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•	Specialty Brands includes innovative specialty pharmaceutical brands; and

•	Specialty Generics includes niche specialty generic drugs and active pharmaceutical ingredients ("API(s)").

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Acthar® Gel (repository corticotropin injection) ("Acthar Gel") is an injectable drug approved by the U.S. Food and Drug Administration ("FDA") for use in 19 indications. The product currently generates substantially all of its net sales from 11 of the on-label indications, including adjunctive therapy for short-term administration for an acute episode or exacerbation in rheumatoid arthritis ("RA"), including juvenile RA; monotherapy for the treatment of infantile spasms in infants and children under 2 years of age; treatment during an exacerbation or as maintenance therapy in selected cases of systemic lupus erythematosus; treatment of acute exacerbations of multiple sclerosis ("MS") in adults; including a diuresis or a remission of proteinuria in nephrotic syndrome ("NS") without uremia of the idiopathic type or that due to lupus; treatment during an exacerbation or as maintenance therapy in selected cases of systemic dermatomyositis (polymyositis); treatment of symptomatic sarcoidosis; and treatment of severe acute and chronic allergic and inflammatory processes involving the eye and its adnexa including keratitis and uveitis; add-on medicine for the short-term administration (to tide patients over an acute episode or exacerbation) in psoriatic arthritis (PsA); and ankylosing spondylitis. We may initiate commercial efforts for other approved indications where there is high unmet medical need. The currently approved indications of Acthar Gel are not subject to patent or other exclusivity.

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INOmax® (nitric oxide) gas, for inhalation ("INOmax") is a vasodilator that, in conjunction with ventilatory support and other appropriate agents, is indicated to improve oxygenation and reduce the need for extracorporeal membrane oxygenation in term and near-term (>34 weeks) neonates with hypoxic respiratory failure ("HRF") associated with clinical or echocardiographic evidence of pulmonary hypertension. INOmax received approval in Australia for the treatment of perioperative pulmonary hypertension in adults in conjunction with cardiovascular surgery. Additionally, our Phase 4 registry assessing INOmax for treatment of pulmonary hypertension in premature (27 to 34 weeks) and term and near-term neonates showed positive results during the planned interim analysis with 86% of the 31 premature and 56 term and near-term patients showing a 25% or greater improvement in oxygenation index from baseline, or surrogate oxygenation index for patients who are not ventilated, during the treatment.

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Ofirmev® (acetaminophen) injection ("Ofirmev") is a proprietary intravenous formulation of acetaminophen indicated for the management of mild to moderate pain, the management of moderate to severe pain with adjunctive opioid analgesics and the reduction of fever. This product is marketed to hospitals and ambulatory surgical centers and provides us with an expanded presence in these channels. Ofirmev is protected by two patents listed in the Orange Book: Approved Drug Products with Therapeutic Equivalence ("the Orange Book"), one of which expired in August 2017 and the other will expire in June 2021. Settlement agreements have been reached in association with certain challenges to these patents, which allow for generic competition to Ofirmev in December 2020, or earlier under certain circumstances.

•	Therakos® photopheresis ("Therakos") is focused on providing innovative immunotherapy treatment platforms that enhance the ability of a patient's immune system to fight disease. Therakos is the global leader in autologous

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Amitiza is a leading global product in the branded constipation market. Amitiza is approved by the FDA for treatment of chronic idiopathic constipation in adults, irritable bowel syndrome with constipation in women 18 years of age and older, and opioid-induced constipation in adult patients with chronic, non-cancer pain, including patients with chronic pain related to prior cancer or its treatment who do not require frequent opioid dosage escalation. Amitiza is a chloride channel activator which increases fluid secretion and motility of the intestine, facilitating passage of stool. Roughly 40 million patients in the U.S. suffer from some form of chronic constipation. Of the branded products currently marketed, only Amitiza is approved for three constipation indications in the U.S.

•	Pipeline products - We have multiple products in various stages of development, which we believe will provide long-term organic growth and diversification. For a detailed description of the most significant development products in our pipeline, refer to the Research and Development ("R&D") section in this Item 1. Business.

•	hydrocodone (API) and hydrocodone-containing tablets;

•	oxycodone (API) and oxycodone-containing tablets;

•	acetaminophen (API) products; and

•	other controlled substances.

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Terlipressin is being investigated for the treatment of hepatorenal syndrome ("HRS") type 1, an acute, rare and life-threatening condition requiring hospitalization, with no currently approved therapy in the U.S. or Canada. During fiscal 2019 we completed enrollment for the Phase 3 clinical study to evaluate the efficacy and safety of terlipressin (for injection) in subjects with HRS type 1, and announced positive top line results. The study met its primary endpoint of verified HRS type 1 reversal, as well as the statistical value requirements outlined in the FDA completed response letter. This Phase 3 clinical study was conducted under an FDA Special Protocol Assessment ("SPA"). We expect to submit the new drug application ("NDA") filing to the FDA in the first half of 2020.

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StrataGraft regenerative skin tissue is an investigational product in Phase 3 development for treatment of severe, deep partial thickness burns and Phase 2 development for treatment of severe, full thickness burns. In 2012, the FDA granted StrataGraft orphan product status, conferring seven years exclusivity to be applied upon approval of the drug. The product is being developed as a biologic to be filed under a biologic license application that would confer regulatory protection until 2032. In June 2017, we enrolled the first patient in our Phase 3 clinical study to evaluate the efficacy and safety of StrataGraft regenerative skin tissue in the promotion of autologous skin regeneration of complex skin defects due to thermal burns that contain intact dermal elements. StrataGraft is among the first products to be designated as a Regenerative Medicine Advanced Therapy ("RMAT") by the FDA under the provisions of the 21st Century Cures Act. The RMAT designation allows for earlier and increased interactions with the FDA, including discussions of whether priority review and/or accelerated approval would be appropriate based on surrogate or intermediate endpoints that would be reasonably likely to predict long-term clinical benefit; or reliance upon data obtained from a meaningful number of sites. During fiscal 2019, we completed full enrollment for the Phase 3 clinical study and met both primary endpoints as well as the secondary end point evaluating the safety and efficacy of a single application of StrataGraft in the treatment of severe deep partial thickness burns. We expect to submit a biologics license application ("BLA") filing to the FDA in the first half of 2020.

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MNK-6105 (IV) and MNK-6106 (oral), an ammonia scavenger, is being studied for treatment of hepatic encephalopathy ("HE"), a neuropsychiatric syndrome associated with hyperammonemia, a complication of acute or chronic liver disease. If approved, MNK-6105 and MNK-6106 are expected to be effective therapy formulations that rapidly eliminate ammonia in the bloodstream, excreting it through the kidneys, a more effective and less burdensome method of addressing HE than existing treatment options. The intravenous ("IV") formulation of MNK-6105, if approved, is expected to provide rapid reduction in symptoms of acute HE, and potentially reduce hospitalization stay. MNK-6106's oral formulation, if approved, is expected to provide post-discharge continuity of care for the HE patient, reducing the risk of recurrent HE episodes and rehospitalization. It is also anticipated that patients may transition from the IV to the oral formulation prior to discharge from the hospital setting. The FDA and European Medicines Agency ("EMA") have granted orphan drug designation to MNK-6105/6106. The FDA also granted fast track designation to MNK-6105/6106. We are currently working with the FDA,

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SLN500 is a ribonucleic acid ("RNA") technology therapy currently in preclinical development designed to inhibit the complement cascade, a group of proteins that are involved in the immune system and play a role in the development of inflammation. These proteins are known to contribute to the pathogenesis of many diseases, including autoimmune diseases. In July 2019, we announced a collaboration with Silence Therapeutics plc to develop and commercialize SLN500, and an option for up to two additional assets with different complement protein targets.

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•	Completion of formulation and laboratory testing in accordance with GLP that fully characterizes the drug product from a pre-clinical perspective and provides preliminary evidence that the drug product is safe to test in human beings;

•	Filing an Investigational New Drug Application with the FDA will permit the conduct of clinical trials (testing in human beings under adequate and well-controlled conditions);

•	Designing and conducting clinical trials to show the safety and efficacy of the drug product in accordance with GCP;

•	Submitting the NDA for FDA review, which provides a complete characterization of the drug product;

•	Satisfactory completion of FDA pre-approval inspections regarding the conduct of the clinical trials and the manufacturing processes at the designated facility in accordance with cGMP;

•	If applicable, satisfactory completion of an FDA Advisory Committee meeting in which the FDA requests help from outside experts in evaluating the NDA;

•	Final FDA approval of the full prescribing information, labeling and packaging of the drug product; and

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•	Ongoing monitoring and reporting of adverse events related to the drug product, implementation of a REMS program, if applicable, and conduct of any required Phase 4 studies.

•	Phase 1 trials are typically small (less than 100 healthy volunteers) and are designed to determine the toxicity and maximum safe dose of the drug product.

•	Phase 2 trials usually involve 100 to 300 participants and are designed to determine whether the drug product produces any clinically significant effects in patients with the intended disease or condition. If the results of these trials show promise, then a larger Phase 3 trial may be conducted.

•	Phase 3 trials are often multi-institution studies that involve a large number of participants and are designed to show efficacy. Phase 3 (and some Phase 2) trials are designed to be pivotal, or confirmatory trials. The goal of a pivotal trial is to establish the safety and efficacy of a drug product by eliminating biases and increasing statistical power.

•	In some cases, the FDA requires Phase 4 trials, which are usually performed after the NDA has been approved. Such post-marketing surveillance is intended to obtain more information about the risks of harm, benefits and optimal use of the drug product by observing the results of the drug product in a large number of patients.

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•	developing, testing and manufacturing products in compliance with regulatory and quality standards in a timely manner;

•	our ability to successfully engage with the FDA or other regulatory authorities as part of the approval process and to receive requisite regulatory approvals for such products in a timely manner, or at all;

•	the availability, on commercially reasonable terms, of raw materials, including API and other key ingredients;

•	developing, commercializing and launching a new product is time-consuming, costly and subject to numerous factors, including legal actions brought by our competitors, that may delay or prevent the development, commercialization and/or launch of new products;

•	unanticipated costs;

•	payment of prescription drug user fees to the FDA to defray the costs of review and approval of marketing applications for branded and generic drugs;

•	experiencing delays as a result of limited resources at the FDA or other regulatory authorities;

•	changing review and approval policies and standards at the FDA or other regulatory authorities;

•	potential delays in the commercialization of generic products by up to 30 months resulting from the listing of patents with the FDA;

•	effective execution of the product launches in a manner that is consistent with expected timelines and anticipated costs; and

•	identifying appropriate partners for distribution of our products, including any future over-the-counter commercialization opportunities, and negotiating contractual arrangements in a timely manner with commercially reasonable terms.

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•	the generation, storage, use and transportation of hazardous materials;

•	emissions or discharges of substances into the environment;

•	investigation and remediation of hazardous substances or materials at various sites;

•	chemical constituents in products and end-of-life disposal, mandatory recycling and take-back programs; and

•	the health and safety of our employees.

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•	our ability to increase market demand for products through our own marketing and support of our sales force;

•	our ability to implement and maintain pricing and continue to maintain or increase market demand for these products;

•	our ability to achieve hospital and other third-party payer formulary acceptance, and maintain reimbursement levels by third-party payers;

•	our ability to maintain confidentiality of the proprietary know-how and trade secrets relating to Acthar Gel;

•	our ability to maintain and defend the patent protection and regulatory exclusivity of Ofirmev and INOmax;

•	our ability to continue to procure raw materials or finished goods, as applicable, for Acthar Gel, Ofirmev, INOmax and Therakos from internal and third-party manufacturers in sufficient quantities and at acceptable quality and pricing levels in order to meet commercial demand;

•	our ability to maintain fees and discounts payable to the wholesalers and distributors and GPOs, at commercially reasonable levels;

•	whether the DOJ or other third parties seek to challenge and are successful in challenging patents or patent-related settlement agreements or our sales and marketing practices;

•	warnings or limitations that may be required to be added to FDA-approved labeling; and

•	the occurrence of adverse side effects related to or emergence of new information related to the therapeutic efficacy of these products, and any resulting product liability claims or product recalls.

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•	potentially longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain non-U.S. legal systems;

•	potential inability to sell products into certain countries given the delay of foreign governments in responding to changes in our U.S. business licensing;

•	political and economic instability, including the impact of U.K.'s exit from the E.U. (commonly known as Brexit) and the related uncertainties;

•	the unpredictability of U.S. trade policy, including Section 301 tariffs and U.S. trade relations with other countries, that may increase raw material cost or impact our ability to obtain the raw materials we need to manufacture our products and impact our ability to sell our products outside of the U.S.;

•	potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and trade barriers;

•	difficulties and costs of staffing and managing our non-U.S. operations;

•	exposure to global economic conditions;

•	exposure to potentially unfavorable movements in foreign currency exchange rates associated with international net sales and operating expense and intercompany debt financings; and

•	potential negative impact of public health epidemics on employees, our supply chain and the global economy, such as the coronavirus currently impacting China and elsewhere.

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•	making it more difficult for us to satisfy our obligations with respect to our debt;

•	limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other corporate requirements;

•	requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

•	limiting our ability to refinance our indebtedness on terms acceptable to us or at all;

•	placing us at a competitive disadvantage to other less leveraged competitors;

•	making us more vulnerable to economic downturns and limiting our ability to withstand competitive pressures;

•	limiting our flexibility in planning for and reacting to changes in the industry in which we compete; and

•	increasing our costs of borrowing.

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•	incur, assume or guarantee additional indebtedness;

•	declare or pay dividends, make other distributions with respect to equity interests, or purchase or otherwise acquire or retire equity interests;

•	make any principal payment on, or redeem or repurchase, subordinated debt;

•	make loans, advances or other investments;

•	sell or otherwise dispose of assets, including capital stock of subsidiaries;

•	incur liens;

•	enter into transactions with affiliates;

•	enter into sale and lease-back transactions; and

•	consolidate or merge with or into, or sell all or substantially all of our assets to, another person or entity.

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•	limited in how we conduct our business;

•	unable to raise additional debt or equity financing to operate during general economic or business downturns; or

•	unable to compete effectively, execute our growth strategy or take advantage of new business opportunities.

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•	market reaction to developments related to current litigation involving our Specialty Generics business;

•	actual or anticipated fluctuations in our results of operations;

•	changes in earnings estimated by securities analysts or our ability to meet those estimates;

•	perceived impacts to our results from acquisitions of products, license rights or businesses;

•	the operating and share price performance of comparable companies;

•	actual or anticipated sales of our ordinary shares;

•	allegations by third parties (even if unsubstantiated) regarding our products or business practices;

•	publicity and media reports potentially negative about the company or its products/reputation;

•	new regulations or legislation in the U.S. relating to the development, sale or pricing of pharmaceuticals or medical devices;

•	political pressure to reduce the pricing of pharmaceuticals;

•	continued consolidation in pharmacy networks and among insurers that may further increase their competitive market power;

•	changes to the regulatory and legal environment in which we operate; and

•	U.S. and worldwide economic conditions.

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•	provisions of our articles of association which allow our Board of Directors to adopt a shareholder rights plan (commonly known as a "poison pill") upon such terms and conditions as the Board of Directors deems expedient and in the best interests of our company;

•	a provision of our articles of association which generally prohibits us from engaging in a business combination with an interested shareholder for a period of three years following the date the person became an interested shareholder, subject to certain exceptions;

•	rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;

•	the right of our Board of Directors to issue preferred shares without shareholder approval in certain circumstances, subject to applicable law; and

•	the ability of our Board of Directors to fill vacancies on our Board of Directors in certain circumstances.

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A.	Lawsuits Filed by State and Territory Attorneys General

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B.	Lawsuits Filed by Cities, Counties, and Other Municipalities

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C.	Lawsuits Filed by District Attorneys

D.	Lawsuits Filed by Hospitals and Health Systems

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E.	Lawsuits Filed by Individuals

F.	Lawsuits Filed by Third-Party Payers

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(1)

We report our results based on a "52-53 week" year ending on the last Friday of December. Fiscal 2016 included 53 weeks. All other fiscal years presented include 52 weeks. Refer to the Consolidated Financial Statements included within Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for detail on trends in financial condition and results of operations for fiscal 2019, 2018 and 2017.

(2)

On May 17, 2016, the Board of Directors of the Company approved a change in the Company's fiscal year end to the last Friday in December from the last Friday in September. The change in fiscal year became effective for the Company's 2017 fiscal year, which began on December 31, 2016 and ended on December 29, 2017. As a result of the change in fiscal year, the Company filed a Transition Report on Form 10-Q on February 7, 2017, covering the period from October 1, 2016 through December 30, 2016 ("the three months ended December 30, 2016"). Fiscal 2016 and 2015 covers the period from September 26, 2015 through September 30, 2016 and from September 27, 2014 through September 25, 2015, respectively.

(3)

Fiscal 2019 includes the opioid-related litigation settlement charge of $1,643.4 million. Fiscal 2018 includes non-restructuring impairment charges of $3,893.1 million for goodwill and an IPR&D asset. For further information, refer to Notes 13 and 24 of the Notes to the Consolidated Financial Statements included within Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

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•	Specialty Brands includes innovative specialty pharmaceutical brands; and

•	Specialty Generics includes niche specialty generic drugs and API(s).

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(1)	Includes $10.0 million and $118.8 million of inventory fair-value step up expense, primarily related to Amitiza during fiscal 2019 and 2018, respectively.

(2)	Includes restructuring-related accelerated depreciation.

(3)	Represents R&D expense incurred related to an upfront payment made to Silence in connection with the license and collaboration agreement entered into in July 2019.

(4)	For further information, refer to Note 24 of the Notes to the Consolidated Financial Statements included within Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

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(1)	Includes $118.8 million of inventory fair-value step up expense, primarily related to Amitiza during fiscal 2018.

(2)	Includes restructuring-related accelerated depreciation.

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(1)	Interest on long-term debt obligations are projected for future periods using interest rates in effect as of December 27, 2019. Certain of these projected interest payments may differ in the future based on changes in market interest rates.

(2)	Refer to Note 12 of the Notes to Consolidated Financial Statements included within Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further information.

(3)	Purchase obligations consist of commitments for purchases of goods and services made in the normal course of business to meet operational and capital requirements.

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1.	the right to invoice the customer in an amount that directly corresponds with the value to the customer of our performance to date, for which the practical expedient to recognize in proportion to the amount it has the right to invoice has been applied, or

2.	the remaining goods and services to which the customer is entitled is diminished upon consumption.

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•	We tested the effectiveness of management’s controls over income taxes, including those over the legal entity reorganization and the interpretation of tax laws and regulations.

•	With the assistance of our tax specialists, we evaluated the income taxes associated with the legal entity reorganization by performing the following:

–	Obtaining management and third-party tax opinions or memoranda regarding the analysis of relevant tax laws and regulations and evaluating whether the analysis was consistent with our interpretation.

–	Evaluating the appropriateness of management’s conclusions with respect to reserves for uncertain tax positions associated with the legal entity reorganization.

–	Testing the underlying calculations and allocations supporting the tax expense and benefit recorded.

•	We tested the effectiveness of controls over the Litigation Settlement, which included review and approval of the accounting and related disclosures.

•	We requested and received written responses from the Company’s external legal counsel regarding opioid litigation and the Litigation Settlement.

•	We evaluated the Company’s conclusions regarding the recognition and measurement of the opioid-related litigation settlement by obtaining management’s documented accounting treatment and evaluating the accounting based on the terms of the Litigation Settlement and the applicable accounting principles generally accepted in the United States of America.

•	We evaluated the Company’s disclosures for consistency with our knowledge of the Litigation Settlement.

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Background

Mallinckrodt plc is a global business of multiple wholly owned subsidiaries (collectively, "Mallinckrodt" or "the Company") that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. Areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; analgesics and gastrointestinal products.

The Company operates in two reportable segments, which are further described below:

•	Specialty Brands includes innovative specialty pharmaceutical brands; and

•	Specialty Generics includes niche specialty generic drugs and active pharmaceutical ingredients "("API(s)").

The Company is incorporated in Ireland, with its principal executive offices located in the United Kingdom ("U.K."). The Company continues to be subject to United States ("U.S.") Securities and Exchange Commission ("SEC") reporting requirements and the applicable corporate governance rules of the New York Stock Exchange. 

Basis of Presentation

The consolidated financial statements have been prepared in U.S. dollars and in accordance with accounting principles generally accepted in the U.S. ("GAAP"). The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results may differ from those estimates. The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and entities in which they own or control more than 50.0% of the voting shares, or have the ability to control through similar rights. All intercompany balances and transactions have been eliminated in consolidation and all normal recurring adjustments necessary for a fair presentation have been included in the results reported.

The results of entities disposed of are included in the consolidated financial statements up to the date of disposal and, where appropriate, these operations have been reflected as discontinued operations. Divestitures of product lines not meeting the criteria for discontinued operations have been reflected in operating (loss) income.

During fiscal 2019, the Company experienced a change in its reportable segments, which primarily served to move the results related to Amitiza^® (lubiprostone) ("Amitiza") to the Specialty Brands segment from the Specialty Generics segment. All prior period segment information has been recast to reflect the realignment of the Company's reportable segments on a comparable basis.

Certain prior-period amounts on the consolidated financial statements have been reclassified to conform to current-period presentation.

Fiscal Year

The Company reports its results based on a "52-53 week" year ending on the last Friday of December. Fiscal 2019, 2018 and 2017 each consisted of 52 weeks. Unless otherwise indicated, fiscal 2019, 2018 and 2017 refer to the Company's fiscal years ended December 27, 2019, December 28, 2018 and December 29, 2017, respectively.

