Adjusted Free Cash Flow was $146.6 million for the six months ended June 30, 2012, compared with $59.6 million in the prior-year period.

2012 Outlook

As of July 25, 2012, Grace affirmed its outlook for 2012 Adjusted EBIT in the range of $510 million to $530 million, up 6 to 11 percent compared with 2011 Adjusted EBIT of $478.6 million. The company expects 2012 Adjusted EBITDA in the range of $630 million to $650 million.

The following updated assumptions are components of Grace’s 2012 outlook:
  • Consolidated sales in the range of $3.1 billion to $3.2 billion, reflecting improved sales volumes and base pricing, offset by lower rare earth surcharges and unfavorable currency translation of approximately $175 million and $125 million, respectively.
  • Consolidated gross margin in the high end of the 35-37 percent target range with raw material inflation expected to moderate in the second half of 2012;
  • An average euro exchange rate of $1.22 for the remainder of the year, compared with an average of $1.38 for the second half of 2011.
  • Pension expense of approximately $72 million for the full year, compared with $63 million for 2011; and,
  • An effective tax rate of 33.5 percent and a cash tax rate of 14.0 percent.

The company continues to project an atypical quarterly earnings pattern for the year and now expects the third quarter to be weaker than the second and fourth quarters.

Grace is unable to make a reasonable estimate of the income effects of the consummation of the Joint Plan of Reorganization (the “Plan”) because the value of certain consideration payable to the asbestos trusts under the Plan (primarily the deferred payments and the warrant) will not ultimately be determined until the effective date of the Plan, the timing of which is uncertain. When the Plan is consummated, Grace expects to reduce its liabilities subject to compromise, including asbestos-related contingencies, recognize the value of the deferred payments and the warrant and recognize expense for the costs of consummating the Plan and the income tax effects of these items.

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