-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EfwrMnbZayozeP5i5ma5vz+DKK+jtzPfDn2Z1tLAZTbITYX0jeT9/FPUVs3qdMAu dESZxx3B7dy0TNn5cwkdlQ== 0000950135-97-000319.txt : 19970225 0000950135-97-000319.hdr.sgml : 19970225 ACCESSION NUMBER: 0000950135-97-000319 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961206 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970204 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENZYME CORP CENTRAL INDEX KEY: 0000732485 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 061047163 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14680 FILM NUMBER: 97517776 BUSINESS ADDRESS: STREET 1: ONE KENDALL SQ CITY: CAMBRIDGE STATE: MA ZIP: 02139 BUSINESS PHONE: 6172527500 MAIL ADDRESS: STREET 1: ONE KENDALL SQUARE CITY: CAMBRIDGE STATE: MA ZIP: 02139 8-K 1 GENZYME CORPORATION CURRENT REPORT ON FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): DECEMBER 6, 1996 GENZYME CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS 0-14680 06-1047163 (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) ONE KENDALL SQUARE, CAMBRIDGE, MASSACHUSETTS 02139 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (617) 252-7500 Total number of page in document - 26 Exhibit Index located on page - 4 2 ITEM 5. OTHER. ------ On October 28, 1996, Genzyme Corporation ("Genzyme"), through Neozyme II Acquisition Corp. ("Acquisition Corp."), its wholly-owned subsidiary, completed its tender offer for the outstanding units (the "Units") of Neozyme II Corporation ("Neozyme II"), each Unit consisting of (i) one share of the Callable Common Stock (the "Callable Common Stock"), $1.00 par value per share, of Neozyme II and (ii) one Callable Warrant (the "Callable Warrants") to purchase two shares of General Division Common Stock ("General Division Stock"), $0.01 par value per share, and .135 share of Tissue Repair Division Common Stock ("TR Stock"), $0.01 par value per share, of Genzyme, for $45 per Unit in cash. 2,385,686 Units, or 98.8%, were tendered and accepted for payment, resulting in an aggregate tender offer price of $107.4 million. On December 6, 1996, Neozyme II was merged with and into Acquisition Corp. and as a result of the merger, all outstanding shares of Callable Common Stock (other than shares held by Genzyme and its subsidiaries) were cancelled and converted into the right to receive $29.00 in cash per share, for an aggregate merger consideration of $0.9 million. The Callable Warrants included in the untendered Units separated from the shares of Callable Common Stock converted in the merger and became exercisable on December 6, 1996. The exercise price of the Callable Warrants is $44.202 per Callable Warrant and was determined by the average closing price of two shares of General Division Stock and .135 share of TR Stock for the 20 trading days prior to December 6, 1996. The Callable Warrants will expire in December 31, 1998. Funds for the tender offer and for the merger were provided as follows: $80.0 million from borrowings under a revolving credit facility from Fleet National Bank, and the balance from Genzyme General Division cash balances. The nature and amount of the consideration paid pursuant to the tender offer and the merger were determined by negotiation between Genzyme and a special committee of independent directors of Neozyme II who are neither executive officers nor directors of Genzyme. In order to update the information previously filed with the Securities and Exchange Commission at pages F-2 to F-17 to the Current Report of Genzyme on Form 8-K (Commission File No. 0-14680) filed on November 5, 1996, Genzyme hereby files as Exhibit 99.1 unaudited pro forma financial statements and the related notes thereto for both Genzyme and Genzyme General Division (the "General Division") giving effect to the acquisition by Genzyme of Genetrix, Inc. ("Genetrix") on May 1, 1996 (the "Genetrix Acquisition"), the acquisition of Deknatel Snowden Pencer, Inc. ("DSP") on July 1, 1996 (the "DSP Acquisition"), and the acquisition of Neozyme II (the "Neozyme II Acquisition") (collectively, the "Acquisitions"). Pro forma condensed statements of operations have been presented for both Genzyme and the General Division assuming that the Acquisitions occurred as of January 1, 1995, using the purchase accounting method. Pro forma balance sheets have been presented for both Genzyme and the General Division assuming that the Neozyme II Acquisition occurred as of September 30, 1996. The historical Genzyme and General Division balances included in the pro forma balance sheets reflect the effect of the Genetrix Acquisition which was completed on May 1, 1996 and the DSP Acquisition which was completed on July 1, 1996. In addition, historical financial statements and notes thereto of Neozyme II are filed herewith as Exhibit 99.2. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. ---------------------------------
(c) Exhibits. EXHIBIT NO. DESCRIPTION ----------- ----------- 99.1 Unaudited pro forma balance sheets as of September 30, 1996 and statements of operations (and related notes) for the year ended December 31, 1995 and for the nine-months ended September 30, 1996 for Genzyme and the General Division, giving effect to the Acquisitions. Filed herewith. 99.2 Historical unaudited financial statements (and related notes) of Neozyme II Corporation including statements of operations for the nine months ended September 30, 1995 and 1996 and cumulative from March 2, 1992 (date of inception) to September 30, 1996; balance sheets as of September 30, 1996 and December 31, 1995; and statements of cash flows for the nine months ended September 30, 1996 and 1995 and cumulative from March 2, 1992 (date of inception) to September 30, 1996. Filed herewith.
3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: February 4, 1996 GENZYME CORPORATION By:/s/ David J. McLachlan ------------------------------------ David J. McLachlan Executive Vice President, Finance; Chief Financial Officer 4 EXHIBIT INDEX EXHIBIT SEQUENTIAL NO. DESCRIPTION PAGE NO. --- ----------- -------- 99.1 Unaudited pro forma balance sheets as of September 30, 7 1996 and statements of operations (and related notes) for the year ended December 31, 1995 and for the nine-months ended September 30, 1996 for Genzyme and the General Division, giving effect to the Acquisitions. Filed herewith. 99.2 Historical unaudited financial statements (and related 22 notes) of Neozyme II Corporation including statements of operations for the three and nine months ended September 30, 1995 and 1996 and cumulative from March 2, 1992 (date of inception) to September 30, 1996; balance sheets as of September 30, 1996 and December 31, 1995; and statements of cash flows for the nine months ended September 30, 1996 and cumulative from March 2, 1992 (date of inception) to September 30, 1996. Filed herewith. 5 INDEX TO FINANCIAL STATEMENTS
PAGE(S) ------- EXHIBIT 99.1 - ------------ PRO FORMA FINANCIAL STATEMENTS: Introduction to Unaudited Pro Forma Financial Statements ......................... F-2 GENZYME CORPORATION: Pro Forma Consolidated Balance Sheets as of September 30, 1996.................. F-3 Pro Forma Consolidated Statements of Operations for the Nine Months Ended September 30, 1996..................................................... F-4 Pro Forma Consolidated Statements of Operations for the Year Ended December 31, 1995............................................................ F-6 GENZYME GENERAL DIVISION: Pro Forma Combined Balance Sheets as of September 30, 1996...................... F-8 Pro Forma Combined Statements of Operations for the Nine Months Ended September 30, 1996........................................................... F-9 Pro Forma Combined Statements of Operations for the Year Ended December 31, 1995............................................................ F-11 Notes to Unaudited Pro Forma Financial Statements................................ F-13 EXHIBIT 99.2 - ------------ NEOZYME II UNAUDITED FINANCIAL STATEMENTS: Statements of Operations for the Three and Nine Months Ended September 30, 1995 and 1996 and Cumulative from March 2, 1992 (date of inception) through September 30, 1996........................................ F-18 Balance Sheets as of December 31, 1995 and September 30, 1996 .................. F-19 Statements of Cash Flows for the Nine Months Ended September 30, 1995 and 1996 and Cumulative from March 2, 1992 (date of inception) through September 30, 1996........................................................... F-20 Notes to Unaudited Condensed Financial Statements............................... F-21
