SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                --------------

                                  FORM 10-Q


[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

              For the quarterly period ended December 31, 2001

                                      OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                       Commission file number: 1-4389


                             APPLERA CORPORATION
           (Exact Name of Registrant as Specified in Its Charter)


             Delaware                                     06-1534213
    (State or Other Jurisdiction of                   (I.R.S. Employer
     Incorporation or Organization)                 Identification Number)

                               301 Merritt 7,
                       Norwalk, Connecticut 06851-0001
        (Address of Principal Executive Offices, Including Zip Code)

                               (203) 840-2000
            (Registrant's Telephone Number, Including Area Code)


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
                                    -----   ----

As of the close of business on February 8, 2002, there were 212,574,037 shares
of Applera Corporation - Applied Biosystems Group Common Stock and 68,640,181
shares of Applera Corporation - Celera Genomics Group Common Stock outstanding.

<PAGE>

                               APPLERA CORPORATION
                                      INDEX
<TABLE>
<CAPTION>
Part I.   Financial Information                                                Page
<S>                                                                          <C>
Item 1.   Financial Statements
     A.   Applera Corporation Consolidated
             Condensed Consolidated Statements of Operations for the
               Three and Six Months Ended December 31, 2000 and 2001             1

             Condensed Consolidated Statements of Financial Position at
               June 30, 2001 and December 31, 2001                               2

             Condensed Consolidated Statements of Cash Flows for the
               Six Months Ended December 31, 2000 and 2001                       3

             Notes to Unaudited Condensed Consolidated Financial Statements   4-23

     B.    Applied Biosystems Group
             Condensed Combined Statements of Operations for the
               Three and Six Months Ended December 31, 2000 and 2001            24

             Condensed Combined Statements of Financial Position at
               June 30, 2001 and December 31, 2001                              25

             Condensed Combined Statements of Cash Flows for the
               Six Months Ended December 31, 2000 and 2001                      26

             Notes to Unaudited Condensed Combined Financial Statements      27-32

     C.    Celera Genomics Group
             Condensed Combined Statements of Operations for the
               Three and Six Months Ended December 31, 2000 and 2001            33

             Condensed Combined Statements of Financial Position at
               June 30, 2001 and December 31, 2001                              34

             Condensed Combined Statements of Cash Flows for the
               Six Months Ended December 31, 2000 and 2001                      35

             Notes to Unaudited Condensed Combined Financial Statements      36-44

Item 2.   Management's Discussion and Analysis of
             Financial Condition and Results of Operations                   45-79

Part II.  Other Information                                                     80
</TABLE>

<PAGE>

                                     APPLERA CORPORATION
                        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                         (unaudited)
                     (Dollar amounts in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                 Three Months Ended           Six Months Ended
                                                   December 31,                  December 31,
<S>                                           <C>           <C>            <C>           <C>
                                                 2000          2001          2000           2001
                                              ---------     ---------      ---------     ---------
Net Revenues                                  $ 413,265     $ 437,166      $ 780,679     $ 825,020
Cost of sales                                   199,725       206,302        368,993       392,826
                                              ---------     ---------      ---------     ---------
Gross Margin                                    213,540       230,864        411,686       432,194
Selling, general and administrative             109,181       109,322        212,186       216,429
Research, development and engineering            75,661        88,467        153,601       172,969
Amortization of goodwill and intangibles         10,968         1,635         22,049         2,106
Acquired research and development                             101,181                      101,181
                                              ---------     ---------      ---------     ---------
Operating Income (Loss)                          17,730       (69,741)        23,850       (60,491)
Gain on investments                               2,981                       14,985
Interest expense                                   (337)         (388)        (1,390)         (628)
Interest income                                  21,332        11,979         43,899        26,326
Other income (expense), net                        (254)           10         (3,156)       (1,728)
                                              ---------     ---------      ---------     ---------
Income (Loss) Before Income Taxes                41,452       (58,140)        78,188       (36,521)
Provision for income taxes                       13,978         3,293         26,258         7,927
                                              ---------     ---------      ---------     ---------
Net Income (Loss)                             $  27,474     $ (61,433)     $  51,930     $ (44,448)
                                              =========     =========      =========     =========
Applied Biosystems Group (see Note 5)
  Net Income                                  $  57,954     $  49,034      $ 107,098     $  81,230
    Basic per share                           $    0.28     $    0.23      $    0.51     $    0.38
    Diluted per share                         $    0.26     $    0.23      $    0.48     $    0.38
 Dividends per share                          $  0.0425     $  0.0425      $  0.0850     $  0.0850

Celera Genomics Group (see Note 5)
  Net Loss                                    $ (29,704)    $(117,940)     $ (55,393)    $(133,502)
    Basic and diluted per share               $   (0.49)    $   (1.82)     $   (0.92)    $   (2.11)
</TABLE>

See accompanying notes to the Applera Corporation unaudited condensed
consolidated financial statements.
                                      1

<PAGE>

                                 APPLERA CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                            (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                           At June 30,    At December 31,
                                                              2001             2001
                                                           -----------    --------------
                                                                            (unaudited)
<S>                                                        <C>              <C>
Assets
Current assets
  Cash and cash equivalents                                $   608,535      $   631,248
  Short-term investments                                       779,482          765,095
  Accounts receivable, net                                     400,803          370,705
  Inventories, net                                             149,658          145,220
  Prepaid expenses and other current assets                    103,006           90,454
                                                           -----------      -----------
Total current assets                                         2,041,484        2,002,722
Property, plant and equipment, net                             435,560          477,416
Other long-term assets                                         410,814          584,818
                                                           -----------      -----------
Total Assets                                               $ 2,887,858      $ 3,064,956
                                                           ===========      ===========
Liabilities And Stockholders' Equity
Current liabilities
  Loans payable                                            $    14,678      $    11,014
  Current portion of long-term debt
    and capital lease obligation                                30,480           41,069
  Accounts payable                                             178,264          159,488
  Accrued salaries and wages                                    64,854           66,867
  Accrued taxes on income                                       83,016           96,547
  Other accrued expenses                                       215,823          224,918
                                                            ----------      -----------
Total current liabilities                                      587,115          599,903
Long-term debt                                                                   18,426
Other long-term liabilities                                    152,432          160,813
                                                           -----------      -----------
Total Liabilities                                              739,547          779,142
Stockholders' Equity
  Capital stock
    Applera Corporation - Applied Biosystems Group               2,115            2,121
    Applera Corporation - Celera Genomics Group                    617              680
  Capital in excess of par value                             1,832,000        2,041,085
  Retained earnings                                            369,444          306,990
  Accumulated other comprehensive loss                         (55,865)         (65,062)
                                                           -----------      -----------
Total Stockholders' Equity                                   2,148,311        2,285,814
                                                           -----------      -----------
Total Liabilities And Stockholders' Equity                 $ 2,887,858      $ 3,064,956
                                                           ===========      ===========
</TABLE>


See accompanying notes to the Applera Corporation unaudited condensed
consolidated financial statements.
                                      2

<PAGE>

                                 APPLERA CORPORATION
                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (unaudited)
                            (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                                 Six months ended
                                                                   December 31,
                                                             2000               2001
                                                           ---------          ---------
<S>                                                        <C>                <C>
Operating Activities From Continuing Operations
Net income (loss)                                          $  51,930          $ (44,448)
Adjustments to reconcile net income (loss) to net cash
 provided (used) by operating activities:
  Depreciation and amortization                               61,028             53,651
  Long-term compensation programs                              3,600              3,849
  Gain on sale of assets                                     (14,985)              (811)
  Loss from equity method investees                                               1,391
  Deferred income taxes                                       (1,355)           (24,359)
  Acquired research and development                                             101,181
Changes in operating assets and liabilities:
  Accounts receivable                                        (67,962)            30,984
  Inventories                                                (13,259)             3,907
  Prepaid expenses and other assets                          (38,736)           (13,124)
  Accounts payable and other liabilities                     (59,031)                43
                                                           ---------          ---------
Net Cash Provided (Used) By Operating Activities             (78,770)           112,264
                                                           ---------          ---------
Investing Activities From Continuing Operations
Additions to property, plant and equipment, net             (108,276)           (56,808)
Sales (purchases) of short-term investments, net            (151,205)            16,749
Investments                                                   (4,131)           (41,314)
Proceeds from the sale of assets, net                         15,498
                                                           ---------          ---------
Net Cash Used By Investing Activities                       (248,114)           (81,373)
                                                           ---------          ---------
Net Cash Provided (Used) By Continuing Operations
 Before Financing Activities                                (326,884)            30,891
                                                           ---------          ---------
Net Cash Used By Operating Activities
 From Discontinued Operations                                 (1,561)            (2,198)
                                                           ---------          ---------
Financing Activities
Net change in loans payable                                  (39,960)           (11,523)
Dividends                                                    (17,758)           (17,973)
Purchases of common stock for treasury                                             (941)
Proceeds from stock issued for stock plans                    37,821             17,942
                                                           ---------          ---------
Net Cash Used By Financing Activities                        (19,897)           (12,495)
                                                           ---------          ---------
Effect Of Exchange Rate Changes On Cash                          192              6,515
                                                           ---------          ---------
Net Change In Cash And Cash Equivalents                     (348,150)            22,713
Cash And Cash Equivalents Beginning Of Period                964,502            608,535
                                                           ---------          ---------
Cash And Cash Equivalents End Of Period                    $ 616,352          $ 631,248
                                                           =========          =========
</TABLE>

See accompanying notes to the Applera Corporation unaudited condensed
consolidated financial statements.
                                      3
<PAGE>

                             APPLERA CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The interim condensed consolidated financial statements should be read in
conjunction with the financial statements presented in the Applera Corporation
(the "Company") 2001 Annual Report to Stockholders. Significant accounting
policies disclosed therein have not changed, except for the accounting for
goodwill and other intangibles discussed in Note 2.

The unaudited condensed consolidated financial statements reflect, in the
opinion of the Company's management, all adjustments that are necessary for a
fair statement of the results for the interim periods. All such adjustments are
of a normal recurring nature. These results are, however, not necessarily
indicative of the results to be expected for a full year. The preparation of
financial statements in conformity with accounting principles generally
accepted in the United States of America 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 reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates. Certain
amounts in the condensed consolidated financial statements have been
reclassified for comparative purposes.

The Applied Biosystems group's and the Celera Genomics group's condensed
combined financial statements should be read in conjunction with the Company's
condensed consolidated financial statements and related notes thereto.

NOTE 2 - CHANGE IN ACCOUNTING POLICY

Effective July 1, 2001, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets." As a result, the Company has reclassified certain other intangible
assets associated with its workforce to goodwill and no longer amortizes
goodwill. The following table provides pro forma information for the three and
six months ended December 31, 2000 had the provisions of SFAS No. 142 been
applied to the fiscal 2001 financial results:

<TABLE>
<CAPTION>
(Dollar amounts in millions except)           Three Months Ended         Six Months Ended
per share amounts)                             December 31, 2000         December 31, 2000
                                             ---------------------      -------------------
<S>                                                <C>                       <C>
Applera Net Income                                 $    37.7                 $    72.4

Applied Biosystems Group
  Net Income                                       $    58.4                 $   108.0
    Basic per share                                $    0.28                 $    0.52
    Diluted per share                              $    0.26                 $    0.49

Celera Genomics Group
  Net Loss                                         $   (19.7)                $   (35.3)
    Basic and diluted per share                    $   (0.32)                $   (0.59)
</TABLE>

                                      4

<PAGE>

                             APPLERA CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

NOTE 3 - ACQUISITIONS

Axys Pharmaceuticals, Inc.
On November 16, 2001, the Company acquired Axys Pharmaceuticals, Inc. ("Axys")
in a stock-for-stock transaction. Axys is an integrated small molecule drug
discovery and development company that is developing products for chronic
therapeutic application through collaborations with pharmaceutical companies
and has a proprietary product portfolio in oncology. The Company believes that
the acquisition will accelerate the Celera Genomics group's evolution as a drug
discovery and development business.

The Company issued 5.5 million shares of Applera - Celera Genomics Group Common
Stock ("Applera - Celera stock") in exchange for all of the outstanding shares
of Axys common stock. The acquisition was accounted for using the purchase
method of accounting. The total purchase price for the acquisition was $188.4
million, which consisted of Applera - Celera stock valued at $170.3 million,
stock options valued at $8.8 million, warrants valued at $2.8 million and
estimated transaction costs of $6.5 million. The purchase price was calculated
using a $31.04 price per share of Applera - Celera stock, based upon a
measurement date of July 17, 2001. This date, determined in accordance with
Emerging Issues Task Force Abstracts Issue 99-12, "Determination of the
Measurement Date for the Market Price of Acquirer Securities Issued in a
Purchase Business Combination," represented the first date on which the
exchange ratio was fixed under the merger agreement. The fair value of the
options and warrants was calculated using the Black-Scholes pricing model.

The purchase price of $188.4 million was allocated to tangible and intangible
assets as follows:

<TABLE>
          <S>                                                        <C>
          (Dollar amounts in millions)
          Current assets                                             $  6.8
          Long-term assets                                            118.7
          Current liabilities                                         (34.9)
          Long-term liabilities                                       (20.7)
                                                                     ------
          Net assets of Axys, at approximate fair value                69.9

          Acquired in-process research and development                 99.0
          Existing technology                                           7.9
          Favorable operating leases                                   11.6
                                                                     ------
          Total purchase price                                       $188.4
                                                                     ======
</TABLE>

Included in the "pre-existing" long-term assets is a $61.3 million deferred tax
asset, recorded in purchase accounting, for net operating loss carryforwards
and other temporary differences of Axys expected to be utilized by the Company.
"Pre-existing" current liabilities included $4.2 million of contractual
severance and involuntary termination costs. As of December 31, 2001, the
Company had paid $1.2 million of these severance costs.

                                      5

<PAGE>

                             APPLERA CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

In connection with the acquisition, the Company assumed $26.0 million of 8%
senior secured convertible notes. These notes mature on October 1, 2004.
Interest is payable quarterly and the principal is payable at maturity as a
lump sum. These notes were convertible at any time into 499,009 shares of
Applera - Celera stock at a conversion price of $52.10 per share. Holders of
notes having an aggregate principal amount of $10 million exercised their right
following the acquisition to require the Company to repurchase such notes. The
Company repaid the $10 million in January 2002. These notes were secured by 6.7
million shares, or approximately 90%, of the Company's holding of Discovery
Partners International, Inc. ("DPI") common stock. As a result of the Axys
acquisition, the Company owns approximately 30% of DPI, which is accounted for
under the equity method of accounting. Additionally, the Company assumed an
existing Axys construction loan of $8.4 million related to its medicinal
chemistry building located in South San Francisco. The Company repaid this loan
during the second quarter of fiscal 2002 following the acquisition.

In connection with the acquisition of Axys, the Company allocated approximately
$99.0 million of the purchase price to acquired in-process research and
development ("IPR&D"). The Company attributed approximately 38% of the acquired
IPR&D value to the Cathepsin S project; 27% to the Cathepsin K project; 15% to
the Tryptase project; 9% to the Cathepsin F project; 5% to the Urokinase
project; 4% to the Serm-beta project; and 2% to the Factors VIIa & Xa project.
As of the acquisition date, the technological feasibility of the projects had
not been established, and it was determined that the acquired projects had no
future alternative uses.

The amount attributed to acquired IPR&D was based on an independent appraisal
and was developed using an income approach. The in-process technologies were
valued using a discounted cash flow model on a project-by-project basis. This
valuation incorporated a percentage of completion analysis using revenues
allocated to in-process technologies. In the development of projected cash
flows, estimated completion percentages from 28% to 91% were applied depending
on the stage of the project. The risk adjusted discount rates applied to the
projects' cash flows were 38% for the Cathepsin S, the Cathepsin K and the
Tryptase projects, and 43% for the Cathepsin F, the Urokinase, the Serm-beta
and the Factors VIIa & Xa projects.

The Cathepsin S project is a collaboration, in the preclinical stage, with
Aventis Pharmaceuticals Products, Inc. ("Aventis"), with the objective of
discovery and development of small molecule drugs that inhibit Cathepsin S, a
human cysteine protease associated with certain inflammatory and autoimmune
diseases. In November 1999, Axys announced the successful testing of a potent,
selective Cathepsin S inhibitor compound in an animal efficacy model of asthma.
In addition, current in vivo proof-of-concept studies are underway, have been
completed, or are planned for several potential disease indications. In October
2000, Axys announced that on the basis of data from an in vivo efficacy model
of asthma, Aventis qualified a collaboration compound for pre-clinical
advancement. In January 2002, the Celera Genomics group announced the
qualification of a number of collaboration compounds as early development
candidates for investigational new drug ("IND") -enabling studies in multiple
therapeutic indications.

                                      6

<PAGE>

                             APPLERA CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

The Cathepsin K project is a collaboration, in the preclinical stage, with
Merck & Co., Inc. ("Merck") to develop small molecule inhibitors of Cathepsin K
for the treatment of osteoporosis. In February 1997, Axys announced the
first-ever solution of the three-dimensional crystal structure of Cathepsin K,
which enabled Axys to design potent and selective inhibitors of Cathepsin K. In
December 1999, Axys announced the successful testing of a specific, selective
Cathepsin K inhibitor compound in an animal efficacy model. In mid-calendar
2001, Merck and Axys announced the achievement of a pre-agreed research
milestone pertaining to selection of an Axys Cathepsin K inhibitor.

The Tryptase project is a late stage preclinical program aimed at the
development of compounds for the treatment of inflammation. Tryptase inhibitors
are designed to slow or halt the inflammatory process at an early stage, in an
attempt to provide safe and effective therapies for the treatment of the
underlying cause of the disease, rather than the symptoms. In earlier Phase II
clinical trials, Axys established human proof-of-concept for tryptase as a drug
target. This was achieved in previous Phase II clinical studies of APC-366, an
inhaled peptide tryptase inhibitor, which showed that inhibiting tryptase
resulted in improved breathing (reduction in late airway response) in
asthmatics. Since 1994, Axys has been in collaboration with Bayer A.G. ("Bayer)
to identify oral tryptase inhibitors for the treatment of asthma. Bayer has
focused on preclinical studies with a later generation small molecule tryptase
inhibitor with high oral bioavailability and good circulating half-life, with
the goal of developing a once-a-day oral therapeutic for the prevention and
treatment of chronic asthma.

The Cathepsin F project is in the early preclinical stage. The objective of
this project is to develop compounds for inflammatory diseases. The compounds
are similar to Cathepsin S in their biological mechanism of action and
potential therapeutic indications.

                                      7

<PAGE>

                             APPLERA CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

The Urokinase project is an oncology program in the preclinical stage involving
the development of inhibitors of the protease urokinase to interfere with
angiogenesis and metastasis processes. Using a broad range of scientific
capabilities including crystallography and structural biology, Axys' scientists
have analyzed urokinase to identify sites on the molecule best suited for drug
interaction. Using Axys' medicinal chemistry and structure-based drug design
capabilities, a series of drug-like compounds have been screened to identify
potential drugs and select a candidate for preclinical development.

The Serm-beta project is an oncology program based upon licenses granted to
Axys by Celgene Corp. ("Celgene"). In October 1999, Celgene (through its
predecessor, Signal Pharmaceuticals) granted Axys exclusive rights to its
selective estrogen receptor-beta modulators (SERM-beta) for the treatment of
cancer. SERM- compounds are small molecules that selectively modulate the
activity of the newly discovered beta estrogen receptor found in tumors and
certain hormonally sensitive tissues.

The Factors VIIa & Xa project is aimed at the development of oral therapeutics
for blood clotting disorders, such as deep vein thrombosis, stroke, and
myocardial infarction or heart attack. More specifically, Axys had been
performing research on inhibitors of Factors Xa and VIIa and thrombin, all of
which are serine proteases involved in the blood clotting process. These
proteases have been acknowledged as targets for a host of disorders related to
abnormal clotting. The program was begun in collaboration with Pharmacia &
Upjohn. In July 1998, the research support for this collaboration ended and, in
February 1999, Axys formally agreed to end this collaboration.

As of the date of the acquisition, the net assets and results of operations
of Axys are included in the Company's consolidated financial statements. The
net assets and results of operations of Axys have been allocated to the Celera
Genomics group. The following selected unaudited proforma

                                      8
<PAGE>

                              APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   continued

information for the Company has been prepared assuming the acquisition had
occurred at the beginning of fiscal 2001 and gives effect to purchase
accounting adjustments:

<TABLE>
<CAPTION>
                                                    Three months ended       Six months ended
(Dollar amounts in millions except)                     December 31,            December 31,
 per share amounts)                                   2000       2001        2000         2001
                                                    -------    --------     -------     --------
<S>                                                 <C>         <C>         <C>         <C>
 Net revenues                                       $ 414.7    $  438.9     $ 784.7     $  827.6
 Net income                                            12.2        29.4        30.6         27.1

Applied Biosystems Group
  Net Income                                        $  58.0    $   49.0     $ 107.1     $   81.2
   Basic per share                                  $  0.28    $   0.23     $  0.51     $   0.38
   Diluted per share                                $  0.26    $   0.23     $  0.48     $   0.38

Celera Genomics group
  Net Loss                                          $ (45.0)   $  (27.1)    $ (76.8)    $  (61.9)
   Basic and diluted per share                      $ (0.68)   $   (.40)    $ (1.17)    $   (.92)
</TABLE>

Upon consummation of the acquisition, the Celera Genomics group recorded a $99.0
million non-cash charge to write-off the value of acquired IPR&D, which has been
excluded from the pro forma results above. Had the acquired IPR&D charge been
excluded from the reported amounts for the three and six month periods ended
December 31, 2001, the Company would have reported net income of $37.5 million
and $54.5 million, respectively, the Celera Genomics group would have reported
net loss of $(19.0) million and $(34.5) million, repectively, and net loss per
share of Applera-Celera stock would have been $(.29) and $(.55), respectively.

Included in the results for the six months ended December 31, 2001, is a
non-cash pretax charge of $10.8 million recorded by Axys for the impairment of
an investment accounted for under the cost method.

Boston Probes, Inc.
During the second quarter of fiscal 2002, the Company acquired the remaining
shares of Boston Probes, Inc. ("Boston Probes") not previously owned, or
approximately 87% of the outstanding shares, and certain intellectual property
rights related to peptide nucleic acids, for approximately $37 million in cash.
As a result of owning 100% of Boston Probes, the Company recorded goodwill of
$22.7 million, other intangible assets of $21.8 million, and a charge to
write-off the value of acquired IPR&D of $2.2 million.  The acquisition was
accounted for using the purchase method of accounting. Boston Probes develops
and commercializes products employing peptide nucleic acid ("PNA") probe
technology and has developed novel chemistry platforms based on its PNA
technology.  The Company expects that this technology will be a key component
of Applied Biosystems' Sequence Detection Systems (SDS), a proprietary
technology platform for real-time analysis of genetic information.  The net
assets and results of operations of Boston Probes have been allocated to the
Applied Biosystems group.

