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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________
FORM 10-Q
 _______________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number : 001-35803
 _______________________________________________________
Mallinckrodt plc
(Exact name of registrant as specified in its charter)
 _______________________________________________________
Ireland
98-1088325
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
College Business & Technology Park, Cruiserath,
Blanchardstown, Dublin 15, Ireland
(Address of principal executive offices) (Zip Code)

Telephone: +353 1 696 0000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)(Trading Symbol(s))(Name of each exchange on which registered)
Ordinary shares, par value $0.01 per shareMNKNYSE American LLC

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       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
Accelerated Filer
Emerging Growth Company
Non-accelerated Filer
Smaller Reporting Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No

As of August 4, 2023, the registrant had 13,289,180 ordinary shares outstanding at $0.01 par value.



MALLINCKRODT PLC
INDEX
 
Page
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 (Successor), for the period from June 17, 2022 through July 1, 2022 (Successor), the period from April 2, 2022 through June 16, 2022 (Predecessor), and the period from January 1, 2022 through June 16, 2022 (Predecessor).
Condensed Consolidated Statements of Comprehensive Operations for the three and six months ended June 30, 2023 (Successor), for the period from June 17, 2022 through July 1, 2022 (Successor), the period from April 2, 2022 through June 16, 2022 (Predecessor), and the period from January 1, 2022 through June 16, 2022 (Predecessor).
Condensed Consolidated Balance Sheets as of June 30, 2023 (Successor) and December 30, 2022 (Successor).
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 (Successor), for the period from June 17, 2022 through July 1, 2022 (Successor), and the period from January 1, 2022 through June 16, 2022 (Predecessor).
Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2023 (Successor), for the period from June 17, 2022 through July 1, 2022 (Successor), the period from April 2, 2022 through June 16, 2022 (Predecessor), and the period from January 1, 2022 through June 16, 2022 (Predecessor).







PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements.

MALLINCKRODT PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in millions, except per share data)
SuccessorPredecessor
Three Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
April 2, 2022
through
June 16, 2022
Net sales$475.0 $85.0 $383.7 
Cost of sales
370.1 102.2 266.8 
Gross profit (loss)104.9 (17.2)116.9 
Selling, general and administrative expenses
132.7 30.3 122.8 
Research and development expenses
29.0 6.2 28.3 
Restructuring charges, net(0.2)1.1 2.8 
Operating loss(56.6)(54.8)(37.0)
Interest expense
(162.6)(21.1)(50.4)
Interest income
4.7 0.1 0.2 
Other (expense) income, net(1.2)5.9 (10.5)
Reorganization items, net(4.0)(3.5)(587.5)
Loss from continuing operations before income taxes(219.7)(73.4)(685.2)
Income tax expense (benefit)528.1 (9.7)(491.4)
Loss from continuing operations(747.8)(63.7)(193.8)
Income from discontinued operations, net of income taxes  0.3 
Net loss$(747.8)$(63.7)$(193.5)
Basic (loss) income per share (Note 5):
Loss from continuing operations$(56.74)$(4.83)$(2.29)
Income from discontinued operations   
Net loss$(56.74)$(4.83)$(2.28)
Basic weighted-average shares outstanding
13.2 13.2 84.8 
Diluted (loss) income per share (Note 5):
Loss from continuing operations$(56.74)$(4.83)$(2.29)
Income from discontinued operations   
Net loss$(56.74)$(4.83)$(2.28)
Diluted weighted-average shares outstanding
13.2 13.2 84.8 


See Notes to Condensed Consolidated Financial Statements.


2


MALLINCKRODT PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)
(unaudited, in millions, except per share data)
SuccessorPredecessor
Six Months Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
Net sales$899.6 $85.0 $874.6 
Cost of sales
744.9 102.2 582.0 
Gross profit (loss)154.7 (17.2)292.6 
Selling, general and administrative expenses
255.6 30.3 275.3 
Research and development expenses
57.3 6.2 65.5 
Restructuring charges, net1.0 1.1 9.6 
Operating loss(159.2)(54.8)(57.8)
Interest expense
(324.6)(21.1)(108.6)
Interest income
9.4 0.1 0.6 
Other (expense) income, net(15.8)5.9 (14.6)
Reorganization items, net(9.6)(3.5)(630.9)
Loss from continuing operations before income taxes(499.8)(73.4)(811.3)
Income tax expense (benefit)497.3 (9.7)(497.3)
Loss from continuing operations(997.1)(63.7)(314.0)
Income from discontinued operations, net of income taxes  0.9 
Net loss$(997.1)$(63.7)$(313.1)
Basic (loss) income per share (Note 5):
Loss from continuing operations$(75.68)$(4.83)$(3.70)
Income from discontinued operations  0.01 
Net loss$(75.68)$(4.83)$(3.69)
Basic weighted-average shares outstanding
13.2 13.2 84.8 
Diluted (loss) income per share (Note 5):
Loss from continuing operations$(75.68)$(4.83)$(3.70)
Income from discontinued operations  0.10 
Net loss$(75.68)$(4.83)$(3.69)
Diluted weighted-average shares outstanding
13.2 13.2 84.8 


See Notes to Condensed Consolidated Financial Statements.

