W. R. Grace & Co. GRA
Q3 2011 Earnings Call Transcript

Operator: Laurence Alexander, Jefferies.

Rob Walker - Jefferies: This is (Rob Walker) on for Laurence. I guess, the first question on your guidance for the 2011. I guess why not raise the low end of your EBITDA guidance. Is there anything that makes you – I mean obviously you talked a little bit about being more nervous environment, but is it fair to say that you'd expected very unlikely to meet the low end of that number?

Hudson La Force - SVP and CFO: Rob, this is Hudson. We did not raise our earnings guidance as you said. There is nothing specific that we're concerned about, but as we said, as we head into the end of the year, there is a risk of events in the macro environment. There is a chance that customers could make decisions around order placement around the end of the year, and we decided the best decision was to leave the range where it was.

Rob Walker - Jefferies: Then on the catalyst business and SEC specifically, how are volumes trending so far in Q4? Then as you think about rare earths having declined minus exactly how you'll be able to manage margin dollars and even if they continue to decline, you would have that higher cost inventory left as you look into 2012?

Fred E. Festa - Chairman, President and CEO: Rob, this is Fred. When you think about it on the rare earth, the rare earth is a surcharge, it does pass through. We've been able to increase the margin on the base catalyst over the year through our new product. Yes, there is a lag from an accounting standpoint, from the inventory side of it. If you look at the decrease so far, we have been able to manage that side. On the volume piece of it, we feel good about the volumes and our position in FCC. As Hudson mentioned earlier, we lost a little bit of share, but again, it bounces around within the range that we are very comfortable with. I see relatively strong refining activity in the fourth quarter and as well as in 2012, so we will see.

Rob Walker - Jefferies: Just last question. I may have missed this. In terms of the incremental margins in GCP going forward, I think the volume numbers you guys put up in North America were probably above most people's expectations, but didn't seem like you're getting much in the way of margin there. Is there anything going on or was that just really Europe kind of clouding what is probably still a good operating leverage story as volumes come back?

Fred E. Festa - Chairman, President and CEO: You are absolutely right, it is Europe. We have been able to increase the volume, increase the margins in North America. With that volume that we have been experiencing, it's been on good, high margin type job, infrastructure and commercial. What's weighing down the results is Europe. I mean, we're up 4 points of gross margin in the U.S. alone.

Rob Walker - Jefferies: Is that 4 points year-over-year?

Hudson La Force - SVP and CFO: That's 4 points year-on-year, Rob, but at the operating margin line. So, we're seeing – we have said that we would see good volume leverage, good operating leverage and we're seeing that in that business; but if you surmised it's offset by Europe and the total the total P&L

Operator: Michael Sison, KeyBanc Capital Markets.

Michael Sison - KeyBanc Capital Markets: Nice quarter. In terms of FCC, the adoption rate, you're 70% now. Does that get even higher as we head into the fourth, Fred?