<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                            ___________________________

                                   FORM 10-K
[X]              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934

                       For the fiscal year ended June 30, 2000

                                          OR
[_]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from                    to

                             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                         (Zip Code)
             executive offices)
        Registrant's telephone number, including area code: 314-654-2000

                          ________________________________

          Securities registered pursuant to Section 12(b) of the Act:
                                                     Name of each exchange
                 Title of each class                   on which registered
                 -------------------                   -------------------
             4% Cumulative Preferred Stock,
             par value $100 per share                  New York Stock Exchange
          Common Stock, par value $1 per share         New York Stock Exchange
                                                       Chicago Stock Exchange
                                                       Pacific Stock Exchange

        Securities registered pursuant to Section 12(g) of the Act: None

                           ______________________________

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 ___
                                      ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K  X
          ---
                           _______________________________

Aggregate market value of the voting and non-voting common equity held by non-
affiliates of the registrant computed by reference to the July 31, 2000 shares
outstanding and closing price of the registrant's common stock: $3,124,969,671

Applicable Only To Corporate Registrants: Indicate the number of shares
outstanding of each of the registrant's classes of common stock: 68,305,348
shares as of July 31, 2000.

Documents Incorporated By Reference:  None
<PAGE>

2000 FORM 10-K CONTENTS

<TABLE>
<CAPTION>
Item                                                                                                 Page
----                                                                                                 ----
<S>                                                                                                  <C>
Part I:
        1.    Business.............................................................................     1
              Introduction.........................................................................     1
              General Factors Related to the Business..............................................     2
              International and Economic Risk Factors..............................................     2
              Operations...........................................................................     3
              Other Actions........................................................................    10
              Other Activities.....................................................................    11
        2.    Properties...........................................................................    13
        3.    Legal Proceedings....................................................................    13
        4.    Submission of Matters to a Vote of Security Holders..................................    19
              Executive Officers of the Registrant.................................................    19

Part II:
        5.    Market for Registrant's Common Equity and Related Stockholder Matters................    21
        6.    Selected Financial Data..............................................................    22
        7.    Management's Discussion and Analysis of Financial Condition and Results of Operations    23
        7A.   Quantitative and Qualitative Disclosures About Market Risk...........................    31
        8.    Financial Statements and Supplementary Data..........................................    32
        9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.    60

Part III:
       10.    Directors and Executive Officers of the Registrant...................................    60
       11.    Executive Compensation...............................................................    62
       12.    Security Ownership of Certain Beneficial Owners and Management.......................    69
       13.    Certain Relationships and Related Transactions.......................................    70

Part IV:
       14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....................    71

Signatures    .....................................................................................    76
</TABLE>
<PAGE>

PART I.

ITEM 1.  BUSINESS

INTRODUCTION

Company Profile
---------------

Mallinckrodt Inc. (Mallinckrodt or the Company) is a global company serving
selected healthcare markets with products used primarily for respiratory care,
diagnostic imaging and pain relief.

The Company was incorporated in New York in 1909 under the name International
Agricultural Corporation.  The corporate headquarters is located at 675
McDonnell Boulevard, St. Louis, Missouri 63134, and the telephone number is
(314) 654-2000.

Mallinckrodt and Tyco International Ltd. Agreement and Plan of Merger
---------------------------------------------------------------------

On June 28, 2000, Mallinckrodt Inc. and Tyco International Ltd. (Tyco) entered
into an Agreement and Plan of Merger. Consummation of the merger is subject to
various conditions, including the approval by Mallinckrodt's shareholders and
the receipt of required regulatory approvals. See Note 2 of the Notes to
Consolidated Financial Statements in Item 8 for additional information.

Transformation of the Company
-----------------------------

During the past several years, many significant steps have been taken to
transform the composition of the Company. During the past four years, the
transformation has involved the following:

     .  On March 31, 1997, the Company disposed of Fries & Fries, Inc., a wholly
        owned subsidiary which owned the Company's 50 percent interest in
        Tastemaker, which was the flavors joint venture. The transaction
        generated a net value to the Company of $550 million.

     .  On June 30, 1997, the Company sold the animal health segment for $405
        million in cash. The Company retained certain liabilities.

     .  On August 28, 1997, the Company acquired Nellcor Puritan Bennett
        Incorporated (Nellcor) through an agreement to purchase for cash all of
        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 is the worldwide market leader in
        providing products that monitor, diagnose and treat respiratory impaired
        patients.

     .  During 1998, the Company sold, or committed to sell, its catalysts and
        chemical additives and Aero Systems divisions. These transactions
        generated cash proceeds of $305 million in 1998 and $56 million in 1999.

-----------------------------
[1] CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: Our discussion and analysis in this annual report contain some forward-
looking statements. Forward-looking statements do not relate strictly to
historical or current facts, but rather give our current expectations or
forecasts of future events. Forward-looking statements may be identified by
their use of words such as "plans," "expects," "will," "anticipates,"
"believes," and other words of similar meaning. Such statements may address,
among other things, the Company's strategy for growth, product development,
regulatory approvals, the outcome of contingencies such as legal proceedings,
market position, expenditures, and financial results.

Forward-looking statements are based on current expectations of future events.
Such statements involve risks and uncertainties and actual results could differ
materially from those discussed. Among the factors that could cause actual
results to differ materially from those projected in any such forward-looking
statements are as follows: 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, governmental investigations and patent
disputes involving the Company; difficulties or delays in addressing "Year 2000"
problems (as discussed in Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations); and the risk factors reported
from time to time in the Company's SEC reports. The Company undertakes no
obligation to update any forward-looking statements as a result of future events
or developments.

                                       1
<PAGE>

Other recent acquisitions, divestitures and continuing investments in each of
Mallinckrodt's businesses are described in the discussions of the business
segments in Management's Discussion and Analysis of Financial Condition and
Results of Operations in Item 7, and Note 3 of the Notes to Consolidated
Financial Statements in Item 8.

General Points
--------------

In this report:

Mallinckrodt Inc. and its subsidiaries, collectively, are called the "Company"
or "Mallinckrodt," unless otherwise indicated by the context. The Company has
three business segments - Respiratory, Imaging and Pharmaceuticals.

The term "operating earnings" represents revenues less all operating expenses.
Operating expenses of a business segment do not include interest expense,
corporate income or expense, and taxes on income.

All references to years are to fiscal years ended June 30 unless otherwise
stated.

Registered and common law trademarks are indicated by an asterisk (*).

General Factors Related to the Business

Results from operations and related working capital requirements for
Mallinckrodt's Respiratory and Pharmaceuticals business segments are materially
affected by seasonal factors primarily related to the common cold and influenza
season. These seasonal factors tend to favorably affect sales and earnings of
ventilators and pulse oximetry products (Respiratory), bulk and dosage
narcotics, and acetaminophen (Pharmaceuticals) primarily in the fiscal third and
fourth quarters.

Mallinckrodt's business segments generally do not extend long-term credit to
customers. The Company does, however, periodically facilitate leasing
arrangements through unaffiliated companies for the financing of medical
equipment sales to hospital and alternate care customers. In certain instances,
the Company provides limited recourse to the unaffiliated company in the event
of customer default; however, the total potential liability from the recourse is
immaterial to the Company as a whole. The Company believes this credit policy,
as well as its working capital requirements, do not materially differ from those
of its competitors.

Competition with manufacturers and suppliers in Mallinckrodt's business segments
involves price, service, quality and technological innovation. Competition is
strong in all markets served.

The Company's operations are subject to significant U.S. and international
regulation related to the safety and efficacy of human medical devices and
pharmaceutical products, the control and safety of radiopharmaceutical and
controlled substances, and the environmental impact of the manufacture, storage
and distribution of the Company's products.

Financial information about the business segments is in Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations, and in
Item 8, Financial Statements and Supplementary Data. Financial information about
foreign and domestic operations is included in Note 19 of the Notes to
Consolidated Financial Statements in Item 8.

International and Economic Risk Factors

The Company operates globally, with manufacturing and distribution facilities in
various countries, and is subject to certain opportunities and risks, including
foreign currency fluctuations and government actions. Various operational
initiatives are employed to help manage business risks. In the ordinary course
of business, Mallinckrodt purchases materials and sells finished products
denominated in approximately 25 different currencies. The Company is primarily
exposed to changes in exchange rates of the German deutsche mark and other Euro
currencies, the Japanese yen and the Great Britain pound. Overall, the Company
is a net beneficiary when the U.S. dollar weakens and is adversely affected by a
stronger U.S. dollar relative to the major currencies identified. To minimize
exposures to foreign currency exchange rates, which occur in the ordinary course
of business, the Company purchases currency options.

                                       2
<PAGE>

The Company's interest income and expense are most sensitive to changes in the
general level of U.S. interest rates.  In this regard, changes in U.S. interest
rates affect the interest earned on the Company's cash equivalents and short-
term investments as well as interest paid on its short-term debt.  To manage the
interest rate characteristics of its outstanding debt to a more desirable fixed
or variable rate basis or to limit the Company's exposure to rising interest
rates, the Company periodically enters into interest rate swaps and option
contracts.

For more information on the Company's risk management strategy, see Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and Item 8, Financial Statements and Supplementary Data.

The Company does not consider the present overall rate of inflation to have a
significant impact on the businesses in which it operates; however, general
sales price declines in hospital and alternate care products on a global basis
due to healthcare cost containment have had a negative effect on operating
results, and this trend is expected to continue.

While future economic events cannot be predicted, the Company believes its
current operations and future expansion plans will not result in a significantly
different risk profile.

Mallinckrodt's sales to customers outside the U.S. represented approximately 32,
32 and 33 percent of consolidated net sales in 2000, 1999 and 1998,
respectively. Products are manufactured and marketed through a variety of
subsidiaries and affiliates around the world. For additional information, see
discussions of individual business segments included below; under Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations; and in Item 8, Financial Statements and Supplementary Data.

Operations

The Company manufactures and distributes advanced innovative products for acute
and chronic respiratory care, imaging products for disease diagnosis, and
pharmaceutical products used in pain management. Principal products include
pulse oximetry monitors and sensors which provide non-invasive monitoring of
pulse rate and oxygen saturation, x-ray contrast media used in radiology and
cardiology procedures, radiopharmaceuticals used in diagnostic nuclear medicine
procedures, critical care and portable ventilators, home oxygen therapy
products, airway management and other critical care devices, acetaminophen and
bulk and dosage narcotics used in pain management, and laboratory and
microelectronic chemicals used in analysis and the semiconductor industry.

The Company is comprised of three business segments - Respiratory, Imaging and
Pharmaceuticals.


Net sales by segment were (in millions):

                                             2000       1999     1998
                                            ------     ------   ------
Respiratory...............................  $1,133     $1,144   $  991
Imaging...................................     769        780      764
Pharmaceuticals...........................     751        661      616
                                            ------     ------   ------
                                            $2,653     $2,585   $2,371
                                            ======     ======   ======

On August 28, 1997, the Company acquired Nellcor through an agreement to
purchase for cash all of 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 combination of Nellcor and Mallinckrodt's
critical care division, which together comprise the Respiratory segment of the
Company, created the worldwide market leader in providing products that monitor,
diagnose and treat respiratory impaired patients. Product lines include pulse
oximetry monitors and sensors, critical care and portable ventilators, home
oxygen therapy products, and sleep apnea diagnostic and therapy products.

The acquisition was accounted for under the purchase method of accounting and,
accordingly, the results of operations of Nellcor have been included in the
Company's consolidated financial statements since September 1, 1997. The
purchase price of the acquisition was allocated to the assets acquired and
liabilities assumed based upon accounting principles generally accepted in the
United States and estimated fair values at the date of acquisition. The excess
of the purchase price over the fair value of the net identifiable assets was
allocated to goodwill and is being amortized on a straight-line basis over 30
years.

The Company's products are instrumental in the delivery of healthcare services
and are sold to hospital and alternate care sites, clinical laboratories,
pharmaceutical manufacturers and other customers on a worldwide basis.
Healthcare products are influenced by a high degree of innovation and
technology, by regulation from agencies

                                       3
<PAGE>

such as the U.S. Food and Drug Administration (FDA), industry standards and by
markets served. They are significantly affected by conditions within the
healthcare industry, including continuing legislative initiatives and public and
private healthcare insurance and reimbursement programs. An aging population and
demand for technologically superior products to extend and improve the quality
of life are two major factors fueling growth within the industry.

The healthcare industry is experiencing extensive change. All markets served by
the Company are highly competitive in the United States and overseas.
Legislative bodies, in all likelihood, will continue to review and assess
alternative healthcare delivery systems and payment methodologies, and ongoing
public debate of these issues can be expected. Cost containment initiatives,
market pressures and proposed changes in applicable laws and regulations may
significantly affect pricing or demand for medical products, the relative costs
associated with doing business, and the amount of reimbursement by both
government and third-party payors. In particular, the industry is experiencing
market-driven reforms from forces within the industry that are exerting pressure
on healthcare providers and product manufacturers to reduce healthcare costs.
These market-driven reforms are resulting in industry-wide consolidation that is
expected to increase the downward pressure on healthcare product margins, as
larger buyer and supplier groups exert pricing pressure on providers of medical
devices and other healthcare products. Managed care and other healthcare
provider organizations have grown substantially in terms of the percentage of
the population in the United States that receives medical benefits through such
organizations and in terms of the influence and control that they are able to
exert over an increasingly large portion of the healthcare industry. These
organizations are continuing to consolidate and grow, which may increase the
ability of the organizations to influence the practices and pricing involved in
the purchase of medical products, including those products sold by the Company.
Both cost containment and regulatory reform may have an adverse impact on the
Company's results of operations.

The demand for price reductions from healthcare customer buying groups continued
throughout 2000. This trend, which is expected to continue, had its most
significant impact on the Company's Imaging segment, where the potential for
generic competitive products and available manufacturing capacity continue to
lower prices. In response to this market trend, in 1996, the Company entered
into a multi-year agreement, with prices subject to periodic renegotiation, with
Premier Purchasing Partners, L.P. (Premier), the group purchasing arm of Premier
Inc. Premier, Inc. is a strategic alliance of approximately 215 independent not
for profit health systems across 50 states. Effective July 1, 1997, Premier
named Mallinckrodt a corporate partner and, accordingly, Premier's members are
provided incentives to use Mallinckrodt products. Effective July 1, 1999, the
corporate partnership agreement was extended two years through December 31,
2006, and the agreement now includes almost all Respiratory and Imaging segment
products. For 2000, 1999 and 1998, net sales to hospital and healthcare
facilities under the Premier agreement represented approximately 16 percent, 13
percent and 13 percent of net sales, respectively. No individual customer,
either through Premier or otherwise, represented more than 10 percent of net
sales for any of the three years in the period ended June 30, 2000.

See Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations; and Item 8, Notes 2 and 3 of Notes to Consolidated
Financial Statements for additional information about business activities.

Respiratory
-----------

The Respiratory segment develops and markets products that diagnose, monitor and
treat respiratory disorders, at virtually all points of care. Nellcor, the
leader in pulse oximetry, acquired Puritan-Bennett Corporation, the leader in
critical care ventilation, in 1995. Mallinckrodt, with the world leadership
positions in airway management and other critical care devices, acquired Nellcor
Puritan-Bennett in 1998. Today, the Company's respiratory product line is the
broadest in the industry. The Respiratory segment is focused in five strategic
businesses: Critical Care Systems composed of anesthesia and respiratory
devices; Nellcor Oximetry, including monitors and sensors; Puritan-Bennett
Ventilation and Service; Alternate Care composed of oxygen therapy, asthma
management, sleep diagnostics and sleep therapy products; and the newest
business unit, the Healthy Mother and Baby Division, which is engaged in
launching fetal oxygen saturation monitoring in the United States.

Anesthesia and respiratory devices of the Critical Care Systems business unit
include continuous core temperature monitoring systems, fluid warming and
convective warm air temperature management systems, and endotracheal and
tracheostomy tubes. Continuous core temperature monitoring and temperature
management systems are utilized both in surgical procedures and post-
operatively. The airway management product line consists of basic and specialty
endotracheal tubes, a full range of disposables used in hospitals to connect the
airway management products to anesthesia and ventilation machines, and
tracheostomy tubes which are used in hospitals and alternate

                                       4
<PAGE>

site facilities for maintaining airways during respiratory care. The Company's
endotracheal and tracheostomy tubes are by far the world market leaders.

Nellcor Oximetry is the world leader in pulse oximetry, offering a wide range of
products for clinical assessment in every healthcare setting including the home.
From simple handheld devices to sophisticated bedside monitors, the Nellcor line
offers choice in size, cost, performance and features. The Company offers the
most comprehensive line of adhesive and reusable sensors for all patient types
and applications. Oximetry product sales were 15 percent, 14 percent and 12
percent of Mallinckrodt's consolidated sales for 2000, 1999 and 1998,
respectively.

Nellcor brand OEM oximetry modules are sold to manufacturers of multiparameter
monitoring systems, which incorporate the Company's oximetry technology into
their own systems. In 2000, the Company achieved double-digit sales growth of
its OEM modules for the eighth consecutive year. In addition, Mallinckrodt has
technology licensing agreements with major manufacturers including Agilent,
GE/Marquette, Siemens and Spacelabs. Six new OEM customers were added in 2000,
for a total of 85 OEM and licensee customers. These customers include medical
equipment manufacturers in the United States, Europe, Asia, Japan and Latin
America.

During 2000, the Company received 510(k) clearance for the Nellcor N-395* Pulse
Oximeter. The N-395* features Oxismart*XL and SatSeconds* technology -- two
advancements in pulse oximetry technology designed to reduce low saturation
alarms, especially in poorly perfused patients and during motion. Since the
product's introduction in October 1999, nearly 10,000 N-395* units have been
sold.

In May 2000, Mallinckrodt unveiled the Intouch* system, a remote oximetry
notification system utilizing Nellcor-brand oximeters to transmit alarm
information directly to pagers worn by clinical staff. When activated, the
Intouch* pager displays the bed number, alarm message, SPO2 value and pulse
rate. By facilitating the use of oximetry in low nurse-to-patient ratio areas of
the hospital, the system helps care givers provide constant vigilance in lower
acuity areas such as step-down units, orthopedic units, pediatric and general
care floors.

Another significant change in the oximetry product line is Mallinckrodt's
decision to exit the multiparameter monitor market. Beginning July 1, 2000,
Agilent Technologies (formerly Hewlett-Packard) will assume exclusive worldwide
distribution for all models of the current Nellcor brand NPB-3900* and NPB-4000*
series multiparameter monitors under the Agilent brand. This arrangement is
expected to strengthen the Company's global market leadership position in
oximetry, allow the Company to focus on innovation and excellence in its
oximetry products and enhance its relationship with all its customers including
OEM and licensee partners.

Puritan-Bennett Ventilation offers the world's most popular ventilator, the
7200* ventilator system. The 7200* series ventilator system is a critical care
ventilator purchased primarily by hospitals to assist or manage patient
respiration in a variety of acute care settings. The 7200* series ventilator is
designed to ease the work of patient breathing and lessen patient discomfort.

During the fourth quarter of 1998, the Company received marketing clearance from
the FDA to sell its new 840* ventilator, which is designed to become the world's
leading infant-pediatric-adult critical care ventilator. During the second
quarter of 1998, the Company received marketing clearance from the FDA for the
740* ventilator. The low operating and maintenance costs of the 740* ventilator
make it ideal for use in developing countries and in subacute care facilities.
In December 1998, the Company received FDA marketing clearance to sell the 760*
ventilator.

During the second quarter of 2000, the Company received marketing clearance from
the FDA to sell its new Achieva* portable volume ventilator in the United
States. The product was launched in Europe in 1999. The versatility of the
Achieva* enables it to work across multiple care sites, from subacute to home,
with a variety of clinical applications. The introduction of this product rounds
out the Company's full continuum of ventilators from the low end bilevels to
highly sophisticated critical care ventilators.

The Company's service programs support customers during all stages of product
ownership and assist healthcare providers in merging the most appropriate
technology with the most cost effective methods, including CliniVision*, the
market leading handheld computing tool used in tracking the care of respiratory
impaired patients.

The Alternate Care business unit provides a wide range of products that address
the needs of the rapidly growing home care market. The oxygen therapy and asthma
management product family covers the entire range of oxygen therapy functions,
from oxygen concentrators to portable liquid oxygen and conservation devices.
The Company's spirometry systems measure lung capacity and performance through a
complete line of devices targeted at hospital pulmonologists and primary care
physicians. The Company also markets peak flow meters, peak flow monitors and

                                       5
<PAGE>

other devices to help patients with asthma or other forms of chronic obstructive
pulmonary disease (COPD) to better manage their conditions.

Diagnostic and therapeutic sleep products are used in hospital sleep
laboratories to diagnose sleep problems and in a variety of other settings to
monitor and treat sleep disorders.

In September 1999, the Company introduced Breeze*, a new revolutionary sleep
gear for CPAP patients. It is designed to provide unsurpassed freedom of
movement and is targeted to fit at least four out of five potential adult
patients. Breeze* eliminates the need for confining straps and masks, providing
an exceptional level of patient comfort.

In January 2000, the company launched Helios*, a new personal oxygen system that
enables patients to return to a more active and healthy lifestyle without bulky,
heavy equipment. A Helios* portable, weighing just over three pounds, allows an
average patient to ambulate for ten hours. At the same time, it provides an
attractive value proposition for home care providers by reducing the number of
deliveries to the patient's home to as few as eight per year, compared to
traditional liquid oxygen systems which require 32 to 40 deliveries per year.

During 2000, the Company released a series of CPAP units based on a new 418*
platform. From the scaled down base model to the auto-CPAP unit, the 418* series
provides the quietest range of CPAPs in the marketplace.

In June 2000, the Company introduced the new Suzanne* portable recording system
that brings new levels of reliability and ease-of-use to sleep diagnosis. The
fully portable Suzanne* can be used in sleep laboratories or in a patient's
home. Its unique modular concept for plug-and-play custom configurations can
record from 10 to 35 channels of a patient's physiological data.

The Company formed the Healthy Mother and Baby Division following the FDA
approval in May 2000 of OxiFirst*, a fetal oxygen saturation monitoring system.
The product has been marketed in Europe for the past two years. OxiFirst* has
been shown to be safe and effective through the results of an extended
randomized clinical trial in the United States. The product is intended to
provide reassurance that the fetus is adequately oxygenated during periods of
non-reassuring fetal heart rate patterns. Non-reassuring heart patterns occur in
approximately 30 percent of all births. The Company believes that fetal oxygen
saturation monitoring can help clinicians make more informed decisions regarding
the status of a fetus during labor and delivery.

The Company formed the new Healthy Mother and Baby Division to focus on products
that address the unmet clinical needs of mothers and their children from
conception to the baby's first birthday. The Company plans to introduce
additional products in this arena.

The Company entered into agreements with Agilent in 1995 and GE (Corometrics),
Inc. in 1995 to incorporate the Company's fetal oximetry technology into
integrated maternal fetal monitors provided by these leading suppliers. Both
Agilent and Corometrics, Inc. are currently selling these integrated monitors
outside of the United States.

Mallinckrodt's customers are physicians, other healthcare professionals, and
home care providers. The Company's products are purchased throughout the
hospital, including the intensive care unit, the operating theater, emergency
room, general care floor, and labor and delivery rooms. The Company's products
are sold in the major markets of the world principally through a direct sales
force, assisted by clinical consultants, product specialists, corporate account
managers, and selected distributors. The products are also sold into the
alternate care market, including free standing surgical centers, subacute care
and skilled nursing facilities, physicians' offices, clinics, ambulatory care
settings, and the growing home market.

In January 1999, the Company acquired Life Design Systems, Inc. (LDS), a Dallas,
Texas based developer and manufacturer of resuscitation bags and related
accessories. LDS produces resuscitation bags with carbon dioxide detection
capability in a range of sizes from infant to adult. This acquisition was
accounted for under the purchase method of accounting.

In December 1999, the Company sold the HemoCue business that manufactured and
marketed in vitro blood testing products. In January 2000, the Company sold the
medical gas business which included gas production facilities and distribution
branches. During 1999, Medical Gas Distribution Systems (MGDS) and Crow River
Industries (including its subsidiary company, Mobility Products and Design) were
divested. The financial statements include the results of these businesses prior
to sale; however, the associated earnings and assets were not material to
Mallinckrodt.

                                       6
<PAGE>

Respiratory manufacturing facilities are located in Athlone, Ireland; Carlsbad,
California; El Paso, Texas; Galway, Ireland; Indianapolis, Indiana; Irvine,
California; Johannesburg, South Africa; Juarez, Mexico; Mirandola, Italy; Nancy,
France; Plymouth, Minnesota; St. Charles, Missouri; and Tijuana, Mexico.
Mallinckrodt owns the Athlone, Carlsbad, Galway, Mirandola and Nancy facilities,
and all other sites are leased.

All the manufacturing facilities of the Respiratory segment, with the exception
of Juarez and Tijuana, Mexico, also serve as distribution sites.

The manufacturing of the 840* ventilator and portions of the oximetry production
will be relocated from Carlsbad, California to Galway, Ireland during 2001 to
take advantage of manufacturing synergies and tax incentives which will ensure a
long-term competitive cost position.

For information about legal activities involving the Respiratory segment, see
the Other Litigation section of Legal Proceedings in Item 3.

Imaging
-------

The Imaging segment includes the manufacture, sale and distribution of contrast
media and nuclear medicine products used in radiology, cardiology and nuclear
medicine.

Radiology products include x-ray contrast media (ionic and nonionic), ultrasound
contrast agents, magnetic resonance imaging (MRI) agents, and catheters for use
in diagnosis and therapy. These products are marketed in the U.S. principally by
a direct sales force. Internationally, these products are marketed through
direct sales forces and distributors.

Cardiology products are directed toward meeting the needs of both invasive and
non-invasive cardiology in diagnosing and treating diseases of the
cardiovascular system. The business currently offers both ionic and nonionic
contrast agents, ultrasound contrast agents, and interventional catheters and
related supplies. These products are sold directly to hospitals, primarily by a
dedicated sales organization within Mallinckrodt's direct sales force. Radiology
and cardiology x-ray contrast media sales were 14 percent, 15 percent and 18
percent of Mallinckrodt's consolidated sales for 2000, 1999 and 1998,
respectively.

Since its introduction in the U.S. eleven years ago, Optiray*, a low osmolar,
nonionic x-ray contrast medium, has been widely accepted in both radiology and
cardiology procedures. Optiray* began to be introduced outside the U.S. in 1991.
To source growing Optiray* volumes in the international market, the Company
opened a production facility in Dublin, Ireland during 1994 for the manufacture
of Optiray* in its bulk drug form. In addition, capacity expansion projects at
Mallinckrodt's existing plant in St. Louis, Missouri were completed in 1994 and
again in June 1997. Mallinckrodt has also made investments at its Dublin and St.
Louis facilities to implement a new process for the synthesis of Ioversol, the
key component of Optiray*, resulting in lower costs and improved quality. The
Dublin, Ireland facility began producing product utilizing the new process in
February 1998 and the project is expected to be completed at the St. Louis
manufacturing site in the fourth quarter of calendar year 2000.

In June 1990, Mallinckrodt introduced Ultraject*, a patented innovation in x-ray
contrast media agent administration. This prefilled syringe provides a more
efficient, convenient and safer method of delivering contrast agents. Ultraject*
allows Mallinckrodt to differentiate its x-ray contrast media offering by
providing advantages over traditional glass bottles and vials because it reduces
handling hazards and the potential for dosage error. In January 1996,
Mallinckrodt acquired Liebel-Flarsheim Company of Cincinnati, Ohio to enhance
its position in the contrast imaging arena. Liebel-Flarsheim's products include
x-ray contrast media power injectors for angiography and CT, x-ray components,
and specialized equipment for diagnostic urology procedures. In January 2000,
Mallinckrodt introduced a new MRI power injector, OptiSTAR*, that can use
Mallinckrodt's new OptiMARK* prefilled Ultraject* syringe.

In September 1996, Mallinckrodt signed a collaboration agreement with Epix
Medical Inc., formerly known as METASYN, Inc., to co-develop a blood pool MRI
agent. Mallinckrodt had worldwide manufacturing rights for the products
developed and had selling and marketing rights to them for all countries, except
Japan.

In 2000, Mallinckrodt decided to seek a partner in the development of this
bloodpool MRI agent. In May 2000, Mallinckrodt, Epix Medical, and Schering A.G.
entered into a new collaboration agreement. Through this new agreement,
Mallinckrodt recovers a portion of its program expenditures. Mallinckrodt
received $10 million on closing and will receive an additional $2.5 million when
the product's NDA is filed and $2.5 million on NDA

                                       7
<PAGE>

approval. Mallinckrodt will also receive a portion of the operating margins from
the sale of the product and will continue to manufacture the product.
Mallinckrodt will not be obligated to fund the future development of the
product.

In December 1999, Mallinckrodt received clearance to market its new MRI agent,
OptiMARK*, from the FDA. OptiMARK* is designed for use in MRI diagnostic
procedures to provide increased enhancement and visualization of lesions of the
brain, spine and liver, including tumors. The MRI market in the U.S. is
approximately $150 million and is growing 12 to 15% annually. Mallinckrodt is
manufacturing this product at its St. Louis, Missouri and Raleigh, North
Carolina facilities.

During 1989, Mallinckrodt acquired less than two percent of the then outstanding
common shares of Molecular Biosystems, Inc. (MBI) of San Diego, California.
Mallinckrodt also obtained exclusive marketing rights in the Western Hemisphere
for Albunex*, a new ultrasound contrast agent. The FDA approved Albunex* in
August 1994 and Mallinckrodt launched the product in the second quarter of 1995.

On September 7, 1995, Mallinckrodt and MBI entered into a new investment
agreement and an amended and restated distribution agreement (ARDA) for Albunex*
and OPTISON* (FS069), a new ultrasound contrast agent then in development. Under
the new investment agreement, Mallinckrodt made an additional equity investment
of $13 million in MBI bringing Mallinckrodt's total ownership of MBI's common
stock to approximately 9.8%. Under ARDA, Mallinckrodt agreed to partially fund
OPTISON* clinical development and make various milestone payments to MBI. In
December 1996, Mallinckrodt and MBI extended ARDA to grant Mallinckrodt
exclusive distribution rights for OPTISON* in Europe, Africa, most of Asia,
Australia and New Zealand. The FDA approved Albunex* in June 1997 for the
diagnosis of fallopian tube patency as part of infertility work up.

On December 31, 1997, the FDA approved OPTISON*. Mallinckrodt launched the
product in the United States on January 2, 1998. OPTISON*, the first of the
perflourocarbon-containing ultrasound agents to reach the market, enables
physicians to enhance resolution of anatomical structure where ultrasound alone
is inadequate. The product is specifically indicated for use in patients with
suboptimal echocardiograms to opacify the left ventricle and to improve the
delineation of the left ventricular endocardial borders. Ultrasound cardiac
imaging has several advantages over other imaging methods. It is minimally
invasive, relatively inexpensive and can provide a real-time image.

OPTISON* helps increase the effectiveness of echocardiography in diagnosing
heart disease by introducing gas-filled microspheres into the blood. The
microspheres travel in the bloodstream to the left ventricle of the heart, where
the microspheres reflect the sound waves generated from ultrasound equipment,
enabling the development of a clearer, more diagnostic ultrasound image.

On May 19, 1998, Mallinckrodt announced that OPTISON* had received final
marketing authorization by the European Commission for use in patients with
suspected or known cardiovascular disease. The authorization covers all 15
member states of the European Union. OPTISON* is the only fluorocarbon-based
agent approved for use in Europe.

In April 1999, Mallinckrodt announced it had reached an agreement in principle
with MBI under which MBI would transfer the manufacture of OPTISON* to the
Company, and the Company would assume responsibility for funding all cardiology,
as well as radiology, clinical trials for OPTISON* in the U.S. The parties
executed a definitive agreement (ARDA II) on September 30, 1999, with an
effective date as between the parties retroactive to March 1, 1999.

