Condensed Consolidating Financial Statements

9 Months Ended

Sep. 27, 2019

Condensed Consolidating Financial Statements [Abstract]

Condensed Consolidating Financial Statements

18. Condensed Consolidating Financial Statements

Mallinckrodt International Finance S.A. ("MIFSA"), an indirectly 100%-owned subsidiary of Mallinckrodt plc established to own, directly or indirectly, substantially all of the operating subsidiaries of the Company, to issue debt securities and to perform treasury operations.

MIFSA is the borrower under the 4.75% Senior Notes due April 2023 ("the 2013 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 2013 Notes, MIFSA as issuer of the 2013 Notes and the operating companies that represent assets of MIFSA. There are no subsidiary guarantees related to the 2013 Notes.

Set forth below are the condensed consolidating financial statements for the three and nine months ended September 27, 2019 and September 28, 2018, and as of September 27, 2019 and December 28, 2018. 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 27, 2019

(unaudited, in millions)

	Mallinckrodt plc		Mallinckrodt International Finance S.A.		Other Subsidiaries		Eliminations			Consolidated
Assets
Current Assets:
Cash and cash equivalents	$	0.7	$	64.5	$	433.6	$	—		$	498.8
Accounts receivable, net	—		—		538.8		—			538.8
Inventories	—		—		325.5		—			325.5
Prepaid expenses and other current assets	11.8		0.2		110.2		—			122.2
Assets held for sale	—		—		175.9		—			175.9
Intercompany receivables	128.2		29.2		5,980.2		(6,137.6		)	—
Total current assets	140.7		93.9		7,564.2		(6,137.6		)	1,661.2
Property, plant and equipment, net	—		—		894.7		—			894.7
Intangible assets, net	—		—		7,496.1		—			7,496.1
Investment in subsidiaries	2,684.4		15,633.9		3,877.0		(22,195.3		)	—
Intercompany loans receivable	447.9		—		2,709.8		(3,157.7		)	—
Other assets	—		—		304.1		—			304.1
Total Assets	$	3,273.0	$	15,727.8	$	22,845.9	$	(31,490.6	)	$	10,356.1
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	—	$	696.7	$	19.4	$	—		$	716.1
Accounts payable	0.1		—		100.8		—			100.9
Accrued payroll and payroll-related costs	—		—		83.7		—			83.7
Accrued interest	—		8.1		82.8		—			90.9
Accrued and other current liabilities	0.8		0.2		505.5		—			506.5
Liabilities held for sale	—		—		55.8		—			55.8
Intercompany payables	191.7		5,732.8		213.1		(6,137.6		)	—
Total current liabilities	192.6		6,437.8		1,061.1		(6,137.6		)	1,553.9
Long-term debt	—		2,250.5		2,798.2		—			5,048.7
Pension and postretirement benefits	—		—		58.6		—			58.6
Environmental liabilities	—		—		60.3		—			60.3
Deferred income taxes	—		—		22.0		—			22.0
Other income tax liabilities	—		—		253.5		—			253.5
Intercompany loans payable	—		3,157.7		—		(3,157.7		)	—
Other liabilities	—		4.8		273.9		—			278.7
Total Liabilities	192.6		11,850.8		4,527.6		(9,295.3		)	7,275.7
Shareholders' Equity	3,080.4		3,877.0		18,318.3		(22,195.3		)	3,080.4
Total Liabilities and Shareholders' Equity	$	3,273.0	$	15,727.8	$	22,845.9	$	(31,490.6	)	$	10,356.1

MALLINCKRODT PLC

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 28, 2018

(unaudited, in millions)

