have a material effect on the Consolidated Financial Statements.
In July 2013, the FASB issued ASU 2013-11 "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". This update is intended to improve the consistency surrounding the presentation of an unrecognized tax benefit when a net operating loss carryforward exists, requiring the unrecognized tax benefit to be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The new requirements are effective for fiscal years beginning after December 15, 2013, and for interim periods within those fiscal years, with early adoption permitted. Grace will adopt this standard for the 2014 first quarter, and does not expect it to have a material effect on the Consolidated Financial Statements.

v2.4.0.8
Other Comprehensive Income (Loss) (Details 2) (USD $)
In Millions, unless otherwise specified
 3 Months Ended 12 Months Ended
Mar. 31, 2013
Dec. 31, 2013
country
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Reclassification out of Accumulated Other Comprehensive Income [Line Items]          
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, before Reclassification Adjustments, Net of Tax   $ (23.6) $ 5.5 $ (11.3)  
Other Comprehensive Income (Loss), Before Reclassification Adjustment from AOCI on Derivatives, Net of Tax 1.2   (0.3) (3.9)  
Other Comprehensive Income Loss before Reclassification Adjustment For Sale Of Securities Included In Net Income Net Of Tax 0.1        
Other Comprehensive Income (loss) Before Reclassifications, Net of Tax (18.5)   6.6 (10.1)  
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax   5.2 28.8    
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Reclassification Adjustment Realized upon Sale or Liquidation, Net of Tax   0 0 0  
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, Net of Tax   (1.4) 2.7 1.8  
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, Net of Tax   0      
Other Comprehensive Income Loss Reclassification Adjustment Net Of Tax   (0.6) 3.6 2.9  
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax, Portion Attributable to Parent   (4.6) (2.3) (6.2)  
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent   (23.6) 5.5 (11.3)  
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax   (0.8) (0.8) (0.8) (0.8)
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax, Portion Attributable to Parent   0.1 0 0  
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax, Portion Attributable to Parent   (0.2) 2.4 (2.1)  
Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During period, Net of Tax, Portion Attributable to Parent   0 0 0  
Comprehensive Income (Loss), Net of Tax, Attributable to Parent   (19.1) 10.2 (7.2)  
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax   6.6 2.0 (0.3) (6.5)
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax     28.8 23.3 34.6
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax   (0.5) (0.3) (2.7) (0.6)
Accumulated Other Comprehensive Income, Net of Tax   10.6 29.7 19.5 26.7
Defined benefit pension and other postretirement plans:          
Net prior service cost (net of tax)   (0.3) 1.3 1.8  
Net deferred actuarial loss (net of tax)   (6.3) (3.3) (1.5)  
Accumulated Other Comprehensive Income (Loss), Net of Tax   10.6 29.7    
Number of countries in which the entity has operations   40      
Accumulated Defined Benefit Plans Adjustment [Member]
          
Reclassification out of Accumulated Other Comprehensive Income [Line Items]          
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, before Reclassification Adjustments, Net of Tax   3.8 1.4 5.1  
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax   $ 0.8 $ 0.9 $ 1.1  

v2.4.0.8
Debt (Tables)
 12 Months Ended
Dec. 31, 2013
Debt Disclosure [Abstract]  
Components of debt
Components of Debt
(In millions)
2013
 
2012
Debt payable within one year(1)
$
76.6

 
$
83.4

Debt payable after one year
$
5.3

 
$
13.4

Debt Subject to Compromise(2)
 
 
 
Bank borrowings(3)
$
500.0

 
$
500.0

Accrued interest on bank borrowings
471.0

 
437.2

Default interest settlement(4)
129.0

 
—

Drawn letters of credit(5)
26.7

 
26.5

Accrued interest on drawn letters of credit
11.1

 
9.6

 
$
1,137.8

 
$
973.3

Full-year weighted average interest rates on total debt
3.6
%
 
3.5
%

_______________________________________________________________________________
(1)
Represents borrowings under various lines of credit and other borrowings, primarily by non-U.S. subsidiaries. At December 31, 2013, the fair value of Grace's debt payable within one year not subject to compromise approximated the recorded value of $76.6 million.
(2)
At December 31, 2013, the carrying value of Grace's bank debt subject to compromise plus interest was $1,137.8 million. The estimated fair value of the bank debt approximates the carrying value and is estimated using Level 2 inputs. These amounts were paid in full on February 3, 2014.
(3)
Under bank revolving credit agreements in effect prior to the Filing, Grace could borrow up to $500 million at interest rates based upon the prevailing prime, federal funds and/or Eurodollar rates. Of that amount, $250 million was available under short-term facilities that expired in May 2001, and $250 million was available under a long-term facility that expired in May 2003. As a result of the Filing, Grace was not permitted to make payments under the bank revolving credit agreements, and accordingly, the balance as of the Filing Date was reclassified to debt subject to compromise in the Consolidated Balance Sheets.
(4)
On December 31, 2013, Grace entered into an agreement to settle the final appeal pending in its Chapter 11 bankruptcy with the holders of the company’s pre-petition bank debt (the “Bank Lenders”). The settlement calls for Grace to pay the Bank Lenders $129.0 million, plus interest from December 31, 2013, in addition to the distributions provided in the Joint Plan.
(5)
Amounts drawn on letters of credit pursuant to settled but unpaid claims.

v2.4.0.8
Noncontrolling Interests in Consolidated Affiliates (Tables)
 12 Months Ended
Dec. 31, 2013
Noncontrolling Interest [Abstract]  
Schedule of condensed statements of operations for consolidated affiliates for which there is a noncontrolling interest
The following tables present summary financial information for Grace's consolidated affiliates for which there is a noncontrolling interest:
Statements of Operations
(In millions)
Year Ended December 31,
2013
 
2012
 
2011
Sales
$
101.5

 
$
108.8

 
$
86.3

Income (loss) before taxes
2.7

 
0.8

 
(0.1
)
Net income (loss)
3.4

 
1.1

 
(0.9
)
Noncontrolling interests in net income (loss)
1.6

 
1.0

 
(0.6
)
Schedule of condensed balance sheets for consolidated affiliates for which there is a noncontrolling interest
Balance Sheets
(In millions)
December 31,
2013
 
2012
 
2011
Cash
$
5.1

 
$
5.7

 
$
6.7

Other current assets
33.4

 
41.6

 
34.7

Total assets
71.1

 
73.8

 
53.0

Total liabilities
48.9

 
46.1

 
30.1

Shareholders' equity
22.2

 
27.7

 
22.9

Noncontrolling interests in shareholders' equity
10.6

 
9.9

 
8.1

v2.4.0.8
Income Taxes (Details 3) (USD $)
In Millions, unless otherwise specified
 1 Months Ended 12 Months Ended
Feb. 28, 2014
Nov. 30, 2011
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Income Tax Disclosure [Abstract]            
Amount of unrecognized tax benefits     $ 84.4 $ 88.6 $ 69.3  
Amount of unrecognized tax benefits, excluding interest and penalties     80.3 83.1 62.4  
Roll forward of uncertain tax positions            
Additions for current year tax positions     6.3 3.4 0.6  
Additions for prior year tax positions     6.4 22.0 0.5  
Reductions for prior year tax positions and reclassifications   (10.6) (9.6) (0.8) [1],[2] (17.8) [3],[4]  
Settlements       (1.0) (0.1) [4]  
Reductions for expirations of statute of limitations     (5.9) (2.9)    
Balance at the end of the period     80.3 83.1 62.4 79.2
Amount of uncertain tax position reversed   (10.6) (9.6) (0.8) [1],[2] (17.8) [3],[4]  
Material change to aggregate recorded liabilities for uncertain tax positions in the next twelve months            
Change in Federal Deferred Tax Assets, Year Over Year     123.8      
Amount of Uncertain Tax Position Reclassified to Income Taxes Payable         6.7  
Period in Which Liability for Unrecognized Tax Benefits Could Decrease     0 years 12 months      
Net Operating Losses From Emergence 670          
Unrecognized tax benefits, net of indemnification     79.5 82.1    
Indemnification assets that would be indemnified by a third party     0.8 1.0    
Accrued interest and penalties related to uncertain tax positions     4.1 5.5 6.9  
US Federal Income Tax Deduction Upon Settlement of Warrant Held by Asbestos Trusts     490      
US Federal Income Tax Deduction Upon Payment of Deferred Payment Obligations     1,580      
Change in Net Deferred Tax Assets, Year Over Year     98.1      
Examination issues and settlements with U.S. federal, state, and foreign tax authorities
            
Material change to aggregate recorded liabilities for uncertain tax positions in the next twelve months            
Decrease in unrecognized tax benefits during the next 12 months     $ 68      
[1] In 2012, $1.0 million of uncertain tax positions representing withholding taxes due were paid as a result of the completion of Grace's Canadian audit for the years 2002, 2003, and 2004.
[2] In 2013, $9.6 million of uncertain tax positions representing agreed adjustments resulting from the 2007-2009 IRS examination were reclassified to income taxes payable.
[3] On November 3, 2011, Grace received notice from the Canadian Revenue Agency that they had completed a review of Grace's Canadian transfer pricing for the years 2002, 2003, and 2004. As a result, Grace reversed $10.6 million of uncertain tax positions because they were effectively settled pursuant to ASC 740-10-25. A tax matter is effectively settled through examination when the taxing authority has completed an examination; the entity does not intend to appeal or litigate any aspect of a particular tax position for the completed examination; and based on a tax authority's widely understood policy, the entity considers it remote that the taxing authority would subsequently examine or reexamine any of the positions once the examination process is completed.
[4] In 2011, $6.7 million of uncertain tax positions representing pre-petition federal and state settlements were reclassified to income taxes payable.

v2.4.0.8
Consolidated Statements of Operations (USD $)
In Millions, except Per Share data, unless otherwise specified
 3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Net sales $ 776.7 $ 771.3 $ 802.8 $ 709.9 $ 797.8 $ 776.6 $ 826.7 $ 754.4 $ 3,060.7 $ 3,155.5 $ 3,211.9
Cost of goods sold                 1,918.6 2,041.1 2,099.0
Gross profit 299.8 282.4 300.9 259.0 258.3 282.2 301.4 272.5 1,142.1 1,114.4 1,112.9
Selling, general and administrative expenses                 505.7 635.2 659.9
Restructuring expenses and related asset impairments                 12.5 6.9 6.9
Research and development expenses                 65.2 64.5 68.5
Defined Benefit Pension Expense                 (23.2) 149.6 139.9
Interest expense and related financing costs                 43.8 46.5 43.3
Provision for environmental remediation                 8.2 3.6 17.8
Chapter 11 expenses, net of interest income                 15.3 16.6 20.0
Default interest settlement on prepetition debt                 129.0 0 0
Asbestos and bankruptcy-related charges                 21.9 384.6 0
Provision for asbestos-related contingencies                 21.9 384.6 0
Equity in earnings of unconsolidated affiliates                 (22.9) (18.5) (15.2)
Other (income) expense, net                 23.5 6.1 29.4
Total costs and expenses                 781.5 1,135.0 805.9
Income before income taxes                 360.6 (20.6) 307.0
Benefit from (provision for) income taxes                 (102.9) 61.6 (87.9)
Net income                 257.7 41.0 219.1
Less: Net loss (income) attributable to noncontrolling interests                 (1.6) (1.0) 0.6
Net income attributable to W. R. Grace & Co. shareholders $ 29.7 $ 77.0 $ 90.3 $ 59.1 $ (184.3) $ 82.1 $ 75.4 $ 66.8 $ 256.1 $ 40.0 $ 219.7
Basic earnings per share:                      
Net income attributable to W. R. Grace & Co. shareholders (in dollars per share) $ 0.39 [1] $ 1.00 [1] $ 1.18 [1] $ 0.78 [1] $ (2.44) [1] $ 1.09 [1] $ 1.01 [1] $ 0.90 [1] $ 3.35 $ 0.53 $ 2.99
Weighted average number of basic shares (in shares)                 76.4 74.9 73.6
Diluted earnings per share:                      
Net income attributable to W. R. Grace & Co. shareholders (in dollars per share) $ 0.38 [1] $ 0.99 [1] $ 1.16 [1] $ 0.77 [1] $ (2.44) [1] $ 1.07 [1] $ 0.98 [1] $ 0.87 [1] $ 3.30 $ 0.52 $ 2.91
Weighted average number of diluted shares (in shares)                 77.7 76.3 75.5
[1] Per share results for the four quarters may differ from full-year per share results, as a separate computation of the weighted average number of shares outstanding is made for each quarter presented.

v2.4.0.8
Restructuring Expenses and Related Asset Impairments (Tables)
 12 Months Ended
Dec. 31, 2013
Restructuring and Related Activities [Abstract]  
Schedule of restructuring expenses and related asset impairments
Restructuring Expenses and Related Asset Impairments
(In millions)
Year Ended December 31,
2013
 
2012
 
2011
Severance and other employee-related costs
$
6.7

 
$
5.6

 
$
3.8

Asset impairments and other restructuring costs
5.8

 
1.3

 
3.1

Total restructuring expenses and related asset impairments
$
12.5

 
$
6.9

 
$
6.9
Schedule of restructuring liability
Restructuring Liability
(In millions)
December 31,
2013
 
2012
 
2011
Balance, December 31, 2012
$
3.0

 
$
5.9

 
$
9.6

Accruals for severance and other costs
7.6

 
5.6

 
3.8

Payments
(6.4
)
 
(8.4
)
 
(7.2
)
Currency translation adjustments and other
0.2

 
(0.1
)
 
(0.3
)
Balance, December 31, 2013
$
4.4

 
$
3.0

 
$
5.9

v2.4.0.8
Consolidated Balance Sheet (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Statement of Financial Position [Abstract]      
Trade accounts receivable, allowance $ 6.0 $ 5.2  
Properties and equipment, accumulated depreciation and amortization $ 1,876.8 $ 1,785.1  
Common stock issued, par value (in dollars per share) $ 0.01 $ 0.01  
Common stock issued, shares authorized 300,000,000 300,000,000  
Common stock issued, shares outstanding 77,046,143 75,565,409 73,886,050
Treasury Stock, Shares 0 1,414,351  

v2.4.0.8
Subsequent Event - Chapter 11 Emergence (Details) (USD $)
 1 Months Ended 12 Months Ended
Feb. 28, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Feb. 03, 2014
Dec. 31, 2010
Subsequent Event [Line Items]            
Trade accounts receivable, allowance   $ 6,000,000 $ 5,200,000      
Other Liabilities, Current   292,000,000 307,300,000      
Emergence-related claims and other costs paid by Grace         1,900,000,000  
Chapter 11 Expenses Paid 1,360,000,000 15,000,000 15,500,000 20,600,000    
Senior Secured Credit Facilities to Fund Emergence 900,000,000          
Pro Forma Income Tax Effects US Federal and State Tax Rate         37.41%  
Cash and Cash Equivalents, at Carrying Value   (964,800,000) (1,336,900,000) (1,048,300,000)   (1,015,700,000)
Restricted cash and cash equivalents   (395,400,000) (197,600,000)      
Accounts Receivable, Net, Current   469,500,000 474,800,000      
Accounts Receivable, Related Parties, Current   12,300,000 15,600,000      
Inventories   295,300,000 283,600,000      
Deferred Tax Assets, Net of Valuation Allowance, Current   58,100,000 58,300,000      
Other current assets   99,000,000 78,400,000      
Total Current Assets   (2,294,400,000) (2,445,200,000)      
Properties and equipment, net   829,900,000 770,500,000      
Goodwill   457,500,000 196,700,000      
Intangible Assets, Net (Excluding Goodwill)   315,500,000 82,700,000      
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent   845,900,000 953,200,000      
Net operating loss carryforward   0        
Asbestos-related insurance   500,000,000 500,000,000      
Overfunded defined benefit pension plans   16,700,000 32,100,000      
Equity Method Investments   96,200,000 85,500,000      
Other Assets, Noncurrent   40,000,000 24,500,000      
Cash (Including Restricted Cash) Transferred to the Asbestos PI and PD Trusts 512,000,000          
Total Assets   5,396,100,000 5,090,400,000 4,495,600,000    
Debt payable within one year   76,600,000 [1] 83,400,000 [1]      
Notes Payable, Related Parties, Current   4,500,000 3,600,000      
Accounts payable   249,500,000 249,400,000      
Accounts Payable, Related Parties, Current   13,000,000 2,600,000      
PI warrant liability   0        
Total Current Liabilities   635,600,000 646,300,000      
Debt payable after one year   5,300,000 13,400,000      
Notes Payable, Related Parties, Noncurrent   24,300,000 22,400,000      
Deferred payment obligations   0        
Deferred income taxes   18,200,000 27,100,000      
Income tax contingencies   0        
Underfunded defined benefit pension plans   66,200,000        
Unfunded pay-as-you-go defined benefit pension plans   233,400,000        
Other Liabilities, Noncurrent   65,800,000 45,000,000      
Total Liabilities Not Subject to Compromise   1,048,800,000 1,150,700,000      
Liabilities Subject to Compromise, Debt and Accrued Interest   1,137,800,000 973,300,000      
Liabilities Subject to Compromise, Income Tax Contingencies   76,600,000 87,600,000      
Liabilities Subject to Compromise, Asbestos Obligations   2,092,400,000 2,065,000,000      
Liabilities Subject to Compromise, Environmental Contingencies   134,500,000 140,500,000      
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations   176,300,000 190,900,000      
Liabilities Subject to Compromise, Other Liabilities   158,500,000 162,600,000      
Total Liabilities Subject to Compromise   3,776,100,000 3,619,900,000      
Total Liabilities   4,824,900,000 4,770,600,000      
Common Stock, Value, Outstanding   800,000 800,000      
Paid-in capital   533,400,000 536,500,000      
Retained Earnings (Accumulated Deficit)   15,800,000 (240,300,000)      
Treasury Stock, Value   0 16,800,000      
Accumulated Other Comprehensive Income (Loss), Net of Tax   10,600,000 29,700,000      
Total W. R. Grace & Co. Shareholders' Equity   560,600,000 309,900,000      
Noncontrolling interests in shareholders' equity   10,600,000 9,900,000      
Total Equity   571,200,000 319,800,000 184,100,000   (55,700,000)
Total Liabilities and Equity   5,396,100,000 5,090,400,000      
US Federal and State NOL Carryforwards Increase Due to Payment of Bankruptcy Claims 670,000,000          
Tax Effected US Federal and State NOL Carryforwards Increase Due to Payment of Bankruptcy Claims 252,000,000          
Tax Deductions Attributable to PI and ZAI Deferred Payments         1,580,000,000  
Tax Deductions Attributable to Warrant Settlement         490,000,000  
Properties and equipment, accumulated depreciation and amortization   1,876,800,000 1,785,100,000      
Common stock issued, par value (in dollars per share)   $ 0.01 $ 0.01      
Common stock issued, shares authorized   300,000,000 300,000,000      
Common stock issued, shares outstanding   77,046,143 75,565,409 73,886,050    
Treasury Stock, Shares   0 1,414,351      
Pro Forma [Member]
            
Subsequent Event [Line Items]            
Other Liabilities, Current   338,000,000        
Cash and Cash Equivalents, at Carrying Value   (350,800,000)        
Restricted cash and cash equivalents   0        
Accounts Receivable, Net, Current   469,500,000        
Accounts Receivable, Related Parties, Current   12,300,000        
Inventories   295,300,000        
Deferred Tax Assets, Net of Valuation Allowance, Current   58,100,000        
Other current assets   99,000,000        
Total Current Assets   (1,285,000,000)        
Properties and equipment, net   829,900,000        
Goodwill   457,500,000        
Intangible Assets, Net (Excluding Goodwill)   315,500,000        
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent   600,800,000        
Net operating loss carryforward   252,200,000        
Asbestos-related insurance   0        
Overfunded defined benefit pension plans   16,700,000        
Equity Method Investments   96,200,000        
Other Assets, Noncurrent   67,000,000        
Total Assets   3,920,800,000        
Debt payable within one year   85,600,000        
Notes Payable, Related Parties, Current   4,500,000        
Accounts payable   249,500,000        
Accounts Payable, Related Parties, Current   13,000,000        
PI warrant liability   490,000,000        
Total Current Liabilities   1,180,600,000        
Debt payable after one year   896,300,000        
Notes Payable, Related Parties, Noncurrent   24,300,000        
Deferred payment obligations   594,500,000        
Deferred income taxes   18,200,000        
Income tax contingencies   76,600,000        
Underfunded defined benefit pension plans   66,200,000        
Unfunded pay-as-you-go defined benefit pension plans   329,300,000        
Other Liabilities, Noncurrent   171,000,000        
Total Liabilities Not Subject to Compromise   3,357,000,000        
Liabilities Subject to Compromise, Debt and Accrued Interest   0        
Liabilities Subject to Compromise, Income Tax Contingencies   0        
Liabilities Subject to Compromise, Asbestos Obligations   0        
Liabilities Subject to Compromise, Environmental Contingencies   0        
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations   0        
Liabilities Subject to Compromise, Other Liabilities   0        
Total Liabilities Subject to Compromise   0        
Total Liabilities   3,357,000,000        
Common Stock, Value, Outstanding   800,000        
Paid-in capital   533,400,000        
Retained Earnings (Accumulated Deficit)   8,400,000        
Treasury Stock, Value   0        
Accumulated Other Comprehensive Income (Loss), Net of Tax   10,600,000        
Total W. R. Grace & Co. Shareholders' Equity   553,200,000        
Noncontrolling interests in shareholders' equity   10,600,000        
Total Equity   563,800,000        
Total Liabilities and Equity   3,920,800,000        
Payment of Remaining Pre-Petition Liabilities and Adjustment for Additional Expenses [Member]
            
Subsequent Event [Line Items]            
Other Liabilities, Current   7,200,000        
Cash and Cash Equivalents, at Carrying Value   1,370,600,000        
Restricted cash and cash equivalents   0        
Accounts Receivable, Net, Current   0        
Accounts Receivable, Related Parties, Current   0        
Inventories   0        
Deferred Tax Assets, Net of Valuation Allowance, Current   0        
Other current assets   0        
Total Current Assets   1,370,600,000        
Properties and equipment, net   0        
Goodwill   0        
Intangible Assets, Net (Excluding Goodwill)   0        
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent   (134,100,000)        
Net operating loss carryforward   141,200,000        
Asbestos-related insurance   0        
Overfunded defined benefit pension plans   0        
Equity Method Investments   0        
Other Assets, Noncurrent   0        
Other emergence costs   12,000,000        
Total Assets   (1,363,500,000)        
Debt payable within one year   0        
Notes Payable, Related Parties, Current   0        
Accounts payable   0        
Accounts Payable, Related Parties, Current   0        
PI warrant liability   0        
Total Current Liabilities   7,200,000        
Debt payable after one year   0        
Notes Payable, Related Parties, Noncurrent   0        
Deferred payment obligations   0        
Deferred income taxes   0        
Income tax contingencies   0        
Underfunded defined benefit pension plans   0        
Unfunded pay-as-you-go defined benefit pension plans   0        
Other Liabilities, Noncurrent   0        
Total Liabilities Not Subject to Compromise   7,200,000        
Liabilities Subject to Compromise, Debt and Accrued Interest   (1,135,700,000)        
Liabilities Subject to Compromise, Income Tax Contingencies   0        
Liabilities Subject to Compromise, Asbestos Obligations   0        
Liabilities Subject to Compromise, Environmental Contingencies   (77,500,000)        
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations   (27,700,000)        
Liabilities Subject to Compromise, Other Liabilities   (122,400,000)        
Total Liabilities Subject to Compromise   (1,363,300,000)        
Total Liabilities   (1,356,100,000)        
Common Stock, Value, Outstanding   0        
Paid-in capital   0        
Retained Earnings (Accumulated Deficit)   (7,400,000)        
Treasury Stock, Value   0        
Accumulated Other Comprehensive Income (Loss), Net of Tax   0        
Total W. R. Grace & Co. Shareholders' Equity   (7,400,000)        
Noncontrolling interests in shareholders' equity   0        
Total Equity   (7,400,000)        
Total Liabilities and Equity   (1,363,500,000)        
Consideration to the Asbestos Trusts [Member]
            
Subsequent Event [Line Items]            
Other Liabilities, Current   0        
Cash and Cash Equivalents, at Carrying Value   (269,600,000)        
Restricted cash and cash equivalents   (242,200,000)        
Accounts Receivable, Net, Current   0        
Accounts Receivable, Related Parties, Current   0        
Inventories   0        
Deferred Tax Assets, Net of Valuation Allowance, Current   0        
Other current assets   0        
Total Current Assets   (511,800,000)        
Properties and equipment, net   0        
Goodwill   0        
Intangible Assets, Net (Excluding Goodwill)   0        
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent   (111,000,000)        
Net operating loss carryforward   111,000,000        
Asbestos-related insurance   (500,000,000)        
Overfunded defined benefit pension plans   0        
Equity Method Investments   0        
Other Assets, Noncurrent   0        
Total Assets   (1,011,800,000)        
Debt payable within one year   0        
Notes Payable, Related Parties, Current   0        
Accounts payable   0        
Accounts Payable, Related Parties, Current   0        
PI warrant liability   490,000,000        
Total Current Liabilities   490,000,000        
Debt payable after one year   0        
Notes Payable, Related Parties, Noncurrent   0        
Deferred payment obligations   594,500,000        
Deferred income taxes   0        
Income tax contingencies   0        
Underfunded defined benefit pension plans   0        
Unfunded pay-as-you-go defined benefit pension plans   0        
Other Liabilities, Noncurrent   0        
Total Liabilities Not Subject to Compromise   1,084,500,000        
Liabilities Subject to Compromise, Debt and Accrued Interest   0        
Liabilities Subject to Compromise, Income Tax Contingencies   0        
Liabilities Subject to Compromise, Asbestos Obligations   (2,084,100,000)        
Liabilities Subject to Compromise, Environmental Contingencies   0        
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations   0        
Liabilities Subject to Compromise, Other Liabilities   (12,200,000)        
Total Liabilities Subject to Compromise   (2,096,300,000)        
Total Liabilities   (1,011,800,000)        
Common Stock, Value, Outstanding   0        
Paid-in capital   0        
Retained Earnings (Accumulated Deficit)   0        
Treasury Stock, Value   0        
Accumulated Other Comprehensive Income (Loss), Net of Tax   0        
Total W. R. Grace & Co. Shareholders' Equity   0        
Noncontrolling interests in shareholders' equity   0        
Total Equity   0        
Total Liabilities and Equity   (1,011,800,000)        
Borrowings [Member]
            