In May 2000, Mallinckrodt and Nycomed Amersham plc (Nycomed) announced an
intellectual property settlement had been agreed to by the two companies, MBI
and Sonus Pharmaceuticals Inc. (Sonus). The agreement covers all markets around
the world with the exception of the Pacific Rim and resolves key intellectual
property disputes among the parties, including ultrasound bubble composition.
Under terms of the settlement, Mallinckrodt and MBI paid Nycomed $10 million for
the right to use certain patents. Mallinckrodt will also pay royalties to
Nycomed on future ultrasound contrast product sales. Nycomed also received
immediate joint access to OPTISON*. Mallinckrodt and Nycomed have agreed to
collaborate on further joint development and commercialization of OPTISON* and
of Nycomed's product, SONAZOID, which is currently undergoing regulatory review
in Europe and the United States. In return, Nycomed grants Mallinckrodt a non-
exclusive license under the Nycomed and Sonus patents and Mallinckrodt and
Molecular Biosystems grant Nycomed and Sonus the right to practice under their
ultrasound patents.

                                       8
<PAGE>

In May 2000, Mallinckrodt and MBI announced the restructuring of their
relationship concerning OPTISON*. Under the terms of this new agreement,
Mallinckrodt agreed to assume full control of the OPTISON* business, including
responsibility for intellectual property disputes, clinical development,
manufacturing and real estate. The parties agreed to reduce the royalty payable
by Mallinckrodt to MBI on sales of ultrasound contrast agents in the
Mallinckrodt territory to 5%. MBI also agreed to pay a total of $7 million as
part of the above referenced intellectual property dispute with Nycomed and
Sonus, $3 million of which was paid up front.

The Company continues to be involved in other litigation in which the
manufacture and sale of OPTISON* is alleged to infringe upon patents held by the
plaintiffs therein. For additional information about this litigation, see the
Other Litigation section of Legal Proceedings in Item 3.

Nuclear medicine products consist of radiopharmaceuticals used to provide images
of numerous body organs, anatomy and function, and to diagnose and treat
diseases. Nuclear medicine products are sold in the U.S. by a direct sales force
and distributed both directly and through a nationwide network of nuclear
pharmacies. Internationally, nuclear medicine products are marketed through a
direct sales force and distributors.

In 1995, Mallinckrodt signed an agreement with Medi+Physics to distribute
healthcare proprietary radiopharmaceutical products through Medi+Physics'
radiopharmacies in the U.S. and Canada. Additionally, in 1997, Mallinckrodt
signed a 5-year co-marketing agreement with Medi+Physics for Mallinckrodt to
market Myoview*, a radiopharmaceutical cardiac imaging agent, in the U.S.

In August 1999, Mallinckrodt and Palatin Technologies (Palatin) signed an
agreement under which Mallinckrodt licensed LeuTech*, a radiolabeled monoclonal
antibody for diagnosing infections. Under the agreement, Mallinckrodt paid to
Palatin a licensing fee of $.5 million and an additional $13 million to purchase
700,000 restricted unregistered shares of Palatin preferred stock. Milestone
payments of an additional $10 million will be paid on FDA approval of the first
LeuTech* indication and on attainment of certain sales goals. Mallinckrodt will
also reimburse Palatin for 50% of all ongoing LeuTech* development costs.
Palatin will manufacture the product and receive a transfer price and a royalty
on LeuTech* sales. In February 2000, the FDA accepted for its full review the
Biologics License Application for LeuTech.*

In September 1999, Mallinckrodt signed an agreement with UroCor, Inc. (UroCor)
to sell brachytherapy sources (prostate cancer radiotherapy). The agreement
gives Mallinckrodt a license to sell and distribute UroCor's new radiation
treatment for prostate cancer in the U.S. through Mallinckrodt's nationwide
nuclear pharmacy network. The product, ProstaSeed* I-125 radioactive sources,
has received 510(k) clearance from the FDA. ProstaSeed* sources are small,
radioactive pellets which are implanted in a patient's prostate under ultrasound
guidance to destroy the tumor. This treatment, called brachytherapy, is
increasingly selected by early stage prostate cancer patients. Approximately
200,000 new cases of prostate cancer are diagnosed in the U.S. each year, and
about 60% of these are potentially treatable by brachytherapy. The current U.S.
market for such seed implants is approximately $150 million annually.

In March 2000, Mallinckrodt announced the signing of an agreement with
International Brachytherapy sa (Ibt) to promote, sell and distribute Ibt's
brachytherapy implants in Europe to treat prostate cancer. The agreement
includes palladium and iodine implants used for the treatment of localized
prostate cancer. It covers all of the European continent as well as Africa and
the middle Orient. It is a five-year agreement with annual minimum sales levels
and provides for Mallinckrodt to pay Ibt 1.8 million Euros for the distribution
rights.

On August 20, 1999, the Company sold the manufacturing facility in Angleton,
Texas and the associated diagnostic catheter product line produced at this
location. Two Canadian pharmacies were sold to Dupont in April 2000. The
financial statements include the results of these businesses prior to sale;
however, the associated earnings and assets were not material to Mallinckrodt.

Imaging manufacturing facilities are located in Cincinnati, Ohio; Maryland
Heights, Missouri; Mexico City, Mexico; Mulhuddart, Ireland; Petten, the
Netherlands; Pointe Claire, Canada; Raleigh, North Carolina; St. Louis, Missouri
and San Diego, California. Mallinckrodt owns these facilities. The Company also
operates 38 nuclear pharmacies located in population centers throughout the U.S.
and one in London, England.

The Imaging business distributes products through owned facilities in
Cincinnati, Ohio; Dublin, Ireland; Maryland Heights, Missouri; Petten, the
Netherlands; Pointe Claire, Canada; Raleigh, North Carolina, and leased
facilities in Chino, California; Harrisburg, Pennsylvania; Kansas City, Missouri
and all the nuclear pharmacies.

                                       9
<PAGE>

Pharmaceuticals
---------------

The Pharmaceuticals segment's products include analgesics such as acetaminophen
(APAP) used to control pain and fever; codeine salts, morphine and other opium-
based narcotics and synthetic narcotics used to treat pain and coughs; and
peptides which are used in many new pharmaceuticals. Other Pharmaceuticals
segment products include laboratory chemicals used in analysis and
microelectronic chemicals used in the semiconductor industry; magnesium stearate
for use as a tableting aid in pharmaceuticals; potassium chloride for use as a
potassium supplement in pharmaceuticals and nutritionals; and other salts,
chemicals and reagents used in the production of pharmaceutical and food
products.

Most Pharmaceuticals products are sold through distributors and by a direct
sales force to the pharmaceutical industry for use in the manufacture of dosage
form drugs. Narcotic prescription chemicals are sold directly to pharmaceutical
manufacturers, and pharmaceutical dosage products are sold directly to drug
wholesalers and chain pharmacies, while opiate addiction products are sold
primarily to clinics. Laboratory chemical products, which include thousands of
high-purity reagent chemicals used in research and development and analytical
laboratories, are sold primarily through distributors to medical, industrial,
educational and governmental laboratories. A direct sales force is used to offer
microelectronic chemicals and photoresist strippers to semi-conductor chip
producers worldwide.

Mallinckrodt expanded its product offering in healthcare by acquiring an
analgesic pharmaceutical product line from King Pharmaceuticals, Inc. in 1996.
In November 1996, Mallinckrodt acquired D.M. Graham Laboratories, Inc. of
Hobart, New York. Graham Laboratories is a contract manufacturer of both tablet
and capsule dosage pharmaceuticals and a licensed producer of a variety of
medicinal narcotic substances. In September 1999, the Company announced
expansion plans for the Hobart, New York facility with a new distribution and
packaging center scheduled for completion in 2002.

The Company expanded its capacity at its St. Louis, Missouri site to manufacture
pharmaceutical intermediates and additives with the addition of an FDA
registered facility in 1997. In August 1999, the Company announced a $24
million, two-year expansion project to add manufacturing capacity for its bulk
narcotic products in St. Louis, Missouri. The APAP manufacturing at the Raleigh,
North Carolina facility has been incrementally expanded over the past few years,
while costs have been reduced. Capacity of the Derbyshire, England para-
aminophenol (PAP, a precursor of APAP) manufacturing plant has also been
significantly increased. Mallinckrodt also upgraded its Compap* production
facility in Greenville, Illinois in 1997.

Pharmaceuticals products are manufactured and distributed from Derbyshire,
England; Deventer, the Netherlands; Greenville, Illinois; Hayward, California
(manufacturing only); Hobart, New York; Mexico City, Mexico; Paris, Kentucky;
Phillipsburg, New Jersey; Raleigh, North Carolina; St. Louis, Missouri; and
Torrance, California. Mallinckrodt owns all the facilities except Torrance,
California, which is leased.

Other Actions

Discontinued Operations
-----------------------

In 1998, the Company sold or committed to sell the catalysts and chemical
additives and Aero Systems divisions. Certain liabilities for environmental,
litigation and employee benefits remain with the Company. The last portion of
the catalysts and chemical additives division was sold on July 31, 1998.

On June 30, 1997, the Company sold its animal health segment for cash plus the
assumption of certain liabilities. Certain environmental liabilities, facility
leases and liabilities for employee benefits, including postretirement benefits,
were retained by the Company. During 1998, the Company recorded a charge related
to settlement costs from the sale.

On March 31, 1997, the Company disposed of Fries & Fries, Inc., a wholly owned
subsidiary which owned the Company's 50 percent interest in Tastemaker, which
was the flavors joint venture.

The results of these transactions and the results of operations from these
businesses have been reclassified to discontinued operations in prior years. For
additional information about discontinued operations, see Management's
Discussion and Analysis of Financial Condition and Results of Operations in Item
7, and Note 3 of the Notes to Consolidated Financial Statements in Item 8.

                                       10
<PAGE>

Other Activities

Research and Development
------------------------

The Company performs applied research directed at development of new products,
development of new uses for existing products, and improvement of existing
products and processes. Research and development programs include laboratory
research as well as product development and application. The Company's
development activities are focused on marketplace needs. Internal research
efforts in each of its business segments are supplemented with third-party and
university technical agreements. Research and development expenses, excluding
purchased research and development as a result of the Nellcor acquisition in
1998, were $145.8 million, $152.2 million and $145.0 million in 2000, 1999 and
1998, respectively.

The Respiratory segment's research and development functions are individually
aligned with each of its business units. The research and development functions
are housed most frequently near a primary manufacturing site, which are
principally located in Carlsbad, California; Hazelwood, Missouri; Irvine,
California; Mirandola, Italy; Pleasanton, California; Plymouth, Minnesota; and
St. Charles, Missouri.

Research and development activities for the Imaging segment are performed
primarily in Cincinnati, Ohio; Petten, the Netherlands; and St. Louis, Missouri.
Research and development activities for the Pharmaceuticals segment are carried
on in Phillipsburg, New Jersey; St. Louis, Missouri; and Torrance, California.
Technical personnel for process support are located at each manufacturing
location.

Patents, Trademarks and Licenses
--------------------------------

Mallinckrodt owns or licenses in excess of 1,800 United States and foreign
patents that expire at various times over the next twenty years. Mallinckrodt
owns or licenses in excess of 1,750 United States and foreign trademarks. The
Company also currently has pending approximately 890 United States and foreign
patent applications and over 270 United States and foreign trademark
applications. No single patent or trademark is considered to be essential to the
Company as a whole, but in the aggregate, the patents and trademarks are of
material importance to the Company.

Government Regulation
---------------------

Drug and Medical Device Regulation - Most of the Company's businesses are
subject to varying degrees of governmental regulation in the countries in which
operations are conducted, and the general trend is toward regulation of
increasing stringency. In the United States, the drug and device industries have
long been subject to regulation by various federal, state and local agencies,
primarily as to product safety, efficacy, advertising and labeling. The exercise
of broad regulatory powers by the FDA continues to result in increases in the
amounts of testing and documentation required for FDA clearance of new drugs and
devices and a corresponding increase in the expense of product introduction.
Similar trends toward product and process regulation are also evident in a
number of major countries outside of the United States, especially in the
European Economic Community where efforts are continuing to harmonize the
internal regulatory systems. In 1997, the Food and Drug Administration
Modernization Act was passed in the United States and was the culmination of a
comprehensive legislative reform effort designed to streamline regulatory
procedures within the FDA and to improve the regulation of drugs and medical
devices. The legislation was principally designed to ensure the timely
availability of safe and effective drugs and medical devices by expediting the
premarket review process for new products.

The regulatory agencies under whose purview the Company operates have
administrative powers that may subject the Company to such actions as product
recalls, seizure of products, and other civil and criminal sanctions. In some
cases, the Company may deem it advisable to initiate product recalls
voluntarily.

Puritan-Bennett Corporation (Puritan-Bennett), which became a wholly owned
subsidiary of Mallinckrodt as a result of the acquisition of Nellcor in August
1997, had entered into a consent decree with the FDA in January 1994, pursuant
to which Puritan-Bennett agreed to maintain systems and procedures complying
with the FDA's good manufacturing practices regulation and medical device
reporting regulation in all of its device manufacturing facilities. Burton A.
Dole, Jr., who currently serves as the sole director and the sole officer of
Puritan-Bennett, is a party to the consent decree.

Puritan-Bennett has experienced and will continue to experience incremental
operating costs due to ongoing regulatory compliance requirements and quality
assurance programs initiated in part as a result of the FDA consent decree. The
amount of these incremental costs currently cannot be completely predicted and
will depend upon a

                                       11
<PAGE>

variety of factors, including future changes in statutes and regulations
governing medical device manufacturers, and the manner in which the FDA
continues to enforce and interpret the requirements of the consent decree.

There can be no assurance that the Company will not experience problems
associated with FDA regulatory compliance, including increased general costs of
ongoing regulatory compliance and specific costs associated with the Puritan-
Bennett consent decree. The Company could experience a material adverse effect
on business, operations, profitability and outlook from, among other things: (i)
requirements associated with the Puritan-Bennett consent decree; (ii)
requirements arising from continuing company-wide adherence to quality assurance
and good manufacturing practices; (iii) the results of future FDA inspections of
the operations and facilities of the Company; and (iv) any modification,
extension or adverse interpretation of the Puritan-Bennett consent decree or any
product recall, plant closure or other FDA enforcement activity with respect to
the Company.

Environmental Regulation - The Company's operations are subject to a variety of
federal, state and local environmental laws and regulations that govern, among
other things, the generation, handling, storage, transportation, treatment and
disposal of hazardous substances, discharges to water, and air emissions from
equipment and facilities.

Most of the Company's environmental-related capital expenditures are in response
to provisions of the Federal Clean Air Act; Water Pollution Control Act;
Resource Conservation and Recovery Act; and land use, air and water protection
regulations of the various localities and states, and their foreign
counterparts. Capital expenditures worldwide relating to air emission control,
wastewater purification, land reclamation and solid waste disposal totaled
approximately $6 million in 2000, $5 million in 1999, and $6 million in 1998.
The Company currently estimates that environmental capital expenditures during
2001 and 2002 will be $22 million and $21 million, respectively.

The Company had previously recognized the costs associated with the
investigation and remediation of Superfund sites, the litigation of potential
environmental claims, and the investigation and remedial activities at the
Company's current and former operating sites. Related accruals of $122.6 million
at June 30, 2000 are included in current accrued liabilities and other
noncurrent liabilities and deferred credits. Any claims for potential recovery
from any sources have not been valued against the accrued environmental
liabilities. While ongoing litigation may eventually result in recovery of costs
expended at certain of the environmental sites, any recovery is contingent upon
a successful outcome and has not been recognized in the Company's results of
operations. The Company has recognized the costs and associated liabilities only
for those matters that are in its view probable and estimable. Based upon
information currently available, management believes that existing accrued
liabilities 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 results
of operations or financial position.

Compliance - Mallinckrodt endeavors to comply with all applicable laws and
regulations, but there can be no assurance that its compliance efforts will
always be acceptable. Instances of non-compliance have occurred in the past and,
although they have not had a material adverse impact on the Company, such
instances could occur in the future and possibly have a material adverse impact.
In particular, the Company is unable to predict the extent to which it may be
adversely affected by future regulatory developments such as new or changed laws
or regulations.

The Nuclear Regulatory Commission (NRC) has conducted an Augmented Inspection at
the Company's Maryland Heights, Missouri facility in response to the Company's
notification letters of May 12, 2000 and May 26, 2000 indicating that certain
employees had been exposed to radiological sources above allowable limits. The
NRC and the Company entered into a Confirmatory Order Modifying License (Order)
issued on June 23, 2000, which identifies certain corrective actions to complete
at the Company's Maryland Heights, Missouri facility as a result of the
exposures and requires an amendment to its NRC License No. 24-04206-01.

The NRC issued a written report on its Augmented Inspection on July 17, 2000.
Furthermore, the NRC conducted an enforcement inspection on July 17-19, 2000 at
the Company's Maryland Heights, Missouri facility to review possible notices of
violation. Any potential violations will be identified in an inspection report
and issued by September 2000. The Company cannot predict the outcome of the
enforcement inspection, but does not believe any potential notices of violations
and fines or penalties will have a material impact on the Company's consolidated
results of operations.

In the Fall of calendar 1997, the German authorities seized certain records of
two of the Company's non-U.S. subsidiaries, Mallinckrodt Medical GmbH and
Mallinckrodt Radiopharma GmbH. These seizures were part of

                                       12
<PAGE>

investigations of certain practices at these subsidiaries that involved payments
to physicians and other German healthcare providers. The investigations, which
are ongoing, appear to focus on whether the payments in question were for
research or other services performed by the recipients, or may have been sales
incentives or discounts which could possibly be contrary to German law.

The Company understands that the German authorities are also reviewing the
conduct of physicians and healthcare providers that were the recipients of these
payments. This aspect of the investigation appears to have adversely affected
some of the German subsidiaries' customer relationships. When compared to the
same period last year, sales of x-ray contrast media and radiopharmaceutical
products in Germany have declined during 2000 by 17 percent in local currency,
or approximately $11 million excluding the impact of translation, which was in
part the result of a decline in market price.

The Company cannot anticipate the outcome of the pending German investigations.
At present, no charges have been filed against the Company's subsidiaries or
their employees. Settlement discussions are underway with the German
authorities. There have been significant changes in the management of the German
subsidiaries since the time of the seizures, and the Company believes it has
terminated those who were responsible. In addition, the Company has undertaken a
review of its procedures governing payments to healthcare providers, both in
Germany and elsewhere in Europe. The Company is also reviewing, with the advice
of German counsel, whether the payments in question may result in any liability
to German health insurers. Based upon currently available information, the
Company does not believe that the German investigation will have a material
impact on the Company's consolidated results of operations or financial
position.

See the Environmental Matters section of Legal Proceedings in Item 3,
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 7, and Note 21 of the Notes to Consolidated Financial
Statements in Item 8 for additional information.

Employees
---------

Mallinckrodt had 12,265 employees at June 30, 2000, consisting of 6,879 U.S.
based employees and 5,386 employees outside the U.S.

Labor Relations
---------------

In the U.S., the Company has eight collective bargaining agreements with eleven
international unions or their affiliated locals covering 824 employees. One
agreement covering 70 employees was negotiated during 2000, with no work
stoppages. One agreement covering 202 employees will expire in 2001. Seven
operating locations outside the U.S. have collective bargaining agreements
and/or work counsel agreements covering approximately 938 employees. Recent wage
and benefit increases were consistent with competitive industry and community
patterns.

ITEM 2. PROPERTIES

Information regarding the principal manufacturing and distribution properties of
Mallinckrodt is included in the Operations and Other Activities sections of
Business in Item 1.

The Company leases space for its international operations in Argentina,
Australia, Austria, Belgium, Brazil, Canada, China, Colombia, Finland, France,
Germany, India, Ireland, Italy, Japan, Korea, Malaysia, Mexico, the Netherlands,
Philippines, Poland, Portugal, Puerto Rico, Singapore, South Africa, Spain,
Sweden, Switzerland and United Kingdom. Additionally, Mallinckrodt leases
office space in Pleasanton, California and St. Louis, Missouri.

The Company believes its manufacturing and distribution facilities are adequate,
suitable and of sufficient capacity to support its current operations.

ITEM 3. LEGAL PROCEEDINGS

Environmental Matters
---------------------

The Company is actively involved in the investigation or remediation of, or is
addressing potential claims of, alleged or acknowledged contamination at
approximately 22 currently or previously owned or operated sites and at
approximately 13 off-site locations where its waste was taken for treatment or
disposal.  These actions are in various stages of development and generally
include demands for reimbursement of previously incurred costs, or costs for

                                       13
<PAGE>

future investigation and/or for remedial actions. In many instances, the dollar
amount of the claim is not specified. For some sites, other potentially
responsible parties may be jointly and severally responsible, along with the
Company, to pay for any past remediation and other related expenses. For other
sites, the Company may be solely responsible for remediation and related costs.
The Company anticipates that a portion of these costs will be covered by
insurance or third party indemnities. A number of the currently pending matters
relate to historic and formerly owned operations of the Company.

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, engineering 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 costs at 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 only for those 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 results of operations or financial position.

The following is a brief discussion of certain pending environmental proceedings
which the Company believes, based on currently available information, are most
significant:

Orrington, ME - Hanlin Group, Inc. (Hanlin) purchased a chemical manufacturing
facility located in Orrington, Maine from the Company in 1982. In April 1989,
Hanlin filed suit in the U.S. District Court for the District of Maine alleging
that the Company had operated the facility in violation of federal and state
environmental laws. More specifically, Hanlin asserted that the Company had
allowed the discharge of unlawful amounts of mercury, contaminating the soil,
air, groundwater and adjoining waterways. The parties settled these claims in
1991. The facility was subsequently sold to HoltraChem Manufacturing Company,
L.L.C. (HoltraChem); the settlement agreement was assigned to HoltraChem as part
of the sale. Under the settlement agreement, the Company agreed to pay specified
costs of a study ordered by the United States Environmental Protection Agency
(EPA). A final Site Investigation has been completed by the Company and
submitted to EPA and the State of Maine Department of Environmental Protection
(Maine DEP) on December 29, 1998. The Company and HoltraChem met with the Maine
DEP and EPA in April 1999 to discuss the conclusions of the Site Investigation.
The Company received comments on the Site Investigation Plan from the agencies
in April 2000. The Company and HoltraChem disagreed with many of the comments.
The Company and HoltraChem gave notice to EPA invoking dispute resolution in May
2000, under the terms of the Consent Decree between EPA and HoltraChem. The
Company, HoltraChem, EPA and Maine DEP are attempting to resolve these issues.
Costs of implementing remedial action at the site will be shared by the Company
and HoltraChem on a yet-to-be agreed basis. If the parties cannot reach
agreement, the matter will be referred to binding arbitration.

On June 21, 1999, the Company and HoltraChem Manufacturing Company, LLC received
a Notice of Intent to Sue (Notice) under Section 7002(a)(1)(B) of the Resource
Conservation and Recovery Act (RCRA) sent by the Natural Resources Defense
Council, Inc. (NRDC) and the Maine People's Alliance. This Notice was based on
alleged mercury contamination of the Penobscot River from the Orrington, Maine
chlor-alkali facility. The parties attempted to negotiate a settlement of this
matter and made some progress, but could not settle the matter. The NRDC sued
Mallinckrodt and HoltraChem on April 10, 2000 in the United States District
Court for the State of Maine. The Company and HoltraChem filed Motions to
Dismiss on June 12, 2000. These were based on standing and ripeness because
Mallinckrodt believes that the current RCRA Corrective Action process being
conducted at the site under a Federal Consent Decree with EPA preempts this
lawsuit and makes the relief sought moot. This case will be set on the complex
tract, but will be moved along the docket promptly based on meetings with the
magistrate and practice of the Maine federal court docket. A trial date of June
2001 is expected.

                                       14
<PAGE>

Auburn Hills, MI - The Company is a defendant in an action that was filed on
January 13, 1986 and is currently pending in the U.S. District Court for the
Eastern District of Michigan, styled Frank J. Kelley and the City of
                                     -------------------------------
Pontiac v. Great Lakes Container Corporation, et al, relating to a drum
---------------------------------------------------
reconditioning facility located in Auburn Hills, Michigan that was leased and
operated by the Company in the 1970s. The State of Michigan (State) and the
present owner of the facility, Columbus Steel Drum Company, Inc., claim that the
Company is jointly and severally liable, along with approximately twenty other
former owners and operators of the facility, for alleged contamination of soil
and groundwater resulting from improper disposal practices. The State seeks
remedial measures at the site and reimbursement for costs incurred to date. The
current owner seeks reimbursement for previously incurred clean-up costs and
compensation for damages to the site. The Company denies any violation of
applicable law on its part. The Company has filed a third-party complaint
against approximately 110 parties that sent drums to the facility, seeking
contribution for damages that might be assessed against the Company.

The Company and other parties have explored settlement alternatives, but have
not reached a global settlement to date. The Company submitted a Remedial Action
Plan (RAP) to the State of Michigan for this site which was rejected. Although
the Company completed additional work as requested by the State and prepared a
report describing the results of the additional work and submitted it to the
Court, the Michigan Department of Environmental Quality (MDEQ) decided to
complete additional investigation.

MDEQ hired a consultant to complete these further studies at the site. MDEQ
concluded that further additional investigation was necessary before defining a
final RAP for the site. The Company and the other major parties held several
mediation sessions with MDEQ and the State of Michigan. These sessions were to
negotiate both past cost claims and discuss the terms of a final RAP. After
several mediation sessions, the parties have not negotiated a resolution. The
judge believes mediation attempts have failed and will set a trial date for
September or October 2000.

St. Louis, MO/CT Decommissioning - The Company processed certain ores, columbium
and tantalum, under license with the Nuclear Regulatory Commission (NRC) from
the 1960s through 1986. Pursuant to NRC regulations, the Company is required to
complete decommissioning of the processing areas, buildings and soil on the site
where manufacturing occurred. The Company submitted a Phase I Decommissioning
Plan to NRC in November 1997 and received NRC comments in February 1999. The
Company revised the Phase I Plan based on NRC comments and expects final NRC
approval by September 2000. The Company has received additional time to develop
the Phase II Decommissioning and Decontamination Plan to submit to the NRC.

St. Louis, MO/RCRA Corrective Action - The Company's St. Louis plant has a
Resource Conservation Recovery Act (RCRA) Part B permit which requires the
facility to undergo corrective action. The Company worked with the Missouri
Department of Natural Resources (MDNR) to complete the RCRA Facility Assessment
and identified certain Solid Waste Management Units (SWMUs) and Areas of Concern
(AOCs). The Company received its Part B Permit and appealed certain provisions.
The Company has negotiated a resolution of its appeal. The MDNR has
conditionally approved the RCRA Facility Investigation Final Work Plan (Work
Plan) submitted by the Company, which describes additional investigation of
certain SWMUs and AOCs. The Company has started field work in accordance with
the Work Plan and is submitting quarterly reports to the MDNR. Activities are
continuing in accordance with the RCRA process.

Raleigh, NC - The Company's bulk pharmaceutical facility has been operating
since the mid 1960s. It 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 identify certain Solid Waste Management Units
(SWMUs). The Company received its permit and submitted a RCRA Facility
Investigation Work Plan (RFI Work Plan) to the North Carolina Department of
Environment, Health and Natural Resources (Agency) proposing to investigate the
SWMUs. The Agency identified certain technical issues concerning the RFI Work
Plan and the Company has been responding to these issues through revisions to
the RFI Work Plan. Final approval of the RFI Work Plan was issued in December
1997. The North Carolina Department of Environment, Health and Natural Resources
approved the Company's Phase II Remedial Investigation Plan. The Company will
implement the Plan.

Animal Health Business Properties - The Company sold its animal health business
in June 1997 to Schering-Plough Corporation (S-P) and provided an environmental
indemnity to S-P. This indemnity covered both U.S. facilities and international
facilities. The indemnity lasts for a term of fifteen years and is limited to
claims arising from activities and uses of the property prior to closing. The
Company is working with S-P and the Indiana Department of Environmental
Management (IDEM) to resolve certain issues regarding the Resource Conservation
and Recovery

                                       15
<PAGE>

Act (RCRA) requirements at the Terre Haute, Indiana facility. The facility had
begun the RCRA Corrective Action process, but decided to allow the RCRA Part B
permit to expire. Mallinckrodt and S-P have determined to proceed under the
IDEM's voluntary remediation program (VRP). IDEM accepted the plan; however, S-P
has sold this facility and the Company has not finalized execution of the plan.

Under the terms of the indemnity, S-P had the option to conduct baseline
environmental assessments at all of the properties transferred. S-P has
completed initial baseline assessments and has made certain claims against the
Company under the indemnity. Furthermore, the Company transferred several
facilities to S-P as part of the sale of the Company's animal health business in
the following South American locations: Buenos Aires, Argentina; Cali, Colombia;
Cotia, Brazil; Itu, Brazil; and Luque, Paraguay. During the baseline study
performed in connection with the sale, chemical constituents were identified at
these sites. Based on the information obtained upon completion of the baseline
study, S-P determined that it needed to further delineate the extent of any
potential contamination. The Company has hired outside consultants to assist it
in evaluating the environmental requirements of the various countries to
determine if additional investigation and/or remediation is necessary or
required. The Company has determined that additional investigation at these
facilities is not necessary. Furthermore, S-P has not made formal claims
regarding these sites.

The Company recognized the estimated incremental expense associated with the
indemnification of environmental liabilities in the loss recorded on the sale of
the business in 1997. The Company intends to vigorously defend its position in
connection with the environmental matters in connection with the formerly owned
animal health business.

Erie, PA (Calsicat) - The Company sold its facility located in Erie,
Pennsylvania to Engelhard Corporation (Engelhard) in May 1998. This facility
manufactures a variety of specialty catalysts. As part of the transaction, the
Company provided an environmental indemnity to Engelhard. The Company has an
obligation to jointly manage any on-site liabilities covered by the indemnity,
which require remediation. The Company and Engelhard are working together to
address an ongoing groundwater collection and soil remediation project at the
site. This project is being managed under the oversight of the Pennsylvania
Department of Environmental Protection (PADEP). The Company and Engelhard have
applied to participate under the Pennsylvania voluntary remediation program for
the current groundwater collection system. The PADEP has indicated the voluntary
remediation proposal is feasible. The Company has accruals to address the
ongoing remediation projects and potential environmental claims under the
indemnity.

Allentown, PA (Trimet) - The Company sold its operations in Allentown,
Pennsylvania to Geo Specialty Chemicals, Inc. (Geo) in July 1998. This facility
currently manufactures formaldehyde and a limited number of specialty chemicals.
The facility was historically operated as an explosives manufacturing plant. The
Company retained a portion of the property where no manufacturing activities
currently occur. The Company provided an environmental indemnity to Geo for
certain environmental activities which may be required by governmental agencies,
and a more limited indemnity for potential environmental claims arising from the
actions of Geo.

In addition to the indemnity, the Company has retained responsibility for
completion of the closure of a wastewater lagoon. The Company had presented a
remediation plan to the Pennsylvania Department of Environmental Protection
(PADEP) which includes consolidation of the wastewater lagoon sludges in one of
the onsite lagoons. PADEP had not issued approval of consolidation. Therefore,
the Company is in the process of discussions with PADEP and is coordinating
these activities with Geo. The Company is evaluating alternatives to on-site
closure. The Company has established a reserve to address the ongoing
remediation projects, potential environmental claims under the indemnity, and
other potential environmental issues.

Springville, UT - In 1996, the Company entered into 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
explosive 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. 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 (State), EBI has
conducted a feasibility study of alternatives for remediating impacted off-site
groundwater. EBI also is conducting a RCRA Corrective Action study under a 1995
consent order with the State. The Company and EBI have entered into an interim
allocation agreement with two additional parties to address funding remedial
activities at this site.

The parties have continued to meet with the Utah Department of Environmental
Quality (DEQ) to update the DEQ

                                       16
<PAGE>

on the progress of the off-site groundwater remedial activities and the progress
of RCRA Corrective Action activities at the site. The parties implemented the
Revised RFI Work Plan (Plan) and conducted the analytical testing in accordance
with the Plan. The results of sampling performed under the Plan were submitted
to DEQ in July 2000. An allocation consultant hired by the parties has been
reviewing documents and is going to assist in developing a process to negotiate
a final allocation.

