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 ~~April 1, 2022~~March 31, 2023


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

For the transition period from to

Commission File Number : 001-35803

_______________________________________________________

Mallinckrodt plc

(Exact name of registrant as specified in its charter)

_______________________________________________________


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

College Business & Technology Park, Cruiserath,

Blanchardstown, Dublin 15, Ireland

(Address of principal executive offices) (Zip Code)

Telephone: +353 1 696 0000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: ~~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 ~~April 29, 2022,~~May 5, 2023, the registrant had ~~84,782,926~~13,170,932 ordinary shares outstanding at ~~$0.20~~$0.01 par value.

MALLINCKRODT PLC

~~(DEBTOR-IN-POSSESSION)~~

~~(IN EXAMINATION UNDER PART 10 OF THE IRISH COMPANIES ACT 2014)~~

INDEX


		Page

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited).
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 (Successor) and April 1, 2022 ~~and March 26, 2021.~~(Predecessor).	2
	Condensed Consolidated Statements of Comprehensive Operations for the three months ended March 31, 2023 (Successor) and April 1, 2022 ~~and March 26, 2021.~~(Predecessor).	3
	Condensed Consolidated Balance Sheets as of ~~April 1,~~March 31, 2023 (Successor) and December 30, 2022 ~~and December 31, 2021.~~(Successor).	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 (Successor) and April 1, 2022 ~~and March 26, 2021.~~(Predecessor).	5
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2023 (Successor) and April 1, 2022 ~~and March 26, 2021.~~(Predecessor).	6
	Notes to Condensed Consolidated Financial Statements.	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	2921
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	3729
Item 4.	Controls and Procedures.	3730

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings.	3831
Item 1A.	Risk Factors.	3831
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	3831

Item 6.	Exhibits.	3932

SIGNATURES		4033

PART I. FINANCIAL INFORMATION


Item 1.			Financial Statements.

MALLINCKRODT PLC

~~(DEBTOR-IN-POSSESSION)~~

~~(IN EXAMINATION UNDER PART 10 OF THE IRISH COMPANIES ACT 2014)~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in millions, except per share data)


		Three Months Ended			Successor						Predecessor
			April 1, 2022			March 26, 2021			Three Months Ended March 31, 2023			Three Months Ended April 1, 2022
Net sales	Net sales		$	490.9		$	558.0	Net sales	$	424.6		$	490.9
Cost of sales	Cost of sales		315.2			307.6		Cost of sales	374.8			315.2
Gross profit	Gross profit		175.7			250.4		Gross profit	49.8			175.7
Selling, general and administrative expenses	Selling, general and administrative expenses		152.5			136.0		Selling, general and administrative expenses	122.9			152.5
Research and development expenses	Research and development expenses		37.2			66.2		Research and development expenses	28.3			37.2
Restructuring charges, net	Restructuring charges, net		6.8			0.4		Restructuring charges, net	1.2			6.8
Non-restructuring impairment charges			—			64.5
Losses on divestiture			—			0.8

Operating loss	Operating loss		(20.8)			(17.5)		Operating loss	(102.6)			(20.8)
Interest expense	Interest expense		(58.2)			(59.6)		Interest expense	(162.0)			(58.2)
Interest income	Interest income		0.4			1.9		Interest income	4.7			0.4

Other (expense) income, net			(4.1)			8.1
Other expense, net								Other expense, net	(14.6)			(4.1)
Reorganization items, net	Reorganization items, net		(43.4)			(93.5)		Reorganization items, net	(5.6)			(43.4)
Loss from continuing operations before income taxes	Loss from continuing operations before income taxes		(126.1)			(160.6)		Loss from continuing operations before income taxes	(280.1)			(126.1)
Income tax benefit	Income tax benefit		(5.9)			(16.4)		Income tax benefit	(30.8)			(5.9)
Loss from continuing operations	Loss from continuing operations		(120.2)			(144.2)		Loss from continuing operations	(249.3)			(120.2)
Income from discontinued operations, net of income taxes	Income from discontinued operations, net of income taxes		0.6			0.3		Income from discontinued operations, net of income taxes	—			0.6
Net loss	Net loss		$	(119.6)		$	(143.9)	Net loss	$	(249.3)		$	(119.6)

Basic (loss) income per share (Note 6):
Basic (loss) income per share (Note 5):								Basic (loss) income per share (Note 5):
Loss from continuing operations	Loss from continuing operations		$	(1.42)		$	(1.70)	Loss from continuing operations	$	(18.93)		$	(1.42)
Income from discontinued operations	Income from discontinued operations		0.01			—		Income from discontinued operations	—			0.01
Net loss	Net loss		$	(1.41)		$	(1.70)	Net loss	$	(18.93)		$	(1.41)
Basic weighted-average shares outstanding	Basic weighted-average shares outstanding		84.7			84.6		Basic weighted-average shares outstanding	13.2			84.7

Diluted (loss) income per share (Note 6):
Diluted (loss) income per share (Note 5):								Diluted (loss) income per share (Note 5):
Loss from continuing operations	Loss from continuing operations		$	(1.42)		$	(1.70)	Loss from continuing operations	$	(18.93)		$	(1.42)
Income from discontinued operations	Income from discontinued operations		0.01			—		Income from discontinued operations	—			0.01
Net loss	Net loss		$	(1.41)		$	(1.70)	Net loss	$	(18.93)		$	(1.41)
Diluted weighted-average shares outstanding	Diluted weighted-average shares outstanding		84.7			84.6		Diluted weighted-average shares outstanding	13.2			84.7

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

~~(DEBTOR-IN-POSSESSION)~~

~~(IN EXAMINATION UNDER PART 10 OF THE IRISH COMPANIES ACT 2014)~~

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

(unaudited, in millions)


		Three Months Ended			Successor						Predecessor
			April 1, 2022			March 26, 2021			Three Months Ended March 31, 2023			Three Months Ended April 1, 2022
Net loss	Net loss		$	(119.6)		$	(143.9)	Net loss	$	(249.3)		$	(119.6)
Other comprehensive income, net of tax:
Other comprehensive loss, net of tax:								Other comprehensive loss, net of tax:
Currency translation adjustments	Currency translation adjustments		0.2			0.2		Currency translation adjustments	1.8			0.2

Derivatives, net of tax								Derivatives, net of tax	(4.3)			—
Benefit plans, net of tax	Benefit plans, net of tax		(0.2)			(0.1)		Benefit plans, net of tax	(0.1)			(0.2)
Total other comprehensive income, net of tax			—			0.1
Total other comprehensive loss, net of tax								Total other comprehensive loss, net of tax	(2.6)			—
Comprehensive loss	Comprehensive loss		$	(119.6)		$	(143.8)	Comprehensive loss	$	(251.9)		$	(119.6)

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

~~(DEBTOR-IN-POSSESSION)~~

~~(IN EXAMINATION UNDER PART 10 OF THE IRISH COMPANIES ACT 2014)~~

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in millions, except share data)


							Successor
		April 1, 2022		December 31, 2021			March 31, 2023		December 30, 2022
Assets	Assets					Assets
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,365.3	$	1,345.0	Cash and cash equivalents	$	480.0	$	409.5
Accounts receivable, less allowance for doubtful accounts of $5.5 and $4.7		364.4		439.1
Accounts receivable, less allowance for doubtful accounts of $5.1 and $4.4						Accounts receivable, less allowance for doubtful accounts of $5.1 and $4.4	395.1		405.3
Inventories	Inventories	371.5		347.2		Inventories	895.4		947.6
Prepaid expenses and other current assets	Prepaid expenses and other current assets	179.4		178.3		Prepaid expenses and other current assets	120.7		273.4

Total current assets	Total current assets	2,280.6		2,309.6		Total current assets	1,891.2		2,035.8
Property, plant and equipment, net	Property, plant and equipment, net	758.5		776.0		Property, plant and equipment, net	454.4		457.6

Intangible assets, net	Intangible assets, net	5,293.4		5,448.4		Intangible assets, net	2,710.6		2,843.8

Deferred income taxes						Deferred income taxes	509.4		475.5
Other assets	Other assets	372.4		382.3		Other assets	205.2		201.1
Total Assets	Total Assets	$	8,704.9	$	8,916.3	Total Assets	$	5,770.8	$	6,013.8

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity					Liabilities and Shareholders' Equity
Current Liabilities:	Current Liabilities:					Current Liabilities:
Current maturities of long-term debt	Current maturities of long-term debt	$	1,389.5	$	1,388.9	Current maturities of long-term debt	$	44.1	$	44.1
Accounts payable	Accounts payable	107.5		123.0		Accounts payable	86.4		114.0
Accrued payroll and payroll-related costs	Accrued payroll and payroll-related costs	63.0		84.6		Accrued payroll and payroll-related costs	35.4		49.5
Accrued interest	Accrued interest	17.4		17.0		Accrued interest	76.8		29.0

Acthar Gel-Related Settlement						Acthar Gel-Related Settlement	16.5		16.5
Opioid-Related Litigation Settlement liability						Opioid-Related Litigation Settlement liability	200.0		200.0
Accrued and other current liabilities	Accrued and other current liabilities	269.9		328.7		Accrued and other current liabilities	234.5		290.7

Total current liabilities	Total current liabilities	1,847.3		1,942.2		Total current liabilities	693.7		743.8

Long-term debt						Long-term debt	3,041.6		3,027.7
Acthar Gel-Related Settlement						Acthar Gel-Related Settlement	81.2		75.0
Opioid-Related Litigation Settlement liability						Opioid-Related Litigation Settlement liability	419.6		379.9
Pension and postretirement benefits	Pension and postretirement benefits	29.5		30.1		Pension and postretirement benefits	41.2		41.0
Environmental liabilities	Environmental liabilities	37.7		43.0		Environmental liabilities	35.6		35.8
Deferred income taxes		20.1		20.9

Other income tax liabilities	Other income tax liabilities	77.5		83.2		Other income tax liabilities	18.5		18.2

Other liabilities	Other liabilities	64.6		85.8		Other liabilities	75.0		78.7
Liabilities subject to compromise (Note 2)		6,433.2		6,397.7

Total Liabilities	Total Liabilities	8,509.9		8,602.9		Total Liabilities	4,406.4		4,400.1
Shareholders' Equity:	Shareholders' Equity:					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; 94,307,550, and 94,296,235 issued; 84,734,080 and 84,726,590 outstanding		18.9		18.9
Ordinary shares held in treasury at cost, 9,573,470 and 9,569,645		(1,616.1)		(1,616.1)

Successor preferred shares, $0.01 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	—		—

Successor 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	—		—

Successor ordinary shares, $0.01 par value, 500,000,000 authorized; 13,170,932 issued and outstanding						Successor ordinary shares, $0.01 par value, 500,000,000 authorized; 13,170,932 issued and outstanding	0.1		0.1

Additional paid-in capital	Additional paid-in capital	5,599.0		5,597.8		Additional paid-in capital	2,193.6		2,191.0
Accumulated other comprehensive income						Accumulated other comprehensive income	8.2		10.8
Retained deficit	Retained deficit	(3,798.5)		(3,678.9)		Retained deficit	(837.5)		(588.2)
Accumulated other comprehensive loss		(8.3)		(8.3)
Total Shareholders' Equity	Total Shareholders' Equity	195.0		313.4		Total Shareholders' Equity	1,364.4		1,613.7
Total Liabilities and Shareholders' Equity	Total Liabilities and Shareholders' Equity	$	8,704.9	$	8,916.3	Total Liabilities and Shareholders' Equity	$	5,770.8	$	6,013.8

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

~~(DEBTOR-IN-POSSESSION)~~

~~(IN EXAMINATION UNDER PART 10 OF IRISH COMPANIES AT 2014)~~

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)


							Successor		Predecessor
		Three Months Ended
		April 1, 2022		March 26, 2021			Three Months Ended March 31, 2023		Three Months Ended April 1, 2022
Cash Flows From Operating Activities:	Cash Flows From Operating Activities:					Cash Flows From Operating Activities:
Net loss	Net loss	$	(119.6)	$	(143.9)	Net loss	$	(249.3)	$	(119.6)
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	177.2		169.6		Depreciation and amortization	145.1		177.2
Share-based compensation	Share-based compensation	1.2		3.6		Share-based compensation	2.6		1.2
Deferred income taxes	Deferred income taxes	(0.9)		(3.4)		Deferred income taxes	(33.4)		(0.9)
Non-cash impairment charges		—		64.5

Reorganization items, net	Reorganization items, net	2.9		15.7		Reorganization items, net	—		2.9
Non-cash accretion expense						Non-cash accretion expense	69.9		—
Other non-cash items	Other non-cash items	12.3		(11.9)		Other non-cash items	20.0		12.3
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable, net	Accounts receivable, net	73.8		61.8		Accounts receivable, net	9.6		73.8
Inventories	Inventories	(27.0)		(22.8)		Inventories	48.0		(27.0)
Accounts payable	Accounts payable	0.4		0.5		Accounts payable	(20.4)		0.4
Income taxes	Income taxes	(7.8)		(21.2)		Income taxes	138.9		(7.8)

Other	Other	(63.3)		38.9		Other	(31.1)		(63.3)
Net cash from operating activities	Net cash from operating activities	49.2		151.4		Net cash from operating activities	99.9		49.2
Cash Flows From Investing Activities:	Cash Flows From Investing Activities:					Cash Flows From Investing Activities:
Capital expenditures	Capital expenditures	(23.6)		(20.9)		Capital expenditures	(19.3)		(23.6)

Other	Other	0.2		(0.7)		Other	0.3		0.2
Net cash from investing activities	Net cash from investing activities	(23.4)		(21.6)		Net cash from investing activities	(19.0)		(23.4)
Cash Flows From Financing Activities:	Cash Flows From Financing Activities:					Cash Flows From Financing Activities:

Repayment of external debt	Repayment of external debt	(4.6)		(118.9)		Repayment of external debt	(11.0)		(4.6)

Net cash from financing activities	Net cash from financing activities	(4.6)		(118.9)		Net cash from financing activities	(11.0)		(4.6)
Effect of currency rate changes on cash	Effect of currency rate changes on cash	(0.7)		(0.4)		Effect of currency rate changes on cash	0.3		(0.7)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	20.5		10.5		Net change in cash, cash equivalents and restricted cash	70.2		20.5
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	1,405.2		1,127.0		Cash, cash equivalents and restricted cash at beginning of period	466.7		1,405.2
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	1,425.7	$	1,137.5	Cash, cash equivalents and restricted cash at end of period	$	536.9	$	1,425.7

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,365.3	$	1,077.9	Cash and cash equivalents at end of period	$	480.0	$	1,365.3
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	24.0		23.4		Restricted cash included in prepaid expenses and other current assets at end of period	21.5		24.0
Restricted cash included in other long-term assets at end of period	Restricted cash included in other long-term assets at end of period	36.4		36.2		Restricted cash included in other long-term assets at end of period	35.4		36.4
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	1,425.7	$	1,137.5	Cash, cash equivalents and restricted cash at end of period	$	536.9	$	1,425.7

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

~~(DEBTOR-IN-POSSESSION)~~

~~(IN EXAMINATION UNDER PART 10 OF THE IRISH COMPANIES ACT 2014)~~

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 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 loss — — — — — — 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
Balance as of December 31, 2021 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 94.3 $ 18.9 9.6 $ (1,616.1) $ 5,599.0 $ (3,798.5) $ (8.3) $ 195.0


	Ordinary Shares			Treasury Shares			Additional Paid-In Capital		Retained Deficit		Accumulated Other Comprehensive (Loss) Income		Total Shareholders' Equity
	Number	Par Value		Number	Amount
Balance as of December 31, 2021 (Predecessor)	94.3	$	18.9	9.6	$	(1,616.1)	$	5,597.8	$	(3,678.9)	$	(8.3)	$	313.4
Net loss	—	—		—	—		—		(119.6)		—		(119.6)


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

Balance as of December 30, 2022 (Successor)	13.2	$	0.1	—	$	—	$	2,191.0	$	(588.2)	$	10.8	$	1,613.7
Net loss	—	—		—	—		—		(249.3)		—		(249.3)
Other comprehensive loss	—	—		—	—		—		—		(2.6)		(2.6)

Share-based compensation	—	—		—	—		2.6		—		—		2.6
Balance as of March 31, 2023 (Successor)	13.2	$	0.1	—	$	—	$	2,193.6	$	(837.5)	$	8.2	$	1,364.4

See Notes to Condensed Consolidated Financial Statements.