Subsequent Event [Line Items]            
Other Liabilities, Current   0        
Cash and Cash Equivalents, at Carrying Value   (873,000,000)        
Restricted cash and cash equivalents   0        
Accounts Receivable, Net, Current   0        
Accounts Receivable, Related Parties, Current   0        
Inventories   0        
Deferred Tax Assets, Net of Valuation Allowance, Current   0        
Other current assets   0        
Total Current Assets   (873,000,000)        
Properties and equipment, net   0        
Goodwill   0        
Intangible Assets, Net (Excluding Goodwill)   0        
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent   0        
Net operating loss carryforward   0        
Asbestos-related insurance   0        
Overfunded defined benefit pension plans   0        
Equity Method Investments   0        
Other Assets, Noncurrent   27,000,000        
Total Assets   900,000,000        
Debt payable within one year   9,000,000        
Notes Payable, Related Parties, Current   0        
Accounts payable   0        
Accounts Payable, Related Parties, Current   0        
PI warrant liability   0        
Total Current Liabilities   9,000,000        
Debt payable after one year   891,000,000        
Notes Payable, Related Parties, Noncurrent   0        
Deferred payment obligations   0        
Deferred income taxes   0        
Income tax contingencies   0        
Underfunded defined benefit pension plans   0        
Unfunded pay-as-you-go defined benefit pension plans   0        
Other Liabilities, Noncurrent   0        
Total Liabilities Not Subject to Compromise   900,000,000        
Liabilities Subject to Compromise, Debt and Accrued Interest   0        
Liabilities Subject to Compromise, Income Tax Contingencies   0        
Liabilities Subject to Compromise, Asbestos Obligations   0        
Liabilities Subject to Compromise, Environmental Contingencies   0        
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations   0        
Liabilities Subject to Compromise, Other Liabilities   0        
Total Liabilities Subject to Compromise   0        
Total Liabilities   900,000,000        
Common Stock, Value, Outstanding   0        
Paid-in capital   0        
Retained Earnings (Accumulated Deficit)   0        
Treasury Stock, Value   0        
Accumulated Other Comprehensive Income (Loss), Net of Tax   0        
Total W. R. Grace & Co. Shareholders' Equity   0        
Noncontrolling interests in shareholders' equity   0        
Total Equity   0        
Total Liabilities and Equity   900,000,000        
Reclassifications at Emergence [Member]
            
Subsequent Event [Line Items]            
Other Liabilities, Current   38,800,000        
Cash and Cash Equivalents, at Carrying Value   (153,200,000)        
Restricted cash and cash equivalents   153,200,000        
Accounts Receivable, Net, Current   0        
Accounts Receivable, Related Parties, Current   0        
Inventories   0        
Deferred Tax Assets, Net of Valuation Allowance, Current   0        
Other current assets   0        
Total Current Assets   0        
Properties and equipment, net   0        
Goodwill   0        
Intangible Assets, Net (Excluding Goodwill)   0        
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent   0        
Net operating loss carryforward   0        
Asbestos-related insurance   0        
Overfunded defined benefit pension plans   0        
Equity Method Investments   0        
Other Assets, Noncurrent   0        
Total Assets   0        
Debt payable within one year   0        
Notes Payable, Related Parties, Current   0        
Accounts payable   0        
Accounts Payable, Related Parties, Current   0        
PI warrant liability   0        
Total Current Liabilities   38,800,000        
Debt payable after one year   0        
Notes Payable, Related Parties, Noncurrent   0        
Deferred payment obligations   0        
Deferred income taxes   0        
Income tax contingencies   76,600,000        
Underfunded defined benefit pension plans   0        
Unfunded pay-as-you-go defined benefit pension plans   95,900,000        
Other Liabilities, Noncurrent   105,200,000        
Total Liabilities Not Subject to Compromise   316,500,000        
Liabilities Subject to Compromise, Debt and Accrued Interest   (2,100,000)        
Liabilities Subject to Compromise, Income Tax Contingencies   (76,600,000)        
Liabilities Subject to Compromise, Asbestos Obligations   (8,300,000)        
Liabilities Subject to Compromise, Environmental Contingencies   (57,000,000)        
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations   (148,600,000)        
Liabilities Subject to Compromise, Other Liabilities   (23,900,000)        
Total Liabilities Subject to Compromise   (316,500,000)        
Total Liabilities   0        
Common Stock, Value, Outstanding   0        
Paid-in capital   0        
Retained Earnings (Accumulated Deficit)   0        
Treasury Stock, Value   0        
Accumulated Other Comprehensive Income (Loss), Net of Tax   0        
Total W. R. Grace & Co. Shareholders' Equity   0        
Noncontrolling interests in shareholders' equity   0        
Total Equity   0        
Total Liabilities and Equity   0        
Term Loan B (USD) [Member]
            
Subsequent Event [Line Items]            
Senior Secured Credit Facilities to Fund Emergence 700,000,000          
Term Loan B (EUR) [Member]
            
Subsequent Event [Line Items]            
Senior Secured Credit Facilities to Fund Emergence $ 150,000,000          
[1] Represents borrowings under various lines of credit and other borrowings, primarily by non-U.S. subsidiaries. At December 31, 2013, the fair value of Grace's debt payable within one year not subject to compromise approximated the recorded value of $76.6 million.

v2.4.0.8
Subsequent Event - Chapter 11 Emergence (Tables)
 12 Months Ended
Dec. 31, 2013
Subsequent Event [Line Items]  
Chapter 11 Emergence, Pro Forma Balance Sheet [Table Text Block]
W. R. Grace and Co. and Subsidiaries
Pro forma Consolidated Balance Sheet (unaudited)
 
 
 
Pro forma Adjustments
 
 
(In millions, except par value and shares)
December 31, 2013
Reported
 
Borrowings Under New Credit Agreements
 
Consideration to the Asbestos Trusts
 
Payment of Remaining Pre-Petition Liabilities and Adjustment for Additional Expenses
 
Reclassifications at Emergence
 
December 31, 2013
Pro forma
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
964.8

 
$
873.0

 
$
(269.6
)
 
$
(1,370.6
)
 
$
153.2

 
$
350.8

Restricted cash and cash equivalents
395.4

 
—

 
(242.2
)
 
—

 
(153.2
)
 
—

Trade accounts receivable, less allowance of $6.0
469.5

 
—

 
—

 
—

 
—

 
469.5

Accounts receivable—unconsolidated affiliate
12.3

 
—

 
—

 
—

 
—

 
12.3

Inventories
295.3

 
—

 
—

 
—

 
—

 
295.3

Deferred income taxes
58.1

 
—

 
—

 
—

 
—

 
58.1

Other current assets
99.0

 
—

 
—

 
—

 
—

 
99.0

Total Current Assets
2,294.4

 
873.0

 
(511.8
)
 
(1,370.6
)
 
—

 
1,285.0

Properties and equipment, net of accumulated depreciation and amortization of $1,876.8
829.9

 
—

 
—

 
—

 
—

 
829.9

Goodwill
457.5

 
—

 
—

 
—

 
—

 
457.5

Technology and other intangible assets, net
315.5

 
—

 
—

 
—

 
—

 
315.5

Deferred income taxes:
 
 
 
 
 
 
 
 
 
 


Net operating loss carryforward
—

 
—

 
111.0

 
141.2

 
—

 
252.2

Temporary differences
845.9

 
—

 
(111.0
)
 
(134.1
)
 
—

 
600.8

Asbestos-related insurance
500.0

 
—

 
(500.0
)
 
—

 
—

 
—

Overfunded defined benefit pension plans
16.7

 
—

 
—

 
—

 
—

 
16.7

Investment in unconsolidated affiliate
96.2

 
—

 
—

 
—

 
—

 
96.2

Other assets
40.0

 
27.0

 
—

 
—

 
—

 
67.0

Total Assets
$
5,396.1

 
$
900.0

 
$
(1,011.8
)
 
$
(1,363.5
)
 
$
—

 
$
3,920.8

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
Liabilities Not Subject to Compromise
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
 
 
 
Debt payable within one year
$
76.6

 
$
9.0

 
$
—

 
$
—

 
$
—

 
$
85.6

Debt payable—unconsolidated affiliate
4.5

 
—

 
—

 
—

 
—

 
4.5

Accounts payable
249.5

 
—

 
—

 
—

 
—

 
249.5

Accounts payable—unconsolidated affiliate
13.0

 
—

 
—

 
—

 
—

 
13.0

PI warrant liability
—

 
—

 
490.0

 
—

 
—

 
490.0

Other current liabilities
292.0

 
—

 
—

 
7.2

 
38.8

 
338.0

Total Current Liabilities
635.6

 
9.0

 
490.0

 
7.2

 
38.8

 
1,180.6

Debt payable after one year
5.3

 
891.0

 
—

 
—

 
—

 
896.3

Debt payable—unconsolidated affiliate
24.3

 
—

 
—

 
—

 
—

 
24.3

Deferred payment obligations
—

 
—

 
594.5

 
—

 
—

 
594.5

Deferred income taxes
18.2

 
—

 
—

 
—

 
—

 
18.2

Income tax contingencies
—

 
—

 
—

 
—

 
76.6

 
76.6

Underfunded defined benefit pension plans
66.2

 
—

 
—

 
—

 
—

 
66.2

Unfunded pay-as-you-go defined benefit pension plans
233.4

 
—

 
—

 
—

 
95.9

 
329.3

Other liabilities
65.8

 
—

 
—

 
—

 
105.2

 
171.0

Total Liabilities Not Subject to Compromise
1,048.8

 
900.0

 
1,084.5

 
7.2

 
316.5

 
3,357.0

Liabilities Subject to Compromise
 
 
 
 
 
 
 
 
 
 
 
Debt plus accrued interest
1,137.8

 
—

 
—

 
(1,135.7
)
 
(2.1
)
 
—

Income tax contingencies
76.6

 
—

 
—

 
—

 
(76.6
)
 
—

Asbestos-related contingencies
2,092.4

 
—

 
(2,084.1
)
 
—

 
(8.3
)
 
—

Environmental contingencies
134.5

 
—

 
—

 
(77.5
)
 
(57.0
)
 
—

Postretirement benefits
176.3

 
—

 
—

 
(27.7
)
 
(148.6
)
 
—

Other liabilities and accrued interest
158.5

 
—

 
(12.2
)
 
(122.4
)
 
(23.9
)
 
—

Total Liabilities Subject to Compromise
3,776.1

 
—

 
(2,096.3
)
 
(1,363.3
)
 
(316.5
)
 
—

Total Liabilities
4,824.9

 
900.0

 
(1,011.8
)
 
(1,356.1
)
 
—

 
3,357.0

Equity
 
 
 
 
 
 
 
 
 
 
 
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 77,046,143 (2012—75,565,409)
0.8

 
—

 
—

 
—

 
—

 
0.8

Paid-in capital
533.4

 
—

 
—

 
—

 
—

 
533.4

Retained earnings
15.8

 
—

 
—

 
(7.4
)
 
—

 
8.4

Treasury stock, at cost: shares: 0 (2012—1,414,351)
—

 
—

 
—

 
—

 
—

 
—

Accumulated other comprehensive loss
10.6

 
—

 
—

 
—

 
—

 
10.6

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

 
—

 
—

 
(7.4
)
 
—

 
553.2

Noncontrolling interests
10.6

 
—

 
—

 
—

 
—

 
10.6

Total Equity
571.2

 
—

 
—

 
(7.4
)
 
—

 
563.8

Total Liabilities and Equity
$
5,396.1

 
$
900.0

 
$
(1,011.8
)
 
$
(1,363.5
)
 
$
—

 
$
3,920.8

v2.4.0.8
Goodwill and Other Intangible Assets (Details 2) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Goodwill and Intangible Assets Disclosure [Abstract]      
Intangible assets, net book value $ 315.5 $ 82.7  
Amortization of intangible assets 12.7 10.7 10.0
Net book value of other intangible assets      
Gross carrying amount 414.2 169.6  
Accumulated Amortization 98.7 86.9  
Estimated Amortization Expenses      
2013 24.0    
2014 22.4    
2015 18.6    
2016 17.3    
2017 17.0    
Thereafter 211.3    
Total estimated amortization expenses 310.6    
Customer Lists [Member]
      
Net book value of other intangible assets      
Gross carrying amount 94.9 81.6  
Accumulated Amortization 43.7 37.9  
Technology
      
Net book value of other intangible assets      
Gross carrying amount 260.0 54.6  
Accumulated Amortization 37.8 32.6  
Trademarks [Member]
      
Net book value of other intangible assets      
Gross carrying amount 36.9 24.6  
Accumulated Amortization 14.0 12.2  
Indefinite-lived trademarks 4.9 4.8  
Other Intangible Assets [Member]
      
Net book value of other intangible assets      
Gross carrying amount 22.4 8.8  
Accumulated Amortization $ 3.2 $ 4.2  

v2.4.0.8
Other Expense, net
 12 Months Ended
Dec. 31, 2013
Other Income and Expenses [Abstract]  
Other (Income) Expense, net
Other Expense, net
Components of other expense, net are as follows:
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Restructuring expenses and related asset impairments
$
12.5

 
$
6.9

 
$
6.9

Provision for environmental remediation
8.2

 
3.6

 
17.8

Translation effects—intercompany loans
(11.9
)
 
(5.6
)
 
11.7

Value of currency forward contracts—intercompany loans
10.9

 
3.7

 
(9.3
)
Currency transaction loss in Venezuela
8.5

 
—

 
—

Other currency transaction effects
5.0

 
2.2

 
3.2

Interest income of non-Debtor subsidiaries
(1.0
)
 
(1.0
)
 
(1.2
)
Net (gain) loss on sales of investments and disposals of assets
0.5

 
0.7

 
(3.0
)
Other miscellaneous (income) expense
(9.2
)
 
(4.4
)
 
3.3

Total other expense, net
$
23.5

 
$
6.1

 
$
29.4

v2.4.0.8
Inventories (Tables)
 12 Months Ended
Dec. 31, 2013
Inventory Disclosure [Abstract]  
Schedule of inventories
Inventories are stated at the lower of cost or market, and cost is determined using FIFO. Inventories consisted of the following at December 31, 2013 and 2012:
 
December 31,
(In millions)
2013
 
2012
Raw materials
$
69.7

 
$
66.5

In process
41.8

 
46.1

Finished products
152.4

 
138.8

Other
31.4

 
32.2

 
$
295.3

 
$
283.6

v2.4.0.8
Shareholders' Equity (Deficit)
 12 Months Ended
Dec. 31, 2013
Equity [Abstract]  
Shareholders' Equity
Shareholders' Equity
Under its Certificate of Incorporation, the Company is authorized to issue 300,000,000 shares of common stock, $0.01 par value. As of December 31, 2013, the W. R. Grace & Co. 2011 Stock Incentive Plan had 800,000 shares of unissued stock reserved for issuance in the event of the exercise of stock options under the Plan. Historically all stock options exercised were covered by reissuing treasury stock. During 2013, stock options exercises exceeded the shares available in treasury stock and therefore the Company issued new shares, which were reserved for issuance under the Plans. For the years ended December 31, 2013, 2012, and 2011, 1,464,294, 1,679,359, and 765,693 stock options were exercised for aggregate proceeds of $34.4 million, $32.2 million, and $12.1 million, respectively. Additionally in 2013, 10,440 common shares were issued to members of the Board of Directors and 6,000 restricted common shares were issued to certain key employees.
The following table sets forth information relating to common stock activity for 2013 and 2012:
Balance of Outstanding Shares, December 31, 2011
73,886,050

Stock options exercised
1,679,359

Balance of Outstanding Shares, December 31, 2012
75,565,409

Stock options exercised
1,464,294

Shares Issued
16,440

Balance of Outstanding Shares, December 31, 2013
77,046,143

v2.4.0.8
Fair Value Measurements and Risk (Details 2) (USD $)
In Millions, unless otherwise specified
Feb. 03, 2015
Dec. 31, 2013
Dec. 31, 2012
Fair values of derivative instruments      
Notional Amount of Interest Rate Derivatives $ 250    
Asset Derivatives   2.1 1.4
Liability Derivatives   7.0 5.5
Derivative, Fixed Interest Rate 4.643%    
Derivatives designated as hedging instruments under ASC 815 | Other current assets
      
Fair values of derivative instruments      
Asset Derivatives, Commodity contracts   0 0.2
Asset Derivatives, Currency contracts   1.0 1.2
Derivatives designated as hedging instruments under ASC 815 | Other assets
      
Fair values of derivative instruments      
Asset Derivatives, Currency contracts   1.0  
Derivatives designated as hedging instruments under ASC 815 | Other current liabilities
      
Fair values of derivative instruments      
Liability Derivatives, Commodity contracts   0.1 0.4
Liability Derivatives, Currency contracts   0 0.2
Derivatives designated as hedging instruments under ASC 815 | Other liabilities
      
Fair values of derivative instruments      
Liability Derivatives, Currency contracts   0  
Derivatives not designated as hedging instruments under ASC 815 | Other current assets
      
Fair values of derivative instruments      
Asset Derivatives, Currency contracts   0.1 0
Derivatives not designated as hedging instruments under ASC 815 | Other current liabilities
      
Fair values of derivative instruments      
Liability Derivatives, Currency contracts   $ 6.9 $ 4.9
Fixed Rate Natural Gas Swaps Call Option [Member]
      
Fair values of derivative instruments      
Nonmonetary Notional Amount of Price Risk Derivative Instruments Not Designated as Hedging Instruments   7,100,000  
Fixed Rate Natural Gas Swaps [Member]
      
Fair values of derivative instruments      
Nonmonetary Notional Amount of Price Risk Derivative Instruments Not Designated as Hedging Instruments   300,000  

v2.4.0.8
Consolidated Statements of Equity (Deficit) (USD $)
In Millions, unless otherwise specified
Total
Common Stock and Paid-in Capital
Retained Earnings (Accumulated Deficit)
Treasury Stock
Accumulated Other Comprehensive Loss
Noncontrolling Interests
Balance at Dec. 31, 2010 $ (55.7) $ 456.6 $ (500.0) $ (45.9) $ 26.7 $ 6.9
Increase (Decrease) in Stockholders' Equity Roll Forward            
Net income (loss) 219.1 0 219.7 0 0 (0.6)
Stock plan activity 14.0 14.0 0 0 0 0
Stock Issued During Period, Value, Stock Options Exercised 12.1 3.0 0 9.1 0 0
Other Comprehensive Income (Loss), Net of Tax (5.4) 0 0 0 (7.2) 1.8
Balance at Dec. 31, 2011 184.1 473.6 (280.3) (36.8) 19.5 8.1
Increase (Decrease) in Stockholders' Equity Roll Forward            
Net income (loss) 41.0 0 40.0 0 0 1.0
Stock plan activity 14.7 14.7 0 0 0 0
Stock Issued During Period, Value, Stock Options Exercised 32.2 12.2 0 20.0 0 0
Adjustments to Additional Paid in Capital, Income Tax Benefit from Share-based Compensation 36.8 36.8 0 0 0 0
Other Comprehensive Income (Loss), Net of Tax 11.0 0 0 0 10.2 0.8
Balance at Dec. 31, 2012 319.8 537.3 (240.3) (16.8) 29.7 9.9
Increase (Decrease) in Stockholders' Equity Roll Forward            
Net income (loss) 257.7 0 256.1 0 0 1.6
Stock plan activity 13.4 13.4 0 0 0 0
Stock Issued 1.3 1.3 0 0 0 0
Stock Issued During Period, Value, Stock Options Exercised 34.4 17.6   16.8    
Adjustments to Additional Paid in Capital, Income Tax Benefit from Share-based Compensation (35.4) (35.4) 0 0 0 0
Other Comprehensive Income (Loss), Net of Tax (20.0) 0 0 0 (19.1) (0.9)
Balance at Dec. 31, 2013 $ 571.2 $ 534.2 $ 15.8 $ 0 $ 10.6 $ 10.6

v2.4.0.8
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Net income (loss) $ 257.7 $ 41.0 $ 219.1
Other comprehensive income (loss):      
Defined benefit pension and other postretirement plans, net of income taxes 4.6 2.3 6.2
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent (23.6) 5.5 (11.3)
Gain (loss) from hedging activities, net of income taxes (0.2) 2.4 (2.1)
Total other comprehensive income (loss) attributable to noncontrolling interests (0.9) 0.8 1.8
Total other comprehensive loss (20.0) 11.0 (5.4)
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest 237.7 52.0 213.7
Less: comprehensive (income) loss attributable to noncontrolling interests 0.1 0 0
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest (0.7) (1.8) (1.2)
Comprehensive income attributable to W.R. Grace & Co. shareholders $ 237.0 $ 50.2 $ 212.5

v2.4.0.8
Income Taxes
 12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Provision for Income Taxes
The components of income from consolidated operations before income taxes and the related provision for income taxes for 2013, 2012, and 2011 are as follows:
Income Taxes—Consolidated Operations
(In millions)
2013
 
2012
 
2011
Income (loss) before income taxes:
 
 
 
 
 
Domestic
$
141.4

 
$
(170.3
)
 
$
107.7

Foreign
219.2

 
149.7

 
199.3

Total
$
360.6

 
$
(20.6
)
 
$
307.0

Benefit from (provision for) income taxes:
 
 
 
 
 
Federal—current
$
1.4

 
$
(51.2
)
 
$
16.7

Federal—deferred
(73.1
)
 
82.0

 
(49.3
)
State and local—current
(0.7
)
 
(4.4
)
 
(2.3
)
State and local—deferred
38.2

 
70.2

 
—

Foreign—current
(83.5
)
 
(43.1
)
 
(52.5
)
Foreign—deferred
14.8

 
8.1

 
(0.5
)
Total
$
(102.9
)
 
$
61.6

 
$
(87.9
)

The preceding allocation of income between jurisdictions does not reflect $25.9 million, $22.1 million, and $30.1 million of domestic income resulting from repatriated earnings in 2013, 2012, and 2011, respectively.
The difference between the provision for income taxes at the U.S. federal income tax rate of 35% and Grace's overall income tax provision is summarized as follows:
Income Tax Provision Analysis
(In millions)
2013
 
2012
 
2011
Tax benefit (provision) at U.S. federal income tax rate
$
(126.2
)
 
$
7.2

 
$
(107.4
)
Change in benefit (provision) resulting from:
 
 
 
 
 
Release of state valuation allowance
24.4

 
44.0

 
—

Effect of tax rates in foreign jurisdictions
16.6

 
14.9

 
17.6

Benefits from domestic production activities
—

 
14.0

 
0.9

Nontaxable income/non-deductible expenses
(9.7
)
 
(8.1
)
 
(7.3
)
U.S. taxes on repatriated foreign earnings
3.7

 
(2.2
)
 
(1.1
)
State and local income taxes, net of federal income tax
(0.7
)
 
0.1

 
(1.5
)
Adjustments to uncertain tax positions and other items
(11.0
)
 
(8.3
)
 
10.9

Benefit from (provision for) income taxes
$
(102.9
)
 
$
61.6

 
$
(87.9
)


Deferred Tax Assets and Liabilities
At December 31, 2013 and 2012, the tax attributes giving rise to deferred tax assets and liabilities consisted of the following items:
Deferred Tax Analysis
(In millions)
2013
 
2012
Deferred tax assets:
 
 
 
Liability for asbestos-related litigation
$
657.1

 
$
717.5

Federal tax credit carryforwards
16.9

 
2.4

Foreign net operating loss carryforwards
18.0

 
22.7

Deferred state taxes
90.3

 
88.4

Liability for environmental remediation
47.1

 
49.2

Other postretirement benefits
18.2

 
22.9

Pension liabilities
96.7

 
133.1

Reserves and allowances
60.4

 
51.6

Research and development
32.6

 
34.0

Accrued interest on pre-petition debt
66.7

 
121.9

Other
16.3

 
20.8

Total deferred tax assets
$
1,120.3

 
$
1,264.5

Deferred tax liabilities:
 
 
 
Asbestos-related insurance receivable
$
(175.0
)
 
$
(175.0
)
Pension assets
(3.7
)
 
(14.9
)
Properties and equipment
(30.3
)
 
(35.3
)
Other
(7.3
)
 
(14.7
)
Total deferred tax liabilities
$
(216.3
)
 
$
(239.9
)
Valuation allowance:
 
 
 
Deferred state taxes
$
(13.6
)
 
$
(40.3
)
Federal credits
(4.4
)
 
—

Foreign net operating loss carryforwards
(0.3
)
 
(0.5
)
Total valuation allowance
(18.3
)
 
(40.8
)
Net deferred tax assets
$
885.7

 
$
983.8


U.S. Federal deferred tax assets decreased year over year by $123.8 million. The $98.1 million reduction in net deferred tax assets was primarily the result of Grace's ability to accelerate the deductibility of certain emergence deductions, including the utilization of a qualified settlement fund. This overall reduction was partially offset by an increase in state deferred tax assets, mostly the result of a valuation allowance release.
Grace has recorded a valuation allowance to reduce its net deferred tax assets to the amount that is more likely than not to be realized. Grace has considered forecasted earnings, recent past and future taxable income, the mix of earnings in the jurisdictions in which it operates and prudent and feasible tax planning strategies in determining the need for these valuation allowances. The valuation allowance decreased $22.5 million from December 31, 2012, to December 31, 2013. In the 2013 fourth quarter, Grace determined that it is more likely than not that its deductions generated at emergence will be used before their expiration. Accordingly, Grace recorded a $24.4 million release of its valuation allowance on its state deferred tax assets. Further decreases in Grace's deferred tax assets resulted from the utilization and expiration of state net operating losses ("NOLs") in the current year, and the reduction of NOLs resulting from prior-year adjustments to taxable income. These decreases were partially offset by the recording of valuation allowances on deferred tax assets associated with certain U.S. federal foreign tax credits.
The realization of deferred tax assets is dependent on the generation of sufficient taxable income in the appropriate tax jurisdictions. Although realization is not assured, Grace believes it is more likely than not that the remaining deferred tax assets will be realized. If Grace were to determine that it would not be able to realize a portion of its net deferred tax assets in the future, for which there is currently no valuation allowance, an adjustment to the net deferred tax assets would be charged to earnings in the period such determination was made. Conversely, if Grace were to make a determination that it is more likely than not that deferred tax assets, for which there is currently a valuation allowance, would be realized, the related valuation allowance would be reduced and a benefit to earnings would be recorded.
The U.S. Federal tax credit carryforwards at December 31, 2013, were $65.2 million. Grace has recorded a valuation allowance of $4.4 million against the credit carryforwards because they are expected to expire unused by 2018 while Grace continues to be in an NOL position. Grace expects to use $52.4 million of the credits that would otherwise expire in the years 2019 through 2028, as well as the remaining $8.4 million, which do not expire. In addition, as a result of certain realization requirements, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2013 and 2012, that arose directly from tax deductions related to equity compensation in excess of compensation recognized for financial reporting. Equity will be increased by $57.7 million if and when such deferred tax assets are ultimately realized.
U.S. Federal Net Operating Losses
At emergence from bankruptcy, Grace generated approximately $670 million in U.S. Federal net operating losses, which were previously recorded as deferred tax assets for temporary differences, that will be available to reduce U.S. Federal taxable income in 2014 and future years. In addition, Grace expects to receive a U.S. Federal income tax deduction of $490 million upon settlement of the warrant held by one of the asbestos trusts and $1,580 million upon payment of deferred payment obligations. Grace expects to carryforward most of its NOLs. Under U.S. Federal income tax law, a corporation is generally permitted to carryforward NOLs for a 20-year period for deduction against future taxable income. Grace believes that it will generate sufficient domestic taxable income to use all available future tax deductions prior to expiration. Grace has generally not paid U.S. Federal income taxes in cash in recent years since available tax deductions and credits have fully offset U.S. taxable income.
Unrepatriated Foreign Earnings
Grace has not provided for U.S. federal, state and foreign deferred income taxes on $1,126.5 million of undistributed earnings of foreign subsidiaries. Grace expects that these earnings will be permanently reinvested by such subsidiaries except in certain instances where repatriation attributable to current earnings results in minimal or no U.S. tax consequences. The unrecorded deferred tax liability associated with these earnings is $149.7 million. Since 2001, Grace has repatriated cash and promissory notes from foreign subsidiaries to support its Chapter 11 funding requirements. Grace repatriated earnings of $25.9 million, $22.1 million, and $30.1 million from its non-U.S. subsidiaries in 2013, 2012, and 2011, respectively, incurring an insignificant amount of U.S. income tax expense.
Uncertain Tax Positions
The amount of unrecognized tax benefits at December 31, 2013, was $84.4 million ($80.3 million excluding interest and penalties). The amount of unrecognized tax benefits at December 31, 2012, was $88.6 million ($83.1 million excluding interest and penalties). The amount of unrecognized tax benefits at December 31, 2011, was $69.3 million ($62.4 million excluding interest and penalties). A reconciliation of the unrecognized tax benefits, excluding interest and penalties, for the three years ended December 31, 2013, follows:
Rollforward of Uncertain Tax Positions
(In millions)
Unrecognized
Tax Benefits
Balance as of January 1, 2011
$
79.2

