MALLINCKRODT PLC

INDEX


			Page

PART I.		FINANCIAL INFORMATION	~~Page~~

~~PART I.~~Item 1.		~~FINANCIAL INFORMATION~~
~~Item 1.~~	Financial Statements (Unaudited).
		Condensed Consolidated Statements of ~~Income~~Operations for the three and nine months ended September ~~27, 2019~~25, 2020 and September ~~28, 2018.~~27, 2019.	2
		Condensed Consolidated Statements of Comprehensive ~~Income~~Operations for the three and nine months ended September ~~27, 2019~~25, 2020 and September ~~28, 2018.~~27, 2019.	3
		Condensed Consolidated Balance Sheets as of September ~~27, 2019~~25, 2020 and December ~~28, 2018.~~27, 2019.	4
		Condensed Consolidated Statements of Cash Flows for the nine months ended September ~~27, 2019~~25, 2020 and September ~~28, 2018.~~27, 2019.	5
		Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September ~~27, 2019~~25, 2020 and September ~~28, 2018.~~27, 2019.	6
		Notes to Condensed Consolidated Financial Statements.	87
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations.	4438
Item 3.		Quantitative and Qualitative Disclosures About Market Risk.	5855
Item 4.		Controls and Procedures.	5955

PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings.	6057
Item 1A.		Risk Factors.	6657
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds.	7366
Item 6.3.		~~Exhibits.~~Defaults Upon Senior Securities.	7366
Item 5.		Other Information.	66
~~SIGNATURES~~Item 6.		75Exhibits.	67

SIGNATURES			68

PART I. FINANCIAL INFORMATION



Item 1.			Financial Statements.

MALLINCKRODT PLC

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS

(unaudited, in millions, except per share data)


	Three Months Ended				Nine Months Ended
	September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
Net sales (includes refined estimate of the retrospective one-time charge of $0.7 and $535.1 related to the Medicaid lawsuit for the three and nine months ended September 25, 2020, respectively)	$	698.3	$	743.7	$	1,530.6	$	2,357.6
Cost of sales	403.0		419.4		1,171.7		1,309.3
Gross profit	295.3		324.3		358.9		1,048.3
Selling, general and administrative expenses	220.8		205.7		683.2		661.8
Research and development expenses	65.5		103.1		225.8		268.0
Restructuring charges, net	3.2		7.2		15.8		11.2
Non-restructuring impairment charges	0		0		63.5		113.5
Gains on divestiture	(9.7)		0		(10.1)		0
Opioid-related litigation settlement (Note 11)	(25.8)		0		(34.1)		0
Medicaid lawsuit (Note 11)	(0.2)		0		105.1		0
Operating income (loss)	41.5		8.3		(690.3)		(6.2)
Interest expense	(62.2)		(77.6)		(200.9)		(231.8)
Interest income	0.9		2.9		5.4		6.6

Other income, net	0		37.9		1.1		128.6
Loss from continuing operations before income taxes	(19.8)		(28.5)		(884.7)		(102.8)
Income tax benefit	(211.6)		(27.6)		(69.2)		(256.6)
Income (loss) from continuing operations	191.8		(0.9)		(815.5)		153.8
(Loss) income from discontinued operations, net of income taxes	(0.2)		(0.2)		23.8		6.8
Net income (loss)	$	191.6	$	(1.1)	$	(791.7)	$	160.6

Basic earnings (loss) per share (Note 5):
Income (loss) from continuing operations	$	2.27	$	(0.01)	$	(9.66)	$	1.84
(Loss) income from discontinued operations	0		0		0.28		0.08
Net income (loss)	$	2.26	$	(0.01)	$	(9.38)	$	1.92
Basic weighted-average shares outstanding	84.6		84.0		84.4		83.8

Diluted earnings (loss) per share (Note 5):
Income (loss) from continuing operations	$	2.27	$	(0.01)	$	(9.66)	$	1.83
(Loss) income from discontinued operations	0		0		0.28		0.08
Net income (loss)	$	2.26	$	(0.01)	$	(9.38)	$	1.91
Diluted weighted-average shares outstanding	84.6		84.0		84.4		84.2

Three Months Ended Nine Months Ended
September 27,
2019 September 28,
2018 September 27,
2019 September 28,
2018
Net sales $ 743.7
$ 799.9
$ 2,357.6
$ 2,380.7
Cost of sales 419.4
433.5
1,309.3
1,272.8
Gross profit 324.3
366.4
1,048.3
1,107.9

Selling, general and administrative expenses 205.7
193.4
661.8
594.5
Research and development expenses 103.1
86.1
268.0
260.7
Restructuring charges, net 7.2
14.8
11.2
101.8
Non-restructuring impairment charges —
2.0
113.5
2.0
Loss on divestiture —
0.6
—
0.6
Operating income (loss) 8.3
69.5
(6.2 ) 148.3

Interest expense (77.6 ) (93.6 ) (231.8 ) (280.1 )
Interest income 2.9
2.0
6.6
6.6
Other income, net 37.9
13.4
128.6
17.8
Loss from continuing operations before income taxes (28.5 ) (8.7 ) (102.8 ) (107.4 )

Income tax benefit (27.6 ) (122.9 ) (256.6 ) (203.9 )
(Loss) income from continuing operations (0.9 ) 114.2
153.8
96.5

(Loss) income from discontinued operations, net of income taxes (0.2 ) (0.4 ) 6.8
14.9

Net (loss) income $ (1.1 ) $ 113.8
$ 160.6
$ 111.4

Basic earnings per share (Note 7):
(Loss) income from continuing operations $ (0.01 ) $ 1.37
$ 1.84
$ 1.15
(Loss) income from discontinued operations —
—
0.08
0.18
Net (loss) income $ (0.01 ) $ 1.37
$ 1.92
$ 1.32

Basic weighted-average shares outstanding 84.0
83.2
83.8
84.2

Diluted earnings per share (Note 7):
(Loss) income from continuing operations
$ (0.01 ) $ 1.34
$ 1.83
$ 1.13
(Loss) income from discontinued operations —
—
0.08
0.17
Net (loss) income $ (0.01 ) $ 1.34
$ 1.91
$ 1.31

Diluted weighted-average shares outstanding 84.0
85.0
84.2
85.2

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME~~OPERATIONS

(unaudited, in millions)


	Three Months Ended				Nine Months Ended
	September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
Net income (loss)	$	191.6	$	(1.1)	$	(791.7)	$	160.6
Other comprehensive income (loss), net of tax:
Currency translation adjustments	1.0		(2.1)		0.7		1.6
Derivatives, net of tax	0		0.3		0.1		1.0
Benefit plans, net of tax	(0.6)		(0.2)		(1.3)		(0.9)

Total other comprehensive income (loss), net of tax	0.4		(2.0)		(0.5)		1.7
Comprehensive income (loss)	$	192.0	$	(3.1)	$	(792.2)	$	162.3

Three Months Ended Nine Months Ended
September 27,
2019 September 28,
2018 September 27,
2019 September 28,
2018
Net (loss) income $ (1.1 ) $ 113.8
$ 160.6
$ 111.4
Other comprehensive (loss) income, net of tax:
Currency translation adjustments (2.1 ) 3.2
1.6
(4.1 )
Derivatives, net of tax 0.3
0.2
1.0
0.7
Benefit plans, net of tax (0.2 ) (0.4 ) (0.9 ) (0.9 )
Total other comprehensive (loss) income, net of tax (2.0 ) 3.0
1.7
(4.3 )
Comprehensive (loss) income $ (3.1 ) $ 116.8
$ 162.3
$ 107.1

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in millions, except share data)


	September 25, 2020		December 27, 2019
Assets
Current Assets:
Cash and cash equivalents	$	844.2	$	790.9
Accounts receivable, less allowance for doubtful accounts of $3.7 and $4.0	516.1		577.5
Inventories	343.3		312.1
Prepaid expenses and other current assets	360.9		150.2

Total current assets	2,064.5		1,830.7
Property, plant and equipment, net	851.4		896.5

Intangible assets, net	6,355.9		7,018.0

Other assets	433.1		593.7
Total Assets	$	9,704.9	$	10,338.9

Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	5,241.3	$	633.6
Accounts payable	79.1		139.8
Accrued payroll and payroll-related costs	73.1		105.2
Accrued interest	89.1		62.9
Medicaid lawsuit (Note 11)	640.2		0
Accrued and other current liabilities	381.0		485.4

Total current liabilities	6,503.8		1,426.9
Long-term debt	0		4,741.2
Opioid-related litigation settlement liability (Note 11)	1,609.3		1,643.4
Pension and postretirement benefits	61.4		62.4
Environmental liabilities	60.0		60.0

Other income tax liabilities	118.5		227.1

Other liabilities	186.2		237.2
Total Liabilities	8,539.2		8,398.2
Shareholders' Equity:
Preferred shares, $0.20 par value, 500,000,000 authorized; NaN issued and outstanding	0		0
Ordinary A shares, €1.00 par value, 40,000 authorized; NaN issued and outstanding	0		0
Ordinary shares, $0.20 par value, 500,000,000 authorized; 94,104,519, and 93,459,206 issued; 84,598,497 and 84,105,786 outstanding	18.8		18.7
Ordinary shares held in treasury at cost, 9,506,022 and 9,353,420	(1,616.1)		(1,615.7)
Additional paid-in capital	5,580.0		5,562.5
Retained deficit	(2,808.6)		(2,016.9)
Accumulated other comprehensive loss	(8.4)		(7.9)
Total Shareholders' Equity	1,165.7		1,940.7
Total Liabilities and Shareholders' Equity	$	9,704.9	$	10,338.9

September 27,
2019 December 28,
2018
Assets
Current Assets:
Cash and cash equivalents $ 498.8
$ 348.9
Accounts receivable, less allowance for doubtful accounts of $4.5 and $5.0 538.8
623.3
Inventories 325.5
322.3
Prepaid expenses and other current assets 122.2
132.7
Assets held for sale 175.9
—
Total current assets 1,661.2
1,427.2
Property, plant and equipment, net 894.7
982.0
Intangible assets, net 7,496.1
8,282.8
Other assets 304.1
185.3
Total Assets $ 10,356.1
$ 10,877.3

Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt $ 716.1
$ 22.4
Accounts payable 100.9
147.5
Accrued payroll and payroll-related costs 83.7
124.0
Accrued interest 90.9
77.6
Accrued and other current liabilities 506.5
572.2
Liabilities held for sale 55.8
—
Total current liabilities 1,553.9
943.7
Long-term debt 5,048.7
6,069.2
Pension and postretirement benefits 58.6
60.5
Environmental liabilities 60.3
59.7
Deferred income taxes 22.0
324.3
Other income tax liabilities 253.5
228.0
Other liabilities 278.7
304.6
Total Liabilities 7,275.7
7,990.0
Shareholders' Equity:
Preferred shares, $0.20 par value, 500,000,000 authorized; none issued and outstanding —
—
Ordinary A shares, €1.00 par value, 40,000 authorized; none issued and outstanding —
—
Ordinary shares, $0.20 par value, 500,000,000 authorized; 93,427,563 and 92,705,747 issued;
84,078,103 and 83,323,877 outstanding

18.7
18.5
Ordinary shares held in treasury at cost, 9,349,460 and 9,381,870 (1,615.6 ) (1,617.4 )
Additional paid-in capital 5,559.2
5,528.2
Retained deficit (859.8 ) (1,017.7 )
Accumulated other comprehensive loss (22.1 ) (24.3 )
Total Shareholders' Equity 3,080.4
2,887.3
Total Liabilities and Shareholders' Equity $ 10,356.1
$ 10,877.3

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)


	Nine Months Ended
	September 25, 2020		September 27, 2019
Cash Flows From Operating Activities:
Net (loss) income	$	(791.7)	$	160.6
Adjustments to reconcile net cash from operating activities:
Depreciation and amortization	675.5		723.5
Share-based compensation	17.6		30.6
Deferred income taxes	304.0		(301.9)
Non-cash impairment charges	63.5		113.5
Gains on divestiture	(10.1)		0
Gain on repurchase of debt	0		(98.6)

Other non-cash items	(21.6)		(31.7)
Changes in assets and liabilities, net of the effects of acquisitions:
Accounts receivable, net	61.1		68.7
Inventories	(43.9)		(32.0)
Accounts payable	(52.4)		(27.8)
Income taxes	(431.2)		17.2
Medicaid lawsuit (Note 11)	640.2		0
Other	(116.3)		(88.0)
Net cash from operating activities	294.7		534.1
Cash Flows From Investing Activities:
Capital expenditures	(42.4)		(108.7)

Proceeds from divestitures, net of cash	(0.7)		0
Other	6.7		13.7
Net cash from investing activities	(36.4)		(95.0)
Cash Flows From Financing Activities:
Issuance of external debt	0		695.0
Repayment of external debt	(134.6)		(940.1)
Debt financing costs	(9.3)		0
Repurchase of shares	(0.4)		(2.5)
Other	(36.3)		(17.6)
Net cash from financing activities	(180.6)		(265.2)
Effect of currency rate changes on cash	0.2		0.5
Net change in cash, cash equivalents and restricted cash, including cash classified within assets held for sale	77.9		174.4
Less: Net change in cash classified within assets held for sale	0		(15.1)
Net change in cash, cash equivalents and restricted cash	77.9		159.3
Cash, cash equivalents and restricted cash at beginning of period	822.6		367.5
Cash, cash equivalents and restricted cash at end of period	$	900.5	$	526.8

Cash and cash equivalents at end of period	$	844.2	$	498.8
Restricted cash included in prepaid expenses and other assets at end of period	20.2		0
Restricted cash included in other long-term assets at end of period	36.1		28.0
Cash, cash equivalents and restricted cash at end of period	$	900.5	$	526.8

Nine Months Ended
September 27,
2019 September 28,
2018
Cash Flows From Operating Activities:
Net income $ 160.6
$ 111.4
Adjustments to reconcile net cash from operating activities:
Depreciation and amortization 723.5
597.0
Share-based compensation 30.6
27.9
Deferred income taxes (301.9 ) (232.7 )
Non-cash impairment charges 113.5
2.0
Loss on divestiture —
0.6
Gain on repurchase of debt (98.6 ) (6.5 )
Other non-cash items (31.7 ) 2.8
Changes in assets and liabilities, net of the effects of acquisitions:
Accounts receivable, net 68.7
(59.0 )
Inventories (32.0 ) 43.1
Accounts payable (27.8 ) (0.1 )
Income taxes 17.2
16.7
Other (88.0 ) (22.1 )
Net cash from operating activities 534.1
481.1
Cash Flows From Investing Activities:
Capital expenditures (108.7 ) (93.3 )
Acquisitions, net of cash —
(699.9 )
Proceeds from divestitures, net of cash —
313.2
Other 13.7
28.8
Net cash from investing activities (95.0 ) (451.2 )
Cash Flows From Financing Activities:
Issuance of external debt 695.0
657.2
Repayment of external debt (940.1 ) (1,563.4 )
Debt financing costs —
(12.0 )
Proceeds from exercise of share options 0.5
1.0
Repurchase of shares (2.5 ) (57.4 )
Other (18.1 ) (24.3 )
Net cash from financing activities (265.2 ) (998.9 )
Effect of currency rate changes on cash 0.5
(0.9 )
Net change in cash, cash equivalents and restricted cash, including cash classified within assets held for sale 174.4
(969.9 )
Less: Net change in cash classified within assets held for sale (15.1 ) —
Net change in cash, cash equivalents and restricted cash 159.3
(969.9 )
Cash, cash equivalents and restricted cash at beginning of period 367.5
1,279.1
Cash, cash equivalents and restricted cash at end of period $ 526.8
$ 309.2

Cash and cash equivalents at end of period $ 498.8
$ 290.7
Restricted cash included in other assets at end of period 28.0
18.5
Cash, cash equivalents and restricted cash at end of period $ 526.8
$ 309.2

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

~~For the nine months ended September 27, 2019~~

(unaudited, in millions)


	Ordinary Shares			Treasury Shares			Additional Paid-In Capital		Retained Deficit		Accumulated Other Comprehensive Loss		Total Shareholders' Equity
	Number	Par Value		Number	Amount
Balance as of December 28, 2018	92.7	$	18.5	9.4	$	(1,617.4)	$	5,528.2	$	(1,017.7)	$	(24.3)	$	2,887.3
Impact of accounting standard adoptions, net of tax	—	—		—	—		—		(0.5)		0.5		0
Net income	—	—		—	—		—		154.9		—		154.9
Other comprehensive income	—	—		—	—		—		—		1.3		1.3
Share options exercised	—	—		—	—		0.3		—		—		0.3
Vesting of restricted shares	0.2	0.1		0	(0.5)		0		—		—		(0.4)
Share-based compensation	—	—		—	—		10.0		—		—		10.0
Reissuance of treasury shares	—	—		0	0.9		—		(0.4)		—		0.5
Balance as of March 29, 2019	92.9	$	18.6	9.4	$	(1,617.0)	$	5,538.5	$	(863.7)	$	(22.5)	$	3,053.9
Net income	—	—		—	—		—		6.8		—		6.8
Other comprehensive income	—	—		—	—		—		—		2.4		2.4
Share options exercised	—	—		—	—		0.2		—		—		0.2
Vesting of restricted shares	0.4	0.1		0.1	(2.0)		0		—		—		(1.9)
Share-based compensation	—	—		—	—		12.8		—		—		12.8
Reissuance of treasury shares	—	—		(0.1)	1.6		—		(0.6)		—		1.0
Balance as of June 28, 2019	93.3	$	18.7	9.4	$	(1,617.4)	$	5,551.5	$	(857.5)	$	(20.1)	$	3,075.2
Net income	—	—		—	—		—		(1.1)		—		(1.1)
Other comprehensive income	—	—		—	—		—		—		(2.0)		(2.0)
Vesting of restricted shares	0.1	0		0	0		(0.1)		—		—		(0.1)
Share-based compensation	—	—		—	—		7.8		—		—		7.8
Reissuance of treasury shares	—	—		(0.1)	1.8		—		(1.2)		—		0.6
Balance as of September 27, 2019	93.4	$	18.7	9.3	$	(1,615.6)	$	5,559.2	$	(859.8)	$	(22.1)	$	3,080.4

Balance as of December 27, 2019	93.5	$	18.7	9.4	$	(1,615.7)	$	5,562.5	$	(2,016.9)	$	(7.9)	$	1,940.7
Net loss	—	—		—	—		—		(50.2)		—		(50.2)
Other comprehensive loss	—	—		—	—		—		—		(1.3)		(1.3)
Vesting of restricted shares	0.1	0		0	0		(0.1)		—		—		(0.1)
Share-based compensation	—	—		—	—		6.7		—		—		6.7
Balance as of March 27, 2020	93.6	$	18.7	9.4	$	(1,615.7)	$	5,569.1	$	(2,067.1)	$	(9.2)	$	1,895.8
Net loss	—	—		—	—		—		(933.1)		—		(933.1)
Other comprehensive income	—	—		—	—		—		—		0.4		0.4
Vesting of restricted shares	0.5	0.1		0.1	(0.3)		0		—		—		(0.2)
Share-based compensation	—	—		—	—		6.6		—		—		6.6
Balance as of June 26, 2020	94.1	$	18.8	9.5	$	(1,616.0)	$	5,575.7	$	(3,000.2)	$	(8.8)	$	969.5
Net income	—	—		—	—		—		191.6		—		191.6
Other comprehensive income	—	—		—	—		—		—		0.4		0.4
Vesting of restricted shares	0	0		0	(0.1)		0		—		—		(0.1)
Share-based compensation	—	—		—	—		4.3		—		—		4.3
Balance as of September 25, 2020	94.1	$	18.8	9.5	$	(1,616.1)	$	5,580.0	$	(2,808.6)	$	(8.4)	$	1,165.7

Ordinary Shares Treasury Shares
Additional
Paid-In Capital
Retained Deficit Accumulated Other Comprehensive Loss
Total
Shareholders'
Equity
Number
Par
Value
Number Amount
Balance as of December 28, 2018 92.7
$ 18.5
9.4
$ (1,617.4 ) $ 5,528.2
$ (1,017.7 ) $ (24.3 ) $ 2,887.3
Impact of accounting standard adoptions, net of tax —
—
—
—
—
(0.5 ) 0.5
—
Net income —
—
—
—
—
154.9
—
154.9
Currency translation adjustments —
—
—
—
—
—
1.4
1.4
Change in derivatives, net of tax —
—
—
—
—
—
0.2
0.2
Change in benefit plans, net of tax —
—
—
—
—
—
(0.3 ) (0.3 )
Share options exercised —
—
—
—
0.3
—
—
0.3
Vesting of restricted shares 0.2
0.1
—
(0.5 ) —
—
—
(0.4 )
Share-based compensation —
—
—
—
10.0
—
—
10.0
Reissuance of treasury shares —
—
—
0.9
—
(0.4 ) —
0.5
Balance as of March 29, 2019 92.9
$ 18.6
9.4
$ (1,617.0 ) $ 5,538.5
$ (863.7 ) $ (22.5 ) $ 3,053.9
Net income —
—
—
—
—
6.8
—
6.8
Currency translation adjustments —
—
—
—
—
—
2.3
2.3
Change in derivatives, net of tax —
—
—
—
—
—
0.5
0.5
Change in benefit plans, net of tax —
—
—
—
—
—
(0.4 ) (0.4 )
Share options exercised —
—
—
—
0.2
—
—
0.2
Vesting of restricted shares 0.4
0.1
0.1
(2.0 ) —
—
—
(1.9 )
Share-based compensation —
—
—
—
12.8
—
—
12.8
Reissuance of treasury shares —
—
(0.1 ) 1.6
—
(0.6 ) —
1.0
Balance as of June 28, 2019 93.3
$ 18.7
9.4
$ (1,617.4 ) $ 5,551.5
$ (857.5 ) $ (20.1 ) $ 3,075.2
Net loss —
—
—
—
—
(1.1 ) —
(1.1 )
Currency translation adjustments —
—
—
—
—
—
(2.1 ) (2.1 )
Change in derivatives, net of tax —
—
—
—
—
—
0.3
0.3
Change in benefit plans, net of tax —
—
—
—
—
—
(0.2 ) (0.2 )
Vesting of restricted shares 0.1
—
—
—
(0.1 ) —
—
(0.1 )
Share-based compensation —
—
—
—
7.8
—
—
7.8
Reissuance of treasury shares —
—
(0.1 ) 1.8
—
(1.2 ) —
0.6
Balance as of September 27, 2019 93.4
$ 18.7
9.3
$ (1,615.6 ) $ 5,559.2
$ (859.8 ) $ (22.1 ) $ 3,080.4

See Notes to Condensed Consolidated Financial Statements.