3


MALLINCKRODT PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(unaudited, in millions)

SuccessorPredecessor
Three Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
April 2, 2022
through
June 16, 2022
Net loss$(747.8)$(63.7)$(193.5)
Other comprehensive income (loss), net of tax:
Currency translation adjustments(3.6)(1.7)(1.7)
Derivatives, net of tax10.1   
Benefit plans, net of tax(0.1) 0.2 
Total other comprehensive income (loss), net of tax6.4 (1.7)(1.5)
Comprehensive loss$(741.4)$(65.4)$(195.0)

SuccessorPredecessor
Six Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
Net loss$(997.1)$(63.7)$(313.1)
Other comprehensive income (loss), net of tax:
Currency translation adjustments(1.8)(1.7)(1.5)
Derivatives, net of tax5.8   
Benefit plans, net of tax(0.2)  
Total other comprehensive income (loss), net of tax3.8 (1.7)(1.5)
Comprehensive loss$(993.3)$(65.4)$(314.6)


See Notes to Condensed Consolidated Financial Statements.

4


MALLINCKRODT PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except share data)
Successor
June 30,
2023
December 30,
2022
Assets
Current Assets:
Cash and cash equivalents$480.6 $409.5 
Accounts receivable, less allowance for doubtful accounts of $4.0 and $4.4
391.2 405.3 
Inventories860.5 947.6 
Prepaid expenses and other current assets123.2 273.4 
Total current assets1,855.5 2,035.8 
Property, plant and equipment, net453.2 457.6 
Intangible assets, net2,581.3 2,843.8 
Deferred income taxes 475.5 
Other assets216.9 201.1 
Total Assets$5,106.9 $6,013.8 
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt$2,361.0 $44.1 
Accounts payable83.4 114.0 
Accrued payroll and payroll-related costs51.7 49.5 
Accrued interest81.0 29.0 
Acthar Gel-Related Settlement21.4 16.5 
Opioid-Related Litigation Settlement liability 400.0 200.0 
Accrued and other current liabilities256.8 290.7 
Total current liabilities3,255.3 743.8 
Long-term debt737.6 3,027.7 
Acthar Gel-Related Settlement65.8 75.0 
Opioid-Related Litigation Settlement liability 258.0 379.9 
Pension and postretirement benefits41.0 41.0 
Environmental liabilities35.2 35.8 
Other income tax liabilities18.9 18.2 
Other liabilities69.7 78.7 
Total Liabilities4,481.5 4,400.1 
Shareholders' Equity:
Successor preferred shares, $0.01 par value, 500,000,000 authorized; none issued and outstanding
  
Successor ordinary A shares, €1.00 par value, 40,000 authorized; none issued and outstanding
  
Successor ordinary shares, $0.01 par value, 500,000,000 authorized; 13,353,356 and 13,170,932 issued; 13,289,180 and 13,170,932 outstanding
0.1 0.1 
Successor ordinary shares held in treasury at cost, 64,176 and zero
(0.1) 
Additional paid-in capital2,196.1 2,191.0 
Accumulated other comprehensive income14.6 10.8 
Retained deficit(1,585.3)(588.2)
Total Shareholders' Equity625.4 1,613.7 
Total Liabilities and Shareholders' Equity$5,106.9 $6,013.8 

See Notes to Condensed Consolidated Financial Statements.
5


MALLINCKRODT PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
SuccessorPredecessor
Six Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
Cash Flows From Operating Activities:
Net loss$(997.1)$(63.7)$(313.1)
Adjustments to reconcile net cash from operating activities:
Depreciation and amortization286.2 48.4 321.8 
Share-based compensation5.3  1.7 
Deferred income taxes475.5 (6.4)(473.0)
Reorganization items, net  425.4 
Non-cash accretion expense138.6 7.7  
Other non-cash items16.8 (6.1)35.3 
Changes in assets and liabilities:
Accounts receivable, net14.4 17.0 49.8 
Inventories75.7 24.6 (33.2)
Accounts payable(24.5)(11.7)(3.6)
Income taxes159.4 (4.1)(26.9)
Payments of claims  (629.0)
Other(29.3)(21.2)2.5 
Net cash from operating activities121.0 (15.5)(642.3)
Cash Flows From Investing Activities:
Capital expenditures(26.3)(3.7)(33.4)
Proceeds from divestitures, net of cash 65.0  
Other0.7  0.4 
Net cash from investing activities(25.6)61.3 (33.0)
Cash Flows From Financing Activities:
Issuance of external debt  650.0 
Repayment of external debt(22.0)(1.7)(904.6)
Debt financing costs  (24.1)
Repurchase of shares(0.1)  
Net cash from financing activities(22.1)(1.7)(278.7)
Effect of currency rate changes on cash(1.1)(0.2)(3.9)
Net change in cash, cash equivalents and restricted cash72.2 43.9 (957.9)
Cash, cash equivalents and restricted cash at beginning of period466.7 447.3 1,405.2 
Cash, cash equivalents and restricted cash at end of period$538.9 $491.2 $447.3 
Cash and cash equivalents at end of period$480.6 $354.7 $297.9 
Restricted cash included in prepaid expenses and other current assets at end of period22.7 100.1 113.0 
Restricted cash included in other long-term assets at end of period35.6 36.4 36.4 
Cash, cash equivalents and restricted cash at end of period$538.9 $491.2 $447.3 

See Notes to Condensed Consolidated Financial Statements.