Additions for current year tax positions
0.6

Additions for prior year tax positions
0.5

Reductions for prior year tax positions and reclassifications(1)(2)
(17.8
)
Reductions for expirations of statute of limitations
(0.1
)
Balance as of December 31, 2011
62.4

Additions for current year tax positions
3.4

Additions for prior year tax positions
22.0

Reductions for prior year tax positions and reclassifications
(0.8
)
Reductions for expirations of statute of limitations
(2.9
)
Settlements(3)
(1.0
)
Balance as of December 31, 2012
83.1

Additions for current year tax positions
6.3

Additions for prior year tax positions
6.4

Reductions for prior year tax positions and reclassifications(4)
(9.6
)
Reductions for expirations of statute of limitations
(5.9
)
Balance as of December 31, 2013
$
80.3

_______________________________________________________________________________
(1)
On November 3, 2011, Grace received notice from the Canadian Revenue Agency that they had completed a review of Grace's Canadian transfer pricing for the years 2002, 2003, and 2004. As a result, Grace reversed $10.6 million of uncertain tax positions because they were effectively settled pursuant to ASC 740-10-25. A tax matter is effectively settled through examination when the taxing authority has completed an examination; the entity does not intend to appeal or litigate any aspect of a particular tax position for the completed examination; and based on a tax authority's widely understood policy, the entity considers it remote that the taxing authority would subsequently examine or reexamine any of the positions once the examination process is completed.
(2)
In 2011, $6.7 million of uncertain tax positions representing pre-petition federal and state settlements were reclassified to income taxes payable.
(3)
In 2012, $1.0 million of uncertain tax positions representing withholding taxes due were paid as a result of the completion of Grace's Canadian audit for the years 2002, 2003, and 2004.
(4)
In 2013, $9.6 million of uncertain tax positions representing agreed adjustments resulting from the 2007-2009 IRS examination were reclassified to income taxes payable.
The balance of unrecognized tax benefits as of December 31, 2013, 2012, and 2011 of $79.5 million (net of $0.8 million that would be indemnified by a third party), $82.1 million (net of $1.0 million that would be indemnified by a third party), and $62.4 million, respectively, if recognized, would affect the effective tax rate. Grace accrues potential interest and any associated penalties related to uncertain tax positions in "benefit from (provision for) income taxes" in the Consolidated Statements of Operations. The balances of unrecognized tax benefits in the preceding table do not include accrued interest and penalties. The total amount of interest and penalties accrued on uncertain tax positions as of December 31, 2013, 2012, and 2011 was $4.1 million, $5.5 million and $6.9 million, respectively, net of applicable federal income tax benefits.
Grace files U.S. Federal income tax returns as well as income tax returns in various state and foreign jurisdictions. Grace's uncertain tax positions are related to income tax returns for tax years that remain subject to examination by the relevant taxing authorities. The following table summarizes these open tax years by major jurisdiction:
Tax Jurisdiction(1)
Examination in Progress
 
Examination Not Yet Initiated
United States—Federal
2007-2009
 
2010-2012
United States—State
2007-2012
 
2010-2012
Germany
None
 
2009-2012
Italy
None
 
2008-2012
France
2010-2011
 
2012
Canada
None
 
2006-2012
_______________________________________________________________________________
(1)
Includes federal, state, provincial or local jurisdictions, as applicable.
Grace notes that there are attributes generated in prior years that are otherwise closed by statute and were carried forward into years that are open to examination. Those attributes may still be subject to adjustment to the extent utilized in open years.
As a multi-national taxpayer, Grace is under continual audit by the various tax authorities on open-year tax positions. Based on the status of current examinations in various taxing jurisdictions and applicable judicial decisions applied to Grace's fact pattern, Grace believes it is reasonably possible that in the next 12 months the amount of the liability for unrecognized tax benefits could decrease by as much as $68 million.

v2.4.0.8
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Reconciliation of valuation and reserves roll forward      
Income Tax Reconciliation Release of State Valuation Allowance $ (24.4) $ (44.0)   
Allowances for notes and accounts receivable
      
Reconciliation of valuation and reserves roll forward      
Balance at beginning of period 6.9 9.8 8.7
Additions charged to costs and expenses 2.2 1.9 2.9
Deductions (1.6) (4.8) (2.0)
Other net 0.1 [1] 0 [1] 0.2 [1]
Balance at end of period 7.6 6.9 9.8
Valuation allowance for deferred tax assets
      
Reconciliation of valuation and reserves roll forward      
Balance at beginning of period 40.8 [2] 100.8 [2] 104.6 [2]
Additions charged to costs and expenses 4.4 [2] 0 [2] 0 [2]
Deductions (24.4) [2] (60.0) [2] (3.8) [2]
Other net (2.5) [1],[2] 0 [1],[2] 0 [1],[2]
Balance at end of period 18.3 [2] 40.8 [2] 100.8 [2]
Reserves for asbestos related litigation
      
Reconciliation of valuation and reserves roll forward      
Balance at beginning of period 2,065.0 1,700.0 1,700.0
Additions charged to costs and expenses 27.4 365.0 0
Deductions 0 0 0
Other net 0 [1] 0 [1] 0 [1]
Balance at end of period 2,092.4 2,065.0 1,700.0
Reserves for environmental remediation
      
Reconciliation of valuation and reserves roll forward      
Balance at beginning of period 140.5 149.9 144.0
Additions charged to costs and expenses 8.0 3.6 17.8
Deductions (14.0) (13.0) (11.8)
Other net 0 [1] 0 [1] (0.1) [1]
Balance at end of period 134.5 140.5 149.9
Reserves for retained obligations of divested businesses
      
Reconciliation of valuation and reserves roll forward      
Balance at beginning of period 34.2 33.7 33.9
Additions charged to costs and expenses 0.8 0.7 0.4
Deductions 0 (0.2) (0.6)
Other net 0 [1] 0 [1] 0 [1]
Balance at end of period 35.0 34.2 33.7
Net Operating Loss Carryforwards [Member] | State and Local Jurisdiction [Member]
      
Reconciliation of valuation and reserves roll forward      
Reduction in valuation allowance $ 22.5    
[1] Various miscellaneous adjustments against reserves and effects of currency translation.
[2] The valuation allowance decreased $22.5 million from December 31, 2012, to December 31, 2013. In the 2013 fourth quarter, Grace determined that it is more likely than not that its deductions generated at emergence will be used before their expiration. Accordingly, Grace recorded a $24.4 million release of its valuation allowance on its state deferred tax assets. Further decreases in Grace’s deferred tax assets resulted from the utilization and expiration of state net operating losses ("NOLs") in the current year, and the reduction of NOLs resulting from prior-year adjustments to taxable income. These decreases were partially offset by the recording of valuation allowance on deferred tax assets associated with certain U.S. federal foreign tax credits. The reduction in the valuation allowance during 2012 related in part to a $44.0 million release of the valuation allowance as Grace determined that it is more likely than not that a substantial portion of its state net operating losses will be used before their expiration; the remainder of the release related to the utilization and expiration of state net operating losses in the current year, and the reduction of net operating losses resulting from prior-year adjustments made to income by the Internal Revenue Service. The reduction in 2011 primarily related to the utilization and expiration of state net operating losses.

v2.4.0.8
Noncontrolling Interests in Consolidated Affiliates (Details) (USD $)
In Millions, unless otherwise specified
 3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Summary financial statistics - statement of operations and cash flows, consolidated affiliates                        
Net sales $ 776.7 $ 771.3 $ 802.8 $ 709.9 $ 797.8 $ 776.6 $ 826.7 $ 754.4 $ 3,060.7 $ 3,155.5 $ 3,211.9  
Income (loss) before taxes                 360.6 (20.6) 307.0  
Net income (loss)                 257.7 41.0 219.1  
Noncontrolling interests in net income (loss)                 1.6 1.0 (0.6)  
Summary financial statistics - balance sheet information, consolidated affiliates                        
Other current assets 99.0       78.4       99.0 78.4    
Assets 5,396.1       5,090.4       5,396.1 5,090.4 4,495.6  
Total liabilities 4,824.9       4,770.6       4,824.9 4,770.6    
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest 571.2       319.8       571.2 319.8 184.1 (55.7)
Noncontrolling interests in shareholders' equity 10.6       9.9       10.6 9.9    
Joint ventures
                        
Summary financial statistics - statement of operations and cash flows, consolidated affiliates                        
Net sales                 101.5 108.8 86.3  
Income (loss) before taxes                 2.7 0.8 (0.1)  
Net income (loss)                 3.4 1.1 (0.9)  
Noncontrolling interests in net income (loss)                 1.6 1.0 (0.6)  
Summary financial statistics - balance sheet information, consolidated affiliates                        
Cash 5.1       5.7       5.1 5.7 6.7  
Other current assets 33.4       41.6       33.4 41.6 34.7  
Assets 71.1       73.8       71.1 73.8 53.0  
Total liabilities 48.9       46.1       48.9 46.1 30.1  
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest 22.2       27.7       22.2 27.7 22.9  
Noncontrolling interests in shareholders' equity $ 10.6       $ 9.9       $ 10.6 $ 9.9 $ 8.1  

v2.4.0.8
Document and Entity Information (USD $)
 12 Months Ended
Dec. 31, 2013
Jan. 31, 2014
Jun. 30, 2013
Document and Entity Information [Abstract]      
Entity Registrant Name W R GRACE & CO    
Entity Central Index Key 0001045309    
Document Type 10-K    
Document Period End Date Dec. 31, 2013    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Large Accelerated Filer    
Entity Public Float     $ 6,435,601,758
Entity Common Stock, Shares Outstanding   77,063,385  
Document Fiscal Year Focus 2013    
Document Fiscal Period Focus FY    

v2.4.0.8
Pension Plans and Other Postretirement Benefit Plans
 12 Months Ended
Dec. 31, 2013
Pension and Other Postretirement Benefit Expense [Abstract]  
Pension Plans and Other Postretirement Benefit Plans
Pension Plans and Other Postretirement Benefit Plans
Pension Plans    
As discussed in Note 1, the Company elected to change its method of accounting for deferred actuarial gains and losses relating to its global defined benefit pension plans in 2013. The new accounting method, referred to as mark-to-market accounting, was adopted in the 2013 fourth quarter and retrospectively applied to the Company's financial results for all periods presented in this report. See Note 1 under the caption "Change in Accounting Principle Regarding Pension Benefits" for additional information.
The following table presents the funded status of Grace's fully-funded, underfunded, and unfunded pension plans:
(In millions)
December 31, 2013
 
December 31, 2012
Overfunded defined benefit pension plans
$
16.7

 
$
32.1

Underfunded defined benefit pension plans
(66.2
)
 
(175.1
)
Unfunded defined benefit pension plans
(233.4
)
 
(221.4
)
Total underfunded and unfunded defined benefit pension plans
(299.6
)
 
(396.5
)
Unfunded defined benefit pension plans included in liabilities subject to compromise
(123.6
)
 
(131.2
)
Pension liabilities included in other current liabilities
(15.0
)
 
(14.0
)
Net funded status
$
(421.5
)
 
$
(509.6
)

Fully-funded plans include several advance-funded plans where the fair value of the plan assets exceeds the projected benefit obligation ("PBO"). This group of plans was overfunded by $16.7 million as of December 31, 2013, and the overfunded status is reflected as "overfunded defined benefit pension plans" in the Consolidated Balance Sheets. Underfunded plans include a group of advance-funded plans that are underfunded on a PBO basis. Unfunded plans include several plans that are funded on a pay-as-you-go basis, and therefore, the entire PBO is unfunded. The combined balance of the underfunded and unfunded plans was $438.2 million as of December 31, 2013.
Grace maintains defined benefit pension plans covering current and former employees of certain business units and divested business units who meet age and service requirements. Benefits are generally based on final average salary and years of service. Grace funds its U.S. qualified pension plans ("U.S. qualified pension plans") in accordance with U.S. federal laws and regulations. Non-U.S. pension plans ("non-U.S. pension plans") are funded under a variety of methods, as required under local laws and customs.
Grace also provides, through nonqualified plans, supplemental pension benefits in excess of U.S. qualified pension plan limits imposed by federal tax law. These plans cover officers and higher-level employees and serve to increase the combined pension amount to the level that they otherwise would have received under the U.S. qualified pension plans in the absence of such limits. The nonqualified plans are unfunded and Grace pays the costs of benefits as they are due to the participants.
At the December 31, 2013, measurement date for Grace's defined benefit pension plans, the PBO was $1,873.2 million as measured under U.S. GAAP compared with $1,954.9 million as of December 31, 2012. The PBO basis reflects the present value (using a 4.76% discount rate for U.S. plans and a 4.25% weighted average discount rate for non-U.S. plans as of December 31, 2013) of vested and non-vested benefits earned from employee service to date, based upon current services and estimated future pay increases for active employees.
On an annual basis a full remeasurement of pension assets and pension liabilities is performed based on the Company's estimates and actuarial valuations. These valuations reflect the terms of the plan, and use participant-specific information as well as certain key assumptions provided by management.
Postretirement Benefits Other Than Pensions    Grace provides postretirement health care and life insurance benefits for retired employees of certain U.S. business units and certain divested business units. The postretirement medical plan provides various levels of benefits to employees hired before 1993 who retire from Grace after age 55 with at least 10 years of service. These plans are unfunded and Grace pays a portion of the costs of benefits under these plans as they are incurred. Grace applies ASC 715 to these plans, which requires that the future costs of postretirement health care and life insurance benefits be accrued over the employees' years of service. Actuarial gains and losses are recognized in the Consolidated Balance Sheets as a component of Shareholders’ Equity, with amortization of the net actuarial gains and losses that exceed 10 percent of the accumulated postretirement benefit obligation recognized each quarter in the Consolidated Statements of Operations over the average future service period of active employees.
Retirees and beneficiaries covered by the postretirement medical plan are required to contribute a minimum of 40% of the calculated premium for that coverage. During 2002, per capita costs under the retiree medical plans exceeded caps on the amount Grace was required to contribute under a 1993 amendment to the plan. As a result, for 2003 and future years, retirees will bear 100% of any increase in premium costs.
For 2013 measurement purposes, per capita costs, before retiree contributions, were assumed to initially increase at a rate of 8.25%. The rate of increase is assumed to decrease gradually to 5% through 2020 and remain at that level thereafter. A one percentage point increase or decrease in assumed health care medical cost trend rates would not materially change Grace's postretirement benefit obligations (impact of less than $1 million) and would have a negligible impact on the aggregate of the service and interest cost components of net periodic benefit cost.
Defined Contribution Retirement Plan    Grace sponsors a defined contribution retirement plan for its employees in the United States. This plan is qualified under section 401(k) of the U.S. tax code. Currently, Grace contributes an amount equal to 100% of employee contributions, up to 6% of an individual employee's salary or wages. Grace's cost related to this benefit plan was $13.2 million, $12.6 million, and $12.3 million for the years ended December 31, 2013, 2012, and 2011, respectively.
Analysis of Plan Accounting and Funded Status    The following table summarizes the changes in benefit obligations and fair values of retirement plan assets during 2013 and 2012:
 
Defined Benefit Pension Plans
 
Other Post-
Retirement Plans
Change in Financial Status of Retirement Plans
(In millions)
U.S.
 
Non-U.S.
 
Total
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Change in Projected Benefit Obligation (PBO):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
1,425.6

 
$
1,282.3

 
$
529.3

 
$
452.8

 
$
1,954.9

 
$
1,735.1

 
$
63.9

 
$
64.6

Service cost
25.2

 
21.5

 
11.1

 
8.9

 
36.3

 
30.4

 
0.2

 
0.2

Interest cost
51.9

 
55.9

 
20.6

 
21.4

 
72.5

 
77.3

 
2.2

 
2.5

Plan participants' contributions
—

 
—

 
0.6

 
0.6

 
0.6

 
0.6

 
—

 
—

Amendments
—

 
—

 
—

 
—

 
—

 
—

 
(1.7
)
 
—

Actuarial (gain) loss
(96.7
)
 
132.3

 
(2.4
)
 
58.2

 
(99.1
)
 
190.5

 
(4.3
)
 
(2.1
)
Medicare subsidy receipts
—

 
—

 
—

 
—

 
—

 
—

 
1.4

 
3.3

Benefits paid
(79.2
)
 
(66.4
)
 
(22.1
)
 
(23.1
)
 
(101.3
)
 
(89.5
)
 
(4.5
)
 
(4.6
)
Currency exchange translation adjustments
—

 
—

 
9.3

 
10.5

 
9.3

 
10.5

 
—

 
—

Benefit obligation at end of year
$
1,326.8

 
$
1,425.6

 
$
546.4

 
$
529.3

 
$
1,873.2

 
$
1,954.9

 
$
57.2

 
$
63.9

Change in Plan Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
$
1,131.7

 
$
955.3

 
$
313.6

 
$
295.1

 
$
1,445.3

 
$
1,250.4

 
$
—

 
$
—

Actual return on plan assets
37.1

 
127.9

 
0.8

 
20.8

 
37.9

 
148.7

 
—

 
—

Employer contributions
55.6

 
114.9

 
12.7

 
11.9

 
68.3

 
126.8

 
3.1

 
1.3

Plan participants' contributions
—

 
—

 
0.6

 
0.6

 
0.6

 
0.6

 
—

 
—

Medicare subsidy receipts
—

 
—

 
—

 
—

 
—

 
—

 
1.4

 
3.3

Benefits paid
(79.2
)
 
(66.4
)
 
(22.1
)
 
(23.1
)
 
(101.3
)
 
(89.5
)
 
(4.5
)
 
(4.6
)
Currency exchange translation adjustments
—

 
—

 
0.9

 
8.3

 
0.9

 
8.3

 
—

 
—

Fair value of plan assets at end of year
$
1,145.2

 
$
1,131.7

 
$
306.5

 
$
313.6

 
$
1,451.7

 
$
1,445.3

 
$
—

 
$
—

Funded status at end of year (PBO basis)
$
(181.6
)
 
$
(293.9
)
 
$
(239.9
)
 
$
(215.7
)
 
$
(421.5
)
 
$
(509.6
)
 
$
(57.2
)
 
$
(63.9
)
Amounts recognized in the Consolidated Balance Sheets consist of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncurrent assets
$
—

 
$
—

 
$
16.7

 
$
32.1

 
$
16.7

 
$
32.1

 
$
—

 
$
—

Current liabilities
(5.8
)
 
(5.8
)
 
(9.2
)
 
(8.2
)
 
(15.0
)
 
(14.0
)
 
(4.5
)
 
(4.3
)
Noncurrent liabilities
(175.8
)
 
(288.1
)
 
(247.4
)
 
(239.6
)
 
(423.2
)
 
(527.7
)
 
(52.7
)
 
(59.6
)
Net amount recognized
$
(181.6
)
 
$
(293.9
)
 
$
(239.9
)
 
$
(215.7
)
 
$
(421.5
)
 
$
(509.6
)
 
$
(57.2
)
 
$
(63.9
)
Amounts recognized in Accumulated Other Comprehensive Income consist of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated actuarial gain
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(5.0
)
 
$
(0.3
)
Prior service cost (credit)
1.5

 
2.2

 
(0.3
)
 
(0.3
)
 
1.2

 
1.9

 
(1.7
)
 
—

Net amount recognized
$
1.5

 
$
2.2

 
$
(0.3
)
 
$
(0.3
)
 
$
1.2

 
$
1.9

 
$
(6.7
)
 
$
(0.3
)

 
Defined Benefit Pension Plans
 
Other Post-
Retirement Plans
Change in Financial Status of Retirement Plans
(In millions)
U.S.
 
Non-U.S.
 
Total
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Weighted Average Assumptions Used to Determine Benefit Obligations as of December 31:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
4.76
%
 
3.75
%
 
4.25
%
 
4.06
%
 
NM
 
NM
 
4.26
%
 
3.50
%
Rate of compensation increase
4.70
%
 
4.30
%
 
3.41
%
 
3.37
%
 
NM
 
NM
 
NM

 
NM

Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
3.75
%
 
4.50
%
 
4.06
%
 
4.83
%
 
NM
 
NM
 
3.50
%
 
4.00
%
Expected return on plan assets
6.00
%
 
6.25
%
 
4.66
%
 
4.98
%
 
NM
 
NM
 
NM

 
NM

Rate of compensation increase
4.30
%
 
4.30
%
 
3.37
%
 
3.40
%
 
NM
 
NM
 
NM

 
NM


_______________________________________________________________________________
NM—Not meaningful
Components of Net Periodic Benefit (Income) Cost and Other Amounts Recognized in Other Comprehensive (Income) Loss
(In millions)
2013
 
2012
 
2011
U.S.
 
Non-U.S.
 
Other
 
U.S.
 
Non-U.S.
 
Other
 
U.S.
 
Non-U.S.
 
Other
Net Periodic Benefit (Income) Cost
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
25.2

 
$
11.1

 
$
0.2

 
$
21.5

 
$
8.9

 
$
0.2

 
$
18.2

 
$
8.7

 
$
0.3

Interest cost
51.9

 
20.6

 
2.2

 
55.9

 
21.4

 
2.5

 
60.3

 
22.7

 
3.2

Expected return on plan assets
(68.0
)
 
(14.0
)
 
—

 
(63.3
)
 
(14.8
)
 
—

 
(66.1
)
 
(16.2
)
 
—

Amortization of prior service cost (credit)
0.7

 
—

 
—

 
0.9

 
(0.1
)
 
—

 
1.1

 
—

 
—

Annual mark-to-market adjustment
(65.8
)
 
11.0

 
—

 
67.7

 
52.2

 
—

 
99.1

 
13.1

 
—

Amortization of net deferred actuarial loss
—

 
—

 
0.4

 
—

 
—

 
0.6

 
—

 
—

 
0.6

Net curtailment and settlement loss
—

 
(0.1
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Net periodic benefit (income) cost
$
(56.0
)
 
$
28.6

 
$
2.8

 
$
82.7

 
$
67.6

 
$
3.3

 
$
112.6

 
$
28.3

 
$
4.1

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net deferred actuarial gain
$
—

 
$
—

 
$
(4.3
)
 
$
—

 
$
—

 
$
(2.1
)
 
$
—

 
$
—

 
$
(7.3
)
Net prior service credit
—

 
—

 
(1.7
)
 
—

 
—

 
—

 
—

 
(0.4
)
 
—

Amortization of prior service cost (credit)
(0.7
)
 
—

 
—

 
(0.9
)
 
0.1

 
—

 
(1.1
)
 
—

 
—

Amortization of net deferred actuarial loss
—

 
—

 
(0.4
)
 
—

 
—

 
(0.6
)
 
—

 
—

 
(0.6
)
Total recognized in other comprehensive (income) loss
(0.7
)
 
—

 
(6.4
)
 
(0.9
)
 
0.1

 
(2.7
)
 
(1.1
)
 
(0.4
)
 
(7.9
)
Total recognized in net periodic benefit (income) cost and other comprehensive (income) loss
$
(56.7
)
 
$
28.6

 
$
(3.6
)
 
$
81.8

 
$
67.7

 
$
0.6

 
$
111.5

 
$
27.9

 
$
(3.8
)

The estimated prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit (income) cost over the next fiscal year is $0.7 million. The estimated net deferred actuarial gain and prior service credit for the other postretirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit (income) cost over the next fiscal year are $0.9 million and $0.3 million, respectively.
Funded Status of U.S. Pension Plans
(In millions)
Fully-Funded U.S. Qualified
Pension Plans(1)
 
Underfunded U.S.
Qualified Pension Plans(1)
 
Unfunded Pay-As-You-Go
U.S. Nonqualified Plans(2)
2013

2012

2011

2013

2012

2011

2013

2012

2011
Projected benefit obligation
$
—

 
$
—

 
$
—

 
$
1,197.4

 
$
1,288.6

 
$
1,157.5

 
$
129.4

 
$
137.0

 
$
124.8

Fair value of plan assets
—

 
—

 
—

 
1,145.2

 
1,131.7

 
955.3

 
—

 
—

 
—

Funded status (PBO basis)
$
—

 
$
—

 
$
—

 
$
(52.2
)
 
$
(156.9
)
 
$
(202.2
)
 
$
(129.4
)
 
$
(137.0
)
 
$
(124.8
)
Benefits paid
$
—

 
$
—

 
$
—

 
$
(73.6
)
 
$
(60.7
)
 
$
(59.9
)
 
$
(5.6
)
 
$
(5.7
)
 
$
(5.6
)
Funded Status of Non-U.S. Pension Plans
(In millions)
Fully-Funded Non-U.S.
Pension Plans(1)
 
Underfunded Non-U.S.
Pension Plans(1)
 
Unfunded Pay-As-You-Go
Non-U.S. Pension Plans(2)
2013
 
2012
 
2011
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Projected benefit obligation
$
247.3

 
$
237.1

 
$
213.3

 
$
56.5

 
$
62.6

 
$
53.1

 
$
242.6

 
$
229.6

 
$
186.4

Fair value of plan assets
264.0

 
269.2

 
255.8

 
42.5

 
44.4

 
39.3

 
—

 
—

 
—

Funded status (PBO basis)
$
16.7

 
$
32.1

 
$
42.5

 
$
(14.0
)
 
$
(18.2
)
 
$
(13.8
)
 
$
(242.6
)
 
$
(229.6
)
 
$
(186.4
)
Benefits paid
$
(10.0
)
 
$
(11.8
)
 
$
(10.2
)
 
$
(4.2
)
 
$
(3.6
)
 
$
(2.2
)
 
$
(7.9
)
 
$
(7.7
)
 
$
(8.8
)
_______________________________________________________________________________
(1)
Plans intended to be advance-funded.
(2)
Plans intended to be pay-as-you-go.
The accumulated benefit obligation for all defined benefit pension plans was approximately $1,772 million and $1,849 million as of December 31, 2013 and 2012, respectively.
Pension Plans with Underfunded or
Unfunded Accumulated Benefit Obligation
(In millions)
U.S.
 
