-----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, W1zURLsQYEHuERo4pWHKhwfj2RiG3yM7pNBTWKSUC+SAb8xq4gnCD4Ay8asuZuv6 QBE5dYPYc+N86G1ExcaeBw== 0000051396-98-000046.txt : 19980619 0000051396-98-000046.hdr.sgml : 19980618 ACCESSION NUMBER: 0000051396-98-000046 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980617 SROS: CSX SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MALLINCKRODT INC /MO CENTRAL INDEX KEY: 0000051396 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 361263901 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-00483 FILM NUMBER: 98649506 BUSINESS ADDRESS: STREET 1: 675 MCDONNELL BLVD STREET 2: PO BOX 5840 CITY: ST LOUIS STATE: MO ZIP: 63134 BUSINESS PHONE: 3146542000 MAIL ADDRESS: STREET 1: 7733 FORSYTH BLVD CITY: ST LOUIS STATE: MO ZIP: 63105-1820 FORMER COMPANY: FORMER CONFORMED NAME: MALLINCKRODT INC /MO DATE OF NAME CHANGE: 19970625 FORMER COMPANY: FORMER CONFORMED NAME: MALLINCKRODT GROUP INC DATE OF NAME CHANGE: 19940322 FORMER COMPANY: FORMER CONFORMED NAME: IMCERA GROUP INC DATE OF NAME CHANGE: 19920703 - -----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, Ps+kuPP6pRZ+J3XZ4yhlvgooqYiQLgVV9C9cM7ZzHGbqH2kCH0FxFZkNNCBOPKIq EAcCCtwHU3a6ZOejIqYL3A== 0000051396-98-000046.txt : 19980618 0000051396-98-000046.hdr.sgml : 19980618 ACCESSION NUMBER: 0000051396-98-000046 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980617 SROS: CSX SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MALLINCKRODT INC /MO CENTRAL INDEX KEY: 0000051396 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 361263901 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-00483 FILM NUMBER: 98649506 BUSINESS ADDRESS: STREET 1: 675 MCDONNELL BLVD STREET 2: PO BOX 5840 CITY: ST LOUIS STATE: MO ZIP: 63134 BUSINESS PHONE: 3146542000 MAIL ADDRESS: STREET 1: 7733 FORSYTH BLVD CITY: ST LOUIS STATE: MO ZIP: 63105-1820 FORMER COMPANY: FORMER CONFORMED NAME: MALLINCKRODT INC /MO DATE OF NAME CHANGE: 19970625 FORMER COMPANY: FORMER CONFORMED NAME: MALLINCKRODT GROUP INC DATE OF NAME CHANGE: 19940322 FORMER COMPANY: FORMER CONFORMED NAME: IMCERA GROUP INC DATE OF NAME CHANGE: 19920703 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________ FORM 10-Q/A No. 1 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF --- THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1997 OR --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-483 ______________________________ MALLINCKRODT 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.) 675 McDonnell Boulevard St. Louis, Missouri 63134 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 314-654-2000 ______________________________ 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. 73,014,162 shares excluding 14,102,127 treasury shares as of January 31, 1998. Pursuant to Rule 12b-15 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), this Form 10-Q/A No. 1 is hereby filed with respect to that certain Quarterly Report on Form 10-Q for the three months ended December 31, 1997 of Mallinckrodt Inc. filed with the Securities and Exchange Commission on February 12, 1998 (the "Form 10-Q"). In accordance therewith, Part I, Items 1 and 2 "Financial Information" of the Form 10-Q are hereby restated in their entirety to provide additional disclosure as follows. PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited). The accompanying interim condensed consolidated financial statements of Mallinckrodt 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 1997 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, 2, 3, 4 and 5 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 STATEMENTS OF OPERATIONS (In millions, except per share amounts)
Quarter Ended Six Months Ended December 31, December 31, ------------------- ------------------- 1997 1996 1997 1996 -------- -------- -------- -------- Net sales $ 656.2 $ 453.1 $1,154.3 $ 895.1 Operating costs and expenses: Cost of goods sold 430.8 248.8 739.8 490.8 Selling, administrative and general expenses 183.2 109.0 308.5 214.8 Purchased research and development 398.3 Research and development expenses 38.2 27.1 67.7 55.9 Other operating (income) expense, net (16.7) 1.1 (18.4) .2 -------- -------- --------- -------- Total operating costs and expenses 635.5 386.0 1,495.9 761.7 -------- -------- --------- -------- Operating earnings (loss) 20.7 67.1 (341.6) 133.4 Interest income and other nonoperating income, net 2.3 6.3 11.5 10.8 Interest expense (29.0) (11.9) (47.4) (24.6) -------- -------- --------- -------- Earnings (loss) from continuing operations before income taxes (6.0) 61.5 (377.5) 119.6 Income tax provision (benefit) (1.3) 22.4 8.6 43.9 -------- -------- --------- -------- Earnings (loss) from continuing operations (4.7) 39.1 (386.1) 75.7 Discontinued operations 4.4 3.2 -------- -------- --------- -------- Net earnings (loss) (4.7) 43.5 (386.1) 78.9 Preferred stock dividends (.1) (.1) (.2) (.2) -------- -------- --------- -------- Available for common shareholders $ (4.8) $ 43.4 $ (386.3) $ 78.7 ======== ======== ========= ======== Basic earnings per common share: Earnings (loss) from continuing operations $ (.07) $ .53 $ (5.31) $ 1.02 Earnings from discontinued operations .06 .04 -------- -------- --------- -------- Net earnings (loss) $ (.07) $ .59 $ (5.31) $ 1.06 ======== ======== ========= ======== Earnings per common share - assuming dilution: Earnings (loss) from continuing operations $ (.07) $ .51 $ (5.31) $ 1.00 Earnings from discontinued operations .06 .04 -------- -------- --------- -------- Net earnings (loss) $ (.07) $ .57 $ (5.31) $ 1.04 ======== ======== ========= ======== (See Notes to Condensed Consolidated Financial Statements on pages 5 through 10.)
