UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________

FORM 10-Q

_______________________________________________________


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

For the quarterly period ended September ~~24, 2021~~30, 2022


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

Commission File Number : 001-35803

_______________________________________________________

Mallinckrodt plc

(Exact name of registrant as specified in its charter)

_______________________________________________________


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

College Business & Technology Park, Cruiserath,

Blanchardstown, Dublin 15, Ireland

(Address of principal executive offices) (Zip Code)

Telephone: +353 1 696 0000

(Registrant's telephone number, including area code)

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


(Title of each class)	(Trading Symbol(s))	(Name of each exchange on which registered)
Ordinary shares, par value $0.01 per share	MNK	NYSE American LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

Large Accelerated Filer

☐

Accelerated Filer

☒☐

Emerging Growth Company

☐

Non-accelerated Filer

☐☒

Smaller Reporting Company

☐☒

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

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

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

As of ~~October 29, 2021,~~November 4, 2022, the registrant had ~~84,723,768~~13,170,932 ordinary shares outstanding at ~~$0.20~~$0.01 par value.

MALLINCKRODT PLC

INDEX


		Page

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited).
	Condensed Consolidated Statements of Operations for the three months ended September 30, 2022 (Successor), the period from June 17, 2022 through September 30, 2022 (Successor), the per iod from January 1, 2022 through June 16, 2022 (Predecessor) and the three and nine months ended September 24, 2021 (Prede ~~2021 and~~ cessor)~~September 25, 2020.~~.	2
	Condensed Consolidated Statements of Comprehensive Operations for the three months ended September 30, 2022 (Successor),the period from June 17, 2022 through September 30, 2022 (Suc cessor), the period from January 1, 2022 through June 16, 2022 (Predecessor) and the three and nine~~nine~~ months ~~months~~ ended Se ~~ptember~~ 24 ~~, 2021 and~~ ~~September 25, 2020.~~	3
	~~Condensed Consolidated Balance Sheets as of~~ September 24, 2021 (Predec ~~, 2021 and December 25, 2020.~~essor).	4
	Condensed Consolidated ~~Statements~~Balance Sheets as of ~~Cash Flows for the~~ ~~nine~~ ~~months ended~~September 30, 2022 ~~September 24, 2021~~(Successor) and December 31, 2021~~September 25, 2020.~~ (Predecessor).	5
	Condensed Consolidated Statements of ~~Changes in Shareholders' Equity~~Cash Flows for the ~~three~~period from June 17, 2022 through September 30, 2022 (Successor), the period from January 1, 2022 through June 16, 2022 (Predecessor) and the nine months ended September 24, 2021~~, 2021 and~~ ~~September 25, 2020.~~ (Predecessor).	6
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended September 30, 2022 (Successor), the period from June 17, 2022 through September 30, 2022 (Succes sor), the period from January 1, 2022 through June 16, 2022 (Predecessor) an d the three and nine months ended September 24, 2021 (Predecessor).	7
	Notes to Condensed Consolidated Financial Statements.	78
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	3544
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	5060
Item 4.	Controls and Procedures.	5160

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings.	5262
Item 1A.	Risk Factors.	5262
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	5264

Item 6.	Exhibits.	5366

SIGNATURES		5467

PART I. FINANCIAL INFORMATION


Item 1.			Financial Statements.

MALLINCKRODT PLC

~~(DEBTOR-IN-POSSESSION)~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in millions, except per share data)

Three Months Ended Nine Months Ended
September 24,
2021 September 25,
2020 September 24,
2021 September 25,
2020
Net sales (includes refined estimate of the retrospective one-time charge of $0.7 million and $535.1 million related to the Medicaid lawsuit for the three and nine months ended September 25, 2020) $ 507.2 $ 698.3 $ 1,611.6 $ 1,530.6
Cost of sales 319.2 403.0 958.4 1,171.7
Gross profit 188.0 295.3 653.2 358.9
Selling, general and administrative expenses 127.3 220.8 408.3 683.2
Research and development expenses 47.3 65.5 166.3 225.8
Restructuring charges, net 11.0 3.2 17.5 15.8
Non-restructuring impairment charges — — 64.5 63.5
(Gains) losses on divestiture — (9.7) 0.8 (10.1)
Opioid-related litigation settlement loss (gain) (Note 12) 125.0 (25.8) 125.0 (34.1)
Medicaid lawsuit (Note 12) — (0.2) — 105.1
Operating (loss) income (122.6) 41.5 (129.2) (690.3)
Interest expense (48.7) (62.2) (160.7) (200.9)
Interest income — 0.9 1.9 5.4
Other (expense) income, net (3.5) — 15.9 1.1
Reorganization items, net (126.2) — (329.2) —
Loss from continuing operations before income taxes (301.0) (19.8) (601.3) (884.7)
Income tax benefit (32.0) (211.6) (81.9) (69.2)
(Loss) income from continuing operations (269.0) 191.8 (519.4) (815.5)
Income (loss) from discontinued operations, net of income taxes 5.3 (0.2) 6.0 23.8
Net (loss) income $ (263.7) $ 191.6 $ (513.4) $ (791.7)
Basic (loss) income per share (Note 6):
(Loss) income from continuing operations $ (3.18) $ 2.27 $ (6.13) $ (9.66)
Income (loss) from discontinued operations 0.06 — 0.07 0.28
Net (loss) income $ (3.11) $ 2.26 $ (6.06) $ (9.38)
Basic weighted-average shares outstanding 84.7 84.6 84.7 84.4
Diluted (loss) income per share (Note 6):
(Loss) income from continuing operations $ (3.18) $ 2.27 $ (6.13) $ (9.66)
Income (loss) from discontinued operations 0.06 — 0.07 0.28
Net (loss) income $ (3.11) $ 2.26 $ (6.06) $ (9.38)
Diluted weighted-average shares outstanding 84.7 84.6 84.7 84.4



	Successor		Predecessor
	Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Net sales	$	465.4	$	507.2
Cost of sales	449.9		319.2
Gross profit	15.5		188.0
Selling, general and administrative expenses	129.2		127.3
Research and development expenses	28.3		47.3
Restructuring charges, net	2.2		11.0


Opioid-related litigation settlement loss	—		125.0

Operating loss	(144.2)		(122.6)
Interest expense	(148.0)		(48.7)
Interest income	1.3		—

Other expense, net	(5.1)		(3.5)
Reorganization items, net	(14.2)		(126.2)
Loss from continuing operations before income taxes	(310.2)		(301.0)
Income tax benefit	(24.9)		(32.0)
Loss from continuing operations	(285.3)		(269.0)
Income from discontinued operations, net of income taxes	0.4		5.3
Net loss	$	(284.9)	$	(263.7)

Basic (loss) income per share (Note 7):
Loss from continuing operations	$	(21.61)	$	(3.18)
Income from discontinued operations	0.03		0.06
Net loss	$	(21.58)	$	(3.11)
Basic weighted-average shares outstanding	13.2		84.7

Diluted (loss) income per share (Note 7):
Loss from continuing operations	$	(21.61)	$	(3.18)
Income from discontinued operations	0.03		0.06
Net loss	$	(21.58)	$	(3.11)
Diluted weighted-average shares outstanding	13.2		84.7

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

~~(DEBTOR-IN-POSSESSION)~~

CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE~~ OPERATIONS - (Continued)

(unaudited, in ~~millions)~~millions, except per share data)


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Net sales	$	550.4	$	874.6	$	1,611.6
Cost of sales	552.1		582.0		958.4
Gross (loss) profit	(1.7)		292.6		653.2
Selling, general and administrative expenses	159.5		275.3		408.3
Research and development expenses	34.5		65.5		166.3
Restructuring charges, net	3.3		9.6		17.5
Non-restructuring impairment charges	—		—		64.5
Losses on divestiture	—		—		0.8
Opioid-related litigation settlement loss	—		—		125.0

Operating loss	(199.0)		(57.8)		(129.2)
Interest expense	(169.1)		(108.6)		(160.7)
Interest income	1.4		0.6		1.9

Other income (expense), net	0.8		(14.6)		15.9
Reorganization items, net	(17.7)		(630.9)		(329.2)
Loss from continuing operations before income taxes	(383.6)		(811.3)		(601.3)
Income tax benefit	(34.6)		(497.3)		(81.9)
Loss from continuing operations	(349.0)		(314.0)		(519.4)
Income from discontinued operations, net of income taxes	0.4		0.9		6.0
Net loss	$	(348.6)	$	(313.1)	$	(513.4)

Basic (loss) income per share (Note 7):
Loss from continuing operations	$	(26.44)	$	(3.70)	$	(6.13)
Income from discontinued operations	0.03		0.01		0.07
Net loss	$	(26.41)	$	(3.69)	$	(6.06)
Basic weighted-average shares outstanding	13.2		84.8		84.7

Diluted (loss) income per share (Note 7):
Loss from continuing operations	$	(26.44)	$	(3.70)	$	(6.13)
Income from discontinued operations	0.03		0.01		0.07
Net loss	$	(26.41)	$	(3.69)	$	(6.06)
Diluted weighted-average shares outstanding	13.2		84.8		84.7

Three Months Ended Nine Months Ended
September 24,
2021 September 25,
2020 September 24,
2021 September 25,
2020
Net (loss) income $ (263.7) $ 191.6 $ (513.4) $ (791.7)
Other comprehensive (loss) income, net of tax:
Currency translation adjustments (1.1) 1.0 (0.3) 0.7
Derivatives, net of tax — — — 0.1
Benefit plans, net of tax (0.2) (0.6) (0.6) (1.3)
Total other comprehensive (loss) income, net of tax (1.3) 0.4 (0.9) (0.5)
Comprehensive (loss) income $ (265.0) $ 192.0 $ (514.3) $ (792.2)

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

~~(DEBTOR-IN-POSSESSION)~~

CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF COMPREHENSIVE OPERATIONS

(unaudited, in ~~millions, except share data)~~millions)

September 24,
2021 December 25,
2020
Assets
Current Assets:
Cash and cash equivalents $ 1,322.6 $ 1,070.6
Accounts receivable, less allowance for doubtful accounts of $5.0 and $4.5 431.7 538.8
Inventories 367.6 344.9
Prepaid expenses and other current assets 203.7 350.0
Total current assets 2,325.6 2,304.3
Property, plant and equipment, net 767.7 833.1
Intangible assets, net 5,684.1 6,184.5
Other assets 380.6 393.5
Total Assets $ 9,158.0 $ 9,715.4
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt $ 1,388.1 $ 3,587.9
Accounts payable 122.2 93.3
Accrued payroll and payroll-related costs 62.7 79.4
Accrued interest 25.7 26.9
Accrued and other current liabilities 387.1 331.2
Total current liabilities 1,985.8 4,118.7
Pension and postretirement benefits 32.6 34.6
Environmental liabilities 60.3 59.8
Deferred income taxes 61.5 80.6
Other income tax liabilities 82.9 100.1
Other liabilities 86.0 109.8
Liabilities subject to compromise (Note 2) 6,335.5 4,192.6
Total Liabilities 8,644.6 8,696.2
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; 94,290,199, and 94,111,303 issued;
84,722,432 and 84,605,156 outstanding
18.9 18.8
Ordinary shares held in treasury at cost, 9,567,767 and 9,506,147 (1,616.1) (1,616.1)
Additional paid-in capital 5,596.0 5,587.6
Retained deficit (3,474.9) (2,961.5)
Accumulated other comprehensive loss (10.5) (9.6)
Total Shareholders' Equity 513.4 1,019.2
Total Liabilities and Shareholders' Equity $ 9,158.0 $ 9,715.4


	Successor		Predecessor
	Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Net loss	$	(284.9)	$	(263.7)
Other comprehensive loss, net of tax:
Currency translation adjustments	(4.4)		(1.1)

Benefit plans, net of tax	(0.3)		(0.2)
Total other comprehensive loss, net of tax	(4.7)		(1.3)
Comprehensive loss	$	(289.6)	$	(265.0)


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Net loss	$	(348.6)	$	(313.1)	$	(513.4)
Other comprehensive loss, net of tax:
Currency translation adjustments	(6.1)		(1.5)		(0.3)

Benefit plans, net of tax	(0.3)		—		(0.6)
Total other comprehensive loss, net of tax	(6.4)		(1.5)		(0.9)
Comprehensive loss	$	(355.0)	$	(314.6)	$	(514.3)

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(~~DEBTOR-IN-POSSESSION)~~unaudited, in millions, except share data)


	Successor		Predecessor
	September 30, 2022		December 31, 2021
Assets
Current Assets:
Cash and cash equivalents	$	391.2	$	1,345.0
Accounts receivable, less allowance for doubtful accounts of $6.0 and $4.7	377.0		439.1
Inventories	1,071.6		347.2
Prepaid expenses and other current assets	321.4		178.3
Current assets held for sale	7.2		—
Total current assets	2,168.4		2,309.6
Property, plant and equipment, net	448.3		776.0

Intangible assets, net	2,980.4		5,448.4

Deferred income taxes	464.2		—
Other assets	196.1		382.3
Total Assets	$	6,257.4	$	8,916.3

Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	44.1	$	1,388.9
Accounts payable	89.1		123.0
Accrued payroll and payroll-related costs	40.7		84.6
Accrued interest	71.1		17.0
Acthar Gel-Related Settlement	16.5		—
Opioid-Related Litigation Settlement liability	200.0		—
Accrued and other current liabilities	317.6		328.7

Total current liabilities	779.1		1,942.2
Long-term debt	3,034.3		—
Acthar Gel-Related Settlement	69.2		—
Opioid-Related Litigation Settlement liability	342.8		—
Pension and postretirement benefits	53.6		30.1
Environmental liabilities	36.4		43.0
Deferred income taxes	1.5		20.9
Other income tax liabilities	14.4		83.2

Other liabilities	77.0		85.8
Liabilities subject to compromise	—		6,397.7
Total Liabilities	4,408.3		8,602.9
Shareholders' Equity:
Predecessor preferred shares, $0.20 par value, 500,000,000 authorized; none issued and outstanding	—		—
Successor preferred shares, $0.01 par value, 500,000,000 authorized; none issued and outstanding	—		—
Predecessor ordinary A shares, €1.00 par value, 40,000 authorized; none issued and outstanding	—		—
Successor ordinary A shares, €1.00 par value, 40,000 authorized; none issued and outstanding	—		—
Predecessor ordinary shares, $0.20 par value, 500,000,000 authorized; 94,296,235 issued; 84,726,590 outstanding	—		18.9
Successor ordinary shares, $0.01 par value, 500,000,000 authorized; 13,170,932 issued and outstanding	0.1		—
Predecessor ordinary shares held in treasury at cost, none and 9,569,645	—		(1,616.1)
Additional paid-in capital	2,204.0		5,597.8
Accumulated other comprehensive loss	(6.4)		(8.3)
Retained deficit	(348.6)		(3,678.9)
Total Shareholders' Equity	1,849.1		313.4
Total Liabilities and Shareholders' Equity	$	6,257.4	$	8,916.3

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)


							Successor		Predecessor
		Nine Months Ended
		September 24, 2021		September 25, 2020			Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Cash Flows From Operating Activities:	Cash Flows From Operating Activities:					Cash Flows From Operating Activities:
Net loss	Net loss	$	(513.4)	$	(791.7)	Net loss	$	(348.6)	$	(313.1)	$	(513.4)
Adjustments to reconcile net cash from operating activities:	Adjustments to reconcile net cash from operating activities:					Adjustments to reconcile net cash from operating activities:
Depreciation and amortization	Depreciation and amortization	506.1		675.5		Depreciation and amortization	196.9		321.8		506.1
Share-based compensation	Share-based compensation	8.4		17.6		Share-based compensation	0.5		1.7		8.4
Deferred income taxes	Deferred income taxes	(19.1)		304.0		Deferred income taxes	(10.8)		(473.0)		(19.1)
Non-cash impairment charges	Non-cash impairment charges	64.5		63.5		Non-cash impairment charges	—		—		64.5
Losses (gains) on divestiture		0.8		(10.1)

Losses on divestiture						Losses on divestiture	—		—		0.8

Reorganization items, net	Reorganization items, net	22.5		—		Reorganization items, net	—		425.4		22.5
Non-cash accretion expense						Non-cash accretion expense	72.3		—		—
Other non-cash items	Other non-cash items	(6.0)		(21.6)		Other non-cash items	5.7		35.3		(6.0)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable, net	Accounts receivable, net	105.7		61.1		Accounts receivable, net	9.2		49.8		105.7
Inventories	Inventories	(30.9)		(43.9)		Inventories	150.9		(33.2)		(30.9)
Accounts payable	Accounts payable	14.7		(52.4)		Accounts payable	(11.6)		(3.6)		14.7
Income taxes	Income taxes	92.5		(431.2)		Income taxes	(27.8)		(26.9)		92.5
Opioid-related litigation settlement liability		125.0		—
Medicaid lawsuit		(4.8)		640.2
Opioid-Related Litigation Settlement liability						Opioid-Related Litigation Settlement liability	—		—		125.0
Acthar Gel-Related Settlement						Acthar Gel-Related Settlement	—		—		(4.8)
Payments of claims						Payments of claims	—		(629.0)		—
Other	Other	40.4		(116.3)		Other	(17.4)		2.5		40.4
Net cash from operating activities	Net cash from operating activities	406.4		294.7		Net cash from operating activities	19.3		(642.3)		406.4
Cash Flows From Investing Activities:	Cash Flows From Investing Activities:					Cash Flows From Investing Activities:
Capital expenditures	Capital expenditures	(39.2)		(42.4)		Capital expenditures	(15.6)		(33.4)		(39.2)

Proceeds from divestitures, net of cash	Proceeds from divestitures, net of cash	15.7		(0.7)		Proceeds from divestitures, net of cash	65.0		—		15.7
Other	Other	1.4		6.7		Other	0.2		0.4		1.4
Net cash from investing activities	Net cash from investing activities	(22.1)		(36.4)		Net cash from investing activities	49.6		(33.0)		(22.1)
Cash Flows From Financing Activities:	Cash Flows From Financing Activities:					Cash Flows From Financing Activities:

Issuance of external debt						Issuance of external debt	—		650.0		—
Repayment of external debt	Repayment of external debt	(128.2)		(134.6)		Repayment of external debt	(17.3)		(904.6)		(128.2)
Debt financing costs	Debt financing costs	—		(9.3)		Debt financing costs	—		(24.1)		—
Repurchase of shares		—		(0.4)
Other		—		(36.3)

Net cash from financing activities	Net cash from financing activities	(128.2)		(180.6)		Net cash from financing activities	(17.3)		(278.7)		(128.2)
Effect of currency rate changes on cash	Effect of currency rate changes on cash	(0.9)		0.2		Effect of currency rate changes on cash	(3.7)		(3.9)		(0.9)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	255.2		77.9		Net change in cash, cash equivalents and restricted cash	47.9		(957.9)		255.2
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	1,127.0		822.6		Cash, cash equivalents and restricted cash at beginning of period	447.3		1,405.2		1,127.0
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	1,382.2	$	900.5	Cash, cash equivalents and restricted cash at end of period	$	495.2	$	447.3	$	1,382.2

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,322.6	$	844.2	Cash and cash equivalents at end of period	$	391.2	$	297.9	$	1,322.6
Restricted cash included in prepaid expenses and other assets at end of period		23.3		20.2
Restricted cash included in prepaid expenses and other current assets at end of period						Restricted cash included in prepaid expenses and other current assets at end of period	67.5		113.0		23.3
Restricted cash included in other long-term assets at end of period	Restricted cash included in other long-term assets at end of period	36.3		36.1		Restricted cash included in other long-term assets at end of period	36.5		36.4		36.3
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	1,382.2	$	900.5	Cash, cash equivalents and restricted cash at end of period	$	495.2	$	447.3	$	1,382.2

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

~~MALLINCKRODT PLC~~

~~(DEBTOR-IN-POSSESSION)~~

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

~~(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 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 — — — (0.1) — — (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) — — — (0.2)
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 — — — (0.1) — — — (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
Balance as of December 25, 2020 94.1 $ 18.8 9.5 $ (1,616.1) $ 5,587.6 $ (2,961.5) $ (9.6) $ 1,019.2
Net loss — — — — — (143.9) — (143.9)
Other comprehensive income — — — — — — 0.1 0.1
Vesting of restricted shares — — — — (0.1) — — (0.1)
Share-based compensation — — — — 3.6 — — 3.6
Balance as of March 26, 2021 94.1 $ 18.8 9.5 $ (1,616.1) $ 5,591.1 $ (3,105.4) $ (9.5) $ 878.9
Net loss — — — — — (105.8) — (105.8)
Other comprehensive income — — — — — — 0.3 0.3
Vesting of restricted shares 0.2 0.1 0.1 — 0.1 — — 0.2
Share-based compensation — — — — 2.4 — — 2.4
Balance as of June 25, 2021 94.3 $ 18.9 9.6 $ (1,616.1) $ 5,593.6 $ (3,211.2) $ (9.2) $ 776.0
Net loss — — — — — (263.7) — (263.7)
Other comprehensive loss — — — — — — (1.3) (1.3)
Share-based compensation — — — — 2.4 — — 2.4
Balance as of September 24, 2021 94.3 $ 18.9 9.6 $ (1,616.1) $ 5,596.0 $ (3,474.9) $ (10.5) $ 513.4

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(~~DEBTOR-IN-POSSESSION)~~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 25, 2020 (Predecessor)	94.1	$	18.8	9.5	$	(1,616.1)	$	5,587.6	$	(2,961.5)	$	(9.6)	$	1,019.2
Net loss	—	—		—	—		—		(143.9)		—		(143.9)
Other comprehensive income	—	—		—	—		—		—		0.1		0.1
Vesting of restricted shares	—	—		—	—		(0.1)		—		—		(0.1)
Share-based compensation	—	—		—	—		3.6		—		—		3.6
Balance as of March 26, 2021 (Predecessor)	94.1	$	18.8	9.5	$	(1,616.1)	$	5,591.1	$	(3,105.4)	$	(9.5)	$	878.9
Net loss	—	—		—	—		—		(105.8)		—		(105.8)
Other comprehensive income	—	—		—	—		—		—		0.3		0.3
Vesting of restricted shares	0.2	0.1		0.1	—		0.1		—		—		0.2
Share-based compensation	—	—		—	—		2.4		—		—		2.4
Balance as of June 25, 2021 (Predecessor)	94.3	$	18.9	9.6	$	(1,616.1)	$	5,593.6	$	(3,211.2)	$	(9.2)	$	776.0
Net loss	—	—		—	—		—		(263.7)		—		(263.7)
Other comprehensive loss	—	—		—	—		—		—		(1.3)		(1.3)
Vesting of restricted shares	—	—		—	—		—		—		—		—
Share-based compensation	—	—		—	—		2.4		—		—		2.4
Balance as of September 24, 2021 (Predecessor)	94.3	$	18.9	9.6	$	(1,616.1)	$	5,596.0	$	(3,474.9)	$	(10.5)	$	513.4






Balance as of December 31, 2021 (Predecessor)	94.3	$	18.9	9.6	$	(1,616.1)	$	5,597.8	$	(3,678.9)	$	(8.3)	$	313.4
Net loss	—	—		—	—		—		(119.6)		—		(119.6)


Share-based compensation	—	—		—	—		1.2		—		—		1.2
Balance as of April 1, 2022 (Predecessor)	94.3	$	18.9	9.6	$	(1,616.1)	$	5,599.0	$	(3,798.5)	$	(8.3)	$	195.0
Net loss	—	—		—	—		—		(193.5)		—		(193.5)
Other comprehensive loss	—	—		—	—		—		—		(1.5)		(1.5)

Share-based compensation	—	—		—	—		0.5		—		—		0.5
Cancellation of Predecessor equity	(94.3)	(18.9)		(9.6)	1,616.1		(5,599.5)		3,992.0		9.8		(0.5)
Issuance of Successor common stock	13.2	0.1		—	—		2,189.6		—		—		2,189.7
Issuance of Successor Opioid Warrants	—	—		—	—		13.9		—		—		13.9
Balance as of June 16, 2022 (Successor)	13.2	$	0.1	—	$	—	$	2,203.5	$	—	$	—	$	2,203.6
Net loss	—	—		—	—		—		(63.7)		—		(63.7)
Other comprehensive loss	—	—		—	—		—		—		(1.7)		(1.7)

Balance as of July 1, 2022 (Successor)	13.2	$	0.1	—	$	—	$	2,203.5	$	(63.7)	$	(1.7)	$	2,138.2
Net loss	—	—		—	—		—		(284.9)		—		(284.9)
Other comprehensive loss	—	—		—	—		—		—		(4.7)		(4.7)
Share-based compensation	—	—		—	—		0.5		—		—		0.5
Balance as of September 30, 2022 (Successor)	13.2	$	0.1	—	$	—	$	2,204.0	$	(348.6)	$	(6.4)	$	1,849.1

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 of multiple wholly owned subsidiaries (collectively, "Mallinckrodt" or "the Company") that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. Areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, hepatology, nephrology, pulmonology, ophthalmology and ~~ophthalmology;~~oncology; immunotherapy and neonatal respiratory critical care therapies; ~~analgesics~~analgesics; cultured skin substitutes and gastrointestinal products.

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

•Specialty Brands includes innovative specialty pharmaceutical brands; and

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

The Company owns or has rights to use the trademarks and trade names that are used in conjunction with the operation of its business. One of the more important trademarks that the Company owns or has rights to use that appears in this Quarterly Report on Form 10-Q is "Mallinckrodt," which is a registered trademark or the subject of pending trademark applications in the United States ("U.S.") and other jurisdictions. Solely for convenience, the Company only uses the ™ or ® symbols the first time any trademark or trade name is mentioned in the following notes. Such references are not intended to indicate in any way that the Company will not assert, to the fullest extent permitted under applicable law, its rights to its trademarks and trade names. Each trademark or trade name of any other company appearing in the following notes is, to the Company's knowledge, owned by such other company.

Basis of Presentation

On October 12, 2020 (the "Petition Date"), Mallinckrodt plc and substantially all of its U.S. subsidiaries, including certain subsidiaries of Mallinckrodt plc operating the Specialty Generics business (the "Specialty Generics Subsidiaries") and the Specialty Brands business (the "Specialty Brands Subsidiaries"), and certain of the Company's international subsidiaries (together with the Company, Specialty Generics Subsidiaries and Specialty Brands Subsidiaries, the "Debtors") voluntarily initiated proceedings (the "Chapter 11 Cases") under chapter 11 of title 11 ("Chapter 11") of the United States Code (the "Bankruptcy Code"). On March 2, 2022, the U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") entered an order confirming the fourth amended plan of reorganization (with technical modifications) (the "Plan"). Subsequent to the filing of the Chapter 11 Cases, Chapter 11 proceedings commenced by a limited subset of the Debtors were recognized and given effect in Canada, and separately the High Court of Ireland made an order confirming a scheme of arrangement on April 27, 2022, which is based on and consistent in all respects with the Plan (the "Scheme of Arrangement"). On June 8, 2022, the Bankruptcy Court entered an order approving a minor modification to the Plan. The Plan became effective on June 16, 2022 (the "Effective Date"), and on such date the Company emerged from the Chapter 11 and the Scheme of Arrangement became effective concurrently.

See Note 2 for further information on the Plan and emergence from Chapter 11.

Upon emergence from Chapter 11, the Company adopted fresh-start accounting in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 852 - Reorganizations ("ASC 852"), and became a new entity for financial reporting purposes as of the Effective Date. References to "Successor" relate to the financial position as of June 16, 2022 and results of operations of the reorganized Company subsequent to June 16, 2022, while references to "Predecessor" relate to the financial position prior to June 16, 2022 and results of operations of the Company prior to, and including, June 16, 2022. All emergence-related transactions of the Predecessor were recorded as of June 16, 2022. Accordingly the unaudited condensed consolidated financial statements for the Successor are not comparable to the unaudited condensed consolidated financial statements for the Predecessor. See Note 3 for further information.

The Company's significant accounting policies are described within the notes to the financial statements included within the Company's Annual Report filed on Form 10-K for the fiscal year ended December 31, 2021 (Predecessor). In connection with the adoption of fresh-start accounting, the Company elected to make an accounting policy change as described below:

Predecessor Contingencies — Legal fees pertaining to asbestos-related matters were estimated and accrued as part of the Company's projected asbestos liability.

Successor Contingencies — Legal fees pertaining to asbestos matters are expensed as incurred.

This change in accounting policy resulted in a $22.8 million fresh-start adjustment to the asbestos-related liability and a $20.3 million adjustment to the corresponding indemnification receivable as of the Effective Date.

Also in connection with the adoption of fresh-start accounting, the Company made a change in estimate related to the Specialty Generics segment inventory turn calculation. This prospective change is expected to result in the discrete amortization of $20.5 million of capitalized variances through the first quarter of fiscal 2023. The amount recognized for the three months ended September 30, 2022 (Successor) was $12.5 million and the amount recognized for the period June 17, 2022 through September 30, 2022 (Successor) was $14.9 million.

The Company also reassessed and updated its product line net sales presentation for its Specialty Generics segment. Beginning with the Quarterly Report on Form 10-Q for the quarterly period ended July 1, 2022 (Successor), the Company's unaudited condensed consolidated financial statements reflect the updated product line net sales structure for its Specialty Generics segment. Prior year amounts have been recast to conform to current 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 50.0% of the voting shares, or have the ability to control through similar rights. In the opinion of management, all adjustments necessary for a fair statement of results of operations, cash flows and financial position have been made. All intercompany balances and transactions have been eliminated in consolidation and all normal recurring adjustments necessary for a fair presentation have been included in the results reported. The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern.

The results of entities disposed of are included in the unaudited condensed consolidated financial statements up to the date of disposal, and where appropriate, these operations have been reported in discontinued operations. Divestitures of product lines and businesses not meeting the criteria for discontinued operations have been reflected in operating ~~(loss) income.~~loss.

The fiscal year end balance sheet data was derived from audited consolidated financial statements, but dodoes 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 ~~25, 2020~~31, 2021 (Predecessor) filed with the U.S. Securities and Exchange Commission ("SEC") on March ~~10, 2021.~~

~~Voluntary Filing Under Chapter 11 and 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 12 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 amended, supplemented or otherwise modified, the "RSA") (further detail for which is provided in Note 2) as part of a prearranged plan of reorganization. See Note 2 for further information on the voluntary petitions for reorganization, the RSA and agreements in principle subsequently memorialized in the Company's Chapter 11 plan of reorganization.

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 (repository corticotropin injection) ("Acthar Gel")-related settlements, restructured debt obligations, 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 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 RSA may be terminated by one or more of the parties thereto, (c) the Bankruptcy Court may grant or deny motions in a manner that is adverse to the 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 Company's Chapter 11 plan of reorganization 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 a going concern.

The unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might result from the outcome of this uncertainty.

Pursuant to sections 1107(a) and 1108 of the Bankruptcy Code, the Debtors (as defined in Note 2) retain control of their assets and are authorized to operate their business as debtors-in-possession while being subject to the jurisdiction of the Bankruptcy Court. While operating as debtors-in-possession under Chapter 11, the Debtors may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business and subject to applicable orders of the Bankruptcy Court, for amounts other than those reflected in the accompanying unaudited condensed consolidated financial statements. Any such actions occurring during the Chapter 11 Cases authorized by the Bankruptcy Court could materially impact the amounts and classifications of assets and liabilities reported in the Company's unaudited condensed consolidated financial statements. For more information regarding the Chapter 11 Cases, see Note 2.15, 2022.

Fiscal Year

The Company reports its results based on a "52-53 week" year ending on the last Friday of December. The period June 17, 2022 through September 30, 2022 and the three months ended September 30, 2022 reflect the Successor periods, while the period January 1, 2022 through, and including, June 16, 2022 reflects the Predecessor period. Unless otherwise indicated, the three months ended September 30, 2022 (Successor) reflects the thirteen week period ended September 30, 20222 (Successor), and the three and nine months ended September 24, 2021 (Predecessor) refers to the thirteen and thirty-nine week ~~periods~~period ended September 24, 2021 ~~and the three and nine months ended September 25, 2020 refers to the thirteen and thirty-nine week periods ended September 25, 2020. The full year~~(Predecessor). Fiscal 2021 (Predecessor) consisted of 53 weeks, while fiscal ~~2020 consisted~~2022 will consist of 52 weeks ~~while fiscal 2021~~and will ~~consist of 53 weeks and~~ end on December ~~31, 2021.~~30, 2022.


2.			~~Bankruptcy Proceedings~~Emergence from Voluntary Reorganization

~~Voluntary Filing Under Chapter 11~~

~~On October 12, 2020 (the "Petition Date"), Mallinckrodt plc and certain~~During the pendency of ~~its subsidiaries voluntarily initiated~~ the Chapter 11 Cases, ~~under~~ the Bankruptcy Code in the Bankruptcy Court to effectuate settlements contemplated in the RSA. The entities that filed the Chapter 11 Cases include the Company, substantially all of the Company’s U.S. subsidiaries, including certain subsidiaries of Mallinckrodt plc operating the Specialty Generics business (the "Specialty Generics Subsidiaries") and the Specialty Brands business (the "Specialty Brands Subsidiaries"), and certain of the Company’s international subsidiaries (together with the Company, Specialty Generics Subsidiaries and Specialty Brands Subsidiaries, the "Debtors"). Pursuant to orders granted by the Ontario Superior Court of Justice, the Chapter 11 proceedings commenced by a limited subset of the Company's subsidiaries have also been recognized and given effect in Canada. The Chapter 11 Cases are being jointly administered under the caption In re Mallinckrodt plc, Case No. 20-12522 (JTD). Information about the Chapter 11 Cases, including the case docket, may be found free of charge at https://restructuring.primeclerk.com/Mallinckrodt/.

~~The~~ Debtors ~~continue to operate~~operated their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As debtors-in-possession, the Debtors ~~are~~were authorized to continue to operate as ongoing businesses, and ~~may~~were allowed to pay all debts and honor all obligations arising in the ordinary course of their businesses after the Petition Date. However, the Debtors ~~may~~were not allowed to pay third-party claims or creditors on account of obligations arising before the Petition Date or engage in transactions outside the ordinary course of business without approval of the Bankruptcy Court.

Under the Bankruptcy Code, third-party actions to collect pre-petition indebtedness owed by the Debtors, as well as most litigation pending against the Company as of the Petition Date, ~~are~~were subject to an automatic stay. However, under the Bankruptcy Code, certain regulatory or criminal proceedings generally are not subject to the automatic stay and may continue unless otherwise ordered by the Bankruptcy Court. Absent an order of the Bankruptcy Court providing otherwise, substantially all pre-petition liabilities will be resolved under a Chapter 11 plan of reorganization.

Among other requirements, a Chapter 11 plan of reorganization must comply with the priority scheme established by the Bankruptcy Code, under which certain post-petition and secured or “priority” pre-petition liabilities need to be satisfied before general unsecured creditors and holders of the Company's equity are entitled to receive any distribution. Upon solicitation of the plan of reorganization to creditors, with an accompanying court-approved disclosure statement, certain impaired creditors and interest holders will vote by ballot to approve or reject the plan. No assurance can be given as to what values, if any, will be ascribed in the Chapter 11 Cases to the claims and interests of each of these constituencies. See~~Restructuring Support Agreement and~~ Plan of Reorganization section below for ~~contemplated~~the distributions to creditors and interest holders.

Under the Bankruptcy Code, the Debtors may assume, modify, assign or reject certain executory contracts and unexpired leases, including, without limitation, leases of real property and equipment, subject to the approval of the Bankruptcy Court and to certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors from performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease in this Quarterly Report on Form 10-Q, including, where applicable, the express termination rights thereunder or a quantification of their obligations, must be read in conjunction with, and is qualified by, any overriding rejection rights the Debtors have under the Bankruptcy Code.

As discussed further below, the Debtors obtained approval from the Bankruptcy Court for certain "first day" motions, including motions to obtain customary relief intended to continue ordinary course operations after the Petition Date.

~~Significant Bankruptcy Court Actions~~

~~First Day Motions~~

On October 14, 2020, the Debtors received Bankruptcy Court approval of their customary motions filed on the Petition Date ("First Day Motions") on an interim basis seeking court authorization to continue to support its business operations during the Chapter 11 Cases, including the continued payment of employee wages and benefits without interruption, payment of critical and foreign vendors, continuation of customer programs, continuation of use of existing cash management programs and allowance of certain financing payments under a cash collateral order. The First Day Motions were subsequently approved by the Bankruptcy Court on a final basis at hearings.

~~Chapter 11 Financing~~

The Company obtained an order of the Bankruptcy Court in the Chapter 11 Cases (in a form agreed with, among others, the agent under the senior secured credit facilities, lenders under the senior secured revolving credit facility and the senior secured term loans and holders of the first lien senior notes and the second lien senior notes) permitting the use of cash collateral to finance the Chapter 11 Cases. Such use is subject to an approved budget, updated and submitted every four weeks, consisting of rolling thirteen week periods subject to the consent of the lenders under the senior secured revolving credit facility and the senior secured term loans.

Such order requires that the Company make cash adequate protection payments on the senior secured revolving credit facility and the senior secured term loans for, among other things, unpaid pre-petition and post-petition fees, unpaid pre-petition interest (at the specified contract rate) and post-petition interest (at a rate equal to (1) the adjusted London Inter-Bank Offered Rate ("LIBOR"), plus (2) the contract-specified applicable margin, and plus (3) an incremental 200 basis points), quarterly amortization payments on the senior secured term loans and reimbursement of certain costs. Such order further requires that the Company make cash adequate protection payments on the first lien senior notes and the second lien senior notes for, among other things, unpaid pre-petition and post-petition interest (at the specified non-default interest rate) and reimbursement of certain costs. On April 13, 2021, the Debtors received Bankruptcy Court approval of their motion to amend the final cash collateral order as of March 22, 2021 to pay post-petition interest on the senior secured term loans at a rate equal to (1) the adjusted LIBOR, plus (2) the contract-specified applicable margin, and plus (3) an incremental 250 basis points for its senior secured term loans.

Interest expense incurred and paid with respect to the incremental adequate protection payments of 200 basis points and 250 basis points on the senior secured revolving credit facility and the senior secured term loans, respectively, were as follows:

September 24,
2021
Three Months Ended Nine Months Ended
Interest expense incurred for adequate protection payments $ 15.8 $ 46.1
Cash paid for adequate protection payments 16.4 45.5

The cash collateral order provides that it is without prejudice to (i) the rights of certain parties to request additional or alternative adequate protection from the Bankruptcy Court, (ii) the rights of lenders under the senior secured revolving credit facility and the senior secured term loans to seek a higher rate of interest and (iii) the rights of the holders of the first lien senior notes and the second lien senior notes to seek payment of a make-whole premium.

~~Bar Date~~

On December 31, 2020, the Bankruptcy Court entered an order approving a deadline of February 16, 2021 at 5:00 pm (Eastern Time) (the "General Bar Date") and April 12, 2021, at 5:00 p.m. (Eastern Time) (the “Governmental Bar Date”) (collectively, together the "Bar Dates") for filing claims against the Debtors relating to the period prior to the Petition Date for general claims and government claims, respectively. The preceding Bar Dates do not cover opioid claims (inclusive of voluntary injunction opioid claims). The Company's review of asserted claims is discussed further below in ~~Chapter 11 Claims Process~~.

~~Administrative Expense Bar Date~~

On May 20, 2021, the Bankruptcy Court entered an order approving a deadline of June 28, 2021 at 5:00 pm (Eastern Time) (the "Administrative Expense Bar Date") for filing claims against the Debtors relating to the period from the Petition Date to April 30, 2021 for administrative expense requests by certain creditors. The preceding Administrative Expense Bar Date does not cover opioid claims (inclusive of voluntary injunction opioid claims). The Company's review and reconciliation of asserted administrative expense requests is ongoing.

~~Injunctive Litigation Relief~~

The Bankruptcy Court entered an order extending its prior injunctions against certain opioid and Acthar Gel-related litigation matters proceeding against the Debtors and also against certain covered non-Debtors on August 30, 2021. Refer to Note 12 for further discussion.

~~Restructuring Support Agreement and Plan of Reorganization~~

~~Restructuring Support Agreement~~

On October 11, 2020, the Company and the other Debtors entered into a RSA with creditors holding approximately 84%, by aggregate principal amount, of the Company’s outstanding guaranteed unsecured senior notes and with a group of governmental plaintiffs in the opioid litigation pending against the Company and certain of its subsidiaries, including 50 state and territory attorneys general and the court-appointed plaintiffs’ executive committee in the opioid multidistrict litigation (collectively, the "RSA Supporting Parties"). After the bankruptcy filing, the Multi-State Governmental Entities Group (the "MSGE Group") entered into a joinder to the RSA that gained the support of approximately 1,300 cities, municipalities, hospital and school districts, amongst others. On March 11, 2021, an ad hoc group of lenders holding approximately $1,300.0 million, by aggregate principal amount, of the Company’s outstanding senior secured term loan due September 2024 (the "2017 Term Loan") and senior secured term loan due February 2025 (the "2018 Term Loan") agreed to join the RSA as supporting parties and certain of the existing supporting parties agreed to certain amendments thereto (the "Joinder and Amendment").

The restructuring transactions will be effectuated through the Chapter 11 plan of reorganization, which among other things provides for a financial restructuring that would reduce the Company’s total debt by approximately $1,300.0 million. Pursuant to the RSA, each of the Debtors and the RSA Supporting Parties has made certain customary commitments to each other in connection with the pursuit of the transactions contemplated by the term sheets attached thereto. The Debtors have agreed, among other things, to use commercially reasonable efforts to make all requisite filings with the Bankruptcy Court; continue to involve and update the RSA Supporting Parties’ representatives in the bankruptcy process; and satisfy certain other covenants. The RSA Supporting Parties have committed to support and vote for the Chapter 11 plan of reorganization implementing the terms of the RSA and have agreed to use commercially reasonable efforts to take, or refrain from taking, certain actions in furtherance of such support.

The RSA contains milestones for the progress of the Chapter 11 Cases (the "Milestones"), which include the dates by which the Debtors are required to, among other things, obtain certain orders of the Bankruptcy Court and consummate the Debtors’ emergence from bankruptcy. Among other milestones, the RSA (as amended, including by the Joinder and Amendment) requires the Debtors to have filed a Chapter 11 plan of reorganization by no later than April 20, 2021, the Bankruptcy Court to have entered an order

confirming the Chapter 11 plan of reorganization by no later than August 15, 2021 and the Debtors to have emerged from bankruptcy by no later than November 15, 2021. The Bankruptcy Court commenced the plan confirmation hearing on November 1, 2021, to which scheduling the parties to the RSA consented.

