-----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, JafrSPaKRm9OmGotL4Rc7qLLeB1vF4sq93jMf36dpJDkjFJOX6eFhDRK0w66sCHs 1xVPta2XQNL20pTAqTXzdg== 0000051396-96-000005.txt : 19960213 0000051396-96-000005.hdr.sgml : 19960213 ACCESSION NUMBER: 0000051396-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960212 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MALLINCKRODT GROUP INC CENTRAL INDEX KEY: 0000051396 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 361263901 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00483 FILM NUMBER: 96515743 BUSINESS ADDRESS: STREET 1: 7733 FORSYTH BLVD CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3148545299 MAIL ADDRESS: STREET 1: 7733 FORSYTH BLVD CITY: ST LOUIS STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: IMCERA GROUP INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL MINERALS & CHEMICAL CORP DATE OF NAME CHANGE: 19900614 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF --- THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF --- THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-483 ------------------------ MALLINCKRODT GROUP INC. (Exact name of registrant as specified in its charter) New York 36-1263901 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7733 Forsyth Boulevard St. Louis, Missouri 63105-1820 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 314-854-5200 ----------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X. No . Applicable Only To Issuers Involved In Bankruptcy Proceedings During The Preceding Five Years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes . No . Applicable Only To Corporate Issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 74,184,899 shares excluding 12,931,390 treasury shares as of January 31, 1996. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED). The accompanying interim condensed consolidated financial statements of Mallinckrodt Group Inc. (the Company or Mallinckrodt) do not include all disclosures normally provided in annual financial statements. These financial statements, which should be read in conjunction with the consolidated financial statements contained in Mallinckrodt's 1995 Annual Report to Shareholders, are unaudited but include all adjustments which Mallinckrodt's management considers necessary for a fair presentation. These adjustments consist of normal recurring accruals except as discussed in Notes 1 and 2 of the Notes to Condensed Consolidated Financial Statements. Interim results are not necessarily indicative of the results for the fiscal year. All references to years are to fiscal years ended June 30 unless otherwise stated. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In millions except per share amounts)
Quarter Ended Six Months Ended December 31, December 31, ------------------ ------------------ 1995 1994 1995 1994 ------- ------- --------- ------- Net sales $528.2 $471.5 $1,020.3 $920.1 Operating costs and expenses: Cost of goods sold 289.1 250.0 557.4 498.3 Selling, administrative and general expenses 141.0 133.8 279.9 257.5 Research and development expenses 31.5 24.5 55.6 47.7 Other operating income, net (4.2) (1.8) (7.4) (3.9) ------- ------- --------- ------- Total operating costs and expenses 457.4 406.5 885.5 799.6 ------- ------- --------- ------- Operating earnings 70.8 65.0 134.8 120.5 Equity in pre-tax earnings of joint venture 5.9 4.1 13.2 10.2 Interest and other nonoperating expense, net (.5) (.5) (.9) (.8) Interest expense (14.9) (11.8) (28.7) (23.8) ------- ------- --------- ------- Earnings from continuing operations before income taxes 61.3 56.8 118.4 106.1 Income tax provision 23.0 21.5 44.4 40.3 ------- ------- --------- ------- Earnings from continuing operations 38.3 35.3 74.0 65.8 Discontinued operations 19.0 4.5 22.5 7.9 ------- ------- --------- ------- Net earnings 57.3 39.8 96.5 73.7 Preferred stock dividends (.1) (.1) (.2) (.2) ------- ------- --------- ------- Available for common shareholders $ 57.2 $ 39.7 $ 96.3 $ 73.5 ======= ======= ========= ======= Earnings per common share: Continuing operations $.50 $.45 $ .96 $.85 Discontinued operations .25 .06 .29 .10 ---- ---- ----- ---- Net earnings $.75 $.51 $1.25 $.95 ==== ==== ===== ====
(See Notes to Condensed Consolidated Financial Statements on page 5.) 1 CONDENSED CONSOLIDATED BALANCE SHEET (In millions except share and per share amounts)
December 31, June 30, 1995 1995 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 76.3 $ 60.9 Trade receivables, less allowances of $12.7 at December 31 and $13.5 at June 30 376.6 392.5 Inventories 459.7 415.5 Net current assets of discontinued operations 15.8 Deferred income taxes 53.4 53.1 Other current assets 98.6 56.9 --------- --------- Total current assets 1,064.6 994.7 Investments and long-term receivables, less allowances of $13.1 at December 31 and $17.0 at June 30 148.4 165.5 Property, plant and equipment, net 1,001.6 978.0 Intangible assets 596.3 527.6 Net noncurrent assets of discontinued operations 26.6 Deferred income taxes .8 .7 --------- --------- Total assets $2,811.7 $2,693.1 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt $ 140.2 $ 197.5 Accounts payable 157.7 182.8 Accrued liabilities 365.4 332.1 Income taxes payable 46.3 7.7 Deferred income taxes 2.0 2.7 --------- --------- Total current liabilities 711.6 722.8 Long-term debt, less current maturities 595.4 501.5 Deferred income taxes 82.8 76.9 Postretirement benefits 148.7 142.7 Other noncurrent liabilities and deferred credits 120.3 77.7 --------- --------- Total liabilities 1,658.8 1,521.6 Shareholders' equity: 4 Percent cumulative preferred stock 11.0 11.0 Common stock, par value $1, authorized 300,000,000 shares; issued 87,116,289 shares as of December 31 and June 30 87.1 87.1 Capital in excess of par value 277.1 274.1 Reinvested earnings 1,058.4 984.5 Foreign currency translation (20.2) (9.3) Treasury stock, at cost (260.5) (175.9) --------- --------- Total shareholders' equity 1,152.9 1,171.5 --------- --------- Total liabilities and shareholders' equity $2,811.7 $2,693.1 ========= =========
