Fresh-Start Accounting (Tables)

9 Months Ended

Jun. 16, 2022

Sep. 30, 2022

The following table reconciles the enterprise value to the implied fair value of the Successor's equity as of the Effective Date:


Enterprise value	$	5,223.0
Plus: Enterprise value adjustments (1)	197.0
Adjusted enterprise value	5,420.0
Plus: Cash and cash equivalents	297.9
Plus: Non-operating assets, net (2)	178.7
Less: Fair value of debt	(3,067.2)
Less: Fair value of Opioid-Related Litigation Settlement, Acthar Gel-Related Settlement, StrataGraft PRV proceeds and Terlivaz contingent value rights	(625.8)
Successor equity value	$	2,203.6

(1)Represents incremental tax benefits not contemplated in the projections utilized in the disclosure statement.

(2)Represents non-operating assets and liabilities which were excluded from the enterprise value as put forth in the disclosure statement as there were no cash projections associated with these net assets.

Upon the application of fresh-start accounting, the Company allocated the reorganization value to its individual assets based on their estimated fair values. Reorganization value represents the fair value of the Successor's assets before considering liabilities.

The following table reconciles the Company's enterprise value to its reorganization value as of the Effective Date:


Adjusted enterprise value	$	5,420.0
Plus: Cash and cash equivalents	297.9
Plus: Non-operating assets, net	178.7
Plus: Current liabilities (excluding debt or debt-like items)	522.5
Plus: Other non-current liabilities (excluding debt or debt-like items)	183.2
Reorganization value of Successor assets	$	6,602.3

Fresh-Start Four Column Balance Sheet

The four-column unaudited condensed consolidated balance sheet as of June 16, 2022 is as follows:


	Predecessor		Reorganization Adjustments			Fresh-Start Adjustments			Successor
Assets
Current Assets:
Cash and cash equivalents	$	1,392.6	$	(1,094.7)	(a)	$	—		$	297.9
Accounts receivable, less allowance for doubtful accounts	387.4		—			—			387.4
Inventories	375.2		—			851.8		(q)	1,227.0
Prepaid expenses and other current assets	322.6		75.3		(b)	(58.3)		(r)	339.6
Current asset held for sale	—		—			100.0		(j)	100.0
Total current assets	2,477.8		(1,019.4)			893.5			2,351.9
Property, plant and equipment, net	748.6		—			(299.2)		(s)	449.4
Intangible assets, net	5,166.6		—			(2,014.4)		(t)	3,152.2
Deferred income taxes	—		—			453.4		(l)	453.4
Other assets	222.8		(3.9)		(c)	(23.5)		(u)	195.4
Total Assets	$	8,615.8	$	(1,023.3)		$	(990.2)		$	6,602.3

Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	1,389.9	$	(1,355.2)	(d)	$	—		$	34.7
Accounts payable	156.4		(53.8)		(e)	—			102.6
Accrued payroll and payroll-related costs	71.4		—			—			71.4
Accrued interest	20.8		(13.0)		(f)	—			7.8
Acthar Gel-Related Settlement	—		16.5		(g)	—			16.5
Opioid-Related Litigation Settlement	—		200.0		(h)	—			200.0
Accrued and other current liabilities	296.1		50.8		(i)	(6.1)		(v)	340.8
Current liability held for sale	—		35.0		(j)	—			35.0
Total current liabilities	1,934.6		(1,119.7)			(6.1)			808.8
Long-term debt	—		3,050.9		(d)	(18.4)		(w)	3,032.5
Acthar Gel-Related Settlement	—		63.2		(g)	—			63.2
Opioid-Related Litigation Settlement liability	—		304.3		(h)	—			304.3
Pension and postretirement benefits	27.6		27.2		(k)	—			54.8
Environmental liabilities	37.1		—			—			37.1
Deferred income taxes	20.4		102.7		(l)	(121.7)		(l)	1.4
Other income tax liabilities	75.9		—			(61.9)		(x)	14.0
Other liabilities	68.6		23.6		(m)	(9.6)		(v)	82.6
Liabilities subject to compromise	6,402.7		(6,402.7)		(n)	—			—
Total Liabilities	8,566.9		(3,950.5)			(217.7)			4,398.7
Shareholders' Equity:
Predecessor preferred shares	—		—			—			—
Predecessor ordinary A shares	—		—			—			—
Predecessor ordinary shares	18.9		(18.9)		(o)	—			—
Successor ordinary shares	—		0.1		(o)	—			0.1
Predecessor ordinary shares held in treasury	(1,616.1)		1,616.1		(o)	—			—
Predecessor additional paid-in capital	5,599.5		(5,599.5)		(o)	—			—
Successor additional paid-in capital	—		2,203.5		(o)	—			2,203.5
Predecessor accumulated other comprehensive loss	(9.9)		—			9.9		(y)	—
Retained (deficit) earnings	(3,943.5)		4,725.9		(p)	(782.4)		(z)	—
Total Shareholders' Equity	48.9		2,927.2			(772.5)			2,203.6
Total Liabilities and Shareholders' Equity	$	8,615.8	$	(1,023.3)		$	(990.2)		$	6,602.3

Reorganization Adjustments, Cash and Cash Equivalents

The table below reflects the sources and uses of cash on the Effective Date:


Sources:
Proceeds from New 1L Notes	$	637.0
Total Sources	637.0
Uses:
Payment of Predecessor revolving credit facility	(900.0)
Upfront payment of the Opioid-Related Litigation Settlement	(447.4)
Upfront payment of the Acthar Gel-Related Settlement, inclusive of settlement interest	(17.8)
Payment of secured, administrative, priority and trade claims	(26.2)
Payment of professional fees	(43.5)
Payment to fund professional fees escrow (prepaid and other current assets restricted cash)	(89.0)
Payment of general unsecured claims	(135.0)
Payment of noteholder consent fees	(19.3)
Payment of costs, fees and expenses related to exit-financing activities, an exit fee associated with senior secured loans and accrued and unpaid interest on certain pre-emergence debt	(53.5)
Total Uses	(1,731.7)
Net Uses of Cash	$	(1,094.7)

Reorganization Adjustments, Debt

Fair value adjustments to the carrying value of debt instruments impacted by the Plan as determined by the Black-Derman-Toy model as follows:


2017 Replacement Term Loan	$	(169.4)
2018 Replacement Term Loan	(42.2)
New 2L Notes	(95.7)
Takeback 2L Notes	(184.8)
Total fair value adjustment to debt instruments	$	(492.1)

Adjustment Adjustment, Current Liabilities

The following table reconciles reorganization adjustments to accrued and other current liabilities:


Severance - Exiting Chief Executive Officer ("CEO")	$	5.7
Reinstatement of various successor obligations from LSTC	15.4
Success fees for professionals incurred on Effective Date	29.7
	$	50.8

Reorganization Adjustments, Liabilities Subject to Compromise

LSTC were settled as follows in accordance with the Plan (in millions):


Liabilities subject to compromise
Accounts payable	$	17.7
Accrued interest	35.2
Debt	3,746.2
Environmental liabilities	67.2
Acthar Gel-Related Settlement	630.0
Opioid-Related Litigation Settlement liability	1,722.4
Other current and non-current liabilities	151.6
Pension and postretirement benefits	32.4
Total liabilities subject to compromise	$	6,402.7

To be reinstated on the Effective Date:
Accounts payable	$	(0.1)

Other current and non-current liabilities	(27.3)
Pension and postretirement benefits	(32.4)
Total liabilities reinstated	$	(59.8)

