Condensed Consolidating Financial Statements

9 Months Ended

Sep. 28, 2018

Condensed Consolidating Financial Statements [Abstract]

Condensed Consolidating Financial Statements

20. Condensed Consolidating Financial Statements

MIFSA, an indirectly 100%-owned subsidiary of Mallinckrodt plc, is the borrower under the 3.50% notes due April 2018, which were paid in full in April 2018, and the 4.75% notes due April 2023 (collectively, "the Notes"), which are fully and unconditionally guaranteed by Mallinckrodt plc. The following information provides the composition of the Company's comprehensive income, assets, liabilities, equity and cash flows by relevant group within the Company: Mallinckrodt plc as guarantor of the Notes, MIFSA as issuer of the Notes and the other subsidiaries. There are no subsidiary guarantees related to the Notes.

Set forth on the following pages are the condensed consolidating financial statements for the three and nine months ended September 28, 2018 and September 29, 2017, and as of September 28, 2018 and December 29, 2017. Eliminations represent adjustments to eliminate investments in subsidiaries and intercompany balances and transactions between or among Mallinckrodt plc, MIFSA and other subsidiaries. Condensed consolidating financial information for Mallinckrodt plc and MIFSA, on a standalone basis, has been presented using the equity method of accounting for subsidiaries.

MALLINCKRODT PLC

CONDENSED CONSOLIDATING BALANCE SHEET

As of September 28, 2018

(unaudited, in millions)

	Mallinckrodt plc		Mallinckrodt International Finance S.A.		Other Subsidiaries		Eliminations			Consolidated
Assets
Current Assets:
Cash and cash equivalents	$	0.3	$	151.3	$	139.1	$	—		$	290.7
Accounts receivable, net	—		—		349.6		—			349.6
Inventories	—		—		143.4		—			143.4
Prepaid expenses and other current assets	3.3		0.2		114.2		—			117.7
Notes receivable	—		—		—		—			—
Current assets held for sale	—		—		1,136.8		—			1,136.8
Intercompany receivables	192.0		52.2		353.5		(597.7		)	—
Total current assets	195.6		203.7		2,236.6		(597.7		)	2,038.2
Property, plant and equipment, net	—		—		439.3		—			439.3
Goodwill	—		—		3,675.4		—			3,675.4
Intangible assets, net	—		—		8,585.2		—			8,585.2
Investment in subsidiaries	6,194.4		29,157.0		11,964.2		(47,315.6		)	—
Intercompany loans receivable	504.0		—		13,073.8		(13,577.8		)	—
Other assets	—		—		170.5		—			170.5
Total Assets	$	6,894.0	$	29,360.7	$	40,145.0	$	(61,491.1	)	$	14,908.6
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	—	$	16.5	$	0.2	$	—		$	16.7
Accounts payable	0.1		0.1		76.4		—			76.6
Accrued payroll and payroll-related costs	—		—		89.0		—			89.0
Accrued interest	—		76.2		0.8		—			77.0
Income taxes payable	—		—		43.4		—			43.4
Accrued and other current liabilities	1.6		0.4		435.5		—			437.5
Current liabilities held for sale	—		—		182.4		—			182.4
Intercompany payables	288.7		19.4		289.6		(597.7		)	—
Total current liabilities	290.4		112.6		1,117.3		(597.7		)	922.6
Long-term debt	—		3,698.3		2,475.7		—			6,174.0
Pension and postretirement benefits	—		—		65.2		—			65.2
Environmental liabilities	—		—		49.8		—			49.8
Deferred income taxes	—		—		668.9		—			668.9
Other income tax liabilities	—		—		127.6		—			127.6
Intercompany loans payable	—		13,577.8		—		(13,577.8		)	—
Other liabilities	—		7.8		289.1		—			296.9
Total Liabilities	290.4		17,396.5		4,793.6		(14,175.5		)	8,305.0
Shareholders' Equity	6,603.6		11,964.2		35,351.4		(47,315.6		)	6,603.6
Total Liabilities and Shareholders' Equity	$	6,894.0	$	29,360.7	$	40,145.0	$	(61,491.1	)	$	14,908.6

MALLINCKRODT PLC

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 29, 2017

(unaudited, in millions)