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except share and per share amounts)
December 31, June 30, 1997 1997 ------------ ------------ Assets Current assets: Cash and cash equivalents $ 110.7 $ 808.5 Trade receivables, less allowances of $15.0 at December 31 and $8.4 at June 30 476.8 356.0 Inventories 508.1 315.9 Deferred income taxes 68.3 36.8 Other current assets 83.3 99.6 ------------ ------------ Total current assets 1,247.2 1,616.8 Investments and long-term receivables, less allowances of $14.9 at December 31 and $14.1 at June 30 168.2 145.1 Property, plant and equipment, net 984.5 827.9 Goodwill, net 902.6 226.2 Technology, net 389.0 24.2 Other intangible assets, net 290.2 146.7 Deferred income taxes 23.5 .8 ------------ ------------ Total assets $4,005.2 $2,987.7 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Short-term debt $1,154.5 $ 11.7 Accounts payable 183.3 169.3 Accrued liabilities 444.2 396.1 Income taxes payable 20.6 76.4 Deferred income taxes .2 .2 ------------ ------------ Total current liabilities 1,802.8 653.7 Long-term debt, less current maturities 547.9 545.2 Deferred income taxes 471.0 248.7 Postretirement benefits 168.0 161.9 Other noncurrent liabilities and deferred credits 168.5 127.0 ------------ ------------ Total liabilities 3,158.2 1,736.5 ------------ ------------ 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 87.1 87.1 Capital in excess of par value 313.1 305.9 Reinvested earnings 882.3 1,292.6 Foreign currency translation (67.1) (49.9) Treasury stock, at cost (379.4) (395.5) ------------ ------------ Total shareholders' equity 847.0 1,251.2 ------------ ------------ Total liabilities and shareholders' equity $4,005.2 $2,987.7 ============ ============ (See Notes to Condensed Consolidated Financial Statements on pages 5 through 10.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
Six Months Ended December 31, --------------------- 1997 1996 --------- --------- Cash Flows - Operating Activities Net earnings (loss) $ (386.1) $ 78.9 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 58.8 57.1 Amortization 36.0 20.7 Postretirement benefits 6.1 6.3 Undistributed equity in earnings of joint venture (9.6) Gains on disposals of assets (15.9) (.7) Deferred income taxes (22.2) (2.6) Write-off of purchased research and development 398.3 Sale of inventory stepped up to fair value at acquisition 75.4 --------- --------- 150.4 150.1 Changes in operating assets and liabilities: Trade receivables 27.2 (4.2) Inventories ( 25.8) (2.3) Other current assets 47.7 (5.7) Accounts payable, accrued liabilities and income taxes payable, net (213.5) (19.2) Net current liabilities of discontinued operations .3 Other noncurrent liabilities and deferred credits 23.0 (14.3) Other, net (.6) 23.7 --------- --------- Net cash provided by operating activities 8.4 128.4 --------- --------- Cash Flows - Investing Activities Capital expenditures (70.0) (56.4) Acquisition spending (1,786.4) (13.2) Proceeds from asset disposals 29.5 35.2 Other, net 1.7 7.3 --------- --------- Net cash used by investing activities (1,825.2) (27.1) --------- --------- Cash Flows - Financing Activities Increase in short-term debt 1,121.1 7.4 Proceeds from long-term debt .4 Payments on long-term debt (1.6) (6.9) Issuance of Mallinckrodt common stock 33.0 21.6 Acquisition of treasury stock (9.7) (66.0) Dividends paid (24.2) (23.8) --------- --------- Net cash provided (used) by financing activities 1,119.0 (67.7) --------- --------- Increase (decrease) in cash and cash equivalents (697.8) 33.6 Cash and cash equivalents at beginning of period 808.5 496.1 --------- --------- Cash and cash equivalents at end of period $ 110.7 $ 529.7 ========= ========= (See Notes to Condensed Consolidated Financial Statements on pages 5 through 10.)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In millions, except per share amounts)
1997 1996 --------- --------- 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 30 305.9 283.5 Stock option exercises 1.6 4.9 Restricted stock award 3.2 Investment plan match 2.4 Issuance of stock related to an acquisition 10.0 --------- --------- Balance at December 31 313.1 298.4 --------- --------- Reinvested earnings: Balance at June 30 1,292.6 1,150.7 Net earnings (loss) (386.1) 78.9 Dividends: 4 Percent cumulative preferred stock ($2.00 per share) (.2) (.2) Common stock ($.33 per share in fiscal 1998 and $.32 per share in fiscal 1997) (24.0) (23.6) --------- --------- Balance at December 31 882.3 1,205.8 --------- --------- Foreign currency translation: Balance at June 30 (49.9) (15.3) Translation adjustment (17.2) 16.3 --------- --------- Balance at December 31 (67.1) 1.0 --------- --------- Treasury stock: Balance at June 30 (395.5) (284.8) Acquisition of treasury stock (9.7) (66.0) Stock option exercises 11.6 16.7 Investment plan match 7.3 Restricted stock award 6.9 Issuance of stock related to an acquisition 12.0 --------- --------- Balance at December 31 (379.4) (322.1) --------- --------- Total shareholders' equity $ 847.0 $1,281.2 ========= ========= (See Notes to Condensed Consolidated Financial Statements on pages 5 through 10.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. On August 28, 1997, the Company acquired Nellcor Puritan Bennett Incorporated (Nellcor) through an agreement to purchase for cash all the outstanding shares of common stock of Nellcor for $28.50 per share. The aggregate purchase price of the Nellcor acquisition was approximately $1.9 billion. Nellcor, based in Pleasanton, California, is a developer and manufacturer of products to diagnose, monitor and treat respiratory impaired patients in all healthcare settings. The acquisition has been accounted for by the purchase method and accordingly, the results of Nellcor have been included in the Company's consolidated statements from September 1, 1997. The purchase price has been allocated based upon the estimated fair value of the assets acquired. Identifiable intangible assets are purchased research and development, technology, trademarks and trade names, and the assembled work force. The purchased research and development of $398.3 million, which represents the value of medical devices still in the development stage and not considered to have reached technical feasibility, was written off in the first quarter of fiscal 1998. See Note 2 for additional information. Technology, also referred to as core or base technology and which represents that portion of the existing technology that provides a basis for future generation products as well as existing products, was recorded at $374.2 million and is being amortized on a straight-line basis over 15 years. Other intangible assets of $152.9 million are being amortized on a straight-line basis over 10 to 25 years (weighted average life of 24 years). Goodwill, which represents the excess of acquisition costs over the fair value of the net assets