(See Notes to Condensed Consolidated Financial Statements on page 5.) 2 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In millions)
Six Months Ended December 31, 1995 1994 ------- ------- CASH FLOW - OPERATING ACTIVITIES Net earnings $ 96.5 $ 73.7 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 68.2 56.9 Postretirement benefits 6.0 5.7 Undistributed equity in earnings of joint venture (9.5) (6.8) Deferred income taxes 5.1 12.3 Gains on disposals of assets (53.7) (1.3) Other, net 32.6 (15.4) ------- ------- 145.2 125.1 Changes in non-cash operating working capital: Accounts receivable (36.7) (1.8) Inventories (49.2) (30.5) Accounts payable, accrued liabilities and income taxes, net 33.8 (19.3) Other, net 1.9 (1.7) ------- ------- Net cash provided by operating activities 95.0 71.8 CASH FLOW - INVESTING ACTIVITIES Capital expenditures (77.6) (75.6) Acquisition spending (81.0) (4.1) Proceeds from asset disposals 118.8 16.3 Other, net 27.6 (1.8) ------- ------- Net cash used by investing activities (12.2) (65.2) CASH FLOW - FINANCING ACTIVITIES Increase (decrease) in short-term debt (56.4) 24.1 Proceeds from long-term debt 196.5 2.4 Payments on long-term debt (103.3) (3.5) Issuance of Mallinckrodt common stock 9.3 1.4 Acquisition of treasury stock (90.9) (14.7) Dividends paid (22.6) (20.5) ------- ------- Net cash used by financing activities (67.4) (10.8) ------- ------- Increase (decrease) in cash and cash equivalents 15.4 (4.2) Cash and cash equivalents at beginning of period 60.9 86.2 ------- ------- Cash and cash equivalents at end of period $ 76.3 $ 82.0 ======= =======
(See Notes to Condensed Consolidated Financial Statements on page 5.) 3 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (In millions except per share amounts)
1995 1994 --------- --------- 4 Percent cumulative preferred stock: Balance at June 30 and December 31 $ 11.0 $ 11.0 Common stock: Balance at June 30 and December 31 87.1 87.1 Capital in excess of par value: Balance at June 30 274.1 268.2 Stock options exercised 3.0 .3 -------- --------- Balance at December 31 277.1 268.5 Reinvested earnings: Balance at June 30 984.5 846.4 Net earnings 96.5 73.7 Dividends: 4 Percent cumulative preferred stock ($2.00 per share) (.2) (.2) Common stock ($.295 per share in 1995 and $.265 per share in 1994) (22.4) (20.3) --------- --------- Balance at December 31 1,058.4 899.6 Foreign currency translation: Balance at June 30 (9.3) (34.2) Translation adjustment (10.9) 5.5 --------- --------- Balance at December 31 (20.2) (28.7) Treasury stock: Balance at June 30 (175.9) (162.6) Purchase of common stock (90.9) (14.7) Stock options exercised 6.3 1.1 Restricted stock awards (4.2) --------- --------- Balance at December 31 (260.5) (180.4) --------- --------- Total shareholders' equity $1,152.9 $1,057.1 ======== ========
(See Notes to Condensed Consolidated Financial Statements on page 5.) 4 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Results for the quarter and six months ended December 31, 1995 included a non-cash charge for write-off of purchased research and development of $3.7 million, $2.3 million after taxes, or 3 cents per share, relating to Mallinckrodt Veterinary's acquisition of Syntro Corporation. The charge was recorded as research and development expenses. 2. Included in discontinued operations are earnings, net of taxes, from the divested feed ingredients business of $1.0 million and $5.5 million for the quarter and through October 16, 1995, the date of sale, respectively. Corresponding amounts were $5.4 million and $9.5 million for the quarter and six months ended December 31, 1994, respectively. Fiscal 1996 feed ingredients net sales were $5.8 million and $43.0 million for the quarter and through October 16, 1995, respectively. Sales for the quarter and six months ended December 31, 1994 were $44.7 million and $83.8 million, respectively. Other principal factors affecting discontinued operations were an after tax gain of $34.4 million on the sale of the feed ingredients business and an after tax provision for additional environmental costs of $15.6 million. 3. Provisions for income taxes were based on estimated annual effective tax rates for each fiscal year. The Company's effective tax rate for the first six months was 37.5 percent, compared to last year's 38.0 percent. This decrease reflects an earnings mix toward lower statutory tax rate jurisdictions and the utilization of certain operating losses. 4. The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. In addition, in connection with laws and regulations pertaining to the protection of the environment, the Company is party to several environmental remediation investigations and clean-ups and, along with other companies, has been named a "potentially responsible party" for certain waste disposal sites. Each of these matters is subject to various uncertainties, and it is possible that some of these matters will be decided unfavorably against the Company. The Company has established accruals for matters that are in its view probable and reasonably sufficient to satisfy any known environmental liabilities. Further, any additional liability that may ultimately result from the resolution of these matters is not expected to have a material effect on Mallinckrodt's business or financial condition as a whole. 