Cash Flow

Net cash provided by operating activities for the year ended December 31, 2012, was $453.6 million compared with $219.4 million in the prior year. The improved cash flow was due to reduced working capital requirements and lower pension contributions.

Adjusted Free Cash Flow was $421.2 million for the year ended December 31, 2012, compared with $278.4 million in the prior year.

2013 Outlook

As of February 6, 2013, Grace expects 2013 Adjusted EBIT to be in the range of $560 million to $580 million, an increase of 8 to 12 percent compared with 2012 Adjusted EBIT of $517.4 million. The company expects 2013 Adjusted EBITDA to be in the range of $685 million to $705 million.

The following assumptions are components of Grace’s 2013 outlook:
  • Consolidated sales in the range of $3.2–$3.3 billion with organic growth of 6–8 percent offset by headwinds of approximately $120 million due to lower rare earth- related pricing and unfavorable currency;
  • Gross margin in the range of 36–38 percent;
  • Adjusted EBIT margin improvement of approximately 100 basis points;
  • Capital expenditures in the range of $180–200 million;
  • Adjusted Free Cash Flow greater than $400 million;
  • A book effective tax rate of 34.0 percent and a cash tax rate of 14.0 percent; and
  • Diluted shares outstanding at year end of approximately 78 million.

Although Grace adjusted the recorded value of its asbestos-related liability in the 2012 fourth quarter, the ultimate cost of settling this liability will be based on the value of the consideration transferred to the asbestos trusts at emergence and may vary from the current estimate. Therefore, Grace is unable to make a final estimate of the income effects of the consummation of the Joint Plan of Reorganization (the “Joint Plan”). When the Joint 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 Joint Plan and the income tax effects of these items.

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