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EXHIBIT 99.2
FRESENIUS MEDICAL CARE AG
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined statement of earnings
and unaudited pro forma condensed combined balance sheet for Fresenius Medical
Care (collectively, the "Pro Forma Condensed Combined Financial Information")
have been prepared to illustrate the pro forma effects of the proposed
transactions in accordance with US GAAP and are based on the assumptions set
forth below and in the notes to the Fresenius Worldwide Dialysis Combined
Financial Statements and the W. R. Grace & Co. Special-Purpose, Consolidated
Financial Statements included in the Joint Proxy Statement-Prospectus
dated August 2, 1996 of Grace and Fresenius USA. The Fresenius Medical Care
unaudited pro forma condensed combined statement of earnings is based on the
statements of earnings of Fresenius Worldwide Dialysis and Grace for the six
months ending June 30, 1996 and is prepared as if the Reorganization had
occurred as of January 1, 1996. The Fresenius Medical Care unaudited pro forma
condensed combined balance sheet is based on the June 30, 1996 balance sheets of
Fresenius Worldwide Dialysis and Grace and is prepared as if the Reorganization
had occurred as of June 30, 1996. The financial statements of Grace on which
the Pro Forma Condensed Combined Financial Information is based represent the
National Medical Care, Inc. business of Grace only after completing the spin
off of New Grace.
The financial statements of Fresenius Worldwide Dialysis and Grace were
prepared as if each entity operated as an independent, stand-alone entity for
the period presented. Neither entity exists in the form presented and, as such,
the net assets (equity) for each entity represent the excess of its assets over
its liabilities and not the capital structure of its parent and reporting
entity. The accompanying unaudited pro forma condensed combined financial
information does not present historical earnings per share data since the
weighted average number of shares associated with each of these combining
segments to support such a calculation does not exist. The capital structure of
Fresenius Medical Care will consist of 70,000,000 FMC Ordinary Shares issued to
Fresenius AG and the shareholders of Fresenius USA and Grace in consideration
for the contribution of Fresenius Worldwide Dialysis and Grace to Fresenius
Medical Care. Fresenius AG, the public shareholders of Fresenius USA, and the
holders of common stock (and options) of Grace will receive 50.3%, 4.9% and
44.8% of the outstanding FMC Ordinary Shares, respectively, on a fully diluted
basis.
The Pro Forma Condensed Combined Financial Information does not give effect
to certain restructuring and rationalization costs expected to be incurred
following the Reorganization. In addition, although Fresenius Medical Care plans
to realize cost reductions from the Reorganization and such restructuring and
rationalization, no effect has been given in the Pro Forma Financial Statements
to any such benefits. However, such cost reduction will be a function of
numerous factors, and no assurance can be given that any such cost reduction
will be realized over time.
For accounting purposes, the Reorganization will be treated as a purchase
of Grace by Fresenius Medical Care. Accordingly, for the purpose of these Pro
Forma Condensed Combined Financial Statements, the excess of the purchase price
of Grace over the historical costs of Grace's assets is reflected in the pro
forma condensed combined balance sheet as "excess purchase price over cost" and
has been amortized over an estimated composite life in the unaudited pro forma
condensed combined statement of earnings. Fresenius Medical Care intends to
obtain a valuation study to value existing assets and liabilities and to
appropriately allocate the excess purchase price over the cost of the business
acquired. Fresenius Medical Care management believes that the composite life
used in the pro forma condensed combined statement of earnings will not vary
materially from the amounts charged to operations once a valuation study has
been completed and existing assets and liabilities have been recorded at their
fair values.
The pro forma adjustments recognize the increase in debt that is incurred
immediately prior to the Reorganization and the resultant increase in financing
costs in the unaudited pro forma condensed combined statement of earnings. In
accordance with the Reorganization Agreement, Grace will borrow an amount
sufficient to finance the payment to, and assumption of indebtedness of, Grace
Chemicals, such that the Debt of Grace on a consolidated basis at the Effective
Time, will not exceed $2.273 billion, subject to adjustment as provided therein.
