•	2019 sales increased 1.3% to $1.96 billion, up 3.0% on constant currency; the previously disclosed discrete items reduced sales by $36 million (-1.8%)

•	2019 Diluted EPS of $1.89, down $0.60 primarily due to charges related to annual pension mark-to-market adjustments and legacy liabilities

•	2019 Adjusted EPS increased 5.8% to $4.38

•	Strong cash flow funded $102 million of dividends and share repurchases

•	Sales growth of 0% to 3% reflecting a weak global manufacturing environment and the potential effects of the coronavirus

•	Adjusted EBIT of $500 to $520 million, up 6% to 10% and in line with our 2020 Adjusted EBIT preview provided with 3Q19 results in October, updated to reflect potential effects of the coronavirus

•	Adjusted EPS of $4.73 to $4.91 per share, up 8% to 12%

•	Annual cash dividend of $1.20 per share, up 11%

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•	Fourth quarter sales of $504.5 million decreased 3.0%, down 1.9% on constant currency. Sales growth was impacted by lower sales volumes (-3.5%) due to the 2H19 discrete items (-4.2%) and the weak global manufacturing environment partially offset by improved pricing (+1.6%) across all businesses.

•	Net income of ($28.3) million and Diluted EPS of ($0.42) were down due to a pretax non-cash pension mark-to-market adjustment of $85.9 million, or $0.93 per share, and pretax charges related to legacy liabilities of $51.4 million, or $0.60 per share. (See Other Developments.)

•	Adjusted EBIT of $134.3 million was up $15.5 million, or 13.0%, primarily driven by improved pricing and lower manufacturing and raw materials and energy costs. Adjusted EBIT margin was up 380 bps driven by a 290 bps increase in gross margin and a 160 bps benefit from business interruption insurance recoveries of $8.0 million for losses in 2H19 related to the FCC refinery customer discrete item.

•	Full-year sales of $1.96 billion increased 1.3%, up 3.0% on constant currency. Sales growth was driven by improved pricing (+2.4%) and the 2Q18 Specialty Catalysts acquisition (+1.3%) partially offset by lower sales volumes (-0.7%) primarily related to the 2H19 discrete items (-1.8%) and the weak global manufacturing environment.

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Net income of $126.3 million decreased $41.3 million and Diluted EPS of $1.89 per share was down $0.60 per share. Net income and Diluted EPS declined due to a pretax non-cash pension mark-to-market adjustment of $85.9 million, or $0.93 per share, and pretax charges related to legacy liabilities of $103.5 million, or $1.17 per share. Higher gross profit, lower restructuring and repositioning expenses, and lower provision for income taxes partially offset the decline.

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•	Adjusted EBIT of $473.2 million was up $16.5 million, or 3.6%, primarily driven by improved price and favorable mix, and Adjusted EBIT margin was up 60 bps.

•	Adjusted EPS of $4.38 was up 5.8%.

•	Adjusted Free Cash Flow of $247.2 million increased $12.6 million, or 5.4%.

•	Invest to accelerate growth and extend our competitive advantages

•	Invest in great people to strengthen our high-performance culture

•	Execute the Grace Value Model to drive operating excellence

•	Acquire to build our technology and manufacturing capabilities for our customers

•	Fourth quarter sales of $389.9 million decreased 3.8%, down 3.0% on constant currency. Sales growth was impacted by lower sales volumes (-4.5%), partially offset by improved pricing (+1.5%) in both businesses. The decline in sales volumes in the quarter was primarily due to the 2H19 discrete items (-5.4%) as well as a weaker global manufacturing environment.

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•	Gross margin of 43.0% increased 440 bps driven by improved price, favorable mix, and lower raw materials and energy costs. In 4Q18 we reduced production rates amid concerns of slowing global growth and took the opportunity to run additional customer trials in the quarter. Together, these actions reduced 4Q18 margins by 250 bps.

