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, 1996
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.)
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.
73,965,042 shares excluding 13,151,247 treasury shares as of December
31, 1996.
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 1996
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 and 4 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)
<CAPTIONS>
Quarter Ended Six Months Ended
December 31, December 31,
---------------- -------------------
1996 1995 1996 1995
------- ------- -------- ---------
Net sales $ 571.1 $ 528.2 $1,112.5 $1,020.3
Operating costs and expenses:
Cost of goods sold 307.9 289.1 604.2 557.4
Selling, administrative
and general expenses 151.4 141.0 297.8 279.9
Research and development
expenses 34.2 31.5 70.2 55.6
Other operating (income)
expense, net 1.0 (4.2) (2.5) (7.4)
-------- ------- -------- --------
Total operating costs and
expenses 494.5 457.4 969.7 885.5
-------- ------- -------- --------
Operating earnings 76.6 70.8 142.8 134.8
Interest income and other
nonoperating income
(expense), net 6.4 (.5) 10.9 (.9)
Interest expense (11.8) (14.7) (25.7) (28.6)
-------- ------- -------- -------
Earnings from continuing
operations before income
taxes 71.2 55.6 128.0 105.3
Income tax provision 26.0 20.9 47.0 39.5
-------- ------- -------- -------
Earnings from continuing
operations 45.2 34.7 81.0 65.8
Discontinued operations ( 1.7) 22.6 (2.1) 30.7
-------- ------- -------- -------
Net earnings 43.5 57.3 78.9 96.5
Preferred stock dividends (.1) (.1) (.2) (.2)
-------- ------- -------- -------
Available for common
shareholders $ 43.4 $ 57.2 $ 78.7 $ 96.3
======== ======= ======== =======
Earnings per common share:
Continuing operations $.59 $.45 $1.07 $.85
Discontinued operations (.02) .30 (.03) .40
-------- ------- -------- -------
Net earnings $.57 $.75 $1.04 $1.25
======== ======= ======== =======
(See Notes to Condensed Consolidated Financial Statements on pages 5 and 6.)
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except share and per share amounts)
December 31, June 30,
1996 1996
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 551.0 $ 546.2
Trade receivables, less allowances
of $14.8 at December 31 and $12.8
at June 30 453.9 453.9
Inventories 473.3 470.2
Deferred income taxes 42.3 42.9
Other current assets 64.5 57.7
------------ ------------
Total current assets 1,585.0 1,570.9
Investments and long-term receivables,
less allowances of $8.2 at December 31
and $8.1 at June 30 41.5 39.3
Property, plant and equipment, net 1,042.5 1,036.4
Intangible assets 651.8 647.5
Net noncurrent assets of discontinued
operations 115.2 108.5
Deferred income taxes 1.4 1.1
------------ ------------
Total assets $3,437.4 $3,403.7
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $ 122.2 $ 112.2
Accounts payable 172.3 194.6
Accrued liabilities 310.1 312.3
Income taxes payable 49.8 38.5
Net current liabilities of discontinued
operations 551.3 550.9
Deferred income taxes 3.3 3.3
------------ ------------
Total current liabilities 1,209.0 1,211.8
Long-term debt, less current maturities 572.1 575.8
Deferred income taxes 95.8 97.9
Postretirement benefits 162.2 155.9
Other noncurrent liabilities and
deferred credits 117.1 130.1
------------ ------------
Total liabilities 2,156.2 2,171.5
------------ ------------
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 as of December 31 and June 30 87.1 87.1
Capital in excess of par value 298.4 283.5
Reinvested earnings 1,205.8 1,150.7
Foreign currency translation 1.0 (15.3)
Treasury stock, at cost (322.1) (284.8)
------------ ------------
Total shareholders' equity 1,281.2 1,232.2
------------ ------------
Total liabilities and shareholders'
equity $3,437.4 $3,403.7
============ ============
(See Notes to Condensed Consolidated Financial Statements on pages 5 and 6.)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTIONS>
Six Months Ended
December 31,
----------------
1996 1995
------- -------
Cash Flows - Operating Activities
Net earnings $ 78.9 $ 96.5
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 77.8 68.2
Postretirement benefits 6.3 6.0
Undistributed equity in earnings of joint
venture (9.6) (9.5)
Deferred income taxes (2.6) 5.1
Gains on disposals of assets (.7) (53.7)
------- -------
150.1 112.6
Changes in operating assets and liabilities:
Trade receivables (4.2) (36.7)
Inventories (2.3) (49.2)
Other current assets (5.7) 1.9
Accounts payable, accrued liabilities
and income taxes payable, net (19.2) 13.6
Net current liabilities of discontinued
operations .3 20.2
Other noncurrent liabilities and deferred
credits (14.3) 40.4
Other, net (3.5) (7.8)