	Mallinckrodt plc		Mallinckrodt International Finance S.A.		Other Subsidiaries		Eliminations			Consolidated
Assets
Current Assets:
Cash and cash equivalents	$	0.4	$	140.8	$	207.7	$	—		$	348.9
Accounts receivable, net	—		—		623.3		—			623.3
Inventories	—		—		322.3		—			322.3
Prepaid expenses and other current assets	3.9		0.2		128.6		—			132.7
Intercompany receivables	131.1		29.2		1,087.9		(1,248.2		)	—
Total current assets	135.4		170.2		2,369.8		(1,248.2		)	1,427.2
Property, plant and equipment, net	—		—		982.0		—			982.0
Intangible assets, net	—		—		8,282.8		—			8,282.8
Investment in subsidiaries	2,481.6		25,506.1		8,362.1		(36,349.8		)	—
Intercompany loans receivable	497.7		—		12,343.0		(12,840.7		)	—
Other assets	—		—		185.3		—			185.3
Total Assets	$	3,114.7	$	25,676.3	$	32,525.0	$	(50,438.7	)	$	10,877.3
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	—	$	22.1	$	0.3	$	—		$	22.4
Accounts payable	0.1		—		147.4		—			147.5
Accrued payroll and payroll-related costs	—		—		124.0		—			124.0
Accrued interest	—		48.7		28.9		—			77.6
Accrued and other current liabilities	0.6		0.4		571.2		—			572.2
Intercompany payables	226.7		827.8		193.7		(1,248.2		)	—
Total current liabilities	227.4		899.0		1,065.5		(1,248.2		)	943.7
Long-term debt	—		3,566.9		2,502.3		—			6,069.2
Pension and postretirement benefits	—		—		60.5		—			60.5
Environmental liabilities	—		—		59.7		—			59.7
Deferred income taxes	—		—		324.3		—			324.3
Other income tax liabilities	—		—		228.0		—			228.0
Intercompany loans payable	—		12,840.7		—		(12,840.7		)	—
Other liabilities	—		7.6		297.0		—			304.6
Total Liabilities	227.4		17,314.2		4,537.3		(14,088.9		)	7,990.0
Shareholders' Equity	2,887.3		8,362.1		27,987.7		(36,349.8		)	2,887.3
Total Liabilities and Shareholders' Equity	$	3,114.7	$	25,676.3	$	32,525.0	$	(50,438.7	)	$	10,877.3

MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the three months ended September 27, 2019

(unaudited, in millions)

	Mallinckrodt plc			Mallinckrodt International Finance S.A.			Other Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	—		$	743.7		$	—		$	743.7
Cost of sales	0.4			—			419.0			—			419.4
Gross (loss) profit	(0.4		)	—			324.7			—			324.3
Selling, general and administrative expenses	10.0			0.6			195.1			—			205.7
Research and development expenses	1.6			—			101.5			—			103.1
Restructuring charges, net	—			—			7.2			—			7.2
Operating (loss) income	(12.0		)	(0.6		)	20.9			—			8.3
Interest expense	(1.4		)	(60.2		)	(72.7		)	56.7			(77.6		)
Interest income	2.5			0.1			57.0			(56.7		)	2.9
Other income, net	0.2			12.9			24.8			—			37.9
Intercompany fees	(4.6		)	(0.1		)	4.7			—			—
Equity in net income of subsidiaries	12.7			80.6			29.5			(122.8		)	—
(Loss) income from continuing operations before income taxes	(2.6		)	32.7			64.2			(122.8		)	(28.5		)
Income tax (benefit) expense	(1.5		)	3.3			(29.4		)	—			(27.6		)
(Loss) income from continuing operations	(1.1		)	29.4			93.6			(122.8		)	(0.9		)
Income (loss) from discontinued operations, net of income taxes	—			0.1			(0.3		)	—			(0.2		)
Net (loss) income	(1.1		)	29.5			93.3			(122.8		)	(1.1		)
Other comprehensive loss, net of tax	(2.0		)	(2.0		)	(4.3		)	6.3			(2.0		)
Comprehensive (loss) income	$	(3.1	)	$	27.5		$	89.0		$	(116.5	)	$	(3.1	)

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	$	—		$	—		$	799.9		$	—		$	799.9
Cost of sales	0.7			—			432.8			—			433.5
Gross (loss) profit	(0.7		)	—			367.1			—			366.4
Selling, general and administrative expenses	12.4			0.1			180.9			—			193.4
Research and development expenses	1.6			—			84.5			—			86.1
Restructuring charges, net	—			—			14.8			—			14.8
Non-restructuring impairment charge	—			—			2.0			—			2.0
Loss on divestiture	—			—			0.6			—			0.6
Operating (loss) income	(14.7		)	(0.1		)	84.3			—			69.5
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			247.7			(588.6		)	(8.7		)
Income tax benefit	(1.1		)	(2.4		)	(119.4		)	—			(122.9		)
Income from continuing operations	113.8			221.9			367.1			(588.6		)	114.2
Loss from discontinued operations, net of income taxes	—			—			(0.4		)	—			(0.4		)
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 nine months ended September 27, 2019

(unaudited, in millions)

