Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

The domestic and international components (1) of loss from continuing operations before income taxes were as follows:

	Successor		Predecessor
	Period from June 17, 2022  through December 30, 2022		Period from January 1, 2022  through June 16, 2022		Year Ended December 31, 2021		Year Ended December 25, 2020
Domestic	$	(359.4)	$	(2,883.3)	$	(512.2)	$	(656.9)
International	(290.9)		2,072.0		(317.6)		(303.9)
Total	$	(650.3)	$	(811.3)	$	(829.8)	$	(960.8)

(1) Domestic reflects Ireland.

Significant components (1) of income taxes related to continuing operations are as follows:

	Successor		Predecessor
	Period from June 17, 2022  through December 30, 2022		Period from January 1, 2022  through June 16, 2022		Year Ended December 31, 2021		Year Ended December 25, 2020
Current:
Domestic	$	(32.8)	$	33.7	$	(33.7)	$	0.1
International	5.7		(57.6)		(12.7)		(375.4)
Current income tax (benefit) provision	(27.1)		(23.9)		(46.4)		(375.3)
Deferred:
Domestic	(44.6)		(82.3)		(59.5)		102.2
International	19.7		(391.1)		(0.4)		282.0
Deferred income tax (benefit) provision	(24.9)		(473.4)		(59.9)		384.2
Total	$	(52.0)	$	(497.3)	$	(106.3)	$	8.9

(1) Domestic reflects Ireland.

The domestic current income tax provision reflects a tax benefit of $7.9 million, $4.1 million, $2.2 million, and $0.2 million from using NOL carryforwards for the period from June 17, 2022 through December 30, 2022 (Successor), the period from January 1, 2022 through June 16, 2022 (Predecessor), fiscal 2021 (Predecessor), and fiscal 2020 (Predecessor), respectively. The international current income tax provision reflects a tax benefit of $61.0 million, $0.1 million, $1.2 million, and $33.4 million from using NOL carryforwards for the period from June 17, 2022 through December 30, 2022 (Successor), the period from January 1, 2022 through June 16, 2022 (Predecessor), fiscal 2021 (Predecessor), and fiscal 2020 (Predecessor), respectively. The fiscal 2020 (Predecessor) international current income tax provision also included a tax benefit of $1.0 million related to refundable credits and a tax benefit of $281.5 million related to carryback claims. The international credit utilization is comprised of credit carryforwards.

During the period from June 17, 2022 through December 30, 2022 (Successor) and the period from January 1, 2022 through June 16, 2022 (Predecessor), net cash payments for income taxes were $3.0 million and $3.0 million, respectively. During fiscal 2021 (Predecessor) net cash refunds for income taxes were $160.0 million and fiscal 2020 (Predecessor) net cash payments for income taxes were $39.9 million. Included within the net cash refunds of $160.0 million were refunds of $178.8 million received as a result of the provisions in the Coronavirus Aid, Relief and Economic Security ("CARES") Act and net payments of $18.8 million related to operational activity.

The reconciliation between domestic income taxes at the statutory rate and the Company's provision for income taxes on continuing operations is as follows:

	Successor		Predecessor
	Period from June 17, 2022  through December 30, 2022		Period from January 1, 2022  through June 16, 2022		Year Ended December 31, 2021		Year Ended December 25, 2020
Benefit for income taxes at domestic statutory income tax rate (1)	$	(81.3)	$	(101.4)	$	(103.7)	$	(120.1)
Adjustments to reconcile to income tax provision:
Rate difference between domestic and international jurisdictions	(4.7)		226.5		(224.9)		(315.3)
Adjustments to accrued income tax liabilities and uncertain tax positions (2)	—		—		(9.7)		16.7
Credits, principally research and orphan drug	—		(0.9)		(4.7)		(11.2)
Permanently nondeductible and nontaxable items (3)	3.1		(1.7)		9.8		2.8
Emergence	—		(31.6)		—		—
Withholding tax on Swiss distribution	4.7		—		—		—
U.S. Tax Reform (4)	—		—		—		(281.5)
Legal entity reorganization (5)	—		—		—		82.0
Separation costs	—		—		—		8.4
Reorganization items, net	1.7		15.7		36.9		8.8
Other	(1.4)		(3.1)		0.3		0.1
Valuation allowances (6)	25.9		(600.8)		189.7		618.2
(Benefit) provision for income taxes	$	(52.0)	$	(497.3)	$	(106.3)	$	8.9

(1)The statutory tax rate reflects the Irish statutory tax rate of 12.5%.

