Income Taxes

12 Months Ended

Dec. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

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

	Successor		Predecessor
	Period from November 15, 2023 through December 29, 2023		Period from December 31, 2022 through November 14, 2023		Period from June 17, 2022 through December 30, 2022		Period from January 1, 2022 through June 16, 2022		Year Ended December 31, 2021
Domestic	$	(46.1)	$	(3,628.8)	$	(359.4)	$	(2,883.3)	$	(512.2)
International	(0.1)		1,719.7		(290.9)		2,072.0		(317.6)
Total	$	(46.2)	$	(1,909.1)	$	(650.3)	$	(811.3)	$	(829.8)

(1) Domestic reflects Ireland.

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

	Successor		Predecessor
	Period from November 15, 2023 through December 29, 2023		Period from December 31, 2022 through November 14, 2023		Period from June 17, 2022 through December 30, 2022		Period from January 1, 2022 through June 16, 2022		Year Ended December 31, 2021
Current:
Domestic	$	(0.8)	$	36.6	$	(32.8)	$	33.7	$	(33.7)
International	(0.6)		4.7		5.7		(57.6)		(12.7)
Current income tax (benefit) provision	(1.4)		41.3		(27.1)		(23.9)		(46.4)
Deferred:
Domestic	(6.1)		(300.6)		(44.6)		(82.3)		(59.5)
International	(0.5)		(18.5)		19.7		(391.1)		(0.4)
Deferred income tax (benefit) provision	(6.6)		(319.1)		(24.9)		(473.4)		(59.9)
Total	$	(8.0)	$	(277.8)	$	(52.0)	$	(497.3)	$	(106.3)

(1) Domestic reflects Ireland.

The domestic current income tax provision reflects a tax benefit of zero, $2.9 million, $7.9 million, $4.1 million and $2.2 million from using NOL carryforwards for the period from November 15, 2023 through December 29, 2023 (Successor), the period from December 31, 2022 through November 14, 2023 (Predecessor), the period from June 17, 2022 through December 30, 2022 (Predecessor), the period from January 1, 2022 through June 16, 2022 (Predecessor) and fiscal 2021 (Predecessor), respectively. The international current income tax provision reflects a tax benefit of $6.9 million, $259.6 million, $61.0 million, $0.1 million and $1.2 million from using NOL carryforwards for the period from November 15, 2023 through December 29, 2023 (Successor), the period from December 31, 2022 through November 14, 2023 (Predecessor), the period from June 17, 2022 through December 30, 2022 (Predecessor), the period from January 1, 2022 through June 16, 2022 (Predecessor) and fiscal 2021 (Predecessor), respectively.

During the period from November 15, 2023 through December 29, 2023 (Successor) and the period from December 31, 2022 through November 14, 2023 (Predecessor), net cash payments and net cash refunds for income taxes were $0.3 million and $128.0 million, respectively. Included within the net cash refunds of $128.0 million were refunds of $141.6 million received as a result of the provisions in the Coronavirus Aid, Relief and Economic Security ("CARES") Act. During the period from June 17, 2022 through December 30, 2022 (Predecessor) 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, of which $178.8 million was received as a result of the provisions in the CARES Act.

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 November 15, 2023 through December 29, 2023		Period from December 31, 2022 through November 14, 2023		Period from June 17, 2022 through December 30, 2022		Period from January 1, 2022 through June 16, 2022		Year Ended December 31, 2021
Benefit for income taxes at domestic statutory income tax rate (1)	$	(5.8)	$	(238.6)	$	(81.3)	$	(101.4)	$	(103.7)
Adjustments to reconcile to income tax provision:
Rate difference between domestic and international jurisdictions	(2.2)		56.6		(4.7)		226.5		(224.9)
Adjustments to accrued income tax liabilities and uncertain tax positions (2)	—		—		—		—		(9.7)
Credits, principally research and orphan drug	—		(1.9)		—		(0.9)		(4.7)
Permanently nondeductible and nontaxable items (3)	(0.2)		3.2		3.1		(1.7)		9.8
Emergence	—		(103.7)		—		(31.6)		—
Withholding tax on Swiss distribution	—		—		4.7		—		—
Legal entity reorganization (4)	—		(44.7)		—		—		—
Reorganization items, net	—		6.7		1.7		15.7		36.9
Other	0.1		0.6		(1.4)		(3.1)		0.3
Valuation allowances (5)	0.1		44.0		25.9		(600.8)		189.7
(Benefit) provision for income taxes	$	(8.0)	$	(277.8)	$	(52.0)	$	(497.3)	$	(106.3)

(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 items were primarily driven by the Opioid-Related Litigation Settlement loss.

(4)Associated unrecognized tax expense is netted within this line.

(5)The period from January 1, 2022 through June 16, 2022 (Predecessor) consists 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.

During the period from November 15, 2023 through December 29, 2023 (Successor), the rate difference between domestic and international jurisdictions was $2.2 million of tax benefit, which was primarily related to $3.7 million of tax benefit attributable to inventory step-up amortization expense and $0.2 million of tax benefit attributable to accretion expense associated with the Company's settlement obligation, offset by $0.3 million of tax expense attributable to amortization associated with the Company's debt and $1.4 million of tax expense predominately attributable to the pretax earnings in various jurisdictions.