~~MALLINCKRODT PLC~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY~~

~~For the nine months ended September 28, 2018~~

~~(unaudited, in millions)~~

Ordinary Shares Treasury Shares
Additional
Paid-In Capital
Retained Earnings Accumulated Other Comprehensive Loss
Total
Shareholders'
Equity
Number
Par
Value
Number Amount
Balance as of December 29, 2017 92.2
$ 18.4
5.9
$ (1,564.7 ) $ 5,492.6
$ 2,588.6
$ (12.9 ) $ 6,522.0
Impact of accounting standard adoptions, net of tax —
—
—
—
—
2.6
(1.5 ) 1.1
Net loss —
—
—
—
—
(18.0 ) —
(18.0 )
Currency translation adjustments —
—
—
—
—
—
(2.3 ) (2.3 )
Change in derivatives, net of tax —
—
—
—
—
—
0.4
0.4
Change in benefit plans, net of tax —
—
—
—
—
—
(0.5 ) (0.5 )
Vesting of restricted shares 0.3
0.1
—
(1.4 ) —
—
—
(1.3 )
Share-based compensation —
—
—
—
4.6
—
—
4.6
Reissuance of treasury shares —
—
—
0.8
—
(0.3 ) —
0.5
Repurchase of shares —
—
2.9
(45.2 ) —
—
—
(45.2 )
Balance as of March 30, 2018 92.5
$ 18.5
8.8
$ (1,610.5 ) $ 5,497.2
$ 2,572.9
$ (16.8 ) $ 6,461.3
Net income —
—
—
—
—
15.6
—
15.6
Currency translation adjustments —
—
—
—
—
—
(5.0 ) (5.0 )
Change in derivatives, net of tax —
—
—
—
—
—
0.1
0.1
Vesting of restricted shares —
—
0.1
(0.2 ) (0.1 ) —
—
(0.3 )
Share-based compensation —
—
—
—
11.8
—
—
11.8
Reissuance of treasury shares —
—
(0.1 ) 1.6
—
(0.7 ) —
0.9
Repurchase of shares —
—
0.7
(10.0 ) —
—
—
(10.0 )
Balance as of June 29, 2018 92.5
$ 18.5
9.5
$ (1,619.1 ) $ 5,508.9
$ 2,587.8
$ (21.7 ) $ 6,474.4
Net income —
—
—
—
—
113.8
—
113.8
Currency translation adjustments —
—
—
—
—
—
3.2
3.2
Change in derivatives, net of tax —
—
—
—
—
—
0.2
0.2
Change in benefit plans, net of tax —
—
—
—
—
—
(0.4 ) (0.4 )
Vesting of restricted shares 0.2
—
—
(0.6 ) 0.9
—
—
0.3
Share-based compensation —
—
—
—
11.5
—
—
11.5
Reissuance of treasury shares —
—
(0.1 ) 1.2
—
(0.6 ) —
0.6
Balance as of September 28, 2018 92.7
$ 18.5
9.4
$ (1,618.5 ) $ 5,521.3
$ 2,701.0
$ (18.7 ) $ 6,603.6

~~See Notes to Condensed Consolidated Financial Statements.~~

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 ~~consisting~~ 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, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; analgesics and gastrointestinal products.

The Company operates in two reportable segments, which are further described below:


•	•Specialty Brands includes innovative specialty pharmaceutical brands; and • ~~includes innovative specialty pharmaceutical brands (inclusive of Amitiza~~^® ~~(lubiprostone) ("Amitiza"); and~~


•	Specialty Generics includes niche specialty generic drugs and active pharmaceutical ingredients ("API(s)").

During the nine months ended September 27, 2019, the Company experienced a change in its reportable segments, which primarily served to move the results related to Amitiza to the Specialty Brands segment from the Specialty Generics segment. All prior period segment information has been recast to reflect the realignment of the Company's reportable segments on a comparable basis.

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

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 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%~~50.0% of the voting shares, or have the ability to control through similar rights. 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 ~~income.~~ income (loss).

The fiscal year end balance sheet data was derived from audited consolidated financial statements, but do 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 ~~28, 2018~~27, 2019 filed with the U.S. Securities and Exchange Commission ("SEC") on February 26, ~~2019.~~2020.

Beginning in the first quarter through the third quarter of fiscal 2018, the historical financial results attributable to "the Specialty Generics Disposal Group" were reflected in the Company's interim

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.

On October 12, 2020, Mallinckrodt plc and certain of its subsidiaries voluntarily initiated proceedings (the "Chapter 11 Cases") under chapter 11 of title 11 ("Chapter 11") of the United States Code (the "Bankruptcy Code"), to modify its capital structure, including restructuring portions of its debt, and resolve potential legal liabilities, including but not limited to those described in Note 11 as ~~discontinued operations. As~~Opioid-Related Matters and Acthar Gel-Related Matters. In connection with the filing of the Chapter 11 Cases, the Company entered into a Restructuring Support Agreement (as defined in Note 14) as part of a prearranged plan of reorganization. See Note 14 for further information on the voluntary petitions for reorganization and the Restructuring Support Agreement.

Substantial doubt about the Company's ability to continue as a going concern exists in light of its Chapter 11 Cases. The Company's ability to continue as a going concern is contingent upon, among other things, its ability to, subject to the approval by the U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), implement a plan of reorganization, emerge from the

Chapter 11 proceedings and generate sufficient liquidity following the reorganization to meet its obligations, most notably its opioid and Acthar Gel®-related claims and outstanding debt, and operating needs.

Although management believes that the reorganization of the Company through the Chapter 11 proceedings will appropriately position the Company upon emergence, the commencement of these proceedings constituted an event of default under certain of the Company’s debt agreements, enforcement of any remedies in respect of which is automatically stayed as a result of the ~~December 6, 2018 spin-off announcement~~Chapter 11 proceedings. There are a number of risks and uncertainties associated with the Company’s bankruptcy, including, among others that: (a) the Company’s prearranged plan of reorganization may never be confirmed or become effective, (b) the Restructuring Support Agreement may be terminated by one or more of the ~~Specialty Generics business,~~parties thereto, (c) the ~~Specialty Generics Disposal Group no longer met the requirements to be classified as held for sale, and the historical financial results attributable~~Bankruptcy Court may grant or deny motions in a manner that is adverse to the ~~Specialty Generics Disposal Group were recast~~Company and its subsidiaries, and (d) the Chapter 11 Cases may be converted into cases under chapter 7 of the Bankruptcy Code.

The transactions contemplated by the Restructuring Support Agreement are subject to approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated. As a result, the Company has concluded that management’s plans at this stage do not alleviate substantial doubt about the Company’s ability to continue as ~~continuing operations in the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 2018, as well as the~~a going concern.

The unaudited condensed consolidated financial statements ~~for~~do not include any adjustments related to the ~~prior periods as presented herein. During~~recoverability and classification of recorded asset amounts and classification of liabilities that might result from the ~~three months ended September 27, 2019, the Company announced that it had suspended for now its previously announced plans to spin off the Specialty Generics business.~~outcome of this uncertainty.

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 nine months ended September ~~27, 2019~~25, 2020 refers to the thirteen and ~~thirty-nine~~twenty-six week periods ended September ~~27, 2019~~25, 2020 and the three and nine months ended September ~~28, 2018~~27, 2019 refers to the thirteen and ~~thirty-nine~~twenty-six week periods ended September ~~28, 2018.~~27, 2019.



2.			~~Recently Issued Accounting Standards~~

The Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," in February 2018. This ASU allows for a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for the stranded tax effects arising from the change in the reduction of the U.S. federal statutory income tax rate from 35% to 21%. The Company adopted this standard as of day 1 of fiscal 2019, which resulted in a reclassification between AOCI and retained deficit of $0.5 million, and had no impact on the Company's results of operations or financial position.

The FASB issued ASU 2016-02, "Leases," in February 2016. This ASU was issued to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset. The FASB subsequently issued additional ASUs to clarify the guidance of ASU 2016-02 ("Topic 842,") as amended. The Company adopted this standard as of day 1 of fiscal 2019 utilizing the modified transition approach expedient, which allows an entity to elect not to recast its comparative periods in the period of adoption. In addition, the Company elected to use the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. The Company also elected the hindsight practical expedient to determine the lease term for existing leases. Adoption of the new standard resulted in the recording of additional lease assets and corresponding liabilities of $83.1 million and $99.7 million, respectively, as of day 1 of fiscal 2019. Refer to Note 10 for further details on the Company's leases.



3.	Revenue from Contracts with Customers

Product Sales Revenue

See Note 1713 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		Product Returns		Other Sales Deductions		Total
Balance as of December 28, 2018	$	354.3	$	34.0	$	17.1	$	405.4
Provisions	1,772.9		18.8		50.7		1,842.4
Payments or credits	(1,844.4)		(22.9)		(41.2)		(1,908.5)
Balance as of September 27, 2019	$	282.8	$	29.9	$	26.6	$	339.3

Balance as of December 27, 2019	$	295.8	$	28.4	$	13.2	$	337.4
Provisions	1,453.7		22.3		44.3		1,520.3

Provision for Medicaid lawsuit (Note 11) (1)	535.1		0		0		535.1
Payments or credits	(1,461.3)		(24.3)		(45.8)		(1,531.4)
Balance as of September 25, 2020 (1)	$	823.3	$	26.4	$	11.7	$	861.4

Rebates and Chargebacks Product Returns Other Sales Deductions Total
Balance as of December 29, 2017 $ 327.4
$ 34.5
$ 14.7
$ 376.6
Provisions 1,644.5
32.0
47.5
1,724.0
Payments or credits (1,623.9 ) (30.5 ) (47.2 ) (1,701.6 )
Balance as of September 28, 2018 $ 348.0
$ 36.0
$ 15.0
$ 399.0

Balance as of December 28, 2018 $ 354.3
$ 34.0
$ 17.1
$ 405.4
Provisions 1,772.9
18.8
50.7
1,842.4
Payments or credits (1,844.4 ) (22.9 ) (41.2 ) (1,908.5 )
Balance as of September 27, 2019 $ 282.8
$ 29.9
$ 26.6
$ 339.3
(1)Excludes the $105.1 million that is reflected as a component of operating expenses as it represents a pre-acquisition contingency related to the portion of the liability that arose from sales of Acthar Gel prior to the Company’s acquisition of Questcor Pharmaceuticals Inc. ("Questcor") in August 2014. See Note 11 for further detail on the status of the Medicaid lawsuit.

Product sales transferred to customers at a point in time and over time were as follows:


	Three Months Ended				Nine Months Ended
	September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
Product sales transferred at a point in time	79.5	%	81.4	%	78.5	%	81.7	%
Product sales transferred over time	20.5		18.6		21.5		18.3

Three Months Ended Nine Months Ended
September 27,
2019 September 28,
2018 September 27,
2019 September 28,
2018
Product sales transferred at a point in time 81.4 % 83.1 % 81.7 % 82.8 %
Product sales transferred over time 18.6 % 16.9 % 18.3 % 17.2 %

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 September ~~27, 2019:~~25, 2020:


Remainder of Fiscal 2020	$	49.3
Fiscal 2021	106.0
Fiscal 2022	41.0
Fiscal 2023	9.9
Thereafter	0.3

Remainder of Fiscal 2019 $ 44.6
Fiscal 2020 168.3
Fiscal 2021 72.4
Fiscal 2022 16.5
Thereafter 6.2

Costs to fulfill a contract

As of September ~~27, 2019~~25, 2020 and December ~~28, 2018,~~27, 2019, the total net book value of the devices used in the Company's portfolio of drug-device combination products, which are used in satisfying future performance obligations, were ~~$26.4~~$26.8 million and ~~$28.4~~$26.5 million, respectively, and ~~are~~were classified in property, plant and equipment, net, on the unaudited condensed consolidated balance sheets. The associated depreciation expense recognized during the nine months ended September 25, 2020 and September 27, 2019 ~~and September 28, 2018~~ was ~~$5.1~~$4.0 million and ~~$8.5~~$5.1 million, respectively.

Product Royalty Revenues

The Company licenses certain rights to Amitiza® (lubiprostone) ("Amitiza") to a third party in exchange for royalties on net sales of the product. The Company recognizes such royalty revenue as the related sales occur. The royalty rates consist of several tiers ranging from ~~18%~~18.0% to ~~26%~~26.0% with the royalty rate resetting every year. The associated royalty revenue recognized was as follows:


	Three Months Ended				Nine Months Ended
	September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
Royalty revenue	$	20.4	$	19.5	$	52.3	$	56.3

Three Months Ended Nine Months Ended
September 27,
2019 September 28,
2018 September 27,
2019 September 28,
2018
Royalty revenue $ 19.5
$ 22.5
$ 56.3
$ 52.1

Royalty revenue for the three and nine months ended September 28, 2018 reflects royalty revenue for the period subsequent to the Company's February 2018 acquisition of Sucampo Pharmaceuticals, Inc. ("Sucampo Acquisition").

Contract Liabilities

The following table reflects the balance of the Company's contract liabilities at the end of ~~the respective periods:~~each period:

September 27,
2019 December 28,
2018
Accrued and other current liabilities $ 5.9
$ 20.4
Other liabilities 0.6
15.1
Contract liabilities $ 6.5
$ 35.5


	September 25, 2020		December 27, 2019
Accrued and other current liabilities	$	3.0	$	5.6
Other liabilities	0.4		0.6
Contract liabilities	$	3.4	$	6.2

Revenue recognized during the nine months ended September 25, 2020 and September 27, 2019 from amounts included in contract liabilities at the beginning of the period was $4.7 million and $10.3 million, respectively, inclusive of the Company's wholly owned subsidiary BioVectra Inc. ("BioVectra"), ~~which was classified as held for~~prior to the completion of the sale as of ~~September 27,~~this business in November 2019.



4.3.			~~Divestitures~~

In September 2019, the Company entered into an agreement to sell BioVectra to an affiliate of H.I.G. Capital for up to $250.0 million, including fixed consideration of $175.0 million, comprised of an upfront payment of $135.0 million and a long-term note for $40.0 million and contingent payments of up to $75.0 million. See Note 19 for updates to the deal structure that were made in conjunction with the completed sale of BioVectra on November 4, 2019.

~~The results related to BioVectra are reported under the Specialty Brands segment.~~

~~The following table summarizes the assets and liabilities of BioVectra that are classified as held for sale on the unaudited condensed consolidated balance sheet at the end of the respective period:~~

September 27,
2019
Carrying amounts of major classes of assets included as held for sale
Accounts receivable $ 15.6
Inventories 14.7
Property, plant and equipment, net 103.4
Intangible assets, net 14.5
Other current and non-current assets 27.7
Total assets classified as held for sale on the balance sheet $ 175.9
Carrying amounts of major classes of liabilities included as held for sale
Accounts payable $ 9.9
Other current and non-current liabilities 45.9
Total liabilities classified as held for sale on the balance sheet $ 55.8



5.	Restructuring and Related Charges

~~In July~~During fiscal 2018 and 2016, the ~~Company's Board~~Company launched restructuring programs designed to improve its cost structure. Charges of ~~Directors approved a~~ $100.0 million to $125.0 million ~~restructuring~~were provided for under each program. Each program (the "2016 Mallinckrodt Program"), designed to further improve its cost structure as the Company continues to transform its business. The 2016 Mallinckrodt Program included actions across the Specialty Brands segment and the Specialty Generics segment, as well as within the corporate functions. The 2016 Mallinckrodt Program was substantially completed in fiscal 2018.

In February 2018, the Company's Board of Directors approved a $100.0 million to $125.0 million restructuring program (the "2018 Mallinckrodt Program") that is of similar design as the 2016 Mallinckrodt Program. The utilization of the 2018 Mallinckrodt Programgenerally commenced upon substantial completion of the ~~2016 Mallinckrodt Program. There is no specified time period associated with the 2018 Mallinckrodt Program.~~

previous program. In addition to the ~~2018 and 2016 Mallinckrodt Programs,~~aforementioned programs, the Company has taken restructuring actions to generate synergies from its acquisitions.

Net restructuring and related charges by segment were as follows:


	Three Months Ended				Nine Months Ended
	September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
Specialty Brands	$	0	$	0	$	0.1	$	0.4
Specialty Generics	0		6.7		0.1		9.3
Corporate	3.2		0.5		15.6		1.5
Restructuring charges, net	$	3.2	$	7.2	$	15.8	$	11.2

Three Months Ended Nine Months Ended
September 27,
2019 September 28,
2018 September 27,
2019 September 28,
2018
Specialty Brands $ —
$ 4.9
$ 0.4
$ 52.4
Specialty Generics 6.7
0.1
9.3
5.3
Corporate 0.5
14.6
1.5
48.9
Restructuring and related charges, net 7.2
19.6
11.2
106.6
Less: accelerated depreciation —
(4.8 ) —
(4.8 )
Restructuring charges, net $ 7.2
$ 14.8
$ 11.2
$ 101.8

Net restructuring and related charges by program were comprised of the following:


	Three Months Ended				Nine Months Ended
	September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
2018 Program	$	3.2	$	6.7	$	17.8	$	9.3
2016 Program	0		0.5		(0.1)		2.7
Acquisition Programs	0		0		(1.9)		(0.8)


Total charges expected to be settled in cash	$	3.2	$	7.2	$	15.8	$	11.2

Three Months Ended Nine Months Ended
September 27,
2019 September 28,
2018 September 27,
2019 September 28,
2018
2018 Mallinckrodt Program $ 6.7
$ 5.2
$ 9.3
$ 5.2
2016 Mallinckrodt Program 0.5
9.8
2.7
70.2
Acquisition Programs —
4.6
(0.8 ) 31.2
Total 7.2
19.6
11.2
106.6
Less: non-cash charges, including accelerated depreciation —
(4.8 ) —
(4.8 )
Total charges expected to be settled in cash $ 7.2
$ 14.8
$ 11.2
$ 101.8

Nine Months Ended
September 27,
2019 September 28,
2018 Percentage Change
Hydrocodone (API) and hydrocodone-containing tablets $ 51.2
$ 46.3
10.6 %
Oxycodone (API) and oxycodone-containing tablets 53.3
43.3
23.1
Acetaminophen (API) 143.1
149.0
(4.0 )
Other controlled substances 265.7
258.0
3.0
Other 31.9
39.8
(19.8 )
Specialty Generics $ 545.2
$ 536.4
1.6

Operating ~~Income~~Loss

Operating income by segment and as a percentage of segment net sales were as follows (dollars in millions):


	Nine Months Ended
	September 25, 2020				September 27, 2019
Specialty Brands (1)	$	765.0	49.3	%	$	894.2	49.3	%
Specialty Generics	155.5		30.3		125.4		23.0
Segment operating income	920.5		44.6		1,019.6		43.2
Unallocated amounts:
Corporate and unallocated expenses (2)	(152.3)				(76.6)
Depreciation and amortization	(675.5)				(723.5)
Share-based compensation	(17.6)				(30.6)
Restructuring and related charges, net	(15.8)				(11.2)
Non-restructuring impairment charges	(63.5)				(113.5)
Separation costs	(75.0)				(50.4)
R&D upfront payment (3)	(5.0)				(20.0)
Opioid-related litigation settlement (4)	34.1				—
Medicaid lawsuit (Note 11)	(640.2)				—
Total operating loss	$	(690.3)			$	(6.2)

Nine Months Ended
September 27, 2019 September 28, 2018
Specialty Brands ⁽¹⁾
$ 864.2
47.7 % $ 794.4
43.1 %
Specialty Generics 80.1
14.7
94.7
17.7
Segment operating income 944.3
40.1
889.1
37.3
Unallocated amounts:
Corporate and allocated expenses (105.6 ) (85.7 )
Intangible asset amortization (649.8 ) (546.5 )
Restructuring and related charges, net (11.2 ) (106.6 )
Non-restructuring impairment charges (113.5 ) (2.0 )
Separation costs (50.4 ) —

R&D upfront payment ⁽²⁾
(20.0 ) —

Total operating (loss) income $ (6.2 ) $ 148.3

(1)Includes $10.0 million of inventory fair-value step up expense, primarily related to Amitiza, during the nine months ended September 27, 2019.