•	Operating income of $135.2 million was up $20.0 million, or 17.4%, primarily driven by higher gross profit (+$11.1 million) and higher income from our ART joint venture (+$1.6 million). Operating margin of 34.7% was up 630 bps, including a 210 bps benefit from $8.0 million of business interruption insurance recoveries for losses in 2H19 related to the FCC refinery customer discrete item.

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Full-year sales of $1.5 billion increased 2.3%, up 3.4% on constant currency. Sales growth was driven by improved pricing (+2.5%) and the 2Q18 Specialty Catalysts acquisition (+1.7%), which more than offset the impact of lower sales volumes (-0.8%) primarily relating to the 2H19 discrete items (-2.4%). FCC catalysts pricing improved over 200 bps for the second consecutive year. For the year, we announced 6 new UNIPOL® polypropylene process technology licenses totaling approximately 2,500 kilotons of annual resin capacity which will continue to drive long-term catalysts and donor sales.

•	Gross margin of 42.8% was up 110 bps primarily driven by improved pricing and favorable mix.

•	Operating income of $466.5 million was up $26.0 million, or 5.9%. Income from our ART joint venture was $4.0 million lower than the prior year reflecting an increase in overhead costs charged to the joint venture from the partners, higher manufacturing costs and unfavorable mix between first-fill and refill catalysts sales.

•	Operating margin of 31.2% was up 110 bps.

•	Fourth quarter sales of $114.6 million decreased 0.3%. Sales were up 2.0% on constant currency driven primarily by improved pricing (+1.8%).

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Gross margin of 35.1% decreased 210 bps, primarily due to: a $4.0 million (-350 bps) impact from proactively reducing our manufacturing rates in 4Q19 to adjust inventory levels in response to the weak global manufacturing environment; and a $2.0 million (-175 bps) impact from the 2Q19 discrete item relating to a manufacturing disruption. These impacts were partially offset by improved pricing and lower raw materials and energy costs.

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•	Operating income of $23.6 million was down $1.7 million, or 6.7%. Operating margin of 20.6% was down 140 bps.

•	Full-year sales of $461.4 million decreased 1.5%. Sales were up 2.2% on constant currency. Improved pricing (+1.9%) and strength in Consumer/Pharma markets and colloidal silica applications helped offset weakness primarily in Coatings markets in EMEA and Asia Pacific.

•	Gross margin of 36.5% decreased 130 bps, primarily due to higher manufacturing costs relating to the 2Q19 discrete item and the 4Q19 inventory control actions.

•	Operating income of $97.8 million was down $7.8 million, or 7.4%. Operating margin of 21.2% was down 130 bps.

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In June 2019, an FCC catalysts customer experienced a fire resulting in the closure of its refinery. Grace has a business interruption policy with a $25 million limit that covers lost profits from this event. Grace received $8 million in insurance recoveries through December 31, 2019, for a portion of losses incurred in 3Q19 and 4Q19, which are reflected in the Catalysts Technologies results in the fourth quarter. Grace expects to receive additional insurance recoveries related to this event in 2020. We are actively working to replace the lost sales volume while maintaining our value-selling strategy.

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Libby Dam Spillway: Based on an updated remediation strategy for the Libby, Montana, mine site, Grace has re-engineered the dam spillway to meet more demanding performance requirements. As a result, we increased our cost estimate to $68 million and recorded an additional charge of $23 million in 4Q19. It is reasonably possible that the ultimate costs of this project could range between $50 million and $100 million.

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Contingent Financial Obligations Related to ZAI: In 4Q19, Grace recorded a reserve in the amount of $24 million related to probable future payments with respect to its former Zonolite attic insulation ("ZAI") product for the 2020 to 2024 period. Grace estimates that the reasonable range of payments over the period would be between $16 million and $24 million and projects that the first payment could be due in 2022. Grace’s maximum financial obligation over the next 19 years is $80 million, and no single year’s obligation can exceed $8 million. (See Grace's most recent Form 10-K or Form 10-Q for more information.)

