W.R. Grace & Co. (GRA) Q1 2012 Earnings Call April 25, 2012 11:00 am ET Executives J. Mark Sutherland - Vice President of Investor Relations Alfred E. Festa - Chairman and Chief Executive Officer Hudson La Force - Chief Financial Officer and Senior Vice President Analysts Robert Walker - Jefferies & Company, Inc., Research Division Michael J. Sison - KeyBanc Capital Markets Inc., Research Division Christopher L. Shaw - Monness, Crespi, Hardt & Co., Inc., Research Division Presentation Operator
We will also discuss certain non-GAAP financial measures, which are described in more detail in this morning's release and on our website. Reconciliations to the most directly comparable GAAP financial measures and other associated disclosures are contained in our earnings release and on our website.Our comments on forward-looking statements and non-GAAP financial measures apply both to the prepared remarks and to the question and answer. We want to remind everyone that this webcast contains time-sensitive information that is accurate only as of today. Any redistribution, retransmission or reproduction of this call without company consent is prohibited. With that, I'll turn the call over to Fred. Alfred E. Festa Good. Thanks, Mark. Hello, everyone. Thank you for joining us this morning. We're off to a good start in 2012. We performed well in the quarter led by the results in our Catalyst Technologies and Construction Products segments. For the quarter, sales increased 8% to $754 million, gross margins improved 40 basis points to 36.7%, adjusted EBIT increased 16% to $111 million and adjusted EBITDA margin improved 70 basis points to 18.7%. We also saw good sequential improvement across our businesses. Hudson will walk you through the details shortly. It was a busy first quarter. First, we divided the Grace Davison business into 2 operating segments; Catalysts Technologies and Material Technologies. We are now reporting our financial results in 3 operating segments, these 2, plus the Construction Products group. Catalysts Technologies is now the home for all of our catalysts businesses, including refining catalysts and additives, polyolefin catalysts and chemical catalysts. Our ART hydroprocessing joint venture is managed in this segment as well. By combining all of our catalyst activities into a single unit, we have enhanced our critical mass in terms of research, innovation and customer reach. And this will enable us to do what we do best: anticipate customer needs and increase the value of their business. Additionally, we believe this will increase the public recognition of Grace as the industry-leading innovator and manufacturer of specialty catalysts.
Moving to 2 segments -- in moving from 2 segments to 3, we are actually simplifying our organization as well. We are moving to a more closely integrated operating structure, we call it, One Grace. The manufacturing, supply chains and functional support services are being consolidated. As a result, we've taken a restructuring charge this quarter of approximately $3 million as we eliminate some redundancies.This restructuring will provide cost savings of just under $6 million this year and about $10 million in annual savings in 2013. These savings were anticipated in our 2012 outlook and the 2014 targets. I am challenging our leaders to continue to find ways to move the business forward. We've had some good examples to share from the past quarter. We signed a memorandum of understanding to form a joint venture in Abu Dhabi to build a new catalyst and additives plant for Middle East and South Asian opportunities. We project growth of $150 million for the next 5 years from new refineries in the region. We established a partnership with Dow, which includes licensing to develop new polypropylene catalyst, which will enable producers to improve plastics performance including clarity, stiffness and impact strength. We announced a successful clinical trial for novel use of silica for drug delivery. Innovation came out of our discovery sciences product group, a component of the Materials Technology segment. This development showcases how we apply our historical silica applications expertise to new and potentially large addressable markets. These are all exciting developments. We'll be hearing about more opportunities like these in the future as we continue to advance our business. I'd also like to update you on the bankruptcy. Read the rest of this transcript for free on seekingalpha.com