~~(1)~~	~~Includes $10.0 million and $77.5 million of inventory fair-value step up expense, primarily related to Amitiza, during the nine months ended September 27, 2019 and September 28, 2018, respectively.~~


~~(2)~~	~~Represents R&D expense incurred related to an upfront payment made to Silence in connection with the license and collaboration agreement entered into in July 2019.~~

(2)Includes administration expenses and certain compensation, legal, environmental and other costs not charged to our reportable segments.

(3)Represents R&D expense incurred related to an upfront payment made to acquire product rights in Japan for terlipressin during the nine months ended September 25, 2020, and an upfront payment made to Silence in connection with the license and collaboration agreement entered into during the nine months ended September 27, 2019.

(4)Represents the change in the Settlement Warrants' fair value. Refer to Note 12 of the notes to the unaudited condensed consolidated financial statements for further information regarding the valuations of the Settlement Warrants.

Specialty Brands. Operating income for the nine months ended September ~~27, 2019 increased $69.8~~25, 2020 decreased $129.2 million to ~~$864.2~~$765.0 million, compared with ~~$794.4~~$894.2 million for the nine months ended September ~~28, 2018.~~27, 2019. Operating margin ~~increased to 47.7%~~remained consistent at 49.3% for the nine months ended September ~~27, 2019, compared with 43.1% for~~25, 2020 and the nine months ended September ~~28, 2018.~~27, 2019. The ~~increase~~decrease in operating income ~~and margin includes a $35.2 million increase in gross profit~~is primarily driven by ~~an additional $67.5~~the $259.4 million, ~~of expense recorded during~~or 14.3%, decrease in net sales over the ~~nine months ended September 28, 2018 related to the inventory fair value adjustment for Amitiza,~~

same period, which resulted in a $188.0 million decrease in gross profit. This was ~~fully amortized in the first quarter of 2019. The increase in operating income and margin was also attributable to~~partially offset by a ~~$29.7~~$38.8 million or 9.7% decrease in SG&A expenses ~~compared to the nine months ended September 28, 2018,~~ primarily driven by lower professional fees, lower travel costs due to ~~cost benefits gained from restructuring actions, including~~temporary travel restrictions for COVID-19, lower ~~employee compensation costs, partially offset by increased legal expense~~consulting and professional fees and a $20.0 million or 9.5% decrease in R&D ~~expenses of $5.4 million.~~expenses.

Specialty Generics. Operating income for the nine months ended September ~~27, 2019 decreased $14.6~~25, 2020 increased $30.1 million to ~~$80.1~~$155.5 million, compared with $94.7 million for the nine months ended September 28, 2018. Operating margin decreased to 14.7% for the nine months ended September 27, 2019, compared with 17.7% for the nine months ended September 28, 2018. The decrease in operating income and margin was primarily impacted by an increase in SG&A primarily due to higher legal expense related to opioid defense costs, partially offset by an $8.4 million decrease in R&D expenses. Operating income and margin during the nine months ended September 28, 2018 benefited from the exclusion of $17.7 million of depreciation for the Specialty Generics Disposal Group given its classification as held for sale through the third quarter of fiscal 2018.

~~Corporate and allocated expenses.~~ ~~Corporate and allocated expenses were $105.6 million and $85.7~~$125.4 million for the nine months ended September 27, ~~2019 and~~2019. Operating margin increased to 30.3% for the nine months ended September ~~28, 2018, respectively. The~~25, 2020, compared with 23.0% for the nine months ended September 27, 2019. As a result of the Opioid-Related Litigation Settlement announced during the three months ended March 27, 2020, the corresponding opioid defense costs are considered to be non-recurring; therefore, such costs are excluded from segment operating income and presented as a corporate and unallocated expense on a go-forward basis. In comparison, there were $42.3 million of opioid defense costs reflected in operating income during the nine months ended September 27, 2019. This was partially offset by a decrease in gross profit driven by the decrease in net sales.

Corporate and unallocated expenses. Corporate and unallocated expenses were $152.3 million and $76.6 million for the nine months ended September 25, 2020 and September 27, 2019, ~~included~~respectively. This increase was primarily driven by opioid defense costs of $53.1 million being presented as a corporate and unallocated expense beginning during the nine months ended September 25, 2020, as a result of the Opioid-Related Litigation Settlement, as previously discussed, and a $2.4 million increase in the fair value of our contingent consideration liabilities during the nine months ended September 25, 2020, compared to a $23.5 million decrease during the three months ended September 27, 2019. The remaining increase is primarily related to employee compensation and benefits driven by certain changes made to the design of our long-term incentive compensation program in an effort to manage share usage and dilution and the approval of a key employee incentive program during the nine months ended September 25, 2020, both of which reflect the shorter-term nature of our new target opportunities. These increases were partially offset by a $28.2 million charge associated with the settlement of the MDL Track 1 Cases ~~partially offset by a $23.5 million decrease~~during the ~~fair value of our contingent consideration liabilities primarily due to an increase in discount rates. The nine~~three months ended September ~~28, 2018 included a $35.0 million decrease in fair value of the contingent consideration liability related to stannsoporfin~~27, 2019 and an $11.8 million reduction in the accrual associated with our Lower Passaic River, New Jersey environmental remediation liability. The remaining decrease was primarily driven by cost benefits gained from restructuring actions, including lower ~~employee compensation costs, partially offset by increased~~ professional and fees.

Liquidity and Capital Resources

Significant factors driving our liquidity position include cash flows generated from operating activities, financing transactions, capital expenditures, cash paid in connection with acquisitions and licensing agreements and cash received as a result of our

divestitures. We ~~believe~~have historically generated and expect to continue to generate positive cash flows from operations. Our ability to fund our capital needs is impacted by our ongoing ability to generate cash from operations and access to capital markets.

On October 12, 2020, we voluntarily initiated Chapter 11 proceedings in the Bankruptcy Court to modify our capital structure, including restructuring portions of our debt, and resolve potential legal liabilities. We intend to use the Chapter 11 process to provide a fair, orderly, efficient and legally binding mechanism to implement a RSA that provides for a financial restructuring designed to strengthen our balance sheet and reduce our total debt by approximately $1,300.0 million, improving our financial position and allowing us to continue driving our strategic priorities and investing in the business to develop and commercialize therapies to improve health outcomes.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming we will continue as a going concern. The transactions contemplated by the RSA are subject to approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated. As a result, we have concluded that management’s plans at this stage do not alleviate substantial doubt about our ability to continue as a going concern. Consequently, our future cash from operations and access to capital markets ~~will~~may not provide adequate resources to fund our working capital needs, capital expenditures and strategic investments for the foreseeable future.

From time to time, we may seek to enter into certain transactions to reduce the extent of our leverage and/or to extend the maturities of our outstanding indebtedness. For example, on November 5, 2019, we announced the commencement of a private exchange offering as discussed further in "Debt and Capitalization" within this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Furthermore, resolution of the previously mentioned opioid-related matters could have a material adverse impact on our financial position, cash flows or liquidity. We have been in preliminary discussions with certain plaintiffs in other pending opioid lawsuits and are likely to have further discussions and/or enter into additional discussions with other parties in connection with opioid lawsuits. We may be required to pay material amounts and/or incur other material obligations as a result of any settlements that are entered into as a result of such discussions. Further information on these risks are described in Part II, Item 1A. "Risk Factors".

A summary of our cash flows from operating, investing and financing activities is provided in the following table (dollars in millions):


	Nine Months Ended
	September 25, 2020		September 27, 2019
Net cash from:
Operating activities	$	294.7	$	534.1
Investing activities	(36.4)		(95.0)
Financing activities	(180.6)		(265.2)
Effect of currency exchange rate changes on cash and cash equivalents	0.2		0.5
Net increase (decrease) in cash and cash equivalents	$	77.9	$	174.4

Nine Months Ended
September 27,
2019 September 28,
2018
Net cash from:
Operating activities $ 534.1
$ 481.1
Investing activities (95.0 ) (451.2 )
Financing activities (265.2 ) (998.9 )
Effect of currency exchange rate changes on cash and cash equivalents 0.5
(0.9 )
Net increase (decrease) in cash and cash equivalents $ 174.4
$ (969.9 )

Operating Activities

Net cash provided by operating activities of $294.7 million for the nine months ended September 25, 2020 was attributable to a net loss of $791.7 million, adjusted for non-cash items of $1,028.9 million, driven by depreciation and amortization of $675.5 million, a $304.0 million reduction in our deferred income tax assets, and a non-cash impairment charge of $63.5 million. This net loss was offset by cash provided from net investment in working capital of $57.5 million, which was primarily driven by the recognition of the $640.2 million retrospective one-time charge related to the Acthar Gel Medicaid Retrospective Rebateas previously mentioned. Also included within this change in working capital was a $61.1 million decrease in accounts receivable, offset by a $431.2 million increase in net receivables related to income taxes driven by tax benefits from the CARES Act , a $116.3 million net cash outflow related to other assets and liabilities primarily driven by decreases in accrued payroll and accrued restructuring, a $52.4 million decrease in accounts payable and a $43.9 million increase in inventory.

Net cash provided by operating activities of $534.1 million for the nine months ended September 27, 2019 was primarily attributable to net income of $160.6 million, adjusted for non-cash items of $435.4 million driven by depreciation and amortization of $723.5 million and a non-cash impairment charge of $113.5 million, partially offset by a $301.9 million reduction in our deferred income tax liabilities and a $98.6 million gain on debt repurchased. Net investment in working capital utilized $61.9 million of cash flow from operating activities. Included within this change in working capital was aan $88.0 million net cash outflow related to other assets

and liabilities primarily driven by a $37.8 million decrease in accrued payroll liabilities, a $32.0 million increase in inventory, a $27.8 million decrease in accounts payable and a one-time payment of $15.4 million related to the legacy Questcor ~~Pharmaceuticals, Inc. (“Questcor”)~~ U.S. Department of Justice ("DOJ") settlement. This was partially offset by a $68.7 million decrease in accounts ~~receivable primarily attributable to a shift in customer mix and the timing of receipts, in addition to a higher balance of gross receivables at the end of fiscal 2018.~~receivable.

Net cash provided by operating activities of $481.1 million for the nine months ended September 28, 2018 was primarily attributable to net income of $111.4 million, adjusted for non-cash items of $391.1 million driven by depreciation and amortization of $597.0 million, partially offset by $232.7 million related to a reduction in our deferred income tax liabilities and a $21.4 million outflow from net investment in working capital. Included within this change in working capital were a $22.1 million net cash outflow related to other assets and liabilities, a $59.0 million increase in accounts receivable, partially offset by a $43.1 million decrease in inventory and a $16.7 million increase in net payables related to income taxes. The net cash outflow from other assets and liabilities was primarily attributable to the payment of liabilities assumed from the acquisition of Sucampo Pharmaceuticals, Inc. ("Sucampo Acquisition") in February 2018.

Investing Activities

Net cash used in investing activities was $36.4 million for the nine months ended September 25, 2020, compared with $95.0 million for the nine months ended September 27, ~~2019, compared with $451.2~~2019. The $58.6 million ~~for the nine months ended September 28, 2018. The $356.2 million~~ change primarily resulted from the cash outflows related to the Sucampo Acquisition of $698.0 million, partially offset by the $159.2 million of proceeds received, net of transaction costs, from the divestiture of a portion of the Hemostasis business, inclusive of the PreveLeak and Recothrom products during the nine months ended September 28, 2018; proceeds received of $154.0 million related to the note receivable from the purchaser of the Intrathecal Therapy business, which was sold during the three months ended March 31, 2017; and a $25.5 million cash inflow related to the sale of the remaining portion of our investment in Mesoblast Limited during the nine months ended September 28, 2018. The cash used in investing activities during the nine months ended September 27, 2019 was primarily attributable to ~~$108.7~~the $66.3 million decrease in capital expenditures.

Under our term loan credit agreement, the proceeds from the sale of assets and businesses must be either reinvested into capital expenditures or business development activities within one year of the respective transaction or we are required to make repayments on our term loan. For further information, refer to "Debt and Capitalization" within this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Financing Activities

Net cash used in financing activities was $180.6 million for the nine months ended September 25, 2020, compared with $265.2 million for the nine months ended September 27, ~~2019, compared with $998.9 million for the nine months ended September 28, 2018.~~2019. The ~~$733.7~~$84.6 million decrease in cash outflows was attributable to a ~~$661.1~~$110.5 million decrease in debt repayments, net of issuances, and a ~~$54.9~~$2.1 million decrease in shares repurchased. Our current year debt repayments included a $119.8 million payment on the remaining principal amount of 2020 Notes and $14.8 million in aggregate payments on our variable-rate term loans. The significant components of our ~~current year~~ debt repayments during the nine months ended September 27, 2019 included aggregate debt repayments of $281.4 million on our variable-rate term loans, open market debt repurchases that aggregated to a total principal amount of $492.1 million and a repayment of $250.0 million on the receivable securitization program. These repayments were partially offset by a net draw of $680.0 million on our revolving credit facility. The nine months ended September 28, 2018 included debt repayment of $600.0 million related to our revolving credit facility, a $225.0 million voluntary repayment of the variable-rate term loan maturing in 2024, repayment of $366.0 million of assumed debt from the Sucampo Acquisition, a $300.0 million repayment of fully matured unsecured fixed rate notes and open market debt repurchases that aggregated to a total principal amount of $33.0 million.

Debt and Capitalization

As of September ~~27, 2019,~~25, 2020, the total debt principal was ~~$5,810.9~~$5,288.2 million, all of which ~~$717.7 million~~ was classified as ~~current.~~

current as a result of the filing of the Chapter 11 Cases. The total debt principal as of September ~~27, 2019~~25, 2020 was comprised of the following:


Variable-rate instruments:
Term loan due September 2024	$	1,509.1
Term loan due February 2025	400.5

Revolving credit facility	900.0
Fixed-rate instruments	2,478.6
Debt principal	$	5,288.2

Variable-rate instruments:
Term loan due September 2024 $ 1,524.7
Term loan due February 2025 404.6
Revolving credit facility 900.0
Fixed-rate instruments 2,981.6
Debt principal $ 5,810.9

The variable-rate term loan interest rates are based on ~~LIBOR,~~the London Inter-bank Offered Rate ("LIBOR"), subject to a minimum LIBOR level of 0.75% with interest payments generally expected to be payable every 90 days, and requires quarterly principal payments equal to 0.25% of the principal amount. As of September ~~27, 2019,~~25, 2020, our fixed-rate instruments have a weighted-average interest rate of ~~5.37%~~7.05% and pay interest at various dates throughout the fiscal year. As of September ~~27, 2019,~~25, 2020, we were fully drawn on our $900.0 million revolving credit facility.

In November 2015, our Board of Directors authorized us to reduce our outstanding debt at our discretion. As ~~market~~ conditions warrant, and subject to limitations under Chapter 11, we may ~~from time to time~~ repurchase debt securities issued by us, in the open market, in privately negotiated transactions, by tender offer or otherwise. ~~Such repurchases, if any, will depend~~

2020 Notes

On April 7, 2020, we and Mallinckrodt International Finance S.A. and Mallinckrodt CB LLC, two of our wholly owned subsidiaries ( "Issuers"), entered into an exchange agreement (the "Exchange Agreement") with certain third parties (collectively, the "Exchanging Holders"). Pursuant to the Exchange Agreement, the Exchanging Holders agreed to exchange with the Issuers, on ~~prevailing market conditions, our liquidity requirements and other factors. The amounts involved may be material.~~

~~Debt reduction continues to be one~~April 7, 2020, their holdings of the ~~primary focuses~~2020 Notes issued by the Issuers (the "Existing Notes") (consisting of ~~our capital allocation strategy for fiscal 2019. Total principal debt reduction during the nine months ended September 27, 2019 was $345.8~~approximately $495.0 million ~~inclusive of debt repurchases of total~~aggregate principal amount of ~~$492.1 million, repayment~~the Existing Notes) for new 10.00% First Lien Senior Secured Notes due 2025 issued by the Issuers (the "First Lien 2025 Notes"), at a rate of ~~$250.0 million~~$1,000 of First Lien 2025 Notes for every $1,000 of Existing Notes exchanged (such exchange, the "Exchange"). The Issuers and Exchanging Holders consummated the Exchange on ~~our variable-rate receivable securitization due July 2020, thus automatically terminating this facility,~~April 7, 2020.

Interest on the First Lien 2025 Notes is payable semi-annually in cash on April 15th and ~~voluntary prepayments~~October 15th of ~~$25.0 million and $175.0 million~~each year, commencing on our outstanding term loans due September 2024 and February 2025, respectively. In making the voluntary prepayments, we satisfied certain obligations included within external debt agreements to reinvest proceeds from the sale of assets and businesses within one yearOctober 15, 2020.

The Issuers may redeem some or all of the ~~respective transaction~~First Lien 2025 Notes prior to April 15, 2022 by paying a "make-whole" premium. The Issuers may redeem some or ~~use~~all of the First Lien 2025 Notes on or after April 15, 2022 at specified redemption prices. In addition, prior to April 15, 2022, the Issuers may redeem up to 40% of the aggregate principal amount of the First Lien 2025 Notes with the net proceeds of certain equity offerings. The Issuers may also redeem all, but not less than all, of the First Lien 2025 Notes at any time at a price of 100% of their principal amount, plus accrued and unpaid interest, if any, in the event the Issuers become obligated to pay ~~down debt.~~additional amounts as a result of changes affecting certain withholding tax laws applicable to payments on the First Lien 2025 Notes.

The Issuers are obligated to offer to repurchase (a) all of the First Lien 2025 Notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events and (b) First Lien 2025 Notes using asset sale proceeds at a price of 100% of their principal amount plus accrued and unpaid interest, if any, in the event of certain asset sales. These ~~repayments were partially offset~~obligations are subject to certain qualifications and exceptions.

The First Lien 2025 Notes are subject to an indenture that contains certain customary covenants and events of default (subject in certain cases to customary grace and cure periods). The occurrence of an event of default under the indenture could result in the acceleration of the First Lien 2025 Notes and could cause a cross-default that could result in the acceleration of our other indebtedness.

The First Lien 2025 Notes are jointly and severally guaranteed, subject to certain exceptions, on a secured, unsubordinated basis by ~~$680.0~~us and each of our subsidiaries (other than the Issuers) (the "Note Guarantors") that guarantees the obligations under the Issuers’ existing senior secured credit facilities.

The First Lien 2025 Notes and the guarantees thereof are secured by liens on the same assets of the Issuers and the Note Guarantors that are subject to liens securing the existing senior secured credit facilities, subject to certain exceptions.

On April 15, 2020, we paid in full the remaining approximately $119.8 million in principal amount of ~~aggregate draws~~outstanding 2020 Notes at the maturity thereof with cash on ~~our revolving credit facility during the nine months ended September 27, 2019.~~ hand.

As of September ~~27, 2019,~~25, 2020, we were ~~and expect to remain,~~ in full compliance with the provisions and covenants associated with our debt agreements.

~~On November 5, 2019, upon~~ The commencement of the ~~terms and conditions set forth in a confidential offering memorandum dated November 5, 2019, Mallinckrodt International Finance S.A. and Mallinckrodt CB LLC, each a wholly owned subsidiary~~Chapter 11 Cases on October 12, 2020 constituted an event of ours (the "Issuers") commenced private offers to exchange (the "Exchange Offers") any and all of (i) the 4.875% Senior Notes due April 2020 issued by the Issuers for new 10.000% Second Lien Senior Secured Notes due 2025 to be issued by the Issuers (the "New Notes") and (ii) the 5.750% Senior Notes due August 2022, 4.750% Senior Notes due April 2023, 5.625% Senior Notes due October 2023 and 5.500% Senior Notes due April 2025 issued by the Issuers (collectively, and together with the 4.875% Senior Notes due April 2020, the "Notes") for up to $355.0 million of New Notes. In connection with the Exchange Offers, the Issuers also commenced solicitations of consents from the holders of each series of Notes to (other than the 4.750% Senior Notes due April 2023) amend the indentures governing such series of Notes to eliminatedefault under certain of our debt agreements. Accordingly, all long-term debt was classified as current on the ~~covenants, restrictive provisions, events~~unaudited condensed consolidated balance sheet as of ~~default and related provisions therein. Refer~~September 25, 2020. However, any efforts to ~~Part II, Item 1A. "Risk Factors" for information regarding~~enforce payment obligations under the ~~risks related~~debt instruments are automatically stayed as a result of the Chapter 11 Cases. See Note 14 of the notes to the ~~Exchange Offers.~~unaudited condensed consolidated financial statements for further information.