2.	Summary of Significant Accounting Policies

Revenue Recognition

Product Sales Revenue

The Company sells its products through independent channels, including direct to retail pharmacies, end user customers and through distributors who resell the products to retail pharmacies, institutions and end user customers, while certain products are sold and distributed to hospitals. The Company also enters into arrangements with indirect customers, such as health care providers and payers, wholesalers, government agencies, institutions, managed care organizations and group purchasing organizations to establish contract pricing for certain products that provide for government-mandated and/or privately-negotiated rebates, sales

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incentives, chargebacks, distribution service agreements fees, fees for services and administration fees and discounts with respect to the purchase of the Company's products.

Reserve for Variable Considerations

Product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. These reserves result from estimated chargebacks, rebates, product returns and other sales deductions that are offered within contracts between the Company and its customers, health care providers and payers relating to the sale of the Company's products. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as the Company's historical experience, estimated future trends, estimated customer inventory levels, current contracted sales terms with customers, level of utilization of the Company's products and other competitive factors. Overall, these reserves reflect the Company's best estimate of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained (reduced) and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. The Company adjusts reserves for chargebacks, rebates, product returns and other sales deductions to reflect differences between estimated and actual experience. Such adjustments impact the amount of net sales recognized in the period of adjustment.

Product sales are recognized when the customer obtains control of the Company's product. Control is transferred either at a point in time, generally upon delivery to the customer site, or in the case of certain of the Company's products, over the period in which the customer has access to the product and related services. Revenue recognized over time is based upon either consumption of the product or passage of time based upon the Company's determination of the measure that best aligns with how the obligation is satisfied. The Company's considerations of why such measures provide a faithful depiction of the transfer of its products are as follows:

•	For those contracts whereby revenue is recognized over time based upon consumption of the product, the Company either has:

1.	the right to invoice the customer in an amount that directly corresponds with the value to the customer of the Company's performance to date, for which the practical expedient to recognize in proportion to the amount it has the right to invoice has been applied, or

2.	the remaining goods and services to which the customer is entitled is diminished upon consumption.

•

For those contracts whereby revenue is recognized over time based upon the passage of time, the benefit that the customer receives from unlimited access to the Company's product does not vary, regardless of consumption. As a result, the Company's obligation diminishes with the passage of time; therefore, ratable recognition of the transaction price over the contract period is the measure that best aligns with how the obligation is satisfied.

Transaction price allocated to the remaining performance obligations

The majority of the Company's contracts have a term of less than one year; therefore, the related disclosure of the amount of transaction price allocated to the performance obligations that are unsatisfied at period end has been omitted.

Cost to obtain a contract

As the majority of the Company's contracts are short-term in nature, sales commissions are generally expensed when incurred as the amortization period would have been less than one year. These costs are recorded within selling, general and administrative expense ("SG&A") in the consolidated statements of operations. For contracts that extend beyond one year, the incremental expense recognition matches the recognition of related revenue.

Costs to fulfill a contract

The Company capitalizes the costs associated with the devices used in the Company's portfolio of drug-device combination products, which are used in satisfaction of future performance obligations. Capital expenditures for these devices represent cash outflows for the Company's cost to produce the asset, which is classified in property, plant and equipment, net on the consolidated balance sheets and expensed to cost of sales over the useful life of the equipment.

Product Royalty Revenues

The Company licenses certain rights to Amitiza to a third party in exchange for royalties on net sales of the product. The Company recognizes such royalty revenue as the related sales occur.

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Contract Balances

Accounts receivable are recorded when the right to consideration becomes unconditional. Payments received from customers are typically based upon payment terms of 30 days. The Company does not maintain contract asset balances aside from the accounts receivable balance as presented on the consolidated balance sheets as costs to obtain a contract are expensed when incurred as the amortization period would have been less than one year. These costs are recorded within SG&A on the consolidated statements of operations. Contract liabilities are recorded when cash payments are received in advance of the Company's performance, including amounts which are refundable.

Taxes collected from customers relating to product sales and remitted to governmental authorities are accounted for on a net basis. Accordingly, such taxes are excluded from both net sales and expenses.

Shipping and Handling Costs

Shipping costs, which are costs incurred to physically move product from the Company's premises to the customer's premises, are classified as SG&A. Handling costs, which are costs incurred to store, move and prepare product for shipment, are classified as cost of sales. Shipping costs included in SG&A expenses in continuing operations were as follows:

	Fiscal Year
	2019				2018				2017
Shipping costs	$	17.6			$	12.8			$	13.9

Research and Development

Internal research and development costs are expensed as incurred. Research and development ("R&D") expenses include salary and benefits, allocated overhead and occupancy costs, clinical trial and related clinical manufacturing costs, contract services, medical affairs and other costs.

From time to time, the Company has entered into licensing or collaborative agreements with third parties from time to time to develop a new drug candidate or intellectual property asset. These agreements may include R&D, marketing, promotion and selling activities to be performed by one or all parties involved. These collaborations generally include upfront, milestone and royalty or profit sharing payments contingent upon future events tied to the developmental and commercial success of the asset. In general, upfront and milestone payments made to third parties under these agreements are expensed as incurred up to the point of regulatory approval of the product. Milestone payments made to third parties upon regulatory approval are capitalized as an intangible asset and amortized to cost of sales over the estimated useful life of the related product.

Currency Translation

For the Company's non-U.S. subsidiaries that transact in a functional currency other than U.S. dollars, assets and liabilities are translated into U.S. dollars using fiscal year-end exchange rates. Revenues and expenses are translated at the average exchange rates in effect during the related month. The net effect of these translation adjustments is shown in the consolidated financial statements as a component of accumulated other comprehensive (loss) income ("AOCI"). From time to time, the Company has entered into derivative instruments to mitigate the exposure of movements in certain of these foreign currency transactions. Gains and losses resulting from foreign currency transactions are included in net (loss) income.

Cash and Cash Equivalents

The Company classifies cash on hand and deposits in banks, including commercial paper, money market accounts and other investments it may hold from time to time, with an original maturity to the Company of three months or less, as cash and cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are presented net of an allowance for doubtful accounts. The allowance for doubtful accounts reflects an estimate of losses inherent in the Company's accounts receivable portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other available evidence. Accounts receivable are written off when management determines they are uncollectible. Trade accounts receivable are also presented net of reserves related to chargebacks and rebates payable to customers with whom the Company has trade accounts receivable and the right of offset exists.

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Inventories

Inventories are recorded at the lower of cost or net realizable value, primarily using the first-in, first-out convention. The Company reduces the carrying value of inventories for those items that are potentially excess, obsolete or slow-moving based on changes in customer demand, technology developments or other economic factors.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. Major renewals and improvements are capitalized, while routine maintenance and repairs are expensed as incurred. Depreciation for property, plant and equipment, other than land and construction in process, is generally based upon the following estimated useful lives, using the straight-line method:

Buildings	10	to	45 years
Leasehold improvements	1	to	20 years
Capitalized software	1	to	10 years
Machinery and equipment	1	to	20 years

 The Company capitalizes certain computer software and development costs incurred in connection with developing or obtaining software for internal use.

Upon retirement or other disposal of property, plant and equipment, the cost and related amount of accumulated depreciation are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds is included in net income.

The Company assesses the recoverability of assets or asset groups using undiscounted cash flows whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. If an asset or asset group is found to be impaired, the amount recognized for impairment is equal to the difference between the carrying value of the asset or asset group and its fair value.

Leases

The Company assesses all contracts at inception to determine whether a lease exists. The Company leases office space, manufacturing and warehousing facilities, equipment and vehicles, which are generally operating leases. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately. The Company's lease agreements generally do not contain variable lease payments or any material residual value guarantees.

Lease assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term as of the commencement date. As the Company's leases do not generally provide an implicit rate, the Company utilized its incremental borrowing rate based on the information available at commencement date in determining the present value of future lease payments. The Company used the incremental borrowing rate as of December 29, 2018 for leases that commenced prior to that date. Most leases include one or more options to terminate or renew, with renewal terms that can extend the lease term from one to five years. The exercise of lease renewal options is at the Company's sole discretion. Termination and renewal options are included within the lease assets and liabilities only to the extent they are reasonably certain. Refer to Note 3 for further information regarding the adoption of the lease accounting standard in fiscal 2019.

Acquisitions

Amounts paid for acquisitions that meet the criteria for business combination accounting are allocated to the tangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The Company then allocates the purchase price in excess of net tangible assets acquired to identifiable intangible assets, including purchased R&D. The fair value of identifiable intangible assets is based on detailed valuations. The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill.

The Company's purchased R&D represents the estimated fair value as of the acquisition date of in-process projects that have not reached technological feasibility. The primary basis for determining technological feasibility of these projects is obtaining regulatory approval.

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The fair value of in-process research and development ("IPR&D") is determined using the discounted cash flow method. In determining the fair value of IPR&D, the Company considers, among other factors, appraisals, the stage of completion of the projects, the technological feasibility of the projects, whether the projects have an alternative future use and the estimated residual cash flows that could be generated from the various projects and technologies over their respective projected economic lives. The discount rate used includes a rate of return that accounts for the time value of money, as well as risk factors that reflect the economic risk that the cash flows projected may not be realized.

The fair value attributable to IPR&D projects at the time of acquisition is capitalized as an indefinite-lived intangible asset and tested annually for impairment until the project is completed or abandoned. Upon completion of the project, the indefinite-lived intangible asset is then accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life. If the project is abandoned, the indefinite-lived intangible asset is charged to expense.

Certain asset acquisitions or license agreements may not meet the criteria for a business combination. The Company accounts for these transactions as asset acquisitions and recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity. Any initial up-front payments incurred in connection with the acquisition or licensing of IPR&D product candidates that do not meet the definition of a business are treated as R&D expense.

Goodwill and Other Intangible Assets

During fiscal 2018, the Company's annual goodwill impairment analysis resulted in the recognition of a full goodwill impairment of $3,672.8 million related to the Specialty Brands reporting unit. As a result, the Company did not have a goodwill balance during fiscal 2019. Prior to this full impairment, the Company tested goodwill on the first day of the fourth quarter of each year for impairment or whenever events or changes in circumstances indicated that the carrying value may not be recoverable. Goodwill represents the excess of the purchase price of an acquired entity over the amounts assigned to assets and liabilities assumed in a business combination. The Company tests goodwill for impairment on the first day of the fourth quarter of each fiscal year, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The impairment test is comprised of comparing the carrying value of a reporting unit to its estimated fair value. The Company estimates the fair value of a reporting unit through internal analyses and valuation, utilizing an income approach (a level three measurement technique) based on the present value of future cash flows. The fair value of the Company's reporting units is reconciled to its share price and market capitalization as a corroborative step. If the carrying value of a reporting unit exceeds its fair value, the Company will recognize the excess of the carrying value over the fair value as a goodwill impairment loss.

Intangible assets acquired in a business combination are recorded at fair value, while intangible assets acquired in other transactions are recorded at cost. Intangible assets with finite useful lives are subsequently amortized, generally using the straight-line method, over the estimated useful lives of the assets. The estimated useful lives of the Company's intangible assets as of December 27, 2019 were the following:

Completed technology	8	to	25 years
License agreements			30 years
Trademarks	22	to	30 years

Amortization expense related to completed technology and certain other intangible assets is included in cost of sales, while amortization expense related to intangible assets that contribute to the Company's ability to sell, market and distribute products is included in SG&A.

When a triggering event occurs, the Company evaluates potential impairment of finite-lived intangible assets by first comparing undiscounted cash flows associated with the asset, or the asset group they are part of, to its carrying value. If the carrying value is greater than the undiscounted cash flows, the amount of potential impairment is measured by comparing the fair value of the assets, or asset group, with their carrying value. The fair value of the intangible asset, or asset group, is estimated using an income approach. If the fair value is less than the carrying value of the intangible asset, or asset group, the amount recognized for impairment is equal to the difference between the carrying value of the asset and the fair value of the asset. The Company assesses the remaining useful life and the recoverability of finite-lived intangible assets whenever events or circumstances indicate that the carrying value of an asset may not be recoverable. The Company annually tests the indefinite-lived intangible assets for impairment, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable by either a qualitative or income approach. The Company will compare the fair value of the assets with their carrying value and record an impairment when the carrying value exceeds the fair value.

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Contingencies

The Company is subject to various patent infringement claims, product liability matters, government investigations, environmental matters, employee disputes, contractual disputes and other commercial disputes, and other legal proceedings in the ordinary course of business as further discussed in Note 19. The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. The Company discounts environmental liabilities using a risk-free rate of return when the obligation is fixed or reasonably determinable. The impact of the discount in the consolidated balance sheets was not material in any period presented. Legal fees, other than those pertaining to environmental and asbestos matters, are expensed as incurred. Insurance recoveries related to potential claims are recognized up to the amount of the recorded liability when coverage is confirmed and the estimated recoveries are probable of payment. Assets and liabilities are not netted for financial statement presentation.

Share-Based Compensation

The Company recognizes the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. That cost is recognized over the period during which an employee is required to provide service in exchange for the award, the requisite service period (generally the vesting period).

Restructuring

The Company recognizes charges associated with the Company's Board of Directors approved restructuring programs designed to transform its business and improve its cost structure. Restructuring charges can include severance costs, infrastructure charges, distributor contract cancellations and other items. The Company accrues for costs when they are probable and reasonably estimable.

Income Taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been reflected in the consolidated financial statements. Deferred tax assets and liabilities are determined based on the differences between the book and tax bases of assets and liabilities and operating loss carryforwards, using tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to reduce net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax liabilities are also recorded for deferred tax obligations related to installment sale arrangements. The deferral of tax payments to the U.S. Internal Revenue Service ("IRS") are subject to interest, which is accrued and included within interest expense.

The Company determines whether it is more likely than not that a tax position will be sustained upon examination. The tax benefit of any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50.0% likely of being realized upon resolution of the uncertainty. To the extent a full benefit is not expected to be realized on the uncertain tax position, an income tax liability is established. Interest and penalties on income tax obligations, associated with uncertain tax positions, are included in the provision for income taxes.

The calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across the Company's global operations. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from current estimates of the tax liabilities. If the Company's estimate of tax liabilities proves to be less than the ultimate assessment, an additional charge to expense would result. If payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities may result in income tax benefits being recognized in the period when it is determined that the liabilities are no longer necessary. Refer to Note 8 for further information regarding the classification of such amounts in the consolidated balance sheets.

3.	Recently Issued Accounting Standards

Adopted

The Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," in February 2018. This ASU allows for a reclassification from AOCI to retained earnings for the stranded tax effects arising from the change in the reduction of the U.S. federal statutory income tax rate from 35.0% to 21.0%. The Company adopted this

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standard as of day 1 of fiscal 2019, which resulted in a reclassification between AOCI and retained deficit of $0.5 million and had no impact on the Company's results of operations or financial position.

The FASB issued ASU 2017-07, "Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post Retirement Benefit Cost," in March 2017. This update requires that the service cost component be disaggregated from the other components of net benefit cost. Service cost should be reported in the same line item or items as other compensation costs arising from services rendered by pertinent employees during the period. The other components of net benefit cost should be presented in the statement of operations separately from the service cost component and outside a subtotal of income from operations, if one is presented. The Company adopted this standard as of day 1 of fiscal 2018 which required retroactive application resulting in the reclassification of the following:

	Fiscal Year
	2017
Cost of sales	$	1.2
Selling, general and administrative expenses	71.2
Research and development expenses	0.4
Other income (expense), net	$	72.8

The adoption of this standard did not result in any material changes to the consolidated financial statements.

The FASB issued ASU 2016-02, "Leases," in February 2016. This ASU was issued to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset. The FASB subsequently issued additional ASUs to clarify the guidance of ASU 2016-02 ("Topic 842"), as amended. The Company adopted this standard as of day 1 of fiscal 2019 utilizing the modified transition approach expedient which allows an entity to elect not to recast its comparative periods in the period of adoption. In addition, the Company elected to use the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. The Company also elected the hindsight practical expedient to determine the lease term for existing leases. Adoption of the new standard resulted in the recording of additional lease assets and corresponding liabilities of $83.1 million and $99.7 million, respectively, as of December 29, 2018. Refer to Note 12 for further details on the Company's leases.

The FASB issued ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," in January 2016. This update addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. Under the new guidance, equity investments, other than equity method investments, are to be measured at fair value with changes in fair value recognized through net income. The Company adopted this standard in fiscal 2018, resulting in a $1.5 million increase to beginning retained earnings with an offsetting decrease to AOCI relating to the unrealized gain on its investment in Mesoblast Limited ("Mesoblast"). The adoption of this standard did not result in any material changes to the consolidated financial statements.

4.	Revenue from Contracts with Customers

Product Sales Revenue

 See Note 21 for presentation of the Company's net sales by product family.

Reserves for variable consideration

The following table reflects activity in the Company's sales reserve accounts:

	Rebates and Chargebacks				Product Returns				Other Sales Deductions				Total
Balance as of December 29, 2017	$	327.4			$	34.5			$	14.7			$	376.6
Provisions	2,281.3				39.3				66.9				2,387.5
Payments or credits	(2,254.4		)		(39.8		)		(64.5		)		(2,358.7		)
Balance as of December 28, 2018	354.3				34.0				17.1				405.4
Provisions	2,347.3				22.2				68.2				2,437.7
Payments or credits	(2,405.8		)		(27.8		)		(72.1		)		(2,505.7		)
Balance as of December 27, 2019	$	295.8			$	28.4			$	13.2			$	337.4

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Product sales transferred to customers at a point in time and over time were as follows:

	Fiscal Year
	2019			2018
Product sales transferred at a point in time	81.8	%		82.9	%
Product sales transferred over time	18.2			17.1

Transaction price allocated to the remaining performance obligations

The following table includes estimated revenue from contracts extending greater than one year for certain of the Company's hospital products that are expected to be recognized in the future related to performance obligations that were unsatisfied or partially unsatisfied as of December 27, 2019:

Fiscal 2020	$	191.5
Fiscal 2021	95.5
Fiscal 2022	35.7
Thereafter	6.2

Costs to fulfill a contract

As of December 27, 2019 and December 28, 2018, the total net book value of the devices used in the Company's portfolio of drug-device combination products, which are used in satisfying future performance obligations, was $26.5 million and $28.4 million, respectively, and was classified in property, plant and equipment, net, on the consolidated balance sheets. The associated depreciation expense recognized during fiscal 2019 and 2018 was $6.7 million and $7.4 million, respectively.

Product Royalty Revenues

  As part of the Company's acquisition of Sucampo Pharmaceuticals, Inc. ("Sucampo") in fiscal 2018, as discussed in further detail in Note 6, it acquired an arrangement under which the Company licenses certain rights to Amitiza to a third party in exchange for royalties on net sales of the product. The Company recognizes such royalty revenue as the related sales occur. The royalty rates consist of several tiers ranging from 18.0% to 26.0% with the royalty rate resetting every year. The associated royalty revenue recognized during both fiscal 2019 and 2018 was $81.3 million.

Contract Liabilities

The following table reflects the balance of the Company's contract liabilities at the end of the respective periods:

	December 27, 2019				December 28, 2018
Accrued and other current liabilities	$	5.6			$	20.4
Other liabilities	0.6				15.1
Contract liabilities	$	6.2			$	35.5

Revenue recognized during fiscal 2019 and 2018 from amounts included in contract liabilities at the beginning of the period was approximately $13.7 million and $12.5 million inclusive of the Company's wholly owned subsidiary BioVectra Inc. ("BioVectra), prior to the completion of the sale of this business in November 2019.

5.	Discontinued Operations and Divestitures

Discontinued Operations

Nuclear Imaging: In January 2017, the Company completed the sale of its Nuclear Imaging business to IBA Molecular ("IBAM") for approximately $690.0 million before tax impacts, including up-front considerations of approximately $574.0 million, up to $77.0 million of contingent considerations and the assumption of certain liabilities. The Company recorded a pre-tax gain on the sale of the business of $362.8 million during fiscal 2017, which excluded any potential proceeds from the contingent consideration. This business met the discontinued operations criteria and, accordingly, was included in discontinued operations for all periods presented.

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The Company received a total of $9.0 million and $15.0 million in contingent consideration related to the sale of the Nuclear Imaging business during fiscal 2019 and 2018, respectively, consisting primarily of the issuance of $9.0 million par value non-voting preferred equity certificates in both fiscal 2019 and 2018, with an additional $6.0 million cash payment in fiscal 2018. The preferred equity certificates accrue interest at a rate of 10.0% per annum and are redeemable on the retirement date of July 27, 2025, or earlier if elected by the issuer, for cash at a price equal to the par value and any accrued but unpaid interest. The receipt of the preferred equity certificates are presented as a non-cash investing activity on the consolidated statements of cash flows for fiscal 2019 and 2018.

The following table summarizes the financial results of the Nuclear Imaging business as presented in the consolidated statement of operations, prior to the completion of the sale of this business in January 2017:

	Fiscal Year
Major line items constituting income from discontinued operations	2017
Net sales	$	31.6
Cost of sales	15.6
Selling, general and administrative expenses	7.8
Other	(0.2		)
Income from discontinued operations	8.4
Gain on disposal of discontinued operations	362.8
Income from discontinued operations, before income taxes	371.2
Income tax expense	5.2
Income from discontinued operations, net of tax	$	366.0

The Company incurred $0.3 million of capital expenditures related to the Nuclear Imaging business that are included within the consolidated statement of cash flows for fiscal 2017.

