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EXHIBIT 99.1
On August 2, 1996, New Grace filed with the Securities and Exchange
Commission a Registration Statement on Form S-1 (Registration No. 333-09495),
including a Prospectus dated August 2, 1996 ("Prospectus") that was sent to
the Company's shareholders in connection with a Special Meeting of
Shareholders to be held on September 16, 1996. The Prospectus contained
unaudited pro forma financial information for New Grace ("Pro Forma
Information"). The following unaudited pro forma financial information is
being provided to update the Pro Forma Information contained in the Prospectus,
and should be read in conjunction with the Consolidated Financial Statements
and the First Quarter Financial Statements (each as defined in the Prospectus),
as well as the consolidated financial statements and the notes thereto included
in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996 ("Second Quarter Financial Statements"). The following unaudited pro
forma financial information does not necessarily indicate the financial
position and results of operations that would actually have occurred if New
Grace were a stand-alone entity on the dates and for the periods indicated.
Undefined terms used in the following unaudited pro forma financial information
have the meanings given those terms in the Prospectus.
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PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The unaudited pro forma condensed consolidated balance sheet of New Grace
has been derived from the historical consolidated balance sheet of Grace New
York, adjusted for the disposition of NMC and for certain costs and expenses to
be incurred in connection with the Reorganization. The pro forma condensed
consolidated balance sheet has been prepared on the assumption that the
Reorganization occurred on June 30, 1996.
GRACE NEW YORK PRO FORMA ADJUSTMENTS NEW GRACE
---------------------------
HISTORICAL DEBIT CREDIT PRO FORMA
---------------- ---------- ----------- -------------
(DOLLARS IN MILLIONS)
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . $ 73.7 $2,259.1 (a) $1,199.1 (b)
60.0 (a) $ 1,073.7
Notes and accounts receivable, net . . . . . . 712.5 101.5 (b) 814.0
Other current assets . . . . . . . . . . . . . 918.7 918.7
--------- ---------
Total Current Assets . . . . . . . . . . . . 1,704.9 2,806.4
Properties and equipment, net . . . . . . . . . 1,771.8 1,771.8
Net assets of discontinued operations - health care 1,571.6 361.3 (b) 1,872.0 (c) 60.9
Other assets . . . . . . . . . . . . . . . . . . 1,257.5 1,257.5
--------- ---------
Total Assets . . . . . . . . . . . . . . . . $ 6,305.8 $ 5,896.6
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt . . . . . . . . . . . . . . . $ 603.9 566.2 (b) $ 37.7
Other current liabilities . . . . . . . . . . 1,697.2 1,697.2
--------- ---------
Total Current Liabilities . . . . . . . . . 2,301.1 1,734.9
Long-term debt . . . . . . . . . . . . . . . . . 1,262.8 170.1 (b) 1,092.7
Other liabilities . . . . . . . . . . . . . . . 816.8 816.8
Noncurrent liability for asbestos-related litigation 659.1 659.1
--------- ---------
Total Liabilities . . . . . . . . . . . . . 5,039.8 4,303.5
--------- ---------
Commitments and Contingencies
Shareholders' Equity
Preferred stocks . . . . . . . . . . . . . . . 7.4 7.4 (e) --
Common stock . . . . . . . . . . . . . . . . . 98.7 97.7 (d) 1.0
Paid in capital . . . . . . . . . . . . . . . 513.4 297.4 (d) 216.0
Retained earnings . . . . . . . . . . . . . . 1,082.0 60.0 (a) 2,259.1 (a)
1,872.0 (c) 7.4 (e) 1,416.5
Cumulative translation adjustments . . . . . . (40.4) (40.4)
Treasury stock, at cost . . . . . . . . . . . (395.1) 395.1 (d) --
--------- ---------
Total Shareholders' Equity . . . . . . . . . 1,266.0 1,593.1
--------- ---------
Total Liabilities and Shareholders' Equity . $ 6,305.8 $ 5,896.6
========= =========
THE NOTES TO THIS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
ARE AN INTEGRAL PART OF THE PRO FORMA FINANCIAL INFORMATION PRESENTED.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The unaudited pro forma condensed consolidated statement of operations of
New Grace has been derived from the historical consolidated statement of
operations of Grace New York, adjusted to reflect the reduction in interest
expense expected to result from the Reorganization. The pro forma condensed
consolidated statement of operations has been prepared on the assumption that
the Reorganization occurred on January 1, 1995.