The RSA (as supplemented by the above-described joinders, including the Joinder and Amendment) incorporates the terms agreed to by the parties reflected in the term sheets attached to the RSA and such joinders, including the Joinder and Amendment, including an agreement by the RSA Supporting Parties. Each of the parties to the RSA may terminate the agreement (and thereby their support for the associated plan of reorganization) under certain limited circumstances. Any Debtor may terminate the RSA upon, among other circumstances: (i) its board of directors, after consultation with legal counsel, reasonably determining in good faith that performance under the RSA would be inconsistent with its fiduciary duties; and (ii) certain actions by the Bankruptcy Court, including dismissing the Chapter 11 Cases or converting the Chapter 11 Cases into cases under Chapter 7 of the Bankruptcy Code.

The RSA Supporting Parties also have specified termination rights, including, among other circumstances, termination rights that arise if certain of the Milestones have not been achieved, extended, or waived. Termination by one of these creditor groups will result in the termination of the RSA as to the terminating group only, with the RSA remaining in effect with respect to the Debtors and the non-terminating group.

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.

Plan of Reorganization

On September 2, 2021, the Debtors reached agreements in principle with (1) the Governmental Plaintiff Ad Hoc Committee (the “GAHC”), the MSGE Group, and the Official Committee of Opioid Related Claimants appointed in the Chapter 11 Cases (the “OCC” and, together with the GAHC and the MSGE Group, the “Opioid Claimants”), (2) the Official Committee of Unsecured Creditors appointed in the Chapter 11 Cases (the “UCC”) and (3) holders of more than two-thirds of the outstanding principal amount of the 10.00% second lien senior secured notes due April 2025 (the "Second Lien Notes") issued by Company’s subsidiaries Mallinckrodt International Finance S.A. and Mallinckrodt CB LLC (the “Settling Second Lien Noteholders”) and the trustee for the Second Lien Notes, in each case relating to the treatment of certain claims pursuant to the proposed Joint Chapter 11 Plan of Reorganization of Mallinckrodt plc and Its Debtor Affiliates Under Chapter 11 of the Bankruptcy Code dated as of June 18, 2021 (the "Proposed Plan"), as it was amended to conform to such agreements in principle (the “Amended Plan”) as filed by the Debtors on September 29, 2021.

~~The RSA Supporting Parties along with the OCC, the UCC and the Settling Second Lien Noteholders (in~~In accordance with the ~~agreements in principle) agree to support~~effectuated Plan, the following ~~as memorialized in~~significant transactions occurred upon the ~~Amended~~Company's emergence from bankruptcy on the Effective Date:

Resolution of Opioid-Related Claims

Pursuant to the Plan ~~which may be amended, modified or supplemented from time to time:~~

•~~A proposed resolution~~and the Scheme of Arrangement, on the Effective Date all ~~opioid-related~~opioid claims against the Company and its subsidiaries~~. Under~~ were deemed to have been settled, discharged, waived, released and extinguished in full against the ~~terms of~~Company and its subsidiaries, and the ~~amended proposed settlement (the "Amended Proposed Opioid-Related Litigation Settlement"),~~Company and its subsidiaries ceased to have any liability or obligation with respect to such claims, which ~~would become effective upon Mallinckrodt’s emergence from~~were treated in accordance with the ~~Chapter 11 process, subject to court approval and other conditions:~~Plan as follows:

◦Opioid claims ~~would be~~were channeled to ~~one or more~~certain trusts, which ~~would~~will receive $1,725.0 million in ~~structured~~deferred payments from the Company and certain of its subsidiaries (the "Opioid-Related Litigation Settlement") consisting of (i) a $450.0 million payment that was made upon the ~~Company’s emergence from Chapter 11;~~Effective Date (of which $2.6 million was prefunded); (ii) a $200.0 million payment upon each of the first and second anniversaries of ~~emergence;~~the Effective Date; (iii) a $150.0 million payment upon each of the third through seventh anniversaries of ~~emergence;~~the Effective Date; and (iv) a $125.0 million payment upon the eighth anniversary of ~~emergence~~Effective Date (collectively, the "Opioid Deferred Payments") with the Company retaining an eighteen-month ~~prepayment~~ option to prepay outstanding Opioid Deferred Payments (other than the initial Effective Date payment) at a discount (and to prepay the Opioid Deferred Payments at their undiscounted value even after the expiration of such eighteen-month period). The Opioid Deferred Payments are unsecured and are guaranteed by Mallinckrodt and its subsidiaries that are borrowers, issuers or guarantors under the Takeback Term Loans and the New 1L Notes, Existing 1L Notes, New 2L Notes and Takeback 2L Notes (such notes collectively, the "Effective Date Notes") (except for the Effective Date Notes), and certain future indebtedness (subject to certain exceptions). The Opioid Deferred Cash Payments agreement contains affirmative and negative covenants (including an obligation to offer to pay the Opioid Deferred Payments without discount upon the occurrence of certain change of control triggering events) and events of default (subject in certain cases to customary grace and cure periods). The occurrence of an event of default under the Opioid Deferred Cash Payments agreement could result in the required repayment of all ~~but~~outstanding Opioid Deferred Payments and could cause a cross-default that could result in the ~~first payment.~~acceleration of certain indebtedness of Mallinckrodt and its subsidiaries.

◦•Opioid claimants ~~would~~ also ~~receive~~received, in addition to other potential consideration, 3,290,675 warrants for approximately 19.99% of the reorganized ~~Company’s~~Company's new outstanding shares, with a nominal value $0.01 per share ("Ordinary Share(s)"), after giving effect to the exercise of the warrants, but subject to dilution from equity reserved under the management incentive plan, exercisable at any time on or prior to the sixth anniversary of the ~~Company's emergence,~~Effective Date, at a strike price ~~reflecting an aggregate equity value for the reorganized Debtors~~ of ~~$1,551.0 million~~$103.40 per Ordinary Share (the ~~"New Opioid Warrants"~~"Opioid Warrant(s)").

◦•~~Upon commencing~~Pursuant to the ~~Chapter 11 filing,~~Plan, certain subsidiaries of the Company ~~has begun~~will remain subject to ~~comply with~~ an agreed-upon operating injunction with respect to the operation of ~~its~~their opioid business.

•Governmental Acthar~~A proposed resolution with the U.S. Department of Justice and other governmental parties to settle a range of litigation matters and disputes relating to~~ ® Gel (repository corticotropin injection) ("Acthar ~~Gel~~.Gel") Settlement

◦~~The Company has reached an agreement in principle with~~Pursuant to the Plan and the Scheme of Arrangement, on the Effective Date, all claims of the U.S. Department of Justice ("DOJ") and other governmental parties relating to Acthar Gel against the Company were deemed to have been settled, discharged, waived, released and extinguished in full against the Company, and the Company ceased to have any liability or obligation with respect to such claims, which were treated in accordance with the Plan and the terms of the settlement that is summarized below:

•The Company entered into an agreement with the DOJ and other governmental parties to settle a range of litigation matters and disputes relating to Acthar Gel (the ~~"Proposed Acthar~~"Acthar Gel-Related Settlement") including ~~the~~a Medicaid lawsuit with the Centers for Medicare and Medicaid Services ("CMS"), a related False Claims Act ("FCA") lawsuit in Boston, and an Eastern District of Pennsylvania ("EDPA") FCA lawsuit principally relating to interactions of Acthar Gel's previous ~~owner's~~owner (Questcor Pharmaceuticals Inc. ("Questcor")) ~~interactions~~ with an independent charitable foundation. To implement the Acthar Gel-Related Settlement, the Company entered into two settlement agreements with the U.S. and certain relators. Under the ~~Proposed~~ Acthar Gel-Related Settlement, which was conditioned upon the Company ~~entering the~~commencing its Chapter 11 ~~restructuring process,~~proceeding and provided for the distributions the applicable claimants received under the Plan, the Company ~~has agreed to~~will pay

~~$260.0~~ $260.0 million to the DOJ and other parties over seven years and reset Acthar ~~Gel’s~~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,~~The $260.0 million in payments consists of (i) a $15.0 million payment that was made upon ~~execution~~the Effective Date; (ii) a $15.0 million payment upon the first anniversary of the ~~settlement, the Company will dismiss its appeal~~Effective Date; (iii) a $20.0 million payment upon each of the ~~U.S. District Court~~second and third anniversaries of ~~Columbia's ("D.C. District Court") adverse decision in~~ the ~~Medicaid lawsuit, which appeal was filed in~~Effective Date; (iv) a $32.5 million payment upon each of the ~~U.S. Court~~fourth and fifth anniversaries of ~~Appeals for~~ the ~~District~~Effective Date; and (v) a $62.5 million payment upon the sixth and seventh anniversaries of ~~Columbia ("D.C. Circuit").~~Effective Date. Also in connection with the ~~Proposed~~ Acthar Gel-Related Settlement, the Company ~~expects to enter~~entered into (a) separate settlement agreements with certain states, the Commonwealth of Puerto Rico, the District of Columbia and the above-noted relators, which further implement the Acthar Gel-Related Settlement, and (b) a five-year corporate integrity agreement ("CIA") with the Office of Inspector General ("OIG") of the

U.S. Department of Health and Human ~~Services. The Company continues to work~~Services ("HHS") in March 2022. As a result of these agreements, upon effectiveness of the Acthar Gel-Related Settlement in connection with the ~~government to finalize~~effectiveness of the ~~CIA. In turn,~~Plan, the U.S. Government ~~will drop~~has dropped its demand for approximately $640 million in retrospective Medicaid rebates for Acthar Gel and ~~agree~~agreed to dismiss the FCA lawsuit in Boston and the EDPA FCA lawsuit. Similarly, state and territory Attorneys General have also dropped related lawsuits. In turn, the Company dismissed its appeal of the U.S. District Court for the District of Columbia's ("D.C. District Court") adverse decision in the Medicaid lawsuit, which was filed in the U.S. Court of Appeals for the District of Columbia Circuit ("D.C. Circuit").

•Mallinckrodt has entered into the ~~Proposed~~ Acthar Gel-Related Settlement ~~to settle~~ with the DOJ and other governmental parties solely to move past these litigation matters and disputes and ~~will~~does not make noany admission of ~~liability. The Company is working to complete the settlement with the DOJ, as well as various states that are party to the Boston FCA litigation, subject to court approval.~~liability or wrongdoing.

•~~A modification~~In accordance with the effectuated Acthar Gel-Related Settlement, on June 28, 2022, the Bankruptcy Court entered an order dismissing the federal government's FCA lawsuit with prejudice, and further ordered the related state lawsuits dismissed without prejudice.

•In accordance with the effectuated Acthar Gel-Related Settlement, on July 20, 2022, the court entered an order dismissing the EDPA FCA lawsuit with prejudice.

Satisfaction of Existing Term Loans and Repayment of Existing Revolver

On the Effective Date and pursuant to the Plan, Mallinckrodt International Finance S.A. ("MIFSA") and Mallinckrodt CB LLC ("MCB" and together with MIFSA, the "Issuers"), each of which is a subsidiary of the ~~Company's~~Company, entered into a senior secured term ~~loans~~loan facility with an aggregate principal amount of $1,392.9 million (the "2017 Replacement Term Loans") and a senior secured term loan facility with an aggregate principal amount of $369.7 million (the "2018 Replacement Term Loans", and together with the 2017 Replacement Term Loan, the "Takeback Term Loans"). AtPursuant to the ~~end~~Plan and Scheme of Arrangement, on the ~~court-supervised process,~~Effective Date, lenders holding allowed claims in respect of the ~~Company’s 2017 and 2018 Term Loans are expected to receive either (1) new~~existing senior secured term loans due September 2024 (the "2024 Term Loans") and senior secured term loans due February 2025 (the "2025 Term Loans" and, together with the 2024 Term Loans, the "Existing Term Loans") incurred by the Issuers received their pro rata share of the 2017 Replacement Term Loans (in the case of the 2024 Term Loans) or the 2018 Replacement Term Loans (in the case of the 2025 Term Loans) and payment in cash of an ~~amount~~exit fee equal to 1.00% of the remaining principal amount of ~~claims (as reduced~~Existing Term Loans held by ~~inter alia, the excess cash flow ("ECF") Payment) bearing interest at a rate per annum equal to LIBOR plus 5.25% (with respect~~such lenders in satisfaction thereof.

Pursuant to the ~~2017 Term Loan) or LIBOR plus 5.50% (with respect to the 2018 Term Loan) (the "Adjusted Interest Rate"), maturing~~Plan and Scheme of Arrangement, on the ~~earlier of September 30, 2027 and 5.75 years after emergence and without any financial maintenance covenant or (2) payment~~Effective Date, lenders' allowed claims in ~~full in cash. A mandatory prepayment in an amount equal to $114.0 million arising from excess cash flow with~~ respect ~~to fiscal 2020 was paid to the holders~~ of the ~~Company’s 2017 and 2018 Term Loans on March 19, 2021.~~

•~~The reinstatement or repayment of the Company's~~existing $900.0 million senior secured revolving credit facility~~. At~~ (the "Existing Revolver") incurred by the ~~end~~Issuers and certain of ~~the court-supervised process, all allowed claims under such facility would be~~their respective subsidiaries were paid in full in ~~cash with~~cash.

Reinstatement of Existing 10.00% First Lien Senior Secured Notes due 2025

On the ~~proceeds~~Effective Date and pursuant to the Plan and the Scheme of ~~newly incurred debt.~~

•~~The reinstatement~~Arrangement, the Issuers' existing 10.00% First Lien Senior Secured Notes due 2025 (the "Existing 1L Notes") in an aggregate principal amount of $495.0 million and the note documents relating thereto were reinstated. In addition, pursuant to the terms of the ~~agreements associated with~~indenture governing the ~~Company's 10.00% first lien senior notes. At~~Existing 1L Notes, the ~~end~~Issuers, Mallinckrodt plc and the subsidiary guarantors of the court-supervised process, all allowed claims under these agreements would either be reinstated at existing rates and maturities if the applicable holders' purported make-whole claims are disallowed or, if such reinstatement is not permitted or if the applicable holders' make-whole claims are allowed, receive take-back notes at market rates with an extended maturity.

•~~A modification~~Existing 1L Notes entered into a supplemental indenture, dated of the ~~Company's~~Effective Date (the "Supplemental Indenture"), pursuant to which certain additional assets were added to the collateral securing the Existing 1L Notes and the guarantees thereof.

Satisfaction of 10.00% ~~second lien senior notes.~~ AtSecond Lien Senior Secured Notes due 2025

Pursuant to the ~~end~~Plan and Scheme of Arrangement, on the ~~court-supervised process,~~Effective Date, lenders holding allowed claims in respect of the ~~Company’s~~Issuers' existing 10.00% second lien senior secured notes ~~are expected to receive~~due 2025 (the "Existing 2L Notes") in an aggregate principal amount of $322.9 million received their pro rata share of a like aggregate principal amount of new 10.00% second lien senior secured notes due 2025 ~~that will have~~("New 2L Notes") in satisfaction thereof.

Discharge of Mallinckrodt's Guaranteed Unsecured Notes

Pursuant to the ~~same principal amount~~Plan and ~~other economic terms as~~Scheme of Arrangement, on the ~~existing second lien senior secured notes.~~

•~~A restructuring of the Company’s unsecured notes under the guaranteed unsecured notes indentures.~~ ~~At the end of the court-supervised process,~~Effective Date, holders of allowed claims ~~under indentures governing~~in respect of the ~~Guaranteed Unsecured Notes (the~~Issuers' 5.75% Senior Notes due 2022, the 5.625% Senior Notes due 2023 and the 5.50% Senior Notes due ~~2025) and the Guaranteed~~2025 (the "Guaranteed Unsecured ~~Notes are expected to receive~~Notes") received their pro rata share of $375.0 million aggregate principal amount of new 10.00% second lien senior secured notes due ~~seven years after emergence~~2029 ("Takeback 2L Notes") and 100% of the new ~~Mallinckrodt ordinary shares,~~13,170,932 Ordinary Shares issued, subject to dilution by the ~~warrants~~Opioid Warrants described above and ~~certain other equity.~~the management incentive plan ("MIP"). Otherwise, pursuant to the Plan and the Scheme of Arrangement, all claims in respect of the Guaranteed Unsecured Notes and the indentures governing them were settled, discharged, waived, released and extinguished in full.

Resolution of Other Remaining Claims

•~~A proposed resolution~~Pursuant to the Plan and Scheme of ~~other remaining~~Arrangement, on the Effective Date, certain trade claims and ~~treatment of equity holders.~~ ~~At the end of the court-supervised process, certain trade creditors and holders of~~ other ~~allowed~~ general unsecured claims, including the claims of holders of ~~the 9.50% debentures due May 2022, the 8.00% debentures due March 2023 and~~ the 4.75% senior notes due April 2023, ~~are expected~~against the Debtors were deemed to have been settled, discharged, waived, released and extinguished in full. Mallinckrodt ceased to have any liability or obligation with respect to such claims, which were then treated in accordance with the Plan and Scheme of Arrangement, which provided for the holders of such

claims to share in $135.0 million in cash, plus other potential consideration, including but not limited to 35.0% of the proceeds of the sale of the StrataGraft® Priority Review Voucher ("PRV") and $20.0 million payable upon the achievement of both (1) U.S. Food and Drug Administration ("FDA") approval of Terlivaz® (which occurred on September 14, 2022) and (2) cumulative net sales of $100.0 million of Terlivaz.

On June 30, 2022, subsequent to the Effective Date, the Company completed the sale of its PRV for $100.0 million and received net proceeds of $65.0 million as the buyer remitted the remaining $35.0 million to the General Unsecured Claims Trustee pursuant to the terms of (i) the Plan, and (ii) that certain General Unsecured Claims Trust Agreement entered into in connection with the Plan.

New Warrant Agreement

On the Effective Date and pursuant to the Plan, Mallinckrodt entered into a warrant agreement and issued 3,290,675 Opioid Warrants to purchase the Ordinary Shares to MNK Opioid Abatement Fund, LLC (the "Initial Holder"), a wholly owned subsidiary of the Opioid Master Disbursement Trust II, a master disbursement trust established in accordance with the ~~allocations as prescribed~~Plan. Each Opioid Warrant is initially exercisable for one Ordinary Share at an initial exercise price of $103.40 per Ordinary Share (the "Exercise Price"), subject to the cashless exercise provisions contained in the ~~Amended Plan, and equity holders would receive no recovery.~~

~~On April 20, 2021,~~warrant agreement. The Opioid Warrants are exercisable from the ~~Debtors filed a joint plan~~date of ~~reorganization~~issuance until the sixth anniversary of the ~~Debtors~~Effective Date. The warrant agreement governing the Opioid Warrants contains customary anti-dilution adjustments in the event of any share dividends, share splits, distributions, issuance of additional shares or options, or certain other dilutive events.

Other than in the case of an adjustment through certain other dividends or distributions, whenever the Exercise Price is adjusted as provided above, the number of Opioid Warrant shares for which an Opioid Warrant is exercisable (the ~~"Original Plan"~~"Warrant Number") ~~reflecting~~shall simultaneously be adjusted by multiplying the ~~terms~~warrant number for which an Opioid Warrant is exercisable immediately prior to such adjustment by a fraction, the numerator of which shall be the ~~RSA,~~Exercise Price immediately prior to such adjustment, and the denominator of which shall be the Exercise Price immediately thereafter.

Pursuant to the warrant agreement, no holder of an Opioid Warrant, by virtue of holding or having a beneficial interest in the Opioid Warrant, will have the right to vote, receive dividends, receive notice as ~~amended by the Joinder and Amendment and a related proposed Disclosure Statement (the “Original Disclosure Statement”). On each of June 8, 2021 (or,~~stockholders with respect to any meetings of stockholders for the ~~Original Disclosure Statement, June 9, 2021), June 15, 2021~~election of Mallinckrodt's directors or any other matter, or exercise any rights whatsoever as a stockholder of Mallinckrodt unless, until and ~~June 17, 2021,~~only to the ~~Debtors filed~~extent such holders become holders of record of Ordinary Shares issued upon exercise of Opioid Warrants.

New Registration Rights Agreement

On the Effective Date and pursuant to the Plan, Mallinckrodt entered into a registration rights agreement (the "Registration Rights Agreement") with the ~~Bankruptcy Court amended versions~~Initial Holder of the ~~Original Plan~~Opioid Warrants. The Registration Rights Agreement provides certain resale and other registration rights for the registrable securities, including the Opioid Warrants and the ~~Original Disclosure Statement. Finally, on June 18, 2021,~~Opioid Warrant shares, held by the ~~Debtors filed~~Initial Holder and its permitted transferees and assignees. Pursuant to the Registration Rights Agreement, Mallinckrodt has agreed to prepare and file with the ~~Bankruptcy Court~~SEC a ~~solicitation version~~registration statement by no later than (x) 90 days after the Effective Date if Mallinckrodt is then eligible to register the registrable securities on a registration statement on Form S-3 or (y) 180 days after the Effective Date if Mallinckrodt is not then eligible to register the registrable securities on a registration statement on Form S-3, in each case, covering the resale pursuant to the Securities Act of 1933, as amended (the "Securities Act") of all registrable securities held by the ~~Proposed Plan,~~initial holder and ~~a solicitation version~~its permitted transferees and assignees. Following the effectiveness of such registration statement, Mallinckrodt has agreed to use commercially reasonable efforts to keep such registration statement continuously effective under the Securities Act until the date that all registrable securities covered by such registration statement are no longer registrable securities. In addition, during the effectiveness of such registration statement, the holders of a ~~related Disclosure Statement (the “Disclosure Statement”). Contemporaneously, the Debtors filed a motion requesting~~majority of registrable securities then outstanding may request to sell all or any portion of their registrable securities in an underwritten public offering that ~~the Court (i) establish the Proposed Plan solicitation and voting procedures, (ii) approve the forms of ballots, solicitation packages, and related notices~~is registered pursuant to ~~be sent~~such registration statement, subject to the ~~various creditors~~limitations provided in the Registration Rights Agreement.

Exit Financing

On the Effective Date, the Company issued $650.0 million aggregate principal amount of new 11.50% First Lien Senior Secured Notes due 2028 (the "New 1L Notes") and ~~interest holders in connection~~entered into a receivables financing facility based on a borrowing base with ~~confirmation~~a maximum draw of ~~the Plan, and (iii) establish certain deadlines in connection with the approval of the disclosure statement (the “Solicitation and Voting Procedures”). On September 29,~~up to $200.0 million. See Note 11 for further information on these debt instruments.

~~2021 the Debtors filed the Amended Plan with~~

Financing

Predecessor Chapter 11 Financing

The Company obtained an order of the Bankruptcy Court ~~incorporating the Amended Proposed Opioid-Related Litigation Settlement, the settlement with the UCC and the settlement with the Settling Second Lien Noteholders.~~

The Amended Plan and the related Disclosure Statement describe, among other things, the terms of the Amended Plan; the Debtors contemplated financial restructuring (the “Restructuring”); the events leading up to the Chapter 11 Cases; certain events that have occurred or are anticipated to occur duringin the Chapter 11 Cases ~~including~~(in a form agreed with, among others, the ~~anticipated solicitation of votes to approve~~agent under the ~~Proposed Plan from certain~~predecessor senior secured credit facilities, lenders under the Existing Revolver and the Existing Term Loans and holders of the ~~Debtors’ creditors and certain other aspects of the Restructuring.~~

~~By order dated June 17, 2021, the Bankruptcy Court approved the Disclosure Statement~~Existing 1L Notes and the ~~Solicitation and Voting Procedures. Pursuant~~Existing 2L Notes) permitting the use of cash collateral to the Solicitation and Voting Procedures, the Debtors mailed the ballots, solicitation packages and related notices by June 24, 2021, and votes were due by October 13, 2021, with exception of holders of class 8 and 9 whose votes were due October 20, 2021. In accordance with the Debtors’ proposed confirmation timeline, which is subject to change by the Bankruptcy Court, a hearing to consider confirmation of the Amended Plan (which may be adjourned or extended from time to time) commenced on November 1, 2021.

~~Event of default~~

~~The commencement of~~finance the Chapter 11 ~~Cases above constituted an event of default under certain of~~Cases.

Such order required that the Company’s debt agreements. Subject to any applicable provisions of the Bankruptcy Code, the Company’s debt instruments and agreements, as further described in Note 10 and within the notes to the financial statements included within the Company’s Annual Report filed on Form 10-K for the fiscal year ended December 25, 2020, provide that, as a result of the commencement of the Chapter 11 Cases, the principal amount, together with accrued and unpaid interest thereon, and in the case of the indebtedness outstanding under the senior notes, premium, if any, thereon, shall be immediately due and payable. Accordingly, all long-term debt was classified as currentCompany make cash adequate protection payments on the ~~unaudited condensed consolidated balance sheets as of September 24, 2021~~Existing Revolver and December 25, 2020. However, any efforts to enforce payment obligations under the debt instruments are automatically stayed as a result of the Chapter 11 Cases and the creditors’ rights in respect of the debt instruments are subject to the applicable provisions of the Bankruptcy Code.

~~Financial Reporting in Reorganization~~

Effective on the Petition Date, the Company began to apply Financial Accounting Standards Board Accounting Standards Codification ("ASC") Topic 852 - Reorganizations, which specifies the accounting and financial reporting requirementsExisting Term Loans for, entities reorganizing through Chapter 11 bankruptcy proceedings. These requirements include distinguishing transactions directly associated with the reorganization from activities related to the ongoing operations of the business within the financial statements for periods subsequent to the Petition Date. Expenses, realized gains and losses, and provisions for losses that are directly associated with reorganization proceedings must be reported separately as reorganization items, net in the unaudited condensed consolidated statements of operations. In addition, the unaudited condensed consolidated balance sheet must distinguish pre-petition liabilities subject to compromise ("LSTC") of the Debtors from pre-petition liabilities that are not subject to compromise, post-petition liabilities, and liabilities of the subsidiaries of the Company that are not debtors in the Chapter 11 Cases. LSTC are pre-petition obligations that are not fully secured and have at least a possibility of not being repaid at the full claim amount. Where there is uncertainty about whether a secured claim will be paid or impaired pursuant to the Chapter 11 Cases, the Debtors have classified the entire amount of the claim as LSTC.

Furthermore, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession, actions to enforce or otherwise effect the payment of certain claims against the Debtors in existence before the Petition Date are stayed while the Debtors continue business operations as debtors-in-possession. These claims are reflected as LSTC in the unaudited condensed consolidated balance sheets as of September 24, 2021 and December 25, 2020. Additional claims (which could be LSTC) may arise after the Petition Date resulting from the rejection of executory contracts, including leases, and from the determination by the Bankruptcy Court (or agreement by parties-in-interest) of allowed claims for contingencies and other disputed amounts.

Certain subsidiary entities are not debtors under the Chapter 11 Cases. However, condensed combined financial statements of the Debtors are not presented in the notes to the unaudited condensed consolidated financial statements as the assets and liabilities, operating results and cash flows of the non-debtor entities included in the consolidated financial statements are insignificant and, therefore, the unaudited condensed consolidated financial statements presented herein materially represent the unaudited condensed combined financial statements of the debtor entities for all periods presented.

~~Non-debtor entity intercompany balances from/due to the debtor entities at the end of each period were:~~

September 24,
2021 December 25,
2020
Intercompany receivables $ 137.2 $ 282.3
Intercompany payables 119.7 120.3

The intercompany balances were primarily attributable to the Company's centralized approach to cash management and financing of its operations. The permission to continue the use of existing cash management systems during the pendency of the Chapter 11 Cases was approved by the Bankruptcy Court on a final basis as part of the First Day motions as described further above.

The Company is currently assessing whether or not it qualifies for fresh start accounting upon emergence from Chapter 11. If the Company were to meet the requirements to adopt the fresh start accounting rules, its assets and liabilities would 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 its unaudited condensed consolidated balance sheets as of September 24, 2021 and December 25, 2020.

~~Liabilities Subject to Compromise~~

As a result of the commencement of the Chapter 11 Cases, the payment of pre-petition liabilities is subject to compromise or other treatment pursuant to a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed. Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Debtors the authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of the Debtors' business and assets. As described above, among other things, unpaid pre-petition and post-petition fees, unpaid pre-petition interest (at the specified contract rate) and post-petition interest (at a rate equal to (1) the adjusted London Interbank Offered Rate ("LIBOR"), plus (2) the contract-specified applicable margin, and plus (3) an incremental 200 basis points), quarterly amortization payments on the Existing Term Loans and reimbursement of certain costs. Such order further required that the Company make cash adequate protection payments on the Existing 1L Notes and Existing 2L Notes for, among other things, unpaid pre-petition and post-petition interest (at the specified non-default interest rate) and reimbursement of certain costs. On April 13, 2021, the Debtors received Bankruptcy Court ~~authorized, but did not require,~~approval of their motion to amend the ~~Debtors~~final cash collateral order as of March 22, 2021 to pay ~~certain pre-petition claims relating to employee wages and benefits, critical and foreign vendors and customer programs.~~

~~The determination of how liabilities will ultimately be settled or treated cannot be made until~~post-petition interest on the Bankruptcy Court confirms a Chapter 11 plan of reorganization and such plan becomes effective. Accordingly, the ultimate amount of such liabilities is not determinable at this time. GAAP requires pre-petition liabilities that are subject to compromise to be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for different amounts. The amounts currently classified as LSTC are preliminary and may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, rejection of executory contracts, continued reconciliation or other events.

~~Liabilities subject to compromise at the end of each period consisted of the following:~~

September 24,
2021 December 25,
2020
Accounts payable (1)
$ 43.5 $ 61.9
Accrued interest 35.2 35.2
Debt (2)
3,760.1 1,660.7
Medicaid lawsuit 634.1 638.9
Opioid-related litigation settlement liability (3)
1,725.0 1,600.0
Other current and non-current liabilities (4)
107.3 163.5
Pension and postretirement benefits 30.3 32.4
Total liabilities subject to compromise $ 6,335.5 $ 4,192.6

~~(1)Pre-petition accounts payable balances have been repaid under effectuated trade agreements pursuant to the critical vendor motion approved by the Bankruptcy Court.~~

~~(2)~~Subsequent to December 25, 2020, in accordance with the agreement in principle reached with the Settling Second Lien Noteholders on September 2, 2021 and Joinder and Amendment to the RSA entered into in March 2021, $322.9 million of Second Lien Notes and $1,776.5 million of outstanding senior secured term loans at a rate equal to (1) the adjusted LIBOR, plus (2) the contract-specified applicable margin, and plus (3) an incremental 250 basis points for its Existing Term Loans. The cash collateral order expired on June 16, 2022.

Interest expense incurred and paid with respect to the incremental adequate protection payments of 200 basis points and 250 basis points on the Existing Revolver and Existing Term Loans, respectively, were ~~classified~~ as ~~LSTC in the Company's unaudited condensed consolidated balance sheet as of September 24, 2021.~~follows:

~~(3)~~In accordance with the agreement in principle reached with the Opioid Claimants on September 2, 2021, and subsequently memorialized in the Amended Plan on September 29, 2021, the Company recorded an accrual of $125.0 million related to the additional payment expected to be made on the eighth anniversary of the effective date of emergence, which has been classified as LSTC in the Company's unaudited condensed consolidated balance sheet as of September 24, 2021.


	Predecessor
		Three Months Ended September 24, 2021
Interest expense incurred for adequate protection payments		$	15.8
Cash paid for adequate protection payments		16.4

~~(4)~~The decrease in other current and non-current liabilities was primarily attributable to the Bankruptcy Court's approval of the Company's rejection of its Bedminster facility lease, which resulted in a $34.8 million adjustment to the carrying value of the respective lease liability in LSTC to reflect the estimated allowed claim amount. The remaining decrease was primarily attributable to a decrease of $15.6 million in the fair value of contingent consideration related to an asset for which the Company is no longer pursuing further development. Refer to Note 12 for further information on the valuation of contingent consideration.


	Predecessor
		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Interest expense incurred for adequate protection payments		$	28.8	$	46.1
Cash paid for adequate protection payments		28.8		45.5

Contractual interest

While the Chapter 11 Cases ~~are~~were pending, the Company iswas not accruing interest on its unsecured debt instruments as of the Petition Date on a go-forward basis as the Debtors dodid not anticipate making interest payments due under their respective unsecured debt instruments; however, the Debtors expect to pay all interest payments in full as they come due under their respective senior secured debt instruments. The total aggregate amount of interest payments contractually due under the Company's unsecured debt instruments, which the Company did not pay as the obligation was extinguished pursuant to the Plan, was $46.5 million for the period January 1, 2022 through June 16, 2022 (Predecessor) and $17.7 million and $64.2 million for the three and nine months ended September 24, 2021 ~~which it did not pay was $17.7 million and $64.2 million.~~(Predecessor), respectively.

~~Chapter 11 Claims Process~~


3.			Fresh-Start Accounting

The ~~Debtors have received over 50,000 proofs~~Company qualified for and adopted fresh-start accounting as of ~~claim since~~ the ~~Petition Date. The Debtors continue their review~~Effective Date in accordance with ASC 852 as (i) the reorganization value of the assets of the Company immediately prior to the date of effectuation of the Plan was less than the post-petition liabilities and ~~analysis of certain claims including litigation claims, trade creditor claims, non-qualified benefit plan claims, customer deposits and advances, along with other tax and regulatory~~allowed claims and ~~therefore,~~(ii) the ~~ultimate liability~~holders of the ~~Debtors for such claims may differ from~~voting shares of the Predecessor immediately before effectuation of the Plan received less than 50% of the voting shares of the Successor.

Reorganization Value

Reorganization value represents the fair value of the Successor Company's total assets and is intended to approximate the amount ~~recorded~~a willing buyer would pay for the assets immediately after restructuring. Upon the application of fresh-start accounting, the Company allocated the reorganization value to its individual assets based on their estimated fair values in ~~LSTC. To~~accordance with Accounting Standards

Codification ("ASC") Topic 805 - Business Combinations. Deferred income tax amounts were determined in accordance with ASC Topic 740 - Income Taxes.

As set forth in the ~~extent that the Debtors believe that such claims will be allowed~~disclosure statement approved by the Bankruptcy Court, the ~~Debtors will continue~~estimated enterprise value of the Successor was estimated to ~~record~~be between $5,200.0 million and $5,700.0 million, with a midpoint of $5,450.0 million, which was estimated with the assistance of third-party valuation advisors using various valuation methods, including (i) discounted cash flow analysis, a calculation of the present value of the future cash flows to be generated by the business based on its projection, and (ii) comparable public company analysis, a method to estimate the value of a company relative to other publicly traded companies with similar operation and financial characteristics. The estimated enterprise value per the disclosure statement included estimated equity value in a range between $563.0 million and $1,063.0 million, with a midpoint of $813.0 million. Subsequent to the filing of the disclosure statement, the Company made revisions to certain of the cash flow projections due to declines in projected operating performance. Based upon a reevaluation of relevant factors used in determining the range of enterprise value and updated expected ~~allowed amounts~~cash flow projections, the Company concluded the enterprise value, or fair value, was $5,223.0 million.

The basis of the discounted cash flow analysis used in developing the enterprise value was based on Company prepared projections that included a variety of estimates and assumptions. While the Company considers such ~~claims as LSTC. The~~estimates and assumptions reasonable, they are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond the Company's control and, therefore, may not be realized. Changes in these estimates and assumptions may have had a significant effect on the determination of the ~~expected allowed amount~~Company's enterprise value.

The following table reconciles the enterprise value to the implied fair value of ~~a claim is~~the Successor's equity as of the Effective Date:


Enterprise value	$	5,223.0
Plus: Enterprise value adjustments (1)	197.0
Adjusted enterprise value	5,420.0
Plus: Cash and cash equivalents	297.9
Plus: Non-operating assets, net (2)	178.7
Less: Fair value of debt	(3,067.2)
Less: Fair value of Opioid-Related Litigation Settlement, Acthar Gel-Related Settlement, StrataGraft PRV proceeds and Terlivaz contingent value rights	(625.8)
Successor equity value	$	2,203.6

(1)Represents incremental tax benefits not contemplated in the projections utilized in the disclosure statement.

(2)Represents non-operating assets and liabilities which were excluded from the enterprise value as put forth in the disclosure statement as there were no cash projections associated with these net assets.

Upon the application of fresh-start accounting, the Company allocated the reorganization value to its individual assets based on ~~many factors, including whether~~their estimated fair values. Reorganization value represents the ~~Debtors are party~~fair value of the Successor's assets before considering liabilities.

The following table reconciles the Company's enterprise value to ~~a settlement agreement with applicable claimholders or their representatives, and is not necessarily limited to information available to~~its reorganization value as of the ~~Debtors. Claims covered by a settlement agreement include the Proposed Acthar Gel-Related Settlement and Amended Opioid-Related Litigation Settlement (collectively, the "Proposed Settlements"). See~~ Effective Date:


Adjusted enterprise value	$	5,420.0
Plus: Cash and cash equivalents	297.9
Plus: Non-operating assets, net	178.7
Plus: Current liabilities (excluding debt or debt-like items)	522.5
Plus: Other non-current liabilities (excluding debt or debt-like items)	183.2
Reorganization value of Successor assets	$	6,602.3

~~Restructuring Support Agreement and Plan of Reorganization~~ section within this note for more information on settlement of these claims. As the Debtors continue to resolve claims, differences between those final allowed claims and the liabilities recorded in the

Unaudited Condensed Consolidated Balance Sheet

The four-column unaudited condensed consolidated balance sheet ~~will be recognized~~ as ~~reorganization items, net~~of the Effective Date included herein, applies effects of the Plan (reflected in the ~~Company's consolidated~~column "Reorganization Adjustments") and fresh-start accounting (reflected in the column "Fresh-Start Adjustments") to the carrying values and classifications of assets or liabilities. Upon adoption of fresh-start accounting, the recorded amounts of assets and liabilities were adjusted to reflect their estimated fair values. Accordingly, the reported historical financial statements of ~~operations in~~ the ~~period in which they~~Predecessor prior to the adoption of fresh-start accounting for periods ended on or prior to the Effective Date are ~~resolved.~~not comparable to those of the Successor. The ~~determination~~explanatory notes highlight methods used to determine fair values or other amounts of ~~how~~the assets and liabilities ~~will ultimately be resolved cannot be made until~~as well as significant assumptions.

The four-column unaudited condensed consolidated balance sheet as of June 16, 2022 is as follows:


	Predecessor		Reorganization Adjustments			Fresh-Start Adjustments			Successor
Assets
Current Assets:
Cash and cash equivalents	$	1,392.6	$	(1,094.7)	(a)	$	—		$	297.9
Accounts receivable, less allowance for doubtful accounts	387.4		—			—			387.4
Inventories	375.2		—			851.8		(q)	1,227.0
Prepaid expenses and other current assets	322.6		75.3		(b)	(58.3)		(r)	339.6
Current asset held for sale	—		—			100.0		(j)	100.0
Total current assets	2,477.8		(1,019.4)			893.5			2,351.9
Property, plant and equipment, net	748.6		—			(299.2)		(s)	449.4
Intangible assets, net	5,166.6		—			(2,014.4)		(t)	3,152.2
Deferred income taxes	—		—			453.4		(l)	453.4
Other assets	222.8		(3.9)		(c)	(23.5)		(u)	195.4
Total Assets	$	8,615.8	$	(1,023.3)		$	(990.2)		$	6,602.3

Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	1,389.9	$	(1,355.2)	(d)	$	—		$	34.7
Accounts payable	156.4		(53.8)		(e)	—			102.6
Accrued payroll and payroll-related costs	71.4		—			—			71.4
Accrued interest	20.8		(13.0)		(f)	—			7.8
Acthar Gel-Related Settlement	—		16.5		(g)	—			16.5
Opioid-Related Litigation Settlement	—		200.0		(h)	—			200.0
Accrued and other current liabilities	296.1		50.8		(i)	(6.1)		(v)	340.8
Current liability held for sale	—		35.0		(j)	—			35.0
Total current liabilities	1,934.6		(1,119.7)			(6.1)			808.8
Long-term debt	—		3,050.9		(d)	(18.4)		(w)	3,032.5
Acthar Gel-Related Settlement	—		63.2		(g)	—			63.2
Opioid-Related Litigation Settlement liability	—		304.3		(h)	—			304.3
Pension and postretirement benefits	27.6		27.2		(k)	—			54.8
Environmental liabilities	37.1		—			—			37.1
Deferred income taxes	20.4		102.7		(l)	(121.7)		(l)	1.4
Other income tax liabilities	75.9		—			(61.9)		(x)	14.0
Other liabilities	68.6		23.6		(m)	(9.6)		(v)	82.6
Liabilities subject to compromise	6,402.7		(6,402.7)		(n)	—			—
Total Liabilities	8,566.9		(3,950.5)			(217.7)			4,398.7
Shareholders' Equity:
Predecessor preferred shares	—		—			—			—
Predecessor ordinary A shares	—		—			—			—
Predecessor ordinary shares	18.9		(18.9)		(o)	—			—
Successor ordinary shares	—		0.1		(o)	—			0.1
Predecessor ordinary shares held in treasury	(1,616.1)		1,616.1		(o)	—			—
Predecessor additional paid-in capital	5,599.5		(5,599.5)		(o)	—			—
Successor additional paid-in capital	—		2,203.5		(o)	—			2,203.5
Predecessor accumulated other comprehensive loss	(9.9)		—			9.9		(y)	—
Retained (deficit) earnings	(3,943.5)		4,725.9		(p)	(782.4)		(z)	—
Total Shareholders' Equity	48.9		2,927.2			(772.5)			2,203.6
Total Liabilities and Shareholders' Equity	$	8,615.8	$	(1,023.3)		$	(990.2)		$	6,602.3

Reorganization Adjustments

(a)The table below reflects the ~~Bankruptcy Court approves~~sources and uses of cash on the Effective Date:


Sources:
Proceeds from New 1L Notes	$	637.0
Total Sources	637.0
Uses:
Payment of Predecessor revolving credit facility	(900.0)
Upfront payment of the Opioid-Related Litigation Settlement	(447.4)
Upfront payment of the Acthar Gel-Related Settlement, inclusive of settlement interest	(17.8)
Payment of secured, administrative, priority and trade claims	(26.2)
Payment of professional fees	(43.5)
Payment to fund professional fees escrow (prepaid and other current assets restricted cash)	(89.0)
Payment of general unsecured claims	(135.0)
Payment of noteholder consent fees	(19.3)
Payment of costs, fees and expenses related to exit-financing activities, an exit fee associated with senior secured loans and accrued and unpaid interest on certain pre-emergence debt	(53.5)
Total Uses	(1,731.7)
Net Uses of Cash	$	(1,094.7)

(b)Represents the transfer of funds to a ~~plan~~restricted cash account for purposes of ~~reorganization or approves orders~~funding the $89.0 million professional fee reserve offset by the release of a $10.9 million prepaid success fee as a result of emergence and the write off of prepaid expenses related to ~~settlement~~premiums for the Predecessor Company's directors' and officers' insurance policies.