Non-U.S.
 
Total
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Projected benefit obligation
$
347.8

 
$
1,425.6

 
$
259.2

 
$
280.3

 
$
607.0

 
$
1,705.9

Accumulated benefit obligation
344.1

 
1,371.2

 
230.7

 
242.0

 
574.8

 
1,613.2

Fair value of plan assets
201.1

 
1,131.7

 
8.9

 
35.5

 
210.0

 
1,167.2


Estimated Expected Future Benefit Payments Reflecting Future Service and Medicare Subsidy Receipts for the Fiscal Years Ending
(In millions)
Pension Plans
 
Other
Postretirement Plans
 
Total
Payments
Net of
Subsidy
U.S.(1)
 
Non-U.S.(2)
 
Benefit
Payments
 
Medicare
Subsidy
Receipts
 
Benefit
Payments(3)
 
Benefit
Payments
 
 
 
2011 (actual)
$
65.5

 
$
21.2

 
$
3.6

 
$
(1.9
)
 
$
88.4

2012 (actual)
66.4

 
23.1

 
4.6

 
(3.3
)
 
90.8

2013 (actual)
79.2

 
22.1

 
4.5

 
(1.4
)
 
104.4

2014(3)
108.6

 
23.0

 
6.2

 
(1.7
)
 
136.1

2015
82.2

 
22.7

 
6.0

 
(0.5
)
 
110.4

2016
83.5

 
24.4

 
5.8

 
(0.1
)
 
113.6

2017
84.9

 
25.1

 
5.6

 
(0.1
)
 
115.5

2018
86.3

 
26.0

 
5.3

 
(0.1
)
 
117.5

2019 - 2023
446.5

 
146.7

 
22.1

 
(0.3
)
 
615.0


_______________________________________________________________________________
(1)
Effective January 1, 2008, lump sum distributions from certain U.S. qualified pension plans were restricted based on the provisions of the Pension Protection Act of 2006 (the "Act"). The Act prohibited the distribution of lump sums to retiring participants while the Company was operating under Chapter 11 of the U.S. Bankruptcy Code and when the plan was less than 100% funded. After emergence from Chapter 11, the plan is permitted to distribute lump sums to retiring participants under the Act when the plan is at least 80% funded.
(2)
Non-U.S. estimated benefit payments for 2014 and future periods have been translated at the applicable December 31, 2013, exchange rates.
(3)
Includes approximately $28 million of benefit payments from nonqualified plans that were previously restricted by the Bankruptcy Court while the Company was in Chapter 11 and are expected to be paid in 2014.
Discount Rate Assumption    The assumed discount rate for pension plans reflects the market rates for high-quality corporate bonds currently available and is subject to change based on changes in overall market interest rates. For the U.S. qualified pension plans, the assumed discount rate of 4.76% as of December 31, 2013, was selected by Grace, in consultation with its independent actuaries, based on a yield curve constructed from a portfolio of high quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plan.
As of December 31, 2013 and 2012, the United Kingdom pension plan and German pension plans combined represented approximately 86% and 84%, respectively, of the benefit obligation of the non-U.S. pension plans. The assumed discount rates as of December 31, 2013, for the United Kingdom (4.34%) and Germany (3.76%) were selected by Grace, in consultation with its independent actuaries, based on yield curves constructed from a portfolio of sterling- and euro-denominated high quality bonds for which the timing and amount of cash outflows approximate the estimated payouts of the plans. The assumed discount rates for the remaining non-U.S. pension plans were determined based on the nature of the liabilities, local economic environments and available bond indices.
Investment Guidelines for Advance-Funded Pension Plans    The investment goal for the U.S. qualified pension plans subject to advance funding is to earn a long-term rate of return consistent with the related cash flow profile of the underlying benefit obligation. The plans are pursuing a well-defined risk management strategy designed to reduce investment risks as their funded status improves.
The U.S. qualified pension plans have adopted a diversified set of portfolio management strategies to optimize the risk reward profile of the plans:
•
Liability hedging portfolio: primarily invested in intermediate-term and long-term investment grade corporate bonds in actively managed strategies.
•
Growth portfolio: invested in a diversified set of assets designed to deliver performance in excess of the underlying liabilities with controls regarding the level of risk.
•
U.S. equity securities: the portfolio contains domestic equities that are passively managed to the S&P 500 and Russell 2000 benchmark and an allocation to an active portfolio benchmarked to the Russell 2000.
•
Non-U.S. equity securities: the portfolio contains non-U.S. equities in an actively managed strategy. Currency futures and forward contracts may be held for the sole purpose of hedging existing currency risk in the portfolio.
•
Other investments: may include (a) high yield bonds: fixed income portfolio of securities below investment grade including up to 30% of the portfolio in non-U.S. issuers; and (b) global real estate securities: portfolio of diversified REIT and other liquid real estate related securities. These portfolios combine income generation and capital appreciation opportunities from developed markets globally.
•
Liquidity portfolio: invested in short-term assets intended to pay periodic plan benefits and expenses.
For 2013, the expected long-term rate of return on assets for the U.S. qualified pension plans was 6.00%. Average annual returns over one-, three-, five-, and ten-year periods were approximately 4%, 8%, 11%, and 6%, respectively.
The expected return on plan assets for the U.S. qualified pension plans for 2013 was selected by Grace, in consultation with its independent actuaries, using an expected return model. The model determines the weighted average return for an investment portfolio based on the target asset allocation and expected future returns for each asset class, which were developed using a building block approach based on observable inflation, available interest rate information, current market characteristics, and historical results.
The target allocation of investment assets at December 31, 2013, and the actual allocation at December 31, 2013 and 2012, for Grace's U.S. qualified pension plans are as follows:
 
Target
Allocation
 
Percentage of Plan Assets
December 31,
U.S. Qualified Pension Plans Asset Category
2013
 
2013
 
2012
U.S. equity securities
10
%
 
10
%
 
16
%
Non-U.S. equity securities
6
%
 
6
%
 
7
%
Short-term debt securities
10
%
 
10
%
 
6
%
Intermediate-term debt securities
28
%
 
28
%
 
31
%
Long-term debt securities
44
%
 
44
%
 
35
%
Other investments
2
%
 
2
%
 
5
%
Total
100
%
 
100
%
 
100
%


The following tables present the fair value hierarchy for the U.S. qualified pension plan assets measured at fair value as of December 31, 2013 and 2012.
 
Fair Value Measurements at December 31, 2013 Using
Assets Measured at Fair Value—U.S. Qualified Pension Plans
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
U.S. equity group trust funds
$
111.5

 
$
—

 
$
111.5

 
$
—

Non-U.S. equity group trust funds
67.1

 
—

 
67.1

 
—

Corporate bond group trust funds—intermediate-term
322.6

 
—

 
322.6

 
—

Corporate bond group trust funds—long-term
502.3

 
—

 
502.3

 
—

Other fixed income group trust funds
22.9

 
—

 
22.9

 
—

Common/collective trust funds
102.3

 
—

 
102.3

 
—

Annuity and immediate participation contracts
16.5

 
—

 
16.5

 
—

Total Assets
$
1,145.2

 
$
—

 
$
1,145.2

 
$
—



 
Fair Value Measurements at December 31, 2012 Using
Assets Measured at Fair Value—U.S. Qualified Pension Plans
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
U.S. equity group trust funds
$
178.8

 
$
—

 
$
178.8

 
$
—

Non-U.S. equity group trust funds
79.2

 
—

 
79.2

 
—

Corporate bond group trust funds—intermediate-term
348.4

 
—

 
348.4

 
—

Corporate bond group trust funds—long-term
399.4

 
—

 
399.4

 
—

Other fixed income group trust funds
36.9

 
—

 
36.9

 
—

REIT group trust funds
15.0

 
—

 
15.0

 
—

Common/collective trust funds
58.1

 
—

 
58.1

 
—

Annuity and immediate participation contracts
15.9

 
—

 
15.9

 
—

Total Assets
$
1,131.7

 
$
—

 
$
1,131.7

 
$
—


Non-U.S. pension plans accounted for approximately 21% and 22% of total global pension assets at December 31, 2013 and 2012, respectively. Each of these plans, where applicable, follows local requirements and regulations. Some of the local requirements include the establishment of a local pension committee, a formal statement of investment policy and procedures, and routine valuations by plan actuaries.
The target allocation of investment assets for non-U.S. pension plans varies depending on the investment goals of the individual plans. The plan assets of the United Kingdom pension plan represent approximately 83% and 82% of the total non-U.S. pension plan assets at December 31, 2013 and 2012, respectively. In determining the expected rate of return for the U.K. pension plan, the trustees' strategic investment policy has been considered together with long-term historical returns and investment community forecasts for each asset class. The expected return by sector has been combined with the actual asset allocation to determine the 2013 expected long-term return assumption of 4.25%.
The target allocation of investment assets at December 31, 2013, and the actual allocation at December 31, 2013 and 2012, for the U.K. pension plan are as follows:
 
Target
Allocation
 
Percentage of Plan Assets
December 31,
United Kingdom Pension Plan Asset Category
2013
 
2013
 
2012
Diversified growth funds
12
%
 
13
%
 
12
%
U.K. gilts
41
%
 
40
%
 
41
%
U.K. corporate bonds
47
%
 
47
%
 
47
%
Total
100
%
 
100
%
 
100
%


The plan assets of the Canadian pension plan represent approximately 9% and 8% of the total non-U.S. pension plan assets at December 31, 2013 and 2012, respectively. The expected long-term rate of return on assets for the Canadian pension plan was 6.5% for 2013.
The target allocation of investment assets at December 31, 2013, and the actual allocation at December 31, 2013 and 2012, for the Canadian pension plan are as follows:
 
Target
Allocation
 
Percentage of Plan Assets
December 31,
Canadian Pension Plan Asset Category
2013
 
2013
 
2012
Equity securities
33
%
 
34
%
 
61
%
Bonds
49
%
 
48
%
 
39
%
Other investments
18
%
 
18
%
 
—
%
Total
100
%
 
100
%
 
100
%


The plan assets of the other country plans represent approximately 8% and 10% in the aggregate (with no country representing more than 3% individually) of total non-U.S. pension plan assets at December 31, 2013 and 2012, respectively.
The following tables present the fair value hierarchy for the non-U.S. pension plan assets measured at fair value as of December 31, 2013 and 2012.
 
Fair Value Measurements at December 31, 2013 Using
Assets Measured at Fair Value—Non-U.S. Pension Plans
(In millions)
Total
 
Quoted Prices
in Active
Markets for
Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Common/collective trust funds
$
294.8

 
$
—

 
$
294.8

 
$
—

Government and agency securities
2.4

 
—

 
2.4

 
—

Corporate bonds
1.3

 
—

 
1.3

 
—

Insurance contracts and other investments
6.3

 
—

 
6.3

 
—

Cash
1.7

 
1.7

 
—

 
—

Total Assets
$
306.5

 
$
1.7


$
304.8

 
$
—



 
Fair Value Measurements at December 31, 2012 Using
Assets Measured at Fair Value—Non-U.S. Pension Plans
(In millions)
Total
 
Quoted Prices
in Active
Markets for
Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Common/collective trust funds
$
301.3

 
$
—

 
$
301.3

 
$
—

Government and agency securities
2.4

 
—

 
2.4

 
—

Corporate bonds
1.2

 
—

 
1.2

 
—

Insurance contracts and other investments
8.0

 
—

 
8.0

 
—

Cash
0.7

 
0.7

 
—

 
—

Total Assets
$
313.6

 
$
0.7

 
$
312.9

 
$
—


Plan Contributions and Funding    Grace intends to satisfy its funding obligations under the U.S. qualified pension plans and to comply with all of the requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"). For ERISA purposes, funded status is calculated on a different basis than under U.S. GAAP. In March 2013, Grace made an accelerated contribution to the trusts that hold assets of the U.S. qualified pension plans of approximately $50 million. Based on the U.S. qualified pension plans' status as of December 31, 2013, there are no minimum required payments under ERISA for 2014.
Grace intends to fund non-U.S. pension plans based on applicable legal requirements and actuarial and trustee recommendations. Grace expects to contribute approximately $18 million to its non-U.S. pension plans and approximately $6 million (excluding any Medicare subsidy receipts) to its other postretirement plans in 2014.
Grace plans to pay benefits as they become due under the pay-as-you-go plans and to maintain compliance with federal funding laws for its U.S. qualified pension plans.

v2.4.0.8
Restructuring Expenses and Related Asset Impairments (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Restructuring expenses and related asset impairments      
Severance and other employee related costs $ 6.7 $ 5.6 $ 3.8
Asset impairments and other restructuring costs 5.8 1.3 3.1
Total restructuring expenses and related asset impairments 12.5 6.9 6.9
Restructuring Liability      
Balance at beginning of the period 3.0 5.9 9.6
Accruals for severance and other employee related costs 7.6 5.6 3.8
Payments (6.4) (8.4) (7.2)
Currency translation adjustments and other 0.2 (0.1) (0.3)
Total restructuring liability 4.4 3.0 5.9
Grace Construction Products
      
Restructuring expenses and related asset impairments      
Total restructuring expenses and related asset impairments 6.1 2.0  
Grace Catalysts Technologies
      
Restructuring expenses and related asset impairments      
Total restructuring expenses and related asset impairments 4.0 0.2  
Grace Materials Technologies
      
Restructuring expenses and related asset impairments      
Total restructuring expenses and related asset impairments 0.4 1.0  
Corporate [Member]
      
Restructuring expenses and related asset impairments      
Total restructuring expenses and related asset impairments $ 2.0 $ 3.7  

v2.4.0.8
Unconsolidated Affiliates (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Equity Method Investments and Joint Ventures [Abstract]      
Equity method investment, ownership interest 50.00%    
Investment in unconsolidated affiliate $ 96.2 $ 85.5  
Equity in earnings of unconsolidated affiliates 22.9 18.5 15.2
ART's assets, liabilities and results of operations:      
Current assets 187.9 136.7  
Noncurrent assets 62.5 65.9  
Total assets 250.4 202.6  
Current liabilities 62.6 37.8  
Noncurrent liabilities 0.6 0.1  
Total liabilities 63.2 37.9  
Net sales 377.6 325.0 339.0
Costs and expenses applicable to net sales 318.4 276.0 296.3
Income before income taxes 46.6 38.9 32.8
Net income 45.6 37.8 31.2
Related party transactions:      
Grace sales of catalysts to ART 232.0 206.9 171.4
Charges for fixed costs, research and development and selling, general and administrative services to ART 28.8 28.5 27.8
Schedule of Investments [Line Items]      
Commitment fee on credit facility 0.10%    
W R Grace & Co. [Member]
      
Schedule of Investments [Line Items]      
Line of credit facility, maximum provided by Grace and Chevron each $ 15    

v2.4.0.8
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
OPERATING ACTIVITIES      
Net income (loss) $ 257.7 $ 41.0 $ 219.1
Reconciliation to net cash provided by operating activities:      
Depreciation and amortization 123.1 119.0 120.0
Equity in earnings of unconsolidated affiliate (22.9) (18.5) (15.2)
Chapter 11 expenses, net of interest income 15.3 16.6 20.0
Chapter 11 expenses paid (15.0) (15.5) (20.6)
Provision for asbestos-related contingencies 21.9 384.6 0
(Benefit from) provision for income taxes 102.9 (61.6) 87.9
Income taxes paid, net of refunds (60.4) (82.6) (44.7)
Tax benefits from stcok-based compensation 35.4 (36.8) 0
Interest accrued on pre-petition liabilities subject to compromise 38.1 40.4 39.0
Default interest settlement on prepetition debt 129.0 0 0
Defined Benefit Pension Expense (23.2) 149.6 139.9
Payments under defined benefit pension arrangements (68.3) (126.8) (265.1)
Expenditures for environmental remediation (14.0) (13.0) (11.8)
Changes in assets and liabilities, excluding effect of currency translation:      
Trade accounts receivable 13.5 (3.0) (80.6)
Inventories 8.6 53.2 (67.9)
Accounts payable 4.2 (11.7) 52.6
All other items, net (30.0) 18.7 46.8
Net cash provided by operating activities 515.9 453.6 219.4
INVESTING ACTIVITIES      
Capital expenditures (156.2) (138.5) (144.0)
Businesses acquired, net of cash acquired (526.2) (80.0) (55.8)
Transfer to restricted cash and cash equivalents (197.8) (61.1) (38.8)
Proceeds from sales of product lines 1.8 0 10.0
Other investing activities (2.3) (0.7) 7.7
Net cash used for nvesting activities (880.7) (280.3) (220.9)
FINANCING ACTIVITIES      
Proceeds from Issuance of Debt 49.8 60.7 40.9
Repayments of Debt (64.5) (24.8) (19.3)
Proceeds from Stock Options Exercised 34.4 32.2 12.1
Tax benefits from stock-based compensation (35.4) 36.8 0
Proceeds from (Payments for) Other Financing Activities 7.3 5.4 6.0
Net cash provided by financing activities (8.4) 110.3 39.7
Effect of currency exchange rate changes on cash and cash equivalents 1.1 5.0 (5.6)
Increase in cash and cash equivalents (372.1) 288.6 32.6
Cash and cash equivalents, beginning of period 1,336.9 1,048.3 1,015.7
Cash and cash equivalents, end of period $ 964.8 $ 1,336.9 $ 1,048.3

v2.4.0.8
Properties and Equipment
 12 Months Ended
Dec. 31, 2013
Property, Plant and Equipment [Abstract]  
Properties and Equipment
Properties and Equipment
 
December 31,
(In millions)
2013
 
2012
Land
$
20.0

 
$
19.9

Buildings
524.3

 
500.3

Information technology and equipment
172.0

 
146.7

Machinery, equipment and other
1,883.2

 
1,786.8

Projects under construction
107.2

 
101.9

Properties and equipment, gross
2,706.7

 
2,555.6

Accumulated depreciation and amortization
(1,876.8
)
 
(1,785.1
)
Properties and equipment, net
$
829.9

 
$
770.5


Capitalized interest costs amounted to $1.2 million, $0.1 million, and $0.1 million in 2013, 2012, and 2011, respectively. Depreciation and lease amortization expense relating to properties and equipment amounted to $108.6 million, $108.2 million, and $110.0 million in 2013, 2012, and 2011, respectively. Grace's rental expense for operating leases amounted to $28.4 million, $26.1 million, and $20.5 million in 2013, 2012, and 2011, respectively.
At December 31, 2013, minimum future non-cancelable payments for operating leases are:
 
(In millions)
2014
$
22.8

2015
17.3

2016
13.4

2017
7.9

2018
4.8

Thereafter
18.7

 
$
84.9


The above minimum non-cancelable lease payments are net of anticipated sublease income of $0.8 million in 2014, $0.7 million in 2015, $0.4 million in 2016, $0.2 million in 2017, $0.1 million in 2018 and $0.1 million thereafter.

v2.4.0.8
Inventories
 12 Months Ended
Dec. 31, 2013
Inventory Disclosure [Abstract]  
Inventories
Inventories are stated at the lower of cost or market, and cost is determined using FIFO. Inventories consisted of the following at December 31, 2013 and 2012:
 
December 31,
(In millions)
2013
 
2012
Raw materials
$
69.7

 
$
66.5

In process
41.8

 
46.1

Finished products
152.4

 
138.8

Other
31.4

 
32.2

 
$
295.3

 
$
283.6

v2.4.0.8
Other Comprehensive Income (Loss)
 12 Months Ended
Dec. 31, 2013
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]  
Other Comprehensive Income (Loss)
The following tables present the pre-tax, tax, and after-tax components of Grace's other comprehensive income (loss) for the years ended December 31, 2013, 2012, and 2011:
Year Ended December 31, 2013
(In millions)
Pre-Tax
Amount
 
Tax
Benefit/
(Expense)
 
After-Tax
Amount
Defined benefit pension and other postretirement plans:
 
 
 
 
 
Amortization of net prior service cost included in net periodic benefit cost
$
0.7

 
$
(0.2
)
 
$
0.5

Amortization of net deferred actuarial loss included in net periodic benefit cost
0.4

 
(0.1
)
 
0.3

Net prior service credit arising during period
1.7

 
(0.6
)
 
1.1

Net deferred actuarial gain arising during period
4.3

 
(1.6
)
 
2.7

Benefit plans, net
7.1

 
(2.5
)
 
4.6

Currency translation adjustments
(23.6
)
 
—

 
(23.6
)
Loss from hedging activities
(0.3
)
 
0.1

 
(0.2
)
Gain on securities available for sale
0.1

 
—

 
0.1

Other comprehensive loss attributable to W. R. Grace & Co. shareholders
$
(16.7
)
 
$
(2.4
)
 
$
(19.1
)

Year Ended December 31, 2012
(In millions)
Pre-Tax
Amount
 
Tax
Benefit/
(Expense)
 
After-Tax
Amount
Defined benefit pension and other postretirement plans:
 
 
 
 
 
Amortization of net prior service cost included in net periodic benefit cost
$
0.8

 
$
(0.3
)
 
$
0.5

Amortization of net deferred actuarial loss included in net periodic benefit cost
0.6

 
(0.2
)
 
0.4

Net deferred actuarial gain arising during period
2.1

 
(0.7
)
 
1.4

Benefit plans, net
3.5

 
(1.2
)
 
2.3

Currency translation adjustments
5.5

 
—

 
5.5

Gain from hedging activities
3.7

 
(1.3
)
 
2.4

Other comprehensive income attributable to W. R. Grace & Co. shareholders
$
12.7

 
$
(2.5
)
 
$
10.2


Year Ended December 31, 2011
(In millions)
Pre-Tax
Amount
 
Tax
Benefit/
(Expense)
 
After-Tax
Amount
Defined benefit pension and other postretirement plans:
 
 
 
 
 
Amortization of net prior service cost included in net periodic benefit cost
$
1.1

 
$
(0.4
)
 
$
0.7

Amortization of net deferred actuarial loss included in net periodic benefit cost
0.6

 
(0.2
)
 
0.4

Net prior service credit arising during period
0.4

 
(0.1
)
 
0.3

Net deferred actuarial gain arising during period
7.3

 
(2.5
)
 
4.8

Benefit plans, net
9.4

 
(3.2
)
 
6.2

Currency translation adjustments
(11.3
)
 
—

 
(11.3
)
Loss from hedging activities
(3.2
)
 
1.1

 
(2.1
)
Other comprehensive loss attributable to W. R. Grace & Co. shareholders
$
(5.1
)
 
$
(2.1
)
 
$
(7.2
)

The following tables present the changes in accumulated other comprehensive income, net of tax, for the years ended December 31, 2013, 2012, and 2011:
Year Ended December 31, 2013
(In millions)
Defined Benefit Pension and Other Postretirement Plans
 
Currency Translation Adjustments
 
Gains and Losses from Hedging Activities
 
Unrealized Loss on Investment
 
Gain on Securities Available for Sale
 
Total
Beginning balance
$
2.0

 
$
28.8

 
$
(0.3
)
 
$
(0.8
)
 
$
—

 
$
29.7

Other comprehensive income (loss) before reclassifications
3.8

 
(23.6
)
 
1.2

 
—

 
0.1

 
(18.5
)
Amounts reclassified from accumulated other comprehensive income
0.8

 
—

 
(1.4
)
 
—

 
—

 
(0.6
)
Net current-period other comprehensive income (loss)
4.6

 
(23.6
)
 
(0.2
)
 
—

 
0.1

 
(19.1
)
Ending balance
$
6.6

 
$
5.2

 
$
(0.5
)
 
$
(0.8
)
 
$
0.1

 
$
10.6


Year Ended December 31, 2012
(In millions)
Defined Benefit Pension and Other Postretirement Plans
 
Currency Translation Adjustments
 
Gains and Losses from Hedging Activities
 
Unrealized Loss on Investment
 
Total
Beginning balance
$
(0.3
)
 
$
23.3

 
$
(2.7
)
 
$
(0.8
)
 
$
19.5

Other comprehensive income (loss) before reclassifications
1.4

 
5.5

 
(0.3
)
 
—

 
6.6

Amounts reclassified from accumulated other comprehensive income
0.9

 
—

 
2.7

 
—

 
3.6

Net current-period other comprehensive income
2.3

 
5.5

 
2.4

 
—

 
10.2

Ending balance
$
2.0

 
$
28.8

 
$
(0.3
)
 
$
(0.8
)
 
$
29.7


Year Ended December 31, 2011
(In millions)
Defined Benefit Pension and Other Postretirement Plans
 
Currency Translation Adjustments
 
Gains and Losses from Hedging Activities
 
Unrealized Loss on Investment
 
Total
Beginning balance
$
(6.5
)
 
$
34.6

 
$
(0.6
)
 
$
(0.8
)
 
$
26.7

Other comprehensive income (loss) before reclassifications
5.1

 
(11.3
)
 
(3.9
)
 
—

 
(10.1
)
Amounts reclassified from accumulated other comprehensive income
1.1

 
—

 
1.8

 
—

 
2.9

Net current-period other comprehensive income (loss)
6.2

 
(11.3
)
 
(2.1
)
 
—

 
(7.2
)
Ending balance
$
(0.3
)
 
$
23.3

 
$
(2.7
)
 
$
(0.8
)
 
$
19.5


Accumulated other comprehensive income related to the defined benefit pension and other postretirement plans at December 31, 2013, 2012, and 2011, respectively, represents the accumulation of net deferred actuarial gains of $6.3 million, $3.3 million, and $1.5 million as well as net prior service credits (costs) of $0.3 million, $(1.3) million, and $(1.8) million. These amounts are net of tax and are amortized as a component of net periodic benefit cost.
Grace is a global enterprise operating in over 40 countries with local currency generally deemed to be the functional currency for accounting purposes. The currency translation amount represents the adjustments necessary to translate the balance sheets valued in local currencies to the U.S. dollar as of the end of each period presented, and to translate revenues and expenses at average exchange rates for each period presented.
See Note 9 for a discussion of hedging activities.

v2.4.0.8
Other Balance Sheet Accounts
 12 Months Ended
Dec. 31, 2013
Other Balance Sheet Accounts  
Other Balance Sheet Accounts
(In millions)
December 31, 2013
 
December 31, 2012
Other Current Liabilities
 
 
 
Accrued compensation
$
62.4

 
$
84.5

Income tax payable
32.0

 
44.8

Customer volume rebates
33.3

 
32.5

Deferred revenue
14.3

 
—

Pension liabilities
15.0

 
14.0

Accrued commissions
6.9

 
12.9

Accrued Chapter 11 reorganization expenses
6.9

 
6.6

Fair value of currency forward and commodity contracts
7.0

 
5.5

Restructuring liability
4.4

 
3.0

Deferred tax liability
0.1

 
0.6

Other accrued liabilities
109.7

 
102.9

 
$
292.0

 
$
307.3


Accrued compensation in the table above includes salaries and wages as well as estimated current amounts due under the annual and long-term incentive programs. Deferred revenue in the above table is related to the UNIPOL® polypropylene process licensing business.