Divestitures

The below businesses did not meet the criteria for discontinued operations classification and accordingly were included in continuing operations for all periods presented.

BioVectra: In November 2019, the Company completed the sale of its wholly owned subsidiary BioVectra to an affiliate of H.I.G. Capital for total consideration of up to $250.0 million, including an upfront payment of $135.0 million and contingent consideration of $115.0 million based on long-term performance of the business. During fiscal 2019, the Company recorded a loss on the sale of $33.5 million, which excluded any potential proceeds from future milestones, in the event they are achieved.

PreveLeak/Recothrom: In March 2018, the Company completed the sale of a portion of its Hemostasis business, inclusive of its PreveLeak™ Surgical Sealant ("PreveLeak") and RECOTHROM^® Thrombin topical (Recombinant) ("Recothrom") products to Baxter International Inc. ("Baxter") for approximately $185.0 million, with a base payment of $153.0 million, inclusive of existing inventory and subject to a closing inventory adjustment, with the remainder in potential future milestones. Baxter assumed other expenses, including contingent liabilities associated with PreveLeak. During fiscal 2018, the Company recorded a loss on the sale of $0.8 million, which excluded any potential proceeds from future milestones, in the event they are achieved and reflected a post-sale closing inventory adjustment of $13.7 million.

As part of the divestiture and calculation of the loss, the Company wrote off intangible assets of $49.9 million and goodwill of $51.5 million during fiscal 2018, from the Specialty Brands segment, ascribed to the PreveLeak and Recothrom operations. The remaining items included in the calculation of the loss are primarily attributable to inventory transferred, contingent consideration transferred and transaction costs incurred by the Company.

Intrathecal Therapy: In March 2017, the Company completed its sale of its Intrathecal Therapy business to Piramal Enterprises Limited's subsidiary in the U.K., Piramal Critical Care ("Piramal"), for approximately $203.0 million, including fixed consideration of $171.0 million and contingent consideration of up to $32.0 million. The $171.0 million of fixed consideration consisted of $17.0 million received at closing and a $154.0 million note receivable due one year from the transaction closing date. The Company recorded a gain on the sale of the business of $56.6 million during fiscal 2017, which excluded any potential proceeds from the contingent consideration and reflects a post-sale working capital adjustment. In fiscal 2018, the Company received $154.0 million from Piramal for the settlement of the aforementioned note receivable.

During fiscal 2017, as part of the divestiture and calculation of the gain, the Company wrote off intangible assets of $48.7 million and goodwill of $49.8 million, from the Specialty Brands segment, ascribed to the Intrathecal Therapy business. The Company is committed to reimburse up to $7.3 million of product development expenses incurred by Piramal, of which $2.1 million and

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$3.1 million was included in accrued and other current liabilities on the consolidated balance sheets as of December 27, 2019 and December 28, 2018, respectively. The remaining items included in the gain calculation were attributable to inventory transferred and transaction costs incurred by the Company.

6.	Acquisitions and License Agreements

Business Acquisitions

Sucampo Pharmaceuticals, Inc.

In February 2018, the Company acquired Sucampo through the acquisition of all the outstanding common stock of Sucampo. Consideration for the transaction consisted of approximately $1.2 billion, including the assumption of Sucampo's third-party debt ("the Sucampo Acquisition"). The acquisition was funded through the issuance of a $600.0 million aggregate principal amount of senior secured term loan, a $900.0 million borrowing under the Company's revolving credit facility, as discussed further in Note 14, and cash on hand. Sucampo's primary commercialized product was Amitiza, a leading global product in the branded constipation market. Through this acquisition, the Company acquired VTS-270, a Phase 3 development product for Niemann-Pick Type C, a complicated, ultra-rare neurodegenerative disease that typically presents in childhood and is ultimately fatal. Also acquired was an option to exercise a collaborative agreement with Cancer Prevention Pharmaceuticals ("CPP") associated with the development of CPP-1X/sulindac, a Phase 3 development product for Familial Adenomatous Polyposis ("FAP").

Upon completion of the Sucampo Acquisition, Sucampo's 3.25% convertible senior notes due 2021 ("the Sucampo Notes") became eligible to receive increased consideration in conjunction with a make-whole fundamental change, such that each $1,000 principal face amount of Sucampo Notes could be converted into $1,221 cash. The issued convertible debt of $300.0 million had been converted and paid in full by the Company during fiscal 2018.

Ocera Therapeutics, Inc.

In December 2017, the Company acquired Ocera Therapeutics, Inc. ("Ocera") for upfront consideration of approximately $42.4 million, of which $1.9 million of the consideration was paid subsequent to December 29, 2017, and contingent consideration up to $75.0 million based on the successful completion of certain development and sales milestones ("the Ocera Acquisition"). Through this acquisition, the Company acquired Ocera's primary development product MNK-6105/6106, an ammonia scavenger, which is being studied for treatment of hepatic encephalopathy, a neuropsychiatric syndrome associated with hyperammonemia, a complication of acute or chronic liver disease. The Ocera Acquisition was funded with cash on hand.

InfaCare Pharmaceutical Corporation

In September 2017, the Company acquired InfaCare Pharmaceutical Corporation ("InfaCare") in a transaction valued at approximately $80.4 million, with additional payments of up to $345.0 million dependent on regulatory and sales milestones ("the InfaCare Acquisition"). Consideration for the transaction consisted of approximately $37.2 million in cash paid to the prior shareholders of InfaCare and the assumption of approximately $43.2 million of debt and other liabilities, which was repaid in conjunction with the InfaCare Acquisition. Through this acquisition, the Company acquired InfaCare's development product stannsoporfin, a heme oxygenase inhibitor. The InfaCare Acquisition was funded with cash on hand.

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Fair Value Allocation

The following amounts represent the allocation of the fair value of the identifiable assets acquired and liabilities assumed for the respective acquisitions:

	Sucampo (1)				Ocera (2)				InfaCare (3)
Acquisition Date	February 2018				December 2017				September 2017
Cash	$	149.6			$	1.0			$	1.3
Accounts receivable	35.7				—				—
Inventory	153.2				—				—
Intangible assets	919.5				64.5				113.5
Goodwill (non-tax deductible) (4)	248.6				18.0				11.4
Other assets, current and non-current	25.8				0.4				0.1
Total assets acquired	1,532.4				83.9				126.3
Current liabilities	109.4				12.0				14.5
Other liabilities (non-current)	33.3				—				—
Deferred tax liabilities, net (non-current)	175.8				16.7				8.7
Contingent consideration (non-current)	—				12.8				35.0
Debt	366.3				—				30.0
Total liabilities assumed	684.8				41.5				88.2
Net assets acquired	$	847.6			$	42.4			$	38.1

(1)	During fiscal 2019, the Company recognized a full impairment of the IPR&D asset related to VTS-270 of $274.5 million. Refer to Note 13 for further information.

(2)	Of the $42.4 million net assets acquired for Ocera, $40.5 million and $1.9 million was paid in fiscal 2017 and 2018, respectively.

(3)	During fiscal 2019, the Company recognized a full impairment of the IPR&D asset related to stannsoporfin of $113.5 million. During fiscal 2018, the Company reduced the contingent consideration liability related to this acquisition to zero through the recognition of a $35.0 million fair value adjustment. Refer to Note 13 and 21 for further information.

(4)	Refer to Note 13 for further information relating to the full goodwill impairment recorded in fiscal 2018.

The following reconciles the total consideration to net assets acquired:

	Sucampo				Ocera (1)				InfaCare
Total consideration, net of cash	$	698.0			$	63.4			$	71.8
Plus: cash assumed in acquisition	149.6				1.0				1.3
Total consideration	847.6				64.4				73.1
Less: non-cash contingent consideration	—				(22.0		)		(35.0		)
Net assets acquired	$	847.6			$	42.4			$	38.1

(1)	$1.9 million of the total consideration, net of cash was paid in fiscal 2018, subsequent to the Company's December 11, 2017 acquisition date.

Intangible assets acquired consist of the following:  

Acquisition

Intangible Asset Acquired

Amount

Amortization Period

Discount Rate

Segment

Sucampo

Completed technology - Amitiza

$

634.0

9 years

14.0

%

Specialty Brands

Sucampo

Completed technology - Other (1)

11.0

8 years

14.0

Specialty Brands

Sucampo

In-process research and development - VTS-270 (2)

274.5

Non-Amortizable

15.0

Specialty Brands

Ocera

In-process research and development - MNK-6105/6106

64.5

Non-Amortizable

15.5

Specialty Brands

InfaCare

In-process research and development - stannsoporfin (3)

113.5

Non-Amortizable

13.5

Specialty Brands

(1)	During fiscal 2019, the intellectual property related to this intangible asset was sold, and therefore is no longer reflected in the Company's consolidated balance sheet as of December 27, 2019.

(2)	During fiscal 2019, the Company recognized a full impairment of the IPR&D asset related to VTS-270 of $274.5 million.

(3)	During fiscal 2019, the Company recognized a full impairment of the IPR&D asset related to stannsoporfin of $113.5 million.

The fair value of the intangible assets was determined using the income approach. The fair value of the IPR&D, completed technology and trademark was determined using the income approach, which is a valuation technique that provides an estimate of fair

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value of the assets based on the market participant expectations of cash flows the asset would generate. The discount rates were developed after assigning a probability of success to achieving the projected cash flows based on the current stage of development, inherent uncertainty in the U.S. Food and Drug Administration ("FDA") approval process and risks associated with commercialization of a new product. Based on the Company's preliminary estimate, the excess of purchase price over net tangible and intangible assets acquired resulted in goodwill, which represents future product development, the assembled workforce, and the tax status of the transaction. The goodwill was not deductible for U.S. income tax purposes.

Financial Results

The amount of net sales and operating losses included in the Company's fiscal 2019 consolidated statement of operations related to the Sucampo Acquisition were $217.2 million and $210.6 million, respectively, as compared to $190.5 million and $369.1 million included in the Company's 2018 consolidated statement of operations, respectively. Included within the Sucampo operating results was the full impairment of the VTS-270 intangible asset in fiscal 2019 and a charge for the goodwill allocated to Sucampo at the time of acquisition as a result of the full goodwill impairment in fiscal 2018. Also included within the fiscal 2019 and 2018 results was $70.9 million and $62.9 million of amortization associated with intangibles recognized from this acquisition, respectively, and $10.0 million and $118.8 million of expense associated with fair value adjustments of acquired inventory, respectively. During fiscal 2019, 2018, and 2017, the Company in total recognized $10.0 million, $120.8 million, and $10.1 million, respectively, of expense associated with fair value adjustments of acquired inventory. This expense was included within cost of sales.

Acquisition-Related Costs - Acquisition-related costs incurred for each of the acquisitions discussed above were as follows:

	Fiscal Year
Acquisition-related costs	2018				2017
Sucampo	$	5.2			$	4.2
Ocera	0.5				0.9
InfaCare	—				1.2
Other	0.1				0.1
Total acquisition-related costs	$	5.8			$	6.4

License Agreements

Silence Therapeutics

In July 2019, the Company entered into a license and collaboration agreement with Silence Therapeutics plc ("Silence") that will allow the companies to develop and commercialize ribonucleic acid interference ("RNAi") drug targets designed to inhibit the complement cascade, a group of proteins that are involved in the immune system and that play a role in the development of inflammation. These proteins are known to contribute to the pathogenesis of many diseases, including autoimmune disease. Under the terms of the agreement, the Company will obtain an exclusive worldwide license to Silence's C3 complement asset, SLN500, with options to license up to two additional complement-targeted assets in Silence's preclinical complement-directed RNAi development program. Silence will be responsible for preclinical activities, and for executing the development program of each asset until the end of Phase 1, after which the Company will assume clinical development and responsibility for global commercialization.

During fiscal 2019, the Company provided Silence an upfront payment of $20.0 million with cash on hand, which was recorded within R&D expense, and gained an exclusive worldwide license to Silence's C3 complement asset, SLN500, with options to license up to two additional complement-targeted assets in Silence's preclinical complement-directed RNAi development program. Silence is also eligible to receive up to $10.0 million in research milestones for SLN500, in addition to funding for Phase 1 clinical development including good manufacturing practices (GMP) manufacturing. Silence will be responsible for preclinical activities, and for executing the development program of SLN500 until the end of Phase 1, after which the Company will assume clinical development and responsibility for global commercialization. If approved, Silence could receive up to $563.0 million in commercial milestone payments and tiered low double-digit to high-teen royalties on net sales for SLN500.

Mesoblast

In January 2017, $21.5 million of consideration was remitted to Mesoblast in exchange for equity shares and rights to a nine month exclusivity period related to any potential commercial and development agreements the Company may have entered into for Mesoblast's therapy products used to treat acute graft versus host disease and/or chronic lower back pain. As a result of this transaction the Company recorded an available for sale investment. During fiscal 2018, all of the Company's shares were sold for gross proceeds

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of $25.5 million resulting in a $3.4 million gain being recognized within other income (expense), net within the consolidated statement of operations.

Ofirmev

As part of the acquisition of Cadence Pharmaceuticals, Inc. ("Cadence" or "Cadence Acquisition") in March 2014, the Company acquired the exclusive development and commercialization rights to Ofirmev^® in the U.S. and Canada, as well as the rights to the patents and technology, which were originally in-licensed by Cadence from Bristol-Myers Squibb Company ("BMS") in March 2006. BMS sublicensed these rights to Cadence under a license agreement with SCR Pharmatop S.A. ("Pharmatop"), and the Company has the right to grant sublicenses to third parties. Under this license agreement, the Company made the final milestone payment of $15.0 million in fiscal 2018. In addition, the Company is obligated to pay royalties on sales of the product. During fiscal 2019, 2018 and 2017, the Company paid royalties of $69.8 million, $76.9 million and $53.9 million, respectively, which were recorded within cost of sales on the consolidated statements of operations.

Advanced Accelerator Applications

In 2007, the Company's Nuclear Imaging business entered into a license agreement with BioSynthema, Inc. ("BioSynthema"), which was subsequently amended in 2010 when Advanced Accelerator Applications ("AAA") acquired BioSynthema. Pursuant to the amended agreement, upon the first commercial sale of Lutathera^® ("Lutathera"), AAA is to provide the Company with a royalty based on net sales of the product through January 1, 2020. In early 2018, the FDA approved Lutathera for treatment of gastroenteropancreatic neuroendocrine tumors and commercial sales commenced. During fiscal 2019 and 2018, in relation to this agreement, the Company recognized royalty income of $39.0 million and $15.5 million, respectively, which was recognized within other income (expense), net in the consolidated statements of operations.

7.	Restructuring and Related Charges

During fiscal 2018, 2016 and 2013, the Company launched restructuring programs designed to improve its cost structure. Charges of $100.0 million to $125.0 million were provided for under each program. Each program generally commences upon substantial completion of the previous program. In addition to the aforementioned restructuring programs, the Company has taken restructuring actions to generate synergies from its acquisitions.

Net restructuring and related charges by segment were as follows:

	Fiscal Year
	2019				2018				2017
Specialty Brands	$	(13.7	)		$	54.6			$	25.4
Specialty Generics	10.0				5.3				7.7
Corporate	2.0				48.3				3.3
Restructuring and related charges, net	(1.7		)		108.2				36.4
Less: accelerated depreciation	—				(5.2		)		(5.2		)
Restructuring charges, net	$	(1.7	)		$	103.0			$	31.2

Net restructuring and related charges by program from continuing operations are comprised of the following:

	Fiscal Year
	2019				2018				2017
2018 Program	$	9.8			$	5.2			$	—
2016 Program	(10.6		)		71.6				36.2
2013 Program	—				—				(0.7		)
Acquisition programs	(0.9		)		31.4				0.9
Total programs	(1.7		)		108.2				36.4
Less: non-cash charges, including accelerated depreciation	—				(5.2		)		(5.2		)
Total charges expected to be settled in cash	$	(1.7	)		$	103.0			$	31.2

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The following table summarizes cash activity for restructuring reserves, substantially all of which related to contract termination costs, employee severance and benefits and exiting of certain facilities:

	2018 Program				2016 Program				2013 Program				Acquisition Programs				Total
Balance as of December 30, 2016	$	—			$	9.5			$	5.1			$	0.2			$	14.8
Charges from continuing operations	—				35.8				—				0.9				36.7
Changes in estimate from continuing operations	—				(4.8		)		(0.7		)		—				(5.5		)
Cash payments	—				(26.1		)		(4.4		)		(0.3		)		(30.8		)
Reclassifications	—				0.3				—				—				0.3
Balance as of December 29, 2017	—				14.7				—				0.8				15.5
Charges from continuing operations	2.2				76.9				—				29.9				109.0
Changes in estimate from continuing operations	—				(5.3		)		—				(0.7		)		(6.0		)
Cash payments	—				(23.4		)		—				(22.2		)		(45.6		)
Reclassifications	—				(1.9		)		—				—				(1.9		)
Balance as of December 28, 2018	2.2				61.0				—				7.8				71.0
Charges from continuing operations	11.2				4.0				—				0.1				15.3
Changes in estimate from continuing operations	(1.4		)		(14.6		)		—				(1.0		)		(17.0		)
Cash payments	(9.3		)		(13.1		)		—				(2.4		)		(24.8		)
Reclassifications (1)	—				(5.0		)		—				(4.3		)		(9.3		)
Currency translation	—				(1.0		)		—				—				(1.0		)
Balance as of December 27, 2019	$	2.7			$	31.3			$	—			$	0.2			$	34.2

(1)	Represents the reclassification of lease liabilities, net to lease liabilities and lease assets, which are reflected within other liabilities and other assets on the consolidated balance sheet, due to the adoption of ASU 2016-02.

As of December 27, 2019, net restructuring and related charges incurred cumulative to date were as follows:

	2018 Program (1)				2016 Program				2013 Program
Specialty Brands	$	3.0			$	68.1			$	18.8
Specialty Generics	10.0				14.6				18.3
Discontinued Operations	—				—				69.9
Corporate	2.0				28.9				17.7
	$	15.0			$	111.6			$	124.7

(1)	There is no specified time period associated with this restructuring program.

In fiscal 2018, the Company discontinued the marketing of Raplixa after an evaluation of strategic options and incurred restructuring expenses of $51.1 million under the 2016 Program, consisting primarily of estimated contract termination costs related to the production of Raplixa. During fiscal 2019, the Company finalized the settlement of these contract termination costs.

All of the restructuring reserves were included in accrued and other current liabilities on the Company's consolidated balance sheets. Amounts paid in the future may differ from the amount currently recorded.

8.	Income Taxes

The U.K. and non-U.K. components of (loss) income from continuing operations before income taxes were as follows:

	Fiscal Year
	2019				2018				2017
U.K.	$	(75.3	)		$	(233.7	)		$	(165.9	)
Non-U.K.	(1,516.2		)		(3,818.3		)		227.5
Total	$	(1,591.5	)		$	(4,052.0	)		$	61.6

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

	Fiscal Year
	2019				2018				2017
Current:
U.K.	$	0.1			$	(0.2	)		$	0.4
Non-U.K.	21.7				113.0				37.7
Current income tax provision	21.8				112.8				38.1
Deferred:
U.K.	(1.1		)		1.4				0.6
Non-U.K.	(605.0		)		(544.3		)		(1,748.3		)
Deferred income tax benefit	(606.1		)		(542.9		)		(1,747.7		)
Total	$	(584.3	)		$	(430.1	)		$	(1,709.6	)

The fiscal 2019 U.K. current income tax provision reflects a tax benefit of $1.2 million from utilization of net operating loss carryforwards. The fiscal 2019 non-U.K. current income tax provision reflects a tax benefit of $0.9 million from utilization of net operating loss carryforwards.

The fiscal 2018 U.K. current income tax provision reflects a tax benefit of $8.5 million from utilization of net operating loss carryforwards. The fiscal 2018 non-U.K. current income tax provision reflects a tax benefit of $13.7 million from utilization of net operating loss carryforwards.

The fiscal 2017 U.K. current income tax provision reflects a tax benefit of $14.3 million from utilization of net operating loss carryforwards. The fiscal 2017 non-U.K. current income tax provision reflects a tax benefit of $57.2 million from utilization of net operating loss carryforwards and $5.6 million of U.S. credits. In addition, the non-U.K. current income tax provision includes a tax benefit of $27.2 million related to carryback claims filed in fiscal 2017. The U.S. credit utilization is comprised of credit carryforwards and credits generated during fiscal 2017.

During fiscal years 2019, 2018, and 2017, net cash payments for income taxes was $30.7 million, $12.4 million, and $73.4 million.

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

	Fiscal Year
	2019				2018				2017
Provision (benefit) for income taxes at U.K. statutory income tax rate (1)	$	(302.4	)		$	(770.1	)		$	11.7
Adjustments to reconcile to income tax provision:
Rate difference between U.K. and non-U.K. jurisdictions (2)	(206.3		)		(235.7		)		(219.9		)
Valuation allowances, nonrecurring (3)	61.7				—				(3.7		)
Adjustments to accrued income tax liabilities and uncertain tax positions	(12.4		)		60.1				5.1
Interest and penalties on accrued income tax liabilities and uncertain tax positions	(6.3		)		13.1				0.2
Credits, principally research and orphan drug (4)	(13.5		)		(25.9		)		(13.8		)
Impairments non deductible	—				788.7				—
Permanently nondeductible and nontaxable items (3)	98.1				7.2				6.4
Pension plan settlement, release of tax effects lodged in other comprehensive income	—				—				(2.4		)
Divestitures (5)	9.6				(2.7		)		18.2
U.S. Tax Reform (6)	—				(8.5		)		(456.9		)
Legal Entity Reorganization (7)	(212.8		)		(256.0		)		(1,054.8		)
Other	—				(0.3		)		0.3
Benefit for income taxes	$	(584.3	)		$	(430.1	)		$	(1,709.6	)

(1)	The statutory tax rate reflects the U.K. statutory tax rate of 19.0% for all periods presented.