F-1 EX-99.1 2 GENZYME CORPORATION PRO FORMA FINANCIAL STATEMENTS 1 Exhibit 99.1 ------------ GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED PRO FORMA FINANCIAL STATEMENTS INTRODUCTION: These unaudited condensed pro forma financial statements and the related notes are presented to give effect to the Genetrix Acquisition using shares of General Division Stock (as described in Note 3), the DSP Acquisition (as described in Note 4) and the Neozyme II Acquisition (as described in Note 5). Pro forma condensed statements of operations have been presented for both Genzyme and the General Division assuming that the Acquisitions each occurred as of January 1, 1995, using the purchase accounting method. Pro forma balance sheets have been presented for both Genzyme and the General Division assuming that the Neozyme II Acquisition occurred as of September 30, 1996. The historical Genzyme and General Division balances included in the pro forma balance sheets reflect the effect of the Genetrix Acquisition, which was completed on May 1, 1996, and the DSP Acquisition, which was completed on July 1, 1996. To distinguish the effect of each transaction, the pro forma statements of operations include subtotal columns which give effect to the Genetrix Acquisition, after certain pro forma adjustments, and the DSP Acquisition, after certain pro forma adjustments, before consideration of the Neozyme II Acquisition. The notes to the unaudited pro forma financial statements are defined as related either to the Genetrix Acquisition, the DSP Acquisition or the Neozyme II Acquisition. Year-end for Genzyme, Genetrix and Neozyme II is December 31, while year-end for DSP prior to the acquisition by Genzyme was September 30. The pro forma financial statements for the year ended December 31, 1995 included herein are based on the historical income statements of Genzyme, Genetrix and Neozyme II for the year ended December 31, 1995 and the historical income statement for DSP for the year ended September 30, 1995. Revenues and operating costs and expenses for DSP for the three months ended December 31, 1995 were $22.0 million and $18.3 million, respectively. F-2 2 GENZYME CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 1996 (AMOUNTS IN THOUSANDS) ASSETS PRO HISTORICAL PRO FOOT- FORMA GENZYME HISTORICAL FORMA NOTE GENZYME CORP. NEOZYME II ADJS. REF. CORP. ---------- ---------- --------- ------ -------- Current assets: Cash and cash equivalents............. $ 141,522 $ 2,815 $(108,206) (C) $ 36,131 Short-term investments.... 82,941 5,069 -- 88,010 Accounts receivable, less allowance for doubtful accounts................ 116,072 -- -- 116,072 Inventories............... 112,664 -- -- 112,664 Prepaid expenses and other current assets.......... 17,028 604 (635) (A) 16,997 Deferred tax assets -- current....... 7,729 -- -- 7,729 ---------- -------- --------- ---------- Total current assets.... 477,956 8,488 (108,841) 377,603 Property, plant and equipment, net.......... 384,088 -- -- 384,088 Other Assets: Long-term investments..... 48,396 -- -- 48,396 Intangibles, net of accumulated amortization............ 261,426 -- -- 261,426 Deferred tax assets -- noncurrent.... 26,370 -- 20,548 (C) 46,918 Other noncurrent assets... 31,001(C) -- (619) (A,C) 30,382 ---------- -------- --------- ---------- Total other assets........ 367,193 -- 19,929 387,122 ---------- -------- --------- ---------- Total assets............ $1,229,237 $ 8,488 $ (88,912) $1,148,813 ========== ======== ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......... $ 22,159 $ -- $ -- $ 22,159 Accrued expenses.......... 81,380 281 2,108 (A,C) 83,769 Income taxes payable...... 13,621 -- -- 13,621 Deferred revenue.......... 3,203 -- (598) (A) 2,605 Short-term borrowings..... 15,000 -- -- 15,000 Current portion of long-term debt and capital lease obligations............. 817 -- -- 817 ---------- -------- --------- ---------- Total current liabilities........... 136,180 281 1,510 137,971 Noncurrent liabilities: Long-term debt and capital lease obligations....... 224,256 -- -- 224,256 Note payable to Genzyme... -- 100 (100) (A) -- Other noncurrent liabilities............. 923 -- -- 923 ---------- -------- --------- ---------- 225,179 100 (100) 225,179 Stockholders' Equity: General Division Stock, $.01 par value.......... 350 -- -- 350 TR Stock, $.01 par value................... 126 -- -- 126 Treasury Stock, at cost... (881) -- -- (881) Neozyme II callable common stock................... -- 2,415 (2,415) (B) -- Additional paid-in capital................. 886,476 75,620 (75,620) (B) -- -- -- 469 (C) 886,945 Accumulated earnings (deficit)............... (12,922) (69,908) 69,908 (B) (103,212) (C) 20,548 (C) (95,586) Other equity adjustments............. (5,271) (20) -- (5,291) ---------- -------- --------- ---------- Total stockholders' equity................ 867,878 8,107 (90,322) 785,663 ---------- -------- --------- ---------- Total liabilities and stockholders' equity.... $1,229,237 $ 8,488 $ (88,912) $1,148,813 ========== ======== ========= ==========
See notes to unaudited pro forma financial statements. F-3 3 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PRO FORMA HISTORICAL FOOT- HISTORICAL PRO FOOT- GENZYME PRO FOOT- GENZYME NOTE GENETRIX, FORMA NOTE CORP. AND HISTORICAL FORMA NOTE CORP. REF. INC. ADJS. REF. GENETRIX DSP ADJS. REF. ---------- ----- ---------- ----- ----- --------- ---------- ------- ----- Net revenues............................ $ 372,015 $7,239 $ -- $379,254 $ 54,138 $ -- Operating costs and expenses: Cost of products sold................. 110,399 -- -- 110,399 26,138 -- Cost of services sold................. 40,593 5,631 -- 46,224 -- -- Selling, general and administrative expenses............................ 118,575 1,634 -- 120,209 18,189 -- Research and development expenses..... 57,493 -- -- 57,493 1,365 -- Amortization of intangibles........... 5,657 187 770 [D] 6,614 3,532 (646) [H] Charge for junior stock options....... -- -- -- -- 12,090 (12,090) [J] Charge for in-process technology...... 24,170 [4] -- -- 24,170 -- -- Other expenses........................ 1,465 -- 1,465 546 -- -------- ------ ----- -------- -------- ------- Total operating costs and expenses...... 358,352 7,452 770 366,574 61,860 (12,736) -------- ------ ----- -------- -------- ------- Operating income (loss)................. 13,663 (213) (770) 12,680 (7,722) 12,736 Other income and (expenses): Investment income..................... 12,740 -- -- 12,740 -- -- Interest expense...................... (3,582) [I] (115) 59 [E] (3,638) (3,039) (3,121) [I] Other................................. 123 (43) -- 80 (894) -- -------- ------ ----- -------- -------- ------- 9,281 (158) 59 9,182 (3,933) (3,121) -------- ------ ----- -------- -------- ------- Income (loss) before income taxes....... 22,944 (371) (711) 21,862 (11,655) 9,615 (Provision) benefit for income taxes.... (18,708) -- 133 [F] (18,575) 96 1,326 [K] -------- ------ ----- -------- -------- ------- Net income (loss)....................... $ 4,236 $ (371) $(578) $ 3,287 $(11,559) $10,941 ======== ====== ===== ======== ======== ======= Attributable to the General Division: Net income............................ $ 21,635 $ 20,686 Tax benefit allocated from Tissue Repair Division................... 11,775 11,775 -------- -------- Net income attributable to General Division Stock........................ $ 33,410 $ 32,461 ======== ========
PRO FORMA GENZYME PRO CORP., PRO FOOT- FORMA GENETRIX HISTORICAL FORMA NOTE GENZYME AND DSP NEOZYME II ADJS. REF. CORP. -------- ---------- -------- ----- -------- Net revenues............................ $433,392 $ -- $(16,545) [L] $416,847 Operating costs and expenses: Cost of products sold................. 136,537 -- -- 136,537 Cost of services sold................. 46,224 -- -- 46,224 Selling, general and administrative expenses............................ 138,398 393 (57) [L] 138,734 Research and development expenses..... 58,858 16,493 (16,493) [L] 58,858 Amortization of intangibles........... 9,500 -- -- 9,500 Charge for junior stock options....... -- -- -- -- Charge for in-process technology...... 24,170 -- -- 24,170 Other expenses........................ 2,011 -- -- 2,011 -------- -------- -------- -------- Total operating costs and expenses...... 415,698 16,886 (16,550) 416,034 -------- -------- -------- -------- Operating income (loss)................. 17,694 (16,886) 5 813 Other income and (expenses): Investment income..................... 12,740 591 (4,063) [L,M] 9,268 Interest expense...................... (9,798) -- -- (9,798) Other................................. (814) -- -- (814) -------- -------- -------- -------- 2,128 591 (4,063) (1,344) -------- -------- -------- -------- Income (loss) before income taxes....... 19,822 (16,295) (4,058) (531) (Provision) benefit for income taxes.... (17,153) -- 8,650 [N] (8,503) -------- -------- -------- -------- Net income (loss)....................... $ 2,669 $(16,295) $ 4,592 $ (9,034) ======== ======== ======== ======== Attributable to the General Division: Net income............................ $ 20,068 $ 8,365 Tax benefit allocated from Tissue Repair Division................... 11,775 11,775 -------- -------- Net income attributable to General Division Stock........................ $ 31,843 $ 20,140 ======== ========