•	Capital expenditures: For 2019, we invested $194.1 million in capital expenditures as part of our previously outlined, multi-year investment program to accelerate growth, extend our competitive advantages and drive operating excellence.

•	Share repurchase program: For 2019, we repurchased 409,769 shares of Grace common stock for $29.8 million, at an average per share price of $72.60. In 4Q19, we did not repurchase common stock as we prioritized de-leveraging to lower our net leverage to within our target

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•	Dividend: For 2019, we returned $72.6 million to shareholders in cash dividends. In 4Q19, we paid $18 million in cash dividends to shareholders.

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(A)

In the above, Grace presents financial information in accordance with U.S. generally accepted accounting principles (U.S. GAAP), as well as the non-GAAP financial information described below. Grace believes that this non-GAAP financial information provides useful supplemental information about the performance of its businesses, improves period-to-period comparability and provides clarity on the information management uses to evaluate the performance of its businesses. In the above charts, Grace has provided reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP. These non-GAAP financial measures should not be considered as a substitute for financial measures calculated in accordance with U.S. GAAP, and the financial results calculated in accordance with U.S. GAAP and reconciliations from those results should be evaluated carefully. Grace defines these non-GAAP financial measures as follows:

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Adjusted EBIT means net income attributable to W. R. Grace & Co. shareholders adjusted for interest income and expense; income taxes; costs related to legacy matters; restructuring and repositioning expenses and asset impairments; pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; gains and losses on sales and exits of businesses, product lines, and certain other investments; third-party acquisition-related costs and the amortization of acquired inventory fair value adjustment; and certain other items that are not representative of underlying trends.

•	Adjusted EBITDA means Adjusted EBIT adjusted for depreciation and amortization. Grace uses Adjusted EBITDA for its calculation of net leverage, a non-GAAP financial measure, which means Gross debt, less cash divided by Adjusted EBITDA.

•	Adjusted EBIT Return On Invested Capital means Adjusted EBIT (on a trailing four quarters basis) divided by equity adjusted for debt; underfunded and unfunded defined benefit pension plans; liabilities related to legacy matters; cash, cash equivalents, and restricted cash; net income tax assets; and certain other assets and liabilities.

•	Adjusted Gross Margin means gross margin adjusted for pension-related costs included in cost of goods sold, the amortization of acquired inventory fair value adjustment, and write-offs of inventory related to exits of businesses and product lines.

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Adjusted EPS means diluted EPS adjusted for costs related to legacy matters; restructuring and repositioning expenses and asset impairments; pension costs other than service and interest costs, expected returns on plan assets, and amortization of prior service costs/credits; gains and losses on sales and exits of businesses, product lines, and certain other investments; third-party acquisition-related costs and the amortization of acquired inventory fair value adjustment; certain other items that are not representative of underlying trends; and certain discrete tax items and income tax expense related to historical tax attributes.

•	Adjusted Free Cash Flow means net cash provided by or used for operating activities minus capital expenditures plus cash flows related to legacy matters; cash paid for restructuring and repositioning; capital expenditures related to repositioning; cash paid for third-party acquisition-related costs; and accelerated payments under defined benefit pension arrangements.

•	Net Sales, constant currency means the period-over-period change in net sales calculated using the foreign currency exchange rates that were in effect during the previous comparable period.

•	Organic sales growth means the period-over-period change in net sales excluding the sales growth attributable to acquisitions.

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(B)	Grace's segment operating income includes only Grace's share of income from consolidated and unconsolidated joint ventures.

(C)

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 and Materials Technologies 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.

(D)	Grace's historical tax attribute carryforwards (net operating losses and tax credits) unfavorably affected its tax expense with respect to certain provisions of the Tax Cuts and Jobs Act of 2017. To normalize the effective tax rate, an adjustment was made to eliminate the tax expense impact associated with the historical tax attributes.