In October 1996, a resident with property bordering the Springville site filed
suit against The Ensign-Bickford Company (EBCo), the subsidiary of EBI into
which the Trojan Corporation was merged, in the U.S. District Court for the
District of Utah (Don Henrichsen, et al v. The Ensign-Bickford Company, et al)
                  -----------------------------------------------------------
alleging nuisance and trespass for contamination that allegedly migrated onto
the resident's property. On January 31, 1997, the Company was added as a
defendant. The Company and other parties are currently negotiating to resolve
the dispute.

Ensign-Bickford Industries, Inc. and The Ensign-Bickford Company (jointly called
EBI) and the Company have received three additional complaints by nearby
residents alleging personal injury and property damage from migration of
contaminants from facility operations. All of the lawsuits have been filed in
the U.S. District Court for the District of Utah. The lawsuits are styled as
follows: Howard Ruff and Kay Ruff v. Ensign-Bickford Industries, Inc., et al
         -------------------------------------------------------------------
(filed February 26, 1999); Charles Bates and Ellen Bates v. Ensign-Bickford
                           ------------------------------------------------
Industries, Inc., et al (filed March 9, 1999); and Rodney Petersen and Marilyn
-----------------------                            ---------------------------
Petersen v. Ensign-Bickford Industries, Inc. (filed April 15, 1999). These suits
--------------------------------------------
allege that the Company and EBI's actions in operating the facility caused
injury. Answers were filed in the Ruff, Bates, and Petersen complaints in early
                                  ----  -----      --------
May 1999. Discovery has been completed. The Company and EBI will file a Daubert
motion in August 2000 challenging the scientific basis for Plaintiffs' claims.
The Company and EBI are jointly defending these actions.

A fourth lawsuit was filed against the Company and EBI on July 6, 2000 in the
U.S. District Court for the District of Utah styled Glenn and Jennette Allman v.
                                                    ----------------------------
Ensign-Bickford Industries, Inc., et al. This lawsuit alleges property damage
----------------------------------------
and personal injury allegedly arising from damages by migration of contaminants
from the facility operations.

The Company has also received another letter in connection with this site from
the children of David Nemelka and Kent Stephens who had previously settled a
lawsuit with the Company and EBCo. In this letter, counsel for the children of
these parties has made a demand for payment to address multiple illnesses
alleged to have been caused by contaminants originating at the Springville, Utah
plant site. The Company and EBCo are currently evaluating these potential
claims. No complaint has been filed.

The Company has also received a letter for another potential claim from Phillip,
Betty, Jean and Stacy Broadbent alleging similar injuries, but no complaint has
been filed.

The State also has advised EBI that it is investigating a natural resource
damages claim; however, the State has not indicated it plans to pursue this
claim. Nevertheless, all parties have entered into a Tolling Agreement with the
State in connection with the potential natural resource damages claim.

Other Litigation
----------------

The Company is a party to a number of other legal proceedings arising in the
ordinary course of business. The Company does not believe these pending legal
matters will have a material adverse effect on its financial condition or the
results of the Company's operations. The most significant of these matters are
as follows:

OPTISON* Patent Litigation - On July 31, 1997, the Company and its licensor,
Molecular BioSystems, Inc. (MBI), filed suit (the Mallinckrodt/MBI Action) in
the United States District Court for the District of Columbia against four
potential competitors - Sonus Pharmaceuticals, Inc. (Sonus), Nycomed Imaging AS
(Nycomed), ImaRx Pharmaceutical Corp. (ImaRx) and its marketing partner DuPont
Merck, and Bracco International BV (Bracco) - seeking declarations that certain
of their ultrasound contrast agent patents are invalid. The complaint alleged
that each of the defendant's patents are invalid on a variety of independent
grounds under United States patent laws. In addition to requesting that all of
the patents in question be declared invalid, the complaint requested a
declaration that contrary to the defendants' contentions, MBI and the Company do
not infringe the defendants' patents, and asked that the defendants be enjoined
from proceeding against MBI and the Company for infringement until the status of
the defendants' patents had been determined by the court or the U.S. Patent and
Trademark Office (PTO). The complaint also alleged that each defendant had
claimed or was likely to claim that its patent or patents cover OPTISON* and
would attempt to prevent its commercialization.

                                       17
<PAGE>

Each of the defendants, except Nycomed, filed a motion to dismiss the complaint
on jurisdictional grounds. In January 1998, the court dismissed the complaint
against (a) ImaRx (and its marketing partner, DuPont Merck) and Bracco for lack
of jurisdiction, and (b) Sonus for improper venue. The court's ruling did not
purport to rule on the merits of the Company and MBI's claims. The Company and
MBI elected not to appeal the court's decision. Accordingly, only the action
against Nycomed continued to proceed in the District Court for the District of
Columbia.

On April 21, 1998, Nycomed filed an action in the District Court of The Hague,
the Netherlands against various Mallinckrodt European entities and MBI, alleging
that OPTISON* infringed or will infringe its European patent EP 0576521. Nycomed
also sought damages and an injunction against future sales. The patent that was
the subject of this action is the counterpart of Nycomed's United States patent
that was the subject matter of the Mallinckrodt/MBI Action.

Following the dismissal of Sonus as a defendant in the Mallinckrodt/MBI Action,
Sonus activated a patent infringement lawsuit (the Sonus Action) that it had
filed on August 4, 1997 against the Company and MBI in the United States
District Court for the Western District of Washington. Although the complaint
was filed in August 1997, Sonus had agreed not to proceed with its action until
the jurisdictional motions were decided in the Mallinckrodt/MBI Action. Sonus's
complaint alleged that the manufacture and sale of OPTISON* by the Company and
MBI infringed two patents owned by Sonus. The Company and MBI filed a
counterclaim seeking a declaration of invalidity and non-infringement with
respect to the Sonus patents.

The Sonus Action was stayed until reexamination proceedings in the PTO were
concluded. These proceedings were subsequently concluded with the PTO confirming
patentability of some of the claims in the two patents under reexamination.
Sonus also announced that it had licensed its patents covering ultrasound
products to Nycomed, which joined with Sonus as a plaintiff in the Sonus Action.

On May 8, 2000, the Company announced it had entered into a settlement with
Nycomed of patent litigation relating to OPTISON*, including the Sonus Action.
The settlement also included MBI and Sonus as parties.

Under terms of the settlement, Nycomed received from Mallinckrodt and MBI a $10
million payment, as well as the right to receive royalties from Mallinckrodt on
future ultrasound contrast product sales. Nycomed also received immediate joint
access to OPTISON*. Mallinckrodt and Nycomed have also agreed to collaborate on
further joint development and commercialization of Mallinckrodt's OPTISON* and
of Nycomed's SONAZOID(TM). In return, Nycomed granted Mallinckrodt a non-
exclusive license under the Nycomed and Sonus patents and Mallinckrodt and MBI
granted Nycomed and Sonus the right to practice under their ultrasound patents.
The agreement covers all markets around the world with the exception of the
Pacific Rim and resolves key intellectual property disputes between the parties.

In connection with the settlement of the patent litigation with Nycomed, the
Company and MBI restructured their agreement concerning OPTISON*. Under the
terms of the restructured agreement: (a) Mallinckrodt assumed full control of
the OPTISON* business, including responsibility for intellectual property
disputes, clinical development and manufacturing; (b) Mallinckrodt will pay MBI
a reduced ongoing royalty of 5 percent on certain future sales of ultrasound
contrast agents; and (c) MBI agreed to pay a total of $7 million of the
intellectual property settlement with Nycomed, $3 million of which was paid
immediately.

On May 3, 1999, ImaRx and DuPont Pharmaceuticals (DuPont) filed suit against MBI
and the Company in the United States District Court for the District of
Delaware. The suit alleges that the manufacture and sale of OPTISON* by the
Company and MBI infringe two patents owned by ImaRx and licensed to DuPont. As
noted above, the Company and MBI had previously filed an action in July 1997 in
the United States District Court for the District of Columbia to declare these
patents invalid or not infringed, but that action was dismissed on
jurisdictional grounds. Since that time, the patents have undergone
reexamination in the PTO with the PTO recently confirming patentability of the
claims of the patents. The Company and MBI will defend this suit on the grounds
of invalidity and non-infringement with respect to the ImaRx patents.

New Mexico Steel v. Puritan-Bennett - The Company's subsidiary, Puritan-Bennett
Corporation (Puritan-Bennett), is a defendant in an action that was filed on
August 29, 1997 with the United States District Court for the District of New
Mexico, styled New Mexico Steel Company Inc. v. Puritan-Bennett Corporation.
               ------------------------------------------------------------
This case relates to a 1996 Asset Purchase Agreement (Agreement) whereby
Puritan-Bennett agreed to purchase certain assets of New Mexico Steel. The
purchase price of the assets was $1.2 million and was to be adjusted upward or
downward based upon post-closing schedules of inventory, accounts receivable and
office equipment to be provided by Puritan-Bennett.

                                       18
<PAGE>

Plaintiff alleges that Puritan-Bennett breached the Agreement by failing to
deliver the post-closing schedules in a timely manner.

On September 23, 1999, a jury returned a verdict against Puritan-Bennett and in
favor of New Mexico Steel in the amount of $.4 million in compensatory and $5.0
million in punitive damages. The Company believes that the verdict was not
supported by the law or the facts of the case and was a product of passion and
prejudice on the part of the jury. On January 4, 2000, the trial court judge
ordered a remittur of the punitive damages award from $5.0 million to $2.5
million. Each of the Company and the plaintiff have appealed the verdict.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the three months ended June 30, 2000, there were no matters submitted to
a vote of the Company's shareholders.

Executive Officers of the Registrant

The ages and five-year employment histories of Mallinckrodt's executive officers
at June 30, 2000 were as follows:

Barbara A. Abbett
Age 60. Vice President, Communications of the Company since April 1994.

Ashok Chawla
Age 50. Senior Vice President of the Company and President, Global Business
Group, since February 1998; Senior Vice President, Strategic Management of the
Company from 1997 to 1998; Vice President, Strategic Management of the Company
from 1991 to 1997.

Michael J. Collins
Age 46. Senior Vice President of the Company and President, Pharmaceuticals
Group since February 1998; Vice President of the Company from 1996 to 1998; and
President, Pharmaceutical Specialties Division from 1995 to 1998.

Bruce K. Crockett, Ph.D.
Age 56. Vice President, Human Resources of the Company since March 1995.

Bradley J. Fercho
Age 42. Senior Vice President of the Company and President, Imaging Group since
November 1998; Vice President, North America Field Operations, Imaging from
early 1998 to November 1998; and Vice President, North America Field Sales from
1995 to 1998.

Douglass B. Given
Age 48. Senior Vice President and Chief Technology Officer of the Company since
August 1999; and Chief Executive Officer of Progenitor, Inc. from 1994 to 1999.

John Q. Hesemann
Age 52. Senior Vice President of the Company since July 1998; and Vice President
Mallinckrodt Medical, Inc., Imaging-Contrast Media from 1994 to 1998.

C. Ray Holman
Age 57. Chairman of the Company since October 1994; and Chief Executive Officer
of the Company since December 1992.

Roger A. Keller
Age 55. Vice President, Secretary and General Counsel of the Company since July
1993.

Douglas A. McKinney
Age 47. Vice President and Controller of the Company since October 1997; and
Treasurer of the Company from 1995 to 1997.

                                       19
<PAGE>

Adeoye Y. Olukotun
Age 55. Vice President, Medical and Regulatory Affairs of the Company since June
1996; and Vice President, Bristol-Meyers Squibb Company 1991 to 1996.

Michael A. Rocca
Age 55. Senior Vice President and Chief Financial Officer of the Company since
April 1994.

William B. Stone
Age 57. Chief Information Officer and Vice President, Information Services since
August 1996; and Vice President and Controller of the Company from 1990 to 1996.

Frank A. Voltolina
Age 39. Staff Vice President and Treasurer of the Company since October 1997;
and Vice President, Corporate Tax from 1995 to 1997.

Forrest R. Whittaker
Age 50. Senior Vice President of the Company and President, Respiratory Group
since June 2000; Chief Executive Officer of Paidos Health Management Services
and President of Paidos Healthcare from 1993 to 2000.

Miscellaneous
All of the Company's officers are elected annually in October. No "family
relationships" exist among any of the listed officers.

                                       20
<PAGE>

PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Common Stock Prices and Dividends

                                                      Quarter
                                        ----------------------------------
                                         First    Second   Third    Fourth
                                        -------  -------  -------  -------
Fiscal 2000
   Dividends per common share........   $  .165  $  .165  $  .165  $  .165
   Common stock prices
      High...........................    37.188   35.813   33.313   45.000
      Low............................    28.938   29.000   22.188   25.750

Fiscal 1999
   Dividends per common share........   $  .165  $  .165  $  .115  $  .165
   Common stock prices
      High...........................    30.938   33.438   36.375   37.563
      Low............................    19.750   19.750   25.563   25.688

In February 1999, the Board of Directors of the Company approved the redemption
of the Company's non-voting common stock purchase rights at the redemption price
of five cents per right effective March 15, 1999. The combined payment of the
redemption price and the third quarter dividend equaled 16.5 cents per share.

The principal market on which Mallinckrodt's common stock is traded is the New
York Stock Exchange. Common stock prices are from the composite tape for New
York Stock Exchange issues, as reported in The Wall Street Journal. As of July
31, 2000, the number of registered holders of common stock as reported by the
Company's registrar was 6,111.

                                       21
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA
(Dollars in millions, except per share amounts)

<TABLE>
<CAPTION>
                                                                                         Year Ended June 30,
                                                                   --------------------------------------------------------------
                                                                    2000(1)       1999(1)       1998(2)        1997        1996
                                                                   --------      --------      --------      --------    --------
<S>                                                                <C>           <C>           <C>           <C>         <C>
SUMMARY OF OPERATIONS
Net sales......................................................    $2,652.8      $2,584.8      $2,371.2      $1,701.2    $1,600.4
Earnings (loss) from continuing operations.....................       205.0         172.9        (268.4)        175.2       143.6
Discontinued operations (3)....................................                      23.3          72.4          14.9        68.3
Cumulative effect of accounting change (4).....................                                    (8.4)
                                                                   --------      --------      --------      --------    --------
Net earnings (loss)............................................       205.0         196.2        (204.4)        190.1       211.9
Preferred stock dividends......................................         (.4)          (.4)          (.4)          (.4)        (.4)
                                                                   --------      --------      --------      --------    --------
Available for common shareholders..............................    $  204.6      $  195.8      $ (204.8)     $  189.7    $  211.5
                                                                   ========      ========      ========      ========    ========

PER COMMON SHARE DATA
Diluted earnings (loss) from continuing operations.............    $   2.96      $   2.40      $  (3.69)     $   2.33    $   1.88
Diluted net earnings (loss)....................................        2.96          2.72         (2.81)         2.53        2.77
Dividends declared.............................................         .66           .61           .66           .65         .61
Redemption of common stock purchase rights.....................                       .05
Book value.....................................................       16.71         14.84         13.60         17.16       16.44

OTHER DATA
Total assets...................................................    $3,468.9      $3,657.4      $3,873.1      $2,975.4    $3,017.6
Working capital................................................    $   70.4      $   26.9      $   (8.8)     $  963.1    $  359.1
Current ratio..................................................       1.1:1         1.0:1         1.0:1         2.5:1       1.4:1
Total debt (5).................................................    $  944.5      $1,126.3      $1,255.9      $  555.9    $  666.1
Shareholders' equity...........................................    $1,140.8      $1,060.4      $1,005.9      $1,251.2    $1,232.2
Return on shareholders' equity (5).............................          19%           17%         (24)%           14%         12%
Capital expenditures (5).......................................    $  149.2      $  116.9      $  142.7      $  104.4    $  116.6
Total dividends paid...........................................    $   45.5      $   43.9      $   48.5      $   48.2    $   45.7
Redemption of common stock purchase rights.....................                  $    3.6
Weighted-average common shares - diluted (in millions).........        69.1          71.9          73.5          75.1        76.4
Common shares outstanding (in millions)........................        67.6          70.7          73.2          72.3        74.3
Number of employees (5)........................................      12,300        13,100        13,300         8,000       8,000
</TABLE>

(1)  See Item 7, Management's Discussion and Analysis of Financial Condition and
     Results of Operations, for a description of nonrecurring items.

(2)  On August 28, 1997, the Company acquired Nellcor through an agreement to
     purchase for cash all of 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, and $308.3 million of the
     purchase price was allocated to purchased research and development. This
     intangible asset, which had no tax benefit, was charged to results of
     operations during 1998. Of the total charge of $308.3 million, $2.0 million
     related to the Aero Systems division which was sold and reclassified to
     discontinued operations in 1998.

     The sale of Nellcor inventories, which were stepped up to fair value in
     connection with allocation of purchase price, decreased earnings by $75.4
     million, $46.7 million net of taxes for 1998. After-tax charges to the
     Respiratory segment, which are included in earnings (loss) from continuing
     operations, were $46.1 million. After-tax charges to discontinued
     operations related to the Aero Systems division were $.6 million.

     Costs of exiting certain activities related to Mallinckrodt operations plus
     integration costs of the combined Mallinckrodt and Nellcor operations were
     $68.6 million, $46.4 million net of taxes. See the Special Charges section
     of Note 3 of the Notes to Consolidated Financial Statements for additional
     disclosure.

(3)  See Note 3 of Notes to Consolidated Financial Statements for information on
     discontinued operations in 1999 and 1998. Results for 1997 and 1996
     represent earnings from the catalysts and chemical additives division,
     animal health segment, Fries & Fries, Inc., and the feed ingredients
     business, partially offset by environmental and related litigation charges.

(4)  In April 1998, the American Institute of Certified Public Accountants
     (AICPA) issued SOP 98-5, "Reporting on the Costs of Start-Up Activities"
     (SOP 98-5), which requires that costs related to start-up activities be
     expensed as incurred. Prior to 1998, the Company capitalized its
     preoperating costs incurred in connection with opening a new facility. The
     Company elected to early adopt the provisions of SOP 98-5 in its financial
     statements for 1998. The effect of adoption of SOP 98-5 was to record a
     charge of $8.4 million, net of taxes, for the cumulative effect of an
     accounting change to expense costs that had previously been capitalized
     prior to July 1, 1997.

(5)  Excludes discontinued operations.

                                       22
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Mallinckrodt Inc. and its subsidiaries, collectively, are called the "Company"
or "Mallinckrodt." All references to years are to fiscal years ended June 30
unless otherwise stated. Certain amounts in prior years were reclassified to
conform to the current year presentation. All earnings per share amounts are
calculated on a diluted basis unless otherwise stated.

Overview

2000 vs. 1999
-------------

In 2000, Mallinckrodt had earnings from continuing operations and net earnings
of $205.0 million, or $2.96 per share. Results for the current year include a
net pretax gain of $16.3 million, $4.0 million net of tax, associated with gains
on the sale of the medical gas business and blood analysis product line, charges
associated with the manufacturing consolidation within the Respiratory segment,
and the write-down of an investment in an equity security. Excluding these
transactions, earnings from continuing operations and net earnings were $201.0
million, or $2.90 per share. These results represent improvements of 16 percent
and 21 percent in earnings from continuing operations and earnings per share
from continuing operations, respectively, when compared to 1999. This
improvement is attributable to operating earnings increases in the Respiratory
and Pharmaceuticals segments of the Company, lower interest and income tax
expense, and lower share base. Operating earnings of the Imaging segment
declined.

Earnings from continuing operations in 1999 were $172.9 million or $2.40 per
share. Net earnings in 1999 were $196.2 million, or $2.72 per share and included
a gain of $23.3 million, net of tax, or 32 cents per share on the sale of a
chemical additives business in July 1998 which related to a division
reclassified to discontinued operations in 1998.

On December 16, 1999, the Company sold its blood analysis product line, which
was part of the Respiratory segment, and recorded a $27.3 million pretax gain,
$16.9 million net of tax. On January 21, 2000, the Company sold its medical gas
business, which was part of the Respiratory segment, and recorded a $17.7
million pretax gain, $5.5 million net of tax. The pretax gains from these
transactions were included in nonoperating income, net.

During the quarter ended December 31, 1999, the Company recorded a pretax charge
in nonoperating income, net of $10.5 million, $6.5 million net of tax,
associated with the write-down of an investment in an equity security due to a
decline in fair value considered to be other than temporary.

During 2000, the Company recorded a pretax charge to cost of goods sold of $18.2
million, $11.9 million net of tax, for a manufacturing consolidation plan with
the objective of enhancing operating efficiencies within the Respiratory
segment. The pretax charge included $6.3 million related to the termination of
260 employees primarily associated with critical care ventilation production in
the United States, and $8.2 million to write off assets, primarily inventory,
associated with plan implementation. During the year, payments of $1.0 million
were made to the affected employees. The remaining cash expenditures are
expected to occur during 2001 and, although none are expected, reductions in the
liability will be credited to cost of goods sold. The pretax charge to cost of
goods sold also included $3.7 million primarily associated with employee
transition bonuses and other items expensed as incurred to ensure an orderly
transfer of manufacturing activities to Galway, Ireland. Expenses of this nature
will continue to be incurred in future periods until the manufacturing
consolidation plan is completed. Some products currently manufactured and
serviced are being discontinued; however, the revenue and operating earnings
associated with these products are not significant to the Respiratory segment.
The manufacturing consolidation is expected to have a positive impact on
earnings from continuing operations in 2001.

Net sales in 2000 increased 3 percent to $2.65 billion compared with $2.58
billion in 1999. Excluding sales of divested businesses of $61.0 million and
$131.8 million in 2000 and 1999, respectively, sales increased 6 percent over
last year. Sales to customers outside the United States were $857 million, or 32
percent of sales in 2000, and $840 million or 32 percent of total 1999 sales.

Mallinckrodt acquired Nellcor in August 1997. The acquisition of Nellcor was
accounted for under the purchase method of accounting and, accordingly, the
results of operations of Nellcor have been included in the Company's
consolidated financial statements since September 1, 1997. The purchase price of
the acquisition was allocated to the assets acquired and liabilities assumed
based upon accounting principles generally accepted in the United States and
estimated fair values at the date of acquisition.

                                       23
<PAGE>

As a result of the Nellcor acquisition, purchased research and development
valued at $308.3 million was charged to operations during the first quarter of
1998. The purchased research and development represents the value of numerous
new medical devices and other products/technology underway in all major product
lines of Nellcor that were in various stages of development and had not reached
technological feasibility at the date of acquisition. The value represents the
projected net cash flows based upon management's estimates of future revenues
and expected profitability of each product/technology. The projected net cash
flows were discounted at a rate which accounts for the time value of money as
well as the risks of realization of the cash flows. The discounted cash flows
were then reduced to reflect only the accomplishments made by Nellcor through
the acquisition date toward the products' ultimate completion.

Based upon results to date, the most significant in-process projects and
acquired technologies have experienced delays in market introduction and related
ramp up of revenues. The major hurdles associated with completion and
commercialization of these products are to transform concepts into designs that
meet customer requirements, gain regulatory approval and market clearance in key
markets, and ramp up the manufacturing process once regulatory approval is
obtained. In addition, due to the long development and regulatory approval
times, the customers' desires and competitors' actions oftentimes cause
unanticipated modifications to features or market acceptance. Actual revenue
shortfalls, which have occurred to date in these businesses when compared with
projections developed at the date of acquisition, have not materially reduced
profit expectations of these businesses. Material negative variations from the
projected results, should they occur, will reduce the expected rate of return on
the investment to acquire Nellcor and negatively impact the Company's
consolidated results of operations and financial position.

1999 vs. 1998
-------------

In 1999, Mallinckrodt had earnings from continuing operations of $172.9 million,
or $2.40 per share. The Company incurred a loss from continuing operations of
$268.4 million, or $3.69 per share, for 1998. The 1998 results of operations
included nonrecurring acquisition and integration charges related to the
acquisition of Nellcor in August 1997 which totaled $398.8 million net of taxes,
or $5.47 per share. Excluding these charges, earnings from continuing operations
would have been $130.4 million, or $1.77 per share. The 1999 earnings from
continuing operations and per share results represent improvements of 33 percent
and 36 percent, respectively, when compared to 1998 results after excluding the
nonrecurring charges. This year over year improvement was primarily attributable
to operating earnings improvement in the Respiratory and Pharmaceuticals
segments of the Company's operations while profitability of the Imaging segment
declined.

Net earnings for 1999 were $196.2 million, or $2.72 per share as compared to a
net loss of $204.4 million, or $2.81 per share during the prior year. Net
earnings for 1999 included an after-tax gain of $23.3 million on the sale of the
remaining operation of the catalysts and chemical additives division which was
reclassified to discontinued operations in 1998. The net loss in 1998 included
an after-tax gain of $80.3 million associated with the completed sales and
results of operations of the catalysts and chemical additives and Aero Systems
divisions. During the third quarter of 1998, the Company recorded an after-tax
charge of $7.9 million related to settlement costs from the sale of the animal
health business in the prior year. The net loss for 1998 also included an after-
tax charge of $8.4 million for the cumulative effect of an accounting change for
the early adoption of a new standard of accounting related to previously
capitalized start-up costs.

Net sales for 1999 increased 9 percent to $2.58 billion compared with $2.37
billion in 1998. Sales to customers outside the U.S. were $840 million or 32
percent of total 1999 sales. The year to year sales comparison benefitted from
the fact that 1998 sales only included sales of Nellcor after the acquisition
which occurred on August 28, 1997.

The acquisition of Nellcor was accounted for under the purchase method of
accounting and, accordingly, the results of operations of Nellcor have been
included in the Company's consolidated financial statements since September 1,
1997. The purchase price of the acquisition was allocated to the assets acquired
and liabilities assumed based upon accounting principles generally accepted in
the United States and estimated fair values at the date of acquisition.

As a result of the Nellcor acquisition, purchased research and development
valued at $308.3 million was charged to operations during the first quarter of
1998. The purchased research and development represents the value of numerous
new medical devices and other products/technologies underway in all major
product lines of Nellcor that were in various stages of development and had not
reached technological feasibility at the date of acquisition. The value
represents the projected net cash flows based upon management's estimates of
future revenues and expected profitability of each product/technology. The
projected net cash flows were discounted at a rate which accounts for the time
value of money as well as the risks of realization of the cash flows. The
discounted cash flows were then

                                       24
<PAGE>

reduced to reflect only the accomplishments made by Nellcor through the
acquisition date toward the products' ultimate completion.

The largest components of purchased research and development were in the pulse
oximetry, including perinatal, and the hospital ventilator businesses which
represent approximately 63 percent and 15 percent, respectively, of purchased
research and development.

The pulse oximetry projects underway at the date of acquisition related to
development of new monitors and disposable sensors. The most significant project
involves a new family of products that provide enhanced capabilities and ease of
use. This project anticipated sales revenue to begin in 2000. With many of the
products/features of this new family of products still in development, the
market release dates for all the items in this line of next generation products
has not been finalized. The other major project within oximetry is the
development of a fetal oximeter, a new monitor to directly measure fetal
oxygenation during labor and delivery. This perinatal product is intended to
provide reassurance to obstetricians when a baby is adequately oxygenated in the
presence of a non-reassuring fetal heart rate (FHR). In this common situation, a
cesarean section is often performed due to concern for possible fetal distress -
as suggested by the FHR pattern. Since a non-reassuring FHR is an indirect
indicator of fetal hypoxia with poor specificity, many of these cesarean
sections are retrospectively seen to be unnecessary. By providing a direct
measure of oxygenation, the fetal oximeter may help prevent unnecessary cesarean
sections for suspected fetal distress. The FDA approved the PMA in May 2000.

The most significant projects in development in the hospital ventilator business
at the date of acquisition were the Models 840* and 740*/760* ventilators. These
hospital ventilators were expected to be commercially available in the U.S.
within two years of the acquisition date. All three models received FDA market
clearance by December 1998. Actual revenues of these projects have experienced
shortfalls when compared to revenue estimates as of the acquisition date. These
shortfalls are primarily attributable to delays in receiving regulatory
clearance to market and problems with production ramp up activities which often
occur in the early stages of manufacturing a new product. These factors are no
longer concerns and, although sales were less than expected in 1998, the ramp up
in 1999 was consistent with Mallinckrodt's expectations.

Although market release dates for the most significant in-process projects and
acquired technologies discussed above have experienced delays, the projections
of total revenues to be generated and estimated costs to complete that were
developed at acquisition date were appropriate. Based upon results to date, the
major risks associated with completion and commercialization of these products
are to transform concepts into designs that meet customer requirements, gain
regulatory approval and market clearance in key markets, and ramp up the
manufacturing process once regulatory approval is obtained. Actual revenue
shortfalls, which have occurred to date in these businesses when compared with
projections developed at the date of acquisition, are not expected to materially
reduce the expected long-term revenues of these products, but only the timing of
the receipt of these revenues. Material negative variations from the projected
results, should they occur, will reduce the expected rate of return on the
investment to acquire Nellcor and negatively impact the Company's consolidated
results of operations and financial position.

Immediately after the acquisition of Nellcor was consummated, management of the
combined Company formulated an integration plan to combine Mallinckrodt and
Nellcor into one company. Since both companies (Mallinckrodt and Nellcor) had
global healthcare operations, senior management, through transition teams,
assessed which activities should be consolidated. Management finalized and
approved a Nellcor integration plan during 1998. Accordingly, the Company
recorded additional purchase liabilities during 1998 of $50.1 million, $30.8
million net of related tax benefit, which were included in the acquisition cost
allocation and related goodwill. The principal actions of the plan included the
involuntary severance of approximately 450 Nellcor employees as a result of work
force reduction primarily in U.S. administrative areas at a cost of $37.2
million, relocation of Nellcor employees at a cost of $3.8 million, and the
elimination of contractual obligations of Nellcor which had no future economic
benefit at a cost of $9.1 million. The actual number of employees terminated was
425. Approximately $45.4 million of cash expenditures were incurred through June
30, 1999 and liabilities of $1.6 million related to the Nellcor integration plan
remained in accrued liabilities at June 30, 1999. In June 1999, the estimated
liability was reduced by $3.1 million, $1.9 million net of related tax benefit,
with a corresponding $1.9 million reduction of goodwill primarily as a result of
reduced severance costs.

During 1998, the Company recorded a pretax charge to selling, general and
administrative expenses of $19.1 million associated with exiting certain
activities related to Mallinckrodt operations. The charge included severance
costs of $17.1 million related to the involuntary severance of approximately 130
Mallinckrodt employees as a result of work force reduction primarily in the
Europe administration function and U.S. sales force, and facility

                                       25
<PAGE>

exit costs of $2.0 million. The actual number of employees terminated was 115.
Approximately $14.5 million of cash expenditures have been incurred through June
30, 1999. In June 1999, the associated accrual was reduced by $.7 million and
credited to selling, general and administrative expenses.

Operating Results
  (In millions)
<TABLE>
<CAPTION>
                                                                    2000              1999              1998
                                                                    ----              ----              ----
<S>                                                                 <C>               <C>               <C>
Net sales
 Respiratory..................................................      $1,133            $1,144            $  991
 Imaging......................................................         769               780               764
 Pharmaceuticals..............................................         751               661               616
                                                                    ------            ------            ------
                                                                    $2,653            $2,585            $2,371
                                                                    ======            ======            ======
Operating earnings (loss)
 Respiratory..................................................      $  147            $  138            $  102
 Imaging......................................................          84               119               124
 Pharmaceuticals..............................................         120               103                83
                                                                     -----            ------            ------
                                                                       351               360               309
 Corporate expense............................................         (23)              (25)              (23)
 Nellcor acquisition and integration charges..................                                            (449)
                                                                    ------            ------            ------
                                                                    $  328            $  335            $ (163)
                                                                    ======            ======            ======
</TABLE>

2000 vs. 1999
-------------

Operating earnings for 2000, excluding corporate expense, was $351 million,
which is a 3 percent decline from the $360 million in 1999. Excluding an $18
million charge in the current year associated with the Respiratory segment
manufacturing consolidation plan previously discussed and earnings related to
divested businesses of $15 million and $31 million recorded in 2000 and 1999,
respectively, operating earnings in 2000, excluding corporate expense, were $354
million, which is a 7 percent increase over the $329 million for 1999 determined
on a comparable basis.