                                      9

<PAGE>

                              APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   continued

NOTE 4 - COMPREHENSIVE LOSS

Accumulated other comprehensive loss included in stockholders' equity on the
Condensed Consolidated Statements of Financial Position consisted of foreign
currency translation adjustments, unrealized gains and losses on foreign
currency and interest rate hedge contracts, unrealized gains and losses on
available-for-sale investments, and minimum pension liability adjustments.
Total comprehensive loss for the three and six months ended December 31, 2000
and 2001 is presented in the following table:

<TABLE>
<CAPTION>
                                                    Three months ended       Six months ended
                                                        December 31,           December 31,
(Dollar amounts in millions)                          2000        2001       2000        2001
                                                    -------     -------     -------     -------
<S>                                                 <C>         <C>         <C>         <C>
Net income (loss)                                   $  27.4     $ (61.4)    $  51.9     $ (44.4)
Other comprehensive income (loss):
  Foreign currency translation adjustments              7.8       (13.5)       (4.8)        5.8
  Unrealized gain on hedge contracts,
    net of tax                                          3.7        11.0         8.8         2.1
  Reclassification adjustments for net gains on
   hedge contracts included in net income,
    net of tax                                         (2.5)       (2.1)       (3.2)       (5.4)
  Unrealized gain (loss) on investments,
    net of tax                                        (60.7)       13.2       (82.6)      (11.7)
  Reclassification adjustments for gains on
   investments included in net income (loss),
   net of tax                                          (1.9)                   (9.7)
                                                    -------     -------     -------     -------
Other comprehensive income (loss):                    (53.6)        8.6       (91.5)       (9.2)
                                                    -------     -------     -------     -------
Comprehensive loss                                  $ (26.2)    $ (52.8)    $ (39.6)    $ (53.6)
                                                    -------     -------     -------     -------
</TABLE>

NOTE 5 - EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share for each class of common stock is computed by
dividing the earnings or losses allocated to each class of common stock by the
weighted average number of outstanding shares of that class of common stock.
Diluted earnings (loss) per share is computed by dividing the earnings or
losses allocated to each class of common stock by the weighted average number
of outstanding shares of that class of common stock including the dilutive
effect of common stock equivalents.

The earnings or losses allocated to each class of common stock are determined
by the Company's Board of Directors.  This determination is generally based on
the net income or loss amounts of the corresponding group determined in
accordance with accounting principles generally accepted in the United States
of America consistently applied.  The Company believes this method of
allocation is

                                      10

<PAGE>

                              APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   continued

systematic and reasonable.  The Board can, at its discretion, change the method
of allocating earnings or losses to each class of common stock at any time.

The following table presents a reconciliation of basic and diluted earnings
(loss) per share for the three months ended December 31:

<TABLE>
<CAPTION>
                                                      Applied Biosystems          Celera Genomics
                                                            Group                     Group
                                                    ----------------------    -----------------------
(Amounts in thousands except per share amounts)        2000         2001        2000         2001
                                                    ---------    ---------    ---------    ----------
<S>                                                 <C>          <C>          <C>          <C>
Weighted average number of common shares
 used in the calculation of basic earnings
 (loss) per share                                     210,034      211,744       60,645        64,693
Common stock equivalents                               12,656        4,473
                                                    ---------    ---------    ---------     ---------
Shares used in the calculation of diluted
 earnings (loss) per share                            222,690      216,217       60,645        64,693
                                                    =========    =========    =========    ==========
Earnings (loss) used in the calculation of
 basic and diluted earnings (loss) per share        $  57,954    $  49,034    $ (29,704)   $ (117,940)
                                                    =========    =========    =========    ==========
Earnings (loss) per share
  Basic                                             $    0.28    $    0.23    $   (0.49)   $    (1.82)
  Diluted                                           $    0.26    $    0.23    $   (0.49)   $    (1.82)
</TABLE>

                                      11

<PAGE>

                              APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   continued

The following table presents a reconciliation of basic and diluted earnings
(loss) per share for the six months ended December 31:

<TABLE>
<CAPTION>
                                                        Applied Biosystems          Celera Genomics
                                                             Group                      Group
                                                    ----------------------    -----------------------
(Amounts in thousands except per share amounts)        2000         2001        2000          2001
                                                    ---------    ---------    ---------    ----------
 <S>                                                <C>          <C>          <C>          <C>
 Weighted average number of common shares
  used in the calculation of basic earnings
  (loss) per share                                    209,584      211,556       60,182        63,258
 Common stock equivalents                              12,341        4,302
                                                    ---------    ---------    ---------    ----------
 Shares used in the calculation of diluted
  earnings (loss) per share                           221,925      215,858       60,182        63,258
                                                    =========    =========    =========    ==========
 Earnings (loss) used in the calculation of
  basic and diluted earnings (loss) per share       $ 107,098    $  81,230    $ (55,393)   $ (133,502)
                                                    ---------    ---------    ---------    ----------
 Earnings (loss) per share
   Basic                                            $    0.51    $    0.38    $   (0.92)   $    (2.11)
   Diluted                                          $    0.48    $    0.38    $   (0.92)   $    (2.11)
</TABLE>

Options to purchase 6.1 million and 8.7 million shares of Applera
Corporation - Applied Biosystems Group Common Stock were outstanding at
December 31, 2000 and 2001, respectively, but were not included in the
computation of diluted earnings per share because the effect was antidilutive.
Options and warrants to purchase 13.7 million and 14.5 million shares of
Applera - Celera stock were outstanding at December 31, 2000 and 2001,
respectively, but were not included in the computation of diluted loss per
share because the effect was antidilutive.

NOTE 6 - INVENTORIES

Inventories are stated at the lower of cost (on a first-in, first-out basis) or
market.  Inventories included the following components:

<TABLE>
<CAPTION>
                                 June 30,    December 31,
(Dollar amounts in millions)      2001          2001
                                ---------    ------------
<S>                             <C>           <C>
Raw materials and supplies      $   58.8      $    63.2
Work-in-process                     12.9           11.0
Finished products                   78.0           71.0
                                --------      ---------
Total inventories               $  149.7      $   145.2
                                ========      =========
</TABLE>



                                      12

<PAGE>

                              APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   continued

NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION

Significant non-cash financing activities were as follows:

<TABLE>
<CAPTION>
                                                  Six months ended
                                                     December 31,
(Dollar amounts in millions)                        2000      2001
                                                  --------   -------
<S>                                               <C>        <C>
Tax benefit related to employee stock options     $  42.5    $   6.2
Dividends declared not paid                       $   8.9    $   9.0
Equity instruments issued in Axys acquisition                $ 181.9
Debt and capital lease obligation assumed in
  Axys acquisition                                           $  39.1
</TABLE>

NOTE 8 - FINANCIAL INSTRUMENTS

Cash Flow Hedges
The Company's international sales are typically denominated in the customers'
local (non-U.S. dollar) currencies. The Company uses foreign exchange forward,
option, and range forward contracts to hedge a portion of forecasted
international sales not denominated in U.S. dollars. The Company utilizes hedge
accounting on derivative contracts that are considered highly effective in
offsetting the changes in fair value of the forecasted sales transactions
caused by movements in foreign currency exchange rates. These contracts are
designated as cash flow hedges and the effective portion of the change in the
fair value of these contracts is recorded in other comprehensive income (loss)
in the Condensed Consolidated Statements of Financial Position until the
underlying external forecasted transaction affects earnings. At that time, the
gain or loss on the derivative instrument, which had been deferred in other
comprehensive income (loss), is reclassified to net revenues in the Condensed
Consolidated Statements of Operations. During the three and six month periods
ended December 31, 2001, the Company recognized net gains of $3.1 million and
$7.8 million, respectively, in net revenues from derivative instruments
designated as cash flow hedges of anticipated sales. At December 31, 2001,
$12.9 million of derivative gains ($8.0 million net of deferred taxes) recorded
in other comprehensive income (loss) are expected to be reclassified to
earnings during the next twelve months.

NOTE 9 - CONTINGENCIES

Amersham
On November 18, 1997, Amersham Pharmacia Biotech, Inc. ("Amersham") filed a
patent infringement action against the Company in the United States District
Court for the Northern District of California. The complaint alleges that the
Company is directly, contributorily, or by inducement infringing U.S. Patent
No. 5,688,648 ("the '648 patent"). Amersham asserts that the Company's use and
sale of DNA analysis reagents and systems that incorporate "BigDye"
fluorescence detection technology infringe the '648 patent, and seeks
injunctive and monetary relief. The Company answered the complaint, alleging
that the '648 patent is invalid and unenforceable, and that the Company has not
infringed the '648 patent. In December 2000, the court granted Amersham's motion

                                      13

<PAGE>

                             APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

for summary judgment in part, finding that certain of the Company's activities
infringe the claims of the `648 patent, but denied Amersham's motion for
summary judgment that the Company induced its customers to infringe the claims
of the `648 patent. On April 6, 2001, the court granted the Company's motion
for summary judgment finding that the Company's recently introduced BigDye
Version 3.0 dye technology does not infringe the '648 patent.

On March 13, 1998, the Company filed a patent infringement action against
Amersham and Molecular Dynamics, Inc. in the United States District Court for
the Northern District of California. The Company asserts that one of its
patents (U.S. Patent No. 4,811,218) is infringed by reason of Molecular
Dynamics' and Amersham's sale of certain DNA analysis systems (e.g., the
MegaBACE 1000 System). In response, Amersham has asserted various affirmative
defenses and several counterclaims, including that the Company is infringing
two patents, U.S. Patent No. 5,091,652 ("the '652 patent") and U.S. Patent No.
5,459,325, each owned by or licensed to Molecular Dynamics, by selling certain
ABI PRISM(TM) DNA sequencing systems. In December 2000, the court granted the
Company's motion for summary judgment of non-infringement of the `652 patent.
The trial date previously scheduled for August 6, 2001 was vacated in July 2001.

On May 21, 1998, Amersham filed a patent infringement action against the
Company in the United States District Court for the Southern District of New
York. The complaint alleges that the Company is infringing, contributing to the
infringement of, and inducing the infringement of U.S. Patent No. 4,707,235
("the `235 patent") by reason of the Company's sale of certain ABI PRISM(TM)
DNA sequencing systems. The complaint seeks injunctive and monetary relief. The
Company answered the complaint, alleging that the `235 patent is invalid and
that the Company does not infringe the `235 patent. The matters described in
this paragraph and the immediately preceding paragraph have been consolidated
into a single case to be heard in the United States District Court for the
Northern District of California. In December 2000, the court granted the
Company's motion for summary judgment of non-infringement of the `235 patent.
However, on December 18, 2000, Amersham filed a new complaint alleging that the
Company is infringing the `235 patent by reason of the Company's sale of
certain DNA sequencing systems, which allegations were not in the previous suit
under the `235 patent. This action is in the early stages of discovery.

On May 30, 2000, the Company filed a patent infringement action against
Amersham in the United States District Court for the Northern District of
California. The Company asserts that one of its patents (U.S. Patent No.
5,945,526) is infringed by reason of Amersham's sale of DNA analysis reagents
and systems that incorporate ET Terminator fluorescence detection technology.
The claims construction hearing previously scheduled for June 7, 2001 was
postponed.

On July 10, 2001, United States Judge Charles R. Breyer stayed all cases in the
litigation described above for the purpose of facilitating court ordered
settlement mediation. The stay is scheduled to expire on March 11, 2002.

The Company believes that the claims asserted by Amersham and Molecular
Dynamics in the foregoing cases are without merit and intends to defend the
cases vigorously. However, the outcome of this or any other litigation is
inherently uncertain, and the Company cannot be sure that it will

                                      14

<PAGE>

                             APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

prevail in any of these matters. An adverse determination in any of the actions
brought by Amersham could have a material adverse effect on the financial
statements of the Company.

Other
The Company has been named as a defendant in several other legal actions,
including patent, commercial, and environmental, arising from the conduct of
normal business activities. Although the amount of any liability that might
arise with respect to any of these matters cannot be accurately predicted, the
resulting liability, if any, will not in the opinion of management have a
material adverse effect on the consolidated financial statements of the Company.

NOTE 10 - SEGMENT AND CONSOLIDATING INFORMATION

Presented below is the segment and consolidating financial information
reflecting the businesses of the individual groups, including the allocation of
expenses between groups in accordance with the Company's allocation policies,
as well as other related party transactions, such as sales of products between
groups and interest income and expense on intercompany borrowings. Earnings
attributable to each group have been determined in accordance with accounting
principles generally accepted in the United States of America.

See Note 1 to the Applied Biosystems group's and the Celera Genomics group's
combined financial statements in the Company's 2001 Annual Report to
Stockholders for a detailed description of allocation policies.

In the following tables, the "Eliminations/Other" column represents the
elimination of intergroup activity and the results of the Celera Diagnostics
joint venture, a joint venture between the Applied Biosystems group and the
Celera Genomics group. See Note 6 to the consolidated financial statements
included in the Company's 2001 Annual Report to Stockholders for a discussion
of the Company's segments.

                                      15

<PAGE>

                             APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

Consolidating Statement of Operations For the Three Months Ended December 31,
2001

<TABLE>
<CAPTION>
                                                 Applied      Celera
                                               Biosystems    Genomics    Eliminations/
(Dollar amounts in thousands)                    Group         Group         Other     Consolidated
                                               ----------   ---------    -----------   ------------

<S>                                            <C>          <C>          <C>           <C>
Net revenues from external customers           $ 401,982    $  35,054    $      130    $  437,166
Intergroup revenues                                9,207                     (9,207)
                                               ---------    ---------    ----------    ----------
Net Revenues                                     411,189       35,054        (9,077)      437,166
Cost of sales                                    196,792       17,992        (8,482)      206,302
                                               ---------    ---------    ----------    ----------
Gross Margin                                     214,397       17,062          (595)      230,864
Selling, general and administrative               84,177       12,144        13,001       109,322
Corporate allocated expenses                       9,462        1,812       (11,274)
Research, development and engineering             52,665       30,611         5,191        88,467
Amortization of intangibles                                     1,635                       1,635
Acquired research and development                  2,200       98,981                     101,181
                                               ---------    ---------    ----------    ----------
Operating Income (Loss)                           65,893     (128,121)       (7,513)      (69,741)
Interest expense                                    (250)        (138)                       (388)
Interest income                                    3,275        8,704                      11,979
Other income (expense), net                        1,043       (1,033)                         10
Loss from joint venture                                        (8,487)        8,487
                                               ---------    ---------    ----------    ----------
Income (Loss) Before Income Taxes                 69,961     (129,075)          974       (58,140)
Provision (benefit) for income taxes              20,927      (11,135)       (6,499)        3,293
                                               ---------    ---------    ----------    ----------
Net Income (Loss)                              $  49,034    $(117,940)   $    7,473    $  (61,433)
                                               =========    =========    ==========    ==========
</TABLE>

                                      16

<PAGE>

                             APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

Consolidating Statement of Operations For the Six Months Ended December 31,
2001

<TABLE>
<CAPTION>
                                                 Applied      Celera
                                               Biosystems    Genomics    Eliminations/
(Dollar amounts in thousands)                    Group         Group         Other     Consolidated
                                               ----------   ---------    -----------   ------------

<S>                                            <C>          <C>          <C>           <C>
Net revenues from external customers           $ 762,462    $   62,328   $      230    $ 825,020
Intergroup revenues                               15,279                    (15,279)
                                               ---------    ----------   ----------    ----------
Net Revenues                                     777,741        62,328      (15,049)     825,020
Cost of sales                                    376,165        29,907      (13,246)     392,826
                                               ---------    ----------   ----------    ----------
Gross Margin                                     401,576        32,421       (1,803)     432,194
Selling, general and administrative              165,901        22,733       27,795      216,429
Corporate allocated expenses                      19,488         3,828      (23,316)
Research, development and engineering            104,983        58,353        9,633      172,969
Amortization of intangibles                                      2,106                     2,106
Acquired research and development                  2,200        98,981                   101,181
                                               ---------    ----------   ----------    ---------
Operating Income (Loss)                          109,004      (153,580)     (15,915)     (60,491)
Interest expense                                    (490)         (138)                     (628)
Interest income                                    6,772        19,554                    26,326
Other income (expense), net                           21        (1,749)                   (1,728)
Loss from joint venture                                        (17,864)      17,864
                                               ---------    ----------   ----------    ---------
Income (Loss) Before Income Taxes                115,307      (153,777)       1,949      (36,521)
Provision (benefit) for income taxes              34,077       (20,275)      (5,875)       7,927
                                               ---------    ----------   ----------    ---------
Net Income (Loss)                              $  81,230    $ (133,502)  $    7,824    $ (44,448)
                                               =========    ==========   ==========    =========
</TABLE>

                                      17

<PAGE>

                             APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

Consolidating Statement of Financial Position At December 31, 2001

<TABLE>
<CAPTION>
                                                 Applied        Celera
                                               Biosystems     Genomics    Eliminations/
(Dollar amounts in thousands)                    Group          Group        Other      Consolidated
                                               ----------    ---------    ------------  ------------

<S>                                            <C>           <C>           <C>          <C>
Assets
Current assets
  Cash and cash equivalents                    $   455,491   $   175,757   $      -     $   631,248
  Short-term investments                                         765,095                    765,095
  Accounts receivable, net                         341,806        35,488     (6,589)        370,705
  Inventories, net                                 137,243         6,312      1,665         145,220
  Prepaid expenses and other current assets         83,141         6,658        655          90,454
                                               -----------   -----------   --------     -----------
Total current assets                             1,017,681       989,310     (4,269)      2,002,722
Property, plant and equipment, net                 337,303       137,032      3,081         477,416
Other long-term assets                             391,761       187,341      5,716         584,818
                                               -----------   -----------   --------     -----------
Total Assets                                   $ 1,746,745   $ 1,313,683   $  4,528     $ 3,064,956
                                               ===========   ===========   ========     ===========

Liabilities And Stockholders' Equity
Current liabilities
  Loans payable                                $    11,014   $         -   $      -     $    11,014
  Current portion of long-term debt and
   capital lease obligation                         28,860        12,209                     41,069
  Accounts payable                                 139,370        20,987       (869)        159,488
  Accrued salaries and wages                        48,312        16,508      2,047          66,867
  Accrued taxes on income                           92,498                    4,049          96,547
  Other accrued expenses                           165,449        64,376     (4,907)        224,918
                                               -----------   -----------   --------     -----------
Total current liabilities                          485,503       114,080        320         599,903
Long-term debt                                                    18,426                     18,426
Other long-term liabilities                        136,102        24,711                    160,813
                                               -----------   -----------   --------     -----------
Total Liabilities                                  621,605       157,217        320         779,142
                                               -----------   -----------   --------     -----------
Stockholders' Equity
Applera Corporation - Applied Biosystems stock                                2,121           2,121
Applera Corporation - Celera Genomics stock                                     680             680
Other stockholders' equity                       1,125,140     1,156,466      1,407       2,283,013
                                               -----------   -----------   --------     -----------
Total Stockholders' Equity                       1,125,140     1,156,466      4,208       2,285,814
                                               -----------   -----------   --------     -----------
Total Liabilities And Stockholders' Equity     $ 1,746,745   $ 1,313,683   $  4,528     $ 3,064,956
                                               ===========   ===========   ========     ===========
</TABLE>

                                      18

<PAGE>

                             APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 continued

Consolidating Statement of Cash Flows For the Six Months Ended December 31,
2001

<TABLE>
<CAPTION>
                                                            Applied         Celera
                                                           Biosystems      Genomics    Eliminations/
(Dollar amounts in thousands)                                Group          Group         Other        Consolidated
                                                           ---------     -----------    ---------      ------------
<S>                                                        <C>           <C>            <C>            <C>
Operating Activities From Continuing Operations
Net income (loss)                                          $ 81,230      $ (133,502)    $  7,824       $ (44,448)
Adjustments to reconcile net income (loss) to net
  cash provided (used) by operating activities:
   Depreciation and amortization                             37,914          16,310         (573)         53,651
   Long-term compensation programs                            2,942             907                        3,849
   Gain on sale of assets                                                      (811)                        (811)
   Loss from joint venture and equity method investees                       19,255      (17,864)          1,391
   Deferred income taxes                                    (12,663)         (5,821)      (5,875)        (24,359)
   Nonreimbursable utilization of intergroup tax benefits     8,499          (8,499)
   Acquired research and development                          2,200          98,981                      101,181
Changes in operating assets and liabilities:
   Accounts receivable                                       41,412         (11,241)         813          30,984
   Inventories                                                3,039             (73)         941           3,907
   Prepaid expenses and other assets                        (10,674)           (470)      (1,980)        (13,124)
   Accounts payable and other liabilities                    (4,805)            241        4,607              43
                                                          ---------      ----------     --------       ---------
Net Cash Provided (Used) By Operating Activities            149,094         (24,723)     (12,107)        112,264
                                                          ---------      ----------     --------       ---------
Investing Activities From Continuing Operations
Additions to property, plant and equipment, net             (42,131)        (10,837)      (3,840)        (56,808)
Sales of short-term investments, net                                         16,749                       16,749
Acquisitions and investments, net                           (36,369)        (20,892)      15,947         (41,314)
                                                          ---------      ----------     --------       ---------
Net Cash Used By Investing Activities                       (78,500)        (14,980)      12,107         (81,373)
                                                          ---------      ----------     --------       ---------
Net Cash Provided (Used) By Continuing Operations
   Before Financing Activities                               70,594         (39,703)                      30,891
                                                          ---------      ----------     --------       ---------
Net Cash Used By Operating Activities
   From Discontinued Operations                              (2,198)                                      (2,198)
                                                          ---------      ----------     --------       ---------
Financing Activities
Net change in loans payable                                  (3,080)         (8,443)                     (11,523)
Dividends                                                   (17,973)                                     (17,973)
Purchases of common stock for treasury                                         (941)                        (941)
Proceeds from stock issued for stock plans                    9,174           8,768                       17,942
                                                          ---------      ----------     --------       ---------
Net Cash Used By Financing Activities                       (11,879)           (616)                     (12,495)
                                                          ---------      ----------     --------       ---------
Effect Of Exchange Rate Changes On Cash                       6,515                                        6,515
                                                          ---------      ----------     --------       ---------
Net Change In Cash And Cash Equivalents                      63,032         (40,319)                      22,713
Cash And Cash Equivalents Beginning Of Period               392,459         216,076                      608,535
                                                          ---------      ----------     --------       ---------
Cash And Cash Equivalents End Of Period                   $ 455,491      $  175,757     $      -       $ 631,248
                                                          =========      ==========     ========       =========
</TABLE>

                                      19

<PAGE>

                             APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

Consolidating Statement of Operations For the Three Months Ended December 31,
2000

<TABLE>
<CAPTION>

                                                            Applied          Celera
                                                           Biosystems       Genomics      Eliminations/
(Dollar amounts in thousands)                                Group           Group          Other        Consolidated
                                                           ----------     -----------     ------------   ------------
<S>                                                        <C>            <C>              <C>            <C>
Net revenues from external customers                       $ 393,645      $  19,620        $      -       $ 413,265
Intergroup revenues                                           17,376            699         (18,075)
                                                           ---------      ---------        --------       ---------
Net Revenues                                                 411,021         20,319         (18,075)        413,265
Cost of sales                                                197,843         10,419          (8,537)        199,725
                                                           ---------      ---------        --------       ---------
Gross Margin                                                 213,178          9,900          (9,538)        213,540
Selling, general and administrative                           85,949         12,289          10,943         109,181
Corporate allocated expenses                                   8,870          2,073         (10,943)
Research, development and engineering                         42,010         42,326          (8,675)         75,661
Amortization of goodwill and intangibles                                     10,968                          10,968
                                                           ---------      ---------        --------       ---------
Operating Income (Loss)                                       76,349        (57,756)           (863)         17,730
Gain on investments                                            2,981                                          2,981
Interest expense                                                (294)           (43)                           (337)
Interest income                                                4,208         17,124                          21,332
Other expense, net                                              (239)           (15)                           (254)
                                                           ---------      ----------       ---------      ---------
Income (Loss) Before Income Taxes                             83,005        (40,690)           (863)         41,452
Provision (benefit) for income taxes                          25,051        (10,986)            (87)         13,978
                                                           ---------      ---------        --------       ---------
Net Income (Loss)                                          $  57,954      $ (29,704)       $   (776)      $  27,474
                                                           =========      =========        ========       =========
</TABLE>

                                      20

<PAGE>
                             APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