On November 5, 2019, Deerfield Partners, L.P., Deerfield Special Situations Fund, L.P. and Deerfield Private Design Fund IV, L.P. (the "Exchanging Holders") entered into an exchange agreement (the "Exchange Agreement") with the Issuers pursuant to which such Exchanging Holders agreed to, among other things, exchange with the Issuers on the settlement date of the Exchange Offers, separate from such Exchange Offers, their holdings of Notes (comprised of approximately $67.6 million aggregate principal amount 4.875% Senior Notes due April 2020, approximately $258.7 million aggregate principal amount of the 4.750% Senior Notes due April 2023, approximately $98.5 million aggregate principal amount of the 5.625% Senior Notes due October 2023 and approximately $75.2 million aggregate principal amount of 5.500% Senior Notes due April 2025) for approximately $227.0 million aggregate principal amount of New Notes.

Commitments and Contingencies

Legal Proceedings

See Note 1511 of the notes to the unaudited condensed consolidated financial statements for a description of the legal proceedings and claims as of September ~~27, 2019.~~25, 2020.

Guarantees

In disposing of assets or businesses, we have historically provided representations, warranties and indemnities to cover various risks and liabilities, including unknown damage to the 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. We assess the probability of potential liabilities related to such representations, warranties and indemnities and adjust potential liabilities as a result of changes in facts and circumstances. We believe, given the information currently available, that their ultimate resolutions will not have a material adverse effect on our financial condition, results of operations and cash flows. These representations, warranties and indemnities are discussed in Note 1410 of the notes to the unaudited condensed consolidated financial statements.

Off-Balance Sheet Arrangements

As of September ~~27, 2019,~~25, 2020, we had various letters of credit, guarantees and surety bonds totaling ~~$35.6~~$31.2 million. There has been no change in our off-balance sheet arrangements during the nine months ended September ~~27, 2019.~~25, 2020.

Critical Accounting Policies and Estimates

The preparation of our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. (GAAP) requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities.

We believe that our accounting policies for revenue recognition, intangible assets, acquisitions, contingencies and income taxes are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. During the nine months ended September ~~27, 2019~~,25, 2020, there were no significant changes to these policies or in the underlying accounting assumptions and estimates used in the above critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December ~~28, 2018.~~27, 2019.

~~Refer to Note 10 to the unaudited condensed consolidated financial statements for our adoption of ASU 2016-02, "Leases," and its related amendments.~~

Forward-Looking Statements

We have made forward-looking statements in this Quarterly Report on Form 10-Q that are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include, but are not limited to, information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, ~~and~~ the effects of competition, ~~litigation~~ and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," "plan," "intend," "project," "anticipate," "estimate," "predict," "potential," "continue," "may," ~~"should,~~"could," ~~"will," "would," "could"~~"should" or the negative of these terms or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any forward-looking statements.

The risk factors included within Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December ~~28, 2018~~27, 2019 and within Part II, Item 1A of this Quarterly Report on Form 10-Q could cause our results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business.

These forward-looking statements are made as of the filing date of this Quarterly Report on Form 10-Q. We expressly disclaim any obligation to update these forward-looking statements other than as required by law.



Item 3.			Quantitative and Qualitative Disclosures About Market Risk.

Our operations include activities in the U.S. and countries outside of the U.S. These operations expose us to a variety of market risks, including the effects of changes in interest rates and currency exchange rates. We monitor and manage these financial exposures as an integral part of our overall risk management program. We do not utilize derivative instruments for trading or speculative purposes.

Interest Rate Risk

Our exposure to interest rate risk relates primarily to our variable-rate debt instruments, which bear interest based on LIBOR plus margin. As of September ~~27, 2019,~~25, 2020, our outstanding debt included ~~$1,929.3~~$1,909.6 million variable-rate debt on our senior secured term loans and $900.0 million outstanding borrowings on our senior secured revolving credit facility. Assuming a one percent increase in the applicable interest rates, in excess of applicable minimum floors, quarterly interest expense would increase by approximately ~~$7.1~~$7.0 million.

The remaining outstanding debt as of September ~~27, 2019~~25, 2020 is fixed-rate debt. Changes in market interest rates generally affect the fair value of fixed-rate debt, but do not impact earnings or cash flows.

Currency Risk

Certain net sales and costs of our international operations are denominated in the local currency of the respective countries. As such, profits from these subsidiaries may be impacted by fluctuations in the value of these local currencies relative to the U.S. dollar. We also have significant intercompany financing arrangements that may result in gains and losses in our results of operations. In an effort to mitigate the impact of currency exchange rate effects we may hedge certain operational and intercompany transactions; however, our hedging strategies may not fully offset gains and losses recognized in our results of operations.

The unaudited condensed consolidated statement of ~~income~~operations is exposed to currency risk from intercompany financing arrangements, which primarily consist of intercompany debt and intercompany cash pooling, where the denominated currency of the transaction differs from the functional currency of one or more of our subsidiaries. We performed a sensitivity analysis for these arrangements as of September ~~27, 2019~~25, 2020 that measured the potential unfavorable impact to income from continuing operations before income taxes from a hypothetical 10.0% adverse movement in foreign exchange rates relative to the U.S. dollar, with all other variables held constant. The aggregate potential unfavorable impact from a hypothetical 10.0% adverse change in foreign exchange rates was ~~$1.8~~$0.5 million aggregate potential as of September ~~27, 2019.~~25, 2020. This hypothetical loss does not reflect any hypothetical benefits that would be derived from hedging activities, including cash holdings in similar foreign currencies that we have historically utilized to mitigate our exposure to movements in foreign exchange rates.

~~The financial results of our international operations are translated into U.S. dollars, further exposing us to currency exchange rate fluctuations. We have performed a sensitivity analysis as of~~ ~~September 27, 2019~~ that measures the change in the net financial position arising from a hypothetical 10.0% adverse movement in the exchange rates of all foreign currencies used, including the Euro and the Canadian Dollar, our most widely used foreign currencies, relative to the U.S. dollar, with all other variables held constant. The aggregate potential change in net financial position from a hypothetical 10.0% adverse change in the above currencies was $15.7 million as of ~~September 27, 2019~~. The change in the net financial position associated with the translation of these currencies is generally recorded as an unrealized gain or loss on foreign currency translation within accumulated other comprehensive loss in shareholders' equity of our unaudited condensed consolidated balance sheets.



Item 4.			Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended ("the Exchange Act"), is recorded, processed, summarized and reported within the specified time periods, and that such information is accumulated and communicated to management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q.

As previously disclosed under “Part II - Item 9A - Controls and Procedures” in our Annual Report on Form 10-K for the fiscal year ended December 28, 2018, the Company did not design and maintain sufficiently precise or effective review and approval controls over the future cash flow forecasts used to develop certain management estimates, including those related to goodwill and other intangible assets. Management concluded that this control deficiency represented a material weakness. This material weakness did not result in a material misstatement to the Company’s financial statements or disclosures.

~~Management’s Remediation Initiatives~~

During the three months ended March 29, 2019, management, under the oversight of the executive leadership team and those charged with governance, completed the remedial actions below to improve the Company’s internal control over financial reporting and remediated the design of the material weakness:

Continued to emphasize the importance of, and monitor the sustained compliance with, the execution of our internal controls over financial reporting through, among other activities, numerous meetings and trainings.

Enhanced, and will continue to enhance, the design of internal controls governing oversight and evaluation of future cash flow forecasts used to develop certain management estimates, including those related to goodwill and other intangible assets.

Tested the design effectiveness of the enhanced internal controls by performing them to re-evaluate the appropriateness, and test the accuracy, of information used to develop future cash flow forecasts in 2018.

~~Concluded the enhanced controls were designed effectively and developed a plan to implement them to support future cash flow forecasts in 2019.~~

During the three months ended March 29, 2019, we successfully completed the actions above of testing the design of the enhanced internal controls to the extent necessary to conclude that the deficiencies in the design of the internal controls over future cash flows have been remediated. We will test and conclude on the operating effectiveness of these controls as they occur in 2019. Based on ~~the activities and~~that evaluation, ~~described above,~~ our CEO and CFO concluded that, as of ~~September 27, 2019,~~that date, our disclosure controls and procedures were effective.

The remediation efforts were intended both to address the identified material weakness and to enhance our overall financial control environment. Management is committed to continuous improvement of the Company’s internal control over financial reporting and will continue to diligently review the Company’s internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September ~~27, 2019~~25, 2020 that have materially affected, or are likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION



Item 1.			Legal Proceedings.

We are subject to various legal proceedings and claims, including government investigations, environmental matters, product liability matters, patent infringement claims, employment disputes, contractual disputes and other commercial disputes, including those described below. We believe these legal proceedings and claims likely will be resolved over an extended period of time. Although it is not feasible to predict the outcome of these matters, we believe, unless indicated below, given the information currently available, that their ultimate resolution will not have a material adverse effect on our financial condition, results of operations and cash flows.

~~Opioid-Related Matters~~

Since 2017, multiple U.S. states, counties, other governmental persons or entities and private plaintiffs have filed lawsuits against certain entities of our company, as well as various other manufacturers, distributors, pharmacies, pharmacy benefit managers, individual doctors and/or others, asserting claims relating to defendants’ alleged sales, marketing, distribution, reimbursement, prescribing, dispensing and/or other practices with respect to prescription opioid medications, including certain of our products. As of November 5, 2019, the cases we are aware of include, but are not limited to, approximately 2,315 cases filed by counties, cities, Native American tribes and/or other government-related persons or entities; approximately 207 cases filed by hospitals, health systems, unions, health and welfare funds or other third-party payers; approximately 104 cases filed by individuals and 14 cases filed by the Attorneys General for New Mexico, Kentucky, Rhode Island, Georgia, Florida, Alaska, New York, Hawaii, Nevada, South Dakota, New Hampshire, Louisiana, Illinois and Idaho, with Idaho being the only state Attorney General to file in federal as opposed to state court. As of November 5, 2019, the Mallinckrodt defendants in these cases consist of Mallinckrodt plc and the following subsidiaries of Mallinckrodt plc: Mallinckrodt Enterprises LLC, Mallinckrodt LLC, SpecGx LLC, Mallinckrodt Brand Pharmaceuticals Inc., Mallinckrodt Inc., MNK 2011 Inc., and Mallinckrodt Enterprises Holdings, Inc. On September 12, 2019, the Attorney General for Ohio filed a motion in the Common Pleas Court of Ross County, Ohio to amend its complaint to add certain entities of our Company, but the court has not yet ruled on that motion. Certain of the lawsuits have been filed as putative class actions.

~~Federal Lawsuits~~

Most pending federal lawsuits have been coordinated in a federal MDL pending in the U.S. District Court for the Northern District of Ohio. The MDL court has issued a series of case management orders permitting motion practice addressing threshold legal issues in certain cases, allowing discovery, setting pre-trial deadlines and setting a trial date on October 21, 2019 for two cases originally filed in the Northern District of Ohio by Summit County and Cuyahoga County against opioid manufacturers, distributors, and pharmacies. The counties claim that opioid manufacturers’ marketing activities changed the medical standard of care for treating both chronic and acute pain, which led to increases in the sales of their prescription opioid products. They also allege that opioid manufacturers’ and distributors’ failure to maintain effective controls against diversion was a substantial cause of the opioid crisis.

Summit County filed a complaint on December 20, 2017, an amended complaint that added us on April 25, 2018, and a second amended complaint on May 18, 2018. The manufacturer defendants jointly moved to dismiss the second amended complaint on May 25, 2018. Judge Polster, who is presiding over the MDL, denied the motion on December 19, 2018. Summit County filed a third amended complaint on March 21, 2019, which alleges violations of Racketeer-Influenced and Corrupt Organizations (“RICO”), the Ohio Corrupt Practices Act, statutory public nuisance, common law absolute public nuisance, negligence, common law fraud,

violations of Injury Through Criminal Acts, unjust enrichment, and civil conspiracy. Summit County seeks damages including but not limited to actual damages, treble damages, equitable and/or injunctive relief, restitution, disgorgement of profits, compensatory and punitive damages, attorneys’ fees, all costs and expenses of suit, and pre- and post-judgment interest. Cuyahoga County filed a complaint on October 21, 2017, and an amended complaint on April 25, 2018 that added us. Cuyahoga County filed a third amended complaint on May 10, 2019. The third amended complaint contains causes of action and damages similar to those in the Summit County litigation. In June 2019, the parties filed motions for summary judgment and Daubert motions in Summit County and Cuyahoga County. In August and September 2019, the MDL court ruled on the summary judgment and Daubert motions, granting some and denying most others, including Mallinckrodt's Motion for Partial Summary Judgment. On September 6, 2019, the Company announced that it had reached a settlement in principle with Summit County and Cuyahoga County. The settlement fully resolves the Track 1 Cases against all named Mallinckrodt entities that were scheduled to go to trial in October 2019 in the MDL. The Track 1 Cases assert various claims related to the opioid business operated by SpecGx LLC. Under the agreement, we paid a total sum of $24.0 million in cash during the three months ending December 27, 2019. In addition, we will provide $6.0 million in generic products, including addiction treatment products, and also provide a $0.5 million payment in two years in recognition of the counties' time and expenses. Further, in the event of a comprehensive resolution of government-related opioid claims, we have agreed that the two plaintiff counties will receive the value they would have received under such a resolution, less the payments described above. All named Mallinckrodt entities were dismissed with prejudice from the lawsuit. The value of the settlement should not be extrapolated to any other opioid-related cases or claims. On October 21, 2019, the MDL court issued a Stipulated Dismissal Order dismissing the claims against the remaining manufacturers and distributors pursuant to a settlement agreement, and severing the claims against the remaining pharmacy defendant to be heard in a subsequent trial. A hearing is scheduled for November 6, 2019 to discuss the next steps in the MDL, including potential remand of certain cases and which defendants will be included in subsequent trials.

We are also named in 224 similar state court cases in 29 states. These state court cases include actions filed by (1) state attorneys general; (2) counties, cities, and other municipalities; (3) district attorneys; (4) hospitals and other health systems; (5) individuals; (6) third-party payers; and (7) a Native American Tribe. There are differences among these cases. For instance, counties and cities often seek to recoup governmental expenses related to public services, while hospitals and other health systems typically seek compensation for opioid-related medical services. These cases also contain different causes of action. For example, state attorneys general complaints often utilize consumer protection statutes whereas third-party payers tend to focus on claims of fraud and breach of implied warranties. Further, not all lawsuits name the same defendants - some name manufacturers and distributors, while others also include pharmacies, pain clinics, doctors, and/or other individuals as defendants.

On June 14, 2019, MDL Plaintiffs filed a Notice of Motion and Motion for Certification of Rule 23(b)(3) Cities/Counties Negotiation Class. On July 9, 2019, the Plaintiffs' Executive Committee filed an Amended Motion for Class Certification. In July 2019, parties and third parties filed responses and replies to Plaintiffs' Amended Motion for Class Certification. A hearing on the Amended Motion took place on August 6, 2019. On September 11, 2019, the MDL court certified the Rule 23(b)(3) negotiation class.

~~State Court Lawsuits~~


A.	~~Lawsuits Filed by State Attorneys General~~

Fourteen state attorneys general have filed lawsuits against us in their respective state courts. The Florida Attorney General was the first attorney general to file suit against us on May 15, 2018. The Illinois Attorney General filed the most recent attorney general lawsuit against us on October 28, 2019. In general, the state attorneys general allege that opioid manufacturers engaged in fraudulent or misleading marketing activities that led to increases in the sales of their prescription opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. For example, on August 14, 2018, the New York Attorney General brought an action against Purdue in the coordinated opioid litigation in Suffolk County, New York. An amended complaint was filed on March 28, 2019, naming us, among other opioid manufacturers, distributors, and individuals. The amended complaint alleges state law violations of the New York State Finance Law, the New York Social Service Law, the New York General Business Law, the New York Controlled Substance Act, and the New York Executive Law, as well as public nuisance, fraud, gross negligence, willful misconduct, and unjust enrichment against us. The amended complaint seeks, among other remedies, declaratory judgment, injunctive relief, the creation of an abatement fund, damages, civil penalties, and the disgorgement of profits. Certain defendants, including us, filed motions to dismiss on May 31, 2019. The State of New York opposed the motions on July 31, 2019 and defendants filed their reply briefs on August 30, 2019. Oral argument on these motions was subsequently held on October 7, 2019, and the motions are still pending. While the New York Attorney General action is illustrative, there are differences between the cases filed by state attorneys general. Each lawsuit contains different causes of action, including different common law claims and alleged violations of state-specific statutes. The lawsuits also contain different claims for damages. For instance, the Kentucky and Hawaii actions seek punitive damages, but the Florida action does not. Further, not all lawsuits name the same defendants - some name manufacturers and distributors, while others also include pharmacies and/or individuals as defendants. The New York Attorney General action is currently part of the Track One cases in the New York consolidated proceedings in Suffolk County, New York, with a trial currently scheduled to begin on March 2, 2020. Trial dates have also been set in Louisiana (September 14, 2020), Alaska (January 5, 2021), and New Mexico (September 7, 2021).


B.	~~Lawsuits Filed by Cities, Counties, and Other Municipalities~~

There are currently more than 186 lawsuits against us filed by cities, counties, and other municipalities, pending in various state courts in 18 states. The earliest lawsuit that remains in state court was filed by the County of Northampton, Pennsylvania on December 28, 2017. In general, the complaints allege that opioid manufacturers engaged in fraudulent or misleading marketing activities that led to increases in the sales of their prescription opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. For example, on September 18, 2018, City of Reno filed a complaint in the Second Judicial District Court of Nevada and named us as a defendant, among other opioid manufacturers, distributors, and healthcare providers. An amended complaint was filed in December 3, 2018, following removal to and remand from the U.S. District Court for the District of Nevada. The amended complaint alleges violations of statutory public nuisance, common law public nuisance, negligence, negligent misrepresentation, negligence, and unjust enrichment. City of Reno seeks damages including but not limited to, general and special damages, punitive damages, a fund for establishing a medical monitoring program, restitution and reimbursement, disgorgement, and attorneys’ fees and costs. Defendants, including us, filed motions to dismiss on March 4, 2019; the motions are pending, and a hearing is set for January 2020. On September 16, 2019, City of Reno filed supplemental argument in opposition to the motions to dismiss, to which Defendants filed a response on October 4, 2019. While the City of Reno action is illustrative, there are differences between the cases filed by cities, counties and other municipalities. These lawsuits contain different causes of action, including different common law claims and alleged violations of state-specific statutes. For example, municipalities in Maryland, Pennsylvania, and Virginia assert violations of their state consumer protection statutes, while many other states do not. The lawsuits also contain different claims for damages. For example, the City of Granite City and the County of Jersey, Illinois seek damages for particular public health expenditures, while municipalities in other states allege damages related more generally to costs for public services. Further, not all lawsuits name the same defendants - some name manufacturers and distributors, while others also include pharmacies and/or individuals as defendants.

In some jurisdictions, such as California, Connecticut, Illinois, Massachusetts, New York, Pennsylvania, South Carolina, Texas and West Virginia, certain of the 186 state lawsuits filed by counties, cities and other municipalities have been coordinated for pre-trial proceedings before a single court within their respective state court systems. The first coordinated proceeding was formed in New York on July 31, 2017. The most recent state coordinated proceeding was formed in California on September 6, 2019. We are not named as a defendant in each case that may be pending in a particular state court MDL or coordinated proceeding. For example, approximately 44 cases filed by Texas counties are consolidated in the ~~In re: Texas Opioid Litigation~~, No. 2018-63587, MDL No. 18-0358 (the “Texas MDL”), of which we are named in 13 cases. The Texas complaints generally allege violations of public nuisance, negligence, the Texas Controlled Substances Act, the Deceptive Trade Practices-Consumer Protection Act, unjust enrichment, common law fraud, and civil conspiracy, though there are differences among the complaints. Plaintiffs seek damages including but not limited to injunctive relief, economic and treble damages arising from alleged violations of the Texas Deceptive Trade Practices-Consumer Protection Act, civil penalties for violations of the Texas Controlled Substances Act, abatement of public nuisance, injunctive relief, punitive and actual damages, restitution, and attorneys’ fees. We have filed answers in certain cases. A hearing on bellwether selection and other trial scheduling matters occurred on July 26, 2019, in which eight bellwether counties and alternates were selected as candidates for four trials, the first two of which are scheduled to occur in January 2021 and April 2021. We are currently named in six out of the eight selected bellwether counties but plaintiffs may amend their complaints to add us to the other two cases. Since the bellwether candidates were selected on July 26, 2019, three of the eight bellwether cases have been removed to federal court, one of which has been transferred to the federal MDL. Motions to remand have been filed in the other two cases; no replacement bellwethers have been selected while those cases remain in federal court. At present, we are named in three of the five bellwether candidates that remain in state court, and all three of the bellwethers that have been removed, although we may still be amended into others. Pursuant to the Docket Control Order entered by the court on October 18, 2019, trials are scheduled to begin on January 19, 2021 and April 12, 2021. While the Texas MDL is illustrative, there are differences between the coordinated cases. Each states’ coordinated proceedings contain different causes of action, including different common law claims and alleged violations of state-specific statutes. For example, municipalities in Connecticut, Illinois, Massachusetts, New York, Pennsylvania, South Carolina, and Texas assert violations of their state unfair or deceptive trade practices acts, while other plaintiffs do not. The lawsuits also contain different claims for damages. For example, some of the cases in the Texas MDL request exemplary and punitive damages for gross negligence, while other cases do not. Further, not all lawsuits name the same defendants-some name manufacturers and distributors, while others also include pharmacies and/or individuals as defendants. A Case Management Order has been entered in the New York consolidated cases in Suffolk County, which provides for two separate case tracks to proceed to discovery and ultimately to trial. We are named in the three Track One cases with a trial currently scheduled to begin on March 2, 2020.