Respiratory segment sales for 2000 were $1,133 million or 1 percent below prior
year. Excluding sales from businesses divested of $60 million and $121 million
for 2000 and 1999, respectively, sales were up $50 million or 5 percent over the
prior year. Components of the 5 percent sales increase were 6 percent volume
growth offset by a 1 percent negative foreign currency impact, while pricing
remained relatively unchanged. Pulse oximetry sales grew $36 million over the
comparable period of last year with volume up 12 percent and pricing down 2
percent. Oxygen therapy, after excluding divested businesses, grew $9 million
over prior year with volume and price up 7 percent and 4 percent, respectively,
and partially offset by a negative foreign currency impact of 2 percent. The
other product lines within this segment had sales which were approximately equal
to those recorded in the prior year. Operating earnings for the Respiratory
segment were $147 million or 6 percent higher than the same period last year.
Divested businesses in the Respiratory segment had combined operating earnings
of $15 million and $29 million for 2000 and 1999, respectively. Excluding an $18
million charge in the current year associated with the manufacturing
consolidation plan and earnings related to divested businesses, operating
earnings were $150 million, which is $41 million or 37 percent higher than the
prior year determined on a comparable basis. The improvement was primarily
attributable to the strong volume growth of pulse oximetry and lower operating
expenses.

Imaging segment sales in 2000 were $769 million or 1 percent below the prior
year period. Volume and pricing in x-ray contrast media declined 2 percent and 3
percent, respectively. Radiopharmaceutical volume and price increased 8 percent
and 3 percent, respectively, while foreign currency had a 2 percent negative
impact as a result of the strength of the U.S. dollar. Operating earnings for
this segment were $84 million in 2000 or 30 percent below prior year. Excluding
earnings of divested businesses, the operating earnings decline would have been
28 percent. In addition to lower sales volume and price declines in x-ray
contrast media, profits were negatively impacted when compared to the prior year
by lower manufacturing volume to reduce inventory levels and expense associated
with implementation of a manufacturing process cost reduction for Ioversol, the
key active ingredient in Optiray*. Price declines within the x-ray contrast
media business are expected to continue to be a factor in future periods.

The Pharmaceuticals segment's sales in 2000 were $751 million or 14 percent
greater than for 1999. The sales increase of $90 million was attributable to
volume increases in all product lines, but 75 percent of the increase was in
bulk and dosage narcotics. This increase was the result of increased demand and
manufacturing capacity of bulk narcotics, the impact of new product
introductions, and increased market share of dosage products. The bulk and
dosage narcotic product lines' sales increase of 29 percent was comprised of
volume growth of 30 percent offset by

                                       26
<PAGE>

price declines related to dosage narcotics. Operating earnings during 2000 were
$120 million or 16 percent higher than last year primarily due to increased
sales.

1999 vs. 1998
-------------

Operating earnings for 1999 were $360 million, which is a 16 percent improvement
over the $309 million in 1998 excluding acquisition and integration charges
associated with the acquisition of Nellcor, which were discussed previously, and
corporate expense.

The Respiratory segment, of which Nellcor is a part, had sales for 1999 of
$1,144 million, or 15 percent greater than the sales recorded for 1998. The
segment's sales increase of $153 million was attributable to volume growth of 17
percent, of which 10 percent was due to the inclusion of ten months of Nellcor
revenue in 1998. The 7 percent volume growth in the comparable September through
June periods included $97 million or 12 percent overall growth of pulse
oximetry, ventilation, service, anesthesiology and respiratory disposables,
blood analysis and medical gases. Volume declines of $27 million included $11
million associated with divested businesses and $16 million in the oxygen
therapy, sleep and portable ventilation lines of business. The volume declines
in the on-going businesses were primarily due to delayed new product
introductions and competitive pressures associated with customer third-party
reimbursement on existing products in these businesses. Operating earnings of
this segment for 1999 were $138 million, or 35 percent greater than the $102
million reported for the prior year. The year to year improvement was primarily
attributable to the two additional months of sales and higher sales volumes in
product lines generating the highest margins.

The Imaging segment's sales in 1999 were $780 million, or 2 percent above the
sales for the prior year. The sales increase was attributable to a $30 million
increase in sales of nuclear medicine products. All major product lines
contributed to the year over year volume increase of 4 percent, which was offset
by price erosion in x-ray contrast media. Although price declines of 5 percent
in the x-ray contrast media portion of the business in 1999 were less
significant when compared to those experienced in prior years, declines will
continue in future periods thus reducing profitability further. Operating
earnings for 1999 were $119 million, which was 4 percent lower than in the prior
year primarily as a result of selling price erosion in x-ray contrast media.

The Pharmaceuticals segment's sales for 1999 were $661 million, or 7 percent
above the revenues generated last year. The sales increase of $45 million was
primarily attributable to volume increases in narcotics and drug chemicals of
$52 million, which was an increase of 17 percent. Sales volumes of acetaminophen
and laboratory and microelectronic chemicals declined 5 percent and 6 percent,
respectively. The decline in acetaminophen sales was primarily due to a late flu
season in the U.S., while the decline in laboratory and microelectronic
chemicals was primarily attributable to the weakness in the microchip industry.
Price generated a 2 percent increase in sales for the segment when compared to
the prior year. New competitors are expected in narcotics manufacturing during
2000 which may negatively impact selling prices. Operating earnings for 1999
were $103 million, or 24 percent above the prior year primarily as a result of
increased sales of higher margin products.

Corporate Matters

Corporate expense in 2000 was down $2 million or 8 percent when compared to
1999. Corporate expense in 1999 was up $2 million or 8 percent over 1998,
excluding 1998 nonrecurring integration charges.

Nonoperating income, net was $42.2 million for 2000. The Company recorded a
pretax gain on the divestiture of the medical gas business of $17.7 million, a
pretax gain on the divestiture of the blood analysis product line of $27.3
million and a pretax charge of $10.5 million related to the write-down of an
investment in an equity security classified as available for sale due to a
decline in fair value considered other than temporary. The remaining balance of
$7.7 million is primarily the result of gains on the disposal of real estate.
See Note 3 of the Notes to Consolidated Financial Statements for additional
information.

Nonoperating income, net was $4.0 million and $14.8 million in 1999 and 1998,
respectively. In 1998, the Company generated interest income on cash proceeds
from 1997 divestiture activities invested in interest bearing securities. These
cash equivalents were utilized to acquire Nellcor at the end of August 1997.

Interest expense in 2000 was $74.6 million, which is $10.4 million below the
$85.0 million for the prior year. The reduction in interest expense was
attributable to lower outstanding debt, as divestiture proceeds generated in
2000 were partially used to reduce short-term borrowing. The 1999 interest
expense was $16.8 million lower than was

                                       27
<PAGE>

recorded in 1998, as divestiture proceeds were used to reduce short-term
borrowing and short-term borrowing costs were lower.

The Company's effective tax rate in 2000 was 30.6 percent. Excluding the impact
of the divestitures of the medical gas business and the blood analysis product
line, the write-down of the equity investment and the charge for the
manufacturing consolidation in the Respiratory segment discussed above, the
effective tax rate was 28.0 percent for 2000. The Company's effective tax rate
in 1999 was 32.0 percent. The effective tax rate reduction is attributable to a
shift in the Company's earnings mix toward low tax jurisdictions and the
implementation of various ongoing tax initiatives. Excluding the one-time
noncash write-off of purchased research and development, which related to the
Nellcor acquisition and which had no tax benefit, the Company's effective tax
rate in 1998 was 32.7 percent.

Financial Condition

The Company's financial resources are expected to continue to be adequate to
support existing businesses. Since June 30, 1999, cash and cash equivalents
decreased $6.8 million. Operations provided $274.7 million of cash, while
capital spending totaled $149.2 million. The Company received $220.4 million in
proceeds from asset disposals. Payments on long-term debt were $201.5 million.
At June 30, 2000, the Company's current ratio was 1.1:1, and debt as a
percentage of invested capital was 45.3 percent.

At June 30, 2000, the Company had a $1.0 billion private placement commercial
paper program. The program is backed by a $1.0 billion revolving credit facility
expiring September 12, 2002. There were no borrowings outstanding under the
revolving credit facility at June 30, 2000. Commercial paper borrowings under
this program were $172.8 million as of June 30, 2000. Non-U.S. lines of credit
totaling $125.8 million were also available, and borrowings under these lines
amounted to $24.6 million at June 30, 2000. The non-U.S. lines are cancelable at
any time.

In May 1999, a $500 million shelf debt registration was declared effective by
the Securities and Exchange Commission, and at June 30, 2000, the entire amount
remained available.

The Company has $200 million aggregate principal amount of 6.3 percent notes,
which mature in 2011 and are redeemable at the election of the holder, in whole
but not in part, at 100 percent of the principal amount on March 15, 2001. These
notes have been classified as short-term.

The Company's common stock share repurchases have totaled 4.0 million shares
during 2000. As of June 30, 2000, authorizations to repurchase an additional 6.1
million shares remain under previously approved resolutions of the Company's
Board of Directors.

Estimated capital spending for the year ending June 30, 2001 is $140 million.

Year 2000 Readiness Disclosure
------------------------------

The Year 2000 issue is the result of date-sensitive devices, systems and
computer programs that were deployed using two digits rather than four to define
the applicable year. Any such technologies may recognize a year containing "00"
as the year 1900 rather than the year 2000. If left unaddressed, this could
result in a system failure or miscalculations, under certain circumstances,
causing disruptions of operations including, among other things, a temporary
inability to process transactions or engage in similar normal business
activities.

Mallinckrodt developed and implemented a comprehensive program to address the
Year 2000 issue. The program has four major focus areas: information technology
systems, non-information technology systems, products, and key supplier and
business partners.

The Company completed modifications, replacements or conversions where deemed
necessary and appropriate. In addition, the Company developed operating
contingency plans to address unanticipated interruptions that could occur in its
critical processes, systems and devices that have been assessed, remediated and
considered Year 2000 ready by Mallinckrodt and its key suppliers and business
partners.

The Company has experienced no significant problems associated with the Year
2000 issues.

The program to address Year 2000 has been underway since February 1997. Both
internal and external resources were used to assess and modify or replace non-
compliant technologies, and to appropriately test Year 2000

                                       28
<PAGE>

modifications and replacements. The program is funded through operating cash
flows. Based upon management's best estimates, the pretax costs incurred for
this effort were approximately $10 million, $7 million and $1 million in 1999,
1998 and 1997, respectively. In 2000, the Company incurred an additional $2
million in pretax costs for program management and to complete monitoring and
evaluations of key suppliers and business partners, program verification and
contingency planning. As of March 31, 2000, the Year 2000 program was considered
complete and no further actions were required.

European Monetary Union (EMU)
-----------------------------

The euro was introduced on January 1, 1999, at which time the eleven
participating EMU member countries established fixed conversion rates between
their existing currencies (legacy currencies) and the euro. The legacy
currencies will continue to be valid as legal tender through July 1, 2002;
thereafter, the legacy currencies will be canceled. Euro bills and coins will be
used for cash transactions in the participating countries effective January 1,
2002, allowing for a six-month transition period to euro cash.

The Company's European sales offices and various manufacturing and distribution
facilities affected by the euro conversion have established plans to address the
systems issues raised by the euro currency conversion. The Company is cognizant
of the potential business implications of converting to a common currency;
however, to date, it has not had a material impact on the results of operations.
The ultimate financial impact of the conversion on the Company's operations will
be dependent upon the competitive situations which exist in the various regional
markets in which the Company participates and the potential actions which may or
may not be taken by the Company's competitors and suppliers.

Mallinckrodt believes converting to the euro will have no material impact on the
Company's currency exchange cost and/or risk exposure, continuity of contracts
or taxation.

Environmental Matters

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 active
investigation or remediation of, or is addressing potential claims of, alleged
or acknowledged contamination at approximately 22 currently or previously owned
or operated sites and at approximately 13 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.

Most of the Company's environmental-related capital expenditures are in response
to provisions of the Federal Clean Air Act; Water Pollution Control Act;
Resource Conservation and Recovery Act; and land use, air and water protection
regulations of the various localities and states, and their foreign
counterparts. Capital expenditures worldwide relating to air emission control,
wastewater purification, land reclamation and solid waste disposal totaled
approximately $6 million in 2000, $5 million in 1999, and $6 million in 1998.
The Company currently estimates that environmental capital expenditures during
2001 and 2002 will be $22 million and $21 million, respectively.

                                       29
<PAGE>

The Company had previously recognized the costs associated with the
investigation and remediation of Superfund sites, the litigation of potential
environmental claims, and the investigation and remedial activities at the
Company's current and former operating sites. Related accruals of $122.6 million
at June 30, 2000 are included in current accrued liabilities and other
noncurrent liabilities and deferred credits. Any claims for potential recovery
from any sources have not been valued against the accrued environmental
liabilities. While ongoing litigation may eventually result in recovery of costs
expended at certain of the environmental sites, any recovery is contingent upon
a successful outcome and has not been recognized in the Company's results of
operations.

The Company has recognized the costs and associated liabilities only for those
matters that are in its view probable and estimable. Based upon information
currently available, management believes that existing accrued liabilities 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 results of
operations or financial position.

Risk Management Strategies

The Company operates globally, with manufacturing and distribution facilities in
various countries throughout the world, and is subject to certain opportunities
and risks, including foreign currency fluctuations and government actions.
Various operational initiatives are employed to help manage business risks. In
the ordinary course of business, Mallinckrodt purchases materials and sells
finished products denominated in approximately 25 different currencies. The
Company is primarily exposed to changes in exchange rates of the German deutsche
mark and other Euro currencies, the Japanese yen and the Great Britain pound.
Overall, the Company is a net beneficiary when the U.S. dollar weakens and is
adversely affected by a stronger U.S. dollar relative to the major currencies
identified.

Operations in each country are monitored so that the Company can quickly respond
to changing economic and political environments as well as changes in foreign
currency exchange rates and interest rates. The Company enters into forward
foreign exchange contracts and currency swaps to minimize the exposure on
intercompany financing transactions. To minimize the impact of anticipated
foreign currency exposures which arise from probable purchases of raw materials
or other inventory, collection of accounts receivable, settlement of accounts
payable, and periodic debt service by international subsidiaries which occur in
the ordinary course of business, the Company hedges a portion of its non-U.S.
dollar denominated exposures by purchasing currency options which generally have
terms of two years or less, and which have little or no intrinsic value at time
of purchase. The Company uses the options with an objective of limiting negative
foreign exchange rate effects on overall performance for both budget and prior
year comparisons over a rolling 18- to 24-month horizon. The Company seeks to
have effective coverage levels over such 18- to 24-month horizon of 50 to 80
percent of currency exposures that subject the Company to risk. The hedges are
designed to satisfy the requirements for deferral accounting treatment at
inception. Gains and losses in the hedges are expected to be systematically
monetized with concurrent reinvestment to replace monetized hedges and maintain
overall hedging coverage targets. The net impact of foreign exchange activities
on earnings was immaterial for 2000, 1999 and 1998, including conversion of
certain currencies into functional currencies and the costs of hedging certain
transactions and balance sheet exposures. The foreign currency translation loss
included in accumulated other comprehensive loss in shareholders' equity, and
resulting from the translation of the financial statements of most of the
Company's international affiliates into U.S. dollars, increased by $30.1 million
in 2000 due to the strengthening of the U.S. dollar against the functional
currency of many of the Company's international affiliates.

The Company's interest income and expense are most sensitive to changes in the
general level of U.S. interest rates. In this regard, changes in U.S. interest
rates affect the interest earned on the Company's cash equivalents and short-
term investments as well as interest paid on its short-term debt. To manage the
interest rate characteristics of its outstanding debt to a more desirable fixed
or variable rate basis or to limit the Company's exposure to rising interest
rates, the Company periodically enters into interest rate swaps and option
contracts.

The Company does not consider the present general rate of inflation to have a
significant impact on the businesses in which it operates.

While future economic events cannot be predicted, the Company believes its
current operations and future expansion plans will not result in a significantly
different risk profile.

                                       30
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has determined that its market risk exposures, which arise primarily
from exposures to fluctuations in interest rates and foreign currency rates, are
not material to its future earnings, fair value and cash flows.

                                       31
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


     Report of Independent Auditors.....................................   33
     Responsibility for Financial Reporting.............................   34
     Consolidated Statements of Operations..............................   35
     Consolidated Balance Sheets........................................   36
     Consolidated Statements of Cash Flows..............................   37
     Consolidated Statements of Changes in Shareholders' Equity.........   38
     Notes to Consolidated Financial Statements.........................   39
     Quarterly Results..................................................   59

                                       32
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of Mallinckrodt Inc.

We have audited the accompanying consolidated balance sheets of Mallinckrodt
Inc. as of June 30, 2000 and 1999, and the related consolidated statements of
operations, changes in shareholders' equity, and cash flows for each of the
three years in the period ended June 30, 2000, appearing on pages 35 through 58.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Mallinckrodt Inc. at June 30, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
June 30, 2000, in conformity with accounting principles generally accepted in
the United States.

As discussed in Note 1 to the consolidated financial statements, in the year
ended June 30, 1998, the Company adopted Statement of Position 98-5, "Reporting
on the Costs of Start-Up Activities."



Ernst & Young LLP
St. Louis, Missouri
August 1, 2000

                                       33
<PAGE>

RESPONSIBILITY FOR FINANCIAL REPORTING

The consolidated financial statements included in this report are the
responsibility of management. The statements have been prepared in conformity
with accounting principles generally accepted in the United States and include
amounts based on our best estimates and judgments. Financial information
appearing elsewhere in this report is consistent with that in the financial
statements.

Management is also responsible for maintaining systems of internal accounting
control with the objectives of providing reasonable assurance at reasonable cost
that the Company's assets are safeguarded against material loss from
unauthorized use or disposition and that transactions are properly authorized
and recorded to permit reliance on the Company's financial data and records. In
addition, the Company maintains a program for communicating corporate policy
throughout the organization and, as a further safeguard, an internal audit staff
monitors compliance with policies and systems of internal accounting control.

Mallinckrodt's consolidated financial statements have been audited by Ernst &
Young LLP. To express their opinion as to the fairness of the statements in
conformity with accounting principles generally accepted in the United States,
the independent auditors review and evaluate Mallinckrodt's accounting controls
and conduct such tests and other procedures as they deem necessary. The Audit
Committee of the Board of Directors regularly meets with the independent
auditors, without management present, to review financial reporting matters, and
audit and control functions.



Douglas A. McKinney
Vice President and Controller
August 1, 2000



Michael A. Rocca
Senior Vice President and Chief Financial Officer
August 1, 2000

                                       34
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)


<TABLE>
<CAPTION>
                                                                                        YEAR ENDED JUNE 30,
                                                                           --------------------------------------------
                                                                             2000             1999               1998
                                                                           --------          --------          --------
<S>                                                                        <C>               <C>               <C>
Net sales...............................................................   $2,652.8          $2,584.8          $2,371.2
Operating costs and expenses:
  Cost of goods sold....................................................    1,474.5           1,379.9           1,368.8
  Selling, general and administrative expenses..........................      704.7             717.3             714.1
  Purchased research and development....................................                                          306.3
  Research and development expenses.....................................      145.8             152.2             145.0
                                                                           --------          --------          --------
Total operating costs and expenses......................................    2,325.0           2,249.4           2,534.2
                                                                           --------          --------          --------

Operating earnings (loss)...............................................      327.8             335.4            (163.0)
Nonoperating income, net................................................       42.2               4.0              14.8
Interest expense........................................................      (74.6)            (85.0)           (101.8)
                                                                           --------          --------          --------

Earnings (loss) from continuing operations before income taxes..........      295.4             254.4            (250.0)
Income tax provision....................................................       90.4              81.5              18.4
                                                                           --------          --------          --------

Earnings (loss) from continuing operations..............................      205.0             172.9            (268.4)
Discontinued operations.................................................                         23.3              72.4
                                                                           --------          --------          --------

Earnings (loss) before cumulative effect of accounting change...........      205.0             196.2            (196.0)
Cumulative effect of accounting change..................................                                           (8.4)
                                                                           --------          --------          --------

Net earnings (loss).....................................................      205.0             196.2            (204.4)
Preferred stock dividends...............................................        (.4)              (.4)              (.4)
                                                                           --------          --------          --------

Available for common shareholders.......................................   $  204.6          $  195.8          $ (204.8)
                                                                           ========          ========          ========

Basic earnings per common share:
  Earnings (loss) from continuing operations............................   $   2.97          $   2.41          $  (3.69)
  Discontinued operations...............................................                          .32               .99
  Cumulative effect of accounting change................................                                           (.11)
                                                                           --------          --------          --------
  Net earnings (loss)...................................................   $   2.97          $   2.73          $  (2.81)
                                                                           ========          ========          ========

Diluted earnings per common share:
  Earnings (loss) from continuing operations............................   $   2.96          $   2.40          $  (3.69)
  Discontinued operations...............................................                          .32               .99
  Cumulative effect of accounting change................................                                           (.11)
                                                                           --------          --------          --------
  Net earnings (loss)...................................................   $   2.96          $   2.72          $  (2.81)
                                                                           ========          ========          ========
</TABLE>



(The accompanying Notes are an integral part of the Consolidated Financial
Statements.)

                                       35
<PAGE>

CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                                                    JUNE 30,
                                                                                           -------------------------
ASSETS                                                                                        2000           1999
                                                                                           ----------     ----------
<S>                                                                                        <C>             <C>
Current assets:
     Cash and cash equivalents...........................................................  $   25.9        $   32.7
     Trade receivables, less allowances of $18.2 in 2000 and $17.9 in 1999...............     487.8           490.9
     Inventories.........................................................................     447.1           530.3
     Deferred income taxes...............................................................      93.8            54.7
     Other current assets................................................................      79.7            61.3
                                                                                           --------        --------
Total current assets.....................................................................   1,134.3         1,169.9


Investments and other noncurrent assets..................................................     101.4            67.2
Property, plant and equipment, net.......................................................     853.3           870.7
Goodwill, net............................................................................     858.1           942.3
Technology, net..........................................................................     287.0           336.4
Other intangible assets, net.............................................................     225.7           266.6
Deferred income taxes....................................................................       9.1             4.3
                                                                                           --------        --------
Total assets.............................................................................  $3,468.9        $3,657.4
                                                                                           ========        ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Short-term debt.....................................................................  $  403.6        $  383.8
     Accounts payable....................................................................     250.1           221.2
     Accrued liabilities.................................................................     366.5           459.5
     Income taxes payable................................................................      42.6            77.3
     Deferred income taxes...............................................................       1.1             1.2
                                                                                           --------        --------
Total current liabilities................................................................   1,063.9         1,143.0

Long-term debt, less current maturities..................................................     540.9           742.5
Deferred income taxes....................................................................     391.1           363.0
Postretirement benefits..................................................................     166.1           166.5
Other noncurrent liabilities and deferred credits........................................     166.1           182.0
                                                                                           --------        --------
Total liabilities........................................................................   2,328.1         2,597.0
                                                                                           --------        --------

Shareholders' equity:
     4 Percent cumulative preferred stock................................................      11.0            11.0
     Common stock, par value $1, authorized 300,000,000 shares;
          issued 87,124,773 shares.......................................................      87.1            87.1
     Capital in excess of par value......................................................     318.5           314.7
     Reinvested earnings.................................................................   1,347.9         1,188.4
     Accumulated other comprehensive loss................................................     (94.0)         (105.1)
     Treasury stock, at cost.............................................................    (529.7)         (435.7)
                                                                                           --------        --------
Total shareholders' equity...............................................................   1,140.8         1,060.4
                                                                                           --------        --------
Total liabilities and shareholders' equity...............................................  $3,468.9        $3,657.4
                                                                                           ========        ========
</TABLE>

(The accompanying Notes are an integral part of the Consolidated Financial
Statements.)

                                       36
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

<TABLE>
<CAPTION>

                                                                                       YEAR ENDED JUNE 30,
                                                                                 ---------------------------------
                                                                                  2000       1999         1998
                                                                                --------    -------    ----------
<S>                                                                              <C>       <C>          <C>
CASH FLOWS - OPERATING ACTIVITIES
Net earnings (loss)..........................................................    $ 205.0    $ 196.2    $  (204.4)
Adjustments to reconcile net earnings (loss) to net cash provided
 by operating activities:
    Depreciation.............................................................      123.6      130.6        114.3
    Amortization.............................................................       81.6       84.5         75.3
    Postretirement benefits..................................................        (.5)      (2.6)         6.3
    Gains on asset disposals.................................................      (54.4)     (39.7)      (114.3)
    Deferred income taxes....................................................      (29.9)      13.6        (75.8)
    Write-down of investment in equity security..............................       10.5
    Write-off of purchased research and development..........................                              308.3
    Sale of inventory stepped up to fair value at acquisition................                               75.4
    Write-off of pre-operating costs.........................................                               12.5
                                                                                --------    -------    ---------
                                                                                   335.9      382.6        197.6
    Changes in operating assets and liabilities:
     Trade receivables.......................................................       (7.3)      (9.2)       (15.6)
     Inventories.............................................................       72.3      (62.2)       (18.1)
     Other current assets....................................................      (18.0)       4.5         63.8
     Accounts payable, accrued liabilities and income taxes payable, net.....      (84.7)    (112.2)       (15.8)
     Net assets of discontinued operations...................................                                (.4)
     Other noncurrent liabilities and deferred credits.......................        7.5        8.1         30.6
     Other, net..............................................................      (31.0)     (18.0)         1.3
                                                                                --------    -------    ---------
Net cash provided by operating activities....................................      274.7      193.6        243.4
                                                                                --------    -------    ---------
CASH FLOWS - INVESTING ACTIVITIES
Capital expenditures.........................................................     (149.2)    (116.9)      (142.7)
Proceeds from asset disposals................................................      220.4       75.4        308.2
Acquisition spending.........................................................       (1.0)      (3.5)    (1,790.9)
Purchase of investments and intangible assets................................      (27.2)     (11.5)       (17.0)
Proceeds from redemption and sale of investments.............................                  89.8          8.8
                                                                                --------    -------    ---------
Net cash provided (used) by investing activities.............................       43.0       33.3     (1,633.6)
                                                                                --------    -------    ---------
CASH FLOWS - FINANCING ACTIVITIES
Increase (decrease) in notes payable.........................................       19.1     (126.2)       279.5
Proceeds from long-term debt.................................................                              399.8
Payments on long-term debt...................................................     (201.5)      (8.1)        (3.9)
Issuance of common stock.....................................................       21.2        6.1         20.2
Acquisition of treasury stock................................................     (117.8)     (74.0)        (9.7)
Dividends paid...............................................................      (45.5)     (43.9)       (48.5)
Redemption of common stock purchase rights...................................                  (3.6)
                                                                                --------    -------    ---------
Net cash provided (used) by financing activities.............................     (324.5)    (249.7)       637.4
                                                                                --------    -------    ---------

Decrease in cash and cash equivalents........................................       (6.8)     (22.8)      (752.8)
Cash and cash equivalents at beginning of year...............................       32.7       55.5        808.3
                                                                                --------    -------    ---------
Cash and cash equivalents at end of year.....................................    $  25.9    $  32.7   $     55.5
                                                                                ========    =======    =========
</TABLE>

(The accompanying Notes are an integral part of the Consolidated Financial
Statements.)

                                       37
<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In millions, except per share amounts)
<TABLE>
<CAPTION>
                                                                                               Accumulated
                                                                    Capital in                    Other
                                                 Preferred  Common   Excess of   Reinvested   Comprehensive   Treasury
                                                   Stock    Stock    Par Value    Earnings         Loss         Stock      Total
                                                 ---------  ------  -----------  -----------  --------------  ---------  ----------
<S>                                              <C>        <C>     <C>          <C>          <C>             <C>        <C>
BALANCE, JUNE 30, 1997...........................    $11.0   $87.1      $305.9     $1,292.6         $ (49.9)   $(395.5)   $1,251.2
Comprehensive income (loss):
 Net loss........................................                                    (204.4)                                (204.4)
 Foreign currency translation....................                                                     (21.1)                 (21.1)
 Unrealized loss on investments..................                                                      (1.6)                  (1.6)
 Comprehensive loss..............................                                                                           (227.1)
Cash dividends:
 4 percent cumulative preferred stock
  ($4.00 per share)..............................                                       (.4)                                   (.4)
 Common stock ($.66 per share)...................                                     (48.1)                                 (48.1)
Stock option exercises...........................                          1.6                                    16.5        18.1
Income tax benefit from stock
  options exercised..............................                          2.1                                                 2.1
Acquisition of treasury stock....................                                                                 (9.7)       (9.7)
Investment plan match............................                          2.4                                     7.3         9.7
Stock awards.....................................                          3.2                                     6.9        10.1
                                                    ------   -----     -------    ---------         -------    -------    --------
BALANCE, JUNE 30, 1998...........................     11.0    87.1       315.2      1,039.7           (72.6)    (374.5)    1,005.9
Comprehensive income (loss):
 Net earnings....................................                                     196.2                                  196.2
 Foreign currency translation....................                                                     (28.7)                 (28.7)
 Unrealized loss on investments..................                                                      (3.8)                  (3.8)
                                                                                                                          --------
 Comprehensive income............................                                                                            163.7
                                                                                                                          --------
Cash dividends:
 4 percent cumulative preferred
  stock ($4.00 per share)........................                                       (.4)                                   (.4)
 Common stock ($.61 per share)...................                                     (43.5)                                 (43.5)
Redemption of common stock
  purchase rights ($.05 per share)...............                                      (3.6)                                  (3.6)
Stock option exercises...........................                         (1.2)                                    6.4         5.2
Income tax benefit from stock
  options exercised..............................                           .9                                                  .9
Acquisition of treasury stock....................                                                                (74.0)      (74.0)
Investment plan match............................                          (.2)                                    6.2         6.0
Stock awards.....................................                                                                   .2          .2
                                                    ------   -----     -------    ---------         -------    -------    --------
BALANCE, JUNE 30, 1999...........................     11.0    87.1       314.7      1,188.4          (105.1)    (435.7)    1,060.4
Comprehensive income (loss):
 Net earnings....................................                                     205.0                                  205.0
 Foreign currency translation....................                                                       5.7                    5.7
 Unrealized gain on investments..................                                                       5.4                    5.4
                                                                                                                          --------
 Comprehensive income............................                                                                            216.1
                                                                                                                          --------
Cash dividends:
 4 percent cumulative preferred
  stock ($4.00 per share)........................                                       (.4)                                   (.4)
 Common stock ($.66 per share)...................                                     (45.1)                                 (45.1)
Stock option exercises...........................                           .6                                    16.9        17.5
Income tax benefit from stock
  options exercised..............................                          2.7                                                 2.7
Acquisition of treasury stock....................                                                               (117.8)     (117.8)
Investment plan match............................                           .6                                     5.7         6.3
Employee stock purchase plan.....................                          (.1)                                    1.1         1.0
Stock awards.....................................                                                                   .1          .1
                                                    ------   -----     -------    ---------         -------    -------    --------
BALANCE, JUNE 30, 2000...........................    $11.0   $87.1      $318.5     $1,347.9         $ (94.0)   $(529.7)   $1,140.8
                                                    ======   =====     =======    =========         =======    =======    ========
</TABLE>

The accompanying Notes are an integral part of the Consolidated Financial
Statements.



                                       38
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Mallinckrodt Inc. and its subsidiaries, collectively, are called the "Company"
or "Mallinckrodt."  All references to years are to fiscal years ended June 30
unless otherwise stated.  Disclosures relate to continuing operations, unless
otherwise stated.  Certain amounts in prior years were reclassified to conform
to the current year presentation.  All earnings per share amounts are calculated
on a diluted basis unless otherwise stated.