MALLINCKRODT PLC

~~(DEBTOR-IN-POSSESSION)~~

~~(IN EXAMINATION UNDER PART 10 OF THE IRISH COMPANIES ACT 2014)~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited, dollars in millions, except share data, per share data and where indicated)


1.			Background and Basis of Presentation

Background

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

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

•Specialty Brands includes innovative specialty pharmaceutical brands; and

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

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

Basis of Presentation

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

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

Reorganization items, net for the Successor represents amounts incurred after the Effective Date that directly resulted from Chapter 11 and were entirely comprised of professional fees associated with the implementation of the Plan. Reorganization items, net for the Predecessor represents amounts incurred after the Petition Date but prior to emergence as a direct result of the Chapter 11 Cases and were comprised of bankruptcy-related professional fees and adjustments to reflect the carrying value of liabilities subject to compromise ("LSTC") at their estimated allowed claim amounts, as such adjustments were approved by the Bankruptcy Court. Cash paid for reorganization items, net for the three months ended March 31, 2023 (Successor) and April 1, 2022 (Successor) was $9.4 million and $79.1 million, respectively.

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.

The fiscal year end balance sheet data was derived from audited consolidated financial statements, but does not include all of the annual disclosures required by GAAP; accordingly these unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited annual consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December ~~31, 2021~~30, 2022 filed with the U.S. Securities and Exchange Commission ("SEC") on March ~~15, 2022.~~

~~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~~3, 2023 ("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. Subsequent to the filing of the Chapter 11 Cases, Chapter 11 proceedings commenced by a limited subset of the Debtors have been recognized and given effect in Canada, and separately

Mallinckrodt plc has substantively concluded an examinership process with the High Court of Ireland, which will become effective concurrently with the effectiveness of the plan of reorganization. Refer to Note 15 for further information.

~~See Note 2 for further information~~Annual Report 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"Form 10-K")~~, 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 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.

Although the Bankruptcy Court has entered an order confirming the fourth amended plan of reorganization (with technical modifications) (the "Plan") proposed by the Debtors (the "Confirmation Order"), consummation of the Plan and the transactions contemplated thereby and emergence from the Chapter 11 proceedings remains subject to the satisfaction of various conditions. Accordingly, no assurance can be given that the plan of reorganization or the transactions contemplated thereby 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..

Fiscal Year

The Company reports its results based on a "52-53 week" year ending on the last Friday of December. Unless otherwise indicated, the three months ended March 31, 2023 (Successor) refers to the thirteen week period ended March 31, 2023 (Successor) and the three months ended April 1, 2022 (Predecessor) refers to the thirteen week period ended April 1, 2022 and the three months ended March 26, 2021 refers to the thirteen week period ended March 26, 2021. Fiscal 2021 consisted of 53 weeks, while fiscal 2022 will consist of 52 weeks and end on December 30, 2022.(Predecessor).


2.			~~Bankruptcy Proceedings~~

~~Voluntary Filing Under Chapter 11~~

On October 12, 2020 (the "Petition Date"), Mallinckrodt plc and certain 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"). On February 14, 2022, the directors of Mallinckrodt plc initiated examinership proceedings with respect to Mallinckrodt plc and on April 27, 2022, such proceedings substantively concluded. Refer to Note 15 for further information. 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 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 authorized to continue to operate as ongoing businesses, and may pay all debts and honor all obligations arising in the ordinary course of their businesses after the Petition Date. However, the Debtors may not 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 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 the Plan. See ~~Confirmed Plan of Reorganization~~ ~~section below for contemplated 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.

~~Significant Bankruptcy Court Actions~~

~~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 Interbank 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:

Three Months Ended
April 1,
2022 March 26,
2021
Interest expense incurred for adequate protection payments $ 15.7 $ 14.5
Cash paid for adequate protection payments 15.5 13.8

~~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. The Bankruptcy Court

further extended the injunction on November 29, 2021 and on March 17, 2022. Absent further extension, the injunction will expire at the earlier of (a) plan effective date or (b) June 16, 2022, with certain modifications. Refer to Note 12 for further discussion.

~~Distribution Agreement Contract Rejection~~

On March 30, 2022, the Company sought authorization from the Bankruptcy Court to reject the CuraScript Inc. ("CuraScript") distribution agreement. On April 11, 2022, the Bankruptcy Court entered the order authorizing the rejection of the CuraScript distribution agreement effective April 22, 2022. The rejection has the effect of relieving the Company of certain obligations under such agreement. In turn, the Company has entered into a distribution agreement with FFF Enterprises, Inc, which took effect on April 25, 2022. The new distribution agreement covers the same scope of services and products on terms that are at least approximately comparable economically to the CuraScript distribution agreement. As such, the Company believes the transition will result in no material financial impact or operational disruptions.

~~Confirmed Plan of Reorganization~~

~~On February 3, 2022, the Bankruptcy Court confirmed the Plan and subsequently entered the Confirmation Order on March 2, 2022. The Plan provides for the following:~~

•~~A proposed resolution of all opioid-related claims against the Company and its subsidiaries~~. Under the terms of the amended proposed settlement (the "Amended Proposed Opioid-Related Litigation Settlement"), which would become effective upon Mallinckrodt’s emergence from the Chapter 11 process, subject to court approval and other conditions:

◦Opioid claims would be channeled to one 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, in addition to other potential consideration, 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 began to comply with an agreed-upon operating injunction with respect to the operation of its opioid business.~~

•~~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 Acthar Gel~~.

◦The Company has reached an agreement with the U.S. Department of Justice ("DOJ") and other governmental parties to settle a range of litigation matters and disputes relating to Acthar Gel (the "Proposed Acthar Gel-Related Settlement") including the 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 Acthar Gel's previous owner's (Questcor Pharmaceuticals Inc. ("Questcor")) interactions with an independent charitable foundation. Under the Proposed Acthar Gel-Related Settlement, which was conditioned upon the Company entering the Chapter 11 restructuring process, the Company has agreed to pay $260.0 million to the DOJ and other parties over seven years and 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. Also in connection with the Proposed Acthar Gel-Related Settlement, the Company entered into a five-year corporate integrity agreement ("CIA") with the Office of Inspector General ("OIG") of the Department of Health and Human Services ("HHS") in March 2022. As a result of these agreements, upon effectiveness of the settlement, the U.S. Government will drop its demand for approximately $640 million in retrospective Medicaid rebates for Acthar Gel and agree to dismiss the FCA lawsuit in Boston and the EDPA FCA lawsuit upon consummation of the Plan and emergence from the Chapter 11 Cases. Similarly, state and territory Attorneys General will also drop related lawsuits. In turn, the Company will dismiss 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 with the DOJ and other governmental parties solely to move past these litigation matters and disputes and does not make any admission of liability or wrongdoing.

•~~A modification of the Company's senior secured term loans~~. At the end of the court-supervised process, lenders holding allowed claims in respect of the Company’s senior secured term loans due September 2024 (the "2017 Term Loans") and its senior secured term loans due February 2025 (the "2018 Term Loans") are expected to receive either (1) their pro rata share of new senior secured term loans in an amount equal to the then-remaining principal amount of claims (as reduced by, inter alia, the excess cash flow payment) bearing interest at a rate per annum equal to LIBOR plus 5.25% (with respect to the 2017 Term Loan) or LIBOR plus 5.50% (with respect to the 2018 Term Loan), maturing on the earlier of September 30, 2027 and 5.75 years after emergence and without any financial maintenance covenant, and payment in cash of an exit fee equal to 1.00% of such remaining principal amount or (2) payment in full of such remaining principal amount in cash and payment in cash of an exit fee equal to 0.50% of such remaining principal amount. 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 repayment of the Company's senior secured revolving credit facility. At the end of the court-supervised process, all allowed claims under such facility are expected to be paid in full in cash, principally with the proceeds of newly incurred debt.~~

•~~The reinstatement of the agreements associated with the Company's 10.00% first lien senior secured notes~~. At the end of the court-supervised process, all allowed claims under these agreements will be reinstated at existing rates and maturities as the applicable holders' purported make-whole claims were disallowed.

•~~A modification of the Company's 10.00% second lien senior secured notes.~~ At the end of the court-supervised process, lenders holding allowed claims in respect of the Company’s 10.00% second lien senior secured notes are expected to receive their pro rata share of new 10.00% second lien senior secured notes due 2025 that will have the same principal amount and other economic terms as 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, holders of allowed claims under indentures governing the 5.75% Senior Notes due 2022, the 5.625% Senior Notes due 2023 and the 5.50% Senior Notes due 2025 (the "Guaranteed Unsecured Notes") and the Guaranteed Unsecured Notes are expected to receive their pro rata share of $375.0 million of new 10.00% second lien senior secured notes due seven years after emergence and 100% of the new Mallinckrodt ordinary shares, subject to dilution by the warrants described above and the management incentive plan. Under the terms of the RSA, a consent fee equal to 1.50% is payable to consenting noteholders in an amount equal to 1.50% of each such noteholder's Guaranteed Unsecured Notes.

•~~A proposed resolution of other remaining 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 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 to share in $135.0 million in cash, plus other potential consideration, in accordance with the allocations as prescribed in the Plan, and equity holders would receive no recovery.

~~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 requirements 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 April 1, 2022 and December 31, 2021. 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, unaudited 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 unaudited condensed 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:~~

April 1,
2022 December 31,
2021
Intercompany receivables $ 146.2 $ 119.1
Intercompany payables 115.6 112.9

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 certain "first day" motions.

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 April 1, 2022 and December 31, 2021.

~~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 the Plan. 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.

The determination of how liabilities will ultimately be settled or treated cannot be made until the Plan becomes effective. Accordingly, the ultimate amount of such liabilities is not determinable at this time. 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:~~

April 1,
2022 December 31,
2021
Accounts payable $ 43.4 $ 42.9
Accrued interest 35.2 35.2
Debt 3,746.2 3,750.8
Environmental liabilities 66.9 52.0
Medicaid lawsuit 634.7 634.7
Opioid-related litigation settlement liability 1,725.0 1,725.0
Other current and non-current liabilities 149.6 125.1
Pension and postretirement benefits 32.2 32.0
Total liabilities subject to compromise $ 6,433.2 $ 6,397.7

~~Contractual interest~~

While the Chapter 11 Cases are pending, the Company is not accruing interest on its unsecured debt instruments as of the Petition Date on a go-forward basis as the Debtors do 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 due under the Company's unsecured debt instruments for both the three months ended April 1, 2022 and March 26, 2021, which it did not pay was $17.7 million.

~~Chapter 11 Claims Process~~

The Debtors have received over 50,000 proofs of claim since the Petition Date. The Debtors continue their review 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 claims, and therefore, the ultimate liability of the Debtors for such claims may differ from the amount recorded in LSTC. To the extent that the Debtors believe that such claims will be allowed by the Bankruptcy Court, the Debtors will continue to record the expected allowed amounts of such claims as LSTC. The determination of the expected allowed amount of a claim is based on many factors, including whether the Debtors are party to a settlement agreement with applicable claimholders or their representatives, and is not necessarily limited to information available to 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 ~~Confirmed 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 will be recognized as reorganization items, net in the Company's consolidated statements of operations in the period in which they are resolved. The determination of how liabilities will ultimately be resolved cannot be made until the Plan is consummated or the Bankruptcy Court approves orders related to settlement of specific liabilities. Accordingly, the ultimate amount or resolution of such liabilities is not determinable at this time. The resolution of such claims could result in substantial adjustments to the Company's consolidated financial statements.

~~Reorganization items, net~~

Reorganization items, net, represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of bankruptcy-related professional fees and adjustments to reflect the carrying value of LSTC at their estimated allowed claim amounts, as such adjustments are approved by the Bankruptcy Court. Cash paid for reorganization items, net for the three months ended April 1, 2022 and March 26, 2021 was $79.1 million and $33.7 million, respectively. Reorganization items, net, were comprised of the following:

Three Months Ended
April 1,
2022 March 26,
2021
Professional fees $ 40.4 $ 77.7
Lender fees 0.1 —
Debt valuation adjustments — 16.3
Adjustments of other claims 2.9 (0.5)
Total reorganization items, net $ 43.4 $ 93.5


3.			Revenue from Contracts with Customers

Product Sales Revenue

See Note 13 for presentation of the Company's net sales by product family.

Reserves for variable consideration

The following table reflects activity in the Company's sales reserve accounts:

Rebates and Chargebacks Product Returns Other Sales Deductions Total
Balance as of December 25, 2020 $ 196.5 $ 26.6 $ 12.3 $ 235.4
Provisions (1)
488.0 25.7 13.0 526.7
Payments or credits (442.9) (10.0) (14.9) (467.8)
Balance as of March 26, 2021 $ 241.6 $ 42.3 $ 10.4 $ 294.3
Balance as of December 31, 2021 $ 241.8 $ 21.5 $ 9.5 $ 272.8
Provisions 370.8 2.4 9.7 382.9
Payments or credits (412.0) (4.3) (10.0) (426.3)
Balance as of April 1, 2022 $ 200.6 $ 19.6 $ 9.2 $ 229.4


	Rebates and Chargebacks (1)		Product Returns		Other Sales Deductions		Total
Balance as of December 31, 2021 (Predecessor)	$	241.8	$	21.5	$	9.5	$	272.8
Provisions	370.8		2.4		9.7		382.9
Payments or credits	(412.0)		(4.3)		(10.0)		(426.3)
Balance as of April 1, 2022 (Predecessor)	$	200.6	$	19.6	$	9.2	$	229.4

Balance as of December 30, 2022 (Successor)	$	265.3	$	16.0	$	12.7	$	294.0
Provisions	355.6		3.2		9.5		368.3
Payments or credits	(404.3)		(4.0)		(15.0)		(423.3)
Balance as of March 31, 2023 (Successor)	$	216.6	$	15.2	$	7.2	$	239.0

(1)~~Provision for returns decreased by $23.3~~Includes $58.9 million ~~driven by~~and $89.3 million of accrued Medicaid and $44.6 million and $55.3 million of accrued rebates as of March 31, 2023 (Successor) and December 30, 2022 (Successor), respectively, included within accrued and other current liabilities in the ~~Specialty Brands segment primarily related to a discrete return of product during the three months ended March 26, 2021.~~unaudited condensed consolidated balance sheets.

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


		Three Months Ended				Successor				Predecessor
		April 1, 2022		March 26, 2021				Three Months Ended March 31, 2023			Three Months Ended April 1, 2022
Product sales transferred at a point in time	Product sales transferred at a point in time	79.5	%	75.7	%		Product sales transferred at a point in time	80.2	%		79.5	%
Product sales transferred over time	Product sales transferred over time	20.5		24.3			Product sales transferred over time	19.8			20.5

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 ~~April 1, 2022:~~March 31, 2023 (Successor):


Remainder of Fiscal ~~2022~~2023	$	~~69.6~~
~~Fiscal 2023~~	~~71.2~~56.6
Fiscal 2024	~~17.5~~37.7
Fiscal 2025	13.2
Thereafter	~~0.3~~0.2

Product Royalty Revenues

The Company licenses certain rights to Amitiza® (lubiprostone) ("Amitiza") to third parties in exchange for royalties on net sales of the product. The Company receives a double-digit royalty based on a percentage of the gross profits of the licensed products sold during the term of the agreements. The Company recognizes such royalty revenue as the related sales occur. The associated royalty revenue recognized was as follows:

Three Months Ended
April 1,
2022 March 26,
2021
Royalty revenue $ 20.0 $ 35.4



	Successor		Predecessor
	Three Months Ended March 31, 2023		Three Months Ended April 1, 2022
Royalty revenue	$	3.4	$	20.0


4.3.			Restructuring and Related Charges

During fiscal 2021 and 2018, the Company launched restructuring 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. The 2021~~ program, and has not commenced as of April 1, 2022 and there is no specified time period associated with this program. In addition to the aforementioned restructuring programs, the Company has taken restructuring actions to generate synergies from its acquisitions.March 31, 2023 (Successor).