5. Earnings per common share were based on the weighted average number of common and common equivalent shares (77,161,246 and 77,403,148 for the six months ended December 31, 1995 and 1994, and 76,397,750 and 77,249,318 for the quarters ended December 31, 1995 and 1994, respectively). 6. The components of inventory include the following as of December 31, 1995: (In millions) Raw materials and supplies $146.6 Work in process 102.2 Finished goods 210.9 ------ $459.7 ====== 7. As of December 31, 1995, the Company has authorized and issued 100,000 shares, par value $100, 4 Percent cumulative preferred stock of which 98,330 shares are outstanding. Mallinckrodt also has authorized 1,400,000 shares, par value $1, of Series preferred stock, none of which is outstanding. Shares included in treasury stock were: December 31, June 30, 1995 1995 ------------ ---------- Common stock 12,539,789 10,365,203 4 Percent cumulative preferred stock 1,670 1,670 5 8. At December 31, 1995 common shares reserved were: Exercise of common stock purchase rights 85,177,351 Exercise of stock options and granting of stock awards 10,600,851 ---------- Total 95,778,202 ========== 9. Supplemental cash flow information for the six months ended December 31 included: (In millions) 1995 1994 ----- ----- Interest paid $21.4 $21.4 Income taxes paid $30.2 $22.7 Non-cash investing and financing activities: Assumption of liabilities related to acquisitions $6.2 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS General - ------- Although the strategic change initiative announced in December, 1995 is affecting the structure of Mallinckrodt Group, results for the quarter ended December 31, 1995 continue to be reported in the previous format. Earnings from continuing operations for the second quarter ended December 31, 1995 were $38 million, or 50 cents per share. This represents an 11 percent increase in per-share earnings from continuing operations compared with $35 million, or 45 cents per share, during the same period a year ago. These results reflect a non-cash charge of $3.7 million, $2.3 million after taxes, or 3 cents per share, associated with the acquisition of Syntro Corporation. Excluding this charge, earnings from continuing operations would have been 53 cents per share, an 18 percent increase over the prior year. Net sales for the quarter were up 12 percent to $528 million, compared to $471 million a year ago. Net earnings for the second quarter were $57 million, or 75 cents per share, compared with $40 million, or 51 cents per share, during the same period a year ago. Net earnings include the gain resulting from the sale of the feed ingredients business in the second quarter of fiscal 1996, partially offset by a second quarter adjustment of provisions for environmental costs related to discontinued operations. For the six months, earnings from continuing operations were $74 million, or 96 cents per share. Excluding the charge related to the Syntro acquisition, per-share earnings increased 16 percent over the comparable $66 million, or 85 cents per share in the prior year. Net sales for the first half were up 11 percent to $1.0 billion, compared to $920 million last year. Net earnings for the six months were $97 million, or $1.25 per share, compared with $74 million, or 95 cents per share last year. A comparison of sales and operating earnings follows: (In millions)
Quarter Ended Six Months Ended December 31, December 31, ------------- ----------------- 1995 1994 1995 1994 ---- ---- ------ ----- Sales - ----- Mallinckrodt Chemical $166 $121 $ 319 $232 Mallinckrodt Medical 246 240 484 470 Mallinckrodt Veterinary 116 110 217 218 ----- ----- ------- ----- $528 $471 $1,020 $920 ===== ===== ======= ===== 6 Operating earnings - ------------------ Mallinckrodt Chemical $ 16 $ 15 $ 24 $ 22 Mallinckrodt Medical 59 51 117 102 Mallinckrodt Veterinary 4 6 9 10 Corporate (8) (7) (15) (13) ----- ----- ----- ----- $ 71 $ 65 $135 $121 ===== ===== ===== =====
Business Segments - ----------------- MALLINCKRODT CHEMICAL
Net Sales Quarter Ended Six Months Ended (In millions) December 31, December 31, ------------- ---------------- 1995 1994 1995 1994 ---- ---- ---- ---- Catalyst, Performance & Lab Chemicals $102 $ 64 $198 $119 Pharmaceutical Specialties 64 57 121 113 ---- ---- ---- ---- $166 $121 $319 $232 ==== ==== ==== ====
Mallinckrodt Chemical's earnings were $21.4 million and $36.9 million for the second quarter and six months, respectively, representing increases of 11 percent and 15 percent over the same prior year periods. These results include the equity in the earnings of Tastemaker, the flavors joint venture, of $5.9 million and $13.2 million for the quarter and six months, respectively. Net sales increased 37 percent and 38 percent compared to the corresponding prior year quarter and six months, respectively. Catalyst, performance and lab chemicals sales increased 58 percent for the quarter and 66 percent for the first half, primarily from the acquisition of J.T. Baker completed in the third quarter of fiscal 1995. Pharmaceutical specialties sales increased by 13 percent and 7 percent for the quarter and six months, respectively. Second quarter improvement in acetaminophen (APAP) volumes outside the U.S. and continued strength in sales of medicinal narcotics were the main contributors to the increases. MALLINCKRODT MEDICAL