See notes to unaudited pro forma financial statements. F-4 4 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PRO FORMA HISTORICAL HISTORICAL PRO FOOT- GENZYME PRO FOOT- GENZYME GENETRIX, FORMA NOTE CORP. AND HISTORICAL FORMA NOTE CORP. INC. ADJS. REF. GENETRIX DSP ADJS. REF. ---------- ---------- ----- ----- --------- ---------- ----- ----- Income per General Division common and common equivalent share.............. $ 0.46 $ 0.44 ======== ======== Pro forma weighted average shares outstanding.............................. 73,024 613 [G] 73,637 ======== === ======== Income per General Division common and common equivalent share assuming full dilution................................. $ 0.45 $ 0.43 ======== ======== Pro forma fully diluted weighted average shares outstanding....................... 74,146 613 [G} 74,759 ======== === ======== Attributable to the Tissue Repair Division: Net loss................................. $(29,174) $(29,174) ======== ======== Loss per Tissue Repair Division common share.................................. $ (2.33) $ (2.33) ======== ======== Historical weighted average shares outstanding............................ 12,511 12,511 ======== ========
PRO FORMA GENZYME PRO CORP., PRO FOOT- FORMA GENETRIX HISTORICAL FORMA NOTE GENZYME AND DSP NEOZYME II ADJS. REF. CORP. -------- ---------- ----- ----- -------- Income per General Division common and common equivalent share.............. $ 0.43 $ 0.27 ======== ======== Pro forma weighted average shares outstanding.............................. 73,637 73,637 ======== ======== Income per General Division common and common equivalent share assuming full dilution................................. $ 0.43 $ 0.27 ======== ======== Pro forma fully diluted weighted average shares outstanding....................... 74,759 74,759 ======== ======== Attributable to the Tissue Repair Division: Net loss................................. $(29,174) $(29,174) ======== ======== Loss per Tissue Repair Division common share.................................. $ (2.33) $ (2.33) ======== ======== Historical weighted average shares outstanding............................ 12,511 12,511 ======== ========
See notes to unaudited pro forma financial statements. F-5 5 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PRO FORMA HISTORICAL HISTORICAL PRO FOOT- GENZYME PRO FOOT- GENZYME GENETRIX, FORMA NOTE CORP. AND HISTORICAL FORMA NOTE CORP. INC. ADJS. REF. GENETRIX DSP ADJS. REF. ---------- ---------- ------- ----- --------- ---------- -------- ----- Net revenues.......................... $383,783 $ 22,006 $ -- $405,789 $ 95,259 $ -- Operating costs and expenses: Cost of products sold............... 113,964 -- -- 113,964 48,191 5,668 (J) Cost of services sold............... 35,868 11,328 -- 47,196 -- -- Selling, general and administrative expenses.......................... 110,417 10,289 -- 120,706 28,984 -- Research and development expenses... 68,845 -- -- 68,845 1,971 -- Amortization of intangibles......... 4,677 534 2,310 (D) 7,521 2,750 3,021 (H) Charge for in-process technology.... 14,216 -- -- 14,216 -- -- Other expenses...................... -- -- -- -- 3,585 -- -------- -------- ------- -------- -------- -------- Total operating costs and expenses.... 347,987 22,151 2,310 372,448 85,481 8,689 -------- -------- ------- -------- -------- -------- Operating income (loss)............... 35,796 (145) (2,310) 33,341 9,778 (8,689) Other income and (expenses): Investment income................... 8,814 25 -- 8,839 -- -- Interest expense.................... (1,109) (260) 178 (E) (1,191) (6,937) (5,383) (I) Other............................... (202) -- -- (202) (1,354) -- -------- -------- ------- -------- -------- -------- 7,503 (235) 178 7,446 (8,291) (5,383) -------- -------- ------- -------- -------- -------- Income (loss) before income taxes..... 43,299 (380) (2,132) 40,787 1,487 (14,072) (Provision) benefit for income taxes.. (21,649) -- 86 (F) (21,563) (172) 2,288 (K) -------- -------- ------- -------- -------- -------- Net income (loss)..................... $ 21,650 $ (380) $(2,046) $ 19,224 $ 1,315 $(11,784) ======== ======== ======= ======== ======== ======== Attributable to the General Division: Net income.......................... $ 34,823 $ 32,397 Tax benefit allocated from Tissue Repair Division................. 8,857 8,857 -------- -------- Net income attributable to General Division Stock...................... $ 43,680 $ 41,254 ======== ========
PRO FORMA GENZYME PRO CORP. PRO FOOT- FORMA GENETRIX, HISTORICAL FORMA NOTE GENZYME & DSP NEOZYME II ADJS. REF. CORP. -------- ---------- -------- ----- -------- Net revenues.......................... $501,048 $ -- $(24,198) [L] $476,850 Operating costs and expenses: Cost of products sold............... 167,823 -- -- 167,823 Cost of services sold............... 47,196 -- -- 47,196 Selling, general and administrative expenses.......................... 149,690 327 (77) [L] 149,940 Research and development expenses... 70,816 24,128 (24,128) [L] 70,816 Amortization of intangibles......... 13,292 -- -- 13,292 Charge for in-process technology.... 14,216 -- -- 14,216 Other expenses...................... 3,585 -- -- 3,585 -------- -------- -------- -------- Total operating costs and expenses.... 466,618 24,455 (24,205) 466,868 -------- -------- -------- -------- Operating income...................... 34,430 (24,455) 7 9,982 Other income and (expenses): Investment income................... 8,839 1,497 (5,417) [L,M] 4,919 Interest expense.................... (13,511) -- -- (13,511) Other............................... (1,556) -- -- (1,556) -------- -------- -------- -------- (6,228) 1,497 (5,417) (10,148) -------- -------- -------- -------- Income (loss) before income taxes..... 28,202 (22,958) (5,410) (166) (Provision) benefit for income taxes.. (19,447) -- 12,056 [N] (7,391) -------- -------- -------- -------- Net income (loss)..................... $ 8,755 $(22,958) $ 6,646 $ (7,557) ======== ======== ======== ======== Attributable to the General Division: Net income.......................... $ 21,928 $ 5,616 Tax benefit allocated from Tissue Repair Division................. 8,857 8,857 -------- -------- Net income attributable to General Division Stock...................... $ 30,785 $ 14,473 ======== ========
See notes to unaudited pro forma financial statements. F-6 6 GENZYME CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1995 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PRO FORMA HISTORICAL HISTORICAL PRO FOOT- GENZYME PRO FOOT- GENZYME GENETRIX, FORMA NOTE CORP. AND HISTORICAL FORMA NOTE CORP. INC. ADJS. REF. GENETRIX DSP ADJS. REF. ---------- ---------- ------ ----- --------- ---------- ------ ----- Income per General Division common and common equivalent share.............. $ 0.73 $ 0.67 -------- -------- Pro forma weighted average shares outstanding.............................. 60,185 1,380 [G] 61,565 ======== ===== ======== Income per General Division common and common equivalent share assuming full dilution................................. $ 0.66 $ 0.61 ======== ======== Pro forma fully diluted weighted average shares outstanding....................... 66,621 1,380 [G] 68,001 ======== ===== ======== Attributable to the Tissue Repair Division: Net loss................................. $(22,030) $(22,030) ======== ======== Loss per Tissue Repair Division common share.................................. $ (2.28) $ (2.28) ======== ======== Historical weighted average shares outstanding............................ 9,659 9,659 ======== ========
PRO FORMA GENZYME PRO CORP. PRO FOOT- FORMA GENETRIX HISTORICAL FORMA NOTE GENZYME & DSP NEOZYME II ADJS. REF. CORP. -------- ---------- ------ ----- -------- Income per General Division common and common equivalent share.............. $ 0.50 $ 0.24 -------- -------- Pro forma weighted average shares outstanding.............................. 61,565 61,565 ======== ======== Income per General Division common and common equivalent share assuming full dilution................................. $ 0.45 $ 0.21 ======== ======== Pro forma fully diluted weighted average shares outstanding....................... 68,001 68,001 ======== ======== Attributable to the Tissue Repair Division: Net loss................................. $(22,030) $(22,030) ======== ======== Loss per Tissue Repair Division common share.................................. $ (2.28) $ (2.28) ======== ======== Historical weighted average shares outstanding............................ 9,659 9,659 ======== ========