Net restructuring and related charges by segment were as follows:


		Three Months Ended				Successor				Predecessor
		April 1, 2022		March 26, 2021				Three Months Ended March 31, 2023			Three Months Ended April 1, 2022

Specialty Generics	Specialty Generics	$	3.5	$	—		Specialty Generics	$	—		$	3.5
Corporate	Corporate	3.3		1.1			Corporate	1.9			3.3
Restructuring and related charges, net	Restructuring and related charges, net	6.8		1.1			Restructuring and related charges, net	1.9			6.8
Less: accelerated deprecation		—		(0.7)
Less: accelerated depreciation							Less: accelerated depreciation	(0.7)			—
Restructuring charges, net	Restructuring charges, net	$	6.8	$	0.4		Restructuring charges, net	$	1.2		$	6.8

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


		Three Months Ended				Successor				Predecessor
		April 1, 2022		March 26, 2021				Three Months Ended March 31, 2023			Three Months Ended April 1, 2022
2018 Program	2018 Program	$	6.8	$	1.1		2018 Program	$	1.9		$	6.8

Less: non-cash charges, including accelerated depreciation	Less: non-cash charges, including accelerated depreciation	(2.1)		(1.1)			Less: non-cash charges, including accelerated depreciation	(0.8)			(2.1)
Total charges expected to be settled in cash	Total charges expected to be settled in cash	$	4.7	$	—		Total charges expected to be settled in cash	$	1.1		$	4.7

The following table summarizes cash activity for restructuring reserves for the 2018 Program, which primarily related to employee severance and benefits:

2018 Program

Balance as of December 30, 2022 (Successor)

4.6

Charges from continuing operations

1.2

Changes in estimate from continuing operations

(0.1)

Cash payments

(4.2)

Balance as of ~~December~~March 31, ~~2021~~2023 (Successor)

~~10.9~~1.5

~~Charges~~

~~5.7~~

~~Changes in estimate~~

~~(1.0)~~

~~Cash payments~~

~~(12.6)~~

~~Balance as of April 1, 2022~~

~~3.0~~

As of ~~April 1, 2022,~~March 31, 2023 (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	0.8		18.5
Corporate	13.2		84.0
	$	14.0	$	105.6

~~Specialty Brands~~

~~3.1~~

~~Specialty Generics~~

~~18.5~~

~~Corporate~~

~~81.2~~

~~102.8~~

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.


5.4.			Income Taxes

~~As further discussed in Note 1, in light of the~~The Company's ~~Chapter 11 Cases initiated on October 12, 2020, the Company concluded that there is substantial doubt about its ability to continue~~income tax expense (benefit) was as ~~a going concern within one year from the date of issuance of the unaudited condensed consolidated financial statements.~~ follows:



	Successor		Predecessor
	Three Months Ended March 31, 2023		Three Months Ended April 1, 2022
Current tax expense (benefit)	$	2.6	$	(5.0)
Deferred tax benefit	(33.4)		(0.9)
Income tax benefit	$	(30.8)	$	(5.9)

The Company ~~considered this~~recognized an income tax benefit of $30.8 million on a loss from continuing operations before income taxes of $280.1 million for the three months ended March 31, 2023 (Successor). This resulted in ~~determining that certain net~~an effective tax rate of 11.0%. The income tax provision consisted of a deferred income tax ~~assets were no longer more likely than not realizable. As a result, as of both April 1, 2022~~benefit predominately related to intangible asset amortization, accretion expense associated with our settlement obligations and ~~December 31, 2021, all of the Company's net deferred tax assets in applicable tax jurisdictions are fully~~debt, inventory step-up amortization expense and other operating activity, partially offset by current income tax expense related to a ~~valuation allowance.~~decrease in prepaid income taxes.

The income tax benefit of $30.8 million for the three months ended March 31, 2023 (Successor) consisted of $27.4 million attributed to pretax earnings in various jurisdictions, $2.1 million attributed to separation costs, reorganization items, net and restructuring charges, and $1.3 million attributed to the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.

The Company recognized an income tax benefit of $5.9 million on a loss from continuing operations before income taxes of $126.1 million for the three months ended April 1, 2022 ~~and an income tax benefit of $16.4 million on a loss from continuing operations before income taxes of $160.6 million for the three months ended March 26, 2021.~~(Predecessor). This resulted in an effective tax ~~rates~~rate of

4.7%. The current and ~~10.2% for the three months ended April 1, 2022 and March 26, 2021, respectively. The~~deferred income tax ~~benefit for the three months ended April 1, 2022 was comprised of $5.0 million of current tax benefit and $0.9 million of deferred tax benefit. The current tax benefit was~~benefits were predominantly related to an increase to prepaid taxes. 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 three months ended March 26, 2021 was comprised of $13.0 million of current tax benefittaxes and $3.4 million of deferred tax benefit. The current tax benefit was predominately related to an increase to prepaid taxes, partially offset by changes 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 ~~was~~of $5.9 million for the three months ended April 1, 2022 ~~compared with an income tax benefit~~(Predecessor) consisted of ~~$16.4 million for the three months ended March 26, 2021. The $10.5 million net decrease in the tax benefit included a decrease of $12.5~~$4.8 million attributed to ~~changes~~pretax earnings in ~~the timing, amount~~various jurisdictions and ~~jurisdictional mix of income, a decrease of $1.3 million attributed to the Coronavirus Aid, Relief, and Economic Security (CARES) Act and a decrease of $0.9~~$1.9 million attributed to separation costs, reorganization items, net and restructuring charges, ~~net,~~ partially offset by ~~an increase of $4.2~~$0.8 million attributed to ~~uncertain tax positions.~~the CARES Act.

During the three months ended March 31, 2023 (Successor), net cash refunds for income taxes were $136.3 million, including refunds of $139.3 million received as a result of provisions in the CARES Act and net payments of $3.0 million related to operational activity. During the three months ended April 1, 2022 ~~and March 26, 2021,~~(Predecessor), net cash payments for income taxes were $2.7 ~~million and $8.1 million, respectively.~~million.

The Company's unrecognized tax benefits, excluding interest, totaled ~~$333.5~~$24.8 million as of both ~~April 1, 2022~~March 31, 2023 (Successor) and December ~~31, 2021.~~30, 2022 (Successor). If favorably settled, ~~$77.0 million of unrecognized tax benefits as of April 1, 2022~~these balances would benefit the effective tax rate. The total amount of accrued interest and penalties related to these obligations was ~~$20.4~~$3.1 million and ~~$18.9~~$2.8 million as of ~~April 1, 2022~~March 31, 2023 (Successor) and December ~~31, 2021,~~30, 2022 (Successor), respectively. ~~As of April 1, 2022, $7.0 million of unrecognized tax benefits, including interest and penalties, were reflected within LSTC on the Company's unaudited condensed consolidated balance sheet.~~

~~It is reasonably possible that within~~Within the next twelve months, the unrecognized tax benefits ~~could decrease by up to $230.9 million~~ and the ~~amount of~~ related interest and penalties ~~could decrease by up~~are not expected to $18.5 million as a result of payments or releases due to the resolution of examinations, appeals and litigation, successful emergence from Chapter 11 and the expiration of various statutes of limitation.significantly change.

Certain of the Company's subsidiaries continue to be subject to examination by taxing authorities. The earliest open years subject to examination for both the U.S federal and state jurisdictions and various foreign jurisdictions, including Ireland, Japan, Luxembourg, Switzerland and the United Kingdom ~~are from 2013 to present and the earliest open years for the U.S federal and state jurisdictions are 2013 and 2009, respectively.~~is 2013.


6.5.			Loss per Share

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

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

Three Months Ended
April 1,
2022 March 26,
2021
Basic and diluted 84.7 84.6

Successor

Predecessor

Three Months
Ended
March 31, 2023

Three Months
Ended
April 1, 2022

Basic and diluted

13.2

84.7

The computation of diluted weighted-average shares outstanding for the three months ended March 31, 2023 (Successor) and April 1, 2022 ~~and March 26, 2021~~(Predecessor) excluded approximately ~~5.1 million~~zero and ~~5.5~~5.1 million shares of equity awards, respectively, because the effect would have been anti-dilutive.


7.6.			Inventories

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


							Successor
		April 1, 2022		December 31, 2021			March 31, 2023		December 30, 2022
Raw materials and supplies	Raw materials and supplies	$	65.1	$	59.8	Raw materials and supplies	$	89.9	$	80.2
Work in process	Work in process	210.4		196.4		Work in process	523.3		552.1
Finished goods	Finished goods	96.0		91.0		Finished goods	282.2		315.3
		$	371.5	$	347.2		$	895.4	$	947.6


8.7.			Property, Plant and Equipment

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


							Successor
		April 1, 2022		December 31, 2021			March 31, 2023		December 30, 2022
Property, plant and equipment, gross	Property, plant and equipment, gross	$	1,884.7	$	1,886.6	Property, plant and equipment, gross	$	492.5	$	485.0
Less: accumulated depreciation	Less: accumulated depreciation	(1,126.2)		(1,110.6)		Less: accumulated depreciation	(38.1)		(27.4)
Property, plant and equipment, net	Property, plant and equipment, net	$	758.5	$	776.0	Property, plant and equipment, net	$	454.4	$	457.6

Depreciation expense was as follows:

Three Months Ended
April 1,
2022 March 26,
2021
Depreciation expense $ 22.1 $ 24.3


	Successor		Predecessor
	Three Months Ended March 31, 2023		Three Months Ended April 1, 2022
Depreciation expense	$	11.9	$	22.1


9.8.			Intangible Assets

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

April 1, 2022 December 31, 2021
Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Amortizable:
Completed technology $ 10,404.0 $ 5,313.5 $ 10,404.0 $ 5,160.4
License agreements 120.1 83.1 120.1 82.1
Trademarks 77.7 27.8 77.7 26.9
Total $ 10,601.8 $ 5,424.4 $ 10,601.8 $ 5,269.4
Non-Amortizable:
Trademarks $ 35.0 $ 35.0
In-process research and development 81.0 81.0
Total $ 116.0 $ 116.0


	Successor
	March 31, 2023				December 30, 2022
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable:
Completed technology	$	3,041.2	$	451.9	$	3,041.2	$	318.7





Non-Amortizable:

In-process research and development	121.3				121.3

~~Amitiza~~

Beginning January 1, 2022, 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 $12.4 million during the three months ended April 1, 2022, which impacted basic loss per share by $0.15.

~~Terlipressin~~

During September 2020, the U.S. Food and Drug Administration ("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 and on February 18, 2022, the Prescription Drug User Fee Act (or "PDUFA") date, the FDA issued a CRL. In the weeks leading up to the PDUFA date, it became necessary for the Company to identify a new packaging and labeling manufacturing facility, which meant that an inspection by the FDA could not be completed by the PDUFA date. A satisfactory inspection is required before the NDA can be approved. This is the only outstanding issue noted in the CRL, and it is important to note that there were no safety or efficacy issues cited. The Company remains committed to this critically ill patient population, who currently have no approved treatment option in the U.S. for HRS-1 and believes that there is a path to approval in fiscal 2022. The Company 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 asset of $81.0 million included within intangible assets, net on the unaudited condensed consolidated balance sheets as of April 1, 2022 and December 31, 2021.

The Company annually tests 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 value of the indefinite-lived intangible asset.

~~Intangible asset amortization expense~~

Intangible asset amortization expense was as follows:

Three Months Ended
April 1,
2022 March 26,
2021
Amortization expense $ 155.1 $ 145.3


	Successor		Predecessor
	Three Months Ended March 31, 2023		Three Months Ended April 1, 2022
Amortization expense	$	133.2	$	155.1

The estimated aggregate amortization expense on intangible assets owned by the Company ~~and being amortized as of April 1, 2022,~~ is expected to be as follows:


Remainder of Fiscal 2022		$	458.7
Fiscal 2023		593.8
					Successor
Remainder of Fiscal 2023				Remainder of Fiscal 2023	$	376.0
Fiscal 2024	Fiscal 2024	573.5		Fiscal 2024	446.1
Fiscal 2025	Fiscal 2025	551.8		Fiscal 2025	385.1
Fiscal 2026	Fiscal 2026	526.0		Fiscal 2026	337.5
Fiscal 2027				Fiscal 2027	284.4

1812


~~10.~~9.			Debt

The commencement of the Chapter 11 Cases constituted an event of default under certain of the Company’s 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 April 1, 2022 and December 31, 2021. However, any efforts to enforce payment obligations under the Company's 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. See Note 2 for further information.

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

April 1, 2022 December 31, 2021
Principal Unamortized Discount and Debt Issuance Costs Principal Unamortized Discount and Debt Issuance Costs
Secured debt:
Term loan due September 2024 $ 1,392.9 $ — $ 1,396.5 $ —
Term loan due February 2025 369.7 — 370.7 —
10.00% first lien senior notes due April 2025 495.0 5.5 495.0 5.9
10.00% second lien senior notes due April 2025 322.9 — 322.9 —
Revolving credit facility 900.0 — 900.0 0.2
Total secured debt 3,480.5 5.5 3,485.1 6.1
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 5,141.2 5.5 5,145.8 6.1
Less: Current portion (1,395.0) (5.5) (1,395.0) (6.1)
Less: Amounts reclassified to liabilities subject to compromise (3,746.2) — (3,750.8) —
Total long-term debt, net of current portion $ — $ — $ — $ —


	Successor
	March 31, 2023						December 30, 2022
	Principal		Carrying Value		Unamortized Discount and Debt Issuance Costs		Principal		Carrying Value		Unamortized Discount and Debt Issuance Costs
Current maturities of long-term debt:
2017 Replacement Term loan due September 2027	$	34.8	$	34.8	$	—	$	34.8	$	34.8	$	—
2018 Replacement Term loan due September 2027	9.3		9.3		—		9.3		9.3		—
Total current debt	44.1		44.1		—		44.1		44.1		—
Long-term debt:
10.00% first lien senior secured notes due April 2025	495.0		478.0		—		495.0		475.9		—
10.00% second lien senior secured notes due April 2025	321.9		249.8		—		321.9		242.2		—
2017 Replacement Term loan due September 2027	1,330.6		1,186.6		—		1,339.3		1,187.3		—
2018 Replacement Term loan due September 2027	353.2		317.3		—		355.5		317.6		—
11.50% first lien senior secured notes due December 2028	650.0		650.0		19.9		650.0		650.0		20.8
10.00% second lien senior secured notes due June 2029	328.3		179.8		—		328.3		175.5		—
Total long-term debt	3,479.0		3,061.5		19.9		3,490.0		3,048.5		20.8
Total debt	$	3,523.1	$	3,105.6	$	19.9	$	3,534.1	$	3,092.6	$	20.8

Applicable interest rate

As of ~~April 1, 2022,~~March 31, 2023 (Successor), the applicable interest rate and outstanding ~~borrowings~~principal on the Company's debt instruments were as follows:

Applicable interest rate Outstanding borrowings
Fixed-rate instruments 7.15 % $ 2,478.6
Term loan due September 2024 (1)
6.25 1,392.9
Term loan due February 2025 (1)
6.25 369.7
Revolving credit facility (2)
4.82 900.0


	Applicable Interest Rate		Outstanding Principal
Fixed-rate instruments	10.54	%	$	1,795.2
2017 Replacement Term Loan due September 2027 (1)	9.94		1,365.4
2018 Replacement Term Loan due September 2027 (1)	10.19		362.5

(1)~~The applicable~~Includes the impact of the 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~~cap agreement, which is discussed further in 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.~~12.

~~As of April 1, 2022, the Company was fully drawn on its $900.0 million revolving credit facility.~~


~~11.~~10.			Guarantees

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

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 ~~included in LSTC~~was governed by a contract that was rejected as part of Chapter 11 and other liabilities on the Company's unaudited condensed consolidated balance sheets as of April 1, 2022 and December 31, 2021 was $14.3 million and $14.9 million, respectively, of which $11.6 million and $12.1 million, respectively, related to environmental, health and safety matters. The valueis no longer a liability 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 April 1, 2022 and December 31, 2021. As of April 1, 2022, the maximum future payments the Company could be required to make under these indemnification obligations were $70.2 million.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 $19.0~~March 31, 2023 (Successor) and December 30, 2022 (Successor), $19.5 million and $19.3 million remained in restricted cash, included in other long-term assets on the unaudited condensed consolidated balance sheets, asrespectively. As of ~~both April 1, 2022 and December~~March 31, ~~2021.~~

The Company has recorded liabilities for known 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 31, 2021.