Consolidating Statement of Operations For the Six Months Ended December 31,
2000
<TABLE>
<CAPTION>
                                           Applied        Celera
                                          Biosystems     Genomics    Eliminations/
(Dollar amounts in thousands)               Group         Group         Other        Consolidated
                                          ----------    ---------    ------------    ------------
<S>                                       <C>           <C>            <C>             <C>
Net revenues from external customers      $ 742,806     $  37,873      $     -         $ 780,679
Intergroup revenues                          31,787           699        (32,486)
                                          ---------     ---------      ---------       ---------
Net Revenues                                774,593        38,572        (32,486)        780,679
Cost of sales                               367,468        16,186        (14,661)        368,993
                                          ---------     ---------      ---------       ---------
Gross Margin                                407,125        22,386        (17,825)        411,686
Selling, general and administrative         165,827        23,228         23,131         212,186
Corporate allocated expenses                 18,967         4,164        (23,131)
Research, development and engineering        88,125        83,303        (17,827)        153,601
Amortization of goodwill and intangibles                   22,049                         22,049
                                          ---------     ---------      ---------       ---------
Operating Income (Loss)                     134,206      (110,358)             2          23,850
Gain on investments                          14,985                                       14,985
Interest expense                               (561)         (829)                        (1,390)
Interest income                               8,589        35,310                         43,899
Other expense, net                           (3,152)           (4)                        (3,156)
                                          ---------     ---------      ---------       ---------
Income (Loss) Before Income Taxes           154,067       (75,881)             2          78,188
Provision (benefit) for income taxes         46,969       (20,488)          (223)         26,258
                                          ---------     ---------      ---------       ---------
Net Income (Loss)                         $ 107,098     $ (55,393)     $     225       $  51,930
                                          =========     =========      =========       =========
</TABLE>

                                      21
<PAGE>

                             APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 continued

Consolidating Statement of Financial Position At June 30, 2001

<TABLE>
<CAPTION>

                                                           Applied          Celera
                                                          Biosystems       Genomics    Eliminations/
(Dollar amounts in thousands)                               Group           Group        Other      Consolidated
                                                         ------------  -----------    ----------   -------------
<S>                                                      <C>           <C>            <C>           <C>
Assets
Current assets
   Cash and cash equivalents                             $   392,459   $  216,076     $       -     $   608,535
   Short-term investments                                                 779,482                       779,482
   Accounts receivable, net                                  382,560       24,019        (5,776)        400,803
   Inventories, net                                          140,813        6,239         2,606         149,658
   Prepaid expenses and other current assets                  98,124        4,838            44         103,006
                                                         -----------   ----------     ---------     -----------
Total current assets                                       1,013,956    1,030,654        (3,126)      2,041,484
                                                         -----------   ----------     ---------     -----------
Property, plant and equipment, net                           315,356      123,497        (3,293)        435,560
Other long-term assets                                       348,575       65,985        (3,746)        410,814
                                                         -----------   ----------     ---------     -----------
Total Assets                                             $ 1,677,887   $1,220,136     $ (10,165)    $ 2,887,858
                                                         ===========   ==========     =========     ===========

Liabilities And Stockholders' Equity
Current liabilities
   Loans payable                                         $    14,678   $        -     $       -     $    14,678
   Current portion of long-term debt                          30,480                                     30,480
   Accounts payable                                          162,104       21,024        (4,864)        178,264
   Accrued salaries and wages                                 49,553       15,088           213          64,854
   Accrued taxes on income                                    82,717                        299          83,016
Other accrued expenses                                       168,552       49,468        (2,197)        215,823
                                                         -----------   ----------     ---------     -----------
Total current liabilities                                    508,084       85,580        (6,549)        587,115
Other long-term liabilities                                  128,592       23,840                       152,432
                                                         -----------   ----------     ---------     -----------
Total Liabilities                                            636,676      109,420        (6,549)        739,547
                                                         -----------   ----------     ---------     -----------
Stockholders' Equity
Applera Corporation - Applied Biosystems stock                                            2,115           2,115
Applera Corporation - Celera Genomics stock                                                 617             617
Other stockholders' equity                                 1,041,211     1,110,716       (6,348)      2,145,579
                                                         -----------   -----------    ---------     -----------
Total Stockholders' Equity                                 1,041,211     1,110,716       (3,616)      2,148,311
                                                         -----------   -----------    ---------     -----------
Total Liabilities And Stockholders' Equity               $ 1,677,887   $ 1,220,136    $ (10,165)    $ 2,887,858
                                                         ===========   ===========    =========     ===========
</TABLE>
                                      22

<PAGE>
                             APPLERA CORPORATION
        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  continued

Consolidating Statement of Cash Flows For the Six Months Ended December 31,
2000
<TABLE>
<CAPTION>
                                                                Applied         Celera
                                                              Biosystems       Genomics    Eliminations/
(Dollar amounts in thousands)                                   Group           Group         Other      Consolidated
                                                              ----------     ----------     ---------     ----------
<S>                                                           <C>            <C>            <C>           <C>
Operating Activities From Continuing Operations
Net income (loss)                                             $  107,098     $  (55,393)    $     225     $   51,930
Adjustments to reconcile net income (loss) to net
 cash used by operating activities:
  Depreciation and amortization                                   30,745         32,107        (1,824)        61,028
  Long-term compensation programs                                  2,972            628                        3,600
  Gain from sales of assets                                      (14,985)                                    (14,985)
  Deferred income taxes                                             (741)          (614)                      (1,355)
  Nonreimbursable utilization of intergroup tax benefits          14,429        (14,429)
Changes in operating assets and liabilities:
 Tax benefit receivable from the Applied Biosystem Group                         16,702       (16,702)
 Accounts receivable                                             (68,207)        (4,303)        4,548        (67,962)
 Inventories                                                     (14,209)           379           571        (13,259)
 Prepaid expenses and other assets                               (39,494)           758                      (38,736)
 Accounts payable and other liabilities                          (67,925)        (3,037)       11,931        (59,031)
                                                              ----------     ----------     ---------     ----------
Net Cash Used By Operating Activities                            (50,317)       (27,202)       (1,251)       (78,770)
                                                              ----------     ----------     ---------     ----------
Investing Activities From Continuing Operations
Additions to property, plant and equipment, net                  (96,904)       (12,623)        1,251       (108,276)
Purchases of short-term investments, net                                       (151,205)                    (151,205)
Acquisitions and investments, net                                 (4,131)                                     (4,131)
Proceeds from the sale of assets, net                             15,498                                      15,498
                                                              ----------     ----------     ---------     ----------
Net Cash Used By Investing Activities                            (85,537)      (163,828)        1,251       (248,114)
                                                              ----------     ----------     ---------     ----------
Net Cash Used By Continuing Operations Before
 Financing Activities                                           (135,854)      (191,030)                    (326,884)
                                                              ----------     ----------     ---------     ----------
Net Cash Used By Operating Activities
 From Discontinued Operations                                     (1,561)                                     (1,561)
                                                              ----------     ----------     ---------     ----------
Financing Activities
Net change in loans payable                                        6,040        (46,000)                     (39,960)
Dividends                                                        (17,758)                                    (17,758)
Proceeds from stock issued for stock plans                        24,387         13,434                       37,821
                                                              ----------     ----------     ---------     ----------
Net Cash Provided (Used) By Financing Activities                  12,669        (32,566)                     (19,897)
                                                              ----------     ----------     ---------     ----------
Effect Of Exchange Rate Changes On Cash                              192                                         192
                                                              ----------     ----------     ---------     ----------
Net Change In Cash And Cash Equivalents                         (124,554)      (223,596)                    (348,150)
Cash And Cash Equivalents Beginning Of Period                    394,608        569,894                      964,502
                                                              ----------     ----------     ---------     ----------
Cash And Cash Equivalents End Of Period                       $  270,054     $  346,298     $       -     $  616,352
                                                              ==========     ==========     =========     ==========
</TABLE>
                                      23

<PAGE>

                           APPLIED BIOSYSTEMS GROUP
                 CONDENSED COMBINED STATEMENTS OF OPERATIONS
                                 (unaudited)
                        (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                           Three Months Ended          Six Months Ended
                                              December 31,                December 31,
                                           2000        2001            2000        2001
                                        ----------  ----------      ----------  ----------
<S>                                      <C>         <C>             <C>         <C>
Net Revenues                             $ 411,021   $ 411,189       $ 774,593   $ 777,741
Cost of sales                              197,843     196,792         367,468     376,165
                                         ---------   ---------       ---------   ---------
Gross Margin                               213,178     214,397         407,125     401,576
Selling, general and administrative         94,819      93,639         184,794     185,389
Research, development and engineering       42,010      52,665          88,125     104,983
Acquired research and development                        2,200                       2,200
                                         ---------   ---------       ---------   ---------
Operating Income                            76,349      65,893         134,206     109,004
Gain on investments                          2,981                      14,985
Interest expense                              (294)       (250)           (561)       (490)
Interest income                              4,208       3,275           8,589       6,772
Other income (expense), net                   (239)      1,043          (3,152)         21
                                         ---------   ---------       ---------   ---------
Income Before Income Taxes                  83,005      69,961         154,067     115,307
Provision for income taxes                  25,051      20,927          46,969      34,077
                                         ---------   ---------       ---------   ---------
Net Income                               $  57,954   $  49,034       $ 107,098   $  81,230
                                         =========   =========       =========   =========
</TABLE>

See accompanying notes to the Applied Biosystems group unaudited condensed
combined financial statements.
                                      24

<PAGE>

                           APPLIED BIOSYSTEMS GROUP
             CONDENSED COMBINED STATEMENTS OF FINANCIAL POSITION
                                 (unaudited)
                        (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                 At June 30,       At December 31,
                                                    2001                2001
                                                ------------       ---------------
                                                                     (unaudited)
<S>                                              <C>                 <C>
Assets
 Current assets
 Cash and cash equivalents                       $   392,459         $   455,491
 Accounts receivable, net                            382,560             341,806
 Inventories, net                                    140,813             137,243
 Prepaid expenses and other current assets            98,124              83,141
                                                 -----------         -----------
Total current assets                               1,013,956           1,017,681
Property, plant and equipment, net                   315,356             337,303
Other long-term assets                               348,575             391,761
                                                 -----------         -----------
Total Assets                                     $ 1,677,887         $ 1,746,745
                                                 ===========         ===========

Liabilities And Allocated Net Worth
Current liabilities
 Loans payable                                   $    14,678         $    11,014
 Current portion of long-term debt                    30,480              28,860
 Accounts payable                                    162,104             139,370
 Accrued salaries and wages                           49,553              48,312
 Accrued taxes on income                              82,717              92,498
 Other accrued expenses                              168,552             165,449
                                                 -----------         -----------
Total current liabilities                            508,084             485,503
Other long-term liabilities                          128,592             136,102
                                                 -----------         -----------
Total Liabilities                                    636,676             621,605

Allocated Net Worth                                1,041,211           1,125,140
                                                 -----------         -----------
Total Liabilities And Allocated Net Worth        $ 1,677,887         $ 1,746,745
                                                 ===========         ===========
</TABLE>

See accompanying notes to the Applied Biosystems group unaudited condensed
combined financial statements.

                                      25

<PAGE>

                           APPLIED BIOSYSTEMS GROUP
                 CONDENSED COMBINED STATEMENTS OF CASH FLOWS
                                 (unaudited)
                        (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                               Six months ended
                                                                 December 31,
                                                             2000           2001
                                                          ---------      ---------
<S>                                                       <C>            <C>
Operating Activities From Continuing Operations
Net income                                                $ 107,098      $  81,230
Adjustments to reconcile net income to net cash
 provided (used) by operating activities:
  Depreciation and amortization                              30,745         37,914
  Long-term compensation programs                             2,972          2,942
  Gain on sale of assets                                    (14,985)
  Acquired research and development                                          2,200
  Nonreimbursable utilization of tax benefits generated
   by the Celera Genomics group                              14,429          8,499
  Deferred income taxes                                        (741)       (12,663)
Changes in operating assets and liabilities:
 Accounts receivable                                        (68,207)        41,412
 Inventories                                                (14,209)         3,039
 Prepaid expenses and other assets                          (39,494)       (10,674)
 Accounts payable and other liabilities                     (67,925)        (4,805)
                                                          ---------      ---------
Net Cash Provided (Used) By Operating Activities            (50,317)       149,094
                                                          ---------      ---------
Investing Activities From Continuing Operations
Additions to property, plant and equipment, net             (96,904)       (42,131)
Investments                                                  (4,131)       (36,369)
Proceeds from the sale of assets, net                        15,498
                                                          ---------      ---------
Net Cash Used By Investing Activities                       (85,537)       (78,500)
                                                          ---------      ---------
Net Cash Provided (Used) By Continuing Operations
 Before Financing Activities                               (135,854)        70,594
                                                          ---------      ---------
Net Cash Used By Operating Activities
 From Discontinued Operations                                (1,561)        (2,198)
                                                          ---------      ---------
Financing Activities
Net change in loans payable                                   6,040         (3,080)
Dividends                                                   (17,758)       (17,973)
Proceeds from stock issued for stock plans                   24,387          9,174
                                                          ---------      ---------
Net Cash Provided (Used) By Financing Activities             12,669        (11,879)
                                                          ---------      ---------
Effect Of Exchange Rate Changes On Cash                         192          6,515
                                                          ---------      ---------
Net Change In Cash And Cash Equivalents                    (124,554)        63,032
Cash And Cash Equivalents Beginning Of Period               394,608        392,459
                                                          ---------      ---------
Cash And Cash Equivalents End Of Period                   $ 270,054      $ 455,491
                                                          =========      =========
</TABLE>

See accompanying notes to the Applied Biosystems group unaudited condensed
combined financial statements.

                                      26

<PAGE>

                                APPLIED BIOSYSTEMS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

           NOTE 1 - INTERIM CONDENSED COMBINED FINANCIAL STATEMENTS

The interim condensed combined financial statements should be read in
conjunction with the financial statements presented in the Applera Corporation
(the "Company") 2001 Annual Report to Stockholders.  Significant accounting
policies disclosed therein have not changed, except for the accounting for
goodwill and other intangibles.  Effective July 1, 2001, the Applied Biosystems
group adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets," and as a result, the
Applied Biosystems group no longer amortizes goodwill.  Amortization of
goodwill in prior year periods was immaterial.

The unaudited condensed combined financial statements reflect, in the
opinion of the Company's management, all adjustments that are necessary for a
fair statement of the results for the interim periods.  All such adjustments
are of a normal recurring nature.  These results are, however, not necessarily
indicative of the results to be expected for a full year.  The preparation of
financial statements in conformity with accounting principles generally
accepted in the United States of America 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 reported amounts of revenues and expenses during the
reporting periods.  Actual results could differ from those estimates.  Certain
amounts in the condensed combined financial statements have been reclassified
for comparative purposes.

The Applied Biosystems group's condensed combined financial statements
should be read in conjunction with the Company's condensed consolidated
financial statements and related notes thereto.

NOTE 2 - ACQUISITIONS AND OTHER

Boston Probes, Inc.
During the second quarter of fiscal 2002, the Company acquired the remaining
shares of Boston Probes, Inc. ("Boston Probes") not previously owned, or
approximately 87% of the outstanding shares, and certain intellectual property
rights related to peptide nucleic acids, for approximately $37 million in cash.
As a result of owning 100% of Boston Probes, the Applied Biosystems group
recorded goodwill of $22.7 million, other intangible assets of $21.8 million,
and a charge to write-off the value of acquired IPR&D of $2.2 million. The
acquisition was accounted for using the purchase method of accounting. Boston
Probes develops and commercializes products employing peptide nucleic acid (PNA)
probe technology and has developed novel chemistry platforms based on its PNA
technology. The Applied Biosystems group expects that this technology will be a
key component of its Sequence Detection Systems (SDS), a proprietary technology
platform for real-time analysis of genetic information.

Transfer of Business Unit from the Celera Genomics Group
Effective July 1, 2001, the Company transferred the assets, liabilities and
personnel of a business unit from the Celera Genomics group to the Applied
Biosystems group. The Company's Board of Directors determined that the assets
of the business to be transferred and the liabilities of the business to be
assumed by the Applied Biosystems group constituted fair value for the
transfer. The net assets

                                      27

<PAGE>

                           APPLIED BIOSYSTEMS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

were transferred at recorded book value as an increase to the Applied
Biosystems group's allocated net worth.  The Applied Biosystems group plans to
utilize the resources of this business unit for initiatives that will include
validation of single nucleotide polymorphisms.

NOTE 3 - COMPREHENSIVE INCOME

Accumulated other comprehensive loss included in allocated net worth on the
Condensed Combined Statements of Financial Position consists of foreign
currency translation adjustments, unrealized gains and losses on foreign
currency and interest rate hedge contracts, unrealized gains and losses on
available-for-sale investments, and minimum pension liability adjustments.
Total comprehensive income for the three and six months ended December 31, 2000
and 2001 is presented in the following table:

<TABLE>
<CAPTION>
                                                        Three months ended      Six months ended
                                                            December 31,           December 31,
(Dollar amounts in millions)                             2000       2001        2000       2001
                                                       --------   --------    --------   --------
<S>                                                     <C>        <C>         <C>        <C>
Net income                                              $  58.0    $  49.0     $ 107.1    $  81.2
Other comprehensive income (loss):
 Foreign currency translation adjustments                   7.8      (13.2)       (4.8)       6.0
 Unrealized gain (loss) on hedge contract,
  net of tax                                                3.7       11.0         8.8        2.1
 Reclassification adjustments for net gains on
  hedge contracts included in net income,
  net of tax                                               (2.5)      (2.1)       (3.2)      (5.4)
 Unrealized gain (loss) on investments,
  net of tax                                              (60.9)      13.1       (83.1)     (13.6)
 Reclassification adjustments for gains on
  investments included in net income,
  net of tax                                               (1.9)                  (9.7)
                                                       --------   --------    --------   --------
Other comprehensive income (loss)                         (53.8)       8.8       (92.0)     (10.9)
                                                       --------   --------    --------   --------
Comprehensive income                                    $   4.2    $  57.8     $  15.1    $  70.3
                                                       --------   --------    --------   --------
</TABLE>

                                      28

<PAGE>

                          APPLIED BIOSYSTEMS GROUP
         NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

NOTE 4 - INVENTORIES

Inventories are stated at the lower of cost (on a first-in, first-out basis) or
market. Inventories included the following components:

<TABLE>
<CAPTION>
                                                 June 30,   December 31,
(Dollar amounts in millions)                       2001        2001
                                                 -------      -------
<S>                                              <C>          <C>
Raw materials and supplies                       $  51.8      $  57.0
Work-in-process                                     12.2          9.8
Finished products                                   76.8         70.4
                                                 -------      -------
Total inventories                                $ 140.8      $ 137.2
                                                 =======      =======
</TABLE>

NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION

Significant non-cash financing activities were as follows:

<TABLE>
<CAPTION>
                                                       Six months ended
                                                         December 31,
(Dollar amounts in millions)                           2000        2001
                                                      ------       -----
<S>                                                   <C>          <C>
Nonreimbursable utilization of tax benefits
  generated by the Celera Genomics group              $ 14.4       $ 8.5
Tax benefit related to employee stock options         $ 32.9       $ 2.7
Dividends declared not paid                           $  8.9       $ 9.0
Transfer of business unit from the Celera
  Genomics group (Note 2)                                          $ 8.1
</TABLE>

NOTE 6 - FINANCIAL INSTRUMENTS

Cash Flow Hedges
The Applied Biosystems group's international sales are typically denominated in
the customers' local (non-U.S. dollar) currencies. The Applied Biosystems group
uses foreign exchange forward, option, and range forward contracts to hedge a
portion of forecasted international sales not denominated in U.S. dollars. The
Applied Biosystems group utilizes hedge accounting on derivative contracts that
are considered highly effective in offsetting the changes in fair value of the
forecasted sales transactions caused by movements in foreign currency exchange
rates. These contracts are designated as cash flow hedges and the effective
portion of the change in the fair value of these contracts is recorded in other
comprehensive income in the Condensed Combined Statements of Financial Position
until the underlying external forecasted transaction affects earnings. At that
time, the gain or loss on the derivative instrument, which had been deferred in
other comprehensive income, is reclassified to net

                                      29

<PAGE>

                          APPLIED BIOSYSTEMS GROUP
         NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

revenues in the Condensed Combined Statements of Operations. During the three
and six month periods ended December 31, 2001, the Applied Biosystems group
recognized net gains of $3.1 million and $7.8 million, respectively, in net
revenues from derivative instruments designated as cash flow hedges of
anticipated sales. At December 31, 2001, $12.9 million of derivative gains
($8.0 million net of deferred taxes) recorded in other comprehensive income
(loss) are expected to be reclassified to earnings during the next twelve
months.

NOTE 7 - RELATED PARTY TRANSACTIONS

Sales of Products and Services Between Groups. For the three and six month
periods ended December 31, 2000, net revenues from leased instruments,
shipments of consumables and project materials, and contracted R&D services to
the Celera Genomics group totaled $17.4 million and $31.8 million,
respectively. For the three and six month periods ended December 31, 2001, net
revenues from leased instruments, shipments of consumables and project
materials, and contracted R&D services to the Celera Genomics group totaled
$8.8 million and $14.8 million, respectively.

NOTE 8 - CONTINGENCIES

Amersham
On November 18, 1997, Amersham Pharmacia Biotech, Inc. ("Amersham") filed a
patent infringement action against the Company in the United States District
Court for the Northern District of California. The complaint alleges that the
Company is directly, contributorily, or by inducement infringing U.S. Patent
No. 5,688,648 ("the `648 patent"). Amersham asserts that the Company's use and
sale of DNA analysis reagents and systems that incorporate "BigDye"
fluorescence detection technology infringe the `648 patent, and seeks
injunctive and monetary relief. The Company answered the complaint, alleging
that the `648 patent is invalid and unenforceable, and that the Company has not
infringed the '648 patent. In December 2000, the court granted Amersham's
motion for summary judgment in part, finding that certain of the Company's
activities infringe the claims of the `648 patent, but denied Amersham's motion
for summary judgment that the Company induced its customers to infringe the
claims of the `648 patent. On April 6, 2001, the court granted the Company's
motion for summary judgment finding that the Company's recently introduced
BigDye Version 3.0 dye technology does not infringe the `648 patent.

On March 13, 1998, the Company filed a patent infringement action against
Amersham and Molecular Dynamics, Inc. in the United States District Court for
the Northern District of California. The Company asserts that one of its
patents (U.S. Patent No. 4,811,218) is infringed by reason of Molecular
Dynamics' and Amersham's sale of certain DNA analysis systems (e.g., the
MegaBACE 1000 System). In response, Amersham has asserted various affirmative
defenses and several counterclaims, including that the Company is infringing
two patents, U.S. Patent No. 5,091,652 ("the `652 patent") and U.S. Patent No.
5,459,325, each owned by or licensed to Molecular Dynamics, by

                                      30

<PAGE>

                          APPLIED BIOSYSTEMS GROUP
         NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

selling certain ABI PRISM(TM) DNA sequencing systems. In December 2000, the
court granted the Company's motion for summary judgment of non-infringement of
the `652 patent. The trial date previously scheduled for August 6, 2001 was
vacated in July 2001.

On May 21, 1998, Amersham filed a patent infringement action against the
Company in the United States District Court for the Southern District of New
York. The complaint alleges that the Company is infringing, contributing to the
infringement of, and inducing the infringement of U.S. Patent No. 4,707,235
("the `235 patent") by reason of the Company's sale of certain ABI PRISM(TM)
DNA sequencing systems. The complaint seeks injunctive and monetary relief. The
Company answered the complaint, alleging that the `235 patent is invalid and
that the Company does not infringe the `235 patent. The matters described in
this paragraph and the immediately preceding paragraph have been consolidated
into a single case to be heard in the United States District Court for the
Northern District of California. In December 2000, the court granted the
Company's motion for summary judgment of non-infringement of the `235 patent.
However, on December 18, 2000, Amersham filed a new complaint alleging that the
Company is infringing the `235 patent by reason of the Company's sale of
certain DNA sequencing systems, which allegations were not in the previous suit
under the `235 patent. This action is in the early stages of discovery.

