Background

Mallinckrodt plc and its subsidiaries (collectively, "Mallinckrodt" or "the Company"), is a global business that develops, manufactures, markets and distributes specialty pharmaceutical products and therapies. As of December 29, 2017, areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; and analgesics. Our core strengths include the acquisition and management of highly regulated raw materials and specialized chemistry, formulation and manufacturing capabilities.

Our business is operated in two reportable segments, which are further described below:


•	Specialty Brands includes branded medicines; and


•	Specialty Generics includes specialty generic drugs, active pharmaceutical ingredients ("API") and external manufacturing.

In May 2015, the Board of Directors of Mallinckrodt plc approved the migration of the Company’s principal executive offices from Ireland to the United Kingdom. The Company remains incorporated in Ireland and continues to be subject to United States ("U.S.") Securities and Exchange Commission ("SEC") reporting requirements and the applicable corporate governance rules of the New York Stock Exchange.

Basis of Presentation

The 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 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 consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and entities in which they own or control more than 50% of the voting shares, or have the ability to control through similar rights. All intercompany balances and transactions have been eliminated in consolidation and all normal recurring adjustments necessary for a fair presentation have been included in the results reported.

The results of entities disposed of are included in the consolidated financial statements up to the date of disposal and, where appropriate, these operations have been reflected as discontinued operations. Divestitures of product lines not meeting the criteria for discontinued operations have been reflected in operating income. As such, when the Company completed the sale of its Nuclear Imaging business and contrast media and delivery systems ("CMDS") businesses on January 27, 2017 and November 27, 2015, respectively, prior year balances were recast to present the financial results of these business as discontinued operations.

Beginning in the first quarter of fiscal year 2016, the Company revised the presentation of certain medical affairs costs to better align with industry practice, which were previously included in selling, general and administrative ("SG&A") expenses and are now included in research and development ("R&D") expenses. As a result, $56.4 million of expenses previously included in SG&A for the fiscal year ended September 25, 2015 have been classified as R&D expenses to conform to this change. No other financial statement line items were impacted by this change in classification.