~~The Company is also liable for product performance; however,~~2023 (Successor), the Company ~~believes, given the information currently available, that the ultimate resolution of any such claims will~~does not ~~have a material adverse effect on its financial condition, results of operations and cash flows.~~expect to make future payments related to these indemnification obligations.

As of ~~April 1, 2022,~~March 31, 2023 (Successor), the Company had various other letters of credit, guarantees and surety bonds totaling ~~$34.7~~$29.9 million and restricted cash of ~~$41.4~~$37.4 million held in segregated accounts primarily to collateralize surety bonds for the Company's environmental liabilities.


~~12.~~11.			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 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~~outcomes 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 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 April 22, 2022, the cases the Company is aware of include, but are not limited to, approximately 2,619

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 8 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 April 22, 2022, the Mallinckrodt defendants in these cases consist of Mallinckrodt plc and the following subsidiaries of Mallinckrodt plc: Mallinckrodt Enterprises LLC, Mallinckrodt LLC, SpecGx LLC, Mallinckrodt Brand Pharmaceuticals Inc., Mallinckrodt Inc., MNK 2011 Inc., and Mallinckrodt Enterprises Holdings, Inc. Certain of 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.

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.

~~Amended Proposed Opioid-Related Litigation Settlement.~~ On September 2, 2021, the Debtors further amended its agreement in principle with the 50 state and territory attorneys general and the court-appointed plaintiffs' committee in the opioid multidistrict litigation (the Multi-State Governmental Entities Group), the Governmental Plaintiff Ad Hoc Committee (the GAHC) and the Official Committee of Opioid Related Claimants (the OCC) appointed in the Chapter 11 Cases (together, the Opioid Claimants) that would resolve all opioid-related claims against the Company and its subsidiaries. The agreement in principle provides that, upon the Company’s emergence from the Chapter 11 process, subject to court approval and other conditions:

•Opioid claims would be channeled to one 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 with respect to the operation of its opioid business.~~

As of both April 1, 2022 and December 31, 2021, the Company maintained an accrual for this contingency of $1,725.0 million within LSTC. No value has been ascribed to the warrants as of April 1, 2022 or December 31, 2021 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.

Acthar Gel-Related Matters

~~Medicaid Lawsuit.~~SEC Subpoena. In ~~May~~August 2019, CMS issued a final decision directing the Company to revert to the original base date 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 final decision, the Company filed suit in the D.C. District Court against 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~~a subpoena 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 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 AMPSEC for ~~Acthar in the government’s price reporting system. As of both April 1, 2022 and December 31, 2021, $634.7 million related to the Medicaid lawsuit was recorded within LSTC.~~

Pursuant to the Proposed Acthar Gel-Related Settlement, the Company has agreed to pay $260.0 million over seven years and to reset Acthar Gel’s Medicaid rebate calculation as of July 1, 2020, such that state Medicaid programs will receive 100% rebates on Acthar Gel Medicaid sales, based on current Acthar Gel pricing. Additionally, upon effectiveness of the Proposed Acthar Gel-Related

Settlement, the Company will dismiss its D.C. Circuit appeal. The Company has entered into the Proposed Acthar Gel-Related Settlement with the DOJ and other governmental parties solely to move past these litigation matters and disputes and does not make any admission of liability or wrongdoing.

~~Commercial and Securities Litigation~~

~~Acthar Gel-Related Matters~~

~~Law Enforcement Health Benefits Litigation.~~ 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., No. 3:21-cv-50215 (N.D. Ill.) (“LEHB”). The complaint~~alleges 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 to defraud, and unjust enrichment and incorporates the allegations at issue in ~~Rockford~~ ~~and the~~ ~~Rockford-~~related cases. After the complaint was filed, the Company requested that the district court stay the case in light of the Chapter 11 Cases. The motion 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. As of March 10, 2022, the U.S. District Court lifted the stay in this matter and established an initial schedule for the proceedings. 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 April 26, 2022, the Company filed a motion to dismiss, which remains pending. The Company intends to vigorously defend itself in this matter.

~~For additional details on~~ ~~Rockford~~ ~~and the~~ ~~Rockford-related cases, 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.~~

~~Other Commercial and Securities Litigation Matters~~

~~Shareholder Litigation (HealthCor)~~. In October 2020, four purported shareholders of the Company's stock filed a complaint in the D.C. District Court against the Company, its CEO Mark C. Trudeau and its former Chief Financial Officer ("CFO") Matthew K. Harbaugh. The lawsuit, captioned ~~HealthCor Offshore Master Fund, L.P., et al. v. Mallinckrodt plc, et al.~~, asserts claims for false and misleading statements in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, common law fraud, and negligent misrepresentation arising from substantially similar allegations from the putative class action securities litigation that was filed against the Company and certain of its officers in January 2017, captioned ~~Patricia A. Shenk v. Mallinckrodt plc, et al ("Shenk").~~ The complaint seeks damages in an unspecified amount. The defendants intend to vigorously defend themselves 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. 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 the proceedings against the individual named defendants. The Bankruptcy Court extended the injunction staying the proceedings against the individual named defendants on August 30, 2021. The plaintiffs subsequently appealed the Bankruptcy Court action to the U.S. District Court in Delaware through an interlocutory appeal, which was denied on November 10, 2021. The Bankruptcy Court further extended the injunction on November 29, 2021 and on March 17, 2022. Absent further extension, the injunction will expire at the earlier of (a) plan effective date or (b) June 16, 2022, with certain modifications.

~~Shareholder Derivative Litigation (Brandhorst)~~. In September 2019, a purported shareholder of the Company's stock filed a shareholder derivative complaint in the D.C. District Court against the Company, as nominal defendant, as well as its CEO, its former CFO, its Executive Vice President Hugh O'Neill, and the following members of the Board of Directors: Angus Russell, David Carlucci, J. Martin Carroll, David Norton, JoAnn Reed and Kneeland Youngblood (collectively with Trudeau, Harbaugh and O'Neill, the “Brandhorst Defendants”). The lawsuit is captioned ~~Lynn Brandhorst, derivatively on behalf of nominal defendant Mallinckrodt PLC v. Mark Trudeau et al.~~ ~~and relies on the allegations contained in the~~ ~~Shenk~~ class action lawsuit. The complaint asserts claims for contribution, breaches of fiduciary duty, unjust enrichment, abuse of control, and gross mismanagement, and is premised on allegations that the Brandhorst Defendants caused the Company to make the allegedly false or misleading statements at issue in the ~~Shenk~~ class action lawsuit. The complaint seeks damages in an unspecified amount and corporate governance reforms. On November 20, 2019, this matter was stayed by agreement of the parties pending resolution of the ~~Shenk~~ lawsuit below. The Brandhorst Defendants intend to vigorously defend themselves in this matter. 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 the proceedings against the Brandhorst Defendants. The Bankruptcy Court extended the injunction staying the proceedings against the Brandhorst Defendants on August 30, 2021, and further extended the injunction on November 29, 2021 and on March 17, 2022. Absent further extension, the injunction will expire at the earlier of (a) plan effective date or (b) June 16, 2022, with certain modifications.

~~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 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 dispute with the U.S. Department of Health and Human Services ("HHS") and Centers for Medicare and Medicaid Services (together with HHS, the "Agency") concerning the base date average manufacturer price for Acthar Gel ~~in patients~~under the Medicaid Drug Rebate Program, which was also the subject of litigation that the Company filed against the Agency. The SEC issued subsequent subpoenas on January 7, 2022 and September 28, 2022, requesting additional documents from the Company.

In connection with ~~amyotrophic lateral sclerosis.~~the investigation, on January 13, 2023, the SEC staff issued Wells Notices to the Company and individuals, including certain of its current and former executive officers, who were employed during 2019 (collectively, the “Individuals”). The ~~lawsuit seeks monetary damages in~~notices indicate that the SEC staff has made a preliminary determination to recommend that the SEC file an ~~unspecified amount. A lead plaintiff was designated~~enforcement action against the Company that would allege violations of the federal securities laws, and against the Individuals that would allege violations of the federal securities laws and/or aiding and abetting violations of the federal securities laws. The recommendation as to the Company may involve an injunction, a cease-and-desist order and/or other appropriate relief.

The actions recommended by the SEC staff would allege, among other things, that (a) the Company improperly omitted to disclose the dispute with the Agency prior to the litigation filed by the Company in federal court on ~~June 25, 2020,~~May 21, 2019, and ~~on July 30, 2020,~~(b) the ~~court approved the transfer~~Company’s disclosure of the ~~case to~~civil investigative demand received from the U.S. ~~District Court~~Attorney’s Office 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"Massachusetts in January 2019 (“Boston CID”)~~. The amended complaint claims~~ should have stated that the ~~defendants made false and/or misleading statements and/or failed~~Boston CID related to ~~disclose that: (i)~~ the ~~CMS had informed~~Company’s dispute with the Agency.

A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law. Under the SEC procedures, a recipient of a Wells Notice has an opportunity to respond and make a submission to the SEC staff setting forth the recipient’s interests and position in regard to the subject matter of the investigation.

The Company believes that it ~~was using the wrong base date AMP for calculating the Medicaid rebate the Company owed CMS for Acthar Gel each quarter since 2014; (ii)~~has complied with all applicable laws and regulations, and it has provided a submission explaining the Company’s reported net income was improperly inflated in violation of GAAP; (iii) the Company’s contingent liabilities associated with the rebates owed to CMS for Acthar Gel were misrepresented; (iv) the Company’s fiscal year 2019 guidance for Acthar Gel net sales was false; (v) theposition and its belief that no enforcement action is warranted or appropriate. The Company ~~failed to disclose material information regarding 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~~understands that the ~~clinical trials for Acthar Gel were purportedly initiated in order~~Individuals have provided similar submissions to ~~make it appear that alternative revenue opportunities for Acthar Gel existed~~the SEC staff. The outcome of this matter is uncertain, 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 defendants filed a motion to dismiss the amended complaint. The defendants intend to vigorously defend themselves in this matter. At this stage, the Company is ~~not able~~unable to ~~reasonably~~ estimate the ~~expected amount or range of cost or any loss~~potential exposure 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. The Bankruptcy Court extended the injunction staying the proceedings against the Strougo Defendants on August 30, 2021, and further extended the injunction on November 29, 2021 and on March 17, 2022. Absent further extension, the injunction will expire at the earlier of (a) plan effective date or (b) June 16, 2022, with certain modifications.

~~Employee Stock Purchase Plan (ESPP) Securities Litigation.~~ In July 2017, a purported purchaser of Mallinckrodt stock through Mallinckrodt's ESPPs filed a derivative and class action lawsuit in the Federal District Court in the Eastern District of Missouri, captioned ~~Solomon v. Mallinckrodt plc, et 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 Federal District Court for the Eastern District of Missouri and refiled virtually the same complaint in the D.C. District Court. The complaint purports to be brought on behalf of all persons who purchased or otherwise acquired Mallinckrodt stock between November 25, 2014, and January 18, 2017, through the ESPPs. In the alternative, the plaintiff alleges a class action for those same purchasers/acquirers of stock in the ESPPs during the same period. The complaint asserts claims under Section 11 of the 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 the ~~Shenk~~ class action lawsuit. Stipulated co-lead plaintiffs were 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. The complaint seeks damages in an unspecified amount. On July 6, 2018, this matter was stayed by agreement of the parties pending resolution of the ~~Shenk~~ ~~class action lawsuit. The defendants intend to vigorously defend themselves in this~~ matter. On October 13, 2020, the trial court entered an order acknowledging the automatic stay of this litigation as to the Company pursuant to §362 of the Bankruptcy Code, and on December 4, 2020, the Bankruptcy Court also enjoined the proceedings against the individual named defendants. The Bankruptcy Court extended the injunction staying the proceedings against the individual named defendants on August 30, 2021, and further extended the injunction on November 29, 2021 and on March 17, 2022. Absent further extension, the injunction will expire at the earlier of (a) plan effective date or (b) June 16, 2022, with certain modifications.

~~For additional details on the~~ ~~Shenk~~ ~~class action lawsuit, 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.~~

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 ~~April 1, 2022,~~March 31, 2023 (Successor), it was probable that it would incur remediation costs in the range of ~~$82.3~~$18.1 million to ~~$119.2~~$48.1 million. The Company also concluded that, as of ~~April 1, 2022,~~March 31, 2023 (Successor), the best estimate within this range was ~~$105.8~~$36.5 million, of which ~~$1.2~~$0.9 million was included in accrued and other current liabilities ~~$66.9 million was included in LSTC,~~ and the ~~remaining $37.7 million~~remainder was included in environmental liabilities on the unaudited condensed consolidated balance

sheet as of ~~April 1, 2022.~~March 31, 2023 (Successor). While it is not possible at this time to determine with certainty the ultimate outcome of these matters, the Company 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 material adverse effect on its financial condition, results of operations and cash flows.

~~Crab Orchard National Wildlife Refuge Superfund Site, near Marion, Illinois.~~ Lower Passaic River, New Jersey~~Between 1967~~. The Company and ~~1982, International Minerals and Chemicals Corporation,~~approximately 70 other companies ("Cooperating Parties Group" or "CPG") are parties to a predecessor in interest to the Company, 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 andMay 2007 Administrative Order on Consent with the Environmental Protection Agency ~~(EPA) (together, "the Government Agencies"~~("EPA") issued a special notice letter to General Dynamics Ordinance and Tactical Systems, Inc. ("General Dynamics"), one of the other potentially responsible parties ("PRPs") at the CO Site, to compel General Dynamics to perform ~~the~~a remedial investigation and feasibility study ("RI/FS") of the 17-mile stretch known as the Lower Passaic River Study Area (“River”). The Company's potential liability stems from former operations at Lodi and Belleville, New Jersey (the “Lodi facility” and the “Belleville facility” respectively). In April 2014, the EPA issued a revised Focused Feasibility Study ("FFS"), with remedial alternatives to address cleanup of the lower 8-mile stretch of the River. The EPA estimated the cost for the ~~AUS Operable Unit. General Dynamics negotiated~~remediation alternatives ranged from $365.0 million to $3.2 billion and the EPA's preferred approach had an ~~Administrative Order~~estimated cost of ~~Consent~~$1.7 billion. In April 2015, the CPG

presented a draft of the RI/FS of the River to the EPA that included alternative remedial actions for the entire 17-mile stretch of the River. In March 2016, the EPA issued the Record of Decision ("ROD(s)") for the lower 8 miles of the River with a slight modification on its preferred approach and a revised estimated cost of $1.38 billion. In October 2016, the EPA announced that Occidental Chemicals Corporation had entered into an agreement to develop the remedial design.

In August 2018, the EPA finalized a buyout offer of $280,600 with the ~~Government Agencies~~Company, limited to ~~conduct an extensive RI/FS at~~its former Lodi facility, for the ~~CO Site under the direction~~lower 8 miles of the ~~U.S. Fish and Wildlife Service. General Dynamics asserted in August 2004 that~~River. In September 2021, the ~~Company is jointly and severally liable, along~~EPA issued the ROD for the upper 9 miles of the River selecting source control as the remedy for the upper 9 miles with ~~approximately eight other lessees and operators at~~an estimated cost of $441.0 million. In September 2022, the ~~AUS Operable Unit, for costs associated with alleged contamination of soils and groundwater resulting from historic operations, and the parties have~~Company entered into a ~~non-binding mediation process. However,~~conditional $0.3 million Early Cash-Out Consent Decree (“CD”) with the ~~mediation process has indefinitely stalled due~~EPA as a buyout for its portion of the upper part of the River related to ~~an "internal issue" that~~its former Lodi facility; finalization of the ~~Government Agencies are facing and cannot seem to resolve.~~

~~Subsequent~~CD is subject to the ~~issuance~~EPA approval following the public comment period that ended March 2023.

The portion of the ~~Company's financial statements for~~liability related to the ~~fiscal year ended December 31, 2021,~~Belleville facility was discharged against the Company ~~increased~~as a result of the ~~accrual~~Plan. Any reserves associated with this ~~matter by $11.1 million to $57.4 million, which represents~~contingency were included in LSTC as of the ~~Company's estimate~~Effective Date, and any related liabilities were discharged under the Bankruptcy Code.