(c)Debt issuance costs of ~~specific liabilities. Accordingly,~~$2.6 million related to entering into a receivables financing facility. These costs were capitalized as other non-current assets as the ~~ultimate amount or resolution~~facility was undrawn as of ~~such liabilities is not determinable at this time. The resolution~~June 16, 2022. Refer to Note 11 for further information on the receivables financing facility. Also reflects a write-off of ~~such claims could result in substantial~~$6.5 million of prepaid expenses related to premiums for the Predecessor Company's directors' and officers' insurance policies.

(d)Impacts to long-term debt, net of current maturities, pursuant to the Plan, included the following:

•Repayment of the $900.0 million Existing Revolver;

•Issuance of the 2017 and 2018 Replacement Term Loans of $1,392.9 million and $369.7 million, respectively, of which $34.7 million was current;

•Issuance of the New 2L Notes of $322.9 million;

•Issuance of the Takeback 2L Notes of $375.0 million;

•Reinstatement of the Existing 1L Notes of $495.0 million principal, net of $5.1 million deferred financing fees; and

•Issuance of $650.0 million New IL Notes, net of a $13.0 million original issuance discount and $9.7 million of deferred debt issuance costs.

Fair value adjustments to the carrying value of debt instruments impacted by the Plan as determined by the Black-Derman-Toy model as follows:


2017 Replacement Term Loan	$	(169.4)
2018 Replacement Term Loan	(42.2)
New 2L Notes	(95.7)
Takeback 2L Notes	(184.8)
Total fair value adjustment to debt instruments	$	(492.1)

Predecessor debt for certain of these instruments described above were classified in liabilities subject to compromise ("LSTC") as of the Effective Date.

(e)Represents $43.5 million of professional fees paid to the Company's ~~consolidated financial statements.~~restructuring advisors upon the Company's emergence from Chapter 11 bankruptcy and $25.2 million of secured, administrative and priority payments, partially offset by $14.6 million of professional advisor success fees incurred on the Effective Date plus reinstatement of LSTC.

(f)Represents payments of accrued interest on the Company's Existing Revolver, Existing Term Loans and Existing 2L Notes in accordance with the cash collateral order on the Effective Date.

(g)Pursuant to the Plan, the Company agreed to pay $260.0 million to the DOJ and other parties over seven years to settle the Acthar Gel-related matters. The Company reduced its estimated allowed claim amount related to these matters to the settlement amount of $260.0 million and reclassified it from LSTC to other non-current liabilities. On the Effective Date, the Company made an upfront payment of $17.8 million, inclusive of settlement interest. The remaining deferred cash payments of $245.0 million and related settlement interest were recorded at fair value utilizing a discounted cash flow model with an average credit-adjusted discount rate of 27.8%. The fair value of the liability was $16.5 million and $63.2 million, respectively, reflected within current and other non-current liabilities in the above table.

(h)Pursuant to the Plan, the Company agreed to pay $1,725.0 million into certain trusts to resolve all opioid claims, and made an upfront payment of $447.4 million on the Effective Date. The remaining deferred cash payments of $1,275.0 million were recorded at fair value utilizing the Black-Derman-Toy model, which incorporates the option to prepay as well as other inputs such as an average credit-adjusted discount rate of 27.8%. The fair value of the liability was $200.0 million and $304.3 million, respectively, reflected within current and other non-current liabilities in the above table.

(i)The following table reconciles reorganization adjustments to accrued and other current liabilities:


Severance - Exiting Chief Executive Officer ("CEO")	$	5.7
Reinstatement of various successor obligations from LSTC	15.4
Success fees for professionals incurred on Effective Date	29.7
	$	50.8

(j)As part of fresh-start accounting, the Company recorded a $100.0 million intangible asset in relation to the Company's PRV that was awarded under a FDA program intended to encourage the development of certain product applications for therapies used to treat or prevent material threat medical countermeasures. It also recorded a $35.0 million liability related to the proceeds from a sale of the PRV which was due to the general unsecured claims trustee pursuant to the term of the Plan and the general unsecured claims trust agreement entered into with the Plan. As of the Effective Date, this asset and liability were classified as held-for-sale. Refer to Note 10 for further information on the subsequent sale of the PRV.

(k)Reinstatement of certain long-term pension and other postretirement plans from LSTC to other liabilities.

(l)Reflects reorganization adjustments consisting of (1) the reduction in federal and state net operating loss ("NOL") carryforwards from the cancelation of debt income ("CODI") realized upon emergence and limitations under Section 382 and 383 of the U.S. Internal Revenue Code of 1986 (the "IRC"); (2) the net decrease in deferred tax assets resulting from reorganization adjustments; (3) the reduction in the valuation allowance on the Company's deferred tax assets and fresh-start adjustments consisting of (4) the net decrease in deferred tax liabilities resulting from fresh-start adjustments; and (5) the release of uncertain tax positions that are no longer required upon emergence.

(m)Reinstatement of the Company's $16.8 million asbestos-related defense costs from LSTC to other liabilities and establishment of a liability for the contingent value right ("CVR") associated with Terlivaz in accordance with the Plan and Scheme of Arrangement. The CVR is based upon the achievement of a cumulative net sales milestone. The Company will assess the likelihood of and timing of making such payment at each balance sheet date. The fair value of the contingent payment was measured based on the net present value of a probability-weighted assessment estimated using a Monte Carlo simulation. The Company determined the fair value of the CVR to be $6.8 million as of the Effective Date.

(n)LSTC were settled as follows in accordance with the Plan (in millions):


Liabilities subject to compromise
Accounts payable	$	17.7
Accrued interest	35.2
Debt	3,746.2
Environmental liabilities	67.2
Acthar Gel-Related Settlement	630.0
Opioid-Related Litigation Settlement liability	1,722.4
Other current and non-current liabilities	151.6
Pension and postretirement benefits	32.4
Total liabilities subject to compromise	$	6,402.7

To be reinstated on the Effective Date:
Accounts payable	$	(0.1)

Other current and non-current liabilities	(27.3)
Pension and postretirement benefits	(32.4)
Total liabilities reinstated	$	(59.8)

Consideration provided to settle amounts per the Plan
Issuance of Successor common stock	$	(2,189.7)
Issuance of Opioid Warrants	(13.9)
Issuance of Takeback Term Loans and New 2L Notes	(1,778.3)
Acthar Gel-Related Settlement	(79.7)
Opioid-Related Litigation Settlement liability	(504.3)
Issuance of Takeback 2L Notes to holders of the Guaranteed Unsecured Notes	(190.2)
Contingent liabilities for proceeds of sale of StrataGraft PRV and Terlivaz CVR	(41.8)
Cash payment	(601.3)
Total consideration provided to settle amounts per the Plan	$	(5,399.2)

Gain on settlement of liabilities subject to compromise	$	943.7

(o)Pursuant to the Plan, as of the Effective Date, all Predecessor's preferred and ordinary shares were cancelled without any distribution. The following table reconciles reorganization adjustments made to Successor common stock, Opioid Warrants and additional paid in capital:


Par value of 13,170,932 shares of Successor Common Stock issued to former holders of the Guaranteed Unsecured Notes (par valued at 0.01 dollars per share)	$	0.1
Fair value of Opioid Warrants issued to holders of the Guaranteed Unsecured Notes (1)	13.9
Additional paid in capital - Successor Common Stock	2,189.6
Successor equity	$	2,203.6

(1)The fair value of the Opioid Warrants was estimated using a Black-Scholes model with the following assumptions: $18.50 stock price of the Successor Company; exercise price per share of $103.40; expected volatility of 62.28%; risk free interest rate of 3.34%, continuously compounded; and a holding period of six years. The expected volatility assumption is based on the historical and implied volatility of the Company's peer group with similar business models.

(p)Retained deficit - The cumulative effect of the consummation of the Plan on the Predecessor's retained deficit is as follows:


Gain on settlement of LSTC	$	943.7
Professional, success and exit fees	(91.6)
Release of prepaid success fee	(10.9)
Release of prepaid insurance (1)	(9.2)
Accrual of severance for former CEO	(5.7)
Income tax expense on plan adjustments	(102.7)
Cancellation of Predecessor equity	4,002.3
Net impact on retained deficit	$	4,725.9

(1)Write off of prepaid expenses related to premiums for the Predecessor Company's directors' and officers' insurance policies.

Fresh-Start Adjustments

(q)Reflects the fair value adjustment related to the Company's inventory. Both the bottom-up and top-down approach were used. The bottom-up approach considers the inventory value that had been created by the Company including the costs incurred, profit realized, and tangible and intangible assets used pre-Effective Date. The top-down approach measures the incremental inventory value created by the market participant buyer as part of its selling effort to an end customer and considers the costs that will be incurred, the profit that will be realized, and the tangible and intangible assets that will be used post-Effective Date.

(r)Reflects the reduction of $54.0 million in prepaid income taxes due to remeasurement as a result of fresh-start accounting. Also reflects a write-off of $4.3 million of asbestos indemnification receivable affiliated with asbestos-related defense costs in line with the Company's accounting policy change as outlined in Note 1.

(s)Reflects the fair value adjustment related to the Company's property, plant and equipment. Both the market and cost approaches were utilized to fair value land and buildings. The cost approach was utilized to fair value capitalized software and machinery and equipment. Construction in process was reported at its cost less adjustments for economic obsolescence.

(t)Reflects the fair value adjustment related to the Company's intangible assets. The fair value of the completed technology and in-process research and development ("IPR&D") intangible assets were determined using the income approach. The cash flows were discounted commensurate with the level of risk associated with each asset or its projected cash flows. The valuation used discount rates ranging from 13.0% through 15.0%, depending on the asset. The IPR&D discount rate was developed after assigning a probability of success to achieving the projected cash flows based on the current stages of development, inherent uncertainty in the FDA approval process and risks associated with commercialization of a new product. See Note 10 for further information on intangible assets.

(u)Reflects the write-off of (i) $16.0 million of asbestos indemnification receivable affiliated with asbestos-related defense costs in line with the Company's accounting policy change as outlined in Note 1; (ii) $3.9 million of spare parts that did not meet the Company's capitalization threshold; and (iii) $1.1 million of third party debt issuance costs. Also reflects a decrease of $0.9 million to income tax receivables associated with a change in uncertain tax positions as a result of fresh-start accounting.

In addition, the Company's lease obligations were revalued using the incremental borrowing rate applicable to the Company upon emergence from the Chapter 11 proceedings and commensurate with its new capital structure. The incremental borrowing rate used in the revaluation of the lease obligations increased from 8.85% in the Predecessor period to 11.83% in the Successor period. The revaluation of lease obligations includes the adjustment for contract-based off-market intangibles for favorable or unfavorable terms to the right-of-use assets as well as the removal of right-of-use assets (and affiliated lease liabilities) associated with the Company's leases with a remaining contract term of less than one year as of the Effective Date. The revaluation resulted in a reduction in the right-of-use asset of $1.6 million.

(v)Reflects the write-off of (i) $6.1 million and $16.7 million of current and non-current asbestos-related defense costs, respectively, in line with the Company's accounting policy change as outlined in Note 1; and (ii) an adjustment of $6.9 million to increase the Company's total lease liabilities as a result of the revaluation of the lease obligations as described in footnote (t) above.

(w)Reflects the write-off of $5.1 million of unamortized debt issuance costs and a $23.5 million fair value adjustment to debt principal as determined by the Black-Derman-Toy model related to the reinstated Existing 1L Notes.

(x)Reflects the reduction of liabilities for unrecognized tax benefits that are no longer required upon emergence.

(y)Reflects the fair value adjustment to eliminate the accumulated other comprehensive income of $8.1 million related to pension benefits and $2.1 million of currency translation adjustment, partially offset by the elimination of $0.3 million of income tax effects, which resulted in income tax benefit of $0.3 million.

(z)The cumulative effect of the fresh-start accounting on the Successor's retained deficit is as follows:


Fresh-start adjustment:
Inventories	$	851.8
Property, plant and equipment, net	(299.2)
Intangible assets, net	(2,014.4)
Current asset held for sale	100.0
Debt	18.4
Other assets and liabilities	(11.2)
Total fresh-start adjustments impacting reorganization items, net	(1,354.6)
Fresh-start adjustments to accumulated other comprehensive income, net of $0.3 million of tax benefit	(9.9)
Total fresh-start adjustments recorded to income tax benefit	582.1
Net fresh-start impact to accumulated deficit	$	(782.4)

Reorganization items, net

Reorganization items, net for the Predecessor represent amounts incurred after the Petition Date but prior to emergence as a direct result of the Chapter 11 Cases and ~~are~~were comprised of gains and losses associated with the reorganization, primarily the loss on fresh-start adjustments, gain on settlement of LSTC, bankruptcy-related professional fees, debt financing fees and ~~adjustments to reflect~~write-off of debt issuance costs and related unamortized premiums and discounts. Successor reorganization items, net represent amounts incurred after the ~~carrying value~~Effective Date that directly resulted from Chapter 11 and were entirely comprised of ~~LSTC at their estimated allowed claim amounts, as such adjustments are approved by~~professional fees associated with the ~~Bankruptcy Court.~~implementation of the Plan. Cash paid for reorganization items, net for the period from June 17, 2022 through September 30, 2022 (Successor), January 1, 2022 through June 16, 2022 (Predecessor) and the nine months ended September 24, 2021 (Predecessor) was $9.9 million, $304.1 million and $209.1 ~~million.~~million, respectively. Reorganization items, net, ~~for the three and nine months ended September 24, 2021 included~~were comprised of the following:


		September 24, 2021					Successor		Predecessor
		Three Months Ended		Nine Months Ended			Three Months Ended September 30, 2022			Three Months Ended September 24, 2021
Professional fees		$	119.4	$	306.6

Professional and other service provider fees						Professional and other service provider fees	$	14.2		$	119.4

Debt valuation adjustments	Debt valuation adjustments	6.8		23.1		Debt valuation adjustments	—			6.8
Adjustments of other claims		—		(0.5)

Total reorganization items, net	Total reorganization items, net	$	126.2	$	329.2	Total reorganization items, net	$	14.2		$	126.2


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Gain on settlements of LSTC	$	—	$	(943.7)	$	—
Loss on fresh-start adjustments	—		1,354.6		—
Professional and other service provider fees	17.7		161.1		306.6
Success fees for professional service providers	—		44.3		—
Write off of prepaid premium for directors' and officers' insurance policies	—		9.2		—
Debt valuation adjustments	—		—		23.1
Adjustments of other claims	—		5.4		(0.5)

Total reorganization items, net	$	17.7	$	630.9	$	329.2

1520


3.4.			Revenue from Contracts with Customers

Product Sales Revenue

See Note 1315 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 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 12) (1)
535.1 — — 535.1
Payments or credits (1,461.3) (24.3) (45.8) (1,531.4)
Balance as of September 25, 2020 $ 823.3 $ 26.4 $ 11.7 $ 861.4
Balance as of December 25, 2020 $ 196.5 $ 26.6 $ 12.3 $ 235.4
Provisions 1,588.6 18.2 42.5 1,649.3
Payments or credits (1,535.7) (23.5) (32.6) (1,591.8)
Balance as of September 24, 2021 $ 249.4 $ 21.3 $ 22.2 $ 292.9

~~(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 12 for further detail on the status of the Medicaid lawsuit.


	Rebates and Chargebacks		Product Returns		Other Sales Deductions		Total
Balance as of December 25, 2020 (Predecessor)	$	196.5	$	26.6	$	12.3	$	235.4
Provisions	1,588.6		18.2		42.5		1,649.3
Payments or credits	(1,535.7)		(23.5)		(32.6)		(1,591.8)
Balance as of September 24, 2021 (Predecessor)	$	249.4	$	21.3	$	22.2	$	292.9

Balance as of December 31, 2021 (Predecessor)	$	241.8	$	21.5	$	9.5	$	272.8
Provisions	693.4		5.2		17.1		715.7


Payments or credits	(684.6)		(8.1)		(18.9)		(711.6)
Balance as of June 16, 2022 (Predecessor)	$	250.6	$	18.6	$	7.7	$	276.9


Balance as of June 17, 2022 (Successor)	$	250.6	$	18.6	$	7.7	$	276.9
Provisions	429.9		3.1		26.8		459.8
Payments or credits	(462.4)		(4.3)		(11.2)		(477.9)
Balance as of September 30, 2022 (Successor)	$	218.1	$	17.4	$	23.3	$	258.8

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


		Three Months Ended				Nine Months Ended					Successor		Predecessor
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Product sales transferred at a point in time	Product sales transferred at a point in time	80.3	%	79.5	%	78.7	%	78.5	%	Product sales transferred at a point in time	82.4	%	80.3	%
Product sales transferred over time	Product sales transferred over time	19.7		20.5		21.3		21.5		Product sales transferred over time	17.6		19.7


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Product sales transferred at a point in time	82.6	%	80.8	%	78.7	%
Product sales transferred over time	17.4		19.2		21.3

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 ~~24, 2021:~~30, 2022 (Successor):


Remainder of Fiscal ~~2021~~2022	$	~~35.6~~
~~Fiscal 2022~~	~~106.4~~28.0
Fiscal 2023	~~64.4~~87.7
Fiscal 2024	23.5
Thereafter	~~14.7~~2.7

~~Costs to fulfill a contract~~

As of September 24, 2021 and December 25, 2020, 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 $26.5 million and $25.8 million, respectively, and 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 24, 2021 and September 25, 2020 was $4.4 million and $4.0 million, respectively.

Product Royalty Revenues

The Company licenses certain rights to Amitiza® (lubiprostone) ("Amitiza") to third parties in exchange for royalties on net sales of the product. The Company receives a double-digit royalty based on a percentage of the gross profits of the licensed products sold

during the term of the agreements. The Company recognizes such royalty revenue as the related sales occur. The associated royalty revenue recognized was as follows:

Three Months Ended Nine Months Ended
September 24,
2021 September 25,
2020 September 24,
2021 September 25,
2020
Royalty revenue $ 27.3 $ 20.4 $ 82.2 $ 52.3



	Successor		Predecessor
	Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Royalty revenue	$	18.2	$	27.3


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Royalty revenue	$	21.2	$	34.9	$	82.2


4.5.			Restructuring and Related Charges

During fiscal 2021 and 2018, the Company launched a restructuring ~~program~~programs designed to improve its cost ~~structure.~~structure, neither of which has a specified time period. Charges of $50.0 million to $100.0 million were provided for under the 2021 program and $100.0 million to $125.0 million were provided for under the 2018 program. The 2021 program will commence upon substantial completion of the 2018 program, and has not commenced as of September 30, 2022 (Successor). In addition to the aforementioned ~~program,~~restructuring 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					Successor		Predecessor
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Specialty Brands	Specialty Brands	$	0.1	$	—	$	0.1	$	0.1	Specialty Brands	$	—	$	0.1
Specialty Generics	Specialty Generics	—		—		—		0.1		Specialty Generics	(0.2)		—
Corporate	Corporate	11.6		3.2		19.4		15.6		Corporate	2.4		11.6
Restructuring and related charges, net	Restructuring and related charges, net	11.7		3.2		19.5		15.8		Restructuring and related charges, net	2.2		11.7
Less: accelerated deprecation		(0.7)		—		(2.0)		—
Less: accelerated depreciation										Less: accelerated depreciation	—		(0.7)
Restructuring charges, net	Restructuring charges, net	$	11.0	$	3.2	$	17.5	$	15.8	Restructuring charges, net	$	2.2	$	11.0


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Specialty Brands	$	—	$	—	$	0.1
Specialty Generics	(0.2)		3.5		—
Corporate	3.5		6.1		19.4
Restructuring and related charges, net	3.3		9.6		19.5
Less: accelerated deprecation	—		—		(2.0)
Restructuring charges, net	$	3.3	$	9.6	$	17.5

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


		Three Months Ended				Nine Months Ended					Successor		Predecessor
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
2018 Program	2018 Program	$	11.7	$	3.2	$	19.5	$	17.8	2018 Program	$	2.2	$	11.7
2016 Program 1		—		—		—		(0.1)
Acquisition Programs		—		—		—		(1.9)
Total programs		11.7		3.2		19.5		15.8

Less: non-cash charges, including accelerated depreciation	Less: non-cash charges, including accelerated depreciation	(1.7)		—		(4.3)		—		Less: non-cash charges, including accelerated depreciation	(0.7)		(1.7)
Total charges expected to be settled in cash	Total charges expected to be settled in cash	$	10.0	$	3.2	$	15.2	$	15.8	Total charges expected to be settled in cash	$	1.5	$	10.0

~~(1)The 2016 Program was completed during fiscal 2020.~~


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
2018 Program	$	3.3	$	9.6	$	19.5


Less: non-cash charges, including accelerated depreciation	(0.9)		(3.6)		(4.3)
Total charges expected to be settled in cash	$	2.4	$	6.0	$	15.2

The following table summarizes cash activity for restructuring reserves ~~substantially all of~~for the 2018 Program, which primarily related to ~~contract termination costs,~~ employee severance and ~~benefits and exiting of certain facilities:~~benefits:


	~~2018 Program~~
~~Balance as of December 25, 2020~~	$	~~1.0~~
~~Charges~~	~~15.8~~
~~Changes in estimate~~	~~(0.6)~~
~~Cash payments~~	~~(10.1)~~

Balance as of December 31, 2021 (Predecessor)	$	10.9
Charges	7.1
Changes in estimate	(1.1)
Cash payments	(15.9)


Balance as of June 16, 2022 (Predecessor)	$	1.0


Balance as of June 17, 2022 (Successor)	$	1.0
Charges	2.6
Changes in estimate	(0.2)
Cash payments	(1.6)
Balance as of September ~~24, 2021~~30, 2022 (Successor)	$	~~6.1~~1.8

As of September ~~24, 2021,~~30, 2022 (Successor), net restructuring and related charges incurred cumulative to date for the 2018 Program were as follows:

~~2018 Program~~


	Successor		Predecessor

Specialty Brands	$	—	$	3.1
Specialty Generics	(0.2)		18.5
Corporate	3.5		84.0
	$	3.3	$	105.6

~~Specialty Brands~~

~~3.1~~

~~Specialty Generics~~

~~10.1~~

~~Corporate~~

~~73.3~~

~~86.5~~

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


5.6.			Income Taxes

The Company's income tax benefit was as follows:



	Successor		Predecessor
	Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Current tax benefit	$	20.5	$	26.2
Deferred tax benefit	4.4		5.8
Income tax benefit	$	24.9	$	32.0


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Current tax benefit	$	23.8	$	23.9	$	62.8
Deferred tax benefit	10.8		473.4		19.1
Income tax benefit	$	34.6	$	497.3	$	81.9

As ~~further discussed~~stated in Note 1, in light of the Company's Chapter 11 Cases initiated on October 12, 2020, the Company concluded that there is substantial doubt about its ability to continue as a going concern within one year from the date of issuance of the unaudited condensed consolidated financial ~~statements. The Company considered this in determining that certain net deferred tax assets were no longer more likely than not realizable. As a result,~~statements as of ~~both~~ September ~~24, 2021 and December 25, 2020, all of~~30, 2022 have been prepared assuming the ~~Company's~~Company will continue as a going concern. Therefore, the Company has determined that its net deferred tax assets in ~~applicable tax~~certain jurisdictions are ~~fully~~more likely than not realizable, and has released the associated valuation allowance as of the Effective Date.

The effective tax rate for the three months ended September 30, 2022 (Successor) and the period from June 17, 2022 through September 30, 2022 (Successor) was 8.0% and 9.0%, respectively. The current and deferred income tax benefits were predominately related to intangible asset amortization and activity attributed to fresh-start adjustments, partially offset by ~~a valuation allowance.~~the utilization of loss carryforwards.

The ~~Company recognized an~~ income tax benefit of ~~$32.0 million on a loss from continuing operations before income taxes of $301.0~~$24.9 million for the three months ended September ~~24, 2021,~~30, 2022 (Successor) was attributed to the jurisdictional mix of pretax earnings, separation costs, reorganization items, net and anrestructuring charges.

The income tax benefit of ~~$211.6 million on a loss from continuing operations before income taxes of $19.8~~$34.6 million for the ~~three months ended~~period from June 17, 2022 through September ~~25, 2020. This resulted in~~30, 2022 (Successor) was attributed to the jurisdictional mix of pretax earnings, separation costs, reorganization items, net and restructuring charges.

The effective tax ~~rates of 10.6% and 1,068.7%~~rate for the ~~three months ended September 24, 2021 and September 25, 2020, respectively.~~period from January 1, 2022 through June 16, 2022 (Predecessor) was 61.3%. The income tax benefit for the period from January 1, 2022 through June 16, 2022 (Predecessor) primarily consisted of the income tax impacts from reorganization and fresh-start adjustments, including adjustments to the Company's valuation allowance. For the period January 1, 2022 through June 16, 2022 (Predecessor), the Company recorded an income tax benefit of $497.3 million, primarily for reorganization adjustments in the Predecessor period consisting of (1) $1,231.5 million of tax expense for the reduction in federal and state NOL carryforwards from the cancellation of debt income ("CODI") realized upon emergence and limitations under Sections 382 and 383 of the IRC; (2) $141.3 million of tax expense for the net decrease in deferred tax assets resulting from reorganization adjustments; and (3) $1,270.1 million of tax benefit for the reduction in the valuation allowance on the Company's deferred tax assets; and fresh-start adjustments in the Predecessor period consisting of (4) $297.1 million of tax benefit for the net decrease in deferred tax liabilities resulting from fresh-start adjustments and (5) $285.3 million of tax benefit associated with the release of uncertain tax positions. The remaining tax benefit was attributable to the jurisdictional mix of pretax earnings during the Predecessor period.

The effective tax rate for the three and nine months ended September 24, 2021 (Predecessor) was ~~comprised of $26.2 million of current tax benefit~~10.6% and ~~$5.8 million of deferred tax benefit.~~13.6%, respectively. The current and deferred income tax ~~benefit was predominantly related to~~benefits for the three and nine months ended September 24, 2021 (Predecessor) were primarily impacted by intangible asset amortization, an increase to prepaid taxes and a decrease to uncertain tax ~~positions. The deferred tax benefit was predominantly related to intangible asset amortization~~positions partially offset by the utilization of loss carryforwards in non-valuation allowance jurisdictions. The income tax benefit for the three months ended September 25, 2020 was comprised of $201.4 million of current tax benefit and $10.2 million of deferred tax benefit. The current tax benefit was primarily the result of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act and unrecognized tax benefits, partially offset by the fiscal 2020 reorganization of the Company's intercompany financing and associated legal entity ownership. The deferred tax benefit was predominately related to the fiscal 2020 reorganization of the Company's intercompany financing and associated legal entity ownership.

The Company recognized an income tax benefit of $81.9 million on a loss from continuing operations before income taxes of $601.3 million for the nine months ended September 24, 2021, and an income tax benefit of $69.2 million on a loss from continuing operations before income taxes of $884.7 million for the nine months ended September 25, 2020. This resulted in effective tax rates of 13.6% and 7.8% for the nine months ended September 24, 2021 and September 25, 2020, respectively. The income tax benefit for the nine months ended September 24, 2021 was comprised of $62.8 million of current tax benefit and $19.1 million of deferred tax benefit. The current tax benefit was predominantly related to an increase to prepaid taxes and a decrease to uncertain tax positions. The deferred tax benefit was predominantly related to intangible asset amortization, partially offset by utilization of loss carryforwards in non-valuation allowance jurisdictions. The income tax benefit for the nine months ended September 25, 2020 was comprised of $370.3 million of current tax benefit and $301.1 million of deferred tax expense. The current tax benefit was primarily the result of the CARES Act and unrecognized tax benefits, partially offset by the fiscal 2020 reorganization of the Company's intercompany financing and associated legal entity ownership. The deferred tax expense was predominately related to the valuation allowance recorded against the Company's net deferred tax assets and unrecognized tax benefits, partially offset by a tax benefit predominately related to the fiscal 2020 reorganization of the Company's intercompany financing and associated legal entity ownership.

The income tax benefit ~~was~~of $32.0 million for the three months ended September 24, 2021 ~~compared with an income tax benefit~~(Predecessor) consisted of ~~$211.6 million for the three months ended September 25, 2020. The $179.6 million net decrease in the tax benefit included a decrease of $236.8~~$16.9 million attributed to the CARES Act, partially offset by an increase of $32.0 million attributed to the fiscal 2020 reorganization of the Company’s intercompany financing and associated legal entity ownership, an increase of $12.6 million attributed to changes in the timing, amount and jurisdictional mix of ~~income, an increase of $7.9~~pretax earnings, $11.8 million attributed to uncertain tax positions and ~~an increase of $4.7~~$4.3 million attributed to separation costs, reorganization items, net and restructuring charges, ~~net.~~partially offset by $1.0 million attributed to the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.

The income tax benefit ~~was~~of $81.9 million for the nine months ended September 24, 2021 ~~compared with an income tax benefit~~(Predecessor) consisted of ~~$69.2 million for the nine months ended September 25, 2020. The $12.7 million net increase in the tax benefit included an increase of $202.7~~$55.9 million attributed to ~~a valuation allowance recorded against~~ the ~~Company's net deferred tax assets, an increase~~jurisdictional mix of ~~$56.2~~pretax earnings, $15.1 million attributed to ~~changes in the timing, amount~~uncertain tax positions and jurisdictional mix of income, an increase of $25.7 million predominately attributed to the fiscal 2020 reorganization of the Company’s intercompany financing and associated legal entity ownership, an increase of

~~$10.8~~$11.0 million attributed to separation costs, reorganization items, net, and restructuring charges, ~~net and an increase of $2.8 million attributed to uncertain tax positions,~~ partially offset by ~~a decrease of $285.5~~$0.1 million attributed to the CARES Act.

During the period June 17, 2022 through September 30, 2022 (Successor) and the period January 1, 2022 through June 16, 2022 (Predecessor), net cash payments for income taxes were $3.8 million and $3.0 million, respectively. During the nine months ended September 24, 2021 ~~and September 25, 2020,~~(Predecessor), net cash refunds for income taxes were $160.4 ~~million and net cash payments for income taxes were $42.9 million, respectively.~~million. Included within the net cash refunds of $160.4 million were refunds of $178.8 million received as a result of provisions in the CARES Act and net payments of $18.4 million related to operational activity.

On July 15, 2022, the Company received notification that the Joint Committee on Taxation approved the Internal Revenue Service audit reports relating to three CARES Act tax refund claims that were individually in excess of $5.0 million. The Company expects to receive CARES Act tax refunds totaling $135.9 million, excluding related interest, within the next twelve months. Such amount has been reflected as a component of prepaid expenses and other current assets on the unaudited condensed consolidated balance sheet as of September 30, 2022 (Successor).

The Company's unrecognized tax benefits, excluding interest, totaled ~~$334.2~~$24.8 million and ~~$349.0~~$333.5 million as of September ~~24, 2021~~30, 2022 (Successor) and December ~~25, 2020,~~31, 2021 (Predecessor), respectively. The ~~net~~ decrease of ~~$14.8~~$308.7 million primarily resulted from a ~~lapse~~reduction of ~~statutes~~prior period tax positions related to fresh-start adjustments of ~~limitations of $21.8~~$306.1 million and settlements of ~~$0.2 million, partially offset by a net increase to prior period tax positions of $7.2~~$2.6 million. If favorably settled, ~~$63.2~~$24.8 million of unrecognized tax benefits as of September ~~24, 2021~~30, 2022 (Successor) would benefit the effective tax rate. The total amount of accrued interest and penalties related to these obligations was ~~$17.9~~$2.5 million and ~~$16.7~~$18.9 million as of September ~~24, 2021~~30, 2022 (Successor) and December ~~25, 2020,~~31, 2021 (Predecessor), respectively. Due to a lapse of the statute of limitations noted above, $5.1 million of tax and interest on unrecognized tax benefits related to the Nuclear Imaging business were eliminated, and a benefit of $5.1 million was recorded in discontinued operations within the unaudited condensed consolidated statement of operations for the nine months ended September 24, 2021.

~~It is reasonably possible that within~~Within the next twelve months, the unrecognized tax benefits ~~could decrease by up to $139.9 million~~ and the ~~amount of~~ related interest and penalties ~~could decrease by up~~are not expected to ~~$16.4 million as a result of payments or releases due to the resolution of examinations, appeals and litigation and the expiration of various statutes of limitation.~~decrease.

Certain of the ~~Company’s~~Company's subsidiaries continue to be subject to examination by taxing authorities. The earliest open years subject to examination for both the U.S federal and state jurisdictions and various foreign jurisdictions, including Ireland, Japan, Luxembourg, Switzerland and the United Kingdom is 2013.

As a result of the Plan, the Company recognized CODI on its indebtedness, resulting in the utilization of, and reduction to, certain of its tax losses and tax credits in the U.S. and Luxembourg. The remaining of its U.S. tax losses and credits are ~~from 2013~~expected to ~~present~~be significantly limited under Sections 382 and 383 of the ~~earliest open~~IRC. Additionally, the Company recognized a U.S. capital loss as a result of the Plan. This capital loss may be carried forward to offset capital gains recognized by the Company in the next five years, ~~for~~to the ~~U.S federal~~extent it is not reduced by CODI or limited under IRC section 382 or 383. The deferred tax asset associated with the capital loss carryforward is offset by a valuation allowance due to significant uncertainty regarding the Company's ability to utilize the carryforward prior to its expiration. The portion of deferred tax assets associated with the tax losses and ~~state jurisdictions~~credits that are ~~2013~~limited under IRC Section 382 or 383, and ~~2009, respectively.~~that have a remote possibility of being utilized, have been written off.

The Plan's tax effect, and impacts on the Company's tax losses and credits, is expected to be finalized when the U.S. Federal income tax return that is due in 2023 is completed.


6.7.			~~(Loss) Earnings~~Loss per Share

~~(Loss) earnings~~Loss per share is computed by dividing net loss by the number of weighted-average shares outstanding during the period. Dilutive securities, including participating securities, have not been included in the computation of ~~(loss) earnings~~loss per share as the Company reported a net ~~(loss) income~~loss from continuing operations during all periods presented below and therefore, the impact would be anti-dilutive.

The weighted-average number of shares outstanding used in the computations of both basic and diluted ~~(loss) earnings~~loss per share were as follows (in millions):

Three Months Ended Nine Months Ended
September 24,
2021 September 25,
2020 September 24,
2021 September 25,
2020
Basic and diluted 84.7 84.6 84.7 84.4

Successor

Predecessor

Three Months
Ended
September 30, 2022

Three Months Ended September 24, 2021

Basic and diluted

13.2

84.7

Successor

Predecessor

Period from
June 17, 2022
through
September 30, 2022

Period from
January 1, 2022
through
June 16, 2022

Nine Months Ended
September 24, 2021

Basic and diluted

13.2

84.8

84.7

The computation of diluted weighted-average shares outstanding for both the three months ended September 30, 2022 (Successor) and the period June 17, 2022 through September 30, 2022 (Successor) excluded approximately 3.3 million shares of Opioid Warrants because the effect would have been anti-dilutive. The computation of diluted weighted-average shares outstanding for the period January 1, 2022 through June 16, 2022 (Predecessor) and both the three and nine months ended September 24, 2021 (Predecessor)

excluded approximately ~~5.3~~0.5 million ~~shares of equity awards,~~ and ~~for both the three and nine months ended September 25, 2020 excluded approximately 5.8~~5.3 million shares of equity awards because the effect would have been ~~anti-dilutive.~~anti-dilutive, respectively.


7.8.			Inventories

Inventories were comprised of the following at the end of each period:


							Successor		Predecessor
		September 24, 2021		December 25, 2020			September 30, 2022		December 31, 2021
Raw materials and supplies	Raw materials and supplies	$	54.6	$	58.1	Raw materials and supplies	$	72.9	$	59.8
Work in process	Work in process	218.8		200.7		Work in process	612.1		196.4
Finished goods	Finished goods	94.2		86.1		Finished goods	386.6		91.0
		$	367.6	$	344.9		$	1,071.6	$	347.2


8.9.			Property, Plant and Equipment

The gross carrying amount and accumulated depreciation of property, plant and equipment were comprised of the following at the end of each period:


							Successor		Predecessor
		September 24, 2021		December 25, 2020			September 30, 2022		December 31, 2021
Property, plant and equipment, gross	Property, plant and equipment, gross	$	1,892.4	$	1,910.9	Property, plant and equipment, gross	$	463.1	$	1,886.6
Less: accumulated depreciation	Less: accumulated depreciation	(1,124.7)		(1,077.8)		Less: accumulated depreciation	(14.8)		(1,110.6)
Property, plant and equipment, net	Property, plant and equipment, net	$	767.7	$	833.1	Property, plant and equipment, net	$	448.3	$	776.0

Depreciation expense was as follows:

Three Months Ended Nine Months Ended
September 24,
2021 September 25,
2020 September 24,
2021 September 25,
2020
Depreciation expense $ 23.2 $ 25.5 $ 70.3 $ 75.7



	Successor		Predecessor
	Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Depreciation expense	$	11.9	$	23.2


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Depreciation expense	$	14.8	$	40.0	$	70.3


9.10.			Intangible Assets

The gross carrying amount and accumulated amortization of intangible assets were comprised of the following at the end of each period:


											Successor				Predecessor
		September 24, 2021				December 25, 2020					September 30, 2022				December 31, 2021
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable:	Amortizable:									Amortizable:
Completed technology	Completed technology	$	10,494.4	$	5,016.9	$	10,394.6	$	4,586.6	Completed technology	$	3,041.2	$	182.1	$	10,404.0	$	5,160.4
License agreements	License agreements	120.1		81.1		120.1		78.1		License agreements	—		—		120.1		82.1
Trademarks	Trademarks	77.7		26.1		77.7		23.5		Trademarks	—		—		77.7		26.9

Total	Total	$	10,692.2	$	5,124.1	$	10,592.4	$	4,688.2	Total	$	3,041.2	$	182.1	$	10,601.8	$	5,269.4
Non-Amortizable:	Non-Amortizable:									Non-Amortizable:
Trademarks	Trademarks	$	35.0			$	35.0			Trademarks	$	—			$	35.0
In-process research and development	In-process research and development	81.0				245.3				In-process research and development	121.3				81.0
Total	Total	$	116.0			$	280.3			Total	$	121.3			$	116.0

As part of fresh-start accounting, as of the Effective Date, the Company wrote-off the existing intangible assets and accumulated amortization of the Predecessor and recorded $3,152.2 million to reflect the fair value of intangible assets of the Successor (see also Note 3). Such adjustment included $100.0 million in relation to the Company's PRV that was awarded under a FDA program intended to encourage the development of certain product applications for therapies used to treat or prevent material threat medical countermeasures. On June 30, 2022, subsequent to the Effective Date, the Company completed the sale of its PRV for $100.0 million and received net proceeds of $65.0 million as the buyer remitted the remaining $35.0 million to the General Unsecured Claims Trustee pursuant to the terms of (i) the Plan, and (ii) that certain General Unsecured Claims Trust Agreement entered into in connection with the Plan.

Intangible assets of the Successor as of the Effective Date consisted of the following:


	Carrying Amount		Amortization Method	Amortization Period (in years)	Discount Rate	Segment
Amortizable completed technology:
Acthar Gel	$	1,069.0	Sum of the years digits	13.5	14.2%	Specialty Brands
Therakos	913.8		Sum of the years digits	10.0	14.0	Specialty Brands
Amitiza	84.5		Sum of the years digits	3.0	14.0	Specialty Brands
INOmax	652.9		Sum of the years digits	9.0	14.0	Specialty Brands
StrataGraft	56.8		Straight-line	11.0	14.0	Specialty Brands
Generics	71.4		Straight-line	5.0	13.3	Specialty Generics
APAP	70.5		Straight-line	20.5	13.0	Specialty Generics
	2,918.9

Non-Amortizable in-process research and development:
Terlivaz (1)	104.8		Straight-line	7.0	15.0	Specialty Brands
Generics IPR&D	128.5		Not applicable	Not applicable	14.0	Specialty Generics
	233.3
	$	3,152.2

~~StrataGraft~~(1)®Subsequent to the Effective Date, Terlivaz was approved by the FDA and was transferred to amortizable, finite-lived completed technology. See further discussion below.

Amitiza

Beginning January 1, 2022 (Predecessor), the Company changed its amortization method used for the Amitiza intangible asset from the straight-line method to the sum of the years digits method, an accelerated method of amortization, to more accurately reflect the consumption of economic benefits over the remaining useful life of the asset. This change in amortization method resulted in additional amortization expense of $21.7 million, which impacted basic loss per share by $0.26 for the period January 1, 2022 through June 16, 2022 (Predecessor), respectively.

Terlivaz

On June ~~15, 2021,~~9, 2022, the Company resubmitted its new drug application for Terlivaz to the FDA. On September 14, 2022, the Company announced that the ~~U.S. Food and Drug Administration ("FDA")~~FDA had approved ~~the StrataGraft biologics license application ("BLA")~~Terlivaz for ~~the treatment of adults with deep partial-thickness burns.~~injection. Upon FDA approval, the Company transferred the total ~~$99.8~~$104.8 million of asset value from ~~non-amortized,~~non-amortizable indefinite-lived acquired ~~in-process research and development ("~~IPR~~&D") product~~&D rights to amortizable, finite-lived completed technology and will begin amortization of the asset in tandem with the first commercial ~~launch~~shipment of the product ~~which is expected~~ during the fourth quarter of fiscal ~~2021.~~

~~Terlipressin~~

During September 2020, the FDA issued a Complete Response Letter ("CRL") regarding the Company's New Drug Application ("NDA") seeking approval for the investigational agent terlipressin to treat adults with hepatorenal syndrome type 1 ("HRS-1"). The CRL stated that, based on the available data, the agency cannot approve the terlipressin NDA in its current form and requires more information to support a positive risk-benefit profile for terlipressin for patients with HRS-1.