	Mallinckrodt plc		Mallinckrodt International Finance S.A.		Other Subsidiaries		Eliminations			Consolidated
Assets
Current Assets:
Cash and cash equivalents	$	0.7	$	908.8	$	351.4	$	—		$	1,260.9
Accounts receivable, net	—		—		275.4		—			275.4
Inventories	—		—		128.7		—			128.7
Prepaid expenses and other current assets	1.0		0.2		73.5		—			74.7
Notes receivable	—		—		154.0		—			154.0
Current assets held for sale	—		—		391.5		—			391.5
Intercompany receivables	70.0		173.4		831.4		(1,074.8		)	—
Total current assets	71.7		1,082.4		2,205.9		(1,074.8		)	2,285.2
Property, plant and equipment, net	—		—		413.2		—			413.2
Goodwill	—		—		3,482.7		—			3,482.7
Intangible assets, net	—		—		8,261.0		—			8,261.0
Long-term assets held for sale	—		—		742.7		—			742.7
Investment in subsidiaries	6,551.6		23,217.8		12,356.2		(42,125.6		)	—
Intercompany loans receivable	593.1		—		4,664.8		(5,257.9		)	—
Other assets	—		—		156.2		—			156.2
Total Assets	$	7,216.4	$	24,300.2	$	32,282.7	$	(48,458.3	)	$	15,341.0
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	—	$	313.5	$	0.2	$	—		$	313.7
Accounts payable	0.1		—		77.2		—			77.3
Accrued payroll and payroll-related costs	—		—		78.4		—			78.4
Accrued interest	—		53.0		4.0		—			57.0
Income taxes payable	—		—		15.5		—			15.5
Accrued and other current liabilities	0.8		0.4		367.3		—			368.5
Current liabilities held for sale	—		—		140.0		—			140.0
Intercompany payables	693.5		104.6		276.7		(1,074.8		)	—
Total current liabilities	694.4		471.5		959.3		(1,074.8		)	1,050.4
Long-term debt	—		6,206.8		214.1		—			6,420.9
Pension and postretirement benefits	—		—		67.1		—			67.1
Environmental liabilities	—		—		62.8		—			62.8
Deferred income taxes	—		—		749.1		—			749.1
Other income tax liabilities	—		—		94.1		—			94.1
Long-term liabilities held for sale	—		—		22.6		—			22.6
Intercompany loans payable	—		5,257.9		—		(5,257.9		)	—
Other liabilities	—		7.8		344.2		—			352.0
Total Liabilities	694.4		11,944.0		2,513.3		(6,332.7		)	8,819.0
Shareholders' Equity	6,522.0		12,356.2		29,769.4		(42,125.6		)	6,522.0
Total Liabilities and Shareholders' Equity	$	7,216.4	$	24,300.2	$	32,282.7	$	(48,458.3	)	$	15,341.0

MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the three months ended September 28, 2018

(unaudited, in millions)

	Mallinckrodt plc			Mallinckrodt International Finance S.A.			Other Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	—		$	640.0		$	—		$	640.0
Cost of sales	0.7			—			325.5			—			326.2
Gross (loss) profit	(0.7		)	—			314.5			—			313.8
Selling, general and administrative expenses	12.4			0.1			151.5			—			164.0
Research and development expenses	1.6			—			76.9			—			78.5
Restructuring charges, net	—			—			14.7			—			14.7
Losses on divestiture	—			—			0.6			—			0.6
Operating (loss) income	(14.7		)	(0.1		)	70.8			—			56.0
Interest expense	(1.6		)	(112.0		)	(257.4		)	277.4			(93.6		)
Interest income	2.4			249.6			27.4			(277.4		)	2.0
Other income (expense), net	2.3			(156.8		)	167.9			—			13.4
Intercompany fees	(3.5		)	(0.1		)	3.6			—			—
Equity in net income of subsidiaries	127.8			238.9			221.9			(588.6		)	—
Income (loss) from continuing operations before income taxes	112.7			219.5			234.2			(588.6		)	(22.2		)
Income tax benefit	(1.1		)	(2.4		)	(121.7		)	—			(125.2		)
Income from continuing operations	113.8			221.9			355.9			(588.6		)	103.0
Income from discontinued operations, net of income taxes	—			—			10.8			—			10.8
Net income	113.8			221.9			366.7			(588.6		)	113.8
Other comprehensive income, net of tax	3.0			3.0			5.8			(8.8		)	3.0
Comprehensive income	$	116.8		$	224.9		$	372.5		$	(597.4	)	$	116.8

MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the three months ended September 29, 2017

(unaudited, in millions)