6



MALLINCKRODT PLC
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited, in millions)
 
Ordinary SharesTreasury SharesAdditional
Paid-In Capital
Retained DeficitAccumulated Other Comprehensive (Loss) Income
Total
Shareholders'
Equity
Number
Par
 Value
Number
Amount
Balance as of December 31, 2021 (Predecessor)94.3 $18.9 9.6 $(1,616.1)$5,597.8 $(3,678.9)$(8.3)$313.4 
Net loss— — — — — (119.6)— (119.6)
Share-based compensation— — — — 1.2 — — 1.2 
Balance as of April 1, 2022 (Predecessor)94.3 $18.9 9.6 $(1,616.1)$5,599.0 $(3,798.5)$(8.3)$195.0 
Net loss— — — — — (193.5)— (193.5)
Other comprehensive loss— — — — — — (1.5)(1.5)
Share-based compensation— — — — 0.5 — — 0.5 
Cancellation of Predecessor equity(94.3)(18.9)(9.6)1,616.1 (5,599.5)3,992.0 9.8 (0.5)
Issuance of Successor common stock13.2 0.1 — — 2,189.6 — — 2,189.7 
Issuance of Successor Opioid Warrants— — — — 13.9 — — 13.9 
Balance as of June 16, 2022 (Successor)13.2 $0.1  $ $2,203.5 $ $ $2,203.6 
Net loss— — — — — (63.7)— (63.7)
Other comprehensive loss— — — — — — (1.7)(1.7)
Balance as of July 1, 2022 (Successor)13.2 $0.1  $ $2,203.5 $(63.7)$(1.7)$2,138.2 
Balance as of December 30, 2022 (Successor)13.2 $0.1  $ $2,191.0 $(588.2)$10.8 $1,613.7 
Net loss— — — — — (249.3)— (249.3)
Other comprehensive loss— — — — — — (2.6)(2.6)
Share-based compensation— — — — 2.6 — — 2.6 
Balance as of March 31, 2023 (Successor)13.2 $0.1  $ $2,193.6 $(837.5)$8.2 $1,364.4 
Net loss— — — — — (747.8)— (747.8)
Other comprehensive income— — — — — — 6.4 6.4 
Vesting of restricted shares0.2 — 0.1 (0.1)— — — (0.1)
Share-based compensation— — — — 2.5 — — 2.5 
Balance as of June 30, 2023 (Successor)13.4 $0.1 0.1 $(0.1)$2,196.1 $(1,585.3)$14.6 $625.4 
 
See Notes to Condensed Consolidated Financial Statements.
7


MALLINCKRODT PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, dollars in millions, except share data, per share data and where indicated)

1.Background and Basis of Presentation
Background
Mallinckrodt plc is a global business of multiple wholly owned subsidiaries (collectively, "Mallinckrodt" or "the Company") that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. Areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, hepatology, nephrology, pulmonology, ophthalmology and oncology; immunotherapy and neonatal respiratory critical care therapies; analgesics; cultured skin substitutes and gastrointestinal products.
The Company operates in two reportable segments, which are further described below:
Specialty Brands includes innovative specialty pharmaceutical brands; and
Specialty Generics includes niche specialty generic drugs and active pharmaceutical ingredients ("API(s)").
The Company owns or has rights to use the trademarks and trade names that are used in conjunction with the operation of its business. One of the more important trademarks that the Company owns or has rights to use that appears in this Quarterly Report on Form 10-Q is "Mallinckrodt," which is a registered trademark or the subject of pending trademark applications in the United States ("U.S.") and other jurisdictions. Solely for convenience, the Company only uses the ™ or ® symbols the first time any trademark or trade name is mentioned in the following notes. Such references are not intended to indicate in any way that the Company will not assert, to the fullest extent permitted under applicable law, its rights to its trademarks and trade names. Each trademark or trade name of any other company appearing in the following notes is, to the Company's knowledge, owned by such other company.