In response to receipt of the CRL, the Company had an End of Review Meeting on October 26, 2020 and a Type A Meeting on January 29, 2021 with the FDA where both parties engaged in constructive dialogue in an effort to clarify a viable path to U.S. approval. On August 18, 2021, the Company resubmitted its NDA for terlipressin to the FDA. The Prescription Drug User Fee Act (PDUFA) date for this development product is February 18, 2022. The ~~Company will continue~~FDA approval gave rise to ~~assess the impact of any changes to planned revenue or earnings on the fair value of the associated IPR&D asset of $81.0~~a $17.5 million ~~included within intangible assets, net on the unaudited condensed consolidated balance sheets~~milestone payable, which remained unpaid as of September ~~24, 2021 and December 25, 2020.~~

~~The Company annually tests~~30, 2022 (Successor). A corresponding intangible asset was recorded as of September 30, 2022 (Successor), which will be amortized over the indefinite-lived intangible assets for impairment, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable by either a qualitative or income approach. Management relies on a number of qualitative factors when considering a potential impairment such as changes to planned revenue or earnings that could affect significant inputs used to determine the fair valueuseful life of the ~~indefinite-lived intangible asset.~~

~~MNK-6105 and MNK-6106~~

~~During~~related asset beginning with the ~~three months ended March 26, 2021,~~first commercial shipment of the ~~Company recognized a full impairment on its Specialty Brands IPR&D asset related to MNK-6105 and MNK-6106~~product during the fourth quarter of ~~$64.5 million. The Company has decided it will no longer pursue further development of this asset.~~

~~Intangible asset amortization expense~~fiscal 2022.

Intangible asset amortization expense was as follows:

Three Months Ended Nine Months Ended
September 24,
2021 September 25,
2020 September 24,
2021 September 25,
2020
Amortization expense $ 145.3 $ 210.6 $ 435.8 $ 599.8



	Successor		Predecessor
	Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Amortization expense	$	136.6	$	145.3


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Amortization expense	$	182.1	$	281.8	$	435.8

The estimated aggregate amortization expense on intangible assets owned by the Company ~~and being amortized as of September 24, 2021,~~ is expected to be as follows:


Remainder of Fiscal 2021		$	145.3
Fiscal 2022		581.1
					Successor
Remainder of Fiscal 2022				Remainder of Fiscal 2022	$	136.5
Fiscal 2023	Fiscal 2023	581.1		Fiscal 2023	509.3
Fiscal 2024	Fiscal 2024	581.1		Fiscal 2024	446.1
Fiscal 2025	Fiscal 2025	579.6		Fiscal 2025	385.1
Fiscal 2026				Fiscal 2026	337.5

2128


~~10.~~11.			Debt

Debt was comprised of the following at the end of each period:


	Successor						Predecessor
	September 30, 2022						December 31, 2021
	Principal		Carrying Value (1)		Unamortized Discount and Debt Issuance Costs		Principal		Unamortized Discount and Debt Issuance Costs
10.00% first lien senior secured notes due April 2025	$	495.0	$	473.9	$	—	$	495.0	$	5.9
10.00% second lien senior secured notes due April 2025	321.9		234.8		—		—		—
2017 Replacement Term loan due September 2027	1,382.8		1,222.8		—		—		—
2018 Replacement Term loan due September 2027	367.1		327.2		—		—		—
11.50% first lien senior secured notes due December 2028	650.0		650.0		21.6		—		—
10.00% second lien senior secured notes due June 2029	366.8		191.3		—		—		—
Revolving credit facility due February 2022	—		—		—		900.0		0.2
9.50% debentures due May 2022	—		—		—		10.4		—
5.75% senior notes due August 2022	—		—		—		610.3		—
8.00% debentures due March 2023	—		—		—		4.4		—
4.75% senior notes due April 2023	—		—		—		133.7		—
5.625% senior notes due October 2023	—		—		—		514.7		—
Term loan due September 2024	—		—		—		1,396.5		—
Term loan due February 2025	—		—		—		370.7		—
10.00% second lien senior secured notes due April 2025	—		—		—		322.9		—
5.50% senior notes due April 2025	—		—		—		387.2		—
Total debt	3,583.6		3,100.0		21.6		5,145.8		6.1
Less: Current portion	(44.1)		(44.1)		—		(1,395.0)		(6.1)
Less: Amounts reclassified to liabilities subject to compromise	—		—		—		(3,750.8)		—
Total long-term debt, net of current portion	$	3,539.5	$	3,055.9	$	21.6	$	—	$	—

(1)Upon adoption of fresh-start accounting, the Company recorded its debt instruments at fair value utilizing the Black-Derman-Toy model, which takes into consideration prepayment options and a credit-adjusted discount rate. Subsequent to the Effective Date, the Company accounted for its debt instruments utilizing the amortized cost method and accretes the instruments up from their fair value to the principal amount over the term of the respective instruments. Such accretion expense is reflected as interest expense on the unaudited condensed consolidated statement of operations for the successor period.

The commencement of the Chapter 11 Cases constituted an event of default under certain of the ~~Company’s~~Company's predecessor debt agreements. Accordingly, all debt not reclassified as LSTC with original long-term stated maturities was classified as current on the unaudited condensed consolidated balance sheets as of September 24, 2021 and December 25, 2020. However, any efforts to enforce payment obligations under the Company's debt instruments are automatically stayed asAs a result of the Chapter 11 Cases, the principal and ~~the creditors’ rights in respect of the~~interest due under these debt instruments ~~are subject~~became immediately due and payable. However, any efforts to enforce payment was automatically stayed in accordance with the applicable provisions of the Bankruptcy Code. ~~See~~

On the Effective Date, the principal balance outstanding under the Existing Term Loans of $1,762.6 million, Existing 2L Notes of $322.9 million, Guaranteed Unsecured Notes of $1,512.2 million, 9.50% debentures of $10.4 million, 8.00% debentures of $4.4 million and 4.75% senior notes due April 2023 of $133.7 million were canceled and the Company entered into new Takeback Term Loans, New 2L Notes, and Takeback 2L Notes (all further described in Note ~~2 for~~2). The Existing 1L Notes were reinstated and the Existing Revolver was paid in full in cash. Additionally, the Company issued New 1L Notes and entered into a receivables financing facility (discussed further ~~information.~~below).

~~Debt was comprised~~

Successor Company Indebtedness

Takeback Term Loans

On the Effective Date and pursuant to the Plan, the Issuers entered into the Takeback Term Loans, each pursuant to a Credit Agreement, dated as of the ~~following~~Effective Date (the "Credit Agreement"), among Mallinckrodt plc, the Issuers, the lenders party thereto from time to time, Acquiom Agency Services LLC and Seaport Loan Products LLC, as co-administrative agents, and Deutsche Bank AG New York Branch, as collateral agent. The Takeback Term Loans were issued to the holders of the existing senior secured term loans incurred by the Issuers in satisfaction thereof. All obligations under the Takeback Term Loans are unconditionally guaranteed by Mallinckrodt plc, certain of its direct or indirect wholly owned U.S. subsidiaries, each of its direct or indirect wholly owned subsidiaries that owns directly or indirectly any such wholly owned U.S. subsidiary, and certain other subsidiaries, subject to certain exceptions (collectively, the "Guarantors") and are secured by a security interest in certain assets of the Issuers and the Guarantors.

The 2017 Replacement Term Loans bear interest at a rate equal to, at the option of the borrowers thereunder, adjusted London Interbank Office Rate ("LIBOR"), subject to a floor of 0.75%, plus a spread equal to 5.25% or an alternate base rate, subject to a floor of 1.75%, plus a spread equal to 4.25%. The 2018 Replacement Term Loans bear interest at a rate equal to, at the option of the borrowers thereunder, adjusted LIBOR, subject to a floor of 0.75%, plus a spread equal to 5.50% or an alternate base rate, subject to a floor of 1.75%, plus a spread equal to 4.50%. Interest on the Takeback Term Loans is payable at the end of each ~~period:~~applicable interest period, but in no event less frequently than quarterly. The Takeback Term Loans mature on September 30, 2027. Amounts outstanding under the Takeback Term Loans may be prepaid at any time, subject, under certain circumstances, to a 1.00% prepayment premium on prepayments made within the first nine months of the Effective Date. The Issuers may be obligated to prepay the Takeback Term Loans with the net proceeds of certain asset sales and recovery events, subject to certain qualifications and exceptions. The Issuers may also be obligated to prepay the Term Loans with a specified percentage of excess cash flow, subject to certain qualifications and exceptions.

September 24, 2021 December 25, 2020
Principal
Unamortized Discount and Debt Issuance Costs (1)
Principal
Unamortized Discount and Debt Issuance Costs (1)
Secured debt:
Term loan due September 2024 $ 1,403.9 $ — $ 1,505.2 $ 12.3
Term loan due February 2025 372.6 — 399.5 5.0
10.00% first lien senior notes due April 2025 495.0 6.3 495.0 7.7
10.00% second lien senior notes due April 2025 322.9 — 322.9 8.0
Revolving credit facility 900.0 0.6 900.0 1.7
Total secured debt 3,494.4 6.9 3,622.6 34.7
Unsecured debt:
9.50% debentures due May 2022 10.4 — 10.4 —
5.75% senior notes due August 2022 610.3 — 610.3 —
8.00% debentures due March 2023 4.4 — 4.4 —
4.75% senior notes due April 2023 133.7 — 133.7 —
5.625% senior notes due October 2023 514.7 — 514.7 —
5.50% senior notes due April 2025 387.2 — 387.2 —
Total unsecured debt 1,660.7 — 1,660.7 —
Total debt, prior to reclassification to liabilities subject to compromise 5,155.1 6.9 5,283.3 34.7
Less: Current portion (1,395.0) (6.9) (3,622.6) (34.7)
Less: Amounts reclassified to liabilities subject to compromise (2)
(3,760.1) — (1,660.7) —
Total long-term debt, net of current portion $ — $ — $ — $ —
The Credit Agreement contains certain customary affirmative and negative covenants, representations and warranties and events of default (subject in certain cases to customary grace and cure periods). The occurrence of an event of default under the Credit Agreement could result in the acceleration of all outstanding borrowings under the Takeback Term Loans and could cause a cross-default that could result in the acceleration of other indebtedness of Mallinckrodt plc and its subsidiaries.

~~(1)~~As11.50% First Lien Senior Secured Notes due 2028

On June 15, 2022, the Issuers and Mallinckrodt plc entered into a purchase agreement (the "Note Purchase Agreement") with certain Purchasers (as defined in the Note Purchase Agreement) with respect to the issuance and sale of $650.0 million aggregate principal amount of 11.50% First Lien Senior Secured Notes due 2028 (the "New 1L Notes"). The Note Purchase Agreement contains customary representations, warranties and covenants and includes the terms and conditions for the sale of the New 1L Notes, and other terms and conditions customary in agreements of this type. The net proceeds of the issuance of the New 1L Notes were applied to repay in part the existing senior secured revolving credit facility incurred by the Issuers and certain of their respective subsidiaries. The issuance of the New 1L Notes was exempt from registration under the Securities Act.

The New 1L Notes were issued by the Issuers on the Effective Date pursuant to an indenture, dated as of the Effective Date (the "New 1L Notes Indenture") among the Issuers, Mallinckrodt plc, the Subsidiary Note Guarantors (as defined below), Wilmington Savings Fund Society, FSB, as first lien trustee, and Deutsche Bank AG New York Branch, as first lien collateral agent. The New 1L Notes mature on December 15, 2028.

Interest on the New 1L Notes is payable semi-annually in cash on June 15 and December 15 of each year, commencing on December 15, 2022. The initial interest rate on the New 1L Notes of 11.50% per annum is subject to increase to cause the yield to maturity of the New 1L Notes to match, to the extent greater, the yield to maturity of certain additional first lien indebtedness incurred during the six months following the Effective Date.

The Issuers may redeem some or all of the New 1L Notes prior to June 15, 2027 by paying a "make-whole" premium, plus accrued and unpaid interest, if any. The Issuers may redeem some or all of the New 1L Notes on or after June 15, 2027 at par, plus accrued and unpaid interest, if any. The Issuers may also redeem all, but not less than all, of the New 1L 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 additional amounts as a result of changes affecting certain withholding tax laws applicable to payments on the ~~Company's Chapter 11 Cases,~~New 1L Notes. The Issuers are obligated to offer to repurchase the New 1L Notes (a) 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) at a price of 100% of their principal amount plus accrued and unpaid interest, if any, with the net proceeds of certain asset sales. These obligations are subject to certain qualifications and exceptions.

The New 1L Notes Indenture 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 New 1L Notes Indenture could result in the acceleration of the New 1L Notes and could cause a cross-default that could result in the acceleration of other indebtedness of Mallinckrodt plc and its subsidiaries. The New 1L Notes are jointly and severally guaranteed on a secured, unsubordinated basis by Mallinckrodt plc and each of its subsidiaries (other than the Issuers) that guarantees the obligations under the Takeback Term Loans (the "Subsidiary Note Guarantors"). The New 1L Notes and the guarantees thereof are secured by liens on the same assets of the Issuers, Mallinckrodt plc and the Subsidiary Note Guarantors that are subject to liens securing the Takeback Term Loans, subject to certain exceptions.

Existing 10.00% First Lien Senior Secured Notes due 2025

On the Effective Date and pursuant to the Plan and the Scheme of Arrangement, the Issuers' Existing 1L Notes in an aggregate principal amount of $495.0 million and the note documents relating thereto were reinstated.

In addition, pursuant to the terms of the indenture governing the Existing 1L Notes, the Issuers, Mallinckrodt plc, the Subsidiary Note Guarantors, Wilmington Savings Fund Society, FSB, as first lien trustee, and Deutsche Bank AG New York Branch, as first lien collateral agent, entered into a supplemental indenture, dated of the Effective Date (the "Supplemental Indenture"), pursuant to which certain additional assets were added to the collateral securing the Existing 1L Notes and the guarantees thereof. The Issuers are obligated to offer to repurchase the Existing 1L Notes (a) 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) at a price of 100% of their principal amount plus accrued and

unpaid interest, if any, with the net proceeds of certain asset sales. These obligations are subject to certain qualifications and exceptions.

10.00% Second Lien Senior Secured Notes due 2025

On the Effective Date, pursuant to the Plan and the Scheme of Arrangement, the Issuers issued 10.00% Second Lien Senior Secured Notes due 2025 (the "New 2L Notes") in an aggregate principal amount of $322.9 million to the holders of the Issuers' Existing 2L Notes in satisfaction thereof. The New 2L Notes were issued pursuant to an Indenture, dated as of the Effective Date (the "New 2L Notes Indenture"), among the Issuers, Mallinckrodt plc, the Subsidiary Note Guarantors and Wilmington Savings Fund Society, FSB, as second lien trustee and second lien collateral agent. The New 2L Notes mature on April 15, 2025. The issuance of the New 2L Notes was exempt from registration under the Securities Act.

Interest on the New 2L Notes is payable semi-annually in cash on April 15 and October 15 of each year, which commenced on October 15, 2022.

The Issuers may redeem some or all of the New 2L Notes prior to April 15, 2024 at specified redemption prices, plus accrued and unpaid interest, if any. The Issuers may redeem some or all of the New 2L Notes on or after April 15, 2024 at par, plus accrued and unpaid interest, if any. The Issuers may also redeem all, but not less than all, of the New 2L 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 additional amounts as a result of changes affecting certain withholding tax laws applicable to payments on the New 2L Notes. The Issuers are obligated to offer to repurchase the New 2L Notes (a) 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) at a price of 100% of their principal amount plus accrued and unpaid interest, if any, with the net proceeds of certain asset sales. These obligations are subject to certain qualifications and exceptions.

The New 2L Notes Indenture 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 New 2L Notes Indenture could result in the acceleration of the New 2L Notes and could cause a cross-default that could result in the acceleration of other indebtedness of Mallinckrodt plc and its subsidiaries. The New 2L Notes are jointly and severally guaranteed, subject to certain exceptions, on a secured, unsubordinated basis by Mallinckrodt plc and the Subsidiary Note Guarantors. The New 2L Notes and the guarantees thereof are secured by liens on the same assets of the Issuers, Mallinckrodt plc and the Subsidiary Note Guarantors that are subject to liens securing the Takeback Term Loans, subject to certain exceptions.

10.00% Second Lien Senior Secured Notes due 2029

On the Effective Date, pursuant to the Plan and the Scheme of Arrangement, the Issuers issued 10.00% second lien senior secured notes due 2029 (the "Takeback 2L Notes") in an aggregate principal amount of $375.0 million to the holders of the Issuers' Guaranteed Unsecured Notes in partial satisfaction thereof. The Takeback 2L Notes were issued pursuant to an indenture, dated as of the Effective Date (the "Takeback 2L Notes Indenture"), among the Issuers, Mallinckrodt plc, the Subsidiary Note Guarantors and Wilmington Savings Fund Society, FSB, as second lien trustee and second lien collateral agent. The Takeback 2L Notes mature on June 15, 2029. The issuance of the Takeback 2L Notes was exempt from registration under the Securities Act.

Interest on the Takeback 2L Notes is payable semi-annually in cash on June 15 and December 15 of each year, commencing on December 15, 2022.

The Issuers may redeem some or all of the Takeback 2L Notes prior to June 15, 2026 by paying a "make-whole" premium, plus accrued and unpaid interest, if any. The Issuers may redeem some or all of the Takeback 2L Notes on or after June 15, 2026 but prior to June 15, 2028 at specified redemption prices, plus accrued and unpaid interest, if any. The Issuers may redeem some or all of the Takeback 2L Notes on or after June 15, 2028 at par, plus accrued and unpaid interest, if any. In addition, prior to June 15, 2026, the Issuers may redeem up to 40% of the aggregate principal amount of the Takeback 2L Notes with the net proceeds of certain equity offerings. The Issuers may also redeem all, but not less than all, of the Takeback 2L 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 additional amounts as a result of changes affecting certain withholding tax laws applicable to payments on the Takeback 2L Notes. The Issuers are obligated to offer to repurchase the Takeback 2L Notes (a) 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) at a price of 100% of their principal amount plus accrued and unpaid interest, if any, with the net proceeds of certain asset sales. These obligations are subject to certain qualifications and exceptions.

The Takeback 2L Notes Indenture 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 Takeback 2L Notes Indenture could result in the acceleration of the Takeback 2L Notes and could cause a cross-default that could result in the acceleration of other indebtedness of Mallinckrodt plc and its subsidiaries. The Takeback 2L Notes are jointly and severally guaranteed, subject to certain exceptions, on a secured, unsubordinated basis by Mallinckrodt plc and the Subsidiary Note Guarantors. The Takeback 2L Notes and the guarantees thereof are secured by liens on the same assets of the Issuers, Mallinckrodt plc and the Subsidiary Note Guarantors that are subject to liens securing the Takeback Term Loans, subject to certain exceptions.

Accounts Receivable Financing Facility

On the Effective Date, MEH, Inc. ("MEH"), as servicer, ST US AR Finance LLC, a direct wholly owned subsidiary of MEH ("ST US AR"), as borrower, the lenders party thereto, and the letter of credit issuers party thereto entered into a receivables financing facility (the "Receivables Financing Facility") pursuant to an ABL Credit Agreement (the "Receivables Financing Credit Agreement") and a Purchase and Sale Agreement (the "Purchase and Sale Agreement"). Under the Receivables Financing Facility, ST US AR may borrow money up to an amount based on a borrowing base with a maximum draw of up to $200.0 million. Borrowings are secured by a first-lien security interest under the Receivables Financing Facility on existing and future accounts receivables and related assets that have been sold from certain subsidiaries of MEH to ST US AR. The Receivables Financing Facility includes customary affirmative and negative covenants for transactions of this type. From the closing date until the last day of the first fiscal quarter after the closing date, borrowings bear interest at a rate of (a) either (i) the alternate base rate or (ii) secured overnight financing rate (SOFR), and (b) an applicable margin. On the first day of each fiscal quarter thereafter, the applicable margins shall be determined from a pricing grid based upon the historical excess availability for the most recent fiscal quarter ended immediately prior. The Receivables Financing Facility matures on the earlier of June 16, 2026 and a date that is 91 days prior to the maturity date of other material debt or any other material indebtedness that is incurred after the closing date. ST US AR may borrow, pay or prepay and reborrow under the Receivables Financing Facility at any time. So long as there is not an overadvance under the Receivables Financing Facility, and subject to certain other conditions, ST US AR can elect to repay borrowings or use cash to make distributions to MEH and certain subsidiaries of MEH that have contributed receivables to ST US AR. The obligations under the Receivables Financing Facility are not guaranteed by MEH or any of its restricted subsidiaries. The Receivables Financing Facility is subject to customary events of defaults for transactions of this type. As of September 30, 2022 (Successor), the Company expensed $23.1 million of unamortized discount and debt issuance costs, net, recorded in reorganization items, net in the unaudited condensed consolidated statement of operations during the nine months ended September 24, 2021.

~~(2)In connection with the Company’s Chapter 11 Cases, $3,760.1 million and $1,660.7 million~~had no outstanding secured and unsecured debt instruments have been reclassified to LSTC in the Company's unaudited condensed consolidated balance sheets as of September 24, 2021 and December 25, 2020, respectively. Up to the date of reclassification to LSTC, the Company continued to accrue interest expense in relation to the unsecured debt instruments reclassified to LSTC. The Company continues to accrue and pay interestborrowings on ~~the outstanding secured debt instruments classified as LSTC in conjunction with the cash collateral order. Refer to Note 2 for further information.~~its Receivables Financing Facility.

Applicable interest rate

As of September ~~24, 2021,~~30, 2022 (Successor), the applicable interest rate and outstanding ~~borrowings~~principal on the Company's ~~variable-rate~~ debt instruments were as follows:

Applicable interest rate Outstanding borrowings
Term loan due September 2024 (1)
6.00 % $ 1,403.9
Term loan due February 2025 (1)
6.25 372.6
Revolving credit facility (2)
4.38 900.0

~~(1)~~The applicable interest rate for the senior secured term loans includes the incremental 250 basis points as a result of the amendment to the cash collateral order that took effect on March 22, 2021. Refer to Note 2 for further discussion on the amendment.

~~(2)Includes the incremental 200 basis points related to the cash adequate protection payments. Refer to Note 2 for further information.~~


	Applicable interest rate		Outstanding principal
Fixed-rate instruments	10.68	%	$	1,833.7
2017 Replacement Term Loan due September 2027	8.73		1,382.8
2018 Replacement Term Loan due September 2027	8.98		367.1

~~As of September 24, 2021, the Company was fully drawn on its $900.0 million revolving credit facility.~~


~~11.~~12.			Guarantees

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

In connection with the sale of the Specialty Chemical business (formerly known as Mallinckrodt Baker) in fiscal 2010, the Company agreed to indemnify the purchaser with respect to various matters, including certain environmental, health, safety, tax and other matters. The indemnification obligations relating to certain environmental, health and safety matters have a term of 17 years from the sale, while some of the other indemnification obligations have an indefinite term. The ~~amount of the~~ liability ~~relating to all of these indemnification obligations~~was $14.9 million and included in ~~other liabilities~~LSTC on the Company's unaudited condensed consolidated balance ~~sheets~~sheet as of ~~September 24,~~December 31, 2021 ~~and December 25, 2020 was $15.0 million and $15.4 million, respectively,~~(Predecessor), of which ~~$12.3~~$12.1 million ~~and $12.7 million, respectively,~~ related to environmental, health and safety matters. The value of the environmental, health and safety indemnity was measured based on the probability-weighted present value of the costs expected to be incurred to address environmental, health and safety claims made under the indemnity. The aggregate fair value of these indemnification obligations did not differ significantly from their aggregate carrying value as of ~~September 24,~~December 31, 2021 ~~and December 25, 2020. As~~(Predecessor). The liability relating to all of ~~September 24, 2021, the maximum future payments the Company could be required to make under~~ these indemnification obligations ~~were $70.2 million.~~was governed by a contract that was rejected as part of Chapter 11 and is no longer a liability of the Successor Company. The Company was required to pay $30.0 million into an escrow account as collateral to the ~~purchaser,~~purchaser. The contract governing the escrow account was assumed in the Chapter 11 proceedings. As of ~~which~~September 30, 2022 (Successor) and December 31, 2021 (Predecessor), $19.1 million and $19.0 million remained in restricted cash, included in other long-term assets on the unaudited condensed consolidated balance ~~sheets as~~sheets. respectively. As of ~~both~~ September ~~24, 2021 and December 25, 2020, respectively.~~

~~The~~30, 2022 (Successor), the Company ~~has recorded liabilities for known~~does not expect to make future payments related to these indemnification obligations included as part of environmental liabilities, which are discussed within the notes to the financial statements included within the Company's Annual Report filed on Form 10-K for the fiscal year ended December 25, 2020.obligations.

The Company is also liable for product performance; however, the Company believes, given the information currently available, that the ultimate resolution of any such claims will not have a material adverse effect on its financial condition, results of operations and cash flows.

As of September ~~24, 2021,~~30, 2022 (Successor), the Company had various other letters of credit, guarantees and surety bonds totaling ~~$34.2~~$30.0 million and restricted cash of ~~$40.6~~$41.4 million held in segregated accounts primarily to collateralize surety bonds for the Company's environmental liabilities.


~~12.~~13.			Commitments and Contingencies

The Company is subject to various legal proceedings and claims, including government investigations, environmental matters, product liability matters, patent infringement claims, antitrust matters, securities class action lawsuits, personal injury claims, employment disputes, contractual ~~disputes~~ and other commercial disputes, and all other legal proceedings, all in the ordinary course of business, including those described below. Although it is not feasible to predict the outcome of these matters, the Company believes, unless otherwise indicated below, given the information currently available, that their ultimate resolution will not have a material adverse effect on its financial condition, results of operations and cash flows.

~~On October 12, 2020, the Company announced that Mallinckrodt plc and certain of its subsidiaries voluntarily initiated the Chapter 11 Cases under the Bankruptcy Code in the Bankruptcy Court.~~ As a result of initiating the Chapter 11 Cases, all litigation and proceedings against the Company ~~have been~~were automatically stayed, subject to certain limited exceptions. In addition, the Bankruptcy Court issued orders enjoining certain litigation against the Company and various individuals named in certain of the litigation described below that might otherwise be subject to such an exception. For further information about the Chapter 11 Cases, refer to Note 2.

Governmental Proceedings

Opioid-Related Matters

Since 2017, multiple U.S. states, counties, a territory, other governmental persons or entities and private plaintiffs have filed lawsuits against certain entities of the 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 the Company's products. ~~As of November 1, 2021,~~

Pursuant to the ~~cases the Company is aware of include, but are not limited to, approximately 2,618~~

cases filed by counties, cities, Native American tribes and/or other government-related persons or entities; approximately 270 cases filed by hospitals, health systems, unions, health and welfare funds or other third-party payers; approximately 124 cases filed by individuals; approximately 6 cases filed by schools and school boards; and 17 cases filed by the Attorneys General for New Mexico, Kentucky, Rhode Island, Georgia, Florida, Alaska, New York, 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 1, 2021, the Mallinckrodt defendants in these cases consist of Mallinckrodt plcPlan and the ~~following subsidiaries~~Scheme of Mallinckrodt plc: Mallinckrodt Enterprises LLC, Mallinckrodt LLC, SpecGx LLC, Mallinckrodt Brand Pharmaceuticals Inc., Mallinckrodt Inc., MNK 2011 Inc., and Mallinckrodt Enterprises Holdings, Inc. Certain ofArrangement, on the lawsuits have been filed as putative class actions. On October 8, 2020, the State of Rhode Island filed a lawsuit against the Company's President and Chief Executive Officer ("CEO"), Mark C. Trudeau, asserting similar claims relating to the marketing and distribution of prescription opioid medications. Rhode Island has voluntarily agreed to a stay of the lawsuit against Mr. Trudeau.

Most pending federal lawsuits have been coordinated in a federal multi-district litigation (“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 ("Track 1 Cases"). The counties claimed 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 alleged that opioid manufacturers' and distributors' failure to maintain effective controls against diversion was a substantial cause of the opioid crisis. On September 30, 2019, the Company announced that Mallinckrodt plc, along with its wholly owned subsidiaries Mallinckrodt LLC and SpecGx LLC, had executed a definitive settlement agreement and release with Cuyahoga and Summit Counties in Ohio. The settlement fully resolves the Track 1 cases againstEffective Date all named Mallinckrodt entities that were scheduled to go to trial in October 2019 in the MDL. Under the agreement, the Company paid $24.0 million in cash on October 1, 2019. In addition, the Company will provide $6.0 million in generic products, including addiction treatment products, and will 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 ~~the Company has 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~~against 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.~~

Other lawsuits remain pending in various state courts. In some jurisdictions, certain of the state lawsuits have been consolidated or coordinated for pre-trial proceedings before a single court within their respective state court systems.

The lawsuits assert a variety of claims, including, but not limited to, public nuisance, negligence, civil conspiracy, fraud, violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) or similar state laws, violations of state Controlled Substances Acts or state False Claims Acts, product liability, consumer fraud, unfair or deceptive trade practices, false advertising, insurance fraud, unjust enrichment, negligence, negligent misrepresentation, and other common law and statutory claims arising from defendants' manufacturing, distribution, marketing and promotion of opioids and seek restitution, damages, injunctive and other relief and 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.

~~Opioid-Related Litigation Settlement.~~ On February 25, 2020, the Company announced that it had reached an agreement in principle with a court-appointed plaintiffs' executive committee representing the interest of thousands of plaintiffs in the MDL and supported by a broad-based group of 48 state and U.S. Territory Attorneys General on the terms of a global settlement that would resolve all opioid-related claims against the Company and its subsidiaries ~~(the "Opioid-Related Litigation Settlement"). The Opioid-Related Litigation Settlement contemplated the filing of voluntary petitions under Chapter 11 by the Specialty Generics Subsidiaries~~were deemed to have been settled, discharged, waived, released and ~~the establishment of a trust for the benefit of plaintiffs holding opioid-related claims~~extinguished in full against the Company (the "Opioid Claimant Trust"). Furthermore, under the terms of the Opioid-Related Litigation Settlement, subject to court approval and other conditions, it was contemplated that, the Company would (1) make cash payments of $1,600.0 million in structured payments over eight years, beginning upon the Specialty Generics Subsidiaries’ emergence from the completed Chapter 11 case, the substantial majority of which would be expected to be contributed to the Opioid Claimant Trust and (2) issue warrants with an eight year term to the Opioid Claimant Trust exercisable at a strike price of $3.15 per share to purchase the Company’s ordinary shares that would represent approximately 19.99% of the Company's fully diluted outstanding shares, including after giving effect to the exercise of the warrants (the “Settlement Warrants”).

~~Amended Opioid-Related Litigation Settlement.~~ ~~In conjunction with the Company's Chapter 11 filing on October 12, 2020, the Company entered into a RSA which includes a proposed resolution of all opioid-related claims against the Company~~Mallinckrodt and its subsidiaries, that supersedes the Opioid-Related Litigation Settlement. On September 2, 2021, the Debtors reached an agreement in principle with the Opioid Claimants, which supersedes the Amended Opioid-Related Litigation Settlement as proposed in the RSA. The agreement in principle provides that, upon the Company’s emergence from the Chapter 11 process, subjectand Mallinckrodt and its subsidiaries ceased to ~~court approval and other conditions:~~

•~~Opioid claims would be channeled to one~~have any liability or ~~more trusts, which would receive $1,725.0 million in structured payments consisting of (i) a $450.0 million payment upon the Company’s emergence from Chapter 11; (ii) a $200.0 million payment~~

upon each of the first and second anniversaries of emergence; (iii) a $150.0 million payment upon each of the third through seventh anniversaries of emergence; and (iv) a $125.0 million payment upon the eighth anniversary of emergence with an eighteen month prepayment option at a discount for all but the first payment.

•Opioid claimants would also receive warrants for approximately 19.99% of the reorganized Company’s new outstanding shares, after giving effect to the exercise of the warrants, but subject to dilution from equity reserved under the management incentive plan, exercisable at any time on or prior to the sixth anniversary of the Company's emergence, at a strike price reflecting an aggregate equity value for the reorganized Debtors of $1,551.0 million (the "New Opioid Warrants").

•~~Upon commencing the Chapter 11 filing, the Company has begun to comply with an agreed-upon operating injunction~~obligation with respect to ~~the operation of its opioid business.~~

Insuch claims, which were treated in accordance with the ~~announced agreement~~Plan as set forth in principle, the Company recorded an accrual for the additional structured cash payment related to this contingency of $125.0 million during the three months ended September 24, 2021. As of September 24, 2021 and December 25, 2020, the Company maintained an accrual for this contingency of $1,725.0 million and $1,600.0 million within LSTC, respectively. No value has been ascribed to the warrants as of September 24, 2021 or December 25, 2020 as the Company cannot reasonably estimate the equity value upon emergence. For further information on the terms of this proposed resolution, refer to Note 2.

~~Other Opioid-Related Matters.~~ On June 1, 2020, a putative class action lawsuit was filed against Mallinckrodt plc, Mallinckrodt Canada ULC, Her Majesty the Queen in right of the Province of British Columbia ("Province") and the College of Pharmacists of British Columbia ("College") in the Supreme Court of British Columbia, captioned ~~Laura Shaver v. Mallinckrodt Canada ULC, et al.~~, Court File No. VLC-S-S-205793. The action purports to be brought on behalf of any persons: (1) prescribed Methadose for opioid agonist treatment in British Columbia after March 1, 2014; (2) covered by Pharmacare Plan C within British Columbia who were prescribed Methadose for opioid agonist treatment after February 1, 2014; (3) who transitioned from compounded methadone to Methadose for opioid agonist treatment in British Columbia after March 1, 2014; (4) covered by Pharmacare Plan C within British Columbia who were transitioned from compounded methadone to Methadose for opioid agonist treatment after February 1, 2014; or (5) falling within such other class definition as the British Columbia Court may approve. The suit generally alleges that the Province’s decision to grant Methadose coverage under Pharmacare Plan C and remove compounded methadone from coverage under Pharmacare Plan C had adversely affected those being treated for opioid use disorder due to Methadose allegedly being a significantly less effective treatment than generic compounded methadone. The suit asserts that the Province, the College and the Mallinckrodt defendants knew (or ought to have known) about, failed to warn patients about and made false representations concerning, the efficacy of Methadose and the risks of switching from compounded methadone to Methadose. The suit seeks general, special, aggravated, punitive and exemplary damages in an unspecified amount, costs and interest and injunctive relief against the Province, the College and the Mallinckrodt defendants. Pursuant to two orders granted by the Ontario Superior Court of Justice (Commercial List) ("Canadian Court") on October 15, 2020, the Chapter 11 proceedings commenced by Mallinckrodt plc and Mallinckrodt Canada ULC pursuant to the U.S. Bankruptcy Code were recognized and given effect in Canada. Among other things, the Canadian Court has stayed all proceedings against the Mallinckrodt defendants, including the British Columbia class action proceedings. The Canadian Court granted a further order on February 25, 2021, staying the British Columbia class action proceedings against all defendants. At this stage, the Company is not able to reasonably estimate the expected amount or range of cost or any loss associated with this lawsuit.

~~New York State Opioid Stewardship Act~~. On October 24, 2018, the Company 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 the Company's motion for preliminary injunctive relief. On January 17, 2019, the State of New York appealed the court's decision. 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 the Company’s (and other parties’) challenges to the OSA for lack of subject matter jurisdiction. Together with the other plaintiffs, the Company filed a petition for rehearing en banc to challenge the panel's decision, which was denied on December 18, 2020. On February 12, 2021, the Second Circuit granted the parties' request to stay the mandate. The parties filed a petition for certiorari with the Supreme Court on May 17, 2021. The Supreme Court denied the petition on October 4, 2021. On October 21, 2021, the District Court vacated its December 19, 2018 order, except for its invalidation of the "pass through prohibition" on the basis it violates the Commerce Clause. The invalidation of that provision remains in effect and the State of New York is permanently enjoined from enforcing it. 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.

Acthar Gel-Related Matters

Medicaid Lawsuit. In May 2019, CMS issued a final decision directing the Company to revert to the original base date ~~AMP~~average manufacturers price ("AMP") used to calculate Medicaid drug rebates for Acthar Gel despite CMS having given the previous owner of the product, Questcor, written authorization in 2012 to reset the base date AMP. Upon receipt of ~~CMS’s~~CMS's final decision, the Company filed suit in the D.C. District

Court against ~~the Agency~~HHS and CMS under the Administrative Procedure Act seeking to have the decision declared unlawful and set aside. In March 2020, the Company received an adverse decision from the D.C. District Court. The Company immediately sought reconsideration by the D.C. District Court, which was denied. The Company then appealed the D.C. District ~~Court’s~~Court's decision to the D.C. Circuit. In June 2020, while its appeal remained pending, the Company was required to revert to the original base date AMP for Acthar in the ~~government’s~~government's price reporting system.

As a result of this contingency, the Company incurred a retrospective one-time charge of $641.1 million (the "Acthar Gel Medicaid Retrospective Rebate"), of which $536.0 million and $105.1 million was reflected as a component of net sales and operating expenses, respectively, in the consolidated statement of operations for fiscal 2020. The $105.1 million reflected as a component of operating expenses represented a pre-acquisition contingency related to the portion of the Acthar Gel Medicaid Retrospective Rebate that arose from sales of Acthar Gel prior to the Company’s acquisition of Questcor in August 2014. As of September 24, 2021 and December 25, 2020, $634.1 million and $638.9 million related to the Medicaid lawsuit was recorded within LSTC, respectively.

The D.C. Circuit heard argument on the merits of the Company's appeal in September 2020, prior to the Company's filing of the Chapter 11 Cases on October 12, 2020. At the joint request of the parties, the D.C. Circuit has agreed to hold the case in abeyance pending completion of the Proposed Acthar Gel-Related Settlement, which was conditioned upon the Company entering the Chapter 11 restructuring process. Pursuant to the ~~Proposed Acthar Gel-Related Settlement,~~Plan and the ~~Company has agreed~~Scheme of Arrangement, on the Effective Date, certain claims of the DOJ and related governmental parties relating 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~~against Mallinckrodt were deemed to have been settled, discharged, waived, released and extinguished in full against Mallinckrodt, and Mallinckrodt ceased to have any liability or obligation with respect to such claims, which will be treated in accordance with the Plan and the terms of the Proposed Acthar Gel-Related Settlement, the Company will dismiss its D.C. Circuit appeal. The Company expects that the Proposed Acthar Gel-Related Settlement will be completed over the next several months, subject to Bankruptcy Court approval.settlement as set forth in Note 2.

~~Other Related Matters~~Patent Litigation

~~Therakos~~Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica NV v. Pharmascience Inc. and SpecGx LLC® ~~Subpoena.~~ . In ~~March 2014,~~December 2019, Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica NV (collectively "Janssen") initiated litigation against the Company and Pharmascience Inc. ("Pharmascience") relating to the collaboration between Company and Pharmascience that resulted in Pharmascience's abbreviated new drug application submission, containing a Paragraph IV patent certification, with the FDA for a competing version of Invega Sustenna. Janssen alleges that the Company and Pharmascience infringe U.S. ~~Attorney's Office ("USAO") for~~Patent No. 9,439,906. On July 13, 2022, the ~~Eastern District of Pennsylvania ("EDPA") requested~~court administratively closed this case pending the ~~production of documents related to an investigation~~outcome of the ~~U.S. promotion of Therakos~~Federal Circuit's decision in ® photopheresis ("Therakos") drug/device system UVADEX/UVAR XTS and UVADEX/CELLEX (collectively, the "Therakos System"), for indications not approved by the FDA, including treatment of patients with graft versus host disease ("GvHD") and solid organ transplant patients, including pediatric patients. The investigation also included Therakos' efforts to secure FDA approval for additional uses of, and alleged quality issues relating to, UVADEX/UVAR. In August 2015, the USAO for the EDPA sent Therakos a subsequent request for documents related to the investigation and has since made certain related requests. The Company responded to these requests. On June 28, 2021, the USAO for EDPA and the entities named as defendants in the ~~qui tam~~ ~~complaint captioned~~ ~~United States ex. rel. Michael Johnson and Frank Strobl~~Janssen Pharmaceuticals, Inc. v. ~~Therakos, et al.~~Mylan Laboratories Limited, Case No. ~~12-cv-0454-JHS, that was filed under seal in 2012 filed a stipulation of dismissal in the United States District Court for the EDPA terminating the matter.~~22-1307.

Commercial and Securities Litigation

~~City of Rockford and Other~~ Acthar Gel-Related ~~Matters.~~ ~~On March 12, 2021, the plaintiffs in~~ City of Rockford v. Mallinckrodt ARD, Inc., et al. (“Rockford”), United Ass’n of Plumbers and Pipefitters Local 322 of Southern New Jersey v. Mallinckrodt ARD, LLC, et al. (“Local 322”), Steamfitters Local Union No. 420 v. Mallinckrodt ARD, LLC, et al. (“Steamfitters”), Int'l Union of Operating Engineers Local 542 v. Mallinckrodt ARD Inc., et al. (“Local 542”) ~~and~~ ~~Acument Global Technologies, Inc., v. Mallinckrodt ARD Inc., et al. (“Acument”)~~ filed a motion with the Joint Panel on Multi-District Litigation (“JPML”) under 28 U.S.C. § 1407 requesting that those cases and others alleging claims related to the price of Acthar Gel (including ~~Health Care Service Corp. v. Mallinckrodt ARD LLC, et al. (“HCSC”), City of Marietta v. Mallinckrodt ARD LLC (“Marietta”), Humana Inc. v. Mallinckrodt ARD LLC (“Humana”)~~, ~~MSP Recovery Claims, Series II, LLC, et al. v. Mallinckrodt ARD, Inc., et al. (“MSP”)~~ ~~and~~ ~~U.S. ex rel. Strunck v. Mallinckrodt ARD LLC ("Strunck")~~) be transferred to the Northern District of Illinois for coordinated or consolidated pretrial proceedings as a MDL (the “Section 1407 Motion”). The Company opposed the Section 1407 Motion. In April 2021, the U.S. District Courts in the Northern District of Illinois and the EDPA stayed consideration of the Company’s motions to transfer ~~Rockford, MSP~~ ~~and~~ ~~Steamfitters~~ ~~to the District of Delaware pending a decision by the JPML. The EDPA District Court also denied~~ ~~Local 542~~'s motion for reconsideration of the court's order transferring that case to the District of Delaware. On June 7, 2021, the JPML denied the Section 1407 Motion on the grounds that the timing and outcome of the bankruptcy proceedings made centralization premature.Matters

On April 30, 2021, the Company filed several pleadings in the Chapter 11 Cases in respect of Acthar Gel-based claims, including without limitation the following: (a) objections to putative class proofs of claim filed by the City of Rockford, City of Marietta, Georgia, United Association of Plumbers and Pipefitters Local 322 of Southern New Jersey and Steamfitters Local Union No. 420; (b) objections to all purportedly Acthar Gel-related proofs of claim that state no basis for Acthar Gel-related liability against the named debtor; (c) a motion for establishment of an administrative claims bar date that would require all Acthar Gel claimants, among others,

to promptly file any requests for payment of purported administrative claims; and (d) an adversary proceeding seeking a declaratory judgment that the claims of the City of Rockford, as a governmental unit, are dischargeable in the Chapter 11 Cases.