(2)Includes interest and penalties on accrued income tax liabilities and uncertain tax positions.

(3)For fiscal 2021 (Predecessor), the permanently nondeductible and nontaxable item were primarily driven by the opioid-related litigation settlement loss.

(4)For fiscal 2020 (Predecessor), the Company recognized a tax benefit as a result of the CARES Act. Associated unrecognized tax benefit and valuation allowance are netted within this line.

(5)Associated unrecognized tax benefit and valuation allowance are netted within this line.

(6)Fiscal 2020 (Predecessor) includes a tax expense of $204.9 million for an increase to the valuation allowance on certain net deferred tax assets that were no longer more likely than not realizable due to the Company's former substantial doubt about its ability to continue as a going concern. Additional valuation allowance impacts are netted within other line items, as referenced in the associated footnotes.

The Successor Company’s rate difference between domestic and international jurisdictions was $4.7 million of tax benefit for the period from June 17, 2022 through December 30, 2022 (Successor). The rate difference between domestic and international jurisdictions was primarily related to $19.7 million of tax benefit attributable to inventory step-up amortization expense, $8.9 million of tax benefit attributable to accretion expense associated with our settlement liabilities and $6.3 million of tax benefit attributable to accretion expense associated with our debt offset by $30.2 million of tax expense predominately attributable to the pretax earnings in various jurisdictions.

The Predecessor Company’s rate difference between domestic and international jurisdictions was $226.5 million of tax expense for the period from January 1, 2022, through June 16, 2022 (Predecessor). The rate difference between domestic and international jurisdictions was primarily related to $128.9 million of tax expense related to fresh-start adjustments, $103.4 million of tax expense attributable to gain on adjustments to LSTC and $12.8 million of tax expense predominately related to the pretax earnings in various jurisdictions offset by $18.6 million of tax benefit related to professional and lender fees.

As a result of the Plan, the Company recognized CODI on its indebtedness, resulting in the utilization of, and reduction to, certain of its tax losses and tax credits in the U.S. and Luxembourg. The emergence from Chapter 11 bankruptcy proceedings resulted in a change in ownership for purposes of IRC Section 382, causing the remaining U.S. tax losses and credits to be limited under IRC Sections 382 and 383. The Company also recognized a U.S. capital loss as a result of the Plan, which may be carried forward to offset capital gains recognized by the Company in the next five years, to the extent it is not reduced by CODI or limited under IRC section 382 or 383. The deferred tax asset associated with the capital loss carryforward is offset by a valuation allowance due to significant uncertainty regarding the Company’s ability to utilize the carryforward prior to its expiration. The portion of deferred tax assets associated with the tax losses and credits that are limited under IRC Section 382 or 383, and that have a remote possibility of being utilized, have been written off. The Plan's tax effect, and impacts on the Company's tax losses and credits, is expected to be finalized when the associated U.S. Federal income tax return is filed in 2023. Refer to Note 4 for further information regarding the Company's income tax accounting policies.

During the period from January 1, 2022 through June 16, 2022 (Predecessor), the Company recognized a tax benefit of $31.6 million upon emergence from Chapter 11 bankruptcy. These impacts of emergence consist of a $1,202.0 million tax benefit related to the revaluation of net deferred tax assets as a result of fresh-start accounting and a $285.3 million tax benefit related to the release of uncertain tax positions, offset by $1,209.8 million of tax expense for the reduction in federal and state NOL carryforwards

from the CODI realized upon emergence from bankruptcy and limitations under IRC Sections 382 and 383, $191.9 million of tax expense related to permanently nondeductible impacts on fair value adjustments, and $54.0 million of tax expense related to prepaid income taxes.

During the period from January 1, 2022 through June 16, 2022 (Predecessor), the Company recognized a tax benefit of $600.8 million related to valuation allowances, consisting of $512.1 million of tax benefit for the reduction in the valuation allowance on the Company's deferred tax assets due to the alleviation of the previous substantial doubt about the Company’s ability to continue as a going concern and $88.7 million of tax benefit which mainly offsets impacts included within the benefit for income taxes at the domestic statutory income tax rate and the rate difference between domestic and international jurisdictions.

The rate difference between domestic and international jurisdictions changed to $224.9 million of tax benefit for fiscal 2021 (Predecessor) from $315.3 million of tax benefit for fiscal 2020 (Predecessor). Of the $90.4 million decrease in the tax benefit, $48.9 million of the decrease is attributable to the Medicaid lawsuit and $92.9 million of decrease is predominately attributable to changes in the jurisdictional mix of operating loss resulting from the fiscal 2020 (Predecessor) reorganization of the Company's intercompany financing and associated asset and legal entity ownership, partially offset by $27.6 million of an increase attributable to reorganization items, $13.2 million of an increase attributable to non-restructuring impairment charges and $10.6 million of an increase attributable to the opioid-related litigation settlement loss.