Net Sales Quarter Ended Six Months Ended (In millions) December 31, December 31, ------------- ---------------- 1995 1994 1995 1994 ---- ---- ---- ---- Imaging $167 $164 $328 $324 Anesthesiology & Critical Care 79 76 156 146 ---- ---- ---- ---- $246 $240 $484 $470 ==== ==== ==== ====
Mallinckrodt Medical's operating earnings increased 14 percent for both the quarter and six months, to $58.8 million and $116.6 million, respectively. Net sales improved 2 percent for the quarter and 3 percent for the six months compared to the same periods last year. Imaging sales for both periods were 1 percent higher than the corresponding prior year quarter and six months. Higher nuclear medicine sales volume was the primary factor for the increases, as improved X-ray contrast media sales volume was offset by competitive pricing. Anesthesiology and critical care sales for the quarter and first half increased 4 percent and 7 percent, respectively, largely from improved sales volumes of respiratory therapy products. Improved plant operations and spending controls also benefitted earnings growth. Mallinckrodt Veterinary
Net Sales Quarter Ended Six Months Ended (In million December 31, December 31, ------------- ---------------- 1995 1994 1995 1994 ---- ---- ---- ---- Animal Health $116 $110 $217 $218 ==== ==== ==== ====
7 Mallinckrodt Veterinary's operating earnings decreased 28 percent for the quarter and 8 percent for the six months, to $4.2 million and $9.2 million, respectively. These results reflect a non-cash pre-tax charge of $3.7 million for write-off of purchased research and development associated with the acquisition of Syntro Corporation. Excluding this charge, operating earnings improved 36 percent and 29 percent for the quarter and first half, respectively. Net sales increased 6 percent for the second quarter and were flat for the six months compared to the corresponding prior year periods. The improvements in second quarter sales occurred primarily in Europe due to new product launches and in North America. Sales for both comparative periods also reflect the exit of certain Latin American distributorships last fiscal year. An improved sales mix toward higher margin products and lower expenses as a percentage of sales augmented the improved earnings performance. Corporate Matters - ----------------- Corporate expense increased $.1 million for the quarter and $.8 million for the six months compared to last year. The effective tax rate for the six months was 37.5 percent, compared to last year's 38.0 percent. This decrease reflects an earnings mix toward lower statutory tax rate jurisdictions and the utilization of certain operating losses. FINANCIAL CONDITION The Company's financial resources are expected to continue to be adequate to support existing businesses and fund new opportunities. Since June 30, 1995, cash and cash equivalents increased $15 million. Operations provided $95 million of cash, while acquisition and capital spending totaled $159 million. The Company's current ratio at December 31, 1995, was 1.5:1. Debt as a percentage of invested capital was 39 percent. The Company's Board of Directors previously authorized repurchase of a total of 42 million shares of its common stock. Thirty-two million shares have been repurchased under this authorization, 2.5 million during the six months ended December 31, 1995. In September 1995 and November 1995, the Company issued $100 million of 6.75% notes due September 15, 2005, and $100 million of 6.5% notes due November 15, 2007, respectively, from the $250 million shelf registration statement filed in February of 1995. As of December 31, 1995, $50 million of securities under this shelf and $50 million of securities under a shelf registration statement filed with the SEC in 1992 remain unissued. The Company has a $450 million private-placement commercial paper program. This program is backed by $650 million of U.S. lines of credit, $100 million available until March 1996 and $550 million available until November 1999. At December 31, 1995, commercial paper borrowings amounted to $80 million. There were no outstanding borrowings under the U.S. lines of credit at December 31, 1995. At December 31, 1995, non-U.S. lines of credit totaling $233 million were also available and borrowings under these lines amounted to $40 million. The non-U.S. lines are cancelable at any time. Estimated capital spending for the year ending June 30, 1996, is approximately $200 million. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. In addition, in connection with laws and regulations pertaining to the protection of the environment, the Company is a party to several environmental remediation investigations and clean-ups and, along with other companies, has been named a "potentially responsible party" for certain waste disposal sites. Each of these matters is subject to various uncertainties, and it is possible that some of these matters will be decided unfavorably against the Company. The Company has established accruals for matters that are in its 8 view probable and reasonably estimable. Based on information presently available, management believes that existing accruals are sufficient to satisfy any known environmental liabilities. Further, any additional liability that may ultimately result from the resolution of these matters is not expected to have a material effect on Mallinckrodt's business or financial condition taken as a whole. Previously Disclosed Matters - ---------------------------- The following is a brief discussion of material developments in proceedings disclosed in the Company's Form 10-K for its fiscal year ended June 30, 1995, as amended by the Company's report on Form 10-Q for its fiscal quarter ended September 30, 1995: Auburn Hills, Michigan -- In this previously reported matter involving a drum recycling facility in Auburn Hills, Michigan, the State announced on November 7, 1995 that its proposed remedial action plan for the site would not be adopted in its present form and that additional site evaluation would be conducted. The litigation regarding this site, which is pending in the U.S. District Court for the Eastern District of Michigan, remains dormant. Ashtabula County, Ohio -- This previously reported matter involves claims pending in the U.S. District Court for the Northern District of Ohio regarding the contamination of a stream near Ashtabula, Ohio, where the Company had operated a chloralkalai plant for approximately eight years until 1982. The Fields Brook Remedial Action Group, a group of potentially responsible parties (PRPs) that has been negotiating with the U.S. Environmental Protection Agency (USEPA), has offered the Company a buy-out settlement for $1,271,967. Approximately $385,000 of this amount has already been paid by the Company for its share of Phase I costs and Phase II assessments. The Company has accepted the buy-out offer and expects to execute settlement papers and obtain court approval of the settlement by March 31, 1996. The settlement extends to certain defined "Covered Matters," including all Phase I study and investigation costs, Phase II remedial costs for the sediment and certain floodplains, and government oversight costs. It does not include the Company's possible liability for natural resource damages, remediation of the Ashtabula River, and remediation of certain upper-brook floodplain areas. While USEPA is not a party to the settlement, the PRPs do not expect USEPA will object to the settlement. Pierce County, Washington -- This previously reported matter, which is pending in the U. S. District Court for the Western District of Washington, concerns groundwater contamination allegedly caused by the operation of an explosives manufacturing facility operated by Olin Corporation between 1935 and 1963 and by the Company between 1963 and 1976. In December 1995, the Company filed a third-party complaint against the Boeing Company, the current site owner, seeking contribution. The plaintiff (Centrum Properties, Inc.), Boeing, Olin, and the Company are currently discussing possible ways of resolving the dispute and allocating the clean-up costs. The court has set the case for final pretrial in December 1996. Additional Proceedings - ---------------------- Springville, Utah -- The Company currently is negotiating an interim settlement agreement with Ensign-Bickford Industries, Inc. ("EBI") to share certain costs of remediating groundwater that allegedly has been impacted by nitrates and explosives compounds emanating from EBI's Springville, Utah explosives plant. The plant, under a series of owners, has been manufacturing explosives at the mouth of the Spanish Fork Canyon in Utah since the 1940s. Corporate predecessors of the Company acquired the plant in 1967, and the Company sold the plant and related assets to the Trojan Corporation in 1982. EBI acquired the Trojan Corporation in 1986 and has operated the plant since that time. Pursuant to a 1991 stipulation and consent order with the State of Utah, EBI is preparing a feasibility study of alternatives for remediating impacted off-site groundwater. EBI also is conducting a corrective action study under a 1995 consent order with Utah. EBI and the Company are investigating whether additional parties should share in possible remediation costs. EBI has notified the Company that some residents near the plant have threatened to sue EBI for bodily injuries and property damage, which they claim to have suffered as a result of contamination of their drinking water by chemicals emanating from the plant. The State also has advised EBI that it is investigating a natural resource damages claim. The Company's insurers have been notified of the potential claims. 9 Avon Settlement -- In December 1995, the Company entered into an agreement with Avon Products, Inc. to settle litigation the Company filed in 1988 to enforce indemnity claims included in Avon's agreement to sell Mallinckrodt Inc. to the Company in 1986. The settlement covers all outstanding indemnity issues related to Avon's sale of Mallinckrodt, including environmental clean-up claims and the 1988 settlement of a DuPont patent claim. The Company used a portion of the settlement proceeds to fund reserves for probable costs and related liabilities for claims which the Company is, as a result of the settlement, responsible. The following is a brief discussion of certain claims assumed by the Company as a result of the settlement which the Company believes, based on currently available information, are the more significant: St. Louis, Missouri/FUSRAP. The Company owns a manufacturing facility in St. Louis, Missouri. This site has been used for chemical manufacturing since the late 1800s. During the late 1940s through the early 1960s, the Company processed uranium under contract with the U.S. government. When the processing ceased, the site was decommissioned to remove radioactive residue to appropriate standards, however since then, the clean-up standards have become more stringent. Therefore, the radioactive