In May 2021, Law Enforcement Health Benefits, Inc. (“LEHB”) filed a putative class action complaint in the U.S. District Court for the Northern District of Illinois against the Company and certain of its officers and directors as well as third-party advisors captioned Law Enforcement Health Benefits ~~Inc. v. Trudeau, et al.~~Litigation. ~~, No. 3:21-cv-50215 (N.D. Ill.) (“~~On June 1, 2022, the plaintiff filed a notice of voluntary dismissal of this case, which the Court entered without prejudice.

Local 322~~LEHB~~. On April 25, 2022, the plaintiff voluntarily dismissed the case following confirmation of the Plan and in anticipation of the Plan becoming effective.

Putative Class Action Litigation (MSP)”). ~~The complaintalleges antitrust claims under Section 1 and Section 2 and numerous state laws, RICO claims under 18 U.S.C. §§ 1962(a), 1962(c) and 1962(d), fraud, conspiracy~~As a result of the Plan becoming effective, this case was dismissed as to ~~defraud, and unjust enrichment and incorporates the allegations at issue in~~ ~~Rockford~~ ~~and the~~ ~~Rockford-related cases discussed above. After the complaint was filed,~~ the Company ~~requested that the district court stay the case in light~~on August 16, 2022.

Putative Class Action Litigation (Rockford). As a result of the ~~Chapter 11 Cases. The motion~~Plan becoming effective, this case was dismissed as to stay was granted. In June 2021, LEHB voluntarily dismissed without prejudice the Mallinckrodt defendant entities that are debtors in the Chapter 11 Cases. In July 2021, LEHB voluntarily dismissed without prejudice most of the Company’s officers and directors as named defendants in the case. The case remains stayed. At this stage, the Company ~~is not able to reasonably estimate the expected amount or range of cost or any loss associated with this lawsuit.~~on July 20, 2022.

On June 16, 2021, the Bankruptcy Court held that the City of Rockford’s claims are dischargeable in the Chapter 11 Cases. On June 29, 2021, the Bankruptcy Court sustained the Company’s objections to the putative class proofs of claim filed by City of Rockford, City of Marietta, United Association of Plumbers and Pipefitters Local 322 of Southern New Jersey and Steamfitters Local Union No. 420.

~~In September 2021, the Company filed a motion in the Bankruptcy Court to assume the exclusive distribution agreement for Acthar Gel that plaintiffs in~~ ~~Rockford~~ ~~and the~~ ~~Rockford~~-related litigation matters (together, the “Ad Hoc Acthar Group”) allege is anticompetitive. The Ad Hoc Acthar Group moved to dismiss the motion to assume. In October 2021, the Company filed an adversary proceeding in the Bankruptcy Court seeking a declaratory judgment that the exclusive distribution agreement for Acthar Gel is lawful.

For additional details on ~~Rockford, Local 322, Steamfitters, Local 542, Acument, Marietta, MSP~~ ~~and~~ ~~Strunck,~~aforementioned Acthar Gel-related matters, refer to the notes to the financial statements included within the Company's Annual Report filed on Form 10-K for the fiscal year ended December ~~25, 2020.~~31, 2021 (Predecessor).

~~Health Care Service Corporation Litigation.~~ Acument Global. In ~~February 2020, HCSC~~May 2019, Acument Global Technologies, Inc. ("Acument"), filed a non-class complaint against the Company and other defendants in ~~California~~Tennessee state court alleging ~~improper pricing, marketing~~violations of Tennessee Consumer Protection Laws, unjust enrichment, fraud and ~~distribution of Acthar Gel, and challenging the acquisition of rights to Synacthen~~® Depot ("Synacthen") by the Company's predecessor-in-interest. The complaint included claims for violation of the New Jersey RICO statute and various states’ antitrust laws. It also included claims for conspiracy to violate the New Jersey RICO statute, fraud, unlawful restraint of trade, unfair and deceptive trade practices, insurance fraud, tortious interference with contract and unjust enrichment. The case, which is proceeding as ~~Health Care Service Corp. v. Mallinckrodt ARD LLC, et al., alleges similar facts as those alleged in the~~ ~~Humana~~ matter below. The Company intends to vigorously defend itself in this matter and the Company moved to dismiss the complaint in June 2020. In August 2020, the court dismissed the antitrust and tortious interference claims without prejudice, but held that HCSC could proceed to discovery on its remaining counts. The Company disagrees with the court's decision and contests liability. The Company was preparing to move to dismiss an amended complaint when the Company filed the Chapter 11 Cases. In January 2021, the Company removed this case to federal court and moved for transfer to the District of Delaware where the Company's Chapter 11 Cases are pending. HCSC moved to remand the case back to state court. On June 17, 2021, the district court in California remanded the case back to California state court. At this stage, the Company is not able to reasonably estimate the expected amount or range of cost or any loss associated with this lawsuit.

~~Humana Litigation.~~ ~~In August 2019, Humana Inc. filed a lawsuit against the Company in the U.S. District Court for the Central District of California captioned~~ ~~Humana Inc. v. Mallinckrodt ARD LLC~~ alleging violations of federal and state antitrust laws; RICO violations under 18 U.S.C. § 1962(c); conspiracy to violate RICO under 18 U.S.C. § 1962(d); violations of state unfair competition, consumer fraud and deceptive trade practice laws; state insurance fraud; tortious interference with contract; and unjust enrichment related to the pricing and marketing of Acthar Gel and the acquisition of Synacthen by the Company's predecessor-in-interest. Humana alleges that it paid more than $700.0 million for Acthar Gel and seeks undisclosed damages from 2011 through present.defraud. The case alleges similar facts as those alleged in the MSP and Rockford matters discussed below, and ~~includes references to allegations at issue in a pending~~is captioned ~~qui tam~~Acument Global Technologies, Inc., v. Mallinckrodt ARD Inc., et al. ~~action against the Company in the U.S. District Court for the EDPA.~~ In ~~March~~February 2020, the court granted-in-part and denied-in-part the Company's motion to ~~dismiss Humana's claims. The~~dismiss. While the court dismissed ~~Humana's antitrust~~Acument's fraud-based claims and ~~tortious interference claims with leave to amend. The court denied~~its claim under the ~~Company's motion to dismiss Humana's RICO and other fraud-based claims. Humana filed an amended complaint in May 2020, which~~Tennessee Consumer Protection Act, the Company moved to dismiss. In August 2020, the court granted-in-part and denied-in-part the Company's motion to dismiss the amended complaint. The court dismissed with prejudice Humana's claims under most state antitrust laws to the extent predicated on conduct before 2014 and Humana's tortious interference claims. The court ruled that ~~Humana's federal~~the antitrust ~~federal RICO, state insurance fraud~~ and unjust enrichment claims may proceed.The Company disagrees with the court's decision and ~~contest~~contests liability. Following lifting of the automatic stay of this litigation pursuant to §362 of the Bankruptcy Code, the court granted Acument's motion to remand the case back to state court. On September 29, 2022, the court remanded the case to state court; no further action has been taken. The Company intends to vigorously defend itself in this matter. At this stage, the Company is not able to reasonably estimate the expected amount or range of cost or any loss associated with this lawsuit.

SEC Subpoena. In ~~September 2020,~~August 2019, the Company ~~answered~~received a subpoena from the remaining allegations and claims of the operative complaint. In October 2020, the court entered an order acknowledging the automatic stay of this litigation pursuant to §362 of the Bankruptcy Code. In January 2021, the Company moved to transfer this case to the District of Delaware where the Company's Chapter 11 Cases are pending. Humana opposed transfer. On June 28, 2021, the district court in California granted the Company’s motion to transfer the case to the District of

Delaware where the Chapter 11 cases are pending. Humana, along with an assignee of claims by United Healthcare Services, Inc., Optum Rx Group Holdings and OptumRx Holdings, LLC and CVS Pharmacy, Inc. (together, the "Acthar Insurance Claimants"), has filed similar claims (including claimsSEC for administrative expense) in the Chapter 11 Cases. In August 2021, the Company filed a motion for partial summary judgement as to the Acthar Insurance Claimants' antitrust claims. In September 2021, the Bankruptcy Court denied the Company's motion for partial summary judgement in a bench ruling with a written ruling issued in October 2021.

~~Putative Class Action Securities Litigation (Strougo)~~. In July 2019, a putative class action lawsuit was filed against the Company, its CEO Mark C. Trudeau, its Chief Financial Officer ("CFO") Bryan M. Reasons, its former Interim CFO George A. Kegler and its former CFO Matthew K. Harbaugh, in the U.S. District Court for the Southern District of New York, captioned ~~Barbara Strougo v. Mallinckrodt plc, et al~~. The complaint purports to be brought on behalf of all persons who purchased or otherwise acquired Mallinckrodt's securities between February 28, 2018 and July 16, 2019. The lawsuit generally alleges that the defendants made false and/or misleading statements in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunderdocuments related to the Company's ~~clinical study designed to assess the efficacy and safety~~disclosure of its ~~Acthar Gel in patients~~dispute with ~~amyotrophic lateral sclerosis. The lawsuit seeks monetary damages in an unspecified amount. A lead plaintiff was designated by~~ the ~~court on June 25, 2020,~~HHS and ~~on July 30, 2020,~~CMS (together with HHS, the ~~court approved~~"Agency") concerning the transfer of the case to the U.S. District Court for the District of New Jersey. On August 10, 2020, an amended complaint was filed by the lead plaintiff alleging an expended putative class period of May 3, 2016 through March 18, 2020 against the Company and Mark C. Trudeau, Bryan M. Reasons, George A. Kegler and Matthew K. Harbaugh, as well as newly named defendants Kathleen A. Schaefer, Angus C. Russell, Melvin D. Booth, JoAnn A. Reed, Paul R. Carter, and Mark J. Casey (collectively with Trudeau, Reasons, Kegler and Harbaugh, the "Strougo Defendants"). The amended complaint claims that the defendants made false and/or misleading statements and/or failed to disclose that: (i) the CMS had informed the Company that it was using the wrong base date AMP for ~~calculating~~Acthar Gel under the Medicaid ~~rebate~~Drug Rebate Program for Mallinckrodt's Acthar Gel, which is also the subject of litigation that the Company ~~owed CMS for Acthar Gel each quarter since 2014; (ii)~~filed against the ~~Company’s reported net income was improperly inflated in violation of GAAP; (iii)~~Agency (see Medicaid Lawsuit below). The SEC issued subsequent subpoenas on January 7, 2022 and September 28, 2022, requesting additional documents from the ~~Company’s contingent liabilities associated~~Company. The Company is cooperating with the ~~rebates owed to CMS for Acthar Gel were misrepresented; (iv)~~SEC's investigation, which is ongoing.

Other Commercial and Securities Litigation Matters

Shareholder Litigation (HealthCor). Following mediation, the ~~Company’s fiscal year 2019 guidance for Acthar Gel net sales was false; (v)~~parties settled the ~~Company failed to disclose material information regarding~~action and the ~~cases captioned~~ ~~Landolt v. Mallinckrodt ARD LLC, No. 1:18-cv-11931-PBS (D. Mass.) (Landolt)~~ ~~and~~ ~~U.S. ex rel. Strunck v. Mallinckrodt ARD LLC, No. 2:12-cv-0175-BMS (E.D. Pa.) (Strunck)~~, or the related investigation by the DOJ and (vi) the Company failed to disclose that the clinical trials for Acthar Gel were purportedly initiated in order to make it appear that alternative revenue opportunities for Acthar Gel existed and thus offset the expected 10% decline in net sales as a result of the rebates the Company now had to pay. On October 1, 2020, the defendantsplaintiffs filed a ~~motion to dismiss~~notice of voluntary dismissal with prejudice in August 2022.

Shareholder Derivative Litigation (Brandhorst). On August 2, 2022, the ~~amended complaint. The defendants intends to vigorously defend themselves in this matter. At this stage,~~plaintiff filed a notice of voluntary dismissal without prejudice, which the ~~Company is not able to reasonably estimate~~court entered the expected amount or range of cost or any loss associated with this lawsuit. As to the Company, this litigation is subject to the automatic stay under §362 of the Bankruptcy Code, and on December 4, 2020, the Bankruptcy Court also enjoined proceedings against the Strougo Defendants. The plaintiffs subsequently appealed the Bankruptcy Court action to the U.S. District Court in Delaware through a motion for reconsideration, which was denied by that court on January 27, 2021.same day.

Employee Stock Purchase Plan (ESPP) Securities Litigation. ~~In July 2017, a purported purchaser of Mallinckrodt stock through Mallinckrodt's ESPPs~~On September 30, 2022, plaintiffs filed a Notice of Partial Dismissal of Certain Claims, voluntarily dismissing the derivative ~~and class action lawsuit~~claims asserted in the ~~Federal District Court~~action on the basis that all derivative claims sought to be pursued in the ~~Eastern District~~action were discharged and released, and all Mallinckrodt shares held in the plans were cancelled, in connection with the Bankruptcy Court’s approval of ~~Missouri, captioned~~ the Plan. On October 31, 2022, the parties filed a Joint Submission Concerning Status of Proceedings advising that the parties have reached a resolution of the remaining claims in the action, whereby plaintiffs will file a notice of dismissal as to all defendants, with prejudice as to the three named plaintiffs and without prejudice as to all other members of the putative class, upon the satisfaction of certain conditions expected to occur in November 2022.

Class Action Securities Litigation~~Solomon v.~~ (Shenk v Mallinckrodt plc, et ~~al.~~al., against the Company, its CEO, its former CFO Matthew K. Harbaugh, its Controller Kathleen A. Schaefer, and current and former directors of the Company (collectively, the "Solomon Defendants"). On September 6, 2017, plaintiff voluntarily dismissed its complaint in the FederalU.S. District Court for the ~~Eastern~~ District of ~~Missouri and refiled virtually~~Columbia). On August 2, 2022, the ~~same complaint~~district court held a fairness hearing at which it granted final approval of the settlement in the ~~D.C. District Court. The complaint purports~~amount of $65.8 million to be ~~brought on behalf of all persons who purchased or otherwise acquired Mallinckrodt stock between November 25, 2014,~~paid by the insurance carriers, entered final judgment, and ~~January 18, 2017, through~~dismissed the ~~ESPPs. In the alternative, the plaintiff alleges~~action with prejudice.

Health Care Service Corporation Litigation. As a ~~class action for those same purchasers/acquirers of stock in the ESPPs during the same period. The complaint asserts claims under Section 11~~result of the Plan, this matter was dismissed as to the Company on October 3, 2022.

Putative Class Action Securities ~~Act and for breach of fiduciary duty, misrepresentation, non-disclosure, mismanagement of the ESPPs' assets and breach of contract arising from substantially similar allegations as those contained in~~Litigation (Strougo).On March 17, 2022, the ~~Patricia A. Shenk v. Mallinckrodt plc, et al ("Shenk")~~ Strougo~~class~~ action ~~lawsuit. Stipulated co-lead plaintiffs were~~was administratively closed. On March 29, 2022, the Strougo action was reinstated only with respect to the individual defendants, and the individual defendants filed their reply in support of their motion to dismiss on May 2, 2022. On July 21, 2022, the Company filed a notice of discharge that, if approved by the court, ~~on March 1, 2018. Co-lead Plaintiffs filed an amended complaint on June 4, 2018 having a class period of July 14, 2014 to November 6, 2017.~~would result in dismissal for the Company. The ~~complaint seeks damages in an unspecified amount. On July 6, 2018, this matter was stayed by agreement of~~notice informed the ~~parties pending resolution of~~court that (i) the ~~Shenk~~ ~~class action lawsuit. The defendants intends to vigorously defend themselves in this matter. On October 13, 2020,~~Bankruptcy Court confirmed the ~~trial court entered an order acknowledging~~Company's Plan; (ii) the ~~automatic stay of this litigation as to the Company~~Company's discharge pursuant to ~~§362~~Section 1141(d) of the Bankruptcy Code of the claims

asserted against it the Strougo action had taken effect; and ~~on December 4, 2020,~~(iii) the ~~Bankruptcy Court also enjoined~~Plan and the ~~proceedings~~discharge injunction enjoin any party from, among other things, continue to pursue claims against the ~~individual named defendants.~~Company in the Strougo action.

For additional details on the aforementioned other commercial and securities litigation matters, refer to the notes to the financial statements included within the Company's Annual Report filed on Form 10-K for the fiscal year ended December 31, 2021 (Predecessor).

Generic Price Fixing Litigation

Canadian (Eaton) Litigation. InAny potential liability from this matter has been discharged through the bankruptcy proceedings. The Company filed a motion seeking an order from the Bankruptcy Court dismissing the Eaton Action on January 18, 2022. The Bankruptcy Court order recognizing the U.S. Confirmation Order and ordering the dismissal of the Eaton Action was granted on April 22, 2022. All appeal periods have expired. For additional details on this matter, refer to the notes to the financial statements included within the Company's Annual Report filed on Form 10-K for the fiscal year ended December ~~2020,~~31, 2021 (Predecessor).

Xyrem Litigation

Self-Insured Schools Litigation. Any potential liability from this case has been discharged through the bankruptcy proceedings. For additional details on this matter, refer to the notes to the financial statements included within the Company's Annual Report filed on Form 10-K for the fiscal year ended December 31, 2021 (Predecessor).

Environmental Remediation and Litigation Proceedings

The Company is involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites, including those described below. The ultimate cost of site cleanup and timing of future cash outlays is difficult to predict, given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations and alternative cleanup methods. The Company concluded that, as of September 30, 2022 (Successor), it was probable that it would incur remediation costs in the range of $18.8 million to $48.2 million. The Company also concluded that, as of September 30, 2022 (Successor), the best estimate within this range was $37.5 million, of which $1.1 million was included in accrued and other current liabilities and the remainder was included in environmental liabilities on the unaudited condensed consolidated balance sheet as of September 30, 2022 (Successor). While it is not possible at this time to determine with certainty the ultimate outcome of these matters, the Company ~~received~~believes, given the information currently available, that the final resolution of all known claims, after taking into account amounts already accrued, will not have a ~~statement~~material adverse effect on its financial condition, results of ~~claim filed~~operations and cash flows. Upon effectuation of the Plan, certain of the Company's environmental liabilities were discharged. Refer to Note 2 for further information.

Crab Orchard National Wildlife Refuge Superfund Site, near Marion, Illinois. Between 1967 and 1982, International Minerals and Chemicals Corporation, a predecessor in ~~federal court in Toronto, Ontario, Canada, naming~~interest to the Company, ~~Mallinckrodt Canada ULC, Mallinckrodt LLC~~leased portions of the Additional and Uncharacterized Sites ("AUS") Operable Unit at the Crab Orchard Superfund Site ("the CO Site") from the government and manufactured various explosives for use in mining and other operations. In March 2002, the DOJ, the U.S. Department of the Interior and the Environmental Protection Agency (EPA) (together, "the Government Agencies") issued a ~~predecessor~~special notice letter to ~~MNK 2011 LLC, as well as~~General Dynamics Ordinance and Tactical Systems, Inc. ("General Dynamics"), one of the other ~~pharmaceutical manufacturers, as defendants~~potentially responsible parties ("PRPs") at the CO Site, to compel General Dynamics to perform the remedial investigation and feasibility study ("RI/FS") for the AUS Operable Unit. General Dynamics negotiated an Administrative Order of Consent with the Government Agencies to conduct an extensive RI/FS at the CO Site under the direction of the U.S. Fish and Wildlife Service. General Dynamics asserted in ~~an action captioned~~ ~~Kathryn Eaton v Teva Canada Limited et al~~. The claim purports to be brought on behalf of all persons or entities in Canada who, from January 1, 2012 to the present, purchased generic drugs in the private sector. The allegations and requests for relief in the statement of claim, in substance, are similar to those in the ~~1199SEIU National Benefit Fund~~ ~~litigation, and include the claim~~August 2004 that the Company ~~breached~~is jointly and severally liable, along with approximately eight other lessees and operators at the ~~Competition Act~~AUS Operable Unit, for costs associated with alleged contamination of soils and groundwater resulting from historic operations, and the parties have entered into a non-binding mediation process. However, the mediation process has indefinitely stalled due to an "internal issue" that the Government Agencies are facing and cannot seem to resolve.

Subsequent to the issuance of the Company's predecessor financial statements for the fiscal year ended December 31, 2021 (Predecessor), the Company increased the accrual associated with this matter by $11.1 million to $57.4 million, which represented the Company's estimate of its liability related to this environmental site. The non-cash charge of $11.1 million was reflected in ~~Canada. As~~the predecessor unaudited condensed consolidated statement of operations as a component of operating expenses. Pursuant to the Plan, this liability was discharged as a general unsecured claim. Refer to Note 2 for further information.

2835

~~result~~

Bankruptcy Appeals

First Lien Noteholder Matters. As set forth in greater detail in Note 2, the Plan proposed to reinstate the Existing First Lien Notes. Certain holders of the ~~Eaton action being served on the Mallinckrodt defendants, Mallinckrodt Canada ULC sought,~~Existing First Lien Notes and the ~~Canadian Court granted, an order on April 20, 2021,~~trustee in respect thereof (collectively, the "Noteholder Parties"), objected to the proposed reinstatement, arguing, among other ~~things: (1) recognizing the Chapter 11 Cases of, and granting Canadian stays with respect to, Mallinckrodt LLC and MNK 2011 LLC; and (2) declaring~~things, that the ~~Eaton action is stayed~~Company was required to pay a significant make-whole premium as ~~against each~~a condition to reinstatement of the ~~Mallinckrodt defendants and~~Existing First Lien Notes. In the ~~named predecessor to MNK 2011 LLC.~~course of confirming the Plan, the Bankruptcy Court overruled these objections.

~~Rite Aid Litigation. In July 2020, a direct action complaint filed in~~On March 30, 2022, the ~~U.S. District Court for~~Noteholder Parties appealed the ~~EDPA named the Company and several other pharmaceutical manufacturers as new defendants in an action captioned~~ ~~Rite Aid Corp. et al. v. Actavis Holdco U.S., Inc~~. ~~et al.~~ The lawsuit purports to be brought by entities that directly purchased generic drugs from defendants or a co-conspirator. The complaint seeks monetary damages and injunctive relief for violations of Section 1Confirmation Order's approval of the ~~Sherman Antitrust Act, and is premised on facts similar~~reinstatement of the Existing First Lien Notes to ~~those alleged in~~ the ~~State Attorneys General Litigation. This lawsuit has been consolidated with the Generic Pricing MDL. An amended complaint was filed in December 2020.~~

~~State Attorneys General Litigation.~~ ~~In June 2020, the Company, along with more than 20 other pharmaceutical manufacturers, was named as a defendant in a lawsuit brought by Attorneys General for 51~~United States ~~Territories, and the District of Columbia. The lawsuit, filed in the U.S.~~ District Court for the District of ~~Connecticut, alleges that manufacturers of generic drugs conspired~~Delaware. The Company and the Existing First Lien Notes Trustee reached an agreement to ~~fix prices for certain generic drugs~~hold the trustee's appeal in abeyance, to be determined by ~~communicating in advance of price increases and agreeing to certain market share allocations amongst competitors to thwart competition. The lawsuit alleges that prices for~~ the ~~generic drugs at issue were inflated as a~~ result of the ~~alleged conspiracies, causing harm~~holders' appeals, subject to certain conditions, which was approved by the ~~U.S. healthcare system. The complaint seeks monetary damages and injunctive relief for violations of Section 1~~District Court. Briefing on the merits of the ~~Sherman Antitrust Act~~Noteholder Parties' appeals was completed on July 1, 2022. On the same date, the Company moved to dismiss the Noteholder Parties' appeals as equitably moot. Briefing on the motion was completed on August 5, 2022. The Noteholder Parties' appeals and ~~various state antitrust, consumer protection, and unjust enrichment claims. This lawsuit has been consolidated with~~ the ~~Generic Pricing MDL and was selected as a bellwether case in May 2021. The Company disagrees with the Attorneys Generals’ characterization of the facts and applicable law.~~related motion to dismiss remain pending.

~~Generic Pharmaceutical Antitrust MDL.~~ In August 2016, a multidistrict litigation was established in the EDPA relating to allegations of antitrust violations with respect to generic pharmaceutical pricing (the "Generic Pricing MDL"). Plaintiffs in the Generic Pricing MDL, captioned ~~In re: Generic Pharmaceuticals Pricing Antitrust Litigation~~, allege a conspiracy of price-fixing and customer allocation among generic drug manufacturers beginning in or around July 2009. Since its establishment, the Generic Pricing MDL has expanded to encompass dozens of pharmaceutical companies and more than 200 generic pharmaceutical drugs. Plaintiffs in the Generic Pricing MDL have proceeded with discovery collectively and recently issued subpoenas to former Company employees. The Company intends to vigorously defend itself in this matter. At this stage, the Company is not able to reasonably estimate the expected amount or range of cost or any loss associated with these appeals. The Company will continue to vigorously defend the Plan.

Sanofi. On October 12, 2021, in the Company's bankruptcy, sanofi-aventis U.S. LLC ("Sanofi") filed a motion asking the Bankruptcy Court for an order determining that, under the Bankruptcy Code, the Company could not discharge alleged royalty obligations owed to Sanofi under an asset purchase agreement through which the Company acquired certain intellectual property from Sanofi's predecessor (the "Sanofi Motion"). On November 8, 2021, the Bankruptcy Court denied the Sanofi Motion and ordered that any royalty obligations allegedly owed to Sanofi constitute prepetition unsecured claims that may be discharged under the Bankruptcy Code. On November 19, 2021, Sanofi appealed the Bankruptcy Court's ruling to the District Court. Briefing was completed on March 10, 2022. On July 1, 2022, the Company moved to dismiss Sanofi's appeal as equitably moot. Briefing on that motion was completed on August 5, 2022. The appeal and related motion to dismiss remain pending.

Glenridge. On October 21, 2021, in the Company's bankruptcy, Kenneth Greathouse, Stuart Rose, and Lloyd Glenn (collectively, the "Glenridge Principals") filed a joinder to the Sanofi Motion and asked the Bankruptcy Court for an order similarly determining that royalty obligations owed by the Company to the Glenridge Principals under a royalty agreement were not dischargeable under the Bankruptcy Code and that the royalty agreement could not be rejected by the Company in its bankruptcy. On December 1, 2021, the Bankruptcy Court denied the motion, entering an order that the royalty agreement between the Company and the Glenridge Principals could be rejected under the Bankruptcy Code and that any royalties owed under the agreement were prepetition unsecured claims that could be discharged under the Bankruptcy Code. On December 15, 2021, the Glenridge Principals appealed the Bankruptcy Court's ruling to the District Court. Briefing has not been completed at this ~~lawsuit.~~time.

Acthar Insurance Claimants. In the Company's bankruptcy, Attestor Limited and Humana Inc. (collectively, the "Acthar Insurance Claimants") filed administrative claims with the Bankruptcy Court seeking hundreds of millions of dollars based on the Company's allegedly illegal sales of Acthar Gel. The Company objected to the claims, arguing that the Company had no such liability. After a bench trial, the Bankruptcy Court, on December 6, 2021, sustained the Company's objection and disallowed the administrative claims filed by the Acthar Insurance Claimants. The Acthar Insurance Claimants appealed that ruling to the District Court on December 20, 2021. On February 4, 2022, the Acthar Insurance Claimants moved to have the District Court certify their appeal directly to the Third Circuit. Meanwhile, on July 1, 2022, the Company moved to dismiss the Acthar Insurance Claimants' appeal as equitably moot. Briefing on that motion was completed on August 5, 2022 and remains pending. On October 31, 2022, the District Court denied the Acthar Insurance Claimants motion for direct appeal to the Third Circuit, and a briefing schedule on the merits of the case is pending.

Stratatech. As described in Note 14, consummation of the Plan discharged the Company's liability with respect to certain contingent consideration provided to the prior shareholders of Stratatech Corporation ("Stratatech"). However, the representative of these shareholders has indicated his intention to challenge in the bankruptcy court whether the liability was susceptible to discharge, among other things, and the parties have agreed on a schedule for litigating these matters.

Internal Revenue Code Section 453A Interest

As a result of historical internal installment sales, the Company has reported ~~IRC~~Internal Revenue Code ("IRC") §453A interest on its tax returns on the basis of its interpretation of the IRC. ~~Alternative interpretations of these provisions could result in additional interest payable.~~ Due to the inherent uncertainty in these interpretations, the Company has deferred the recognition of the benefit associated with the Company's interpretation and ~~maintains~~maintained a corresponding liability of $12.4 million and $28.2 million as of September 24, 2021 and December 25, 2020, respectively. The decrease of $15.8 million was recognized as a benefit to interest expense during the nine months ended September 24, 2021 due to lapses of certain statute of limitations. Further favorable resolution of this uncertainty would likely resultwithin other liabilities in ~~a reversal of this liability and a benefit being recorded to interest expense within~~ the unaudited condensed consolidated ~~statements~~balance sheet as of ~~operations.~~December 31, 2021 (Predecessor). Upon effectuation of the Plan, this liability was discharged.

Other Matters

The Company's legal proceedings and claims are further described within the notes to the financial statements included within the Company's Annual Report filed on Form 10-K for the fiscal year ended December ~~25, 2020.~~31, 2021 (Predecessor).


~~13.~~14.			Financial Instruments and Fair Value Measurements

Fair value is defined as the exit price that would be received from the sale of an asset or paid to transfer a liability, using assumptions that market participants would use in pricing an asset or liability. The fair value guidance establishes a three-level fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs used in measuring fair value. The levels within the hierarchy are as follows:

Level 1— observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2— significant other observable inputs that are observable either directly or indirectly; and

Level 3— significant unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.

The following tables provide a summary of the significant assets and liabilities that are measured at fair value on a recurring basis at the end of each period:


		September 24, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			September 30, 2022 (Successor)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Debt and equity securities held in rabbi trusts	Debt and equity securities held in rabbi trusts	$	37.9	$	23.7	$	14.2	$	—	Debt and equity securities held in rabbi trusts	$	33.4	$	21.7	$	11.7	$	—
Equity securities	Equity securities	37.3		37.3		—		—		Equity securities	17.2		17.2		—		—
		$	75.2	$	61.0	$	14.2	$	—		$	50.6	$	38.9	$	11.7	$	—
Liabilities:	Liabilities:									Liabilities:
Deferred compensation liabilities	Deferred compensation liabilities	$	35.9	$	—	$	35.9	$	—	Deferred compensation liabilities	$	24.1	$	—	$	24.1	$	—
Contingent consideration and acquired contingent liabilities		27.1		—		—		27.1
Contingent consideration liabilities										Contingent consideration liabilities	6.0		—		—		6.0
											$	30.1	$	—	$	24.1	$	6.0

		$	63.0	$	—	$	35.9	$	27.1

December 25,
2020
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Assets:
Debt and equity securities held in rabbi trusts $ 33.0 $ 23.5 $ 9.5 $ —
Equity securities 31.1 31.1 — —
$ 64.1 $ 54.6 $ 9.5 $ —
Liabilities:
Deferred compensation liabilities $ 38.0 $ — $ 38.0 $ —
Contingent consideration and acquired contingent liabilities 34.7 — — 34.7
$ 72.7 $ — $ 38.0 $ 34.7


	December 31, 2021 (Predecessor)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Debt and equity securities held in rabbi trusts	$	38.7	$	24.9	$	13.8	$	—
Equity securities	36.5		36.5		—		—
	$	75.2	$	61.4	$	13.8	$	—
Liabilities:
Deferred compensation liabilities	$	36.9	$	—	$	36.9	$	—
Contingent consideration liabilities	27.3		—		—		27.3

	$	64.2	$	—	$	36.9	$	27.3

Debt and equity securities held in rabbi trusts. Debt securities held in rabbi trusts primarily consist of U.S. government and agency securities and corporate bonds. When quoted prices are available in an active market, the investments are classified as level 1. When quoted market prices for a security are not available in an active market, they are classified as level 2. Equity securities held in rabbi trusts primarily consist of U.S. common stocks, which are valued using quoted market prices reported on nationally recognized securities exchanges.

Equity securities. Equity securities consist of shares in Silence Therapeutics plc ~~("Silence"),~~and Panbela Therapeutics, Inc. for which quoted prices are available in an active market; therefore, ~~the investment is~~these investments are classified as level 1 and isare valued based on quoted market prices reported on an internationally recognized securities ~~exchange.~~exchanges.

Deferred compensation liabilities. The Company maintains a non-qualified deferred compensation plan in the U.S., which permits eligible employees of the Company to defer a portion of their compensation. A recordkeeping account is set up for each participant and the participant chooses from a variety of funds for the deemed investment of their accounts. The recordkeeping accounts generally correspond to the funds offered in the Company's U.S. tax-qualified defined contribution retirement plan and the account balance fluctuates with the investment returns on those funds.

~~Contingent~~Successor contingent consideration liabilities. In accordance with the Plan and Scheme of Arrangement, the Company will provide consideration for a CVR associated with Terlivaz primarily in the form of the achievement of a cumulative net sales milestone. The Company assesses the likelihood and timing of making such payments at each balance sheet date. The fair value of the contingent payment was measured based on the net present value of a probability-weighted assessment. The Company determined the fair value of the Terlivaz CVR to be $6.0 million as of September 30, 2022 (Successor).

Predecessor contingent consideration liabilities. As part of the acquisition of Stratatech, ~~Corporation ("Stratatech"),~~ the Company provided contingent consideration to the prior shareholders of Stratatech, primarily in the form of regulatory filing and approval milestones associated with the deep partial-thickness and full-thickness indications associated with StrataGraft. For each indication, the Company iswas responsible for a payment upon acceptance of the Company's submission and another upon approval by the FDA. The Company assesses the likelihood and timing of making such payments at each balance sheet date. The fair value of the contingent payments was measured based on the net present value of a probability-weighted assessment. The Company determined the fair value of the contingent consideration associated with the acquisition of Stratatech to be ~~$27.1 million and $19.1~~$27.3 million as of ~~September 24,~~December 31, 2021 ~~and December 25, 2020, respectively.~~

As part of the acquisition of Ocera, the Company provided contingent consideration to the prior shareholders of Ocera in the form of both patient enrollment clinical study milestones and sales-based milestones associated with MNK-6105 and MNK-6106. During the three months ended March 26, 2021, the Company determined it will no longer pursue further development of this asset. The Company determined the fair value of the contingent consideration based on an option pricing model to be zero and $15.6 million as of September 24, 2021 and December 25, 2020, respectively.

~~Contingent consideration~~(Predecessor). These liabilities were ~~classified as~~governed by a contract and recorded at their estimated allowed claim amount within LSTC in the unaudited condensed consolidated balance sheet as of ~~September 24, 2021.~~December 31, 2021 (Predecessor). The ~~following table summarizes~~contract governing this liability was rejected and the ~~activity for contingent consideration:~~


~~Balance as of December 25, 2020~~liability was discharged pursuant to the Plan on the Effective Date.	$	~~34.7~~


~~Fair value adjustments~~	~~(7.6)~~
~~Balance as of September 24, 2021~~	$	~~27.1~~

Financial Instruments Not Measured at Fair Value

The following methods and assumptions were used by the Company in estimating fair values for financial instruments not measured at fair value as of September ~~24, 2021~~30, 2022 (Successor) and December ~~25, 2020:~~31, 2021 (Predecessor):

•The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and the majority of other current assets and liabilities approximate fair value because of their short-term nature. The Company classifies cash on hand and deposits in banks, including commercial paper, money market accounts and other investments it may hold from time to time, with an original maturity of three months or less, as cash and cash equivalents (level 1). The fair value of restricted cash was equivalent to its carrying value of ~~$59.6~~$104.0 million and ~~$56.4~~$60.2 million as of September ~~24, 2021~~30, 2022 (Successor) and December ~~25, 2020~~31, 2021 (Predecessor) (level 1), respectively. AsIncluded within the balance as of September ~~24, 2021, $23.3~~30, 2022 (Successor) was $43.5 million ~~and $36.3 million~~related to the funding of the restricted cash balance was included in prepaid and other current assets and other assets, respectively, on the unaudited condensed consolidated balance sheet. As of December 25, 2020, $20.2 million and $36.2 million of the restricted cash balance was included in prepaid and other current assets and other assets, respectively, on the consolidated balance sheet.a professional fee escrow account upon emergence from Chapter 11. Refer to Note 3 for further information.

•The Company's life insurance contracts are carried at cash surrender value, which is based on the present value of future cash flows under the terms of the contracts (level 3). Significant assumptions used in determining the cash surrender value include the amount and timing of future cash flows, interest rates and mortality charges. The fair value of these contracts approximates the carrying value of ~~$51.0~~$48.1 million and ~~$52.3~~$51.3 million as of September ~~24, 2021~~30, 2022 (Successor) and December ~~25, 2020,~~31, 2021 (Predecessor), respectively. These contracts are included in other assets on the unaudited condensed consolidated balance sheets.

•~~The carrying value of the Company's revolving credit facility approximates the fair value due to the short-term nature of this instrument, and is therefore classified as level 1.~~ Successor debt. The Company's ~~4.875%, 5.75%, 4.75%, 5.625%, 5.50%~~Existing 1L Notes, New 2L Notes, New 1L Notes and ~~10.00% first and second lien senior notes~~Takeback 2L Notes are classified as level 1, as quoted prices are available in an active market for these notes. Since ~~the~~ quoted market prices for the Company's term loans ~~and 9.50% and 8.00% debentures~~ are not available in an active market, they are classified as level 2 for purposes of developing an estimate of fair value.

Predecessor debt. The carrying value of the Company's former revolving credit facility approximated the fair value due to the short-term nature of this instrument, and was therefore classified as level 1. The Company's former 5.75%, 4.75%, 5.625%, 5.50% senior notes and 10.00% first and second lien senior secured notes were classified as level 1, as quoted prices were available in an active market for these notes. Since the quoted market prices for the Company's former term loans and former 9.50% and 8.00% debentures were not available in an active market, they were classified as level 2 for purposes of developing an estimate of fair value.

The following table presents the carrying values and estimated fair values of the Company's debt as of the end of each period:


											Successor				Predecessor
		September 24, 2021				December 25, 2020					September 30, 2022				December 31, 2021
		Carrying Value		Fair Value		Carrying Value		Fair Value			Carrying Value		Fair Value		Carrying Value		Fair Value
Level 1:	Level 1:									Level 1:
10.00% first lien senior secured notes due April 2025										10.00% first lien senior secured notes due April 2025	$	473.9	$	453.0	$	495.0	$	523.7
10.00% second lien senior secured notes due April 2025										10.00% second lien senior secured notes due April 2025	234.8		202.6		—		—

11.50% first lien senior secured notes due December 2028										11.50% first lien senior secured notes due December 2028	650.0		586.6		—		—
10.00% second lien senior secured notes due June 2029										10.00% second lien senior secured notes due June 2029	191.3		204.6		—		—
Revolving credit facility due February 2022										Revolving credit facility due February 2022	—		—		900.0		900.0
5.75% senior notes due August 2022	5.75% senior notes due August 2022	$	610.3	$	353.1	$	610.3	$	191.2	5.75% senior notes due August 2022	—		—		610.3		324.1
4.75% senior notes due April 2023	4.75% senior notes due April 2023	133.7		49.7		133.7		11.1		4.75% senior notes due April 2023	—		—		133.7		48.9
5.625% senior notes due October 2023	5.625% senior notes due October 2023	514.7		302.9		514.7		158.9		5.625% senior notes due October 2023	—		—		514.7		279.1
10.00% second lien senior secured notes due April 2025										10.00% second lien senior secured notes due April 2025	—		—		322.9		312.7
5.50% senior notes due April 2025	5.50% senior notes due April 2025	387.2		226.9		387.2		115.4		5.50% senior notes due April 2025	—		—		387.2		211.6
10.00% first lien senior notes due April 2025		495.0		539.5		495.0		528.4
10.00% second lien senior notes due April 2025		322.9		322.1		322.9		279.0
Revolving credit facility		900.0		900.0		900.0		900.0

Level 2:	Level 2:									Level 2:
2017 Replacement Term loan due September 2027										2017 Replacement Term loan due September 2027	1,222.8		1,134.6		—		—
2018 Replacement Term loan due September 2027										2018 Replacement Term loan due September 2027	327.2		301.0		—		—
9.50% debentures due May 2022	9.50% debentures due May 2022	10.4		7.7		10.4		4.2		9.50% debentures due May 2022	—		—		10.4		7.7
8.00% debentures due March 2023	8.00% debentures due March 2023	4.4		3.2		4.4		1.3		8.00% debentures due March 2023	—		—		4.4		3.2
Term loan due September 2024	Term loan due September 2024	1,403.9		1,351.5		1,505.2		1,386.9		Term loan due September 2024	—		—		1,396.5		1,309.2
Term loan due February 2025	Term loan due February 2025	372.6		357.7		399.5		367.9		Term loan due February 2025	—		—		370.7		347.7
Total Debt	Total Debt	$	5,155.1	$	4,414.3	$	5,283.3	$	3,944.3	Total Debt	$	3,100.0	$	2,882.4	$	5,145.8	$	4,267.9

Concentration of Credit and Other Risks

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of accounts receivable. The Company generally does not require collateral from customers. A portion of the Company's accounts receivable outside the U.S. includes sales to government-owned or supported healthcare systems in several countries, which are subject to payment delays. Payment is dependent upon the financial stability and creditworthiness of those countries' national economies.

The following table shows net sales attributable to distributors that accounted for 10.0% or more of the Company's total ~~segment~~ net ~~sales. which excludes~~sales:

Successor

Predecessor

Three Months
Ended
September 30, 2022

Three Months Ended September 24, 2021

FFF Enterprises, Inc.

26.1

CuraScript, Inc.

27.0


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
FFF Enterprises, Inc.	25.7	%	11.8	%	*%
CuraScript, Inc.	*		15.6		25.2

* Net sales to this distributor was less than 10.0% of the ~~one-time charge incurred during~~Company's total net sales for the ~~three and nine months ended September 25, 2020 related to the Medicaid lawsuit:~~respective periods presented above.

