Transactions with Former Parent Company

6 Months Ended

Mar. 27, 2015

Related Party Transactions [Abstract]

Transactions with Former Parent Company

14. Transactions with Former Parent Company

On June 28, 2013, the Pharmaceuticals business of Covidien plc, which was subsequently acquired by Medtronic plc, ("Covidien") was transferred to Mallinckrodt plc, thereby completing its legal separation from Covidien ("the Separation"). Prior to the completion of the Separation on June 28, 2013, the Company was part of Covidien and, as such, transactions between Covidien and the Company were considered related party transactions. The continuing relationship between Covidien and the Company was primarily governed through agreements entered into as part of the Separation, including a separation and distribution agreement, a tax matters agreement and a transition services agreement. These agreements were filed with the SEC as Exhibits 2.1, 10.1 and 10.3, respectively, to the Company's Current Report on Form 8-K filed on July 1, 2013. For further discussion on these agreements and other historical related party transactions, refer to the Company's Annual Report on Form 10-K filed with the SEC on November 24, 2014.

Sales and Purchases

During the three months ended March 27, 2015 and March 28, 2014, the Company sold inventory to Covidien in the amount of $10.2 million and $11.1 million, respectively, which is included in net sales in the unaudited condensed consolidated statements of income. During the six months ended March 27, 2015 and March 28, 2014, the Company sold inventory to Covidien in the amount of $19.4 million and $23.2 million, respectively. The Company also purchases inventories from Covidien. The Company recognized cost of sales from these inventory purchases of $4.3 million and $9.3 million during the three months ended March 27, 2015 and March 28, 2014, respectively, and $8.8 million and $19.3 million during the six months ended March 27, 2015 and March 28, 2014, respectively.

Balance Sheet Impacts

Subsequent to the Separation, the Company and Covidien maintain an ongoing relationship in which each party may provide services to the other party, including the distribution of goods. As a result of these relationships, the unaudited condensed consolidated balance sheets as of March 27, 2015 and September 26, 2014 included $10.9 million and $82.2 million, respectively, of amounts due to the Company from Covidien, within prepaid expenses and other current assets, and $5.4 million and $84.5 million, respectively, of amounts the Company owes Covidien, included within accrued and other liabilities.

Transition Services Agreement

The Company and Covidien entered into a transition services agreement in connection with the Separation pursuant to which the Company and Covidien provided each other, on an interim and transitional basis, various services including, but not limited to, treasury administration, information technology services, non-exclusive distribution and importation services for the Company's products in certain countries outside the U.S., regulatory, general and administrative services and other support services. The agreed-upon charges for such services were generally intended to allow the servicing party to recover all out-of-pocket costs and expenses, and included a predetermined profit margin. The Company terminated the transition services agreement during the first quarter of fiscal 2015.