acquired, was $695.1 million at December 31, 1997 and is being amortized on a straight-line basis over 30 years. The amortization of identifiable intangible assets and goodwill directly associated with the Nellcor acquisition was $15.0 million and $20.7 million for the quarter and six-month period ended December 31, 1997. Since the results of Nellcor have only been included in the Company's consolidated results since September, the year-to-date amortization represents only four months of activity. The Company has also recorded a deferred tax liability of approximately $224.6 million, representing the tax effect of timing differences recorded as part of the acquisition. Immediately after the acquisition was consummated, management of the combined Company began to formulate an integration plan to combine Mallinckrodt and Nellcor into one successful company. Eleven transition teams comprised of employees of Mallinckrodt and Nellcor were established in the second quarter to focus on business strategy, revenue enhancement, global development, sales force integration, product development, operations and administrative consolidation. All segments of the employee work force could be impacted by these efforts. The transition teams are expected to complete their work during fiscal 1998. Since both companies (Mallinckrodt and Nellcor) have global healthcare operations, senior management, through the transition teams, is assessing which activities should be consolidated, including customer service, logistics and sales. In addition, from a physical and legal perspective, assessment of the need for existing regional sales offices, country operations and headquarters are being evaluated. Upon the approval of exit plans, the resulting costs, which will include involuntary severance of Nellcor employees as a result of work force reduction, relocation of Nellcor employees, and the elimination of contractual obligations of Nellcor which will have no future economic benefit when the plan is complete, will be recognized as a liability assumed as of the acquisition date. The contractual obligations include facility leases and consulting arrangements which are no longer required for software implementation and other projects which may be stopped. Termination and relocation arrangements will be (and, in some cases, have been) communicated in sufficient detail for the affected Nellcor employee groups to determine the types and amounts of benefits they will receive if terminated or relocated. Nellcor corporate staff functions, which were performed at the Nellcor headquarters located in Pleasanton, California, will now be performed at the Mallinckrodt headquarters in St. Louis, Missouri. The Nellcor corporate staff employees in legal, treasury, human resources, corporate accounting, financial services, communications and investor relations have been notified. Integrating these two large international organizations is a complex process. The most complex undertaking for the transition teams is the determination of whether certain functions should be consolidated and where they should be located. The breadth of international operations creates logistic, legal and tax structural issues which must be assessed to derive the greatest value for the Company going forward. Decisions that result from the transition team recommendations will impact the valuation of assets acquired as determinations are made to end product lives and shut down or consolidate operations. Significant actions needed to complete the plan include determination of the legal ramifications of closing operations in certain countries, assessment of the tax implications of various alternative strategies, and analysis of the costs associated with the various activities to be exited and employees to be terminated. The evaluations of alternative Nellcor integration actions are still in preliminary stages of development. At December 31, 1997, the costs of exit activities which will be approved are not estimable but are expected to be significant. As of December 31, 1997, $26.9 million has been accrued and included in the acquisition cost allocation, and $1.6 million has been paid and charged against this accrual. The primary component of this balance relates to severance agreements in place prior to the acquisition date which provide certain employees with specified benefits in the event that their employment with Nellcor is terminated or there is an adverse change, based upon the employee's judgment, in the employee's status, title, position or responsibilities. As additional accruals are recorded for Nellcor integration actions, there will be a corresponding increase in goodwill. Allocations of the purchase price have been determined based upon preliminary estimates of value, and therefore, are subject to change. As refinements are made, goodwill will be adjusted accordingly. The most significant refinement of the purchase price allocation will result from the integration plan being formulated by management. Based upon information currently available regarding actions under consideration, the differences between the preliminary and final allocations are not expected to have a material impact on either the results of operations or financial position. The integration plan will also identify exit activities related to the operations of Mallinckrodt prior to the acquisition of Nellcor. Costs of these exit activities will include severance of Mallinckrodt employees. A liability for these costs will be recognized at the time management commits to the plan and communicates termination arrangements in sufficient detail for the affected Mallinckrodt employee groups to determine the types and amounts of benefits they will receive if terminated. In addition, integration costs of the combined Company, such as transition bonuses and consulting costs, will generally be expensed as incurred. At December 31, 1997, costs of exit activities related to the operations of Mallinckrodt prior to the acquisition of Nellcor plus integration costs of the combined Company, which will be a nonrecurring charge to fiscal 1998 operating results, are expected to be material but are not estimable. During the first half of fiscal 1998, the actions taken have resulted in pre-tax charges to operations of $6.8 million, consisting of $3.8 million for transition bonuses, $1.5 million for involuntary severance, and $1.5 million for other integration costs. As of December 31, 1997, payments made relating to the above totaled $0.1 million for involuntary severance and $1.5 million for other integration costs. The following unaudited pro forma financial information presents the combined results of operations of Mallinckrodt and Nellcor as if the acquisition had occurred as of the beginning of fiscal 1997, after giving effect to certain adjustments, including amortization of goodwill, additional depreciation expense, increased interest payments on debt related to the acquisition, reduced interest income from cash utilized to complete the acquisition and the related tax effects. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had Mallinckrodt and Nellcor operated as a combined entity during such periods. Six Months Ended December 31, -------------------- (In millions, except per share amounts) 1997 1996 -------- -------- Net sales $1,255.4 $1,252.3 Net income $ 36.2 $ 35.9 Net income per share Basic $ .50 $ .48 Diluted $ .49 $ .47 The pro forma financial information presented above does not include noncash charges for purchased research and development and the sale of inventory stepped up to fair value at date of acquisition. These charges are included in the actual results of operations for the quarter and six months ended December 31, 1997. See Note 2 for additional information. The Company utilized cash and cash equivalents and borrowed funds to complete the acquisition of Nellcor. The borrowing was obtained through a $2.0 billion credit facility established in July 1997, and amended and restated in September 1997. The credit facility consists of a $400 million term loan and a $1.6 billion five-year revolving credit facility. Under this agreement, interest rates on borrowing are based on the London Interbank Offered Rate (LIBOR) plus a margin dependent on the Company's senior debt rating. 2. Included in operating earnings for the six months ended December 31, 1997 are one-time noncash acquisition-related costs of $398.3 million for the write-off of Nellcor purchased research and development. Of this amount, $396.3 million relates to the healthcare segment and $2.0 million relates to the specialty chemicals segment. The purchased research and development represents the value of numerous new medical devices and other products/technologies in all major product lines (e.g., sensors, monitors and ventilators) that are in various stages of development and have significant technological hurdles remaining as of the transaction date. Medical devices are subjected to significant clinical analysis and screening to validate their safety and efficacy as well as determine their commercial viability. Accordingly, medical devices are considered technologically feasible upon FDA (or international regulatory body) market approval. The steps required to introduce these products include both research and development and clinical and regulatory costs and efforts to be expended over the next one to four years. Clinical and regulatory costs and efforts relate primarily to the costs and efforts associated with receiving FDA approval (and/or international regulatory body approval, where applicable), specifically costs and efforts incurred for clinical trials and preparation of FDA submission and interaction with the FDA (and international regulatory bodies, where applicable). None of these medical devices or products had received FDA (or international regulatory body) market approval as of the acquisition date, and therefore all were identified as in-process research and development that had not reached technological feasibility. No alternative future uses were identified prior to reaching technological feasibility because of the uniqueness of the projects. Additionally, no identifiable alternate markets were established for projects that were in such early stages of development. The same methodology (income approach) was utilized to evaluate purchased research and development as was utilized to evaluate the other Nellcor identifiable intangible assets acquired, except the cost approach was utilized to evaluate the assembled work force. The sale of Nellcor inventories, which were stepped up to fair value in connection with allocation of purchase price, decreased earnings by $56.6 million, $35.0 million net of taxes, and $75.4 million, $46.7 million net of taxes, for the quarter and six months ended December 31, 1997, respectively. Pre-tax charges to the healthcare segment were $55.8 million and $74.4 million for the quarter and six months ended December 31, 1997, respectively. Specialty chemicals charges were $.8 million and $1.0 million for the respective periods. In addition, results of operations for the second quarter included Nellcor integration-related charges of $6.8 million, $4.3 million net of taxes, related to the healthcare segment. 3. Included in the results of operations for the quarter and six months ended December 31, 1997 is a gain of $15.9 million, $10.2 million after taxes, resulting from the sale of specialty chemical product lines. 4. Included in earnings from continuing operations for the six months ended December 31, 1996 is a one-time research and development expense of $6.0 million, $3.8 million after taxes, resulting from a strategic alliance to develop new magnetic resonance imaging technology. 5. Included in discontinued operations are the results of the animal health segment which was divested June 30, 1997 and the results of Fries & Fries, Inc., a wholly owned subsidiary which owned the Company's 50 percent interest in Tastemaker, the flavors joint venture with Hercules Incorporated, which was divested March 31, 1997. 6. On October 6, 1994, Augustine Medical, Inc. (Augustine) commenced a patent infringement litigation against Mallinckrodt Inc. and its wholly owned subsidiary, Mallinckrodt Medical, Inc. (collectively, the Company) in the U.S. District Court for the District of Minnesota. Specifically, Augustine alleged that the Company's sale of all five (5) models of its convective warming blankets infringes certain claims of one or more of its patents. The Company filed counterclaims against Augustine in connection with the above actions alleging unfair competition, antitrust violations, and invalidity of the asserted patents, among other things. The liability phase of the case was tried to a jury in August 1997 and the verdict was that the Company's blankets infringe certain Augustine patents under the doctrine of equivalents, but do not literally infringe the patents. There was also a finding of no willful infringement. On September 22, 1997, the jury awarded damages in the amount of $16.8 million for the period ended September 30, 1997 and the judge put in place an injunction which stopped the Company from manufacturing and selling blankets in the United States. The Company appealed the jury verdicts of liability and damages to the Court of Appeals for the Federal Circuit (a special court for patent appeals that does not involve a jury). The Court of Appeals has stayed the injunction pending the outcome of the Company's appeal, and the Company continues to sell and manufacture blankets in the United States. With the advice of outside counsel, the Company believes there was insufficient evidence of equivalents presented and, consequently, for this and other reasons the verdicts were in error. The Company is working vigorously in the Appeals Court to overturn the verdicts and believes that it has strong arguments that its blankets do not infringe Augustine's patents. Based on all the facts available to management, the Company believes that it is probable that the jury verdict and the trial court injunction will be overturned on appeal. If damages were assessed in the same manner as determined by the jury for sales subsequent to September 30, 1997 plus interest on the estimated total, payment would approximate $18.6 million at December 31, 1997. The Company has not recorded an accrual for payment of the damages, because an unfavorable outcome in this litigation is, in management's opinion, reasonably possible but not probable. See Part II, Item 1 "Legal Proceedings" for additional information about this claim by Augustine against the Company. 