Three Months Ended Nine Months Ended
September 24,
2021 September 25,
2020 September 24,
2021 September 25,
2020
CuraScript, Inc. 27.0 % 28.1 % 25.2 % 27.7 %

The following table shows accounts receivable attributable to distributors that accounted for 10.0% or more of the Company's gross accounts receivable at the end of each period:


							Successor		Predecessor
		September 24, 2021		December 25, 2020			September 30, 2022		December 31, 2021
AmerisourceBergen Corporation	AmerisourceBergen Corporation	37.1	%	33.6	%	AmerisourceBergen Corporation	30.2	%	30.0	%
McKesson Corporation	McKesson Corporation	16.2		18.2		McKesson Corporation	15.8		15.0

FFF Enterprises, Inc.						FFF Enterprises, Inc.	11.5		*
CuraScript, Inc.						CuraScript, Inc.	*		12.7

*Accounts receivable attributable to this distributor was less than 10.0% of total gross accounts receivable at the end of the respective period presented above.

The following table shows net sales attributable to products that accounted for 10.0% or more of the Company's total ~~segment~~ net ~~sales, which excludes the one-time charge incurred during the three and nine months ended September 25, 2020 related to the Medicaid lawsuit:~~sales:


		Three Months Ended				Nine Months Ended					Successor		Predecessor
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Acthar Gel	Acthar Gel	28.3	%	27.9	%	26.3	%	27.9	%	Acthar Gel	27.0	%	28.3	%
INOmax	INOmax	19.4		20.3		21.0		21.2		INOmax	17.3		19.4
Ofirmev		*		12.7		*		10.5
Therakos	Therakos	12.3		*		12.3		*		Therakos	12.5		12.3
APAP										APAP	12.4		*


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Acthar Gel	27.8	%	25.4	%	26.3	%
INOmax	17.1		19.0		21.0
Therakos	12.4		12.5		12.3
APAP	12.6		11.0		*

*Net sales attributable to ~~these products were~~this product was less than 10.0% of total net sales ~~during~~for the respective periods presented above.


~~14.~~15.			Segment Data

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

•Specialty Brands includes innovative specialty pharmaceutical brands; and

•Specialty Generics includes niche specialty generic drugs and APIs.

Management measures and evaluates the Company's operating segments based on segment net sales and operating income. Management excludes corporate expenses from segment operating income. In addition, certain amounts that management considers to be non-recurring or non-operational are excluded from segment ~~net sales and~~ operating income because management and the chief operating decision maker evaluate the operating results of the segments excluding such items. These items may include, but are not limited to, depreciation and amortization, share-based compensation, net restructuring charges, non-restructuring impairment charges and separation costs, research and development ("R&D") upfront payments, changes related to the Amended Proposed Opioid-Related Litigation Settlement and the Acthar Gel Medicaid Retrospective Rebate incurred as a result of the Medicaid lawsuit.costs. Although these amounts are excluded from segment ~~net sales and~~ operating income, as applicable, they are included in reported consolidated ~~net sales and~~ operating ~~income (loss)~~loss and are reflected in the reconciliations presented below.

3240

Selected information by reportable segment was as follows:


		Three Months Ended				Nine Months Ended					Successor		Predecessor
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Net sales:	Net sales:									Net sales:
Specialty Brands	Specialty Brands	$	359.7	$	539.6	$	1,149.6	$	1,553.0	Specialty Brands	$	303.5	$	359.7
Specialty Generics	Specialty Generics	147.5		159.4		462.0		512.7		Specialty Generics	161.9		147.5
Segment net sales		507.2		699.0		1,611.6		2,065.7
Medicaid lawsuit (Note 12)		—		(0.7)		—		(535.1)
Net sales	Net sales	$	507.2	$	698.3	$	1,611.6	$	1,530.6	Net sales	$	465.4	507.2
Operating income (loss):	Operating income (loss):									Operating income (loss):
Specialty Brands	Specialty Brands	$	189.9	$	291.8	$	588.6	$	765.0	Specialty Brands	$	43.7	$	189.9
Specialty Generics		15.2		43.1		73.8		155.5
Specialty Generics (1)										Specialty Generics (1)	(9.0)		15.2
Segment operating income	Segment operating income	205.1		334.9		662.4		920.5		Segment operating income	34.7		205.1
Unallocated amounts:	Unallocated amounts:									Unallocated amounts:
Corporate and unallocated expenses (1)		(20.8)		(42.1)		(69.1)		(152.3)
Corporate and unallocated expenses (2)										Corporate and unallocated expenses (2)	(15.0)		(20.8)
Depreciation and amortization	Depreciation and amortization	(168.4)		(236.1)		(506.1)		(675.5)		Depreciation and amortization	(148.5)		(168.4)
Share-based compensation	Share-based compensation	(2.4)		(4.3)		(8.4)		(17.6)		Share-based compensation	(0.5)		(2.4)
Restructuring charges, net	Restructuring charges, net	(11.0)		(3.2)		(17.5)		(15.8)		Restructuring charges, net	(2.2)		(11.0)
Non-restructuring impairment charges	Non-restructuring impairment charges	—		—		(64.5)		(63.5)		Non-restructuring impairment charges	—		—
Separation costs (2)		(0.1)		(33.0)		(1.0)		(75.0)
R&D upfront payment (3)		—		—		—		(5.0)
Opioid-related litigation settlement (loss) gain (Note 12)		(125.0)		25.8		(125.0)		34.1
Medicaid lawsuit (Note 12)		—		(0.5)		—		(640.2)
Operating (loss) income		$	(122.6)	$	41.5	$	(129.2)	$	(690.3)
Separation costs (3)										Separation costs (3)	(6.9)		(0.1)
Opioid-related litigation settlement loss										Opioid-related litigation settlement loss	—		(125.0)
Bad debt expense - customer bankruptcy										Bad debt expense - customer bankruptcy	(5.8)		—
Operating loss										Operating loss	$	(144.2)	$	(122.6)

(1)Includes $17.9 million of fresh-start inventory-related expense during the three months ended September 30, 2022 (Successor) primarily driven by the Company's change in accounting estimate as disclosed in Note 1.

~~(1)~~(2)Includes administration expenses and certain compensation, legal, environmental and other costs not charged to the Company's reportable segments.

~~(2)~~(3)Represents costs included in ~~SG&A~~selling, general and administrative expenses, primarily related to expenses incurred related to the severance of certain former executives of the Predecessor, in addition to professional fees and costs incurred as the Company explores potential sales of non-core assets to enable further deleveraging post-emergence.


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Net sales:
Specialty Brands	$	361.7	$	587.1	$	1,149.6
Specialty Generics	188.7		287.5		462
Net sales	$	550.4	$	874.6	$	1,611.6
Operating income (loss):
Specialty Brands	$	48.2	$	267.2	$	588.6
Specialty Generics (1)	(8.7)		65.3		73.8
Segment operating income	39.5		332.5		662.4
Unallocated amounts:
Corporate and unallocated expenses (2)	(15.9)		(48.2)		(69.1)
Depreciation and amortization	(196.9)		(321.8)		(506.1)
Share-based compensation	(0.5)		(1.7)		(8.4)
Restructuring charges, net	(3.3)		(9.6)		(17.5)
Non-restructuring impairment charges	—		—		(64.5)
Separation costs (3)	(16.1)		(9.0)		(1.0)
Opioid-related litigation settlement loss	—		—		(125.0)
Bad debt expense - customer bankruptcy	(5.8)		—		—
Operating loss	$	(199.0)	$	(57.8)	$	(129.2)

(1)Includes $20.3 million of fresh-start inventory-related expense during the period from June 17, 2022 through September 30, 2022 (Successor) primarily driven by the Company's change in ~~preparation for the Chapter 11 proceedings. As of the Petition Date, professional fees directly related~~accounting estimate as disclosed in Note 1.

(2)Includes administration expenses and certain compensation, legal, environmental and other costs not charged to the ~~Chapter 11 proceedings that were previously reflected as separation costs are being classified on a go-forward basis as reorganization items, net.~~Company's reportable segments.

(3)Represents ~~R&D expense~~costs included in selling, general and administrative expenses, primarily related to expenses incurred related to ~~an upfront payment made~~the Predecessor directors' and officers' insurance policies and severance for the former CEO and certain former executives of the Predecessor, in addition to ~~acquire product rights in Japan for terlipressin.~~professional fees and costs incurred as the Company explores potential sales of non-core assets to enable further deleveraging post-emergence.

Net sales by product family within the Company's reportable segments were as follows:


		Three Months Ended				Nine Months Ended					Successor		Predecessor
		September 24, 2021		September 25, 2020		September 24, 2021		September 25, 2020			Three Months Ended September 30, 2022		Three Months Ended September 24, 2021
Acthar Gel	Acthar Gel	$	143.4	$	195.3	$	423.9	$	576.6	Acthar Gel	$	125.7	$	143.4
INOmax	INOmax	98.4		141.9		338.3		438.5		INOmax	80.7		98.4
Ofirmev	Ofirmev	4.7		88.7		24.0		216.0		Ofirmev	—		4.7
Therakos	Therakos	62.5		62.6		197.8		174.1		Therakos	58.0		62.5
Amitiza (1)	Amitiza (1)	49.6		47.7		155.8		138.2		Amitiza (1)	37.1		49.6
Other	Other	1.1		3.4		9.8		9.6		Other	2.0		1.1
Specialty Brands	Specialty Brands	359.7		539.6		1,149.6		1,553.0		Specialty Brands	303.5		359.7

Hydrocodone (API) and hydrocodone-containing tablets		16.9		20.0		60.7		71.9
Oxycodone (API) and oxycodone-containing tablets		15.2		16.1		49.5		48.0
Acetaminophen (API)		49.6		54.9		146.8		154.5
Other controlled substances		60.8		62.4		187.9		223.8
Opioids										Opioids	46.5		46.5
ADHD										ADHD	11.6		8.7
Addiction treatment										Addiction treatment	16.6		15.3
Other	Other	5.0		6.0		17.1		14.5		Other	2.9		2.9
Generics										Generics	77.6		73.4
Controlled substances										Controlled substances	19.7		19.4
APAP										APAP	57.9		49.6
Other										Other	6.7		5.1
API										API	84.3		74.1
Specialty Generics	Specialty Generics	147.5		159.4		462.0		512.7		Specialty Generics	161.9		147.5
Segment net sales		507.2		699.0		1,611.6		2,065.7
Medicaid lawsuit (Note 12)		—		(0.7)		—		(535.1)
Net sales	Net sales	$	507.2	$	698.3	$	1,611.6	$	1,530.6	Net sales	$	465.4	$	507.2

(1)Amitiza consists of both product net sales and royalties. Refer to Note 24 for further details on Amitiza's revenues.


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Acthar Gel	$	153.2	$	221.9	$	423.9
INOmax	94.2		165.8		338.3
Ofirmev	(0.2)		2.5		24.0
Therakos	68.2		109.6		197.8
Amitiza (1)	42.9		81.5		155.8
Other	3.4		5.8		9.8
Specialty Brands	361.7		587.1		1,149.6

Opioids	55.2		88.8		155.0
ADHD	13.4		17.5		24.8
Addiction treatment	19.1		30.0		47.7
Other	3.0		4.9		8.4
Generics	90.7		141.2		235.9
Controlled substances	21.4		37.6		62.4
APAP	69.2		96.5		146.8
Other	7.4		12.2		16.9
API	98.0		146.3		226.1
Specialty Generics	188.7		287.5		462.0
Net sales	$	550.4	$	874.6	$	1,611.6

(1)Amitiza consists of both product net sales and royalties. Refer to Note 4 for further details on Amitiza's revenues.

3342


~~15.~~16.			Subsequent Events

~~Bankruptcy Proceedings~~Commitments and Contingencies

Certain ~~bankruptcy proceeding~~litigation matters occurred ~~during the nine months ended~~on, or prior to, September ~~24, 2021 or prior,~~30, 2022 (Successor), but had subsequent updates through the issuance of this report. See further discussion in Note 2.13.

~~Commitments~~Ordinary Shares

On October 24, 2022, the Company announced that it had received approval to list its ordinary shares on the New York Stock Exchange American LLC ("NYSE American"). The Company's ordinary shares were listed on NYSE American and ~~Contingencies~~

~~Certain litigation matters occurred during~~began trading on October 27, 2022 under the ~~nine months ended September 24, 2021 or prior, but had subsequent updates through~~ticker symbol "MNK". At such time, trading of the ~~issuance of this report. See further discussion in Note 12.~~Company's ordinary shares on the OTC Pink Current Market ceased, concurrent with the NYSE American listing.

Debt Repurchases

Subsequent to September 30, 2022 (Successor), the Company repurchased debt that aggregated to a principal amount of $10.9 million related to its 10.00% second lien senior secured notes due 2029.

3443


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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs and involve risks, uncertainties and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed in Part I, Item 1A. ~~Risk Factors~~"Risk Factors" and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December ~~25, 2020,~~31, 2021 (Predecessor), filed with the United States ("U.S.") Securities and Exchange Commission ("SEC") on March ~~10, 2021~~15, 2022 and ~~within~~ Part II, Item 1A "Risk Factors" and Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q.

We own or have rights to use the trademarks and trade names that we use in conjunction with the operation of our business. One of the more important trademarks that we own or have 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 U.S. and other jurisdictions. Solely for convenience, we only use the ™ or ® symbols the first time any trademark or trade name is mentioned in the following discussion. Such references are not intended to indicate in any way that we will not assert, to the fullest extent permitted under applicable law, our rights to our trademarks and trade names. Each trademark or trade name of any other company appearing in the following discussion is, to our knowledge, owned by such other company.

Overview

We are a global business consisting of multiple wholly owned subsidiaries that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. Areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, hepatology, nephrology, pulmonology, ophthalmology and ~~ophthalmology;~~oncology; immunotherapy and neonatal respiratory critical care therapies; ~~analgesics~~analgesics; cultured skin substitutes and gastrointestinal products.

We operate our business in two reportable segments, which are further described below:

•Specialty Brands includes innovative specialty pharmaceutical brands; and

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

For further information on our business and products, refer to our Annual Report on Form 10-K for the fiscal year ended December ~~25, 2020,~~31, 2021 (Predecessor), filed with the ~~U.S.~~ SEC on March ~~10, 2021.~~15, 2022.

Significant Events

Terlivaz®

On June 9, 2022, we resubmitted our new drug application for Terlivaz to the U.S. Food and Drug Administration ("FDA"). On September 14, 2022, we announced that the FDA had approved Terlivaz for injection and during the fourth quarter of fiscal 2022, we released our first commercial shipment of the product. The FDA approval gave rise to a $17.5 million milestone payable, which remained unpaid as of September 30, 2022 (Successor). A corresponding intangible asset was recorded as of September 30, 2022 (Successor), which will be amortized over the useful life of the related asset beginning with the first commercial shipment of the product during the fourth quarter of fiscal 2022.

StrataGraft®

During the three months ended April 1, 2022 (Predecessor), we released our first commercial shipment of StrataGraft. Net sales of this product are anticipated to be uneven as a result of contracting with hospitals and the government procurement schedule associated with sales to the Biomedical Advanced Research and Development Authority (BARDA) for placement in the Strategic National Stockpile.

On June 30, 2022, we completed the sale of our PRV for $100.0 million. We were awarded the Priority Review Voucher ("PRV") under a FDA program intended to encourage the development of certain product applications for therapies used to treat or prevent material threat medical countermeasures. We received the PRV upon FDA approval of StrataGraft for the treatment of adults with thermal burns containing intact dermal elements for which surgical intervention is clinically indicated (deep partial-thickness burns). We received from the buyer $65.0 million and the buyer remitted $35.0 million to the General Unsecured Claims Trustee pursuant to the terms of (i) the fourth amended plan of reorganization (with technical modifications (the "Plan"), and (ii) the General Unsecured Claims Trust Agreement entered into in connection with the Plan.

INOmax®

On September 28, 2022, we submitted a 510(k) premarket notification to the FDA for an investigational inhaled nitric oxide delivery system for INOmax (nitric oxide) gas, for inhalation, which has been previously approved by the FDA for treating hypoxic respiratory failure in newborns. The safety and efficacy of the inhaled nitric oxide delivery system has not been evaluated by the FDA and is subject to a pending 510(k) application. Consistent with its review process, the FDA has asked us to provide summary tables of certain submitted data, which is expected to be completed during the fourth quarter of 2022. The delivery system combines automation, integration and interaction into one device, and if the 510(k) application is cleared, would be the latest in a long line of dual channel delivery systems implemented with the objective of building on our dedication to meeting clinicians' evolving needs.

Emergence from Voluntary ~~Petitions for~~ Reorganization

On October 12, 2020 (the "Petition Date"), we voluntarily initiated Chapter 11 proceedings (the "Chapter 11 Cases") under chapter 11 of title 11 ("Chapter 11") of the United States Code (the "Bankruptcy Code") in the U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). On March 2, 2022, the U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") entered an order confirming the Plan. Subsequent to ~~modify our capital structure, including restructuring portions~~the filing of ~~our debt, and resolve otherwise unmanageable potential legal liabilities. We are continuing to operate and supply customers and patients with products as normal.~~

~~We intend to use~~ the Chapter 11 ~~process to provide~~Cases, Chapter 11 proceedings commenced by a ~~fair, orderly, efficient~~limited subset of the debtors were recognized and ~~legally binding mechanism to implement~~given effect in Canada, and separately the High Court of Ireland made an order confirming a ~~restructuring support agreement ("RSA"~~scheme of arrangement on April 27, 2022, which is based on and consistent in all respects with the Plan (the "Scheme of Arrangement"). The Plan and Scheme of Arrangement became effective on June 16, 2022, (the "Effective Date"), and on such date we emerged from the Chapter 11 and Irish examinership proceedings.

On the Effective Date, pursuant to ~~which,~~the Plan and Scheme of Arrangement, among other ~~things, the parties thereto have agreed to support:~~things:

•~~A financial restructuring that would, among other things, reduce our total debt by approximately $1,300.0 million, improving our financial position and better positioning us for long-term growth;~~We issued 13,170,932 ordinary shares to holders of the former unsecured notes;

•~~A proposed resolution of all opioid-related~~All opioid claims against us were deemed to have been settled, discharged, waived, released and extinguished in full in exchange for $1,725.0 million in deferred payments over the next eight years (the ~~"Amended Proposed Opioid-Related~~"Opioid-Related Litigation Settlement");

•We issued 3,290,675 warrants with a strike price of $103.40 to opioid claimants that are exercisable at any time on or prior to the sixth anniversary of the Effective Date (the "Opioid Warrants");

•We adopted a management incentive plan providing for the issuance to management, key employees and directors of the Company of equity awards with respect to up to an aggregate of 1,829,068 shares;

•All claims of the U.S. Department of Justice ("DOJ") and other governmental parties relating to Acthar® Gel (repository corticotropin injection) ("Acthar Gel") were deemed to have been settled, discharged, waived, released and extinguished in full in exchange for $260.0 million of deferred payments over the next seven years (the "Acthar Gel-Related Settlement");

•All shares of our stock issued and outstanding immediately prior to the Effective Date were canceled and discharged;

•Principal debt outstanding was reduced by more than $1.3 billion; and

•~~A proposed resolution~~General unsecured claims were satisfied in an aggregate settlement of ~~various Acthar~~® ~~Gel ("Acthar Gel")-related matters,~~$135.0 million in cash plus other potential consideration, including but not limited to 35.0% of the ~~Medicaid lawsuit, an associated False Claims Act ("FCA") lawsuit~~proceeds of the sale of the StrataGraft PRV and ~~an FCA lawsuit relating to Acthar Gel’s previous owner’s interactions with an independent charitable foundation (the "Acthar Gel-Related Settlement").~~

~~Taken together, these actions are intended to enable us to move forward with our vision to become an innovation-driven biopharmaceutical company meeting~~$20.0 million payable upon the ~~needs~~achievement of ~~underserved patients with severe~~both (1) FDA approval of Terlivaz (which occurred on September 14, 2022) and ~~critical conditions.~~(2) cumulative net sales of $100.0 million of Terlivaz.

For further ~~information,~~details of the Plan, refer to Note 2 of the notes to the unaudited condensed consolidated financial statements.

New Financing

In connection with emergence, we issued $650.0 million in aggregate principal amount of new first lien senior secured notes. The net proceeds of the issuance of such notes were applied to repay in part our former senior secured revolving credit facility. We also entered into a $200.0 million accounts receivable financing facility, which remains undrawn as of September 30, 2022 (Successor).

Pursuant to the Plan and Scheme of Arrangement, we also reinstated $495.0 million in aggregate principal amount of our existing first lien senior secured notes and issued $1,762.6 million in aggregate principal amount of new first lien senior secured term loans to the holders of our existing term loans in satisfaction thereof, issued $322.9 million in aggregate principal amount of new second lien senior secured notes to the holders of our existing second lien senior secured notes in satisfaction thereof and issued $375.0 million in aggregate principal amount of new second lien senior secured notes to the holders of certain of our existing unsecured senior notes in partial satisfaction thereof.

Fresh-Start Accounting

We adopted fresh-start accounting as of the Effective Date. As a result of the application of fresh-start accounting, our financial statements for periods prior to the Effective Date are not comparable to those for periods subsequent to the Effective Date. References in this report to "Successor" refer to the results of operations of the Company after the Effective Date. References to "Predecessor" refer to the results of operations of the Company on or prior to the Effective Date. Operating results for the Successor and Predecessor periods are not necessarily indicative of the results to be expected for a full fiscal year. References such as the "Company," "we," "our," and "us" refer to Mallinckrodt and its consolidated subsidiaries, whether Predecessor and/or Successor, as appropriate.

Our results of operations as reported in our unaudited condensed consolidated financial statements for the Successor and Predecessor periods are in accordance with generally accepted accounting principles in the U.S. ("GAAP"). The presentation of the combined financial information of the Predecessor and Successor for the nine months ended September 30, 2022 is not in accordance with GAAP. However, we believe that for purposes of discussion and analysis in this Quarterly Report on Form 10-Q, the combined financial information is useful for management and investors to assess our ongoing financial and operational performance and trends.

For further information, refer to Note 3 of the notes to the unaudited condensed consolidated financial statements.

Reorganization items, net

~~Reorganization~~During the period January 1, 2022 through June 16, 2022 (Predecessor), we incurred expenses of $630.9 million from reorganization items, net. These expenses were primarily driven by the loss on application of fresh-start accounting of $1,354.6 million and professional and lender fees, partially offset by a $943.7 million gain on settlement of liabilities subject to compromise ("LSTC") in accordance with the Plan. During the three months ended September 30, 2022 (Successor) and the period from June 17, 2022 through September 30, 2022 (Successor) and the three and nine months ended September 24, 2021 (Predecessor), we incurred expenses of $14.2 million, $17.7 million, $126.2 million and $329.2 million from reorganization items, net, respectively. The Successor expenses represent amounts incurred after the ~~Petition~~Effective Date ~~as a direct result~~that directly resulted from Chapter 11 and were entirely comprised of professional fees associated with the implementation of the ~~Chapter 11 Cases~~Plan. The amounts incurred in the three and ~~are comprised of bankruptcy-related~~nine months ended September 24, 2021 (Predecessor) were primarily professional fees and adjustments to reflect the carrying value of ~~liabilities subject to compromise ("LSTC")~~LSTC at their estimated allowed claim amounts, as such adjustments are approved by the Bankruptcy Court. During the three and nine months ended September 24, 2021, we incurred $126.2 million and $329.2 million of reorganization items, net, respectively.

During the three and nine months ended September 25, 2020, we incurred $13.4 million and $53.1 million in opioid defense costs, respectively, and $33.0 million and $75.0 million in separation costs, respectively, which were both included within selling general and administrative ("SG&A") expenses. As of the Petition Date, the majority of these costs are being classified on a go-forward basis as reorganization items, net, as they directly relate to the Chapter 11 proceedings.

~~StrataGraft~~®

On June 15, 2021, we announced that the U.S. Food and Drug Administration ("FDA") had approved the StrataGraft biologics license application ("BLA") for the treatment of adults with deep partial-thickness burns and we expect commercial launch to commence during the fourth quarter of fiscal 2021.

~~Terlipressin~~

During September 2020, the FDA issued a Complete Response Letter ("CRL") regarding our New Drug Application ("NDA") seeking approval for the investigational agent terlipressin to treat adults with hepatorenal syndrome type 1 ("HRS-1"). The CRL stated that, based on the available data, the agency cannot approve the terlipressin NDA in its current form and requires more information to support a positive risk-benefit profile for terlipressin for patients with HRS-1.

In response to receipt of the CRL, we had an End of Review Meeting on October 26, 2020 and a Type A Meeting on January 29, 2021 with the FDA where both parties engaged in constructive dialogue in an effort to clarify a viable path to U.S. approval. On August 18, 2021, we resubmitted our NDA for terlipressin to the FDA. The Prescription Drug User Fee Act (PDUFA) date for this development product is February 18, 2022. We will continue to assess the impact of any changes to planned revenue or earnings on the fair value of the associated in-process research and development ("IPR&D") asset of $81.0 million included within intangible assets, net on the unaudited condensed consolidated balance sheets as of September 24, 2021 and December 25, 2020.

~~MNK-6105 and MNK-6106~~

During the three months ended March 26, 2021, the Company recognized a full impairment on its Specialty Brands IPR&D asset related to MNK-6105 and MNK-6106 of $64.5 million. The Company has decided it will no longer pursue further development of this asset.amounts.

Business Factors Influencing the Results of Operations

~~COVID-19 Business Update~~

The novel coronavirus ("COVID-19") pandemic has presented a substantial public health and economic challenge around the world. As we navigate the unprecedented challenges created by the COVID-19 pandemic, we remain committed to supporting our employees, customers, patients and the broader communities in which we operate.

~~Since the onset~~We cannot adequately benchmark certain operating results of the ~~COVID-19 pandemic, we have continued to manufacture, supply~~three and ~~deliver our products largely without interruption. At present, we do not anticipate significant COVID-19-related manufacturing or supply chain disruptions,~~nine months ended September 30, 2022 against the three and ~~we continue to evaluate our end-to-end supply chain and assess opportunities to refine our processes going forward.~~

~~We expect the coming months to continue to be challenging due to the impact of COVID-19. Our business performance was significantly impacted by COVID-19 during fiscal 2020 and the~~ nine months ended September 24, ~~2021. The ultimate business impact going forward will largely~~2021 as the comparison would include the three months ended September 30, 2022 Successor Period and the nine months September 30, 2022 combined Successor and Predecessor periods against the three and nine months ended September 24, 2021 prior year Predecessor periods, which would be ~~determined by~~considered to not be in accordance with GAAP. We do not believe that reviewing the ~~ongoing return to work guidance issued by international, national, and local governments and health officials and organizations. We are monitoring the demand for~~results of these Successor periods in isolation would be useful in identifying trends in or reaching conclusions regarding our ~~products, including the duration and degree to which we may see declines in customer orders or delays in starting new patients on a product,~~overall operating performance. Management believes that our key performance metrics such as ~~Acthar Gel, due to the limited ability of our~~net sales ~~representatives to meet with physicians~~ and patients to visit their doctors and pharmacists to receive prescriptions for certain of our products. In regards to Acthar Gel, we continue to see a reduction in new patients, which may continue to impact results in fiscal 2021. Furthermore, while we are supporting the continuation of ongoing patients in our clinical trials, as much as possible, we expect that COVID-19 precautions may directly or indirectly impact the timeline for some of our clinical trials.

~~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,~~segment results of operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted. For additional information on the various risks posed by the COVID-19 pandemic, please read Part I, Item 1A. Risk Factors included within our Annual Report filed on Form 10-K for the ~~fiscal year ended December 25, 2020.~~

~~Specialty Brands~~

~~Net sales of Ofirmev~~® Successor Period for the three months ended September ~~24, 2021 decreased $84.0 million, or 94.7%,~~30, 2022, and when combined with the current Predecessor year-to-date periods for the nine months ended September 30, 2022, provide more meaningful comparisons to ~~$4.7 million driven primarily by~~prior Predecessor periods and are more useful in identifying current business trends. Accordingly, in addition to presenting our results of operations as reported in our unaudited condensed consolidated financial statements in accordance with GAAP, in certain circumstances the ~~entrance~~discussion in "Results of ~~generic competition during fiscal 2021.~~Operations" and "Segment Results" below utilizes the combined results for the nine months ended September 30, 2022.

Specialty Brands

Net sales of Acthar Gel for the three months ended September 30, 2022 (Successor) and September 24, 2021 (Predecessor) were $125.7 million and $143.4 million, respectively. Net sales decreased ~~$51.9~~$17.7 million, or ~~26.6%~~12.3%, for the three months ended September 30, 2022 (Successor), compared to ~~$143.4 million~~the three months ended September 24, 2021 (Predecessor), driven primarily by ~~the marketplace impact of the COVID-19 pandemic and~~ continued ~~payer~~ scrutiny on overall specialty pharmaceutical spending. We anticipate that competition for the Acthar Gel product will likely intensify ~~in relation to our Acthar Gel product~~ following ~~ANI Pharmaceuticals Inc’s. (“ANI”) expected commercial~~the launch of ~~their purified cortrophin gel product~~a competitive alternative form of treatment during the first quarter of 2022, which could have an adverse effect on our financial condition, results of operations and cash flows. ANI’s purified cortrophin gel product was recently approved by the FDA for the treatment of certain chronic autoimmune disorders, including acute exacerbations of multiple sclerosis and rheumatoid arthritis, in addition to excess urinary protein due to nephrotic syndrome. We continue our efforts to extend the value of the Acthar Gel product through product enhancements including the ongoing development of the Acthar Gel self-injection device, which will create an easier and more patient-friendly application for single unit dosage indications, as well as through additional studies.

Net sales of INOmax®for the three months ended September 30, 2022 (Successor) and September 24, 2021 (Predecessor) were $80.7 million and $98.4 million, respectively. Net sales decreased $17.7 million, or 18.0%, for the three months ended September 30, 2022 (Successor), compared to the three months ended September 24, 2021 ~~decreased $43.5 million, or 30.7%~~(Predecessor), ~~to $98.4 million~~ driven primarily by ~~increased~~continued competition ~~following the launch of a competitive~~from alternative nitric oxide ~~product before the expiration of the last of the listed patents on May 3, 2036 (November 3, 2026 including pediatric exclusivity),~~products, which could continue to adversely affect our ability to successfully maximize the value of INOmax and have an adverse effect on our financial condition, results of operations and cash flows. We continue to develop and

pursue patent protection of next generation nitric oxide delivery systems and additional uses of nitric ~~oxide.~~oxide through our submission of a 510(k) premarket notification to the FDA for our next generation nitric oxide delivery system, as discussed above. We further intend to vigorously enforce our intellectual property rights relating to our nitric oxide products against any additional parties that may seek to market ~~a generic~~an alternative version of our INOmax product and/or next generation delivery systems.

Net sales of Amitiza® for the three months ended September 30, 2022 (Successor) and September 24, 2021 (Predecessor) were $37.1 million and $49.6 million, respectively. Net sales decreased $12.5 million, or 25.2%, for the three months ended September 30, 2022 (Successor), compared to the three months ended September 24, 2021 (Predecessor), driven primarily by a decline in royalties associated with loss of exclusivity in the U.S. Additional generic competitors are expected to enter in 2023.

Specialty Generics

Net sales from the Specialty Generics segment ~~decreased $11.9~~for the three months ended September 30, 2022 (Successor) and September 24, 2021 (Predecessor) were $161.9 million and $147.5 million. Net sales increased $14.4 million, or ~~7.5%~~9.8%, for the three months ended September 30, 2022 (Successor), compared to ~~$147.5 million for~~ the three months ended September 24, 2021 ~~compared to $159.4 million for the three months ended September 25, 2020~~(Predecessor), primarily driven by ~~a decrease~~an increase in ~~acetaminophen and hydrocodone-related products~~API net sales of ~~$5.3~~$10.2 million driven primarily by growth in acetaminophen (APAP) and ~~$3.1~~an increase in generics net sales of $4.2 million ~~respectively.~~driven primarily by growth in attention-deficit hyperactivity disorder ("ADHD") products.

Results of Operations

This report contains certain financial measures, including net sales, gross profit, gross profit margin, SG&A expenses as a percentage of net sales and research and development ("R&D") expenses as a percentage of net sales, which exclude the one-time charge related to the Medicaid lawsuit that is included as a component of net sales for the three and nine months endedThree Months Ended September ~~25, 2020.~~

We have provided these measures because they are used by management to evaluate our operating performance. In addition, we believe that they will be used by certain investors to measure Mallinckrodt's operating results. Management believes that presenting these measures provides useful information about our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These measures should be considered supplemental to and not a substitute for financial information prepared in accordance30, 2022 (Successor) Compared with ~~accounting principles generally accepted in the U.S. ("GAAP").~~

Because these measures exclude the effect of items that will increase or decrease our reported results of operations, management strongly encourages investors to review our unaudited condensed consolidated financial statements and this report in its entirety. A reconciliation of certain of these financial measures to the most directly comparable GAAP financial measures is included herein.

Three Months Ended September 24, 2021 ~~Compared with Three Months Ended September 25, 2020~~(Predecessor)

Net Sales

Net sales by geographic area were as follows (dollars in millions):

Three Months Ended
September 24,
2021 September 25,
2020 Percentage
Change
U.S. $ 459.8 $ 632.3 (27.3) %
Europe, Middle East and Africa 40.2 53.3 (24.6)
Other geographic areas 7.2 13.4 (46.3)
Geographic area net sales 507.2 699.0 (27.4)
Medicaid lawsuit — (0.7) *
Net sales $ 507.2 $ 698.3 (27.4) %

*Not meaningful


	Successor		Predecessor		Non-GAAP
	Three Months Ended September 30, 2022		Three Months Ended September 24, 2021		Percentage Change
U.S.	$	415.5	$	459.8	(9.6)	%
Europe, Middle East and Africa	44.5		40.2		10.7
Other geographic areas	5.4		7.2		(25.0)
Net sales	$	465.4	$	507.2	(8.2)

Net sales for the three months ended September 30, 2022 (Successor) and September 24, 2021 (Predecessor) were $465.4 million and $507.2 million, respectively. Net sales decreased ~~$191.1~~$41.8 million, or ~~27.4%~~8.2%, ~~to $507.2 million, compared with $698.3 million~~ for the three months ended September ~~25, 2020.~~30, 2022 (Successor), compared to the three months ended September 24, 2021 (Predecessor). This decrease was primarily driven by a decrease in net sales of Acthar Gel, INOmax and Amitiza within our Specialty Brands segment, ~~including a significant decrease in net sales of Ofirmev, Acthar Gel and INOmax,~~ as previously mentioned. For further information on changes in our net sales, refer to "Segment Results" within this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Operating ~~(Loss) Income~~Loss

Gross profit. Gross profit for the three months ended September 30, 2022 (Successor) and September 24, 2021 ~~decreased $107.3~~(Predecessor) was $15.5 million ~~or 36.3%, to~~and $188.0 million, ~~compared with $295.3 million for the three months ended September 25, 2020.~~respectively. Gross profit margin was 3.3% and 37.1% for the three months ended September 30, 2022 (Successor) and September 24, 2021 ~~compared with 42.3% for the three months ended September 25, 2020.~~(Predecessor), respectively. These decreases were primarily driven by the ~~$191.1 million~~ decrease in net sales and a change in product ~~mix.~~mix, coupled with $129.1 million of inventory step-up amortization expense and $17.9 million of fresh-start inventory-related expense during the three months ended September 30, 2022 (Successor).

Selling, general and administrative expenses. Selling general and administrative ("SG&A&A") expenses for the three months ended September 30, 2022 (Successor) and September 24, 2021 (Predecessor) were $129.2 million and $127.3 million, ~~compared with $220.8 million for the three months ended September 25, 2020, a decrease of $93.5 million, or 42.3%.~~respectively. As a percentage of net sales, SG&A expenses were 27.8% and 25.1% for the three months ended September 30, 2022 (Successor) and ~~31.6% for~~September 24, 2021 (Predecessor), respectively. These increases were primarily driven by $6.9 million of separation costs incurred during the three months ended September 30, 2022 (Successor) related to severance of Predecessor executives, compared to $0.1 million during the three months ended September 24, 2021 (Predecessor), coupled with $5.8 million of bad debt expense attributable to a customer bankruptcy during the three months ended September 30, 2022 (Successor). These increases were predominately offset by cost containment initiatives.

Research and development expenses. Research and development ("R&D") expenses for the three months ended September 30, 2022 (Successor) and September ~~25, 2020,~~24, 2021 (Predecessor) were $28.3 million and $47.3 million, respectively. As a percentage of net sales, R&D expenses were 6.1% and 9.3% for the three months ended September 30, 2022 (Successor) and September 24, 2021 (Predecessor), respectively. These decreases were primarily driven by the bankruptcy-related professional fees being classified as reorganization items, net, subsequent to the Petition Date. Comparatively, during the three months ended September 25, 2020, we incurred $13.4 million and $33.0 million in opioid defense costs and separation costs, respectively, that were reflected in SG&A. These decreases were also driven by cost containment initiatives ~~and lower employee compensation costs,~~ coupled with a $2.1 million decrease in the fair value of our contingent consideration liabilities during three months ended September 24, 2021, compared to a $8.1 million increase during the three months ended September 25, 2020.

~~Research and development expenses.~~ R&D expenses decreased $18.2 million, or 27.8%, to $47.3 million for the three months ended September 24, 2021, compared with $65.5 million for the three months ended September 25, 2020. The decrease was driven by the completion of certain development ~~programs during fiscal 2020.~~programs. We continue to focus current R&D activities on performing clinical studies and publishing clinical and non-clinical experiences and evidence that support health economic activities and patient outcomes.

~~outcomes. As a percentage of net sales, R&D expenses were 9.3% and 9.4% for the three months ended September 24, 2021 and September 25, 2020, respectively.~~

Restructuring charges, net. During the three months ended September 30, 2022 (Successor) and September 24, 2021 ~~and September 25, 2020,~~(Predecessor), we incurred ~~$11.0~~$2.2 million and ~~$3.2~~$11.0 million of restructuring charges, net, respectively, primarily related to employee severance and benefits.

~~Gains on divestiture.~~ During the three months ended September 25, 2020, we incurred a gain of $9.7 million primarily driven by a gain of $10.0 million related to the achievement of a milestone related to the sale of a portion of our Hemostasis business in fiscal 2018 to Baxter International, Inc. ("Baxter").

~~Opioid-related litigation settlement~~. During the three months ended September 24, 2021, we recorded a charge of $125.0 million as a result of an additional payment expected to be made on the eighth anniversary of the effective date of the Amended Proposed Opioid-Related Litigation Settlement, in accordance with the agreement in principle reached on September 2, 2021. For further information, refer to Note 2 of the notes to the unaudited condensed consolidated financial statements. During the three months ended September 25, 2020, we recorded a non-cash gain of $25.8 million as a result of the change in the settlement warrants' fair value driven by the decreased value of our share price. Consistent with the determination at December 25, 2020, the settlement warrants continue to have no value as of September 24, 2021 given we cannot reasonably estimate the equity value at emergence. For further information, refer to Note 12 of the notes to the unaudited condensed consolidated financial statements.

Non-Operating Items

Interest expense and interest income. During the three months ended September 30, 2022 (Successor) and September 24, 2021 ~~and September 25, 2020,~~(Predecessor), net interest expense was $146.7 million and $48.7 million, respectively. During the three months ended September 30, 2022 (Successor), interest expense included $40.6 million and ~~$61.3~~$24.0 million of accretion expense associated with our settlement obligations and debt, respectively. The ~~$13.5 million decrease in~~three months ended September 30, 2022 (Successor) also reflect increased interest ~~expense was primarily attributable~~rates on our variable interest rate debt as compared to a $23.1 million decrease resulting from the cessation of interest accruals as of the Petition Date on outstanding unsecured pre-petition debt classified as LSTC in connection with the Chapter 11 Cases, partially offset by $15.8 million of expense related to adequate protection payments. Additionally, the three months ended September 24, 2021 ~~and~~(Predecessor). Interest expense during the predecessor periods included cash adequate protection payments on certain of our predecessor senior secured debt instruments. The three months ended September ~~25, 2020~~24, 2021 (Predecessor) also included the recognition of a $9.6 million ~~and $8.4 million~~ benefit to interest expense ~~respectively,~~ due to a lapse of certain statute of limitations. ~~Interest income decreased to zero for the three months ended September 24, 2021, compared with $0.9 million for the three months ended September 25, 2020.~~

Other ~~(expense) income,~~expense, net. During the three months ended September 30, 2022 (Successor) and September 24, 2021 (Predecessor), we ~~recorded~~incurred other expense ~~net,~~ of $5.1 million and $3.5 million, ~~compared with zero for~~respectively. The three months ended September 30, 2022 (Successor) included $5.1 million of unrealized losses on equity securities related to our investments in Silence Therapeutics plc ("Silence") and Panbela Therapeutics, Inc. ("Panbela"), while the three months ended September ~~25, 2020. The three months ended September~~ 24, 2021 (Predecessor) included an $8.3 million unrealized loss on equity securities, inclusive of foreign currency loss, related to ~~our investment in~~ Silence ~~Therapeutics plc ("Silence"), compared to a $0.1 million unrealized loss during the three months ended September 25, 2020.~~only. The three months ended September 24, 2021 (Predecessor) also included income from a $5.0 million one-time milestone receivable.

Reorganization items, net. During the three months ended September 30, 2022 (Successor) and September 24, 2021 (Predecessor), we recorded ~~$126.2~~$14.2 million ofand $109.5 million in reorganization items, net, respectively driven entirely by ~~advisor and legal~~professional fees ~~directly related to our Chapter 11 proceedings. These charges included $119.4 million of advisor and legal fees directly~~ related to the ~~Chapter 11 Cases and $6.8 million~~implementation of ~~deferred financing fee write-offs related to~~ the 10.00% second lien senior secured notes due 2025 ("Second Lien Notes") in order to reflect the carrying value within LSTC on the unaudited condensed consolidated balance sheet as of September 24, 2021 at the estimated allowed claim amount.Plan.

Income tax benefit. We recognized an income tax benefit of $24.9 million on a loss from continuing operations before income taxes of $310.2 million for the three months ended September 30, 2022 (Successor). This resulted in an effective tax rate of 8.0%. The income tax benefit was comprised of $20.5 million of current tax benefit and $4.4 million of deferred tax benefit. The current and deferred income tax benefits were predominately related to intangible asset amortization and activity attributed to fresh-start adjustments, partially offset by the utilization of loss carryforwards.

The income tax benefit of $24.9 million for the three months ended September 30, 2022 (Successor) was attributed to the jurisdictional mix of pretax earnings, separation costs, reorganization items, net and restructuring charges.