See notes to unaudited pro forma financial statements. F-7 7 GENZYME GENERAL DIVISION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS SEPTEMBER 30, 1996 (AMOUNTS IN THOUSANDS)
ASSETS PRO HISTORICAL FORMA GENZYME PRO FOOT- GENZYME GENERAL HISTORICAL FORMA NOTE GENERAL DIVISION NEOZYME II ADJS. REF. DIVISION ---------- ---------- --------- ----- ---------- Current Assets: Cash and cash equivalents.......... $ 116,881 $ 2,815 $(108,206) [Q] $ 11,490 Short-term investments.......... 80,910 5,069 85,979 Accounts receivable, less allowance for doubtful accounts.... 114,263 -- -- 114,263 Inventories............. 110,975 -- -- 110,975 Prepaid expenses and other current assets............... 16,683 604 (635) [O] 16,652 Due from Tissue Repair Division............. 3,569 -- -- 3,569 Deferred tax assets -- current.... 7,729 -- -- 7,729 ---------- ------- --------- ---------- Total current assets........ 451,010 8,488 (108,841) 350,657 Property, plant & equipment, net.......... 362,792 -- -- 362,792 Other Assets: Long-term investments... 48,396 -- -- 48,396 Intangibles, net of accumulated amortization......... 261,426 -- -- 261,426 Deferred tax assets -- noncurrent... 26,370 -- 20,548 [Q] 46,918 Other noncurrent assets............... 30,877 (Q) -- (619) [O,Q] 30,258 ---------- ------- --------- ---------- Total other assets........ 367,069 -- 19,929 386,998 ---------- ------- --------- ---------- Total assets.... $1,180,871 $ 8,488 $ (88,912) $1,100,447 ========== ======= ========= ========== LIABILITIES AND DIVISION EQUITY Current Liabilities: Accounts payable........ $ 20,852 -- -- $ 20,852 Accrued expenses........ 79,038 281 2,108 [O,Q] 81,427 Income taxes payable.... 13,621 -- 13,621 Deferred revenue........ 3,203 -- (598) [O] 2,605 Current portion of long-term debt and capital lease obligations.......... 817 -- -- 817 ---------- -------- --------- ---------- Total current liabilities... 117,531 281 1,510 119,322 Noncurrent Liabilities: Long-term debt and capital lease obligations.......... 224,256 -- -- 224,256 Note Payable to Genzyme.............. -- 100 (100) [O] -- Other noncurrent liabilities............. 208 -- -- 208 ---------- -------- --------- ---------- 224,464 100 (100) 224,464 Division Equity: Division equity......... 838,876 (20) (103,212) [Q] -- -- 20,548 [Q] -- 469 [Q] 756,661 Neozyme II, callable common stock......... -- 2,415 (2,415) [P] -- Additional paid-in capital.............. -- 75,620 (75,620) [P] -- Accumulated deficit..... -- (69,908) 69,908 [P] -- ---------- -------- --------- ---------- Total division equity........ 838,876 8,107 (90,322) 756,661 ---------- -------- --------- ---------- Total liabilities and division equity......... $1,180,871 $ 8,488 $ (88,912) $1,100,447 ========== ======== ========= ==========
See notes to unaudited pro forma financial statements. F-8 8 GENZYME GENERAL DIVISION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PRO FORMA GENZYME HISTORICAL GENERAL GENZYME FOOT- HISTORICAL PRO FOOT- DIVISION PRO FOOT- GENERAL NOTE GENETRIX, FORMA NOTE AND HISTORICAL FORMA NOTE DIVISION REF. INC. ADJS. REF. GENETRIX DSP ADJS. REF. ---------- ----- ---------- ------- ----- --------- ---------- -------- ----- Net revenues.......................... $366,793 $7,239 $ -- $374,032 $54,138 $ -- Operating costs and expenses: Cost of products sold............... 110,399 -- -- 110,399 26,138 -- Cost of services sold............... 32,195 5,631 -- 37,826 -- -- Selling, general and administrative expenses.......................... 98,961 1,634 -- 100,595 18,189 -- Research and development expenses... 49,854 -- -- 49,854 1,365 -- Amortization of intangibles......... 5,657 187 770 [R] 6,614 3,532 (646) [V] Charge for junior stock options..... -- -- -- -- 12,090 (12,090) [X] Charge for in-process technology.... 24,170 [4] -- -- 24,170 -- -- Other expenses...................... 1,465 -- -- 1,465 546 -- -------- ------ ----- -------- -------- -------- Total operating costs and expenses.... 322,701 7,452 770 330,923 61,860 (12,736) -------- ------ ----- -------- -------- -------- Operating income (loss)............... 44,092 (213) (770) 43,109 (7,722) 12,736 Other income and (expenses): Investment income................... 11,485 -- -- 11,485 -- -- Interest expense.................... (3,582) (115) 59 [S] (3,638) (3,039) (3,121) [W] Other............................... 123 (43) -- 80 (894) -- -------- ------ ----- -------- -------- -------- 8,026 (158) 59 7,927 (3,933) (3,121) -------- ------ ----- -------- -------- -------- Income (loss) before income taxes..... 52,118 (371) (711) 51,036 (11,655) 9,615 (Provision) benefit for income taxes.. (30,483) -- 133 [T] (30,350) 96 1,326 [Y] -------- ------ ----- -------- -------- -------- Net income (loss)..................... 21,635 (371) (578) 20,686 (11,559) 10,941 Tax benefit allocated from Tissue Repair Division..................... 11,775 -- -- 11,775 -- -- -------- ------ ----- -------- -------- -------- Net income attributable to General Division Stock...................... $ 33,410 $ (371) $(578) $ 32,461 $(11,559) $ 10,941 ======== ====== ===== ======== ======== ========
PRO FORMA GENZYME PRO GENERAL FORMA DIVISION, PRO FOOT- GENZYME GENETRIX HISTORICAL FORMA NOTE GENERAL AND DSP NEOZYME II ADJS. REF. DIVISION -------- ---------- -------- ----- -------- Net revenues.......................... $428,170 $ -- $(16,545) [Z] $411,625 Operating costs and expenses: Cost of products sold............... 136,537 -- -- 136,537 Cost of services sold............... 37,826 -- -- 37,826 Selling, general and administrative expenses.......................... 118,784 393 (57) [Z] 119,120 Research and development expenses... 51,219 16,493 (16,493) [Z] 51,219 Amortization of intangibles......... 9,500 -- -- 9,500 Charge for junior stock options..... -- -- -- -- Charge for in-process technology ... 24,170 -- -- 24,170 Other expenses...................... 2,011 -- -- 2,011 -------- -------- -------- -------- Total operating costs and expenses.... 380,047 16,886 (16,550) 380,383 -------- -------- -------- -------- Operating income (loss)............... 48,123 (16,886) 5 31,242 Other income and (expenses): Investment income................... 11,485 591 (4,063) [Z,AB] 8,013 Interest expense.................... (9,798) -- -- (9,798) Other............................... (814) -- -- (814) -------- -------- -------- -------- 873 591 (4,063) (2,599) -------- -------- -------- -------- Income (loss) before income taxes..... 48,996 (16,295) (4,058) 28,643 (Provision) benefit for income taxes.. (28,928) -- 8,650 [AA] (20,278) -------- -------- -------- -------- Net income (loss)..................... 20,068 (16,295) 4,592 8,365 Tax benefit allocated from Tissue Repair Division..................... 11,775 -- -- 11,775 -------- -------- -------- -------- Net income attributable to General Division Stock...................... $ 31,843 $(16,295) $ 4,592 $ 20,140 ======== ======== ======== ========
See notes to unaudited pro forma financial statements. F-9 9 GENZYME GENERAL DIVISION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PRO FORMA GENZYME HISTORICAL GENERAL GENZYME HISTORICAL PRO FOOT- DIVISION PRO FOOT- GENERAL GENETRIX, FORMA NOTE AND HISTORICAL FORMA NOTE DIVISION INC. ADJS. REF. GENETRIX DSP ADJS. REF. ---------- ---------- ----- ----- --------- ---------- ------- ----- Income per General Division common and common equivalent share.... $ 0.46 $ 0.44 ======= ======= Pro forma weighted average shares outstanding........................... 73,024 613 [U] 73,637 ======= === ======= Income per General Division common and common equivalent share assuming full dilution.............................. $ 0.45 $ 0.43 ======= ======= Pro forma fully diluted weighted average shares outstanding.................... 74,146 613 [U] 74,759 ======= === =======
PRO FORMA GENZYME PRO GENERAL FORMA DIVISION, PRO FOOT- GENZYME GENETRIX HISTORICAL FORMA NOTE GENERAL AND DSP NEOZYME II ADJS. REF. DIVISION -------- ---------- -------- ----- -------- Income per General Division common and common equivalent share.... $ 0.43 $ 0.27 ======= ======= Pro forma weighted average shares outstanding........................... 73,637 73,637 ======= ======= Income per General Division common and common equivalent share assuming full dilution.............................. $ 0.43 $ 0.27 ======= ======= Pro forma fully diluted weighted average shares outstanding.................... 74,759 74,759 ======= =======