On May 30, 2000, the Company filed a patent infringement action against
Amersham in the United States District Court for the Northern District of
California. The Company asserts that one of its patents (U.S. Patent No.
5,945,526) is infringed by reason of Amersham's sale of DNA analysis reagents
and systems that incorporate ET Terminator fluorescence detection technology.
The claims construction hearing previously scheduled for June 7, 2001 was
postponed.

On July 10, 2001, United States Judge Charles R. Breyer stayed all cases in the
litigation described above for the purpose of facilitating court ordered
settlement mediation. The stay is scheduled to expire on March 11, 2002.

The Company believes that the claims asserted by Amersham and Molecular
Dynamics in the foregoing cases are without merit and intends to defend the
cases vigorously. However, the outcome of this or any other litigation is
inherently uncertain, and the Company cannot be sure that it will prevail in
any of these matters. An adverse determination in any of the actions brought by
Amersham could have a material adverse effect on the financial statements of
the Company.

Other

The Company has been named as a defendant in several other legal actions,
including patent, commercial, and environmental, arising from the conduct of
normal business activities. Although the amount of any liability that might
arise with respect to any of these matters cannot be accurately predicted, the
resulting liability, if any, will not in the opinion of management have a
material

                                      31

<PAGE>

                          APPLIED BIOSYSTEMS GROUP
         NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

adverse effect on the combined financial statements of the Applied Biosystems
group or the consolidated financial statements of the Company.

The holders of Applera Corporation - Applied Biosystems Group Common Stock are
stockholders of the Company and will continue to be subject to all risks
associated with an investment in the Company, including any legal proceedings
and claims affecting the Celera Genomics group.

                                      32

<PAGE>

                            CELERA GENOMICS GROUP
                 CONDENSED COMBINED STATEMENTS OF OPERATIONS
                                 (unaudited)
                        (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                            Three Months Ended        Six Months Ended
                                               December 31,              December 31,
                                             2000         2001        2000         2001
                                          ---------   ----------   ---------   ----------
<S>                                       <C>         <C>          <C>         <C>
Net Revenues                              $  20,319   $   35,054   $  38,572   $   62,328
Costs And Expenses
Cost of sales                                10,419       17,992      16,186       29,907
Research and development                     42,326       30,611      83,303       58,353
Selling, general and administrative          14,362       13,956      27,392       26,561
Amortization of goodwill and intangibles     10,968        1,635      22,049        2,106
Acquired research and development                         98,981                   98,981
                                          ---------   ----------   ---------   ----------
Operating Loss                              (57,756)    (128,121)   (110,358)    (153,580)
Interest expense                                (43)        (138)       (829)        (138)
Interest income                              17,124        8,704      35,310       19,554
Other expense, net                              (15)      (1,033)         (4)      (1,749)
Loss from joint venture                                   (8,487)                 (17,864)
                                          ---------   ----------   ---------   ----------
Loss Before Income Taxes                    (40,690)    (129,075)    (75,881)    (153,777)
Benefit for income taxes                    (10,986)     (11,135)    (20,488)     (20,275)
                                          ---------   ----------   ---------   ----------
Net Loss                                  $ (29,704)  $ (117,940)  $ (55,393)  $ (133,502)
                                          =========   ==========   =========   ==========
</TABLE>

See accompanying notes to the Celera Genomics group unaudited condensed
combined financial statements.

                                      33

<PAGE>

                            CELERA GENOMICS GROUP
             CONDENSED COMBINED STATEMENTS OF FINANCIAL POSITION
                        (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                     At June 30,    At December 31,
                                                        2001             2001
                                                    -----------      -----------
                                                                      (unaudited)
<S>                                                 <C>              <C>
Assets
Current assets
 Cash and cash equivalents                          $   216,076      $   175,757
 Short-term investments                                 779,482          765,095
 Accounts receivable, net                                24,019           35,488
 Inventories, net                                         6,239            6,312
 Prepaid expenses and other current assets                4,838            6,658
                                                    -----------      -----------
Total current assets                                  1,030,654          989,310
Property, plant and equipment, net                      123,497          137,032
Other long-term assets                                   65,985          187,341
                                                    -----------      -----------
Total Assets                                        $ 1,220,136      $ 1,313,683
                                                    ===========      ===========

Liabilities And Allocated Net Worth
Current liabilities
 Current portion of long-term debt and capital
   lease obligation                                 $         -      $    12,209
 Accounts payable                                        21,024           20,987
 Accrued salaries and wages                              15,088           16,508
 Deferred revenues                                       37,486           45,053
 Other accrued expenses                                  11,982           19,323
                                                    -----------      -----------
Total current liabilities                                85,580          114,080
Long-term debt                                                            18,426
Other long-term liabilities                              23,840           24,711
                                                    -----------      -----------
Total Liabilities                                       109,420          157,217

Allocated Net Worth                                   1,110,716        1,156,466
                                                    -----------      -----------
Total Liabilities And Allocated Net Worth           $ 1,220,136      $ 1,313,683
                                                    ===========      ===========
</TABLE>

See accompanying notes to the Celera Genomics group unaudited condensed
combined financial statements.

                                      34

<PAGE>

                            CELERA GENOMICS GROUP
                 CONDENSED COMBINED STATEMENTS OF CASH FLOWS
                                 (unaudited)
                        (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                                  Six months ended
                                                                    December 31,
                                                                 2000           2001
                                                              ----------      ---------
<S>                                                           <C>             <C>
Operating Activities
Net loss                                                      $ (55,393)      $(133,502)
Adjustments to reconcile net loss to net cash
  used by operating activities:
    Depreciation and amortization                                32,107          16,310
    Long-term compensation programs                                 628             907
    Gain on sale of assets                                                         (811)
    Loss from equity method investees                                             1,391
    Deferred income taxes                                          (614)         (5,821)
    Loss from joint venture                                                      17,864
    Nonreimbursable utilization of tax benefits by the
      Applied Biosystems group                                  (14,429)         (8,499)
    Acquired research and development                                            98,981
Changes in operating assets and liabilities:
    Tax benefit receivable from the Applied Biosystems group     16,702
    Accounts receivable                                          (4,303)        (11,241)
    Inventories                                                     379             (73)
    Prepaid expenses and other assets                               758            (470)
    Accounts payable and other liabilities                       (3,037)            241
                                                              ---------       ---------
Net Cash Used By Operating Activities                           (27,202)        (24,723)
                                                              ---------       ---------
Investing Activities
Additions to property, plant and equipment, net                 (12,623)        (10,837)
Sales (purchases) of short-term investments, net               (151,205)         16,749
Investments                                                                     (20,892)
                                                              ---------       ---------
Net Cash Used By Investing Activities                          (163,828)        (14,980)
                                                              ---------       ---------
Financing Activities
Net change in loans payable                                     (46,000)         (8,443)
Purchases of common stock for treasury                                             (941)
Proceeds from stock issued for stock plans                       13,434           8,768
                                                              ---------       ---------
Net Cash Used By Financing Activities                           (32,566)           (616)
                                                              ---------       ---------
Net Change In Cash And Cash Equivalents                        (223,596)        (40,319)
Cash And Cash Equivalents Beginning Of Period                   569,894         216,076
                                                              ---------       ---------
Cash And Cash Equivalents End Of Period                       $ 346,298       $ 175,757
                                                              =========       =========
</TABLE>

See accompanying notes to the Celera Genomics group unaudited condensed
combined financial statements.

                                      35

<PAGE>

                            CELERA GENOMICS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

NOTE 1 - INTERIM CONDENSED COMBINED FINANCIAL STATEMENTS

The interim condensed combined financial statements should be read in
conjunction with the financial statements presented in the Applera Corporation
(the "Company") 2001 Annual Report to Stockholders. Significant accounting
policies disclosed therein have not changed, except for the accounting for
goodwill and other intangibles discussed in Note 2.

The unaudited condensed combined financial statements reflect, in the opinion
of the Company's management, all adjustments that are necessary for a fair
statement of the results for the interim periods. All such adjustments are of
a normal recurring nature. These results are, however, not necessarily
indicative of the results to be expected for a full year. The preparation of
financial statements in conformity with accounting principles generally
accepted in the United States of America 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 reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates. Certain
amounts in the condensed combined financial statements have been reclassified
for comparative purposes.

The Celera Genomics group's condensed combined financial statements should be
read in conjunction with the Company's condensed consolidated financial
statements and related notes thereto.

NOTE 2 - CHANGE IN ACCOUNTING POLICY

Effective July 1, 2001, the Celera Genomics group adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets." As a result, the Celera Genomics group has
reclassified certain other intangible assets associated with its workforce to
goodwill and no longer amortizes goodwill. Had the provisions of SFAS No. 142
been applied to the fiscal 2001 financial results, the Celera Genomics group's
net loss would have been $19.7 million and $35.3 million for the three and six
months ended December 31, 2000, respectively, on a pro forma basis.

NOTE 3 - ACQUISITIONS AND OTHER

Axys Pharmaceuticals, Inc.
On November 16, 2001, the Company acquired Axys Pharmaceuticals, Inc. ("Axys")
in a stock-for-stock transaction. Axys is an integrated small molecule drug
discovery and development company that is developing products for chronic
therapeutic application through collaborations with pharmaceutical companies
and has a proprietary product portfolio in oncology. The Company believes that
the acquisition will accelerate the Celera Genomics group's evolution as a drug
discovery and development business.

The Company issued 5.5 million shares of Applera - Celera Genomics Common Stock
("Applera - Celera stock") in exchange for all of the outstanding shares of
Axys common stock. The acquisition was accounted for using the purchase method
of accounting. The total purchase price for the

                                      36

<PAGE>

                            CELERA GENOMICS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

acquisition was $188.4 million, which consisted of Applera - Celera stock
valued at $170.3 million, stock options valued at $8.8 million, warrants valued
at $2.8 million and estimated transaction costs of $6.5 million. The purchase
price was calculated using a $31.04 price per share of Applera - Celera stock,
based upon a measurement date of July 17, 2001. This date, determined in
accordance with Emerging Issues Task Force Abstracts Issue 99-12,
"Determination of the Measurement Date for the Market Price of Acquirer
Securities Issued in a Purchase Business Combination," represented the first
date on which the exchange ratio was fixed under the merger agreement. The
fair value of the options and warrants was calculated using the Black-Scholes
pricing model.

The purchase price of $188.4 million was allocated to tangible and intangible
assets as follows:

<TABLE>
     <S>                                                <C>
     (Dollar amounts in millions)
     Current assets                                     $   6.8
     Long-term assets                                     118.7
     Current liabilities                                  (34.9)
     Long-term liabilities                                (20.7)
                                                        -------
     Net assets of Axys, at approximate fair value         69.9

     Acquired in-process research and development          99.0
     Existing technology                                    7.9
     Favorable operating leases                            11.6
                                                        -------
     Total purchase price                               $ 188.4
                                                        =======
</TABLE>

Included in the "pre-existing" long-term assets is a $61.3 million deferred tax
asset, recorded in purchase accounting, for net operating loss carryforwards
and other temporary differences of Axys expected to be utilized by the Company.
"Pre-existing" current liabilities included $4.2 million of contractual
severance and involuntary termination costs. As of December 31, 2001, the
Celera Genomics group had paid $1.2 million of these severance costs.

In connection with the acquisition, the Company assumed $26.0 million of 8%
senior secured convertible notes. These notes mature on October 1, 2004.
Interest is payable quarterly and the principal is payable at maturity as a
lump sum. These notes were convertible at any time into 499,009 shares of
Applera - Celera stock at a conversion price of $52.10 per share. Holders of
notes having an aggregate principal amount of $10 million exercised their right
following the acquisition to require the Company to repurchase such notes. The
Celera Genomics group repaid the $10 million in January 2002. These notes were
secured by 6.7 million shares, or approximately 90%, of the Company's holding
of Discovery Partners International, Inc. ("DPI") common stock. As a result of
the Axys acquisition, the Company owns approximately 30% of DPI, allocated to
the Celera Genomics group, which is accounted for under the equity method of
accounting. Additionally, the Company assumed an existing Axys construction
loan of $8.4 million related to its medicinal

                                      37

<PAGE>

                            CELERA GENOMICS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

chemistry building located in South San Francisco. The Celera Genomics group
repaid this loan during the second quarter of fiscal 2002 following the
acquisition.

In connection with the acquisition of Axys, the Celera Genomics group allocated
approximately $99.0 million of the purchase price to acquired in-process
research and development ("IPR&D"). The Celera Genomics group attributed
approximately 38% of the acquired IPR&D value to the Cathepsin S project; 27%
to the Cathepsin K project; 15% to the Tryptase project; 9% to the Cathepsin F
project; 5% to the Urokinase project; 4% to the Serm-beta project; and 2% to
the Factors VIIa & Xa project. As of the acquisition date, the technological
feasibility of the projects had not been established, and it was determined
that the acquired projects had no future alternative uses.

The amount attributed to acquired IPR&D was based on an independent appraisal
and was developed using an income approach. The in-process technologies were
valued using a discounted cash flow model on a project-by-project basis. This
valuation incorporated a percentage of completion analysis using revenues
allocated to in-process technologies. In the development of projected cash
flows, estimated completion percentages from 28% to 91% were applied depending
on the stage of the project. The risk adjusted discount rates applied to the
projects' cash flows were 38% for the Cathepsin S, the Cathepsin K and the
Tryptase projects, and 43% for the Cathepsin F, the Urokinase, the Serm-beta
and the Factors VIIa & Xa projects.

The Cathepsin S project is a collaboration, in the preclinical stage, with
Aventis Pharmaceuticals Products, Inc. ("Aventis"), with the objective of
discovery and development of small molecule drugs that inhibit Cathepsin S, a
human cysteine protease associated with certain inflammatory and autoimmune
diseases. In November 1999, Axys announced the successful testing of a potent,
selective Cathepsin S inhibitor compound in an animal efficacy model of asthma.
In addition, current in vivo proof-of-concept studies are underway, have been
completed, or are planned for several potential disease indications. In October
2000, Axys announced that on the basis of data from an in vivo efficacy model of
asthma, Aventis qualified a collaboration compound for pre-clinical advancement.
In January 2002, the Celera Genomics group announced the qualification of a
number of collaboration compounds as early development candidates for
investigational new drug ("IND") -enabling studies in multiple therapeutic
indications.

The Cathepsin K project is a collaboration, in the preclinical stage, with
Merck & Co., Inc. ("Merck") to develop small molecule inhibitors of Cathepsin K
for the treatment of osteoporosis. In February

                                      38

<PAGE>

                            CELERA GENOMICS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

1997, Axys announced the first-ever solution of the three-dimensional crystal
structure of Cathepsin K, which enabled Axys to design potent and selective
inhibitors of Cathepsin K. In December 1999, Axys announced the successful
testing of a specific, selective Cathepsin K inhibitor compound in an animal
efficacy model. In mid-calendar 2001, Merck and Axys announced the achievement
of a pre-agreed research milestone pertaining to selection of an Axys Cathepsin
K inhibitor.

The Tryptase project is a late stage preclinical program aimed at the
development of compounds for the treatment of inflammation. Tryptase
inhibitors are designed to slow or halt the inflammatory process at an early
stage, in an attempt to provide safe and effective therapies for the treatment
of the underlying cause of the disease, rather than the symptoms. In earlier
Phase II clinical trials, Axys established human proof-of-concept for tryptase
as a drug target. This was achieved in previous Phase II clinical studies of
APC-366, an inhaled peptide tryptase inhibitor, which showed that inhibiting
tryptase resulted in improved breathing (reduction in late airway response) in
asthmatics. Since 1994, Axys has been in collaboration with Bayer A.G.
("Bayer") to identify oral tryptase inhibitors for the treatment of asthma.
Bayer has focused on preclinical studies with a later generation small molecule
tryptase inhibitor with high oral bioavailability and good circulating
half-life, with the goal of developing a once-a-day oral therapeutic for the
prevention and treatment of chronic asthma.

The Cathepsin F project is in the early preclinical stage. The objective of
this project is to develop compounds for inflammatory diseases. The compounds
are similar to Cathepsin S in their biological mechanism of action and
potential therapeutic indications.

The Urokinase project is an oncology program in the preclinical stage involving
the development of inhibitors of the protease urokinase to interfere with
angiogenesis and metastasis processes. Using a

                                      39

<PAGE>

                            CELERA GENOMICS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

broad range of scientific capabilities including crystallography and structural
biology, Axys' scientists have analyzed urokinase to identify sites on the
molecule best suited for drug interaction. Using Axys' medicinal chemistry and
structure-based drug design capabilities, a series of drug-like compounds have
been screened to identify potential drugs and select a candidate for
preclinical development.

The Serm-beta project is an oncology program based upon licenses granted to
Axys by Celgene Corp. ("Celgene"). In October 1999, Celgene (through its
predecessor, Signal Pharmaceuticals) granted Axys exclusive rights to its
selective estrogen receptor-beta modulators (SERM-beta) for the treatment of
cancer. SERM- compounds are small molecules that selectively modulate the
activity of the newly discovered beta estrogen receptor found in tumors and
certain hormonally sensitive tissues.

The Factors VIIa & Xa project is aimed at the development of oral therapeutics
for blood clotting disorders, such as deep vein thrombosis, stroke, and
myocardial infarction or heart attack. More specifically, Axys had been
performing research on inhibitors of Factors Xa and VIIa and thrombin, all of
which are serine proteases involved in the blood clotting process. These
proteases have been acknowledged as targets for a host of disorders related to
abnormal clotting. The program was begun in collaboration with Pharmacia &
Upjohn. In July 1998, the research support for this collaboration ended and,
in February 1999, Axys formally agreed to end this collaboration.

As of the date of the acquisition, the net assets and results of operations of
Axys are included in the Celera Genomics group's combined financial statements.
The following selected unaudited pro forma information for the Celera Genomics
group has been prepared assuming the acquisition had occurred at the beginning
of fiscal 2001 and gives effect to purchase accounting adjustments:

                                      40

<PAGE>

                            CELERA GENOMICS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

<TABLE>
<CAPTION>
                                      Three months ended       Six months ended
                                         December 31,             December 31,
(Dollar amounts in millions)           2000        2001        2000        2001
                                     -------      ------      ------      ------
 <S>                                 <C>           <C>        <C>          <C>
 Net revenues                        $ 21.8        $36.8      $ 42.6       $64.9
 Net loss                            $ 45.0        $27.1      $ 76.8       $61.9
</TABLE>

Upon consummation of the acquisition, the Celera Genomics group recorded a $99.0
million non-cash charge to write-off the value of acquired IPR&D, which has been
excluded from the pro forma results above. Had the acquired IPR&D charge been
excluded from the reported amounts for the three and six months ended December
31, 2001, the Celera Genomics group would have reported net loss of $19.0
million and $34.5 million, repectively.

Included in the results for the six months ended December 31, 2001, is a
non-cash pretax charge of $10.8 million recorded by Axys for the impairment of
an investment accounted for under the cost method.

Transfer of Business Unit To The Applied Biosystems Group
Effective July 1, 2001, the Company transferred the assets, liabilities and
personnel of a business unit from the Celera Genomics group to the Applied
Biosystems group. The Company's Board of Directors determined that the assets
of the business to be transferred and the liabilities of the business to be
assumed by the Applied Biosystems group constituted fair value for the
transfer. The net assets were transferred at recorded book value as a charge to
the Celera Genomics group's allocated net worth.

NOTE 4 - COMPREHENSIVE LOSS

Accumulated other comprehensive income (loss) included in allocated net worth
on the Condensed Combined Statements of Financial Position consists of foreign
currency translation adjustments and unrealized gains and losses on
available-for-sale investments. Total comprehensive loss for the three and six
months ended December 31, 2000 and 2001 is presented in the following table:

                                      41

<PAGE>

                            CELERA GENOMICS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

<TABLE>
<CAPTION>
                                          Three months ended        Six months ended
                                             December 31,             December 31,
(Dollar amounts in millions)               2000        2001          2000        2001
                                         --------    --------      --------    --------
<S>                                      <C>         <C>           <C>         <C>
Net loss                                 $  (29.7)   $ (117.9)     $  (55.4)   $ (133.5)
Other comprehensive income (loss):
 Foreign currency translation adjustment                 (0.3)                     (0.2)
 Unrealized gain on investments, net
  of tax                                      0.2         0.1           0.5         1.9
                                         --------    --------      --------    --------
Other comprehensive income (loss)             0.2        (0.2)          0.5         1.7
                                         --------    --------      --------    --------
Comprehensive loss                       $  (29.5)   $ (118.1)     $  (54.9)   $ (131.8)
                                         --------    --------      --------    --------
</TABLE>

NOTE 5 - INVENTORIES

Inventories are stated at the lower of cost (on a first-in, first-out basis) or
market. Inventories included the following components:

<TABLE>
<CAPTION>
                                    June 30,    December 31,
(Dollar amounts in millions)          2001         2001
                                     ------       ------
<S>                                  <C>          <C>
Raw materials and supplies           $  4.9       $  4.7
Work-in-process                          .6          1.1
Finished products                        .7           .5
                                     ------       ------
Total inventories                    $  6.2       $  6.3
                                     ======       ======
</TABLE>

NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION

Significant non-cash financing activities were as follows:

<TABLE>
<CAPTION>
                                                       Six months ended
                                                         December 31,
(Dollar amounts in millions)                           2000        2001
                                                     -------     -------
<S>                                                  <C>         <C>
Nonreimbursable utilization of tax benefits by
  the Applied Biosystems group                       $  14.4     $   8.5
Tax benefit related to employee stock options        $   9.6     $   3.5
Transfer of business unit to the Applied
  Biosystems group (Note 3)                                      $   8.1
Applera - Celera stock issued in Axys acquisition                $ 181.9
Debt and capital lease obligation assumed in
  Axys acquisition                                               $  39.1
</TABLE>

                                      42

<PAGE>

                            CELERA GENOMICS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

NOTE 8 - RELATED PARTY TRANSACTIONS

Sales of Products and Services Between Groups. For the three and six months
ended December 31, 2000, costs of sales and research and development expenses
included $17.4 million and $30.5 million, respectively, for lease payments on
instruments, the purchase of consumables and project materials, and services
contracted from the Applied Biosystems group. For the three and six months
ended December 31, 2001, costs of sales and research and development expenses
included $8.8 million and $14.8 million, respectively, for lease payments on
instruments, the purchase of consumables, and services contracted from the
Applied Biosystems group.

NOTE 9 - CONTINGENCIES

Amersham
On November 18, 1997, Amersham Pharmacia Biotech, Inc. ("Amersham") filed a
patent infringement action against the Company in the United States District
Court for the Northern District of California. The complaint alleges that the
Company is directly, contributorily, or by inducement infringing U.S. Patent
No. 5,688,648 ("the `648 patent"). Amersham asserts that the Company's use and
sale of DNA analysis reagents and systems that incorporate "BigDye"
fluorescence detection technology infringe the `648 patent, and seeks
injunctive and monetary relief. The Company answered the complaint, alleging
that the `648 patent is invalid and unenforceable, and that the Company has not
infringed the '648 patent. In December 2000, the court granted Amersham's
motion for summary judgment in part, finding that certain of the Company's
activities infringe the claims of the `648 patent, but denied Amersham's motion
for summary judgment that the Company induced its customers to infringe the
claims of the `648 patent. On April 6, 2001, the court granted the Company's
motion for summary judgment finding that the Company's recently introduced
BigDye Version 3.0 dye technology does not infringe the `648 patent.

On March 13, 1998, the Company filed a patent infringement action against
Amersham and Molecular Dynamics, Inc. in the United States District Court for
the Northern District of California. The Company asserts that one of its
patents (U.S. Patent No. 4,811,218) is infringed by reason of Molecular
Dynamics' and Amersham's sale of certain DNA analysis systems (e.g., the
MegaBACE 1000 System). In response, Amersham has asserted various affirmative
defenses and several counterclaims, including that the Company is infringing
two patents, U.S. Patent No. 5,091,652 ("the `652 patent") and U.S. Patent No.
5,459,325, each owned by or licensed to Molecular Dynamics, by selling certain
ABI PRISM(TM) DNA sequencing systems. In December 2000, the court granted the
Company's motion for summary judgment of non-infringement of the `652 patent.
The trial date previously scheduled for August 6, 2001 was vacated in July
2001.

