Discontinued Operations and Disposal Groups

9 Months Ended

Sep. 27, 2024

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure

3. Disposition and Held for Sale

On August 3, 2024, the Company entered into a Purchase and Sale Agreement for the Company’s Therakos business for a base purchase price of $925.0 million. The base purchase price is subject to customary adjustments, which will be paid in cash. Subject to satisfaction or waiver of the closing conditions, the Company expects the transaction to be completed in the fourth quarter of 2024. The Company is required to use net proceeds from the transaction to prepay or redeem the term loans and notes, which are further described in Note 11. Such mandatory prepayment or redemption requires the Company to pay a makewhole premium with the prepaid or redeemed debt, the amount of which will be based on the final net proceeds from the transaction.

Since management is authorized to sell and believes it is probable that the sale will occur within a year, the Company determined that the Therakos business met the criteria to be classified as held for sale as of August 3, 2024. However, the Therakos business, the results of which are reported under the Specialty Brands segment, did not qualify as discontinued operations as it did not represent a strategic shift that will have a major effect on the Company’s operations and financial results. As a result, the related assets and liabilities were included in the separate held for sale line items of the asset and liability sections of the unaudited condensed consolidated balance sheet as of September 27, 2024 (Successor). The Company determined that the fair value of Therakos, using a market based approach, was greater than its carrying value and, accordingly, determined that the carrying value was appropriately recorded at cost and no write down was required.

The following table summarizes the assets and liabilities of Therakos that are classified as held for sale on the unaudited condensed consolidated balance sheet as of September 27, 2024 (Successor). As of December 29, 2023 (Successor), the Company had no assets or liabilities related to divestiture activities that met the classification of held for sale.

	Successor
	September 27, 2024
Carrying amounts of major classes of assets
Cash and cash equivalents	$	3.0
Accounts receivable	9.8
Inventories	32.2
Prepaid expenses and other current assets	4.3
Current assets held for sale	49.3
Property, plant and equipment, net	2.2
Intangibles assets, net	108.7
Other non-current assets	4.4
Total assets held for sale	$	164.6
Carrying amounts of major classes of liabilities
Accounts payable	$	9.2
Accrued payroll and payroll-related costs	4.0
Other current liabilities	10.9
Current liabilities held for sale	24.1
Pension and postretirement benefits	1.6
Other non-current liabilities	1.6
Total liabilities held for sale	$	27.3

Consistent with the Company’s calculation of reportable segment operating income, management excludes corporate expenses and certain amounts that management considers to be non-recurring or non-operational, including, but not limited to, depreciation and amortization, share-based compensation, net restructuring charges, non-restructuring impairment charges and liabilities management and separation costs. Refer to Note 15 for additional information on the Company’s segments.

The following tables summarize (loss) income from operations before income taxes for the Therakos business:

	Successor		Predecessor
	Three Months Ended September 27, 2024		Three Months Ended September 29, 2023
(Loss) income from operations before income taxes	$	(2.2)	$	31.6

	Successor		Predecessor
	Nine Months Ended September 27, 2024		Nine Months Ended September 29, 2023
(Loss) income from operations before income taxes	$	(0.9)	$	52.8

Transaction Incentive Plan

On February 2, 2024, the Company’s Board of Directors (“Board”) adopted a Transaction Incentive Plan, which is intended to compensate designated Mallinckrodt executive officers and directors with bonus payments to be made upon the consummation of qualifying asset sale transactions (each, a “Qualifying Transaction”). On August 4, 2024, the Board amended and restated the Transaction Incentive Plan (“A&R TrIP”). Each bonus payment earned under the A&R TrIP will be generally delivered 50% in connection with closing of the applicable Qualifying Transaction and 50% on the earlier of (a) December 31, 2026 and (b) a Significant Asset Transaction, as defined in the A&R TrIP (“Final Payment Date”); provided, however that in the event that a Qualifying Transaction closes following a Significant Asset Transaction, 100% of the applicable bonus payment earned with respect to such Qualifying Transaction generally will be paid in connection with closing of such Qualifying Transaction.

Subject to the finalization of the purchase price, the Company currently expects to make payments to participants of approximately $13.6 million within 30 days upon closing of the Therakos divestiture. Similarly, the Company expects to make additional payments to participants of approximately $16.5 million by the Final Payment Date. The Company accrued $7.3 million within accrued payroll and payroll-related costs in the unaudited condensed consolidated balance sheet as of September 27, 2024 (Successor), while the corresponding expense was recorded primarily within SG&A on the unaudited condensed consolidated statements of operations during the three and nine months ended September 27, 2024 (Successor). There was no comparable expense accrued related to the A&R TrIP during the three and nine months ended September 29, 2023 (Predecessor).

Transition Services Agreement

In connection with the Therakos divestiture, the Company will enter into a transition services agreement (“TSA”) effective upon closing to provide certain business support services for up to 18 months after the closing date. These services include, but are not limited to, information technology, procurement, distribution, logistics and order to delivery, compliance, accounting, finance, and administrative activities. Revenue associated with the TSA will be recorded within other expense, net, and expenses associated with servicing the TSA will be recorded within their natural expense classification, respectively, on the unaudited condensed consolidated statements of operation. Since the TSA is not yet in effect, no revenue or expenses were recorded related to the TSA during three and nine months ended September 27, 2024 (Successor).

Disposal Groups, Including Discontinued Operations

The following table summarizes the assets and liabilities of Therakos that are classified as held for sale on the unaudited condensed consolidated balance sheet as of September 27, 2024 (Successor). As of December 29, 2023 (Successor), the Company had no assets or liabilities related to divestiture activities that met the classification of held for sale.

	Successor
	September 27, 2024
Carrying amounts of major classes of assets
Cash and cash equivalents	$	3.0
Accounts receivable	9.8
Inventories	32.2
Prepaid expenses and other current assets	4.3
Current assets held for sale	49.3
Property, plant and equipment, net	2.2
Intangibles assets, net	108.7
Other non-current assets	4.4
Total assets held for sale	$	164.6
Carrying amounts of major classes of liabilities
Accounts payable	$	9.2
Accrued payroll and payroll-related costs	4.0
Other current liabilities	10.9
Current liabilities held for sale	24.1
Pension and postretirement benefits	1.6
Other non-current liabilities	1.6
Total liabilities held for sale	$	27.3

Consistent with the Company’s calculation of reportable segment operating income, management excludes corporate expenses and certain amounts that management considers to be non-recurring or non-operational, including, but not limited to, depreciation and amortization, share-based compensation, net restructuring charges, non-restructuring impairment charges and liabilities management and separation costs. Refer to Note 15 for additional information on the Company’s segments.

The following tables summarize (loss) income from operations before income taxes for the Therakos business:

	Successor		Predecessor
	Three Months Ended September 27, 2024		Three Months Ended September 29, 2023
(Loss) income from operations before income taxes	$	(2.2)	$	31.6

	Successor		Predecessor
	Nine Months Ended September 27, 2024		Nine Months Ended September 29, 2023
(Loss) income from operations before income taxes	$	(0.9)	$	52.8