	Mallinckrodt plc			Mallinckrodt International Finance S.A.			Other Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	—		$	2,357.6		$	—		$	2,357.6
Cost of sales	1.7			—			1,307.6			—			1,309.3
Gross (loss) profit	(1.7		)	—			1,050.0			—			1,048.3
Selling, general and administrative expenses	35.2			1.2			625.4			—			661.8
Research and development expenses	4.8			—			263.2			—			268.0
Restructuring charges, net	—			—			11.2			—			11.2
Non-restructuring impairment charge	—			—			113.5			—			113.5
Operating (loss) income	(41.7		)	(1.2		)	36.7			—			(6.2		)
Interest expense	(14.0		)	(192.3		)	(209.2		)	183.7			(231.8		)
Interest income	17.5			0.4			172.4			(183.7		)	6.6
Other income, net	8.9			43.6			76.1			—			128.6
Intercompany fees	(14.6		)	(0.1		)	14.7			—			—
Equity in net income of subsidiaries	200.8			448.7			292.0			(941.5		)	—
Income (loss) from continuing operations before income taxes	156.9			299.1			382.7			(941.5		)	(102.8		)
Income tax (benefit) expense	(3.7		)	9.9			(262.8		)	—			(256.6		)
Income from continuing operations	160.6			289.2			645.5			(941.5		)	153.8
Income from discontinued operations, net of income taxes	—			2.8			4.0			—			6.8
Net income	160.6			292.0			649.5			(941.5		)	160.6
Other comprehensive income, net of tax	1.7			1.7			2.4			(4.1		)	1.7
Comprehensive income	$	162.3		$	293.7		$	651.9		$	(945.6	)	$	162.3

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	$	—		$	—		$	2,380.7		$	—		$	2,380.7
Cost of sales	1.6			—			1,271.2			—			1,272.8
Gross (loss) profit	(1.6		)	—			1,109.5			—			1,107.9
Selling, general and administrative expenses	30.1			0.5			563.9			—			594.5
Research and development expenses	3.8			—			256.9			—			260.7
Restructuring charges, net	—			—			101.8			—			101.8
Non-restructuring impairment charge	—			—			2.0			—			2.0
Loss on divestiture	—			—			0.6			—			0.6
Operating (loss) income	(35.5		)	(0.5		)	184.3			—			148.3
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		)	162.8			—			17.8
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			582.1			(1,218.5		)	(107.4		)
Income tax benefit	(3.4		)	(4.4		)	(196.1		)	—			(203.9		)
Income from continuing operations	111.4			425.4			778.2			(1,218.5		)	96.5
Income from discontinued operations, net of income taxes	—			—			14.9			—			14.9
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 CASH FLOWS

For the nine months ended September 27, 2019

(unaudited, in millions)

	Mallinckrodt plc			Mallinckrodt International Finance S.A.			Other Subsidiaries			Eliminations			Consolidated
Cash Flows From Operating Activities:
Net cash from operating activities	$	(32.7	)	$	108.3		$	462.2		$	(3.7	)	$	534.1
Cash Flows From Investing Activities:
Capital expenditures	—			—			(108.7		)	—			(108.7		)
Intercompany loan investment, net	57.8			—			(662.1		)	604.3			—
Investment in subsidiary	—			(678.6		)	—			678.6			—
Other	—			—			13.7			—			13.7
Net cash from investing activities	57.8			(678.6		)	(757.1		)	1,282.9			(95.0		)
Cash Flows From Financing Activities:
Issuance of external debt	—			—			695.0			—			695.0
Repayment of external debt	—			(135.2		)	(804.9		)	—			(940.1		)
Proceeds from exercise of share options	0.5			—			—			—			0.5
Repurchase of shares	(2.5		)	—			—			—			(2.5		)
Intercompany loan borrowings, net	(24.9		)	629.2			—			(604.3		)	—
Intercompany dividends	—			—			(3.7		)	3.7			—
Capital contribution	—			—			678.6			(678.6		)	—
Other	2.1			—			(20.2		)	—			(18.1		)
Net cash from financing activities	(24.8		)	494.0			544.8			(1,279.2		)	(265.2		)
Effect of currency rate changes on cash	—			—			0.5			—			0.5
Net change in cash, cash equivalents and restricted cash, including cash classified within assets held for sale	0.3			(76.3		)	250.4			—			174.4
Less: Net change in cash classified within assets held for sale	—			—			(15.1		)	—			(15.1		)
Net change in cash, cash equivalents and restricted cash	0.3			(76.3		)	235.3			—			159.3
Cash, cash equivalents and restricted cash at beginning of period	0.4			140.8			226.3			—			367.5
Cash, cash equivalents and restricted cash at end of period	$	0.7		$	64.5		$	461.6		$	—		$	526.8
Cash and cash equivalents at end of period	$	0.7		$	64.5		$	433.6		$	—		$	498.8
Restricted cash, included in other assets at end of period	—			—			28.0			—			28.0
Cash, cash equivalents and restricted cash at end of period	$	0.7		$	64.5		$	461.6		$	—		$	526.8

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	—			—			(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	—			(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