v2.4.0.8
Shareholders' Equity (Deficit) (Details) (USD $)
In Millions, except Share data, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Equity [Abstract]      
Authorized shares 300,000,000 300,000,000  
Par value of common stock (in dollars per share) $ 0.01 $ 0.01  
Shares reserved for issuance of stock options 800,000    
Stock Issued During Period, Value, Stock Options Exercised $ 34.4 $ 32.2 $ 12.1
Common stock activity roll forward      
Common stock outstanding at the beginning of the period (in shares) 75,565,409 73,886,050  
Stock options exercised (in shares) 1,464,294 1,679,359 765,693
Common stock outstanding at the end of the period (in shares) 77,046,143 75,565,409 73,886,050
Common Stock, Shares, Issued 10,440    
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures 6,000    
Shares, Issued 16,440    

v2.4.0.8
Debt
 12 Months Ended
Dec. 31, 2013
Debt Disclosure [Abstract]  
Debt
Debt
Components of Debt
(In millions)
2013
 
2012
Debt payable within one year(1)
$
76.6

 
$
83.4

Debt payable after one year
$
5.3

 
$
13.4

Debt Subject to Compromise(2)
 
 
 
Bank borrowings(3)
$
500.0

 
$
500.0

Accrued interest on bank borrowings
471.0

 
437.2

Default interest settlement(4)
129.0

 
—

Drawn letters of credit(5)
26.7

 
26.5

Accrued interest on drawn letters of credit
11.1

 
9.6

 
$
1,137.8

 
$
973.3

Full-year weighted average interest rates on total debt
3.6
%
 
3.5
%

_______________________________________________________________________________
(1)
Represents borrowings under various lines of credit and other borrowings, primarily by non-U.S. subsidiaries. At December 31, 2013, the fair value of Grace's debt payable within one year not subject to compromise approximated the recorded value of $76.6 million.
(2)
At December 31, 2013, the carrying value of Grace's bank debt subject to compromise plus interest was $1,137.8 million. The estimated fair value of the bank debt approximates the carrying value and is estimated using Level 2 inputs. These amounts were paid in full on February 3, 2014.
(3)
Under bank revolving credit agreements in effect prior to the Filing, Grace could borrow up to $500 million at interest rates based upon the prevailing prime, federal funds and/or Eurodollar rates. Of that amount, $250 million was available under short-term facilities that expired in May 2001, and $250 million was available under a long-term facility that expired in May 2003. As a result of the Filing, Grace was not permitted to make payments under the bank revolving credit agreements, and accordingly, the balance as of the Filing Date was reclassified to debt subject to compromise in the Consolidated Balance Sheets.
(4)
On December 31, 2013, Grace entered into an agreement to settle the final appeal pending in its Chapter 11 bankruptcy with the holders of the company’s pre-petition bank debt (the “Bank Lenders”). The settlement calls for Grace to pay the Bank Lenders $129.0 million, plus interest from December 31, 2013, in addition to the distributions provided in the Joint Plan.
(5)
Amounts drawn on letters of credit pursuant to settled but unpaid claims.
Fair value is determined based on expected future cash flows (discounted at market interest rates), quotes from financial institutions and other appropriate valuation methodologies.
On February 3, 2014, Grace entered into a Credit Agreement (the "Credit Agreement") in connection with its exit financing. The Credit Agreement provides for:
(a)
a $400 million revolving credit facility due in 2019, with interest at LIBOR +175 bps;
(b)
a $700 million term loan due in 2021, with interest at LIBOR +225 bps with a 75 bps floor;
(c)
a €150 million term loan due in 2021 with interest at EURIBOR +250 bps with a 75 bps floor; and
(d)
a $250 million delayed draw term loan facility available for 12 months, with amounts drawn due in 2021, with interest at LIBOR +225 bps with a 75 bps floor.
The term loans will amortize in equal monthly installments in aggregate annual amounts equal to 1.00% of the original principal amount thereof.
The Credit Agreement contains customary affirmative covenants, including, but not limited to (i) maintenance of legal existence and compliance with laws and regulations; (ii) delivery of consolidated financial statements and other information; (iii) payment of taxes; (iv) delivery of notices of defaults and certain other material events; and (v) maintenance of adequate insurance. The Credit Agreement also contains customary negative covenants, including but not limited to restrictions on (i) dividends on, and redemptions of, equity interests and other restricted payments; (ii) liens; (iii) loans and investments; (iv) the sale, transfer or disposition of assets and businesses; (vi) transactions with affiliates; and (vii) a maximum total leverage ratio.
Events of default under the Credit Agreement include, but are not limited to: (i) failure to pay principal, interest, fees or other amounts under the Credit Agreement when due, taking into account any applicable grace period; (ii) any representation or warranty proving to have been incorrect in any material respect when made; (iii) failure to perform or observe covenants or other terms of the Credit Agreement subject to certain grace periods; (iv) a cross-default and cross-acceleration with certain other material debt; (v) bankruptcy events; (vi) certain defaults under ERISA; and (vii) the invalidity or impairment of security interests.
To secure its obligations under the Credit Agreement, the Company has granted security interests in the shares of its Grace-Conn. and Alltech Associates subsidiaries, substantially all of its U.S. non-real estate assets and property, and certain U.S. real estate.
This summary of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such agreement, a copy of which has been filed with the SEC.

v2.4.0.8
Inventories (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Inventory Disclosure [Abstract]    
Raw materials $ 69.7 $ 66.5
In process 41.8 46.1
Finished products 152.4 138.8
Other 31.4 32.2
Total inventories $ 295.3 $ 283.6

v2.4.0.8
Acquisitions
 12 Months Ended
Dec. 31, 2013
Business Combinations [Abstract]  
Acquisitions
In 2013, Grace completed two business combinations for total consideration of $526.2 million as follows:
•
In April 2013, Grace acquired the assets of Chemind Construction Products, a privately held specialty manufacturer and distributor of waterproofing coatings technologies and materials for the design and construction industry.
•
In December 2013, Grace acquired the assets of the UNIPOL® Polypropylene Process Technology Licensing and Catalysts business of The Dow Chemical Company. The acquisition is complementary to Grace's specialty catalysts business and significantly enhances the company’s position as a leading supplier of polyolefin catalysts and technologies.
The purchase price for the acquisitions was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date in accordance with ASC 805 "Business Combinations".
 
(In millions)
Tangible assets
$
55.8

Goodwill
262.9

Intangible assets
247.6

Liabilities assumed
(40.1
)
Net assets acquired, net of cash acquired
$
526.2

The table below presents the assets acquired and liabilities assumed as part of the acquisition of the UNIPOL® licensing and related catalyst business. The excess of the purchase price over the fair value of the tangible net assets and intangible assets acquired was recorded as goodwill. The goodwill recognized is attributable to the expected growth and operating synergies that Grace expects to realize from this acquisition. Goodwill generated from the acquisition will be deductible for tax purposes.
 
(In millions)
Trade accounts receivable
$
10.5

Inventories
22.6

Properties and equipment
18.4

Goodwill
253.2

Intangible assets
243.0

Current deferred revenue
(14.3
)
Noncurrent deferred revenue
(23.0
)
The table below presents the intangible assets acquired as part of the acquisition of the UNIPOL® licensing and related catalyst business and the periods over which they will be amortized.
 
Amount
(In millions)
 
Weighted Average Amortization Period
(in years)
Technology
$
205.3

 
20.9
Trademarks
11.9

 
30.0
Customer Lists
10.6

 
20.0
Other
15.2

 
17.0
Total
$
243.0

 
20.9

Pro forma information is not presented for the UNIPOL® licensing and related catalyst business as the acquisition is not material to the Company. In the month of December, Grace recorded $5.2 million in sales related to the acquisition and earnings of $0.6 million before $8.6 million of acquisition, integration, and transition costs.

v2.4.0.8
Goodwill and Other Intangible Assets
 12 Months Ended
Dec. 31, 2013
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets
The carrying amount of goodwill attributable to each operating segment and the changes in those balances during the year ended December 31, 2013, are as follows:
(In millions)
Grace Catalysts Technologies
 
Grace Materials Technologies
 
Grace
Construction
Products
 
Total
Grace
Balance, December 31, 2012
$
39.5

 
$
40.5

 
$
116.7

 
$
196.7

Goodwill acquired during the year
253.2

 
—

 
9.7

 
262.9

Foreign currency translation/other adjustments
0.7

 
0.7

 
(3.5
)
 
(2.1
)
Balance, December 31, 2013
$
293.4

 
$
41.2

 
$
122.9

 
$
457.5



Grace's net book value of other intangible assets at December 31, 2013 and 2012, was $315.5 million and $82.7 million, respectively, detailed as follows:
 
As of December 31, 2013
(In millions)
Gross Carrying
Amount
 
Accumulated
Amortization
Technology
$
260.0

 
$
37.8

Customer lists
94.9

 
43.7

Trademarks
36.9

 
14.0

Other
22.4

 
3.2

Total
$
414.2

 
$
98.7


 
As of December 31, 2012
(In millions)
Gross Carrying
Amount
 
Accumulated
Amortization
Customer lists
$
81.6

 
$
37.9

Technology
54.6

 
32.6

Trademarks
24.6

 
12.2

Other
8.8

 
4.2

Total
$
169.6

 
$
86.9


Total indefinite-lived trademarks, included above, at December 31, 2013 and 2012, were $4.9 million and $4.8 million, respectively. Amortization expense related to intangible assets amounted to $12.7 million, $10.7 million, and $10.0 million in 2013, 2012, and 2011, respectively.
At December 31, 2013, estimated future annual amortization expenses for intangible assets are:
 
(In millions)
2014
$
24.0

2015
22.4

2016
18.6

2017
17.3

2018
17.0

Thereafter
211.3

Total estimated amortization expenses
$
310.6

v2.4.0.8
Fair Value Measurements and Risk
 12 Months Ended
Dec. 31, 2013
Fair Value Disclosures [Abstract]  
Fair Value Measurements and Risk
Certain of Grace's assets and liabilities are reported at fair value on a gross basis. ASC 820 defines fair value as the value that would be received at the measurement date in the principal or "most advantageous" market. Grace uses principal market data, whenever available, to value assets and liabilities that are required to be reported at fair value.
Grace has identified the following financial assets and liabilities that are subject to the fair value analysis required by ASC 820:
Fair Value of Debt and Other Financial Instruments
See Note 8 for a discussion of the fair value of Grace's debt. At December 31, 2013, the recorded values of other financial instruments such as cash equivalents and trade receivables and payables approximated their fair values, based on the short-term maturities and floating rate characteristics of these instruments.
Derivatives
From time to time, Grace enters into commodity derivatives such as fixed-rate swaps or options with financial institutions to mitigate the risk of volatility of prices of natural gas or other commodities. Under fixed-rate swaps, Grace locks in a fixed rate with a financial institution for future purchases, purchases its commodity from a supplier at the prevailing market rate, and then settles with the bank for any difference in the rates, thereby "swapping" a variable rate for a fixed rate.
The valuation of Grace's fixed-rate natural gas swaps was determined using a market approach, based on natural gas futures trading prices quoted on the New York Mercantile Exchange. Commodity fixed-rate swaps with maturities of not more than 12 months are used and designated as cash flow hedges of forecasted purchases of natural gas. Current open contracts hedge forecasted transactions until March 2014. The effective portion of the gain or loss on the commodity contracts is recorded in "accumulated other comprehensive income" and reclassified into income in the same period or periods that the underlying commodity purchase affects income. At December 31, 2013, the contract volume, or notional amount, of the commodity contracts was 0.3 million MMBtu (million British thermal units) with a total contract value of $1.2 million.
The valuation of Grace's natural gas call options was determined using a market approach, based on the strike price of the options and the natural gas futures trading prices quoted on the New York Mercantile Exchange. Commodity option contracts with maturities of not more than 24 months are used and designated as cash flow hedges of forecasted purchases of natural gas. Current open option contracts hedge forecasted transactions until June 2015. The effective portion of the gain or loss on the commodity contracts is recorded in "accumulated other comprehensive income" and reclassified into income in the same period or periods that the underlying purchases affect income. At December 31, 2013, the contract volume, or notional amount, of the commodity option contracts was 7.1 million MMBtu and the natural gas futures trading price of option contracts was less than the strike price.
The valuation of Grace's fixed-rate aluminum swaps was determined using a market approach, based on aluminum futures trading prices quoted on the London Metal Exchange. Commodity fixed-rate swaps with maturities of not more than 12 months are used and designated as cash flow hedges of forecasted purchases of aluminum. Current open contracts hedge forecasted transactions until December 2014. The effective portion of the gain or loss on the commodity contracts is recorded in "accumulated other comprehensive income" and reclassified into income in the same period or periods that the underlying commodity purchase affects income. At December 31, 2013, the contract volume, or notional amount, of the commodity contracts was 1.4 million pounds with a total contract value of $1.2 million.
Because Grace does business in over 40 countries and in more than 50 currencies, results are exposed to fluctuations in currency exchange rates. Grace seeks to minimize exposure to these fluctuations by matching sales in volatile currencies with expenditures in the same currencies, but it is not always possible to do so. From time to time Grace will use financial instruments such as currency forward contracts, options, or combinations of the two to reduce the risk of certain specific transactions. However, Grace does not have a policy of hedging all exposures, because management does not believe that such a level of hedging would be cost-effective.
The valuation of Grace's currency exchange rate forward contracts is determined using both a market approach and an income approach. Inputs used to value currency exchange rate forward contracts consist of: (1) spot rates, which are quoted by various financial institutions; (2) forward points, which are primarily affected by changes in interest rates; and (3) discount rates used to present value future cash flows, which are based on the London Interbank Offered Rate (LIBOR) curve or overnight indexed swap rates.
In November 2007, Grace purchased currency forward contracts to mitigate the effect of currency risk with respect to intercompany loans between its principal U.S. subsidiary and a German subsidiary. As of December 31, 2013, the total notional amount related to the remaining outstanding currency forward contracts was €194.5 million. These derivatives are not designated as hedging instruments under ASC 815. These contracts were settled upon Grace's emergence from bankruptcy.
The following tables present the fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and 2012:
 
Fair Value Measurements at December 31, 2013 Using
Items Measured at Fair Value on a Recurring Basis
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Currency derivatives
$
2.1

 
$
—

 
$
2.1

 
$
—

Commodity derivatives
—

 
—

 
—

 
—

Total Assets
$
2.1

 
$
—

 
$
2.1

 
$
—

Liabilities
 
 
 
 
 
 
 
Currency derivatives
$
6.9

 
$
—

 
$
6.9

 
$
—

Commodity derivatives
0.1

 
—

 
0.1

 
—

Total Liabilities
$
7.0

 
$
—

 
$
7.0

 
$
—


 
Fair Value Measurements at December 31, 2012 Using
Items Measured at Fair Value on a Recurring Basis
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Currency derivatives
$
1.2

 
$
—

 
$
1.2

 
$
—

Commodity derivatives
0.2

 
—

 
0.2

 
—

Total Assets
$
1.4

 
$
—

 
$
1.4

 
$
—

Liabilities
 
 
 
 
 
 
 
Currency derivatives
$
5.1

 
$
—

 
$
5.1

 
$
—

Commodity derivatives
0.4

 
—

 
0.4

 
—

Total Liabilities
$
5.5

 
$
—

 
$
5.5

 
$
—



The following tables present the location and fair values of derivative instruments included in the Consolidated Balance Sheets as of December 31, 2013 and 2012:
 
Asset Derivatives
 
Liability Derivatives
Fair Values of Derivative Instruments at December 31, 2013
(In millions)
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Derivatives designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$
—

 
Other current liabilities
 
$
0.1

Currency contracts
Other current assets
 
1.0

 
Other current liabilities
 
—

Currency contracts
Other assets
 
1.0

 
Other liabilities
 
—

Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Currency contracts
Other current assets
 
0.1

 
Other current liabilities
 
6.9

Total derivatives
 
 
$
2.1

 
 
 
$
7.0


 
Asset Derivatives
 
Liability Derivatives
Fair Values of Derivative Instruments at December 31, 2012
(In millions)
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Derivatives designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$
0.2

 
Other current liabilities
 
$
0.4

Currency contracts
Other current assets
 
1.2

 
Other current liabilities
 
0.2

Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Currency contracts
Other current assets
 
—

 
Other current liabilities
 
4.9

Total derivatives
 
 
$
1.4

 
 
 
$
5.5



The following tables present the location and amount of gains and losses on derivative instruments included in the Consolidated Statements of Operations or, when applicable, gains and losses initially recognized in other comprehensive income (loss) ("OCI") for the years ended December 31, 2013, 2012, and 2011:
The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Year Ended December 31, 2013
(In millions)
Amount of Gain
or (Loss)
Recognized in
OCI on Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
 
Currency contracts
$
2.0

 
Other expense
 
$
2.4

Currency contracts
(0.2
)
 
Cost of goods sold
 
(0.2
)
Commodity contracts
(0.3
)
 
Cost of goods sold
 
(0.4
)
Total derivatives
$
1.5

 
 
 
$
1.8

 
 
 
 
 
 
 
 
Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
 
Amount of Gain
or (Loss)
Recognized in
Income on
Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
(10.9
)

The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Year Ended December 31, 2012
(In millions)
Amount of Gain
or (Loss)
Recognized in
OCI on Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
 
Currency contracts
$
1.4

 
Other expense
 
$
1.6

Currency contracts
0.2

 
Cost of goods sold
 
(0.1
)
Commodity contracts
(2.3
)
 
Cost of goods sold
 
(5.9
)
Total derivatives
$
(0.7
)
 
 
 
$
(4.4
)
 
 
 
 
 
 
 
 
Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
 
Amount of Gain
or (Loss)
Recognized in
Income on
Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
(4.4
)

The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Year Ended December 31, 2011
(In millions)
Amount of Gain
or (Loss)
Recognized in
OCI on Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
 
Currency contracts
$
(0.2
)
 
Cost of goods sold
 
$
0.1

Commodity contracts
(5.7
)
 
Cost of goods sold
 
(2.8
)
Total derivatives
$
(5.9
)
 
 
 
$
(2.7
)
 
 
 
 
 
 
 
 
Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
 
Amount of Gain
or (Loss)
Recognized in
Income on
Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
9.0


Debt and Interest Rate Swap Agreements
Grace was not a party to any debt or interest rate swaps at December 31, 2013 and 2012. However, in connection with emergence financing, Grace entered into an interest rate swap beginning on February 3, 2015, and maturing on February 3, 2020, fixing $250 million of term debt at 4.643%.
Credit Risk
Grace is exposed to credit risk in its trade accounts receivable. Customers in the petroleum refining and construction industries represent the greatest exposure. Grace's credit evaluation policies, relatively short collection terms and history of minimal credit losses mitigate credit risk exposures. Grace does not generally require collateral for its trade accounts receivable, but may require a bank letter of credit in certain instances, particularly when selling to customers in cash restricted countries.
Grace may also be exposed to credit risk in its derivatives contracts. Grace monitors counterparty credit risk and currently does not anticipate nonperformance by its derivatives counterparties. Grace's derivatives contracts are with internationally recognized commercial financial institutions.

v2.4.0.8
Goodwill and Other Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Changes in goodwill balances  
Balance at the beginning of the period $ 196.7
Goodwill acquired during the year 262.9
Foreign currency translation / other adjustments (2.1)
Balance at the end of the period 457.5
Grace Catalysts Technologies
  
Changes in goodwill balances  
Balance at the beginning of the period 39.5
Goodwill acquired during the year 253.2
Foreign currency translation / other adjustments 0.7
Balance at the end of the period 293.4
Grace Materials Technologies
  
Changes in goodwill balances  
Balance at the beginning of the period 40.5
Goodwill acquired during the year   
Foreign currency translation / other adjustments 0.7
Balance at the end of the period 41.2
Grace Construction Products
  
Changes in goodwill balances  
Balance at the beginning of the period 116.7
Goodwill acquired during the year 9.7
Foreign currency translation / other adjustments (3.5)
Balance at the end of the period $ 122.9

v2.4.0.8
Stock Incentive Plans (Details) (USD $)
In Millions, except Share data, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Stock incentive plan      
Minimum exercise price to fair market value on the date of grant (as a percent) 100.00%    
Stock Option Activity Roll Forward, Number of Shares      
Options exercised (in shares) (1,464,294) (1,679,359) (765,693)
Minimum
      
Stock incentive plan      
Stock incentive plan vesting period 1 year    
Maximum
      
Stock incentive plan      
Stock incentive plan vesting period 3 years    
Employee nonstatutory stock options
      
Stock Option Activity Roll Forward, Number of Shares      
Options outstanding at the beginning of the period (in shares) 4,024,484 4,937,420 4,468,341
Options exercised (in shares) (1,464,294) (1,679,359) (765,693)
Options forfeited (in shares) (95,139) (51,573) (45,369)
Options terminated (in shares) (1,381) (10,995) (7,011)
Options granted (in shares) 421,385 828,991 1,287,152
Options outstanding at the end of the period (in shares) 2,885,055 4,024,484 4,937,420
Stock Option Activity Roll Forward, Average Exercise Price      
Average exercise price at the beginning of the period (in dollars per share) $ 32.33 $ 25.08 $ 18.48
Options exercised (in dollars per share) $ 23.46 $ 19.14 $ 15.76
Options forfeited (in dollars per share) $ 52.17 $ 37.67 $ 22.30
Options terminated (in dollars per share) $ 42.26 $ 15.74 $ 8.03
Options granted (in dollars per share) $ 76.70 $ 49.01 $ 42.18
Average exercise price at the end of the period (in dollars per share) $ 42.60 $ 32.33 $ 25.08
Stock Option Activity, Additional Disclosures      
Weighted-Average Grant Date Fair Value (in dollars per share) $ 19.26 $ 16.67 $ 15.44
Stock Option Activity Roll Forward, Non-vested, Number of Shares      
Non-vested stock options at the beginning of the period (in shares) 2,067,673    
Granted (in shares) 421,385    
Vested/exercised (in shares) (1,101,080)    
Forfeited (in shares) (105,053)    
Non-vested stock options outstanding at the end of the period (in shares) 1,282,925 2,067,673  
Stock Option Activity Roll Forward, Non-vested, Weighted-Average Grant Date Fair Value      
Weighted average grant date fair value of non vested stock options at the beginning of the period (in dollars per share) $ 14.90    
Granted (in dollars per share) $ 19.26    
Vested/Exercised (in dollars per share) $ 12.83    
Forfeited (in dollars per share) $ 16.44    
Weighted average grant date fair value of non vested Stock options at the end of the period (in dollars per share)    $ 14.90  
Summary of intrinsic value      
Intrinsic value for the options outstanding $ 160.5    
Intrinsic value for the options exercisable 105.9    
Total intrinsic value of all options exercised $ 83.2 $ 65.3 $ 21.9
Exercise Price Range One [Member] | Employee nonstatutory stock options
      
Stock incentive plan      
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Remaining Contractual Term 0 years 4 months 5 days    
Exercise Price Range Three [Member] | Employee nonstatutory stock options
      
Stock incentive plan      
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Remaining Contractual Term 1 year 4 months 4 days    
Exercise Price Range Four [Member] | Employee nonstatutory stock options
      
Stock incentive plan      
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Remaining Contractual Term 2 years 7 months 11 days    
Exercise Price Range Five [Member] | Employee nonstatutory stock options
      
Stock incentive plan      
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Remaining Contractual Term 2 years 10 months 1 day    
Exercise Price Range Seven [Member] | Employee nonstatutory stock options
      
Stock incentive plan      
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Remaining Contractual Term 3 years 11 months 5 days    
Exercise Price Range Eight [Member] [Member] | Employee nonstatutory stock options
      
Stock incentive plan      
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Remaining Contractual Term 4 years 3 months 28 days    
Exercise Price Range Nine [Member] | Employee nonstatutory stock options
      
Stock incentive plan      
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Outstanding Options, Weighted Average Remaining Contractual Term 4 years 5 months 28 days    

v2.4.0.8
Debt (Details) (USD $)
In Millions, unless otherwise specified
 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended
Feb. 28, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Feb. 03, 2014
May 31, 2003
May 31, 2001
Feb. 28, 2014
Dec. 31, 2013
Dec. 31, 2013
Revolving Credit Facility [Member]
Feb. 03, 2014
Revolving Credit Facility [Member]
Feb. 28, 2014
Term Loan B (EUR) [Member]
Dec. 31, 2013
Term Loan B (EUR) [Member]
Feb. 28, 2014
Delayed-Draw Term Loan B [Member]
Dec. 31, 2013
Delayed-Draw Term Loan B [Member]
Mar. 31, 2013
Unallocated Amount to Segment [Member]
Dec. 31, 2012
Unallocated Amount to Segment [Member]
Dec. 31, 2011
Unallocated Amount to Segment [Member]
Exchange Rate Net Charges   $ (8.5) $ 0 $ 0                       $ 6.9 $ 0 $ 0
Senior Secured Credit Facilities to Fund Emergence 900             700       150   250        
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Minimum                   75.00%     75.00%   75.00%      
Term Loans, Percent of Original Principal Annual Amortization Amounts   1.00%                                
Debt payable within one year   76.6 [1] 83.4 [1]                              
Debt payable after one year   5.3 13.4                              
Debt Subject to Compromise                                    
Bank borrowings   500.0 [2],[3] 500.0 [2],[3]                              
Accrued interest on bank borrowings   471.0 [2] 437.2 [2]                              
Default interest settlement liability on prepetition debt   129.0 0                              
Drawn letters of credit   26.7 [2] 26.5 [2]                              
Accrued interest on drawn letters of credit   11.1 [2] 9.6 [2]                              
Debt Subject to Compromise   1,137.8 973.3                              
Debt Instrument, Basis Spread on Variable Rate                 225.00%   175.00%   250.00%   225.00%      
Line of Credit Facility, Amount Outstanding         400           400              
Length of Delayed Draw Term Loan Facility                             12 months      
Full-year weighted average interest rates on total debt   3.60% 3.50%                              
Maximum borrowing amount of revolving credit agreements, prior to the Filing   500                                
Maximum borrowing amount of short-term credit facilities, prior to the Filing             250                      
Maximum borrowing amount of long-term credit facilities, prior to the Filing           $ 250                        
[1] Represents borrowings under various lines of credit and other borrowings, primarily by non-U.S. subsidiaries. At December 31, 2013, the fair value of Grace's debt payable within one year not subject to compromise approximated the recorded value of $76.6 million.
[2] At December 31, 2013, the carrying value of Grace's bank debt subject to compromise plus interest was $1,137.8 million. The estimated fair value of the bank debt approximates the carrying value and is estimated using Level 2 inputs.
[3] Under bank revolving credit agreements in effect prior to the Filing, Grace could borrow up to $500 million at interest rates based upon the prevailing prime, federal funds and/or Eurodollar rates. Of that amount, $250 million was available under short-term facilities that expired in May 2001, and $250 million was available under a long-term facility that expired in May 2003. As a result of the Filing, Grace was not permitted to make payments under the bank revolving credit agreements, and accordingly, the balance as of the Filing Date was reclassified to debt subject to compromise in the Consolidated Balance Sheets.

v2.4.0.8
Acquisitions (Details) (USD $)
In Millions, unless otherwise specified
 3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Acquisitions                      
Number of Businesses Acquired                 2    
Net sales $ 776.7 $ 771.3 $ 802.8 $ 709.9 $ 797.8 $ 776.6 $ 826.7 $ 754.4 $ 3,060.7 $ 3,155.5 $ 3,211.9
Income Related to Acquisition Before Acquisition Costs                 0.6    
Business Combination, Acquisition Related Costs                 8.6    
Series of Individually Immaterial Business Acquisitions [Member]
                      