We recognized an income tax benefit of $32.0 million on a loss from continuing operations before income taxes of $301.0 million for the three months ended September 24, 2021 ~~and an income tax benefit of $211.6 million on a loss from continuing operations before income taxes of $19.8 million for the three months ended September 25, 2020.~~(Predecessor). This resulted in an effective tax ~~rates~~rate of 10.6% ~~and 1,068.7% for the three months ended September 24, 2021 and September 25, 2020, respectively.~~. The income tax benefit ~~for the three months ended September 24, 2021~~ was comprised of $26.2 million of current tax benefit and $5.8 million of deferred tax benefit. The current and deferred income tax ~~benefit was predominantly related to~~benefits for the three months ended September 24, 2021 (Predecessor) were primarily impacted by intangible asset amortization, an increase to prepaid taxes and a decrease to uncertain tax ~~positions. The deferred tax benefit was predominantly related to intangible asset amortization~~positions partially offset by the utilization of loss carryforwards in non-valuation allowance jurisdictions. The income tax benefit for the three months ended September 25, 2020 was comprised of $201.4 million of current tax benefit and $10.2 million of deferred tax benefit. The current tax benefit was primarily the result of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act and unrecognized tax benefits, partially offset by the fiscal 2020 reorganization of our intercompany financing and associated legal entity ownership. The deferred tax benefit was predominately related to the fiscal 2020 reorganization of our intercompany financing and associated legal entity ownership.

The income tax benefit ~~was~~of $32.0 million for the three months ended September 24, 2021 ~~compared with an income tax benefit~~(Predecessor) consisted of ~~$211.6 million for the three months ended September 25, 2020. The $179.6 million net decrease in the tax benefit included a decrease of $236.8~~$16.9 million attributed to the CARES Act, partially offset by an increase of $32.0 million attributed to the fiscal 2020 reorganization of our intercompany financing and associated legal entity ownership, an increase of $12.6 million attributed to changes in the timing, amount and jurisdictional mix of ~~income, an increase of $7.9~~pretax earnings, $11.8 million attributed to uncertain tax positions and ~~an increase of $4.7~~$4.3 million attributed to separation costs, reorganization items, net and restructuring charges, ~~net.~~

partially offset by $1.0 million attributed to the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.

Income ~~(loss)~~ from discontinued operations, net of income taxes. We recorded income from discontinued operations of $0.4 million and $5.3 million during the three months ended September 30, 2022 (Successor) and September 24, 2021 ~~and a loss from discontinued operations of $0.2 million during the three months ended September 25, 2020,~~(Predecessor), respectively. The income during the three months ended September 24, 2021 (Predecessor) primarily related to the recognition of a tax ~~benefit~~benefits related to athe release of tax and interest on unrecognized tax benefits due to ~~a lapse~~lapses of certain statute of limitations related to the Nuclear Imaging ~~business.~~business that we divested in 2017. The remaining activity in both periods related to various post-sale adjustments associated with our previous divestitures.

Period from June 17, 2022 through September 30, 2022 (Successor) and Period from January 1, 2022 through June 16, 2022 (Predecessor) Compared with Nine Months Ended September 24, 2021 ~~Compared with Nine Months Ended September 25, 2020~~(Predecessor)

Net Sales

Net sales by geographic area were as follows (dollars in millions):

Nine Months Ended
September 24,
2021 September 25,
2020 Percentage
Change
U.S. $ 1,466.0 $ 1,836.0 (20.2) %
Europe, Middle East and Africa 120.7 185.0 (34.8)
Other geographic areas 24.9 44.7 (44.3)
Geographic area net sales 1,611.6 2,065.7 (22.0)
Medicaid lawsuit (Note 12) — (535.1) *
Net sales $ 1,611.6 $ 1,530.6 5.3

*Not meaningful


	Successor		Predecessor		Non-GAAP		Predecessor		Non-GAAP
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Combined Nine Months Ended September 30, 2022		Nine Months Ended September 24, 2021		Percentage Change
U.S.	$	490.2	$	784.2	$	1,274.4	$	1,466.0	(13.1)	%
Europe, Middle East and Africa	53.9		73.6		127.5		120.7		5.6
Other geographic areas	6.3		16.8		23.1		24.9		(7.2)
Net sales	$	550.4	$	874.6	$	1,425.0	$	1,611.6	(11.6)	%

Net sales for the ~~nine months ended~~period June 17, 2022 through September ~~24, 2021 increased $81.0 million, or 5.3%, to $1,611.6 million, compared with $1,530.6 million~~30, 2022 (Successor) were $550.4 million. Net sales for the nine months ended September 25, 2020. This increase was primarily driven by a retrospective one-time charge of $535.1 million reflected as a component of net sales related to the Medicaid lawsuit during the nine months ended September 25, 2020. For further information on the Medicaid lawsuit, refer to Note 12 of the notes to the unaudited condensed consolidated financial statements.

~~Net sales (excluding the one-time charge related to the Medicaid lawsuit) for~~period January 1, 2022 through June 16, 2022 (Predecessor) and the nine months ended September 24, 2021 (Predecessor) were $874.6 million and $1,611.6 million, respectively. Net sales decreased ~~$454.1~~$186.6 million, or ~~22.0%~~11.6%, ~~to $1,611.6 million,~~for the combined nine months ended September 30, 2022, compared ~~with $2,065.7 million for~~to the nine months ended September ~~25, 2020.~~24, 2021 (Predecessor). This decrease was primarily driven by a decrease in our Specialty Brands segment including a significant decrease in net sales of ~~Ofirmev,~~INOmax, Acthar Gel, Amitiza and ~~INOmax.~~Therakos. For further information on changes in our net sales, refer to "Segment Results" within this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Operating Loss

Gross (loss) profit. Gross loss for the period June 17, 2022 through September 30, 2022 (Successor) was $1.7 million. Gross profit for the period January 1, 2022 through June 16, 2022 (Predecessor) and the nine months ended September 24, 2021 ~~increased $294.3~~(Predecessor) was $292.6 million ~~or 82.0%, to~~and $653.2 million, ~~compared with $358.9 million for the nine months ended September 25, 2020.~~respectively. Gross profit margin was negative 0.3% for the period June 17, 2022 through September 30, 2022 (Successor), 33.5% for the period January 1, 2022 through June 16, 2022 (Predecessor) and 40.5% ~~for~~ the nine months ended September 24, 2021 ~~compared to 23.4% for~~(Predecessor). The decrease during the ~~nine months ended~~period June 17, 2022 through September ~~25, 2020. These increases were~~30, 2022 (Successor) was primarily driven by the ~~retrospective one-time charge of $535.1 million reflected as a component of net sales related to the Medicaid lawsuit during the nine months ended September 25, 2020.~~

Gross profit (excluding the one-time charge related to the Medicaid lawsuit, as discussed above) for the nine months ended September 24, 2021 decreased $240.8 million, or 26.9%, to $653.2 million, compared with $894.0 million for the nine months ended September 25, 2020, due in part to the $454.1 million decrease in net sales and a change in product ~~mix. Gross profit margin~~mix, coupled with $153.2 million of inventory step-up amortization expense and $20.3 million in fresh-start inventory-related expenses. The decrease during the period January 1, 2022 through June 16, 2022 (Predecessor) was ~~40.5%~~primarily driven by a $13.6 million increase in amortization expense for the nine months ended September 24, 2021, compared to 43.3% for the nine months ended September 25, 2020 when excluding the one-time charge related to the Medicaid lawsuit. The decrease in gross profit margin was primarily attributable to the decrease in net sales, as well asAmitiza intangible asset resulting from a change in ~~product mix.~~amortization method as discussed further in Note 10 to notes to the unaudited condensed consolidated financial statements.

Selling, general and administrative expenses. SG&A expenses for the period June 17, 2022 through September 30, 2022 (Successor) were $159.5 million. SG&A expenses for the period January 1, 2022 through June 16, 2022 (Predecessor) and the nine months ended September 24, 2021 (Predecessor) were $275.3 million and $408.3 million, ~~compared with $683.2 million for the nine months ended September 25, 2020, a decrease of $274.9 million, or 40.2%.~~respectively. As a percentage of net sales, SG&A expenses were 29.0% for the period June 17, 2022 through September 30, 2022 (Successor), 31.5% for the period January 1, 2022 through June 16, 2022 (Predecessor) and 25.3% for the nine months ended September 24, 2021 ~~compared to 44.6%, or 33.1% when excluding the one-time charge related to the Medicaid lawsuit, for the nine months ended September 25, 2020.~~(Predecessor). These ~~decreases~~increases were primarily driven by $16.1 million and $9.0 million of separation costs incurred during the ~~bankruptcy-related~~period June 17, 2022 through September 30, 2022 (Successor) and the period January 1, 2022 through June 16, 2022 (Predecessor), respectively, related to the severance for the former Chief Executive Officer ("CEO") and certain former executives of the Predecessor, expense associated with the Predecessor directors' and officers' insurance policies and professional fees ~~being classified~~and costs incurred as ~~reorganization items, net, subsequent~~we explore potential sales of non-core assets to ~~the Petition Date. Comparatively,~~enable further deleveraging post-emergence, respectively, compared to $1.0 million during the nine months ended September ~~25, 2020, we incurred $53.1~~24, 2021 (Predecessor). The increase also included an $11.1 million and $75.0 million in opioid defense costs and separation costs, respectively, that were reflected in SG&A. These decreases were also driven by cost containment initiatives and lower employee compensation costs,increase to certain of our environmental liabilities during the period January 1, 2022 through June 16, 2022 (Predecessor) coupled with a ~~$7.6~~foreign currency remeasurement loss of $3.5 million ~~decrease in~~and $15.8 million during the ~~fair value of our~~

~~contingent consideration liabilities~~period June 17, 2022 through September 30, 2022 (Successor) and the period January 1, 2022 through June 16, 2022 (Predecessor), respectively, compared to an $8.2 million loss during the nine months ended September 24, 2021 ~~compared to a $2.4 million increase during the three months ended September 25, 2020.~~(Predecessor). These increases were partially offset by continued cost containment initiatives.

Research and development expenses. R&D expenses ~~decreased $59.5~~for the period June 17, 2022 through September 30, 2022 (Successor) were $34.5 million. R&D expenses for the period January 1, 2022 through June 16, 2022 (Predecessor) and the nine months ended September 24, 2021 (Predecessor) were $65.5 million ~~or 26.4%, to~~and $166.3 million, respectively. As a percentage of net sales, R&D expenses were 6.3% for the period June 17, 2022 through September 30, 2022 (Successor), 7.5% for the period January 1, 2022 through June 16, 2022 (Predecessor) and 10.3% for the nine months ended September 24, 2021 ~~compared with $225.8 million for the nine months ended September 25, 2020. The decrease was~~(Predecessor). These decreases were driven by cost containment initiatives coupled with the completion of certain development ~~programs during fiscal 2020.~~programs. We continue to focus current R&D

activities on performing clinical studies and publishing clinical and non-clinical experiences and evidence that support health economic activities and patient outcomes. ~~As a percentage of net sales, R&D expenses were 10.3% for~~

Restructuring charges, net. During the period June 17, 2022 through September 30, 2022 (Successor), the period January 1, 2022 through June 16, 2022 (Predecessor) and the nine months ended September 24, 2021 ~~compared to 14.8%~~(Predecessor), ~~or 10.9% when excluding the one-time charge related to the Medicaid lawsuit, for the nine months ended September 25, 2020.~~

~~Restructuring charges, net.~~ ~~During the nine months ended September 24, 2021 and September 25, 2020,~~ we incurred ~~$17.5~~$3.3 million, $9.6 million and ~~$15.8~~$17.5 million of restructuring charges, net, respectively, primarily related to employee severance and benefits.

Non-restructuring impairment charges. During the nine months ended September 24, 2021 (Predecessor), we recognized a full impairment on our Specialty Brands ~~IPR&D~~in-process research and development asset related to MNK-6105 and MNK-6106 of $64.5 ~~million. We~~million as we decided we ~~will~~would no longer pursue further development of this asset. During the nine months ended September 25, 2020, we recognized a partial impairment charge on our Ofirmev intangible asset of $63.5 million due to the revision of its useful life to end December 2020, commensurate with the final period of market exclusivity.

~~(Gains) and losses on divestiture.~~ During the nine months ended September 24, 2021 and September 25, 2020, we incurred a loss of $0.8 million and a gain of $10.1 million, respectively. The nine months ended September 25, 2020 included a gain of $10.0 million related to the achievement of a milestone related to the sale of a portion of our Hemostasis business in fiscal 2018 to Baxter.

~~Opioid-related litigation settlement~~. During the nine months ended September 24, 2021, we recorded a charge of $125.0 million as a result of an additional payment expected to be made on the eighth anniversary of the effective date of the Amended Proposed Opioid-Related Litigation Settlement, in accordance with the agreement in principle reached on September 2, 2021. For further information, refer to Note 2 of the notes to the unaudited condensed consolidated financial statements. During the nine months ended September 25, 2020, we recorded a non-cash gain of $34.1 million as a result of the change in the settlement warrants' fair value. Consistent with the determination at December 25, 2020, the New Opioid Warrants continue to have no value as of September 24, 2021 given we cannot reasonably estimate the equity value at emergence. For further information, refer to Note 12 of the notes to the unaudited condensed consolidated financial statements.

~~Medicaid lawsuit.~~ During the nine months ended September 25, 2020, we incurred a retrospective one-time charge of $105.1 million, which represents a pre-acquisition contingency related to the portion of the liability that arose from sales of Acthar Gel prior to our acquisition of Questcor Pharmaceuticals Inc. ("Questcor") in August 2014. For further information, refer to Note 12 of the notes to the unaudited condensed consolidated financial statements.

Non-Operating Items

Interest expense and interest income. During the ~~nine months ended~~period June 17, 2022 through September ~~24, 2021~~30, 2022 (Successor), the period January 1, 2022 through June 16, 2022 (Predecessor) and September 25, 2020, net interest expense was $158.8 million and $195.5 million, respectively. The $40.2 million decrease in interest expense was primarily attributable to a $69.6 million decrease resulting from the cessation of interest accruals as of the Petition Date on outstanding unsecured pre-petition debt classified as LSTC in connection with the Chapter 11 Cases coupled with a lower average outstanding debt balance, partially offset by $46.1 million of expense related to adequate protection payments. Additionally, the nine months ended September 24, 2021 (Predecessor), net interest expense was $167.7 million, $108.0 million and $158.8 million, respectively. During the period June 17, 2022 through September ~~25, 2020~~30, 2022 (Successor), interest expense included $44.5 million and $27.8 million of accretion expense associated with our settlement obligations and debt, respectively. The period June 17, 2022 through September 30, 2022 (Successor) and the period January 1, 2022 through June 16, 2022 (Predecessor) reflected increased interest rates on our variable interest rate debt as compared to the nine months ended September 24, 2021 (Predecessor). Interest expense during the predecessor periods included cash adequate protection payments on certain of our predecessor senior secured debt instruments. The nine months ended September 24, 2021 (Predecessor) also included the recognition of a $15.8 million ~~and $19.2 million~~ benefit to interest expense ~~respectively,~~ due to a lapse of certain statute of limitations. ~~The Company recognized interest~~

Other income ~~of $1.9 million~~(expense), net. During the period June 17, 2022 through September 30, 2022 (Successor), the period January 1, 2022 through June 16, 2022 (Predecessor) and ~~$5.4 million during~~ the nine months ended September 24, 2021 (Predecessor), we recorded other income of $0.8 million, other expense of $14.6 million and ~~September 25, 2020,~~other income of $15.9 million, respectively. The ~~decrease~~period January 1, 2022 through June 16, 2022 (Predecessor) included $5.8 million of miscellaneous credits and a $2.3 million gain related to our initial investment in ~~interest income was primarily driven by lower interest rates during the~~equity securities of Panbela. The nine months ended September 24, 2021 ~~and interest earned on~~(Predecessor) also included income of $9.0 million related to one-time milestone receivables. Remaining activity in all periods reflects the changes in the fair value of our ~~preferred equity certificates that were received as contingent consideration~~investment in Silence, while the period June 17, 2022 through September 30, 2022 (Successor) included the change in the fair value of our investment in Panbela.

Reorganization items, net. During the period June 17, 2022 through September 30, 2022 (Successor), we recorded a loss of $17.7 million in reorganization items, net entirely driven by professional fees related to the ~~sale~~implementation of the ~~Nuclear Imaging business during~~Plan. During the ~~nine months ended September 25, 2020.~~

~~Other income, net.~~ period January 1, 2022 through June 16, 2022 (Predecessor), we recorded a loss of $594.1 million in reorganization items, net driven primarily by the loss on fresh-start adjustments of $1,354.6 million, professional fees and lender fees of $205.4 million, a write off of predecessor directors' and officers' insurance policies of $9.2 million and adjustments to other claims of $5.4 million, partially offset by a gain on adjustments to LSTC of $943.7 million. During the nine months ended September 24, 2021 ~~and September 25, 2020,~~(Predecessor), we recorded ~~other income, net,~~a loss of $15.9 million and $1.1 million, respectively. The nine months ended September 24, 2021 included a $6.2 million unrealized gain on equity securities, inclusive of foreign currency gain, related to our investment in Silence, compared to $1.8 million for the nine months ended September 25, 2020. The nine months ended September 24, 2021 also included $9.0 million related to one-time milestone receivables.

~~Reorganization items, net. During the nine months ended September 24, 2021, we recorded~~ $329.2 million ofin reorganization items, net, ~~in conjunction with our Chapter 11 proceedings. These charges included~~driven primarily by professional fees of $306.6 million ~~of advisor and legal fees directly related to the Chapter 11 Cases~~ and $23.1 million of deferred financing fee write-offs related to the ~~senior secured~~predecessor term loan due September 2024 (the "2017 Term Loan") and senior secured term loan due February 2025 (the "2018 Term Loan") and Second Lien Notes in order to reflect their respective carrying values within LSTC on the unaudited condensed consolidated balance sheet as of September 24, 2021 at their estimated allowed claim amounts.loans.

Income tax benefit. We recognized an income tax benefit of $34.6 million on a loss from continuing operations before income taxes of $383.6 million for the period from June 17, 2022 through September 30, 2022 (Successor). This resulted in an effective tax rate of 9.0%. The income tax benefit was comprised of $23.8 million of current tax benefit and $10.8 million of deferred tax benefit. The current and deferred income tax benefits were predominantly related to intangible asset amortization and activity attributed to fresh-start adjustments, partially offset by the utilization of loss carryforwards.

The income tax benefit of $34.6 million for the period from June 17, 2022 through September 30, 2022 (Successor) was attributed to the jurisdictional mix of pretax earnings, separation costs, reorganization items, net and restructuring charges.

We recognized an income tax benefit of $497.3 million on a loss from continuing operations before income taxes of $811.3 million for the period from January 1, 2022 through June 16, 2022 (Predecessor). This resulted in an effective tax rate of 61.3%. The income tax benefit was comprised of $23.9 million of current tax benefit and $473.4 million of deferred tax benefit.

The income tax benefit for the period from January 1, 2022 through June 16, 2022 (Predecessor) primarily consisted of the income tax impacts from reorganization and fresh-start adjustments, including adjustments to our valuation allowance. For the period January 1, 2022 through June 16, 2022 (Predecessor), we recorded an income tax benefit of $497.3 million, primarily for reorganization adjustments in the Predecessor period consisting of (1) $1,231.5 million of tax expense for the reduction in federal and state net operating loss ("NOL") carryforwards from the cancellation of debt income ("CODI") realized upon emergence and limitations under Sections 382 and 383 of the Internal Revenue Code ("IRC"); (2) $141.3 million of tax expense for the net decrease in deferred tax assets resulting from reorganization adjustments; and (3) $1,270.1 million of tax benefit for the reduction in the valuation allowance on our deferred tax assets; and fresh-start adjustments in the Predecessor period consisting of (4) $297.1 million of tax benefit for the net decrease in deferred tax liabilities resulting from fresh-start adjustments and (5) $285.3 million of tax benefit

associated with the release of uncertain tax positions. The remaining tax benefit was attributable to the jurisdictional mix of pretax earnings during the Predecessor period.

We recognized an income tax benefit of $81.9 million on a loss from continuing operations before income taxes of $601.3 million for the nine months ended September 24, 2021 ~~and an income tax benefit of $69.2 million on a loss from continuing operations before income taxes of $884.7 million for the nine months ended September 25, 2020.~~(Predecessor). This resulted in an effective tax ~~rates~~rate of 13.6% ~~and 7.8% for the nine months ended September 24, 2021 and September 25, 2020, respectively.~~. The income tax benefit ~~for the nine months ended September 24, 2021~~ was comprised of $62.8 million of current tax benefit and $19.1 million of deferred tax benefit. The current and deferred income tax ~~benefit was predominantly related to~~benefits for the nine months ended September 24, 2021 (Predecessor) were primarily impacted by intangible asset amortization, an increase to prepaid taxes and a decrease to uncertain tax ~~positions. The deferred tax benefit was predominantly related to intangible asset amortization,~~positions partially offset by the utilization of loss carryforwards in non-valuation allowance jurisdictions. The income tax benefit for the nine months ended September 25, 2020 was comprised of $370.3 million of current tax benefit and $301.1 million of deferred tax expense. The current tax benefit was primarily the result of the CARES Act and unrecognized tax benefits, partially offset by the fiscal 2020 reorganization of our intercompany financing and associated legal entity ownership. The deferred tax expense was predominately related to the valuation allowance recorded against our net deferred tax assets and unrecognized tax benefits, partially offset by a tax benefit predominately related to the fiscal 2020 reorganization of our intercompany financing and associated legal entity ownership.

The income tax benefit ~~was~~of $81.9 million for the nine months ended September 24, 2021 ~~compared with an income tax benefit~~(Predecessor) consisted of ~~$69.2 million for the nine months ended September 25, 2020. The $12.7 million net increase in the tax benefit included an increase of $202.7~~$55.9 million attributed to ~~a valuation allowance recorded against our net deferred tax assets, an increase~~the jurisdictional mix of ~~$56.2~~pretax earnings, $15.1 million attributed to ~~changes in the timing, amount~~uncertain tax positions and jurisdictional mix of income, an increase of $25.7 million predominately attributed to the fiscal 2020 reorganization of our intercompany financing and associated legal entity ownership, an increase of $10.8$11.0 million attributed to separation costs, reorganization items, net, and restructuring charges, ~~net and an increase of $2.8 million attributed to uncertain tax positions,~~ partially offset by ~~a decrease of $285.5~~$0.1 million attributed to the CARES Act.

As a result of the Plan, we recognized CODI on our indebtedness, resulting in the utilization of, and reduction to, certain of our tax losses and tax credits in the U.S. and Luxembourg. The remainder of our U.S. tax losses and credits are expected to be significantly limited under Sections 382 and 383 of the IRC. Additionally, we recognized a U.S. capital loss as a result of the Plan. This capital loss may be carried forward to offset capital gains recognized in the next five years, to the extent it is not reduced by CODI or limited under IRC section 382 or 383. The deferred tax asset associated with the capital loss carryforward is offset by a valuation allowance due to significant uncertainty regarding our ability to utilize the carryforward prior to its expiration. The portion of deferred tax assets associated with the tax losses and credits that are limited under IRC Section 382 or 383, and that have a remote possibility of being utilized, have been written off.

The Plan's tax effect, and impacts on our tax losses and credits, is expected to be finalized when the U.S. Federal income tax return that is due in 2023 is completed.

Income from discontinued operations, net of income ~~taxes~~taxes.. We recorded income from discontinued operations of $0.4 million, $0.9 million and $6.0 million for the period June 17, 2022 through September 30, 2022 (Successor), the period from January 1, 2022 through June 16, 2022 (Predecessor) and ~~$23.8 million~~the nine months ended September 24, 2021 (Predecessor), respectively. The income during the nine months ended September 24, 2021 ~~and September 25, 2020, respectively. The income during both periods were~~(Predecessor) primarily related to the recognition of tax benefits related to the releases of tax and interest on unrecognized tax benefits due to lapses of certain statute of limitations related to the Nuclear Imaging ~~business.~~business that we divested in 2017. The remaining activity in both periods related to various post-sale adjustments associated with our previous divestitures.

Segment Results

Management measures and evaluates our operating segments based on segment net sales and operating income. Management excludes corporate expenses from segment operating income. In addition, certain amounts that management considers to be non-recurring or non-operational are excluded from segment ~~net sales and~~ operating income because management and the chief operating decision maker evaluate the operating results of the segments excluding such items. These items include, but are not limited to, depreciation and amortization, share-based compensation, net restructuring charges, non-restructuring impairment charges and separation costs, R&D upfront payment, changes related to the Opioid-Related Litigation Settlement and the Acthar Gel Medicaid Retrospective Rebate (as defined within Note 12 of the notes to the unaudited condensed consolidated financial statements) incurred as a result of the Medicaid lawsuit.costs. Although these amounts are excluded from ~~segment net sales and~~ segment operating income, as applicable, they are included in reported consolidated ~~net sales and~~ operating ~~(loss) income~~loss and in the reconciliations presented below. Selected information by business segment is as follows:

Three Months Ended September 30, 2022 (Successor) Compared with Three Months Ended September 24, 2021 ~~Compared with Three Months Ended September 25, 2020~~(Predecessor)

Net Sales

Net sales by segment are shown in the following table (dollars in millions):

Three Months Ended
September 24,
2021 September 25,
2020
Percentage
Change
Specialty Brands $ 359.7 $ 539.6 (33.3) %
Specialty Generics 147.5 159.4 (7.5)
Segment net sales 507.2 699.0 (27.4)
Medicaid lawsuit (Note 12) — (0.7) *
Net sales $ 507.2 $ 698.3 (27.4)

*~~Not meaningful~~


	Successor		Predecessor		Non-GAAP
	Three Months Ended September 30, 2022		Three Months Ended September 24, 2021		Percentage Change
Specialty Brands	$	303.5	$	359.7	(15.6)	%
Specialty Generics	161.9		147.5		9.8
Net sales	$	465.4	$	507.2	(8.2)	%

Specialty Brands. Net sales for the three months ended September 30, 2022 (Successor) and September 24, 2021 ~~decreased $179.9~~(Predecessor) were $303.5 million toand $359.7 million, ~~compared with $539.6~~respectively. Net sales decreased $56.2 million, or 15.6%, for the three months ended September ~~25, 2020. The~~ 30, 2022 (Successor), compared to the three months ended September 24, 2021 (Predecessor). As previously discussed, the

decrease in net sales was primarily driven by ~~an $84.0~~a $17.7 million, or ~~94.7%, decrease in Ofirmev driven by the loss of exclusivity at the end of fiscal 2020 and the entrance of generic competition during fiscal 2021, a $51.9 million, or 26.6%~~12.3%, decrease in Acthar Gel, ~~net sales driven by the marketplace impact of the COVID-19 pandemic and continued payer scrutiny on overall specialty pharmaceutical spending and~~ a ~~$43.5~~$17.7 million, or ~~30.7%~~18.0%, decrease in INOmax ~~driven by increased competition, as previously discussed.~~and a $12.5 million, or 25.2% decrease in Amitiza.

Net sales for Specialty Brands by geography were as follows (dollars in millions):


		Three Months Ended							Successor		Predecessor		Non-GAAP
		September 24, 2021		September 25, 2020		Percentage Change			Three Months Ended September 30, 2022		Three Months Ended September 24, 2021		Percentage Change
U.S.	U.S.	$	337.5	$	504.7	(33.1)	%	U.S.	$	284.3	$	337.5	(15.8)	%
Europe, Middle East and Africa	Europe, Middle East and Africa	18.4		24.9		(26.1)		Europe, Middle East and Africa	16.5		18.4		(10.3)
Other	Other	3.8		10.0		(62.0)		Other	2.7		3.8		(28.9)
Net sales	Net sales	$	359.7	$	539.6	(33.3)		Net sales	$	303.5	$	359.7	(15.6)	%

Net sales for Specialty Brands by key products were as follows (dollars in millions):


		Three Months Ended							Successor		Predecessor		Non-GAAP
		September 24, 2021		September 25, 2020		Percentage Change			Three Months Ended September 30, 2022		Three Months Ended September 24, 2021		Percentage Change
Acthar Gel	Acthar Gel	$	143.4	$	195.3	(26.6)	%	Acthar Gel	$	125.7	$	143.4	(12.3)%
INOmax	INOmax	98.4		141.9		(30.7)		INOmax	80.7		98.4		(18.0)
Ofirmev	Ofirmev	4.7		88.7		(94.7)		Ofirmev	—		4.7		(100.0)
Therakos	Therakos	62.5		62.6		(0.2)		Therakos	58.0		62.5		(7.2)
Amitiza	Amitiza	49.6		47.7		4.0		Amitiza	37.1		49.6		(25.2)
Other	Other	1.1		3.4		(67.6)		Other	2.0		1.1		81.8
Specialty Brands	Specialty Brands	$	359.7	$	539.6	(33.3)		Specialty Brands	$	303.5	$	359.7	(15.6)%

Specialty Generics. Net sales for the three months ended September 30, 2022 (Successor) and September 24, 2021 ~~decreased $11.9~~(Predecessor) were $161.9 million and $147.5 million, respectively. Net sales increased $14.4 million, or ~~7.5%~~9.8%, ~~to $147.5 million, compared with $159.4 million~~ for the three months ended September ~~25, 2020. The decrease~~30, 2022 (Successor), compared to the three months ended September 24, 2021 (Predecessor). As previously discussed, the increase in net sales was due to ~~a decrease~~an increase in ~~acetaminophen and hydrocodone-related products~~API net sales of ~~$5.3~~$10.2 million, ~~and $3.1~~or 13.8%, primarily related to APAP, coupled with an increase in generics net sales of $4.2 million, ~~respectively.~~or 5.7%, primarily related to ADHD products.

Net sales for Specialty Generics by geography were as follows (dollars in millions):


		Three Months Ended							Successor		Predecessor		Non-GAAP
		September 24, 2021		September 25, 2020		Percentage Change			Three Months Ended September 30, 2022		Three Month Ended September 24, 2021		Percentage Change
U.S.	U.S.	$	122.3	$	127.6	(4.2)	%	U.S.	$	131.2	$	122.3	7.3	%
Europe, Middle East and Africa	Europe, Middle East and Africa	21.8		28.4		(23.2)		Europe, Middle East and Africa	28.0		21.8		28.4
Other	Other	3.4		3.4		—		Other	2.7		3.4		(20.6)
Net sales	Net sales	$	147.5	$	159.4	(7.5)		Net sales	$	161.9	$	147.5	9.8	%

Net sales for Specialty Generics by key products were as follows (dollars in millions):

Three Months Ended
September 24,
2021 September 25,
2020 Percentage Change
Hydrocodone (API) and hydrocodone-containing tablets $ 16.9 $ 20.0 (15.5) %
Oxycodone (API) and oxycodone-containing tablets 15.2 16.1 (5.6)
Acetaminophen (API) 49.6 54.9 (9.7)
Other controlled substances 60.8 62.4 (2.6)
Other 5.0 6.0 (16.7)
Specialty Generics $ 147.5 $ 159.4 (7.5)


	Successor		Predecessor		Non-GAAP
	Three Months Ended September 30, 2022		Three Month Ended September 24, 2021		Percentage Change
Opioids	$	46.5	$	46.5	—	%
ADHD	11.6		8.7		33.3
Addiction treatment	16.6		15.3		8.5
Other	2.9		2.9		—
Generics	77.6		73.4		5.7
Controlled substances	19.7		19.4		1.5
APAP	57.9		49.6		16.7
Other	6.7		5.1		31.4
API	84.3		74.1		13.8
Specialty Generics	$	161.9	$	147.5	9.8	%

Operating ~~(Loss) Income~~Loss

Operating income by segment and as a percentage of segment net sales for the three months ended September 30, 2022 (Successor) and the three months September 24, 2021 ~~and September 25, 2020~~(Predecessor) is shown in the following table (dollars in millions):


		Three Months Ended									Successor		Predecessor
		September 24, 2021				September 25, 2020					Three Months Ended September 30, 2022		Three Month Ended September 24, 2021
Specialty Brands(1)	Specialty Brands(1)	$	189.9	52.8	%	$	291.8	54.1	%	Specialty Brands(1)	$	43.7	$	189.9
Specialty Generics(2)	Specialty Generics(2)	15.2		10.3		43.1		27.0		Specialty Generics(2)	(9.0)		15.2
Segment operating income	Segment operating income	205.1		40.4		334.9		47.9		Segment operating income	34.7		205.1
Unallocated amounts:	Unallocated amounts:									Unallocated amounts:
Corporate and unallocated expenses ~~(1)~~(3)	Corporate and unallocated expenses ~~(1)~~(3)	(20.8)				(42.1)				Corporate and unallocated expenses ~~(1)~~(3)	(15.0)		(20.8)
Depreciation and amortization	Depreciation and amortization	(168.4)				(236.1)				Depreciation and amortization	(148.5)		(168.4)
Share-based compensation	Share-based compensation	(2.4)				(4.3)				Share-based compensation	(0.5)		(2.4)
Restructuring charges, net	Restructuring charges, net	(11.0)				(3.2)				Restructuring charges, net	(2.2)		(11.0)

Non-restructuring impairment charges										Non-restructuring impairment charges	—		—
Separation costs ~~(2)~~(4)	Separation costs ~~(2)~~(4)	(0.1)				(33.0)				Separation costs ~~(2)~~(4)	(6.9)		(0.1)

Opioid-related litigation settlement (loss) gain (Note 12)		(125.0)				25.8
Medicaid lawsuit (Note 12)		—				(0.5)
Total operating (loss) income		$	(122.6)			$	41.5
Opioid-related litigation settlement loss										Opioid-related litigation settlement loss	—		(125.0)
Bad debt expense - customer bankruptcy										Bad debt expense - customer bankruptcy	(5.8)		—
Total operating loss										Total operating loss	$	(144.2)	$	(122.6)

(1)Includes $115.3 million of inventory fair-value step-up expense during the three months ended September 30, 2022 (Successor).

(2)Includes $17.9 million of fresh-start inventory-related expense primarily driven by the Company's change in accounting estimate as disclosed in Note 1 of the notes to the unaudited condensed consolidated financial statements and $13.8 million of inventory fair-value step-up expense during the three months ended September 30, 2022 (Successor).

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

~~(2)~~(4)Represents costs included in SG&A, ~~expenses,~~ primarily related to expenses incurred related to the severance for certain former executives of the Predecessor, in addition to professional fees and costs incurred ~~in preparation for the Chapter 11 proceedings. As~~as we explore potential sales of ~~the Petition Date, professional fees directly related~~non-core assets to ~~the Chapter 11 proceedings that were previously reflected as separation costs are being classified on a go-forward basis as reorganization items, net.~~

enable further deleveraging post-emergence.

Specialty Brands. Operating income for the three months ended September 30, 2022 (Successor) and September 24, 2021 ~~decreased $101.9~~(Predecessor) was $43.7 million toand $189.9 million, ~~compared with $291.8~~respectively. Operating income decreased $146.2 million, or 77.0%, for the three months ended September ~~25, 2020.~~30, 2022 (Successor) when compared to the three months ended September 24, 2021 (Predecessor). Operating margin decreased to 14.4% for the three months ended September 30, 2022 (Successor), compared with 52.8% for the three months ended September 24, 2021 ~~compared with 54.1% for~~(Predecessor). These decreases were primarily driven by $115.3 million of inventory fair-value step-up expense during the three months ended September ~~25, 2020.~~30, 2022 (Successor) coupled with a $56.2 million decrease to combined net sales as discussed above, resulting in a $165.0 million decrease in combined gross profit. The decrease in operating income ~~and margin was primarily driven by a $144.4 million decrease to gross profit as a result of the decrease in net sales and a change in product mix as discussed above,~~is partially offset by a $15.6 million decrease ~~of $26.2~~in R&D expense coupled with a $3.1 million ~~or 24.2%,~~decrease in SG&A expenses ~~compared with the three months ended September 25, 2020. The decrease in SG&A was~~ primarily driven by ~~the bankruptcy-related legal fees being classified as reorganization items, net, subsequent to the Petition Date, in addition to~~continued cost containment initiatives and lower employee compensation costs. Additionally, R&D expenses decreased $16.4 million, or 30.2%, compared with the three months ended September 25, 2020, as previously discussed above.initiatives.

Specialty Generics. ~~Operating~~The three months ended September 30, 2022 (Successor) had an operating loss of $9.0 million compared to operating income of $15.2 million for the three months ended September 24, 2021 (Predecessor). Operating income decreased ~~$27.9~~$24.2 million, ~~to $15.2 million, compared with $43.1 million~~or 159.2%, for the three months ended September ~~25, 2020.~~30, 2022 (Successor) compared to the three months ended September 24,

2021 (Predecessor). Operating margin decreased to negative 5.6% for the three months ended September 30, 2022 (Successor), compared with 10.3% for the three months ended September 24, 2021 ~~compared with 27.0% for~~(Predecessor). These decreases were primarily attributable to $17.9 million of fresh-start inventory-related expense and $13.8 million of inventory fair-value step-up expense during the three months ended September ~~25, 2020. The decrease~~30, 2022 (Successor), resulting in ~~operating income and margin was primarily attributable to~~ a ~~$30.2 million~~ decrease in gross profit ~~primarily driven by an increased competitive environment with respect to Other controlled substances,~~of $23.8 million, or 57.6%, partially offset by ~~decreases~~an increase of $14.5 million in ~~R&D and SG&A expenses.~~net sales.

Corporate and unallocated expenses. Corporate and unallocated expenses were $15.0 million and $20.8 million for the period July 2, 2022 through September 30, 2022 (Successor) and ~~$42.1~~the three months ended September 24, 2021 (Predecessor), respectively. Corporate and unallocated expenses decreased by $5.8 million for the three months ended September ~~24, 2021 and September 25, 2020, respectively. This decrease was primarily driven by the bankruptcy-related professional fees being classified as reorganization items, net, subsequent~~30, 2022 (Successor) compared to the Petition Date, in addition to cost containment initiatives and lower employee compensation costs. Comparatively, during the three months ended September 25, 2020, we incurred $13.4 million of opioid defense costs that were reflected in SG&A. The decrease was partially offset by the change in the fair value of our contingent consideration liabilities with a $2.1 million gain during three months ended September 24, 2021 ~~compared to a $8.1 million charge during the three months ended September 25, 2020.~~(Predecessor), which was primarily driven by continued cost containment initiatives.

Net Sales

Net sales by segment are shown in the following table (dollars in millions):


		Nine Months Ended							Successor		Predecessor		Non-GAAP		Predecessor		Non-GAAP
		September 24, 2021		September 25, 2020		Percentage Change			Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Combined Nine Months Ended September 30, 2022		Nine Months Ended September 24, 2021		Percentage Change
Specialty Brands	Specialty Brands	$	1,149.6	$	1,553.0	(26.0)	%	Specialty Brands	$	361.7	$	587.1	$	948.8	$	1,149.6	(17.5)	%
Specialty Generics	Specialty Generics	462.0		512.7		(9.9)		Specialty Generics	188.7		287.5		476.2		462.0		3.1
Segment net sales		1,611.6		2,065.7		(22.0)
Medicaid lawsuit (Note 12)		—		(535.1)		*
Net sales	Net sales	$	1,611.6	$	1,530.6	5.3		Net sales	550.4		$	874.6	$	1,425.0	$	1,611.6	(11.6)	%

*Not meaningful

Specialty Brands. Net sales for the period June 17, 2022 through September 30, 2022 (Successor) were $361.7 million. Net sales for the period January 1, 2022 through June 16, 2022 (Predecessor) and the nine months ended September 24, 2021 ~~decreased $403.4~~(Predecessor) were $587.1 million toand $1,149.6 million, respectively. Net sales decreased $200.8 million, or 17.5%, for the combined nine months ended September 30, 2022, compared ~~with $1,553.0 million for~~to the nine months ended September ~~25, 2020.~~24, 2021 (Predecessor). The decrease in combined net sales was primarily driven by a ~~$192.0~~decrease of $78.3 million, or ~~88.9%,~~23.1% in INOmax, a decrease ~~in Ofirmev driven by the loss~~ of ~~exclusivity at the end of fiscal 2020 and the entrance of generic competition during the nine months ended September 24, 2021. The decrease in net sales was also impacted by a $152.7~~$48.8 million, or ~~26.5%~~11.5%, ~~decrease~~ in Acthar Gel, ~~net sales driven by the marketplace impact~~a decrease of ~~the COVID-19 pandemic and continued payer scrutiny on overall specialty pharmaceutical spending~~$31.4 million, or 20.2%, in Amitiza, a decrease of $21.7 million, or 90.4%, in Ofirmev and a ~~$100.2~~decrease of $20.0 million, or ~~22.9%~~10.1%, ~~decrease~~ in INOmax due to increased competition. These decreases were partially offset by a $23.7 million, or 13.6%, increase in Therakos net sales driven by increased demand as the product begun to see a recovery from the impact of the COVID-19 pandemic during the first half of fiscal 2021 and a $17.6 million, or 12.7%, increase in Amitiza, primarily as a result of the royalty from Par Pharmaceutical, Inc., et al. (collectively Par) beginning in fiscal 2021.Therakos.