------- -------
Net cash provided by operating activities 101.2 95.0
------- -------
Cash Flows - Investing Activities
Capital expenditures (56.4) (77.6)
Acquisition spending (13.2) (81.0)
Proceeds from asset disposals 35.2 118.8
Other, net 5.6 27.6
------- -------
Net cash used by investing activities (28.8) (12.2)
------- -------
Cash Flows - Financing Activities
Increase (decrease) in short-term debt 7.4 (56.4)
Proceeds from long-term debt 196.5
Payments on long-term debt (6.8) (103.3)
Issuance of Mallinckrodt common stock 21.6 9.3
Acquisition of treasury stock (66.0) (90.9)
Dividends paid (23.8) (22.6)
------- ------
Net cash used by financing activities (67.6) (67.4)
------- -------
Increase in cash and cash equivalents 4.8 15.4
Cash and cash equivalents at beginning of period 546.2 60.9
------- -------
Cash and cash equivalents at end of period $551.0 $ 76.3
======= =======
(See Notes to Condensed Consolidated Financial Statements on pages 5 and 6.)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In millions, except per share amounts)
<CAPTIONS>
1996 1995
-------- ---------
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 30 283.5 274.1
Issuance of stock related to an acquisition 10.0
Stock options exercised 4.9 3.0
-------- ----------
Balance at December 31 298.4 277.1
-------- ----------
Reinvested earnings:
Balance at June 30 1,150.7 984.5
Net earnings 78.9 96.5
Dividends:
4 Percent cumulative preferred
stock ($2.00 per share) (.2) (.2)
Common stock ($.32 per share in 1996
and $.295 per share in 1995) (23.6) (22.4)
-------- ---------
Balance at December 31 1,205.8 1,058.4
-------- ---------
Foreign currency translation:
Balance at June 30 (15.3) (9.3)
Translation adjustment 16.3 (10.9)
-------- ---------
Balance at December 31 1.0 (20.2)
-------- ---------
Treasury stock:
Balance at June 30 (284.8) (175.9)
Purchase of common stock (66.0) (90.9)
Stock options exercised 16.7 6.3
Issuance of stock related to an acquisition 12.0
-------- ---------
Balance at December 31 (322.1) (260.5)
-------- ---------
Total shareholders' equity $1,281.2 $1,152.9
======== =========
(See Notes to Condensed Consolidated Financial Statements on pages 5 and 6.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. On January 29, 1997, the Company's Board of Directors approved a
formal plan to divest Fries & Fries, Inc., a wholly owned
subsidiary which owns a fifty percent interest in Tastemaker,
which is the Company's flavors joint venture with Hercules
Incorporated. Accordingly, Fries & Fries, Inc.'s net after tax
losses of $1.1 million and $.8 million for the quarter and six
months ended December 31, 1996, respectively, and net after tax
earnings of $3.6 million and $8.2 million for the quarter and six
months ended December 31, 1995, respectively, have been
reclassified as discontinued operations. Fries & Fries, Inc.'s
$510 million of short-term debt which was outstanding as of
January 29, 1997, will be assumed as part of the divestiture.
Interest expense related to the debt recorded by Fries & Fries,
Inc. and to be assumed by the buyer is included in discontinued
operations and totals $4.7 million, net of tax and $9.5 million,
net of tax for the quarter and six months ended December 31,
1996, respectively. The Company anticipates realizing a
significant gain on this transaction, net of costs associated
with divestiture, but cannot yet quantify the amount.
2. 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 or
5 cents per share, resulting from a strategic alliance to develop
new magnetic resonance imaging technology.
3. 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 the acquisition of Syntro
Corporation. The charge was recorded as research and development
expenses.
4. Included in discontinued operations for the quarter and six
months ended December 31, 1995, are earnings, net of taxes, from
the divested feed ingredients business of $1.0 million and $5.5
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.
5. 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 36.7 percent,
compared to last year's 37.5 percent. This decrease reflects an
earnings mix toward lower statutory tax rate jurisdictions and
the utilization of certain foreign net operating losses.
6. 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
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, financial condition
or results of operations.
7. Earnings per common share were based on the weighted average
number of common and common equivalent shares outstanding
(75,642,495 and 77,161,246 for the six months ended December 31,
1996 and 1995, and 75,795,411 and 76,397,750 for the quarters
ended December 31, 1996 and 1995, respectively).