Acquisitions                      
Goodwill 262.9               262.9    
Tangible assets 55.8               55.8    
Intangible assets 247.6               247.6    
Liabilities assumed (40.1)               (40.1)    
Net assets acquired, net of cash acquired 526.2               526.2    
Verifi and De Neef
                      
Acquisitions                      
Net sales                 5.2    
Business Acquisition, Purchase Price Allocation, Current Assets, Receivables 10.5               10.5    
Business Acquisition, Purchase Price Allocation, Current Assets, Inventory 22.6               22.6    
Business Acquisition, Purchase Price Allocation, Property, Plant and Equipment 18.4               18.4    
Goodwill 253.2               253.2    
Intangible assets 243.0               243.0    
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life                 20 years 10 months 24 days    
Business Acquisition, Purchase Price Allocation, Current Liabilities, Deferred Revenue (14.3)               (14.3)    
Business Acquisition, Purchase Price Allocation, Noncurrent Liabilities (23.0)               (23.0)    
Verifi and De Neef | Customer Lists [Member]
                      
Acquisitions                      
Intangible assets 10.6               10.6    
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life                 20 years 0 months 0 days    
Verifi and De Neef | Trademarks [Member]
                      
Acquisitions                      
Intangible assets 11.9               11.9    
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life                 30 years 0 months 0 days    
Verifi and De Neef | Developed Technology Rights [Member]
                      
Acquisitions                      
Intangible assets 205.3               205.3    
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life                 20 years 10 months 24 days    
Verifi and De Neef | Other Intangible Assets [Member]
                      
Acquisitions                      
Intangible assets $ 15.2               $ 15.2    
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life                 17 years 0 months 0 days    

v2.4.0.8
Quarterly Summary and Statistical Information (Unaudited) (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
 3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Quarterly Financial Information Disclosure [Abstract]                      
Net sales $ 776.7 $ 771.3 $ 802.8 $ 709.9 $ 797.8 $ 776.6 $ 826.7 $ 754.4 $ 3,060.7 $ 3,155.5 $ 3,211.9
Gross Profit 299.8 282.4 300.9 259.0 258.3 282.2 301.4 272.5 1,142.1 1,114.4 1,112.9
Net income (loss) 29.7 77.0 90.3 59.1 (184.3) 82.1 75.4 66.8 256.1 40.0 219.7
Basic earnings per share:                      
Net income (loss) (in dollars per share) $ 0.39 [1] $ 1.00 [1] $ 1.18 [1] $ 0.78 [1] $ (2.44) [1] $ 1.09 [1] $ 1.01 [1] $ 0.90 [1] $ 3.35 $ 0.53 $ 2.99
Diluted earnings per share:                      
Net income (loss) (in dollars per share) $ 0.38 [1] $ 0.99 [1] $ 1.16 [1] $ 0.77 [1] $ (2.44) [1] $ 1.07 [1] $ 0.98 [1] $ 0.87 [1] $ 3.30 $ 0.52 $ 2.91
Market price of common stock:                      
High (in dollars per share) $ 101.72 [2] $ 89.80 [2] $ 85.43 [2] $ 79.14 [2] $ 68.86 [2] $ 61.58 [2] $ 61.08 [2] $ 58.89 [2]      
Low (in dollars per share) $ 85.06 [2] $ 74.46 [2] $ 72.00 [2] $ 68.23 [2] $ 58.40 [2] $ 48.14 [2] $ 47.40 [2] $ 45.39 [2]      
Close (in dollars per share) $ 98.87 [2] $ 87.40 [2] $ 84.04 [2] $ 77.51 [2] $ 67.23 [2] $ 59.08 [2] $ 50.45 [2] $ 57.80 [2]      
Scenario, Adjustment [Member]
                      
Quarterly Financial Information Disclosure [Abstract]                      
Gross Profit   2.3 2.4 4.8 42.0 2.6 2.7 4.6 6.7 (51.9) (48.4)
Net income (loss)   $ 7.6 $ 7.5 $ 6.2 $ 72.7 $ 6.6 $ 6.1 $ 5.9 $ 66.6 $ (54.1) $ (49.7)
Basic earnings per share:                      
Net income (loss) (in dollars per share)   $ 0.10 $ 0.10 $ 0.08 $ 0.96 $ 0.09 $ 0.08 $ 0.08 $ 0.87 $ (0.72) $ (0.68)
Diluted earnings per share:                      
Net income (loss) (in dollars per share)   $ 0.10 $ 0.10 $ 0.08 $ 0.96 $ 0.09 $ 0.08 $ 0.08 $ 0.86 $ (0.71) $ (0.66)
[1] Per share results for the four quarters may differ from full-year per share results, as a separate computation of the weighted average number of shares outstanding is made for each quarter presented.
[2] Principal market: New York Stock Exchange.

v2.4.0.8
Chapter 11 Information (Tables)
 12 Months Ended
Dec. 31, 2013
Reorganizations [Abstract]  
Schedule of Components of Liabilities Subject to Compromise
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".
Schedule of Changes 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
Schedule of Chapter 11 Expenses
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
Schedule of Condensed Statements of Operations of 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
Schedule of Condensed Statements of Cash Flows of Debtors
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
Schedule of Condensed Balance Sheets Of Debtors
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

v2.4.0.8
Operating Segment Information (Tables)
 12 Months Ended
Dec. 31, 2013
Segment Reporting [Abstract]  
Schedule of operating segment data
Operating Segment Data
(In millions)
2013
 
2012
 
2011
Net Sales
 
 
 
 
 
Catalysts Technologies
$
1,124.0

 
$
1,268.1

 
$
1,347.3

Materials Technologies
878.5

 
862.6

 
872.6

Construction Products
1,058.2

 
1,024.8

 
992.0

Total
$
3,060.7

 
$
3,155.5

 
$
3,211.9

Adjusted EBIT
 
 
 
 
 
Catalysts Technologies segment operating income
$
327.5

 
$
393.8

 
$
388.8

Materials Technologies segment operating income
181.8

 
162.0

 
158.7

Construction Products segment operating income
151.7

 
125.2

 
97.3

Corporate costs
(82.8
)
 
(92.4
)
 
(102.8
)
Certain pension costs
(27.4
)
 
(30.4
)
 
(28.7
)
Total
$
550.8

 
$
558.2

 
$
513.3

Depreciation and Amortization
 
 
 
 
 
Catalysts Technologies
$
54.2

 
$
54.0

 
$
52.5

Materials Technologies
31.4

 
29.5

 
30.9

Construction Products
31.8

 
32.9

 
34.0

Corporate
5.7

 
2.6

 
2.6

Total
$
123.1

 
$
119.0

 
$
120.0

Capital Expenditures
 
 
 
 
 
Catalysts Technologies
$
58.7

 
$
70.8

 
$
74.5

Materials Technologies
33.0

 
27.1

 
32.3

Construction Products
32.8

 
26.5

 
19.5

Corporate
31.7

 
14.1

 
17.7

Total
$
156.2

 
$
138.5

 
$
144.0

Total Assets
 
 
 
 
 
Catalysts Technologies
$
1,361.8

 
$
794.8

 
$
804.5

Materials Technologies
508.9

 
494.9

 
481.1

Construction Products
609.1

 
616.0

 
545.9

Corporate
2,916.3

 
3,184.7

 
2,664.1

Total
$
5,396.1

 
$
5,090.4

 
$
4,495.6
Schedule of reconciliation of operating segment data to financial statements
Reconciliation of Operating Segment Data to Financial Statements
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Grace Adjusted EBIT
$
550.8

 
$
558.2

 
$
513.3

Chapter 11-related costs, net
(16.4
)
 
(15.6
)
 
(23.9
)
Asbestos-related costs
(11.9
)
 
(7.6
)
 
(20.8
)
Asbestos and bankruptcy-related charges, net
(21.9
)
 
(384.6
)
 
—

Default interest settlement
(129.0
)
 
—

 
—

Pension MTM adjustment and other related costs, net
50.6

 
(119.2
)
 
(111.2
)
Restructuring expenses and related asset impairments
(12.5
)
 
(6.9
)
 
(6.9
)
Loss on sale of product line
(1.0
)
 
(0.2
)
 
(0.4
)
Income and expense related to divested businesses
—

 
(0.2
)
 
(0.4
)
Interest expense and related financing costs
(43.8
)
 
(46.5
)
 
(43.3
)
Currency transaction loss on cash in Venezuela
(6.9
)
 
—

 
—

Interest income of non-Debtor subsidiaries
1.0

 
1.0

 
1.2

Net income (loss) attributable to noncontrolling interests
1.6

 
1.0

 
(0.6
)
Income (loss) before income taxes
$
360.6

 
$
(20.6
)
 
$
307.0
Schedule of geographic area data
Geographic Area Data
(In millions)
2013
 
2012
 
2011
Net Sales
 
 
 
 
 
United States
$
886.0

 
$
878.9

 
$
945.0

Canada and Puerto Rico
73.7

 
88.7

 
96.8

Total North America
959.7

 
967.6

 
1,041.8

Europe Middle East Africa
1,087.9

 
1,175.6

 
1,260.4

Asia Pacific
654.1

 
660.3

 
599.3

Latin America
359.0

 
352.0

 
310.4

Total
$
3,060.7

 
$
3,155.5

 
$
3,211.9

Properties and Equipment, net
 
 
 
 
 
United States
$
497.8

 
$
438.4

 
$
421.1

Canada and Puerto Rico
19.1

 
19.8

 
19.5

Total North America
516.9

 
458.2

 
440.6

Europe Middle East Africa
212.4

 
210.3

 
202.1

Asia Pacific
70.9

 
72.1

 
53.8

Latin America
29.7

 
29.9

 
27.0

Total
$
829.9

 
$
770.5

 
$
723.5

Goodwill, Intangibles and Other Assets
 
 
 
 
 
United States
$
589.7

 
$
91.5

 
$
110.3

Canada and Puerto Rico
8.6

 
7.3

 
7.3

Total North America
598.3

 
98.8

 
117.6

Europe Middle East Africa
106.4

 
105.2

 
108.9

Asia Pacific
52.4

 
40.1

 
12.4

Latin America
55.9

 
59.8

 
17.9

Total
$
813.0

 
$
303.9

 
$
256.8

v2.4.0.8
Restructuring Expenses and Related Asset Impairments
 12 Months Ended
Dec. 31, 2013
Restructuring and Related Activities [Abstract]  
Restructuring Expenses and Related Asset Impairments
Restructuring Expenses and Related Asset Impairments
In 2013, Grace incurred costs from restructuring actions as a result of changes in the business environment and business structure. Grace incurred $12.5 million ($6.1 million in Grace Construction Products, $4.0 million in Grace Catalysts Technologies, $0.4 million in Grace Materials Technologies and $2.0 million in Corporate) of restructuring expenses and related asset impairments during 2013, compared with $6.9 million in 2012 ($2.0 million in Grace Construction Products, $0.2 million in Grace Catalysts Technologies, $1.0 million in Grace Materials Technologies and $3.7 million in Corporate). Substantially all costs related to the 2012 programs were paid as of December 31, 2013, while substantially all costs related to the 2013 restructuring programs are expected to be paid by December 31, 2014.
Restructuring Expenses and Related Asset Impairments
(In millions)
Year Ended December 31,
2013
 
2012
 
2011
Severance and other employee-related costs
$
6.7

 
$
5.6

 
$
3.8

Asset impairments and other restructuring costs
5.8

 
1.3

 
3.1

Total restructuring expenses and related asset impairments
$
12.5

 
$
6.9

 
$
6.9


Restructuring Liability
(In millions)
December 31,
2013
 
2012
 
2011
Balance, December 31, 2012
$
3.0

 
$
5.9

 
$
9.6

Accruals for severance and other costs
7.6

 
5.6

 
3.8

Payments
(6.4
)
 
(8.4
)
 
(7.2
)
Currency translation adjustments and other
0.2

 
(0.1
)
 
(0.3
)
Balance, December 31, 2013
$
4.4

 
$
3.0

 
$
5.9

v2.4.0.8
Earnings Per Share
 12 Months Ended
Dec. 31, 2013
Earnings Per Share [Abstract]  
Earnings Per Share
The following table shows a reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share.
(In millions, except per share amounts)
2013
 
2012
 
2011
Numerators
 
 
 
 
 
Net income attributable to W. R. Grace & Co. shareholders
$
256.1

 
$
40.0

 
$
219.7

Denominators
 
 
 
 
 
Weighted average common shares—basic calculation
76.4

 
74.9

 
73.6

Dilutive effect of employee stock options
1.3

 
1.4

 
1.9

Weighted average common shares—diluted calculation
77.7

 
76.3

 
75.5

Basic earnings per share
$
3.35

 
$
0.53

 
$
2.99

Diluted earnings per share
$
3.30

 
$
0.52

 
$
2.91


There were approximately 0.3 million, 0.4 million and 1.3 million anti-dilutive options outstanding for the years ended December 31, 2013, 2012 and 2011, respectively. The effect of the warrant for 10 million shares issued under the Joint Plan, as discussed in Note 2, is not included in diluted earnings per share.

v2.4.0.8
Stock Incentive Plans (Tables)
 12 Months Ended
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of information relating to options
The following table sets forth information relating to such options during 2013, 2012, and 2011:
Stock Option Activity
Number Of
Shares
 
Average
Exercise
Price
 
Weighted-
Average
Grant Date
Fair Value
Balance, January 1, 2011
4,468,341

 
$
18.48

 
 
Options exercised
(765,693
)
 
15.76

 
 
Options forfeited
(45,369
)
 
22.30

 
 
Options terminated
(7,011
)
 
8.03

 


Options granted
1,287,152

 
42.18

 
$
15.44

Balance, December 31, 2011
4,937,420

 
25.08

 
 
Options exercised
(1,679,359
)
 
19.14

 
 
Options forfeited
(51,573
)
 
37.67

 
 
Options terminated
(10,995
)
 
15.74

 
 
Options granted
828,991

 
49.01

 
16.67

Balance, December 31, 2012
4,024,484

 
32.33

 
 
Options exercised
(1,464,294
)
 
23.46

 
 
Options forfeited
(95,139
)
 
52.17

 
 
Options terminated
(1,381
)
 
42.26

 
 
Options granted
421,385

 
76.70

 
19.26

Balance, December 31, 2013
2,885,055

 
42.60

 
Schedule of summary of non-vested option activity for the period
The following is a summary of non-vested option activity for the year ended December 31, 2013:
Stock Option Activity
Number Of
Shares
 
Weighted-
Average
Grant Date
Fair Value
Non-vested options outstanding at beginning of year
2,067,673

 
$
14.90

Granted
421,385

 
19.26

Vested / exercised
(1,101,080
)
 
12.83

Forfeited
(105,053
)
 
16.44

Non vested options outstanding at end of year
1,282,925

 
Schedule of stock options outstanding and exercisable by exercise price range
A summary of our stock options outstanding and exercisable at December 31, 2013, follows:
Exercise Price Range
Number
Outstanding
 
Number
Exercisable
 
Outstanding Weighted-
Average
Remaining
Contractual
Life (Years)
 
Exercisable
Weighted-
Average
Exercise
Price
$0 - $10
253,551

 
253,551

 
0.35
 
$
9.79

$20 - $30
644,916

 
644,916

 
1.34
 
27.75

$30 - $40
11,192

 
5,794

 
2.61
 
37.06

$40 - $50
1,550,004

 
689,602

 
2.84
 
44.07

$60 - $70
24,787

 
8,267

 
3.93
 
66.57

$70 - $80
398,380

 
—

 
4.33
 
—

$80 - $90
2,225

 
—

 
4.49
 
—

 
2,885,055

 
1,602,130

 
 
 
 
Schedule of the assumptions used for estimating the fair value of stock options granted during the period
The following summarizes the assumptions used for estimating the fair value of stock options granted during 2013, 2012 and 2011, respectively.
 
2013
 
2012
 
2011
Expected volatility
32.3% - 34.3%
 
35.8% - 46.4%
 
46.5% -50.7%
Weighted average expected volatility
33.3%
 
40.6%
 
48.7%
Expected term
3.00 - 4.00 years
 
3.00 - 4.00 years
 
3.00 - 4.00 years
Risk-free rate
0.61%
 
0.55%
 
1.43%
Dividend yield
—%
 
—%
 
—%

v2.4.0.8
Fair Value Measurements and Risk (Tables)
 12 Months Ended
Dec. 31, 2013
Fair Value Disclosures [Abstract]  
Schedule of assets and liabilities measured at fair value on a recurring basis
The following tables present the fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and 2012:
 
Fair Value Measurements at December 31, 2013 Using
Items Measured at Fair Value on a Recurring Basis
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Currency derivatives
$
2.1

 
$
—

 
$
2.1

 
$
—

Commodity derivatives
—

 
—

 
—

 
—

Total Assets
$
2.1

 
$
—

 
$
2.1

 
$
—

Liabilities
 
 
 
 
 
 
 
Currency derivatives
$
6.9

 
$
—

 
$
6.9

 
$
—

Commodity derivatives
0.1

 
—

 
0.1

 
—

Total Liabilities
$
7.0

 
$
—

 
$
7.0

 
$
—


 
Fair Value Measurements at December 31, 2012 Using
Items Measured at Fair Value on a Recurring Basis
(In millions)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets or
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Currency derivatives
$
1.2

 
$
—

 
$
1.2

 
$
—

Commodity derivatives
0.2

 
—

 
0.2

 
—

Total Assets
$
1.4

 
$
—

 
$
1.4

 
$
—

Liabilities
 
 
 
 
 
 
 
Currency derivatives
$
5.1

 
$
—

 
$
5.1

 
$
—

Commodity derivatives
0.4

 
—

 
0.4

 
—

Total Liabilities
$
5.5

 
$
—

 
$
5.5

 
$
—
Schedule of the location and fair values of derivative instruments included in the Consolidated Balance Sheets
The following tables present the location and fair values of derivative instruments included in the Consolidated Balance Sheets as of December 31, 2013 and 2012:
 
Asset Derivatives
 
Liability Derivatives
Fair Values of Derivative Instruments at December 31, 2013
(In millions)
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Derivatives designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$
—

 
Other current liabilities
 
$
0.1

Currency contracts
Other current assets
 
1.0

 
Other current liabilities
 
—

Currency contracts
Other assets
 
1.0

 
Other liabilities
 
—

Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Currency contracts
Other current assets
 
0.1

 
Other current liabilities
 
6.9

Total derivatives
 
 
$
2.1

 
 
 
$
7.0


 
Asset Derivatives
 
Liability Derivatives
Fair Values of Derivative Instruments at December 31, 2012
(In millions)
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Derivatives designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$
0.2

 
Other current liabilities
 
$
0.4

Currency contracts
Other current assets
 
1.2

 
Other current liabilities
 
0.2

Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Currency contracts
Other current assets
 
—

 
Other current liabilities
 
4.9

Total derivatives
 
 
$
1.4

 
 
 
$
5.5
Schedule of the location and amount of gains and losses on derivative instruments included in the Consolidated Statements of Operations, or initially recognized in other comprehensive income (loss) ("OCI"), when applicable
The following tables present the location and amount of gains and losses on derivative instruments included in the Consolidated Statements of Operations or, when applicable, gains and losses initially recognized in other comprehensive income (loss) ("OCI") for the years ended December 31, 2013, 2012, and 2011:
The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Year Ended December 31, 2013
(In millions)
Amount of Gain
or (Loss)
Recognized in
OCI on Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
 
Currency contracts
$
2.0

 
Other expense
 
$
2.4

Currency contracts
(0.2
)
 
Cost of goods sold
 
(0.2
)
Commodity contracts
(0.3
)
 
Cost of goods sold
 
(0.4
)
Total derivatives
$
1.5

 
 
 
$
1.8

 
 
 
 
 
 
 
 
Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
 
Amount of Gain
or (Loss)
Recognized in
Income on
Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
(10.9
)

The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Year Ended December 31, 2012
(In millions)
Amount of Gain
or (Loss)
Recognized in
OCI on Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
 
Currency contracts
$
1.4

 
Other expense
 
$
1.6

Currency contracts
0.2

 
Cost of goods sold
 
(0.1
)
Commodity contracts
(2.3
)
 
Cost of goods sold
 
(5.9
)
Total derivatives
$
(0.7
)
 
 
 
$
(4.4
)
 
 
 
 
 
 
 
 
Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
 
Amount of Gain
or (Loss)
Recognized in
Income on
Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
(4.4
)

The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Year Ended December 31, 2011
(In millions)
Amount of Gain
or (Loss)
Recognized in
OCI on Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
 
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
 
Currency contracts
$
(0.2
)
 
Cost of goods sold
 
$
0.1

Commodity contracts
(5.7
)
 
Cost of goods sold
 
(2.8
)
Total derivatives
$
(5.9
)
 
 
 
$
(2.7
)
 
 
 
 
 
 
 
 
Location of Gain
or (Loss)
Recognized in
Income on
Derivatives
 
Amount of Gain
or (Loss)
Recognized in
Income on
Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
9.0

v2.4.0.8
Consolidated Balance Sheet (USD $)
In Millions, unless otherwise specified
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Current Assets        
Cash and cash equivalents $ 964.8 $ 1,336.9 $ 1,048.3 $ 1,015.7
Restricted cash and cash equivalents 395.4 197.6    
Trade accounts receivable, less allowance of $6.0 (2012—$5.2) 469.5 474.8    
Accounts Receivable, Related Parties, Current 12.3 15.6    
Inventories 295.3 283.6    
Deferred Tax Assets, Net of Valuation Allowance, Current 58.1 58.3    
Other current assets 99.0 78.4    
Total Current Assets 2,294.4 2,445.2    
Properties and equipment, net of accumulated depreciation and amortization of $1,876.8 (2012—$1,785.1) 829.9 770.5    
Goodwill 457.5 196.7    
Intangible Assets, Net (Excluding Goodwill) 315.5 82.7    
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent 845.9 953.2    
Asbestos-related insurance 500.0 500.0    
Overfunded defined benefit pension plans 16.7 32.1    
Investment in unconsolidated affiliate 96.2 85.5    
Other Assets, Noncurrent 40.0 24.5    
Total Assets 5,396.1 5,090.4 4,495.6  
Current Liabilities        
Debt payable within one year 76.6 [1] 83.4 [1]    
Notes Payable, Related Parties, Current 4.5 3.6    
Accounts payable 249.5 249.4    
Accounts Payable, Related Parties, Current 13.0 2.6    
Other Liabilities, Current 292.0 307.3    
Total Current Liabilities 635.6 646.3    
Debt payable after one year 5.3 13.4    
Notes Payable, Related Parties, Noncurrent 24.3 22.4    
Deferred income taxes 18.2 27.1    
Underfunded and unfunded defined benefit pension plans 299.6 396.5    
Other Liabilities, Noncurrent 65.8 45.0    
Total Liabilities Not Subject to Compromise 1,048.8 1,150.7    
Liabilities Subject to Compromise-Note 2        
Liabilities Subject to Compromise, Debt and Accrued Interest 1,137.8 973.3    
Liabilities Subject to Compromise, Income Tax Contingencies 76.6 87.6    
Liabilities Subject to Compromise, Asbestos Obligations 2,092.4 2,065.0    
Liabilities Subject to Compromise, Environmental Contingencies 134.5 140.5    
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations 176.3 190.9    
Other liabilities and accrued interest 158.5 162.6    
Total Liabilities Subject to Compromise 3,776.1 3,619.9    
Total Liabilities 4,824.9 4,770.6    
Equity        
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 77,046,143 (2012—75,565,409) 0.8 0.8    
Paid-in capital 533.4 536.5    
Retained Earnings (Accumulated Deficit) 15.8 (240.3)    
Treasury stock, at cost: shares: 0 (2012—1,414,351) 0 (16.8)    
Accumulated Other Comprehensive Income (Loss), Net of Tax 10.6 29.7    
Total W. R. Grace & Co. Shareholders' Equity 560.6 309.9    
Noncontrolling interests 10.6 9.9    
Total Equity 571.2 319.8 184.1 (55.7)
Total Liabilities and Equity $ 5,396.1 $ 5,090.4    
[1] Represents borrowings under various lines of credit and other borrowings, primarily by non-U.S. subsidiaries. At December 31, 2013, the fair value of Grace's debt payable within one year not subject to compromise approximated the recorded value of $76.6 million.

v2.4.0.8
Operating Segment Information (Details) (USD $)
In Millions, unless otherwise specified
 3 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
segment
Dec. 31, 2012
Dec. 31, 2011
Operating segment information                      
Chapter 11 Related Costs                 $ 16.4 $ 15.6 $ 23.9
Number of operating segments                 3    
Net Sales                      
Net sales 776.7 771.3 802.8 709.9 797.8 776.6 826.7 754.4 3,060.7 3,155.5 3,211.9
Adjusted EBIT                      
Grace Adjusted EBIT                 550.8 558.2 513.3
Depreciation and Amortization                 123.1 119.0 120.0
Capital Expenditures                 156.2 138.5 144.0
Total Assets 5,396.1       5,090.4       5,396.1 5,090.4 4,495.6
Certain Pension Costs                 27.4 30.4 28.7
Reconciliation of operating segment data to financial statements                      
Grace Adjusted EBIT                 550.8 558.2 513.3
Chapter 11- and asbestos-related costs, net                 (11.9) (7.6) (20.8)
Asbestos and bankruptcy-related charges                 (21.9) (384.6) 0
Default interest settlement on prepetition debt                 (129.0) 0 0
Defined Benefit Pension Mark to Market Adjustment                 50.6 (119.2) (111.2)
Restructuring expenses and related asset impairments                 (12.5) (6.9) (6.9)
Loss on sale of product line                 (1.0) (0.2) (0.4)
Divestment expenses                    (0.2) (0.4)
Exchange Rate Net Charges                 8.5 0 0
Interest expense and related financing costs                 (43.8) (46.5) (43.3)
Consolidated Exchange Rate Net Charges                 6.9    
Interest income of non-Debtor subsidiaries                 1.0 1.0 1.2
Net (loss) income attributable to noncontrolling interests                 1.6 1.0 (0.6)
Income before income taxes                 360.6 (20.6) 307.0
Catalysts Technologies
                      
Net Sales                      
Net sales                 1,124.0 1,268.1 1,347.3
Adjusted EBIT                      
Operating income (loss)                 327.5 393.8 388.8
Depreciation and Amortization                 54.2 54.0 52.5
Capital Expenditures                 58.7 70.8 74.5
Total Assets 1,361.8       794.8       1,361.8 794.8 804.5
Reconciliation of operating segment data to financial statements                      
Restructuring expenses and related asset impairments                 (4.0) (0.2)  
Materials Technologies
                      
Net Sales                      
Net sales                 878.5 862.6 872.6
Adjusted EBIT                      
Operating income (loss)                 181.8 162.0 158.7
Depreciation and Amortization                 31.4 29.5 30.9
Capital Expenditures                 33.0 27.1 32.3
Total Assets 508.9       494.9       508.9 494.9 481.1
Reconciliation of operating segment data to financial statements                      
Restructuring expenses and related asset impairments                 (0.4) (1.0)  
Construction Products
                      