C.	~~Lawsuits Filed by District Attorneys~~

Six District Attorneys (“DAs”) have also filed lawsuits in state court against us that remain in state court. In general, the DA suits filed in Tennessee allege that defendants engaged in false and deceptive promotion of opioids and contributed to the oversupply and diversion of those products. They also allege that defendants’ actions caused high addiction rates, overdose deaths, and increased rates of neonatal abstinence syndrome. The DAs have initiated lawsuits against opioid manufacturers, distributors, prescribers, retailers, and other individuals. The DAs allege that defendants participated in an illegal opioids market and that plaintiffs suffered damages related to increased law enforcement and health care costs, expenses related to rehabilitation and addiction treatment, prosecution costs, and foster care expenses, among others. ~~Staubus et al. v. Purdue Pharma, LP et al., No. C-41916was filed in the Circuit Court for Sullivan~~

County on June 13, 2017 and amended on July 27, 2017 and February 15, 2018. We joined a motion to dismiss filed by the manufacturer defendants and filed a supplemental motion to dismiss regarding Company-specific claims on March 23, 2018. The court held a hearing on the motion to dismiss, in addition to other motions, on May 8, 2018. The court denied the motions to dismiss in an order filed on June 12, 2018. We filed an answer to the second amended complaint on June 29, 2018. The parties are currently engaged in discovery, and the court has set a trial date to begin on May 18, 2020. ~~Effler et al. v. Purdue Pharma, LP et al., No. 16596~~was filed in the Circuit Court for Campbell County on September 29, 2017 and amended on October 6, 2017, January 10, 2018 and May 21, 2018. We joined a motion to dismiss filed by the manufacturer defendants on July 27, 2018. The court held a hearing on the motion to dismiss on October 4, 2018 and issued an order granting the manufacturer defendants’ motion to dismiss on October 5, 2018. Plaintiffs filed a Notice of Appeal on November 1, 2018. We joined defendants-appellees’ response brief which was filed on May 28, 2019. Plaintiff-appellants’ filed their reply brief on July 11, 2019, and oral argument occurred on July 18, 2019. On September 11, 2019, the court granted Plaintiffs' appeal, reversing the trial court's judgment and remanding the case for further proceedings. Any party that wishes to appeal this ruling must petition the Tennessee Supreme Court by November 12, 2019. ~~Dunaway et al. v. Purdue Pharma, LP et al., No. CCI-2018-cv-6347~~ was filed in the Circuit Court for Cumberland County on January 10, 2018 and amended on August 7, 2018. We joined a motion to dismiss filed by the manufacturer defendants on September 21, 2018. Plaintiffs filed a second amended complaint on April 1, 2019, adding new defendants. A distributor defendant removed the action on May 3, 2019, and the district court remanded the case on May 22, 2019. We joined a motion to dismiss filed by the manufacturer defendants on July 15, 2019. Plaintiffs' opposition to defendants' motions to dismiss were filed on September 30, 2019. Replies are due on November 13, 2019, and oral argument is scheduled for December 16, 2019. Other than ~~Staubus et al. v. Purdue Pharma, LP et al., there are currently no trials set in these cases.~~

With respect to the DA lawsuits filed in Pennsylvania, the first lawsuit that remains in state court was filed by the Commonwealth of Pennsylvania by John T. Adams, District Attorney of Berks County in the Berks County Court of Common Pleas on October 16, 2019. The most recent DA lawsuit that remains in state court was filed by the Commonwealth of Pennsylvania, acting by and through Francis T. Chardo, the District Attorney of Dauphin County in the Dauphin County Court of Common Pleas on October 23, 2019. In general, these DA cases allege that opioid manufacturers engaged in fraudulent or misleading marketing activities that led to increased use of prescription opioid products. They also allege that distributors failed to maintain effective controls over the opioid distribution system and attempted to evade restrictions on opioid distribution. Plaintiffs in all three cases bring claims for alleged violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law and Civil Conspiracy. Plaintiffs in all three cases seek damages related to services associated with addiction, overdoses, adverse health conditions, emergency response, hospitalization, and public safety conditions attributable to the opioid products manufactured and distributed by defendants, among other relief. There are currently no trials set in these cases.


D.	~~Lawsuits Filed by Hospitals and Health Systems~~

Hospitals and other health systems have also filed lawsuits in state courts against us, and there are currently six such lawsuits. The first lawsuit that remains in state court was filed by Tucson Medical Center (“TMC”) in Arizona on October 9, 2018. The other five lawsuits that remain in state court were filed by (1) various hospitals and other health systems in West Virginia on April 29, 2019; (2) various hospitals and other health systems in Arizona on June 18, 2019; (3) various hospitals and other health systems in Florida on September 16, 2019; (4) Mobile County Board of Health and Family Oriented Primary Health Care Clinic in Alabama on October 15, 2019; and (5) various hospitals and other health systems in Mississippi on October 16, 2019. The plaintiffs allege that opioid manufacturers have engaged in fraudulent or misleading marketing activities that led to increases in the sales of their opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. For example, on October 9, 2018, TMC filed a complaint in the Pima County Superior Court, Arizona against us, among other opioid manufacturers and distributors. On July 15, 2019, TMC filed a First Amended Complaint, which asserts claims for negligence, wanton negligence, negligence per se, negligent marketing, negligent distribution, nuisance, unjust enrichment, fraud and deceit, civil conspiracy, fraudulent concealment, and violations of Arizona’s RICO Act and Consumer Fraud Act. TMC seeks damages and costs. Defendants, including us, filed motions to dismiss the complaint, which were denied by the court on September 16, 2019. While the TMC action is illustrative, there are differences between these cases. Each lawsuit contains different causes of action, including different common law claims and alleged violations of state-specific statutes. Further, not all lawsuits name the same defendants. For example, TMC and the other Arizona plaintiffs names manufacturers, distributors and pharmacies as defendants, while the West Virginia, Florida, Alabama and Mississippi plaintiffs also include individuals as defendants. There are currently no trials set in these cases.


E.	~~Lawsuits Filed by Individuals~~

Individuals have filed lawsuits in state courts against us, and there are currently five such lawsuits. The first lawsuit that remains in state court was initially filed by the Estate of Bruce Brockel in the Circuit Court of Mobile County, Alabama, on October 25, 2017, and amended to add us to plaintiff’s first amended complaint on February 5, 2018. The most recent lawsuit that remains in state court was filed by plaintiff Elizabeth Lavoise in the 22nd Judicial Circuit Court, City of St. Louis, Missouri, on August 21, 2019. In general, these lawsuits allege that opioid manufacturers have engaged in fraudulent or misleading marketing activities that led to increases in the sales of their opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. Individual plaintiffs generally claim that they suffered damages

related to increased healthcare costs, or wrongful death. For example, on December 5, 2018, the Estate of Bruce Brockel filed a third amended complaint in the Circuit Court of Mobile County, Alabama against us, among other prescription opioid manufacturers and individual doctors. The complaint contains a variety of causes of actions, including medical malpractice, negligence, wantonness, Alabama extended manufacturer’s doctrine, fraud and misrepresentation, suppression and concealment, deceit, unjust enrichment and civil conspiracy. The plaintiff alleges that manufacturers engaged in the false and deceptive promotion of opioids, which led to the oversupply of opioids and caused decedent’s death. The plaintiff seeks damages in an unspecified amount. We moved to dismiss the complaint on March 26, 2019. An opposition to the motion to dismiss was filed on April 25, 2019. The motion is currently pending. While the ~~Brockel~~ ~~action is illustrative, there are differences among the cases filed by individuals. Many of these lawsuits contain different causes of action. For example,~~ ~~Brockel~~ ~~asserts a claim for civil conspiracy, while two of the individual actions filed in Missouri state court do not. One of the cases,~~ ~~Robert Ruth~~, is a putative class action, asserting claims on behalf of Missouri citizens who purchased or paid for health insurance policies. Further, not all lawsuits name the same defendants. For example, some lawsuits name only us as defendants, while others also include other manufacturers, pharmacies, and/or individuals. There are currently no trials set in these cases.


F.	~~Lawsuits Filed by Third-Party Payers~~

Third-party payers, such as insurers, have also filed lawsuits in state courts against us. There are currently seven such lawsuits. The first lawsuit that remains in state court was filed by United Food and Commercial Workers (UFCW), Local 23 and Employers Health Fund in Pennsylvania on April 24, 2018. The most recent lawsuit that remains in state court, was filed by Steamfitters Local 449 Medical and Benefit Fund, on September 11, 2019. In general, plaintiffs allege that opioid manufacturers have engaged in fraudulent or misleading marketing activities that led to increases in the sales of their opioid products. They also allege that opioid manufacturers and distributors failed to maintain effective controls against diversion and to identify, report, and halt suspicious orders. Third-party payer plaintiffs claim that they paid costs for health issues stemming from opioid overuse.

~~The~~ ~~Illinois Public Risk Fund~~ case asserts state law claims against the Company such as violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, fraudulent misrepresentation, insurance fraud, negligence, public nuisance and unjust enrichment. ~~Fire and Police Retiree Health Care Fund~~, filed in Bexar County District Court in Texas and transferred to the Texas MDL, asserts similar state law claims against us, including public nuisance, common law fraud, negligence, gross negligence, unjust enrichment, civil conspiracy and fraudulent concealment. The remaining five cases are in Pennsylvania state court, where they have all been consolidated in the coordinated proceedings in Delaware County, Pennsylvania. The Pennsylvania complaints assert state law claims such as violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law statute, public nuisance, negligence, unjust enrichment, common law fraud, breach of implied warranties, negligence per se, negligent misrepresentation, negligent marketing and civil conspiracy. The Court denied the manufacturer defendants' preliminary objections on October 30, 2019 and certain test cases are proceeding to discovery. There are differences between these cases. Certain of these lawsuits contain different causes of action. For example, a case filed by Carpenters Health and Welfare Fund of Philadelphia and Vicinity asserts a claim for public nuisance, while a case filed by the International Union of Painters and Allied Trades, District Council 21 Welfare Fund~~does not. The lawsuits also contain different claims for damages. For instance,~~ ~~Carpenters Health~~ ~~seeks a declaratory judgment regarding plaintiffs’ public nuisance claims, but~~ ~~Painters and Allied Trades~~ ~~does not. Further, not all lawsuits name the same defendants - some name manufacturers, while at least one lawsuit includes individuals as defendants. There are currently no trials set in these cases.~~


G.	~~Lawsuits Filed by Native American Tribes~~

One Native American tribe has also filed a lawsuit in state court against us that remains in state court. The Apache Tribe of Oklahoma filed a lawsuit in Oklahoma state court on July 26, 2019. The plaintiff alleges that defendants downplayed the risks of prescription opioids, overstated their benefits, used third-parties to promote false information about prescription opioids, and failed to prevent the diversion of prescription opioid products. The complaint asserts claims for public nuisance, actual and constructive fraud, negligence and negligent misrepresentation, civil conspiracy and unjust enrichment. Plaintiff seeks punitive damages, actual damages, compensation for past and future costs of abatement, an abatement fund and attorneys' fees and costs. We have not yet filed a response to the complaint.

We will continue to vigorously defend ourselves against all of these lawsuits as detailed above and similar lawsuits that may be brought by others. As of the date of this report, we have held preliminary discussions with certain plaintiffs in other pending opioid lawsuits and are likely to have further discussions and/or enter into additional discussions with other parties in connection with opioid lawsuits. We may be required to pay material amounts and/or incur other material obligations as a result of any settlements that are entered into as a result of such discussions, but we are unable to predict outcomes or estimate a range of reasonably possible losses. Further, such matters or the resolution thereof, whether through judicial process or settlement or otherwise, may make it necessary or advisable for us and/or one or more of our subsidiaries to seek to restructure our or their obligations in a bankruptcy proceeding. We are exploring a wide array of such potential outcomes as part of our contingency planning, including the impact such actions could have on our business and operations. Should a bankruptcy occur, we would be subject to additional risks and uncertainties that could adversely affect our business prospects and ability to continue as a going concern, as further described in Part II, Item 1A. "Risk Factors."

~~Investigations and Other Inquiries~~

In addition to the lawsuits described above, certain entities of the Company have received subpoenas and civil investigative demands (“CIDs”) for information concerning the sale, marketing and/or distribution of prescription opioid medications and the Company’s suspicious order monitoring programs, including from the DOJ and the Attorneys General for Missouri, New Hampshire, Kentucky, Washington, Alaska, South Carolina, Puerto Rico, New York, West Virginia, Indiana and the Divisions of Consumer Protection and Occupational and Professional Licensing of the Utah Department of Commerce, and the New York State Department of Financial Services. We have been contacted by the coalition of State Attorneys General investigating the role manufacturers and distributors may have had in contributing to the increased use of opioids in the U.S. On January 27, 2018, we received a grand jury subpoena from the U.S. Attorneys’ Office (“USAO”) for the Southern District of Florida for documents related to the distribution, marketing and sale of generic oxymorphone products. On April 17, 2019, we received a grand jury subpoena from the USAO for the Eastern District of New York (“EDNY”) for documents related to the sales and marketing of controlled substances, the policies and procedures regarding controlled substances, and other related documents. On June 4, 2019, we received a rider from the USAO for EDNY requesting additional documents regarding our anti-diversion program. We are responding or have responded to these subpoenas, CIDs and any informal requests for documents.

The Attorneys General for Kentucky, Alaska and New York, and New Hampshire have subsequently filed lawsuits against us. Similar subpoenas and investigations may be brought by others or the foregoing matters may be expanded or result in litigation. Since these investigations and/or lawsuits are in early stages, we are unable to predict outcomes or estimate a range of reasonably possible losses.

~~New York State Opioid Stewardship Act~~

On October 24, 2018, we filed suit in the U.S. District Court for the Southern District of New York against the State of New York, asking the court to declare New York State’s Opioid Stewardship Act (“OSA”) unconstitutional and to enjoin its enforcement. On December 19, 2018, the court declared the OSA unconstitutional and granted our motion for preliminary injunctive relief. On January 17, 2019, the State of New York appealed the court’s decision. We intend to vigorously assert our position in this matter. In April 2019, the State of New York passed its 2020 budget, which amended the OSA so that if the OSA decision is reversed on appeal, the OSA would apply only to the sale or distribution of certain opioids in New York for 2017 and 2018 and, effective July 1, 2019, imposed an excise tax on certain opioids.

~~U.S. Drug Enforcement Administration Investigation~~

In November 2011 and October 2012, we received subpoenas from the U.S. Drug Enforcement Administration ("DEA") requesting production of documents relating to our suspicious order monitoring program for controlled substances. The USAO for the Eastern District of Michigan investigated the possibility that we failed to report suspicious orders of controlled substances during the period 2006-2011 in violation of the Controlled Substances Act and its related regulations. The USAO for the Northern District of New York and Office of Chief Counsel for the U.S. DEA investigated the possibility that we failed to maintain appropriate records and security measures with respect to manufacturing of certain controlled substances at our Hobart facility during the period 2012-2013. In July 2017, we entered into a final settlement with the DEA and the USAOs for the Eastern District of Michigan and the Northern District of New York to settle these investigations. As part of the agreement, we paid $35.0 million in fiscal 2017 to resolve all potential claims and agreed, as part of a Memorandum of Agreement (“MOA”), to utilize all available transaction information to identify suspicious orders of any of our controlled substance products and to report to the DEA when we conclude that chargeback data or other information indicates that a downstream registrant poses a risk of diversion, among other things. The MOA remains in effect until July 10, 2020, but we will continue utilizing all available transaction information to identify suspicious orders for reporting to the DEA beyond that date.

~~House Energy and Commerce Committee Investigation of Opioid Marketing and Distribution~~

In August 2018, we received a letter from the leaders of the Energy and Commerce Committee in the U.S. House of Representatives requesting a range of documents relating to our marketing and distribution of opioids. We completed our response to this letter in December 2018. We are cooperating with the investigation.

See Note 1511 of the notes to the unaudited condensed consolidated financial statements for further description of the litigation, legal and administrative proceedings as of September ~~27, 2019.~~25, 2020.



Item 1A.			Risk Factors.

Except for the risk factors ~~described~~included below, there have been no ~~other~~ material changes to the risk factors previously disclosed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December ~~28, 2018,~~27, 2019, filed with the ~~U.S.~~ SEC on February 26, ~~2019.~~

2020.

The plan of reorganization under Chapter 11 of the Bankruptcy Code (the "Plan") contemplates the cancellation of our ordinary shares without any value being delivered to shareholders. Any trading in our ordinary shares during the pendency of our Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our ordinary shares.

The Plan contemplates the cancellation of our ordinary shares. We have a significant amount of indebtedness and other liabilities that are senior to our current ordinary shares in our capital structure, and the Plan contemplates value being distributed in respect of such indebtedness and liabilities and not our shares. In addition, our existing ordinary shares have substantially decreased in value leading up to and during the Chapter 11 Cases. Accordingly, any trading in our ordinary shares during the pendency of our Chapter 11 Cases is highly speculative and poses substantial risks to purchasers of our ordinary shares.

We are subject to risks and uncertainties associated with our Chapter 11 Cases.

The Chapter 11 Cases could have a material adverse effect on our business, financial condition, results of operations and cash flows. So long as the Chapter 11 Cases continue, our senior management may be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing on our business operations. Bankruptcy Court protection also may make it more difficult to retain management and the key personnel necessary to the success and growth of our business. In addition, during the period of time we are involved in the Chapter 11 Cases, our customers and suppliers may lose confidence in our ability to reorganize our business successfully and may seek to establish alternative commercial relationships.

Other significant risks associated with the Chapter 11 Cases that could result in material adverse effects on our business, financial condition, results of operations, and cash flows include or relate to the following:

•~~overnmental~~our ability to obtain the Bankruptcy Court’s approval with respect to motions or other requests made to the Bankruptcy Court in the Chapter 11 Cases, including maintaining control as debtors-in-possession;

•our ability to consummate the Plan;

•the effects of the filing of the Chapter 11 Cases on our business and the interests of various constituents, including our shareholders;

•the high costs of Chapter 11 Cases and related fees;

•our ability to maintain relationships with suppliers, customers, employees and other third parties as a result of the Chapter 11 Cases;

•Bankruptcy Court rulings in the Chapter 11 Cases as well as the outcome of all other pending litigation and the outcome of the Chapter 11 Cases in general;

•the length of time that we will operate with Chapter 11 protection and any resulting risk that we will not satisfy the milestones specified in the RSA and in our agreement with our secured lenders with respect to our use of their cash collateral;

•the availability of operating capital during the pendency of the Chapter 11 Cases, including any event that could terminate our right to continued access to the cash collateral of our lenders to use as operating capital;

•third-party motions in the Chapter 11 Cases, including motions which may be filed by the creditors’ committee that will be appointed in the Chapter 11 Cases, which may interfere with our ability to consummate the Plan;

•the potential adverse effects of the Chapter 11 Cases on our liquidity and results of operations;

•the feasibility of the Plan in light of possible changes in our business and its prospects;

•the adequacy of our cash balances at the time of our projected exit from the Chapter 11 Cases; and

•our ability to continue as a going concern.

Because of the risks and uncertainties associated with the Chapter 11 Cases, we may not be able to accurately predict or quantify the ultimate impact the Chapter 11 Cases may have on our business, financial condition, results of operations and cash flows, nor can we accurately predict the ultimate impact the Chapter 11 Cases may have on our corporate or capital structure.

Delays in the Chapter 11 Cases may increase the risks of our being unable to consummate the Plan and increase our costs associated with the Chapter 11 Cases.

The RSA contemplates the consummation of the Plan, but there can be no assurance that we will be able to consummate the Plan. A prolonged Chapter 11 proceeding could adversely affect our relationships with customers, suppliers and employees, among other parties, which in turn could adversely affect our business, financial condition, results of operations and cash flows and our ability to continue as a going concern. A weakening of our financial condition, cash flows and results of operations could adversely affect our ability to implement the Plan (or any other plan of reorganization). If we are unable to consummate the Plan, we may be forced to liquidate our assets.

The RSA is subject to significant conditions and milestones that may be difficult for us to satisfy.

There are certain material conditions we must satisfy under the RSA, including the timely satisfaction of milestones in the Chapter 11 Cases, which include the consummation of the Plan. Our ability to timely complete such milestones is subject to risks and uncertainties, many of which are beyond our control.

If the RSA is terminated, our ability to confirm and consummate the Plan could be materially and adversely affected.