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

Financial statements of all majority owned subsidiaries are consolidated.
Investments in 20 to 50 percent owned affiliates are reported on the equity
method.  Intercompany transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the revenues and expenses during the reporting period, as well
as amounts included in the notes.  While the Company uses its best estimates and
judgments, actual results could differ from these estimates.

Foreign Currency Translation

The financial statements of most of the Company's international affiliates are
translated into U.S. dollars using current exchange rates for balance sheets and
weighted-average rates for income statements.  Unrealized translation
adjustments are included in accumulated other comprehensive loss in
shareholders' equity in the Consolidated Balance Sheets.

The financial statements of international affiliates that operate in
hyperinflationary economies in certain Latin American countries are translated
at current and historical exchange rates, as appropriate.  Unrealized
translation adjustments are included in operating results for these affiliates.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of certificates of deposit, time
deposits and other short-term securities with maturities of three months or less
from the date of purchase.

Inventories

Inventories are valued at the lower of cost or market.  Cost for inventories is
determined on either an average or first-in, first-out basis.

Investments

The Company's investments in marketable equity securities are classified as
"available-for-sale" and are carried at fair market value, with the unrealized
gains and losses included, net of income taxes, in accumulated other
comprehensive loss in shareholders' equity in the Consolidated Balance Sheets.
Interest, dividends and realized gains and losses on the sale of such securities
are included in nonoperating income, net.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost.  Depreciation is based upon
estimated useful lives of 10 to 45 years for buildings and 3 to 15 years for
machinery and equipment, using principally the straight-line method.

The Company recognizes impairment losses for long-lived assets to be held and
used whenever events or changes in circumstances indicate that the carrying
amount of the assets exceeds the sum of the expected undiscounted future cash
flows associated with such assets. The measurement of the impairment losses to
be recognized is based on the difference between the fair values and the
carrying amounts of the assets. Long-lived assets held for sale are reported at
the lower of carrying amount or fair value less cost to sell.

                                       39
<PAGE>

Intangible Assets

The cost of product line or business acquisitions accounted for using the
purchase method is allocated first to identifiable assets and liabilities based
on estimated fair values.  The excess of cost over identifiable assets and
liabilities is recorded as goodwill.

Goodwill is amortized on a straight-line basis over 3 to 40 years (weighted-
average life of 29 years).  Technology is amortized on a straight-line basis
over 15 years.  Other intangible assets, consisting primarily of trademarks,
trade names, and manufacturing and distribution agreements, are amortized
primarily on a straight-line basis over 3 to 30 years (weighted-average life of
19 years).

The carrying amounts of intangible assets and goodwill are routinely reviewed to
determine if facts and circumstances suggest that they may be impaired.  If this
review indicates that the carrying amounts of intangible assets and goodwill
will not be recoverable, as determined based on the estimated undiscounted cash
flows of the entity acquired over the remaining amortization period, the Company
policy is to record an impairment loss in the period it is determined that the
carrying amount of the asset may not be recoverable.  In addition, intangible
assets and goodwill associated with assets acquired in a purchase business
combination are included in impairment evaluations when events and circumstances
exist that indicate the carrying amount of those assets may not be recoverable.

Derivative Financial Instruments

The Company uses interest rate swaps and options to manage the interest rate
characteristics of its outstanding debt to a more desirable fixed or variable
rate basis or to limit the Company's exposure to rising interest rates; forward
foreign exchange agreements and currency swaps to minimize the exposure on
intercompany financing transactions; and foreign exchange option contracts to
minimize the impact of anticipated foreign currency exposures which arise from
probable purchases of raw materials or other inventory, collection of accounts
receivable, settlement of accounts payable, and periodic debt service by
international subsidiaries which occur in the ordinary course of business.

Interest rate differentials to be paid or received as a result of an interest
rate swap are accrued and recognized as an adjustment of interest expense
related to the designated debt.  Interest rate option premiums paid are
amortized to interest expense ratably during the life of the agreement.  Amounts
related to interest rate swaps and the intrinsic value of terminated option
agreements are deferred and amortized as an adjustment to interest expense over
the original period of interest exposure, provided the designated liability
continues to exist or is probable of occurring.

The Company uses forward foreign exchange contracts and currency swaps to hedge
intercompany financial activity denominated in currencies other than the
functional currency of the entity involved.  Forward foreign exchange contracts
and currency swaps are carried off-balance-sheet with unrealized and realized
gains and losses included in the measurement and recording of the hedged
transactions.

The Company hedges a portion of its anticipated foreign currency exchange
exposure using certain derivative financial instruments, primarily purchased
options to sell foreign currencies with little or no intrinsic value at time of
purchase.  These contracts are designated and effective as hedges of the
Company's consolidated foreign currency exchange exposures.  Gains on option
contracts that are designated as hedges (including open, matured and terminated
contracts), and which have nominal intrinsic value at the time of purchase, are
deferred and recognized in earnings at the time the underlying hedged exposure
occurs.  Premiums on purchased options are recorded as assets and amortized over
the lives of the options.  Realized and unrealized gains on options relating to
exposures that are no longer probable of occurring are included as foreign
exchange gains in selling, general and administrative expenses in the
accompanying Consolidated Statements of Operations.

The Company will adopt Financial Accounting Standards Board Statement (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging Activities" as amended
by SFAS Nos. 137 and 138 on July 1, 2000.  See Recent Accounting Pronouncements
Yet-to-be-Adopted in Note 1 of the Notes to Consolidated Financial Statements.

                                       40
<PAGE>

Revenue Recognition and Product Warranty

The Company recognizes revenue at the time of product shipment and provides
currently for estimated discounts, rebates, product returns, and the cost to
repair or replace products under the warranty provisions in effect at the time
of sale.

Stock-Based Compensation

The Company accounts for its stock-based compensation plans using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees."  Financial Accounting Standards
Board (FASB) Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS
123), requires that companies electing to continue using the intrinsic value
method make pro forma disclosures of net earnings and earnings per share as if
the fair-value-based method of accounting had been applied.  See Note 18 for the
fair value disclosures required under SFAS 123.

Advertising Costs

All advertising costs are expensed as incurred and included in selling, general
and administrative expenses. Advertising expense was $19.6 million, $20.0
million and $20.1 million in 2000, 1999 and 1998, respectively.

Recent Accounting Pronouncements

Adopted

In April 1998, the American Institute of Certified Public Accountants (AICPA)
issued SOP 98-5, "Reporting on the Costs of Start-Up Activities" (SOP 98-5),
which requires that costs related to start-up activities be expensed as
incurred.  Prior to 1998, the Company capitalized its pre-operating costs
incurred in connection with opening a new facility.  In the fourth quarter of
1998, the Company elected to early adopt the provisions of SOP 98-5 in its
consolidated financial statements for the year ended June 30, 1998.  The effect
of adoption of SOP 98-5 was to record a charge of $8.4 million, net of taxes,
for the cumulative effect of an accounting change to expense costs that had
previously been capitalized prior to July 1, 1997.

In February 1998, the FASB issued Statement No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" (SFAS 132), which revises the
disclosure requirements for employers' pensions and other retiree benefits.
Mallinckrodt adopted SFAS 132 in 1999 and the required disclosures are presented
in Note 15.

In June 1997, the FASB issued Statement No. 131, "Disclosures About Segments of
an Enterprise and Related Information" (SFAS 131).  This statement establishes
standards for the reporting of information about operating segments in annual
and interim financial statements and requires restatement of prior year
information.  SFAS 131 defines operating segments as components of an enterprise
for which separate financial information is available that is evaluated
regularly by the chief operating decision maker(s) in deciding how to allocate
resources and in assessing performance.  SFAS 131 also requires disclosures
about products and services, geographic areas and major customers.  The adoption
of SFAS 131 in 1999 did not affect results of operations or financial position
but did affect the disclosure of segment information, as presented in Note 19.

In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" (SFAS 130).  This statement establishes new standards for the reporting
and display of comprehensive income and its components. The adoption of SFAS 130
in the first quarter of 1999 did not affect the Company's results of operation
or financial position but did affect the presentation of information.
Mallinckrodt has disclosed the required information in the Consolidated
Statements of Changes in Shareholders' Equity and in Note 16.

Yet-to-be-Adopted

In June 1999, the FASB issued Statement No. 137, which deferred the effective
date of FASB Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133), to years beginning after June 15, 2000.  In June
2000, the FASB issued SFAS No. 138, which clarified certain provisions of SFAS
133.  These statements require that all derivative instruments be recorded on
the balance sheet at their respective fair values. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on the designation of the hedge transaction.  For fair value
hedge transactions in which the Company is hedging changes in the fair value of
assets, liabilities or firm commitments, changes in the fair value of

                                       41
<PAGE>

the derivative instrument will generally be offset by changes in the hedged
item's fair value. For cash flow hedge transactions in which the Company is
hedging the variability of cash flows related to a variable rate asset,
liability or forecasted transaction, changes in the fair value of the derivative
instrument will be reported in other comprehensive income in shareholders'
equity. The gains and losses on the derivative instrument that are reported in
other comprehensive income will be recognized in earnings in the periods in
which earnings are impacted by the hedged item. The Company will adopt SFAS 133,
as amended, in the first quarter of 2001. The adoption of SFAS 133 will not have
a material effect on the Company's results of operations, cash flows or
financial position.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, which provides guidance on the recognition, presentation
and disclosure of revenue in financial statements filed with the Commission.
SAB 101A was released on March 24, 2000 and delayed for one fiscal quarter the
implementation date of SAB 101 for registrants with fiscal years beginning
between December 16, 1999 and March 15, 2000.  Since the issuance of SAB 101 and
SAB 101A, the staff has continued to receive requests from a number of groups
asking for additional time to determine the effect, if any, on registrant's
revenue recognition practices. SAB 101B issued June 26, 2000 further delayed the
implementation date of SAB 101 until no later than the fourth fiscal quarter of
fiscal years beginning after December 15, 1999.

NOTE 2 - TYCO INTERNATIONAL LTD. AGREEMENT AND PLAN OF MERGER

On June 28, 2000, Mallinckrodt and Tyco International Ltd. (Tyco) entered into
an Agreement and Plan of Merger. The merger agreement provides for the merger of
Mallinckrodt with a Tyco subsidiary, as a result of which Mallinckrodt will
become an indirect wholly-owned Tyco subsidiary and Mallinckrodt shareholders
will become Tyco shareholders.  Tyco has guaranteed the obligations of its
subsidiaries in the merger.  Consummation of the merger is subject to various
conditions, including the approval by Mallinckrodt's shareholders and the
receipt of required regulatory approvals.  A special meeting of Mallinckrodt
shareholders is scheduled to be held on September 19, 2000.  At this meeting,
shareholders of Mallinckrodt will be asked to approve the Agreement and Plan of
Merger that Mallinckrodt entered into with subsidiaries of Tyco.  Closing of the
transaction is expected to occur this Fall.

In the merger, Mallinckrodt shareholders will receive Tyco common shares for
each share of Mallinckrodt common stock they own based upon an exchange ratio
which is designed to give Mallinckrodt shareholders $47.50 in market value of
Tyco common shares for each of their shares of Mallinckrodt common stock.  Under
certain circumstances, Mallinckrodt shareholders could receive less than $47.50
in value of Tyco common shares. Mallinckrodt's 4 percent cumulative preferred
stock will be redeemed following the merger.

NOTE 3 - CHANGES IN BUSINESS

Acquisitions and Divestitures

Nellcor Puritan Bennett Incorporated Acquisition

On August 28, 1997, the Company acquired Nellcor through an agreement to
purchase for cash all of the outstanding shares of common stock of Nellcor.  The
aggregate purchase price of the Nellcor acquisition was approximately $1.9
billion.

The acquisition was accounted for under the purchase method of accounting and,
accordingly, the results of operations of Nellcor have been included in the
Company's consolidated financial statements since September 1, 1997.  The
purchase price of the acquisition was allocated to the assets acquired and
liabilities assumed based upon accounting principles generally accepted in the
United States and estimated fair values at the date of acquisition. The excess
of the purchase price over the fair value of the net identifiable assets,
totaling $814.2 million, was allocated to goodwill and is being amortized on a
straight-line basis over 30 years.  The Company also recorded a deferred tax
liability of $211.0 million, representing the tax effect of timing differences
recorded as part of the acquisition.

Approximately $835.4 million of the purchase price was allocated to identifiable
intangible assets including purchased research and development of $308.3
million, technology of $374.2 million, and trademarks and trade names and
assembled work force of $152.9 million.  (See Note 1 for amortization periods
and methods for intangible assets.)

                                       42
<PAGE>

The purchased research and development represents the value of numerous new
medical devices and other products/technologies underway in all major product
lines of Nellcor that were in various stages of development and had not reached
technological feasibility at the transaction date.  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 early stages of development.  The
major risks associated with timely completion and commercialization are to
transform concepts into designs that meet customer requirements, gain regulatory
approval and market clearance in the key markets, and ramp up the manufacturing
process once regulatory approval is obtained.  Management is primarily
responsible for estimating the fair value of purchased research and development.
To determine the value of the purchased research and development, the expected
future net cash flows of the in-process technology were determined based on
forecasts of future results as of the acquisition date for each project that
management believed at the acquisition date were likely to occur.  The projected
net cash flows were discounted at a rate which accounts for the time value of
money as well as the risks of realization of the cash flows.  The discounted
cash flows were then reduced to reflect only the accomplishment made by Nellcor
through the acquisition date toward the products' ultimate completion.  The
assumptions used in determining the value of purchased research and development
represented management's good faith best estimates of the in-process products'
likely performance as of the acquisition date.  The purchased research and
development intangible asset, which had no tax benefit, was charged to results
of operations during the first quarter of 1998.  Of the total charge of $308.3
million, $2.0 million related to the Aero Systems division, which was sold and
reclassified to discontinued operations in the fourth quarter of 1998.

The sale of Nellcor inventories, which were stepped up to fair value in
connection with allocation of purchase price, decreased earnings by $75.4
million, $46.7 million net of taxes for 1998. Pretax charges to the Respiratory
segment and Aero Systems division, which was sold and reclassified to
discontinued operations in the fourth quarter of 1998, were $74.4 million and
$1.0 million, respectively.

Divestitures

On December 16, 1999, the Company sold its blood analysis product line, which
was part of the Respiratory segment, and recorded a $27.3 million pretax gain,
$16.9 million net of tax.  On January 21, 2000, the Company sold its medical gas
business, which was part of the Respiratory segment, and recorded a $17.7
million pretax gain, $5.5 million net of tax.  The pretax gains from these
transactions were included in nonoperating income, net.

Other

The Company had other acquisitions and divestitures during 2000, 1999, and 1998,
the effects of which, individually and in the aggregate, were not material to
the Company's consolidated financial position or results of operations.

Discontinued Operations

The Company sold certain chemical additive product lines in the second quarter
of 1998, and recorded a gain on sale, net of taxes, of $8.7 million.  In the
fourth quarter of 1998, the Company sold its catalyst business and Aero Systems
division.  The catalyst sale resulted in a gain, net of taxes, of $60.2 million.
No gain or loss was recognized on the sale of the Aero Systems division, and
there were no earnings from operations.  In June 1998, the Company committed to
the sale of the remaining chemical additives business of the catalysts and
chemical additives division, and closing of the sale occurred on July 31, 1998.
This transaction resulted in a gain, net of taxes, of $23.3 million and earnings
from operations were zero for the one month of operations in 1999.  Certain
liabilities for environmental, litigation and employee benefits remained with
the Company, and reserves were established to address these liabilities as
deemed appropriate.  Earnings, net of taxes, from the catalysts and chemical
additives division for 1999 and 1998 were zero and $11.4 million, respectively.

On June 30, 1997, the Company sold the animal health segment for cash plus the
assumption of certain liabilities. The Company recorded a loss on sale,
including taxes, of $269.4 million.  During the third quarter of 1998, the
Company recorded a one-time, after-tax charge of $7.9 million to discontinued
operations related to settlement costs from the sale of the animal health
segment.

                                       43
<PAGE>

The following schedule summarizes the components, net of tax, of discontinued
operations presented in the Consolidated Statements of Operations (in millions).

                                              1999    1998
                                              -----   -----
Catalysts and chemical additives division
   Gain on sale.............................. $23.3   $68.9
   Earnings from operations..................          11.4
Animal health segment
   Loss on sale..............................          (7.9)
                                              -----   -----
Discontinued operations...................... $23.3   $72.4
                                              =====   =====

The catalysts and chemical additives and Aero Systems divisions were
reclassified to discontinued operations effective June 30, 1998.

Special Charges

Respiratory Segment Manufacturing Consolidation

During 2000, the Company recorded a pretax charge to cost of goods sold of $18.2
million, $11.9 million net of tax, for a manufacturing consolidation plan with
the objective of enhancing operating efficiencies within the Respiratory
segment.  The pretax charge included $6.3 million related to the termination of
260 employees primarily associated with critical care ventilation production in
the United States, $8.2 million to write off assets, primarily inventory,
associated with plan implementation, and $3.7 million for employee transition
bonuses and other items expensed as incurred.  During the year, payments of $1.0
million were made to the affected employees.  The remaining cash expenditures
are expected to occur during 2001 and, although none are expected, reductions in
the liability will be credited to cost of goods sold.  Some products currently
manufactured and serviced are being discontinued; however, the revenue and
operating earnings associated with these products are not significant to the
Respiratory segment.  The manufacturing consolidation is expected to have a
positive impact on earnings from continuing operations in 2001.

Equity Investment Write-down

During 2000, the Company recorded a pretax charge in nonoperating income, net of
$10.5 million, $6.5 million net of tax, associated with the write-down of an
investment in an equity security due to a decline in fair value considered to be
other than temporary.

Nellcor Acquisition and Integration Charges

In 1998, immediately after the acquisition of Nellcor was consummated,
management of the combined Company formulated an integration plan to combine
Mallinckrodt and Nellcor into one company.  Since both companies (Mallinckrodt
and Nellcor) had global healthcare operations, senior management, through
transition teams, assessed which activities should be consolidated.  Management
finalized and approved a Nellcor integration plan during 1998.  Accordingly, the
Company recorded additional purchase liabilities during 1998 of $50.1 million,
$30.8 million net of related tax benefit, which were included in the acquisition
cost allocation and related goodwill.  The principal actions of the plan
included the involuntary severance of approximately 450 Nellcor employees as a
result of work force reduction primarily in U.S. administrative areas at a cost
of $37.2 million, relocation of Nellcor employees at a cost of $3.8 million, and
the elimination of contractual obligations of Nellcor which had no future
economic benefit at a cost of $9.1 million.  The actual number of employees
terminated was 425.  Approximately $46.5 million of cash expenditures were
incurred through June 30, 2000, and no liabilities related to the Nellcor
integration plan remained in accrued liabilities at June 30, 2000.  Primarily as
a result of reduced severance costs, the liability was reduced by $.5 million
and $3.1 million in 2000 and 1999, respectively, for a total of $3.6 million,
$2.2 million net of related tax benefit, with a corresponding $2.2 million
reduction of goodwill.

During 1998, the Company recorded a pretax charge to selling, general and
administrative expenses of $19.1 million associated with exiting certain
activities related to Mallinckrodt operations.  The charge included severance
costs of $17.1 million related to the involuntary severance of approximately 130
Mallinckrodt employees as a result of work force reduction primarily in the
Europe administration function and U.S. sales force, and facility exit costs of
$2.0 million.  The actual number of employees terminated was 115.  Approximately
$16.9 million of cash expenditures have been incurred through June 30, 2000.  In
June 1999, the associated accrual was reduced by $.7 million and credited to
selling, general and administrative expenses.  The remaining $1.5 million cash
expenditures will occur  in 2001.  No further adjustments to the reserve are
anticipated.

                                       44
<PAGE>

NOTE 4 - EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings
(loss) from continuing operations per common share (in millions, except share
and per share amounts).

<TABLE>
<S>                                                                        <C>           <C>           <C>
                                                                                  2000          1999          1998
                                                                           -----------   -----------   -----------
Numerator:
   Earnings (loss) from continuing operations............................  $     205.0   $     172.9   $    (268.4)
   Preferred stock dividends.............................................          (.4)          (.4)          (.4)
                                                                           -----------   -----------   -----------
   Numerator for basic and diluted earnings (loss) per
    share--income (loss) available to common
    shareholders.........................................................  $     204.6   $     172.5   $    (268.8)
                                                                           ===========   ===========   ===========
Denominator:
   Denominator for basic earnings (loss) per share--
      weighted average shares............................................   68,864,515    71,634,420    72,920,659
   Potential dilutive common shares--employee
      stock options......................................................      276,961       264,455
   Denominator for diluted earnings (loss) per share--                     -----------   -----------   -----------
      adjusted weighted-average shares...................................   69,141,476    71,898,875    72,920,659
                                                                           ===========   ===========   ===========

Basic earnings (loss) from continuing operations
   per common share......................................................  $      2.97   $      2.41   $     (3.69)
                                                                           ===========   ===========   ===========

Diluted earnings (loss) from continuing operations
   per common share......................................................  $      2.96   $      2.40   $     (3.69)
                                                                           ===========   ===========   ===========
</TABLE>

The diluted share base for the year ended June 30, 1998 excluded incremental
shares of 612,285 related to employee stock options.  These shares were excluded
due to their antidilutive effect as a result of the Company's loss from
continuing operations during 1998.

NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<S>                                                                              <C>      <C>      <C>
(In millions)..................................................................    2000     1999     1998
                                                                                 ------   ------   ------
Interest paid..................................................................  $ 81.6   $ 87.3   $ 83.7
Income taxes paid..............................................................   128.0    126.1     73.3
Noncash investing and financing activities:
  Assumption of liabilities related to acquisitions............................      .7      (.7)   465.6
  Issuance of stock for 401(k) employer matching contribution..................     6.3      6.0      9.7
  Stock awards.................................................................      .1       .2     10.1
  Fair value gain (loss) adjustment to securities..............................    (2.0)    (6.1)    (2.5)
  Assets acquired through capital leases.......................................              1.4
  Principal amount of debt assumed by buyers in conjunction with divestitures..                       1.0
</TABLE>

The interest paid and income taxes paid presented above include amounts related
to discontinued operations.

NOTE 6 - INVENTORIES

<TABLE>
<S>                                                         <C>      <C>
AT JUNE 30, (in millions)..................................   2000     1999
                                                            ------   ------
Raw materials and supplies................................. $184.4   $208.3
Work in process............................................   61.7     63.7
Finished goods.............................................  201.0    258.3
                                                            ------   ------
                                                            $447.1   $530.3
                                                            ======   ======
</TABLE>



NOTE 7 - INVESTMENTS AND OTHER NONCURRENT ASSETS

<TABLE>
<S>                                                         <C>      <C>
AT JUNE 30, (in millions)..................................   2000    1999
                                                            ------   ------
Other investments, net..................................... $ 64.2   $42.2
Other noncurrent assets, net...............................   37.2    25.0
                                                            ------   ------
                                                            $101.4   $67.2
                                                            ======   =====
</TABLE>

                                       45
<PAGE>

NOTE 8 - PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<S>                                                         <C>        <C>
AT JUNE 30, (in millions)                                       2000       1999
                                                            --------   --------
Land and land improvements................................. $   80.8   $   85.0
Buildings and leasehold improvements.......................    338.0      345.4
Machinery and equipment....................................  1,028.7      979.7
Construction in progress...................................     84.1       48.9
                                                            --------   --------
                                                             1,531.6    1,459.0
Accumulated depreciation...................................   (678.3)    (588.3)
                                                            --------   --------
                                                            $  853.3   $  870.7
                                                            ========   ========
</TABLE>

Capitalized interest costs were $.6 million in 2000, $.9 million in 1999 and $.8
million in 1998.

NOTE 9 - INTANGIBLE ASSETS

<TABLE>
<S>                                                        <C>         <C>
AT JUNE 30, (in millions)                                      2000        1999
                                                            --------   --------
Goodwill.................................................. $1,010.2    $1,071.0
Accumulated amortization..................................   (152.1)     (128.7)
                                                            --------   --------
Goodwill, net............................................. $  858.1    $  942.3
                                                           ========    ========

Technology................................................ $  353.9    $  387.1
Accumulated amortization..................................    (66.9)      (50.7)
                                                            --------   --------
Technology, net........................................... $  287.0    $  336.4
                                                           ========    ========

Other intangible assets................................... $  303.4    $  337.6
Accumulated amortization..................................    (77.7)      (71.0)
                                                            --------   --------
Other intangible assets, net.............................. $  225.7    $  266.6
                                                           ========    ========
</TABLE>

In connection with the sale of the blood analysis product line and the medical
gas and other businesses during 2000, the following intangible assets were
written off and included in the gains and losses recorded on these sales in
2000: goodwill and related accumulated amortization of $51.4 million and $13.1
million, respectively; technology and related accumulated amortization of $33.1
million and $8.2 million, respectively; and other intangible assets and related
accumulated amortization of $27.3 million and $4.4 million, respectively.

NOTE 10 - FINANCIAL INSTRUMENTS

Derivative Financial Instruments

In the ordinary course of business, Mallinckrodt purchases materials and sells
finished products denominated in approximately 25 different currencies.  The
Company is primarily exposed to changes in exchange rates of the German deutsche
mark and other Euro currencies, the Japanese yen and the Great Britain pound.
Overall, the Company is a net beneficiary when the U.S. dollar weakens and is
adversely affected by a stronger U.S. dollar relative to the major currencies
identified.

The Company enters into forward foreign exchange contracts and currency swaps to
minimize the exposure on intercompany financing transactions.  To mitigate the
short-term effect of changes in foreign currency exchange rates on the Company's
consolidated performance, the Company hedges a portion of its non-U.S. dollar
denominated exposures by purchasing currency options which generally have terms
of two years or less.  The Company uses the currency options with an objective
of limiting negative foreign exchange rate effects on overall performance for
both budget and prior year comparisons over a rolling 18- to 24-month horizon.
The Company seeks to have effective coverage levels over such 18- to 24-month
horizon of 50 to 80 percent of currency exposures that subject the Company to
risk.  There are no hedging gains or losses that are explicitly deferred at June
30, 2000.

The Company's interest income and expense are most sensitive to changes in the
general level of U.S. interest rates. In this regard, changes in U.S. interest
rates affect the interest earned on the Company's cash equivalents and short-
term investments as well as interest paid on its short-term debt.  To mitigate
the impact of fluctuations in U.S. interest rates, the Company periodically
enters into interest rate swaps and option contracts.

                                       46
<PAGE>

Information on the duration by expected maturity, notional value, purpose and
fair value of instruments outstanding as of June 30, 2000 is provided below (in
millions, except average strike price and exchange rate):

<TABLE>
<CAPTION>
                                                                                            Fair Value
                                                                                              (Loss)
                                                                                               As of
                                                              2001      2002     Total        6/30/00
                                                            ------    ------    -------    -----------
<S>                                                        <C>        <C>       <C>        <C>
Purchased option contracts to sell for U.S.$ related to
 anticipated foreign currency exposures
    Great Britain pound
      Notional value....................................... $ 11.7    $  6.2     $ 17.9      $     .8
      Average strike price.................................   1.56      1.56
    German deutsche mark
      Notional value....................................... $ 50.0    $ 15.0     $ 65.0      $    3.3
      Average strike price.................................   1.98      2.06
    Japanese yen
      Notional value....................................... $ 29.0    $ 35.0     $ 64.0      $    1.0
      Average strike price.................................  107.5     113.6

Forward contracts and currency swaps related to
 intercompany financial transactions
   Sale of French franc
      Notional value....................................... $ 12.8               $ 12.8      $    (.2)
      Exchange rate........................................   6.84
   Sale of French franc
      Notional value....................................... $ 24.0               $ 24.0      $    (.5)
      Exchange rate........................................   6.87
   Swap of Japanese yen
      Notional value....................................... $ 12.9               $ 12.9      $   (4.2)
      Exchange rate........................................  140.0

Interest rate swap
 Related to 6.3% debentures, the Company pays variable
   (LIBOR + .3419%)/receives fixed (6.3%)
      Notional value....................................... $200.0               $200.0      $   (1.8)
</TABLE>

Fair Value of Financial Instruments

Non-derivative financial instruments included in the Consolidated Balance Sheets
are cash, short-term investment vehicles, short-term debt and long-term debt.
In the aggregate, these instruments were carried at amounts approximating fair
value at June 30, 2000 and 1999.  The fair value of long-term debt was estimated
based on future cash flows discounted at current interest rates available to the
Company for debt with similar maturities and characteristics.  See Note 14 for
the disclosure of fair value of long-term debt.

Concentrations of Credit Risk

Financial instruments which expose Mallinckrodt to credit risk are short-term
investments (cash equivalents), trade receivables and derivatives.  The Company
mitigates the risk that counterparties to short-term investments and derivatives
will fail to perform by contracting only with major financial institutions
having high credit ratings. Mallinckrodt considers the likelihood of
counterparty failure to be remote.

Trade receivables stem from the Company's worldwide operations and reflect
Mallinckrodt's diverse customer base. The Company periodically assesses the
financial strength of its customers and obtains proof of creditworthiness, as
necessary, prior to extending credit.  Consequently, Mallinckrodt does not have
a material concentration of credit risk, either by transaction type, product
line or geographic region.

                                       47
<PAGE>

NOTE 11 - INCOME TAXES

Income taxes included in the Consolidated Statements of Operations were (in
millions):

<TABLE>
<S>                                                           <C>     <C>      <C>
                                                               2000    1999     1998
                                                              -----   -----    -----
Continuing operations.......................................  $90.4   $81.5    $18.4
Discontinued operations:
     Sale of catalysts and chemical additives division......           13.7     45.4
     Catalysts and chemical additives division operations...                     5.3
     Sale of animal health segment..........................                    (4.2)
 Other......................................................           (3.3)    (8.4)
                                                              -----   -----    -----
 Total discontinued operations..............................           10.4     38.1
                                                              -----   -----    -----
Cumulative effect of accounting change......................                    (4.1)
                                                              -----   -----    -----
                                                              $90.4   $91.9    $52.4
                                                              =====   =====    =====
</TABLE>

The geographical sources of earnings (loss) from continuing operations before
income taxes were (in millions):

                                                     2000     1999      1998
                                                   ------   ------   -------
U.S............................................... $188.6   $141.8   $(355.8)
Outside U.S.......................................  106.8    112.6     105.8
                                                   ------   ------   -------
                                                   $295.4   $254.4   $(250.0)
                                                   ======   ======   =======

The components of the income tax provision charged to continuing operations
follow (in millions):

                                                     2000     1999     1998
                                                    ------   ------   ------
Current:
  U.S. federal...................................   $ 73.7   $ 26.4   $ 53.3
  U.S. state and local...........................     13.1      4.8      4.4
  Outside U.S....................................     33.5     33.5     29.5
                                                    ------   ------   ------
                                                     120.3     64.7     87.2
                                                    ------   ------   ------
Deferred:
  U.S. federal...................................    (32.8)    32.7    (87.5)
  U.S. state and local...........................     (7.5)    (2.9)    14.2
  Outside U.S....................................     10.4    (13.0)     4.5
                                                    ------   ------   ------
                                                     (29.9)    16.8    (68.8)
                                                    ------   ------   ------
                                                    $ 90.4   $ 81.5   $ 18.4
                                                    ======   ======   ======

The Company had the following deferred tax balances at June 30, 2000 and 1999
(in millions):

<TABLE>
<S>                                                               <C>       <C>
                                                                     2000      1999
Deferred tax assets:
     Restructuring accruals......................................  $  2.3    $ 14.5
     Pensions and deferred compensation..........................    33.3      21.6
     Net operating losses........................................     5.3      12.2
     Environmental accruals......................................    13.6      26.4
     Other, net..................................................               3.8
                                                                   ------    ------
Gross deferred tax assets........................................    54.5      78.5
Valuation allowance..............................................    (5.3)    (29.0)
                                                                   ------    ------
Total deferred tax assets........................................    49.2      49.5
                                                                   ------    ------
Deferred tax liabilities:
     Property, plant and equipment...............................   109.1     114.4
     Receivables.................................................    21.3      22.9
     Intangible assets...........................................   189.1     217.4
     Other, net..................................................    19.0
                                                                   ------    ------
Total deferred tax liabilities...................................   338.5     354.7
                                                                   ------    ------
Net deferred tax liabilities.....................................  $289.3    $305.2
                                                                   ======    ======
</TABLE>

The tax benefit of the Company's net operating loss carryforwards of $5.3
million relates to its non-U.S. operations, and $3.3 million of the tax benefit
will expire in years 2001 through 2006.  The remaining $2.0 million of the tax
benefit relates to net operating loss carryforwards with indefinite carryforward
periods.