On May 21, 1998, Amersham filed a patent infringement action against the
Company in the United States District Court for the Southern District of New
York. The complaint alleges that the Company is infringing, contributing to the
infringement of, and inducing the infringement of U.S. Patent No.

                                      43

<PAGE>

                            CELERA GENOMICS GROUP
          NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
                                  continued

4,707,235 ("the `235 patent") by reason of the Company's sale of certain ABI
PRISM(TM) DNA sequencing systems. The complaint seeks injunctive and monetary
relief. The Company answered the complaint, alleging that the `235 patent is
invalid and that the Company does not infringe the `235 patent. The matters
described in this paragraph and the immediately preceding paragraph have been
consolidated into a single case to be heard in the United States District Court
for the Northern District of California. In December 2000, the court granted
the Company's motion for summary judgment of non-infringement of the `235
patent. However, on December 18, 2000, Amersham filed a new complaint alleging
that the Company is infringing the `235 patent by reason of the Company's sale
of certain DNA sequencing systems, which allegations were not in the previous
suit under the `235 patent. This action is in the early stages of discovery.

On May 30, 2000, the Company filed a patent infringement action against
Amersham in the United States District Court for the Northern District of
California. The Company asserts that one of its patents (U.S. Patent No.
5,945,526) is infringed by reason of Amersham's sale of DNA analysis reagents
and systems that incorporate ET Terminator fluorescence detection technology.
The claims construction hearing previously scheduled for June 7, 2001 was
postponed.

On July 10, 2001, United States Judge Charles R. Breyer stayed all cases in the
litigation described above for the purpose of facilitating court ordered
settlement mediation. The stay is scheduled to expire on March 11, 2002.

The Company believes that the claims asserted by Amersham and Molecular
Dynamics in the foregoing cases are without merit and intends to defend the
cases vigorously. However, the outcome of this or any other litigation is
inherently uncertain, and the Company cannot be sure that it will prevail in
any of these matters. An adverse determination in any of the actions brought by
Amersham could have a material adverse effect on the financial statements of
the Company.

Other
The Company has been named as a defendant in several other legal actions,
including patent, commercial, and environmental, arising from the conduct of
normal business activities. Although the amount of any liability that might
arise with respect to any of these matters cannot be accurately predicted, the
resulting liability, if any, will not in the opinion of management have a
material adverse effect on the combined financial statements of the Celera
Genomics group or the consolidated financial statements of the Company.

The holders of Applera Corporation - Celera Genomics Group Common Stock are
stockholders of the Company and will continue to be subject to all risks
associated with an investment in the Company, including any legal proceedings
and claims affecting the Applied Biosystems group.

                                      44

<PAGE>

                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                            RESULTS OF OPERATIONS

Management's Discussion of Operations

The following discussion should be read in conjunction with the Applera
Corporation (the "Company") condensed consolidated financial statements and
related notes included in this report, the Applied Biosystems group's combined
financial statements and related notes included in this report, and the Celera
Genomics group's combined financial statements and related notes included in
this report and "Management's Discussion and Analysis" appearing on pages
13 - 25 of the Company's 2001 Annual Report to Stockholders. Historical results
and percentage relationships are not necessarily indicative of operating
results for any future periods.

Celera Diagnostics was established as a joint venture between the Applied
Biosystems group and the Celera Genomics group during the fourth quarter of
fiscal 2001. This new venture is focused on discovery, development and
commercialization of novel diagnostic tests.

Events Impacting Comparability

Gain on Investments. The three and six months ended December 31, 2000 included
before-tax gains of $3.0 million and $15.0 million, respectively, related to
the sales of minority equity investments.

Acquisitions. The Company acquired Axys Pharmaceuticals, Inc. ("Axys") and
Boston Probes, Inc. ("Boston Probes") during the second quarter of fiscal 2002.
The results of operations for the above acquisitions, each of which was
accounted for using the purchase method of accounting, have been included in
the consolidated financial statements since the date of each respective
acquisition. The net assets and results of operations of Axys have been
allocated to the Celera Genomics group. The net assets and results of
operations of Boston Probes have been allocated to the Applied Biosystems
group. A discussion of these acquisitions is provided in Note 3 of the
Company's condensed consolidated financial statements.

Acquired research and development. During the second quarter of fiscal 2002,
the Company recorded charges to write-off the value of acquired in-process
research and development ("IPR&D") in connection with the Axys and Boston
Probes acquisitions. The Applied Biosystems group recorded a charge of $2.2
million relating to Boston Probes and the Celera Genomics group recorded a
charge of $99.0 million relating to Axys. Refer to Note 3 of the Company's
condensed consolidated financial statements for a further discussion of the
acquired IPR&D.

Discussion of Consolidated Operations

Results of Operations--The Three Months Ended December 31, 2001 Compared With
The Three Months Ended December 31, 2000

The Company reported a net loss of $61.4 million for the second quarter of
fiscal 2002 compared with net income of $27.5 million for the second quarter of
fiscal 2001. Net income for the Company, on a comparable basis excluding the
nonrecurring charges to write-off the value of acquired IPR&D during the second
quarter of fiscal 2002 and the nonrecurring gain from the sale of investments

                                      45

<PAGE>

                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

during the second quarter of fiscal 2001, increased 55.7% during the second
quarter of fiscal 2002 to $39.7 million compared with $25.5 million for the
second quarter of fiscal 2001. The increase in net income reflected higher net
revenues and lower amortization of goodwill and other intangibles, which were
partially offset by lower interest income and higher R&D expenses. On a segment
basis excluding the nonrecurring items, the Applied Biosystems group reported
net income of $51.2 million for the second quarter of fiscal 2002 compared with
$56.0 million for the prior year period and the Celera Genomics group reported
a net loss of $19.0 million for the second quarter of fiscal 2002 compared with
a net loss of $29.7 million for the second quarter of fiscal 2001.

Net revenues for the Company were $437.2 million for the second quarter of
fiscal 2002 compared with $413.3 million for the second quarter of fiscal 2001,
an increase of 5.8%. On a segment basis, net revenues for the Applied
Biosystems group were $411.2 million for the second quarter of fiscal 2002
compared with $411.0 million for the second quarter of fiscal 2001. The Celera
Genomics group reported net revenues of $35.1 million for the second quarter of
fiscal 2002 compared with $20.3 million for the second quarter of fiscal 2001,
an increase of 72.5%

Gross margin as a percentage of net revenues for the Company was 52.8% for the
second quarter of fiscal 2002 compared with 51.7% for the second quarter of
fiscal 2001. The higher gross margin percentage in fiscal 2002 was due
primarily to increased revenues of the Celera Genomics group and product mix
and price increases in certain product lines of the Applied Biosystems group.

SG&A expenses for the Company were $109.3 million for the second quarter of
fiscal 2002 compared with $109.2 million for the second quarter of fiscal 2001.
As a percentage of net revenues, SG&A expenses decreased to 25.0% for the
second quarter of fiscal 2002 compared with 26.4% for the second quarter of
fiscal 2001 primarily due to the Company's efforts to restrain discretionary
spending. On a segment basis, SG&A expenses for the Applied Biosystems group
were $93.6 million and $94.8 million for the second quarters of fiscal 2002 and
2001, respectively. SG&A expenses for the Celera Genomics group were $14.0
million and $14.4 million for the second quarters of fiscal 2002 and 2001,
respectively.

R&D expenses increased $12.8 million for the second quarter of fiscal 2002 to
$88.5 million from $75.7 million for the second quarter of fiscal 2001
primarily due to spending on: diagnostics programs associated with the Celera
Diagnostics business; the Company's genomics initiative for commercializing
products from information obtained through analysis of the human genome, which
is a collaboration, equally shared among the Company's businesses; the
continued development of new products and technologies by the Applied
Biosystems group; and therapeutic discovery programs by the Celera Genomics
group. These increases were partially offset by lower R&D expenses associated
with the shotgun phase of certain whole genome sequencing programs conducted by
the Celera Genomics group. On a segment basis, R&D expenses for the Applied
Biosystems group were $52.7 million and $42.0 million for the second quarters
of fiscal 2002 and 2001,

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       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

respectively. R&D expenses for the Celera Genomics group were $30.6 million
and $42.3 million for the second quarters of fiscal 2002 and 2001, respectively.

The Company recorded non-cash amortization expenses of $1.6 million in the
second quarter of fiscal 2002 compared to $11.0 million in the second quarter
of fiscal 2001 relating to the amortization of goodwill and other intangibles.
Effective July 1, 2001, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets," and as a result, the Company no longer amortizes goodwill. Refer to
Note 2 of the Company's condensed consolidated financial statements for a
further discussion.

The second quarter of fiscal 2002 included $101.2 million of charges for
acquired IPR&D related to the acquisitions of Axys and Boston Probes. Refer to
Note 3 of the Company's condensed consolidated financial statements for a
further discussion of these acquisitions.

Operating loss for the Company was $69.7 million for the second quarter of
fiscal 2002 compared with operating income $17.7 million for the second quarter
of fiscal 2001. Excluding the nonrecurring items from the second quarter of
fiscal 2002, operating income for the Company was $31.4 million in the second
quarter of fiscal 2002. On a segment basis, operating income for the Applied
Biosystems group decreased to $68.1 million for the second quarter of fiscal
2002, excluding the nonrecurring item, from $76.3 million for the second
quarter of fiscal 2001. This decrease in operating income was caused primarily
by higher R&D expenses in large part due to continued development of new
products and technologies, offset by higher gross margin as a percentage of net
revenues, resulting from product mix and price increases in certain product
lines. Excluding the nonrecurring item, operating income as a percentage of
net revenues for the Applied Biosystems group was 16.6% in the second quarter
of fiscal 2002 compared with 18.6% in the second quarter of fiscal 2001.

Excluding the nonrecurring item in the second quarter of fiscal 2002, operating
loss for the Celera Genomics group was $29.1 million compared with $57.8
million for the second quarter of fiscal 2001. The decrease in the Celera
Genomics group's operating loss reflected higher net revenues primarily due to
higher service and grant revenue and increased database subscriptions, lower
R&D expenses, and lower amortization of goodwill and other intangibles.

Interest income was $12.0 million for the second quarter of fiscal 2002
compared with $21.3 million for the second quarter of fiscal 2001. This
decrease was primarily attributable to lower average interest rates during the
second quarter of fiscal 2002 as compared to the second quarter of fiscal 2001.

Excluding the nonrecurring items, the effective income tax rate was 8% for the
second quarter of fiscal 2002 compared with 34% for the second quarter of
fiscal 2001. The higher effective income

                                      47

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                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

tax rate in fiscal 2001 was primarily due to amortization of nondeductible
goodwill, which is no longer being amortized in fiscal 2002 due to the adoption
of SFAS No. 142, as previously described.

Results of Operations--The Six Months Ended December 31, 2001 Compared With The
Six Months Ended December 31, 2000

The Company reported a net loss of $44.4 million for the first six months of
fiscal 2002 compared with net income of $51.9 million for the first six months
of fiscal 2001. Net income for the Company, on a comparable basis excluding the
acquired IPR&D charges during fiscal 2002 and the nonrecurring gain from the
sale of investments during fiscal 2001 previously described, increased 34.4% to
$56.7 million compared with $42.2 million for the first six months of fiscal
2001. The increase in net income reflected increased net revenues and lower
amortization of goodwill and other intangibles, which were partially offset by
lower interest income and higher R&D expenses. On a segment basis, excluding
the nonrecurring items, the Applied Biosystems group reported net income of
$83.4 million for the first six months of fiscal 2002 compared with $97.4
million for the first six months of fiscal 2001 and the Celera Genomics group
reported a net loss of $34.5 million for the first six months of fiscal 2002
compared with a net loss of $55.4 million for the first six months of fiscal
2001.

Net revenues for the Company were $825.0 million for the first six months of
fiscal 2002 compared with $780.7 million for the first six months of fiscal
2001, an increase of 5.7%. On a segment basis, net revenues for the Applied
Biosystems group were $777.7 million for the first six months of fiscal 2002
compared with $774.6 million for the first six months of fiscal 2001. The
Celera Genomics group reported net revenues of $62.3 million for the first six
months of fiscal 2002 compared with $38.6 million for the first six months of
fiscal 2001.

Gross margin as a percentage of net revenues for the Company, was 52.4% for the
first six months of fiscal 2002 compared with 52.7% for the first six months of
fiscal 2001. The lower gross margin percentage for the first six months in
fiscal 2002 was due primarily to lower license fee income of the Applied
Biosystems group.

SG&A expenses for the Company were $216.4 million for the first six months of
fiscal 2002 compared with $212.2 million for the first six months of fiscal
2001. As a percentage of net revenues, SG&A expenses decreased to 26.2% for
the first six months of fiscal 2002 compared with 27.2% for the first six
months of fiscal 2001 primarily due to the Company's efforts to restrain
discretionary spending. On a segment basis, SG&A expenses for the Applied
Biosystems group were $185.4 million and $184.8 million for the first six
months of fiscal 2002 and 2001, respectively. SG&A expenses for the Celera
Genomics group were $26.6 million and $27.4 million for the first six months of
fiscal 2002 and 2001, respectively.

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       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

R&D expenses increased $19.4 million for the first six months of fiscal 2002 to
$173.0 million from $153.6 million for the first six months of fiscal 2001 due
primarily to spending on: diagnostics programs associated with the Celera
Diagnostics business; the Company's genomics initiative for commercializing
products from information obtained through analysis of the human genome, which
is a collaboration, equally shared among the Company's businesses; the
continued development of new products and technologies by the Applied
Biosystems group; and therapeutic discovery programs by the Celera Genomic
group. These increases were partially offset by lower R&D expenses associated
with the shotgun phase of certain whole genome sequencing programs conducted by
the Celera Genomics group. On a segment basis, R&D expenses for the Applied
Biosystems group were $105.0 million and $88.1 million for the first six months
of fiscal 2002 and 2001, respectively. R&D expenses for the Celera Genomics
group were $58.4 million and $83.3 million for the first six months of fiscal
2002 and 2001, respectively.

The Company recorded non-cash amortization expenses of $2.1 million in the
first six months of fiscal 2002 compared to $22.0 million in the first six
months of fiscal 2001 relating to the amortization of goodwill and other
intangibles. Effective July 1, 2001, the Company adopted the provisions of SFAS
No. 142, and as a result, the Company no longer amortizes goodwill. Refer to
Note 2 of the Company's condensed consolidated financial statement for a
further discussion.

The first six months of fiscal 2002 included $101.2 million of charges for
acquired IPR&D related to the acquisitions of Axys and Boston Probes. Refer to
Note 3 of the Company's condensed consolidated financial statement for a
further discussion of these acquisitions.

Operating loss for the Company was $60.5 million for the first six months of
fiscal 2002 compared with operating income $23.9 million for the first six
months of fiscal 2001. Operating income, on a comparable basis, excluding the
nonrecurring items in fiscal 2002, increased 70.6% to $40.7 million for the
first six months of fiscal 2002. On a segment basis, operating income for the
Applied Biosystems group decreased to $111.2 million for the first six months
of fiscal 2002, excluding the acquired IPR&D charge, from $134.2 million for
the first six months of fiscal 2001. This decrease in operating income was
caused primarily by lower gross margin as a percentage of net revenues,
resulting from lower license fee income, and higher R&D expenses due primarily
to continued development of new products and technologies.

Operating loss for the Celera Genomics group was $54.6 million for the first
six months of fiscal 2002, excluding the acquired IPR&D charge, compared with
$110.4 million for the first six months of fiscal 2001. The decrease in the
Celera Genomics group's operating loss reflected lower R&D expenses, lower
amortization of goodwill and other intangibles, and higher net revenues.

Interest income was $26.3 million for the first six months of fiscal 2002
compared with $43.9 million for the first six months of fiscal 2001. This
decrease was primarily attributable to lower average

                                      49

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                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

interest rates during the first six months of fiscal 2002 as compared to the
first six months of fiscal 2001.

Other income (expense), net was expense of $1.7 million for the first six
months of fiscal 2002, which consisted primarily of the Company's share of
losses from equity method investments and other nonoperating costs, partially
offset by a gain on the sale of the Celera Genomics group's AgGen plant
genotyping business. Other income (expense), net was expense of $3.2 million
for the first six months of fiscal 2001, which was primarily related to costs
associated with the Company's foreign currency risk management program.

Excluding the nonrecurring items, the effective income tax rate was 12% for the
first six months of fiscal 2002 compared with 33% for the first six months of
fiscal 2001. The higher effective income tax rate in fiscal 2001 was primarily
due to amortization of nondeductible goodwill, which is no longer being
amortized in fiscal 2002 due to the adoption of SFAS No. 142, as previously
described.

Discussion of Segment Operations

Applied Biosystems Group

Results of Operations--The Three Months Ended December 31, 2001 Compared With
The Three Months Ended December 31, 2000

The Applied Biosystems group reported net income of $49.0 million for the
second quarter of fiscal 2002 compared with $58.0 million for the second
quarter of fiscal 2001. On a comparable basis, excluding the nonrecurring
charge to write-off the value of acquired IPR&D during the second quarter of
fiscal 2002 and the nonrecurring gain from the sale of investments during the
second quarter of fiscal 2001, net income decreased 8.6% during the second
quarter of fiscal 2002 to $51.2 million compared with $56.0 million for the
second quarter of fiscal 2001. This decrease was primarily attributable to
higher R&D expenses during the second quarter of fiscal 2002. The effects of
foreign currency had a negligible impact overall on year over year comparisons
of operations.

Net revenues were $411.2 million for the second quarter of fiscal 2002 compared
with $411.0 million for the second quarter of fiscal 2001. Net revenues from
the Celera Genomics group, primarily from leased instruments and consumables
shipments, were $8.8 million for the second quarter of fiscal 2002, or 2.1% of
the Applied Biosystems group's net revenues, and $17.4 million for the second
quarter of fiscal 2001, or 4.2%.

Geographically, net revenues decreased 4.4% in the United States and 12.6% in
Latin America and other markets, and increased 8.3% in Europe and 1.3% in Asia
Pacific, compared with the prior fiscal year. Excluding the effects of foreign
currency, revenues grew approximately 5% in Europe and approximately 7% in Asia
Pacific.

                                      50

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                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

For the second quarter of fiscal year 2002, revenues from instrument sales were
$199.7 million, a decrease of 3.9% from $207.7 million in the prior year. The
decrease in instrument sales was caused primarily by weakened economic and
equity market conditions, as well as a strong quarter in fiscal 2001 resulting
in part from numerous placements of the ABI PRISM(R) 3700 DNA Analyzer at large
genome centers. Sales of new ABI PRISM(R) 3700 DNA Analyzers declined
approximately 80% in the second quarter of fiscal 2002 compared to the levels in
the second quarter of fiscal 2001. These factors, which contributed to the
decrease in instrument sales, were partially offset by increased sales in
recently introduced Sequence Detection Systems ("SDS") for gene expression and
single nucleotide polymorphism ("SNP") analysis, which helped the SDS
instruments category to increase by more than 70%. Additionally, revenues from
mass spectrometry systems increased approximately 25% in the second quarter of
fiscal 2002 compared to the second quarter of fiscal 2001, led by the API 4000
triple-quadrupole mass spectrometer which began shipping in the fourth quarter
of fiscal 2001, for studies of drug metabolism and pharmacokinetics. Revenues
for the ABI PRISM(R) 310 and 3100 Genetic Analyzers, the low- and mid-throughput
capillary DNA sequencers, increased approximately 16% for the second quarter of
fiscal 2002 compared with the second quarter of fiscal 2001. Excluding sales of
ABI PRISM(R) 3700 DNA Analyzers, instrument sales increased approximately 11% in
the second quarter of fiscal 2002 as compared to the prior year period.
Consumables sales of $150.1 million in the second quarter of fiscal 2002 were
relatively unchanged with consumables sales in the second quarter of fiscal 2001
of $150.3 million. Sales of consumables were strong in TaqMan(R) reagents for
gene expression and SNP analysis. DNA sequencing consumables sales declined
largely due to increasing efficiencies, use of smaller sample volumes and
dilution of sequencing reagents by the large genome centers and a decrease in
whole genome sequencing at the Celera Genomics group. Consumables revenues from
five large genome centers and the Celera Genomics group declined to
approximately $13 million during the second quarter of fiscal 2002, as compared
with approximately $34 million during the similar period in the prior year.
Excluding these five large genome centers and the Celera Genomics group,
consumables revenues increased approximately 17% on a year-over-year basis.
Revenues from other sources, which included service contracts, royalties,
licenses, and contract research, increased 15.7% to $61.3 million in the second
quarter of fiscal 2002 from $53.0 million in the second quarter of fiscal 2001.

Gross margin as a percentage of net revenues increased to 52.1% for the second
quarter of fiscal 2002 from 51.9% for the second quarter of fiscal 2001 due
primarily to product mix and price increases in certain product lines.

SG&A expenses were $93.6 million for the second quarter of fiscal 2002 compared
with $94.8 million for the second quarter of fiscal 2001, a decrease of 1.2%.
SG&A expenses have remained flat primarily due to lower discretionary spending
in response to lower sales growth rates.

R&D expenses were $52.7 million for second quarter of fiscal 2002 compared with
$42.0 million for the second quarter of fiscal 2001, an increase of 25.4%. As a
percentage of net revenues, R&D expenses were 12.8% for the second quarter of
fiscal 2002 compared with 10.2% for the second

                                      51

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                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

quarter of fiscal 2001. The increase in R&D expenses was primarily a result of
continued development of new products and technologies such as novel,
high-throughput instruments for gene and protein studies and related consumable
products, as well as the Applied Biosystems group's participation in the
collaborative genomics initiative among the Company's businesses.

The second quarter of fiscal 2002 included a charge of $2.2 million for
acquired IPR&D related to the acquisition of Boston Probes. Refer to Note 2 of
the Applied Biosystems group's condensed combined financial statements for a
further discussion of this acquisition.

The second quarter of fiscal 2001 included a before-tax gain of $3.0 million
related to the sale of a minority equity investment.

Interest income was $3.3 million for the second quarter of fiscal 2002 compared
with $4.2 million for the second quarter of fiscal 2001. The decrease was
primarily due to lower average interest rates partially offset by larger
average cash balances for the second quarter of fiscal 2002 compared with the
second quarter of fiscal 2001.

Other income (expense), net for the second quarter of fiscal 2002 was income of
$1.0 million compared with expense of $.2 million in the second quarter of
fiscal 2001. The amounts for both periods were primarily related to the Applied
Biosystem group's foreign currency risk management program.

The effective income tax rate was 30% for both the second quarters of fiscal
2002 and fiscal 2001. Excluding the acquired IPR&D charge during the second
quarter of fiscal 2002, the effective income tax rate was 29%. The decrease in
the effective income tax rate, excluding the acquired IPR&D charge, was due to
the implementation of certain tax planning strategies allowing for the
utilization of foreign tax credits. See Note 1 to the Applied Biosystems
group's combined financial statements in the Company's 2001 Annual Report to
Stockholders for a discussion of allocations of federal and state income taxes.

Results of Operations--The Six Months Ended December 31, 2001 Compared With The
Six Months Ended December 31, 2000

The Applied Biosystems group reported net income of $81.2 million for the first
six months of fiscal 2002 compared with $107.1 million for the first six months
of fiscal 2001. On a comparable basis excluding the nonrecurring items from
fiscal 2002 and fiscal 2001 previously described, net income decreased 14.4% to
$83.4 million compared with $97.4 million for the first six months of fiscal
2001. This decrease was primarily attributable to lower gross margins as a
percentage of net revenues and higher R&D expenses. The effects of foreign
currency had a negligible impact overall on year over year comparisons of
operations.