During the period from December 31, 2022 through November 14, 2023 (Predecessor), the rate difference between domestic and international jurisdictions was $56.6 million of a tax expense, which was primarily related to $48.9 million of tax expense attributable to reorganization items, net, and $35.0 million of tax expense predominately related to pretax earnings in various jurisdictions, offset by $15.7 million of tax benefit related to liabilities management and separation costs and $11.6 million of tax benefit related to non-restructuring impairment charges.

During the period from June 17, 2022 through December 30, 2022 (Predecessor), the rate difference between domestic and international jurisdictions was $4.7 million of tax benefit, which 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.

During the period from January 1, 2022 through June 16, 2022 (Predecessor), the rate difference between domestic and international jurisdictions was $226.5 million of tax expense, which 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.

During fiscal year 2021 (Predecessor), the rate difference between domestic and international jurisdictions was $224.9 million of tax benefit, which was primarily related to $27.6 million of tax benefit attributable to reorganization items, net, $13.2 million of tax benefit attributable to non-restructuring impairment charges, $10.6 million of tax benefit attributable to the opioid-related litigation settlement loss, and $173.5 million of tax benefit predominately attributable to the pretax earnings in various jurisdictions.

During the period from December 31, 2022 through November 14, 2023 (Predecessor), the Company recognized a tax benefit of $103.7 million upon emergence from the 2023 Bankruptcy Proceedings. These impacts of emergence consist of a $242.8 million tax benefit related to the revaluation of net deferred tax assets as a result of fresh-start accounting, offset by $139.1 million of tax expense related to permanently nondeductible impacts on fair value adjustments.

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 the 2020 Bankruptcy Proceedings. 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.

As a result of the 2023 Plan and the 2020 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 each of the respective 2023 and 2020 Bankruptcy Proceedings resulted in a change in ownership for purposes of IRC Section 382, causing the remaining U.S. tax losses, credits, and certain built in losses ("BILs") to be limited under IRC Sections 382 and 383. The amount of our pre-ownership change U.S. NOLs and BILs that can be utilized generally cannot exceed an amount equal to the product of (a) the applicable federal long-term tax-exempt rate in effect on the date of the ownership change and (b) the value of our U.S. affiliate stock immediately prior to the implementation of each respective plan ("382 Annual Limitation"). Evaluating the income tax impacts of each respective plan involves the interpretation of complex tax law and regulations which can be inherently uncertain and subject to varied interpretations. The 382 Annual Limitation for periods following the 2023 Effective Date is expected to be significant enough to be able to utilize all of the pre-ownership change U.S. attributes that are benefited in the consolidated financial statements; however, the utilization is expected to occur over a period of greater than 20 years and is dependent on the Company's generation of future taxable income. 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 benefiting of the U.S. tax attributes required significant judgments made by management as to the expected amount and timing of the generation of future taxable income. With respect to non-U.S. deferred tax assets that have been recorded by the Company at emergence, the benefiting of the tax attributes is dependent on significant judgments made by management related to the generation of future taxable income. Based on current projections, the utilization is expected to occur over a period greater than 20 years. Refer to Note 4 for further information regarding the Company's income tax accounting policies.

On December 20, 2021, the OECD released the Global Anti-Base Erosion ("GloBE") Model Rules ("Pillar Two") providing a legislative framework for the Income Inclusion Rule and the Under-Taxed Payment Rule ("UTPR"). Pillar Two is designed to ensure that large multinational enterprise groups pay a minimum level of tax on the income arising in each of the jurisdictions where they operate, principally creating a 15% minimum global effective tax rate. On December 15, 2022, the E.U. member states unanimously adopted a directive implementing the Pillar Two global minimum tax rules. On December 20, 2022, the OECD released three guidance documents related to Pillar Two. These documents included guidance on safe harbors and penalty relief and consultation papers on the GloBE Information Return and Tax Certainty for the GloBE rules. A number of jurisdictions have transposed the directive into national legislation with the rules to be applicable for fiscal years beginning on or after December 31, 2023, with the exception of the UTPR which is to be applicable for fiscal years beginning on or after December 31, 2024. The Company's fiscal year end of December 29, 2023 will allow the Company to postpone the effective date of these law changes by one year. The Company is closely monitoring developments and is evaluating the impacts these new rules will have on its tax rate, including the eligibility to qualify for the safe harbor rules.