The RSA contains a number of termination events, upon the occurrence of which certain parties to the RSA may terminate the agreement. If the RSA is terminated as to all parties thereto, each of the parties thereto will be released from its obligations in accordance with the terms of the RSA. Such termination may result in the loss of support for the Plan by the parties to the RSA, which could adversely affect our ability to confirm and consummate the Plan. If the Plan is not consummated, there can be no assurance that the Chapter 11 Cases would not be converted to Chapter 7 liquidation cases or that any new plan would be as favorable to holders of claims against the Debtors as contemplated by the RSA.

The Amended Proposed Opioid-Related Litigation Settlement and the Acthar Gel-Related Settlement are subject to certain contingencies and may not go into effect in their current form or at all, which may have an adverse impact on our ability to consummate the Plan and our business, financial condition, results of operations and cash flows.

The Amended Proposed Opioid-Related Litigation Settlement and the Acthar Gel-Related Settlement (collectively, the "Proposed Settlements") are neither final nor binding and there is no assurance that the necessary parties will agree to definitive documentation, that the contingencies to any agreement will be fulfilled or that any potential settlement agreement entered into by us will be on terms as favorable as the Proposed Settlements. In particular, each of the Proposed Settlements is subject to a number of conditions, many of which may not be satisfied. Among other things, the Proposed Settlements are intended to be implemented through the Plan, the timing and consummation of which is subject to various risks and uncertainties as described elsewhere in this Item 1A of this Quarterly Report on Form 10-Q.

Furthermore, subject to the satisfaction of the conditions to the Proposed Settlements, the consummation of the Proposed Settlements would become effective upon our emergence from the Chapter 11 bankruptcy process, the timing of which emergence is uncertain. The settlement process may use a significant portion of our resources and divert management’s attention from our day-to-day operations, all of which could harm our business. Furthermore, one or both of the Proposed Settlements may not be implemented or consummated in its or their current form, or at all, as a result of which we would be subject to continued litigation, which, in turn, could adversely impact our ability to consummate the Plan and result in us and/or our subsidiaries becoming subject to some or all of the liabilities that would have otherwise been settled. In such circumstances, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

Even if the Plan is consummated, we may not be able to achieve our stated goals or continue as a going concern.

Even if the Plan or any other Chapter 11 plan of reorganization is consummated, we may continue to face a number of risks, such as changes in economic conditions, changes in our industry, changes in demand for our services and increasing expenses. Some of these risks become more acute when a case under the Bankruptcy Code continues for a protracted period without indication of how or when the case may be completed. As a result of these risks and others, we cannot guarantee that the Plan will achieve our stated goals or that we will be able to continue as a going concern.

Furthermore, even if our debts and other liabilities are reduced or discharged through the Plan, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business after the completion of the Chapter 11 Cases. Among other things, our revolving credit facility is set to expire on February 28, 2022, shortly after when we anticipate completing the Chapter 11 restructuring process, and will need to be paid off or refinanced at that time. Our access to additional financing may be limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms, or at all.

In certain instances, a Chapter 11 case may be converted to a case under Chapter 7 of the Bankruptcy Code.

Upon a showing of cause, the Bankruptcy Court may convert our Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to our creditors than those provided for in the Plan because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern, (ii) additional administrative expenses involved in the appointment of a Chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

Termination of our exclusive right to file a Chapter 11 plan and the exclusive right to solicit acceptances could result in competing plans of reorganization, which could have less favorable terms or result in significant litigation and expenses.

We currently have the exclusive right to file a Chapter 11 plan through and including February 9, 2021, and the exclusive right to solicit acceptances of any such plan through April 10, 2021. Such deadlines may be extended from time to time by the Bankruptcy Court "for cause" (as permitted by section 1121(d) of the Bankruptcy Code). However, it is also possible that (a) parties in interest could seek to shorten or terminate such exclusive plan filing and solicitation periods "for cause" (as permitted by section 1121(d) of the Bankruptcy Code)) or (b) that such periods could expire without extension.

If our exclusive plan filing and solicitation periods expire or are terminated, other parties in interest will be permitted to file alternative plans of reorganization. There can be no assurances that recoveries under any such alternative plan would be as favorable to creditors as the Plan. In addition, the proposal of competing plans of reorganization may entail significant litigation and significantly increase the expenses of administration of the Debtors’ cases, which could deplete creditor recoveries under any plan.

As a result of the Chapter 11 Cases, our historical financial information may not be indicative of our future performance, which may be volatile.

During the Chapter 11 Cases, we expect our financial results to continue to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our Consolidated Financial Statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the filing of the Chapter 11 Cases. In addition, if we emerge from Chapter 11, the amounts reported in subsequent consolidated financial statements may materially change relative to our historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to the Plan. We also may be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. Our financial results after the application of fresh start accounting may be different from historical trends.

We may be subject to claims that will not be discharged in the Chapter 11 Cases, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to consummation of a plan of reorganization. With few exceptions, all claims that arose prior to confirmation of a plan of reorganization (i) would be subject to compromise and/or treatment under the plan of reorganization and/or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the plan of reorganization. Any claims not ultimately discharged pursuant to

the plan of reorganization could be asserted against the reorganized entities and may have an adverse effect on our business, financial condition, results of operations and cash flows on a post-reorganization basis.

The pursuit of the Chapter 11 Cases has consumed, and will continue to consume, a substantial portion of the time and attention of our management, which may have an adverse effect on our business, financial condition, results of operations and cash flows, and we may experience increased levels of employee attrition.

While the Chapter 11 Cases continue, our management will be required to spend a significant amount of time and effort focusing on the Chapter 11 Cases instead of focusing exclusively on our business operations. This diversion of attention may materially adversely affect the conduct of our business, and, as a result, our financial condition and results of operations, particularly if the Chapter 11 Cases are protracted.

Furthermore, during the pendency of the Chapter 11 Cases, we may experience increased levels of employee attrition, and our employees may face considerable distraction and uncertainty. A loss of key personnel or material erosion of employee morale could adversely affect our business and results of operations. Our ability to engage, motivate and retain key employees or take other measures intended to motivate and incentivize key employees to remain with us through the pendency of the Chapter 11 Cases is limited by restrictions on implementation of incentive programs under the Bankruptcy Code. The loss of services of members of our senior management team could impair our ability to execute our strategy and implement operational initiatives, which would be likely to have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, the longer the Chapter 11 Cases continue, the more likely it is that vendors and employees will lose confidence in our ability to reorganize our business successfully.

Aspects of the Chapter 11 Cases limit the flexibility of our management team in running our business.

While we operate our business under supervision by the Bankruptcy Court, we are required to obtain approval of the Bankruptcy Court, and in some cases certain other parties, prior to engaging in activities or transactions outside the ordinary course of business. Bankruptcy Court approval of non-ordinary course activities entails preparation and filing of appropriate motions with the Bankruptcy Court, negotiation with various parties-in-interest, and one or more hearings. Parties-in-interest may be heard at any Bankruptcy Court hearing and may raise objections with respect to these motions. This process may delay major transactions and limit our ability to respond quickly to opportunities and events in the marketplace. Furthermore, in the event the Bankruptcy Court does not approve a proposed activity or transaction, we would be prevented from engaging in activities, transactions and internal restructurings that we believe are beneficial to us, which may have an adverse effect on our business, financial condition, results of operations and cash flows.

Our ordinary shares are quoted on the Pink Open Market, and thus may have a limited market and lack of liquidity.

The delisting of our ordinary shares on the New York Stock Exchange ("NYSE") could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell ordinary shares. Our ordinary shares are currently quoted on the Pink Open Market, which may have an unfavorable impact on our share price and liquidity. The Pink Open Market is a significantly more limited market than the NYSE. The quotation of our shares on the Pink Open Market may result in a less liquid market available for existing and potential shareholders to trade our ordinary shares, could further depress the trading price of our ordinary shares, and could have a long-term adverse impact on our ability to raise capital in the future. There can be no assurance that there will be an active market for our ordinary shares, either now or in the future, or that shareholders will be able to liquidate their investment or the price at which it may be liquidated. Accordingly, we urge extreme caution with respect to existing and future investments in our equity and other securities.

Governmental investigations, inquiries, and regulatory actions and lawsuits brought against us by government agencies and private parties with respect to our historical commercialization of opioids could adversely affect our business, financial condition, results of operations and cash flows.

As a result of greater public awareness of the public health issue of opioid abuse, there has been increased scrutiny of, and investigation into, the commercial practices of opioid manufacturers by state and federal agencies. We, along with other opioid manufacturers, have been the subject of federal and state government investigations and enforcement actions, focused on the misuse and abuse of opioid medications in the U.S. Similar investigations may be initiated in the future.

In addition, a significant number of lawsuits have been filed against us, other opioid manufacturers, distributors and others in the supply chain by cities, counties, state Attorneys General and private persons seeking to hold us and others accountable for opioid misuse and abuse. As of November ~~5, 2019,~~3, 2020, the cases ~~we are~~the Company is aware of include, but are not limited to, approximately ~~2,315~~2,618 cases filed by counties, cities, Native American tribes and/or other government-related persons or entities; approximately ~~207~~270 cases

filed by hospitals, health systems, unions, health and welfare funds or other third-party payers; approximately ~~104~~128 cases filed by ~~individuals~~individuals; approximately six cases filed by schools and 14school boards; and 17 cases filed by the Attorneys General for New Mexico, Kentucky, Rhode Island, Georgia, Florida, Alaska, New York, ~~Hawaii,~~ Nevada, South Dakota, New Hampshire, Louisiana, Illinois, Mississippi, West Virginia, Puerto Rico, Ohio, and Idaho, with Idaho being the only state Attorney General to file in federal as opposed to state court. As of November ~~5, 2019,~~3, 2020, the Mallinckrodt defendants in these cases consist of Mallinckrodt plc and the following subsidiaries of Mallinckrodt plc: Mallinckrodt Enterprises LLC, Mallinckrodt LLC, SpecGx LLC, Mallinckrodt Brand Pharmaceuticals Inc., Mallinckrodt Inc., MNK 2011 Inc., and Mallinckrodt Enterprises Holdings, Inc. However, there can be no assurance that plaintiffs will not assert claims against additional Mallinckrodt plc subsidiaries in the future. The lawsuits assert a variety of claims, including, but not limited to, public nuisance, negligence, civil conspiracy, fraud, violations of the ~~RICO~~Racketeer Influenced and Corrupt Organizations Act ("RICO") or similar state laws, violations of state ~~Controlled Substances Act (“CSA”)~~CSA or state ~~False Claims Act,~~FCA, product liability, consumer fraud, unfair or deceptive trade practices, false advertising, insurance fraud, unjust enrichment, negligence and negligent misrepresentation, and other common law and statutory claims arising from ~~defendants’~~defendants' manufacturing, distribution, marketing and promotion of opioids and seek restitution, damages, injunctive and other relief and ~~attorneys’~~attorneys' fees and costs. The claims generally are based on alleged misrepresentations and/or omissions in connection with the sale and marketing of prescription opioid medications and/or an alleged failure to take adequate steps to prevent diversion. Other parties may file similar lawsuits against us in the future.

As a company that first began processing opioids in the 1890s, we understand the utility of these products and that they are safe and effective when taken as appropriately prescribed. We are deeply committed to diversion control efforts, have sophisticated systems in place to identify suspicious orders and engage in significant due diligence and ongoing monitoring of customers. While we are vigorously defending ourselves in these matters, the nature and scope of these matters is unique and current public perceptions of the public health issue of opioid abuse, together with the manner in which other defendants in those cases resolve opioid-related lawsuits and other actions, may present challenges to favorable resolution of these claims. Accordingly, it is not feasible to predict the ultimate outcome of these investigations, enforcement actions and ~~lawsuits.~~lawsuits if the Amended Proposed Opioid-Related Litigation Settlement is not consummated. The allegations against us may negatively affect our business in various ways, including through harm to our reputation. We will continue to incur significant legal costs in defending these matters and if the Amended Proposed Opioid-Related Litigation Settlement is not fully implemented or consummated, we could in the future be required to pay significant amounts as a result of fines, penalties, settlements or judgments, potentially in excess of established accruals. We may be unable to obtain or maintain insurance in the future on acceptable terms or with adequate coverage against potential liabilities or other losses. Any such potential liabilities or losses could also require us to seek financing, which may not be available on terms acceptable to us, or at all, when required. As of November 5, 2019, we have been in preliminary discussions with certain plaintiffs in pending opioid lawsuits and are likely to have further discussions and/or enter into additional discussions with other parties in connection with opioid lawsuits and/or incur other material obligations. We may be required to pay material amounts and/or incur other material obligations as a result of any settlements that are entered into as a result of such discussions.

Such matters or the resolution thereof, or increase in accruals thereof, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, such matters or the resolution thereof, whether through judicial process or settlement or otherwise may make it necessary or advisable for us and/or one or more of our subsidiaries to seek to restructure our or their obligations in a bankruptcy proceeding. We are exploring a wide array of such potential outcomes as part of our contingency planning, including the impact such actions could have on our business and operations. Should a bankruptcy occur, we would be subject to additional risks and uncertainties that could adversely affect our business prospects and ability to continue as a going concern, including, but not limited to by causing increased difficulty obtaining and maintaining commercial relationships on competitive terms with customers, suppliers and other counterparts; increased difficulty retaining and motivating key employees, as well as attracting new employees; diversion of management’s time and attention to dealing with bankruptcy and restructuring activities rather than focusing exclusively on business operations; incurrence of substantial costs, fees and other expenses associated

with bankruptcy proceedings; and loss of ability to maintain or obtain sufficient financing sources for operations or to fund any reorganization plan and meet future obligations. We would in that event also be subject to risks and uncertainties caused by the actions of creditors and other third parties who have interests that may be inconsistent with our plans.

In addition, legislative, regulatory or industry measures to address the misuse of prescription opioid medications may also affect our business in ways that we are not able to predict. For example, the State of New York enacted the ~~OSA,~~Opioid Stewardship Act (the "OSA"), which went into effect on July 1, 2018 and established an aggregate ~~$100~~$100.0 million annual assessment on sales of certain opioid medications in New York. The OSA was successfully challenged, and on December 19, 2018, the U.S. District Court for the Southern District of New York ruled that the OSA was unconstitutional and enjoined its enforcement. On January 17, 2019, the State of New York appealed this ruling. ~~The litigation is still pending.~~On September 14, 2020, a panel of the U.S. Court of Appeals for the Second Circuit reversed in part the lower court’s judgment, finding that the lower court should have dismissed our (and other parties’) challenges to the OSA for lack of subject matter jurisdiction. We disagree with the decision and continue to evaluate our options with respect to the decision. In April 2019, the State of New York passed its 2020 budget, which amended the OSA so that if the OSA decision is reversed on appeal, the OSA would apply only to the sale or distribution of certain opioids in New York for 2017 and 2018 and, effective July 1, 2019, imposed an excise tax on certain opioids. Furthermore, Rhode Island and Delaware have enacted opioid taxes, Minnesota and Maine have enacted increased licensure and registration fees and other states are considering similar legislation that could require entities to pay an assessment or tax on the sale or distribution of opioid medications in those states and may vary in the assessment or tax amounts and the means of calculation from the OSA. If ~~other~~additional state or local jurisdictions successfully enact such legislation and we are not able to mitigate the impact on our business through operational changes or commercial arrangements, such legislation in the aggregate may have a material adverse effect on our business, financial condition, results of operations and cash flows. See the risk factor ~~“Extensive~~"Extensive laws and regulations govern the industry in which we operate, and any failure to comply with such laws and regulations, including any changes to those laws and regulations may materially adversely affect ~~us” previously disclosed in Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended December 28, 2018 filed with the U.S. SEC on February 26, 2019~~us." for more information.

Furthermore, in the current climate, stories regarding prescription drug abuse and the diversion of opioids and other controlled substances are frequently in the media. Unfavorable publicity regarding the use or misuse of opioid drugs, the limitations of abuse-deterrent formulations, the ability of drug abusers to discover previously unknown ways to abuse our products, public inquiries and investigations into prescription drug abuse, litigation, or regulatory activity regarding sales, marketing, distribution or storage of opioids could have a material adverse effect on our reputation and impact on the results of litigation.

Finally, various government entities, including Congress, state legislatures or other policy-making bodies have in the past and may in the future hold hearings, conduct investigations and/or issue reports calling attention to the opioid crisis, and may mention or criticize the perceived role of manufacturers, including us, in the opioid crisis. Similarly, press organizations have and likely will continue to report on these issues, and such reporting may result in adverse publicity for us, resulting in reputational harm.

~~We previously identified a material weakness~~

Our business may be adversely affected by public health crises and epidemics/pandemics, including the recent coronavirus outbreak.

A pandemic, epidemic or outbreak of an infectious disease occurring in the U.S., or elsewhere, could result in our ~~internal control over financial reporting,~~business being adversely affected. In December 2019, COVID-19, was identified in China, which has now ~~been remediated~~spread to countries throughout the world, including Ireland, the United Kingdom and the U.S. and has resulted in the World Health Organization declaring the outbreak as a pandemic. Our business performance was significantly impacted by ~~management. If~~COVID-19 during the second quarter, and we ~~fail~~continue to ~~maintain~~expect to see challenges while the pandemic persists and potentially thereafter.

We may experience significant and unpredictable increases or decreases in demand for certain of our products as the needs of health care providers and patients evolve during this pandemic. For example, as we are among the world's largest manufacturers of bulk acetaminophen and the only producer of acetaminophen in the North American and European regions, we could experience an ~~effective system of internal controls over financial reporting,~~increase in demand which we may not be able to ~~report~~meet in accordance with the needs of the market. Additionally, our ~~financial results timely and accurately,~~INOmax product is a potential treatment for acute respiratory distress syndrome (ARDS), which is a known clinical manifestation of infection with many respiratory viruses including coronaviruses, which could ~~adversely affect~~be subject to similar dynamics. Alternatively, due to the deprioritization of non-critical medical treatment in the face of this pandemic, demand for our ~~business~~Ofirmev product was negatively affected in the second quarter and may continue to be negatively impacted. We also experienced and may continue to experience reduced demand for Therakos due to immunosuppressed patients who have been instructed to stay-at-home during the COVID-19 pandemic.

Furthermore, earlier this year U.S. President Trump invoked emergency powers under the Defense Production Act, which allows the U.S. government to direct private companies to meet the needs of the nation in the time of an emergency. Given the critical nature of some of the products we manufacture, as well as our pharmaceutical and medical device manufacturing capabilities, we may be impacted by governmental action taken under this or similar legislation.

Many countries around the ~~market price~~world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus. Such disruptions could materially delay potential FDA approval with respect to our ~~ordinary shares.~~

~~As disclosed in~~clinical trials and product candidates, including the FDA’s decision on our ~~Form 10-K~~NDA for terlipressin. Other factors caused by the ~~fiscal year 2018,~~COVID-19 virus have already impacted and could materially delay or otherwise impact clinical trials we ~~previously identified a material weakness in our internal control over financial reporting~~are conducting related to ~~review and approval controls over future cash flow forecasts used to develop certain management estimates,~~our products, including those related to goodwill and other intangible assets. This control deficiency did not result in a material misstatement of our current or prior period consolidated financial statements. During the three months ended March 29, 2019, our management, under the oversight of our executive leadership team and those charged with governance, completed the remedial actions below to improve our internal control over financial reporting and remediated the design of the material weakness:

~~Concluded the enhanced controls were designed effectively and developed a plan to implement them to support future cash flow forecasts in 2019.~~

Although we have remediated this material weakness in our internal controls over financial reporting, any failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely affect our ability to ~~record, process~~recruit and ~~report financial information accurately,~~retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to ~~prepare financial statements within required time periods, which could subject~~the COVID-19 virus. Furthermore, business pressures driven by the ongoing COVID-19 pandemic have led us to ~~litigation or investigations requiring management resources~~prioritize certain investments over others, resulting in the termination of two of our Phase 4 studies related to Acthar Gel, and ~~payment of legal and other expenses and~~such pressures could result in ~~negative publicity or other negative actions that could harm investor confidence~~similar decisions across our product portfolio. Any delays in our ~~financial statements. If any~~clinical trials or regulatory review resulting from such disruptions could materially affect the development or approval of our product candidates or our lifecycle management efforts.

In addition, the economic impact of the spread of the COVID-19 virus', which has caused a broad impact globally, has adversely impacted our business and may continue to adversely affect us. In particular, the COVID-19 virus has negatively affected demand for our products due to limitations on the ability of our sales representatives to meet with physicians, and a reduction in patient visits to their doctors and pharmacists in order to receive prescriptions for our products, all of ~~these~~which may continue so long as the pandemic does not abate. There is also an increased risk of supply interruption at our third-party suppliers to deliver components as well as our manufacturing facilities to produce finished products on a timely basis, which could result in business or operational disruption. Additionally, while the potential long-term economic impact of the COVID-19 virus may be difficult to assess or predict, COVID-19 pandemic has resulted in significant disruption of global financial markets, which could reduce our ability to access capital, thereby negatively affecting our liquidity. The extent to which the COVID-19 pandemic impacts our results will depend on future developments that are highly uncertain and cannot be predicted.

~~events occur, it could have a material adverse effect on~~Given the rapid and evolving nature of the COVID-19 virus, the full extent to which the COVID-19 pandemic will directly or indirectly impact our business, ~~financial condition,~~ results of operations and ~~cash flows or adversely affect the market price of our ordinary shares.~~financial condition will depend on future developments that are highly uncertain and cannot be predicted.