Basis of Presentation
On October 12, 2020 ("Petition Date"), Mallinckrodt plc and substantially all of its U.S. subsidiaries, including certain subsidiaries of Mallinckrodt plc operating the Specialty Generics business ("Specialty Generics Subsidiaries") and the Specialty Brands business ("Specialty Brands Subsidiaries"), and certain of the Company's international subsidiaries (together with the Company, Specialty Generics Subsidiaries and Specialty Brands Subsidiaries, the "Debtors") voluntarily initiated proceedings ("Chapter 11 Cases") under chapter 11 of title 11 ("Chapter 11") of the United States Code ("Bankruptcy Code"). On March 2, 2022, the U.S. Bankruptcy Court for the District of Delaware ("Bankruptcy Court") entered an order confirming the fourth amended plan of reorganization (with technical modifications) ("Plan"). Subsequent to the filing of the Chapter 11 Cases, Chapter 11 proceedings commenced by a limited subset of the Debtors were recognized and given effect in Canada, and separately the High Court of Ireland made an order confirming a scheme of arrangement on April 27, 2022, which is based on and consistent in all respects with the Plan ("Scheme of Arrangement"). On June 8, 2022, the Bankruptcy Court entered an order approving a minor modification to the Plan. The Plan became effective on June 16, 2022 ("Effective Date"), and on such date the Company emerged from the Chapter 11 and the Scheme of Arrangement became effective concurrently.
Upon emergence from Chapter 11, the Company adopted fresh-start accounting in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 852 - Reorganizations, and became a new entity for financial reporting purposes as of the Effective Date. References to "Successor" relate to the financial position as of June 16, 2022 and results of operations of the reorganized Company subsequent to June 16, 2022, while references to "Predecessor" relate to the financial position prior to June 16, 2022 and results of operations of the Company prior to, and including, June 16, 2022. All emergence-related transactions of the Predecessor were recorded as of June 16, 2022. Accordingly, the unaudited condensed consolidated financial statements for the Successor are not comparable to the unaudited condensed consolidated financial statements for the Predecessor.
Reorganization items, net for the Successor represents amounts incurred after the Effective Date that directly resulted from Chapter 11 and were entirely comprised of professional fees associated with the implementation of the Plan. Reorganization items, net for the Predecessor represents amounts incurred after the Petition Date but prior to emergence as a direct result of the Chapter 11 Cases and were comprised of bankruptcy-related professional fees and adjustments to reflect the carrying value of liabilities subject to compromise ("LSTC") at their estimated allowed claim amounts, as such adjustments were approved by the Bankruptcy Court. Cash paid for reorganization items, net for the six months ended June 30, 2023 (Successor), for the period from June 17, 2022 through July 1, 2022 (Successor), and the period from January 1, 2022 through June 16, 2022 (Predecessor), was $14.6 million, zero, and $304.1 million, respectively.
The unaudited condensed consolidated financial statements have been prepared in U.S. dollars and in accordance with accounting principles generally accepted in the U.S. ("GAAP"). The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results may differ
8


from those estimates. The unaudited condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and entities in which they own or control more than 50.0% of the voting shares, or have the ability to control through similar rights. In the opinion of management, all adjustments necessary for a fair statement of results of operations, cash flows and financial position have been made. All intercompany balances and transactions have been eliminated in consolidation and all normal recurring adjustments necessary for a fair presentation have been included in the results reported.
The results of entities disposed of are included in the unaudited condensed consolidated financial statements up to the date of disposal, and where appropriate, these operations have been reported in discontinued operations. Divestitures of product lines and businesses not meeting the criteria for discontinued operations have been reflected in operating loss.
The fiscal year end balance sheet data was derived from audited consolidated financial statements, but does not include all of the annual disclosures required by GAAP; accordingly these unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited annual consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 30, 2022 filed with the U.S. Securities and Exchange Commission ("SEC") on March 3, 2023 ("Annual Report on Form 10-K").

Going Concern
The accompanying unaudited condensed consolidated financial statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
Beginning on May 17, 2023, the Company received unsolicited letters on behalf of various parties holding substantial positions across the Company's capital structure, including certain holders of the Company's (i) first lien senior secured term loans due 2027 ("Term Loans") issued under the credit agreement, dated as of June 16, 2022, by and among the Company, certain of its subsidiaries, the lenders party thereto, Acquiom Agency Services LLC and Seaport Loan Products LLC, as co-administrative agents, and Deutsche Bank AG New York Branch, as collateral agent ("Term Loan Credit Agreement") (ii) 10.00% first lien senior secured notes due 2025 ("2025 First Lien Notes"), (iii) 11.50% first lien senior secured notes due 2028 ("2028 First Lien Notes"), (iv) 10.00% second lien senior secured notes due 2025 ("2025 Second Lien Notes"), and (v) 10.00% second lien senior secured notes due 2029 ("2029 Second Lien Notes"). Under the Board of Directors' direction, the Company has been analyzing various proposals and engaging in discussions with various stakeholders, including such creditors and representatives of the Opioid Master Disbursement Trust II ("Trust"). As the Company’s discussions with its stakeholders proceeded, the Company determined not to make interest payments that were due on June 15, 2023 on its 2028 First Lien Notes and 2029 Second Lien Notes. Substantial doubt about the Company's ability to continue as a going concern exists in light of events of default arising from the failure to make these interest payments before the expiration of applicable grace periods, which events of default were continuing as of the date of this report. While the Company has sufficient liquidity to make such interest payments (as well as the $200.0 million installment payment originally due to be paid to the Trust on June 16, 2023 with respect to our opioid-related litigation settlement obligation ("Opioid Deferred Cash Payment"), which the Trust has agreed to extend until August 15, 2023), the failure to make the above described interest payments has resulted in events of default under the 2028 First Lien Notes and 2029 Second Lien Notes and, absent prompt cure of such events of default or discharge of the 2028 First Lien Notes and 2029 Second Lien Notes, cross-defaults under the Term Loans issued under the Term Loan Credit Agreement and the receivables financing facility pursuant to the ABL credit agreement, dated as of June 16, 2022 by and among ST US AR Finance LLC, the lenders party thereto, the L/C Issuers (as defined in the ABL Credit Agreement) party thereto and Barclays Bank plc, as administrative agent and collateral agent ("ABL Credit Agreement"), permitting specified portions of the creditors in respect of the 2028 First Lien Notes, 2029 Second Lien Notes, Term Loans and/or the ABL Credit Agreement to accelerate such obligations (which, in the case of the 2028 First Lien Notes and the 2029 Second Lien Notes, would include a prepayment premium) and terminate any applicable commitments to make additional loans under the ABL Credit Agreement. Although the Company has entered into forbearance agreements with certain holders of, and agents under, the 2028 First Lien Notes, 2029 Second Lien Notes, Term Loans, and the loans under the ABL Credit Agreement, such agreements expire on August 15, 2023 and it is possible that such obligations may be accelerated and applicable commitments to make additional loans under the ABL Credit Agreement may be terminated even before such date, notwithstanding such forbearance agreements. If such obligations were to be accelerated, the Company would not have sufficient liquidity to meet all such obligations as of the date of issuance of this report. Moreover, if the creditors in respect of the 2028 First Lien Notes, 2029 Second Lien Notes or the Term Loans were to accelerate such obligations (without such obligations being discharged), it would permit the Company's remaining noteholders and/or the Trust to accelerate their respective obligations in respect of the Company's remaining secured notes and opioid-related litigation settlement obligation. See Note 11 for further information with respect to the Company's opioid-related litigation settlement obligation, and Note 14 for further information on these matters, including other significant developments with respect to the Company's funded debt obligations.
The Company's Board of Directors continues to actively evaluate the Company's financial situation and consider options, and the Company is actively engaged in advanced discussions with various stakeholders. These discussions contemplate entering into a restructuring support agreement with various stakeholders that would include, among other things, the Company's initiating Chapter 11 proceedings under the U.S. Bankruptcy Code or analogous foreign bankruptcy or insolvency laws. However, there can be no assurance that the Company will reach an agreement in a timely manner, or at all, on terms of a restructuring support agreement that
9