See notes to unaudited pro forma financial statements. F-10 10 GENZYME GENERAL DIVISION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PRO FORMA GENZYME HISTORICAL GENERAL GENZYME HISTORICAL PRO FOOT- DIVISION PRO FOOT- GENERAL GENETRIX, FORMA NOTE AND HISTORICAL FORMA NOTE DIVISION INC. ADJS. REF. GENETRIX DSP ADJS. REF. ---------- ---------- ------- ----- -------- ---------- -------- ----- Net revenues.......................... $378,563 $22,006 $ -- $400,569 $95,259 $ -- Operating costs and expenses: Cost of products sold............... 113,964 -- -- 113,964 48,191 5,668 [X] Cost of services sold............... 31,137 11,328 -- 42,465 -- -- Selling, general and administrative expenses.......................... 97,490 10,289 -- 107,779 28,984 -- Research and development expenses... 57,907 -- -- 57,907 1,971 -- Amortization of intangibles......... 4,677 534 2,310 [R] 7,521 2,750 3,021 [V] Change for in-process technology.... 14,216 -- -- 14,216 -- -- Other expenses...................... -- -- -- -- 3,585 -- -------- ------- ------- -------- ------- -------- Total operating costs and expenses.... 319,391 22,151 2,310 343,852 85,481 8,689 -------- ------- ------- -------- ------- -------- Operating income (loss)............... 59,172 (145) (2,310) 56,717 9,778 (8,689) Other income and (expenses): Investment income................... 7,428 25 -- 7,453 -- -- Interest expense.................... (1,069) (260) 178 [S] (1,151) (6,937) (5,383) [W] Other............................... (202) -- -- (202) (1,354) -- -------- ------- ------- -------- ------- -------- 6,157 (235) 178 6,100 (8,291) (5,383) -------- ------- ------- -------- ------- -------- Income (loss) before income taxes..... 65,329 (380) (2,132) 62,817 1,487 (14,072) (Provision) benefit for income taxes.. (30,506) -- 86 [T] (30,420) (172) 2,288 [Y] -------- ------- ------- -------- ------- -------- Net income............................ 34,823 $ (380) $(2,046) 32,397 $ 1,315 $(11,784) ======= ======= ======= ======== Tax benefit allocated from Tissue Repair Division..................... 8,857 8,857 -------- -------- Net income attributable to General Division Stock...................... $ 43,680 $ 41,254 ======== ========
PRO FORMA GENZYME PRO GENERAL FORMA DIVISION, PRO FOOT- GENZYME GENETRIX HISTORICAL FORMA NOTE GENERAL AND DSP NEOZYME II ADJS. REF. DIVISION -------- ---------- -------- ----- -------- Net revenues.......................... $495,828 $ -- $(24,198) [Z] $471,630 Operating costs and expenses: Cost of products sold............... 167,823 -- -- 167,823 Cost of services sold............... 42,465 -- -- 42,465 Selling, general and administrative expenses.......................... 136,763 327 (77) [Z] 137,013 Research and development expenses... 59,878 24,128 (24,128) [Z] 59,878 Amortization of intangibles......... 13,292 -- -- 13,292 Change for in-process technology.... 14,216 -- -- 14,216 Other expenses...................... 3,585 -- -- 3,585 -------- -------- -------- -------- Total operating costs and expenses.... 438,022 24,455 (24,205) 438,272 -------- -------- -------- -------- Operating income...................... 57,806 (24,455) 7 33,358 Other income and (expenses): Investment income................... 7,453 1,497 (5,417) [Z,AB] 3,533 Interest expense.................... (13,471) -- -- (13,471) Other............................... (1,556) -- -- (1,556) -------- -------- -------- -------- (7,574) 1,497 (5,417) (11,494) -------- -------- -------- -------- Income (loss) before income taxes..... 50,232 (22,958) (5,410) 21,864 (Provision) benefit for income taxes.. (28,304) -- 12,056 [AA] (16,248) -------- -------- -------- -------- Net income............................ 21,928 $(22,958) $ 6,646 5,616 ======== ======== Tax benefit allocated from Tissue Repair Division..................... 8,857 8,857 -------- -------- Net income attributable to General Division Stock...................... $ 30,785 $ 14,473 ======== ========
See notes to unaudited pro forma financial statements. F-11 11 GENZYME GENERAL DIVISION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 1995 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
PRO FORMA GENZYME HISTORICAL GENERAL GENZYME HISTORICAL PRO FOOT- DIVISION PRO FOOT- GENERAL GENETRIX, FORMA NOTE AND HISTORICAL FORMA NOTE DIVISION INC. ADJS. REF. GENETRIX DSP ADJS. REF. ---------- ---------- ----- ----- --------- ---------- ------- ----- Income per General Division common and common equivalent share.... $ 0.73 $ 0.67 ======= ======= Pro forma weighted average shares outstanding........................... 60,185 1,380 [U] 61,565 ======= ===== ======= Income per General Division common and common equivalent share assuming full dilution.............................. $ 0.66 $ 0.61 ======= ======= Pro forma fully diluted weighted average shares outstanding.................... 66,621 1,380 [U] 68,001 ======= ===== =======
PRO FORMA GENZYME PRO GENERAL FORMA DIVISION, PRO FOOT- GENZYME GENETRIX HISTORICAL FORMA NOTE GENERAL AND DSP NEOZYME II ADJS. REF. DIVISION --------- ---------- -------- ----- -------- Income per General Division common and common equivalent share.... $ 0.50 $ 0.24 ======= ======= Pro forma weighted average shares outstanding........................... 61,565 61,565 ======= ======= Income per General Division common and common equivalent share assuming full dilution.............................. $ 0.45 $ 0.21 ======= ======= Pro forma fully diluted weighted average shares outstanding.................... 68,001 68,001 ======= =======
See notes to unaudited pro forma financial statements. F-12 12 GENZYME CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES AND PROCEDURES: The accounting policies and procedures for Genzyme, Genetrix, DSP and Neozyme II are in conformity in all material respects. The pro forma financial statements include both Genzyme, the registrant, and the General Division, the stock of which was used to effect the Genetrix Acquisition. The General Division is also the borrower of the $200 million under Genzyme's revolving credit facility which was used to effect the DSP Acquisition and the Neozyme II Acquisition and owner of the cash used to effect the Neozyme II Acquisition. 2. THE GENERAL DIVISION'S 2-FOR-1 STOCK SPLIT: In June 1996, the Board of Directors declared a 2-for-1 stock split of shares of General Division Stock to be effected by means of a 100% stock dividend payable on July 25, 1996 to stockholders of record on July 11, 1996, subject to increasing the authorized shares of General Division Stock from 100,000,000 to 200,000,000 shares (the "Amendment"). The Amendment was approved by holders of a majority in interest of the outstanding General Division Stock and TR Stock, voting together as a single class, at a special meeting of the stockholders held on July 24, 1996. On July 25, 1996, a total of 34,669,435 shares of General Division Stock were distributed to stockholders in connection with the dividend. All General Division shares and per share amounts included herein reflect this split. 3. GENZYME'S ACQUISITION OF GENETRIX: On May 1, 1996, Genzyme acquired Genetrix, a privately held genetic testing laboratory based in Phoenix, Arizona, in a tax-free exchange of General Division Stock. In the aggregate, approximately 1,380,000 shares of General Division Stock, valued at approximately $36.5 million, were issued for all the outstanding shares of Genetrix preferred stock and Genetrix common stock. The acquisition was accounted for as a purchase. The total purchase price was $43.5 million and consisted of $36.5 million for the value of the General Division Stock issued to effect the transaction, acquisition costs of approximately $3.2 million and restructuring charges of approximately $3.8 million. The following is a summary of the allocation of the purchase price to the net assets acquired as a result of the Genetrix acquisition (amounts in thousands): Allocation of Purchase Price: Current assets $ 5,224 Property and equipment 3,530 Goodwill 37,022 Deferred income taxes 2,725 Other assets 237 Current liabilites (4,701) Long-term liabilities (546) ------- $43,491 =======