	Mallinckrodt plc			Mallinckrodt International Finance S.A.			Other Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	—		$	600.6		$	—		$	600.6
Cost of sales	0.9			—			267.1			—			268.0
Gross (loss) profit	(0.9		)	—			333.5			—			332.6
Selling, general and administrative expenses	13.4			0.2			172.7			—			186.3
Research and development expenses	1.8			—			45.1			—			46.9
Restructuring charges, net	—			—			15.4			—			15.4
Losses on divestiture	—			—			0.4			—			0.4
Operating (loss) income	(16.1		)	(0.2		)	99.9			—			83.6
Interest expense	(3.3		)	(90.9		)	(19.0		)	20.6			(92.6		)
Interest income	2.2			0.4			19.3			(20.6		)	1.3
Other income (expense), net	1.4			1.7			(0.1		)	—			3.0
Intercompany fees	(4.3		)	—			4.3			—			—
Equity in net income of subsidiaries	82.4			261.8			174.7			(518.9		)	—
Income (loss) from continuing operations before income taxes	62.3			172.8			279.1			(518.9		)	(4.7		)
Income tax benefit	(1.4		)	(2.1		)	(54.3		)	—			(57.8		)
Income from continuing operations	63.7			174.9			333.4			(518.9		)	53.1
(Loss) income from discontinued operations, net of income taxes	—			(0.2		)	10.8			—			10.6
Net income	63.7			174.7			344.2			(518.9		)	63.7
Other comprehensive loss, net of tax	(5.1		)	(5.1		)	(10.5		)	15.6			(5.1		)
Comprehensive income	$	58.6		$	169.6		$	333.7		$	(503.3	)	$	58.6

MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the nine months ended September 28, 2018

(unaudited, in millions)

	Mallinckrodt plc			Mallinckrodt International Finance S.A.			Other Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	—		$	1,844.3		$	—		$	1,844.3
Cost of sales	1.6			—			935.1			—			936.7
Gross (loss) profit	(1.6		)	—			909.2			—			907.6
Selling, general and administrative expenses	30.1			0.5			490.1			—			520.7
Research and development expenses	3.8			—			220.1			—			223.9
Restructuring charges, net	—			—			96.5			—			96.5
Losses on divestiture	—			—			0.6			—			0.6
Operating (loss) income	(35.5		)	(0.5		)	101.9			—			65.9
Interest expense	(6.2		)	(323.2		)	(272.2		)	321.5			(280.1		)
Interest income	6.8			251.6			69.7			(321.5		)	6.6
Other income (expense), net	9.0			(154.0		)	162.5			—			17.5
Intercompany fees	(12.0		)	(0.1		)	12.1			—			—
Equity in net income of subsidiaries	145.9			647.2			425.4			(1,218.5		)	—
Income (loss) from continuing operations before income taxes	108.0			421.0			499.4			(1,218.5		)	(190.1		)
Income tax benefit	(3.4		)	(4.4		)	(214.2		)	—			(222.0		)
Income from continuing operations	111.4			425.4			713.6			(1,218.5		)	31.9
Income from discontinued operations, net of income taxes	—			—			79.5			—			79.5
Net income	111.4			425.4			793.1			(1,218.5		)	111.4
Other comprehensive loss, net of tax	(4.3		)	(4.3		)	(9.3		)	13.6			(4.3		)
Comprehensive income	$	107.1		$	421.1		$	783.8		$	(1,204.9	)	$	107.1

MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the nine months ended September 29, 2017

(unaudited, in millions)

	Mallinckrodt plc			Mallinckrodt International Finance S.A.			Other Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	—		$	1,760.7		$	—		$	1,760.7
Cost of sales	1.8			—			806.5			—			808.3
Gross (loss) profit	(1.8		)	—			954.2			—			952.4
Selling, general and administrative expenses	46.7			0.6			571.2			—			618.5
Research and development expenses	3.6			—			140.6			—			144.2
Restructuring charges, net	—			—			26.3			—			26.3
Gains on divestiture	—			—			(56.6		)	—			(56.6		)
Operating (loss) income	(52.1		)	(0.6		)	272.7			—			220.0
Interest expense	(10.0		)	(264.9		)	(57.9		)	53.8			(279.0		)
Interest income	5.3			1.0			50.3			(53.8		)	2.8
Other income (expense), net	19.0			(1.6		)	(88.0		)	—			(70.6		)
Intercompany fees	(13.3		)	—			13.3			—			—
Equity in net income of subsidiaries	572.1			1,113.5			848.1			(2,533.7		)	—
Income (loss) from continuing operations before income taxes	521.0			847.4			1,038.5			(2,533.7		)	(126.8		)
Income tax benefit	(4.7		)	(2.6		)	(146.1		)	—			(153.4		)
Income from continuing operations	525.7			850.0			1,184.6			(2,533.7		)	26.6
(Loss) income from discontinued operations, net of income taxes	—			(1.9		)	501.0			—			499.1
Net income	525.7			848.1			1,685.6			(2,533.7		)	525.7
Other comprehensive income, net of tax	59.4			59.4			117.9			(177.3		)	59.4
Comprehensive income	$	585.1		$	907.5		$	1,803.5		$	(2,711.0	)	$	585.1

MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the nine months ended September 28, 2018

(unaudited, in millions)