                                      52

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                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

Net revenues were $777.7 million for the first six months of fiscal 2002
compared with $774.6 million for the first six months of fiscal 2001, an
increase of .4%. Net revenues from the Celera Genomics group, primarily from
leased instruments and consumables shipments, were $14.8 million for the first
six months of fiscal 2002, or 1.9% of the Applied Biosystems group's net
revenues, and $31.8 million for the same period in fiscal 2001, or 4.1%.

Geographically, net revenues decreased 3.4% in the United States and 7.3% in
Latin America and other markets, and increased 3.3% in Europe and 7.5% in Asia
Pacific, compared with the first six months of the prior fiscal year. Excluding
the effects of foreign currency, revenues grew approximately 13% in Asia
Pacific.

For the first six months of fiscal year 2002, revenues from instrument sales
were $361.9 million, a decrease of 7.8% from $392.7 million in the prior year.
The decrease in instrument sales was caused primarily by weakened economic and
equity market conditions, as well as the comparison with a strong six months in
fiscal 2001 resulting in part from numerous placements of the ABI PRISM(R) 3700
DNA Analyzer at large genome centers. Sales of new ABI PRISM(R) 3700 DNA
Analyzers declined approximately 80% in the first six months of fiscal 2002
compared to the levels in the first six months of fiscal 2001. These factors,
which contributed to the decrease in instrument sales, were partially offset by
significant increases in sales of recently introduced SDS instruments for gene
expression and SNP analysis, which helped the SDS instruments category to
perform strongly in year over year comparisons. Additionally, revenues from mass
spectrometry systems, increased approximately 22% in the first six months of
fiscal 2002 compared to the first half of fiscal 2001, led by the API 4000
triple-quadrupole mass spectrometer which began shipping in the fourth quarter
of fiscal 2001, for studies of drug metabolism and pharmacokinetics. Revenues
for the ABI PRISM(R) 310 and 3100 Genetic Analyzers, the low- and mid-throughput
capillary DNA sequencers, increased approximately 33% for the first six months
of fiscal 2002 compared with the first half of fiscal 2001. Excluding sales of
ABI PRISM(R) 3700 DNA Analyzers, instrument sales increased approximately 11% in
the first six months of fiscal 2002 as compared to the prior year period.
Consumables sales increased to $299.3 million in the first six months of fiscal
2002 from $274.8 million in the first half of fiscal 2001, an increase of 8.9%.
Sales of consumables were strong in TaqMan(R) reagents for gene expression and
SNP analysis. DNA sequencing consumables sales declined largely due to
increasing efficiencies, use of smaller sample volumes and dilution of
sequencing reagents by the large genome centers and a decrease in whole genome
sequencing at the Celera Genomics group. Revenues from other sources, which
included service contracts, royalties, licenses, and contract research,
increased 8.8% to $116.5 million in the first six months of fiscal 2002 from
$107.1 million in the first six months of fiscal 2001.

Gross margin as a percentage of net revenues, declined to 51.6% for the first
six months of fiscal 2002 from 52.6% for the first six months of fiscal 2001
due primarily to lower license fee income in the first six months of fiscal
2002 as compared to the prior year.

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                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

SG&A expenses of $185.4 million for the first six months of fiscal 2002 were
relatively unchanged from the prior year amount of $184.8 million due to
restraints on discretionary spending in response to lower sales growth rates.

R&D expenses were $105.0 million for first six months of fiscal 2002 compared
with $88.1 million for the first half of fiscal 2001, an increase of 19.1%. As a
percentage of net revenues, R&D expenses were 13.5% for the first six months of
fiscal 2002 compared with 11.4% the same period in fiscal 2001. The increase in
R&D expenses was primarily a result of continued development of new products and
technologies such as novel, high-throughput instruments for gene and protein
studies and related consumable products, including recently introduced SDS
systems and the 4700 Proteomics Analyzer with TOF/TOF(TM) Optics, as well as new
and forthcoming genomics assays for resequencing, gene expression, and SNP
genotyping. Another contributing factor to the above increase was the Applied
Biosystems group's participation in the collaborative genomics initiative among
the Company's businesses.

The first six months of fiscal 2002 included a charge of $2.2 million for
acquired IPR&D related to the acquisition of Boston Probes. Refer to Note 2 of
the Applied Biosystems group's condensed combined financial statements for a
further discussion of this acquisition.

The first six months of fiscal 2001 included before-tax gains of $15.0 million
related to the sales of minority equity investments.

Other income (expense), net was expense of $3.2 million for the first six
months of fiscal 2001, which was primarily related to the Applied Biosystems
group's foreign currency risk management program. Interest income was $6.8
million for the first six months of fiscal 2002 compared with $8.6 million for
the first half of fiscal 2001. The decrease was primarily due to lower average
interest rates partially offset by larger average cash balances during fiscal
2002 compared with the first six months of fiscal 2001.

The effective income tax rate was 30% for both the first six months of fiscal
2002 and fiscal 2001. Excluding the nonrecurring acquired IPR&D charge, the
effective income tax rate was 29% for the first six months of fiscal 2002. The
decrease in the effective income tax rate was due to the implementation of
certain tax planning strategies allowing for the utilization of foreign tax
credits. See Note 1 to the Applied Biosystems group's combined financial
statements in the Company's 2001 Annual Report to Stockholders for a discussion
of allocations of federal and state income taxes.



                                      54

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                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

Celera Genomics Group

Results of Operations--The Three Months Ended December 31, 2001 Compared With
The Three Months Ended December 31, 2000

The Celera Genomics group reported a net loss of $117.9 million for the second
quarter of fiscal 2002 compared with a net loss of $29.7 million for the second
quarter of fiscal 2001. On a comparable basis, excluding from fiscal 2002 the
charge to write-off the value of acquired IPR&D of $99.0 million previously
described, net loss decreased 36.2% to $19.0 million during this period in
fiscal 2002 compared with $29.7 million for the second quarter of fiscal 2001.
The decrease in the net loss primarily resulted from continued operating growth
in the online business, the completion of R&D related genome sequencing
programs and lower amortization of goodwill. Partially offsetting these factors
were continued investments in the Celera Diagnostics joint venture with Applied
Biosystems and lower interest income.

Net revenues for the Celera Genomics group were $35.1 million for the second
quarter of fiscal 2002 compared with $20.3 million for the second quarter of
fiscal 2001. The increased revenues resulted primarily from increased contract
sequencing and other services, as well as revenues from database subscription
agreements with commercial and academic customers.

Cost of sales increased $7.6 million to $18.0 million for the second quarter of
fiscal 2002 from $10.4 million in the second quarter of the prior year. This
increase was primarily due to the increased use of sequencing capacity for
commercial activities.

R&D expenses decreased $11.7 million to $30.6 million for the second quarter of
fiscal 2002 from $42.3 million in the second quarter of the prior year. R&D
expenses associated with therapeutic discovery programs, proteomics and
discovery informatics increased in comparison to the same quarter last year.
R&D spending also increased for the Celera Genomics group's participation in
the collaborative genomics program among the Company's businesses. These
increases were more than offset by lower R&D expenses associated with the
shotgun phase of certain whole genome sequencing programs and an increased use
of sequencing capacity for commercial activity in the second quarter of fiscal
2002 as compared to the prior year. R&D expenses also decreased due to reduced
personnel as a result of the transfer of the personnel and the assets and
liabilities of a business unit to the Applied Biosystems group effective July
1, 2001. See Note 3 to the Celera Genomics group's condensed combined financial
statements for a further discussion of this transfer.

The Celera Genomics group recorded non-cash amortization expenses of $1.6
million in the second quarter of fiscal 2002 compared with $11.0 million in the
second quarter of fiscal 2001 relating to the amortization of goodwill and
other intangibles. Effective July 1, 2001, the Celera Genomics group adopted
the provisions of SFAS No. 142, and as a result, the Celera Genomics group no
longer amortizes goodwill. Refer to Note 2 of the Celera Genomics group's
condensed combined financial statements for a further discussion.

The second quarter of fiscal 2002 included a non-cash charge of $99.0 million
for acquired IPR&D related to the acquisition of Axys. Refer to Note 3 of the
Celera Genomics group's condensed combined financial statements for a further
discussion.

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                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

Interest income was $8.7 million for the second quarter of fiscal 2002 compared
with $17.1 million for the second quarter of fiscal 2001. The decrease was
primarily attributable to lower average interest rates during fiscal 2002
compared to the prior year.

Other expense, net of $1.0 million in the second quarter of fiscal 2002
consisted of the Celera Genomics group's share of losses from equity method
investments and other nonoperating costs, partially offset by a gain on the
sale of the Celera Genomics group's AgGen plant genotyping business.

Loss from joint venture of $8.5 million in the second quarter of fiscal 2002
reflects the loss recognized by the Celera Genomics group as a result of its
interest in Celera Diagnostics, a joint venture with the Applied Biosystems
group. Refer to Note 2 of the Celera Genomics group's Combined Financial
Statements included in the Company's 2001 Annual Report for a further
discussion of this joint venture.

The effective income tax benefit rate was 9% for the second quarter of fiscal
2002 and 27% for the second quarter of fiscal 2001. Excluding the acquired
IPR&D charge, the income tax benefit rate was 37% during the second quarter of
fiscal 2002. The income tax benefit rate was lower in fiscal 2001 due to the
amortization of nondeductible goodwill. As discussed previously, the Celera
Genomics group no longer amortizes goodwill due to the adoption of SFAS No. 142.

Results of Operations--The Six Months Ended December 31, 2001 Compared With The
Six Months Ended December 31, 2000

The Celera Genomics group reported a net loss of $133.5 million for the first
six months of fiscal 2002 compared with a net loss of $55.4 million for the
first half of fiscal 2001. On a comparable basis excluding the acquired IPR&D
charge from fiscal 2002, net loss decreased 37.7% to $34.5 million during
fiscal 2002. The decrease in the net loss primarily resulted from continued
operating growth in the online business, the completion of R&D related genome
sequencing programs and lower amortization of goodwill. Partially offsetting
these factors were recognition of losses from the investment in the Celera
Diagnostics joint venture with Applied Biosystems and lower interest income.

Net revenues for the Celera Genomics group were $62.3 million for the first six
months of fiscal 2002 compared with $38.6 million for the first half of fiscal
2001, an increase of 61.6%. The increased revenues resulted primarily from
increased genomic services and collaborations, as well as revenues from
database subscription agreements with commercial and academic customers.

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Cost of sales increased $13.7 million to $29.9 million for the first six months
of fiscal 2002 from $16.2 million in the first half of fiscal 2001. This
increase was primarily due to the increased use of sequencing capacity for
commercial activities.

R&D expenses decreased $24.9 million to $58.4 million for the first six months
of fiscal 2002 from $83.3 million in the first half of fiscal 2001. R&D
expenses associated with therapeutic discovery programs, proteomics and
discovery informatics increased in comparison to the same period last year. R&D
spending also increased for the Celera Genomics group's participation in the
collaborative genomics initiative among the Company's businesses. These
increases were more than offset by lower R&D expenses for whole genome
sequencing and an increased use of sequencing capacity for commercial activity
in the first six months of fiscal 2002 as compared to the prior year. R&D
expenses also decreased due to reduced personnel as a result of the transfer of
the personnel and the assets and liabilities of a business unit to the Applied
Biosystems group effective July 1, 2001. See Note 3 to the Celera Genomics
group's condensed combined financial statements for a further discussion of
this transfer.

The Celera Genomics group recorded non-cash amortization expenses of $2.1
million in the first six months of fiscal 2002 compared with $22.0 million in
the first six months of fiscal 2001 relating to the amortization of goodwill
and other intangibles. Effective July 1, 2001, the Celera Genomics group
adopted the provisions of SFAS No. 142, and as a result, the Celera Genomics
group no longer amortizes goodwill. Refer to Note 2 of the Celera Genomics
group's condensed combined financial statements for a further discussion.

The first six months of fiscal 2002 included a non-cash charge of $99.0 million
for acquired IPR&D related to the acquisition of Axys. Refer to Note 3 of the
Celera Genomics group's condensed combined financial statements for a further
discussion.

Interest expense was $.1 million in the first six months of fiscal 2002
reflecting interest on debt assumed in the Axys acquisition. Interest expense
was $.8 million in the first six months of fiscal 2001 reflecting the financing
of the purchase of the Celera Genomics group's Rockville, Maryland facilities,
which was repaid in fiscal 2001. Interest income was $19.6 million for the
first six months of fiscal 2002 compared with $35.3 million for the first half
of fiscal 2001. The decrease was primarily attributable to lower average
interest rates during the first six months of fiscal 2002.

Other expense, net of $1.7 million in the first six months of fiscal 2002
consisted primarily of the Celera Genomics group's share of losses from equity
method investments and other nonoperating costs partially offset by a gain on
the sale of the Celera Genomics group's AgGen plant genotyping business.

Loss from joint venture of $17.9 million in the first six months of fiscal 2002
reflects the loss recognized by the Celera Genomics group as a result of its
interest in Celera Diagnostics, a joint

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venture with the Applied Biosystems group. Refer to Note 2 of the Celera
Genomics group's Combined Financial Statements included in the Company's 2001
Annual Report.

The effective income tax benefit rate was 13% for the first six months of
fiscal 2002 and 27% for the first half of fiscal 2001. Excluding the acquired
IPR&D charge, the effective income tax benefit rate was 37% for fiscal 2002.
The income tax benefit rate was lower in fiscal 2001 primarily due to the
amortization of nondeductible goodwill. As discussed previously, the Celera
Genomics group no longer amortizes goodwill due to the adoption of SFAS No. 142.

Management's Discussion of Condensed Consolidated Financial Resources and
Liquidity

The following discussion of financial resources and liquidity focuses on the
Company's Condensed Consolidated Statements of Financial Position and Condensed
Consolidated Statements of Cash Flows, the Applied Biosystems group's Condensed
Combined Statements of Financial Position and Condensed Combined Statements of
Cash Flows, and the Celera Genomics group's Condensed Combined Statements of
Financial Position and Condensed Combined Statements of Cash Flows.

Significant Changes in the Condensed Consolidated Statements of Financial
Position

Cash and cash equivalents and short-term investments were $1.4 billion at
December 31, 2001 and June 30, 2001, with total debt of $70.5 million at
December 31, 2001 and $45.2 million at June 30, 2001. Working capital was $1.4
billion at December 31, 2001 and $1.5 billion at June 30, 2001. Debt to total
capitalization was 3% at December 31, 2001 and 2% at June 30, 2001. During the
second quarter of fiscal 2002, in connection with the Axys acquisition, the
Company assumed $26.0 million of 8% senior secured convertible notes, of which
$10.0 million was repaid in January of fiscal 2002.

Accounts receivable decreased by $30.1 million to $370.7 million at December
31, 2001 from $400.8 million at June 30, 2001, primarily due to the timing of
collections by the Applied Biosystems group.

Prepaid expenses and other current assets decreased $12.5 million to $90.5
million at December 31, 2001 from $103.0 million at June 30, 2001, primarily
due to the collection of certain nontrade receivables.

Property, plant and equipment, net increased $41.8 million to $477.4 million at
December 31, 2001, from $435.6 million at June 30, 2001 in large part due to
approximately $27 million of property, plant and equipment associated with the
acquisitions of Axys and Boston Probes.

Other long-term assets increased $174.0 million to $584.8 million at December
31, 2001 from $410.8 million at June 30, 2001 primarily due to the acquisitions
of Axys and Boston Probes. In connection with these acquisitions, the Company
recorded $22.7 million of goodwill, $41.3 million of other

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intangible assets, and net deferred tax assets of $56.5 million for net
operating loss carryforwards and other temporary differences. As a result of
these acquisitions, the Company also received investments in equity securities
of approximately $32 million. Noncurrent deferred tax assets increased $35.4
million, and the Company spent approximately $12 million for purchased licensed
technology and supply agreements during fiscal 2002. Partially offsetting
these increases was a decrease in the fair value of the Company's minority
equity investments of approximately $25 million primarily caused by the decline
in market prices of the securities.

Accounts payable decreased to $159.5 million at December 31, 2001 from $178.3
million at June 30, 2001. The decrease was primarily related to the timing of
vendor payments.

Accrued taxes on income increased $13.5 million to $96.5 million at December
31, 2001 from $83.0 million at June 30, 2001, primarily due to the timing of
income tax payments.

Discussion of the Condensed Consolidated Statements of Cash Flows

Operating activities generated $112.3 million of cash for the first six months
of fiscal 2002 compared with a use of $78.8 million for the same period in
fiscal 2001. For the first six months of fiscal 2002 compared with the first
six months of fiscal 2001, decreases in accounts receivable and inventory,
lower payments to suppliers and lower compensation-related accruals were only
partially offset by lower income-related cash flows.

During fiscal 2002, net cash used by investing activities was $81.4 million,
compared with $248.1 million for the first six months of fiscal 2001. Capital
expenditures, net of disposals, were $56.8 million in fiscal 2002 compared with
$108.3 million in the prior year. Capital expenditures were higher during
fiscal 2001 primarily due to the Applied Biosystems group's purchase of
additional property in Pleasanton, California. During the first six months of
fiscal 2002, the Company had net sales of short-term investments of $16.7
million compared with $151.2 million of net purchases during the prior year.
During fiscal 2001, the Company realized $15.5 million in net cash proceeds
from the sale of minority equity investments. The Company acquired the
remaining 87% of Boston Probes, not previously owned, for approximately $37
million in the second quarter of fiscal 2002 as described in Note 3 of the
Company's condensed consolidated financial statements.

Net cash used by financing activities was $12.5 million for fiscal 2002
compared with $19.9 million for the first six months of fiscal 2001. The
Company made net payments of $11.5 million on loans payable during fiscal 2002
compared with $40.0 million during the first six months of fiscal 2001. During
the second quarter of fiscal 2002, the Company repaid $8.4 million of debt
assumed in the Axys acquisition. During fiscal 2001, the Company repaid $46.0
million of its commercial paper borrowing, which it secured specifically for
the purchase of the Celera Genomics group's Rockville, Maryland facilities.
During the first half of fiscal 2002, the Company received $17.9 million of
proceeds from stock issued for stock plans compared with $37.8 million fiscal
2001. Dividends paid

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on Applera Corporation - Applied Biosystems Group common stock were $18.0
million during fiscal 2002 compared with $17.8 million for the first six months
of fiscal 2001. During the first six months of fiscal 2002, the Company also
purchased $.9 million of Applera Corporation - Celera Genomics Group Common
Stock for treasury, which was subsequently reissued for stock plans.

Discussion of Segment Financial Resources and Liquidity

Applied Biosystems Group

Significant Changes in the Applied Biosystems Group's Condensed Combined
Statements of Financial Position

Cash and cash equivalents were $455.5 million at December 31, 2001 and $392.5
million at June 30, 2001, with total debt of $39.9 million at December 31, 2001
and $45.2 million at June 30, 2001. Working capital was $532.2 million at
December 31, 2001 and $505.9 million at June 30, 2001. Debt to total
capitalization decreased to 3% at December 31, 2001 from 4% at June 30, 2001.

Accounts receivable decreased by $40.8 million to $341.8 million at December
31, 2001 from $382.6 million at June 30, 2001, primarily due to the timing of
collections, mainly in Europe where some customers paid down receivables ahead
of the Euro conversion effective January 1, 2002.

Prepaid expenses and other current assets decreased $15.0 million to $83.1
million at December 31, 2001 from $98.1 million at June 30, 2001, primarily due
to the collection of certain nontrade receivables.

Other long-term assets increased by $43.2 million to $391.8 million at December
31, 2001 from $348.6 million at June 30, 2001, primarily due to the acquisition
of Boston Probes. In conjunction with this acquisition, the Applied Biosytems
group recorded $22.7 million of goodwill and $21.8 million of other intangible
assets. Also, during fiscal 2002, noncurrent deferred tax assets increased
$14.5 million and the Applied Biosystems group spent $12 million for purchased
licensed technology and supply agreements. Partially offsetting these
increases was a decrease in the fair value of minority equity investments by
approximately $25 million primarily caused by the decline in market prices of
the securities.

Accounts payable decreased to $139.4 million at December 31, 2001 from $162.1
million at June 30, 2001 primarily due to the timing of vendor payments.

Accrued taxes on income increased $9.8 million to $92.5 million at December 31,
2001 from $82.7 million at June 30, 2001 primarily due to the timing of income
tax payments.

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Discussion of the Applied Biosystems Group's Condensed Combined Statements of
Cash Flows

Operating activities generated $149.1 million of cash for the first six months
of fiscal 2002 compared with a use of $50.3 million during fiscal 2001. For
the first half of fiscal 2002 compared with the same period of fiscal 2001,
larger collections of accounts receivable and better management of inventory
balances, along with lower payments to suppliers and lower compensation-related
accruals were only partially offset by lower income-related cash flows.

For the first six months of fiscal 2002, net cash used by investing activities
was $78.5 million, compared with $85.5 million for fiscal 2001. Capital
expenditures, net of disposals, were $42.1 million for the first six months of
fiscal 2002 compared with $96.9 million in the prior year. Capital
expenditures were higher during fiscal 2001 primarily due to the Applied
Biosystems group's purchase of property in Pleasanton, California for
approximately $54 million. During the second quarter of fiscal 2002, the
Applied Biosystems group acquired the remaining shares of Boston Probes for
approximately $37 million. During the first six months of fiscal 2001, the
Applied Biosystems group realized $15.5 million in net cash proceeds from the
sales of minority equity investments and invested $4.1 million in other
minority equity investments.

Net cash used by financing activities was $11.9 million for the first six
months of fiscal 2002 compared with net cash provided by financing activities
of $12.7 million for the fiscal 2001. During the first six months of fiscal
2002, the Applied Biosystems group received $9.2 million of proceeds from stock
issued for stock plans compared with $24.4 million during fiscal 2001.
Dividends paid on Applera Corporation - Applied Biosystems Group common stock
were $18.0 million during fiscal 2002 compared with $17.8 million for the first
six months of fiscal 2001. The Applied Biosystems group made net payments of
$3.1 million on loans payable during the first six months of fiscal 2002
compared with net proceeds of $6.0 million from loans during fiscal 2001.

Celera Genomics Group

Significant Changes in the Celera Genomics Group's Condensed Combined
Statements of Financial Position

Cash and cash equivalents and short-term investments were $940.9 million at
December 31, 2001 compared with $995.6 million at June 30, 2001. During the
second quarter of fiscal 2002, in connection with the Axys acquisition, the
Company assumed $26.0 million of 8% senior secured convertible notes, of which
$10.0 million was repaid in January 2002. Working capital was $875.2 million
at December 31, 2001 and $945.1 million at June 30, 2001.

Accounts receivable increased by $11.5 million to $35.5 million at December 31,
2001 from $24.0 million at June 30, 2001, primarily as a result of increased
revenues and the timing of payments received for database subscription and
service agreements.

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Property, plant and equipment, net increased $13.5 million to $137.0 million at
December 31, 2001, from $123.5 million at June 30, 2001 primarily related to
assets received in the acquisition of Axys.

Other long-term assets increased by $121.3 million to $187.3 million at
December 31, 2001 from $66.0 million at June 30, 2001, primarily as a result of
the acquisition of Axys. In conjunction with this acquisition, the Celera
Genomics group recorded $19.5 million of intangible assets and deferred tax
assets of $61.3 million for deductible net operating loss carryforwards and
other temporary differences. The Celera Genomics group also received
approximately $32 million of equity investments as a result of this
acquisition.

Deferred revenues increased $7.6 million to $45.1 million at December 31, 2001
from $37.5 million at June 30, 2001 due to the timing of subscriptions received
for database and contract sequencing agreement offsets by revenue recognized
under these agreements.

Other accrued expenses increased $7.3 million to $19.3 million at December 31,
2001 from $12.0 million at June 30, 2001, primarily due to other accruals
associated with the acquisition of Axys and an increase in accrued rent.