the Board of Directors would support. Because plans to resolve the risks to the Company's ability to continue as a going concern have not yet been finalized and are not fully within the Company's control, and therefore cannot be deemed probable, the Company has concluded that management's plans at this stage do not alleviate substantial doubt about the Company's ability to continue as a going concern.
The unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might result from the outcome of this uncertainty. See Note 4 for discussion regarding the valuation allowance on the Company's net deferred tax assets that was recorded within the unaudited condensed consolidated balance sheet as of June 30, 2023 (Successor) as a result of considering the aforementioned substantial doubt in the Company's assessment of the realizability of certain net deferred tax assets.

Fiscal Year
The Company reports its results based on a "52-53 week" year ending on the last Friday of December. Unless otherwise indicated, the three and six months ended June 30, 2023 (Successor) refers to the thirteen and twenty-six week period ended June 30, 2023 (Successor). The period June 17, 2022 through July 1, 2022 reflects the Successor period, while the period April 2, 2022 through, and including, June 16, 2022 and the period January 1, 2022 through, and including, June 16, 2022 reflects the Predecessor periods.

2.Revenue from Contracts with Customers
Product Sales Revenue
See Note 13 for presentation of the Company's net sales by product family.

Reserves for variable consideration
The following table reflects activity in the Company's sales reserve accounts:
 
Rebates and Chargebacks (1)
Product Returns Other Sales Deductions Total
Balance as of December 31, 2021 (Predecessor)$241.8 $21.5 $9.5 $272.8 
Provisions693.4 5.2 17.1 715.7 
Payments or credits(684.6)(8.1)(18.9)(711.6)
Balance as of June 16, 2022 (Predecessor)$250.6 $18.6 $7.7 $276.9 
Balance as of June 17, 2022 (Successor)$250.6 $18.6 $7.7 $276.9 
Provisions68.5 0.5 1.5 70.5 
Payments or credits(81.4)(0.7)(1.9)(84.0)
Balance as of July 1, 2022 (Successor)$237.7 $18.4 $7.3 $263.4 
Balance as of December 30, 2022 (Successor)$265.3 $16.0 $12.7 $294.0 
Provisions726.0 5.8 21.0 752.8 
Payments or credits(748.3)(8.6)(25.4)(782.3)
Balance as of June 30, 2023 (Successor)$243.0 $13.2 $8.3 $264.5 
(1)Includes $91.3 million and $89.3 million of accrued Medicaid and $36.4 million and $55.3 million of accrued rebates as of June 30, 2023 (Successor) and December 30, 2022 (Successor), respectively, included within accrued and other current liabilities in the unaudited condensed consolidated balance sheets.

Product sales transferred to customers at a point in time and over time were as follows:
SuccessorPredecessor
Three Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
April 2, 2022
through
June 16, 2022
Product sales transferred at a point in time83.6 %83.8 %82.4 %
Product sales transferred over time16.4 16.2 17.6 

10


SuccessorPredecessor
Six Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
Product sales transferred at a point in time82.0 %83.8 %80.8 %
Product sales transferred over time18.0 16.2 19.2 

Transaction price allocated to the remaining performance obligations
The following table includes estimated revenue from contracts extending greater than one year for certain of the Company's hospital products that are expected to be recognized in the future related to performance obligations that were unsatisfied or partially unsatisfied as of June 30, 2023 (Successor):
Remainder of Fiscal 2023$39.6 
Fiscal 202437.7 
Fiscal 202513.2 
Thereafter0.2 

Product Royalty Revenues
The Company licenses certain rights to Amitiza® (lubiprostone) ("Amitiza") to third parties in exchange for royalties on net sales of the product. The Company receives a double-digit royalty based on a percentage of the gross profits of the licensed products sold during the term of the agreements. The Company recognizes such royalty revenue as the related sales occur. The associated royalty revenue recognized was as follows:
SuccessorPredecessor
Three Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
April 2, 2022
through
June 16, 2022
Royalty revenue$0.4 $3.0 $14.9 
SuccessorPredecessor
Six Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
Royalty revenue$3.8 $3.0 $34.9 