The Company's valuation allowance tax expense was $189.7 million for fiscal 2021 (Predecessor), compared to $618.2 million for fiscal 2020 (Predecessor). Of the $428.5 million decrease in tax expense, $288.9 million of decrease was attributable to operational activity in applicable tax jurisdictions that are fully offset by a valuation allowance and $204.9 million of decrease was attributable to the discrete valuation allowance recorded in fiscal 2020 (Predecessor) on certain beginning-of-the-year net deferred tax assets, partially offset by a $65.3 million increase attributable to deferred remeasurement as a result of tax rate changes. The valuation allowance tax expense mainly offsets impacts included within the benefit for income taxes at the domestic statutory income tax rate and the rate difference between domestic and international jurisdictions.

The following table summarizes the activity related to the Company's unrecognized tax benefits, excluding interest:

	Successor		Predecessor
	Period from June 17, 2022  through December 30, 2022		Period from January 1, 2022  through June 16, 2022		Year Ended December 31, 2021		Year Ended December 25, 2020
Balance at beginning of period	$	24.8	$	333.5	$	349.0	$	398.6
Additions related to current year tax positions	—		—		—		71.1
Additions related to prior period tax positions	—		—		9.3		9.8
Reductions related to prior period tax positions	—		(306.1)		(2.8)		(14.2)
Settlements	—		(2.6)		(0.2)		(80.3)
Lapse of statutes of limitations	—		—		(21.8)		(36.0)
Balance at end of period	$	24.8	$	24.8	$	333.5	$	349.0

Unrecognized tax benefits, excluding interest, were reported in the following consolidated balance sheet captions in the amounts shown:

	Successor		Predecessor
	December 30, 2022		December 31, 2021
Other assets (1)	$	—	$	255.7
Deferred income tax asset	9.4		—
Other income tax liabilities	15.4		64.1
Deferred income tax liability	—		13.7
	$	24.8	$	333.5

(1)Included as a reduction to deferred tax assets.

Total unrecognized tax benefits ("UTB(s)") of $24.8 million as of both December 30, 2022 (Successor) and June 16, 2022 (Predecessor), if favorably settled, would benefit the effective tax rate. Total UTBs of $77.0 million and $85.9 million as of December 31, 2021 (Predecessor) and December 25, 2020 (Predecessor), respectively, if favorably settled, would benefit the effective tax rate with the remaining reflected as a write-off of related other tax assets. During the period January 1, 2022 through June 16, 2022 (Predecessor), the decrease of $306.1 million primarily resulted from fresh-start adjustments. During fiscal 2021 (Predecessor) and 2020 (Predecessor), due to a lapse of statutes of limitations, $5.1 million and $18.1 million of tax and interest on unrecognized tax benefits related to the Nuclear Imaging business were eliminated, and a benefit of $5.1 million and $18.1 million was recorded in discontinued operations within the consolidated statement of operations, respectively. The Company recorded an increase to accrued

interest and penalties of $0.6 million during the period from June 17, 2022 through December 30, 2022 (Successor) and a net decrease of $16.7 million during the period from January 1, 2022 through June 16, 2022 (Predecessor). Interest and penalties activity during fiscal 2021 (Predecessor) and fiscal 2020 (Predecessor), was a net increase of $2.2 million and a net decrease of $16.2 million, respectively. The total amount of accrued interest and penalties related to uncertain tax positions was $2.8 million and $18.9 million as of December 30, 2022 (Successor) and December 31, 2021 (Predecessor), respectively.

Within the next twelve months, the unrecognized tax benefits and the related interest and penalties are not expected to significantly increase or decrease.

Certain of the Company's subsidiaries continue to be subject to examination by taxing authorities. The earliest open years subject to examination for the U.S. federal, U.S. state and other jurisdictions, including Ireland, Japan, Luxembourg, Switzerland and the U.K. is 2013.

