Related Party Transactions

9 Months Ended

Sep. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure

Unconsolidated Affiliate    Grace accounts for its 50% ownership interest in ART, its joint venture with Chevron, using the equity method of accounting. Grace’s investment in ART amounted to $167.4 million and $181.9 million as of September 30, 2020, and December 31, 2019, respectively. ART is a private, limited liability company, taxed as a partnership, and accordingly does not have a quoted market price available. During the three months ended September 30, 2020, Grace received a $10.0 million dividend from ART, and the Consolidated Balance Sheet as of September 30, 2020, includes an additional $10.0 million dividend receivable from ART to be paid in the 2020 fourth quarter.

The table below presents the components of Grace’s “equity in earnings of unconsolidated affiliate” in the Consolidated Statements of Operations.

	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2020			2019			2020			2019
Operating income	$	2.8		$	4.4		$	8.4		$	15.6
Depreciation and amortization	(1.1		)	(0.2		)	(1.9		)	(0.4		)
Interest expense and income taxes	(0.4		)	(0.4		)	(0.6		)	(1.3		)
Equity in earnings of unconsolidated affiliate	$	1.3		$	3.8		$	5.9		$	13.9

The table below presents summary financial data related to ART’s balance sheet and results of operations.

(In millions)	September 30, 2020		December 31, 2019
Summary Balance Sheet information:
Current assets	$	270.4	$	300.7
Noncurrent assets	248.3		237.8
Total assets	$	518.7	$	538.5
Current liabilities	$	185.8	$	177.1
Noncurrent liabilities	0.3		0.3
Total liabilities	$	186.1	$	177.4

	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Summary Statement of Operations information:
Net sales	$	109.9	$	125.7	$	309.6	$	357.2
Costs and expenses applicable to net sales	100.0		113.3		281.1		312.8
Income before income taxes	3.1		8.1		13.4		30.6
Net income	2.8		7.6		11.9		28.8

Grace and ART transact business on a regular basis and maintain several agreements in order to operate the joint venture. These agreements and the resulting transactions are treated as related party activities with an unconsolidated affiliate. Product manufactured by Grace for ART is accounted for on a net basis, with a mark-up, which reduces “cost of goods sold” in the Consolidated Statements of Operations. Grace also receives reimbursement from ART for fixed costs; research and development; selling, general and administrative services; and depreciation. Grace records reimbursements against the respective line items on Grace’s Consolidated Statements of Operations. The table below presents summary financial data related to transactions between Grace and ART.

	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Product manufactured for ART	$	63.4	$	64.1	$	194.7	$	190.2
Mark-up on product manufactured for ART included as a reduction of Grace’s cost of goods sold	1.2		1.2		3.8		3.7
Charges for fixed costs; research and development; selling, general and administrative services; and depreciation to ART	13.1		12.4		40.5		38.0

The table below presents balances in Grace’s Consolidated Financial Statements related to ART.

(in millions)	September 30, 2020		December 31, 2019
Trade accounts receivable	$	23.9	$	17.5
Other current assets	10.0		173.9
Accounts payable	23.5		37.7
Debt payable within one year	4.8		9.9
Debt payable after one year	30.7		37.5
Other current liabilities	—		173.9

The other current asset as of September 30, 2020, in the table above represents the dividend receivable from ART to be paid in the 2020 fourth quarter. The current asset and current liability as of December 31, 2019, represented spending related to a residue hydroprocessing catalyst production plant that has been constructed in Lake Charles, Louisiana. Grace managed the design and construction of the plant, and the asset was included in “other current assets” in Grace’s Consolidated Balance Sheets until commissioning and start-up activities were completed. Grace had likewise recorded a liability for the transfer of the asset to ART upon completion, included in “other current liabilities” in the Consolidated Balance Sheets. Grace transferred the asset to ART in the 2020 third quarter.

Grace and ART maintain an agreement whereby ART loans Grace funds for maintenance capital expenditures at manufacturing facilities used to produce catalysts for ART. Grace makes principal and interest payments on the loans on a monthly basis. These unsecured loans have repayment terms of up to eight years, unless earlier repayment is demanded by ART. The loans bear interest at the three-month LIBOR plus 1.25%.

Grace and Chevron provide lines of credit in the amount of $15.0 million each at a commitment fee of 0.1% of the credit amount. These agreements have been approved by the ART Executive Committee for renewal until February 2021. No amounts were outstanding at September 30, 2020, or December 31, 2019.

Joint Venture Arrangement    In 2018, Grace formed a joint venture in a developing country in Asia. The purpose of the joint venture is to establish a logistics facility and catalyst testing laboratory and to be the exclusive FCC catalysts and additives supplier to certain customers in the country. Grace’s joint venture partner is the parent company of the customers. Grace has an 87.5% ownership interest in the joint venture and consolidates the activities of the entity. Grace’s Consolidated Balance Sheets as of September 30, 2020, and December 31, 2019, include trade accounts receivable of $0.9 million and $3.6 million, respectively, from these customers. Grace’s Consolidated Statements of Operations for the three and nine months ended September 30, 2020, include $0.7 million and $6.6 million, respectively, of revenues from these customers, compared with $1.8 million and $5.8 million in the corresponding prior-year periods.