As of March 31, 2023, the Company estimated that its remaining liability related to ~~this environmental site, all of~~the River was $21.0 million, which was ~~reflected~~included within ~~LSTC~~environmental liabilities on the unaudited condensed consolidated balance sheet as of ~~April 1, 2022. The non-cash charge~~March 31, 2023 (Successor). Despite the issuance of ~~$11.1 million was reflected in~~ the ~~unaudited condensed consolidated statement~~revised FFS and the RODs for both the lower and upper River by the EPA, the RI/FS by the CPG, and the cash out settlement by the EPA, there are many uncertainties associated with the final agreed-upon remediation, potential future liabilities and the Company's allocable share of ~~operations as a component~~the remediation. Given those uncertainties, the amounts accrued may not be indicative of ~~operating expenses. While it is not possible at this time to determine with certainty~~ the ~~ultimate outcome of this matter,~~amounts for which the Company ~~believes, given~~may be ultimately responsible and will be refined as the information currently available, that the final resolution of all known claims, after taking into account amounts already accrued, will not have a material adverse effect on its financial condition, results of operations and cash flows.remediation progresses.

~~Internal Revenue Code Section 453A Interest~~Bankruptcy Litigation and Appeals

AsFirst Lien Noteholder Matters. The Plan proposed to reinstate the issuers' existing 10.00% First Lien Senior Secured Notes due 2025 ("Existing First Lien Notes") in an aggregate principal amount of $495.0 million and the note documents relating thereto. Certain holders of the Existing First Lien Notes and the trustee in respect thereof (collectively, the "Noteholder Parties"), objected to the proposed reinstatement, arguing, among other things, that the Company was required to pay a significant make-whole premium as a condition to reinstatement of the Existing First Lien Notes. In the course of confirming the Plan, the Bankruptcy Court overruled these objections.

On March 30, 2022, the Noteholder Parties appealed the confirmation order's approval of the reinstatement of the Existing First Lien Notes to the United States District Court for the District of Delaware. The Company and the Existing First Lien Notes Trustee reached an agreement to hold the trustee's appeal in abeyance, to be determined by the result of ~~historical internal installment sales,~~the holders' appeals, subject to certain conditions, which was approved by the District Court. Briefing on the merits of the Noteholder Parties' appeals was completed on July 1, 2022. On the same date, the Company ~~has reported Internal Revenue Code ("IRC") §453A interest on its tax returns~~moved to dismiss the Noteholder Parties' appeals as equitably moot. Briefing on the ~~basis~~motion was completed on August 5, 2022 and supplemental declarations have been filed in the appeal. Oral argument was held on the Noteholder Parties' appeals on May 5, 2023, and the court took the matter under advisement.

At this stage, the Company is not able to reasonably estimate the expected amount or range of ~~its interpretation~~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 ("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 of the ~~IRC. Alternative interpretations of these provisions could result in additional interest payable. Due~~Sanofi Motion to the ~~inherent uncertainty in these interpretations,~~District Court. Briefing was completed on March 10, 2022 and the ~~Company has deferred~~District Court affirmed on December 20, 2022, for which Sanofi filed a notice of appeal on January 17, 2023. Sanofi had also appealed the ~~recognition~~Bankruptcy Court's confirmation order, but pursuant to the terms of a settlement between Sanofi and the General Unsecured Claims Trustee appointed pursuant to the Plan, it is expected that Sanofi will dismiss its appeal of the ~~benefit associated~~confirmation order with prejudice in the near term.

Banks et al. v. Cotter Corporation et al. v. Mallinckrodt LLC, et al. On January 29, 2023, the named plaintiffs in Banks et al. v. Cotter Corporation et al. v. Mallinckrodt LLC, et al. No. 20-CV-1227 (E.D. Mo.) filed a motion to amend their class-action petition to add Mallinckrodt LLC as a defendant. Mallinckrodt LLC filed a motion in the Bankruptcy Court to enjoin this petition on the grounds that these alleged claims were discharged pursuant to the Plan and confirmation order. On April 11, 2023, the court held oral argument on the motion to enjoin. Both motions remain pending until the Bankruptcy Court adjudicates the motion to enjoin. Under the confirmation order, any liability Mallinckrodt LLC may have in connection with the ~~Company's interpretation and maintained a corresponding~~Banks litigation was discharged upon emergence from Chapter 11, with the limited exception of liability ~~of $12.4 million within LSTC and other liabilities in~~that is indemnified by the unaudited condensed consolidated balance sheets as of April 1, 2022 and December 31, 2021, respectively. Favorable resolution of this uncertainty would likely result in a reversal of this liability and a benefit being recorded to interest expense within the unaudited condensed consolidated statements of operations.U.S. government.

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 31, 2021.~~10-K.


~~13.~~12.			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:


		April 1, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			March 31, 2023 (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	$	36.9	$	24.7	$	12.2	$	—	Debt and equity securities held in rabbi trusts	$	38.2	$	26.1	$	12.1	$	—
Equity securities	Equity securities	32.4		32.4		—		—		Equity securities	10.3		10.3		—		—
Interest rate cap										Interest rate cap	14.9		—		14.9		—
		$	69.3	$	57.1	$	12.2	$	—		$	63.4	$	36.4	$	27.0	$	—
Liabilities:	Liabilities:									Liabilities:
Deferred compensation liabilities	Deferred compensation liabilities	$	29.3	$	—	$	29.3	$	—	Deferred compensation liabilities	$	19.0	$	—	$	19.0	$	—
Contingent consideration liabilities	Contingent consideration liabilities	27.2		—		—		27.2		Contingent consideration liabilities	7.7		—		—		7.7
											$	26.7	$	—	$	19.0	$	7.7

		$	56.5	$	—	$	29.3	$	27.2


		December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			December 30, 2022 (Predecessor)		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	$	38.7	$	24.9	$	13.8	$	—	Debt and equity securities held in rabbi trusts	$	36.6	$	24.8	$	11.8	$	—
Equity securities	Equity securities	36.5		36.5		—		—		Equity securities	25.5		25.5		—		—
		$	75.2	$	61.4	$	13.8	$	—		$	62.1	$	50.3	$	11.8	$	—
Liabilities:	Liabilities:									Liabilities:
Deferred compensation liabilities	Deferred compensation liabilities	$	36.9	$	—	$	36.9	$	—	Deferred compensation liabilities	$	26.0	$	—	$	26.0	$	—
Contingent consideration liabilities	Contingent consideration liabilities	27.3		—		—		27.3		Contingent consideration liabilities	7.3		—		—		7.3

		$	64.2	$	—	$	36.9	$	27.3		$	33.3	$	—	$	26.0	$	7.3

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.

Interest rate cap. The Company is exposed to interest rate risk on its variable-rate debt. During the three months ended March 31, 2023, the Company entered into an interest rate cap agreement, which serves to reduce the volatility on future interest expense cash outflows. The interest rate cap agreement has a total notional value of $860.0 million with an upfront premium of $20.0 million and provides the Company with interest rate protection (i) for the period March 16, 2023 through July 19, 2023 to the extent that the one-month London Interbank Offered Rate ("LIBOR") exceeds 4.65%, and (ii) for the period July 20, 2023 through March 26, 2026 to the extent that the one-month Secured Overnight Financing Rate ("SOFR") exceeds 3.84%.

The interest rate cap agreement qualifies as a cash flow hedge. The premium paid is recognized in income on a rational basis, and changes in the fair value of the interest rate cap are recorded within accumulated other comprehensive income ("AOCI") and are subsequently reclassed into interest expense in the period when the hedged interest affects earnings. The fair value of the interest rate cap is included in other assets on the Company’s unaudited condensed consolidated balance sheet as of March 31, 2023 (Successor). The Company elected to use the income approach to value the interest rate cap derivative using observable Level 2 market expectations at the measurement date and standard valuation techniques to convert future amounts to a single present amount (discounted) reflecting current market expectations about those future amounts. Level 2 inputs for derivative valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts) and inputs other than quoted prices that are observable such as LIBOR or SOFR rate curves, futures and volatilities. Mid-market pricing is used as a practical expedient in the fair value measurements. The Company recognized an unrealized loss of $5.0 million within AOCI during the three months ended March 31, 2023 (Successor), with $0.3 million being reclassified into earnings as a component of interest expense, net. It is expected that over the next 12 months, $6.7 million of the estimated losses in AOCI will be recognized into interest expense, net. The cash payment of the $20.0 million premium and other corresponding activity related to the interest rate cap were reflected as cash flows from operating activities in the unaudited condensed consolidated statement of cash flows for the three months ended March 31, 2023 (Successor).

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 consideration liabilities. ~~As part~~In accordance with the Plan and the Scheme of ~~the acquisition of Stratatech Corporation ("Stratatech"),~~Arrangement, the Company ~~provided~~will provide consideration for a contingent ~~consideration to the prior shareholders of Stratatech,~~value right ("CVR") associated with Terlivaz® 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 is responsible for~~achievement of a ~~payment upon acceptance of the Company's submission and another upon approval by the FDA.~~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 ~~payments~~payment 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~~Terlivaz CVR as of ~~Stratatech~~March 31, 2023 (Successor) and December 30, 2022 (Successor) to be ~~$27.2~~$7.7 million and ~~$27.3~~$7.3 million, ~~as of April 1, 2022 and December 31, 2021,~~ respectively. These liabilities are governed by an executory contract and recorded at their estimated allowed claim amount within LSTC in the unaudited condensed consolidated balance sheet as of both April 1, 2022 and December 31, 2021.

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 ~~April 1, 2022~~March 31, 2023 (Successor) and December ~~31, 2021:~~30, 2022 (Successor):

•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 ~~$60.4~~$56.9 million and ~~$60.2~~$57.2 million as of ~~April 1, 2022~~March 31, 2023 (Successor) and December ~~31, 2021~~30, 2022 (Successor) (level 1), respectively.

•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 ~~$49.0~~$46.4 million and ~~$51.3~~$46.7 million as of ~~April 1, 2022~~March 31, 2023 (Successor) and December ~~31, 2021,~~30, 2022 (Successor), 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,~~10.00% and ~~is therefore classified as level 1. The Company's 5.75%, 4.75%, 5.625%, 5.50% and 10.00%~~11.50% first and second lien senior secured 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.

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

April 1, 2022 December 31, 2021
Carrying
Value Fair
Value Carrying
Value Fair
Value
Level 1:
5.75% senior notes due August 2022 $ 610.3 $ 293.3 $ 610.3 $ 324.1
4.75% senior notes due April 2023 133.7 51.9 133.7 48.9
5.625% senior notes due October 2023 514.7 252.3 514.7 279.1
5.50% senior notes due April 2025 387.2 189.9 387.2 211.6
10.00% first lien senior notes due April 2025 495.0 519.6 495.0 523.7
10.00% second lien senior notes due April 2025 322.9 306.8 322.9 312.7
Revolving credit facility 900.0 900.0 900.0 900.0
Level 2:
9.50% debentures due May 2022 10.4 7.7 10.4 7.7
8.00% debentures due March 2023 4.4 3.2 4.4 3.2
Term loan due September 2024 1,392.9 1,274.6 1,396.5 1,309.2
Term loan due February 2025 369.7 338.9 370.7 347.7
Total Debt $ 5,141.2 $ 4,138.2 $ 5,145.8 $ 4,267.9


	Successor
	March 31, 2023				December 30, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
Level 1:
10.00% first lien senior secured notes due April 2025	$	478.0	$	415.6	$	475.9	$	425.9
10.00% second lien senior secured notes due April 2025	249.8		222.1		242.2		216.8
11.50% first lien senior secured notes due December 2028	650.0		536.6		650.0		552.6
10.00% second lien senior secured notes due June 2029	179.8		192.0		175.5		176.7

Level 2:
2017 Replacement Term loan due September 2027	1,221.4		1,005.3		1,222.1		1,037.8
2018 Replacement Term loan due September 2027	326.6		262.6		326.9		274.8
Total Debt	$	3,105.6	$	2,634.2	$	3,092.6	$	2,684.6

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 net sales:

Three Months Ended
April 1,
2022 March 26,
2021
CuraScript, Inc. 26.0 % 24.9 %

Successor

Predecessor

Three Months
Ended
March 31, 2023

Three Months
Ended
April 1, 2022

FFF Enterprises, Inc.

18.8

CuraScript, Inc.

26.0

* Net sales to this distributor was less than 10.0% of the Company's total net sales for the respective periods presented above.

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
		April 1, 2022		December 31, 2021			March 31, 2023		December 30, 2022
AmerisourceBergen Corporation	AmerisourceBergen Corporation	29.2	%	30.0	%	AmerisourceBergen Corporation	26.1	%	23.3	%
McKesson Corporation	McKesson Corporation	16.8		15.0		McKesson Corporation	19.0		17.3
CuraScript, Inc.		*		12.7
FFF Enterprises, Inc.						FFF Enterprises, Inc.	*		16.2

*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 net sales:


		Three Months Ended				Successor				Predecessor
		April 1, 2022		March 26, 2021				Three Months Ended March 31, 2023			Three Months Ended April 1, 2022
INOmax							INOmax	19.5	%		20.2	%
Acthar Gel	Acthar Gel	26.0	%	23.1	%		Acthar Gel	19.3			26.0
INOmax		20.2		24.0

Therakos	Therakos	12.2		12.0			Therakos	13.8			12.2
APAP							APAP	10.9			*

*Net sales attributable to this product was less than 10.0% of total net sales for the respective period presented above.


~~14.~~13.			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 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. Although these amounts are excluded from segment operating income, as applicable, they are included in reported consolidated operating loss and are reflected in the reconciliations presented below.

Selected information by reportable segment was as follows:

Three Months Ended
April 1,
2022 March 26,
2021
Net sales:
Specialty Brands $ 339.4 $ 408.4
Specialty Generics 151.5 149.6
Net sales $ 490.9 $ 558.0
Operating income (loss):
Specialty Brands $ 164.8 $ 212.1
Specialty Generics 34.4 31.7
Segment operating income 199.2 243.8
Unallocated amounts:
Corporate and unallocated expenses (1)
(32.8) (22.6)
Depreciation and amortization (177.2) (169.6)
Share-based compensation (1.2) (3.6)
Restructuring charges, net (6.8) (0.4)
Non-restructuring impairment charges — (64.5)
Separation costs (2)
(2.0) (0.6)
Operating loss $ (20.8) $ (17.5)



	Successor		Predecessor
	Three Months Ended March 31, 2023		Three Months Ended April 1, 2022
Net sales:
Specialty Brands	$	252.0	$	339.4
Specialty Generics	172.6		151.5
Net sales	$	424.6	$	490.9
Operating income (loss):
Specialty Brands	$	32.4	$	164.8
Specialty Generics	32.8		34.4
Segment operating income	65.2		199.2
Unallocated amounts:
Corporate and unallocated expenses (1)	(14.0)		(32.8)
Depreciation and amortization	(145.1)		(177.2)
Share-based compensation	(2.6)		(1.2)
Restructuring charges, net	(1.2)		(6.8)

Separation costs (2)	(4.9)		(2.0)


Operating loss	$	(102.6)	$	(20.8)

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

(2)Represents costs included in selling, general and administrative expenses, primarily related to 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				Successor				Predecessor
		April 1, 2022		March 26, 2021				Three Months Ended March 31, 2023			Three Months Ended April 1, 2022
Acthar Gel	Acthar Gel	$	127.7	$	129.0		Acthar Gel	$	82.0		$	127.7
INOmax	INOmax	99.0		134.0			INOmax	82.7			99.0
Ofirmev		2.6		12.8
Therakos	Therakos	59.9		66.8			Therakos	58.7			59.9
Amitiza (1)	Amitiza (1)	47.7		61.4			Amitiza (1)	24.5			47.7
Terlivaz							Terlivaz	2.2			—
Other	Other	2.5		4.4			Other	1.9			5.1
Specialty Brands	Specialty Brands	339.4		408.4			Specialty Brands	252.0			339.4

Hydrocodone (API) and hydrocodone-containing tablets		19.0		23.3
Oxycodone (API) and oxycodone-containing tablets		16.6		17.2
Acetaminophen (API)		46.3		45.5
Other controlled substances		64.1		58.1
Opioids							Opioids	62.2			50.0
ADHD							ADHD	22.4			10.8
Addiction treatment							Addiction treatment	15.6			15.9
Other	Other	5.5		5.5			Other	1.8			2.8
Generics							Generics	102.0			79.5
Controlled substances							Controlled substances	18.5			20.4
APAP							APAP	46.4			46.3
Other							Other	5.7			5.3
API							API	70.6			72.0
Specialty Generics	Specialty Generics	151.5		149.6			Specialty Generics	172.6			151.5
Net sales	Net sales	$	490.9	$	558.0		Net sales	$	424.6		$	490.9

(1)Amitiza consists of both product net sales and royalties. Refer to Note 2 for further details on Amitiza's revenues.