                                      48
<PAGE>

Factors causing the effective tax rate for continuing operations to differ from
the U.S. federal statutory rate were (in millions):

<TABLE>
<CAPTION>
<S>                                                <C>       <C>      <C>
                                                     2000     1999      1998
                                                    ------   ------    ------
Computed tax at the U.S. federal statutory rate.... $103.4   $ 89.0    $(87.5)
State income taxes, net of federal benefit.........    4.0      1.2      12.1
Effect of foreign operations.......................  (18.4)   (13.4)    (14.4)
Purchase accounting................................                     107.2
Goodwill amortization..............................   11.0     11.4      10.4
Gain on sale.......................................    9.7
Change in domestic valuation allowance.............  (16.8)
Other items........................................   (2.5)    (6.7)     (9.4)
                                                    ------   ------    ------
Income tax provision............................... $ 90.4   $ 81.5    $ 18.4
                                                    ======   ======    ======

Effective tax rate.................................   30.6%    32.0%    (7.4)%
</TABLE>

Undistributed earnings of certain subsidiaries outside the U.S. are considered
to be permanently invested. Accordingly, no provision for income taxes was made
for undistributed earnings of such subsidiaries, which aggregated $312.9 million
at June 30, 2000.

NOTE 12 - ACCRUED LIABILITIES

<TABLE>
<CAPTION>
<S>                                                            <C>      <C>
AT JUNE 30, (in millions)                                       2000     1999
                                                               ------   ------
Compensation and benefits....................................  $133.3   $131.9
Environmental liabilities....................................    82.6     81.0
Other........................................................   150.6    246.6
                                                               ------   ------
                                                               $366.5   $459.5
                                                               ======   ======
</TABLE>

NOTE 13 - LINES OF CREDIT

The Company has a $1.0 billion private placement commercial paper program.  The
program is backed by a $1.0 billion revolving credit facility expiring September
12, 2002.  Under this facility, interest rates on borrowings are based upon the
London Interbank Offered Rate, plus a margin dependent on the Company's senior
debt rating. There was no borrowing outstanding under the revolving credit
facility at June 30, 2000.  Commercial paper borrowings under this program were
$172.8 million as of June 30, 2000.

Non-U.S. lines of credit totaling $125.8 million were also available, and
borrowings under these lines amounted to $24.6 million at June 30, 2000.  These
non-U.S. lines are cancelable at any time.

NOTE 14  - DEBT

The components of short-term debt at June 30, 2000 and 1999 were (in millions):

<TABLE>
<CAPTION>
<S>                                                           <C>      <C>
                                                                2000     1999
                                                               ------   ------
Notes payable................................................  $201.8   $180.1
Current maturities of long-term debt.........................   201.8    203.7
                                                               ------   ------
                                                               $403.6   $383.8
                                                               ======   ======
</TABLE>

The weighted-average interest rates on short-term borrowings at June 30, 2000
and 1999 were 6.2 percent and 5.0 percent, respectively.

                                       49
<PAGE>

The components of long-term debt at June 30, 2000 and 1999 were (in millions):

<TABLE>
<CAPTION>
                                                                  Fair Value      Carrying Amount
                                                                ---------------   ----------------
                                                                 2000     1999     2000      1999
                                                                ------   ------   ------    ------
<S>                                                            <C>      <C>      <C>      <C>
9.875% debentures with initial payment of $.9 million due
    2002 and annual installments of $15.0 million beginning
    in 2003, with final payment in 2011.......................  $141.2   $146.4   $135.3    $135.2
7% debentures due 2014........................................    85.9     90.9     98.9      98.9
6.75% notes due 2006..........................................    94.8     98.5     99.6      99.6
6.5% notes due 2008...........................................    89.9     94.1     99.1      98.9
6.3% debentures due 2011......................................   202.2    203.4    200.8     200.9
6% notes due 2004.............................................    95.6     97.1     99.7      99.6
5.99% debentures due 2010.....................................            205.3              202.7
Other.........................................................     9.3     10.4      9.3      10.4
                                                                ------   ------   ------    ------
                                                                $718.9   $946.1    742.7     946.2
                                                                ======   ======
Less current maturities.......................................                     201.8     203.7
                                                                                  ------    ------
                                                                                  $540.9    $742.5
                                                                                  ======    ======
</TABLE>

In January 1998, the Company issued $200 million aggregate principal amount of
notes maturing January 14, 2010. The notes paid interest at 5.99 percent until
January 14, 2000, at which time the notes were put back to the Company and
refinanced with commercial paper. These notes had been classified as short-term
at June 30, 1999.

In March 1998, the Company issued $200 million aggregate principal amount of
notes maturing March 15, 2011. The notes bear interest at 6.3 percent until
March 15, 2001, at which time the interest rate will be reset at a fixed annual
rate of 5.6219 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 March 15, 2001.  In conjunction with this issue, the Company
entered into an interest rate swap transaction whereby the effective periodic
interest payment is equal to three-month LIBOR plus .3419 percent.  The rate is
adjusted every three months starting June 15, 1998.  The swap contract expires
on

March 15, 2001.  The proceeds of this transaction were used to repay commercial
paper borrowings.  These notes have been classified as short-term at June 30,
2000.

Maturities of long-term debt for the next five years are:  2001-$201.8 million;
2002-$.6 million; 2003-$15.5 million; 2004-$115.5 million; and 2005-$15.3
million.  The 9.875 percent debentures are redeemable at the option of
Mallinckrodt at 100 percent in 2001 and thereafter.

                                       50
<PAGE>

NOTE 15 - PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The changes in benefit obligations and plan assets in 2000 and 1999, and the
funded status and amounts recognized in the Consolidated Balance Sheets at June
30, 2000 and 1999 for U.S. and significant non-U.S. defined benefit pension
plans and U.S. postretirement healthcare benefit plans follow (in millions):

<TABLE>
<CAPTION>
                                                            2000                         1999
                                             -----------------------------   ------------------------------
                                              Pension Benefits     Other      Pension Benefits      Other
                                             -------------------             -------------------
                                              U.S.      Non-U.S.  Benefits    U.S.      Non-U.S.   Benefits
                                             ------     --------  --------   ------     --------   --------
<S>                                          <C>        <C>       <C>        <C>        <C>        <C>
Benefit obligation at beginning of year....  $402.7      $79.0     $126.0    $461.6       $65.9     $137.6
Service cost...............................    21.4        5.7        2.8      17.6         4.5        3.4
Interest cost..............................    28.6        3.9        9.0      30.5         4.0        9.4
Plan participants'  contributions..........                 .6                               .7
Plan amendments............................                (.1)                 4.7         1.2       (5.0)
Net actuarial (gain) loss..................     (.4)      (7.9)      (6.9)    (51.9)        7.3       (5.7)
Foreign currency exchange rates............               (4.5)                            (3.3)
Benefits paid..............................   (45.0)      (3.4)      (9.7)    (61.9)       (1.3)     (13.7)
Curtailments...............................                (.1)                 (.2)
Special termination benefits...............     2.7         .6                  2.3
                                             ------      -----     ------    ------       -----     ------
Benefit obligation at end of year..........   410.0       73.8      121.2     402.7        79.0      126.0
                                             ------      -----     ------    ------       -----     ------

Fair value of plan assets at beginning
  of year..................................   370.7       57.1                390.9        46.0
Actual return on plan assets...............    68.2        3.9                 18.2         8.2
Foreign currency exchange rates............               (3.5)                            (2.7)
Employer contributions.....................     6.0        6.5        9.7      26.5         6.4       13.7
Plan participants' contributions...........                 .6                               .7
Benefits and expenses paid.................   (47.3)      (3.7)      (9.7)    (64.9)       (1.5)     (13.7)
                                             ------      -----     ------    ------       -----     ------
Fair value of plan assets at end of year...   397.6       60.9                370.7        57.1
                                             ------      -----     ------    ------       -----     ------

Benefit obligation in excess of plan
  assets...................................    12.4       12.9      121.2      32.0        21.9      126.0
Unrecognized prior service cost............    (9.3)      (1.5)      17.1     (10.8)       (1.8)      18.9
Unrecognized transition asset
  (obligation).............................     (.3)                           (1.1)        (.1)
Unrecognized net actuarial gain (loss).....    70.4        3.8       27.8      38.4        (4.4)      21.6
                                             ------      -----     ------    ------       -----     ------
Accrued benefit liability..................  $ 73.2      $15.2     $166.1    $ 58.5       $15.6     $166.5
                                             ======      =====     ======    ======       =====     ======
</TABLE>


The aggregate projected benefit obligation, aggregate accumulated benefit
obligation, and aggregate fair value of plan assets for the pension plans with
accumulated benefit obligations in excess of plan assets were $64.4 million,
$45.3 million and $4.0 million, respectively, as of June 30, 2000, and $98.1
million, $84.5 million and $45.3 million, respectively, as of June 30, 1999.

The components of net periodic defined benefit pension costs and net periodic
U.S. postretirement healthcare benefit costs are as follows (in millions):
<TABLE>
<CAPTION>
                                                2000                           1999                           1998
                                   ----------------------------    --------------------------     ----------------------------
                                     Pension Benefits    Other     Pension Benefits   Other       Pension Benefits    Other
                                   -------------------             -----------------              -----------------
                                    U.S.      Non-U.S. Benefits     U.S.    Non-U.S. Benefits      U.S.    Non-U.S.  Benefits
                                   ------     -------- --------    -----    -------- --------     ------   --------  ---------
<S>                                <C>        <C>      <C>         <C>     <C>        <C>         <C>     <C>           <C>
Service cost...................    $ 21.4      $ 5.7   $  2.8      $17.6       $4.5    $ 3.4      $15.9      $ 5.3      $ 3.1
Interest cost..................      28.6        3.9      9.0       30.5        4.0      9.4       31.4        3.4       10.0
Expected return on plan
  assets.......................     (34.1)      (3.6)              (33.7)      (3.6)              (32.6)      (2.8)
Amortization of prior service
 cost..........................       1.5         .2     (1.8)       1.2         .1     (1.5)       1.2         .1       (1.4)
Amortization of transition
 (asset) obligation............        .8         .1                  .9         .1                  .9         .1
Recognized net actuarial
 (gain) loss...................       (.1)        .1      (.8)       (.2)       (.1)     (.2)       (.3)       (.1)       (.4)
Curtailments...................                  (.1)                                               (.1)       (.2)      (1.4)
Special termination benefits...       2.7                            2.3                            7.8
                                   ------      -----   ------      -----       ----    -----      -----      -----      -----
Net periodic benefit costs.....    $ 20.8      $ 6.3   $  9.2      $18.6       $5.0    $11.1      $24.2      $ 5.8      $ 9.9
                                   ======      =====   ======      =====       ====    =====      =====      =====      =====
</TABLE>

                                       51
<PAGE>

Included above and relating to the sale of the blood analysis product line and
the medical gas and other businesses, and included in the gains and losses
recorded on these sales in 2000, are special termination benefits of $.3
million. Included above and relating to the sale of the chemical additives
business in 1999, and included in the gain on sale recorded in discontinued
operations in 1999, are special termination benefits of $.1 million and a $.2
million curtailment loss relating to U.S. defined benefit pension plans.
Included above and relating to the sale of the catalyst business in 1998, and
included in the gain on sale recorded in discontinued operations in 1998, are
special termination benefits of $1.2 million, a $.2 million curtailment gain
relating to a non-U.S. defined benefit pension plan, and a $1.4 million
curtailment gain relating to U.S. postretirement healthcare benefit plans.
Special termination benefits in 2000, 1999 and 1998 include charges relating to
employee headcount reduction programs of $2.4 million, $2.2 million and $6.3
million, respectively.

The weighted-average assumptions as of each year end used in accounting for the
defined benefit pension plans and the U.S. postretirement healthcare benefit
plans follow:

<TABLE>
<CAPTION>
                                      June 30, 2000                   June 30, 1999                June 30, 1998
                               -----------------------------   ----------------------------   ----------------------------
                               Pension Benefits     Other      Pension Benefits     Other     Pension Benefits   Other
                               ----------------                ----------------               ----------------
                                U.S.     Non-U.S.   Benefits    U.S.   Non-U.S.    Benefits     U.S.   Non-U.S.  Benefits
                               ------    --------   --------   -----   --------    --------   ------   --------  ---------
<S>                            <C>       <C>        <C>       <C>        <C>      <C>         <C>        <C>       <C>
Discount rate..................  8.00%      5.97%     8.00%     7.25%      5.10%    7.25%       7.00%      5.69%     7.00%
Expected long-term rate of
 return on plan assets.........  9.50%      7.02%               9.50%      6.29%                9.50%      6.76%
Compensation increase rate.....  4.55%      3.17%     5.00%     4.54%      2.85%    5.00%       4.50%      2.97%     5.00%
</TABLE>

For measurement purposes, annual rates of increase in the per capita cost of
covered healthcare benefits of 7.75 percent and 7.5 percent were assumed for
2001 and 2000, respectively.  It was also assumed for 2001 and 2000 that the
annual rates of increase in the per capita cost of covered healthcare benefits
would gradually decline to 5.50 percent and 4.75 percent, respectively, for 2006
and thereafter.  Assumed healthcare cost trend rates have a significant effect
on the amounts reported for the healthcare plans for retired employees.  A one-
percentage-point change in assumed healthcare cost trend rates would have the
following effects on 2000 service and interest cost and the accumulated
postretirement benefit obligation at June 30, 2000 (in millions):

<TABLE>
<CAPTION>
                                                                                One-Percentage-     One-Percentage-
                                                                                Point Increase      Point Decrease
                                                                                --------------      ---------------
<S>                                                                             <C>                <C>
Effect on total of service and interest cost components of net periodic
  postretirement healthcare benefit cost......................................       $ 1.0               $  (.9)
Effect on accumulated postretirement benefit obligation for healthcare
  benefits....................................................................         9.2                 (8.3)
</TABLE>

The net actuarial gain/loss in excess of 10% of the greater of the benefit
obligation and the fair value of plan assets, the prior service cost and the
transition asset/obligation are being amortized on a straight-line basis over
the average remaining service period of active participants at the date
established.

Defined contribution pension and investment plan expense for 2000, 1999 and 1998
was $14.9 million, $12.1 million and $12.6 million, respectively. Expenses
related to the plans consist primarily of Company contributions, which include
discretionary amounts determined on an annual basis for certain investment
plans.

The pension and postretirement healthcare benefit plan information presented
above includes related amounts for the businesses sold in 2000, 1999 and 1998.
Mallinckrodt retained all pension assets and liabilities relating to the frozen
pension benefits of U.S. employees of the businesses sold in 2000, 1999 and
1998.

                                       52
<PAGE>

NOTE 16 - COMPREHENSIVE INCOME

The accumulated balances, net of taxes, related to each component of other
comprehensive loss were as follows (in millions):

<TABLE>
<CAPTION>
                                                                  Accumulated
                                    Foreign       Unrealized         Other
                                    Currency    Gains (Losses)   Comprehensive
                                  Translation   on Securities        Loss
                                  -----------   -------------    -------------
<S>                               <C>           <C>              <C>
Balance at June 30, 1997..........   $(50.0)        $  .1          $ (49.9)
Other comprehensive loss..........    (21.1)         (1.6)           (22.7)
                                     ------         -----          -------
Balance at June 30, 1998..........    (71.1)         (1.5)           (72.6)
Other comprehensive loss..........    (28.7)         (3.8)           (32.5)
                                     ------         -----          -------
Balance at June 30, 1999..........    (99.8)         (5.3)          (105.1)
Other comprehensive income........      5.7           5.4             11.1
                                     ------         -----          -------
Balance at June 30, 2000..........   $(94.1)        $  .1          $ (94.0)
                                     ======         =====          =======
</TABLE>

The foreign currency translation adjustments are not adjusted for income taxes
as they relate to indefinite investments in non-U.S. subsidiaries.  The change
in foreign currency translation in 2000 was net of a $35.8 million translation
loss included in nonoperating income, net and related to the sale of the blood
analysis product line.

The change in unrealized gains (losses) on securities during 2000 was net of a
$6.5 million after-tax loss included in net earnings from the write-down of an
investment in an equity security (see Note 3), and during 1998 included
reclassification adjustments of $.2 million of losses realized from the sale of
securities with no tax benefit.  The tax effects on the components of other
comprehensive income (loss) for 2000, 1999 and 1998 were benefits of $.7
million, $2.3 million and $.9 million, respectively.

NOTE 17 - CAPITAL STOCK

The Company has authorized and issued 100,000 shares, 98,330 outstanding at June
30, 2000, of par value $100, 4 percent cumulative preferred stock. This stock,
with voting rights, is redeemable at the Company's option at $110 per share.
During the three years ended June 30, 2000, the number of issued and outstanding
shares did not change. The Company has authorized 1,400,000 shares, par value
$1, of series preferred stock, none of which was outstanding during the three
years ended June 30, 2000.

In February 1999, the Company's Board of Directors approved the redemption of
the Company's non-voting common stock purchase rights at the redemption price of
five cents per right effective March 15, 1999.

The Company has 14,092,812 common shares reserved at June 30, 2000 for exercise
of stock options, granting of stock awards and employee stock purchases.

The Company's common stock share repurchases have totaled 43.7 million shares as
of June 30, 2000. Authorizations to repurchase an additional 6.1 million shares
of common stock remain under previously approved resolutions of the Company's
Board of Directors. Changes in the number of shares of common stock issued and
in treasury were as follows:

<TABLE>
<CAPTION>
                                                    2000           1999           1998
                                                 ----------     ----------     ----------
<S>                                              <C>            <C>            <C>

Common stock issued...........................   87,124,773     87,124,773     87,124,773
Treasury common stock:
  Balance, beginning of year..................   16,422,084     13,950,122     14,852,331
  Stock options exercised.....................     (625,490)      (244,019)      (614,320)
  Purchased...................................    3,959,878      2,955,200        241,753
  Employee stock purchase plan................      (42,790)
  Stock awards................................       (3,616)        (7,806)      (256,903)
  401(k) employer matching contribution.......     (192,210)      (231,413)      (272,739)
                                                 ----------     ----------     ----------
  Balance, end of year........................   19,517,856     16,422,084     13,950,122
                                                 ----------     ----------     ----------
Common stock outstanding, end of year.........   67,606,917     70,702,689     73,174,651
                                                 ==========     ==========     ==========
</TABLE>

                                       53
<PAGE>

NOTE 18 - STOCK PLANS

The Company authorized a new employee non-qualified stock option plan in October
1997.  This plan provides for granting stock options at prices not less than 100
percent of market price (as defined) at the date of grant.  Options are
exercisable over nine years beginning one year after the date of grant and are
limited for the first and second year of eligibility to 33-1/3 percent and 66-
2/3 percent, respectively.  Options granted under previous non-qualified stock
option plans are exercisable over nine years beginning one year after the date
of grant and are limited to 50 percent during the first year of eligibility.

The Company has a Directors' Stock Option Plan (which will expire in October
2000), which provides each non-employee director continuing in office after an
annual meeting of stockholders a non-qualified option to purchase 1,500 shares
of Mallinckrodt common stock at 100% of fair market value on the date of grant.
Each option has a term of ten years, unless the period is shortened under
provisions taking effect upon death or retirement.  Fifty percent of the shares
covered by each grant become exercisable on the first anniversary of the grant,
and the remaining fifty percent become exercisable on the second anniversary.

The Company also has a Directors' Stock Award Plan which provides each eligible
non-employee director an annual grant of Mallinckrodt common stock having a fair
market value equal to $15,000.  Awards will generally be made on the first
business day following each annual stockholders' meeting.

The Mallinckrodt Employee Stock Purchase Plan (ESPP) enables full-time employees
to purchase full or fractional shares of Mallinckrodt common stock through
payroll deduction of up to 5 percent of eligible compensation.  The price an
employee pays is 85 percent of the lower of the average market price on the
first business day and the last business day of each offering period.  The
offering periods begin on the first day of July, October, January and April.
The shareholders approved the plan in October 1999.  At June 30, 2000,
approximately 1.5 million shares of common stock are available for the ESPP.
During 2000, employees purchased 43 thousand shares, all of which were treasury
shares, and paid Mallinckrodt $1.0 million for these shares.

The pro forma information regarding net earnings and earnings per share required
by SFAS 123 has been determined as if the Company had accounted for its stock
options and employee stock purchase plan under the fair value method.  The fair
value for these options was estimated at the date of grant using the Black-
Scholes option pricing model with the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                                         2000     1999    1998
                                                        -------  ------  ------
<S>                                                     <C>      <C>     <C>
Risk free interest rate...............................   6.01%    5.75%   5.95%
Expected dividend yield of stock......................   1.93%    1.84%   1.58%
Expected volatility of stock..........................   33.3%    22.3%   23.8%
Expected life of option (years).......................     4.6      4.6    4.6
</TABLE>

The weighted-average fair values of options granted during 2000, 1999 and 1998
were $10.18, $6.35 and $9.39, respectively.

The estimated fair value of the options is amortized to expense over the
options' vesting period.  The Company's pro forma information follows (in
millions, except per share amounts):

<TABLE>
<CAPTION>
                                                          2000    1999     1998
                                                        -------  -------  ------
<S>                                                     <C>      <C>     <C>
Net earnings (loss):
  As reported........................................   $205.0   $196.2   $(204.4)
  Pro forma..........................................    200.0    187.1    (215.3)

Earnings (loss) per share:
  As reported........................................   $ 2.96   $ 2.72   $ (2.81)
  Pro forma..........................................     2.89     2.60     (2.96)
</TABLE>

                                       54
<PAGE>

A summary of the Company's stock option activity and related information
follows:

<TABLE>
<CAPTION>
                                                   2000                        1999                          1998
                                      ----------------------------  ---------------------------    ----------------------------
                                        Number       Weighted-Avg.    Number     Weighted-Avg.       Number       Weighted-Avg.
                                      of Options    Exercise Price  of Options   Exercise Price    of Options    Exercise Price
                                      ----------    --------------  ----------   --------------    ----------    --------------
<S>                                   <C>           <C>             <C>          <C>               <C>           <C>
Outstanding-beginning
 of year..........................    8,113,129        $ 32.49      7,218,226        $34.04        5,821,316        $32.96
Granted...........................    1,281,437          32.50      1,921,417         26.28        2,601,227         35.68
Exercised.........................     (625,490)         28.03       (244,019)        21.17         (614,320)        29.40
Canceled..........................   (1,122,981)         34.04       (782,495)        35.95         (589,997)        35.44
                                      ---------                     ---------                      ---------
Outstanding-end of year...........    7,646,095          32.62      8,113,129         32.49        7,218,226         34.04
                                      =========                     =========                      =========
Exercisable at end of year            5,318,429          33.92      5,265,282         34.04        4,394,493         32.64
Reserved for future
 option grants....................    4,925,843                       933,984                      2,768,000
</TABLE>

Outstanding stock options will expire over a period ending no later than June
18, 2010. The average exercise price of outstanding stock options at June 30,
2000 was based on an aggregate exercise price of approximately $249 million. The
weighted-average remaining contractual life of outstanding stock options is 6.4
years. Further breakdown of outstanding stock options by price range follows:

<TABLE>
<CAPTION>

                          Options Currently Outstanding                    Options Exercisable
                   ----------------------------------------------     --------------------------------
                      Number      Weighted-Avg.   Weighted-Avg.        Number          Weighted-Avg.
  Price Range      of Options    Exercise Price   Remaining Life      of Options       Exercise Price
---------------   ------------  ---------------- ---------------     -----------       --------------
<S>               <C>            <C>              <C>                <C>                  <C>
$18.54 - 29.98        2,298,410          $26.59             6.67            1,237,444          $27.13
$30.06 - 34.79        2,152,292           33.09             7.22              928,135           33.72
$35.01 - 44.47        3,195,393           36.65             5.59            3,152,850           36.64
</TABLE>

NOTE 19 - BUSINESS SEGMENT AND GEOGRAPHICAL DATA

Upon adoption of SFAS 131, the Company segregated its operations into three
reportable segments:  Respiratory, Imaging and Pharmaceuticals.  The Company's
reportable segments are business units that offer different products and
services and are managed separately, because each business requires different
manufacturing, technology and marketing strategies.

The Respiratory segment develops, manufactures and sells products that help
diagnose, monitor and treat respiratory disorders.  Respiratory products include
anesthesia and respiratory devices; oximetry, including monitors and sensors;
critical care and portable ventilators; oxygen therapy and asthma management;
sleep diagnostic and therapy; and maintenance services.  The Respiratory
segment's products are purchased for use throughout the hospital, including
intermediate care and step-down units, labor and delivery rooms, emergency rooms
and general care floors, and are marketed and sold into the alternate site care
market, including surgicenters, subacute care and skilled nursing facilities,
physicians' offices, clinics, ambulatory care settings, and the growing home
market.  These products are sold in the major markets of the world principally
through a direct sales force, assisted by clinical consultants and specialists,
corporate account managers, and distributors in the United States and
internationally.

The Imaging segment manufactures, sells and distributes products used in
radiology, cardiology and nuclear medicine.  Radiology and cardiology products
include x-ray contrast media (ionic and nonionic), ultrasound contrast agents,
magnetic resonance imaging (MRI) agents, and catheters for use in diagnosis and
therapy.  These products are marketed throughout the world through a direct
sales force and distributors.  Nuclear medicine products consist of
radiopharmaceuticals used to provide images of numerous body organs, anatomy and
function, and to diagnose and treat diseases.  Nuclear medicine products are
sold in the U.S. by a direct sales force and distributed both directly and
through a nationwide network of nuclear pharmacies.  Internationally, nuclear
medicine products are marketed through a direct sales force and distributors.

The Pharmaceuticals segment includes analgesics such as acetaminophen (APAP)
used to control pain and fever; codeine salts, morphine and other opium based
narcotics and synthetic narcotics used to treat pain and coughs; and peptides
which are used in many new pharmaceuticals.  Other Pharmaceuticals' products
include laboratory chemicals used in analysis and microelectronic chemicals used
in the semiconductor industry; magnesium stearate for use as a tableting aid in
pharmaceuticals; potassium chloride for use as a potassium supplement in

                                       55
<PAGE>

pharmaceuticals and nutritionals; and other salts, chemicals and reagents used
in the production of pharmaceutical and food products. The Pharmaceuticals
products are sold primarily through distributors and by a direct sales force to
the pharmaceutical industry for use in the manufacture of dosage form drugs.
Narcotic prescription chemicals are sold directly to pharmaceutical
manufacturers, and pharmaceutical dosage products are sold directly to drug
wholesalers and chain pharmacies, while opiate addiction products are sold
primarily to clinics. Laboratory chemical products, which include thousands of
high-purity reagent chemicals used in research and development and analytical
laboratories, are sold primarily through distributors to medical, industrial,
educational and governmental laboratories. A direct sales force is used to offer
microelectronic chemicals and photoresist strippers to semi-conductor chip
producers worldwide.

The Company evaluates performance and allocates resources based upon operating
earnings. Operating earnings of a business segment represents revenues less all
operating expenses and does not include interest and corporate expense.
Identifiable segment assets are those identified as directly attributable to a
segment's operations and primarily include accounts receivable, inventory,
property, plant and equipment, intangible assets and goodwill.

The accounting policies of the reportable segments are the same as those
described in Note 1.

The following information by segment is as of and for the years ended June 30
(in millions):

<TABLE>
<CAPTION>
                                                       Respiratory      Imaging       Pharmaceuticals       Total
                                                     ---------------  ------------  -------------------  -----------
<S>                                                  <C>              <C>           <C>                  <C>
2000
----
Net sales............................................  $   1,132.5      $  769.5       $   750.8           $ 2,652.8
Depreciation expense.................................         42.9          40.4            38.6               121.9
Amortization expense.................................         65.7           8.6             7.3                81.6
Operating earnings...................................        146.4          83.8           120.3               350.5
Identifiable segment assets..........................      1,978.1         677.9           721.2             3,377.2
Expenditures for property, plant and equipment.......         36.7          35.8            75.9               148.4

1999
----
Net sales............................................      1,143.9         779.8           661.1             2,584.8
Depreciation expense.................................         48.2          41.8            38.1               128.1
Amortization expense.................................         68.9           8.1             7.5                84.5
Operating earnings...................................        137.6         119.3           103.3               360.2
Identifiable segment assets..........................      2,202.1         698.0           686.4             3,586.5
Expenditures for property, plant and equipment.......         39.5          34.9            41.5               115.9

1998
----
Net sales............................................        991.2         763.8           616.2             2,371.2
Depreciation expense.................................         45.2          34.3            31.9               111.4
Amortization expense.................................         59.0           9.1             7.2                75.3
Operating earnings...................................        102.2         123.8            83.2               309.2
Identifiable segment assets..........................      2,328.1         705.0           653.0             3,686.1
Expenditures for property, plant and equipment.......         49.7          48.6            41.2               139.5
</TABLE>


                                       56
<PAGE>

Reconciliations of operating earnings for reportable segments to earnings from
continuing operations before income taxes as reported in the Consolidated
Statements of Operations and a reconciliation of identifiable segment assets to
total assets as reported in the Consolidated Balance Sheets follow (in
millions):

<TABLE>
<CAPTION>
                                                                                As of and for the Year Ended June 30,
                                                                             ------------------------------------------
                                                                              2000               1999            1998
                                                                             --------          --------        --------
<S>                                                                          <C>               <C>             <C>
Total operating earnings for reportable segments......................       $  350.5          $  360.2        $  309.2
Corporate expense.....................................................          (22.7)            (24.8)          (22.9)
Acquisition-related charges...........................................                                           (380.7)
Integration-related charges...........................................                                            (68.6)
                                                                             --------          --------        --------
Consolidated operating earnings (loss)................................          327.8             335.4          (163.0)
Nonoperating income, net..............................................           42.2               4.0            14.8
Interest expense......................................................          (74.6)            (85.0)         (101.8)
                                                                             --------          --------        --------
Earnings (loss) from continuing operations before income taxes........       $  295.4          $  254.4        $ (250.0)
                                                                             ========          ========        ========

Identifiable segment assets...........................................       $3,377.2          $3,586.5        $3,686.1
Other assets..........................................................           91.7              70.9           169.8
Discontinued operations...............................................                                             17.2
                                                                             --------          --------        --------
Total assets..........................................................       $3,468.9          $3,657.4        $3,873.1
                                                                             ========          ========        ========

Corporate items not associated with identifiable segments:
   Depreciation expense...............................................       $    1.7          $    2.5        $    2.9
   Expenditures for property, plant and equipment.....................             .8               1.0             3.2
</TABLE>

On August 28, 1997, the Company acquired Nellcor.  The acquisition was accounted
for under the purchase method of accounting.  The purchase price of the Nellcor
acquisition was approximately $1.9 billion and was allocated to the assets
acquired and liabilities assumed based upon accounting principles generally
accepted in the United States and estimated fair values at the date of
acquisition.  Purchased research and development, an identifiable intangible
asset, of $306.3 million was charged to continuing operations in the first
quarter of 1998.  The sale of Nellcor inventories, which were stepped up to fair
value in connection with allocation of purchase price, decreased earnings from
continuing operations before income taxes by $74.4 million.  In addition, the
Company recorded pretax integration-related charges of $68.6 million in 1998.
See Note 3 for additional information.

Net sales in the U.S. based upon location of the customers were $1.80 billion,
$1.74 billion and $1.59 billion for 2000, 1999 and 1998, respectively.  The U.S.
represents 68 percent, 68 percent and 67 percent of total net sales for 2000,
1999 and 1998, respectively.  No other individual country had revenues
representing 10 percent or more of total net sales during this three-year
period.