residues remaining on site must be remediated to current standards. The U.S. government established a program to remediate sites formerly used for uranium manufacturing. This program is called the Formerly Utilized Sites Remedial Action Program (FUSRAP). The Department of Energy (DOE) is required to implement and fund the remedial activities under FUSRAP. DOE is working with the Company to remediate certain areas. The DOE is responsible for remediating these residues, not the Company. St. Louis, Missouri/CT Decommissioning. The Company also processed certain ores, columbium and tantalum, under license with the Nuclear Regulatory Commission (NRC) in the 1960s through 1986. The Company is required to complete decommissioning of the processing areas, buildings and soil on the site where manufacturing occurred pursuant to NRC regulations. The Company submitted a Phase I Characterization Plan to NRC and has implemented the characterization plan. The Company will submit a Phase II Characterization plan based upon the results of the first plan. Raleigh, North Carolina. The Company owns a bulk pharmaceutical facility which has been operating since the mid-1960s. The facility has a Resource Conservation Recovery Act (RCRA) Part B permit which requires the facility to undergo corrective action. There are several phases to the corrective action process. The Company has worked with Federal and State agencies to complete the Remedial Feasibility Investigation ("RFI") and identified certain Solid Waste Management Units (SWMUs). The Company received its permit and recently submitted a Remedial Investigation Work Plan to the North Carolina Department of Environmental Protection proposing the work plan to investigate the SWMUs. The Company has not received a response to this Remedial Investigation. ITEM 2. CHANGES IN SECURITIES. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. See Mallinckrodt's Form 10-Q for the three months ended September 30, 1995, for information about the Annual Meeting of Shareholders on October 18, 1995. ITEM 5. OTHER INFORMATION. Not applicable. 10 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 10.1 Consulting Agreement with Herve M. Pinet for the period December 1, 1995 to November 30, 1996.* 10.2 Amendment dated January 10, 1996 to Consulting Agreement with Ronald G. Evens, M.D. extending agreement through December 31, 1996.* 11.1 Primary earnings per share computation for the six months ended December 31, 1995 and 1994. 11.2 Fully diluted earnings per share computation for the six months ended December 31, 1995 and 1994. 11.3 Primary earnings per share computation for the quarters ended December 31, 1995 and 1994. 11.4 Fully diluted earnings per share computation for the quarters ended December 31, 1995 and 1994. 27 Financial Data Schedule. _____________ * Management Contract or compensatory plan required to be filed pursuant to Item 601. (b) Reports on Form 8-K. During the quarter and through the date of this report, the following reports on Form 8-K were filed. - Report dated October 17, 1995, under Item 5 regarding the completion of the sale of the feed ingredients business, increased quarterly dividend and plans for increased share repurchases. - Report dated November 22, 1995, under Item 5 regarding fiscal 1995 and 1994 income statements as restated for the sale of the feed ingredients business. - Report dated December 18, 1995, under Item 5 regarding the appointment of Mack G. Nichols to Chief Operating Officer and the appointment of two other officers. *************** SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Mallinckrodt Group Inc. ____________________________ Registrant By: MICHAEL A. ROCCA By: WILLIAM B. STONE _________________________ _________________________ Michael A. Rocca William B. Stone Senior Vice President and Vice President and Controller Chief Financial Officer Date: February 12, 1996 11 EX-10.1 2 Exhibit 10.1 CONSULTING AGREEMENT --------------------- THIS AGREEMENT is entered into as of December 1, 1995, by and between Mallinckrodt Group Inc., a New York corporation (the "Company") and HERVE M. PINET ("Pinet"). WITNESSETH: WHEREAS, Pinet has special knowledge and ability with respect to international markets and financial transactions; and WHEREAS, the Company has determined that it would be beneficial to use the consulting services of Pinet to develop international business relationships and provide expertise in other international business matters; and WHEREAS, the Company wishes to clarify the capacity in which Pinet will provide such services to the Company; NOW, THEREFORE, it is mutually agreed as follows: 1. Consultancy. ------------ Pinet will be retained as a consultant of the Company for the period December 1, 1995 through November 30, 1996. 2. Consulting Services. -------------------- As a consultant, Pinet will (i) assist the Company in forming strategic business relationships in Asia and Europe, (ii) advise the Company with respect to global economic trends with a particular focus on international banking transactions and, (iii) provide such other assistance with international matters and the Company's search for new directors as may be directed from time to time by the Chairman, President and Chief Executive Officer, C. Ray Holman. 3. Consulting Fee. --------------- The Company will pay Pinet for his consulting services and covenant not to compete, a monthly fee of Ten Thousand Dollars ($10,000.00) payable on the last day of each month. No other fees or commissions will be paid to Pinet arising out of his consulting services under this Agreement. This Agreement, however, will not preclude the payment of fees for services rendered by Pinet as a member of the Company's Board of Directors. 