~~15.~~14.			Subsequent Events

~~Bankruptcy Proceedings~~

Mallinckrodt plc has substantively concluded an examinership process before the High Court of Ireland, which made an order on April 27, 2022 confirming a scheme of arrangement (the "Scheme") that implements certain aspects of the Plan as a matter of the laws of Ireland. The confirmation of the Scheme by the High Court of Ireland (and its subsequent effectiveness) satisfies a key condition to the consummation of the Plan. The Scheme will become effective concurrently with the effectiveness of the Plan, which remains subject to the satisfaction or waiver of certain other conditions.

~~The Company has commenced a process to raise exit financing, which is expected to close upon emergence from the Chapter 11 bankruptcy process.~~

Commitments and Contingencies

Certain litigation matters occurred ~~during the three months ended April 1, 2022~~on, or prior to, March 31, 2023 (Successor), but had subsequent updates through the issuance of this report. See further discussion in Note ~~12.~~

11.

2820


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 Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the United States ("U.S.") Securities and Exchange Commission ("SEC") on March 15, 2022 and within Part II, Item 1A 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 thisThis Quarterly Report on Form 10-Q ~~is "Mallinckrodt," which is a registered trademark or~~includes forward-looking statements that are based on management's beliefs and assumptions and on information currently available to management. See "Forward-Looking Statements" at the ~~subject~~end of ~~pending trademark applications in the U.S.~~this Item 2 for important additional information 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.related considerations.

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 oncology; immunotherapy and neonatal respiratory critical care therapies; 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 ~~31, 2021,~~30, 2022 ("Annual Report on Form 10-K"), filed with the United States ("U.S. ~~SEC~~") Securities and Exchange Commission ("SEC") on March ~~15, 2022.~~3, 2023.

~~Significant Events~~Emergence from bankruptcy

~~Voluntary Petitions for Reorganization~~

On October 12, 2020 ~~(the "Petition~~("Petition Date"), weMallinckrodt plc and substantially all of its U.S. subsidiaries, including certain subsidiaries of Mallinckrodt plc operating the Specialty Generics business and the Specialty Brands business and certain of the Company's international subsidiaries (collectively the "Debtors") voluntarily initiated ~~Chapter 11~~ proceedings ~~(the "Chapter~~("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") to modify our capital structure, including restructuring portions of our debt, and resolve potential legal liabilities, including, but not limited to those described in Note 12 to the notes to the unaudited condensed consolidated financial statements as ~~Opioid-Related Matters~~ ~~and~~ ~~Acthar~~® ~~Gel ("Acthar Gel")-Related Matters~~. We are continuing to operate our business as debtors-in-possession and supply customers and patients with products as normal. We intend to use the Chapter 11 process to provide a fair, orderly, efficient and legally binding mechanism to implement a plan of reorganization. Taken together, these actions are intended to enable us to move forward with our vision to become an innovation-driven biopharmaceutical company meeting the needs of underserved patients with severe and critical conditions.

~~On February 3, 2022, the Bankruptcy Court confirmed the~~Code. The fourth amended plan of reorganization (with technical modifications) ~~(the "Plan"~~("Plan") became effective on June 16, 2022 ("Effective Date"), and ~~subsequently entered a confirmation order~~ on ~~March 2, 2022. In addition, Chapter 11 proceedings commenced by a limited subset of~~such date the debtors have been recognized and given effect in Canada, and separately Mallinckrodt plc has substantively concluded an examinership process before the High Court of Ireland, which made an order on April 27, 2022 confirming a scheme of arrangement that implements certain aspects of the Plan as a matter of the laws of Ireland, and which will become effective concurrently with the effectiveness of the Plan.

~~Consummation of the Plan and the transactions contemplated thereby and emergence~~Company emerged from the Chapter 11.

Upon emergence from Chapter 11, ~~proceedings remains subject~~the Company adopted fresh-start accounting in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 852 - Reorganizations, and became a new entity for financial reporting purposes as of the Effective Date. References to "Successor" relate to the ~~satisfaction or waiver~~financial position as of ~~various conditions.~~

~~We have commenced a process to raise exit financing, which is expected to close upon emergence from the Chapter 11 bankruptcy process.~~

~~For further information, refer to Note 2~~June 16, 2022 and results of operations of the ~~notes~~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.~~statements for the Predecessor.

Significant Events

Reorganization items, net

~~Reorganization~~During the three months ended March 31, 2023 (Successor) and April 1, 2022 (Predecessor), we incurred $5.6 million and $43.4 million of reorganization items, net, respectively. The Successor expenses represent amounts incurred after the Effective Date that directly resulted from Chapter 11 and were entirely comprised of professional fees associated with the implementation of the Plan. The Predecessor expenses represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of professional fees and adjustments to reflect the carrying value of liabilities subject to compromise ("LSTC") at their estimated allowed claim amounts, as such adjustments are approved by the Bankruptcy Court. During the three months ended April 1, 2022 and March 26, 2021, we incurred $43.4 million and $93.5 million of reorganization items, net, respectively.amounts.

~~Terlipressin~~

During September 2020, the U.S. Food and Drug Administration ("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 approval. In August 2021, we resubmitted our NDA for terlipressin to the FDA and on February 18, 2022 (the Prescription Drug User Fee Act ("PDUFA") date), the FDA issued a CRL. In the weeks leading up to the PDUFA date, it became necessary for us to identify a new packaging and labeling manufacturing facility, which meant that an inspection by the FDA could not be completed by the PDUFA date. A satisfactory inspection is required before the NDA can be approved. This is the only outstanding issue noted in the CRL, and it is important to note that there were no safety or efficacy issues cited. We are working with the new facility to have it ready for inspection by the FDA. We remain committed to this critically ill patient population, who currently have no approved treatment option in the U.S. for HRS-1 and we believe that there is a path to approval in fiscal 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 April 1, 2022 and December 31, 2021.

~~StrataGraft~~®

During the three months ended April 1, 2022, 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.

Business Factors Influencing the Results of Operations

We cannot adequately benchmark certain operating results of the three months ended March 31, 2023 (Successor) against the three months ended April 1, 2022 (Predecessor) as the comparison of Successor and Predecessor periods would not be in accordance with GAAP. We do not believe that reviewing the results of the Successor period in isolation would be useful in identifying trends in or reaching conclusions regarding our overall operating performance. Management believes that our key performance metrics such as net sales and segment results of operations for the three months ended March 31, 2023 (Successor) provide a meaningful comparison and are useful in identifying current business trends when compared to the three months ended April 1, 2022 (Predecessor). Accordingly, in addition to presenting our results of operations as reported in our unaudited condensed consolidated financial statements in accordance with GAAP, the discussion in "Results of Operations" and "Segment Results" below utilizes a comparison of the three months ended March 31, 2023 (Successor) against the three months ended April 1, 2022 (Predecessor).

Specialty Brands

Net sales of Acthar® Gel for the three months ended March 31, 2023 (Successor) decreased $45.7 million, or 35.8%, to $82.0 million driven primarily by continued scrutiny on overall specialty pharmaceutical spending, slower than expected returning patient volumes and the entrance of new competition in fiscal 2022. Competition intensified with the commercial launch of a purified cortrophin gel product in 2022 and this competitive pressure is expected to continue to negatively impact sales of Acthar Gel in 2023. The ongoing competition is expected to continue to have an adverse effect on our financial condition, results of operations and cash flows. We continue to differentiate Acthar Gel through pre-clinical studies and through product enhancements, including the development of the Acthar Gel self-injection device, which has been completed, but we do not anticipate a launch in 2023. We continue to work toward the resolution of a regulatory matter involving one of our partners and not specific to our device. If approved, this product is expected to create an easier and more patient-friendly application for single unit dosage indications.

Net sales of Amitiza® for the three months ended March 31, 2023 (Successor) decreased $23.2 million, or 48.6%, to $24.5 million driven primarily by a decline in royalties associated with loss of exclusivity in the U.S. Additional generic competitors have entered the market in 2023, resulting in the elimination of the Par U.S. royalties.

Net sales of INOmax® for the three months ended ~~April 1, 2022~~March 31, 2023 (Successor) decreased ~~$35.0~~$16.3 million, or ~~26.1%~~16.5%, to ~~$99.0~~$82.7 million driven primarily by continued competition ~~following the launch of a competitive~~from alternative nitric oxide ~~product in fiscal 2021 before the expiration of the last of the listed patents on May 3, 2036 (November 3, 2036 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 U.S. Food and Drug Administration for our next generation nitric oxide delivery system. 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 an alternative version of our INOmax product and/or next generation delivery systems.

~~Net sales of Amitiza~~® for the three months ended April 1, 2022 decreased $13.7 million, or 22.3%, to $47.7 million driven primarily by lower royalty revenue as a result of the entrance of generic competition during fiscal 2021.

~~Net sales of Ofirmev for the three months ended April 1, 2022 decreased $10.2 million, or 79.7%, to $2.6 million driven by the entrance of generic competition during fiscal 2021.~~

~~Net sales of Therakos~~® photopheresis ("Therakos") for the three months ended April 1, 2022 decreased $6.9 million, or 10.3%, to $59.9 million driven by the lagging effect of the novel coronavirus (COVID-19) that contributed to a reduction in use of the platform for treatment of graft-versus-host disease (GvHD), which is a non-promoted use in the U.S. market.

Net sales of Acthar Gel for the three months ended April 1, 2022 decreased $1.3 million, or 1.0%, to $127.7 million driven primarily by continued payer scrutiny on overall specialty pharmaceutical spending. We anticipate that competition for the Acthar Gel product will likely intensify following the launch of 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.

Specialty Generics

Net sales from the Specialty Generics segment ~~increased $1.9 million, or 1.3%, to $151.5 million for the three months ended April 1, 2022, compared to $149.6 million~~ for the three months ended March ~~26, 2021~~31, 2023 (Successor) increased $21.1 million, or 13.9%, to $172.6 million driven primarily ~~driven~~ by an increase in ~~other controlled substances~~finished-dosage generics net sales of ~~$6.0~~$22.5 million ~~partially~~driven by the Company's ability to manufacture and supply product during periods of market disruption offset by a decrease in ~~hydrocodone-related products~~API net sales of ~~$4.3~~$1.4 million.

Results of Operations

Three Months Ended ~~April 1, 2022~~March 31, 2023 (Successor) Compared with Three Months Ended ~~March 26, 2021~~April 1, 2022 (Predecessor)

Net Sales

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


		Three Months Ended							Successor		Predecessor		Non-GAAP
		April 1, 2022		March 26, 2021		Percentage Change			Three Months Ended March 31, 2023		Three Months Ended April 1, 2022		Percentage Change
U.S.	U.S.	$	449.8	$	510.1	(11.8)	%	U.S.	$	379.6	$	449.8	(15.6)	%
Europe, Middle East and Africa	Europe, Middle East and Africa	33.3		39.8		(16.3)		Europe, Middle East and Africa	40.6		33.3		21.9
Other geographic areas	Other geographic areas	7.8		8.1		(3.7)		Other geographic areas	4.4		7.8		(43.6)
Net sales	Net sales	$	490.9	$	558.0	(12.0)	%	Net sales	$	424.6	$	490.9	(13.5)

Net sales for the three months ended ~~April 1, 2022~~March 31, 2023 (Successor) decreased ~~$67.1~~$66.3 million, or ~~12.0%~~13.5%, to ~~$490.9~~$424.6 million, compared with ~~$558.0~~$490.9 million for the three months ended ~~March 26, 2021.~~April 1, 2022 (Predecessor). This decrease was primarily driven by ~~our Specialty Brands segment including~~ a decrease in net sales of ~~INOmax, Amitiza, Ofirmev, Therakos and~~ Acthar Gel, Amitiza and INOmax within our Specialty Brands segment, 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

Gross profit. Gross profit for the three months ended ~~April 1, 2022~~March 31, 2023 (Successor) decreased ~~$74.7~~$125.9 million, or ~~29.8%~~71.7%, to ~~$175.7~~$49.8 million, compared with ~~$250.4~~$175.7 million for the three months ended ~~March 26, 2021.~~April 1, 2022 (Predecessor). Gross profit margin was 11.7% for the three months ended March 31, 2023 (Successor), compared with 35.8% for the three months ended April 1, 2022 ~~compared with 44.9% for the three months ended March 26, 2021.~~(Predecessor). These decreases were primarily driven by the ~~$67.1 million~~ decrease in net sales and a change in product mix, coupled with $71.4 million of inventory step-up amortization expense. These decreases were partially offset, and serving to increase gross profit, by a ~~$7.9~~decrease of $20.9 million ~~increase~~ in intangible assets amortization expense ~~for the Amitiza intangible asset resulting from~~as a ~~change in amortization method as discussed further in Note 9 to notes to the unaudited condensed consolidated financial statements.~~result of fresh-start accounting.

Selling, general and administrative expenses. Selling general and administrative ("SG&A") expenses for the three months ended ~~April 1, 2022 were $152.5~~March 31, 2023 (Successor) decreased $29.6 million, or 19.4%, to $122.9 million, compared with ~~$136.0~~$152.5 million for the three months ended ~~March 26, 2021, an increase of $16.5 million, or 12.1%~~April 1, 2022 (Predecessor). As a percentage of net sales, SG&A expenses were ~~31.1%~~28.9% and ~~24.4%~~31.1% for the three months ended March 31, 2023 (Successor) and April 1, 2022 (Predecessor), respectively. The three months ended April 1, 2022 ~~and March 26, 2021, respectively. These increases were primarily driven by~~(Predecessor) included an $11.1 million increase to certain of our environmental ~~liabilities and~~liabilities. The remaining decrease was attributable to a ~~$0.1 decrease in~~foreign currency remeasurement gain of $0.4 million during the ~~fair value~~three months ended March 31, 2023 (Successor) as compared to a loss of ~~our contingent consideration liabilities~~$5.4 million during the three months ended April 1, 2022 ~~as compared to a $10.8 million decrease in the fair value of our contingent consideration liabilities during the three months ended March 26, 2021. These increases were partially offset by continued~~(Predecessor), coupled with cost containment ~~initiatives and lower employee compensation costs.~~initiatives.

Research and development expenses. Research and development ("R&D") expenses for the three months ended March 31, 2023 (Successor) decreased ~~$29.0~~$8.9 million, or ~~43.8%~~23.9%, to $28.3 million, compared with $37.2 million for the three months ended April 1, 2022 ~~compared with $66.2 million~~(Predecessor). As a percentage of net sales, R&D expenses were 6.7% and 7.6% for the three months ended March ~~26, 2021. The decrease was~~31, 2023 (Successor) and April 1, 2022 (Predecessor), respectively. These decreases were primarily driven by cost containment initiatives coupled with the completion of certain development ~~programs, such as the use of StrataGraft for the treatment of adults with deep partial-thickness burns.~~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 7.6% and 11.9% for the three months ended April 1, 2022 and March 26, 2021, respectively.~~

Restructuring charges, net. During the three months ended March 31, 2023 (Successor) and April 1, 2022 ~~and March 26, 2021,~~(Predecessor), we incurred ~~$6.8~~$1.2 million and ~~$0.4~~$6.8 million of restructuring charges, net, respectively, primarily related to employee severance and benefits.

~~Non-restructuring impairment charges.~~ During the three months ended March 26, 2021, we recognized a full impairment of $64.5 million related to the MNK-6105 and MNK-6106 IPR&D asset as a result of the decision to no longer pursue further development of the asset.