Discussion of the Celera Genomics Group's Condensed Combined Statements of Cash
Flows

Operating activities used $24.7 million of cash during fiscal 2002 compared
with $27.2 million for the first six months of fiscal 2001. The decrease in
cash used by operating activities during fiscal 2002 compared with fiscal 2001
was primarily due to lower net cash operating losses, partially offset by
increases in accounts receivable. During the first quarter of fiscal 2001, the
Applied Biosystems group began utilizing tax benefits in excess of the maximum
reimbursable amount. See Note 1 to the Celera Genomics group's combined
financial statements in the Company's 2001 Annual Report to Stockholders for a
discussion of allocations of federal and state income taxes.

For the first six months of fiscal 2002, net cash used by investing activities
was $15.0 million, compared with $163.8 million for fiscal 2001. Capital
expenditures, net of disposals, were $10.8 million, for the first six months of
fiscal 2002 compared to $12.6 million for the first half of fiscal 2001. Fiscal
2001 capital expenditures included $1.9 million of purchases from the Applied
Biosystems group. During the first six months of fiscal 2002, the Celera
Genomics group had net sales of short-term investments of $16.7 million
compared with net purchases of $151.2 million during the prior year. During
fiscal 2002, the Celera Genomics group made investments of $20.9 million, which
were primarily related to the Celera Diagnostics joint venture.

Net cash used by financing activities was $.6 million during fiscal 2002
compared with $32.6 million for the first six months of fiscal 2001. During
the first six months of fiscal 2002, the Celera Genomics group received $8.8
million of proceeds from stock issued for stock plans compared with

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$13.4 million during the prior year. During the first six months of fiscal
2002, the Company purchased $.9 million of Applera Corporation - Celera
Genomics Group Common Stock for treasury, which was subsequently reissued for
stock plans. During the first six months of fiscal 2002, the Celera Genomics
group repaid $8.4 million of debt assumed in the acquisition of Axys. During
the first six months of fiscal 2001, the Company repaid $46.0 million of its
commercial paper borrowing attributed to Celera Genomics group.

Recently Issued Accounting Standards

In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"), which will
be effective for the Company beginning in fiscal year 2003. SFAS 143 addresses
the financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. The Company has not yet determined the impact of adopting SFAS 143 on
its consolidated financial statements.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 provides new guidance
on the recognition of impairment losses on long-lived assets to be held and
used or to be disposed of and also broadens the definition of what constitutes
a discontinued operation and how the results of a discontinued operation are to
be measured and presented. SFAS 144 is effective for the Company's fiscal year
2003 and is not expected to materially change the methods used by the Company
to measure impairment losses on long-lived assets, but may result in more
dispositions being reported as discontinued operations than is permitted under
current accounting principles.

Outlook

Applied Biosystems Group

Economic and political uncertainties continue to add risk to the business
outlook, making forecasting particularly difficult. The Applied Biosystems
group currently expects diluted earnings per share for fiscal 2002 to be in the
range of $0.80 to $0.90. This outlook on earnings per share has been decreased
from the outlook provided in the quarterly report on Form 10Q for the period
ended September 30, 2001 due to the Applied Biosystems group's continued
commitment to increase spending on new product development, as well as lower
sales expectations, including the impact from anticipated negative currency
effects.

Due to the greater than anticipated softness in second fiscal quarter revenues,
the Applied Biosystems group advises caution about revenues in the third
quarter of fiscal 2002. Third quarter sales currently are expected to be flat
to slightly lower than in the comparable quarter a year ago. Contributing
factors include the anticipated continuation of current trends in slowed
spending by certain

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commercial customers, expected currency effects stemming from year-to-year
weakness in the Japanese yen and, to a lesser extent, the Euro, and delays in
the disbursement of U.S. government funds to federal laboratories and U.S.
academic grantees following the late adoption, on January 10, 2002, of the
fiscal 2002 budget of the National Institutes of Health.

The Applied Biosystems group expects year-on-year sales growth of approximately
10% during the fourth quarter of fiscal 2002 and higher sales growth in the
first and second quarters of fiscal 2003. Factors contributing to the expected
higher growth rates starting in the fourth quarter of fiscal 2002 include the
impact of new products and spending by U.S. basic research customers as more
funds are available from the 15% annual increase in funding for the National
Institutes of Health approved in the fiscal 2002 U.S. budget.

R&D expenses are expected to increase, in percentage terms, in the mid to high
teens during the balance of fiscal 2002 compared to the similar period in the
prior year. R&D expenses include the Applied Biosystems group's component of
the Company's anticipated $75 million fiscal 2002 investment in the Applera
genomics initiative involving the Celera Genomics group and Celera Diagnostics,
a joint venture with the Celera Genomics group. The initiative has recently
been expanded to include gene validation and expression, which the Company
believes will require approximately an additional $25 million investment in
fiscal 2003, shared equally by the three businesses.

Celera Genomics Group

The Celera Genomics group continues to focus on leveraging its accomplishments
and expanding its drug discovery infrastructure to facilitate the development of
a new model in therapeutic discovery. Several steps have been taken over the
last year in this regard, including the acquisition of Axys and various
management changes. Most recently, the Company announced that Dr. J. Craig
Venter stepped down as President of the Celera Genomics group on January 22,
2002, and that the Company expects to recruit additional executives experienced
in drug discovery and development.

While the Celera Genomics group continues to focus on drug discovery, it is also
addressing increased market pressure in the online information business. The
Company remains committed to the online business, but heightened competition
from publicly funded sequencing efforts is expected to limit commercial
opportunities for the pure information business. The Company is responding to
these pressures by pursuing value-added products and exploring organizational
alternatives within the Company's overall structure to best assure long term
success for this business.

The Celera Genomics group continues to expect a 40% to 50% increase in revenue
for fiscal 2002 in comparison to the prior year. During the quarter ended
December 31, 2001, the Celera Genomics group allocated a larger portion of its
sequencing capacity toward revenue generating customer commitments, freeing up
additional sequencing capacity in the balance of fiscal 2002 for the Applera
genomics initiative. This shifted several million dollars of revenue to the
second quarter from the balance of fiscal 2002.

The Celera Genomics group has revised its outlook for fiscal 2002 R&D expenses
to the range of $140 million to $150 million. This decrease reflects reductions
within programs outside of

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therapeutic discovery. R&D expenses are expected to increase over the balance
of the fiscal year as a result of: increased spending associated with the
Applera genomics initiative; higher proteomics output; and continued investment
in pre-clinical therapeutic programs from Axys and new therapeutic programs.
R&D expenses include the Celera Genomics group's component of the Company's
anticipated $75 million fiscal 2002 investment in the Applera genomics
initiative involving the Applied Biosystems group and Celera Diagnostics. The
initiative has recently been expanded to include gene validation and
expression, which the Company believes will require approximately an additional
$25 million investment in fiscal 2003 shared equally by the three businesses.

The Celera Genomics group expects fiscal 2002 SG&A expenses to be in a range
similar to fiscal 2001 expenses of $58.3 million.

Fiscal 2002 pre-tax losses related to the Celera Diagnostics joint venture are
expected to be approximately $55 million to $65 million.

The most likely range for the Celera Genomics group's fiscal 2002 net cash use
remains between $155 million and $170 million. Most of the anticipated benefit
of lower R&D expenses should be offset by retirement of debt assumed from Axys.

Forward-Looking Statements

Certain statements contained in this report, including the Outlook section, are
forward-looking and are subject to a variety of risks and uncertainties. These
statements may be identified by the use of forward-looking words or phrases
such as "believe," "expect," "anticipate," "should," "plan," "estimate," and
"potential," among others. These forward-looking statements are based on the
Company's current expectations. The Private Securities Litigation Reform Act
of 1995 provides a "safe harbor" for such forward-looking statements. In order
to comply with the terms of the safe harbor, the Company notes that a variety
of factors could cause actual results and experience to differ materially from
the anticipated results or other expectations expressed in such forward-looking
statements. The risks and uncertainties that may affect the operations,
performance, development and results of the Company's businesses include, but
are not limited to:

Factors Relating to the Applied Biosystems Group

Rapidly changing technology in life sciences could make the Applied Biosystems
group's product line obsolete unless it continues to improve existing products,
develop new products, and pursue new market opportunities. A significant
portion of the net revenues for the Applied Biosystems group each year is
derived from products that did not exist in the prior year. The Applied
Biosystems group's future success depends on its ability to continually improve
its current products, develop and introduce, on a timely and cost-effective
basis, new products that address the evolving needs of its customers, and
pursue new market opportunities that develop as a result of technological and

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scientific advances in life sciences. The Applied Biosystems group's products
are based on complex technology which is subject to rapid change as new
technologies are developed and introduced in the marketplace. Unanticipated
difficulties or delays in replacing existing products with new products could
adversely affect the Applied Biosystems group's future operating results. The
pursuit of new market opportunities will add further complexity and require
additional management attention and resources as these markets are addressed.

A significant portion of sales depends on customers' capital spending policies
that may be subject to significant and unexpected decreases. A significant
portion of the Applied Biosystems group's instrument product sales are capital
purchases by its customers. The Applied Biosystems group's customers include
pharmaceutical, environmental, research, biotechnology, and chemical companies,
and the capital spending policies of these companies can have a significant
effect on the demand for the Applied Biosystems group's products. These
policies are based on a wide variety of factors, including the resources
available to make purchases, the spending priorities among various types of
research equipment, and policies regarding capital expenditures during
recessionary periods. Any decrease in capital spending or change in spending
policies of these companies could significantly reduce the demand for the
Applied Biosystems group's products.

A substantial portion of the Applied Biosystems group's sales is to customers
at universities or research laboratories whose funding is dependent on both the
level and timing of funding from government sources. As a result, the timing
and amount of revenues from these sources may vary significantly due to factors
that can be difficult to forecast. Although research funding has increased
during the past several years, grants have, in the past, been frozen for
extended periods or otherwise become unavailable to various institutions,
sometimes without advance notice. Budgetary pressures may result in reduced
allocations to government agencies that fund research and development
activities. If government funding necessary to purchase the Applied Biosystems
group's products were to become unavailable to researchers for any extended
period of time, or if overall research funding were to decrease, the business
of the Applied Biosystems group could be adversely affected.

The Applied Biosystems group is currently and could in the future be subject to
claims for infringement of patents and other intellectual property rights. The
Applied Biosystems group's products are based on complex, rapidly developing
technologies. These products could be developed without knowledge of previously
filed but unpublished patent applications that cover some aspect of these
technologies. In addition, there are relatively few decided court cases
interpreting the scope of patent claims in these technologies, and the Applied
Biosystems group's belief that its products do not infringe the technology
covered by valid patents could be successfully challenged by third parties.
Also, in the course of its business, the Applied Biosystems group may from time
to time have access to confidential or proprietary information of third
parties, and these parties could bring a theft of trade secret claim against
the Applied Biosystems group asserting that the Applied Biosystems group's
products improperly use technologies which are not patented but which are
protected as trade secrets. The Applied Biosystems group has been made a party
to litigation regarding intellectual property

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matters, including the patent litigation described in the next paragraph, some
of which, if determined adversely, could have a material adverse effect on the
Applied Biosystems group. Due to the fact that the Applied Biosystems group's
business depends in large part on rapidly developing and dynamic technologies,
there remains a constant risk of intellectual property litigation affecting the
group. The Applied Biosystems group has from time to time been notified that it
may be infringing patents and other intellectual property rights of others. It
may be necessary or desirable in the future to obtain licenses relating to one
or more products or relating to current or future technologies, and the Applied
Biosystems group cannot be assured that it will be able to obtain these
licenses or other rights on commercially reasonable terms.

The Company is currently subject to patent litigation with Amersham Pharmacia
Biotech, Inc. and Molecular Dynamics, Inc. In the litigation, Amersham and
Molecular Dynamics allege that the Applied Biosystems group has infringed four
Amersham patents as a result of the Applied Biosystems group's sale of DNA
sequencing instrumentations and reagents. Also in the litigation, the Company
has brought suit against Amersham and Molecular Dynamics alleging that they
have infringed two of the Company's patents as a result of their sale of their
DNA sequencing instrumentations and reagents. At present, these lawsuits are
not scheduled for trial. The sale of DNA sequencing instrumentation and
reagents is an important part of the Applied Biosystems group's business. If
these lawsuits proceed to trial, the cost of the litigation, and the amount of
management time that will be devoted to the litigation, will be significant.
There can be no assurance that this litigation will be resolved favorably to
the Company or either the Celera Genomics group or the Applied Biosystems
group, that the Company and both of its groups will not be enjoined from
selling the products in question or other products as a result, or that any
monetary or other damages assessed against the Company will not have a material
adverse effect on the financial condition of the Company, the Celera Genomics
group, or the Applied Biosystems group.

Since the Applied Biosystems group's business is dependent on foreign sales,
fluctuating currencies will make revenues and operating results more volatile.
Approximately 50% of the Applied Biosystems group's net revenues during fiscal
2001 were derived from sales to customers outside of the United States. The
majority of these sales were based on the relevant customer's local currency. A
significant portion of the related costs for the Applied Biosystems group are
based on the U.S. dollar. As a result, the Applied Biosystems group's reported
and anticipated operating results and cash flows are subject to fluctuations
due to material changes in foreign currency exchange rates that are beyond the
Applied Biosystems group's control.

Integrating acquired technologies may be costly and may not result in
technological advances. The future growth of the Applied Biosystems group
depends in part on its ability to acquire complementary technologies through
acquisitions and investments. The consolidation of employees, operations, and
marketing and distribution methods could present significant managerial
challenges. For example, the Applied Biosystems group may encounter operational
difficulties in the integration

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of manufacturing or other facilities. In addition, technological advances
resulting from the integration of technologies may not be achieved as
successfully or rapidly as anticipated, if at all.

Electricity shortages and earthquakes could disrupt operations in California.
The headquarters and principal operations of the Applied Biosystems group are
located in Foster City, California. The State of California and its principal
electrical utility companies have recently indicated that there is a statewide
electricity shortage and that these utility companies are in poor financial
condition. As a result, California has experienced temporary localized
electricity outages, or rolling blackouts, which may continue or worsen into
blackouts of longer duration in the future. Blackouts in Foster City, even of
modest duration, could impair or cause a temporary suspension of the group's
operations, including the manufacturing and shipment of new products. Power
disruptions of an extended duration or high frequency could have a material
adverse effect on operating results. In addition, Foster City is located near
major California earthquake faults. The ultimate impact of earthquakes on the
Applied Biosystems group, its significant suppliers, and the general
infrastructure is unknown, but operating results could be materially affected
in the event of a major earthquake.

Celera Diagnostics' ability to develop proprietary diagnostic products is
unproven. Celera Diagnostics faces the difficulties inherent in developing and
commercializing diagnostic tests. Celera Diagnostics' ability to develop
proprietary diagnostic products is unproven, and it is possible that Celera
Diagnostics' discovery and development efforts will not result in any commercial
products or services. Even if Celera Diagnostics is able to discover potential
products and services, development of these products and services would be
subject to various risks, including that they may be found be to ineffective or
that they may fail to receive necessary regulatory approvals. Furthermore,
products that are developed may not be commercially viable or successful due to
a variety of reasons, including competitive conditions, the inability to obtain
necessary intellectual property protection, the need to build distribution
channels, failure to get adequate reimbursement for these products from
insurance or government payors, or the inability of Celera Diagnostics to
recover its development costs in a reasonable period.

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Factors Relating to the Celera Genomics Group

The Celera Genomics group has incurred net losses to date and may not achieve
profitability. The Celera Genomics group has accumulated net losses of $498.5
million as of December 31, 2001, and expects that it will continue to incur
additional net losses for the foreseeable future. These cumulative losses are
expected to increase as the Celera Genomics group continues to make investments
in new technology and product development, including its investments in its
therapeutics business and the Company's genomics initiative for commercializing
products from information obtained through the analysis of the human genome, as
well as investments in diagnostics through Celera Diagnostics, its joint venture
with the Applied Biosystems group. The Celera Genomics group will record all
initial operating losses of Celera Diagnostics up to a maximum of $300 million,
after which any additional operating losses would be shared equally by the
Celera Genomics group and the Applied Biosystems group. As an early stage
business, the Celera Genomics group faces significant challenges in
simultaneously expanding its operations, pursuing key scientific goals and
attracting customers for its information products and services. As a result,
there is a high degree of uncertainty that the Celera Genomics group will be
able to achieve profitable operations.

The Celera Genomics group's business plan for its on-line business depends
heavily on continued assembly and annotation of the human and mouse genomes. In
June 2000, the Celera Genomics group and the Human Genome Project each announced
the "first assembly" of the human genome, and in April 2001, the Celera Genomics
group announced the assembly of the mouse genome. Assembly is the process by
which individual fragments of DNA, the molecule that forms the basis of the
genetic material in virtually all living organisms, are pieced together into
their appropriate order and place on each chromosome within the genome. The
Celera Genomics group's first assembly of the human genome covered approximately
95% of that genome, and its assembly of the mouse genome covered approximately
99% of that genome. The Celera Genomics group intends to continue updating its
assembly of the human and mouse genomes as it continues to annotate these
genomes. Annotation is the process of assigning features or characteristics to
each chromosome. Each gene on each chromosome is given a name, its structural
features are described, and proteins encoded by genes are classified into
possible or known function. The Celera Genomics group's ability to retain its
existing customers and attract new customers for its on-line business is heavily
dependent upon the continued assembly and annotation of these genomes. Failure
to update the assembly and annotation efforts in a timely manner may have a
material adverse effect on the Celera Genomics group's business.

The Celera Genomics group's revenue growth for its on-line business depends on
retaining existing customers and adding new customers. The Celera Genomics
group's revenue from its on-line business accounted for most of the Celera
Genomics group's revenue in fiscal year 2001. In order to generate significant
additional revenues for the on-line business, the Celera Genomics group must
obtain additional customers and retain its existing customers. The Celera
Genomics group's ability to retain existing customers and add new customers
depends upon customers' continued belief that the Celera Genomics group's
on-line products can help accelerate therapeutic discovery and development
efforts and lead to important discoveries in biology. Although existing on-line
customer agreements typically have multiple year terms, there can be no
assurance that any of these agreements will be renewed upon expiration or that
future agreements will have such multiple year terms. The Celera Genomics
group's future revenues are also affected by the extent to which existing
customers expand their agreements to include new on-line products. In some
cases, the Celera Genomics group has accepted milestone payments or

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future royalties on products developed by its customers as consideration for
access to the Celera Genomics group's databases and products in lieu of a
portion of subscription fees. These arrangements are unlikely to produce revenue
for the Celera Genomics group for a number of years, if ever, and depend heavily
on the research and product development, sales and marketing and intellectual
property protection abilities of the customer.

The industries in which the Celera Genomics group operates are intensely
competitive and evolving. The Celera Genomics group's on-line products are used
primarily by researchers in both the public and private sectors seeking, among
other things, to interpret segments of the human genome and identify genes
associated with specific diseases and develop products, services and
intellectual property based on these discoveries. The Celera Genomics group
faces intense competition in marketing its on-line products from genomic,
pharmaceutical, biotechnology and diagnostic companies, academic and research
institutions, and government or other publicly funded agencies:

         o  engaged in this type of research that have chosen, or in the future
            may choose, to develop their own genomic, proteomic, or related
            biological data to meet their needs rather than purchase products or
            services from the Celera Genomics group; and
         o  that are marketing or making available, or plan to market or make
            available, genomic, proteomic, and related biological data,
            particularly the federally funded Human Genome Project, which
            currently makes basic human sequence data available for free, and is
            expected in the near future to make basic mouse sequence data
            available for free which is competitive with the Celera Genomics
            group's mouse data.

Some of the key technologies used by the Celera Genomics group and integral to
its on-line products are licensed from third parties on a non-exclusive basis.
Therefore, this technology may be available to competitors of the Celera
Genomics group for their own research and development purposes or as part of
products and services marketed in competition with the Celera Genomics group.

There is also intense competition among pharmaceutical, biotechnology, and
diagnostic companies attempting to discover potential candidates for new
diagnostic and therapeutic products. These companies may:

         o  develop new diagnostic or therapeutic products in advance of the
            Celera Genomics group or its customers;
         o  develop diagnostic or therapeutic products which are more effective
            than those developed by the Celera Genomics group or its customers;
         o  obtain regulatory approvals of their diagnostic or therapeutic
            products more rapidly than the Celera Genomics group or its
            customers; or
         o  obtain patent protection or other intellectual property rights that
            would limit the Celera Genomics group's rights or its customers'
            ability to use the Celera Genomics group's products to develop and
            commercialize therapeutic or diagnostic products.

The Celera Genomics group's current and potential customers are primarily from,
and are subject to risks faced by, the pharmaceutical and biotechnology
industries. The Celera Genomics group derives a substantial portion of its
revenues from pharmaceutical companies and biotechnology companies

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engaged in therapeutic discovery and development. These fees accounted for
approximately 70% of the Celera Genomics group's revenues in fiscal year 2001.
The Celera Genomics group expects that these companies will continue to be the
Celera Genomics group's primary source of revenues for the foreseeable future.
As a result, the Celera Genomics group is subject to risks and uncertainties
that affect the pharmaceutical and biotechnology industries and to reduction and
delays in research and development expenditures by companies in these
industries.

In addition, the Celera Genomics group's future revenues may be adversely
affected by mergers and consolidation in the pharmaceutical and biotechnology
industries, which may reduce the number of the group's existing and potential
customers. Large pharmaceutical and biotechnology customers could also decide to
conduct their own genomics programs or seek other providers instead of using the
Celera Genomics group's products and services.

The Celera Genomics group relies on its strategic relationship with the Applied
Biosystems group. The Celera Genomics group believes that its strategic
relationship with the Applied Biosystems group has provided it with a
significant competitive advantage in its efforts to date to sequence the human
and other genomes. The Applied Biosystems group leases instruments, sells
consumables and project materials and provides research and development services
to the Celera Genomics group. The Celera Genomics group paid the Applied
Biosystems group $17.3 million in fiscal year 1999, $54.4 million in fiscal year
2000 and $60.1 million in fiscal year 2001 for these products and services. The
Celera Genomics group's continued development of its business will depend on the
Applied Biosystems group's ability to continue to provide leading edge,
proprietary technology and products, including advanced technologies for gene
and protein analysis. If the Applied Biosystems group is unable to supply these
technologies, the Celera Genomics group will need to obtain access to
alternative technologies, which may not be available, or may only be available
on unfavorable terms. Any change in the relationship with the Applied Biosystems
group that adversely affects the Celera Genomics group's access to the Applied
Biosystems group's technology or failure by the Applied Biosystems group to
continue to develop new technologies or protect its proprietary technology could
adversely affect the Celera Genomics group's business.

Introduction of new products may expose the Celera Genomics group to product
liability claims. New products developed by the Celera Genomics group or its
partners could expose the Celera Genomics group to potential product liability
risks that are inherent in the testing, manufacturing, marketing and sale of
human therapeutic and diagnostic products. Product liability claims or product
recalls, regardless of the ultimate outcome, could require the Celera Genomics
group to spend significant time and money in litigation and to pay significant
damages. Although the Celera Genomics group expects to seek product liability
insurance to cover claims relating to the testing and use of therapeutic and
diagnostic products, there can be no assurance that such insurance will be
available on commercially reasonable terms, if at all, or that the amount of
coverage obtained will be adequate to cover losses from any particular claim.

The Celera Genomics group could incur liabilities relating to hazardous
materials that it uses in its research and development activities. The Celera
Genomics group's research and development activities involve the controlled use
of hazardous materials, chemicals and various radioactive materials. In the
event of an accidental contamination or injury from these materials, the Celera
Genomics group could be held liable for damages in excess of its resources.