See "THE REORGANIZATION -- The Distribution Agreement" in the Joint Proxy
Statement-Prospectus.
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For purposes of the Pro Forma Condensed Combined Financial Statements, the
Debt of $2,273,000 is comprised at June 30, 1996 of an off-balance sheet working
capital facility of $200,000; historical capital lease obligations of $8,847;
$18,800 related to certain accrued expenses; and new debt of $2,045,353.
Interest on the new borrowings ranges from LIBOR plus 1.375% to LIBOR plus 1.75%
while interest on the off-balance sheet facility is LIBOR plus .50%. (The
average LIBOR was 5.668% for the six-month period ended June 30, 1996.)
Interest also includes commitment fees related to letters of credit. See
"FINANCING -- NMC Credit Agreement" in the Joint Proxy Statement-Prospectus.
In addition, the acquisition of the minority interest of Fresenius USA has
been recorded in the Pro Forma Condensed Combined Financial Statements and the
resultant goodwill has been amortized over 40 years. The pro forma adjustments
include the elimination of the intercompany activity between Fresenius Worldwide
Dialysis and Grace during the six-month period ended June 30, 1996 and the
reclassification of the assets and liabilities as of June 30, 1996. The assets
and liabilities of Rena-Med are reclassified to assets held for disposal. The
Schiwa net assets and any gains on the disposition of those assets will be
retained by Fresenius AG. Certain pro forma adjustments have been made to
reflect the results of operations on a stand-alone basis, including the
elimination of Grace Chemicals' overhead allocations and the costs of the Grace
Chemicals long-term and other incentive plans, that will not be applicable
following the Reorganization. Fresenius Medical Care management believes that
the estimated added costs for Fresenius Medical Care to operate on a stand-alone
basis are reasonable and has made an adjustment to reflect the estimated
expenses for Fresenius Medical Care to operate as an independent entity.
THE PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION IS PROVIDED FOR
ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO REPRESENT WHAT THE FINANCIAL
POSITION OR RESULTS OF OPERATIONS OF FRESENIUS MEDICAL CARE WOULD ACTUALLY HAVE
BEEN IF THE REORGANIZATION HAD IN FACT OCCURRED AS OF THE DATES INDICATED OR TO
PROJECT THE COMBINED FINANCIAL POSITION OR RESULTS OF OPERATIONS FOR ANY FUTURE
DATE OR PERIOD. THE PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE NOTES THERETO AND THE FINANCIAL STATEMENTS AND
RELATED NOTES THERETO CONTAINED IN THE JOINT PROXY STATEMENT-PROSPECTUS AND IN
THE RESPECTIVE QUARTERLY REPORTS ON FORM 10-Q FILED WITH THE COMMISSION BY
GRACE AND BY FRESENIUS USA FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.
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FRESENIUS MEDICAL CARE AG
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1996
PRO FORMA NOTE
FWD GRACE ADJUSTMENTS REFERENCES ADJUSTED
-------- ---------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Net revenues...................... $471,224 $1,080,410 $ (24,912) 5 $1,506,236
(14,725) 9
(5,761) 10
Cost of revenues.................. 271,487 638,286 4,376 7 876,341
(21,647) 5
(12,426) 9
(3,735) 10
-------- ---------- ----------
Gross profit.................... 199,737 442,124 629,895
Operating expenses:
Selling, general and
administrative............... 124,583 205,138 (4,022) 9 332,023
(2,205) 10
1,000 6
1,459 7
6,070 6
Provision for doubtful
accounts..................... -- 42,928 42,928
Depreciation and amortization... -- 62,161 32,049 3 96,512
(excluding $20,628 for 2,500 8
Fresenius Worldwide Dialysis) (160) 5
(38) 10
Research and development........ 7,186 1,308 (12) 9 8,482
Allocation of Grace Chemicals
expenses..................... -- 3,786 (3,786) 6 --
-------- ---------- ----------
Operating income................ 67,968 126,803 149,950
Interest, net................... 5,388 14,463 80,265 2 87,018
(14,202) 2
1,785 4
(681) 10
Other, net...................... (4,139) -- 2,784 9 (1,355)
-------- --------- ----------
Earnings before income taxes...... 66,719 112,340 64,287
Provision for income taxes........ 22,685 51,977 (38,585) 15 35,263
(814) 9
-------- ---------- ----------
Earnings before minority
interest........................ 44,034 60,363 29,024
Minority interest................. 769 -- (769) 8 261
261 11
-------- ---------- --------- ----------
Net earnings...................... $ 43,265 $ 60,363 $ (74,865) $ 28,763
======== ========== ========= ==========
Earnings per ordinary share....... 16 $ 0.41
==========
Earnings per ADS.................. 16 $ 0.14
==========
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Information.
