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Exhibit 99.2
UNAUDITED, COMBINED PRO FORMA FINANCIAL STATEMENTS OF
GENZYME GENERAL
INTRODUCTION:
On June 28, 1999, Genzyme General Division ("Genzyme General") will
transfer $150.0 million of cash and investments (the "Transfer") to Genzyme
Surgical Products Division ("GSP") and Genzyme will distribute (the
"Distribution") approximately 14.8 million shares of Genzyme Surgical Products
Division Common Stock ("GZSP Stock") to the holders of Genzyme General Division
Common Stock ("GENZ Stock"). These unaudited, combined pro forma financial
statements and the related notes are presented to give effect to the Transfer
and the Distribution (as described in Note 1). Pro forma statements of
operations have been presented for Genzyme General assuming that the
Distribution occurred as of January 1, 1998. A pro forma balance sheet has been
presented for Genzyme General assuming that the Transfer and the Distribution
occurred as of March 31, 1999. Pro forma financial statements for Genzyme,
Genzyme Molecular Oncology Division ("GMO") and Genzyme Tissue Repair Division
("GTR") have not been included because the Transfer will have no effect on the
historical financial condition or results of operations of either Genzyme, GTR
or GMO.
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GENZYME GENERAL
UNAUDITED, COMBINED PRO FORMA STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA
FOR THE FOR THE
QUARTER ENDED PRO FORMA QUARTER ENDED
3/31/99 ADJUSTMENTS 2(A) 3/31/99
------------- ---------------- -------------
Total revenues........................................ $178,119 $(27,353) $150,766
Operating costs and expenses:
Cost of products and services sold.................. 52,566 (15,844) 36,722
Selling, general and administrative................. 51,012 (15,287) 35,725
Research and development............................ 26,667 (5,602) 21,065
Amortization of intangibles......................... 3,503 (1,417) 2,086
-------- -------- --------
Total operating costs and expenses.......... 133,748 (38,150) 95,598
-------- -------- --------
Operating income...................................... 44,371 10,797 55,168
Other income (expenses):
Equity in net loss of unconsolidated affiliates..... (7,710) (46) (7,756)
Gain on affiliate sale of stock..................... 606 -- 606
Minority interest................................... 866 -- 866
Gain on sale of investment in equity securities..... 1,963 -- 1,963
Investment income................................... 7,930 (7) 7,923
Interest expense.................................... (5,050) 1 (5,049)
-------- -------- --------
Total other income (expenses)............... (1,395) (52) (1,447)
-------- -------- --------
Income before income taxes............................ 42,976 10,745 53,721
Provision for income taxes............................ (16,391) (3,825) (20,216)
-------- -------- --------
Net income............................................ 26,585 6,920 33,505
Tax benefit allocated from Genzyme Tissue Repair...... 3,962 -- 3,962
Tax benefit allocated from Genzyme Molecular
Oncology............................................ 1,934 -- 1,934
Tax benefit allocated from Genzyme Surgical
Products............................................ -- 3,825 3,825
-------- -------- --------
Net income attributable to GENZ Stock................. $ 32,481 $ 10,745 $ 43,226
======== ======== ========
Per Genzyme General common share:
Net income per Genzyme General common
share -- basic:..................................... $ 0.40 $ 0.13 $ 0.53
======== ======== ========
Weighted average shares outstanding................... 81,958 -- 81,958
======== ======== ========
Net income per Genzyme General common and common
equivalent share -- diluted:........................ $ 0.38 $ 0.11 $ 0.49
======== ======== ========
Adjusted weighted average shares outstanding.......... 85,632 6,959 92,591
======== ======== ========
The accompanying notes are an integral part of these unaudited, combined pro
forma financial statements.
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GENZYME GENERAL
UNAUDITED, COMBINED PRO FORMA STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
PRO FORMA
HISTORICAL FOR THE
FOR THE YEAR
YEAR ENDED PRO FORMA ENDED
12/31/98 ADJUSTMENTS 2(A) 12/31/98
---------- ---------------- ---------
Total revenues............................................ $673,277 $(103,958) $569,319
Operating costs and expenses:
Cost of products and services sold...................... 245,316 (72,274) 173,042
Selling, general and administrative..................... 183,469 (57,297) 126,172
Research and development................................ 91,757 (18,618) 73,139
Amortization of intangibles............................. 13,358 (5,748) 7,610
-------- --------- --------
Total operating costs and expenses.............. 533,900 (153,937) 379,963
-------- --------- --------
Operating income.......................................... 139,377 49,979 189,356
Other income (expenses):
Equity in net loss of unconsolidated affiliates......... (19,685) (54) (19,739)
Gain on affiliate sale of stock......................... 2,369 -- 2,369
Minority interest....................................... 4,285 -- 4,285
Gain on sale of product line............................ 31,202 -- 31,202
Gain on sale of investments............................. 3,391 -- 3,391
Charge for impaired investments......................... (3,397) -- (3,397)
Investment income....................................... 23,097 (144) 22,953
Interest expense........................................ (17,069) 75 (16,994)
-------- --------- --------
Total other income (expenses)................... 24,193 (123) 24,070
-------- --------- --------
Income before income taxes................................ 163,570 49,856 213,426
Provision for income taxes................................ (62,438) (17,936) (80,374)
-------- --------- --------
Net income................................................ 101,132 31,920 133,052
Tax benefit allocated from Genzyme Tissue Repair.......... 16,394 -- 16,394
Tax benefit allocated from Genzyme Molecular Oncology..... 3,527 -- 3,527
Tax benefit allocated from Genzyme Surgical Products...... -- 17,936 17,936
-------- --------- --------
Net income attributable to GENZ Stock..................... $121,053 $ 49,856 $170,909
======== ========= ========
Per Genzyme General common share:
Net income per Genzyme General common share -- basic:..... $ 1.53 $ 0.63 $ 2.16
======== ========= ========
Weighted average shares outstanding....................... 79,063 -- 79,063
======== ========= ========
Net income per Genzyme General common and common
equivalent share -- diluted:............................ $ 1.48 $ 0.58 $ 2.06
======== ========= ========
Adjusted weighted average shares outstanding.............. 81,734 4,088 85,822
======== ========= ========
The accompanying notes are an integral part of these unaudited, combined pro
forma financial statements.