4. Confidentiality of Company Information. --------------------------------------- Pinet agrees to maintain in strict confidence any nonpublic information concerning the Company and its subsidiaries that he knows or acquires in the course of rendering consulting services under this Agreement, or any prior Agreements between the Company and Pinet under which Pinet has provided consulting services. AGREEMENT/Pinet Page 2 5. Non-Compete. ------------ In consideration of the fee provided in paragraph 3 above, Pinet agrees that he will not, during the term of this Agreement and for a period of one year thereafter, be employed by or otherwise render any services for any person or concern which is or which he knows has the intention of becoming a direct competitor of any primary or developing product lines within the primary or developing market areas of any business of the Company or any wholly-owned subsidiary as it now exists or may exist at the expiration of this Agreement (and any extensions thereof) without the prior written consent of the Company, which consent will not be unreasonably withheld. 6. Expenses. --------- The Company will pay or reimburse Pinet, as the case may be, for all expenses reasonably incurred by Pinet in rendering consulting services which have been approved by C. Ray Holman, the Chairman, President and Chief Executive Officer of the Company, and for which a statement of itemized expenses with substantiating documentation has been provided. 7. Termination. ------------ The Company's obligations to Pinet and Pinet's obligations to the Company as a consultant hereunder will terminate prior to November 30, 1996, only in the event of Pinet's death or disability, or if the Company determines that Pinet is in material default of his obligations under this Agreement, or is guilty of wilful misconduct or gross negligence in the performance thereof. For purposes of this paragraph, disability means a physical or mental disability which the Company's Chief Executive Officer has determined, acting with the advice of a competent medical doctor, renders or has rendered Pinet unable to perform consulting services hereunder for a consecutive period of one (1) month or more. No such determination will be made without at least ten (10) day's prior written notice to Pinet, or his spouse, or his personal representative, and such determination will not become effective to terminate the Company's obligations to Pinet as consultant hereunder until the last day of the month in which such notice is given. 8. Independent Contractor Status. ------------------------------ Pinet will be regarded as an independent contractor in all matters pertaining to services performed hereunder, and Pinet will not have the authority to assume, create, or incur any liability or any obligation of any kind, either express or implied, against or on behalf of the Company. 9. Severability. ------------- This Agreement is divisible and separable so that if any provisions are held to be invalid, such holding will not impair the remaining provisions hereof. If any provision is held to be too broad to be enforced, such provision will be construed to create only an obligation to the full extent allowable by law. 10. Counterparts. ------------- This Agreement may be executed in two or more counterparts, each of which need not contain the signatures of more than one party, but such counterparts taken together will constitute one and the same Agreement. AGREEMENT/Pinet Page 3 11. Miscellaneous. -------------- The foregoing constitutes the entire Agreement between the parties and can be amended only by written agreement signed by both parties. Further, this Agreement will not be assignable or transferable, in whole or in part. Any payment required to be made by the Company pursuant to this Agreement to a person who is under a legal disability may be made by the Company to or for the benefit of such person in such of the following ways as the Company may determine: (a) directly to such person, (b) to the legal representative of such person, (c) to some near relative of such person, to be used for the latter's benefit, or (d) directly in payment of expenses in support, maintenance or education of such person. The Company will not be required to see to the application by any third party of any payments made pursuant hereto. All questions in respect of this Agreement, including those pertaining to its validity, interpretation and performance, shall be determined by the laws of the State of Missouri. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by a duly authorized officer and Pinet has set his hand and seal as of the date first above-written. Mallinckrodt Group Inc. By C. RAY HOLMAN --------------------------------------------------- C. Ray Holman Its Chairman, President and Chief Executive Officer ACCEPTED: By HERVE PINET - ------------------------------- Herve Pinet Date December 1, 1995 EX-10.2 3 Exhibit 10.2 January 10, 1996 Ronald G. Evens, M.D. The Edward Mallinckrodt Institute of Radiology 516 South Kingshighway St. Louis, MO 63110 Dear Dr. Evens: A letter of agreement dated December 22 1986, and renewal letters dated November 29, 1989, February 19,1991, January 16, 1992, December 17, 1992, January 7, 1994 and February 1, 1995, between you and Mallinckrodt Medical, Inc., set forth the general terms and conditions under which you agree to