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

	Successor		Predecessor
	Period from November 15, 2023 through December 29, 2023		Period from December 31, 2022 through November 14, 2023		Period from June 17, 2022 through December 30, 2022		Period from January 1, 2022 through June 16, 2022		Year Ended December 31, 2021
Balance at beginning of period	$	33.3	$	24.8	$	24.8	$	333.5	$	349.0
Additions related to current year tax positions	—		8.5		—		—		—
Additions related to prior period tax positions	—		—		—		—		9.3
Reductions related to prior period tax positions	—		—		—		(306.1)		(2.8)
Settlements	—		—		—		(2.6)		(0.2)
Lapse of statutes of limitations	—		—		—		—		(21.8)
Balance at end of period	$	33.3	$	33.3	$	24.8	$	24.8	$	333.5

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

	Successor		Predecessor
	December 29, 2023		December 30, 2022
Deferred income tax asset	17.9		9.4
Other income tax liabilities	15.4		15.4
	$	33.3	$	24.8

Total unrecognized tax benefits ("UTB(s)") of $30.1 million as of both December 29, 2023 (Successor) and November 14, 2023 (Predecessor), and $24.8 million as of both December 30, 2022 (Predecessor) and June 16, 2022 (Predecessor), if favorably settled, would benefit the effective tax rate. Total UTBs of $77.0 million as of December 31, 2021 (Predecessor), 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), due to a lapse of statutes of limitations, $5.1 million of tax and interest on unrecognized tax benefits related to the Nuclear Imaging business were eliminated, and a benefit of $5.1 million was recorded in discontinued operations within the consolidated statement of operations.

The Company recorded zero accrued interest and penalties for the period November 15, 2023 through December 29, 2023 (Successor) and an increase to accrued interest and penalties of $1.4 million during the period December 31, 2022 through November 14, 2023 (Predecessor). Interest and penalties activity during the period from June 17, 2022 through December 30, 2022 (Predecessor), the period from January 1, 2022 through June 16, 2022 (Predecessor) and fiscal 2021 (Predecessor), was a net increase of $0.6 million, a net decrease of $16.7 million, and a net increase of $2.2 million, respectively. The total amount of accrued interest and penalties related to uncertain tax positions was $4.2 million and $2.8 million as of December 29, 2023 (Successor) and December 30, 2022 (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 year subject to examination for the U.S. federal and the U.S. state is 2015 and 2013, respectively. The earliest open year subject to examination in other jurisdictions, including Ireland, Japan, Luxembourg, Switzerland and the U.K. is 2014.

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 29, 2023		December 30, 2022
Accrued and other current liabilities	$	1.7	$	3.6
Other income tax liabilities	19.6		18.2
	$	21.3	$	21.8

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

	Successor	Predecessor
	December 29, 2023	December 30, 2022
Prepaid expenses and other current assets	11.5	179.5

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 29, 2023		December 30, 2022
Deferred tax assets:
Tax loss and credit carryforward	$	3,600.7	$	3,646.0
Capital tax loss carryforward and related assets	983.5		1,412.6
Intangible assets	571.5		278.4
Opioid-Related Litigation Settlement liability	—		111.7
Excess interest	95.1		84.0
Other	231.3		159.8
	5,482.1		5,692.5
Deferred tax liabilities:
Investment in partnership	(68.7)		(67.4)
Other	(28.6)		(157.0)
	(97.3)		(224.4)
Net deferred tax asset before valuation allowances	5,384.8		5,468.1
Valuation allowances	(4,583.8)		(4,992.9)
Net deferred tax asset (liability)	$	801.0	$	475.2

The net deferred tax asset before valuation allowances was $5,384.8 million as of December 29, 2023 (Successor), compared to $5,468.1 million as of December 30, 2022 (Predecessor). This decrease consists of $434.3 million of a decrease related to the expiration of capital tax loss related assets and $111.7 million of a decrease related to the Opioid-Related Litigation Settlement offset by $252.5 million of an increase related to fresh-start activity, $110.5 million of an increase predominately related to tax loss and other operational activity, and $99.7 million of an increase associated with amortization of intangible assets. The $252.5 million increase related to fresh-start activity consists of fair value adjustments related to intangible assets and other deferred tax liabilities.

The deferred tax asset valuation allowances were $4,583.8 million and $4,992.9 million as of December 29, 2023 (Successor) and December 30, 2022 (Predecessor), respectively. The valuation allowances as of both December 29, 2023 (Successor) and December 30, 2022 (Predecessor) relate 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.

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

	Successor		Predecessor
	December 29, 2023		December 30, 2022
Deferred income tax asset	$	801.0	$	475.5
Deferred income tax liability	—		(0.3)
Net deferred tax asset (liability)	$	801.0	$	475.2

As of December 29, 2023 (Successor), the Company had approximately $3,552.1 million of NOL carryforwards in certain international jurisdictions measured at the applicable statutory rates, of which $1,371.9 million have no expiration and the remaining $2,180.2 million will expire in future years through 2039. As of December 29, 2023 (Successor), the Company had $46.9 million of domestic NOL carryforwards measured at the applicable statutory rates, which have no expiration date.

As of December 29, 2023 (Successor), the Company had $13.9 million of capital loss carryforwards in certain international jurisdictions measured at the applicable statutory rates, which will expire in 2028. As of December 29, 2023 (Successor), the Company had approximately $969.6 million of domestic capital loss carryforwards measured at the applicable statutory rates, which have no expiration date.

As of December 29, 2023 (Successor), the Company had $1.7 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 29, 2023 (Successor), the Company's taxable financial reporting basis in subsidiaries exceeded its corresponding tax basis by $3.4 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.