7. Provisions for income taxes were based on estimated annual effective tax rates for each fiscal year. Excluding the one- time $398.3 million write-off of purchased research and development which has no tax benefit, discussed in Notes 1 and 2, the Company's effective tax rate for the first six months was 41.3 percent, compared to last year's 36.7 percent. 8. 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, the Company is in varying stages of investigation or remediation of alleged or acknowledged contamination at currently or previously owned or operated sites and at off-site locations where its waste was taken for treatment or disposal. Once the Company becomes aware of its potential environmental liability at a particular site, the measurement of the related environmental liabilities to be recorded is based on an evaluation of currently available facts such as the extent and types of hazardous substances at a site, the range of technologies that can be used for remediation, evolving standards of what constitutes acceptable remediation, presently enacted laws and regulations, engineers and environmental specialists' estimates of the range of expected clean-up costs that may be incurred, prior experience in remediation of contaminated sites, and the progress to date on remediation in process. While the current law potentially imposes joint and several liability upon each party at a Superfund site, the Company's contribution to clean up these sites is expected to be limited, given the number of other companies which have also been named as potentially responsible parties and the volumes of waste involved. A reasonable basis for apportionment of costs among responsible parties is determined and the likelihood of contribution by other parties is established. If it is considered probable that the Company will only have to pay its expected share of the total clean-up, the recorded liability reflects the Company's expected share. In determining the probability of contribution, the Company considers the solvency of the parties, whether responsibility is disputed, existence of an allocation agreement, status of current action, and experience to date regarding similar matters. Current information and developments are regularly assessed by the Company, and accruals are adjusted on a quarterly basis, as required, to provide for the expected impact of these environmental matters. The Company has established accruals for matters that are in its view probable and estimable. Based upon information currently available, management believes that existing accruals are sufficient and that it is not reasonably possible at this time that any additional liabilities will result from the resolution of these matters that would have a material adverse effect on the Company's consolidated financial position and results of operations. 9. In 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share. Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented and, where necessary, restated to conform to the Statement 128 requirements. 10. The following table sets forth the computation of basic and diluted earnings (loss) from continuing operations per common share (in millions, except shares and per share amounts).
Quarter Ended Six Months Ended December 31, December 31 -------------------- -------------------- 1997 1996 1997 1996 -------- --------- --------- --------- Numerator: Earnings (loss) from continuing operations $ (4.7) $ 39.1 $ (386.1) $ 75.7 Preferred stock dividends (.1) (.1) (.2) (.2) -------- --------- --------- --------- Numerator for basic earnings (loss)per share and earnings (loss) per share assuming dilution--income (loss) available to common shareholders $ (4.8) $ 39.0 $ (386.3) $ 75.5 ======== ========= ========= ========= Denominator: Denominator for basic earnings per share-- weighted-average shares 72,957,721 74,114,694 72,716,625 74,173,030 Potential dilutive common shares-- employee stock options 1,679,359 1,484,960 ---------- ---------- ---------- ---------- Denominator for diluted earnings (loss) per share--adjusted weighted-average shares and assumed conversions 72,957,721 75,794,053 72,716,625 75,657,990 ========== ========== ========== ========== Basic earnings (loss) from continuing operations per common share $ (.07) $ .53 $ (5.31) $ 1.02 ======= ===== ======== ====== Earnings (loss) from continuing operations per common share-- assuming dilution $ (.07) $ .51 $ (5.31) $ 1.00 ======= ===== ======== ======
The diluted share bases for the quarter and six months ended December 31, 1997 exclude incremental shares related to employee stock options of 770,593 and 729,735, respectively, for each period. These shares are excluded due to their antidilutive effect as a result of the Company's loss from continuing operations during these periods. 11. The components of inventory included the following as of December 31, 1997: (In millions) Raw materials and supplies $199.7 Work in process 63.3 Finished goods 245.1 ------ $508.1 ====== 12. As of December 31, 1997, 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, 1997 1997 -------------- -------------- Common stock 14,125,225 14,843,847 4 Percent cumulative preferred stock 1,670 1,670 13. At December 31, 1997, common shares reserved were: Exercise of common stock purchase rights 82,045,737 Exercise of stock options and granting of stock awards 9,054,673 -------------- Total 91,100,410 ============== 14. Supplemental cash flow information for the six months ended December 31 included: (In millions) 1997 1996 ------- ------- Interest paid $ 39.2 $ 38.0 Income taxes paid $ 57.8 $ 34.8 Noncash investing and financing activities: Assumption of liabilities related to an acquisition $458.1 $ 4.7 Issuance of stock related to an acquisition $ 22.0 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. [1] Results of Operations General - - ------- The Company recorded a loss from continuing operations and a net loss of $4.7 million, or 7 cents loss per share on a basic and diluted basis for the quarter ended December 