	Mallinckrodt plc			Mallinckrodt International Finance S.A.			Other Subsidiaries			Eliminations			Consolidated
Cash Flows From Operating Activities:
Net cash from operating activities	$	447.6		$	43.0		$	1,420.5		$	(1,430.0	)	$	481.1
Cash Flows From Investing Activities:
Capital expenditures	—			—			(93.3		)	—			(93.3		)
Acquisitions, net of cash acquired	—			—			(699.9		)	—			(699.9		)
Proceeds from divestitures, net of cash	—			—			313.2			—			313.2
Intercompany loan investment, net	(393.6		)	(85.2		)	(367.2		)	846.0			—
Investment in subsidiary	—			(168.3		)	—			168.3			—
Other	—			—			28.8			—			28.8
Net cash from investing activities	(393.6		)	(253.5		)	(818.4		)	1,014.3			(451.2		)
Cash Flows From Financing Activities:
Issuance of external debt	—			600.0			57.2			—			657.2
Repayment of external debt and capital lease obligation	—			(1,166.8		)	(396.6		)	—			(1,563.4		)
Debt financing costs	—			(12.0		)	—			—			(12.0		)
Proceeds from exercise of share options	1.0			—			—			—			1.0
Repurchase of shares	(57.4		)	—			—			—			(57.4		)
Intercompany loan borrowings, net	—			846.0			—			(846.0		)	—
Intercompany dividends	—			(814.2		)	(615.8		)	1,430.0			—
Capital contribution	—			—			168.3			(168.3		)	—
Other	2.0			—			(26.3		)	—			(24.3		)
Net cash from financing activities	(54.4		)	(547.0		)	(813.2		)	415.7			(998.9		)
Effect of currency rate changes on cash	—			—			(0.9		)	—			(0.9		)
Net change in cash, cash equivalents and restricted cash	(0.4		)	(757.5		)	(212.0		)	—			(969.9		)
Cash, cash equivalents and restricted cash at beginning of period	0.7			908.8			369.6			—			1,279.1
Cash, cash equivalents and restricted cash at end of period	$	0.3		$	151.3		$	157.6		$	—		$	309.2
Cash and cash equivalents at end of period	$	0.3		$	151.3		$	139.1		$	—		$	290.7
Restricted Cash, included in other assets at end of period	—			—			18.5			—			18.5
Cash, cash equivalents and restricted cash at end of period	$	0.3		$	151.3		$	157.6		$	—		$	309.2

MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the nine months ended September 29, 2017

(unaudited, in millions)

	Mallinckrodt plc			Mallinckrodt International Finance S.A.			Other Subsidiaries			Eliminations			Consolidated
Cash Flows From Operating Activities:
Net cash from operating activities	$	1,172.0		$	1,233.7		$	1,963.0		$	(3,920.2	)	$	448.5
Cash Flows From Investing Activities:
Capital expenditures	—			—			(151.3		)	—			(151.3		)
Acquisitions, net of cash acquired	—			—			(35.9		)	—			(35.9		)
Proceeds from divestitures, net of cash	—			—			576.9			—			576.9
Intercompany loan investment, net	(741.3		)	—			(920.8		)	1,662.1			—
Investment in subsidiary	—			(1,412.5		)	—			1,412.5			—
Other	—			—			0.5			—			0.5
Net cash from investing activities	(741.3		)	(1,412.5		)	(530.6		)	3,074.6			390.2
Cash Flows From Financing Activities:
Issuance of external debt	—			500.0			40.0			—			540.0
Repayment of external debt and capital lease obligation	—			(759.9		)	(127.6		)	—			(887.5		)
Debt financing costs	—			(12.7		)	—			—			(12.7		)
Proceeds from exercise of share options	4.0			—			—			—			4.0
Repurchase of shares	(437.7		)	—			—			—			(437.7		)
Intercompany loan borrowings, net	—			1,614.5			47.6			(1,662.1		)	—
Intercompany dividends	—			(1,170.0		)	(2,750.2		)	3,920.2			—
Capital contribution	—			—			1,412.5			(1,412.5		)	—
Other	3.2			—			(21.8		)	—			(18.6		)
Net cash from financing activities	(430.5		)	171.9			(1,399.5		)	845.6			(812.5		)
Effect of currency rate changes on cash	—			—			2.7			—			2.7
Net change in cash, cash equivalents and restricted cash	0.2			(6.9		)	35.6			—			28.9
Cash, cash equivalents and restricted cash at beginning of period	0.5			44.5			316.1			—			361.1
Cash, cash equivalents and restricted cash at end of period	$	0.7		$	37.6		$	351.7		$	—		$	390.0
Cash and cash equivalents at end of period	$	0.7		$	37.6		$	333.5		$	—		$	371.8
Restricted Cash, included in other assets at end of period	—			—			18.2			—			18.2
Cash, cash equivalents and restricted cash at end of period	$	0.7		$	37.6		$	351.7		$	—		$	390.0