Income Taxes

9 Months Ended

Sep. 26, 2025

Income Tax Disclosure [Abstract]

Income Taxes

6. Income Taxes

On July 4, 2025, the U.S. government enacted tax legislation known as the One Big Beautiful Bill Act (the “OBBBA”). The OBBBA makes broad and complex changes to the U.S. tax code. The OBBBA federal provisions include, but are not limited to, (1) bonus depreciation that will allow for full expensing of qualifying property acquired and placed in service after January 19, 2025, (2) permanent add back of interest, depreciation, amortization and depletion in computing the 30% limitation under Section 163(j) for taxable years beginning after December 31, 2024, and (3) permanent expensing of domestic research and development expenditures for taxable years beginning after December 31, 2024. The OBBBA also modifies several international provisions for taxable years beginning after December 31, 2025, including, but not limited to (1) reduced deduction of 40% for the global intangible low-taxed income regime, now referred to as Net CFC Tested Income, (2) reduced deduction of 33.34% for the foreign-derived intangible income regime, now called Foreign-Derived Deduction Eligible Income, and (3) permanent base erosion and anti-abuse tax rate of 10.5%.

The Company analyzed the OBBBA provisions and determined that the impact to income tax expense was not material for the three and nine months ending September 26, 2025, and does not expect it to be material for the year ended December 31, 2025.

The Company recognized an income tax benefit of $35.9 million and $21.3 million on losses from continuing operations before income taxes of $327.0 million and $338.0 million for the three and nine months ended September 26, 2025, respectively. This resulted in an effective tax rate of 11.0% and 6.3%, respectively. The effective tax rate differs from the Irish statutory tax rate of 12.5% primarily due to the mix of pretax earnings in various jurisdictions, remaining effects of adoption of fresh-start accounting as a result of the Company’s emergence from the 2023 Chapter 11 proceedings and Irish examinership proceedings (together, the “2023 Bankruptcy Proceedings”), effects of the Business Combination, impact of valuation allowances on current year activity, and non-deductible costs associated with employee compensation and combination, integration, and other related expenses for both periods.

The Company recognized an income tax expense of $7.2 million and $20.4 million on losses from continuing operations before income taxes of $19.0 million and $114.8 million for the three and nine months ended September 27, 2024, respectively. This resulted in an effective tax rate of negative 37.9% and negative 17.8%, respectively. The effective tax rate differs from the Irish statutory tax rate of 12.5% primarily due to the impact of valuation allowances recorded for current year interest limitations, the mix of pretax earnings in various jurisdictions, and remaining effects of adoption of fresh-start accounting as a result of emergence from the 2023 Bankruptcy Proceedings for both periods.

During the nine months ended September 26, 2025 and September 27, 2024, net cash payments for income taxes were $10.3 million and $4.4 million, respectively, related to operational activity.

On December 20, 2021, the Organization for Economic Co-operation and Development released the Global Anti-Base Erosion 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. A number of jurisdictions have transposed the directive into national legislation with the rules applicable for fiscal years beginning on or after December 31, 2023, with the exception of the UTPR which is applicable for fiscal years beginning on or after December 31, 2024. For the fiscal year beginning December 28, 2024, the Company was in scope of the enacted or substantively enacted legislation and an assessment of the potential exposure to Pillar Two income taxes was performed using forecasted financial information for the fiscal year ended December 31, 2025. Based on the assessment, certain transitional safe harbor relief applied for most jurisdictions, and where the transitional safe harbor relief did not apply, the impact to income tax expense was not material.

The Company's unrecognized tax benefits, excluding interest, totaled $34.2 million and $31.1 million as of September 26, 2025 and December 27, 2024, respectively. It is reasonably possible that within the next twelve months the unrecognized tax benefits could decrease by up to $5.0 million and the amount of related interest and penalties could decrease by up to $4.1 million as a result of the expiration of a statute of limitations.

The Business Combination resulted in a preliminary deferred tax asset increase of $144.4 million, mainly attributable to acquired Endo U.S. deferred tax assets, and a deferred tax liability increase of $139.4 million, mainly attributable to inventory asset step-up in Ireland. Significant components of the net deferred tax asset increase of $5.0 million include $30.0 million of deferred tax assets associated with tax loss and credit carryforwards, $26.0 million of deferred tax assets associated with property, plant, and equipment, $20.8 million of deferred tax assets associated with intangibles, $19.8 million of deferred tax assets associated with fair value debt adjustments, $16.6 million of deferred tax assets associated with interest carryforwards, and $65.1 million of net deferred tax assets primarily associated with accrued expenses, partially offset by $100.3 million of deferred tax liabilities associated with inventory step-up, and $73.0 million of valuation allowances on deferred tax assets. In addition, the Business Combination resulted in a preliminary increase of $21.3 million related to prepaid expenses and other current assets, an increase of $8.0 million related to accrued and other current liabilities, and an increase of $4.4 million related to other income tax liabilities.