3.Restructuring and Related Charges
During fiscal 2021 and 2018, the Company launched restructuring programs designed to improve its cost structure, neither of which has a specified time period. Charges of $50.0 million to $100.0 million were provided for under the 2021 program and $100.0 million to $125.0 million were provided for under the 2018 program. The 2021 program will commence upon substantial completion of the 2018 program, and has not commenced as of June 30, 2023 (Successor).
Net restructuring and related charges by segment were as follows:
SuccessorPredecessor
Three Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
April 2, 2022
through
June 16, 2022
Corporate
$(0.2)$1.1 $2.8 
Restructuring charges, net$(0.2)$1.1 $2.8 

11


SuccessorPredecessor
Six Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
Specialty Generics
$ $ $3.5 
Corporate
1.7 1.1 6.1 
Restructuring and related charges, net1.7 1.1 9.6 
Less: accelerated depreciation(0.7)  
Restructuring charges, net$1.0 $1.1 $9.6 

Net restructuring and related charges by program were comprised of the following:
SuccessorPredecessor
Three Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
April 2, 2022
through
June 16, 2022
2018 Program
$(0.2)$1.1 $2.8 
Less: non-cash charges, including accelerated depreciation
 (0.2)(1.5)
Total charges expected to be settled in cash$(0.2)$0.9 $1.3 

SuccessorPredecessor
Six Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
2018 Program
$1.7 $1.1 $9.6 
Less: non-cash charges, including accelerated depreciation
(0.8)(0.2)(3.6)
Total charges expected to be settled in cash$0.9 $0.9 $6.0 

The following table summarizes cash activity for restructuring reserves for the 2018 Program, which primarily related to employee severance and benefits:
2018 Program
Balance as of December 30, 2022 (Successor)$4.6 
Charges from continuing operations
1.2 
Changes in estimate from continuing operations
(0.3)
Cash payments
(5.3)
Balance as of June 30, 2023 (Successor)$0.2 

As of June 30, 2023 (Successor), net restructuring and related charges incurred cumulative to date for the 2018 Program were as follows:
SuccessorPredecessor
Specialty Brands$ $3.1 
Specialty Generics0.8 18.5 
Corporate13.0 84.0 
$13.8 $105.6 

All of the restructuring reserves were included in accrued and other current liabilities on the Company's unaudited condensed consolidated balance sheets. Amounts paid in the future may differ from the amount currently recorded.

12


4.Income Taxes
The Company's income tax expense (benefit) was as follows:
SuccessorPredecessor
Three Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
April 2, 2022
through
June 16, 2022
Current tax expense (benefit)$19.2 $(3.3)$(18.9)
Deferred tax expense (benefit)508.9 (6.4)(472.5)
Income tax expense (benefit)$528.1 $(9.7)$(491.4)