(2)	Includes the impact of certain recurring valuation allowances for U.K. and non-U.K. jurisdictions.

(3)	For fiscal 2019, the nonrecurring valuation allowances and permanently nondeductible and nontaxable item were primarily driven by the impact from the opioid-related litigation settlement charge. Refer to Note 24 for further discussion.

(4)	During fiscal 2019 and 2018, the research and orphan drug credits decreased primarily as a result of the impact of the Tax Cut and Jobs Act of 2017 ("TCJA") and increased in conjunction with the Company's increased investment in qualified research, respectively.

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(5)	The Company completed the sale of its wholly owned subsidiary BioVectra in November 2019, a portion of its Hemostasis business during fiscal 2018 and the Intrathecal Therapy Business during fiscal 2017.

(6)

For fiscal 2018, the Company completed its analysis of the TCJA and recognized an additional tax benefit. Other line items, to the extent U.S. related, are reflected at the current U.S. statutory income tax rate of 21.0%. For fiscal 2017, the benefit reflects the redetermination of the Company's end of year net deferred tax liabilities as a result of the new U.S. statutory income tax rate of 21.0%. Other line items, to the extent U.S. related, are reflected at the former U.S. statutory income tax rate of 35.0%.

(7)	Associated unrecognized tax benefit netted within this line.

The rate difference between U.K. and non-U.K. jurisdictions changed from $235.7 million of tax benefit to $206.3 million of tax benefit for fiscal 2018 to fiscal 2019, respectively. The $29.4 million decrease in the tax benefit included a $101.0 million decrease attributable to the non-restructuring impairment charges, a $45.8 million decrease attributable to changes in operating income, a $20.2 million decrease attributable to divestitures; partially offset by an increase of $76.7 million attributable to the gain on debt extinguishment and $60.9 million attributable to the opioid-related settlement charge.

The rate difference between U.K. and non-U.K. jurisdictions changed from $219.9 million of tax benefit to $235.7 million of tax benefit for fiscal 2017 to fiscal 2018, respectively. The $15.8 million increase in the tax benefit included a $90.3 million increase attributable to the non-restructuring impairment charges in fiscal 2018, a $22.2 million increase attributable to divestitures; partially offset by decreases of $80.2 million to the tax benefit attributable to the impact of U.S. Tax Reform, an $11.8 million decrease related to recent acquisitions, and a $4.7 million decrease attributable to changes in operating income and fiscal 2017 one-time items that did not recur in fiscal 2018.

During fiscal 2019, the Company completed a reorganization of its intercompany financing and associated legal entity ownership in response to the changing global tax environment. As a result, the Company recognized current income tax expense of $26.2 million and a deferred income tax benefit of $239.0 million with a corresponding reduction to net deferred tax liabilities. The reduction in net deferred tax liabilities was comprised of a decrease in interest-bearing deferred tax obligations which resulted in the elimination of the December 28, 2018 balance of $227.5 million, a $29.7 million increase in various other net deferred tax liabilities, a $28.7 million increase to a deferred tax asset related to excess interest carryforwards and a $12.5 million increase to a deferred tax asset related to tax loss and credit carryforwards net of valuation allowances. The elimination of the interest-bearing deferred tax obligation also eliminated the annual Internal Revenue Code section 453A interest expense. The reorganization involved the interpretation of multi-jurisdictional tax laws and regulations, supported by third party opinions. Interpretation of tax laws can be inherently uncertain and can be subject to potential challenges by the relevant tax authorities, both of which were considered in assessing its reserves for uncertain tax positions.

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

	Fiscal Year
	2019				2018				2017
Balance at beginning of period	$	287.7			$	182.5			$	118.7
Additions related to current year tax positions	123.5				19.6				79.9
Additions related to prior period tax positions	19.2				125.1				0.3
Reductions related to prior period tax positions	(5.7		)		(32.7		)		(13.6		)
Settlements	(1.0		)		(2.0		)		—
Lapse of statute of limitations	(25.1		)		(4.8		)		(2.8		)
Balance at end of period	$	398.6			$	287.7			$	182.5

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

	December 27, 2019				December 28, 2018
Other assets	$	204.7			$	—
Accrued and other current liabilities	—				1.0
Other income tax liabilities	193.9				189.9
Deferred income taxes (non-current liability)	—				96.8
	$	398.6			$	287.7

Included within total unrecognized tax benefits as of December 27, 2019, December 28, 2018, and December 29, 2017, were $395.9 million, $275.8 million, and $180.8 million, respectively, of unrecognized tax benefits, which if favorably settled would benefit the effective tax rate, of which up to $20.0 million in each year may be reported in discontinued operations. The remaining unrecognized tax benefits for each period would be offset by the write-off of related other tax assets, if recognized. During fiscal

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2019, the Company recorded $14.4 million of additional interest through tax provision and decreased accrued interest and penalties by $18.6 million related to prior period reductions, settlements and lapse of statute of limitations. During fiscal 2018 and 2017, the Company had a net increase of interest and penalties activity of $30.0 million and a net interest and penalties activity of zero, respectively. The total amount of accrued interest and penalties related to uncertain tax positions was $32.9 million, $37.1 million, and $7.1 million, respectively.

It is reasonably possible that within the next twelve months, as a result of the resolution of various U.K. and non-U.K. examinations and appeals and the expiration of various statutes of limitation, that the unrecognized tax benefits could decrease by up to $99.5 million. Interest and penalties could decrease by up to $21.7 million.

Certain of the Company's subsidiaries continue to be subject to examination by the IRS for tax years as early as 2014. On August 5, 2019, the IRS proposed an adjustment to the taxable income of Mallinckrodt Hospital Products Inc. (“MHP”) (formerly known as Cadence Pharmaceuticals, Inc.) as a result of its findings in the audit of MHP's tax year ended September 26, 2014. The proposed adjustment to taxable income of $871.0 million, excluding potential associated interest and penalties, is proposed as a multi-year adjustment and may result in a non-cash reduction of the Company's U.S. Federal net operating loss carryforward of $782.0 million. The Company strongly disagrees with the proposed adjustment and intends to contest it through all available administrative and judicial remedies, which may take a number of years to conclude. See Note 19 for further details. In addition, the earliest open years for state tax jurisdictions are 2009 and a number of tax periods from 2013 to present are subject to examination by tax authorities in various jurisdictions, including Ireland, Luxembourg, Switzerland and the U.K.

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

	December 27, 2019				December 28, 2018
Accrued and other current liabilities	$	15.0			$	25.0
Other income tax liabilities	227.1				228.0
	$	242.1			$	253.0

Tax receivables and payments associated with deferred intercompany transactions are included in the following consolidated balance sheet captions in the amounts shown:

	December 27, 2019				December 28, 2018
Other assets	$	3.1			$	3.0
Prepaid expenses and other current assets	8.0				16.2
	$	11.1			$	19.2

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:

	December 27, 2019				December 28, 2018
Deferred tax assets:
Tax loss and credit carryforwards	$	2,263.4			$	1,987.8
Intangible assets	981.2				757.7
Opioid-related litigation settlement liability	273.7				—
Excess interest	81.5				71.4
Other	200.4				189.5
	3,800.2				3,006.4
Deferred tax liabilities:
Intangible assets	(139.4		)		(264.7		)
Interest-bearing deferred tax obligations	—				(227.5		)
Investment in partnership	(178.9		)		(170.2		)
Other	(46.3		)		(42.9		)
	(364.6		)		(705.3		)
Net deferred tax asset before valuation allowances	3,435.6				2,301.1
Valuation allowances	(3,131.5		)		(2,604.9		)
Net deferred tax assets (liability)	$	304.1			$	(303.8	)

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The deferred tax asset valuation allowances of $3,131.5 million and $2,604.9 million as of December 27, 2019 and December 28, 2018, respectively, relate primarily to the uncertainty of the utilization of certain deferred tax assets, driven by U.K. and non-U.K. net operating losses, credits, intangible assets and the opioid-related settlement liability. The Company believes that it will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets.

Deferred taxes are reported in the following consolidated balance sheet captions in the amounts shown:

	December 27, 2019				December 28, 2018
Other assets	$	315.1			$	20.5
Deferred income taxes (non-current liability)	(11.0		)		(324.3		)
Net deferred tax asset (liability)	$	304.1			$	(303.8	)

The net deferred tax liability decreased from $303.8 million as of December 28, 2018 to a non-current deferred tax asset of $304.1 million as of December 27, 2019, primarily due to $239.0 million of decreases associated with the deferred tax benefit recognized from a completed reorganization of its intercompany financing and associated legal entity ownership in response to the changing global tax environment, $211.9 million of decreases related to the opioid-related settlement charge, $69.0 million of decreases related to non-restructuring impairment charges, $37.8 million of decreases associated with the amortization of intangibles and $50.2 million of decreases predominately related to the generation of net operating losses and other operational activity.

The sale of BioVectra was completed in November 2019. This divestiture resulted in a net deferred tax liability decrease of $3.1 million. Significant components of this decrease includes a decrease of $2.7 million of deferred tax liability associated with fixed assets and $2.2 million of deferred tax liability associated with intangible assets, partially offset by an increase of $1.3 million associated with other deferred tax assets and $0.5 million of deferred tax assets associated with tax loss and credit carryforwards.

As of December 27, 2019, the Company had approximately $2,084.0 million of net operating loss carryforwards in certain non-U.K. jurisdictions measured at the applicable statutory rates, of which $1,378.2 million have no expiration and the remaining $705.8 million will expire in future years through 2040. The Company had $115.1 million of U.K. net operating loss carryforwards measured at the applicable statutory rates at December 27, 2019, which have no expiration date.

As of December 27, 2019, the Company also had $64.3 million of tax credits available to reduce future income taxes payable, primarily in jurisdictions within the U.S., of which $2.6 million have no expiration and the remainder will expire in future years through 2040.

As of December 27, 2019, the Company's financial reporting basis in international subsidiaries that may be subject to tax was in excess of its corresponding tax basis by $17.0 million. Such excess amount is considered to be indefinitely reinvested and it is not practicable to determine the cumulative amount of tax liability that would arise if this indefinitely reinvested amount were realized due to a variety of factors including the complexity of the Company's legal entity structure as well as the timing, extent, and nature of any hypothetical realization. The net decrease, as compared to fiscal 2018, was attributable to the divestiture of BioVectra as well as income and losses attributed to current year activity. The Company has recorded a deferred tax liability of $7.6 million for amounts not considered to be indefinitely reinvested.

9.	(Loss) Earnings per Share

Basic (loss) earnings per share is computed by dividing net (loss) income by the number of weighted-average shares outstanding during the period. Diluted (loss) earnings per share is computed using the weighted-average shares outstanding and, if dilutive, potential ordinary shares outstanding during the period. Potential ordinary shares represent the incremental ordinary shares issuable for restricted share units and share option exercises. The Company calculated the dilutive effect of outstanding restricted share units and share options on (loss) earnings per share by application of the treasury stock method. Dilutive securities, including participating securities, are not included in the computation of loss per share when the Company reports a net loss from continuing operations as the impact would be anti-dilutive.

The weighted-average number of shares outstanding used in the computations of basic and diluted (loss) earnings per share were as follows (in millions):

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	Fiscal Year
	2019			2018			2017
Basic	83.9			84.0			97.7
Dilutive impact of restricted share units and share options	—			—			0.2
Diluted	83.9			84.0			97.9

The computation of diluted weighted-average shares outstanding for fiscal 2019, 2018 and 2017 excluded approximately 6.3 million, 3.3 million and 4.2 million, respectively, shares of equity award because the effect would have been anti-dilutive.

10.	Inventories

Inventories were comprised of the following at the end of each period: 

	December 27, 2019				December 28, 2018
Raw materials	$	62.7			$	69.2
Work in process	166.5				167.6
Finished goods	82.9				85.5
Inventories	$	312.1			$	322.3

11.	Property, Plant and Equipment

The gross carrying amount and accumulated depreciation of property, plant and equipment were comprised of the following at the end of each period:

	December 27, 2019				December 28, 2018
Land	$	43.4			$	43.9
Buildings	363.6				379.5
Capitalized software	142.2				130.8
Machinery and equipment	1,157.0				1,137.3
Construction in process	193.9				244.7
	1,900.1				1,936.2
Less: accumulated depreciation	(1,003.6		)		(954.2		)
Property, plant and equipment, net	$	896.5			$	982.0

Depreciation expense was as follows:

	Fiscal Year
	2019				2018				2017
Depreciation expense	$	97.7			$	111.9			$	113.8

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12.	Leases

Lease assets and liabilities related to the Company's operating leases are reported in the following consolidated balance sheet captions:

	December 27, 2019
Other assets	$	83.5
Accrued and other current liabilities	$	19.2
Other liabilities	70.2
Total lease liabilities	$	89.4

Dependent on the nature of the leased asset, lease expense is included within cost of sales or SG&A. The primary components of lease expense were as follows:

	Fiscal Year
	2019
Lease cost:
Operating lease cost	$	21.3
Short-term lease cost	3.5
Total lease cost	$	24.8

Prior to the adoption of Topic 842, rental expense under facility, vehicle and equipment operating leases was $24.8 million and $30.4 million for fiscal 2018 and 2017, respectively.

Lease terms and discount rates were as follows:

	December 27, 2019
Weighted-average remaining lease term (in years) - operating lease	6.6
Weighted-average discount rate - operating leases	3.8	%

Maturities of operating lease liabilities as of December 27, 2019 were as follows:

Fiscal 2020	$	22.7
Fiscal 2021	17.9
Fiscal 2022	13.7
Fiscal 2023	12.1
Fiscal 2024	8.9
Thereafter	28.1
Total lease payments	103.4
Less: Interest	(14.0		)
Present value of lease liabilities	$	89.4

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Other supplemental cash flow information related to leases were as follows:

	Fiscal Year
	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	23.2
Lease assets obtained in exchange for lease obligations:
Operating leases	7.3

13.	Goodwill and Intangible Assets

2018 Goodwill Impairment Analysis

During fiscal 2018, the Company's annual goodwill impairment analysis resulted in the recognition of a full goodwill impairment of $3,672.8 million related to the Specialty Brands reporting unit. The Company performed its annual goodwill impairment analysis for the Specialty Brands reporting unit as of the first day of the fourth quarter. The Company's 2018 annual assessment first considered its internally developed future cash flows, which reflect the Company's overall strategy, future growth and value proposition. At the time of this analysis there continued to be a disparity between the Company's anticipated future performance and present uncertainty reflected in its market capitalization, driven by a sustained decrease in its share price. The Company determined that its share price had been adversely affected primarily by uncertainties regarding patient withdrawal issues impacting net sales of Acthar^® Gel ("Acthar Gel"), ongoing INOmax^® ("INOmax") patent litigation and the perceived value of its various pipeline products. Given the passage of time since first experiencing a substantial decline in its share price during the three months ended December 29, 2017 and the fact that the aforementioned uncertainties were not expected to be resolved in the near-term, the Company determined that its goodwill was fully impaired.

For purposes of the 2018 goodwill impairment assessment for the Specialty Brands reporting unit, the Company made various assumptions regarding estimated future cash flows, discount rate and other factors in determining the respective fair value of the reporting unit using the income approach. The projections of future cash flows were discounted based on a weighted average cost of capital of 12.5% that was determined from relevant market comparisons, adjusted upward for specific reporting unit risks. A terminal value growth rate was applied to the terminal year cash flows, representing the Company's estimate of stable cash flows. The fair value of the Specialty Brands reporting unit represents the sum of the discounted cash flows from the discrete period and the terminal year cash flows.

Intangible Assets

The gross carrying amount and accumulated amortization of intangible assets were comprised of the following at the end of each period:

	December 27, 2019								December 28, 2018
	Gross Carrying Amount				Accumulated Amortization				Gross Carrying Amount				Accumulated Amortization
Amortizable:
Completed technology	$	10,456.9			$	3,822.8			$	10,467.9			$	2,980.6
License agreements	120.1				74.1				120.1				70.1
Trademarks	77.7				20.1				81.9				18.1
Customer relationships	—				—				27.5				14.1
Total	$	10,654.7			$	3,917.0			$	10,697.4			$	3,082.9
Non-Amortizable:
Trademarks	$	35.0							$	35.0
In-process research and development	245.3								633.3
Total	$	280.3							$	668.3

The Company recorded impairment charges totaling $388.0 million, $220.3 million and $63.7 million during fiscal 2019, 2018 and 2017, respectively. The valuation method used to approximate fair value in each of these periods was based on the estimated discounted cash flows for the respective asset. During the three months ended December 27, 2019, the Company recognized a full impairment on its IPR&D asset related to VTS-270 of $274.5 million, primarily driven by continued regulatory challenges. The

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Company will continue to engage in dialogue with the FDA and assess future opportunities for this development program. Also during the three months ended June 28, 2019, the Company recognized a full impairment on its IPR&D asset related to stannsoporfin of $113.5 million as the Company is no longer pursuing this development program. The fiscal 2018 and 2017 impairment charges primarily relate to the MNK-1411 and Raplixa intangible assets, respectively, and were a result of lower than previously anticipated pricing assumptions and commercial opportunities, respectively.

Ofirmev^® 

Since the Company's acquisition of Ofirmev in March 2014, the related completed technology intangible asset had been amortized using the straight-line method over a useful life of eight years. As the product nears loss of exclusivity, the Company is better positioned to reliably determine the pattern in which the remaining economic benefits of the intangible asset are consumed. As a result, during the three months ended March 29, 2019, the Company concluded that the sum of the years digits method, an accelerated method of amortization, would more accurately reflect the consumption of the economic benefits over the remaining useful life of the asset. This change in amortization method resulted in additional amortization expense of $107.3 million during fiscal 2019, which impacted basic earnings per share for the respective periods by $1.28 per share.

Finite-lived intangible asset amortization expense within continuing operations is as follows:

	Fiscal Year
	2019				2018				2017
Amortization expense	$	853.4			$	740.2			$	694.5

The estimated aggregate amortization expense on intangible assets owned by the Company is expected to be as follows:

Fiscal 2020	$	754.2
Fiscal 2021	657.6
Fiscal 2022	585.1
Fiscal 2023	581.1
Fiscal 2024	581.1

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14.	Debt

Debt was comprised of the following at the end of each period:

	December 27, 2019								December 28, 2018
	Principal				Unamortized Discount and Debt Issuance Costs				Principal				Unamortized Discount and Debt Issuance Costs
Current maturities of long-term debt:
4.875% senior notes due April 2020	$	614.8			$	0.6			$	—			$	—
Term loan due September 2024	15.6				0.2				16.4				0.2
Term loan due February 2025	4.1				0.1				6.0				0.1
Other	—				—				0.3				—
Total current debt	634.5				0.9				22.7				0.3
Long-term debt:
4.875% senior notes due April 2020	—				—				700.0				3.2
Variable-rate receivable securitization due July 2020	—				—				250.0				0.4
9.50% debentures due May 2022	10.4				—				10.4				—
5.75% senior notes due August 2022	610.3				3.7				835.2				7.0
8.00% debentures due March 2023	4.4				—				4.4				—
4.75% senior notes due April 2023	133.7				0.8				500.2				3.5
5.625% senior notes due October 2023	514.7				4.4				731.4				8.0
Term loan due September 2024	1,505.2				15.5				1,597.4				19.8
Term loan due February 2025	399.5				6.1				591.0				10.7
5.50% senior notes due April 2025	387.2				3.6				692.1				7.7
10.00% senior notes due April 2025	322.9				9.9				—				—
Other	—				—				1.9				—
Revolving credit facility	900.0				3.1				220.0				4.5
Total long-term debt	4,788.3				47.1				6,134.0				64.8
Total debt	$	5,422.8			$	48.0			$	6,156.7			$	65.1

Mallinckrodt International Finance S.A. ("MIFSA") is a wholly owned subsidiary of the Company. MIFSA functions as a holding company, established to own, directly or indirectly, substantially all of the operating subsidiaries of the Company, as well as to issue debt securities and to perform treasury operations.

In April 2013, MIFSA issued a $600.0 million aggregate principal amount of 4.75% senior unsecured notes due April 2023 ("the April 2023 Notes"). Mallinckrodt plc has fully and unconditionally guaranteed the April 2023 Notes on an unsecured and unsubordinated basis. The April 2023 Notes are subject to an indenture which contains covenants limiting the ability of MIFSA, its restricted subsidiaries (as defined in the April 2023 Notes) and Mallinckrodt plc, as guarantor, to incur certain liens or enter into sale and lease-back transactions. It also restricts Mallinckrodt plc and MIFSA's ability to merge or consolidate with any other person or sell or convey all or substantially all of their assets to any one person. MIFSA may redeem all of the April 2023 Notes at any time, and some of the April 2023 Notes from time to time, at a redemption price equal to the principal amount of the April 2023 Notes redeemed plus a make-whole premium. The Company pays interest on the April 2023 Notes semiannually in arrears on April 15^th and October 15^th of each year, which commenced on October 15, 2013.