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FRESENIUS MEDICAL CARE AG
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1996
PRO FORMA NOTE
FWD GRACE ADJUSTMENTS REFERENCES ADJUSTED
-------- ---------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents..... $ 40,035 $ 40,039 $ (80,074) 1 $ --
Trade accounts receivable,
net........................ 194,094 437,079 (6,600) 5 601,933
(1,238) 9
(1,195) 10
(20,207) 2
Inventories, net.............. 190,264 73,485 (3,475) 9 257,172
(3,102) 10
Prepaid expenses and other
current assets............. 22,903 65,345 (5,076) 9 81,001
(2,171) 10
Deferred income taxes......... 14,273 92,812 (27) 9 107,058
-------- --------- ----------
Total current assets.. 461,569 708,760 1,047,164
Property, plant and equipment,
net........................... 138,541 396,828 (826) 9 532,043
(2,500) 10
Intangible assets, net.......... 63,675 949,732 199,502 8 1,212,903
(6) 9
Excess purchase price over
cost.......................... -- -- 1,776,328 3 1,776,328
Investments in affiliates....... 18,108 -- 18,108
Deferred taxes.................. 399 -- 399
Other assets.................... 38,493 19,201 25,000 4 82,694
Assets held for disposal........ 456 10 456
-------- ---------- ----------- ----------
Total Assets.................... $720,785 $2,074,521 $ 1,874,789 $4,670,095
======== ========== =========== ==========
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Information.
(Continued)
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FRESENIUS MEDICAL CARE AG
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1996
PRO FORMA NOTE
FWD GRACE ADJUSTMENTS REFERENCES ADJUSTED
--------- ----------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........................ $34,576 $ 99,332 $ (34,783) 1 $ 85,769
(6,600) 5
(739) 9
(6,017) 10
Accrued expenses........................ 70,566 210,980 310,241
10,000 14
25,000 4
(3,884) 9
(2,421) 10
Short-term borrowings................... 118,756 -- 118,756
Current portion of long-term debt and
capital lease obligations............. 21,924 155,222 (151,118) 2 26,028
Income taxes payable.................... 1,611 13,194 (430) 9 14,301
(74) 10
Deferred taxes.......................... 123 -- -- 123
Other current liabilities............... 13,392 -- -- 13,392
-------- ---------- ----------
Total current liabilities........ 260,948 478,728 568,610
Long-term debt and capital lease
obligations, less current portion....... 29,320 26,320 (21,577) 2 34,063
New debt.................................. -- -- 2,045,353 2 2,045,353
Other liabilities......................... 5,493 22,286 (846) 9 26,933
Pension liabilities....................... 17,022 -- (951) 9 16,071
Deferred taxes............................ 5,442 64,778 171,177 3 241,397
Minority interest......................... 27,441 -- (27,441) 8 17,177
7,439 11
9,738 12
-------- ---------- ----------
Total Liabilities....................... 345,666 592,112 2,949,604
Stockholders' Equity:
Capital stock........................... 252,945 13 252,945
Additional paid in capital.............. 1,467,546 13 1,467,546
Retained earnings....................... --
Net assets.............................. 375,119 1,482,409 (5,256) 1 --
(171,177) 3
1,776,328 3
226,943 8
(7,439) 11
(9,738) 12
(10,000) 14
(1,892,865) 2
(3,798) 9
(40,035) 1
(1,720,491) 13 --
-------- ---------- ----------
Total Stockholders' Equity....... 375,119 1,482,409 1,720,491
-------- ---------- ----------- ----------
Total Liabilities and
Stockholders' Equity........... $720,785 $2,074,521 $ 1,874,789 $4,670,095
======== ========== =========== ==========
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Information.