The purchase price was allocated to the assets and liabilities of Genetrix based on their estimated respective fair values. The historical balance sheets for Genzyme and the General Division as of September 30, 1996 reflect the acquisition of Genetrix which was completed on May 1, 1996. The pro forma statements of operations for the period ended September 30, 1996 include pro forma amounts for Genetrix for the four month period ended April 30, 1996 and actual results thereafter. The pro forma statements of operations for the year ended December 31, 1995 include pro forma amounts for Genetrix for the twelve month period then ended. 4. GENZYME'S ACQUISITION OF DSP: On July 1, 1996, Genzyme completed the acquisition of DSP, a privately held specialty surgical products company. The purchase price was $251.0 million and consisted of cash of $245 million and acquisition costs of $6.0 million. The following is a summary of the allocation of the purchase price to net assets acquired as a result of the DSP Acquisition (amounts in thousands): Allocation of Purchase Price: Current assets.......................................... $ 47,421 Property and Equipment.................................. 17,475 Patents................................................. 15,319 Trade Names............................................. 45,878 In-process technology................................... 24,170 Goodwill................................................ 133,916 Current Liabilities..................................... (25,126) Deferred income taxes................................... (8,103) -------- $250,950 ======== The purchase price was allocated to the assets and liabilities of DSP based on their estimated respective fair values. Completed technology that has reached technological feasibility is valued using a risk adjusted cash flow model under which future cash flows were discounted, taking into account risks related to existing and future markets and assessments of the life expectancy of the completed technology. In-process technology that has not reached technological feasibility and that has no alternative future use is valued using the same method. Expected future cash flows associated with in-process technology are discounted considering risks and uncertainties related to the viability of and to the potential changes in future target markets and to the completion of the products expected to be ultimately marketed by Genzyme. Amounts allocated to in-process technology are charged to operations at the time of the acquisition. The historical balance sheets for Genzyme and the General Division as of September 30, 1996 reflect the acquisition of DSP, which was completed on July 1, 1996. The pro forma statements of operations for the year ended December 31, 1995 include pro forma amounts for DSP the twelve-month period ended September 30, 1995 and the pro forma statements of operations for the nine months ended September 30, 1996 include pro forma amounts for DSP for the six month period ended June 30, 1996 and actual results thereafter. The pro forma adjustments to the pro forma statements of operations for the year ended December 31, 1995 do not give effect to the nonrecurring charge for in-process technology in the amount of $24.2 million which was charged to operations upon consummation of the DSP Acquisition on July 1, 1996 and is reflected in the historical results for Genzyme and the General Division for the nine months ended September 30, 1996. F-13 13 GENZYME CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) 5. GENZYME'S ACQUISITION OF NEOZYME II: On October 28, 1996, Genzyme completed its tender offer for outstanding Units of Neozyme II for $45 per Unit in cash. A total of 2,385,686 Units, or 98.8 percent, were tendered and accepted for payment. Each Neozyme II Unit consists of one share of Callable Common Stock and one Callable Warrant to purchase two shares of General Division Stock and 0.135 share of TR Stock. The tender offer was made pursuant to an agreement entered into by Genzyme and Neozyme II announced on September 23, 1996. Pursuant to this agreement, on December 6, 1996, Neozyme II was merged with and into Acquisition Corp. and, as a result of the merger, all outstanding shares of Callable Common Stock (other than shares held by Genzyme and its subsidiaries) were cancelled and converted into the right to receive $29.00 per share. The Callable Warrants included in the untendered Units separated form the shares of Callable Common Stock converted in the merger and became exercisable on December 6, 1996. The exercise price of the Callable Warrants is $44.202 per Callable Warrant and was determined by the average closing price of two shares of General Division Stock and .135 share of TR Stock for the 20 trading days prior to December 6, 1996. The Callable Warrants will expire on December 31, 1998. The pro forma financial statements reflect the 98.8% of the 2,415,000 shares of Callable Common Stock that were purchased under the tender offer at $45 per share and the remaining 1.2% of the shares that were acquired in the merger for $29 per share. Funds for the tender offer and the merger were provided, as follows: $80 million from borrowings under a revolving credit facility from Fleet National Bank, and the balance from the General Division's cash balances. In addition, a $0.5 million increase to additional paid-in capital has been recorded in effecting the merger to reflect the value of the Callable Warrants ($16 per Callable Warrant) included in the untendered Units which became exercisable on December 6, 1996, the effective date of the merger, and remain outstanding after the merger. The aggregate purchase price of $108.7 million of the Neozyme II Acquisition plus estimated acquisition costs of $2.6 million has been allocated to the net assets acquired based on their estimated respective fair values (amounts in thousands): Cash $ 2,815 Short-term investments 5,089 Prepaid research and development 604 Assumed liabilities (281) Note payable to Genzyme (100) In-process technology 103,212 -------- $111,339 ========
The excess purchase price of $103.2 million was allocated to Neozyme II's only remaining assets which were technologies that were still in the development stage and had no alternative future use. The pro forma adjustments to the pro forma statements of operations do not give effect to the charge for in-process technology of $103.2 million and related deferred tax benefit of $20.5 million which were recorded upon consummation of the acquisition. Adjustments to the pro forma balance sheets which give effect to the Neozyme II Acquisition reflect the repayment on October 3, 1996 of $80 million of the $200 million borrowed under a revolving credit facility with Fleet National Bank to finance the DSP Acquisition and the subsequent withdrawal on October 31, 1996 of $80 million under the same credit facility to finance the tender offer. 6. PRO FORMA ADJUSTMENTS RELATED TO THE ACQUISITIONS: These adjustments reflect the retirement of all DSP Common Stock and the retirement of all Callable Common Stock. I. PRO FORMA ADJUSTMENTS TO GENZYME'S CONSOLIDATED BALANCE SHEETS: F-14 14 GENZYME CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) Related to the Neozyme II Acquisition: A. Eliminate Series 1992 note payable issued by Neozyme II to Genzyme of $100,000 and related accrued interest of $31,000, prepaid research and development costs paid by Neozyme II to Genzyme of $598,000 and service fee owed to Genzyme of $5,800. B. Eliminate Callable Common Stock of $2.4 million, additional paid-in capital of $75.6 million and accumulated deficit of $69.9 million. C. Record the repayment on October 3, 1996 of $80 million of the $200 million borrowed under a revolving credit facility with Fleet National Bank to finance the DSP Acquisition and the subsequent withdrawal on October 31, 1996 of $80 million under the same credit facility with interest payable at LIBOR plus 5/8% to finance the tender offer. The acquisition of Neozyme II has been recorded as a purchase of in-process technology of $103.2 million (aggregate purchase price of $108.7 million plus estimated acquisition costs of $2.6 million, less the fair value of the net assets acquired of $8.1 million) and a related deferred tax benefit of $20.5 million. The historical Genzyme Other Non Current Assets balance as of September 30, 1996 includes $519,000 of the $2.6 million estimated acquisition costs. The aggregate purchase price consists of cash of $28.2 million, $80 million of short-term borrowings, and $0.5 million in equity for the value of the Callable Warrants. II. PRO FORMA ADJUSTMENTS TO GENZYME'S CONSOLIDATED STATEMENTS OF OPERATIONS: Related to the Genetrix Acquisition: D. Record amortization expense based on $35.0 million of goodwill being amortized over 15 years, of $770,000 for the four months ended April 30, 1996 and $2.3 million for the year ended December 31, 1995. E. Eliminate interest expense related to debt of Genetrix assumed by Genzyme and subsequently repaid. F. Record incremental income tax (provision) benefit. G. To adjust the historical General Division primary and fully diluted weighted average shares to reflect the issuance of the 1,380,000 shares of General Division Stock used to effect the Genetrix acquisition as if the stock had been issued on January 1, 1995. The historical General Division primary and fully diluted weighted average shares for the nine months ended September 30, 