In August 2014, MIFSA and Mallinckrodt CB LLC ("MCB") ("the Issuers") issued $900.0 million aggregate principal amount of 5.75% senior unsecured notes due August 2022 ("the 2022 Notes”). The 2022 Notes are guaranteed by Mallinckrodt plc and each of its subsidiaries that guarantee the obligations under the 2017 Facilities (as defined below). The 2022 Notes are subject to an indenture that contains certain customary covenants and events of default (subject in certain cases to customary grace and cure periods). The occurrence of an event of default under the indenture could result in the acceleration of the 2022 Notes and could cause a cross-default that could result in the acceleration of other indebtedness of Mallinckrodt plc and its subsidiaries. The Issuers may redeem some or all of the 2022 Notes at specified redemption prices. The Issuers are obligated to offer to repurchase the 2022 Notes at a price of (a) 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events and (b) 100% of their principal amount plus accrued and unpaid interest of net proceeds from certain asset sales. These obligations are subject to certain qualifications and exceptions. The Company pays interest on the 2022 Notes semiannually in arrears on February 1^st and August 1^st of each year, which commenced on February 1, 2015.

In April 2015, in connection with the Company's acquisition of Ikaria, Inc. ("Ikaria"), MIFSA and MCB issued $700.0 million aggregate principal amount of 4.875% senior unsecured notes due April 2020 ("the 2020 Notes") and $700.0 million aggregate principal amount of 5.50% senior unsecured notes due April 2025 ("the 2025 Notes", and together with the 2020 Notes, the "Ikaria

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Notes"). The Ikaria Notes are guaranteed by Mallinckrodt plc and each of its subsidiaries that guarantee the obligations under the 2017 Facilities (as defined below), which following the acquisition of Ikaria includes Compound Holdings II, Inc. (or its successors) and its U.S. subsidiaries. The Ikaria Notes are subject to an indenture that contains certain customary covenants and events of default (subject in certain cases to customary grace and cure periods). The occurrence of an event of default under the indenture could result in the acceleration of the Ikaria Notes and could cause a cross-default that could result in the acceleration of other indebtedness of the Company. The Issuers may redeem some or all of the 2025 Notes prior to April 15, 2020 by paying a “make-whole” premium. The Issuers may redeem some or all of the (i) 2020 Notes and (ii) 2025 Notes on or after April 15, 2020, in each case, at specified redemption prices. The Issuers are obligated to offer to repurchase the Ikaria Notes (a) at a price of 101% of their respective principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events and (b) at a price of 100% of their respective principal amount plus accrued and unpaid interest of net proceeds from certain asset sales. These obligations are subject to certain qualifications and exceptions. The Company pays interest on the Ikaria Notes semiannually on April 15^th and October 15^th of each year, which commenced on October 15, 2015.

In September 2015, in connection with the Company's acquisition of Therakos, Inc. ("Therakos"), MIFSA and MCB issued $750.0 million aggregate principal amount of 5.625% senior unsecured notes due October 2023 (the “October 2023 Notes”). The October 2023 Notes are guaranteed by Mallinckrodt plc and each of its subsidiaries under the 2017 Facilities (as defined below), which following the acquisition of Therakos, includes TGG Medical Solutions, Inc. (or its successors) and its U.S. subsidiaries. The October 2023 Notes are subject to an indenture that contains certain customary covenants and events of default (subject in certain cases to customary grace and cure periods). The occurrence of an event of default under the indenture could result in the acceleration of the October 2023 Notes and could cause a cross-default that could result in the acceleration of other indebtedness of the Company. The issuers may call some or all of the October 2023 Notes at specified redemption prices. The issuers may also redeem all, but not less than all, of the October 2023 Notes at any time at a price of 100% of their principal amount, plus accrued and unpaid interest, if any, in the event the issuers become obligated to pay additional amounts as a result of changes affecting certain withholding tax laws applicable to payments on the October 2023 Notes. The Issuers are obligated to offer to repurchase the October 2023 Notes (a) at a price of 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events and (b) at a price of 100% of their principal amount plus accrued and unpaid interest of net proceeds from certain asset sales. These obligations are subject to certain qualifications and exceptions. The Company pays interest on the October 2023 Notes semiannually on April 15^th and October 15^th of each year, which commenced on April 15, 2016.

In February 2017, MIFSA and MCB refinanced the March 2014 and August 2014 term loans, both of which were due March 2021. The Company accounted for the term loan refinancing as a debt modification, which resulted in a $10.0 million charge included within the other expense line in the consolidated statement of operations. The refinanced term loan had an initial aggregate principal amount of $1,865.0 million, is due September 2024 and bears interest at London Interbank Offered Rate ("LIBOR") plus 2.75% ("the 2017 Term Loan"). The 2017 Term Loan requires quarterly principal amortization payments in an amount equal to 0.25% of the original principal balance of the 2017 Term Loan, and may be reduced by making optional prepayments. The quarterly principal amortization is payable on the last day of each calendar quarter, which commenced on June 30, 2017, with the remaining balance due September 2024. In January 2019, the Company made a $25.0 million prepayment on the 2017 Term Loan. In making this payment, the Company satisfied certain obligations included within external debt agreements to reinvest proceeds from the sale of assets and businesses within the year of the respective transaction or use the proceeds to pay down debt.

In conjunction with the term loan refinancing, MIFSA and MCB entered into a $900.0 million revolving credit facility that matures on February 28, 2022 (the "Revolving Credit Facility"). The Revolving Credit Facility bears interest at LIBOR plus 2.25% and contains a $50.0 million letter of credit provision, of which none had been issued as of December 27, 2019. Unused commitments on the Revolving Credit Facility are subject to an annual commitment fee, which was 0.275% as of December 27, 2019, and the fee applied to outstanding letters of credit is based on the interest rate applied to borrowings. The Revolving Credit Facility added certain wholly owned subsidiaries of the Company as borrowers, in addition to MIFSA and MCB.

The 2017 Term Loan and Revolving Credit Facility (collectively "the 2017 Facilities") are fully and unconditionally guaranteed by Mallinckrodt plc, certain of its direct or indirect wholly owned U.S. subsidiaries and each of its direct or indirect wholly owned subsidiaries that owns directly or indirectly any wholly owned U.S. subsidiaries and certain of its other subsidiaries (collectively, "the Guarantors"). The 2017 Facilities are secured by a security interest in certain assets of MIFSA, MCB and the Guarantors. The 2017 Facilities contain customary affirmative and negative covenants, which include, among other things, restrictions on the Company's ability to declare or pay dividends, create liens, incur additional indebtedness, enter into sale and lease-back transactions, make investments, dispose of assets and merge or consolidate with any other person.

In July 2017, Mallinckrodt Securitization S.à r.l. ("Mallinckrodt Securitization"), a wholly owned special purpose subsidiary of the Company, entered into a $250.0 million accounts receivable securitization facility ("the Receivable Securitization") with PNC Bank, National Association, as administrative agent, and Mallinckrodt LLC, a wholly owned subsidiary of the Company, as initial servicer (the "Servicer"). Loans under the Receivable Securitization bore interest (including facility fees) at a rate equal to one month LIBOR rate plus a margin of 0.90%. In July 2019, the Company repaid $200.0 million of outstanding obligations. Upon payment in full of such outstanding obligations under the Receivable Securitization, the $250.0 million receivables securitization program was automatically terminated (including (i) the Receivable Securitization, (ii) the Amended and Restated Purchase and Sale Agreement,

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dated as of July 28, 2017 (as amended, the "Purchase and Sale Agreement"), among certain wholly owned subsidiaries of the Company, the Servicer, and Mallinckrodt Securitization, (iii) the Sale Agreements (together, the "Sale Agreements"), between Mallinckrodt LLC and certain subsidiaries of the Company and (iv) all agreements and documents entered into in connection therewith, and all security interests, liens or other rights securing the receivables securitization program were automatically released and terminated. Certain indemnification and other obligations in the Receivable Securitization, the Purchase and Sale Agreement, the Sale Agreements and the documents related thereto, which by their terms expressly survive termination of such documents, will survive the termination of Mallinckrodt Securitization's receivables securitization program.

In February 2018, in connection with the Sucampo Acquisition, MIFSA and MCB issued a $600.0 million senior secured term loan due February 2025 (the "2018 Term Loan"). The variable-rate loan bears an interest rate of LIBOR plus 3.00% basis points and was issued with a discount of 0.25%. The incremental term loan requires quarterly principal amortization payments in an amount equal to 0.25% of the original principal balance of the incremental term loan, and may be reduced by making optional prepayments. The quarterly principal amortization is payable on the last day of each calendar quarter, which commenced on June 30, 2018. In February 2019, the Company made a $175.0 million prepayment on the term loan due February 2025. In making this payment, the Company satisfied certain obligations included within external debt agreements to reinvest proceeds from the sale of assets and businesses within the year of the respective transaction or use the proceeds to pay down debt.

In December 2019, upon the terms and conditions set forth in a confidential offering memorandum dated November 5, 2019, the Issuers, completed private offers to exchange (the "2019 Exchange Offers") (i) $83.2 million of the 2020 Notes issued by the Issuers for $70.2 million of new 10.00% Second Lien Senior Secured Notes due April 2025 to be issued by the Issuers (the "2025 Notes") and (ii) $52.9 million of the 2022 Notes, $216.4 million of the April 2023 Notes, $144.7 million of the October 2023 Notes and $208.9 million of the 2025 Notes issued by the Issuers (collectively, and together with the 2020 Notes, the "Existing Notes") for $252.7 million of 2025 Notes. The 2025 Notes are subject to an indenture that contains customary covenants and events of default (subject in certain cases to customary grace and cure periods). The 2025 Notes are secured by a second lien security interest in all collateral that currently secures Mallinckrodt plc's senior secured notes, subject to certain exceptions. The 2025 Notes are guaranteed by each entity that currently guarantees Mallinckrodt plc's senior secured notes, subject to certain exceptions. The Issuers may redeem any or all of the 2025 Notes at any time at specified redemption prices. The Issuers are obligated to (a) offer to repurchase all of the 2025 Notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, upon the occurrence of certain change of control events and (b) offer to repurchase 2025 Notes with the net proceeds of certain asset sales at a price equal to 100% of their principal amount plus accrued and unpaid interest, if any. These obligations are subject to certain qualifications and exceptions.

The Company accounted for the 2019 Exchange Offers as a debt extinguishment, which resulted in the extinguishment of $383.2 million of principal of Existing Notes and the transfer of $322.9 million of Existing Notes to 2025 Notes. The exchanges also resulted in the capitalization of $10.1 million of deferred financing fees related to the 2025 Notes. In conjunction with the exchanges, the Company recorded a gain on debt extinguishment of $377.4 million primarily associated with retiring a portion of its Existing Notes at less than face value, net of the write-off of associated deferred financing fees of $4.9 million.

As of December 27, 2019, the applicable interest rate and outstanding borrowings on the Company's variable-rate debt instruments were as follows:

	Applicable interest rate			Outstanding borrowings
Term loan due September 2024	4.85	%		$	1,520.8
Term loan due February 2025	4.91			403.6
Revolving credit facility	4.23			900.0

The aggregate amounts of debt maturing during the next five fiscal years are as follows:

Fiscal 2020	$	634.5
Fiscal 2021	19.7
Fiscal 2022	1,540.4
Fiscal 2023	672.5
Fiscal 2024	1,462.5

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15.	Retirement Plans

Pension Plan Termination

On March 31, 2016, the Company terminated six of its previously frozen U.S. pension plans. During fiscal 2017, approximately $212.9 million of obligations and corresponding pension assets were transferred to a third party for settlement of the terminated pension plans through the purchase of annuity contracts. As a result of the settlement, the Company made a $62.3 million cash contribution to the terminated plans and recognized a $70.5 million charge included within other income (expense) during fiscal 2017.

Defined Benefit Plans

The Company sponsors a number of defined benefit retirement plans covering certain of its U.S. employees and non-U.S. employees. As of December 27, 2019, U.S. plans represented 35.0% of the Company's remaining projected benefit obligation. The Company generally does not provide postretirement benefits other than retirement plan benefits for its employees; however, certain of the Company's U.S. employees participate in postretirement benefit plans that provide medical benefits. These plans are unfunded.

The net periodic benefit cost (credit) for the Company's pension and postretirement benefit plans was as follows:

	Pension Benefits												Postretirement Benefits
	Fiscal Year												Fiscal Year
	2019				2018				2017				2019				2018				2017
Service cost	$	0.1			$	0.2			$	1.4			$	—			$	—			$	—
Interest cost	0.7				0.6				2.3				1.6				1.5				1.7
Expected return on plan assets	—				—				(1.3		)		—				—				—
Amortization of net actuarial loss	0.5				0.5				2.7				—				0.1				—
Amortization of prior service cost	0.2				0.1				0.2				(2.1		)		(2.1		)		(2.0		)
Loss (gain) on plan settlements	—				0.1				71.1				—				(0.7		)		(0.9		)
Curtailment gain	—				—				(1.0		)		—				—				—
Net periodic benefit cost (credit)	$	1.5			$	1.5			$	75.4			$	(0.5	)		$	(1.2	)		$	(1.2	)

The following table represents the changes in benefit obligations and the net amounts recognized on the consolidated balance sheets for pension and postretirement benefit plans at the end of each period:

	Pension Benefits								Postretirement Benefits
	December 27, 2019				December 28, 2018				December 27, 2019				December 28, 2018
Change in benefit obligations:
Projected benefit obligations at beginning of year	$	26.1			$	27.8			$	39.8			$	45.6
Service cost	0.1				0.2				—				—
Interest cost	0.7				0.6				1.6				1.5
Actuarial loss (gain)	2.3				0.7				1.7				(3.9		)
Benefits and administrative expenses paid	(1.7		)		(1.6		)		(2.6		)		(2.7		)
Plan settlements	(0.2		)		(0.8		)		—				(0.7		)
Currency translation	(0.3		)		(0.8		)		—				—
Projected benefit obligations at end of year	$	27.0			$	26.1			$	40.5			$	39.8

The accumulated benefit obligation for pension plans with projected benefit obligations in excess of plan assets do not significantly differ from the amounts recognized on the consolidated balance sheet, as noted in the table above, since all of the Company's U.S. pension plans are frozen.

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	Pension Benefits								Postretirement Benefits
	December 27, 2019				December 28, 2018				December 27, 2019				December 28, 2018
Amounts recognized on the consolidated balance sheet:
Current liabilities	$	(1.8	)		$	(2.0	)		$	(3.3	)		$	(3.4	)
Non-current liabilities	(25.2		)		(24.1		)		(37.2		)		(36.4		)
Net amount recognized on the consolidated balance sheet	$	(27.0	)		$	(26.1	)		$	(40.5	)		$	(39.8	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net actuarial (loss) gain	$	(10.1	)		$	(8.4	)		$	(0.8	)		$	0.9
Prior service (cost) credit	(0.2		)		(0.4		)		5.9				8.1
Net amount recognized in accumulated other comprehensive loss	$	(10.3	)		$	(8.8	)		$	5.1			$	9.0

The estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic benefit cost (credit) in fiscal 2020 are as follows:

	Pension Benefits				Postretirement Benefits
Amortization of net actuarial loss	$	0.7			$	—
Amortization of prior service cost (credit)	0.1				(2.1		)

Actuarial Assumptions

Weighted-average assumptions used each period to determine net periodic benefit cost for the Company's pension plans were as follows:

	U.S. Plans									Non-U.S. Plans
	Fiscal Year									Fiscal Year
	2019			2018			2017			2019			2018			2017
Discount rate	4.0	%		3.3	%		3.0	%		2.0	%		1.9	%		1.8	%
Rate of compensation increase	—	%		—	%		—	%		2.5	%		2.5	%		2.5	%

Weighted-average assumptions used each period to determine benefit obligations for the Company's pension plans were as follows:

	U.S. Plans									Non-U.S. Plans
	Fiscal Year									Fiscal Year
	2019			2018			2017			2019			2018			2017
Discount rate	2.8	%		4.0	%		3.3	%		1.3	%		2.0	%		1.9	%
Rate of compensation increase	—	%		—	%		—	%		2.5	%		2.5	%		2.5	%

For the Company's unfunded U.S. plans, the discount rate is based on the market rate for a broad population of AA-rated (Moody's or S&P) corporate bonds over $250.0 million. For the Company's U.S. plans that were funded in prior periods, the discount rate was based on the estimated final settlement discount rates based on quotes received from a group of well-rated insurance carriers who are active in the single premium group annuity marketplace. The group of insurance carriers are rated A or better by AM best.

The weighted-average discount rate used to determine net periodic benefit credit and obligations for the Company's postretirement benefit plans were as follows:

	Fiscal Year
	2019			2018			2017
Net periodic benefit credit	4.1	%		3.4	%		3.7	%
Benefit obligations	3.0	%		4.1	%		3.4	%

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Healthcare cost trend assumptions for postretirement benefit plans are as follows:

	December 27, 2019			December 28, 2018
Healthcare cost trend rate assumed for next fiscal year	5.8	%		6.3	%
Rate to which the cost trend rate is assumed to decline	4.5	%		4.5	%
Fiscal year the ultimate trend rate is achieved	2038			2038

Contributions

The Company's funding policy is to make contributions in accordance with the laws and customs of the various countries in which the Company operates, as well as to make discretionary voluntary contributions from time to time. In fiscal 2019 and 2018, the Company made $1.9 million and $2.4 million in contributions, respectively, to the Company's pension plans.

 

Expected Future Benefit Payments

Benefit payments expected to be paid, reflecting future expected service as appropriate, were as follows:

	Pension Benefits				Postretirement Benefits
Fiscal 2020	$	1.8			$	3.4
Fiscal 2021	1.7				3.2
Fiscal 2022	1.6				3.0
Fiscal 2023	1.6				2.9
Fiscal 2024	1.6				2.8
Fiscal 2025 - 2029	7.2				12.6

Defined Contribution Retirement Plans

The Company maintains one active tax-qualified 401(k) retirement plan and one active non-qualified deferred compensation plan in the U.S. The 401(k) retirement plan provides for an automatic Company contribution of three percent of an eligible employee's pay, with an additional Company matching contribution generally equal to 50.0% of each employee's elective contribution to the plan up to six percent of the employee's eligible pay. The deferred compensation plan permits eligible employees to defer a portion of their compensation. Total defined contribution expense related to continuing operations was $21.9 million, $25.3 million, and $25.2 million for fiscal 2019, 2018 and 2017, respectively.

Rabbi Trusts and Other Investments

The Company maintains several rabbi trusts, the assets of which are used to pay retirement benefits. The rabbi trust assets are subject to the claims of the Company's creditors in the event of the Company's insolvency. Plan participants are general creditors of the Company with respect to these benefits. The trusts primarily hold life insurance policies and debt and equity securities, the value of which is included in other assets on the consolidated balance sheets. Note 20 provides additional information regarding the debt and equity securities. During fiscal 2019, a portion of these policies were liquidated. The carrying value of the 62 and 118 life insurance contracts held by these trusts was $43.8 million and $58.4 million as of December 27, 2019 and December 28, 2018, respectively. These contracts had a total death benefit of $94.0 million and $142.9 million at December 27, 2019 and December 28, 2018, respectively. However, there are outstanding loans against the policies amounting to $23.6 million and $43.8 million at December 27, 2019 and December 28, 2018, respectively.

The Company has insurance contracts that serve as collateral for certain of the Company's non-U.S. pension plan benefits. These insurance contracts totaled $7.3 million and $8.0 million at December 27, 2019 and December 28, 2018, respectively. These amounts were included in other assets on the consolidated balance sheets.

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16.	Equity

Preferred Shares

Mallinckrodt is authorized to issue 500,000,000 preferred shares, par value of $0.20 per share, none of which were issued or outstanding at December 27, 2019. Rights as to dividends, return of capital, redemption, conversion, voting and otherwise with respect to these shares may be determined by Mallinckrodt's Board of Directors on or before the time of issuance. In the event of the liquidation of the Company, the holders of any preferred shares then outstanding would, if issued on such terms that they carry a preferential distribution entitlement on liquidation, be entitled to payment to them of the amount for which the preferred shares were subscribed and any unpaid dividends prior to any payment to the ordinary shareholders.

Share Repurchases

From time to time, the Company's Board of Directors have authorized share repurchase programs, as set forth below:

	March 2017 Repurchase Program (1)							March 2016 Repurchase Program
	Number of Shares			Amount				Number of Shares			Amount
Authorized repurchase amount				$	1,000.0						$	350.0
Repurchases:
Three months ended December 30, 2016 (2)	—			—				1,501,676			84.0
Fiscal 2017	13,490,448			380.6				5,366,741			266.0
Fiscal 2018	3,610,968			55.2				—			—
Fiscal 2019	—			—				—			—
Remaining amount available				$	564.2						$	—

(1)	The March 2017 Program has no time limit or expiration date, and the Company currently expects to fully utilize the program.

(2)

On May 17, 2016, the Company's Board of Directors approved a change in the Company's fiscal year end to the last Friday in December from the last Friday in September. The change in fiscal year became effective for the Company's 2017 fiscal year, which began on December 31, 2016 and ended on December 29, 2017. As a result of the change in fiscal year, the Company filed a Transition Report on Form 10-Q on February 7, 2017, covering the period from October 1, 2016 through December 30, 2016 ("the three months ended December 30, 2016").