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------
GRACE PRO FORMA NEW
NEW YORK ADJUSTMENTS GRACE
----------------
HISTORICAL DEBIT CREDIT PRO FORMA
------------------ ----- ------ --------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Sales and revenues . . . . . . . . . . . . . . . . . . . . . . $3,665.5 $ 3,665.5
Other income . . . . . . . . . . . . . . . . . . . . . . . . . 41.9 41.9
-------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 3,707.4 3,707.4
-------- ---------
Cost of goods sold and operating expenses . . . . . . . . . . . 2,243.7 2,243.7
Selling, general and administrative expenses . . . . . . . . . 905.6 905.6
Depreciation and amortization . . . . . . . . . . . . . . . . . 186.3 186.3
Interest expense and related financing costs . . . . . . . . . 71.3 $0.7 (f) 70.6
Research and development expenses . . . . . . . . . . . . . . . 120.6 120.6
Corporate expenses previously allocated to health care operations 37.8 37.8
Restructuring costs and asset impairments . . . . . . . . . . . 179.5 179.5
Provision relating to asbestos-related liabilities and insurance
coverage . . . . . . . . . . . . . . . . . . . . . . . 275.0 275.0
-------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 4,019.8 4,019.1
-------- ---------
Loss from continuing operations before income taxes . . . . . . (312.4) (311.7)
Benefit from income taxes . . . . . . . . . . . . . . . . . . . (115.8) $0.3 (f) (115.5)
-------- ---------
Loss from continuing operations . . . . . . . . . . . . . . . $ (196.6) $ (196.2)
======== =========
Loss per share:
Continuing operations . . . . . . . . . . . . . . . . . . $ (2.05) $ (2.05)
Fully diluted loss per share:
Continuing operations . . . . . . . . . . . . . . . . . . $ -- (1) $ -- (1)
Weighted average shares of Common Stock outstanding (in thousands) 95,822 95,822
- ------------
(1) Not presented as the effect is anti-dilutive.
SIX MONTHS ENDED JUNE 30, 1996
-------------------------------------------
GRACE PRO FORMA NEW
NEW YORK ADJUSTMENTS GRACE
----------------
HISTORICAL DEBIT CREDIT PRO FORMA
------------ ----- ------ ------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Sales and revenues . . . . . . . . . . . . . . . . . . . . . . $1,834.9 $1,834.9
Other income . . . . . . . . . . . . . . . . . . . . . . . . . 17.9 17.9
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 1,852.8 1,852.8
-------- --------
Cost of goods sold and operating expenses . . . . . . . . . . . 1,103.8 1,103.8
Selling, general and administrative expenses . . . . . . . . . 405.7 405.7
Depreciation and amortization . . . . . . . . . . . . . . . . . 91.9 91.9
Interest expense and related financing costs . . . . . . . . . 36.7 $8.9 (f) 45.6
Research and development expenses . . . . . . . . . . . . . . . 57.8 57.8
Restructuring costs . . . . . . . . . . . . . . . . . . . . . . 53.7 53.7
Gain on sales of businesses . . . . . . . . . . . . . . . . . . (326.4) (326.4)
--------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 1,423.2 1,432.1
--------- --------
Income from continuing operations before income taxes . . . . . 429.6 420.7
Provision for income taxes . . . . . . . . . . . . . . . . . . 154.9 $3.6 (f) 151.3
-------- --------
Income from continuing operations . . . . . . . . . . . . . . $ 274.7 $ 269.4
======== ========
Earnings per share:
Continuing operations . . . . . . . . . . . . . . . . . . $ 2.82 $ 2.77
Fully diluted earnings per share:
Continuing operations . . . . . . . . . . . . . . . . . . $ 2.76 $ 2.71
Weighted average shares of Common Stock outstanding (in thousands) 97,259 97,259
THE NOTES TO THIS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS ARE AN INTEGRAL PART OF THE PRO FORMA FINANCIAL INFORMATION
PRESENTED.