Net Sales                      
Net sales                 1,058.2 1,024.8 992.0
Adjusted EBIT                      
Operating income (loss)                 151.7 125.2 97.3
Depreciation and Amortization                 31.8 32.9 34.0
Capital Expenditures                 32.8 26.5 19.5
Total Assets 609.1       616.0       609.1 616.0 545.9
Reconciliation of operating segment data to financial statements                      
Restructuring expenses and related asset impairments                 (6.1) (2.0)  
Corporate costs
                      
Adjusted EBIT                      
Operating income (loss)                 (82.8) (92.4) (102.8)
Reconciliation of operating segment data to financial statements                      
Exchange Rate Net Charges       (6.9)           0 0
Corporate [Member]
                      
Adjusted EBIT                      
Depreciation and Amortization                 5.7 2.6 2.6
Capital Expenditures                 31.7 14.1 17.7
Total Assets 2,916.3       3,184.7       2,916.3 3,184.7 2,664.1
Reconciliation of operating segment data to financial statements                      
Restructuring expenses and related asset impairments                 $ (2.0) $ (3.7)  

v2.4.0.8
Subsequent Event - Chapter 11 Emergence (Notes)
 12 Months Ended
Dec. 31, 2013
Subsequent Event-Chapter 11 Emergence [Abstract]  
Subsequent Events [Text Block]
Grace emerged from bankruptcy on February 3, 2014. Grace paid approximately $1,900 million in emergence-related claims and other costs. This included payments to the PI Trust and the PD Trust, pre-petition bank debt, drawn letters of credit, environmental settlements, income tax settlements, amounts due to vendors, and other non-asbestos claims, plus accrued interest for certain of these items as well as other emergence costs. Grace will satisfy all other liabilities previously subject to compromise as they become due and payable after emergence.
Grace funded these payments through a combination of approximately $1,360 million of cash on hand and approximately $900 million in exit financing. The exit financing consisted of a $700 million term loan and a €150 million term loan. See Note 8 for a discussion of Grace's exit financing.
Pro forma Information (Unaudited)    The below table presents the pro forma consolidated balance sheet of Grace as of December 31, 2013, reflecting the accounting effects of the Joint Plan as if it became effective on that date. The income tax effects of the pro forma adjustments have been computed at a 37.41% U.S. Federal and state income tax rate. Grace is not required to adopt fresh-start accounting at emergence since existing shareholders continue to retain a majority interest in the Company on the Effective Date, and Grace is not balance sheet insolvent. Following is a description of the pro forma adjustments:
1.
Borrowings Under New Credit Agreements—Reflects $900 million of debt borrowed on the Effective Date. Cash proceeds were approximately $873 million after approximately $27 million of origination fees and other costs of the exit financing, including original issue discount.
2.
Consideration to the Asbestos Trusts—Reflects the transfer by Grace to the PI Trust and the PD Trust of (i) cash (including restricted cash) of approximately $512 million, (ii) the PI Deferred Payment Obligations, (iii) the PD Deferred Payment Obligation, (iv) the warrant, and (v) rights to proceeds from Grace's asbestos-related insurance coverage. See Note 2 for a discussion of this consideration. The related deferred income tax assets are reclassified from temporary differences to NOL carryforward.
Grace expects to recognize income tax deductions on the Deferred Payments when cash payments are made. Grace has determined that payments of the U.S. ZAI contingent payments are not probable, and no such payments are included in this pro forma.
3.
Payment of Remaining Pre-Petition Liabilities and Adjustment for Additional Expenses—Reflects the payment of pre-petition bank debt, drawn letters of credit, environmental settlements, income tax settlements, amounts due to vendors and other non-asbestos claims, accrued interest for certain of these items, and other emergence costs on the Effective Date. The related deferred income tax assets are reclassified from temporary differences to NOL carryforward. Also reflects approximately $12 million of emergence costs, which are assumed fully deductible for tax purposes.
4.
NOLs and Future Tax Deductions—Reflects U.S. Federal and state income tax deductions attributable to the payment of certain bankruptcy claims. U.S. Federal and state NOL carryforwards are assumed to increase to approximately $670 million (tax effected at approximately $252 million). In addition, under current U.S. Federal and state income tax law, future deductions are expected in the amount of $1,580 million when the deferred payments are made and $490 million when the warrant is settled.
These future payments are expected to create additional NOL carryforwards in the years paid. It is expected that use of these U.S. Federal tax benefits will be unrestricted and that a valuation allowance will not be established. U.S. state tax benefits associated with these future payments may have some restrictions and a partial valuation allowance may be recorded. The realization of the tax benefits depends on the amount and timing of future U.S. taxable income and the avoidance of limitation events that would apply in the event that Grace undergoes an "ownership change" (as defined by the Internal Revenue Code).
5.
Reclassification of Liabilities Subject to Compromise—Reflects certain items that were classified as Liabilities Subject to Compromise as of December 31, 2013, and were not paid at emergence, which were reclassified to the appropriate liability accounts at emergence. This includes income tax contingencies, postretirement benefits, and environmental contingencies that will be paid as they come due after emergence.
W. R. Grace and Co. and Subsidiaries
Pro forma Consolidated Balance Sheet (unaudited)
 
 
 
Pro forma Adjustments
 
 
(In millions, except par value and shares)
December 31, 2013
Reported
 
Borrowings Under New Credit Agreements
 
Consideration to the Asbestos Trusts
 
Payment of Remaining Pre-Petition Liabilities and Adjustment for Additional Expenses
 
Reclassifications at Emergence
 
December 31, 2013
Pro forma
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
964.8

 
$
873.0

 
$
(269.6
)
 
$
(1,370.6
)
 
$
153.2

 
$
350.8

Restricted cash and cash equivalents
395.4

 
—

 
(242.2
)
 
—

 
(153.2
)
 
—

Trade accounts receivable, less allowance of $6.0
469.5

 
—

 
—

 
—

 
—

 
469.5

Accounts receivable—unconsolidated affiliate
12.3

 
—

 
—

 
—

 
—

 
12.3

Inventories
295.3

 
—

 
—

 
—

 
—

 
295.3

Deferred income taxes
58.1

 
—

 
—

 
—

 
—

 
58.1

Other current assets
99.0

 
—

 
—

 
—

 
—

 
99.0

Total Current Assets
2,294.4

 
873.0

 
(511.8
)
 
(1,370.6
)
 
—

 
1,285.0

Properties and equipment, net of accumulated depreciation and amortization of $1,876.8
829.9

 
—

 
—

 
—

 
—

 
829.9

Goodwill
457.5

 
—

 
—

 
—

 
—

 
457.5

Technology and other intangible assets, net
315.5

 
—

 
—

 
—

 
—

 
315.5

Deferred income taxes:
 
 
 
 
 
 
 
 
 
 


Net operating loss carryforward
—

 
—

 
111.0

 
141.2

 
—

 
252.2

Temporary differences
845.9

 
—

 
(111.0
)
 
(134.1
)
 
—

 
600.8

Asbestos-related insurance
500.0

 
—

 
(500.0
)
 
—

 
—

 
—

Overfunded defined benefit pension plans
16.7

 
—

 
—

 
—

 
—

 
16.7

Investment in unconsolidated affiliate
96.2

 
—

 
—

 
—

 
—

 
96.2

Other assets
40.0

 
27.0

 
—

 
—

 
—

 
67.0

Total Assets
$
5,396.1

 
$
900.0

 
$
(1,011.8
)
 
$
(1,363.5
)
 
$
—

 
$
3,920.8

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
Liabilities Not Subject to Compromise
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
 
 
 
Debt payable within one year
$
76.6

 
$
9.0

 
$
—

 
$
—

 
$
—

 
$
85.6

Debt payable—unconsolidated affiliate
4.5

 
—

 
—

 
—

 
—

 
4.5

Accounts payable
249.5

 
—

 
—

 
—

 
—

 
249.5

Accounts payable—unconsolidated affiliate
13.0

 
—

 
—

 
—

 
—

 
13.0

PI warrant liability
—

 
—

 
490.0

 
—

 
—

 
490.0

Other current liabilities
292.0

 
—

 
—

 
7.2

 
38.8

 
338.0

Total Current Liabilities
635.6

 
9.0

 
490.0

 
7.2

 
38.8

 
1,180.6

Debt payable after one year
5.3

 
891.0

 
—

 
—

 
—

 
896.3

Debt payable—unconsolidated affiliate
24.3

 
—

 
—

 
—

 
—

 
24.3

Deferred payment obligations
—

 
—

 
594.5

 
—

 
—

 
594.5

Deferred income taxes
18.2

 
—

 
—

 
—

 
—

 
18.2

Income tax contingencies
—

 
—

 
—

 
—

 
76.6

 
76.6

Underfunded defined benefit pension plans
66.2

 
—

 
—

 
—

 
—

 
66.2

Unfunded pay-as-you-go defined benefit pension plans
233.4

 
—

 
—

 
—

 
95.9

 
329.3

Other liabilities
65.8

 
—

 
—

 
—

 
105.2

 
171.0

Total Liabilities Not Subject to Compromise
1,048.8

 
900.0

 
1,084.5

 
7.2

 
316.5

 
3,357.0

Liabilities Subject to Compromise
 
 
 
 
 
 
 
 
 
 
 
Debt plus accrued interest
1,137.8

 
—

 
—

 
(1,135.7
)
 
(2.1
)
 
—

Income tax contingencies
76.6

 
—

 
—

 
—

 
(76.6
)
 
—

Asbestos-related contingencies
2,092.4

 
—

 
(2,084.1
)
 
—

 
(8.3
)
 
—

Environmental contingencies
134.5

 
—

 
—

 
(77.5
)
 
(57.0
)
 
—

Postretirement benefits
176.3

 
—

 
—

 
(27.7
)
 
(148.6
)
 
—

Other liabilities and accrued interest
158.5

 
—

 
(12.2
)
 
(122.4
)
 
(23.9
)
 
—

Total Liabilities Subject to Compromise
3,776.1

 
—

 
(2,096.3
)
 
(1,363.3
)
 
(316.5
)
 
—

Total Liabilities
4,824.9

 
900.0

 
(1,011.8
)
 
(1,356.1
)
 
—

 
3,357.0

Equity
 
 
 
 
 
 
 
 
 
 
 
Common stock issued, par value $0.01; 300,000,000 shares authorized; outstanding: 77,046,143 (2012—75,565,409)
0.8

 
—

 
—

 
—

 
—

 
0.8

Paid-in capital
533.4

 
—

 
—

 
—

 
—

 
533.4

Retained earnings
15.8

 
—

 
—

 
(7.4
)
 
—

 
8.4

Treasury stock, at cost: shares: 0 (2012—1,414,351)
—

 
—

 
—

 
—

 
—

 
—

Accumulated other comprehensive loss
10.6

 
—

 
—

 
—

 
—

 
10.6

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

 
—

 
—

 
(7.4
)
 
—

 
553.2

Noncontrolling interests
10.6

 
—

 
—

 
—

 
—

 
10.6

Total Equity
571.2

 
—

 
—

 
(7.4
)
 
—

 
563.8

Total Liabilities and Equity
$
5,396.1

 
$
900.0

 
$
(1,011.8
)
 
$
(1,363.5
)
 
$
—

 
$
3,920.8

v2.4.0.8
Chapter 11 Information (Details 2) (USD $)
In Millions, unless otherwise specified
 3 Months Ended 12 Months Ended 12 Months Ended 153 Months Ended 12 Months Ended
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Mar. 31, 2012
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Jan. 31, 2014
Dec. 31, 2010
Dec. 31, 2005
Apr. 02, 2001
Dec. 31, 2013
Chapter 11 Filing Entities
Dec. 31, 2012
Chapter 11 Filing Entities
Dec. 31, 2011
Chapter 11 Filing Entities
Dec. 31, 2013
Chapter 11 Filing Entities
Apr. 02, 2001
Chapter 11 Filing Entities
Dec. 31, 2013
UNIPOL Acquisition [Member]
Chapter 11 information                                          
Period of Warrant Settlement after Effective Date of Joint Plan                 1 year                        
Default interest settlement on prepetition debt                 $ 129.0 $ 0 $ 0         $ 129.0 $ 0        
Asbestos and bankruptcy-related charges                 21.9 384.6 0         21.9 384.6        
Interest rate on pre-petition bank credit facilities 3.25%       3.25%       3.25% 3.25%   5.00%   6.09%              
Post-petition interest sought by general unsecured creditors                 210                        
Compound interest rate on unsecured claims (as a percent) 4.19%               4.19%                        
Components of liabilities subject to compromise are as follows:                                          
Liabilities Subject to Compromise, Asbestos Obligations 2,092.4       2,065.0       2,092.4 2,065.0           2,092.4 2,065.0   2,092.4 1,002.8  
Pre-petition bank debt plus accrued interest 1,137.8       973.3       1,137.8 973.3           1,100.0 937.2   1,100.0 511.5  
Liabilities Subject to Compromise, Environmental Contingencies 134.5       140.5       134.5 140.5           134.5 140.5   134.5 164.8  
Unfunded special pension arrangements 176.3       190.9       176.3 190.9           129.4 137.1   129.4 70.8  
Liabilities Subject to Compromise, Income Tax Contingencies 76.6       87.6       76.6 87.6           76.6 87.6   76.6 242.1  
Postretirement benefits other than pension                               57.2 63.9   57.2 185.4  
Drawn letters of credit plus accrued interest                                37.8 36.1   37.8    
Accounts payable                               34.3 31.3   34.3 43.0  
Retained obligations of divested businesses                               29.9 29.0   29.9 43.5  
Other liabilities and accrued interest 158.5       162.6       158.5 162.6           94.3 102.3   94.3 102.1  
Reclassification to current liabilities                                [1] (10.3) [1] (10.1) [1]   (10.3) [1]    
Total Liabilities Subject to Compromise 3,776.1       3,619.9       3,776.1 3,619.9           3,776.1 3,619.9   3,776.1 2,366.0  
Reconciliation of the changes in pre-filing date liability balances                                          
Balance, Filing Date April 2, 2001                                     2,366.0    
Cash disbursements and/or reclassifications under Bankruptcy Court orders:                                          
Payment of environmental settlement liability                 (14.0) (13.0) (11.8)               (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    
Provision for income tax contingencies                                     (91.5)    
Balance sheet reclassifications                                     (36.0)    
Balance, end of period                               3,776.1          
Chapter 11 Expenses                                          
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         15.3 16.6 20.0      
Debtor-in-Possession Statements of Operations                                          
Net sales, including intercompany 776.7 771.3 802.8 709.9 797.8 776.6 826.7 754.4 3,060.7 3,155.5 3,211.9         1,425.4 1,512.6 1,479.4     5.2
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                 505.7 635.2 659.9         178.1 274.9 334.5      
Defined Benefit Pension Expense                 (23.2) 149.6 139.9         (51.8) 82.0 111.6      
Depreciation and amortization                 123.1 119.0 120.0         69.1 67.3 68.3      
Chapter 11 expenses, net of interest income                 15.3 16.6 20.0         15.3 16.6 20.0      
Provision for asbestos-related contingencies                 21.9 384.6 0         21.9 384.6        
Research and development expenses                 65.2 64.5 68.5         37.8 35.9 39.7      
Interest expense and related financing costs                 43.8 46.5 43.3         37.7 41.5 40.0      
Restructuring expenses                 7.6 5.6 3.8                    
Provision for environmental remediation                 8.2 3.6 17.8                    
Other income, net                 23.5 6.1 29.4         (75.7) (93.2) (75.3)      
Total costs and expenses                 781.5 1,135.0 805.9         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                 (102.9) 61.6 (87.9)         (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 29.7 77.0 90.3 59.1 (184.3) 82.1 75.4 66.8 256.1 40.0 219.7         256.1 40.0 219.7      
OPERATING ACTIVITIES                                          
Net income attributable to W. R. Grace & Co. shareholders 29.7 77.0 90.3 59.1 (184.3) 82.1 75.4 66.8 256.1 40.0 219.7         256.1 40.0 219.7      
Reconciliation to net cash provided by operating activities                                          
Depreciation and amortization                 123.1 119.0 120.0         69.1 67.3 68.3      
Provision for asbestos-related contingencies                 21.9 384.6 0         21.9 384.6        
Equity in net income of non-filing entities                               (179.3) (157.9) (137.4)      
(Benefit from) provision for income taxes                 102.9 (61.6) 87.9         53.2 (48.4) 50.8      
Income taxes paid, net of refunds                 (60.4) (82.6) (44.7)         13.5 (33.9) (13.2)      
Tax benefits from stcok-based compensation                 35.4 (36.8) 0         35.4 (36.8)        
Defined Benefit Pension Expense                 (23.2) 149.6 139.9         (51.8) 82.0 111.6      
Payments under defined benefit pension arrangements                 (68.3) (126.8) (265.1)         (55.6) (114.9) (251.4)      
Repatriation of cash from foreign entities                 25.9 22.1 30.1         29.7 21.6 30.3      
Changes in assets and liabilities, excluding the effect of foreign currency translation:                                          
Trade accounts receivable                 13.5 (3.0) (80.6)         (6.2) (7.1) (26.2)      
Inventories                 8.6 53.2 (67.9)         (23.0) 66.7 (66.4)      
Accounts payable                 4.2 (11.7) 52.6         21.9 (15.1) 37.5      
All other items, net                 (30.0) 18.7 46.8         31.1 75.9 13.4      
Net cash provided by operating activities                               345.0 324.0 37.0      
INVESTING ACTIVITIES                                          
Capital expenditures                 (156.2) (138.5) (144.0)         (94.1) (82.6) (77.7)      
Payments to Acquire Businesses, Net of Cash Acquired                 (526.2) (80.0) (55.8)         (510.4)          
Transfer to restricted cash and cash equivalents                 (197.8) (61.1) (38.8)         (222.2) (35.4) (8.4)      
Other                 (2.3) (0.7) 7.7             10.0      
Net cash provided by (used for) investing activities                               (826.7) (118.0) (76.1)      
Proceeds from Issuance of Debt                 49.8 60.7 40.9         0.3 0 0      
Repayments of Debt                 (64.5) (24.8) (19.3)         (0.8) (0.6) 0      
Proceeds from Stock Options Exercised                 34.4 32.2 12.1         34.4 32.2 12.1      
Tax benefits from stock-based compensation                 35.4 (36.8) 0         (35.4) (36.8) 0      
Proceeds from (Payments for) Other Financing Activities                 7.3 5.4 6.0         4.1 1.2 28.4      
Net cash provided by (used for) financing activities                               2.6 69.6 40.5      
Net increase in cash and cash equivalents                               (479.1) 275.6 1.4      
Cash and cash equivalents, beginning of period       1,336.9       1,048.3 1,336.9 1,048.3 1,015.7         1,064.2 788.6 787.2      
Cash and cash equivalents, end of period 964.8       1,336.9       964.8 1,336.9 1,048.3         585.1 1,064.2 788.6 585.1    
Current Assets                                          
Cash and cash equivalents 964.8       1,336.9       964.8 1,336.9 1,048.3         585.1 1,064.2 788.6 585.1    
Restricted cash and cash equivalents 395.4       197.6       395.4 197.6           340.5 118.3   340.5    
Accounts Receivable, Net, Current 469.5       474.8       469.5 474.8           138.8 132.6   138.8    
Accounts Receivable, Related Parties, Current 12.3       15.6       12.3 15.6           10.9 14.1   10.9    
Receivables from non-filing entities, net                               173.0 160.5   173.0    
Inventories 295.3       283.6       295.3 283.6           138.9 115.9   138.9    
Other current assets 99.0       78.4       99.0 78.4           69.3 58.5   69.3    
Total Current Assets 2,294.4       2,445.2       2,294.4 2,445.2           1,456.5 1,664.1   1,456.5    
Properties and equipment, net 829.9       770.5       829.9 770.5           484.5 433.5   484.5    
Goodwill 457.5       196.7       457.5 196.7           279.9 26.8   279.9    
Intangible Assets, Net (Excluding Goodwill) 315.5       82.7       315.5 82.7           249.1 9.6   249.1    
Deferred Tax Assets, Net of Valuation Allowance, Noncurrent 845.9       953.2       845.9 953.2           817.3 933.3   817.3    
Asbestos-related insurance 500.0       500.0       500.0 500.0           500.0 500.0   500.0    
Loans receivable from non-filing entities, net                               283.8 282.1   283.8    
Investment in non-filing entities                               531.3 442.3   531.3    
Investment in unconsolidated affiliate 96.2       85.5       96.2 85.5           96.2 85.5   96.2    
Other Assets, Noncurrent 40.0       24.5       40.0 24.5           16.5 10.8   16.5    
Total Assets 5,396.1       5,090.4       5,396.1 5,090.4 4,495.6         4,715.1 4,388.0   4,715.1    
Liabilities Not Subject to Compromise                                          
Total Current Liabilities 635.6       646.3       635.6 646.3           247.4 244.7   247.4    
Underfunded defined benefit pension plans                               52.2 156.9   52.2    
Other liabilities (including $22.4 due to unconsolidated affiliate) (2011-$18.3) 65.8       45.0       65.8 45.0           78.7 56.5   78.7    
Total Liabilities Not Subject to Compromise 1,048.8       1,150.7       1,048.8 1,150.7           378.3 458.1   378.3    
Total Liabilities Subject to Compromise 3,776.1       3,619.9       3,776.1 3,619.9           3,776.1 3,619.9   3,776.1 2,366.0  
Total Liabilities 4,824.9       4,770.6       4,824.9 4,770.6           4,154.4 4,078.0   4,154.4    
Total W. R. Grace & Co. Shareholders' Equity 560.6       309.9       560.6 309.9           560.6 309.9   560.6    
Noncontrolling interests in Chapter 11 filing entities 10.6       9.9       10.6 9.9           0.1 0.1   0.1    
Total Equity 571.2       319.8       571.2 319.8 184.1   (55.7)     560.7 310.0   560.7    
Total Liabilities and Equity 5,396.1       5,090.4       5,396.1 5,090.4           4,715.1 4,388.0   4,715.1    
Due to unconsolidated affiliate, current                               17.5 6.0   17.5    
Due to unconsolidated affiliate, noncurrent                               $ 24.3 $ 22.4   $ 24.3    
[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".

v2.4.0.8
Other Comprehensive Income (Loss) (Details) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Defined benefit pension and other postretirement plans:      
Amortization of net prior service cost included in net periodic benefit cost $ 0.7 $ 0.8 $ 1.1
Other Comprehensive Income, Amortization of Defined Benefit Plan, Net Deferred Actuarial Gain (Loss) Recognized in Net Periodic Benefit Cost before Tax 0.4 0.6 0.6
Net prior service credit arising during period 1.7   0.4
Net deferred actuarial loss arising during period 4.3 2.1 7.3
Benefit plans, net 7.1 3.5 9.4
Currency translation adjustments (23.6) 5.5 (11.3)
Gain (loss) from hedging activities (0.3) 3.7 (3.2)
Other comprehensive income (loss) attributable to W. R. Grace and Co. shareholders (16.7) 12.7 (5.1)
Defined benefit pension and other postretirement plans:      
Amortization of net prior service credit included in net periodic benefit cost (0.2) (0.3) (0.4)
Amortization of net deferred actuarial loss included in net periodic benefit cost (0.1) (0.2) (0.2)
Net prior service credit arising during period (0.6)   (0.1)
Net deferred actuarial loss arising during period (1.6) (0.7) (2.5)
Benefit plans, net (2.5) (1.2) (3.2)
Currency translation adjustments 0 0 0
Gain (loss) from hedging activities 0.1 (1.3) 1.1
Other comprehensive income (loss) attributable to W. R. Grace and Co. shareholders (2.4) (2.5) (2.1)
Defined benefit pension and other postretirement plans:      
Amortization of net prior service credit included in net periodic benefit cost 0.5 0.5 0.7
Amortization of net deferred actuarial loss included in net periodic benefit cost 0.3 0.4 0.4
Net prior service credit arising during period 1.1   0.3
Net deferred actuarial loss arising during period 2.7 1.4 4.8
Benefit plans, net 4.6 2.3 6.2
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax, Portion Attributable to Parent (23.6) 5.5 (11.3)
Gain (loss) from hedging activities (0.2) 2.4 (2.1)
Other comprehensive income (loss) attributable to W. R. Grace & Co. shareholders (19.1) 10.2 (7.2)
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, before Tax 0.1    
Other Comprehensive Income (Loss), Available-for-sale Securities, Tax 0    
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax $ 0.1    

v2.4.0.8
Fair Value Measurements and Risk (Details 3) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Currency contracts | Other income (expense)
      
Gains and losses on derivative instruments      
Derivative Instruments, Gain (Loss) Recognized in Income, Net $ (10.9) $ (4.4) $ 9.0
Derivatives in ASC 815 cash flow hedging relationships
      
Gains and losses on derivative instruments      
Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) 1.5 (0.7) (5.9)
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) 1.8 (4.4) (2.7)
Derivatives in ASC 815 cash flow hedging relationships | Currency contracts | Cost of goods sold
      
Gains and losses on derivative instruments      
Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) (0.2) 0.2 (0.2)
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (0.2) (0.1) 0.1
Derivatives in ASC 815 cash flow hedging relationships | Currency contracts | Other income (expense)
      
Gains and losses on derivative instruments      
Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) 2.0 1.4  
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) 2.4 1.6  
Derivatives in ASC 815 cash flow hedging relationships | Commodity contracts | Cost of goods sold
      
Gains and losses on derivative instruments      
Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) (0.3) (2.3) (5.7)
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) $ (0.4) $ (5.9) $ (2.8)

v2.4.0.8
Operating Segment Information
 12 Months Ended
Dec. 31, 2013
Segment Reporting [Abstract]  
Operating Segment Information
Operating Segment Information
Grace is a global producer of specialty chemicals and specialty materials. Grace manages its business through three operating segments: Grace Catalysts Technologies, Grace Materials Technologies, and Grace Construction Products. Grace Catalysts Technologies includes catalysts and related products and technologies used in refining, petrochemical and other chemical manufacturing applications. Grace's Advanced Refining Technologies (ART) joint venture is managed in this segment. ART is an unconsolidated affiliate, and Grace accounts for ART using the equity method as discussed in Note 21. Grace Materials Technologies includes packaging technologies and engineered materials, coatings and sealants used in consumer, industrial, and pharmaceutical applications. Grace Construction Products includes specialty construction chemicals and specialty building materials used in commercial, infrastructure and residential construction. Intersegment sales are eliminated in consolidation. The table below presents information related to Grace's operating segments. Only those corporate expenses directly related to the operating segments are allocated for reporting purposes. All remaining corporate items are reported separately and labeled as such.
Grace also excludes defined benefit pension expense from the calculation of segment operating income. Grace believes that the exclusion of defined benefit pension expense provides a better indicator of its operating segment performance as defined benefit pension expense is not managed at an operating segment level.
Grace defines Adjusted EBIT (a non-GAAP financial measure) to be net income adjusted for interest income and expense, income taxes, costs related to Chapter 11, asbestos-related costs, restructuring expenses and related asset impairments, pension costs other than service and interest costs, expected returns on plan assets and amortization of prior service costs/credits, certain income and expense items related to divested businesses, product lines and certain other investments, and gains and losses on sales of businesses, product lines and certain other investments. In the 2013 first quarter, Grace also adjusted for the currency transaction loss incurred on our Venezuelan cash balances of $6.9 million before taxes.
Operating Segment Data
(In millions)
2013
 