1996 include the 1,380,000 shares as of May 1, 1996, the date of completion of the Genetrix acquisition. For the nine months ended September 30, 1996, a pro forma adjustment of 613,000 shares (1,380,000 shares x 4/9 months), respectively, is required to account for the shares during the four months ended April 30, 1996. The historical General Division primary or fully diluted weighted average shares for the year ended December 31, 1995 do not reflect the issuance of shares of General Division Stock used to effect the Genetrix acquisition and, therefore, a pro forma adjustment of 1,380,000 shares is required. Related to the DSP Acquisition: H. Record the adjustment to historical amortization expense based on amortization of patents, tradenames and goodwill over 12 years, 40 years and 40 years, respectively, a reduction of $0.6 million to amortization expense for the nine months ended September 30, 1996 and a charge of $3.0 million for the year ended December 31, 1995. I. Reverse interest expense of DSP long-term debt, which was assumed and repaid, in the amounts of $3.0 million and $6.9 million for the nine months ended September 30, 1996 and the year ended December 31, 1995, respectively, and record interest expense related to the $200 million borrowed under a revolving credit line with Fleet National Bank F-15 15 GENZYME CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) at LIBOR plus 5/8% . Interest expense under the $200 million borrowing is $9.2 million for the nine months ended September 30, 1996 and $12.3 million for the year ended December 31, 1995. Historical Genzyme interest expense for the nine months ended September 30, 1996 includes $3.1 million of the actual interest expense incurred in the three months ended September 30, 1996 related to the $200 million borrowing. J. To record the cost of sales associated with the step-up of inventory to fair value under purchase accounting for the year ended December 31, 1995 of $5.7 million and the reversal of a $12.1 million pre-acquisition charge for junior stock options recorded in the nine months ended September 30, 1996. K. Record incremental income tax (provision) benefit. Related to the Neozyme II Acquisition: L. Eliminate intercompany research and development revenue (Genzyme)/expense (Neozyme II) of $16.5 million for the nine months ended September 30, 1996 and $24.2 million for the year ended December 31, 1995; intercompany service fees of $52,000 for the nine months ended September 30, 1996 and $70,000 for the year ended December 31, 1995; and intercompany interest income/expense related to Series 1992 note payable of $5,200 for the nine months ended September 30, 1996 and $7,000 for the year ended December 31, 1995. M. Reduce investment income related to $108.2 million of cash and cash equivalents used to finance the Neozyme II Acquisition. Interest expense has not been adjusted to reflect the repayment of $80 million borrowed at an interest rate of LIBOR plus 5/8% to finance the DSP Acquisition (Note C) as an additional $80 million was borrowed under the same revolving credit line at an interest rate of 6.1% per annum thereafter to finance the Neozyme II Acquisition. The resulting decrease in interest expense is not considered material to the pro forma financial statements. N. Record incremental income tax (provision) benefit. III. PRO FORMA ADJUSTMENTS TO THE GENERAL DIVISION'S COMBINED BALANCE SHEETS: Related to the Neozyme II Acquisition: O. Eliminate Series 1992 note payable to Genzyme issued by Neozyme II of $100,000, and related accrued interest of $31,000, and prepaid research development costs paid by Neozyme II to Genzyme of $598,000 and service fees owed to Genzyme of $5,800. P. Eliminate Callable Common Stock of $2.4 million additional paid-in capital of $75.6 million and accumulated deficit of $69.9 million. F-16 16 GENZYME CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) Q. Record the re-payment on October 3, 1996 of $80 million of the $200 million borrowed under a revolving credit facility with Fleet National Bank to finance the DSP Acquisition and the subsequent withdrawal on October 31, 1996 of $80 million under the same credit facility with interest payable at LIBOR plus 5/8% to finance the tender offer. The acquisition of Neozyme II has been recorded as a purchase of in-process technology of $103.2 million (the aggregate purchase price of $108.7 million plus estimated acquisition costs of $2.6 million, less the fair value of the net assets acquired of $8.1 million) and a related deferred tax benefit of $20.5 million. The historical General Division Other Noncurrent Assets balance as of September 30, 1996 includes $519,000 of the $2.6 million estimated acquisition costs. The aggregate purchase price consists of cash of $28.2 million, $80 million of short-term borrowings, and $0.5 million of equity for the value of the Callable Warrants. IV. PRO FORMA ADJUSTMENTS TO THE GENERAL DIVISION'S COMBINED STATEMENTS OF OPERATIONS: Related to the Genetrix Acquisition: R. Record amortization expense, based on $35.0 million of goodwill being amortized over 15 years, of $770,000 for the four months ended April 30, 1996 and $2.3 million for the year ended December 31, 1996. S. Eliminate interest expense related to debt of Genetrix assumed by Genzyme and subsequently repaid. T. Record income tax (provision) benefit. U. To adjust the historical General Division primary and fully diluted weighted average shares to reflect the 1,380,000 shares of General Division Stock used to effect the Genetrix acquisition as if issued on January 1, 1995. The historical General Division primary and fully diluted weighted average shares for the nine months ended September 30, 1996 include the 1,380,000 shares as of May 1, 1996, the date of completion of the Genetrix acquisition. For the nine months ended September 30, 1996, a pro forma adjustment to General Division primary and fully diluted weighted average shares for the four months ended April 30, 1996 of 613,000 shares (1,380,000 shares x 4/9 months), respectively, is required. The historical General Division primary or fully diluted weighted average shares for the year ended December 31, do not reflect the issuance of shares of General Division Stock used to effect the Genetrix acquisition and, therefore, a pro forma adjustment to the General Division primary and fully diluted weighted average shares of 1,380,000 is required. Related to the DSP Acquisition: V. Record the adjustment to historical amortization expense based on amortization of patents, tradenames and goodwill over 12 years, 40 years and 40 years, respectively, a reduction of $0.6 million to amortization expense for the nine months ended September 30, 1996 and a charge of $3.0 million for the year ended December 31, 1995. W. Reverse interest expense of DSP long-term debt, which was assumed and repaid, in the amounts of $3.0 million and $6.9 million for the nine months ended September 30, 1996 and the year-ended December 31, 1995, respectively, and record interest expense related to the $200 million borrowed under a revolving credit line with Fleet National Bank at LIBOR plus 5/8%. For the nine months ended September 30, 1996 and for the year ended December 31, 1995 interest expense is $9.2 million and $12.3 million, respectively. Historical General Division interest expense for the nine months ended September 30, 1996 includes $3.1 million of the actual interest expense incurred in the three months ended September 30, 1996 related to the $200 million borrowing. X. To record the cost of sale associated with the step-up of inventory to fair value under purchase accounting for the year ended December 31, 1995 of $5.7 million and the reversal of a $12.1 million pre-acquisition charge for junior stock options recorded in the nine months ending September 30, 1996. Y. Record incremental income tax (provision) benefit. Related to the Neozyme II Acquisition: Z. Eliminate intercompany research and development revenue (Genzyme)/expense (Neozyme II) and service fees of $16.5 million for the nine months ended September 30, 1996 and $24.2 million for the year ended December 31, 1995; intercompany service fees of $52,000 for the nine months ended September 30, 1996 and $70,000 for the year ended December 31, 1995; and intercompany interest income/expense related to Series 1992 note payable of $5,200 for the nine months ended September 30, 1996 and $7,000 for the year ended December 31, 1995. AA. Record incremental income tax (provision) benefit. AB. Reduce investment income related to $108.2 million cash and cash equivalents used to finance the Neozyme II Acquisition. Interest expense has not been adjusted to reflect the repayment of $80 million borrowed at an interest rate of LIBOR plus 5/8% to finance the DSP Acquisition (Note Q) as an additional $80 million was borrowed under the same revolving credit line at an interest rate of 6.1% per annum to finance the Neozyme II Acquisition. The resulting decrease in interest expense is not considered material to these pro forma financial statements. F-17 EX-99.2 3 NEOZYME II CORPORATION UNAUDITED FINANCIALS 1 EXHIBIT 99.2 ------------ NEOZYME II CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF OPERATIONS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED CUMULATIVE SEPTEMBER 30, SEPTEMBER 30, FROM ------------------ ----------------- INCEPTION 1996 1995 1996 1995 (MARCH 2, 1992) ---- ---- ---- ---- ------------- Investment income ....................... $ 138 $ 321 $ 591 $ 1,141 $ 12,753 Costs and expenses: Technology license fee ................ - - - - 5,000 Research and development .............. 5,897 5,549 16,493 17,201 76,072 General and administrative ............ 231 107 393 265 1,589 ------- ------- -------- -------- -------- 6,128 5,656 16,886 17,466 82,661 ------- ------- -------- -------- -------- Net loss ................................ $(5,990) $(5,335) $(16,295) $(16,325) $(69,908) ======= ======= ======== ======== ======== Net loss per callable common share....... $ (2.48) $ (2.21) $ (6.75) $ (6.76) $ (30.09) ======= ======= ======== ======== ======== Weighted average callable common shares outstanding............... 2,415 2,415 2,415 2,415 2,323 ======= ======= ======== ======== ========
The accompanying notes are an integral part of these unaudited, condensed financial statements. F-18 2 NEOZYME II CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEETS (UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30, DECEMBER 31, 1996 1995 ---- ---- ASSETS Current Assets: Cash and cash equivalents .................................. $ 2,815 $ 5,546 Short-term investments ..................................... 5,069 21,501 Prepaid research and development to Genzyme Corporation..... 604 - -------- -------- $ 8,488 $ 27,047 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Payable to Genzyme Corporation ............................. 37 2,469 Accrued expenses ........................................... 244 92 -------- -------- Total current liabilities ............................... 281 2,561 Note payable to Genzyme Corporation ........................... 100 100 Stockholders' Equity: Callable common Stock, $1.00 par value; authorized 9,000,000 shares, 2,415,000 shares issued and outstanding ........... 2,415 2,415 Additional paid-in capital ................................. 75,620 75,620 Deficit accumulated during the development stage ........... (69,908) (53,613) Unrealized loss on investments ............................. (20) (36) -------- -------- 8,107 24,386 -------- -------- $ 8,488 $ 27,047 ======== ========
The accompanying notes are an integral part of these unaudited, condensed financial statements. F-19 3 NEOZYME II CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, CUMULATIVE ----------------- FROM INCEPTION 1996 1995 (MARCH 2, 1992) ---- ---- ------------- Cash flow from operating activities: Net loss ................................................ $(16,295) $(16,325) $ (69,908) Reconciliation of net loss to net cash used by operating activities: (Gain)/loss on sale of investments ................... (25) 226 (1,919) Accrued interest/amortization on investments ......... (242) 277 919 Prepaid research and development ..................... (604) (501) (604) Payable to Genzyme Corporation ....................... (2,432) (729) 37 Accrued expenses ..................................... 152 (24) 244 -------- -------- --------- Net cash used by operating activities ................... (19,446) (17,076) (71,231) Cash flow from investing activities: Purchases of short-term investments ..................... - - (31,216) Purchase of long-term investment ........................ - - (109,521) Sales and maturities of short-term investments .......... 16,715 25,683 63,959 Sales and maturities of long-term investments ........... - - 72,689 -------- -------- --------- Net cash provided (used) by investing activities ........ 16,715 25,683 (4,089) Cash flow from financing activities: Issuance of note payable to Genzyme Corporation ......... - - 100 Issuance of callable common stock ....................... - - 78,035 -------- -------- --------- Net cash provided by financing activities ............... - - 78,135 -------- -------- --------- Increase in cash and cash equivalents ....................... (2,731) 8,607 2,815 Cash and cash equivalents at beginning of period ............ 5,546 135 - -------- -------- --------- Cash and cash equivalents at end of period .................. $ 2,815 $ 8,742 $ 2,815 ======== ======== =========
The accompanying notes are an integral part of these unaudited, condensed financial statements. F-20 4 NEOZYME II CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) SEPTEMBER 30, 1996 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 1. BASIS FOR PRESENTATION: Prior to acquisition by Genzyme, Neozyme II was a development stage enterprise engaged in the research, development and clinical testing of biotherapeutic products for the treatment of cystic fibrosis. These unaudited condensed financial statements should be read in conjunction with Neozyme II's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and the financial statements and footnotes included therein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission rules and regulations. The financial statements for the three and nine months ended September 30, 1996 and 1995 are unaudited but include, in Neozyme II's opinion, all adjustments (consisting only of normally recurring accruals) necessary for a fair presentation of the results for the periods presented. 2. ACCOUNTING POLICIES: The accounting policies underlying the quarterly financial statements are those set forth in Note A of the financial statements included in Neozyme II's Annual Report on Form 10-K for the year ended December 31, 1995. F-21 5 NEOZYME II CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) SEPTEMBER 30, 1996 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 3. TERMINATION OF LICENSE AND DEVELOPMENT AGREEMENT WITH NABI: Under agreement with Genzyme, Neozyme II funds Genzyme's obligations to provide development funding to NABI in exchange for the exclusive rights that Genzyme has acquired to market, on a worldwide basis, HyperGAM+[TM]CF, for the treatment of Pseudomonas lung infections in Cystic Fibrosis patients. In June 1996, Neozyme II and NABI announced the halt of their Phase II clinical trial for HyperGAM+[TM]CF after receiving the results of an interim analysis of the data by an independent statistician which showed no evidence of a reduction in the number of acute pulmonary exacerbations in trial participants. No major issues with the safety of the product were identified. On June 21, 1996, after review of the interim analysis data, the Board of Directors of Neozyme II voted unanimously to terminate the License and Development Agreement with NABI. In the third quarter of 1996, Genzyme charged Neozyme II for $900,000 of costs billed by NABI in connection with the wind down of the HyperGAM+[TM]CF program, which is the agreed maximum payable to NABI under the terms of the Agreement. 4. TENDER OFFER AND SUBSEQUENT EVENT: On October 28, 1996, Genzyme, through Neozyme II Acquisition Corp., completed its tender offer for the outstanding Units of Neozyme II for $45 per Unit in cash. A total of 2,385,686 of the 2,415,000 Units outstanding or 98.8% were tendered and accepted for payment. Each Neozyme II Unit consists of one share of Callable Common Stock and one Callable Warrant to purchase two shares of Genzyme General Division Common Stock ("General Division Stock") and 0.135 share of Genzyme Tissue Repair Common Stock ("TR Stock"). The tender offer was made pursuant to an agreement entered into between Neozyme II and Genzyme on September 23, 1996. The agreement provided that Genzyme would acquire all of the shares of Callable Common Stock not tendered in the tender offer through a merger of Neozyme II into Acquisition Corp. The merger was consummated on December 6, 1996, at which time holders of the Units who did not tender their Units received $29 in cash for each share of Callable Common Stock and the Callable Warrants included in the untendered Units became exercisable. The exercise price of the Callable Warrants is $44.202 per Callable Warrant and was determined by the average closing price of two shares of General Division Stock and 0.135 share of TR Stock for the twenty trading days prior to December 6, 1996. F-22 -----END PRIVACY-ENHANCED MESSAGE-----