•	Net sales of $421.5 million, down 10.2%, or down 9.2% on constant currency, including estimated 4.3%, or $20 million, COVID-19 impact

•	Diluted EPS of $0.63, up $0.26 primarily due to 1Q19 pretax charge for estimated costs related to legacy liabilities which did not repeat in 1Q20

•	Adjusted EPS of $0.71, down $0.22 including estimated $0.10 COVID-19 net impact; high end of February 4, 2020 outlook range

•	Fully implemented pandemic response plan to ensure health and safety of our employees, including significant new safety protocols throughout our global operations

•	Focused on business continuity for our customers; no material impact to global manufacturing operations and supply chain

•	Decisive actions to adjust operations, including reducing full year 2020 capital spending by $35-$40 million, working capital by $35-$40 million, and operating costs by $25-$30 million

•	Strong financial position and resilient cash flows; over $600 million of available liquidity, including over $190 million cash-on-hand, as of March 31, 2020

•	Fully committed to maintaining dividend; declared 2Q20 quarterly cash dividend of $0.30 per share

•	Temporarily suspended share repurchases; repurchased $40.4 million of common stock during 1Q20

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•	Ample Liquidity: Over $600 million in available liquidity, including over $190 million of cash-on-hand, at March 31, 2020. We have not drawn on our revolver.

•	Resilient Cash Flows: Decisive actions to support cash flow include:

–	Lowering capital spending by $35-$40 million;

–	Improving working capital to generate $35-$40 million of cash flow;

–	Reducing operating costs by $25-$30 million; and

–	Aligning production volumes to match near-term demand.

•	Well Positioned Balance Sheet and Limited Debt Service:

–	No material maturities related to our term loans, revolving credit facility or bonds until September 2021;

–	Net debt of $1.8 billion and net debt to trailing twelve months Adjusted EBITDA of 3.2x at March 31, 2020; and

–	One revolver maintenance covenant; not expected to affect ability to access the full amount of the facility.

•	Minimal Pension Funding Requirements:

–	U.S. qualified pension plans are well funded; expected cash contributions of approximately $1 million per year for the next three years;

–	Cash contributions related to pay-as-you-go, unfunded plans and non-U.S. pension plans expected to be approximately $15 million per year for the next three years; and

–	Cash contributions and pension expense consistent with 2019, and fully reflected in operating cash flows and EBITDA.

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First quarter sales of $421.5 million decreased 10.2%, down 9.2% on constant currency. Sales growth was impacted by lower sales volumes (-10.9%) including an estimated 4%, or $20 million, impact related to COVID-19. Lower customer demand resulted from the weak manufacturing environment and significantly higher refinery customer turnarounds, in line with our expectations communicated February 4, 2020. The decline in sales was partially offset by improved pricing (+1.7%).

•	Net income of $42.0 million was up 70.0% and Diluted EPS of $0.63 was up 70.3%, primarily due to a pre-tax charge taken in 1Q19 for estimated costs related to legacy liabilities which did not repeat in 1Q20.

•	Adjusted EBIT of $82.3 million was down 21.4% and Adjusted EPS of $0.71 was down 23.7%. The estimated net impact to Adjusted EBIT and Adjusted EPS related to COVID-19 in the quarter was $10 million and $0.10 per share, respectively.

•	Adjusted Free Cash Flow of $9.3 million decreased $33.5 million primarily due to lower Adjusted EBIT of $22 million and $19 million in higher capital expenditures primarily related to our strategic growth investments.

•	Invest to accelerate growth and extend our competitive advantages

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

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•	Execute the Grace Value Model to drive operating excellence

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

•	First quarter sales of $308.0 million decreased 11.9%, down 11.2% on constant currency, impacted by lower sales volumes (-13.3%), partially offset by improved pricing (+2.1%) in both businesses.

–	Refining Technologies sales decreased 7.3% primarily due to higher refinery turnaround activity and the June 2019 closure of a North American refinery, in line with our expectations. FCC catalysts pricing improved more than 200 bps for the trailing twelve months.

–	Specialty Catalysts sales decreased 17.0% primarily due to lower sales volumes in chemical catalysts for industrial applications and in polyolefin catalysts due to the weak manufacturing environment as well as an estimated 10% impact related to COVID-19. The impact to sales volumes from the weak manufacturing environment and COVID-19 pandemic was in line with our expectations.

•	Gross margin of 40.7% decreased 170 bps, primarily due to under-absorbed fixed costs resulting from lower production volumes in 4Q19 and 1Q20 in response to the weak manufacturing environment and lower sales volumes, partially offset by improved pricing and lower raw materials and energy costs.

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Operating income of $82.0 million was down $19.7 million, or 19.4%, primarily due to lower gross profit and lower income from our ART joint venture (-$2.9 million), partially offset by $8.0 million of insurance recoveries in the quarter. As discussed in 1Q20, ART earnings are expected to be heavily weighted to 2H20 due to back-end loaded customer orders and timing of new hydroprocessing catalysts capacity coming on line.

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In July 2019, a North American FCC catalysts customer filed for bankruptcy protection after announcing that it would not resume refinery operations following a fire in its refinery. Grace received insurance recoveries of $8.0 million in 1Q20, as well as $8.0 million in 4Q19 under its business interruption insurance policy for lost profits. The policy has a $25 million limit per event. Grace expects to receive an additional $9.0 million of insurance recoveries related to this event in the remainder of 2020.

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First quarter sales of $113.5 million decreased 5.3%, down 3.4% on a constant currency basis. Sales growth was impacted by lower sales volumes (-4.0%), partially offset by improved pricing (+0.6%). Lower sales volumes were primarily due to the expected weak manufacturing environment, and included an estimated 2.5% impact related to COVID-19, primarily in coatings and chemical process applications.

•	Gross margin of 33.0% decreased 340 bps, primarily due to under-absorbed fixed costs resulting from lower production volumes in 4Q19 and 1Q20 in response to the weak manufacturing environment and lower sales volumes, partially offset by lower raw materials and energy costs, improved pricing and favorable mix.

•	Operating income of $19.0 million was down $5.0 million, or 20.8%.

•	Capital investments: Year to date, we spent $57.1 million primarily to complete new capacity additions to meet long-term customer demand and support operating excellence investments and other priorities.

•	Share repurchase program: In 1Q20, we repurchased approximately 674,000 shares of Grace common stock through March 5 for $40.4 million, at an average per share price of $59.98.

•	Dividend: In 1Q20, we paid $20.5 million in cash dividends to shareholders. We remain fully committed to maintaining our quarterly cash dividend.

•	M&A: Strategic bolt-on acquisitions remain important to our long-term strategy. However, we are slowing down these activities given the economic environment, the currently elevated business and integration risks, and our leverage profile.

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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; the effects of these items on equity in earnings of unconsolidated affiliate; and certain other items that are not representative of underlying trends.

•	Adjusted EBITDA means Adjusted EBIT adjusted for depreciation and amortization and depreciation and amortization included in equity in earnings of unconsolidated affiliate (collectively, Adjusted Depreciation and Amortization).

•	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.

•	The change in net sales on a constant currency basis, which we sometimes refer to as "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.

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(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.