8. The components of inventory included the following as of December
31, 1996:
(In millions)
Raw materials and supplies $139.5
Work in process 98.0
Finished goods 235.8
------
$473.3
======
9. As of December 31, 1996, 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,
1996 1996
------------ ------------
Common stock 13,151,247 12,835,721
4 Percent cumulative preferred stock 1,670 1,670
10. At December 31, 1996, common shares reserved were:
Exercise of common stock purchase rights 83,154,258
Exercise of stock options and granting of stock awards 9,189,216
----------
Total 92,343,474
==========
11. Supplemental cash flow information for the six months ended
December 31 included:
(In millions)
1996 1995
------ ------
Interest paid $38.0 $21.4
Income taxes paid $34.8 $30.2
Non-cash investing and financing
activities:
Issuance of stock related to an
acquisition $22.0
Assumption of liabilities related to
acquisitions $4.7 $6.2
12. The Company has guaranteed repayment under a $600 million
revolving credit facility established in January 1997 for its
Tastemaker joint venture. Borrowings under the facility and the
Company's guarantee are secured by investments purchased with the
loan proceeds. At January 30, 1997, $500 million was outstanding
under the revolving credit facility. The guarantee will be
released concurrent with the divestiture of Tastemaker.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. (1)
Results of Operations
General
- -------
Earnings from continuing operations for the second quarter ended
December 31, 1996 were $45.2 million, or 59 cents per share. This
represents a 31 percent increase in per-share earnings from
continuing operations compared with $34.7 million, or 45 cents per
share, during the same period a year ago. Prior year results
included 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 the prior year charge, earnings per share
from continuing operations increased 23 percent. Net sales for the
quarter were up 8 percent to $571.1 million, compared to $528.2
__________________________________
[1] The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements, so long as those
statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors that
could cause actual results to differ materially from those discussed
in the forward-looking statements. Certain statements contained
herein are forward-looking, particularly the statements appearing
under Part I. Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Part II. Item 1,
"Legal Proceedings."
Factors that could cause actual results to differ materially from
those expressed or implied by the forward-looking statements include
but are not limited to the following: the effect of business and
economic conditions; constraints on supplies and/or changes in the
cost of raw materials used in the manufacturing of certain of the
Company's products; capacity 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; the effects of, and changes in, trade,
monetary and fiscal policies, laws and regulations; risks associated
with investments and operations in foreign jurisdictions, including
those related to foreign regulatory requirements, exchange rate
fluctuations, and local political, social, and economic factors;
changes in governmental laws and regulations affecting environmental
compliance, taxes, and other matters impacting the Company; the costs
and effects of legal and administrative proceedings, including the
environmental proceedings involving the Company; the ability of the
Company to develop and execute effective marketing and sales
strategies for its products; the potential erosion of prices for
certain of the Company's products as a result of increased
competition in its markets; and the risk factors reported from time
to time in the Company's SEC reports.
million a year earlier. Net earnings for the second quarter were
$43.5 million, or 57 cents per share, compared with $57.3 million, or
75 cents per share, during the same period a year ago. Results for
Fries & Fries, Inc., a wholly owned subsidiary of the Company, have
been accounted for as a discontinued operation and, accordingly,
prior year results have been restated. Fries & Fries, Inc. owns the
Company's fifty percent interest in the Tastemaker flavors joint
venture with Hercules Incorporated. Prior year net earnings also
included a $34.4 million discontinued operations after tax gain
resulting from the sale of the feed ingredients business in the
second quarter, partially offset by a second quarter $15.6 million
after tax adjustment of provisions for environmental costs related to
discontinued operations.
For the six months, earnings from continuing operations were $81.0
million, or $1.07 per share, compared to $65.8 million, or 85 cents
per share during the same period a year ago. Current year results
reflect a one-time research and development expense of $6.0 million,
$3.8 million after taxes, or 5 cents per share, resulting from a
strategic alliance to develop new magnetic resonance imaging
technology, while the prior year reflects the charge associated with
the Syntro Corporation acquisition discussed above. Net sales for
the first half were up 9 percent to $1.1 billion compared to $1.0
billion a year ago. Net earnings for the six months were $78.9
million or $1.04 per share, compared with $96.5 million or $1.25 per
share for the same prior year period.