Sales of our products are affected by, and we may be negatively impacted by any changes to, the reimbursement practices of governmental health administration authorities, private health coverage insurers and other third-party payers. In addition, reimbursement criteria or policies and the use of tender systems outside the U.S. could reduce prices for our products or reduce our market opportunities.

Sales of our products depend, in part, on the extent to which the costs of our products are reimbursed by governmental health administration authorities, private health coverage insurers and other third-party payers. The ability of patients to obtain appropriate reimbursement for products and services from these third-party payers affects the selection of products they purchase and the prices they are willing to pay. In the U.S., there have been, and we expect there will continue to be, a number of state and federal proposals that limit the amount that third-party payers may pay to reimburse the cost of drugs, for example with respect to Acthar Gel. We believe the increasing emphasis on managed care in the U.S. has and will continue to put pressure on the usage and reimbursement of

Acthar Gel. Our ability to commercialize our products depends, in part, on the extent to which reimbursement for the costs of these products is available from government healthcare programs, such as Medicaid and Medicare, private health insurers and others. We cannot be certain that, over time, third-party reimbursements for our products will be adequate for us to maintain price levels sufficient for realization of an appropriate return on our investment.

Reimbursement of highly-specialized products, such as Acthar Gel, is typically reviewed and approved or denied on a patient-by-patient, case-by-case basis, after careful review of details regarding a ~~patient’s~~patient's health and treatment history that is provided to the insurance carriers through a prior authorization submission, and appeal submission, if applicable. During this case-by-case review, the reviewer may refer to coverage guidelines issued by that carrier. These coverage guidelines are subject to on-going review by insurance carriers. Because of the large number of carriers, there are a large number of guideline updates issued each year.

Furthermore, demand for new products may be limited unless we obtain reimbursement approval from governmental and private third-party payers prior to introduction. Reimbursement criteria, which vary by country, are becoming increasingly stringent and require management expertise and significant attention to obtain and maintain qualification for reimbursement.

In addition, a number of markets in which we operate have implemented or may implement tender systems in an effort to lower prices. Under such tender systems, manufacturers submit bids which establish prices for products. The company that wins the tender receives preferential reimbursement for a period of time. Accordingly, the tender system often results in companies underbidding one another by proposing low pricing in order to win the tender. Certain other countries may consider implementation of a tender system. Even if a tender system is ultimately not implemented, the anticipation of such could result in price reductions. Failing to win tenders, or the implementation of similar systems in other markets leading to price declines, could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

We are unable to predict what additional legislation or regulation or changes in third-party coverage and reimbursement policies may be enacted or issued in the future or what effect such legislation, regulation and policy changes would have on our business. In May 2019, CMS issued a decision requiring that we revert to the base date AMP used to calculate Medicaid drug rebates for Acthar Gel. We subsequently filed suit in ~~federal district court~~District Court against the ~~Agency~~HHS and CMS seeking to hold unlawful and set aside this decision. ~~We plan~~In March 2020, we received an adverse decision from the District Court which upheld CMS' decision to ~~vigorously defend~~reverse its previous determination of the base date AMP used to calculate Acthar Gel rebates. On March 16, 2020, we filed an Emergency Motion for Reconsideration and Stay of Entry of Judgment Pending Reconsideration Or, Alternatively, Injunction Pending Appeal. In response, the government agreed that CMS would not require us to change the Medicaid rebate calculation for Acthar Gel until June 14, 2020, to allow the District Court time to decide our ~~position. If~~reconsideration motion. The District Court subsequently denied our reconsideration motion and in June 2020 we ~~are unsuccessful~~appealed the District Court's decision to the Court of Appeals and filed an Emergency Motion for Injunction Pending Appeal and to Expedite Briefing and Argument. The Court of Appeals subsequently denied our request for an injunction pending appeal on June 15, 2020.

As previously disclosed, we recorded an accrual of $640.2 million related to the Acthar Gel Medicaid Retrospective Rebate in ~~our efforts~~the unaudited condensed consolidated balance sheet as of September 25, 2020, of which $535.1 million and $105.1 million have been reflected as a component of net sales and operating expenses, respectively, in the unaudited condensed consolidated statement of operations for the nine months ended September 25, 2020. The $105.1 million reflected as a component of operating expenses represents a pre-acquisition contingency related to ~~set aside CMS’s decision,~~the portion of the Acthar Gel Medicaid ~~net~~Retrospective Rebate that arose from sales of Acthar Gel prior to the Company’s acquisition of Questcor in August 2014.

On October 12, 2020, we announced a settlement in principle, which is conditioned upon the Company entering the Chapter 11 restructuring process, to resolve various Acthar Gel-related matters, including the Medicaid lawsuit, an associated FCA lawsuit and an FCA lawsuit relating to the Acthar Gel-Related Settlement. We have agreed to pay $260.0 million over seven years and to reset Acthar Gel’s Medicaid rebate calculation as of July 1, 2020, such that state Medicaid programs will receive 100% rebates on Acthar Gel Medicaid sales, based on current Acthar Gel pricing. Additionally, upon execution of the settlement, we will dismiss its appeal, which is currently pending in the U.S. Court of Appeals for the D.C. Circuit. We expect that the Acthar Gel-Related Settlement – which would resolve the Medicaid lawsuit, the associated FCA lawsuit in Boston and an FCA lawsuit in the Eastern District of Pennsylvania relating to Acthar’s previous owner’s interactions with an independent charitable foundation – will be completed over the next several months, subject to Bankruptcy Court approval. The failure of the settlement in principle may subject us to additional risk and uncertainties that could ~~be substantially eliminated~~adversely affect our business prospects, as further described above in the risk factor "The Amended Proposed Opioid-Related Litigation Settlement and the Acthar Gel-Related Settlement are subject to certain contingencies and may not go into effect in their current form or at all, which may have an adverse impact on our ability to consummate the Plan and our ~~efforts to continue building on our investment in non-sales~~business, financial condition, results of operations and ~~marketing activities to modernize Acthar Gel could be significantly undermined.~~cash flows."

We may be unable to protect our intellectual property rights, intellectual property rights may be limited or we may be subject to claims that we infringe on the intellectual property rights of others.

We rely on a combination of patents, trademarks, trade secrets, proprietary know-how, market exclusivity gained from the regulatory approval process and other intellectual property to support our business strategy, most notably in relation to Acthar Gel,

Ofirmev, ~~Inomax,~~INOmax, Therakos and Amitiza products. However, our efforts to protect our intellectual property rights may not be sufficient. If we do not obtain sufficient protection for our intellectual property, or if we are unable to effectively enforce our intellectual property rights, or if there is a change in the way courts and regulators interpret the laws, rules and regulations applicable to our intellectual property, our competitiveness could be impacted, which could adversely affect our competitive position, business, financial condition, results of operations and cash flows.

The composition patent for Acthar Gel has expired and we have no patent-based market exclusivity with respect to any indication or condition we might target. We rely on trade secrets and proprietary know-how to protect the commercial viability and value of Acthar Gel. We currently obtain such protection, in part, through confidentiality and proprietary information agreements. These agreements may not provide meaningful protection or adequate remedies for proprietary technology in the event of unauthorized use

or disclosure of confidential and proprietary information. The parties may not comply with or may breach these agreements. Furthermore, our trade secrets may otherwise become known to, or be independently developed by, competitors.

Certain patents related to the use of therapeutic nitric oxide for treating or preventing bronchoconstriction or reversible pulmonary vasoconstriction expired in 2013. Prior to their expiration, we depended, in part, upon these patents to provide us with exclusive marketing rights for our product for some period of time. Since then, we have obtained additional patents, which expire at various dates through 2036, including patents on methods of identifying patients at risk of serious adverse events when nitric oxide is administered to patients with particular heart conditions. Such methods have been approved by the FDA for inclusion in the Warnings and Precautions sections of the ~~Inomax~~INOmax label. Other patents are on inhaled nitric oxide gas delivery systems as well as methods of using such systems, and on use of nitric oxide gas sensors. The Paragraph IV patent litigation trial against Praxair Distribution, Inc. and Praxair, Inc. (collectively ~~“Praxair”~~"Praxair") to prevent the marketing of its potential infringing nitric oxide drug product delivery system prior to the expiration of the patents covering ~~Inomax~~INOmax was held in March 2017 and a decision was rendered September 5, 2017 that ruled five patents invalid and six patents not infringed. We appealed the decision to the Court of Appeals for the Federal Circuit, which upheld the lower ~~court’s~~court's decision on August 27, 2019. We filed a petition for en banc review at the Federal Circuit on September 26, 2019, which the Federal Circuit denied on November 19, 2019. We filed a petition for a writ of certiorari with the United States Supreme Court on March 6, 2020 and the petition was denied on April 6, 2020. There has been limited commercial launch activity by Praxair. While Praxair received FDA approval of their Abbreviated New Drug Application ~~(ANDA)~~("ANDA") for their Noxivent nitric oxide and clearance of their 510(k) for their NOxBOXi device on October 2, 2018, the Noxivent product received an AA-rating and the Noxivent label states that Noxivent must be delivered using the NOxBOXi device. The ~~Court~~adverse final outcome in the appeal of ~~Appeals’ decision with respect to~~ the Praxair litigation ~~ultimately~~decision could result in the broader-scale launch of a competitive nitric oxide product before the expiration of the last of the patents listed in the FDA Orange ~~Book,~~Book: Approved Drug Products with Therapeutic Equivalence, which could adversely affect our ability to successfully maximize the value of ~~Inomax~~INOmax and have an adverse effect on ~~the company’s~~our competitive position, business, financial condition, results of operations and cash flows.

The active ingredient in Ofirmev is acetaminophen. Patent protection is not available for the acetaminophen molecule itself in the territories licensed to us, which include the U.S. and Canada. As a result, competitors who obtain the requisite regulatory approval can offer products with the same active ingredient as Ofirmev so long as the competitors do not infringe any process or formulation patents that we have in-licensed from ~~Bristol-Myers~~Bristol Myers Squibb and its licensor, New Pharmatop LLC and any method-of-use patents that we subsequently obtained. The latest expiration date of the in-licensed patents is 2021 whereas the latest expiration date of the subsequently obtained Company-owned patents is 2032. Settlement agreements have been reached in association with certain challenges to the in-licensed patents, which allow for generic competition to Ofirmev in December 2020, or earlier under certain circumstances.

Our Therakos products focus on extracorporeal photopheresis ("ECP"), which is an autologous immune cell therapy that is indicated in the U.S. for skin manifestations of cutaneous T-cell lymphoma ("CTCL") and is available for several additional indications in markets outside the U.S. In the extracorporeal photopheresis ~~(“ECP”)~~ process, blood is drawn from the patient, separating white blood cells from plasma and red blood cells (which are immediately returned to the patient). The separated white blood cells are treated with an Ultraviolet-A ~~(“UVA”~~("UVA") light activated drug, UVADEX^® (methoxsalen) Sterile Solution, followed by UVA radiation in the photopheresis instrument, prior to being returned to the patient. Patents related to the methoxsalen composition have expired. Therakos historically manufactured two photopheresis systems, the CELLEX^® Photopheresis System ~~(“CELLEX”~~("CELLEX"), which is the only FDA-approved closed ECP system, and the UVAR XTS^® Photopheresis System (“("UVAR ~~XTS”~~XTS"). While ~~the company~~we no longer ~~manufactures~~manufacture the UVAR XTS system, disposable, sterile kits are still supplied to customers for each of the systems. The kits are single use and discarded after a treatment. Certain key patents related to the UVAR XTS system, disposable kit and overall photopheresis method expire in 2020. Key patents related to the CELLEX system, disposable kit and overall photopheresis method expire in 2023. We continue to pursue additional patentable enhancements to the Therakos ECP system. Patent applications were filed in 2016 relating to improvements to the CELLEX system, disposable kit and overall photopheresis method, that, if approved, may offer patent protection through approximately 2036.

Our pending patent applications may not result in the issuance of patents, or the patents issued to or licensed by us in the past or in the future may be challenged or circumvented by competitors. Existing patents may be found to be invalid or insufficiently broad to preclude our competitors from using methods or making or selling products similar or identical to those covered by our patents and patent applications. Regulatory agencies may refuse to grant us the market exclusivity that we were anticipating, or may unexpectedly

grant market exclusivity rights to other parties. In addition, our ability to obtain and enforce intellectual property rights is limited by the unique laws of each country. In some countries, it may be particularly difficult to adequately obtain or enforce intellectual property rights, which could make it easier for competitors to capture market share in such countries by utilizing technologies and product features that are similar or identical to those developed or licensed by us. Competitors also may harm our sales by designing products that mirror the capabilities of our products or technology without infringing our patents, including by coupling separate technologies to replicate what our products accomplish through a single system. Competitors may diminish the value of our trade secrets by reverse engineering or by independent invention. Additionally, current or former employees may improperly disclose such trade secrets to competitors or other third parties. We may not become aware of any such improper disclosure, and, in the event we do become aware, we may not have an adequate remedy available to us.

We operate in an industry characterized by extensive patent litigation, and we may from time to time be a party to such litigation.

The pursuit of or defense against patent infringement is costly and time-consuming and we may not know the outcomes of such litigation for protracted periods of time. We may be unsuccessful in our efforts to enforce our patent or other intellectual property

rights. In addition, patent litigation can result in significant damage awards, including the possibility of treble damages and injunctions. Additionally, we could be forced to stop manufacturing and selling certain products, or we may need to enter into license agreements that require us to make significant royalty or up-front payments in order to continue selling the affected products. Given the nature of our industry, we are likely to face additional claims of patent infringement in the future. A successful claim of patent or other intellectual property infringement against us could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

The healthcare industry has been under increasing scrutiny from governments, legislative bodies and enforcement agencies related to sales, marketing and pricing practices, and changes to, or non-compliance with, relevant policies, laws, regulations or government guidance may result in actions that could adversely affect our business.

In the U.S. over the past several years, a significant number of pharmaceutical and biotechnology companies have been subject to inquiries and investigations by various federal and state regulatory, investigative, prosecutorial and administrative entities in connection with the promotion of products for unapproved uses and other sales, marketing and pricing practices, including the DOJ and various other agencies including the Office of the Inspector General within the HHS, the FDA, the Federal Trade Commission and various state Attorneys General offices. These investigations have alleged violations of various federal and state laws and regulations, including claims asserting antitrust violations, violations of the U.S. Federal Food, Drug and Cosmetic Act (FFDCA), the False Claims Act, the Prescription Drug Marketing Act, anti-kickback laws, data and patient privacy laws, export and import laws, consumer protection laws and other alleged violations in connection with the promotion of products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement. The DOJ and the SEC have also increased their focus on the enforcement of the Foreign Corrupt Practices Act of 1977 (FCPA), particularly as it relates to the conduct of pharmaceutical companies.

Many of these investigations originate as “qui tam” actions under the False Claims Act. Under the False Claims Act, any individual can bring a claim on behalf of the government alleging that a person or entity has presented a false claim, or caused a false claim to be submitted, to the government for payment. The person bringing a “qui tam” suit is entitled to a share of any recovery or settlement. Qui tam suits, also commonly referred to as “whistleblower suits,” are often brought by current or former employees. In a qui tam suit, the government must decide whether to intervene and prosecute the case. If the government declines to intervene and prosecute the case, the individual may pursue the case alone. If the FDA or any other governmental agency initiates an enforcement action against us or if we are the subject of a qui tam suit and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses in connection with past or future activities, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as the possible exclusion from federal healthcare programs including Medicare and Medicaid, consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations. Any such fines, awards or other sanctions could have an adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

Specific to our business, in September 2012, prior to our acquisition of Questcor in August 2014, a subpoena was received from the USAO for the Eastern District of Pennsylvania, requesting documents pertaining to an investigation of its promotional practices. On or about March 8, 2019, the U.S. District Court for the Eastern District of Pennsylvania unsealed two qui tam actions involving the allegations under investigation by the USAO for the Eastern District of Pennsylvania. The DOJ intervened in both actions, which have since been consolidated. In September 2019, we executed a settlement agreement to resolve the portion of the investigation and the litigation involving promotional practices for $15.4 million. If any of our current practices related to the legacy Questcor business are found to be unlawful, we will have to change those practices, which could have a material adverse effect on our business, financial condition and results of operations. Further, if as a result of this investigation or litigation we are found to have violated one or more applicable laws, we could be subject to a variety of fines, penalties, and related administrative sanctions, and our business, financial condition, results of operations and cash flows could be materially adversely affected.

In addition, there has recently been enhanced scrutiny of company-sponsored patient assistance programs, including insurance premium and co-pay assistance programs and donations to third-party charities that provide such assistance. If we are deemed to have failed to comply with relevant laws, regulations or government guidance in any of these areas, we could be subject to criminal and civil sanctions, including significant fines, civil monetary penalties and exclusion from participation in government healthcare programs, including Medicare and Medicaid, actions against executives overseeing our business, and burdensome remediation measures. As discussed above, the USAO for the Eastern District of Pennsylvania is investigating this issue and the U.S. District Court for the Eastern District of Pennsylvania has unsealed two qui tam actions involving the allegations that are the subject of this investigation. In addition, in December 2016, we received a subpoena from the USAO for the District of Massachusetts requesting documents related to our support of 501(c)(3) organizations that provide financial assistance to patients and documents concerning our provision of financial assistance to patients prescribed Acthar Gel. Other companies have disclosed similar inquiries. We are cooperating with this inquiry. It is possible that any actions taken by the DOJ or one of the USAOs as a result of this inquiry or any future action taken by federal or local governments, legislative bodies and enforcement agencies on this subject could result in civil penalties or injunctive relief, negative publicity or other negative actions that could harm our reputation, and could reduce demand for our products and/or reduce coverage of our products, including by federal healthcare programs such as Medicare and Medicaid and

state health care, which would negatively impact sales of our products. If any or all of these events occur, it could have an adverse effect on our business, financial condition, results of operations and cash flows.

The DEA regulates the availability of controlled substances, including API, drug products under development and marketed drug products. At times, the procurement and manufacturing quotas granted by the DEA may be insufficient to meet our needs.

The DEA is the U.S. federal agency responsible for domestic enforcement of the CSA. The CSA classifies drugs and other substances based on identified potential for abuse. Schedule I controlled substances, such as heroin and LSD, have a high abuse potential and have no currently accepted medical use; thus, they cannot be lawfully marketed or sold. Schedule II controlled substances include molecules such as oxycodone, oxymorphone, morphine, fentanyl and hydrocodone. The manufacture, storage, distribution and sale of these controlled substances are permitted, but highly regulated. The DEA regulates the availability of API, products under development and marketed drug products that are in the Schedule II category by setting annual quotas. Every year, we must apply to the DEA for manufacturing quota to manufacture API and procurement quota to manufacture finished dosage products. Given that the DEA has discretion to grant or deny our manufacturing and procurement quota requests, the quota the DEA grants may be insufficient to meet our needs. In 2018, manufacturing and procurement quotas granted by the DEA were sufficient to meet our sales and inventory requirements on most products. In November 2017, the DEA reduced the amount of almost every Schedule II opiate and opioid medication that may be manufactured in the U.S. in 2018 by 20% and could take similar actions in the future. In December 2018, the DEA reduced the amount of the six most frequently misused opioids that may be manufactured in the U.S. in calendar year 2019 by an average of 10% as compared to the 2018 amount. On September 13, 2019, the DEA proposed that benzylfentanyl and 4-anilinopiperidine be controlled as list I chemicals under the CSA. On September 17, 2019, the DEA proposed to designate norfentanyl as an immediate precursor (i.e., a substance from which another is formed) for fentanyl and to make it a Schedule II controlled substance under the CSA. The DEA could take similar actions in the future. Future delay or refusal by the DEA to grant, in whole or in part, our quota requests could delay or result in stopping the manufacture of our marketed drug products, new product launches or the conduct of bioequivalence studies and clinical trials. Such delay or refusal also could require us to allocate marketed drug products among our customers. These factors, along with any delay or refusal by the DEA to provide customers who purchase API from us with sufficient quota, could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

Our reporting and payment obligations under the Medicare and Medicaid rebate programs, and other governmental purchasing and rebate programs, are complex. Any determination of failure to comply with these obligations or those relating to healthcare fraud and abuse laws could have a material adverse effect on our business.

The regulations regarding reporting and payment obligations with respect to Medicare and Medicaid reimbursement programs, and rebates and other governmental programs, are complex. Because our processes for these calculations and the judgments used in making these calculations involve subjective decisions and complex methodologies, these accruals may have a higher inherent risk for material changes in estimates. In addition, they are subject to review and challenge by the applicable governmental agencies, and it is possible that such reviews could result in material adjustments to amounts previously paid. See “Sales of our products are affected by, and we may be negatively impacted by any changes to, the reimbursement practices of governmental health administration authorities, private health coverage insurers and other third-party payers. In addition, reimbursement criteria or policies and the use of tender systems outside the U.S. could reduce prices for our products or reduce our market opportunities.”