serve Mallinckrodt Medical, Inc., in a consulting capacity for the period beginning January 1, 1987, and ending December 31, 1995. Mallinckrodt Medical, Inc., desires to retain your consulting services through the period beginning January 1, 1996, and ending December 31, 1996, under the same terms and conditions as set forth in said letter agreement dated December 22, 1986, and renewal letters dated November 29, 1989, and February 19, 1991. If the foregoing meets with your understanding and approval, please execute this letter in duplicate at the place indicated below and return one of the signed duplicates to us thereby indicating your agreement to continue to serve Mallinckrodt Medical, Inc., as a consultant for the above-state period. Very truly yours, ACCEPTED & AGREED TO: MALLINCKRODT MEDICAL, INC. RONALD G. EVENS, M.D. By: ROBERT G. MOUSSA ROBERT G. EVENS, M.D. -------------------------- ---------------------------- Robert G. Moussa Robert G. Evens, M.D. Title: President Date: January 12, 1996 ----------------------- ---------------------------- EX-11.1 4 Exhibit 11.1 EARNINGS PER SHARE PRIMARY COMPUTATION ($ in millions except share and per share amounts)
Six Months Ended December 31, 1995 1994 - -------------------------------------------------------------------- Basis for computation of earnings per common and common equivalent shares: Earnings from continuing operations $ 74.0 $ 65.8 Deduct dividends on 4 Percent cumulative preferred stock (.2) (.2) -------- -------- Earnings from continuing operations available to common shareholders 73.8 65.6 Discontinued operations 22.5 7.9 -------- -------- Available for common shareholders $ 96.3 $ 73.5 ======== ======== Number of shares: Weighted average shares outstanding 76,098,488 76,757,943 Shares issuable upon exercise of stock options, net of shares assumed to be repurchased 1,062,758 645,205 ---------- ---------- 77,161,246 77,403,148 ========== ========== Earnings per common share: Continuing operations $ .96 $.85 Discontinued operations .29 .10 ----- ----- Net earnings $1.25 $.95 ====== ======
EX-11.2 5 Exhibit 11.2 EARNINGS PER SHARE FULLY DILUTED COMPUTATION ($ in millions except share and per share amounts)
Six Months Ended December 31, 1995 1994 - -------------------------------------------------------------------- Basis for computation of earnings per common and common equivalent shares: Earnings from continuing operations $ 74.0 $ 65.8 Deduct dividends on 4 Percent cumulative preferred stock (.2) (.2) -------- -------- Earnings from continuing operations available to common shareholders 73.8 65.6 Discontinued operations 22.5 7.9 -------- -------- Available for common shareholders $ 96.3 $ 73.5 ======== ======== Number of shares: Weighted average shares outstanding 76,098,488 76,757,943 Shares issuable upon exercise of stock options, net of shares assumed to be repurchased 1,181,659 716,010 ---------- ---------- 77,280,147 77,473,953 ========== ========== Earnings per common share: Continuing operations $ .96 $.85 Discontinued operations .29 .10 ----- ----- Net earnings $1.25 $.95 ===== =====
EX-11.3 6 Exhibit 11.3 EARNINGS PER SHARE PRIMARY COMPUTATION ($ in millions except share and per share amounts)
Quarter Ended December 31, 1995 1994 - ------------------------------------------------------------------------------- Basis for computation of earnings per common and common equivalent shares: Earnings from continuing operations $ 38.3 $ 35.3 Deduct dividends on 4 Percent cumulative preferred stock (.1) (.1) ------- ------- Earnings from continuing operations available to common shareholders 38.2 35.2 Discontinued operations 19.0 4.5 ------- ------- Available for common shareholders $ 57.2 $ 39.7 ======= ======= Number of shares: Weighted average shares outstanding 75,484,367 76,616,993 Shares issuable upon exercise of stock options, net of shares assumed to be repurchased 913,383 632,325 ---------- ---------- 76,397,750 77,249,318 ========== ========== Earnings per common share: Continuing operations $ .52 $ .45 Discontinued operations .25 .06 ------- ------- Net earnings $ .75 $ .51 ======= =======
EX-11.4 7 Exhibit 11.4 EARNINGS PER SHARE FULLY DILUTED COMPUTATION ($ in millions except share and per share amounts)
Quarter Ended December 31, 1995 1994 - ------------------------------------------------------------------------------------ Basis for computation of earnings per common and common equivalent shares: Earnings from continuing operations $ 38.3 $ 35.3 Deduct dividends on 4 Percent cumulative preferred stock (.1) (.1) ------- ------- Earnings from continuing operations available to common shareholders 38.2 35.2 Discontinued operations 19.0 4.5 ------- ------- Available for common shareholders $ 57.2 $ 39.7 ======= ======= Number of shares: Weighted average shares outstanding 75,484,367 76,616,993 Shares issuable upon exercise of stock options, net of shares assumed to be repurchased 1,181,659 716,011 ---------- ---------- 76,666,026 77,333,004 ========== ========== Earnings per common share: Continuing operations $ .50 $ .45 Discontinued operations .25 .06 ------- ------- Net earnings $ .75 $ .51 ======= =======
EX-27 8
5 This schedule contains summary financial informatiaon extracted from the balance sheet and income statement, and is qualified in its entirety by reference to such financial schedules. 1,000,000 6-MOS JUN-30-1996 DEC-31-1995 76 0 389 13 460 1,065 1,527 526 2,812 712 595 87 0 11 1,055 2,812 1,020 1,020 557 886 1 0 29 118 44 74 23 0 0 97 .96 .96
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