The Company also repurchases shares from certain employees in order to satisfy employee tax withholding requirements in connection with the vesting of restricted shares. In addition, the Company repurchases shares to settle certain option exercises. The Company spent $2.6 million, zero and $5.1 million to acquire shares in connection with equity-based awards in fiscal 2019, 2018 and 2017, respectively.

Treasury Shares

17.	Share Plans

Total share-based compensation cost was $33.8 million, $34.6 million and $58.5 million for fiscal 2019, 2018 and 2017, respectively. These amounts are generally included within SG&A expenses in the consolidated statements of operations. The Company recognized a related tax benefit associated with this expense of $1.2 million, zero and $11.0 million in fiscal 2019, 2018 and 2017, respectively. During fiscal 2017, the $11.0 million tax benefit was comprised of $16.0 million associated with amortization and net stock exercises, partially offset by $5.0 million associated with U.S. Tax Reform re-measurement.

Stock Compensation Plans

Over the years, the Company has adopted and amended its Mallinckrodt Pharmaceuticals Stock and Incentive Plan, which provides for the award of share options, share appreciation rights, annual performance bonuses, long-term performance awards, restricted units, restricted shares, deferred share units, promissory shares and other share-based awards (collectively, "Awards"). The maximum number of common shares to be issued as Awards, subject to adjustment as provided under the terms of the respective plans were as follows:

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		Maximum Number of Common Shares to be Issued as Awards (in millions)
2013 Plan		5.7
2015 Plan		17.8
2018 Plan		26.8

As of December 27, 2019, all equity awards held by the Company's employees were converted from equity awards issued by Questcor Pharmaceuticals, Inc. ("Questcor"), acquired during fiscal 2014, or granted under the aforementioned plans.

Share options. Share options are granted to purchase the Company's ordinary shares at prices that are equal to the fair market value of the shares on the date the share option is granted. Share options generally vest in equal annual installments over a period of four years and expire ten years after the date of grant. The grant-date fair value of share options, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. Forfeitures are estimated based on historical experience.

Share option activity and information was as follows:

	Share Options			Weighted-Average Exercise Price				Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding as of December 30, 2016	3,386,694			$	61.24
Granted	1,719,532			51.57
Exercised	(113,605	)		47.74
Expired/Forfeited	(348,637	)		68.08
Outstanding as of December 29, 2017	4,643,984			57.78
Granted	3,159,521			13.92
Exercised	(39,949	)		32.00
Expired/Forfeited	(756,505	)		52.63
Outstanding as of December 28, 2018	7,007,051			38.74
Granted	1,378,175			22.09
Exercised	(45,324	)		20.67
Expired/Forfeited	(1,449,202	)		34.80
Outstanding as of December 27, 2019	6,890,700			36.39				1.6		$	—
Vested and non-vested expected to vest as of December 27, 2019	6,376,302			37.58				7.1		$	—
Exercisable as of December 27, 2019	3,349,227			49.80				1.2		—

As of December 27, 2019, there was $20.9 million of total unrecognized compensation cost related to non-vested share option awards, which is expected to be recognized over a weighted-average period of 2.4 years.

The grant-date fair value of share options has been estimated using the Black-Scholes pricing model. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. The expected volatility assumption is based on the historical and implied volatility of the Company's peer group with similar business models. The expected life assumption is based on the contractual and vesting term of the share option, employee exercise patterns and employee post-vesting termination behavior. The expected annual dividend per share is based on the Company's current intentions regarding payment of cash dividends. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The weighted-average assumptions used in the Black-Scholes pricing model for shares granted in fiscal 2019, 2018 and 2017, along with the weighted-average grant-date fair value, were as follows:

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	Fiscal Year
	2019				2018				2017
Expected share price volatility	45.8		%		38.2		%		36.0		%
Risk-free interest rate	2.2		%		2.6		%		2.0		%
Expected annual dividend per share	—		%		—		%		—		%
Expected life of options (in years)	5.3				5.3				5.3
Fair value per option	$	9.66			$	5.32			$	18.36

In fiscal 2019, 2018 and 2017, the total intrinsic value of options exercised was $0.3 million, $0.2 million and $1.4 million, respectively, and the related tax benefit was $0.1 million, $0.1 million and $0.5 million, respectively.

Restricted share units. Recipients of restricted share units ("RSUs") have no voting rights and receive dividend equivalent units that vest upon the vesting of the related shares. RSUs generally vest in equal annual installments over a period of four years. Restrictions on RSUs lapse upon normal retirement, death or disability of the employee. The grant-date fair value of RSUs, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the service period. The fair market value of RSUs granted is determined based on the market value of the Company's shares on the date of grant.

RSU activity was as follows:

	Shares			Weighted-Average Grant-Date Fair Value
Non-vested as of December 30, 2016	883,462			$	71.03
Granted	655,282			50.74
Exercised	(263,189	)		69.14
Expired/Forfeited	(169,789	)		68.57
Non-vested as of December 29, 2017	1,105,766			60.08
Granted	1,222,568			14.58
Exercised	(433,354	)		57.93
Expired/Forfeited	(209,879	)		44.38
Non-vested as of December 28, 2018	1,685,101			29.54
Granted	755,180			20.13
Exercised	(713,274	)		35.29
Expired/Forfeited	(307,987	)		24.81
Non-vested as of December 27, 2019	1,419,020			22.68

The total fair value of Mallinckrodt RSUs granted during fiscal 2019 was $15.2 million. The total vest date fair value of Mallinckrodt RSUs vested during fiscal 2019 was $25.2 million. As of December 27, 2019, there was $20.6 million of total unrecognized compensation cost related to non-vested RSUs granted, which is expected to be recognized over a weighted-average period of 2.3 years.

Performance share units. Similar to recipients of RSUs, recipients of performance share units ("PSUs") have no voting rights and receive dividend equivalent units. The grant-date fair value of PSUs, adjusted for estimated forfeitures, is generally recognized as expense on a straight-line basis from the grant-date through the end of the performance period. The vesting of PSUs and related dividend equivalent units is generally based on various performance metrics and relative total shareholder return (total shareholder return for the Company as compared to total shareholder return of the PSU peer group), measured over a three year performance period. The PSU peer group is comprised of various healthcare companies which attempts to replicate the Company's mix of businesses. Depending on Mallinckrodt's relative performance during the performance period, a recipient of the award is entitled to receive a number of ordinary shares equal to a percentage, ranging from 0.0% to 200.0%, of the award granted.

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PSU activity was as follows ⁽¹⁾:

	Shares			Weighted-Average Grant-Date Fair Value
Non-vested as of December 30, 2016	265,648			$	88.51
Granted	348,963			51.73
Forfeited	(48,606	)		107.00
Vested	(61,554	)		62.65
Non-vested as of December 29, 2017	504,451			64.44
Granted	770,714			13.80
Forfeited	(89,614	)		59.18
Vested	(24,022	)		98.27
Non-vested as of December 28, 2018	1,161,529			28.61
Granted	448,363			32.46
Forfeited	(414,387	)		30.54
Non-vested as of December 27, 2019	1,195,505			23.85

(1)    The number of shares disclosed within this table are at the target number of 100.0%.

The Company generally uses the Monte Carlo model to estimate the probability of satisfying the performance criteria and the resulting fair value of PSU awards. The assumptions used in the Monte Carlo model for PSUs granted during each year were as follows:

	Fiscal Year
	2019			2018			2017
Expected stock price volatility	55.2	%		56.9	%		47.5	%
Peer group stock price volatility	41.3	%		39.1	%		39.9	%
Correlation of returns	47.8	%		2.1	%		17.0	%

The weighted-average grant-date fair value per share of PSUs granted during fiscal 2019 was $32.46. As of December 27, 2019, there was $10.5 million of unrecognized compensation cost related to PSUs, which is expected to be recognized over a weighted-average period of 1.8 years.

Restricted stock awards. Recipients of restricted stock awards ("RSAs") pertained solely to converted awards from Questcor, which were converted at identical terms to their original award. The grant-date fair value of RSAs, adjusted for estimated forfeitures, was recognized as expense on a straight-line basis over the service period. The weighted average grant-date fair value per share was $70.88.

	Shares
Non-vested as of December 30, 2016	14,868
Vested	(7,970	)
Forfeited	(2,223	)
Non-vested as of December 29, 2017	4,675
Vested	(3,970	)
Forfeited	(705	)
Non-vested as of December 28, 2018	—

Employee Stock Purchase Plans

Effective March 16, 2016, upon approval by the shareholders of Mallinckrodt, the Company adopted a new qualified Mallinckrodt Employee Stock Purchase Plan ("ESPP"). Substantially all full-time employees of the Company's U.S. subsidiaries and employees of certain qualified non-U.S. subsidiaries are eligible to participate in the ESPP. Eligible employees authorize payroll deductions to be made to purchase shares at 15.0% below the market price at the beginning or end of an offering period.

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Employees are eligible to authorize withholdings such that purchases of shares may amount to $25,000 of fair market value for each calendar year as prescribed by the Internal Revenue Code Section 423. Mallinckrodt has elected to deliver shares by utilizing treasury stock accumulated by the Company. The ESPP was suspended effective June 30, 2019 and remains unavailable as of December 27, 2019.

18.	Guarantees

In disposing of assets or businesses, the Company has from time to time provided representations, warranties and indemnities to cover various risks and liabilities, including unknown damage to assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities related to periods prior to disposition. The Company assesses the probability of potential liabilities related to such representations, warranties and indemnities and adjusts potential liabilities as a result of changes in facts and circumstances. The Company believes, given the information currently available, that the ultimate resolutions will not have a material adverse effect on its financial condition, results of operations and cash flows.

In connection with the sale of the Specialty Chemical business (formerly known as Mallinckrodt Baker) in fiscal 2010, the Company agreed to indemnify the purchaser with respect to various matters, including certain environmental, health, safety, tax and other matters. The indemnification obligations relating to certain environmental, health and safety matters have a term of 17 years from the sale, while some of the other indemnification obligations have an indefinite term. The amount of the liability relating to all of these indemnification obligations included in other liabilities on the Company's consolidated balance sheets at December 27, 2019 and December 28, 2018 was $15.0 million and $14.6 million, respectively, of which $12.3 million and $11.8 million, respectively, related to environmental, health and safety matters. The value of the environmental, health and safety indemnity was measured based on the probability-weighted present value of the costs expected to be incurred to address environmental, health and safety claims made under the indemnity. The aggregate fair value of these indemnification obligations did not differ significantly from their aggregate carrying value at December 27, 2019 and December 28, 2018. As of December 27, 2019, the maximum future payments the Company could be required to make under these indemnification obligations was $70.2 million. The Company was required to pay $30.0 million into an escrow account as collateral to the purchaser, of which $18.9 million and $18.6 million remained in restricted cash, included in other long-term assets on the consolidated balance sheets at December 27, 2019 and December 28, 2018, respectively.

The Company has recorded liabilities for known indemnification obligations included as part of environmental liabilities, which are discussed in Note 19.

The Company is also liable for product performance; however the Company believes, given the information currently available, that the ultimate resolution of any such claims will not have a material adverse effect on its financial condition, results of operations and cash flows.

19.	Commitments and Contingencies

The Company has purchase obligations related to commitments to purchase certain goods and services. At December 27, 2019, such obligations were as follows:

Fiscal 2020	$	63.4
Fiscal 2021	1.7
Fiscal 2022	1.7
Fiscal 2023	1.7
Fiscal 2024	1.6

The Company is subject to various legal proceedings and claims, including patent infringement claims, product liability matters, personal injury, environmental matters, employment disputes, contractual disputes and other commercial disputes, including those described below. The Company believes that these legal proceedings and claims likely will be resolved over an extended period of time. Although it is not feasible to predict the outcome of these matters, the Company believes, unless indicated below, given the

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information currently available, that their ultimate resolution will not have a material adverse effect on its financial condition, results of operations and cash flows.

Governmental Proceedings

Opioid-Related Matters

Since 2017, multiple U.S. states, counties, a territory, other governmental persons or entities and private plaintiffs have filed lawsuits against certain entities of the Company, as well as various other manufacturers, distributors, pharmacies, pharmacy benefit managers, individual doctors and/or others, asserting claims relating to defendants' alleged sales, marketing, distribution, reimbursement, prescribing, dispensing and/or other practices with respect to prescription opioid medications, including certain of the Company's products. As of February 25, 2020, the cases the Company is aware of include, but are not limited to, approximately 2,496 cases filed by counties, cities, Native American tribes and/or other government-related persons or entities; approximately 253 cases filed by hospitals, health systems, unions, health and welfare funds or other third-party payers; approximately 110 cases filed by individuals; approximately six cases filed by schools and school boards; and 17 cases filed by the Attorneys General for New Mexico, Kentucky, Rhode Island, Georgia, Florida, Alaska, New York, Nevada, South Dakota, New Hampshire, Louisiana, Illinois, Mississippi, West Virginia, Puerto Rico, Ohio, and Idaho, with Idaho being the only state Attorney General to file in federal as opposed to state court. As of February 25, 2020, the Mallinckrodt defendants in these cases consist of Mallinckrodt plc and the following subsidiaries of Mallinckrodt plc: Mallinckrodt Enterprises LLC, Mallinckrodt LLC, SpecGx LLC, Mallinckrodt Brand Pharmaceuticals Inc., Mallinckrodt Inc., MNK 2011 Inc., and Mallinckrodt Enterprises Holdings, Inc. On November 22, 2019, the Delaware Attorney General filed a motion in the Superior Court of the State of Delaware to amend its complaint to add certain entities of the Company, which the Court granted on December 18, 2019. The Delaware Attorney General has not yet filed its amended complaint. The Hawaii Attorney General filed a complaint against the Company on June 3, 2019. On December 27, 2019, the First Circuit Court entered a written order dismissing the Hawaii Attorney General's claims against all defendants without prejudice, finding that the allegations in the State's complaint failed to give notice of the claims against the defendants. Certain of the lawsuits have been filed as putative class actions.

Most pending federal lawsuits have been coordinated in a federal multi-district litigation (“MDL”) pending in the U.S. District Court for the Northern District of Ohio. The MDL court has issued a series of case management orders permitting motion practice addressing threshold legal issues in certain cases, allowing discovery, setting pre-trial deadlines and setting a trial date on October 21, 2019 for two cases originally filed in the Northern District of Ohio by Summit County and Cuyahoga County against opioid manufacturers, distributors, and pharmacies ("Track 1 Cases"). The counties claimed that opioid manufacturers' marketing activities changed the medical standard of care for treating both chronic and acute pain, which led to increases in the sales of their prescription opioid products. They also alleged that opioid manufacturers' and distributors' failure to maintain effective controls against diversion was a substantial cause of the opioid crisis. On September 30, 2019, the Company announced that Mallinckrodt plc, along with its wholly owned subsidiaries Mallinckrodt LLC and SpecGx LLC, had executed a definitive settlement agreement and release with Cuyahoga and Summit Counties in Ohio. The settlement fully resolves the Track 1 cases against all named Mallinckrodt entities that were scheduled to go to trial in October 2019 in the MDL. Under the agreement, the Company paid $24.0 million in cash on October 1, 2019. In addition, the Company will provide $6.0 million in generic products, including addiction treatment products, and will also provide a $0.5 million payment in two years in recognition of the counties' time and expenses. Further in the event of a comprehensive resolution of government-related opioid claims, the Company has agreed that the two plaintiff counties will receive the value they would have received under such a resolution, less the payments described above. All named Mallinckrodt entities were dismissed with prejudice from the lawsuit. The value of the settlement should not be extrapolated to any other opioid-related cases or claims. On October 21, 2019, the MDL court issued a Stipulated Dismissal Order dismissing the claims against the remaining manufacturers and distributors pursuant to a settlement agreement, and severing the claims against the remaining pharmacy defendant to be heard in a subsequent trial. Judge Polster issued Suggestions of Remand for City and County of San Francisco, California and City of Chicago, Illinois. Additionally, all manufacturer defendants, including us, were severed from the “Track Two” MDL cases, City of Huntington and Cabell County Commission, West Virginia. Those cases have subsequently been remanded to the Southern District of West Virginia.

Other lawsuits remain pending in various state courts. In some jurisdictions, such as Arizona, California, Connecticut, Illinois, Massachusetts, New York, Pennsylvania, South Carolina, Texas, Utah and West Virginia, certain of the 234 state lawsuits have been consolidated or coordinated for pre-trial proceedings before a single court within their respective state court systems. State cases are generally at the pleading and/or discovery stage.

The lawsuits assert a variety of claims, including, but not limited to, public nuisance, negligence, civil conspiracy, fraud, violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) or similar state laws, violations of state Controlled Substances Acts or state False Claims Acts, product liability, consumer fraud, unfair or deceptive trade practices, false advertising, insurance fraud, unjust enrichment, negligence, negligent misrepresentation, and other common law and statutory claims arising from defendants' manufacturing, distribution, marketing and promotion of opioids and seek restitution, damages, injunctive and other relief

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and attorneys' fees and costs. The claims generally are based on alleged misrepresentations and/or omissions in connection with the sale and marketing of prescription opioid medications and/or an alleged failure to take adequate steps to prevent diversion.

Subsequent to December 27, 2019, the Company announced an agreement in principle on the terms of a global settlement of all opioid-related claims against the Company and its subsidiaries. See Note 24 for further information.

In addition to the lawsuits described above, certain entities of the Company have received subpoenas and civil investigative demands ("CID(s)") for information concerning the sale, marketing and/or distribution of prescription opioid medications and the Company's suspicious order monitoring programs, including from the U.S. Department of Justice ("DOJ") and the Attorneys General for Missouri, New Hampshire, Kentucky, Washington, Alaska, South Carolina, Puerto Rico, New York, West Virginia, Indiana, the Divisions of Consumer Protection and Occupational and Professional Licensing of the Utah Department of Commerce, and the New York State Department of Financial Services. The Company has been contacted by the coalition of State Attorneys General investigating the role manufacturers and distributors may have had in contributing to the increased use of opioids in the U.S. On January 27, 2018, the Company received a grand jury subpoena from the U.S. Attorneys' Office (“USAO”) for the Southern District of Florida for documents related to the distribution, marketing and sale of generic oxymorphone products. On April 17, 2019, the Company received a grand jury subpoena from the USAO for the Eastern District of New York ("EDNY") for documents related to the sales and marketing of controlled substances, the policies and procedures regarding controlled substances, and other related documents. On June 4, 2019, the Company received a rider from the USAO for EDNY requesting additional documents regarding the Company's anti-diversion program. The Company is responding or has responded to these subpoenas, CIDs and any informal requests for documents.

In August 2018, the Company received a letter from the leaders of the Energy and Commerce Committee in the U.S. House of Representatives requesting a range of documents relating to its marketing and distribution of opioids. The Company completed its response to this letter in December 2018. The Company received a follow-up letter in January 2020 and provided the committee a response. The Company is cooperating with the investigation.

The Attorneys General for Kentucky, Alaska, New York, New Hampshire, West Virginia and Puerto Rico have subsequently filed lawsuits against the Company. Similar subpoenas and investigations may be brought by others or the foregoing matters may be expanded or result in litigation. Since these investigations and/or lawsuits are in early stages, the Company is unable to predict outcomes or estimate a range of reasonably possible losses.

New York State Opioid Stewardship Act. On October 24, 2018, the Company filed suit in the U.S. District Court for the Southern District of New York against the State of New York, asking the court to declare New York State's Opioid Stewardship Act (“OSA”) unconstitutional and to enjoin its enforcement. On December 19, 2018, the court declared the OSA unconstitutional and granted the Company's motion for preliminary injunctive relief. On January 17, 2019, the State of New York appealed the court's decision. The appeal has been fully briefed and argued before the Second Circuit, and the parties are awaiting a decision. In April 2019, the State of New York passed its 2020 budget, which amended the OSA so that if the OSA decision is reversed on appeal, the OSA would apply only to the sale or distribution of certain opioids in New York for 2017 and 2018 and, effective July 1, 2019, imposed an excise tax on certain opioids.

DEA Investigation. In November 2011 and October 2012, the Company received subpoenas from the U.S. Drug Enforcement Administration ("DEA") requesting production of documents relating to its suspicious order monitoring program for controlled substances. The USAO for the Eastern District of Michigan investigated the possibility that the Company failed to report suspicious orders of controlled substances during the period 2006-2011 in violation of the Controlled Substances Act and its related regulations. The USAO for the Northern District of New York and Office of Chief Counsel for the U.S. DEA investigated the possibility that the Company failed to maintain appropriate records and security measures with respect to manufacturing of certain controlled substances at its Hobart facility during the period 2012-2013. In July 2017, the Company entered into a final settlement with the DEA and the USAOs for Eastern District of Michigan and the Northern District of New York to settle these investigations. As part of the agreement, the Company paid $35.0 million to resolve all potential claims and agreed, as part of a Memorandum of Agreement (“MOA”), to utilize all available transaction information to identify suspicious orders of any Mallinckrodt controlled substance product and to report to the DEA when it concludes that chargeback data or other information indicates that a downstream registrant poses a risk of diversion, among other things. The MOA remains in effect until July 10, 2020.

Other Matters

SEC Subpoena. In August 2019, the Company received a subpoena from the U.S. Securities and Exchange Commission (“SEC”) for documents related to the Company's disclosure of its dispute with the U.S. Department of Health and Human Services ("HHS") and Centers for Medicare & Medicaid Services ("CMS" and together with HHS, the "Agency") concerning the base date average manufacturer price ("AMP") under the Medicaid Drug Rebate Program for Mallinckrodt's Acthar^® Gel (repository corticotropin injection) ("Acthar Gel"), which is now the subject of litigation between the Company and the Agency (see Medicaid Lawsuit below). The Company is cooperating with the SEC's investigation.