Non-Operating Items

Interest expense and interest income. During the three months ended March 31, 2023 (Successor) and April 1, 2022 ~~and March 26, 2021,~~(Predecessor), net interest expense was $157.3 million and $57.8 million, respectively. During the three months ended March 31, 2023 (Successor), interest expense included $45.9 million and ~~$57.7~~$24.0 million ~~respectively, which primarily resulted from~~of accretion expense associated with our settlement obligations and debt, respectively. The three months ended March 31, 2023 (Successor) also reflect increased interest rates on our variable interest rate debt as compared to the three months ended April 1, 2022 (Predecessor). Interest expense during the predecessor period included cash adequate protection payments of $15.7 million on certain of our predecessor senior secured debt instruments. The increase in our interest income of $4.3 million was primarily driven by higher interest earned on our money market funds during the three months ended March 31, 2023 (Successor).

Other ~~(expense) income,~~expense, net. During the three months ended March 31, 2023 (Successor) and April 1, 2022 (Predecessor), we ~~recorded~~incurred other expense ~~net,~~ of $14.6 million and $4.1 million, ~~compared with other income, net,~~respectively. The three months ended March 31, 2023 (Successor) included $15.1 million of ~~$8.1 million for~~unrealized losses on equity securities related to our investments in Silence Therapeutics plc ("Silence") and Panbela Therapeutics, Inc, while the three months ended ~~March 26, 2021. The activity in both periods reflects changes in fair value~~April 1, 2022 (Predecessor) included $3.7 million of unrealized losses on equity securities related to our investment in ~~Silence Therapeutics plc.~~Silence.

Reorganization items, net. During the three months ended March 31, 2023 (Successor) and April 1, 2022 ~~and March 26, 2021,~~(Predecessor), we recorded $5.6 million and $43.4 million ~~and $93.5 million of~~in reorganization items, ~~net. These charges included $40.5 million and $77.7 million of advisor and legal fees~~net, respectively. The Successor expenses represent amounts incurred after the Effective Date that directly ~~related to~~resulted from the Chapter 11 Cases ~~during~~and were entirely comprised of professional fees associated with the ~~three months ended April 1, 2022~~implementation of the Plan. The Predecessor expenses represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and ~~March 26, 2021, respectively. The three months ended March 26, 2021 also included $16.3 million~~were comprised of ~~deferred financing fee write-offs related~~professional fees and adjustments to reflect the ~~senior secured term loans.~~carrying value of LSTC at their estimated allowed claim amounts.

Income tax benefit. We recognized an income tax benefit of $30.8 million on a loss from continuing operations before income taxes of $280.1 million for the three months ended March 31, 2023 (Successor). This resulted in an effective tax rate of 11.0%. The income tax benefit was comprised of $2.6 million of current tax expense and $33.4 million of deferred tax benefit. The income tax provision consisted of deferred income tax benefit predominately related to intangible asset amortization, accretion expense associated

with our settlement obligations and debt, inventory step-up amortization expense and other operating activity, partially offset by current income tax expense related to a decrease in prepaid income taxes.

We recognized an income tax benefit of $5.9 million on a loss from continuing operations before income taxes of $126.1 million for the three months ended April 1, 2022 ~~and an income tax benefit of $16.4 million on a loss from continuing operations before income taxes of $160.6 million for the three months ended March 26, 2021.~~(Predecessor). This resulted in an effective tax ~~rates~~rate of 4.7% ~~and 10.2% for the three months ended April 1, 2022 and March 26, 2021, respectively.~~. The income tax benefit ~~for the three months ended April 1, 2022~~ was comprised of $5.0 million of current income tax benefit and $0.9 million of deferred ~~tax benefit. The current~~income tax benefit, ~~was~~which predominantly related to an increase to prepaid ~~taxes. The deferred tax benefit was predominantly related to~~taxes and intangible asset amortization, partially offset by utilization of loss carryforwards in non-valuation allowance jurisdictions. The income tax benefit for the three months ended March 26, 2021 was comprised of $13.0 million of current tax benefit and $3.4 million of deferred tax benefit. The current tax benefit was predominately related to an increase to prepaid taxes, partially offset by changes 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.

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 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. Although these amounts are excluded from segment operating income, as applicable, they are included in reported consolidated operating loss and in the reconciliations presented below. Selected information by business segment is as follows:

Three Months Ended ~~April 1, 2022~~March 31, 2023 (Successor) Compared with Three Months Ended ~~March 26, 2021~~April 1, 2022 (Predecessor)

Net Sales

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


		Three Months Ended							Successor		Predecessor		Non-GAAP
		April 1, 2022		March 26, 2021		Percentage Change			Three Months Ended March 31, 2023		Three Months Ended April 1, 2022		Percentage Change
Specialty Brands	Specialty Brands	$	339.4	$	408.4	(16.9)	%	Specialty Brands	$	252.0	$	339.4	(25.8)	%
Specialty Generics	Specialty Generics	151.5		149.6		1.3		Specialty Generics	172.6		151.5		13.9
Net sales	Net sales	$	490.9	$	558.0	(12.0)		Net sales	$	424.6	$	490.9	(13.5)	%

Specialty Brands. Net sales for the three months ended ~~April 1, 2022~~March 31, 2023 (Successor) decreased ~~$69.0~~$87.4 million, or 25.8%, to ~~$339.4~~$252.0 million, compared with ~~$408.4~~$339.4 million for the three months ended ~~March 26, 2021.~~April 1, 2022 (Predecessor). As previously discussed, the decrease in net sales was primarily driven by

a ~~$35.0~~$45.7 million, or ~~26.1%, decrease in INOmax, a $13.7 million, or 22.3%, decrease in Amitiza, a $10.2 million, or 79.7%, decrease in Ofirmev, a $6.9 million, or 10.3%, decrease in Therakos and a $1.3 million, or 1.0%~~35.8%, decrease in Acthar ~~Gel.~~Gel, a $23.2 million, or 48.6% decrease in Amitiza, and a $16.3 million, or 16.5%, decrease in INOmax.

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


		Three Months Ended							Successor		Predecessor		Non-GAAP
		April 1, 2022		March 26, 2021		Percentage Change			Three Months Ended March 31, 2023		Three Months Ended April 1, 2022		Percentage Change
U.S.	U.S.	$	318.3	$	384.7	(17.3)	%	U.S.	$	233.3	$	318.3	(26.7)	%
Europe, Middle East and Africa	Europe, Middle East and Africa	16.6		18.7		(11.2)		Europe, Middle East and Africa	15.7		16.6		(5.4)
Other	Other	4.5		5.0		(10.0)		Other	3.0		4.5		(33.3)
Net sales	Net sales	$	339.4	$	408.4	(16.9)		Net sales	$	252.0	$	339.4	(25.8)	%

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


		Three Months Ended							Successor		Predecessor		Non-GAAP
		April 1, 2022		March 26, 2021		Percentage Change			Three Months Ended March 31, 2023		Three Months Ended April 1, 2022		Percentage Change
Acthar Gel	Acthar Gel	$	127.7	$	129.0	(1.0)	%	Acthar Gel	$	82.0	$	127.7	(35.8)	%
INOmax	INOmax	99.0		134.0		(26.1)		INOmax	82.7		99.0		(16.5)
Ofirmev		2.6		12.8		(79.7)
Therakos	Therakos	59.9		66.8		(10.3)		Therakos	58.7		59.9		(2.0)
Amitiza	Amitiza	47.7		61.4		(22.3)		Amitiza	24.5		47.7		(48.6)
Terlivaz								Terlivaz	2.2		—		—
Other	Other	2.5		4.4		(43.2)		Other	1.9		5.1		(62.7)
Specialty Brands	Specialty Brands	$	339.4	$	408.4	(16.9)		Specialty Brands	$	252.0	$	339.4	(25.8)	%

Specialty Generics. Net sales for the three months ended ~~April 1, 2022~~March 31, 2023 (Successor) increased ~~$1.9~~$21.1 million, or ~~1.3%~~13.9%, to ~~$151.5~~$172.6 million, compared with ~~$149.6~~$151.5 million for the three months ended ~~March 26, 2021. The~~April 1, 2022 (Predecessor). As previously discussed, the increase in net sales was due to an increase in ~~other controlled substances~~finished-dosage generics net sales of ~~$6.0~~$22.5 million, or 28.3%, partially offset by a decrease in ~~hydrocodone-related products~~API net sales of ~~$4.3 million.~~$1.4 million, or 1.9%.

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


		Three Months Ended							Successor		Predecessor		Non-GAAP
		April 1, 2022		March 26, 2021		Percentage Change			Three Months Ended March 31, 2023		Three Months Ended April 1, 2022		Percentage Change
U.S.	U.S.	$	131.5	$	125.4	4.9	%	U.S.	$	146.3	$	131.5	11.3	%
Europe, Middle East and Africa	Europe, Middle East and Africa	16.7		21.1		(20.9)		Europe, Middle East and Africa	24.9		16.7		49.1
Other	Other	3.3		3.1		6.5		Other	1.4		3.3		(57.6)
Net sales	Net sales	$	151.5	$	149.6	1.3		Net sales	$	172.6	$	151.5	13.9	%

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

Three Months Ended
April 1,
2022 March 26,
2021 Percentage Change
Hydrocodone (API) and hydrocodone-containing tablets $ 19.0 $ 23.3 (18.5) %
Oxycodone (API) and oxycodone-containing tablets 16.6 17.2 (3.5)
Acetaminophen (API) 46.3 45.5 1.8
Other controlled substances 64.1 58.1 10.3
Other 5.5 5.5 —
Specialty Generics $ 151.5 $ 149.6 1.3


	Successor		Predecessor		Non-GAAP
	Three Months Ended March 31, 2023		Three Months Ended April 1, 2022		Percentage Change
Opioids	$	62.2	$	50.0	24.4	%
ADHD	22.4		10.8		107.4
Addiction treatment	15.6		15.9		(1.9)
Other	1.8		2.8		(35.7)
Generics	102.0		79.5		28.3
Controlled substances	18.5		20.4		(9.3)
APAP	46.4		46.3		0.2
Other	5.7		5.3		7.5
API	70.6		72.0		(1.9)
Specialty Generics	$	172.6	$	151.5	13.9	%

3325

Operating ~~Income (Loss)~~Loss

Operating ~~income~~loss by segment ~~and as a percentage of segment net sales~~ for the three months ended March 31, 2023 (Successor) and the three months April 1, 2022 ~~and March 26, 2021~~(Predecessor) is shown in the following table (dollars in millions):


		Three Months Ended									Successor		Predecessor
		April 1, 2022				March 26, 2021					Three Months Ended March 31, 2023		Three Months Ended April 1, 2022
Specialty Brands(1)	Specialty Brands(1)	$	164.8	48.6	%	$	212.1	51.9	%	Specialty Brands(1)	$	32.4	$	164.8
Specialty Generics(2)	Specialty Generics(2)	34.4		22.7		31.7		21.2		Specialty Generics(2)	32.8		34.4
Segment operating income	Segment operating income	199.2		40.6		243.8		43.7		Segment operating income	65.2		199.2
Unallocated amounts:	Unallocated amounts:									Unallocated amounts:
Corporate and unallocated expenses ~~(1)~~(3)	Corporate and unallocated expenses ~~(1)~~(3)	(32.8)				(22.6)				Corporate and unallocated expenses ~~(1)~~(3)	(14.0)		(32.8)
Depreciation and amortization	Depreciation and amortization	(177.2)				(169.6)				Depreciation and amortization	(145.1)		(177.2)
Share-based compensation	Share-based compensation	(1.2)				(3.6)				Share-based compensation	(2.6)		(1.2)
Restructuring charges, net	Restructuring charges, net	(6.8)				(0.4)				Restructuring charges, net	(1.2)		(6.8)
Non-restructuring impairment charges	Non-restructuring impairment charges	—				(64.5)				Non-restructuring impairment charges	—		(2.0)
Separation costs ~~(2)~~(4)	Separation costs ~~(2)~~(4)	(2.0)				(0.6)				Separation costs ~~(2)~~(4)	(4.9)		—

Total operating loss	Total operating loss	$	(20.8)			$	(17.5)			Total operating loss	$	(102.6)	$	(20.8)

(1)Includes $61.1 million of inventory fair-value step-up expense during the three months ended March 31, 2023 (Successor).

(2)Includes $10.3 million of inventory fair-value step-up expense during the three months ended March 31, 2023 (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, primarily related to expenses ~~primarily~~incurred related to professional fees and costs incurred as we explore potential sales of non-core assets to enable further deleveraging post-emergence.

Specialty Brands. Operating income for the three months ended ~~April 1, 2022~~March 31, 2023 (Successor) decreased ~~$47.3~~$132.4 million, to ~~$164.8~~$32.4 million, compared with ~~$212.1~~$164.8 million for the three months ended ~~March 26, 2021.~~April 1, 2022 (Predecessor). Operating margin decreased to 12.9% for the three months ended March 31, 2023 (Successor), compared with 48.6% for the three months ended April 1, 2022 ~~compared with 51.9% for the three months ended March 26, 2021.~~(Predecessor). These decreases in operating income and margin were primarily driven by ~~a $58.9~~the $87.4 million, ~~decrease to gross profit as a result of the~~or 25.7%, decrease in net sales and a change in product mix, ~~as discussed above. In addition, SG&A expenses increased by $10.7~~coupled with $61.1 million of inventory fair-value step-up expense, which resulted in a $155.5 million, or ~~12.3% primarily driven by~~53.2%, decrease in gross profit. Partially offsetting the annual fee on branded prescription pharmaceutical manufacturers due in large part to the adjustment by the Internal Revenue Service for prior periods primarily related to the Medicaid lawsuit ruling. The decreasesdecrease in operating income and serving to increase operating margin ~~were partially offset by~~was a ~~decrease of $22.3~~$14.5 million, or ~~42.7%~~14.9%, decrease in ~~R&D~~SG&A expenses ~~compared~~primarily driven by cost containment initiatives coupled with a $0.6 million foreign currency remeasurement gain and a $5.3 million foreign currency remeasurement loss during the three months ended March ~~26, 2021 as a result of~~31, 2023 (Successor) and April 1, 2022 (Predecessor), respectively, and an $8.6 million, or 28.5%, decrease in combined R&D expenses also driven by continued cost containment ~~initiatives coupled with the completion of certain development programs, such as the use of StrataGraft for the treatment of adults with deep partial-thickness burns.~~initiatives.

Specialty Generics. Operating income for the three months ended ~~April 1, 2022 increased $2.7~~March 31, 2023 (Successor) decreased $1.6 million, to ~~$34.4~~$32.8 million, compared with ~~$31.7~~$34.4 million for the three months ended ~~March 26, 2021.~~April 1, 2022 (Predecessor). Operating margin ~~increased~~decreased to 19.0% for the three months ended March 31, 2023 (Successor), compared with 22.7% for the three months ended April 1, 2022 ~~compared with 21.2% for the three months ended March 26, 2021.~~(Predecessor). These ~~increases~~decreases in operating income and margin were primarily ~~attributable to cost containment initiatives and a change~~driven by $10.3 million of inventory fair-value step-up expense, partially offset by an increase in ~~product mix.~~net sales.

Corporate and unallocated expenses. Corporate and unallocated expenses ~~were~~for the three months ended March 31, 2023 (Successor) decreased $18.8 million, to $14.0 million, compared with $32.8 ~~million and $22.6~~ million for the three months ended April 1, 2022 ~~and March 26, 2021, respectively.~~(Predecessor). The ~~increase was primarily driven by~~three months ended April 1, 2022 (Predecessor) included an $11.1 million increase to certain of our environmental ~~liabilities and a $0.1~~liabilities. The remaining decrease ~~in the fair value of our contingent consideration liabilities during three months ended April 1, 2022, as compared~~primarily related to ~~a $10.8 million decrease in the fair value of our contingent consideration liabilities during the three months ended March 26, 2021. These increases were partially offset by~~ continued cost containment ~~initiatives and lower employee compensation costs.~~initiatives.

Liquidity and Capital ~~Resources~~Resources.