Any governmental agencies that have commenced, or may commence, an investigation of us relating to the sales, marketing, pricing, quality or manufacturing of pharmaceutical products could seek to impose, based on a claim of violation of fraud and false claims laws or otherwise, civil and/or criminal sanctions, including fines, penalties and possible exclusion from federal healthcare programs including Medicare and Medicaid. Some of the applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with regard to how to properly calculate and report payments, and even in the absence of any such ambiguity, a governmental authority may take a position contrary to a position we have taken, and may impose civil and/or criminal sanctions. For example, from time to time, state attorneys general have brought cases against us that allege generally that we and numerous other pharmaceutical companies reported false pricing information in connection with certain drugs that are reimbursable under Medicaid, resulting in overpayment by state Medicaid programs for those drugs, and generally seek monetary damages and attorneys’ fees. Any such penalties or sanctions that we might become subject to in this or other actions could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

~~The terms of the agreements that govern our indebtedness restrict our current and future operations, particularly our ability to respond to changes or to pursue our business strategies.~~

The agreements that govern the terms of our indebtedness contain (and the indentures governing the New Notes will contain) a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including limitations or restrictions on our ability to:

~~incur, assume or guarantee additional indebtedness;~~

~~declare or pay dividends, make other distributions with respect to equity interests, or purchase or otherwise acquire or retire equity interests;~~

~~make any principal payment on, or redeem or repurchase, subordinated debt;~~

~~make loans, advances or other investments;~~

~~sell or otherwise dispose of assets, including capital stock of subsidiaries;~~

~~incur liens;~~

~~enter into transactions with affiliates;~~

~~enter into sale and lease-back transactions; and~~

~~consolidate or merge with or into, or sell all or substantially all of our assets to, another person or entity.~~

In addition, the restrictive covenants in the credit agreement governing our senior secured credit facilities require us to comply with a financial maintenance covenant in certain circumstances. Our ability to satisfy this financial maintenance covenant can be affected by events beyond our control and we cannot assure holders that we will be able to comply.

A breach of the covenants under the agreements that govern the terms of any of our indebtedness could result in an event of default under the applicable indebtedness. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the credit agreement that governs our senior secured credit facilities would permit the lenders under such facilities to terminate all commitments to extend further credit thereunder. Furthermore, if we are unable to repay the amounts due and payable under our senior secured credit facilities or the New Notes, those lenders or investors will be able to proceed against the collateral granted to them to secure that indebtedness. If the holders of our debt accelerate the repayment of our borrowings, we may not have sufficient assets to repay that indebtedness.

~~As a result of these restrictions, we may be:~~

~~limited in how we conduct our business;~~

~~unable to raise additional debt or equity financing to operate during general economic or business downturns; or~~

~~unable to compete effectively, execute our growth strategy or take advantage of new business opportunities.~~

~~These restrictions may affect our ability to grow in accordance with our plans.~~

If the conditions to the Exchange Offers are not met, the Exchange Offers may not be completed, in which case our liquidity may be limited and we may be unable to pay principal and interest on the Notes when due.

~~Consummation of each Exchange Offer is subject to the satisfaction or waiver of a number of conditions.~~

We are highly leveraged. In the event that the Exchange Offers and the transactions contemplated by the Exchange Agreement are not completed, we will remain highly leveraged, which may result in the inability to pay principal and interest on the Notes when due, which may result in holders of the Notes not realizing a full recovery on their investment in the Notes, or an event of default under the terms of the Notes, which may lead to acceleration of our other indebtedness by the holders thereof.

If the proposed amendments to the indentures governing the Notes become operative, our future subsidiaries will not be required to guarantee the Notes and such future subsidiaries may incur significant indebtedness, and the Issuers and the existing subsidiary guarantors of the Notes may make investments in or transfer assets to such non-guarantor subsidiaries.

The proposed amendments to the indentures governing the Notes would eliminate the requirement that any of our future subsidiaries become guarantors of the Notes. As a result, the Notes will be structurally subordinated to any indebtedness of any such future subsidiaries of ours, including, as applicable, the New Notes. The indentures governing the Notes (as amended by the proposed amendments) will not limit the transfer of assets to, or investments in, any such non-guarantor subsidiaries. There can be no assurance that the Issuers and the subsidiary guarantors of the Notes will not transfer significant amounts of assets to, or make significant investments in, such non-guarantor subsidiaries, or any other persons.

~~We will incur significant costs in conducting the Exchange Offers and Consent Solicitations.~~

The Exchange Offers and conduction of simultaneous solicitations of consents by us ("Consent Solicitations") have resulted, and will continue to result, in significant costs to us, including advisory and professional fees paid in connection with evaluating our alternatives under the Notes and pursuing the Exchange Offers and Consent Solicitations.



Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds.

The following table summarizes the repurchase activity of our ordinary shares during the three months ended September ~~27, 2019~~.25, 2020. The repurchase activity presented below ~~includes both market repurchases of shares and~~is limited to deemed repurchases in connection with the vesting of restricted share units under employee benefit plans to satisfy minimum statutory tax withholding ~~obligations.~~obligations as there were no market repurchases during the three months ended September 25, 2020.

On March 1, 2017, the Company's Board of Directors authorized a $1.0 billion share repurchase program (the "March 2017 Program") which commenced upon the completion of the March 2016 Program. The March 2017 Program has no expiration ~~date,~~date.


	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under Plans or Programs (in millions)
June 27, 2020 to July 24, 2020	4,861	$	2.43	—	$	564.2
July 25, 2020 to August 28, 2020	5,222	2.22		—	564.2
August 29, 2020 to September 25, 2020	652	1.79		—	564.2
June 27, 2020 to September 25, 2020	10,735	2.29


Item 3.			Defaults Upon Senior Securities.

The information set forth in Note 14 of the notes to the unaudited condensed consolidated financial statements included under Part 1. "Item 1. Financial Statements" of this quarterly report is incorporated into this item by reference.


Item 5.			Other Information.

On November 3, 2020, the Company’s Board of Directors approved the waiver of share ownership requirements applicable to non-employee directors and executive officers for the ~~Company currently expects to fully utilize~~duration of the ~~program.~~Chapter 11 Cases.

Total Number of
Shares Purchased
Average Price
Paid
Per Share
Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under Plans or Programs
(in millions)
June 29, 2019 to July 26, 2019 1,500
$ 9.07
—
$ 564.2
July 27, 2019 to August 30, 2019 553
6.62
—
564.2
August 31, 2019 to September 27, 2019 6,468
3.06
—
564.2
June 29, 2019 to September 27, 2019 8,521
4.35



Item 6.			Exhibits.



Exhibit Number		Exhibit

10.1		Form of ~~Deed of Indemnification by and between Mallinckrodt plc and Directors and Secretary~~2020/2021 ERBP Award Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed September ~~24, 2019)~~8, 2020).
10.2		~~Form of Deed of Indemnification by and between Mallinckrodt plc and Officers~~Restructuring Support Agreement, dated October 11, 2020 (incorporated by reference to Exhibit ~~10.2~~10.1 to the Company's Current Report on Form 8-K filed ~~September 24, 2019)~~October 13, 2020).
~~10.3~~31.1		Form of Indemnification Agreement by and between Sucampo Pharmaceuticals, Inc. and Directors and Secretary (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed September 24, 2019).
~~10.4~~	~~Mallinckrodt Pharmaceuticals Severance Plan for U.S. Officers and Executives (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed September 24, 2019).~~
~~10.5~~	~~Separation of Employment Agreement and General Release by and between Matthew Harbaugh and Mallinckrodt Enterprises LLC.~~
~~31.1~~	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Interactive Data File (Form 10-Q for the quarterly period ended September ~~27, 2019~~25, 2020 filed in XBRL). The financial information contained in the XBRL-related documents is "unaudited" and "unreviewed." The instance document does not appear in the interactive file because its XBRL tags are embedded within the ~~Inline~~inline XBRL document.
104		Cover Page Interactive Data File (embedded within the ~~Inline~~inline XBRL document).

SIGNATURES

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


	MALLINCKRODT PLC

	~~MALLINCKRODT PLC~~

By:		/s/ Bryan M. Reasons
			Bryan M. Reasons Executive Vice President and Chief Financial Officer (principal financial officer)

Date: November ~~5, 2019~~3, 2020



Ireland						98-1088325
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)



(Title of each class)	(Trading Symbol(s))	(Name of each exchange on which registered)
Ordinary shares, par value $0.20 per share	~~MNK~~ MNKKQ(1)	~~New York Stock Exchange~~ N/A(1)


	September 25, 2020		December 27, 2019
Raw materials and supplies	$	52.6	$	62.7
Work in process	204.9		166.5
Finished goods	85.8		82.9
	$	343.3	$	312.1



	September 27, 2019		December 28, 2018
Raw materials and supplies	$	56.6	$	69.2
Work in process	176.6		167.6
Finished goods	92.3		85.5
	$	325.5	$	322.3


	September 25, 2020		December 27, 2019
Property, plant and equipment, gross	$	1,901.2	$	1,900.1
Less: accumulated depreciation	(1,049.8)		(1,003.6)
Property, plant and equipment, net	$	851.4	$	896.5



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



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



	Nine Months Ended
	September 27, 2019			September 28, 2018
Cash Flows From Operating Activities:
Net income	$	160.6		$	111.4
Adjustments to reconcile net cash from operating activities:
Depreciation and amortization	723.5			597.0
Share-based compensation	30.6			27.9
Deferred income taxes	(301.9		)	(232.7		)
Non-cash impairment charges	113.5			2.0
Loss on divestiture	—			0.6
Gain on repurchase of debt	(98.6		)	(6.5		)
Other non-cash items	(31.7		)	2.8
Changes in assets and liabilities, net of the effects of acquisitions:
Accounts receivable, net	68.7			(59.0		)
Inventories	(32.0		)	43.1
Accounts payable	(27.8		)	(0.1		)
Income taxes	17.2			16.7
Other	(88.0		)	(22.1		)
Net cash from operating activities	534.1			481.1
Cash Flows From Investing Activities:
Capital expenditures	(108.7		)	(93.3		)
Acquisitions, net of cash	—			(699.9		)
Proceeds from divestitures, net of cash	—			313.2
Other	13.7			28.8
Net cash from investing activities	(95.0		)	(451.2		)
Cash Flows From Financing Activities:
Issuance of external debt	695.0			657.2
Repayment of external debt	(940.1		)	(1,563.4		)
Debt financing costs	—			(12.0		)
Proceeds from exercise of share options	0.5			1.0
Repurchase of shares	(2.5		)	(57.4		)
Other	(18.1		)	(24.3		)
Net cash from financing activities	(265.2		)	(998.9		)
Effect of currency rate changes on cash	0.5			(0.9		)
Net change in cash, cash equivalents and restricted cash, including cash classified within assets held for sale	174.4			(969.9		)
Less: Net change in cash classified within assets held for sale	(15.1		)	—
Net change in cash, cash equivalents and restricted cash	159.3			(969.9		)
Cash, cash equivalents and restricted cash at beginning of period	367.5			1,279.1
Cash, cash equivalents and restricted cash at end of period	$	526.8		$	309.2

Cash and cash equivalents at end of period	$	498.8		$	290.7
Restricted cash included in other assets at end of period	28.0			18.5
Cash, cash equivalents and restricted cash at end of period	$	526.8		$	309.2



Remainder of Fiscal 2019	$	44.6
Fiscal 2020	168.3
Fiscal 2021	72.4
Fiscal 2022	16.5
Thereafter	6.2



	September 27, 2019
Carrying amounts of major classes of assets included as held for sale
Accounts receivable	$	15.6
Inventories	14.7
Property, plant and equipment, net	103.4
Intangible assets, net	14.5
Other current and non-current assets	27.7
Total assets classified as held for sale on the balance sheet	$	175.9
Carrying amounts of major classes of liabilities included as held for sale
Accounts payable	$	9.9
Other current and non-current liabilities	45.9
Total liabilities classified as held for sale on the balance sheet	$	55.8



	2018 Mallinckrodt Program			2016 Mallinckrodt Program			Acquisition Programs			Total
Balance as of December 28, 2018	$	2.2		$	61.0		$	7.8		$	71.0
Charges	10.4			3.1			—			13.5
Changes in estimate	(1.1		)	(0.4		)	(0.8		)	(2.3		)
Cash payments	(6.9		)	(12.3		)	(1.9		)	(21.1		)
Reclassifications ⁽¹⁾	—			(5.0		)	(4.3		)	(9.3		)
Currency translation	—			(1.7		)	—			(1.7		)
Balance as of September 27, 2019	$	4.6		$	44.7		$	0.8		$	50.1


~~(1)~~	Represents the reclassification of lease liabilities, net to lease liabilities and lease assets, which are reflected within other liabilities and other assets on the unaudited condensed consolidated balance sheet, due to the adoption of ASU 2016-02.



	September 27, 2019			December 28, 2018
Property, plant and equipment, gross	$	1,880.9		$	1,936.2
Less: accumulated depreciation	(986.2		)	(954.2		)
Property, plant and equipment, net	$	894.7		$	982.0



	September 27, 2019
Other assets	$	84.7

Accrued and other current liabilities	$	18.8
Other liabilities	72.1
Total lease liabilities	$	90.9



8.			September 27, 2019
~~Weighted-average remaining lease term (in years) - operating lease~~	~~7.5~~
~~Weighted-average discount rate - operating leases~~	~~3.8~~	%Intangible Assets


	September 25, 2020				December 27, 2019
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable:
Completed technology	$	10,394.6	$	4,417.0	$	10,456.9	$	3,822.8
License agreements	120.1		77.1		120.1		74.1
Trademarks	77.7		22.7		77.7		20.1


Total	$	10,592.4	$	4,516.8	$	10,654.7	$	3,917.0
Non-Amortizable:
Trademarks	$	35.0			$	35.0
In-process research and development	245.3				245.3
Total	$	280.3			$	280.3



Remainder of Fiscal 2019	$	5.7
Fiscal 2020	21.6
Fiscal 2021	16.7
Fiscal 2022	12.6
Fiscal 2023	11.7
Thereafter	36.7
Total lease payments	105.0
Less: Interest	(14.1		)
Present value of lease liabilities	$	90.9



	Nine Months Ended
	September 27, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	17.1
Lease assets obtained in exchange for lease obligations:
Operating leases	7.7


Remainder of Fiscal 2020	$	171.4
Fiscal 2021	581.1
Fiscal 2022	581.1
Fiscal 2023	581.1
Fiscal 2024	581.1



Remainder of Fiscal 2019	$	203.6
Fiscal 2020	754.2
Fiscal 2021	657.6
Fiscal 2022	585.1
Fiscal 2023	581.1



	September 27, 2019				December 28, 2018
	Principal		Unamortized Discount and Debt Issuance Costs		Principal		Unamortized Discount and Debt Issuance Costs
Current maturities of long-term debt:
4.875% Senior Notes due April 2020	$	698.0	$	1.3	$	—	$	—
Term loan due September 2024	15.6		0.2		16.4		0.2
Term loan due February 2025	4.1		0.1		6.0		0.1
Other	—		—		0.3		—
Total current debt	717.7		1.6		22.7		0.3
Long-term debt:
4.875% Senior Notes due April 2020	—		—		700.0		3.2
Variable-rate receivable securitization due July 2020	—		—		250.0		0.4
9.50% debentures due May 2022	10.4		—		10.4		—
5.75% Senior Notes due August 2022	663.2		4.4		835.2		7.0
8.00% debentures due March 2023	4.4		—		4.4		—
4.75% Senior Notes due April 2023	350.1		2.0		500.2		3.5
5.625% Senior Notes due October 2023	659.4		6.0		731.4		8.0
Term loan due September 2024	1,509.1		16.4		1,597.4		19.8
Term loan due February 2025	400.5		6.4		591.0		10.7
5.50% Senior Notes due April 2025	596.1		5.9		692.1		7.7
Revolving credit facility	900.0		3.4		220.0		4.5
Other	—		—		1.9		—
Total long-term debt	5,093.2		44.5		6,134.0		64.8
Total debt	$	5,810.9	$	46.1	$	6,156.7	$	65.1



	Applicable interest rate		Outstanding borrowings
Term loan due September 2024	5.08	%	$	1,524.7
Term loan due February 2025	5.18	%	404.6
Revolving credit facility	4.52	%	900.0



	Currency Translation			Unrecognized Loss on Derivatives			Unrecognized Gain (Loss) on Benefit Plans			Accumulated Other Comprehensive Loss
Balance as of December 28, 2018	$	(20.4	)	$	(4.0	)	$	0.1		$	(24.3	)
Impact of accounting standard adoptions	—			—			0.5			0.5
Other comprehensive income before reclassifications	1.6			—			0.2			1.8
Amounts reclassified from accumulated other comprehensive loss	—			1.0			(1.1		)	(0.1		)
Net current period other comprehensive income (loss)	1.6			1.0			(0.9		)	1.7
Balance as of September 27, 2019	$	(18.8	)	$	(3.0	)	$	(0.3	)	$	(22.1	)



	Currency Translation			Unrecognized Loss on Derivatives			Unrecognized Loss on Benefit Plans			Accumulated Other Comprehensive Loss
Balance as of December 29, 2017	$	(8.2	)	$	(4.7	)	$	(1.5	)	$	(14.4	)
Other comprehensive (loss) income before reclassifications	(4.1		)	—			4.3			0.2
Amounts reclassified from accumulated other comprehensive loss	—			0.7			(5.2		)	(4.5		)
Net current period other comprehensive (loss) income	(4.1		)	0.7			(0.9		)	(4.3		)
Balance as of September 28, 2018	$	(12.3	)	$	(4.0	)	$	(2.4	)	$	(18.7	)


	September 27, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			September 25, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:									Assets:
Debt and equity securities held in rabbi trusts	$	35.7	$	25.9	$	9.8	$	—	Debt and equity securities held in rabbi trusts	$	31.8	$	22.5	$	9.3	$	0
Equity securities	11.4		11.4		—		—		Equity securities	28.0		28.0		0		0
	$	47.1	$	37.3	$	9.8	$	—		$	59.8	$	50.5	$	9.3	$	0

Liabilities:									Liabilities:
Deferred compensation liabilities	$	37.3	$	—	$	37.3	$	—	Deferred compensation liabilities	$	33.2	$	0	$	33.2	$	0
Contingent consideration and acquired contingent liabilities	105.4		—		—		105.4		Contingent consideration and acquired contingent liabilities	27.2		0		0		27.2
Settlement Warrants									Settlement Warrants	9.3		0		0		9.3
	$	142.7	$	—	$	37.3	$	105.4
										$	69.7	$	0	$	33.2	$	36.5


Balance as of December 27, 2019	$	69.3
Payments	(45.0)
Accretion expense	0.5
Fair value adjustments	2.4
Balance as of September 25, 2020	$	27.2



Balance as of December 28, 2018	$	151.4
Payments	(25.0		)
Accretion expense	2.5
Fair value adjustments	(23.5		)
Balance as of September 27, 2019	$	105.4


	September 25, 2020			December 27, 2019
Expected share price volatility	60.1		%	54.4		%
Weighted-average risk-free rate	0.5		%	1.8		%
Expected annual dividend per share	0		%	0		%
Weighted-average expected term (in years)	7.6			7.6
Share price	$	1.14		$	3.45



	September 27, 2019				December 28, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Level 1:
4.875% Senior Notes due April 2020	$	698.0	$	457.9	$	700.0	$	676.6
Variable-rate receivable securitization due July 2020	—		—		250.0		250.0
5.75% Senior Notes due August 2022	663.2		250.3		835.2		713.6
4.75% Senior Notes due April 2023	350.1		99.8		500.2		336.7
5.625% Senior Notes due October 2023	659.4		217.9		731.4		557.0
5.50% Senior Notes due April 2025	596.1		179.2		692.1		479.1
Revolving credit facility	900.0		900.0		220.0		220.0
Level 2:
9.50% debentures due May 2022	10.4		5.1		10.4		9.7
8.00% debentures due March 2023	4.4		1.6		4.4		3.8
Term loan due September 2024	1,524.7		1,136.9		1,613.8		1,472.4
Term loan due February 2025	404.6		300.9		597.0		548.0
Level 3:
Other	—		—		2.2		2.2
Total debt	$	5,810.9	$	3,549.6	$	6,156.7	$	5,269.1


	September 25, 2020		December 27, 2019
AmerisourceBergen Corporation	26.5	%	31.3	%
McKesson Corporation	18.1		15.3
CuraScript, Inc.	13.2		12.1


•	~~Specialty Brands~~ ~~includes innovative specialty pharmaceutical brands (inclusive of Amitiza); and~~


•	~~Specialty Generics~~ ~~includes niche specialty generic drugs and APIs.~~


~~(1)~~	~~Includes administration expenses and certain compensation, legal, environmental and other costs not charged to the Company's reportable segments.~~


~~(2)~~	Represents costs incurred related to the separation of the Company's Specialty Generics segment, inclusive of costs related to the suspended spin-off of that business and rebranding costs associated with the Specialty Brands ongoing transformation, all of which are included in SG&A.


~~(3)~~	Represents R&D expense incurred related to an upfront payment made to Silence in connection with the license and collaboration agreement entered into in July 2019. Refer to Note 15 for further details.