31, 1997. The loss includes certain charges related to the acquisition of Nellcor and gains associated with the sale of two specialty chemical product lines. The acquisition-related charges include a noncash cost of goods sold charge of $56.6 million, $35.0 million net of taxes, related to the sale of inventories stepped up to fair value and integration charges of $6.8 million, $4.3 million net of taxes. The divestiture of the specialty chemical product lines resulted in a gain of $15.9 million, $10.2 million net of taxes. Excluding the acquisition- and divestiture-related items, the Company had earnings from continuing operations of $24.4 million, or 33 cents per share on a basic and diluted basis for the second quarter of fiscal 1998. Earnings from continuing operations for the same quarter last year were $39.1 million, or 53 cents per share on a basic earnings per share basis, 51 cents per share on a diluted basis. Net earnings for the second quarter last year were $43.5 million or 59 cents per share on a basic earnings per share basis, 57 cents per share on a diluted basis, which included income of $4.4 million from discontinued operations. Net sales for the quarter rose 45 percent to $656.2 million, compared to $453.1 million a year earlier. The current quarter includes the results of Nellcor, which was acquired in August 1997. Excluding the sales of Nellcor, the Company's net sales were 2 percent below the corresponding period of last year. For the six-month period ended December 31, 1997, the Company recorded a loss from continuing operations and a net loss of $386.1 million, or $5.31 loss per share on a basic and diluted basis. This loss included certain charges related to the Nellcor acquisition and a gain associated with the second quarter divestiture of two specialty chemical product lines. The acquisition- - - -------------------------------------- [1] "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical information, the matters discussed in this report to stockholders are forward- looking statements that involve risks and uncertainties, and actual results could differ materially from those discussed. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions; the impact of competitive products and continued pressure on prices realized by the Company for its products; constraints on supplies of raw materials used in manufacturing certain of the Company's products; capacity constraints limiting the production of certain products; difficulties or delays in the development, production, testing, and marketing of products; difficulties or delays in receiving required governmental or regulatory approvals; market acceptance issues, including the failure of products to generate anticipated sales levels; difficulties in rationalizing acquired businesses and in realizing related cost savings and other benefits; the effects of and changes in trade, monetary, and fiscal policies, laws, and regulations; foreign exchange rates and fluctuations in those rates; the costs and effects of legal and administrative proceedings, including environmental proceedings and patent disputes involving the Company; and the risk factors reported from time to time in the Company's SEC reports. related charges are a one-time $398.3 million write-off of purchased research and development, which had no offsetting tax benefits, a cost of goods sold charge of $75.4 million, $46.7 million net of taxes, related to the sale of inventories stepped up to fair value, and expenses of $6.8 million, $4.3 million net of taxes, associated with the integration of Nellcor into the Company. Excluding the acquisition- and divestiture-related items, the Company had earnings from continuing operations for the six-month period of $53.0 million, or 73 cents per share on a basic earnings per share basis, 72 cents per share on a diluted basis. Earnings from continuing operations for the same period last year were $75.7 million, or $1.02 per share on a basic earnings per share basis, $1.00 per share on a diluted basis. Net earnings for the six-month period last year were $78.9 million or $1.06 per share on a basic earnings per share basis, $1.04 per share on a diluted basis, which included income of $3.2 million from discontinued operations. Net sales for the first half rose 29 percent to $1.15 billion compared to $895.1 million a year earlier. The current year sales amount included the sales of Nellcor subsequent to acquisition in August 1997. Excluding the sales of Nellcor, the Company's net sales were 3 percent below the corresponding six-month period of last year. A comparison of sales and operating earnings follows:
(In millions) Quarter Ended Six Months Ended December 31, December 31, ------------------- -------------------- 1997 1996 1997 1996 -------- -------- --------- -------- Sales - - ----- Healthcare $ 565.0 $ 372.4 $ 976.1 $ 734.1 Specialty chemicals 91.4 80.6 178.4 161.1 Intersegment sales (.2) .1 (.2) (.1) -------- -------- --------- -------- $ 656.2 $ 453.1 $1,154.3 $ 895.1 ======== ======== ========= ======== Operating earnings (loss) - - ------------------------- Healthcare $ 2.1 $ 68.4 $ (359.7) $ 135.8 Specialty chemicals 25.7 6.0 30.7 11.5 Corporate (7.1) (7.3) (12.6) (13.9) -------- -------- --------- -------- $ 20.7 $ 67.1 $ (341.6) $ 133.4 ======== ======== ========= ======== Business Segments - - ----------------- Healthcare Quarter Ended Six Months Ended Net Sales December 31, December 31, (In millions) ------------------- ------------------- 1997 1996 1997 1996 -------- -------- -------- -------- Respiratory care $ 275.8 $ 79.5 $ 417.6 $ 156.8 Imaging agents 189.1 201.2 366.4 399.8 Pharmaceutical specialties 100.1 91.7 192.1 177.5 -------- -------- -------- -------- $ 565.0 $ 372.4 $ 976.1 $ 734.1 ======== ======== ======== ========
Healthcare reported operating earnings for the quarter of $2.1 million, including the respiratory care product results of Nellcor which was acquired in August 1997. The second quarter results of operations include a $55.8 million fair value step-up charge related to the sale of inventories and $6.8 million in charges for integration activities involving Nellcor. Excluding the impact of the Nellcor acquisition- and integration-related charges, healthcare operating earnings would have been $64.7 million, which is 5 percent below the $68.4 million reported for the same period last fiscal year. Healthcare reported an operating loss for the six-month period of $359.7 million. These results of operations include a $396.3 million write-off of purchased research and development, a $74.4 million fair value step-up charge related to the sale of Nellcor inventories acquired and $6.8 million in charges for integration activities involving Nellcor. Excluding the impact of these charges, healthcare operating earnings would have been $117.8 million, which is 13 percent below the $135.8 million reported