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GENZYME GENERAL
UNAUDITED, COMBINED PRO FORMA BALANCE SHEET
(AMOUNTS IN THOUSANDS)
HISTORICAL PRO FORMA
GENZYME GENZYME
GENERAL PRO FORMA GENERAL
3/31/99 ADJUSTMENTS 2(B) 3/31/99
---------- ---------------- ----------
ASSETS
Current assets:
Cash and cash equivalents............................. $ 61,668 $ (1,199) $ 60,469
Short-term investments................................ 247,668 (150,000) 97,668
Accounts receivable, net.............................. 156,461 (16,344) 140,117
Inventories........................................... 107,910 (24,919) 82,991
Prepaid expenses and other current assets............. 31,108 (1,347) 29,761
Due from Genzyme Tissue Repair........................ 3,994 -- 3,994
Due from Genzyme Molecular Oncology................... 4,526 -- 4,526
Deferred tax assets -- current........................ 39,690 -- 39,690
---------- --------- ----------
Total current assets.......................... 653,025 (193,809) 459,216
Property, plant and equipment, net...................... 374,294 (16,306) 357,988
Long-term investments................................... 300,985 -- 300,985
Intangibles, net........................................ 259,934 (176,183) 83,751
Deferred tax assets -- noncurrent....................... 28,245 -- 28,245
Investments in equity securities........................ 39,305 -- 39,305
Other noncurrent assets................................. 33,197 (2,687) 30,510
---------- --------- ----------
Total assets.................................. $1,688,985 $(388,985) $1,300,000
========== ========= ==========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable...................................... $ 21,513 $ (5,285) $ 16,228
Accrued expenses...................................... 76,664 (5,013) 71,651
Income taxes payable.................................. 20,974 12 20,986
Deferred revenue...................................... 1,618 -- 1,618
Current portion of long-term debt and capital lease
obligations........................................ 83,158 -- 83,158
---------- --------- ----------
Total current liabilities..................... 203,927 (10,286) 193,641
Noncurrent liabilities:
Long-term debt and capital lease obligations............ 3,070 -- 3,070
Convertible subordinated notes and debentures........... 271,813 -- 271,813
Other................................................... 8,072 (221) 7,851
---------- --------- ----------
Total liabilities............................. 486,882 (10,507) 476,375
Division equity......................................... 1,202,103 (378,478) 823,625
---------- --------- ----------
Total liabilities and division equity......... $1,688,985 $(388,985) $1,300,000
========== ========= ==========
The accompanying notes are an integral part of these unaudited, combined pro
forma financial statements.
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GENZYME GENERAL
NOTES TO UNAUDITED, COMBINED PRO FORMA FINANCIAL STATEMENTS
(1) CREATION OF GSP AND DISTRIBUTION OF GZSP STOCK:
GSP was created from Genzyme's existing surgical products business, which
previously operated as a business unit of Genzyme General. It primarily
consists of the products and assets of Genzyme acquired upon the purchase of
DSP in 1996, Genzyme's portfolio of Sepra Products, and Genzyme's research
and development programs in gene and cell therapy for cardiovascular
disease. On June 28, 1999 (the "Distribution Date"), Genzyme will distribute
to the holders of GENZ Stock of record at the close of business on June 14,
1999, approximately 14.8 million shares of GZSP Stock. Also on June 28,
1999, Genzyme General will allocate $150.0 million of cash and investments
to GSP. Subsequent to the Distribution, Genzyme General's financial
statements will be restated to eliminate the assets and liabilities and
revenue and expenses attributable to GSP. These pro forma financial
statements reflect such eliminations.
(2) PRO FORMA ADJUSTMENTS RELATED TO THE CREATION OF GSP AND DISTRIBUTION OF
GZSP STOCK:
(A) The pro forma adjustments to the Genzyme General Combined Statements of
Operations for the three months ended March 31, 1999 and for the year
ended December 31, 1998, reflect the elimination of revenues and
expenses attributable to GSP's operations for those periods. In
addition, Genzyme General's income tax provision has been adjusted to
reflect the impact of eliminating GSP's losses. The tax benefit
attributable to GSP has been reallocated to Genzyme General in
accordance with Genzyme's tax allocation policy.
(B) The pro forma adjustments to the Genzyme General Combined Balance Sheet
at March 31, 1999 reflect the elimination of assets, liabilities and
division equity attributable to GSP as of March 31, 1999. In addition,
the short-term investments have been adjusted to reflect the transfer
of $150.0 million to GSP.
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