2012
 
2011
Net Sales
 
 
 
 
 
Catalysts Technologies
$
1,124.0

 
$
1,268.1

 
$
1,347.3

Materials Technologies
878.5

 
862.6

 
872.6

Construction Products
1,058.2

 
1,024.8

 
992.0

Total
$
3,060.7

 
$
3,155.5

 
$
3,211.9

Adjusted EBIT
 
 
 
 
 
Catalysts Technologies segment operating income
$
327.5

 
$
393.8

 
$
388.8

Materials Technologies segment operating income
181.8

 
162.0

 
158.7

Construction Products segment operating income
151.7

 
125.2

 
97.3

Corporate costs
(82.8
)
 
(92.4
)
 
(102.8
)
Certain pension costs
(27.4
)
 
(30.4
)
 
(28.7
)
Total
$
550.8

 
$
558.2

 
$
513.3

Depreciation and Amortization
 
 
 
 
 
Catalysts Technologies
$
54.2

 
$
54.0

 
$
52.5

Materials Technologies
31.4

 
29.5

 
30.9

Construction Products
31.8

 
32.9

 
34.0

Corporate
5.7

 
2.6

 
2.6

Total
$
123.1

 
$
119.0

 
$
120.0

Capital Expenditures
 
 
 
 
 
Catalysts Technologies
$
58.7

 
$
70.8

 
$
74.5

Materials Technologies
33.0

 
27.1

 
32.3

Construction Products
32.8

 
26.5

 
19.5

Corporate
31.7

 
14.1

 
17.7

Total
$
156.2

 
$
138.5

 
$
144.0

Total Assets
 
 
 
 
 
Catalysts Technologies
$
1,361.8

 
$
794.8

 
$
804.5

Materials Technologies
508.9

 
494.9

 
481.1

Construction Products
609.1

 
616.0

 
545.9

Corporate
2,916.3

 
3,184.7

 
2,664.1

Total
$
5,396.1

 
$
5,090.4

 
$
4,495.6


Corporate costs include corporate support function costs and other corporate costs such as non-asbestos environmental remediation, insurance premiums and professional fees.
Grace Adjusted EBIT for the years ended December 31, 2013, 2012 and 2011 is reconciled below to income before income taxes presented in the accompanying Consolidated Statements of Operations.
Reconciliation of Operating Segment Data to Financial Statements
 
Year Ended December 31,
(In millions)
2013
 
2012
 
2011
Grace Adjusted EBIT
$
550.8

 
$
558.2

 
$
513.3

Chapter 11-related costs, net
(16.4
)
 
(15.6
)
 
(23.9
)
Asbestos-related costs
(11.9
)
 
(7.6
)
 
(20.8
)
Asbestos and bankruptcy-related charges, net
(21.9
)
 
(384.6
)
 
—

Default interest settlement
(129.0
)
 
—

 
—

Pension MTM adjustment and other related costs, net
50.6

 
(119.2
)
 
(111.2
)
Restructuring expenses and related asset impairments
(12.5
)
 
(6.9
)
 
(6.9
)
Loss on sale of product line
(1.0
)
 
(0.2
)
 
(0.4
)
Income and expense related to divested businesses
—

 
(0.2
)
 
(0.4
)
Interest expense and related financing costs
(43.8
)
 
(46.5
)
 
(43.3
)
Currency transaction loss on cash in Venezuela
(6.9
)
 
—

 
—

Interest income of non-Debtor subsidiaries
1.0

 
1.0

 
1.2

Net income (loss) attributable to noncontrolling interests
1.6

 
1.0

 
(0.6
)
Income (loss) before income taxes
$
360.6

 
$
(20.6
)
 
$
307.0


The table below presents information related to the geographic areas in which Grace operates. Sales are attributed to geographic areas based on customer location.
Geographic Area Data
(In millions)
2013
 
2012
 
2011
Net Sales
 
 
 
 
 
United States
$
886.0

 
$
878.9

 
$
945.0

Canada and Puerto Rico
73.7

 
88.7

 
96.8

Total North America
959.7

 
967.6

 
1,041.8

Europe Middle East Africa
1,087.9

 
1,175.6

 
1,260.4

Asia Pacific
654.1

 
660.3

 
599.3

Latin America
359.0

 
352.0

 
310.4

Total
$
3,060.7

 
$
3,155.5

 
$
3,211.9

Properties and Equipment, net
 
 
 
 
 
United States
$
497.8

 
$
438.4

 
$
421.1

Canada and Puerto Rico
19.1

 
19.8

 
19.5

Total North America
516.9

 
458.2

 
440.6

Europe Middle East Africa
212.4

 
210.3

 
202.1

Asia Pacific
70.9

 
72.1

 
53.8

Latin America
29.7

 
29.9

 
27.0

Total
$
829.9

 
$
770.5

 
$
723.5

Goodwill, Intangibles and Other Assets
 
 
 
 
 
United States
$
589.7

 
$
91.5

 
$
110.3

Canada and Puerto Rico
8.6

 
7.3

 
7.3

Total North America
598.3

 
98.8

 
117.6

Europe Middle East Africa
106.4

 
105.2

 
108.9

Asia Pacific
52.4

 
40.1

 
12.4

Latin America
55.9

 
59.8

 
17.9

Total
$
813.0

 
$
303.9

 
$
256.8

v2.4.0.8
Pension Plans and Other Postretirement Benefit Plans (Details 2) (USD $)
In Millions, unless otherwise specified
 12 Months Ended
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Change in Projected Benefit Obligation (PBO):      
Benefit obligation at beginning of year $ 1,954.9    
Benefit obligation at end of year 1,873.2 1,954.9  
Change in Plan Assets:      
Fair value of plan assets at beginning of year    [1]    [1]  
Fair value of plan assets at end of year    [1]    [1]    [1]
Amounts recognized in the Consolidated Balance Sheets consist of:      
Defined Benefit Plan, Assets for Plan Benefits, Noncurrent 16.7 32.1  
Current liabilities (15.0) (14.0)  
Noncurrent liabilities (66.2)    
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss      
Net prior service credit (1.7)   (0.4)
Amortization of prior service cost (credit) (0.7) (0.8) (1.1)
Estimated net deferred actuarial loss and prior service cost that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year      
Other Comprehensive Income, Amortization of Defined Benefit Plan, Net Deferred Actuarial Gain (Loss) Recognized in Net Periodic Benefit Cost before Tax 0.4 0.6 0.6
Prior service cost that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year 0.3    
Pension Plans
      
Pension plans and other postretirement benefit plans      
Defined Benefit Plan, Accumulated Benefit Obligation 1,772 1,849  
Change in Projected Benefit Obligation (PBO):      
Benefit obligation at beginning of year 1,954.9 1,735.1  
Service cost 36.3 30.4  
Interest cost 72.5 77.3  
Plan participants' contributions 0.6 0.6  
Amendments    0  
Actuarial (gain) loss (99.1) 190.5  
Medicare subsidy receipts        
Benefits paid (101.3) (89.5)  
Currency exchange translation adjustments 9.3 10.5  
Benefit obligation at end of year 1,873.2 1,954.9 1,735.1
Change in Plan Assets:      
Fair value of plan assets at beginning of year 1,445.3 1,250.4  
Actual return on plan assets 37.9 148.7  
Employer contributions 68.3 126.8  
Plan participants' contributions 0.6 0.6  
Medicare subsidy receipts        
Benefits paid (101.3) (89.5)  
Currency exchange translation adjustments 0.9 8.3  
Fair value of plan assets at end of year 1,451.7 1,445.3 1,250.4
Net funded status (421.5) (509.6)  
Amounts recognized in the Consolidated Balance Sheets consist of:      
Defined Benefit Plan, Assets for Plan Benefits, Noncurrent 16.7 32.1  
Current liabilities (15.0) (14.0)  
Noncurrent liabilities (423.2) (527.7)  
Net amount recognized (421.5) (509.6)  
Amounts recognized in Accumulated Other Comprehensive Loss consist of:      
Accumulated actuarial loss (gain)        
Prior service cost (credit) 1.2 1.9  
Net amount recognized 1.2 1.9  
Estimated net deferred actuarial loss and prior service cost that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year      
Other Comprehensive Income, Amortization of Defined Benefit Plan, Net Deferred Actuarial Gain (Loss) Recognized in Net Periodic Benefit Cost before Tax 0.4 0.6 0.6
Prior service cost that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year 0.7    
Pension Plans | Overfunded pension plans
      
Amounts recognized in the Consolidated Balance Sheets consist of:      
Defined Benefit Plan, Assets for Plan Benefits, Noncurrent 16.7 32.1  
U.S. qualified pension plans
      
Change in Projected Benefit Obligation (PBO):      
Benefit obligation at beginning of year 1,425.6 1,282.3  
Service cost 25.2 21.5 18.2
Interest cost 51.9 55.9 60.3
Plan participants' contributions        
Amendments        
Actuarial (gain) loss (96.7) 132.3  
Medicare subsidy receipts        
Benefits paid (79.2) (66.4)  
Currency exchange translation adjustments        
Benefit obligation at end of year 1,326.8 1,425.6 1,282.3
Change in Plan Assets:      
Fair value of plan assets at beginning of year 1,131.7 955.3  
Actual return on plan assets 37.1 127.9  
Employer contributions 55.6 114.9  
Plan participants' contributions        
Medicare subsidy receipts        
Benefits paid (79.2) (66.4)  
Currency exchange translation adjustments        
Fair value of plan assets at end of year 1,145.2 1,131.7 955.3
Net funded status (181.6) (293.9)  
Amounts recognized in the Consolidated Balance Sheets consist of:      
Defined Benefit Plan, Assets for Plan Benefits, Noncurrent    0  
Current liabilities (5.8) (5.8)  
Noncurrent liabilities (175.8) (288.1)  
Net amount recognized (181.6) (293.9)  
Amounts recognized in Accumulated Other Comprehensive Loss consist of:      
Accumulated actuarial loss (gain)        
Prior service cost (credit) 1.5 2.2  
Net amount recognized 1.5 2.2  
Weighted Average Assumptions Used to Determine Benefit Obligations as of the period      
Discount rate 4.76%    
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended      
Expected return on plan assets 6.00% 6.25%  
Rate of compensation increase 4.30% 4.30%  
Net Periodic Benefit Cost      
Expected return on plan assets (68.0) (63.3) (66.1)
Amortization of prior service cost (credit) 0.7 0.9 1.1
Amortization of net deferred actuarial loss (65.8) 67.7 99.1
Net curtailment and settlement loss         
Net periodic benefit cost (56.0) 82.7 112.6
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss      
Net deferred actuarial (gain) loss    0 0
Net prior service credit         
Amortization of prior service cost (credit) (0.7) (0.9) (1.1)
Amortization of net deferred actuarial loss    0 0
Total recognized in other comprehensive (income) loss (0.7) (0.9) (1.1)
Total recognized in net periodic benefit cost and other comprehensive (income) loss (56.7) 81.8 111.5
Estimated net deferred actuarial loss and prior service cost that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year      
Other Comprehensive Income, Amortization of Defined Benefit Plan, Net Deferred Actuarial Gain (Loss) Recognized in Net Periodic Benefit Cost before Tax 0    
U.S. qualified pension plans | Overfunded pension plans
      
Change in Projected Benefit Obligation (PBO):      
Benefit obligation at beginning of year    [2]    [2]  
Benefits paid    [2]    [2]    [2]
Benefit obligation at end of year    [2]    [2]    [2]
Change in Plan Assets:      
Fair value of plan assets at beginning of year    [2]    [2]  
Benefits paid    [2]    [2]    [2]
Fair value of plan assets at end of year    [2]    [2]    [2]
Net funded status    [2]    [2]    [2]
Weighted Average Assumptions Used to Determine Benefit Obligations as of the period      
Discount rate 4.76% 3.75%  
Rate of compensation increase 4.70% 4.30%  
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended      
Discount rate 3.75% 4.50%  
Non-U.S. pension plans
      
Change in Projected Benefit Obligation (PBO):      
Benefit obligation at beginning of year 529.3 452.8  
Service cost 11.1 8.9 8.7
Interest cost 20.6 21.4 22.7
Plan participants' contributions 0.6 0.6  
Amendments    0  
Actuarial (gain) loss (2.4) 58.2  
Medicare subsidy receipts        
Benefits paid (22.1) (23.1)  
Currency exchange translation adjustments 9.3 10.5  
Benefit obligation at end of year 546.4 529.3 452.8
Change in Plan Assets:      
Fair value of plan assets at beginning of year 313.6 295.1  
Actual return on plan assets 0.8 20.8  
Employer contributions 12.7 11.9  
Plan participants' contributions 0.6 0.6  
Medicare subsidy receipts        
Benefits paid (22.1) (23.1)  
Currency exchange translation adjustments 0.9 8.3  
Fair value of plan assets at end of year 306.5 313.6 295.1
Net funded status (239.9) (215.7)  
Amounts recognized in the Consolidated Balance Sheets consist of:      
Defined Benefit Plan, Assets for Plan Benefits, Noncurrent 16.7 32.1  
Current liabilities (9.2) (8.2)  
Noncurrent liabilities (247.4) (239.6)  
Net amount recognized (239.9) (215.7)  
Amounts recognized in Accumulated Other Comprehensive Loss consist of:      
Accumulated actuarial loss (gain)        
Prior service cost (credit) (0.3) (0.3)  
Net amount recognized (0.3) (0.3)  
Weighted Average Assumptions Used to Determine Benefit Obligations as of the period      
Discount rate 4.25% 4.06%  
Rate of compensation increase 3.41% 3.37%  
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended      
Discount rate 4.06% 4.83%  
Expected return on plan assets 4.66% 4.98%  
Rate of compensation increase 3.37% 3.40%  
Net Periodic Benefit Cost      
Expected return on plan assets (14.0) (14.8) (16.2)
Amortization of prior service cost (credit)    (0.1) 0
Amortization of net deferred actuarial loss 11.0 52.2 13.1
Net curtailment and settlement loss (0.1) 0 0
Net periodic benefit cost 28.6 67.6 28.3
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss      
Net deferred actuarial (gain) loss    0 0
Net prior service credit    0 (0.4)
Amortization of prior service cost (credit)    0.1 0
Amortization of net deferred actuarial loss    0 0
Total recognized in other comprehensive (income) loss    0.1 (0.4)
Total recognized in net periodic benefit cost and other comprehensive (income) loss 28.6 67.7 27.9
Estimated net deferred actuarial loss and prior service cost that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year      
Other Comprehensive Income, Amortization of Defined Benefit Plan, Net Deferred Actuarial Gain (Loss) Recognized in Net Periodic Benefit Cost before Tax 0    
Non-U.S. pension plans | Overfunded pension plans
      
Change in Projected Benefit Obligation (PBO):      
Benefit obligation at beginning of year 237.1 [2] 213.3 [2]  
Benefits paid (10.0) [2] (11.8) [2] (10.2) [2]
Benefit obligation at end of year 247.3 [2] 237.1 [2] 213.3 [2]
Change in Plan Assets:      
Fair value of plan assets at beginning of year 269.2 [2] 255.8 [2]  
Benefits paid (10.0) [2] (11.8) [2] (10.2) [2]
Fair value of plan assets at end of year 264.0 [2] 269.2 [2] 255.8 [2]
Net funded status 16.7 [2] 32.1 [2] 42.5 [2]
Weighted Average Assumptions Used to Determine Benefit Obligations as of the period      
Discount rate 4.25%    
Non-U.S. pension plans | United Kingdom
      
Weighted Average Assumptions Used to Determine Benefit Obligations as of the period      
Discount rate (4.34%)    
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended      
Expected return on plan assets 4.25%    
Non-U.S. pension plans | Canada
      
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended      
Expected return on plan assets 6.50%    
Postretirement Benefits Other Than Pensions
      
Change in Projected Benefit Obligation (PBO):      
Benefit obligation at beginning of year 63.9 64.6  
Service cost 0.2 0.2 0.3
Interest cost 2.2 2.5 3.2
Plan participants' contributions        
Amendments (1.7)     
Actuarial (gain) loss (4.3) (2.1)  
Medicare subsidy receipts 1.4 3.3 1.9
Benefits paid (4.5) (4.6)  
Currency exchange translation adjustments        
Benefit obligation at end of year 57.2 63.9 64.6
Change in Plan Assets:      
Fair value of plan assets at beginning of year 0 0  
Actual return on plan assets        
Employer contributions 3.1 1.3  
Plan participants' contributions        
Medicare subsidy receipts 1.4 3.3 1.9
Benefits paid (4.5) (4.6)  
Currency exchange translation adjustments        
Fair value of plan assets at end of year 0 0 0
Net funded status (57.2) (63.9)  
Amounts recognized in the Consolidated Balance Sheets consist of:      
Defined Benefit Plan, Assets for Plan Benefits, Noncurrent        
Current liabilities (4.5) (4.3)  
Noncurrent liabilities (52.7) (59.6)  
Net amount recognized (57.2) (63.9)  
Amounts recognized in Accumulated Other Comprehensive Loss consist of:      
Accumulated actuarial loss (gain) (5.0) (0.3)  
Prior service cost (credit) (1.7)     
Net amount recognized (6.7) (0.3)  
Weighted Average Assumptions Used to Determine Benefit Obligations as of the period      
Discount rate 4.26% 3.50%  
Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended      
Discount rate 3.50% 4.00%  
Net Periodic Benefit Cost      
Expected return on plan assets         
Amortization of prior service cost (credit)       0
Amortization of net deferred actuarial loss       
Net curtailment and settlement loss         
Net periodic benefit cost 2.8 3.3 4.1
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Income) Loss      
Net deferred actuarial (gain) loss (4.3) (2.1) (7.3)
Net prior service credit (1.7)      
Amortization of prior service cost (credit)       0
Amortization of net deferred actuarial loss (0.4) (0.6) (0.6)
Total recognized in other comprehensive (income) loss (6.4) (2.7) (7.9)
Total recognized in net periodic benefit cost and other comprehensive (income) loss $ (3.6) $ 0.6 $ (3.8)
[1] Plans intended to be pay-as-you-go.
[2] Plans intended to be advance-funded.

v2.4.0.8
Acquisitions (Tables)
 12 Months Ended
Dec. 31, 2013
Business Combinations [Abstract]  
Schedule of assets and liabilities acquired in the business combinations
The purchase price for the acquisitions was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date in accordance with ASC 805 "Business Combinations".
 
(In millions)
Tangible assets
$
55.8

Goodwill
262.9

Intangible assets
247.6

Liabilities assumed
(40.1
)
Net assets acquired, net of cash acquired
$
526.2

The table below presents the assets acquired and liabilities assumed as part of the acquisition of the UNIPOL® licensing and related catalyst business. The excess of the purchase price over the fair value of the tangible net assets and intangible assets acquired was recorded as goodwill. The goodwill recognized is attributable to the expected growth and operating synergies that Grace expects to realize from this acquisition. Goodwill generated from the acquisition will be deductible for tax purposes.
 
(In millions)
Trade accounts receivable
$
10.5

Inventories
22.6

Properties and equipment
18.4

Goodwill
253.2

Intangible assets
243.0

Current deferred revenue
(14.3
)
Noncurrent deferred revenue
(23.0
)
The table below presents the intangible assets acquired as part of the acquisition of the UNIPOL® licensing and related catalyst business and the periods over which they will be amortized.
 
Amount
(In millions)
 
Weighted Average Amortization Period
(in years)
Technology
$
205.3

 
20.9
Trademarks
11.9

 
30.0
Customer Lists
10.6

 
20.0
Other
15.2

 
17.0
Total
$
243.0

 
20.9

v2.4.0.8
Commitments and Contingent Liabilities
 12 Months Ended
Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingent Liabilities
Asbestos-Related Liability    See Note 2 for a discussion of Grace's asbestos-related liability and future obligations and contingencies following the effectiveness of the Joint Plan.
Environmental Remediation    Grace is subject to loss contingencies resulting from extensive and evolving federal, state, local and foreign environmental laws and regulations relating to the generation, storage, handling, discharge, disposition and stewardship of hazardous wastes and other materials. Grace accrues for anticipated costs associated with investigative and remediation efforts where an assessment has indicated that a probable liability has been incurred and the cost can be reasonably estimated. These accruals do not take into account any discounting for the time value of money.
Grace's environmental liabilities are reassessed whenever circumstances become better defined or remediation efforts and their costs can be better estimated. These liabilities are evaluated based on currently available information, including the progress of remedial investigation at each site, the current status of discussions with regulatory authorities regarding the method and extent of remediation at each site, existing technology, prior experience in contaminated site remediation and the apportionment of costs among potentially responsible parties.
Estimated Investigation and Remediation Costs
At December 31, 2013, Grace's estimated liability for environmental investigation and remediation costs (non-asbestos and asbestos-related) totaled $135.9 million, compared with $141.5 million at December 31, 2012. These amounts are based on funding and/or remediation agreements in place, including the Multi-Site Agreement described below, and Grace's estimate of costs for sites not subject to a formal remediation plan for which sufficient information is available to estimate investigation and remediation costs. These amounts do not include environmental response costs for the Libby vermiculite mine area or vermiculite expansion facilities, which may be material but are not currently estimable. Due to these vermiculite-related matters, it is probable that Grace's actual investigation and remediation costs will exceed Grace's current estimates by material amounts.
Grace recorded pre-tax charges of $8.2 million, $3.6 million, and $17.8 million for environmental matters in 2013, 2012, and 2011, respectively. Net cash expenditures charged against previously established reserves in 2013, 2012, and 2011 were $14.0 million, $13.0 million, and $11.8 million, respectively.
Vermiculite-Related Matters
Grace purchased a vermiculite mine in Libby, Montana, in 1963 and operated it until 1990. Vermiculite concentrate from the Libby mine was used in the manufacture of attic insulation and other products. Some of the vermiculite ore that was mined at the Libby mine contained naturally occurring asbestos. EPA has investigated sites, including some owned by Grace, which used, stored or processed vermiculite concentrate from the Libby mine. EPA, Grace, and/or other potentially responsible parties have conducted investigations and/or remedial actions at those sites identified by EPA as requiring remedial action.
During 2010, EPA began reinvestigating certain facilities on a list of 105 facilities where vermiculite concentrate from the Libby mine may have been processed. Grace is cooperating with EPA on this reinvestigation. EPA has requested that Grace perform remediation at eight of these facilities. In 2011, Grace performed preliminary evaluations to estimate the cost of remediating these sites based on the revised criteria and recorded an aggregate charge of $16.0 million. It is probable that EPA will request additional remediation at other facilities. Grace does not have sufficient information to identify either the sites that might require additional remediation or the cost of any additional remediation. Grace will continue to monitor EPA's reinvestigation of the remaining sites and assess any information received from EPA. A liability will be recorded in the future should Grace determine that an obligation is probable and reasonably estimable.
Grace's total estimated liability for asbestos remediation studies and other estimable matters related to its former vermiculite operations in Libby, as well as the cost of remediation at vermiculite processing sites outside of Libby, at December 31, 2013 and 2012, was $60.4 million and $60.8 million, respectively, excluding interest where applicable. It is probable that Grace's ultimate liability will exceed current estimates by material amounts. Grace's current recorded liability will be adjusted as Grace receives new information and amounts become reasonably estimable.
Non-Vermiculite-Related Matters
At December 31, 2013 and 2012, Grace's estimated liability for remediation of sites not related to its former vermiculite mining and processing activities was $75.5 million and $80.7 million, respectively. This liability relates to Grace's current and former operations, including its share of liability for off-site disposal at facilities where it has been identified as a potentially responsible party. Grace's estimated liability is based upon an evaluation of claims for which sufficient information is available, regulatory requirements, and environmental conditions at each site. As Grace receives new information and continues its claims evaluation process, its estimated liability may change materially.
Settlement of Environmental Claims in Chapter 11
EPA filed proofs of claim with respect to potential contamination at 38 sites, including vermiculite-related claims and non-vermiculite-related claims. In June 2008, Grace entered into a settlement agreement (the "Multi-Site Agreement") with the U.S. Government, on behalf of EPA and other federal agencies. Under the Multi-Site Agreement, Grace agreed to pay approximately $44 million, which is included in the liabilities described above, to the U.S. Government and other parties in settlement of 35 of these outstanding claims and the U.S. Government has agreed not to take action against Grace under the Comprehensive Environmental Response, Compensation, and Liability Act with respect to these sites. The settlement amount under the Multi-Site Agreement was paid, with interest, following the effective date of the Joint Plan in February 2014. Grace is implementing remediation at two of the remaining sites. With respect to the third remaining site, Libby, Montana, EPA's claims have been resolved except for claims related to the Grace-owned Libby vermiculite mine and the surrounding area. EPA is engaged in a remedial investigation of these areas to determine an appropriate cleanup standard. Grace is cooperating with EPA in this investigation.
Purchase Commitments    Grace uses purchase commitments to ensure supply and to minimize the volatility of major components of direct manufacturing costs including natural gas, certain metals, rare earths, asphalt, amines and other materials. Such commitments are for quantities that Grace fully expects to use in its normal operations.
Guarantees and Indemnification Obligations    Grace is a party to many contracts containing guarantees and indemnification obligations. These contracts primarily consist of:
•
Product warranties with respect to certain products sold to customers in the ordinary course of business. These warranties typically provide that products will conform to specifications. Grace generally does not establish a liability for product warranty based on a percentage of sales or other formula. Grace accrues a warranty liability on a transaction-specific basis depending on the individual facts and circumstances related to each sale. Both the liability and annual expense related to product warranties are immaterial to the Consolidated Financial Statements.
•
Licenses of intellectual property by Grace to third parties in which Grace has agreed to indemnify the licensee against third party infringement claims.
•
Contracts providing for the sale of a former business unit or product line in which Grace has agreed to indemnify the buyer against liabilities arising prior to the closing of the transaction, including environmental liabilities.
•
Guarantees of real property lease obligations of third parties, typically arising out of (a) leases entered into by former subsidiaries of Grace, or (b) the assignment or sublease of a lease by Grace to a third party.
Financial Assurances    Financial assurances have been established for a variety of purposes, including insurance and environmental matters, asbestos settlements and appeals, trade-related commitments and other matters. At December 31, 2013, Grace had gross financial assurances issued and outstanding of $258.2 million, composed of $108.5 million of surety bonds issued by various insurance companies and $149.7 million of standby letters of credit and other financial assurances issued by various banks; $80.6 million of these financial assurances have been issued under the letter of credit facility.
Accounting for Contingencies    Although the outcome of each of the matters discussed above cannot be predicted with certainty, Grace has assessed its risk and has made accounting estimates as required under U.S. GAAP. Claims related to certain of the items discussed above were addressed as part of Grace's Chapter 11 proceedings. Accruals recorded for such contingencies have been included in "liabilities subject to compromise" in the accompanying Consolidated Balance Sheets.