by this business segment for the same period in fiscal 1997. The earnings declines for the quarter and six-month periods are primarily attributable to lower selling prices, especially involving imaging agents, which are only partially offset by volume growth. Global efforts toward healthcare cost containment continue to exert pressure on product pricing. The demand for price discounts from customer buying groups has adversely impacted earnings. This industry trend is expected to continue. In response to these market changes, the Company has entered into a seven-year contract with Premier, Inc. (Premier), the largest healthcare purchasing group in the U.S., to supply x-ray contrast media, tracheostomy tubes, temperature monitoring systems, and radiopharmaceuticals and related products. Effective July 1, 1997, Premier named Mallinckrodt a corporate partner, and Mallinckrodt's products will be used preferentially by Premier's 1,650 member hospitals. Net sales of the healthcare segment in the second quarter were $565.0 million, an increase of 52 percent over the $372.4 million reported for the same period in fiscal 1997. Excluding Nellcor, healthcare sales were $366.4 million or 2 percent below the same quarter last year. For the first half of the year, net sales of the healthcare segment, which includes four months of Nellcor sales, were $976.1 million or 33 percent above the prior year period. Excluding Nellcor, healthcare sales were $710.9 million or 3 percent below prior year. Respiratory care includes critical care products and Nellcor sales. Excluding Nellcor sales, this business had sales declines for the current quarter and the first half of the year of $2.4 million and $4.4 million, respectively, when compared to the corresponding periods of the prior year. Second quarter sales volumes of respiratory therapy and anesthesiology products increased $7 million or 10 percent, offset by the strong U.S. dollar ($5 million) and lower selling prices of certain respiratory therapy products ($5 million). The comparison of the first six months of the current year with the corresponding prior year period shows similar results with a $16 million sales volume increase of respiratory therapy and anesthesiology products, offset by the continuing negative impact of the strong U.S. dollar ($10 million) and lower selling prices of respiratory products ($5 million). The first half sales growth over prior year was also negatively impacted ($5.6 million) by the divestiture of the blood gas and electrolyte products business in September 1996. Imaging agent sales declined $12.1 million and $33.4 million for the quarter and first half of the year, respectively, when compared to the same periods last year. This sales decline is attributable to continued erosion in selling prices of all imaging agents, in spite of volume increases in all major product lines. For the second quarter, sales volume of iodinated contrast media, the most significant product line of the imaging agent business, increased by $14 million, but total sales for these products were down $14 million as a result of continued price erosion ($24 million) and the negative impact of the strong U.S. dollar ($4 million). For the first six months, iodinated contrast media sales volume increased by $27 million but total sales of these products were down $38 million as a result of price erosion ($58 million) and the negative impact of the strong U.S. dollar ($7 million). The price erosion is anticipated to continue but at a moderating rate through the remainder of the year. The seven-year agreement with Premier aligns the Company with the largest healthcare purchasing group in the U.S., representing approximately thirty percent of all x-ray contrast media purchased. The Premier agreement is believed to be the largest contract ever written for contrast media products. Pharmaceutical specialty sales increased by $8.4 million and $14.6 million over the corresponding three-month and six-month periods of the prior year, respectively. The sales increase for the second quarter, which was primarily due to volume increases, consisted of $5.7 million for dosage narcotics, including the acquisition of D.M. Graham Laboratories, Inc. in November 1996, and $2.0 million for acetaminophen (APAP). Sales volume growth also drove the dosage narcotic and acetaminophen first-half sales increases of $10.1 million and $5.1 million, respectively. Specialty Chemicals Quarter Ended Six Months Ended Net sales December 31, December 31, ------------------ ------------------ (In millions) 1997 1996 1997 1996 ------ ------ ------ ------ $ 91.4 $ 80.6 $178.4 $161.1 ====== ====== ====== ====== Specialty chemicals segment operating earnings for the quarter were $25.7 million. The results of operations include the activities of the Nellcor Aero Systems business and its acquisition-related charges and a $15.9 million gain on product line divestitures. Excluding Aero Systems activity and the nonrecurring gain related to divestitures, operating earnings for the three months were $8.6 million, 43 percent above the prior year amount of $6.0 million. The earnings improvement is attributable to higher catalyst sales volumes and lower expenses. Operating earnings for the first half of the year were $30.7 million. Excluding Aero Systems results and divestiture gains, the six-month operating earnings were $15.0 million or 30 percent greater than results for the same period of fiscal 1997. The improvement is the result of a year-to-date decline in expenses. Sales for the six-month period were $178.4 million or $17.3 million above the prior year. Excluding Aero Systems, which was part of the Nellcor acquisition in August 1997, sales for the six-month period were $161.7 million or flat with the prior year. For the second quarter, sales were $91.4 million or $10.8 million above the same period last year. Excluding the impact of Aero Systems, sales for the three months were $78.9 million or $1.7 million below the prior year. The sales decline in the second quarter can be attributed to plastic additives, which had sold two product lines during the period and therefore generated only $5.6 million in sales during the current quarter compared with $14.4 million in the corresponding period of the prior year, partially offset by catalyst volume increases of $6 million. Corporate Matters - - ----------------- Corporate expense is down 3 percent and 9 percent for the second quarter and six-month periods as compared to the respective periods of the prior year. Excluding the one-time noncash write-off of purchased research and development which had no tax benefit, the Company's effective tax rate for the six months was 41.3 percent, compared to last year's 36.7 percent. This rate increase is primarily due to nondeductible goodwill amortization directly associated with the acquisition of Nellcor on August 28, 1997. Financial