Net sales for Specialty Brands by geography were as follows (dollars in millions):


		Nine Months Ended							Successor		Predecessor		Non-GAAP		Predecessor		Non-GAAP
		September 24, 2021		September 25, 2020		Percentage Change			Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Combined Nine Months Ended September 30, 2022		Nine Months Ended September 24, 2021		Percentage Change
U.S.	U.S.	$	1,078.8	$	1,421.6	(24.1)	%	U.S.	$	339.4	$	547.1	$	886.5	$	741.3	19.6	%
Europe, Middle East and Africa	Europe, Middle East and Africa	55.7		97.2		(42.7)		Europe, Middle East and Africa	19.3		29.2		48.5		37.3		30.0
Other	Other	15.1		34.2		(55.8)		Other	3.0		10.8		13.8		11.3		22.1
Net sales	Net sales	$	1,149.6	$	1,553.0	(26.0)		Net sales	$	361.7	$	587.1	$	948.8	$	789.9	20.1	%

4554

Net sales for Specialty Brands by key products were as follows (dollars in millions):


		Nine Months Ended							Successor		Predecessor		Non-GAAP		Predecessor		Non-GAAP
		September 24, 2021		September 25, 2020		Percentage Change			Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Combined Nine Months Ended September 30, 2022		Nine Months Ended September 24, 2021		Percentage Change
Acthar Gel	Acthar Gel	$	423.9	$	576.6	(26.5)	%	Acthar Gel	$	153.2	$	221.9	$	375.1	$	423.9	(11.5)	%
INOmax	INOmax	338.3		438.5		(22.9)		INOmax	94.2		165.8		260.0		338.3		(23.1)
Ofirmev	Ofirmev	24.0		216.0		(88.9)		Ofirmev	(0.2)		2.5		2.3		24.0		(90.4)
Therakos	Therakos	197.8		174.1		13.6		Therakos	68.2		109.6		177.8		197.8		(10.1)
Amitiza	Amitiza	155.8		138.2		12.7		Amitiza	42.9		81.5		124.4		155.8		(20.2)
Other	Other	9.8		9.6		2.1		Other	3.4		5.8		9.2		9.8		(6.1)
Specialty Brands	Specialty Brands	$	1,149.6	$	1,553.0	(26.0)		Specialty Brands	$	361.7	$	587.1	$	948.8	$	1,149.6	(17.5)	%

Specialty Generics. Net sales for the period June 17, 2022 through September 30, 2022 (Successor) were $188.7 million. Net sales for the period January 1, 2022 through June 16, 2022 (Predecessor) and the nine months ended September 24, 2021 ~~decreased $50.7~~(Predecessor) were $287.5 million and $462.0 million, respectively. Net sales increased $14.2 million, or ~~9.9%~~3.1%, ~~to $462.0 million,~~for the combined nine months ended September 30, 2022, compared ~~with $512.7 million for~~to the nine months ended September ~~25, 2020.~~24, 2021 (Predecessor). The ~~decrease~~increase in combined net sales was primarily driven by an increase in API of $18.2 million, partially offset by a decrease in ~~Other controlled substances~~generics of ~~$35.9 million, driven by an increased competitive environment, in addition to decreases in hydrocodone-related products and acetaminophen of $11.2 million and $7.7 million, respectively.~~$4.0 million.

Net sales for Specialty Generics by geography were as follows (dollars in millions):


		Nine Months Ended							Successor		Predecessor		Non-GAAP		Predecessor		Non-GAAP
		September 24, 2021		September 25, 2020		Percentage Change			Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Combined Nine Months Ended September 30, 2022		Nine Months Ended September 24, 2021		Percentage Change
U.S.	U.S.	$	387.2	$	414.4	(6.6)	%	U.S.	$	150.8	$	237.1	$	387.9	$	264.9	46.4	%
Europe, Middle East and Africa	Europe, Middle East and Africa	65.0		87.8		(26.0)		Europe, Middle East and Africa	34.6		44.4		79.0		43.2		82.9
Other	Other	9.8		10.5		(6.7)		Other	3.3		6.0		9.3		6.4		45.3
Net sales	Net sales	$	462.0	$	512.7	(9.9)		Net sales	$	188.7	$	287.5	$	476.2	$	314.5	51.4	%

Net sales for Specialty Generics by key products were as follows (dollars in millions):

Nine Months Ended
September 24,
2021 September 25,
2020 Percentage Change
Hydrocodone (API) and hydrocodone-containing tablets $ 60.7 $ 71.9 (15.6) %
Oxycodone (API) and oxycodone-containing tablets 49.5 48.0 3.1
Acetaminophen (API) 146.8 154.5 (5.0)
Other controlled substances 187.9 223.8 (16.0)
Other 17.1 14.5 17.9
Specialty Generics $ 462.0 $ 512.7 (9.9)


	Successor		Predecessor		Non-GAAP		Predecessor		Non-GAAP
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Combined Nine Months Ended September 30, 2022		Nine Months Ended September 24, 2021		Percentage Change
Opioids	$	55.2	$	88.8	$	144.0	$	155.0	(7.1)	%
ADHD	13.4		17.5		30.9		24.8		24.6
Addiction treatment	19.1		30.0		49.1		47.7		2.9
Other	3.0		4.9		7.9		8.4		(6.0)
Generics	90.7		141.2		231.9		235.9		(1.7)
Controlled substances	21.4		37.6		59.0		62.4		(5.4)
APAP	69.2		96.5		165.7		146.8		12.9
Other	7.4		12.2		19.6		16.9		16.0
API	98.0		146.3		244.3		226.1		8.0
Specialty Generics	$	188.7	$	287.5	$	476.2	$	462.0	3.1	%

4655

Operating Loss

Operating income by segment and as a percentage of segment net sales ~~were as follows (dollars~~for the period June 17, 2022 through September 30, 2022 (Successor), the period January 1, 2022 through June 16, 2022 (Predecessor) and the nine months September 24, 2021 (Predecessor) is shown in ~~millions)~~the following table (dollars in millions):


		Nine Months Ended									Successor		Predecessor		Non-GAAP		Predecessor
		September 24, 2021				September 25, 2020					Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Combined Nine Months Ended September 30, 2022		Nine Months Ended September 24, 2021
Specialty Brands(1)	Specialty Brands(1)	$	588.6	51.2	%	$	765.0	49.3	%	Specialty Brands(1)	$	48.2	$	267.2	$	315.4	$	588.6
Specialty Generics(2)	Specialty Generics(2)	73.8		16.0		155.5		30.3		Specialty Generics(2)	(8.7)		65.3		56.6		73.8
Segment operating income	Segment operating income	662.4		41.1		920.5		44.6		Segment operating income	39.5		332.5		372.0		662.4
Unallocated amounts:	Unallocated amounts:									Unallocated amounts:
Corporate and unallocated expenses ~~(1)~~(3)	Corporate and unallocated expenses ~~(1)~~(3)	(69.1)				(152.3)				Corporate and unallocated expenses ~~(1)~~(3)	(15.9)		(48.2)		(64.1)		(69.1)
Depreciation and amortization	Depreciation and amortization	(506.1)				(675.5)				Depreciation and amortization	(196.9)		(321.8)		(518.7)		(506.1)
Share-based compensation	Share-based compensation	(8.4)				(17.6)				Share-based compensation	(0.5)		(1.7)		(2.2)		(8.4)
Restructuring charges, net	Restructuring charges, net	(17.5)				(15.8)				Restructuring charges, net	(3.3)		(9.6)		(12.9)		(17.5)
Non-restructuring impairment charges	Non-restructuring impairment charges	(64.5)				(63.5)				Non-restructuring impairment charges	—		—		—		(64.5)
Separation costs ~~(2)~~(4)	Separation costs ~~(2)~~(4)	(1.0)				(75.0)				Separation costs ~~(2)~~(4)	(16.1)		(9.0)		(25.1)		(1.0)
R&D upfront payment (3)		—				(5.0)
Opioid-related litigation settlement (loss) gain (Note 12)		(125.0)				34.1
Medicaid lawsuit (Note 12)		—				(640.2)
Opioid-related litigation settlement loss										Opioid-related litigation settlement loss	—		—		—		(125.0)
Bad debt expense - customer bankruptcy										Bad debt expense - customer bankruptcy	(5.8)		—		(5.8)		—
Total operating loss	Total operating loss	$	(129.2)			$	(690.3)			Total operating loss	$	(199.0)	$	(57.8)	$	(256.8)	$	(4.2)

(1)Includes $136.6 million of inventory fair-value step-up expense during the period from June 17, 2022 through September 30, 2022 (Successor).

(2)Includes $20.3 million of fresh-start inventory-related expense primarily driven by the Company's change in accounting estimate as disclosed in Note 1 of the notes to the unaudited condensed consolidated financial statements and $16.6 million of inventory fair-value step-up expense during the period from June 17, 2022 through September 30, 2022 (Successor).

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

~~(2)~~(4)Represents costs included in SG&A, ~~expenses,~~ primarily related to expenses incurred related to severance for the former CEO and certain former executives of the Predecessor and the Predecessor directors' and officers' insurance policies, in addition to professional fees and costs incurred ~~in preparation for the Chapter 11 proceedings. As~~as we explore potential sales of ~~the Petition Date, professional fees directly related~~non-core assets to ~~the Chapter 11 proceedings that were previously reflected as separation costs are being classified on a go-forward basis as reorganization items, net.~~

~~(3)Represents R&D expense incurred related to an upfront payment made to acquire product rights in Japan for terlipressin.~~enable further deleveraging post-emergence.

Specialty Brands. Operating income for the period June 17, 2022 through September 30, 2022 (Successor) was $48.2 million. Operating income for the period January 1, 2022 through June 16, 2022 (Predecessor) and the nine months September 24, 2021 (Predecessor) was $267.2 million and $588.6 million, respectively. Operating income decreased $273.2 million, or 46.4%, for the combined nine months ended September 30, 2022 when compared to the nine months ended September 24, 2021 (Predecessor). Operating margin decreased ~~$176.4 million~~ to ~~$588.6 million, compared with $765.0 million~~33.2% for the combined nine months ended September ~~25, 2020. Operating margin increased to~~30, 2022 from 51.2% for the nine months ended September 24, 2021 ~~from 49.3% for the nine months ended September 25, 2020. The decrease~~(Predecessor). These decreases in operating income ~~was~~and margin were primarily driven by the ~~$403.4~~$200.8 million, or ~~26.0%~~17.5%, decrease in combined net sales and a change in product mix over the same period, coupled with $136.6 million of inventory fair-value step-up expense during the period June 17, 2022 through September 30, 2022 (Successor), which resulted in a ~~$331.3~~$315.9 million decrease in combined gross profit. The decrease in combined gross profit was partially offset by $13.2 million of royalty expense incurred during the nine months ended September 24, 2021 that did not recur during the period January 1, 2022 through June 16, 2022 (Predecessor) or the period June 17, 2022 through September 30, 2022 (Successor) as these costs were classified as reorganization items, net as a result of the royalty obligation discharges as described within Note 13 of the notes to the unaudited condensed consolidated financial statements. Additionally, combined SG&A expenses increased $10.6 million primarily driven by a foreign currency remeasurement loss of $14.3 million during the combined nine months ended September 30, 2022 compared to a loss of $7.6 million during the nine months ended September 24, 2021 (Predecessor). Partially offsetting the decrease in operating income and serving to increase operating margin was a ~~$97.2~~$53.2 million, or ~~27.0%~~40.0%, decrease in ~~SG&A~~combined R&D expenses ~~primarily~~ driven by ~~the bankruptcy-related legal fees being classified as reorganization items, net, subsequent to the Petition Date, in addition to~~continued cost containment ~~initiatives and lower employee compensation costs and a $57.6 million, or 30.3%, decrease in R&D expenses.~~initiatives.

Specialty Generics. Operating loss for the period June 17, 2022 through September 30, 2022 (Successor) was $8.7 million. Operating income for the period January 1, 2022 through June 16, 2022 (Predecessor) and the nine months September 24, 2021 (Predecessor) was $65.3 million and $73.8 million, respectively. Operating income decreased $17.2 million, or 23.3%, for the combined nine months ended September 30, 2022 when compared to the nine months ended September 24, 2021 ~~decreased $81.7 million~~(Predecessor). Operating margin increased to ~~$73.8 million, compared with $155.5 million~~11.9% for the combined nine months ended September ~~25, 2020. Operating margin decreased to~~30, 2022, compared with 16.0% for the nine months ended September 24, 2021 ~~compared with 30.3% for the nine months ended September 25, 2020.~~(Predecessor). The decrease in combined operating income and operating margin was primarily attributable to $20.3 million of fresh-start inventory-related expense primarily driven by the Company's change in accounting estimate and $16.6 million of inventory fair-value step-up expense during the period from June 17, 2022 through September 30, 2022 (Successor), partially offset by a ~~$76.7~~$14.2 million increase to combined net sales resulting in a net decrease in combined gross profit of

$26.4 million, or 16.6%. The decrease in combined operating income and operating margin was also partially offset by a $9.7 million decrease in ~~gross profit, primarily~~combined R&D expense driven by ~~an increased competitive environment with respect to Other controlled substances, coupled with an increase in R&D expense of $5.2 million.~~continued cost containment initiatives.

Corporate and unallocated expenses. Corporate and unallocated expenses were $15.9 million, $48.2 million and $69.1 million for the period June 17, 2022 through September 30, 2022 (Successor), the period January 1, 2022 through June 16, 2022 (Predecessor) and ~~$152.3~~the nine months September 24, 2021 (Predecessor), respectively. Corporate and unallocated expenses decreased by $5.0 million for the combined nine months ended September 30, 2022 compared to the nine months ended September 24, ~~2021~~2021. The combined decrease in corporate and ~~September 25, 2020, respectively.~~unallocated expenses was predominately driven by continued cost containment initiatives. This decrease was ~~primarily driven~~partially offset by ~~the bankruptcy-related professional fees being classified as reorganization items, net, subsequent~~an $11.1 million increase to ~~the Petition Date, in addition to cost containment initiatives and lower employee compensation costs. Comparatively,~~certain of our environmental liabilities during the ~~nine months ended September 25, 2020, we incurred $53.1~~period January 1, 2022 through June 16, 2022 (Predecessor), coupled with a $7.6 million ~~of opioid defense costs that were reflected in SG&A. The decrease also included~~gain related to the change in the fair value of our contingent consideration liabilities ~~with a $7.6 million gain~~ during the nine months ended September 24, 2021 compared to a ~~$2.4~~$0.8 million ~~charge~~gain during the ~~nine months ended~~period June 17, 2022 through September ~~25, 2020.~~30, 2022 (Successor).

Liquidity and Capital ~~Resources~~Resources.

Significant factors driving our liquidity position include cash flows generated from operating activities, financing transactions, capital expenditures, cash paid in connection with legal settlements (refer to Note 2 to the notes to the unaudited condensed consolidated financial statements), acquisitions and licensing agreements and cash received as a result of our divestitures. We 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,~~Pursuant to the Plan, we ~~voluntarily initiated~~will make payments of $200.0 million and $16.5 million, inclusive of interest, related to our opioid and Acthar Gel-related settlements, respectively, upon the ~~Chapter 11 Cases~~one-year anniversary of the Effective Date. Additionally, we expect to receive CARES Act tax refunds totaling $135.9 million, excluding related interest, within the next twelve months.

In September 2022, our Board of Directors authorized us to utilize certain cash to reduce our outstanding debt at a discount. As market conditions warrant, we may from time to time repurchase debt securities issued by us, in the ~~Bankruptcy Court to modify~~open market, in privately negotiated transactions, by tender offer or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our ~~capital structure, including restructuring portions of our~~liquidity requirements and other factors. During the period June 17, 2022 through September 30, 2022 (Successor), we repurchased debt and resolve potential legal liabilities, including but not limited to those in connection with the Amended Proposed Opioid-Related Litigation Settlement and the Proposed Acthar Gel-Related Settlement. We intend to use the

~~Chapter 11 process to provide a fair, orderly, efficient and legally binding mechanism to implement a plan of reorganization,~~ 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 plan of reorganization 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 may not provide adequate resources to fund our working capital needs, capital expenditures and strategic investments for the foreseeable future.

~~Under our credit agreement, we are required to prepay our term loans in an amount equal~~aggregated to a ~~specified percentage~~principal amount of ~~excess cash flow. After receiving Bankruptcy Court approval, we made a mandatory prepayment in an amount equal~~$8.2 million and $1.0 million related to ~~$114.0 million during the nine months ended September 24, 2021.~~our 10.00% second lien senior secured notes due 2029 and 10.00% second lien senior secured notes due 2025, respectively.

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


		Nine Months Ended					Successor		Predecessor
		September 24, 2021		September 25, 2020			Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Net cash from:	Net cash from:					Net cash from:
Operating activities	Operating activities	$	406.4	$	294.7	Operating activities	$	19.3	$	(642.3)	$	406.4
Investing activities	Investing activities	(22.1)		(36.4)		Investing activities	49.6		(33.0)		(22.1)
Financing activities	Financing activities	(128.2)		(180.6)		Financing activities	(17.3)		(278.7)		(128.2)
Effect of currency exchange rate changes on cash and cash equivalents	Effect of currency exchange rate changes on cash and cash equivalents	(0.9)		0.2		Effect of currency exchange rate changes on cash and cash equivalents	(3.7)		(3.9)		(0.9)
Net increase in cash and cash equivalents		$	255.2	$	77.9
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	$	47.9	$	(957.9)	$	255.2

Operating Activities

Net cash provided by operating activities of $19.3 million for the period June 17, 2022 through September 30, 2022 (Successor) was attributable to a net loss of $348.6 million, adjusted for non-cash items of $264.6 million, driven by depreciation and amortization of $196.9 million and accretion on our settlement obligations and debt of $72.3 million, partially offset with $103.3 million of cash inflow from net changes in working capital. The change in working capital was primarily driven by a $150.9 million decrease in inventory primarily driven by the fair-value step-up expense of $153.2 million and a $9.2 million decrease in accounts receivable primarily due to lower net sales, partially offset by a $27.8 million net cash outflow related to an increase in prepaid income taxes coupled with a $17.4 million net cash outflow in other working capital driven by a decrease in our accrued liabilities and a $11.6 million net cash outflow related to a decrease in accounts payable.

Net cash used in operating activities of $642.3 million for the period January 1, 2022 through June 16, 2022 (Predecessor) was attributable to a net loss of $313.1 million, adjusted for non-cash items of $311.2 million, driven by non-cash reorganization items of $425.4 million and depreciation and amortization of $321.8 million, partially offset by a $473.0 million change in net deferred tax

assets coupled with cash used in working capital of $640.4 million. The change in working capital was primarily driven by a $629.0 million cash outflow related to the payment of claims as a result of the Plan coupled with a $2.5 million net cash outflow related to a decrease in other working capital, a $26.9 million outflow in income taxes primarily driven by a decrease in income taxes payable and a $33.2 million increase in inventory, partially offset by a $49.8 million decrease in accounts receivable primarily due to lower net sales.

Net cash provided by operating activities of $406.4 million for the nine months ended September 24, 2021 (Predecessor) was attributable to a net loss of $513.4 million, adjusted for non-cash items of $577.2 million driven by depreciation and amortization of $506.1 million and a non-cash impairment charge of $64.5 million. This net loss was also offset by cash provided from a net investment in working capital of $342.6 million, which was primarily driven by an ~~increase to the opioid-related litigation settlement liability of $125.0 million, a~~ $105.7 million decrease in accounts receivable, an $40.4 million net cash inflow related to other assets and liabilities primarily ~~due to lower net sales,~~driven by an increase in accrued professional fees and a $92.5 million decrease in net tax receivables driven by the receipt of CARES Act income tax refunds, partially offset by an increase in prepaid income ~~taxes, and a $40.4 million net cash inflow related to other assets and liabilities primarily driven by an increase in accrued professional fees.~~taxes. These inflows were partially offset by a $30.9 million increase in inventory.

Net cash provided by operating activities of $294.7 million for the nine months ended September 25, 2020 was primarily 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 and a $304.0 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 Medicaid lawsuit. Also included within this change in working capital was an $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.

Investing Activities

Net cash provided by investing activities was $49.6 million for the period June 17, 2022 through September 30, 2022 (Successor) primarily driven by the sale of our PRV for $100.0 million in which we received from the buyer $65.0 million and the buyer remitted $35.0 million to the General Unsecured Claims Trustee pursuant to the terms of (i) the Plan, and (ii) the General Unsecured Claims Trust Agreement entered into in connection with the Plan as previously discussed, partially offset by capital expenditures of $15.6 million.

Net cash used in investing activities was $33.0 million for the period January 1, 2022 through June 16, 2022 (Predecessor), primarily driven by $33.4 million in capital expenditures.

Net cash used in investing activities was $22.1 million for the ~~nine~~three months ended September 24, 2021 ~~compared with $36.4 million for the nine months ended September 25, 2020. The $14.3 million decrease was~~(Predecessor) primarily attributable to $39.2 million in capital expenditures, partially offset by $16.5 million in proceeds received ~~during the nine months ended September 24, 2021~~ related to the sale of a portion of our Hemostasis business in fiscal ~~2018 and a $3.2 million decrease in capital expenditures, partially offset by a $6.4 million cash receipt during the nine months ended September 25, 2020 related to certain rabbi trust settlements.~~ 2018.

Under our term loan credit agreement and our notes, 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~~loans and offer to ~~"Debt and Capitalization" within this Item 2. Management's Discussion and Analysis~~repurchase certain of ~~Financial Condition and Results of Operations.~~

our notes.

Financing Activities

Net cash used in financing activities was $17.3 million for the period June 17, 2022 through September 30, 2022 (Successor) driven entirely by debt repayments of $12.7 million on our variable-rate term loans and open market debt repurchases at a discount that aggregated to a total principal amount of $9.2 million.

Net cash used in financing activities was $278.7 million for the period January 1, 2022 through June 16, 2022 (Predecessor) which was inclusive of debt repayments of $904.6 million inclusive of the repayment of our predecessor revolving credit facility of $900.0 million, as well as $24.1 million of debt issuance costs, partially offset by $650.0 million in proceeds from the 11.50% first lien senior secured notes due December 2028.

Net cash used in financing activities was $128.2 million for the nine months ended September 24, 2021 ~~compared with $180.6~~(Predecessor) driven entirely by debt repayments, which included a $114.0 million for the nine months ended September 25, 2020. The $52.4 million decrease was primarily impacted by payments of contingent consideration related to the acquisitions of Questcor and Stratatech Corporation during the nine months ended September 25, 2020 of $25.0 million and $20.0 million, respectively, $9.3 million in debt issuance costs incurred during the nine months ended September 25, 2020 and a $6.4 million decrease in debt repayments.mandatory prepayment on our predecessor senior secured term loans.

~~Debt~~Commitments and ~~Capitalization~~Contingencies

As of September 24, 2021, the total debt principal was $5,155.1 million, of which $3,760.1 million was classified within LSTC on the unaudited condensed consolidated balance sheet. The total debt principal as of September 24, 2021 was comprised of the following:Emergence from Voluntary Reorganization


~~Variable-rate instruments:~~
~~Term loan due September 2024~~	$	~~1,403.9~~
~~Term loan due February 2025~~	~~372.6~~

~~Revolving credit facility~~	~~900.0~~
~~Fixed-rate instruments~~	~~2,478.6~~
~~Debt principal~~	$	~~5,155.1~~

The variable-rate term loan interest rates are based on 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 24, 2021, our fixed-rate instruments have a weighted-average interest rate of 7.15% and pay interest at various dates throughout the fiscal year. As of September 24, 2021, 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 conditions warrant, and subject to limitations under Chapter 11, we may repurchase debt securities issued by us, in the open market, in privately negotiated transactions, by tender offer or otherwise.

The commencement of the Chapter 11 Cases on October 12, 2020 constituted an event of default under certain of our debt agreements. As of September 24, 2021, other than any defaults relating to the Chapter 11 Cases, we were in full compliance with the provisions and covenants associated with our debt agreements. Accordingly, all long-term debt was classified as current on the unaudited condensed consolidated balance sheet as of September 24, 2021. However, any efforts to enforce payment obligations under the debt instruments are automatically stayed as a result of the Chapter 11 Cases. See Note 2 ~~and Note 10~~ of the notes to the unaudited condensed consolidated financial statements for further ~~information.~~information on the Plan and emergence from Chapter 11 on the Effective Date as of September 30, 2022 (Successor).

~~Commitments and Contingencies~~

Legal Proceedings

See Note 1213 of the notes to the unaudited condensed consolidated financial statements for a description of the litigation, legal and administrative proceedings and claims as of September ~~24, 2021.~~30, 2022 (Successor).

Guarantees

In disposing of assets or businesses, we have ~~historically~~from time to time 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~~the 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 1112 of the notes to the unaudited condensed consolidated financial statements.

~~Off-Balance Sheet Arrangements~~

As of September 24, 2021, we had various letters of credit, guarantees and surety bonds totaling $34.2 million. There has been no change in our off-balance sheet arrangements during the nine months ended September 24, 2021.

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~~make estimates and assumptions that affect the reported amounts of assets ~~liabilities, revenue~~ and ~~expenses and related~~liabilities, disclosure of contingent assets and ~~liabilities.~~liabilities and the reported amounts of revenues and expenses.

We believe that our critical accounting ~~policies for revenue recognition, intangible assets, acquisitions, contingencies and income taxes~~estimates are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. ~~During~~Refer to Note 1 of the ~~nine months ended September 24, 2021, there were no significant~~notes to the unaudited condensed consolidated financial statements for the changes to ~~these policies or in~~ the underlying accounting assumptions and estimates used in the ~~above~~ critical accounting ~~policies from those~~estimates disclosed in our Annual Report on Form 10-K for the year ended December ~~25, 2020.~~31, 2021 (Predecessor).

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, the effects of competition, 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," "approximately," "estimate," "predict," "potential," "continue," "may," "could," "should" or the negative of these terms or similar expressions. Forward-looking statement include, but are not limited to, statements regarding:

•the comparability of our post-emergence financial results to our historical results and the projections we filed with the Bankruptcy Court;

•changes in our business strategy that may be implemented by our Board of Directors;

•the listing of our ordinary shares on NYSE American;

•the emergence of an active trading market for our ordinary shares and fluctuations in their market price and trading volume;

•our tax treatment by the IRS under IRC Section 7874 and Section 382;

•our repurchases of debt securities;

•the effects of the Chapter 11 Cases on our liquidity, results of operations and businesses and those of our subsidiaries;

•governmental investigations and inquiries, regulatory actions and lawsuits brought against us by government agencies and private parties with respect to our historical commercialization of opioids, including the agreement set forth in the Plan regarding a global settlement to resolve all opioid-related claims;

•the settlement set forth in the Plan with governmental parties to resolve certain disputes relating to Acthar Gel;

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

•the possibility that we may be unable to achieve our business and strategic goals even now that the Plan is successfully consummated;

•the non-dischargeability of certain claims against us as part of the bankruptcy process;

•developing, funding and executing our business plan and continuing as a going concern;

•our post-bankruptcy capital structure;

•scrutiny from governments, legislative bodies and enforcement agencies related to sales, marketing and pricing practices;

•pricing pressure on certain of our products due to legal changes or changes in insurers’ reimbursement practices resulting from recent increased public scrutiny of healthcare and pharmaceutical costs;

•the impact of the outbreak of the COVID-19 coronavirus;

•the reimbursement practices of governmental health administration authorities, private health coverage insurers and other third-party payers;

•complex reporting and payment obligations under the Medicare and Medicaid rebate programs and other governmental purchasing and rebate programs;

•cost containment efforts of customers, purchasing groups, third-party payers and governmental organizations;

•changes in or failure to comply with relevant laws and regulations;

•our and our partners’ ability to successfully develop or commercialize new products or expand commercial opportunities;

•our ability to navigate price fluctuations;

•competition;

•our and our partners’ ability to protect intellectual property rights;

•limited clinical trial data for Acthar Gel;

•clinical studies and related regulatory processes;

•product liability losses and other litigation liability;

•material health, safety and environmental liabilities;

•potential indemnification liabilities to Covidien pursuant to the separation and distribution agreement;

•business development activities;

•retention of key personnel;

•the effectiveness of information technology infrastructure including cybersecurity and data leakage risks;

•customer concentration;

•our reliance on certain individual products that are material to our financial performance;

•our ability to receive procurement and production quotas granted by the U.S. Drug Enforcement Administration;

•complex manufacturing processes;

•conducting business internationally;

•our ability to achieve expected benefits from restructuring activities;

•our significant levels of intangible assets and related impairment testing;

•labor and employment laws and regulations;

•natural disasters or other catastrophic events;

•our substantial indebtedness, our ability to generate sufficient cash to reduce our indebtedness and our potential need and ability to incur further indebtedness;

•our ability to generate sufficient cash to service indebtedness even now that the prepetition indebtedness has been restructured;

•restrictions on our operations contained in the agreements governing our indebtedness;

•our variable rate indebtedness;

•future changes to U.S. and foreign tax laws or the impact of disputes with governmental tax authorities; and

•the impact of Irish laws.

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~~statements due to a number of factors in addition to those discussed elsewhere herein, including the risk factors included within Part I, Item ~~1A.~~1A of our Annual Report on Form 10-K for the fiscal year ended December ~~25, 2020~~31, 2021 (Predecessor) and within Part II, Item 1A of this Quarterly Report on Form 10-Q, ~~could cause~~and the factors discussed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section included in Part I, Item 2 of this Quarterly Report on Form 10-Q and Part II, Item 7 in our ~~results to differ materially from those expressed in forward-looking statements.~~Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (Predecessor). 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. Given these uncertainties, one should not put undue reliance on any forward-looking statements.


Item 3.			Quantitative and Qualitative Disclosures About Market Risk.

~~Our operations include activities in~~We are a smaller reporting company as defined by Item 10 of Regulations S-K and are not required to provide 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 24, 2021, our outstanding debt included $1,776.5 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 $6.7 million.

The remaining outstanding debt as of September 24, 2021 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 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 24, 2021 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 $0.7 million aggregate potential as of September 24, 2021. 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.information otherwise required under this Item.


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")~~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. Based on that evaluation, our CEO and CFO concluded that, as of that date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the ~~quarter~~three months ended September ~~24, 2021~~30, 2022 (Successor) that have materially affected, or are likely to materially affect, our internal control over financial reporting.

5161

PART II. OTHER INFORMATION


Item 1.			Legal Proceedings.

See Note 1213 of the notes to the unaudited condensed consolidated financial statements for ~~further~~a description of the litigation, legal and administrative proceedings and claims as of September ~~24, 2021.~~30, 2022 (Successor), which is incorporated herein by reference.


Item 1A.			Risk Factors.

~~There~~Except for the risk factors included below, there have been no 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 ~~25, 2020,~~31, 2021 (Predecessor), filed with the SEC on March ~~10, 2021.~~15, 2022.

We recently emerged from bankruptcy, which could adversely affect our business and relationships.

Our having filed for bankruptcy, notwithstanding our recent emergence from the resulting bankruptcy proceedings, could adversely affect our business and relationships with customers, vendors, contractors, employees or suppliers. Due to uncertainties, many risks exist, including the following:

•the ability to attract, motivate, and/or retain key executives and employees may be adversely affected;

•employees may be more easily attracted to other employment opportunities;

•competitors may take business away from us, and our ability to retain customers may be negatively impacted; and

•suppliers may not be willing to do business with us at all or on acceptable terms.

The occurrence of one or more of these events could have a material and adverse effect on our operations, financial condition and reputation and we cannot assure you that having been subject to bankruptcy proceedings will not adversely affect our operations in the future.

Our actual financial results after emergence from bankruptcy may not be comparable to our projections filed with the Bankruptcy Court or otherwise made public in the course of the Chapter 11 Cases.

In connection with the disclosure statement we filed with the Bankruptcy Court and the hearing to consider confirmation of our Plan (as well as in certain other filings), we prepared projected financial information for various reasons, including to demonstrate to the Bankruptcy Court the feasibility of the Plan and our ability to continue operations upon our emergence from Chapter 11. Those projections were prepared solely for the purposes stated therein and have not been, and will not be, updated on an ongoing basis and should not be relied upon by investors. At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to then prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks and the assumptions underlying the projections or valuation estimates may prove to be wrong in material respects. Actual results may vary significantly from those contemplated by the projections. As a result, investors should not rely on those projections.

Our historical financial statements will not be comparable to the information contained in our financial statements after the application of fresh-start accounting.

Upon emergence from bankruptcy, we qualified for and adopted fresh-start accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 852, Reorganizations, which on the Effective Date resulted in a new entity, the Successor, for financial reporting purposes, with no beginning retained earnings or deficit as of the fresh-start reporting date. Fresh-start accounting requires that new fair values be established for our assets, liabilities, and equity as of the Effective Date. The Effective Date fair values of the Successor's assets and liabilities may differ materially from their recorded values as reflected on the historical balance sheets of the Predecessor. In addition, as a result of the application of fresh-start accounting and the effects of the implementation of the Plan, the financial statements for the period after June 16, 2022 will not be comparable with the financial statements prior to and including June 16, 2022. Our unaudited condensed consolidated financial statements after the Effective Date are not comparable with the consolidated financial statements on or before that date and may be different from historical trends. This

will make it difficult for shareholders to assess our performance in relation to prior periods. See Note 3 "Fresh-Start Accounting" to our unaudited condensed consolidated financial statements included in Item 1 of Part I of this report for additional information.

Upon our emergence from bankruptcy, our Board of Directors was changed and may implement changes in our business strategy that could affect the scope and results of our operations.

Our corporate business strategy is subject to continued development, evaluation and implementation by our management and Board of Directors. Pursuant to the Plan, the composition of our Board of Directors changed significantly following our emergence from bankruptcy. Our Board of Directors is now made up of nine directors, with a new non-executive Chairman of the Board, all of whom have not previously served on our Board of Directors. The new directors have different backgrounds, experiences and perspectives from those individuals who previously served on the Board of Directors of the Company prior to our emergence from bankruptcy and, thus, may have different views on the issues that will determine our future, including our strategic plans and priorities. The Board of Directors may determine, from time to time, to implement changes in our business strategy which may affect our operations and the future strategy and plans of the Company and differ materially from those of the past. There is, however, no guarantee that the strategic initiatives and plans, whether current or future, of the Board of Directors will be implemented in a timely manner or at all and, consequently, there is no guarantee that the operational and financial objectives of the Board of Directors will be achieved in a timely manner or at all.

The ability to attract and retain key personnel is critical to the success of our business and may be affected by our emergence from bankruptcy.

The success of our business depends on key personnel. The ability to attract and retain these key personnel may be affected by our emergence from bankruptcy, the uncertainties currently facing the business and changes we may make to the organizational structure to adjust to changing circumstances. Any potential delays in adopting our management incentive plan and other executive benefits and compensation may make it difficult to retain key personnel and we may need to enter into retention or other arrangements that could be costly to maintain. If executives, managers or other key personnel resign, retire or are terminated, or their service is otherwise interrupted, we may not be able to replace them in a timely manner and we could experience significant declines in productivity.

We have contractual and court-ordered compliance obligations that if violated could result in exclusion from participation in federal healthcare programs and monetary, injunctive or other sanctions.

In March 2022, we entered into a Corporate Integrity Agreement (“CIA”) with the Office of Inspector General of the Department of Health and Human Services (OIG-HHS). The CIA has a five-year term and requires, among other things, enhancements to our compliance program, fulfillment of self-reporting, monitoring and training obligations, management certifications and resolutions from the Mallinckrodt board of directors. In addition, we are required to retain an independent review organization to conduct annual reviews of certain Company systems and transactions related to Specialty Brands government pricing and patient assistance activities. Complying with the CIA requires the expenditure of significant resources and management time. If we fail to comply with the terms of the CIA, we may be subject to significant monetary penalties and/or exclusion from participation in federal health care programs, including Medicare.

Additionally, a failure to meet the requirements or terms of an injunction entered by the Bankruptcy Court placing obligations on certain Mallinckrodt entities with respect to the operation of their opioid business (Operating Injunction) could lead to adverse action by the Bankruptcy Court, one or more State or Territory Attorneys General, or other enforcement authorities. Such actions may result in monetary, injunctive or other sanctions, as well as increased legal fees and costs associated with such actions. Such actions and associated violations may also increase the Company’s risk for future lawsuits or other actions by third parties related to the opioid business.

The United States could treat Mallinckrodt plc (parent corporation) as a U.S. taxpayer under IRC Section 7874.

Following the emergence from bankruptcy, Mallinckrodt plc continues to be an Irish tax resident. The Internal Revenue Service ("IRS") may, however, assert that Mallinckrodt plc should be treated as a U.S. corporation for U.S. federal income tax purposes pursuant to IRC Section 7874. For U.S. federal income tax purposes, a corporation is generally considered to be tax resident in the jurisdiction of its organization or incorporation. Because Mallinckrodt plc is an Irish incorporated entity, it would generally be classified as a foreign corporation under these rules. IRC Section 7874 provides an exception to this general rule under which a foreign corporation may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes if the following requirements are met: (i) the foreign corporation completes the direct or indirect acquisition of substantially all of the assets held directly or indirectly by a U.S. corporation (including the indirect acquisition of assets of the U.S. corporation by acquiring the outstanding shares of the U.S. corporation), (ii) the former shareholders of the acquired U.S. corporation hold at least 80% (or 60% in

certain circumstances) of the shares of the foreign acquiring corporation, and (iii) the foreign corporation's "expanded affiliated group" does not have substantial business activities in the foreign corporation's country of organization or incorporation compared to the expanded affiliated group's worldwide activities. Although it is not free from doubt, we believe that after implementation of the plan of reorganization, Mallinckrodt plc should not be treated as acquiring directly or indirectly substantially all of the properties of a U.S. corporation and, as a result, Mallinckrodt plc is not expected to be treated as a U.S. corporation or otherwise subject to the adverse tax consequences of IRC Section 7874. The law and the Treasury Regulations promulgated under IRC Section 7874 are, however, unclear and there can be no assurance that the IRS will agree with this conclusion. If it is determined that IRC Section 7874 is applicable, Mallinckrodt plc would be treated as a U.S. corporation for U.S. federal income tax purposes which could result in additional adverse tax consequences. In addition, although Mallinckrodt plc would be treated as a U.S. corporation for U.S. federal income tax purposes, it would also be considered an Irish tax resident for Irish tax and other non-U.S. tax purposes.

The IRS may interpret Section 382 limitation and CODI attribution rules differently.

In general, Section 382 of the IRC, provides an annual limitation with respect to the ability of a corporation to utilize its tax attributes, as well as certain built-in-losses ("BILs"), against future taxable income in the event of a change in ownership. Emergence from Chapter 11 bankruptcy proceedings resulted in a change in ownership for purposes of Section 382. Any discharge of our external or internal debt obligations as a result of the Chapter 11 filing for an amount less than the adjusted issue price may give rise to CODI, which must either be included in our taxable income or result in a reduction to our tax attributes. U.S. tax attributes subject to reduction include: (i) NOLs and NOL carryforwards; (ii) credit carryforwards (iii) capital losses and capital loss carryforwards; and (iv) the tax basis of our depreciable, amortizable and other assets. The amount of our post ownership change annual U.S. taxable income that can be offset by the pre-ownership change U.S. NOLs and BILs generally cannot exceed an amount equal to the product of (a) the applicable federal long-term tax exempt rate in effect on the date of the ownership change and (b) the value of our U.S. affiliate stock immediately prior to implementation of the Plan (the "Annual Limitation"). The Annual Limitation may also be increased or decreased during the first five years post ownership change for certain realized built-in-gains or realized BILs, respectively. Our interpretation of the impact of the IRC's limitations on the utilization of tax attributes after the ownership change caused by the emergence from bankruptcy may differ from the IRS' interpretation. Any additional limitations on our ability to prospectively use these tax attributes may have an adverse effect on our prospective cash flow.

Although our ordinary shares recently began to trade on the NYSE American stock exchange, an active trading market may not develop and the price and trading volume of our ordinary shares may fluctuate significantly.

Our ordinary shares were previously delisted from the NYSE, and the subsequent cancellation of our ordinary shares and issuance of new ordinary shares in connection with our emergence from bankruptcy resulted in reduced liquidity for investors seeking to buy or sell our ordinary shares. Our ordinary shares were quoted on the OTC Pink Current Market after our emergence from bankruptcy. On October 27, 2022, our ordinary shares began to trade on the NYSE American stock exchange, and trading on the OTC Pink Current Market ceased concurrent with the NYSE American listing. To maintain listing on this market, we must meet certain listing requirements, including requirements for a minimum stockholders' equity, minimum market capitalization or total assets and revenue, minimum public float, minimum market value of public float, minimum number of round lot shareholders, and continued business operations. If our ordinary shares are delisted for any reason, it could reduce the value of our ordinary shares and liquidity.

We cannot predict the extent to which investor interest in us will lead to the development of an active trading market or how liquid that market might become, and there can be no assurance that there will be an active trading market for our ordinary shares, either now or in the future. If an active trading market does not develop, holders of our shares may have difficulty selling any of our ordinary shares that may now be owned or may be purchased later. In addition, the number of investors willing to hold or acquire our ordinary shares may be reduced, the trading price of our ordinary shares may be depressed, we may receive decreased news and analyst coverage and we may be limited in our ability to issue additional securities or obtain additional financing in the future on terms acceptable to us, or at all.

Even if an active trading market develops for our ordinary shares, the market price of our ordinary shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume of our ordinary shares may fluctuate and cause significant price variations to occur. Volatility in the market price or trading volume of our ordinary shares may prevent investors from being able to sell shares at or above the price they paid to acquire their ordinary shares, or at all.


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

~~The following table summarizes the repurchase activity of our ordinary shares during~~During the three months ended September 24, 2021. The repurchase activity presented below 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 as30, 2022 (Successor), there were no ~~market~~ repurchases ~~during the three months ended September 24, 2021.~~

~~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.~~

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 26, 2021 to July 23, 2021 1,006 $ 0.35 — $ 564.2
July 24, 2021 to August 27, 2021 2,013 0.25 — 564.2
August 28, 2021 to September 24, 2021 690 0.21 — 564.2
June 26, 2021 to September 24, 2021 3,709 0.27

our ordinary shares.

5264


Item 6.			Exhibits.


Exhibit Number						Exhibit

10.1						Form of Mallinckrodt Pharmaceuticals ~~Severance Plans for U.S. Officers~~2022 Stock and ~~Executives, Amended September 8, 2021.~~
~~10.2~~						~~Form~~Incentive Plan Terms and Conditions of ~~First Amendment~~Restricted Unit Award to ~~Employment Agreement by and between ST Shared Services LLC and Executive Officers.~~Non-Employee Director.
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 ~~24, 2021~~30, 2022 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 XBRL document.
104						Cover Page Interactive Data File (embedded within the inline XBRL ~~document)~~document and included in Exhibit 101).

5366

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

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

Date: November ~~2, 2021~~8, 2022

5467


	September 24, 2021		December 25, 2020
Intercompany receivables	$	137.2	$	282.3
Intercompany payables	119.7		120.3


	September 24, 2021		December 25, 2020
Accounts payable (1)	$	43.5	$	61.9
Accrued interest	35.2		35.2
Debt (2)	3,760.1		1,660.7


Medicaid lawsuit	634.1		638.9
Opioid-related litigation settlement liability (3)	1,725.0		1,600.0
Other current and non-current liabilities (4)	107.3		163.5
Pension and postretirement benefits	30.3		32.4
Total liabilities subject to compromise	$	6,335.5	$	4,192.6


	Applicable interest rate		Outstanding borrowings
Term loan due September 2024 (1)	6.00	%	$	1,403.9
Term loan due February 2025 (1)	6.25		372.6

Revolving credit facility (2)	4.38		900.0


	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 26, 2021 to July 23, 2021	1,006	$	0.35	—	$	564.2
July 24, 2021 to August 27, 2021	2,013	0.25		—	564.2
August 28, 2021 to September 24, 2021	690	0.21		—	564.2
June 26, 2021 to September 24, 2021	3,709	0.27