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND
STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PAR VALUE)
(a) The Reorganization Agreement provides that, prior to the Reorganization,
NMC will borrow and/or will assume debt of Grace Chemicals in an
aggregate amount of approximately $2,263 (as adjusted pursuant to the
Reorganization Agreement), and will distribute the net cash proceeds to
Grace Chemicals; it is currently estimated that such aggregate amount
will be approximately $2,259.1. A portion of such net cash proceeds
will be applied to further reduce Grace Chemicals' debt, resulting in an
aggregate reduction of $1,199.1 in Grace Chemicals' debt (see note (b)
below). In addition, Grace will incur expenses totaling approximately
$60.0 (net of applicable tax benefit) in connection with the
Reorganization. The remaining net cash proceeds received from NMC
(estimated at $1,000.0) are expected to be used to (i) purchase shares
of New Grace Common Stock (which would result in a decrease in current
assets and a commensurate decrease in shareholders' equity); (ii) invest
in core businesses; and (iii) further reduce Grace Chemicals' debt.
(b) As discussed in note (a) above, the assumption of Grace Chemicals' debt
by NMC and the application of a portion of the net cash proceeds
distributed to Grace Chemicals by NMC to the reduction of Grace
Chemicals' debt is expected to result in an aggregate reduction of
$1,199.1 in Grace Chemicals' debt, consisting of (i) $179.8 of
borrowings under NMC receivables financing arrangements; (ii) $181.5 of
other NMC debt; (iii) $566.2 of short-term debt (consisting of $336.0 of
commercial paper and bank borrowings and $230.2 of other short-term
borrowings); (iv) $170.1 of commercial paper classified as long-term
debt; and (v) $101.5 of borrowings under Grace Chemicals receivables
financing arrangements.
(c) Reflects the disposition of NMC's net assets of $1,872.0. Subsequent to
the disposition of NMC, New Grace will retain as discontinued operations
certain health care assets, primarily a bioseparation sciences business,
a health care services company and other assets (including NMC's cash
and marketable securities). The resulting gain of $387.1 (reflecting
net cash proceeds of $2,259.1, as described in note (a) above, less the
disposition of NMC's net assets of $1,872.0) is not reflected in the
pro forma condensed consolidated statement of operations.
(d) As part of the Reorganization, Grace New York will distribute, on a
one-share-for-one-share basis, all of the issued and outstanding New
Grace Common Stock (which has a par value of $.01 per share) to the
holders of shares of Grace New York Common Stock (which has a par value
of $1.00 per share) at the Time of Distribution. The treasury stock
held by Grace New York at the Time of Distribution will not be
transferred to New Grace and is therefore eliminated in the pro forma
adjustments. As a result of the retirement of the treasury stock and
the difference in the par values, (i) the $395.1 of treasury stock will
be eliminated, (ii) Common stock will decrease by $97.7 and (iii) paid
in capital will decrease by $297.4.
(e) The currently issued and outstanding shares of Grace New York Preferred
Stock will remain issued and outstanding following the Reorganization
and the Distribution, and no New Grace preferred stock will be issued.
The resulting reduction in outstanding Preferred stock is presented as
an increase in retained earnings within the shareholders' equity
section of the pro forma balance sheet.