Consideration provided to settle amounts per the Plan
Issuance of Successor common stock	$	(2,189.7)
Issuance of Opioid Warrants	(13.9)
Issuance of Takeback Term Loans and New 2L Notes	(1,778.3)
Acthar Gel-Related Settlement	(79.7)
Opioid-Related Litigation Settlement liability	(504.3)
Issuance of Takeback 2L Notes to holders of the Guaranteed Unsecured Notes	(190.2)
Contingent liabilities for proceeds of sale of StrataGraft PRV and Terlivaz CVR	(41.8)
Cash payment	(601.3)
Total consideration provided to settle amounts per the Plan	$	(5,399.2)

Gain on settlement of liabilities subject to compromise	$	943.7

Reorganization Adjustment, Equity

Pursuant to the Plan, as of the Effective Date, all Predecessor's preferred and ordinary shares were cancelled without any distribution. The following table reconciles reorganization adjustments made to Successor common stock, Opioid Warrants and additional paid in capital:


Par value of 13,170,932 shares of Successor Common Stock issued to former holders of the Guaranteed Unsecured Notes (par valued at 0.01 dollars per share)	$	0.1
Fair value of Opioid Warrants issued to holders of the Guaranteed Unsecured Notes (1)	13.9
Additional paid in capital - Successor Common Stock	2,189.6
Successor equity	$	2,203.6

(1)The fair value of the Opioid Warrants was estimated using a Black-Scholes model with the following assumptions: $18.50 stock price of the Successor Company; exercise price per share of $103.40; expected volatility of 62.28%; risk free interest rate of 3.34%, continuously compounded; and a holding period of six years. The expected volatility assumption is based on the historical and implied volatility of the Company's peer group with similar business models.

Reorganization, Retained Deficit

Retained deficit - The cumulative effect of the consummation of the Plan on the Predecessor's retained deficit is as follows:


Gain on settlement of LSTC	$	943.7
Professional, success and exit fees	(91.6)
Release of prepaid success fee	(10.9)
Release of prepaid insurance (1)	(9.2)
Accrual of severance for former CEO	(5.7)
Income tax expense on plan adjustments	(102.7)
Cancellation of Predecessor equity	4,002.3
Net impact on retained deficit	$	4,725.9

(1)Write off of prepaid expenses related to premiums for the Predecessor Company's directors' and officers' insurance policies.

Fresh-Start Adjustments, Retained Deficit

The cumulative effect of the fresh-start accounting on the Successor's retained deficit is as follows:


Fresh-start adjustment:
Inventories	$	851.8
Property, plant and equipment, net	(299.2)
Intangible assets, net	(2,014.4)
Current asset held for sale	100.0
Debt	18.4
Other assets and liabilities	(11.2)
Total fresh-start adjustments impacting reorganization items, net	(1,354.6)
Fresh-start adjustments to accumulated other comprehensive income, net of $0.3 million of tax benefit	(9.9)
Total fresh-start adjustments recorded to income tax benefit	582.1
Net fresh-start impact to accumulated deficit	$	(782.4)

Schedule of Debtor Reorganization Items, net

Reorganization items, net, were comprised of the following:


	Successor		Predecessor
	Three Months Ended September 30, 2022			Three Months Ended September 24, 2021


Professional and other service provider fees	$	14.2		$	119.4

Debt valuation adjustments	—			6.8



Total reorganization items, net	$	14.2		$	126.2


	Successor		Predecessor
	Period from June 17, 2022 through September 30, 2022		Period from January 1, 2022 through June 16, 2022		Nine Months Ended September 24, 2021
Gain on settlements of LSTC	$	—	$	(943.7)	$	—
Loss on fresh-start adjustments	—		1,354.6		—
Professional and other service provider fees	17.7		161.1		306.6
Success fees for professional service providers	—		44.3		—
Write off of prepaid premium for directors' and officers' insurance policies	—		9.2		—
Debt valuation adjustments	—		—		23.1
Adjustments of other claims	—		5.4		(0.5)

Total reorganization items, net	$	17.7	$	630.9	$	329.2