A comparison of sales and operating earnings follows:
(In millions)
<CAPTIONS>
Quarter Ended Six Months Ended
December 31, December 31,
---------------- -------------------
1996 1995 1996 1995
------- ------- ------ ------
Sales
- -----
Human healthcare $ 372.4 $ 331.9 $ 734.1 $ 648.0
Specialty chemicals 80.6 80.3 161.1 155.4
Animal health 118.1 116.0 217.5 217.0
Intersegment sales (.2) (.1)
-------- -------- --------- ---------
$ 571.1 $ 528.2 $1,112.5 $1,020.3
======== ======== ========= =========
Operating Earnings
- ------------------
Human healthcare $ 68.4 $ 68.4 $ 135.8 $ 130.4
Specialty chemicals 6.0 5.5 11.5 10.1
Animal health 9.6 4.2 9.5 9.2
Corporate (7.4) (7.1) (14.0) (14.6)
Eliminations (.2) (.3)
-------- -------- --------- ---------
$ 76.6 $ 70.8 $ 142.8 $ 134.8
======== ======== ========= =========
Business Segments
- -----------------
Human Healthcare
Net Sales Quarter Ended Six Months Ended
(In millions) December 31, December 31,
---------------- -------------------
1996 1995 1996 1995
------- -------- --------- --------
Imaging agents $ 201.2 $ 166.4 $ 399.8 $ 327.6
Critical care products 79.5 79.2 156.8 156.1
Pharmaceutical specialties 91.7 86.3 177.5 164.3
------- -------- --------- --------
$ 372.4 $ 331.9 $ 734.1 $ 648.0
======= ======== ========= =========
Human healthcare's operating earnings for the current quarter were
equal to the prior year's second quarter at $68.4 million. Operating
earnings for the six months were $135.8 million, or 4 percent greater
than the corresponding prior year results. Excluding a first quarter
one-time research and development expense of $6.0 million incurred in
conjunction with a strategic alliance to develop new magnetic
resonance imaging technology, operating earnings for the six months
increased 9 percent over the corresponding prior year results. Net
sales increased 12 percent and 13 percent compared to the
corresponding prior year quarter and six months, respectively.
Imaging agent sales increased 21 percent and 22 percent above the
quarter and first half of the prior year, respectively. Iodinated
contrast media market share increases in the U.S. and the acquisition
of Liebel-Flarsheim in January 1996 were the major sales growth
contributors. The increased sales volume was partially offset by
lower contrast media selling prices.
Critical care products experienced increased demand for respiratory
therapy products and HemoCue blood hemoglobin and glucose analysis
systems in both the three month and six month periods of the current
year as compared with the corresponding periods in the prior year.
These sales gains were nearly offset by the lower revenue associated
with the blood gas and electrolyte business which was sold as of
September 30, 1996.
Sales of pharmaceutical specialties grew 6 percent and 8 percent
compared to the three month and six month periods of the prior year,
respectively. The sales growth, which occurred in the narcotics and
peptides product lines, was principally the result of volume
increases.
In November 1996, the Company acquired D.M. Graham Laboratories,
Inc., a contract manufacturer of dosage pharmaceuticals licensed to
produce a variety of medicinal narcotics. This acquisition is a key
step in the continuing growth of the Company's pharmaceutical
specialties business. In December 1996, the Company acquired
expanded sales and marketing rights for Molecular Biosystems, Inc.'s
FS069 (second-generation ultrasound imaging agent). As a result of
this and earlier agreements, Mallinckrodt has marketing rights for
Albunex and FS069 throughout the world except Japan, South Korea and
Taiwan.
Specialty Chemicals
Net Sales Quarter Ended Six Months Ended
(In millions) December 31, December 31,
---------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
$ 80.6 $ 80.3 $161.1 $155.4
====== ====== ====== ======
Specialty chemicals' operating earnings were $6.0 million and $11.5
million for the second quarter and six months ended December 31,
1996, respectively, representing increases of 9 percent and 14
percent over the same prior year periods. Compared with
corresponding prior year periods, sales were relatively flat for the
second quarter, but up 4 percent for the first six months on the
strength of volume growth of plastic additives.
Animal Health
Net Sales Quarter Ended Six Months Ended
(In millions) December 31, December 31,
---------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
$118.1 $116.0 $217.5 $217.0
====== ====== ====== ======
Animal health's operating earnings were $9.6 million and $9.5 million
for the second quarter and six months, respectively. These results
represent a 129 percent and 3 percent increase over the same prior
year periods. Sales revenue for the second quarter and first six
months, when compared to the corresponding periods of the prior year,
benefited from increases in Asia as a result of a new distribution
agreement entered into in January 1996, but were negatively impacted
by lower sales volume and higher discounts in North America. Second
quarter and first half operating earnings when compared to prior year
results benefited from improved manufacturing performance and a
one-time prior year pre-tax charge of $3.7 million for purchased
research and development related to the October 1995 acquisition of
Syntro Corporation, offset by higher operating expenses.