(f) Grace Chemicals has allocated interest expense to discontinued
operations (including NMC), based on the ratio of the net assets of the
businesses classified as discontinued operations as compared to Grace
Chemicals' total capital. Excluding amounts allocated to discontinued
operations, interest expense and related financing costs were $71.3 for
the year ended December 31, 1995 and $36.7 for the six months ended June
30, 1996. For the year ended December 31, 1995, the assumed reduction
in debt as of January 1, 1995 would have the pro forma effect of
reducing total interest expense and related financing costs by $94.2 (of
which $0.7 was attributable to continuing operations and $93.5 was
attributable to discontinued operations). For the six months ended June
30, 1996, the assumed reduction in debt as of January 1, 1995 would have
the pro forma effect of reducing total interest expense and related
financing costs by $42.3 (increasing interest expense and related
financing costs attributable to continuing operations by $8.9 and
reducing interest expense and related financing costs attributable to
discontinued operations by $51.2).
The above adjustments to interest expense and related financing costs
would have the pro forma effect of increasing tax expense by $0.3 for
the year ended December 31, 1995 and reducing tax expense by $3.6 for
the six-month period ended June 30, 1996. The tax effects were
calculated using an effective tax rate of approximately 40%, which
represents the U.S. federal corporate tax rate of 35%, plus state and
local income taxes, net of U.S. federal income tax benefit.
________________
For accounting purposes, Grace Chemicals will receive the Distribution
Payment and will be deemed to receive a 44.8% common equity interest in FMC
and to immediately distribute such interest to the holders of Grace New York
Common Stock; however, the receipt and distribution of the interest in FMC
Ordinary Shares are not reflected in the pro forma condensed consolidated
balance sheet and statement of operations.
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CAPITALIZATION
The following table sets forth the capitalization of Grace New York
and the pro forma capitalization of New Grace at June 30, 1996, giving effect
to the Reorganization and related transactions described in the notes to the
unaudited pro forma condensed consolidated balance sheet and statement of
operations. This table should be read in conjunction with such notes, the
Consolidated Financial Statements and the Second Quarter Financial Statements.
JUNE 30, 1996
----------------------------------------
GRACE NEW YORK NEW GRACE
HISTORICAL PRO FORMA
----------------- -------------
(DOLLARS IN MILLIONS, EXCEPT PAR VALUE)
Debt, including short-term debt (a) . . . . . . . . . . . . . . . . . . . . . . . . $1,866.7 $1,130.4
-------- --------
Shareholders' equity:
Grace New York Common Stock:
Common stock, $1.00 par value; 300,000,000 shares authorized;
98,740,000 issued; 93,550,000 outstanding . . . . . . . . . . . . . $ 98.7 --
New Grace Common Stock:
Common stock, $.01 par value; 300,000,000 shares authorized;
93,550,000 outstanding . . . . . . . . . . . . . . . . . . . . . . . -- $ 1.0
Grace New York Preferred Stock:
6% Preferred Stock, Cumulative, $100 par value; 40,000 shares authorized;
36,460 outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 3.6 --
Class A Preferred Stock, 8% Cumulative, $100 par value; 50,000 shares authorized;
16,256 outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6 --
Class B Preferred Stock, 8% Noncumulative, $100 par value; 40,000 shares
authorized; 21,577 outstanding . . . . . . . . . . . . . . . . . . . . 2.2 --
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513.4 216.0
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,082.0 1,416.5
Cumulative translation adjustments . . . . . . . . . . . . . . . . . . . . . . (40.4) (40.4)
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . (395.1) --
-------- --------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 1,266.0 1,593.1
-------- --------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . $3,132.7 $2,723.5
======== ========
- ----------------------
(a) In addition to the retirement of debt reflected above, it is also
expected that $101.5 of borrowings under Grace Chemicals receivables
financing arrangement, $179.8 of borrowings under NMC receivables
financing arrangements and $181.5 of other NMC debt will be retired.
These amounts are classified within Notes and accounts receivable, net
and Net assets of discontinued operations - health care, respectively,
in the Grace New York historical balance sheet at June 30, 1996.
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