Property, plant and equipment, net located in the U.S. were $672 million, $676
million and $688 million for 2000, 1999 and 1998, respectively.  The U.S.
represents 79 percent, 78 percent and 77 percent of the total property, plant
and equipment for 2000, 1999 and 1998, respectively.  No other individual
country had property, plant and equipment, net representing 10 percent or more
of this asset category during this three-year period.

In July 1996, Mallinckrodt began supplying Premier with x-ray contrast media
under a five-year contract.  Subsequently, Mallinckrodt entered into a sole-
source agreement to supply Premier hospital and healthcare facilities  with
tracheostomy tubes, temperature monitoring systems, and radiopharmaceuticals and
related products.  Effective July 1, 1997, Premier named Mallinckrodt a
corporate partner and, accordingly, Premier's 1,800 hospital and healthcare
facilities are provided incentives to use Mallinckrodt products.  Effective July
1, 1999, the corporate agreement was extended through December 31, 2006.  In
addition, the new agreement with the inclusion of Nellcor products now covers
almost all Respiratory and Imaging segment products.  For 2000, 1999 and 1998,
net sales to hospital and healthcare facilities under the Premier agreement
represented approximately 16 percent, 13 percent and 13 percent, respectively,
of consolidated net sales.  No individual customer, either through Premier or
otherwise, represented more than 10 percent of net sales for any of the three
years in the period ended June 30, 2000.

NOTE 20 - COMMITMENTS

The Company leases office space, data processing equipment, land, buildings, and
machinery and equipment. Rent expense for continuing operations in 2000, 1999
and 1998 related to operating leases was $30.9 million, $32.1 million and $31.5
million, respectively. Minimum rent commitments for continuing operations at
June 30, 2000 under operating leases with an initial or remaining noncancelable
period exceeding one year follow:

                                       57
<PAGE>

(In millions)    2001     2002     2003     2004      2005   After 2005   Total
               -------  -------  -------  --------  -------  ----------  -------
               $ 23.1   $ 19.7   $ 17.0   $ 14.4    $ 13.2   $ 35.2      $ 122.6

NOTE 21 - CONTINGENCIES

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 one such matter, German authorities seized certain
records of two of the Company's non-U.S. subsidiaries, Mallinckrodt Medical GmbH
and Mallinckrodt Radiopharma GmbH, in the Fall of calendar 1997.  These seizures
were part of investigations of certain practices at these subsidiaries that
involved payments to physicians and other German healthcare providers.  The
investigations, which are ongoing, appear to focus on whether the payments in
question were for research or other services performed by the recipients, or may
have been sales incentives or discounts which could possibly be contrary to
German law.

The Company understands that the German authorities are also reviewing the
conduct of physicians and healthcare providers that were the recipients of these
payments.  This aspect of the investigation appears to have adversely affected
some of the German subsidiaries' customer relationships.  When compared to the
same period last year, sales of x-ray contrast media and radiopharmaceutical
products in Germany have declined during 2000 by 17 percent in local currency,
or approximately $11 million excluding the impact of translation, which was in
part the result of a decline in market price.

The Company cannot anticipate the outcome of the pending German investigations.
At present, no charges have been filed against the Company's subsidiaries or
their employees.  Settlement discussions are underway with the German
authorities.  There have been significant changes in the management of the
German subsidiaries since the time of the seizures, and the Company believes it
has terminated those who were responsible.  In addition, the Company has
undertaken a review of its procedures governing payments to healthcare
providers, both in Germany and elsewhere in Europe.  The Company is also
reviewing, with the advice of German counsel, whether the payments in question
may result in any liability to German health insurers.  Based upon currently
available information, the Company does not believe that the German
investigation will have a material impact on the Company's consolidated results
of operations or financial position.

The Company has recognized the costs and associated liabilities only for those
investigations, claims and legal proceedings for which, in its view, it is
probable that liabilities have been incurred and the related amounts are
estimable.  Based upon information currently available, management believes that
existing accrued liabilities 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 results of operations or financial position.

In connection with laws and regulations pertaining to the protection of the
environment, the Company is a party to several environmental investigations or
remediations and, along with other companies, has been named a "potentially
responsible party" for certain waste disposal sites.  The Company accrues for
losses associated with environmental remediation obligations when such losses
are probable and reasonably estimable.  Accruals for estimated losses from
environmental remediation obligations generally are recognized no later than
completion of the remedial feasibility study.  Such accruals are adjusted as
further information develops or circumstances change.  Accruals for future
expenditures for environmental remediation are not discounted to their present
value. Recoveries, of which none exist at June 30, 2000 and 1999, of
environmental remediation costs from other parties are recognized as assets when
their receipt is deemed probable.  The Company previously recognized the costs
associated with the investigation and remediation of Superfund sites, the
litigation of potential environmental claims, and the investigation and remedial
activities at the Company's current and former operating sites for matters that
meet the policy set forth above.  Related accruals at June 30, 2000 and 1999 of
$122.6 million and $128.8 million, respectively, are included in current accrued
liabilities and other noncurrent liabilities and deferred credits.

                                       58
<PAGE>

QUARTERLY RESULTS
(In millions, except per share amounts)

FISCAL 2000

<TABLE>
<CAPTION>
                                                                              Quarter (Unaudited)
                                                                   ----------------------------------------
                                                                    First       Second    Third     Fourth      Year
                                                                   ----------  --------  --------  --------  ----------
<S>                                                                <C>         <C>       <C>       <C>       <C>
Net sales.....................................................     $   614.1    $  681.8  $  659.0  $  697.9  $ 2,652.8
Gross margins.................................................         277.0       296.3     288.5     316.5    1,178.3
Net earnings..................................................          37.7        46.8      57.9      62.6      205.0
Preferred stock dividends.....................................           (.1)        (.1)      (.1)      (.1)       (.4)
                                                                   ---------    --------  --------  --------  ---------
Available for common shareholders.............................     $    37.6    $   46.7  $   57.8  $   62.5  $   204.6
                                                                   =========    ========  ========  ========  =========
Basic earnings per common share...............................     $     .53    $    .67  $    .85  $    .93  $    2.97
                                                                   =========    ========  ========  ========  =========
Diluted earnings per common share.............................     $     .53    $    .67  $    .85  $    .93  $    2.96
                                                                   =========    ========  ========  ========  =========
</TABLE>

Basic and diluted earnings per share for the four quarters of 2000 were more
than full year per share results due to decreases in common shares outstanding
during 2000.


FISCAL 1999

<TABLE>
<CAPTION>
                                                                             Quarter (Unaudited)
                                                                 -------------------------------------------
                                                                     First       Second    Third     Fourth      Year
                                                                 -------------  --------  --------  --------  ----------
<S>                                                              <C>            <C>       <C>       <C>       <C>
Net sales.....................................................    $   591.9      $ 637.9   $   676.1  $  678.9  $2,584.8
Gross margins.................................................        273.6        290.2       317.0     324.1   1,204.9
Earnings from continuing operations...........................         31.7         35.1        54.1      52.0     172.9
Discontinued operations.......................................         22.6                                 .7      23.3
                                                                  ---------     --------   --------- ---------  --------
Net earnings..................................................         54.3         35.1        54.1      52.7     196.2
Preferred stock dividends.....................................          (.1)         (.1)        (.1)      (.1)      (.4)
                                                                  ---------     --------  ---------- --------- ---------
Available for common shareholders.............................    $    54.2         35.0   $    54.0  $   52.6  $  195.8
                                                                  =========     ========  ========== ========= =========

Basic earnings per common share:
   Earnings from continuing operations........................    $     .43      $   .49   $     .76  $    .73  $   2.41
   Discontinued operations....................................          .31                                .01       .32
                                                                  ---------     --------  ---------- --------- ---------
   Net earnings...............................................    $     .74      $   .49   $     .76  $    .74  $   2.73
                                                                  =========     ========  ========== ========= =========

Diluted earnings per common share:
   Earnings from continuing operations........................    $     .43      $   .49   $     .75  $    .73  $   2.40
   Discontinued operations....................................          .31                                .01       .32
                                                                  ---------     --------  ---------- --------- ---------
   Net earnings...............................................    $     .74      $   .49   $     .75  $    .74  $   2.72
                                                                  =========     ========  ========== ========= =========
</TABLE>

In June 1998, the Company committed to the sale of the remaining chemical
additives business of the catalysts and chemical additives division, and closing
of the sale occurred on July 31, 1998. The transaction resulted in a $37.0
million gain on sale, $23.3 million net of taxes, which was included in
discontinued operations. Earnings from operations were zero for the one month of
operations.

                                       59
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.

PART III.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors of the Registrant.   The following information concerning the Board of
Directors of the Registrant is current as of July 1, 2000:

RAYMOND F. BENTELE, 63, president and chief executive officer of Mallinckrodt,
Inc. from 1981 until his retirement in December 1992.  Mr. Bentele joined the
Company as senior vice president when it acquired the corporation then named
Mallinckrodt, Inc. in 1986, and was executive vice president of the Company from
1989 until retirement.  He is a director of Kellwood Company, Leggett & Platt,
Incorporated and IMC Global Inc.  Mallinckrodt director since 1990.  Term
expires in 2002.

WILLIAM L. DAVIS, 56, chairman of the board and chief executive officer since
March 1997 of R. R. Donnelley & Sons Company, a provider of a broad range of
services in print and digital media, with its headquarters located in Chicago,
Illinois.  Mr. Davis was a senior executive vice president of Emerson Electric
Co., St. Louis, Missouri, from 1993 to 1997, and executive vice president from
1988 to 1993.  Mallinckrodt director since 1995.  Term expires in 2001.

RONALD G. EVENS, M.D., 60, president and chief executive officer of Barnes-
Jewish Hospital, St. Louis, Missouri; Professor of Radiology and Professor of
Medical Economics, Washington University, St. Louis, Missouri.  Dr. Evens was
director of the Mallinckrodt Institute of Radiology until the fall of 1999.  He
is also a director of RightCHOICE Managed Care, Inc., a for-profit subsidiary of
Blue Cross and Blue Shield of Missouri. Mallinckrodt director since 1990.  Term
expires in 2002.

PETER B. HAMILTON, 53, vice chairman of Brunswick Corporation, a branded
recreational products company located in Lake Forest, Illinois, since 2000.  He
was executive vice president of Brunswick during 1999.  Mr. Hamilton also serves
as president of the Brunswick Indoor Recreation Group.  He was chief financial
officer of Brunswick Corporation from 1995 to 2000.  Mr. Hamilton previously
held various positions with Cummins Engine Company, Inc., Columbus, Indiana
where he served as vice president and general counsel from 1983 to 1987, vice
president, law and treasury from 1987 to 1988, and vice president and chief
financial officer from 1988 to 1995.  He also serves as a director of Brunswick
Corporation and The Kemper National Insurance Companies.  Term expires in 2002.

C. RAY HOLMAN, 57, chairman of the board of the Company since October 1994;
chief executive officer of the Company since December 1992; and president of the
Company from December 1992 to December 1995. Mr. Holman joined Mallinckrodt,
Inc. as assistant controller in 1976, and held increasingly more responsible
positions thereafter.  He became president and chief executive officer of
Mallinckrodt Medical, Inc., a wholly-owned subsidiary of the Company, in 1989,
and a corporate vice president in 1990.  He is a director of Laclede Gas Company
and Bank of America Corporation.  Mallinckrodt director since 1992.  Term
expires in 2000.

ROBERTA S. KARMEL, 63, professor of law and co-director, Center for the Study of
International Business Law, Brooklyn Law School since 1985; of counsel, Kelley
Drye & Warren, New York, New York, since January 1, 1995, where she was a
partner from 1987 to 1994.  Mrs. Karmel serves as a director of Kemper Insurance
Companies.  Mrs. Karmel served as a Commissioner of the U.S. Securities and
Exchange Commission from 1977 until 1980 and as a director of the New York Stock
Exchange from 1983 until June 1989.  Mallinckrodt director since 1980.  Term
expires in 2001.

CLAUDINE B. MALONE, 64, president of Financial & Management Consulting, Inc., a
management consulting firm located in McLean, Virginia. Ms. Malone currently
serves as a trustee of the Massachusetts Institute of Technology. Ms. Malone
sits on the boards of Dell Computer Corporation (term expires July 20, 2000);
Hannaford Bros. Co. (sold to Delhaize America, Inc. in August 2000); Houghton
Mifflin Company; Lafarge Corporation; Lowe's Companies, Inc.; Science
Applications International Corporation; and Union Pacific Resources Group Inc.
(sold to Anadarko Petroleum Corp. in July 2000). Mallinckrodt director since
1994. Term expires in 2000.

                                       60
<PAGE>

BRIAN M. RUSHTON, Ph.D., 66, former president of the American Chemical Society.
Dr. Rushton served as senior vice president, Research and Development, for Air
Products and Chemicals, Inc., Allentown, Pennsylvania, from 1992 to 1993.  He
joined Air Products in 1981 as vice president of Research and Development.  Dr.
Rushton has also been appointed to serve as a member of the Technical Advisory
Board of Scott Company.  Mallinckrodt director since 1994.  Term expires in
2001.

ANTHONY VISCUSI, 67, retired in December 1999 as president and chief executive
officer of Vasomedical, Inc., a medical device company located in Westbury, New
York, where he had served since 1994.  Mr. Viscusi remains a director of
Vasomedical, Inc.  Mr. Viscusi was senior vice president, Worldwide Marketing,
for the AgVet Division of Merck & Co., Inc. from 1987 to 1993.  Mallinckrodt
director since 1995.  Term expires in 2000.

BARRY W. WILSON, 55, senior vice president of Medtronic, Inc., a medical device
company with its headquarters located in Minneapolis, Minnesota, since September
1997, and president, Europe, Middle East and Africa since joining Medtronic,
Inc. in April 1995.  Prior to that, Mr. Wilson was president of the Lederle
Division of American Cyanamid/American Home Products from 1993 to 1995 and
president, Europe of Bristol-Myers Squibb from 1991 to 1993, where he also
served internationally in various general management positions from 1980 to
1991.  Mallinckrodt director since June 2000.  Term expires in 2000.

EXECUTIVE OFFICERS OF THE REGISTRANT.  For information concerning the executive
officers of the Registrant, see Part I Item 4 of this report, incorporated
herein by reference.

SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the
Securities Exchange Act of 1934 requires directors, certain officers and
beneficial owners of the Company's equity securities to file reports with the
SEC about such ownership. The Company is required to conduct a review and to
identify each director or officer who failed to file any required report under
Section 16 on a timely basis. Based upon that review, the Company believes that
all required reports were filed on a timely basis for the 2000 fiscal year.

                                       61
<PAGE>

ITEM 11.   EXECUTIVE COMPENSATION

Summary Compensation Table. The following table shows compensation information
for the Company's Chief Executive Officer and the four other most highly
compensated executive officers of the Company in fiscal 2000. Executive officers
are the corporate officers of the Company elected by the Board of Directors.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                       Long-Term
                                                                                         Compen-
                                                                                         sation
                                                        Annual Compensation              Awards
                                        -------------------------------------------    ----------
                                                                       Other Annual     Options/       All Other
                                                Salary      Bonus      Compensation       SARS       Compensation
Name and Principal Position (1)         Year      ($)       ($)(2)        ($)(3)         (#)(4)         ($)(5)
===============================         ====    ======    =========    ============    ==========    ===========
<S>                                     <C>     <C>       <C>          <C>             <C>           <C>
C. R. Holman
    Chairman and Chief                  2000    805,162   3,593,200       16,283         100,000        13,983
         Executive Officer              1999    732,840   4,072,400       23,694          82,000         6,145
                                        1998    732,840   1,278,046       21,653          45,400        12,573


M. A. Rocca
    Senior Vice President and           2000    355,746     959,800        3,082          32,400        12,499
         Chief Financial Officer        1999    322,793   1,095,600        3,194          27,400        11,975
                                        1998    314,951     339,334        1,680          15,000        11,881

M. J. Collins
    Senior Vice President and           2000    292,624     895,900            0          28,000        11,340
         President, Pharmaceuticals     1999    259,739     911,800          423          19,600         8,326
         Group(6)                       1998    231,811     227,660          717           6,000         8,247

B. J. Fercho
    Senior Vice President and           2000    247,453     909,400        5,842          19,100         7,531
         President, Imaging
         Group
    Senior Vice President and           1999    181,052     633,286            0          13,000         8,151
         President, Imaging
         Group(7)
    Vice President, North America       1998    141,446      34,700            0           2,900         5,603
         Field Operations,
         Imaging(8)

R. A. Keller
    Vice President, Secretary and       2000    305,785     803,100            0          22,900        11,710
         General Counsel                1999    281,135     924,200            0          18,800         8,406
                                        1998    274,150     286,990            0          10,600         9,483
</TABLE>

(1) Except as otherwise noted, each named executive officer served in the same
    principal position with the Company all three years.

(2) (A) For the 1998 fiscal year, the amounts in this column (except for Mr.
    Fercho) reflect annual incentive awards under the Company's Management
    Incentive Compensation Plan ("MICP"), together with supplemental annual
    incentive awards (the "Supplemental Awards") made in connection with the
    termination of the Company's Long-Term Incentive Plan for the period
    beginning July 1, 1997 and ending June 30, 2000. The Supplemental Awards
    were subject to vesting requirements and payment was deferred until after
    June 30, 2000. The amounts of the MICP awards and Supplemental Awards,
    respectively, for fiscal 1998 were as follows:

<TABLE>
<CAPTION>
                                                     Management Incentive        Supplemental Annual
                                                       Compensation Plan           Incentive Awards
                                                       -----------------           ----------------
<S>                                                  <C>                         <C>
           C. R. Holman..........................          $434,000                   $844,046
           M. A. Rocca...........................           129,000                    210,334
           M. J. Collins.........................            84,600                    143,060
           R. A. Keller..........................           113,000                    173,990
</TABLE>
                                       62
<PAGE>

The amount in this column for Mr. Fercho in fiscal 1998 reflects an incentive
bonus.

(B) For the 1999 fiscal year, the amounts in this column include annual
incentive awards under both the MICP and the 1999 Executive Incentive
Compensation Plan (the "1999 EICP"). 1999 EICP awards were subject to vesting
requirements and payment was deferred until after June 30, 2000. The amounts
of the MICP and 1999 EICP awards, respectively, for fiscal 1999 were as
follows:

<TABLE>
<CAPTION>
                                                     Management Incentive        Executive Incentive
                                                       Compensation Plan          Compensation Plan
                                                       -----------------          -----------------
<S>                                                  <C>                         <C>
           C. R. Holman..........................         $1,070,900                  $3,001,500
           M. A. Rocca...........................            331,100                     749,000
           M. J. Collins.........................            277,700                     634,100
           B. J. Fercho..........................            168,500                     404,786
           R. A. Keller..........................            289,100                     619,600
</TABLE>
The amounts in this column for Messrs. Rocca and Keller also include
special incentive bonuses paid to each of them during fiscal 1999 in the
amount of $15,500. The amount in this column for Mr. Fercho also includes a
stay-on bonus for fiscal 1999 in the amount of $60,000.

(C) For the 2000 fiscal year, the amounts in this column include annual
incentive awards under both the MICP and the 2000 Executive Incentive
Compensation Plan (the "2000 EICP"). The amounts of the MICP and 2000 EICP
awards, respectively, for fiscal 2000 were as follows:

<TABLE>
<CAPTION>
                                                     Management Incentive        Executive Incentive
                                                       Compensation Plan          Compensation Plan
                                                       -----------------          -----------------
<S>                                                  <C>                         <C>
           C. R. Holman..........................          $1,051,700                 $2,541,500
           M. A. Rocca...........................             325,600                    634,200
           M. J. Collins.........................             280,700                    615,200
           B. J. Fercho..........................             265,900                    643,500
           R. A. Keller..........................             278,400                    524,700
</TABLE>

    The annual incentive awards for each of the three fiscal years reported on
    in the Summary Compensation Table were indexed to the price of Mallinckrodt
    common stock. In connection with the proposed merger between the Company and
    subsidiaries of Tyco International Ltd. (the "Merger"), both the MICP and
    the EICP for fiscal 2000 were amended to provide for awards based upon the
    common stock price (i.e., $47.50 in Tyco common stock) received by
    Mallinckrodt shareholders in the Merger if the Merger is consummated. The
    annual incentive awards for fiscal 2000 were also made payable in two
    installments, with the first installment payable in August 2000 based upon a
    Mallinckrodt share price of $27.50, and the second installment payable and
    contingent upon consummation of the Merger.

(3) The amounts in this column represent tax gross-up payments made by the
    Company to the named executive officers relating to (a) reimbursements for
    club dues and (b) non-cash income under the Company's executive life
    insurance program.

(4) The numbers in this column reflect stock options granted to the named
    executive officers. The Company did not grant stock appreciation rights to
    the named executive officers during any of the last three fiscal years.

                                       63
<PAGE>

(5) The amounts in this column consist of matching contributions made by the
    Company under the Company's 401(k) plan, group term life insurance premiums
    paid by the Company, and the value of the economic benefit ("VEB") to each
    of the named executive officers under the Company's executive life insurance
    program, as follows:

<TABLE>
<CAPTION>
                                                                                  Term
                                                            401(k) Match        Insurance         V E B
                                                            ------------        ---------         -----
<S>                                              <C>        <C>                 <C>               <C>
           C. R. Holman....................      2000          $9,216             $    0          $4,767
                                                 1999           2,481                  0           3,664
                                                 1998           6,945                  0           5,628
           M. A. Rocca.....................      2000           9,216              1,504           1,779
                                                 1999           8,064              2,484           1,427
                                                 1998           7,392              2,436           2,053
           M. J. Collins...................      2000           9,216              1,414             710
                                                 1999           4,828              2,970             528
                                                 1998           4,273              3,095             879
           B. J. Fercho....................      2000           6,889                221             421
                                                 1999           7,446                309             396
                                                 1998           5,279                324               0
           R. A. Keller....................      2000           9,216                968           1,526
                                                 1999           6,666              1,740               0
                                                 1998           7,392              2,091               0
</TABLE>

(6) Mr. Collins served as Vice President and President, Pharmaceutical
    Specialties Division of the Company until February 1998, at which time he
    was named Senior Vice President and President, Pharmaceuticals Group.

(7) Mr. Fercho served as Vice President, North America Field Operations,
    Imaging, until November 1998, at which time he was named Senior Vice
    President and President, Imaging Group.

(8) Mr. Fercho served as Vice President, North America Field Sales of the
    Company until early 1998, at which time he was named Vice President, North
    America Field Operations, Imaging.

Stock Options. The following table shows all options to purchase the Company's
common stock granted to the named executive officers in fiscal 2000 and the
potential value of the grants at stock price appreciation rates of 0%, 5% and
10%, compounded annually over the maximum ten-year term of the options. Also
shown is the potential gain of all outstanding shares of common stock held by
the Company's shareholders as of June 30, 2000 using the same base price and
appreciation rates and compounded over the same ten-year period. The 5% and 10%
rates of appreciation are required to be disclosed by SEC rules and are not
intended to forecast possible future appreciation, if any, in the Company's
stock.

                        OPTION GRANTS IN FISCAL YEAR 2000

<TABLE>
<CAPTION>
                                                Individual Grants
                        -----------------------------------------------------------------       Potential Realizable Value at
                                                   Percent of                                   Assumed Annual Rates of Stock
                                                 Total Options    Exercise                    Price Appreciation for Option Term
                              Number of          Granted to All   or Base                    ------------------------------------
                        Securities Underlying     Employees in     Price       Expiration
         Name            Options Granted (1)      Fiscal Year    ($/Sh) (2)       Date       0%($)      5%($)              10%($)
---------------------   ---------------------     -----------    ----------    ----------    -----      -----              ------
<S>                     <C>                      <C>             <C>           <C>           <C>    <C>             <C>
C. R. Holman.........          100,000               7.97           32.66       08/17/09       0        2,054,000       5,205,000
M. A. Rocca..........           32,400               2.58           32.66       08/17/09       0          665,496       1,686,420
M. J. Collins........           28,000               2.23           32.66       08/17/09       0          575,120       1,457,400
B. J. Fercho.........           19,100               1.52           32.66       08/17/09       0          392,314         994,155
R. A. Keller.........           22,900               1.82           32.66       08/17/09       0          470,366       1,191,945
Gain for all Shareholders at Assumed Rates of Appreciation..............................       0    1,388,646,075   3,518,940,030
</TABLE>
-----------------------------------
(1) The options become fully exercisable in 33-1/3% increments over three years,
    provided the officer is still employed by the Company, with certain
    exceptions in the case of disability or retirement. Pursuant to the terms of
    the merger agreement between the Company and subsidiaries of Tyco
    International Ltd., upon consummation of the Merger all stock options under
    the Company's stock option plans will immediately become vested and
    exercisable. The exercise price and tax withholding obligations related to
    exercise may be paid by delivery of already owned shares of common stock or
    by offset of the underlying shares, subject to certain conditions. The
    Company did not grant stock appreciation rights during fiscal 2000.

(2) The exercise price for all options shown in this table is the average of the
    high and low sales prices of the stock on the date of grant as reflected on
    the New York Stock Exchange Composite Transactions Tape.

                                       64
<PAGE>

Option Exercises and Year-End Values. The following table gives information
about options exercised in fiscal 2000 by each of the persons named in the
Summary Compensation Table, and the value (stock price less exercise price) of
the remaining options held by those executive officers at year end.

         TOTAL OPTIONS EXERCISED IN FISCAL YEAR 2000 AND YEAR-END VALUES

<TABLE>
<CAPTION>
                                                                        Number of Unexercised            Value of Unexercised
                                                                             Options at                  In-The-Money Options
                                                                         Fiscal Year End (#)           at Fiscal Year End ($)(1)
                                                                    -----------------------------    -----------------------------
                                       Shares
                                    Acquired on        Value
             Name                   Exercise (#)    Realized ($)    Exercisable    Unexcercisable    Exercisable    Unexcercisable
-----------------------------       ------------    ------------    -----------    --------------    -----------    --------------
<S>                                 <C>             <C>             <C>            <C>               <C>            <C>
C. R. Holman...................        19,500         108,007         298,283         154,667         2,969,293       2,044,673
M. A. Rocca....................             0               0          77,333          50,667           781,932         671,010
M. J. Collins..................        10,500          71,282          62,533          41,067           700,249         531,978
B. J. Fercho...................             0               0          15,083          27,767           140,793         316,272
R. A. Keller...................         7,500          54,431          74,366          35,434           793,512         467,623
</TABLE>
(1) Values are based on the June 30, 2000 closing market price of $43.437 per
    share less option exercise at base price. These values are presented
    pursuant to SEC rules and the actual amount, if any, realizable upon
    exercise will depend upon the market price of the common stock relative to
    the exercise price per share of common stock at the time the stock options
    are exercised. There is no assurance that the values of unexercised in-the-
    money options reflected in the table will be realized.

Pension Plans. The Company maintains a non-contributory qualified pension plan
that covers many of its salaried employees who were hired before July 1, 1999,
including the named executive officers. The Company also has a Supplemental
Executive Retirement Plan ("SERP") that provides a supplemental pension benefit
for managers above a specified salary grade who have been approved for
participation by the chief executive officer. Participants include the named
executive officers and are generally limited to key managers of the Company.

Based on certain assumptions, including continuance of the qualified pension
plan and the Supplemental Executive Retirement Plan, the following table shows
the estimated annual pension benefits that would be payable to participants in
both plans at age 65 for various compensation and years-of-service combinations,
based upon a straight-life annuity form of benefit. If elected, any of several
optional forms of pension (apart from the lump sum option) would, on an
actuarial basis, reduce benefits to the participant but provide benefits to a
surviving beneficiary.

<TABLE>
<CAPTION>

                                                   Annual Benefits for Years of Service Indicated
                                    ----------------------------------------------------------------------------
 Annual Average of Highest Five
 Years Covered Remuneration for
  Pension Purposes in Ten Years
Preceding Normal Retirement Date   10 Years    15 Years     20 Years      25 Years      30 Years      35 Years
--------------------------------   --------    --------    ----------    ----------    ----------    ----------
<S>                                <C>         <C>         <C>           <C>           <C>           <C>
           $  100,000              $ 40,000    $ 50,000    $   60,000    $   60,000    $   60,000    $   60,000
              300,000               120,000     150,000       180,000       180,000       180,000       180,000
              500,000               200,000     250,000       300,000       300,000       300,000       300,000
              700,000               280,000     350,000       420,000       420,000       420,000       420,000
              900,000               360,000     450,000       540,000       540,000       540,000       540,000
            1,100,000               440,000     550,000       660,000       660,000       660,000       660,000
            1,300,000               520,000     650,000       780,000       780,000       780,000       780,000
            1,500,000               600,000     750,000       900,000       900,000       900,000       900,000
            1,800,000               720,000     900,000     1,080,000     1,080,000     1,080,000     1,080,000
</TABLE>
A former subsidiary of the Company, Mallinckrodt, Inc., had a separate
Supplemental Executive Retirement Plan, a non-contributory, non-qualified
pension plan to provide upon retirement an additional pension benefit for its
key executives. As amended, the Plan has been incorporated into the Company's
SERP and now applies only to three current executives of the Company (including
two of the named executive officers, Messrs. Holman and Keller), each of whom
has been employed by the Company for at least 15 years. The following table
shows the additional amount of retirement benefit payable to these three
executives at age 65 for various compensation and years-of-service combinations
based upon a life only form of annuity:

                                       65
<PAGE>

<TABLE>
<CAPTION>
                                                     Net Additional Annual Benefits For Years of Service Indicated
                                                     -------------------------------------------------------------
  Annual Average of Highest Three Years
Covered Remuneration for Pension Purposes
 in Ten Years Preceding Normal Retirement
                   Date                             15 Years       20 Years       25 Years     30 Years     35 Years
-----------------------------------------           --------       --------       --------     --------     --------
<S>                                                 <C>            <C>            <C>          <C>          <C>
                  $ 100,000                         $  5,750         $ 1,330      $  6,900     $   6,900     $  6,900
                    300,000                           17,250           3,990        20,700        20,700       20,700
                    500,000                           28,750           6,650        34,500        34,500       34,500
                    700,000                           40,250           9,310        48,300        48,300       48,300
                    900,000                           51,750          11,970        62,100        62,100       62,100
                  1,100,000                           63,250          14,630        75,900        75,900       75,900
                  1,300,000                           74,750          17,290        89,700        89,700       89,700
                  1,500,000                           86,250          19,950       103,500       103,500      103,500
                  1,800,000                          103,500          23,940       124,200       124,200      124,200
</TABLE>

Compensation covered by the pension plans will generally be equal to the dollar
amounts in the "Salary" and "Bonus" columns of the Summary Compensation Table.
For fiscal years 1998 - 2000, however, covered compensation does not include the
Supplemental Awards made in 1998 or the EICP awards made in 1999 and 2000, each
of which is included in the "Bonus" column of the table for the respective years
in which they were earned. Social Security benefits, qualified plan limitations
on eligible compensation and applicable integration adjustments are not
reflected in the above tables. The current credited years of service for the
individuals named in the Summary Compensation Table are as follows: Mr. Holman,
23 yrs., 10 mos.; Mr. Rocca, 6 yrs., 4 mos.; Mr. Collins, 24 yrs.; Mr. Fercho,
17 yrs., 3 mos.; and Mr. Keller, 24 yrs., 11 mos.

Investment Plan and Other Benefits. The Company has an Investment Plan under
which salaried and most non-union hourly employees of the Company, including
officers, who elect to participate in the Investment Plan may make regular
contributions by salary reduction and/or by payroll deduction of from 1% to a
maximum of 15% of their annual base salaries. Under the Investment Plan and
subject to certain statutory limitations, the Company contributes an amount
equal to 20%, or such greater amount as may be approved by the Board of
Directors, of a participant's contributions up to 6% of his or her annual base
salary. For fiscal 2000, the Company's contribution in excess of 20% (the
"Supermatch") depended and was based upon the Company's return on invested
capital, and was an additional 76% for a total Company match of 96%. All
employee contributions and the initial 20% Company match are invested as
directed by the participant, in one or more investment funds, including a
Mallinckrodt stock fund. The Supermatch is made in Mallinckrodt common stock. To
encourage Company employees to own Mallinckrodt stock, the Investment Plan
requires all participants to maintain at least 15% of their total account
balance in Company stock obtained through Supermatch contributions. The
Company's contributions to the Investment Plan for fiscal 2000 on behalf of the
named executive officers are reflected in the "All Other Compensation" column of
the Summary Compensation Table.