Corporate Matters
- -----------------
Corporate expense is up 4 percent for the second quarter, but down 4
percent for the first half of the year compared to the respective
prior year periods. The Company's effective tax rate for the six
months is 36.7 percent, compared to last year's 37.5 percent. This
rate decrease reflects an earnings mix toward lower statutory rate
jurisdictions and the utilization of certain foreign net 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, 1996, cash and cash equivalents increased $4.8
million. Operations provided $101.2 million of cash, while
acquisition and capital spending totaled $69.6 million. The Company
received $35.2 million in proceeds from asset disposals, primarily
from the blood gas and electrolyte business. The Company's current
ratio at December 31, 1996, was 1.3:1. Debt as a percentage of
invested capital was 35 percent.
The Company's Board of Directors previously authorized repurchase of
a total of 42 million shares of its common stock. Thirty-four and a
half million shares have been repurchased under this authorization,
1.5 million during the six months ended December 31, 1996.
In September 1995 and November 1995, the Company issued $100 million
of 6.75 percent notes due September 15, 2005, and $100 million of 6.5
percent notes due November 15, 2007, respectively, from the $250
million shelf registration statement filed in February of 1995. As
of December 31, 1996, $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 $550 million private-placement commercial paper
program. This program is backed by $550 million of U.S. lines of
credit, available until May 2001. At December 31, 1996, no amounts
were outstanding under the commercial paper program or the credit
agreement. In addition, Fries & Fries, Inc., a wholly-owned
subsidiary, has a $600 million committed line of credit available
until May 1997, which is guaranteed by the Company. Borrowings under
the credit agreement were $600 million at December 31, 1996.
Non-U.S. lines of credit totaling $199.4 million were also available
and borrowings under these lines amounted to $25.0 million at December
31, 1996. The non-U.S. lines are cancelable at any time.
Estimated capital spending for the year ending June 30, 1997, is
approximately $140 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 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 the Company's
business, financial condition or results of operations.
There have not been any material developments in the legal
proceedings previously reported in the Company's Form 10-K for its
fiscal year ended June 30, 1996, as amended by the Company's report
on Form 10-Q for its fiscal quarter ended September 30, 1996.
Item 2. Changes in Securities.
On November 20, 1996, the Company acquired all of the issued and
outstanding voting capital stock of D.M. Graham Laboratories, Inc.
("Graham Laboratories"). In exchange, the Company issued a total of
503,001 shares of its Common Stock, par value $1.00 per share, to the
seven then current stockholders of Graham Laboratories. The Company
issued its shares in reliance on the exemption from federal
securities registration set forth in Section 4(2) of the Securities
Act of 1933, as amended.
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,
1996, for information about the Annual Meeting of Shareholders on
October 16, 1996.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.25 Executive Incentive Compensation Agreement with Paul D.
Cottone dated as of October 24, 1996.*
10.26 Severance and Separation Agreement with Paul D. Cottone
dated as of October 24, 1996.*
11.1 Primary earnings per share computation for the six
months ended December 31, 1996 and 1995.
11.2 Fully diluted earnings per share computation for the
six months ended December 31, 1996 and 1995.
11.3 Primary earnings per share computation for the quarters
ended December 31, 1996 and 1995.
11.4 Fully diluted earnings per share computation for the
quarters ended December 31, 1996 and 1995.
27 Financial Data Schedule.
___________________
* Management contract or compensatory plan required to be filed
pursuant to Item 601 of Regulation S-K.
(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 16, 1996, under Item 5 regarding name
change from Mallinckrodt Group Inc. to Mallinckrodt Inc.
- Report dated October 17, 1996, under Item 5 regarding
increased quarterly dividend and the election of four
directors at the Company's Annual Shareholders Meeting.
- Report dated October 24, 1996, under Item 5 regarding
Molecular Biosystems, Inc. and Mallinckrodt Inc. joint
announcement to file for PMA for next generation
ultrasound imaging agent.
- Report dated December 9, 1996, under Item 5 regarding
approval to market GastroMARK in the U.S.
- Report dated December 16, 1996, under Item 5 regarding
expanded marketing rights for FS069, Molecular Biosystems,
Inc.'s second generation ultrasound imaging agent.
- Report dated February 6, 1997, under Item 5 regarding the
divestiture of Tastemaker, the Company's flavors joint
venture.
***************
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 Inc.
-------------------------
Registrant
By: MICHAEL A. ROCCA By: TERRY D. MEIER
------------------------- ---------------------
Michael A. Rocca Terry D. Meier
Senior Vice President and Vice President and
Chief Financial Officer Controller
Date: February 10, 1997