Significant factors driving our liquidity position include cash flows generated from operating activities, financing transactions (inclusive of interest on our variable-rate debt instruments), capital expenditures, cash paid in connection with legal settlements, acquisitions and licensing agreements and cash received as a result of our divestitures. We ~~have historically generated~~believe that our sources of liquidity are adequate to fund our operations for the next twelve months and ~~expect to continue to generate positive cash flows from operations.~~foreseeable future. Our ability to fund our capital needs, isincluding to repay our outstanding indebtedness and meet our settlement obligations, will be impacted by our ongoing ability to generate cash from operations and access to capital markets. ~~Our material cash requirements are highly dependent upon~~As discussed in greater detail in our Annual Report on Form 10-K, certain of our secured indebtedness has near-term maturity dates, most notably our First Lien Senior Secured Notes due April 2025 and our Second Lien Senior Secured Notes due April 2025. See the ~~Plan~~discussion of risks related to our outstanding indebtedness contained in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K under the heading "Risk Factors - Risk Related to our Indebtedness and ~~successful emergence from Chapter 11.~~Settlement Obligations."

3426

~~Anticipated Sources~~Pursuant to the Plan, we will make payments of $200.0 million and ~~Uses for Chapter 11 Emergence~~

~~In the event we are able to successfully emerge from Chapter 11, our primary cash sources upon emergence are expected to include cash on hand, which was $1,365.3~~$16.5 million, ~~as of April 1, 2022, and proceeds of newly incurred debt. We have commenced a process to raise exit financing, which is expected to close upon emergence from the Chapter 11 bankruptcy process.~~

~~Our primary cash uses upon emergence are expected to include the following:~~

•$900.0 million revolving credit facility with a stated maturity of February 28, 2022, for which efforts to enforce payment obligations were automatically stayed during the pendency of the Chapter 11 Cases;

•~~$450.0 million upfront payment related to our proposed resolution of all opioid-related claims against us (Amended Proposed Opioid-Related Litigation Settlement);~~

•~~$18.0 million upfront payment,~~ inclusive of interest, related to our ~~proposed resolution of various~~opioid and Acthar Gel-related ~~matters, including~~settlements, respectively, upon the ~~Medicaid lawsuit,~~one-year anniversary of the Effective Date. Additionally, during the three months ended March 31, 2023 (Successor), the Company received a $133.8 million tax refund, plus $5.5 million of interest, related to the CARES Act income tax refund receivable. The remaining CARES Act income tax refund was received during April 2023.

We are exposed to interest rate risk on our variable-rate debt. On March 14, 2023, we entered into an ~~associated False Claims Act ("FCA") lawsuit and an FCA lawsuit relating~~interest rate cap agreement by converting a portion of our variable-rate debt to ~~Acthar Gel's previous owner's interactions~~a fixed rate through the expiration date of the interest rate cap, which serves to reduce the volatility on future interest expense cash outflows. The interest rate cap agreement has a total notional value of $860.0 million with an ~~independent charitable foundation (the Proposed Acthar Gel-Related Settlement);~~

•~~$147.0~~upfront premium of $20.0 million ~~payment of administrative, priority~~ and ~~trade claims,~~provides us with interest rate protection (i) for ~~which~~ the ~~amount is not yet finalized due~~period March 16, 2023 through July 19, 2023 to ~~ongoing claims reconciliation efforts;~~

•~~$135.0 million payment~~the extent that one-month London Interbank Offered Rate ("LIBOR") exceeds 4.65%, and (ii) for ~~general unsecured claims in accordance with~~ the ~~agreement in principle with~~period July 20, 2023 through March 26, 2026 to the ~~unsecured creditors committee;~~

•~~$19.0 million payment of noteholder consent fees; and~~

•Approximately $80.0 million in costs, fees and expenses related to exit-financing activities, an exit fee associated with our senior secured term loans and accrued and unpaid interest on certain pre-emergence debt.

extent that one-month Secured Overnight Financing Rate exceeds 3.84%. Refer to Note ~~2 and 10~~12 of the notes to the unaudited condensed consolidated financial statements for ~~further information on our Plan, related expected sources and uses and current outstanding debt instruments.~~additional information.

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


		Three Months Ended					Successor		Predecessor
		April 1, 2022		March 26, 2021			Three Months Ended March 31, 2023		Three Months Ended April 1, 2022
Net cash from:	Net cash from:					Net cash from:
Operating activities	Operating activities	$	49.2	$	151.4	Operating activities	$	99.9	$	49.2
Investing activities	Investing activities	(23.4)		(21.6)		Investing activities	(19.0)		(23.4)
Financing activities	Financing activities	(4.6)		(118.9)		Financing activities	(11.0)		(4.6)
Effect of currency exchange rate changes on cash and cash equivalents	Effect of currency exchange rate changes on cash and cash equivalents	(0.7)		(0.4)		Effect of currency exchange rate changes on cash and cash equivalents	0.3		(0.7)
Net increase in cash, cash equivalents and restricted cash	Net increase in cash, cash equivalents and restricted cash	$	20.5	$	10.5	Net increase in cash, cash equivalents and restricted cash	$	70.2	$	20.5

Operating Activities

Net cash provided by operating activities of $99.9 million for the three months ended March 31, 2023 (Successor) was attributable to a net loss of $249.3 million, adjusted for non-cash items of $204.2 million, driven by depreciation and amortization of $145.1 million and accretion on our settlement obligations and debt of $69.9 million, partially offset with $145.0 million of cash inflow from net changes in working capital. The change in working capital was primarily driven by a $138.9 million inflow in income taxes predominately related to CARES Act income tax refunds of $139.3 million received, a $48.0 million increase in inventory and a $9.6 million increase in accounts receivable, partially offset by $31.1 million net cash outflow related to other assets and liabilities and a $20.4 million decrease in accounts payable.

Net cash provided by operating activities of $49.2 million for the three months ended April 1, 2022 (Predecessor) was attributable to a net loss of $119.6 million, adjusted for non-cash items of $192.7 million, driven by depreciation and amortization of $177.2 million coupled with cash used in working capital of $23.9 million. The change in working capital was primarily driven by a $63.3 million net cash outflow related to a decrease in accrued consulting fees and accrued payroll, a $27.0 million increase in inventory and a $7.8 million outflow in income taxes primarily driven by an increase in prepaid income taxes, partially offset by a $73.8 million decrease in accounts receivable primarily due to lower net sales.

Net cash provided by operating activities of $151.4 million for the three months ended March 26, 2021 was attributable to a net loss of $143.9 million, adjusted for non-cash items of $238.1 million driven by depreciation and amortization of $169.6 million and a non-cash impairment charge of $64.5 million. This net loss was also offset by cash provided from net investment in working capital of $57.2 million, which was primarily driven by a $61.8 million decrease in accounts receivable and a $38.9 million net cash inflow related to other assets and liabilities primarily driven by an increase in accrued consulting fees. These inflows were partially offset by a $22.8 million increase in inventory and $21.2 million related to a decrease in net tax payables and an increase in prepaid income taxes.

Investing Activities

Net cash used in investing activities was $19.0 million for the three months ended March 31, 2023 (Successor), compared with $23.4 million for the three months ended April 1, 2022 ~~compared with $21.6~~(Predecessor) and was primarily driven by $19.3 million and $23.6 million of capital expenditures for the ~~three months ended March 26, 2021. The $1.8 million increase was primarily attributable to a $2.7 million increase in capital expenditures.~~ respective periods.

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 loans and offer to repurchase certain of our notes.

Financing Activities

Net cash used in financing activities was $11.0 million for the three months ended March 31, 2023 (Successor), compared with $4.6 million for the three months ended April 1, 2022 ~~compared with $118.9 million for the three months ended March 26, 2021. The $114.3 million decrease~~(Predecessor) and was entirely ~~driven by a decrease in~~attributable to debt ~~repayments. The three months ended March 26, 2021 included a $114.0 million mandatory prepayment on our senior secured term loans.~~repayments for both respective periods.

Commitments and Contingencies

Legal Proceedings

See Note 1211 of the notes to the unaudited condensed consolidated financial statements for a description of the litigation, legal and administrative proceedings and claims as of ~~April 1, 2022.~~

~~Guarantees~~

In disposing of assets or businesses, we have 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 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 11 of the notes to the unaudited condensed consolidated financial statements.March 31, 2023 (Successor).

Critical Accounting 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 make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses.

We believe that our critical accounting 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 ~~three months ended April 1, 2022, there were no significant~~notes to the unaudited condensed consolidated financial statements for the changes to the underlying accounting assumptions and estimates used in the ~~above~~ critical accounting estimates ~~from those~~ disclosed in our Annual Report on Form ~~10-K for the year ended December 31, 2021.~~10-K.

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 statements ~~involve risks, uncertainties~~include, but are not limited to, statements regarding:

•the comparability of Mallinckrodt’s post-emergence financial results to its historical results and ~~assumptions. Actual~~ the projections filed with the bankruptcy court;

•changes in Mallinckrodt’s business strategy that may be implemented by its Board;

•the listing of Mallinckrodt’s ordinary shares on NYSE American LLC, the emergence of an active trading market for Mallinckrodt’s ordinary shares and fluctuations in market price and trading volume;

• Mallinckrodt’s tax treatment by the Internal Revenue Service under Section 7874 and Section 382 of the Internal Revenue Code of 1986, as amended;

•Mallinckrodt’s repurchases of debt securities;

•the effects of the emergence from bankruptcy on the liquidity;

•results of operations and businesses of Mallinckrodt and its subsidiaries;

•governmental investigations, inquiries, regulatory actions, and lawsuits, in each case related to Mallinckrodt or its officers;

•matters related to the historical commercialization of opioids, including compliance with and restrictions under the global settlement to resolve all opioid-related claims;

•matters related to Acthar Gel, including the settlement with governmental parties to resolve certain disputes and compliance with and restrictions under the related corporate integrity agreement;

•the ability to maintain relationships with Mallinckrodt’s suppliers, customers, employees and other third parties as a result of, and following, the emergence from bankruptcy;

•the possibility that Mallinckrodt may ~~differ materially~~be unable to achieve its business and strategic goals even now that the emergence from ~~those expressed~~bankruptcy plan was successfully consummated;

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

•developing, funding and executing Mallinckrodt’s business plan and continuing as a going concern;

•Mallinckrodt’s post-bankruptcy capital structure;

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

•pricing pressure on certain of Mallinckrodt’s products due to legal changes or changes in ~~these forward-looking statements. You should not place undue~~insurers’ or other payers’ reimbursement practices resulting from recent increased public scrutiny of healthcare and pharmaceutical costs;

•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;

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

•Mallinckrodt’s ability to navigate price fluctuations;

•competition;

•Mallinckrodt’s and its 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;

•business development activities;

•attraction and retention of key personnel;

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

•customer concentration;

•Mallinckrodt’s reliance on ~~any forward-looking statements.~~certain individual products that are material to its financial performance;

~~The risk factors included within Item 1A.~~•Mallinckrodt’s ability to receive procurement and production quotas granted by the U.S. Drug Enforcement Administration;

•complex manufacturing processes;

•conducting business internationally;

•Mallinckrodt’s ability to achieve expected benefits from restructuring activities;

•Mallinckrodt’s significant levels of intangible assets and related impairment testing;

•labor and employment laws and regulations;

•natural disasters or other catastrophic events;

•Mallinckrodt’s substantial indebtedness, its ability to generate sufficient cash to reduce its indebtedness and its potential need and ability to incur further indebtedness;

•restrictions on Mallinckrodt’s operations contained in the agreements governing Mallinckrodt’s indebtedness;

•Mallinckrodt’s variable rate indebtedness;

•future changes to applicable tax laws or the impact of disputes with governmental tax authorities; and

•the impact of Irish laws.

In addition to the above considerations, see the "Risk Factors" sections of our Annual Report on Form 10-K ~~for~~and subsequent filings with the ~~fiscal year ended December 31, 2021~~SEC that identify and ~~within Part II, Item 1A of this Quarterly Report on Form 10-Q could cause~~describe in more detail the risks and uncertainties to which our ~~results to differ materially from those expressed in forward-looking statements.~~businesses are subject. 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 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 March 31, 2023 (Successor), our outstanding debt included $1,727.9 million variable-rate debt on our senior secured term loans. Assuming a one percent increase in the applicable interest rates, in excess of applicable minimum floors, annual interest expense for fiscal 2023 would increase by approximately $8.7 million, which includes the impact of the interest rate cap. For additional information on the interest rate cap, refer to Note 12 of the notes to the unaudited condensed consolidated financial statements.

The remaining outstanding debt as of March 31, 2023 (Successor) 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 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. The aggregate potential unfavorable impact from a ~~smaller reporting company~~hypothetical 10.0% adverse change in foreign exchange rates was $2.3 million as ~~defined by Item 10~~ of ~~Regulations S-K and are~~March 31, 2023 (Successor), with all other variables held constant. This hypothetical loss does not ~~required~~reflect any hypothetical benefits that would be derived from hedging activities, including cash holdings in similar foreign currencies, that we have historically utilized to ~~provide the information otherwise required under this Item.~~mitigate our exposure to movements in foreign exchange rates.


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 ~~April 1, 2022~~March 31, 2023 (Successor) that have materially affected, or are likely to materially affect, our internal control over financial reporting.

3730

PART II. OTHER INFORMATION


Item 1.			Legal Proceedings.

See Note 1211 of the notes to the unaudited condensed consolidated financial statements for a description of the litigation, legal and administrative proceedings and claims as of ~~April 1, 2022.~~March 31, 2023 (Successor), which is incorporated herein by reference.


Item 1A.			Risk Factors.

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 ~~31, 2021,~~30, 2022, filed with the SEC on March ~~15, 2022.~~3, 2023.


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

~~(c) Issuer Purchases of Securities~~

The following table summarizes the repurchase activity of our ordinary shares during the three months ended April 1, 2022. 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 as there were no market repurchases during the three months ended April 1, 2022.

~~On March 1, 2017, the Company's Board of Directors authorized a $1.0 billion share repurchase program (the "March 2017 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)
January 1, 2022 to January 28, 2022 1,317 $ 0.16 — $ 564.2
January 29, 2022 to March 4, 2022 1,728 0.13 — 564.2
March 5, 2022 to April 1, 2022 780 0.37 — 564.2
January 1, 2022 to April 1, 2022 3,825 0.19

None.

3831


Item 6.			Exhibits.


Exhibit Number						Exhibit

~~10.1~~						Settlement Agreement, dated as of March 7, 2022, among the United States of America, acting through the United States Department of Justice and on behalf of the Office of Inspector General of the Department of Health and Human Services, Mallinckrodt plc, Mallinckrodt ARD LLC and James Landolt (incorporated by reference to Exhibit 10.1 to Mallinckrodt plc’s Current Report on Form 8-K filed with the SEC on March 11, 2022).
~~10.2~~						Settlement Agreement, dated as of March 7, 2022, among the United States of America, acting through the United States Department of Justice and on behalf of the Office of Inspector General of the Department of Health and Human Services, Mallinckrodt plc, Mallinckrodt ARD LLC, Charles Strunck, Lisa Pratta and Scott Clark (incorporated by reference to Exhibit 10.2 to Mallinckrodt plc’s Current Report on Form 8-K filed with the SEC on March 11, 2022).
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 ~~April 1, 2022~~March 31, 2023 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).

3932

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: May ~~3, 2022~~9, 2023

4033


	April 1, 2022		December 31, 2021
Intercompany receivables	$	146.2	$	119.1
Intercompany payables	115.6		112.9


	Rebates and Chargebacks		Product Returns		Other Sales Deductions		Total
Balance as of December 25, 2020	$	196.5	$	26.6	$	12.3	$	235.4
Provisions (1)	488.0		25.7		13.0		526.7
Payments or credits	(442.9)		(10.0)		(14.9)		(467.8)
Balance as of March 26, 2021	$	241.6	$	42.3	$	10.4	$	294.3

Balance as of December 31, 2021	$	241.8	$	21.5	$	9.5	$	272.8
Provisions	370.8		2.4		9.7		382.9


Payments or credits	(412.0)		(4.3)		(10.0)		(426.3)
Balance as of April 1, 2022	$	200.6	$	19.6	$	9.2	$	229.4


	Applicable interest rate		Outstanding borrowings
Fixed-rate instruments	7.15	%	$	2,478.6
Term loan due September 2024 (1)	6.25		1,392.9
Term loan due February 2025 (1)	6.25		369.7

Revolving credit facility (2)	4.82		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)
January 1, 2022 to January 28, 2022	1,317	$	0.16	—	$	564.2
January 29, 2022 to March 4, 2022	1,728	0.13		—	564.2
March 5, 2022 to April 1, 2022	780	0.37		—	564.2
January 1, 2022 to April 1, 2022	3,825	0.19