Income taxes payable, including uncertain tax positions and related interest accruals, was reported in the following consolidated balance sheet captions in the amounts shown:

	Successor		Predecessor
	December 30, 2022		December 31, 2021
Accrued and other current liabilities	$	3.6	$	1.7
Other income tax liabilities	18.2		83.2
	$	21.8	$	84.9

Tax receivables were included in the following consolidated balance sheet captions in the amounts shown:

	Successor		Predecessor
	December 30, 2022		December 31, 2021
Other assets	$	—	$	141.3
Prepaid expenses and other current assets	179.5		36.5
	$	179.5	$	177.8

Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The components of the net deferred tax asset (liability) at the end of each fiscal year were as follows:

	Successor		Predecessor
	December 30, 2022		December 31, 2021
Deferred tax assets:
Tax loss and credit carryforward	$	3,646.0	$	4,147.5
Capital tax loss carryforward and related assets	1,412.6		1,605.0
Intangible assets	278.4		—
Opioid-Related Litigation Settlement liability	111.7		294.7
Excess interest	84.0		159.5
Other	159.8		292.2
	5,692.5		6,498.9
Deferred tax liabilities:
Intangible assets	—		(108.5)
Investment in partnership	(67.4)		(67.1)
Other	(157.0)		—
	(224.4)		(175.6)
Net deferred tax asset before valuation allowances	5,468.1		6,323.3
Valuation allowances	(4,992.9)		(6,344.2)
Net deferred tax asset (liability)	$	475.2	$	(20.9)

The net deferred tax asset before valuation allowances was $5,468.1 million as of December 30, 2022 (Successor), compared to $6,323.3 million as of December 31, 2021 (Predecessor). This decrease consists of $904.5 million of a decrease related to fresh-start activity and $72.8 million of a net decrease associated with payments and accretion on the opioid-related litigation settlement offset by a $61.5 million increase associated with amortization on intangible assets and a $60.6 million increase predominately related to tax loss and other operational activity. The $904.5 million decrease related to fresh-start activity consists of (i) CODI realized upon emergence from bankruptcy and limitations under IRC Sections 382 and 383 which resulted in reductions to tax loss and credit carryforward, capital tax loss carryforward, and excess interest deferred tax assets; (ii) fair value adjustments which resulted in

reductions to the opioid-related litigation settlement liability deferred tax assets and intangible asset deferred tax liabilities, and increases to other deferred tax liabilities and (iii) increases to certain deferred tax assets due to the release of uncertain tax positions.

The deferred tax asset valuation allowances were $4,992.9 million and $6,344.2 million as of December 30, 2022 (Successor) and December 31, 2021 (Predecessor), respectively. The valuation allowance as of December 30, 2022 (Successor) relates primarily to the uncertainty of the utilization of certain deferred tax assets, driven by domestic and international net operating and capital losses, credits, and intangible assets. As of December 30, 2022 (Successor), due to the alleviation of the previous substantial doubt about the Company’s ability to continue as a going concern, the associated valuation allowances were released through fresh-start accounting at emergence. The valuation allowance as of December 31, 2021 (Predecessor) was related to the Company's substantial doubt about its ability to continue as a going concern, as well as the uncertainty of the utilization of certain deferred tax assets, driven by domestic and international net operating and capital losses, credits, intangible assets and the opioid-related litigation settlement liability.

Deferred taxes were included in the following consolidated balance sheet captions in the amounts shown:

	Successor		Predecessor
	December 30, 2022		December 31, 2021
Deferred income tax asset	$	475.5	$	—
Deferred income tax liability	(0.3)		(20.9)
Net deferred tax asset (liability)	$	475.2	$	(20.9)

As of December 30, 2022 (Successor), the Company had approximately $3,600.6 million of NOL carryforwards in certain international jurisdictions measured at the applicable statutory rates, of which $1,532.4 million have no expiration and the remaining $2,068.2 million will expire in future years through 2043. As of December 30, 2022 (Successor), the Company had $43.5 million of domestic NOL carryforwards measured at the applicable statutory rates, which have no expiration date.

As of December 30, 2022 (Successor), the Company had $8.7 million of capital loss carryforwards in certain international jurisdictions measured at the applicable statutory rates, which will expire in 2027. As of December 30, 2022 (Successor), the Company had approximately $969.5 million of domestic capital loss carryforwards measured at the applicable statutory rates, which have no expiration date.

As of December 30, 2022 (Successor), the Company had $1.9 million of tax credits available to reduce future income taxes payable, in international jurisdictions, which will expire in future years through 2043.

As of December 30, 2022 (Successor), the Company's taxable financial reporting basis in subsidiaries exceeded its corresponding tax basis by $3.1 million. Such excess amount is indefinitely reinvested and it is not practicable to determine the associated potential tax liability due to the complexity of the Company's legal entity structure as well as the timing, extent, and nature of any hypothetical realization.