The Company maintains a supplemental death benefit program for officers and key
employees that provides individual pre-tax death benefits equal to four times
annual salary grossed up for income taxes. This program is provided at Company
expense and continues in effect post-retirement for participants who retire
while employed by the Company. Each of the named executive officers is a
participant.

The Company maintains a comprehensive employee benefit program that provides
medical, dental, death, disability, and similar benefits in the context of a
cafeteria benefit plan as defined in Section 125 of the Internal Revenue Code.
Employees may pay for certain benefits by means of salary reduction
contributions pursuant to the plan, known as the Flexsecurity Plan.

Termination of Employment and Change-in-Control Arrangements. Mallinckrodt has
entered into retention agreements with all of its executive officers (including
the named executive officers), which supersede the employment agreements (with
certain limited exceptions) and the change in control agreements Mallinckrodt
previously entered into with these executive officers. The retention agreements
provide for the benefits described below in return for the executives' continued
employment with Mallinckrodt and their agreement not to compete with
Mallinckrodt (other than upon a termination that is a nonqualifying termination
(as defined in the retention agreements) or that occurs following the third
anniversary of the effective date of the Merger). The agreements provide that,
to the extent not already provided under Mallinckrodt's equity plans, any
unvested stock options shall become vested and exercisable upon the effective
date of the Merger. The agreements also provide that if either the executive is
employed by Mallinckrodt on the second anniversary of the effective date of the
Merger or the employment of the executive is either terminated by Mallinckrodt
without cause or by the executive for good reason (as defined in the retention
agreements) prior to the second anniversary of the effective date of the Merger,
then the executive shall receive a lump sum cash amount equal to a multiple of
the sum of the executive's base salary plus

                                       66
<PAGE>

the executive's target bonuses under Mallinckrodt's annual incentive plans for
the year in which the Merger occurs or, if greater, for the preceding year. In
addition, if the executive is either terminated by Mallinckrodt without cause or
terminates employment for good reason prior to the third anniversary of the
effective date of the Merger, then the executive shall receive:


     .  a lump sum payment equal to the executive's pro rata target bonuses
        under Mallinckrodt's annual incentive plans for the year of termination
        and the target award or target bonus under any long-term incentive plan
        of Mallinckrodt,

     .  three years' credited service under the Mallinckrodt Supplemental
        Executive Retirement Plan and, with respect to any executive who is 55
        years or older on the date of termination, an unreduced normal
        retirement benefit under the SERP,

     .  continued participation in welfare insurance benefits for life, with
        respect to any executive who is 55 years or older on the date of
        termination, or a 24-month period, if the executive is less than 55
        years old on the date of termination,

     .  either, at the election of the executive, a cash payment equal to
        $75,000 or outplacement services for three years, not to exceed $75,000,
        and

     .  the right to retain all rights to indemnification and coverage under
        Mallinckrodt's director and officers liability insurance.

In the event the payments to any executive under the retention agreement or
otherwise are subject to the 20% parachute payment excise tax under Section 4999
of the Internal Revenue Code, Mallinckrodt will reimburse the executive in an
amount sufficient to enable the executive to retain his benefits as if the
excise tax had not applied.

Compensation Committee Interlocks and Insider Participation. None of the members
of the Board's Organization and Compensation Committee during any part of fiscal
2000 was at any time in the past an officer or employee of the Company or any
subsidiary. There are not executive officer interlocks with any other company.

Directors' Compensation

Compensation for Directors' Services. During the 2000 fiscal year, the Company
paid non-employee directors a retainer of $30,000. The Company also paid non-
employee directors $2,000 for each Board meeting attended ($750 for telephone
Board meetings)1. The non-employee directors also received $1,000 for each
committee meeting attended ($500 for telephone committee meetings) and an annual
retainer of $3,600 for chairing a committee (other than the Executive
Committee)2. The Company paid the Board intermediary3, who also chairs the
Executive Committee, an additional retainer equal to the annual retainer paid to
non-employee directors for service on the Board ($30,000). Employee directors
receive no fees or remuneration, as such, for service on the Board or any
committee of the Board.

The Board of Directors approved the payment of additional compensation to the
non-employee directors who served on the Special Committee for CEO Succession4
at the rate of $1,000 for each meeting of the Special Committee attended in
person and $500 for telephone meetings, resulting in the following payments for
fiscal 2000: Mr. Bentele - $5,000; Mr. Davis - $3,000; Dr. Evens -$10,000; Ms.
Malone - $3,000; Dr. Rushton - $5,000. The Board also approved payment of a
retainer in the amount of $3,600 to the chair of the Special Committee, Dr.
Evens.

------------------------------

/1/The Board held six regular meetings and three special meetings (including
two meetings by conference telephone) during the 2000 fiscal year.

                                       67
<PAGE>

     /2/ The Board of Directors has established five standing committees:
Executive; Audit; Corporate Governance; Organization and Compensation; and
Social Responsibility. The members of the standing committees are as follows:

<TABLE>
<CAPTION>
                                                                                             Organization and
  Executive             Audit           Corporate Governance      Social Responsibility        Compensation
  ---------             -----           --------------------      ---------------------      ----------------
<S>                 <C>                 <C>                       <C>                        <C>
R. F. Bentele*      W. L. Davis*           R. F. Bentele             R. F. Bentele            W. L. Davis
W. L. Davis         P. B. Hamilton         R. G. Evens*              R. G. Evens              R. S. Karmel
R. G. Evens         R. S. Karmel           C. B. Malone              P. B. Hamilton           C. B. Malone*
C. R. Holman        B. M. Rushton          A. Viscusi                B. M. Rushton*           A. Viscusi
C. B. Malone                               B. W. Wilson                                       B. W. Wilson
B. M. Rushton
</TABLE>

*Chair

The standing Board committees held the following numbers of meetings during the
2000 fiscal year: Executive - no meetings; Audit - three meetings; Corporate
Governance - four meetings; Social Responsibility - three meetings; and
Organization and Compensation -seven meetings (including two special meetings).

     /3/ When the positions of chairman and chief executive officer are
combined, as they currently are, the Board selects from its non-employee
directors a person to serve as Board intermediary. The responsibilities of the
intermediary include presiding at all executive sessions of the Board from which
the chief executive officer is excused or otherwise absent, interacting with the
Board and the chief executive officer in setting agendas and assessing
objectives, and coordinating the Board's formal chief executive officer
performance appraisal. The Board selects the intermediary annually at the time
of the regular stockholders' meeting. Mr. Bentele has served as Board
intermediary since October 1998.

     /4/ The Board of Directors established during fiscal 2000 a Special
Committee for CEO Succession (the "Special Committee"). The Board delegated to
the Special Committee authorization to review and recommend a succession process
for use whenever the Board begins the selection of a successor chief executive
officer. The Special Committee is chaired by Dr. Evens and also has as its
members Ms. Malone, Messrs. Bentele and Davis, and Dr. Rushton.

------------------------------
Non-employee directors may defer the receipt of all or part of their
compensation under the Deferral Election Plan for Non-Employee Directors.
Amounts deferred under the plan may be allocated to a cash account, which earns
interest at a fluctuating rate determined by reference to the prime rate charged
by Bankers Trust Company of New York, or to a stock account, which is credited
with share equivalents of Mallinckrodt common stock, or they may divide their
deferrals between the two accounts.

Under the Directors' Stock Option Plan (which will expire in October 2000), each
non-employee director continuing in office after an annual meeting of
stockholders has, since the plan's approval in October 1990, received a non-
qualified option to purchase 1,500 shares of Mallinckrodt common stock at 100%
of fair market value on the date of grant. Each option has a term of ten years,
unless the period is shortened under provisions taking effect upon death or
retirement. Fifty percent of the shares covered by each grant become exercisable
on the first anniversary of the grant, and the remaining fifty percent become
exercisable on the second anniversary.

The Company also provides non-employee directors with accident coverage while on
Company business. Non-employee directors may also participate in the Company's
matching gifts program for gifts to eligible non-profit organizations up to
$2,000 per year.

At the Company's 1997 Annual Meeting, shareholders approved the Directors' Stock
Award Plan. Under this plan, each non-employee director is eligible to receive
an annual grant of Mallinckrodt common stock having a fair market value equal to
$15,000. Awards will generally be made on the first business day following each
annual stockholders' meeting. An award under the plan was made on October 21,
1999, at which time each participating director received 452 shares of
Mallinckrodt common stock.

Concurrent with stockholder approval of the Directors' Stock Award Plan, the
Board discontinued the Company's nonqualified pension plan for all non-employee
directors who continued in office after the 1997 Annual Meeting (except former
director, Mr. Daniel R. Toll, who continued to participate in the pension plan
because of his proximity to retirement), and for all future non-employee
directors of the Company. With respect to each continuing non-employee director
for whom the pension plan was terminated, the Company established a book account
reflecting the then present value of the retirement benefit of such director
under the pension plan. These

                                      68
<PAGE>

accounts will accrue interest at the prime rate until paid. When any such
director leaves the Board, he or she will be paid either in a lump sum or
(except as otherwise provided in the event of a director's death) in
substantially equal payments over up to a fifteen-year period, at the director's
election. In the event of a director's death before receiving full account
value, the balance would be payable in a lump sum to the designated beneficiary
or, if none, to the director's estate.

Mr.Barry Wilson, one of Mallinckrodt's non-employee directors, was granted an
option on 1,500 phantom shares of Mallinckrodt common stock that will be fully
exercisable immediately prior to the consummation of the Merger. Upon exercise
of a phantom share, Mr. Wilson will be entitled to a cash payment equal to the
product of the excess of (x) the fair market value of the number of Tyco
International Ltd. common shares received by Mallinckrodt's shareholders for
each share of Mallinckrodt common stock in connection with the Merger over (y)
the closing of the Mallinckrodt common stock on June 23, 2000.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table shows the number of shares of Mallinckrodt common stock held
beneficially as of the date indicated by each director, each of the named
executive officers in the Summary Compensation Table, and all directors and
executive officers as a group. The named individuals have sole voting and
investment power over all stock reflected in the table.

<TABLE>
<CAPTION>
                                          Number of Common
                                         Shares Beneficially         Percent of
                                                Owned                   Class
                Name                          (1)(2)(3)              Outstanding
                ----                          ---------              -----------
<S>                                      <C>                         <C>
Raymond F. Bentele                              39,667                   *
Michael J. Collins                              95,640                   *
William L. Davis                                 7,167                   *
Ronald G. Evens(4)                              17,117                   *
Bradley J. Fercho                               34,875                   *
Peter B. Hamilton                                1,452                   *
C. Ray Holman                                  506,488                   *
Roberta S. Karmel                               16,667                   *
Roger A. Keller                                108,774                   *
Claudine B. Malone                              10,717                   *
Michael A. Rocca                               119,283                   *
Brian M. Rushton                                10,403                   *
Anthony Viscusi                                  8,667                   *
Barry W. Wilson                                  1,000                   *
All directors and executive officers
  as a group (24 individuals)                1,496,198                  2.15%
</TABLE>

*  Less than 1.0% of the common stock outstanding.

---------------------------------------
(1)  The information in this table reflects holdings as of July 31, 2000.

(2)  The Securities and Exchange Commission ("SEC") considers any person who has
     or shares voting and/or investment power with respect to a security, or who
     has the right to acquire a security within 60 days (such as through the
     exercise of an option), to be the beneficial owner of that security.

(3)  The numbers in this column include options that may be exercised for common
     stock within 60 days of July 31, 2000, for the following individuals:
     Raymond F. Bentele, 8,250 shares; Michael J. Collins, 78,399 shares;
     William L. Davis, 3,000 shares; Ronald G. Evens, 12,750 shares; Bradley J.
     Fercho, 24,783 shares; C. Ray Holman, 358,949 shares; Roberta S. Karmel,
     11,250 shares; Roger A. Keller, 88,265 shares; Claudine B. Malone, 6,750
     shares; Michael A. Rocca, 97,266 shares; Brian M. Rushton, 6,750 shares;
     Anthony Viscusi, 5,250 shares; and all directors and executive officers as
     a group, 1,138,316 shares. The numbers in this column also include
     equivalent shares of common stock held by the Trustee of the Mallinckrodt
     Inc. 401(k) Investment Plan for the accounts of individuals as follows:
     Bradley J. Fercho, 5,092 shares; Michael J. Collins, 2,743 shares; C. Ray
     Holman, 850 shares; Roger A. Keller, 3,203 shares; Michael A. Rocca, 584
     shares; and all directors and executive officers as a group, 35,812 shares.
     Pursuant to the terms of the Merger Agreement between the Company and a
     subsidiary of Tyco International, Ltd., upon consummation of the Merger,
     all stock options under the stock option and stock incentive plans of the
     Company will immediately vest and become exercisable.

                                       69
<PAGE>

(4) This number does not include (a) share equivalents credited to Dr. Evens
    (5,372 share equivalents) under the Deferral Election Plan for Non-Employee
    Directors, as to which no voting or investment power exists prior to share
    issuance, or (b) 1,300 shares for which Dr. Evens disclaims beneficial
    ownership.

(5) This number does not include share equivalents credited to Mr. Rocca (1,045
    share equivalents as of June 30, 2000) under the Company's Income Deferral
    Plan.

Security Ownership of Certain Beneficial Owners

The following table sets forth certain information regarding the beneficial
ownership as of July 31, 2000 by all persons known to the Company to be
beneficial owners of more than 5% of the Company's common stock. To the
Company's knowledge, no person beneficially owns more than 5% of its preferred
stock.

<TABLE>
<CAPTION>
                                                                                Shares of
                                                                              Common Stock
                            Name and Address                               Beneficially Owned     Percent of Class
                            ----------------                               ------------------     ----------------
<S>                                                                        <C>                    <C>
BZW Barclays Global Investors N.A.(1)(2)...............................         4,817,896               6.94%
45 Fremont Street, 17th Floor
San Francisco, CA 94105
Los Angeles, CA 90071
</TABLE>
------------------------------

(1)  Based solely on statements filed with the SEC pursuant to Sections 13(d) or
     13(g) of the Securities Exchange Act of 1934. The Company has not
     independently verified these statements or more current holdings.

(2)  A Schedule 13G, filed with the SEC on February 16, 1999 indicates the
     following: Barclays Global Investors N.A. beneficially owns and has sole
     dispositive power over 4,170,393 shares, of which it has sole voting power
     over 3,778,738 shares and shared voting power over 233 shares; Barclays
     Global Fund Advisors beneficially owns and has sole voting and dispositive
     powers over 277,235 shares; Barclays Bank PLC beneficially owns and has
     sole voting and dispositive powers over 110,300 shares; Barclays Funds
     Limited beneficially owns and has sole voting and dispositive powers over
     15,900 shares; Barclays Global Investors Ltd. beneficially owns and has
     sole dispostive power over 229,215 shares, of which it has sole voting
     power over 217,415 shares; and Barclays Trust and Banking Company (Japan)
     Ltd. beneficially owns and has sole voting and dispositive powers over
     14,853 shares.

Changes in Control

The Company has entered into a merger agreement with subsidiaries of Tyco
International Ltd., as a result of which the Company would become an indirect
Tyco subsidiary and holders of the Company's common stock will become Tyco
shareholders. See Note 2 of the Notes to Consolidated Financial Statements in
Item 8 for additional information.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Ronald G. Evens, M.D., a Mallinckrodt director, is the President and Chief
Executive Officer of Barnes-Jewish Hospital, St. Louis, Missouri, and the
Professor of Radiology and Professor of Medical Economics at Washington
University, St. Louis, Missouri. Dr. Evens has, for many years, beginning before
his joining the Mallinckrodt Board in 1990, rendered consulting services to the
Company's Imaging division. During fiscal 2000, the Company paid Dr. Evens
$51,719 for consulting services. In general, there has also been a history of
research grants and contributions to, and other support by, Mallinckrodt of
Washington University; in fiscal 2000, this totaled about $301,000.

                                       70
<PAGE>

PART IV.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)    Financial Statements, Financial Statement Schedules and Exhibits

(1)(2) See index on page 75 for a listing of financial statements and financial
       statement schedules filed with this report.

(3)    Exhibits filed with this report.

Exhibit
Number                           Description
------  ------------------------------------------------------------------------
2.1     Agreement and Plan of Merger, dated as of June 28, 2000, by and among
        Tyco Acquisition Corp. VI (NV), a Nevada corporation and a wholly owned
        first-tier subsidiary of Tyco International Ltd., a Bermuda company, EVM
        Merger Corp., a New York corporation and a wholly owned first-tier
        subsidiary of Tyco Acquisition Corp. VI (NV), and Mallinckrodt Inc., a
        New York corporation (incorporated by reference to Exhibit 2.1 to Form
        8-K, dated June 28, 2000)

3.1(a)  Restated Certificate of Incorporation of Mallinckrodt, dated June 22,
        1994 (incorporated herein by reference to Exhibit 3.1 to 1994 Form 10-K)

3.1(b)  Certificate of Amendment of the Certificate of Incorporation of
        Mallinckrodt, dated October 16, 1996 (incorporated herein by reference
        to Exhibit 3.3 to September 30, 1996 Form 10-Q)

3.1(c)  Certificate of Amendment of the Certificate of Incorporation of
        Mallinckrodt, dated October 30, 1998 (incorporated herein by reference
        to Exhibit 3.1(c) to December 31, 1998 Form 10-Q)

3.1(d)  Certificate of Change of Mallinckrodt Inc., filed on July 20, 2000
        (filed with this electronic submission)

3.2     By-Laws of Mallinckrodt as amended through August 17, 1999 (incorporated
        herein by reference to Exhibit 3.2 to 1999 Form 10-K)

4.1     Form 8-A Registration Statement under Section 12 of the Securities
        Exchange Act of 1934, dated April 10, 1987 defining the rights of
        holders of Mallinckrodt's 4% Cumulative Preferred Stock and Common Stock
        (incorporated herein by reference to Exhibit 4.6 to 1989 Form 10-K,
        Commission File No. 1-483)

4.2     Indenture dated as of March 15, 1985, as amended and restated as of
        February 15, 1995, between Mallinckrodt and First Trust of New York,
        National Association (incorporated herein by reference to Exhibit 4.1 to
        Form S-3 Registration Statement No. 33-57821)

4.3     The Company hereby agrees to file on request of the Commission a copy of
        all instruments not otherwise filed with respect to long-term debt of
        the Company or any of its subsidiaries for which the total amount
        of securities authorized under such instruments does not exceed 10% of
        the total assets of the Company and its subsidiaries on a consolidated
        basis

10.1    Form of Executive Life Insurance Plan Participation Agreement, as
        entered into with the Company's executive officers and certain other key
        employees (1) (incorporated herein by reference to Exhibit 10.24 to 1996
        Form 10-K)

10.2    Restated Mallinckrodt Executive Long-Term Disability Plan effective
        January 1, 1987 (1) (incorporated herein by reference to Exhibit 10.3 to
        1989 Form 10-K, Commission File No. 1-483)

10.3(a) Supplemental Benefit Plan for Participants in the Mallinckrodt
        Retirement Plan as amended and restated effective January 1, 1980 (1)
        (incorporated herein by reference to Exhibit 10.6(a) to 1989 Form 10-K,
        Commission File No. 1-483)

                                       71
<PAGE>

Exhibit
Number                             Description
------   -----------------------------------------------------------------------
10.3(b)  Amendment No. 1 dated June 20, 1989 to Supplemental Benefit Plan for
         Participants in the Retirement Plan for Salaried Employees of
         Mallinckrodt (1) (incorporated herein by reference to Exhibit 10.6(b)
         to 1989 Form 10-K, Commission File No. 1-483)

10.3(c)  Amendment No. 2 dated April 20, 1990 to Supplemental Benefit Plan for
         Participants in the Mallinckrodt Retirement Plan (1) (incorporated
         herein by reference to Exhibit 10.6(c) to 1990 Form 10-K, Commission
         File No. 1-483)

10.4(a)  Mallinckrodt Supplemental Executive Retirement Plan restated effective
         April 19, 1988 (1) (incorporated herein by reference to Exhibit 10.7(a)
         to 1989 Form 10-K, Commission File No. 1-483)

10.4(b)  Amendment No. 1 effective December 6, 1989, to Supplemental Executive
         Retirement Plan (1) (incorporated herein by reference to Exhibit
         10.7(c) to 1990 Form 10-K, Commission File No. 1-483)

10.4(c)  Amendment No. 2 effective April 19, 1996, to Supplemental Executive
         Retirement Plan (1) (incorporated herein by reference to Exhibit
         10.6(c) to 1996 Form 10-K)

10.4(d)  Amendment Number Three to Supplemental Executive Retirement Plan,
         effective June 15, 2000 (1) (filed with this electronic submission)

10.5     Supplemental Executive Retirement and Supplemental Life Plan of
         Mallinckrodt Inc. effective July 15, 1984 (1) (incorporated herein by
         reference to Exhibit 10.20 to 1989 Form 10-K, Commission File No. 1-
         483)

10.6(a)  Mallinckrodt Management Incentive Compensation Program as amended and
         restated effective July 1, 1991 (1) (incorporated herein by reference
         to Exhibit 10.9(b) to 1991 Form 10-K, Commission File No. 1-483)

10.6(b)  Amendment No. 1 to the Management Incentive Compensation Plan,
         effective April 19, 1996 (1) (incorporated herein by reference to
         Exhibit 10.7(b) to 1996 Form 10-K)

10.6(c)  Amendment to the Management Incentive Compensation Plan of Imcera Group
         Inc. and Fiscal 2000 Management Incentive Compensation Plan of
         Mallinckrodt Inc., effective June 15, 2000 (1) (filed with this
         electronic submission)

10.7(a)  Mallinckrodt 1973 Stock Option and Award Plan as amended effective
         February 21, 1990 (1) (incorporated herein by reference to Post-
         Effective Amendment No. 1 to Form S-8 Registration Statement No. 33-
         32109)

10.7(b)  Amendment No. 1 to the Mallinckrodt 1973 Stock Option and Award Plan
         dated June 19, 1991 (1) (incorporated herein by reference to Form S-8
         Registration Statement No. 33-43925)

10.8(a)  Mallinckrodt 1981 Stock Option Plan as amended through April 19, 1988
         (1) (incorporated herein by reference to Post-Effective Amendment No. 3
         to Form S-8 Registration Statement No. 2-80553)

10.8(b)  Amendment to the 1981 Stock Option Plan effective February 15, 1989 (1)
         (incorporated herein by reference to Exhibit 10.12(b) to 1989 Form 10-
         K, Commission File No. 1-483)

10.8(c)  Amendment to the 1981 Stock Option Plan effective June 19, 1991 (1)
         (incorporated herein by reference to Exhibit 10.12(c) to 1991 Form 10-
         K, Commission File No. 1-483)

10.9(a)  Management Compensation and Benefit Assurance Program (1) (incorporated
         herein by reference to Exhibit 10.30 to 1988 Form 10-K, Commission File
         No. 1-483)

10.9(b)  Amendments to Management Compensation and Benefit Assurance Program (1)
         (incorporated herein by reference to Exhibit 10.12(b) to 1996 Form 10-
         K)

                                       72
<PAGE>

Exhibit
Number                        Description
------   -----------------------------------------------------------------------
10.10(a) Agreement of Trust dated August 16, 1996, between Mallinckrodt and
         Wachovia Bank of North Carolina, N.A. (1) (incorporated herein by
         reference to Exhibit 10.13 to 1996 Form 10-K)

10.10(b) Amendment to Rabbi Trust, effective June 15, 2000 (1) (filed with this
         electronic submission)

10.11(a) Corporate Staff Employee Severance and Benefit Assurance Policy (1)
         (incorporated herein by reference to Exhibit 10.33 to 1988 Form 10-K,
         Commission File No. 1-483)

10.11(b) Mallinckrodt Inc. Corporate Staff Change in Control Severance Plan (1)
         (incorporated herein by reference to Exhibit 10.14(b) to 1996 Form 10-
         K)

10.11(c) Amendment Number One to Mallinckrodt Group Inc. Corporate Staff Change
         in Control Severance Plan, effective June 15, 2000 (1) (filed with this
         electronic submission)

10.12(a) Form of Amended and Restated Severance Agreement, as entered into with
         the Company's named executive officers and certain other key employees
         (1) (filed with this electronic submission)

10.12(b) Form of Retention Agreement, as entered into with the Company's named
         executive officers and certain other key employees (superceded the
         Severance Agreements attached hereto as Exhibit 10.12(a)) (1) (filed
         with this electronic submission)

10.13    Mallinckrodt Directors' Retirement Services Plan as amended and
         restated effective April 21, 1993 (1) (incorporated herein by reference
         to Exhibit 10.10 to 1993 Form 10-K)

10.14    Mallinckrodt Directors' Stock Option Plan effective October 17, 1990
         (1) (incorporated herein by reference to Exhibit 4(a) to Form S-8
         Registration Statement No. 33-40246)

10.15    Consulting Agreement with Ronald G. Evens, M.D., for the period from
         January 1, 2000 through December 31, 2000 (1) (incorporated herein by
         reference to Exhibit 10.24 to March 31, 2000 Form 10-Q)

10.16(a) Deferral Election Plan for Non-Employee Directors, effective June 30,
         1994 (1) (incorporated herein by reference to Exhibit 10.29 to 1994
         Form 10-K)

10.16(b) Amendment of Deferral Election Plan for Non-Employee Directors,
         effective February 15, 1995 (1) (incorporated herein by reference to
         Exhibit 10.22(b) to 1995 Form 10-K)

10.17    Directors Stock Award Plan of Mallinckrodt Inc., effective October 15,
         1997 (1) (incorporated herein by reference to Appendix A to Definitive
         Proxy Statement (Schedule 14A) for the Company's 1997 Annual Meeting of
         Stockholders, filed with the Commission on September 12, 1997)

10.18(a) The Mallinckrodt Inc. Equity Incentive Plan, effective April 16, 1997
         (1) (incorporated herein by reference to Appendix B to Definitive Proxy
         Statement (Schedule 14A) for the Company's 1997 Annual Meeting of
         Stockholders, filed with the Commission on September 12, 1997)

10.18(b) Amendment Number One to the Mallinckrodt Inc. Equity Incentive Plan (1)
         (incorporated herein by reference to Exhibit A to Definitive Proxy
         Statement (Schedule 14A) for the Company's 1999 Annual Meeting of
         Stockholders filed with the Commission on September 8, 1999)

10.19    Executive Incentive Compensation Plan for fiscal 1999 (1) (incorporated
         herein by reference to Exhibit 10.29 to September 30, 1998 Form 10-Q)

10.20(a) Executive Incentive Compensation Plan for fiscal 2000 (1) (incorporated
         herein by reference to Exhibit 10.20 to 1999 Form 10-K)

10.20(b) Amendment Number One to the Executive Incentive Compensation Plan for
         fiscal 2000, effective June 15, 2000 (1) (filed with this electronic
         submission)

                                       73
<PAGE>

Exhibit
Number                       Description
------   -----------------------------------------------------------------------
10.20(c) Amendment Number Two to the Executive Incentive Compensation Plan for
         fiscal 2000, effective June 15, 2000 (1) (filed with this electronic
         submission)

10.21    Mallinckrodt Inc. Income Deferral Plan effective January 1, 2000 (1)
         (incorporated herein by reference to Exhibit 10.23 to December 31, 1999
         Form 10-Q)

10.22    Amended and Restated Credit Agreement dated as of September 12, 1997,
         among Mallinckrodt, the Banks listed therein, Morgan Guaranty Trust
         Company of New York, as Administration Agent, Goldman Sachs Credit
         Partners L.P. and Citibank, N.A. as Co-Syndication Agents, and
         Citibank, N.A., Goldman Sachs Credit Partners L.P., and NationsBank,
         N.A., as Co-Documentation Agents (incorporated herein by reference to
         Exhibit 10.24 to September 30, 1997 Form 10-Q)

21       Subsidiaries of the Registrant (filed with this electronic submission)

23.1     Consent of Ernst & Young LLP (filed with this electronic submission)

27       Financial data schedule for the year ended June 30, 2000 (filed with
         this electronic submission)
_____________________
(1)    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 April 26, 2000 under Item 5 regarding the appointment of Barry
   W. Wilson to the Board of Directors.

 .  Report dated May 16, 2000 under Item 5 regarding Nycomed Amersham and
   Mallinckrodt Inc. agreement on Ultrasound Patent Settlement, and announcement
   of joint development of existing ultrasound products.

 .  Report dated June 8, 2000 under Item 5 regarding Forrest R. Whittaker joining
   Mallinckrodt Inc. as President of the Company's Respiratory Group.

 .  Report dated June 28, 2000 under Item 5 regarding Mallinckrodt Inc. and Tyco
   International Ltd. entering into an Agreement and Plan of Merger.

 .  Report dated August 10, 2000 under Item 5 regarding the Company's financial
   results for the three-month and twelve-month periods ended June 30, 2000.

                                       74
<PAGE>

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
                                                                               Page
                                                                            -----------
<S>                                                                         <C>
Consolidated Balance Sheets at June 30, 2000 and 1999.....................       36
For the years ended June 30, 2000, 1999 and 1998:
    Consolidated Statements of Operations.................................       35
    Consolidated Statements of Cash Flows.................................       37
    Consolidated Statements of Changes in Shareholders' Equity............       38
Notes to Consolidated Financial Statements................................      39-58
Quarterly Results.........................................................       59
</TABLE>

All other schedules are omitted as the required information is not present in
sufficient amounts or the required information is included in the consolidated
financial statements or notes thereto.

Financial statements and schedules and summarized financial information of 50
percent or less owned entities are omitted, as none of such entities are
individually or in the aggregate significant under the tests specified in
Regulation S-X under Article 3-09 of General Instructions as to Financial
Statements.

                                       75
<PAGE>

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:  /s/ MICHAEL A. ROCCA                    By:   /s/ DOUGLAS A. MCKINNEY
     ------------------------------                -----------------------------
         Michael A. Rocca                              Douglas A. McKinney
       Senior Vice President and                   Vice President and Controller
        Chief Financial Officer

Date: August 15, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
                 Signature                                     Title                                Date
                 ---------                                     -----                                ----
<S>                                             <C>                                           <C>
/s/      C. RAY HOLMAN                          Chief Executive Officer and Director          August 15, 2000
---------------------------------------
         C. Ray Holman

/s/      MICHAEL A. ROCCA                         Senior Vice President and Chief             August 15, 2000
---------------------------------------
         Michael A. Rocca                                Financial Officer

/s/      DOUGLAS A. MCKINNEY                       Vice President and Controller              August 15, 2000
---------------------------------------
         Douglas A. McKinney                         (Chief Accounting Officer)

/s/      RAYMOND F. BENTELE                                   Director                        August 15, 2000
---------------------------------------
         Raymond F. Bentele

/s/      WILLIAM L. DAVIS                                     Director                        August 15, 2000
---------------------------------------
         William L. Davis

/s/      RONALD G. EVENS                                      Director                        August 15, 2000
---------------------------------------
         Ronald G. Evens

/s/      PETER B. HAMILTON                                    Director                        August 15, 2000
---------------------------------------
         Peter B. Hamilton

/s/      ROBERTA S. KARMEL                                    Director                        August 15, 2000
---------------------------------------
         Roberta S. Karmel

/s/      CLAUDINE B. MALONE                                   Director                        August 15, 2000
---------------------------------------
         Claudine B. Malone

/s/      BRIAN M. RUSHTON                                     Director                        August 15, 2000
---------------------------------------
         Brian M. Rushton

/s/      ANTHONY VISCUSI                                      Director                        August 15, 2000
---------------------------------------
         Anthony Viscusi

/s/      BARRY W. WILSON                                      Director                        August 15, 2000
---------------------------------------
         Barry W. Wilson
</TABLE>

                                       76