Condition The Company's financial resources are expected to continue to be adequate to support existing businesses. Since June 30, 1997, cash and cash equivalents decreased $697.8 million, primarily as a result of the acquisition of the outstanding common shares of Nellcor in August 1997. Operations provided $8.4 million of cash, while acquisition and capital spending totaled $1,856.4 million. The Company received $29.5 million in proceeds from asset disposals. The Company's current ratio at December 31, 1997 was .7:1. Debt as a percentage of invested capital was 66.8 percent. The current ratio has declined to its current level as a result of short-term borrowings during the first quarter of fiscal 1998 to acquire the outstanding shares of Nellcor. The Company is in the process of restructuring its debt in order to reduce short-term borrowings. The first step in this effort involved the $200 million borrowing completed in January 1998, as discussed below, and another issuance of long-term debt is planned for later in this fiscal year. In addition, the Company recently announced plans to divest its specialty chemicals segment which, when completed, will provide additional cash which the Company anticipates will be used to further reduce short-term borrowings. On August 28, 1997, the Company acquired Nellcor through an agreement to purchase for cash all the outstanding shares of common stock of Nellcor for $28.50 per share. The aggregate purchase price of the Nellcor acquisition was approximately $1.9 billion. The acquisition was completed utilizing cash and cash equivalents and borrowed funds. The borrowing of approximately $1.1 billion, reported as a current liability, was obtained through a $2.0 billion credit facility established in July 1997, and amended and restated in September 1997. The credit facility consists of a $400 million term loan and a $1.6 billion five-year revolving credit facility. Under this agreement, interest rates on borrowings are based upon the London Interbank Offered Rate, plus a margin dependent on the Company's senior debt rating. In January 1998, the Company issued $200 million aggregate principal amount of notes maturing January 14, 2010. The notes bear interest at 5.99 percent until January 14, 2000, at which time the interest rate will be reset at a fixed annual rate of 5.64 percent plus the Company's then incremental borrowing rate above the rate quoted on U.S. Treasury ten-year notes. The notes are redeemable at the election of the holder, in whole but not in part, at 100 percent of the principal amount on January 14, 2000. During the second quarter, the Company entered into two contracts of $100 million each to hedge against a potential rise in interest rates on its anticipated financing activities. One hedge was terminated in January 1998 effective with the issuance of the notes maturing in 2010 discussed above. The second contract will be closed concurrent with the issuance of additional debt later this year. Any gain or loss realized on the termination of the contracts will be deferred and recognized as an adjustment to interest expense over the term of the anticipated underlying debt. The market value of the contracts at December 31, 1997 was not material to the Company's financial position. In December 1997, the Company filed a $500 million shelf debt registration statement. The unused portions of shelf registrations filed in 1995 and 1992 have been canceled. At December 31, 1997, the Company has a $1.0 billion private- placement commercial paper program. The program is backed by the $1.6 billion five-year U.S. revolving credit facility available until September 2002. At December 31, 1997, there was $732.3 million commercial paper borrowings outstanding. There was no borrowing outstanding under the revolving credit facility at December 31, 1997. Non-U.S. lines of credit totaling $138.3 million were also available and borrowings under these lines amounted to $17.2 million at December 31, 1997. The non-U.S. lines are cancelable at any time. The Company's Board of Directors previously authorized repurchase of 47 million shares of common stock and additional repurchases not to exceed cash outlays of $250 million. Share repurchases have totaled 36.8 million shares, including 240 thousand shares during the six months ended December 31, 1997. Estimated capital spending for the year ending June 30, 1998 is approximately $190 million. Impact of Year 2000 - - ------------------- The Year 2000 issue is the result of computer programs that were written using two digits rather than four to define the applicable year. Any such computer programs that have time-sensitive software may recognize a year containing "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations including, among other things, a temporary inability to process transactions or engage in similar normal business activities. The Company has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter. Both internal and external resources will be used to reprogram or replace non-compliant software, and to appropriately test Year 2000 modifications. Such modifications are being funded through operating cash flows and are estimated to be immaterial to current or future results of operations and financial position. The project to address Year 2000 modifications has been underway since February 1997 and is estimated to be substantially completed no later than January 1999, which is prior to any anticipated significant impact on Mallinckrodt's operations. The Company believes that with modifications to existing software and conversions to new software, the Year 2000 issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made or are not completed timely, the Year 2000 issue could have a material impact on the operations of the Company. The cost of the project and the date on which the Company believes it will substantially complete Year 2000 modifications are based on management's best estimates. Such estimates were derived using software surveys and programs to evaluate calendar date exposures and numerous assumptions of future events, including the continued availability of certain resources and other factors. Because none of these estimates can be guaranteed, actual results could differ materially from those anticipated. Specific factors that might cause such differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, and similar uncertainties. *************** 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 thereunto duly authorized. Mallinckrodt Inc. - - --------------------------- Registrant By: MICHAEL A. ROCCA By: DOUGLAS A. MCKINNEY ---------------------------- ------------------------ Michael A. Rocca Douglas A. McKinney Senior Vice President and Vice President and Chief Financial Officer Controller Date: June 12, 1998 - -----END PRIVACY-ENHANCED MESSAGE----- -----END PRIVACY-ENHANCED MESSAGE-----