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The Celera Genomics group's on-line business sales cycle is lengthy and it may
spend considerable resources on unsuccessful sales efforts or may not be able to
complete deals on the schedule anticipated. The Celera Genomics group's on-line
business sales cycle is typically lengthy because the group needs to educate
potential customers and sell the benefits of its products and services to a
variety of constituencies within those companies. In addition, each agreement
involves the negotiation of unique terms. The Celera Genomics group's ability to
obtain new customers for genomic information products, collaborative services,
and licenses to intellectual property depends on its customers' belief that the
Celera Genomics group can help accelerate therapeutic discovery or research
efforts. The Celera Genomics group may expend substantial funds and management
effort with no assurance that an agreement will be reached with a potential
customer. Actual and proposed consolidations of pharmaceutical and biotechnology
companies have affected and may in the future affect the timing and progress of
the Celera Genomics group's sales efforts.

The Celera Genomics group's on-line business is dependent on the continuous,
effective, reliable and secure operation of its computer hardware, software and
Internet applications and related tools and functions. Because the Celera
Genomics group's on-line business requires manipulating and analyzing large
amounts of data, and communicating the results of the analysis to its internal
research personnel and to its customers via the Internet, the Celera Genomics
group depends on the continuous, effective, reliable and secure operation of its
computer hardware, software, networks, Internet servers and related
infrastructure. To the extent that the Celera Genomics group's hardware or
software malfunctions or access to the Celera Genomics group's data by the
Celera Genomics group's internal research personnel or customers through the
Internet is interrupted, its business could suffer.

The Celera Genomics group's computer and communications hardware is protected
through physical and software safeguards. However, it is still vulnerable to
fire, storm, flood, power loss, earthquakes, telecommunications failures,
physical or software break-ins, and similar events. In addition, the Celera
Genomics group's on-line products are complex and sophisticated, and as such,
could contain data, design or software errors that could be difficult to detect
and correct. Software defects could be found in current or future products. If
the Celera Genomics group fails to maintain and further develop the necessary
computer capacity and data to support its computational needs and its customers'
therapeutic discovery and research efforts, it could result in loss of or delay
in revenues and market acceptance. In addition, any sustained disruption in
Internet access provided by third parties could adversely impact the Celera
Genomics group's business.

The Celera Genomics group's competitive position will depend on maintaining its
trade secrets, the patent and copyright protection it obtains for itself, and
licenses to intellectual property it may need to obtain from others, which
licenses may not always be available. The Celera Genomics group's ability to
compete and to achieve and maintain profitability will be affected by its
ability to protect its proprietary technology, in large part, through obtaining
and enforcing patent rights, obtaining copyright protection, maintaining its
trade secrets, and operating without infringing the intellectual property rights
of others. The Celera Genomics group's ability to obtain patent protection for
the intellectual property it creates is uncertain. The patentability of
biotechnology and pharmaceutical inventions involves complex factual and legal
questions. As a result, it is difficult to predict whether patents will issue or
the breadth of claims that will be allowed in biotechnology and pharmaceutical
patents. This may be particularly true with regard to the patenting of gene
sequences, gene functions, and genetic variations. In this regard, the United
States Patent and Trademark Office recently adopted new guidelines for use in
the review of the utility of inventions, particularly biotechnology

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inventions. These guidelines increased the amount of evidence required to
illustrate utility in order to obtain a patent in the biotechnology field,
making patent protection more difficult to obtain. Although others have been
successful in obtaining patents to biotechnology inventions, since the adoption
of these guidelines these patents have been issued with increasingly less
frequency. As a result, patents may not issue from patent applications that the
Celera Genomics group may own or license if the applicant is unable to satisfy
the new guidelines.

The United States Patent and Trademark Office has issued several patents to
third parties covering inventions involving single nucleotide polymorphisms
(SNPs), naturally occurring genetic variations that scientists believe can be
correlated with susceptibility to disease, disease prognosis, therapeutic
efficiency, and therapeutic toxicity. These inventions are subject to the same
new guidelines as other biotechnology inventions. In addition, the Celera
Genomics group may need to obtain rights to patented SNPs in order to develop,
use and sell analyses of the overall human genome or particular full-length
genes. These licenses may not be available to the Celera Genomics group on
commercially acceptable terms, or at all.

In some instances, patent applications in the United States are maintained in
secrecy until a patent issues. In most instances, the content of domestic and
international patent applications is made available to the public within 18
months of the application's filing date. As a result, the Celera Genomics group
cannot be certain that others have not filed patent applications for technology
covered by the Celera Genomics group's patent applications or that the Celera
Genomic group inventors were the first to invent the technology. Accordingly,
the Celera Genomics group's patent applications may be preempted or the Celera
Genomics group may have to participate in interference proceedings declared by
the United States Patent and Trademark Office. These proceedings determine the
priority of invention and the right to a patent for the claimed technology in
the United States.

Furthermore, lawsuits may be necessary to enforce any patents issued to the
Celera Genomics group or to determine the scope and validity of the rights of
third parties. Lawsuits and interference proceedings, even if they are
successful, are expensive to pursue, and the Celera Genomics group could use a
substantial amount of its financial resources in either case. An adverse outcome
could subject the Celera Genomics group to significant liabilities to third
parties and require the Celera Genomics group to license disputed rights from
third parties or to cease using the technology.

The Celera Genomics group may be dependent on protecting its proprietary
databases through copyright law to prevent other organizations from taking
information from those databases and copying and reselling it. Copyright law
currently provides uncertain protection regarding the copying and resale of
factual data. Changes in copyright law could either expand or reduce the extent
to which the Celera Genomics group and its customers are able to protect their
intellectual property. Accordingly, the Celera Genomics group is uncertain as to
whether it can prevent such copying or resale through copyright law.

The Celera Genomics group relies on trade secret protection for its confidential
and proprietary information and procedures, including procedures related to
sequencing genes and to searching and identifying important regions of genetic
information. The Celera Genomics group protects its trade secrets through
recognized practices, including access control, confidentiality and nonuse
agreements with employees, consultants, collaborators, and customers, and other
security measures. These confidentiality and nonuse agreements may be breached,
however, and the Celera Genomics group

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may not have adequate remedies for a breach. In addition, the Celera Genomics
group's trade secrets may otherwise become known or be independently developed
by competitors. Accordingly, it is unclear whether the Celera Genomics group's
trade secrets will provide useful protection.

Disputes may arise in the future with regard to the ownership of rights to any
technology developed with collaborators. These and other possible disagreements
with collaborators could lead to delays in the achievement of milestones or
receipt of royalty payments or in research, development and commercialization of
the Celera Genomics group's technology. In addition, these disputes could
require or result in lawsuits or arbitration. Lawsuits and arbitration are
time-consuming and expensive. Even if the Celera Genomics group wins, the cost
of these proceedings could adversely affect its business, financial condition
and results of operations.

The Celera Genomics group may infringe the intellectual property rights of third
parties and may become involved in expensive intellectual property litigation.
The intellectual property rights of biotechnology companies, including the
Celera Genomics group, are generally uncertain and involve complex legal,
scientific and factual questions. The Celera Genomics group's success in
therapeutic and diagnostic discovery and development may depend, in part, on its
ability to operate without infringing on the intellectual property rights of
others and to prevent others from infringing on its intellectual property
rights.

There has been substantial litigation regarding patents and other intellectual
property rights in the genomics and pharmaceutical industries. The Celera
Genomics group may become a party to patent litigation or proceedings at the
United States Patent and Trademark Office to determine its patent rights with
respect to third parties, which may include subscribers to the Celera Genomics
group's on-line products. Interference proceedings may be necessary to establish
which party was the first to discover the intellectual property. The Celera
Genomics group may become involved in patent litigation against third parties to
enforce the Celera Genomics group's patent rights, to invalidate patents held by
the third parties, or to defend against these claims. The cost to the Celera
Genomics group of any patent litigation or similar proceeding could be
substantial, and it may absorb significant management time. If an infringement
litigation against the Celera Genomics group is resolved unfavorably to the
Celera Genomics group, the Celera Genomics group may be enjoined from
manufacturing or selling its products or services without a license from a third
party. The Celera Genomics group may not be able to obtain a license on
commercially acceptable terms, or at all.

Public disclosure of genomics sequence data could jeopardize the Celera Genomics
group's intellectual property protection and have an adverse effect on the value
of its products and services. The Celera Genomics group, the federally funded
Human Genome Project and others engaged in similar research have made and are
expected to continue making available to the public basic human sequence data,
and are expected in the near future to make available to the public basic mouse
sequence data which is competitive with the Celera Genomics group's mouse data.
These disclosures might limit the scope of the Celera Genomics group's claims or
make subsequent discoveries related to full-length genes and proteins
unpatentable. While the Celera Genomics group believes that the publication of
sequence data will not preclude it or others from being granted patent
protection on genes and proteins, there can be no assurance that the publication
has not affected and will not affect the ability to obtain patent protection.
Customers may also conclude that uncertainties of that protection and the fact
that the basic human and mouse sequence data is or will soon be available for
free decrease the value of the Celera Genomics group's information products and
services and as a result, it may be required to reduce the fees it charges for
its products and services.

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The Celera Genomics group's research and product development depends on access
to tissue samples and other biological materials. To carry out a portion of its
current business plan, the Celera Genomics group will need access to normal and
diseased human and other tissue samples, other biological materials and related
clinical and other information, which may be in limited supply. The Celera
Genomics group may not be able to obtain or maintain access to these materials
and information on acceptable terms. In addition, government regulation in the
United States and foreign countries could result in restricted access to, or use
of, human and other tissue samples. If the Celera Genomics group loses access to
sufficient numbers or sources of tissue samples, or if tighter restrictions are
imposed on its use of the information generated from tissue samples, its
business may be harmed.

Ethical, legal and social issues related to the use of genetic information and
genetic testing may cause less demand for the Celera Genomics group's products.
Genetic testing has raised issues regarding confidentiality and the appropriate
uses of the resulting information. For example, concerns have been expressed
towards insurance carriers and employers using these tests to discriminate on
the basis of this information, resulting in barriers to the acceptance of these
tests by consumers. This could lead to governmental authorities calling for
limits on or regulation of the use of genetic testing or prohibiting testing for
genetic predisposition to certain diseases, particularly those that have no
known cure. Any of these scenarios could reduce the potential markets for
products of the Celera Genomics group.

Use of genomics information to develop or commercialize therapeutic and
diagnostic products is unproven. Both the Celera Genomics group and its
customers are, among other things, seeking to develop new therapeutic and the
diagnostic products based on information derived from the study of the genetic
material of organisms, or genomics. This method is unproven, as few therapeutic
or diagnostic products based on genomic discoveries have been developed and
commercialized and to date no one has developed or commercialized any
therapeutic or diagnostic products based on the Celera Genomics group's
technologies. Furthermore, even if theraputic or diagnostic products are
developed in this manner, theraputic and some diagnostic products are subject to
regulation by the United States Food and Drug Administration and must undergo an
extensive regulatory review and approval process. This process can take many
years and require substantial expense and may not be successful. Also, current
and future patient privacy and health care laws and regulations issued by the
United States Food and Drug Administration may limit the use of data concerning
an individual's genetic information. If the Celera Genomics group or its on-line
customers are not successful in developing and commercializing products using
the Celera Genomics group's genomics databases, or if regulations restrict or
discourage the Celera Genomics group or its customers from developing these
products, the Celera Genomics group's revenues may be adversely affected and the
Celera Genomics group's business may suffer as a result.

The Celera Genomics group's ability to develop proprietary therapeutics and
Celera Diagnostics' ability to develop proprietary diagnostics is unproven. As
the Celera Genomics group expands its therapeutic discovery and development
business, it faces the difficulties inherent in developing and commercializing
therapeutic products. Similarly, Celera Diagnostics faces the difficulties
inherent in developing and commercializing diagnostic tests. Given the Celera
Genomics group's unproven ability to develop proprietary therapeutics and Celera
Diagnostics' unproven ability to develop proprietary diagnostic products, it is
possible that the Celera Genomics group's and Celera

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Diagnostics' discovery and development efforts will not result in any commercial
products or services. Even if the Celera Genomics group or Celera Diagnostics
are able to discover potential therapeutic or diagnostic products and services,
development of these products and services would be subject to various risks,
including that they may be found to be toxic or ineffective, or that they may
fail to receive necessary regulatory approvals. Furthermore, products that are
developed may not be commercially viable or successful for a variety of reasons,
including competitive conditions, the inability to get necessary intellectual
property protection, the need to build distribution channels, failure to get
adequate reimbursement for these products from insurance or government payors,
or the inability of the Celera Genomics group or Celera Diagnostics to recover
its development costs, including the cost of acquired IPR&D, in a reasonable
period.

If the Celera Genomics group or its collaborators fail to discover or develop or
are delayed in the development of therapeutics, the Celera Genomics group's
business and results of operations will be adversely affected. All of the Celera
Genomics group's potential therapeutic products, including those projects
acquired in the acquisition of Axys, are in various stages of research and
development and will require significant additional research and development
efforts by the Celera Genomics group or its collaborators before these products
can be marketed. These efforts include extensive preclinical and clinical
testing and lengthy regulatory review and approval by the United States Food and
Drug Administration. The development of the Celera Genomics group's new
therapeutics products is highly uncertain and subject to a number of significant
risks. To date, the Celera Genomics group has not developed a commercial
therapeutic and the Celera Genomics group does not expect any of its
therapeutics to be commercially available for a number of years, if ever.
Therapeutics that appear to be promising at early stages of development may not
reach the market for a number of reasons, including:

         o  the Celera Genomics group or its collaborators may not successfully
            complete any research and development efforts;
         o  any therapeutics the Celera Genomics group or its collaborators
            develop may be found to be ineffective or to cause harmful side
            effects during preclinical testing or clinical trials;
         o  the Celera Genomics group or its collaborators may fail to obtain
            required regulatory approvals for any products it develops;
         o  the Celera Genomics group or its collaborators may be unable to
            manufacture enough of any potential products at an acceptable cost
            and with appropriate quality;
         o  the Celera Genomics group's or its collaborator's products may not
            be competitive with other existing or future products; and
         o  proprietary rights of third parties may prevent the Celera Genomics
            group or its collaborators from commercializing its products.

If the Celera Genomics group fails to maintain its existing collaborative
relationships and enter into new collaborative relationships, or if
collaboration partners do not perform under collaboration agreements,
development of its therapeutic products could be delayed. The Celera Genomics
group does not currently have the internal capability to move potential products
through clinical testing, manufacturing and the approval process of the United
States Food and Drug Administration. The Celera Genomics group's strategy for
the development, clinical testing, manufacturing and commercialization of most
of its therapeutic product candidates includes entering into collaborations

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<PAGE>

                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

with partners. Although the Celera Genomics group has expended, and continues to
expend, time and money on internal research and development programs, the Celera
Genomics group may be unsuccessful in creating therapeutic product candidates
that would enable it to form additional collaborations and receive milestone
and/or royalty payments from collaborators.

All of the Celera Genomics group's existing collaboration agreements may be
canceled under certain circumstances. In addition, the amount and timing of
resources to be devoted to research, development, eventual clinical trials and
commercialization activities by the Celera Genomics group's collaborators are
not within the Celera Genomics group's control. The Celera Genomics group cannot
guarantee that its partners will perform their obligations as expected. If any
of the Celera Genomics group's collaborators terminate or elect to cancel their
agreements or otherwise fail to conduct their collaborative activities in a
timely manner, the development or commercialization of therapeutic products may
be delayed. If in some cases the Celera Genomics group assumes responsibilities
for continuing unpartnered programs after cancellation of a collaboration, the
Celera Genomics group may be required to devote additional resources to product
development and commercialization or the Celera Genomics group may cancel
certain development programs.

If the Celera Genomics group fails to satisfy United States Food and Drug
Administration regulatory requirements for any therapeutic product, the Celera
Genomics group will be unable to complete the development and commercialization
of that product. Either the Celera Genomics group or its collaborators must show
through preclinical studies and clinical trials that each of the Celera Genomics
group's therapeutics is safe and effective in humans for each indication before
obtaining regulatory clearance from the United States Food and Drug
Administration for the commercial sale of that therapeutic. If the Celera
Genomics group or its collaborator fails to adequately show the safety and
effectiveness of a therapeutic, regulatory approval could be delayed or denied.
The results from preclinical studies and early clinical trials are often
different than the results that are obtained in large-scale testing. The Celera
Genomics group cannot be certain that it will show sufficient safety and
effectiveness in its clinical trials to allow it to obtain the needed regulatory
approval. A number of companies in the therapeutic industry, including
biotechnology companies, have suffered significant setbacks in advanced clinical
trials, even after promising results in earlier trials.

Even if the Celera Genomics group obtains regulatory approval, the Celera
Genomics group may be subject to certain risks and uncertainties relating to
regulatory compliance, including: post approval Phase IV clinical studies and
inability to meet the compliance requirements of the Good Manufacturing
Practices regulations. In addition, identification of certain side effects after
a therapeutic is on the market or the occurrence of manufacturing problems could
cause subsequent withdrawal of approval, reformulation of a therapeutic,
additional preclinical testing or clinical trials and changes in labeling of the
product. This could delay or prevent the Celera Genomics group from generating
revenues from the sale of that therapeutic, or cause the Celera Genomics group's
revenues to decline.

Expected rapid growth in the number of its employees could absorb valuable
management resources and be disruptive to the development of the Celera Genomics
group's business. The Celera Genomics group expects to continue to increase its
employee base significantly. This growth will require substantial effort to hire
new employees and train and integrate them in the Celera Genomics group's
business and to develop and implement management information systems, financial
controls and

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<PAGE>

                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

facility plans. The Celera Genomics group's inability to manage growth
effectively would have a material adverse effect on its future operating
results.

Future acquisitions and other transactions may absorb significant resources, may
be unsuccessful and could dilute the holders of Applera - Celera stock. As part
of the Celera Genomics group's strategy, it expects to pursue acquisitions,
investments and other strategic relationships and alliances. Acquisitions,
investments and other strategic relationships and alliances may involve
significant cash expenditures, debt incurrence, additional operating losses, and
expenses that could have a material effect on the Celera Genomics group's
financial condition and results of operations. Acquisitions involve numerous
other risks, including:

         o  difficulties integrating acquired technologies and personnel into
            the business of the Celera Genomics group;
         o  diversion of management from daily operations;
         o  inability to obtain required financing on favorable terms;
         o  entry into new markets in which the Celera Genomics group has little
            previous experience;
         o  potential loss of key employees, key contractual relationships, or
            key customers of acquired companies or of the Celera Genomics group;
            and
         o  assumption of the liabilities and exposure to unforeseen liabilities
            of acquired companies.

It may be difficult for the Celera Genomics group to complete these transactions
quickly and to integrate these businesses efficiently into its current business.
Any acquisitions, investments or other strategic relationships and alliances by
the Celera Genomics group may ultimately have a negative impact on its business
and financial condition. For example, future acquisitions may not be as
successful as originally anticipated and may result in special charges, such as
the charges for impairment of Paracel goodwill and intangibles in the amount of
$69.1 million during fiscal 2001 and for the Molecular Informatics business in
the amount of $14.5 million during fiscal 1999.

In addition, acquisitions and other transactions may involve the issuance of a
substantial amount of Applera - Celera stock without the approval of the holders
of Applera - Celera stock. Any issuances of this nature will be dilutive to
holders of Applera - Celera stock.

Applera - Celera stock price is highly volatile. The market price of Applera -
Celera stock has been and may continue to be highly volatile due to the risks
and uncertainties described in this section of this Form 10-Q, as well as other
factors that may have affected or may in the future affect the market price,
such as:

         o  conditions and publicity regarding the genomics, biotechnology,
            pharmaceutical, or life sciences industries generally;
         o  price and volume fluctuations in the stock market at large which do
            not relate to the Celera Genomics group's operating performance; and
         o  comments by securities analysts or government officials, including
            with regard to the viability or profitability of the biotechnology
            sector generally or with regard to intellectual property rights of
            biotechnology companies, or the Celera Genomics group's failure to
            meet market expectations.

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<PAGE>

                             APPLERA CORPORATION
       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                        RESULTS OF OPERATIONS continued

The stock market has from time to time experienced extreme price and volume
fluctuations that are unrelated to the operating performance of particular
companies. In the past, companies that have experienced volatility have
sometimes been the subject of securities class action litigation. If litigation
was instituted on this basis, it could result in substantial costs and a
diversion of management's attention and resources.

The Company is subject to a purported class action lawsuit relating to its 2000
offering of shares of Applera - Celera stock that may be expensive and time
consuming. The Company and some of its officers have been served in five
lawsuits purportedly on behalf of purchasers of Applera - Celera stock in the
Company's follow-on public offering of Applera - Celera stock completed on March
6, 2000. In the offering, the Company sold an aggregate of approximately 4.4
million shares of Applera - Celera stock at a public offering price of $225 per
share. All of these lawsuits have been consolidated into a single case and an
amended consolidated complaint was filed on August 21, 2001. The consolidated
complaint generally alleges that the prospectus used in connection with the
offering was inaccurate or misleading because it failed to adequately disclose
the alleged opposition of the Human Genome Project and two of its supporters,
the governments of the United States and the United Kingdom, to providing patent
protection to the Company's genomic-based products. Although the Celera Genomics
group has never sought, or intended to seek, a patent on the basic human genome
sequence data, the complaint also alleges that the Company did not adequately
disclose the risk that it would not be able to patent this data. The
consolidated complaint seeks unspecified money damages, rescission, costs and
expenses, and other relief as the court deems proper. The Company and the other
defendants have filed a motion to dismiss the case, which motion is pending
before the court. Although the Company believes the asserted claims are without
merit and intends to defend the case vigorously, the outcome of this or any
other litigation is inherently uncertain. The defense of this case will require
management attention and resources.





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<PAGE>

                         PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.

     (a) Exhibits.

         10.1    Applera Corporation Performance Unit Bonus Plan, as amended.

         10.2    Applera Corporation Deferred Compensation Plan, as amended and
                 restated.

     (b) Reports on Form 8-K.

         During the quarter ended December 31, 2001, the Company filed the
         following Current Reports on Form 8-K:

         (1)    Current Report on Form 8-K dated October 24, 2001 to (a)
                incorporate under Item 5 thereof the text of the Company's
                press releases issued October 24, 2001 regarding fiscal year
                2002 first quarter results for the Company's Applied
                Biosystems and Celera Genomics groups and (b) disclose under
                Item 5 thereof the classifications of quarterly net revenues
                by product category for the Applied Biosystems group for
                fiscal year 2001.

         (2)    Current Report on Form 8-K dated November 16, 2001 to (a)
                report under Item 5 thereof the consummation of the
                acquisition of Axys Pharmaceuticals, Inc. by the Company and
                (b) incorporate under Item 5 thereof the text of the Company's
                press release issued November 16, 2001 with respect to same.

         (3)    Current Report on Form 8-K dated November 16, 2001 to report
                under Item 2 thereof the consummation of the acquisition of
                Axys Pharmaceuticals, Inc. by the Company.

         (4)    Current Report on Form 8-K dated December 12, 2001 to (a)
                incorporate under Item 5 thereof the text of the Company's
                press release issued December 6, 2001 regarding a meeting with
                the investment community to discuss the Company's Celera
                Genomics group and Celera Diagnostics, a joint venture between
                the Company's Celera Genomics group and Applied Biosystems
                group, and (b) incorporate under Item 5 thereof the
                presentations intended to made at such meeting.

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<PAGE>

                                  SIGNATURES


      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                     APPLERA CORPORATION


                                     By:      /s/ Dennis L. Winger
                                         -------------------------------
                                         Dennis L. Winger
                                         Senior Vice President and
                                         Chief Financial Officer



                                     By:      /s/ Vikram Jog
                                         -------------------------------
                                         Vikram Jog
                                         Corporate Controller
                                         (Chief Accounting Officer)

Dated:  February 14, 2002

                                      81
<PAGE>


                                    EXHIBITS

          Exhibit No.              Description
          -----------              -----------

          10.1                     Applera Corporation Performance Unit Bonus
                                   Plan, as amended.

          10.2                     Applera Corporation Deferred Compensation
                                   Plan, as amended and restated.



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