SuccessorPredecessor
Six Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
Current tax expense (benefit)$21.8 $(3.3)$(23.9)
Deferred tax expense (benefit)475.5 (6.4)(473.4)
Income tax expense (benefit)$497.3 $(9.7)$(497.3)
As further discussed in Note 1, the Company concluded that there is substantial doubt about its ability to continue as a going concern within one year from the date of issuance of this report. The Company considered this in determining that certain net deferred tax assets were no longer more likely than not realizable. Therefore, a valuation allowance of $475.5 million was placed on the net deferred tax assets as of the beginning of the year. Additionally, a valuation allowance was recorded to offset the current year deferred tax activity, predominately related to intangible asset amortization, accretion expense associated with our settlement obligations and debt, and inventory step-up amortization expense. As a result, all of the Company’s net deferred tax assets as of the six months ended June 30, 2023 (Successor) are fully offset by a valuation allowance.
The Company recognized income tax expense of $528.1 million and $497.3 million on losses from continuing operations before income taxes of $219.7 million and $499.8 million for the three and six months ended June 30, 2023 (Successor), respectively. This resulted in effective tax rates of negative 240.4% and negative 99.5%, respectively. The income tax provision for both the three and six months ended June 30, 2023 (Successor) consisted of deferred income tax expense related to the valuation allowance noted above, recorded against the Company's net deferred tax assets, and current income tax expense related to a decrease in prepaid income taxes.
The income tax expense of $528.1 million for the three months ended June 30, 2023 (Successor) consisted of the valuation allowance of $475.5 million placed on the net deferred tax assets as of the beginning of the year that were no longer more likely than not realizable, $29.9 million attributed to the valuation allowance recorded on current year deferred tax activity, $20.9 million attributed to a decrease in prepaid income taxes and $1.8 million predominately attributed to pretax earnings in various jurisdictions.
The income tax expense of $497.3 million for the six months ended June 30, 2023 (Successor) consisted of the valuation allowance of $475.5 million placed on the net deferred tax assets as of the beginning of the year that were no longer more likely than not realizable, $20.9 million attributed to a decrease in prepaid income taxes and $2.2 million predominately attributed to pretax earnings in various jurisdictions, offset by $1.3 million attributed to the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.
The Company recognized $9.7 million, $491.4 million, and $497.3 million of income tax benefit on $73.4 million, $685.2 million, and $811.3 million of losses from continuing operations before income taxes for the periods from June 17, 2022 through July 1, 2022 (Successor), April 2, 2022 through June 16, 2022 (Predecessor), and January 1, 2022 through June 16, 2022 (Predecessor), respectively. This resulted in effective tax rates of 13.2%, 71.7%, and 61.3%, respectively.
The income tax benefit of $9.7 million for the period from June 17, 2022 through July 1, 2022 (Successor) consisted of $8.0 million attributed to pretax earnings in various jurisdictions and $1.7 million attributed to separation costs, reorganization items, net and restructuring charges.
The income tax benefit for the period from April 2, 2022 through June 16, 2022 (Predecessor) and the period from January 1, 2022 through June 16, 2022 (Predecessor) primarily consisted of the income tax impacts from reorganization and fresh-start adjustments, including adjustments to the Company's valuation allowance. For the period January 1, 2022 through June 16, 2022 (Predecessor), the Company recorded an income tax benefit of $497.3 million, primarily for reorganization adjustments in the Predecessor period consisting of (1) $1,231.5 million of tax expense for the reduction in federal and state net operating loss (“NOL”) carryforwards from the cancellation of debt income (“CODI”) realized upon emergence and limitations under Sections 382 and 383 of the IRC; (2) $141.3 million of tax expense for the net decrease in deferred tax assets resulting from reorganization adjustments; and (3) $1,270.1 million of tax benefit for the reduction in the valuation allowance on the Company's deferred tax assets; and fresh-start
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adjustments in the Predecessor period consisting of (4) $297.1 million of tax benefit for the net decrease in deferred tax liabilities resulting from fresh-start adjustments and (5) $285.3 million of tax benefit associated with the release of uncertain tax positions. The remaining tax benefit was attributable to pretax earnings in various jurisdictions during the Predecessor period.
During the six months ended June 30, 2023 (Successor), net cash refunds for income taxes were $137.8 million, including refunds of $141.6 million received as a result of provisions in the CARES Act and net payments of $3.8 million related to operational activity. During the period June 17, 2022 through July 1, 2022 (Successor) and the period January 1, 2022 through June 16, 2022 (Predecessor), net cash payments for income taxes were $0.7 million and $3.0 million, respectively.
The Company's unrecognized tax benefits, excluding interest, totaled $24.8 million as of both June 30, 2023 (Successor) and December 30, 2022 (Successor). If favorably settled, $15.4 million of unrecognized tax benefits as of June 30, 2023 (Successor) would benefit the effective tax rate. The remaining unrecognized tax benefits are reflected as a write-off of related deferred tax assets. If these unrecognized tax benefits were recognized, the related deferred tax assets would be offset by a valuation allowance. The total amount of accrued interest and penalties related to these obligations was $3.4 million and $2.8 million as of June 30, 2023 (Successor) and December 30, 2022 (Successor), respectively.
Within the next twelve months, the unrecognized tax benefits and the related interest and penalties are not expected to significantly change.
Certain of the Company's subsidiaries continue to be subject to examination by taxing authorities. The earliest open years subject to examination for both the U.S federal and state jurisdictions and various foreign jurisdictions, including Ireland, Japan, Luxembourg, Switzerland and the United Kingdom is 2013.

5.Loss per Share
Loss per share is computed by dividing net loss by the number of weighted-average shares outstanding during the period. Dilutive securities, including participating securities, have not been included in the computation of loss per share as the Company reported a net loss from continuing operations during all periods presented below and therefore, the impact would be anti-dilutive.
The weighted-average number of shares outstanding used in the computations of both basic and diluted loss per share were as follows (in millions):
SuccessorPredecessor
Three Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
April 2, 2022
through
June 16, 2022
Basic and diluted13.2 13.2 84.8 
SuccessorPredecessor
Six Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
Basic and diluted13.2 13.2 84.8 

The computation of diluted weighted-average shares outstanding for the three and six months ended June 30, 2023 (Successor) excluded approximately zero shares of equity awards. The computation of diluted weighted-average shares outstanding for the period June 17, 2022 through July 1, 2022 (Successor) excluded approximately 3.2 million shares of warrants that were issued on the Effective Date because the effect would have been anti-dilutive. The computation of diluted weighted-average shares outstanding for both the periods April 2, 2022 through June 16, 2022 (Predecessor) and the period January 1, 2022 through June 16, 2022 (Predecessor) excluded approximately 0.5 million shares of equity awards because the effect would have been anti-dilutive, respectively.