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FRESENIUS MEDICAL CARE AG
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS)
(1) Pursuant to the Reorganization Agreement, all cash and cash equivalents of
Grace and Fresenius Worldwide Dialysis shall be retained by Grace Chemicals
and Fresenius AG, respectively. See "THE REORGANIZATION" in the Joint Proxy
Statement-Prospectus. Accordingly, an adjustment has been recorded to
return the cash balance of $40,035 to Fresenius AG with an offsetting
decrease in the net assets of Fresenius Worldwide Dialysis. At June 30,
1996, Grace recorded an adjustment for $34,783 to reclassify its
outstanding checks to accounts payable. An adjustment has therefore been
recorded to eliminate the Grace financial statement cash balance of
$40,039; reverse the $34,783 reclassification entry to accounts payable,
and decrease net assets for the remaining balance of $5,256.
(2) For purposes of the Pro Forma Condensed Combined Financial Statements,
Grace will incur new debt of $2,045,353 prior to the Reorganization to be
used for payment of the Grace dividend of $1,892,865. Grace's Debt is
subject to adjustment in accordance with the Reorganization Agreement. See
"THE REORGANIZATION -- The Distribution Agreement" in the Joint Proxy
Statement-Prospectus.
Grace's Debt of $2,273,000 is comprised of an off-balance sheet working
capital facility of $200,000; historical capital lease obligations of
$8,847; $18,800 related to certain accrued expenses, and new debt of
$2,045,353. See "FINANCING -- NMC Credit Agreement" in the Joint Proxy
Statement-Prospectus. Interest on the new borrowings ranges from LIBOR plus
1.375% to LIBOR plus 1.75% while interest on the off-balance sheet facility
is LIBOR plus .50% (the average LIBOR was 5.668% for the six-month period
ended June 30, 1996). Interest also includes commitment fees related to
letters of credit. See "FINANCING -- NMC Credit Agreement" in the Joint
Proxy Statement-Prospectus.
Based upon the above, adjustments to record the new debt of $2,045,353,
eliminate existing Grace debt (except for capital lease obligations and
cash overdrafts) of $172,695, and to reduce the equity of Grace by
$1,892,865 for the payment of the Grace dividend have been recorded. In
addition, an adjustment has been recorded for $20,207 to reduce accounts
receivable for the difference between the off-balance sheet working capital
facility of $179,793 at June 30, 1996 and the facility of $200,000 to be
established prior to the Reorganization.
An adjustment has also been recorded to eliminate Grace interest expense
(less the interest on capital lease obligations retained) of $14,202 for
the six-month period ended June 30, 1996. Correspondingly, interest expense
on the total new debt (including the working capital facility) was recorded
at the above noted rates for $80,265 for the six-month period ended June
30, 1996.
(3) Adjustments have been made to record the excess purchase price over the
carrying value of the Grace assets and liabilities acquired of $1,776,328
and to establish a deferred tax liability of $171,177, representing the
estimated tax effect of specifically identified assets to be increased to
fair value. The excess purchase price over the historical cost has not been
allocated to specifically identified assets nor has the unidentified
portion been treated as goodwill. Fresenius Medical Care management intends
to undertake a valuation study to record the assets and liabilities
acquired at their fair market value.
Amortization of the excess purchase price in the amount of $32,049 for the
six-month period ended June 30, 1996, approximating a composite life of
27.7 years has been recorded in the unaudited pro forma condensed combined
income statement. This amount was determined by using a recently completed
Grace valuation study as an estimate of the amounts that will be recorded
upon the completion of the Fresenius Medical Care valuation. Fresenius
Medical Care management believes that the amortization recorded in the pro
forma financial statements will not vary materially from the amounts that
will be recorded once its valuation study is completed.
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An adjustment was made for $6,077 for the six-month period ended June 30,
1996, to reduce income tax expense for the estimated tax effect for
amortization of the estimated specifically identified assets that will be
recorded at fair value.
(4) Adjustments have been made to record estimated net financing costs of
$25,000 for new debt under the NMC Credit Agreement and to amortize such
debt over the seven year life of the financing.
(5) Adjustments have been made to eliminate intercompany balances and activity
between Grace and Fresenius Worldwide Dialysis at June 30, 1996 and for
the six-month period then ended.
(6) An adjustment has been made for the six-month period ended June 30, 1996 to
eliminate historical overhead allocations from Grace of $3,786 and to
establish an estimate of new replacement incentive compensation
arrangements of $3,750 and to record the estimated expenses to operate
on a stand-alone basis of $2,320. An adjustment has also been made to
record incremental overhead expenses related to Fresenius Medical Care
corporate of $1,000 for the six-month period ended June 30, 1996.
(7) An adjustment has been made to record expenses under the proposed operating
lease for land and buildings in Germany of $5,835 for the six-month period
ended June 30, 1996. See "THE REORGANIZATION -- Continuing Arrangements
between Fresenius Medical Care and Fresenius AG" in the Joint Proxy
Statement-Prospectus.
(8) An adjustment has been made to record the acquisition of the Fresenius USA
minority interest and option holders for $226,943. An adjustment has been
made to amortize the resultant goodwill of $199,502 over a 40 year life.
(9) An adjustment has been made to eliminate the assets, liabilities and net
assets of Schiwa at June 30, 1996 and to reverse all income statement
activity for the period then ended. Any proceeds on the disposition of
those proceeds will be retained by Fresenius AG. Accordingly, the net
assets of Schiwa have been removed from Fresenius Medical Care. See "THE
REORGANIZATION -- Conditions" in the Joint Proxy Statement-Prospectus.
(10) An adjustment has been made to reclassify the assets and liabilities of
Rena-Med as net assets held for sale at June 30, 1996 and to reverse all
activity for the six-month period then ended. See "THE REORGANIZATION --
Conditions" in the Joint Proxy Statement-Prospectus.
(11) Adjustments have been made to record the Grace Preferred Stock existing
prior to the Reorganization of $7,439 as a minority interest and to record
the related dividends of $261 for the period then ended, as minority
interest expense.
(12) An adjustment has been made to record the New Preferred Stock to be issued
in the Reorganization at its par value of $.10 per share for 97,375 shares
outstanding of FNMC in minority interest.
(13) An adjustment has been made to establish the capital structure of Fresenius
Medical Care at 70 million shares with a par value per share of $3.61 (DM
5), with the remaining net asset balance recorded as additional paid in
capital.
(14) An adjustment has been recorded to accrue $10,000 for transition related
expenses, including retention distributions to be paid to employees
subsequent to closing.
(15) Adjustments have been made to reflect the tax effects of the pro forma
adjustments described in notes 2, 3, 4, 5, 6 and 7 above. The adjustments
to record the costs of incremental Fresenius Medical Care corporate expense
and the lease of German land and buildings were given a German tax
adjustment of 47%; all other adjustments received tax adjustments of 40%.
(16) Earnings per FMC Ordinary Share and earnings per ADS have been calculated
as if all shares of Fresenius Medical Care stock were outstanding as of
January 1, 1996.
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