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6.Inventories
Inventories were comprised of the following at the end of each period: 
Successor
June 30,
2023
December 30,
2022
Raw materials and supplies$102.2 $80.2 
Work in process485.9 552.1
Finished goods272.4 315.3
$860.5 $947.6 

7.Property, Plant and Equipment
The gross carrying amount and accumulated depreciation of property, plant and equipment were comprised of the following at the end of each period:
Successor
June 30,
2023
December 30,
2022
Property, plant and equipment, gross$503.0 $485.0 
Less: accumulated depreciation(49.8)(27.4)
Property, plant and equipment, net$453.2 $457.6 

Depreciation expense was as follows:
SuccessorPredecessor
Three Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
April 2, 2022
through
June 16, 2022
Depreciation expense$11.8 $2.9 $17.9 
SuccessorPredecessor
Six Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
Depreciation expense$23.7 $2.9 $40.0 


8.Intangible Assets
The gross carrying amount and accumulated amortization of intangible assets were comprised of the following at the end of each period:
Successor
June 30, 2023December 30, 2022
Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
Amortizable:
Completed technology$3,041.2 $581.2 $3,041.2 $318.7 
Non-Amortizable:
In-process research and development121.3 121.3 
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Intangible asset amortization expense was as follows:
SuccessorPredecessor
Three Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
April 2, 2022
through
June 16, 2022
Amortization expense$129.3 $45.5 $126.7 
SuccessorPredecessor
Six Months
Ended
June 30, 2023
Period from
June 17, 2022
through
July 1, 2022
Period from
January 1, 2022
 through
June 16, 2022
Amortization expense$262.5 $45.5 $281.8 

The estimated aggregate amortization expense on intangible assets owned by the Company is expected to be as follows:
Successor
Remainder of Fiscal 2023$246.7
Fiscal 2024446.1
Fiscal 2025385.1
Fiscal 2026337.5
Fiscal 2027284.4

9.Debt
Debt was comprised of the following at the end of each period:
Successor
June 30, 2023December 30, 2022
Principal
Carrying Value
Unamortized Discount and Debt Issuance Costs
Principal
Carrying Value
Unamortized Discount and Debt Issuance Costs
Current maturities of long-term debt:
Receivables financing facility due June 2026$ $ $1.2 $$$
2017 Replacement Term loan due September 20271,356.7 1,220.8  34.834.8
2018 Replacement Term loan due September 2027360.1 326.3  9.39.3
11.50% first lien senior secured notes due December 2028650.0 650.0 19.0 
10.00% second lien senior secured notes due June 2029328.3 184.1  
Total current debt2,695.1 2,381.2 20.2 44.1 44.1  
Long-term debt:
10.00% first lien senior secured notes due April 2025495.0 480.0 495.0475.9
10.00% second lien senior secured notes due April 2025321.9 257.6 321.9242.2
2017 Replacement Term loan due September 2027  1,339.31,187.3
2018 Replacement Term loan due September 2027  355.5317.6
11.50% first lien senior secured notes due December 2028  650.0650.020.8
10.00% second lien senior secured notes due June 2029  328.3175.5
Total long-term debt816.9 737.6  3,490.0 3,048.5 20.8 
Total debt$3,512.0 $3,118.8 $20.2 $3,534.1 $3,092.6 $20.8 

As previously disclosed, the Company determined not to make interest payments that were due on June 15, 2023 on its 2028 First Lien Notes and 2029 Second Lien Notes. The failure to make these interest payments constituted an event of default under each such series of notes because such failure continued unremedied after the expiration of the applicable grace period, permitting specified portions of the creditors in respect thereof to accelerate such obligations (which would include a prepayment premium). The occurrence of such events of default, unless promptly cured and absent the 2028 First Lien Notes and the 2029 Second Lien Notes
16


being discharged, also constitute an event of default under the Company’s Term Loans and ABL Credit Agreement, permitting specified portions of the creditors in respect thereof to accelerate the obligations in respect thereof and terminate any applicable commitments to make additional loans under the ABL Credit Agreement. Although, on July 16, 2023, the Company entered into certain forbearance agreements with holders of more than 75% in principal amount of the outstanding 2028 First Lien Notes, holders of a majority in principal amount of each of the 2029 Second Lien Notes and the Term Loans (and the administrative agent with respect to the Term Loans), and the lenders and agents under the ABL Credit Agreement pursuant to which the applicable creditors and agents party thereto have agreed to forbear from exercising any rights or remedies with respect to the above described events of default, such agreements expire on August 15, 2023, and it is possible that such obligations may be accelerated and any applicable commitments to make additional loans under the ABL Credit Agreement may be terminated even before such date, notwithstanding such forbearance agreements. Refer to Note 14 for further information.
As a result of the above described events of default, the carrying values of the 2028 First Lien Notes, the 2029 Second Lien Notes, the Term Loans and the ABL Credit Agreement were classified as current on the unaudited condensed consolidated balance sheet as of June 30, 2023 (Successor). The Company's debt instruments are further described within the notes to the financial statements included within the Company's Annual Report on Form 10-K.

Applicable interest rate
As of June 30, 2023 (Successor), the applicable interest rate and outstanding principal on the Company's debt instruments were as follows:
Applicable Interest RateOutstanding Principal
Fixed-rate instruments10.54 %$1,795.2 
2017 Replacement Term Loan due September 2027 (1)
10.15 1,356.7 
2018 Replacement Term Loan due September 2027 (1)
10.40 360.1 
(1)Includes the impact of the interest rate cap agreement, which is discussed further in Note 12.

10.Guarantees
In disposing of assets or businesses, the Company has from time to time provided representations, warranties and indemnities to cover various risks and liabilities, including unknown damage to assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities related to periods prior to disposition. The Company assesses the probability of potential liabilities related to such representations, warranties and indemnities and adjusts potential liabilities as a result of changes in facts and circumstances. The Company believes, given the information currently available, that the ultimate resolutions will not have a material adverse effect on its financial condition, results of operations and cash flows.