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Medicaid Lawsuit. In May 2019, the Company filed a lawsuit under the Administrative Procedure Act ("APA") in federal district court for the District of Columbia against the Agency. The dispute involves the base date AMP under the Medicaid Drug Rebate Program for Acthar Gel. A drug's “base date AMP” is used to calculate the Medicaid rebate amount payable by the drug's manufacturer to state Medicaid agencies when the drug is prescribed to Medicaid beneficiaries. At issue in the lawsuit is whether FDA's 2010 approval of a new drug application for use of Acthar Gel in treating infantile spasms rendered Acthar Gel eligible for a new base date AMP, as indicated by CMS's written communications in 2012. In May 2019, CMS indicated that if the Company failed to revert to use of the original base date AMP in its calculation of Acthar Medicaid rebates, CMS would identify the Company as being out of compliance with its Medicaid Drug Rebate Program reporting requirements, among other potential actions, triggering certain negative consequences. As such, the Company filed a lawsuit alleging (i) that CMS has violated the Medicaid drug rebate statute, (ii) that CMS has violated its own regulations defining “single source drug,” (iii) that CMS has failed to adequately explain its change in position based on two letters that CMS sent Questcor Pharmaceuticals Inc. ("Questcor") in 2012 regarding the base date AMP for Acthar Gel, (iv) that CMS failed to give the Company fair notice of its latest position, and (v) that CMS should be prohibited from applying its new position retroactively. The court held a hearing regarding this matter on August 2, 2019 and the court took the matter under advisement. While the Company believes that its lawsuit has strong factual and legal bases, as of December 27, 2019, the potential for retroactive non-recurring charges could range from zero to approximately $630.0 million.

Florida Civil Investigative Demand. In February 2019, the Company received a CID from the U.S. Attorney's Office for the Middle District of Florida for documents related to alleged payments to healthcare providers in Florida and whether those payments violated the Anti-Kickback Statute. The Company is cooperating with the investigation.

U.S. House Committee Investigation. In January 2019, the Company along with 11 other pharmaceutical companies, received a letter from the U.S. House Committee on Oversight and Reform requesting information relating to the Company's pricing strategy for Acthar Gel and related matters. The Company is cooperating with the Committee's investigation.

Boston Civil Investigative Demand. In January 2019, the Company received a CID from the U.S. Attorney's Office for the District of Massachusetts for documents related to the Company's participation in the Medicaid Drug Rebate Program. The Company is cooperating with the investigation. 

Generic Pricing Subpoena. In March 2018, the Company received a grand jury subpoena issued by the U.S. District Court for the Eastern District of Pennsylvania pursuant to which the Antitrust Division of the DOJ is seeking documents regarding generic products and pricing, communications with generic competitors and other related matters. The Company is in the process of responding to this subpoena and intends to cooperate in the investigation.

Boston Subpoena. In December 2016, the Company received a subpoena from the USAO for the District of Massachusetts for documents related to the Company's payments to charitable foundations, the provision of financial and other support by charitable foundations to patients receiving Acthar Gel, and related matters. The Company responded to these requests and continues to cooperate in the investigation.

Texas Pricing Investigation. In November 2014, the Company received a CID from the Civil Medicaid Fraud Division of the Texas Attorney General's Office. According to the CID, the Attorney General's office is investigating the possibility of false reporting of information by the Company regarding the prices of certain of its drugs used by Texas Medicaid to establish reimbursement rates for pharmacies that dispensed the Company's drugs to Texas Medicaid recipients. The Company responded to these requests. In December 2018, the Company entered into a final settlement with the Texas Attorney General's Office to resolve all potential claims in the investigation and recorded a corresponding expense, which is included in SG&A in the consolidated statement of operations.

MNK 2011 Inc. (formerly known as Mallinckrodt Inc.) v. U.S. Food and Drug Administration and United States of America. In November 2014, the FDA reclassified the Company's Methylphenidate ER in the Orange Book: Approved Drug Products with Therapeutic Equivalence ("the Orange Book"). In November 2014, the Company filed a Complaint in the U.S. District Court for the District of Maryland Greenbelt Division against the FDA and the United States (the "MD Complaint") for judicial review of the FDA's reclassification. In July 2015, the court granted the FDA's motion to dismiss with respect to three of the five counts in the MD Complaint and granted summary judgment in favor of the FDA with respect to the two remaining counts (the “MD Order”). On October 18, 2016, the FDA initiated proceedings, proposing to withdraw approval of the Company's Abbreviated New Drug Application ("ANDA") for Methylphenidate ER. On October 21, 2016, the U.S. Court of Appeals for the Fourth Circuit issued an order placing the Company's appeal of the MD Order in abeyance pending the outcome of the withdrawal proceedings. The parties exchanged documents and in April 2018, the Company filed its submission in support of its position in the withdrawal proceedings. A potential outcome of the withdrawal proceedings is that the Company's Methylphenidate ER products may lose their FDA approval and have to be withdrawn from the market.

Therakos^® Subpoena. In March 2014, the USAO for the Eastern District of Pennsylvania requested the production of documents related to an investigation of the U.S. promotion of Therakos' drug/device system UVADEX/UVAR XTS and UVADEX/CELLEX (collectively, the "Therakos System"), for indications not approved by the FDA, including treatment of patients with graft versus host disease ("GvHD") and solid organ transplant patients, including pediatric patients. The investigation also includes Therakos' efforts to secure FDA approval for additional uses of, and alleged quality issues relating to, UVADEX/UVAR. In August 2015, the USAO for

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the Eastern District of Pennsylvania sent Therakos a subsequent request for documents related to the investigation and has since made certain related requests. The Company responded to these requests and continues to cooperate in the investigation.

Questcor Subpoena. In September 2012, Questcor received a subpoena from the USAO for the Eastern District of Pennsylvania for information relating to its promotional practices related to Acthar Gel. Questcor subsequently was informed by the USAO for the Eastern District of Pennsylvania that the USAO for the Southern District of New York and the SEC were participating in the investigation to review Questcor's promotional practices and related matters pertaining to Acthar Gel. The current investigation also relates to Questcor's provision of financial and other support to patients, including through charitable foundations and related matters. On March 9, 2015, the Company received a "No Action" letter from the SEC regarding its review of the Company's promotional practices related to Acthar Gel. On or about March 8, 2019, the U.S. District Court for the Eastern District of Pennsylvania unsealed two qui tam actions involving the allegations under investigation by the USAO for the Eastern District of Pennsylvania. The DOJ intervened in both actions, which were later consolidated. In September 2019, the Company executed a settlement agreement with the DOJ for $15.4 million and finalized settlements with the three qui tam plaintiffs. These settlements were paid during the three months ended September 27, 2019 and resolve the portion of the investigation and litigation involving Questcor's promotional practices related to Acthar Gel. 

On or about June 4, 2019, the DOJ filed its Complaint in Intervention in the litigation, alleging claims under the federal False Claim Act based on Questcor's relationship with and donations to an independent charitable patient co-pay foundation. The Company disagrees with the DOJ's characterization of the facts and applicable law. On January 22, 2020, the court denied the Company's motion to dismiss the Complaint in Intervention. The Company intends to vigorously defend itself in this matter. At this stage, the Company is not able to reasonably estimate the expected amount or range of cost or any loss associated with this lawsuit.

Patent Litigation

Amitiza Patent Litigation: Zydus Pharmaceuticals (USA) Inc. In January 2020, Sucampo GmbH, Sucampo Pharmaceuticals, Inc., Sucampo Pharma Americas LLC and Sucampo Pharma LLC, all subsidiaries of the Company, and Takeda Pharmaceutical Company Limited, Takeda Pharmaceuticals USA, Inc., and Takeda Pharmaceuticals America, Inc. (collectively "Takeda," the exclusive licensee under the patents in litigation) filed suit in the U.S. District Court for the District of New Jersey against Zydus Pharmaceuticals (USA) Inc. (“Zydus”) alleging that Zydus infringed U.S. Patent Nos. 7,795,312, 8,026,393, 8,338,639, 8,748,481 and 8,779,187 following receipt of a December 2019 notice from Zydus concerning its submission of an ANDA containing a Paragraph IV patent certification with the FDA for a generic version of Amitiza. The Company intends to vigorously enforce its intellectual property rights relating to Amitiza.

Amitiza Patent Litigation:  Sun Pharmaceutical Industries, Ltd. and Sun Pharmaceutical Industries, Inc. In October 2018, Sucampo AG, Sucampo Pharmaceuticals, Inc. and Sucampo Pharma LLC, all subsidiaries of the Company, and Takeda Pharmaceutical Company Limited, Takeda Pharmaceuticals USA, Inc., and Takeda Pharmaceuticals America, Inc. (collectively "Takeda," the exclusive licensee under the patents in litigation) filed suit in the U.S. District Court for the District of New Jersey against Sun Pharmaceutical Industries, Ltd. and Sun Pharmaceutical Industries, Inc. (collectively “Sun”) alleging that Sun infringed U.S. Patent Nos. 7,795,312, 8,026,393, 8,097,653, 8,338,639, 8,389,542, 8,748,481 and 8,779,187 following receipt of a September 2018 notice from Sun concerning its submission of an ANDA containing a Paragraph IV patent certification with the FDA for a generic version of Amitiza. The Company intends to vigorously enforce its intellectual property rights relating to Amitiza.

Amitiza Patent Litigation: Teva Pharmaceuticals USA, Inc. In September 2017, Sucampo AG and Sucampo Pharmaceuticals, Inc., both subsidiaries of the Company, and Takeda filed suit in the U.S. District Court for the District of New Jersey against Teva Pharmaceuticals USA, Inc. ("Teva") alleging that Teva infringed U.S. Patent Nos. 6,414,016, 6,982,283, 7,795,312, 8,026,393, 8,071,613, 8,097,653, 8,338,639, 8,389,542 and 8,748,481 following receipt of an August 2017 notice from Teva concerning its submission of an ANDA containing a Paragraph IV patent certification with the FDA for a generic version of Amitiza. On June 28, 2018, the parties entered into a settlement agreement under which Teva was granted the non-exclusive right to market a competing lubiprostone product in the U.S. under its ANDA on or after January 1, 2023, or earlier under certain circumstances.

Amitiza Patent Litigation: Amneal Pharmaceuticals, LLC. In April 2017, Sucampo AG and Sucampo Pharmaceuticals, Inc., both subsidiaries of the Company, and Takeda filed suit in the U.S. District Court for the District of New Jersey against Amneal Pharmaceuticals, LLC ("Amneal") alleging that Amneal infringed U.S. Patent Nos. 6,982,283, 8,026,393, 8,097,653, 8,338,639 and 8,389,542 following receipt of a March 2017 notice from Amneal concerning its submission of an ANDA containing a Paragraph IV patent certification with the FDA for a generic version of Amitiza. On June 28, 2018, the parties entered into a settlement agreement under which Amneal was granted the non-exclusive right to market a competing lubiprostone product in the U.S. under its ANDA on or after January 1, 2023, or earlier under certain circumstances.

Amitiza Patent Litigation: Par and DRL. Settlement and License Agreements were entered into with Anchen Pharmaceuticals, Inc., Par Pharmaceutical, Inc. and Par Pharmaceutical Companies, Inc. (collectively "Par") and Dr. Reddy's Laboratories, Inc. and Dr. Reddy's Laboratories, Ltd. (collectively "DRL") to settle Paragraph IV patent litigation with each of Par and DRL. Under the terms of the Par settlement dated September 30, 2014, Par was granted a non-exclusive license and right to market a competing generic of

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Amitiza on or after January 1, 2021, or earlier under certain circumstances. Under the terms of the DRL settlement dated September 14, 2016, DRL was granted a non-exclusive license and right to market a competing generic of Amitiza on or after January 1, 2023, or earlier under certain circumstances.

INOmax Patent Litigation: Praxair Distribution, Inc. and Praxair, Inc. (collectively “Praxair”). In February 2015, INO Therapeutics LLC and Ikaria, Inc., both subsidiaries of the Company, filed suit in the U.S. District Court for the District of Delaware against Praxair following receipt of a January 2015 notice from Praxair concerning its submission of an ANDA containing a Paragraph IV patent certification with the FDA for a nitric oxide drug product delivery system. In July 2016, the Company filed a second suit against Praxair in the U.S. District Court for the District of Delaware following receipt of a Paragraph IV notice concerning three additional patents recently added to the FDA Orange Book that was submitted by Praxair regarding its ANDA for its nitric oxide drug product delivery system. The infringement claims in the second suit were added to the original suit. In September 2016, the Company filed a third suit against Praxair in the U.S. District Court for the District of Delaware following receipt of a Paragraph IV notice concerning a fourth patent added to the FDA Orange Book that was submitted by Praxair regarding its ANDA for its nitric oxide drug product delivery system.

Trial for the suit filed in February 2015 was held in March 2017 and a decision was rendered September 5, 2017 that ruled five patents invalid and six patents not infringed. The Company appealed the decision to the Court of Appeals for the Federal Circuit. The oral arguments in the appeal occurred on February 6, 2019. Praxair received FDA approval of their ANDA for their Noxivent nitric oxide and clearance of their 510(k) for their NOxBOXi device on October 2, 2018. The appeal decision, issued on August 27, 2019, substantively affirmed the District Court decision with respect to the invalidity of the heart failure (HF) patents and the non-infringement of the delivery system infrared (DSIR) patents. The Company filed a petition for en banc review at the Federal Circuit on September 26, 2019, which the Federal Circuit denied on November 19, 2019. There has been limited commercial launch activity by Praxair. The Company intends to continue its efforts to vigorously enforce its intellectual property rights relating to INOmax in the Praxair litigation to prevent the marketing of infringing generic products prior to the expiration of the patents covering INOmax. An adverse final outcome in the appeal of the Praxair litigation decision (or a broad at-risk launch by Praxair prior to the final appellate decision) could result in the broader-scale launch of a competitive nitric oxide product before the expiration of the last of the listed patents on May 3, 2036 (November 3, 2036 including pediatric exclusivity), which could adversely affect the Company's ability to successfully maximize the value of INOmax and have an adverse effect on its financial condition, results of operations and cash flows.

INOmax Patents: IPR Proceedings. In February 2015 and March 2015, the U.S. Patent and Trademark Office ("USPTO") issued Notices of Filing Dates Accorded to Petitions for IPR petitions filed by Praxair Distribution, Inc. concerning ten patents covering INOmax (i.e., five patents expiring in 2029 and five patents expiring in 2031).

In July 2015 the USPTO Patent Trial and Appeal Board ("PTAB") issued rulings denying the institution of four of the five IPR petitions challenging the five patents expiring in 2029. The PTAB also issued a ruling in July 2015 that instituted the IPR proceeding in the fifth of this group of patents and the PTAB ruled in July 2016 that one claim of this patent survived review and is valid while the remaining claims were unpatentable. The Company believed the claim held valid by the PTAB describes and encompasses a manner in which INOmax is distributed in conjunction with its approved labeling and that Praxair infringes that claim. Praxair filed an appeal and Mallinckrodt filed a cross-appeal of this decision to the Court of Appeals for the Federal Circuit. Oral argument of that appeal occurred in January 2018. The Federal Circuit decision was issued May 16, 2018 and held all claims unpatentable (invalid).

In September 2015 the USPTO PTAB issued rulings that instituted the IPR proceedings in each of the second set of five patents that expire in 2031. In September 2016 the PTAB ruled that all claims in the five patents expiring in 2031 are patentable.

Ofirmev Patent Litigation: Altan Pharma Ltd. In March 2019, Mallinckrodt Hospital Products Inc. and Mallinckrodt Hospital Products IP Limited, both subsidiaries of the Company, and New Pharmatop LP, the current owner of the U.S. patents licensed exclusively by the Company, filed suit in the U.S. District Court for the District of Delaware against Altan Pharma Ltd. (“Altan”) alleging that Altan infringed U.S. Patent No. 6,992,218, U.S. Patent No. 9,399,012, U.S. Patent No. 9,610,265 and U.S. Patent No. 9,987,238 following receipt of a February 2019 notice from Altan concerning its submission of a new drug application, containing a Paragraph IV patent certification with the FDA for a competing version of Ofirmev. On August 29, 2019, the parties entered into a settlement agreement under which Altan was granted the non-exclusive right to market a competing intravenous acetaminophen product in the U.S. under its New Drug Application (NDA) on or after December 6, 2020, or earlier under certain circumstances.

Ofirmev Patent Litigation: Aurobindo Pharma U.S.A., Inc. In December 2017, Mallinckrodt Hospital Products Inc. and Mallinckrodt IP Unlimited Company, both subsidiaries of the Company, and New Pharmatop LP, the current owner of the two U.S. patents licensed exclusively by the Company, filed suit in the U.S. District Court for the District of Delaware against Aurobindo Pharma U.S.A., Inc. (“Aurobindo”) alleging that Aurobindo infringed U.S. Patent No. 6,992,218 ("the ‘218 patent"), U.S. Patent No. 9,399,012 ("the ‘012 patent") and U.S. Patent No. 9,610,265 ("the ‘265 patent") following receipt of a November 2017 notice from Aurobindo concerning its submission of an ANDA, containing a Paragraph IV patent certification with the FDA for a competing version of Ofirmev. On May 7, 2018 the parties entered into a settlement agreement under which Aurobindo was granted the non-exclusive right to market a competing intravenous acetaminophen product in the U.S. under its ANDA on or after December 6, 2020, or earlier under certain circumstances.

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Ofirmev Patent Litigation: B. Braun Medical Inc. In April 2017, Mallinckrodt Hospital Products Inc. and Mallinckrodt IP, both subsidiaries of the Company, and Pharmatop, the then owner of the two U.S. patents licensed exclusively by the Company, filed suit in the U.S. District Court for the District of Delaware against B. Braun Medical Inc. ("B. Braun") alleging that B. Braun infringed the '218 patent and the '012 patent following receipt of a February 2017 notice from B. Braun concerning its submission of a NDA, containing a Paragraph IV patent certification with the FDA for a competing version of Ofirmev. On October 3, 2018, the parties entered into a settlement agreement under which B. Braun was granted the non-exclusive right to market a competing intravenous acetaminophen product in the U.S. under its ANDA on or after December 6, 2020, or earlier under certain circumstances.

Ofirmev Patent Litigation: InnoPharma Licensing LLC and InnoPharma, Inc. In September 2014, Cadence and Mallinckrodt IP, both subsidiaries of the Company, and Pharmatop, the then owner of the two U.S. patents licensed exclusively by the Company, filed suit in the U.S. District Court for the District of Delaware against InnoPharma Licensing LLC and InnoPharma, Inc. (both are subsidiaries of Pfizer and collectively "InnoPharma") alleging that InnoPharma infringed U.S. Patent Nos. 6,028,222 ("the '222 patent") and 6,992,218 ("the '218 patent"). Separately, on December 1, 2016 Mallinckrodt IP Filed suit in the U.S. District Court for the District of Delaware against InnoPharma alleging that InnoPharma infringed the '012 patent. On May 4, 2017 the parties entered into settlement agreements on both suits under which InnoPharma was granted the non-exclusive right to market a competing intravenous acetaminophen product in the U.S. under its NDA on or after December 6, 2020, or earlier under certain circumstances.

Ofirmev Patent Litigation: Agila Specialties Private Limited, Inc. (now Mylan Laboratories Ltd.) and Agila Specialties Inc. (a Mylan Inc. Group), (collectively "Agila"). In December 2014, Cadence and Mallinckrodt IP, both subsidiaries of the Company, and Pharmatop filed suit in the U.S. District Court for the District of Delaware against Agila alleging that Agila infringed the '222 and the '218 patents. Separately, on December 1, 2016 Mallinckrodt IP filed suit in the U.S. District Court for the District of Delaware against Agila alleging that Agila infringed the '012 patent. On December 31, 2016, the parties entered into settlement agreements on both suits under which Agila was granted the non-exclusive right to market a competing intravenous acetaminophen product in the U.S. under its NDA on or after December 6, 2020, or earlier under certain circumstances.

The Company has successfully asserted the '222 and '218 patents and maintained their validity in both litigation and proceedings at the USPTO. The Company will continue to vigorously enforce its intellectual property rights relating to Ofirmev to prevent the marketing of infringing generic or competing products prior to December 6, 2020, which, if unsuccessful, could adversely affect the Company's ability to successfully maximize the value of Ofirmev and have an adverse effect on its financial condition, results of operations and cash flows.

Shire Development LLC, Shire LLC and Shire US, Inc. v. SpecGx LLC. In May 2018, Shire Development LLC, Shire LLC and Shire US, Inc. (collectively “Shire”) filed suit in the U.S. District Court for the District of Delaware against the Company alleging that the Company infringed U.S. Patent Nos. 6,913,768, 8,846,100, and 9,173,857 following receipt of an April 2018 notice from the Company concerning its submission of an ANDA, containing a Paragraph IV patent certification with the FDA for a competing version of Mydayis. On January 28, 2019, the parties entered into a settlement agreement under which the Company was granted the non-exclusive right to market a competing generic version of Mydayis in the U.S. under its ANDA on or after May 10, 2023 (or November 10, 2023 if any pediatric exclusivity is granted by the FDA with respect to the Mydayis product), or earlier under certain circumstances.

Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica NV v. Pharmascience Inc. and SpecGx LLC. In December 2019, Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica NV (collectively “Janssen”) filed suit in the U.S. District Courts for the Districts of New Jersey and Delaware against the Company and Pharmascience Inc. (“Pharmascience”) relating to the collaboration between Company and Pharmascience that resulted in Pharmascience's ANDA submission, containing a Paragraph IV patent certification, with the FDA for a competing version of Invega Sustenna. Janssen alleges that the Company and Pharmascience infringe U.S. Patent No. 9,439,906. The Company intends to vigorously defend its position.

Commercial and Securities Litigation

City of Marietta Litigation. On February 6, 2020, the City of Marietta, Georgia filed a putative civil class action complaint against the Company in the U.S. District Court for the Northern District of Georgia relating to the price of Acthar Gel. The complaint, which pleads one claim for unjust enrichment, purports to be brought on behalf of third-party payers and their beneficiaries and people without insurance in the United States and its Territories that paid for Acthar from four years prior to the filing of the Complaint until the date of trial. The case is captioned City of Marietta v. Mallinckrodt ARC LLC. Marietta alleges that it has paid $2.0 million to cover the cost of an Acthar Gel prescription of an employee and that the Company has been unjustly enriched as a result. The Company intends to vigorously defend itself in this matter.

Shareholder Derivative Litigation (Brandhorst). In September 2019, a purported shareholder of the Company's stock filed a shareholder derivative complaint in the United States District Court for the District of Columbia against the Company, as nominal defendant, as well as its Chief Executive Officer ("CEO") Mark Trudeau, its former Chief Financial Officer ("CFO") Matthew K. Harbaugh, its Executive Vice President Hugh O'Neill, and the following members of the Company's Board of Directors: Angus Russell, David Carlucci, J. Martin Carroll, David Norton, JoAnn Reed and Kneeland Youngblood (collectively with Trudeau,

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Harbaugh and O'Neill, the “Individual Defendants”). The lawsuit is captioned Lynn Brandhorst, derivatively on behalf of nominal defendant Mallinckrodt PLC v. Mark Trudeau et al. and relies on the allegations from the putative class action securities litigation that was filed against the Company and certain of its officers in January 2017, captioned Patricia A. Shenk v. Mallinckrodt plc, et al. described further below. The complaint asserts claims for contribution, breaches of fiduciary duty, unjust enrichment, abuse of control, and gross mismanagement, and is premised on allegations that the Individual Defendants caused the Company to make the allegedly false or misleading statements at issue in the Shenk lawsuit. The complaint seeks damages in an unspecified amount and corporate governance reforms. On November 20, 2019, this matter was stayed by agreement of the parties pending resolution of the Shenk lawsuit below. The Company and the Individual Defendants intend to vigorously defend themselves in this matter.

Humana Litigation. In August 2019, Humana Inc. filed a lawsuit against the Company in the U.S. District Court for the Central District of California alleging violations of federal and state antitrust laws; racketeering (“RICO”) violations under 18 U.S.C. § 1962(c); conspiracy to violate RICO under 18 U.S.C. § 1962(d); violations of state unfair competition, consumer fraud and deceptive trade practice laws; state insurance fraud; tortious interference with contract; and unjust enrichment related to the pricing of Acthar Gel. Humana alleges that it paid more than $700.0 million for Acthar Gel and seeks undisclosed damages from 2011 through present. The case alleges similar facts as those alleged in the MSP and Rockford matters below, and includes references to allegations at issue in a pending qui tam action against the Company in the U.S. District Court for the Eastern District of Pennsylvania (see Questcor Subpoena above) and is proceeding as Humana Inc. v. Mallinckrodt ARD LLC. The Company intends to vigorously defend itself in this matter, and on October 28, 2019, moved to dismiss the complaint. The Company's motion to dismiss remains pending.

Putative Class Action Securities Litigation (Strougo). In July 2019, a putative class action lawsuit was filed against the Company, its CEO Mark Trudeau, its CFO Bryan M. Reasons, its former Interim CFO George A. Kegler and its former CFO Matthew K. Harbaugh, in the U.S. District Court for the Southern District of New York, captioned Barbara Strougo v. Mallinckrodt plc, et al. The complaint purports to be brought on behalf of all persons who purchased or otherwise acquired Mallinckrodt's securities between February 28, 2018 and July 16, 2019. The lawsuit generally alleges that the defendants made false and misleading statements in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder related to the Company's clinical study designed to assess the efficacy and safety of its Acthar Gel in patients with amyotrophic lateral sclerosis. The lawsuit seeks monetary damages in an unspecified amount. The Company intends to vigorously defend itself in this matter. At this stage, the Company is not able to reasonably estimate the expected amount or range of cost or any loss associated with this lawsuit.

Putative Class Action Litigation - Steamfitters Local Union No. 420. In July, 2019, Steamfitters Local Union No. 420 filed a putative class action lawsuit against the Company and United BioSource Corporation in the U.S. District Court for the Eastern District of Pennsylvania, proceeding as Steamfitters Local Union No. 420 v. Mallinckrodt ARD, LLC et al. The complaint makes similar allegations as those alleged in related state and federal actions that were filed by the same plaintiff's law firm in Illinois, Pennsylvania, Tennessee and Maryland (now dismissed; see WCBE below), and includes references to allegations at issue in a pending qui tam actions against the Company in the U.S. District Court for the Eastern District of Pennsylvania (see Questcor Subpoena above). In particular, the complaint alleges RICO violations under 18 U.S.C. § 1962(c); conspiracy to violate RICO under 18 U.S.C. § 1962(c); violations of the Pennsylvania (and other states) Unfair Trade Practices and Consumer Protection laws; negligent misrepresentation; aiding and abetting/conspiracy; and unjust enrichment. The complaint also seeks declaratory and injunctive relief. On December 19, 2019, the court denied the Company's motion to dismiss the complaint. The Company intends to vigorously defend itself in this matter. At this stage, the Company is not able to reasonably estimate the expected amount or range of cost or any loss associated with this lawsuit.

Acument Global. In May 2019, Acument Global Technologies, Inc., filed a non-class complaint against the Company and other defendants in Tennessee state court alleging violations of Tennessee Consumer Protection Laws, unjust enrichment, fraud and conspiracy to defraud. The case alleges similar facts as those alleged in the MSP and Rockford matters below, and is captioned Acument Global Technologies, Inc., v. Mallinckrodt ARD Inc., et al. The Company intends to vigorously defend itself in this matter, and on July 29, 2019, moved to dismiss the complaint. The Company's motion to dismiss remains pending.

Washington County Board of Education ("WCBE"). In May 2019, WCBE filed a non-class complaint against the Company and other defendants in Maryland state court alleging violations of Maryland Consumer Protection Act, negligent misrepresentation, fraud, unjust enrichment and conspiracy to defraud. The case, which was removed to the U.S. District Court for the District of Maryland on June 24, 2019, alleges similar facts as those alleged in the MSP and Rockford matters discussed below. On January 4, 2020, the court dismissed the complaint.

Local 542. In May 2018, the International Union of Operating Engineers Local 542 filed a non-class complaint against the Company and other defendants in Pennsylvania state court alleging improper pricing and distribution of Acthar Gel, in violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Law, aiding and abetting, unjust enrichment and negligent misrepresentation. The case alleges similar facts as the MSP and Rockford matters below, and is captioned Int'l Union of Operating Engineers Local 542 v. Mallinckrodt ARD Inc., et al. Plaintiff filed an amended complaint on August 27, 2018, the Company's objections to which were denied by the court. The Company intends to continue to vigorously defend itself in this matter. On January 22, 2020, the court stayed further proceedings in this case given the overlap with the Rockford and MSP cases discussed below.

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Grifols. In March 2018, Grifols initiated arbitration against the Company, alleging breach of a Manufacturing and Supply Agreement entered into between the Company's predecessor-in-interest, Cadence Pharmaceuticals Inc., and Grifols. During 2019, the Company entered into a settlement for this matter and appropriate reserves were recorded.

Putative Class Action Litigation (MSP). In October 2017, a putative class action lawsuit was filed against the Company and United BioSource Corporation in the U.S. District Court for the Central District of California. Pursuant to a motion filed by the defendants, the case was transferred to the U.S. District Court for the Northern District of Illinois in January 2018, and is currently proceeding as MSP Recovery Claims, Series II, LLC, et al. v. Mallinckrodt ARD, Inc., et al. The Company filed a motion to dismiss on February 23, 2018, which was granted on January 25, 2019 with leave to amend. MSP filed the operative First Amended Class Action Complaint on April 10, 2019, in which it asserts claims under federal and state antitrust laws and state consumer protection laws and names additional defendants. The complaint alleges that the Company unlawfully maintained a monopoly in a purported ACTH product market by acquiring the U.S. rights to Synacthen^® Depot ("Synacthen") and reaching anti-competitive agreements with the other defendants by selling Acthar Gel through an exclusive distribution network. The complaint purports to be brought on behalf of all third-party payers, or their assignees, in the U.S. and its territories, who have, as indirect purchasers, in whole or in part, paid for, provided reimbursement for, and/or possess the recovery rights to reimbursement for the indirect purchase of Acthar Gel from August 1, 2007 to present. The Company moved to dismiss the First Amended Class Action Complaint on May 24, 2019. The Company's motion to dismiss remains pending.

Employee Stock Purchase Plan (ESPP) Securities Litigation. In July 2017, a purported purchaser of Mallinckrodt stock through Mallinckrodt's ESPPs, filed a derivative lawsuit in the Federal District Court in the Eastern District of Missouri, captioned Solomon v. Mallinckrodt plc, et al., against the Company, its CEO Mark C. Trudeau, its former CFO Matthew K. Harbaugh, its Controller Kathleen A. Schaefer, and current and former directors of the Company. On September 6, 2017, plaintiff voluntarily dismissed its complaint in the Federal District Court for the Eastern District of Missouri and refiled virtually the same complaint in the U.S. District Court for the District of Columbia. The complaint purports to be brought on behalf of all persons who purchased or otherwise acquired Mallinckrodt stock between November 25, 2014, and January 18, 2017, through the ESPPs. In the alternative, the plaintiff alleges a class action for those same purchasers/acquirers of stock in the ESPPs during the same period. The complaint asserts claims under Section 11 of the Securities Act, and for breach of fiduciary duty, misrepresentation, non-disclosure, mismanagement of the ESPPs' assets and breach of contract arising from substantially similar allegations as those contained in the putative class action securities litigation described in the Shenk lawsuit below. Stipulated co-lead plaintiffs were approved by the court on March 1, 2018. Co-lead Plaintiffs filed an amended complaint on June 4, 2018 having a class period of July 14, 2014 to November 6, 2017. On July 6, 2018, this matter was stayed by agreement of the parties pending resolution of the Shenk lawsuit below.

Putative Class Action Litigation (Rockford). In April 2017, a putative class action lawsuit was filed against the Company and United BioSource Corporation in the U.S. District Court for the Northern District of Illinois. The case is captioned City of Rockford v. Mallinckrodt ARD, Inc., et al. The complaint was subsequently amended to, among other things, include an additional named plaintiff and additional defendants. As amended, the complaint purports to be brought on behalf of all self-funded entities in the U.S. and its Territories, excluding any Medicare Advantage Organizations, related entities and certain others, that paid for Acthar Gel from August 2007 to the present. Plaintiff alleges violations of federal antitrust and RICO laws, as well as various state law claims in connection with the distribution and sale of Acthar Gel. On January 22, 2018, the Company filed a motion to dismiss the Second Amended Complaint, which was granted in part on January 25, 2019, dismissing one of two named plaintiffs and all claims with the exception of Plaintiff's federal and state antitrust claims. The remaining allegation in the case is that the Company engaged in anti-competitive acts to artificially raise and maintain the price of Acthar Gel. To this end, Plaintiff alleges that the Company unlawfully maintained a monopoly in a purported ACTH product market by acquiring the U.S. rights to Synacthen and conspired with the other named defendants by selling Acthar Gel through an exclusive distributor. The Company intends to continue to vigorously defend itself in this matter. At this stage, the Company is not able to reasonably estimate the expected amount or range of cost or any loss associated with this lawsuit.

Putative Class Action Securities Litigation (Shenk). In January 2017, a putative class action lawsuit was filed against the Company and its CEO in the U.S. District Court for the District of Columbia, captioned Patricia A. Shenk v. Mallinckrodt plc, et al. The complaint purports to be brought on behalf of all persons who purchased Mallinckrodt's publicly traded securities on a domestic exchange between November 25, 2014 and January 18, 2017. The lawsuit generally alleges that the Company made false or misleading statements related to Acthar Gel and Synacthen to artificially inflate the price of the Company's stock. In particular, the complaint alleges a failure by the Company to provide accurate disclosures concerning the long-term sustainability of Acthar Gel revenues, and the exposure of Acthar Gel to Medicare and Medicaid reimbursement rates. On January 26, 2017, a second putative class action lawsuit, captioned Jyotindra Patel v. Mallinckrodt plc, et al. was filed against the same defendants named in the Shenk lawsuit in the U.S. District Court for the District of Columbia. The Patel complaint purports to be brought on behalf of shareholders during the same period of time as that set forth in the Shenk lawsuit and asserts claims similar to those set forth in the Shenk lawsuit. On March 13, 2017, a third putative class action lawsuit, captioned Amy T. Schwartz, et al., v. Mallinckrodt plc, et al., was filed against the same defendants named in the Shenk lawsuit in the U.S. District Court for the District of Columbia. The Schwartz complaint purports to be brought on behalf of shareholders who purchased shares of the Company between July 14, 2014 and January 18, 2017 and asserts claims similar to those set forth in the Shenk lawsuit. On March 23, 2017, a fourth putative class action lawsuit, captioned Fulton County Employees' Retirement System v. Mallinckrodt plc, et al., was filed against the Company, its CEO and former CFO in

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the U.S. District Court for the District of Columbia. The Fulton County complaint purports to be brought on behalf of shareholders during the same period of time as that set forth in the Schwartz lawsuit and asserts claims similar to those set forth in the Shenk lawsuit. On March 27, 2017, four separate plaintiff groups moved to consolidate the pending cases and to be appointed as lead plaintiffs in the consolidated case. Since that time, two of the plaintiff groups have withdrawn their motions. Lead plaintiff was designated by the court on March 9, 2018. Lead plaintiff filed a consolidated complaint on May 18, 2018, alleging a class period from July 14, 2014 to November 6, 2017, the Company, its CEO, its former CFO, and Executive Vice President, Hugh O'Neill, as defendants, and containing similar claims, but further alleging misstatements regarding payer reimbursement restrictions for Acthar Gel. On August 30, 2018, the lead plaintiff voluntarily dismissed the claims against Mr. O'Neill without prejudice. The Company filed a motion to dismiss the complaint which was granted in part, and denied in part by the court on July 30, 2019. The Company intends to vigorously defend itself in this matter.

Generic Price Fixing Litigation

Generic Pharmaceutical Antitrust MDL. In August 2016, a multidistrict litigation was established in the Eastern District of Pennsylvania relating to allegations of antitrust violations with respect to generic pharmaceutical pricing (the "Generic Pricing MDL"). Plaintiffs in the Generic Pricing MDL, captioned In re: Generic Pharmaceuticals Pricing Antitrust Litigation, allege a conspiracy of price-fixing and customer allocation among generic drug manufacturers beginning in or around July 2009. Since its establishment, the Generic Pricing MDL has expanded to encompass dozens of pharmaceutical companies and more than 100 generic pharmaceutical drugs. The Company was recently named in three cases associated with this litigation. A status conference is due to be held on March 12, 2020.

1199SEIU National Benefit Fund Litigation. In December 2019, a putative class action lawsuit was filed against the Company and more than thirty other pharmaceutical manufacturers in the U.S. District Court for the Eastern District of Pennsylvania, captioned 1199SEIU National Benefit Fund et al. v. Actavis Holdco U.S., Inc., et al. The complaint purports to be brought on behalf of all persons and entities that indirectly purchased, paid, or provided reimbursement for the purchase of defendants' generic drugs, other than for resale, from July 1, 2009, to the present. The lawsuit generally alleges that defendants conspired to allocate customers and fix prices for generic pharmaceutical drugs beginning in July 2009. The complaint seeks monetary damages and injunctive relief based on violations of Sections 1 and 3 of the Sherman Act and various state antitrust, consumer protection, and unjust enrichment claims. The Company intends to vigorously defend itself in this matter.

César Castillo, Inc., Litigation. In February 2020, a putative class action lawsuit was filed against the Company and more than thirty other pharmaceutical manufacturers in the U.S. District Court for the Eastern District of Pennsylvania, captioned César Castillo, Inc., et al. v. Actavis Holdco U.S., Inc., et al. The lawsuit purports to be brought on behalf of all persons or entities that directly purchased certain generic drugs from defendants or from one of defendants' direct customers-where the direct customer is alleged to be a completely involved co-conspirator-between July 1, 2009, and the present. The complaint has similar allegations as the 1199SEIU National Benefit Fund litigation and seeks damages for violations of Sections 1 and 3 of the Sherman Act. The Company intends to vigorously defend itself in this matter.

The Kroger Co. Litigation. In February 2020, a proposed amended complaint filed in the U.S. District Court for the Eastern District of Pennsylvania named the Company and several other pharmaceutical manufacturers as new defendants in an action captioned The Kroger Co., et al. v. Actavis Holdco U.S., Inc. et al. The lawsuit is brought by several entities that purportedly purchased generic drugs directly from defendants. The proposed amended complaint seeks monetary damages and injunctive relief for violations of Section 1 of the Sherman Antitrust Act, and is premised on facts similar to those alleged in the 1199SEIU National Benefit Fund and César Castillo litigations. The motion for leave to file the proposed amended complaint remains pending.

Environmental Remediation and Litigation Proceedings

The Company is involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites, including those described below. The ultimate cost of site cleanup and timing of future cash outlays is difficult to predict, given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations and alternative cleanup methods. The Company concluded that, as of December 27, 2019, it was probable that it would incur remediation costs in the range of $38.2 million to $86.9 million. The Company also concluded that, as of December 27, 2019, the best estimate within this range was $61.9 million, of which $1.9 million was included in accrued and other current liabilities and the remainder was included in environmental liabilities on the consolidated balance sheet as of December 27, 2019. While it is not possible at this time to determine with certainty the ultimate outcome of these matters, the Company believes, given the information currently available, that the final resolution of all known claims, after taking into account amounts already accrued, will not have a material adverse effect on its financial condition, results of operations and cash flows.

Lower Passaic River, New Jersey. The Company and approximately 70 other companies (“Cooperating Parties Group” or “CPG”) are parties to a May 2007 Administrative Order on Consent ("AOC") with the Environmental Protection Agency ("EPA") to perform a

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remedial investigation and feasibility study ("RI/FS") of the 17-mile stretch known as the Lower Passaic River ("the River") Study Area. The Company's potential liability stems from former operations at Lodi and Belleville, New Jersey.

In April 2014, the EPA issued a revised Focused Feasibility Study ("FFS"), with remedial alternatives to address cleanup of the lower 8-mile stretch of the River. The EPA estimated the cost for the remediation alternatives ranged from $365.0 million to $3.2 billion and the EPA's preferred approach had an estimated cost of $1.7 billion.

In April 2015, the CPG presented a draft of the RI/FS of the River to the EPA that included alternative remedial actions for the entire 17-mile stretch of the River.

On March 4, 2016, the EPA issued the Record of Decision ("ROD") for the lower 8 miles of the River with a slight modification on its preferred approach and a revised estimated cost of $1.38 billion. On October 5, 2016, the EPA announced that Occidental Chemicals Corporation ("OCC") had entered into an agreement to develop the remedial design.

On August 7, 2018, the EPA finalized a buyout offer of $280,600 with the Company, limited to its former Lodi facility, for the lower 8 miles of the River. During the three months ended September 28, 2018, the Company reduced the accrual associated with this matter by $11.8 million to $26.2 million, which represents the Company's estimate of its remaining liability related to the River.

Despite the issuance of the revised FFS and ROD by the EPA, the RI/FS by the CPG, and the cash out settlement by the EPA there are many uncertainties associated with the final agreed-upon remediation, potential future liabilities and the Company's allocable share of the remediation. Given those uncertainties, the amounts accrued may not be indicative of the amounts for which the Company may be ultimately responsible and will be refined as the remediation progresses.

Occidental Chemical Corp. v. 21st Century Fox America, Inc. The Company and approximately 120 other companies were named as defendants in a lawsuit filed in June 2018, by OCC, in which OCC seeks cost recovery and contribution for past and future costs in response to releases and threatened releases of hazardous substances into the lower 8 miles of the River. A former Mallinckrodt facility located in Jersey City, NJ (located in Newark Bay) and the former Belleville facility were named in the suit. Due to an indemnification agreement with AVON Inc., Mallinckrodt has tendered the liability for the Jersey City site to AVON Inc. and they have accepted. The Company retains a share of the liability for this suit related to the Belleville facility. A motion to dismiss several of the claims was denied by the court. While it is not possible at this time to determine with certainty the ultimate outcome of this matter, the Company believes, given the information currently available, that the ultimate resolution of all known claims, after taking into account amounts already accrued will not have a material adverse effect on its financial condition, results of operations and cash flows.

Mallinckrodt Veterinary, Inc., Millsboro, Delaware. The Company previously operated a facility in Millsboro, Delaware ("the Millsboro Site") where various animal healthcare products were manufactured. In 2005, the Delaware Department of Natural Resources and Environmental Control found trichloroethylene ("TCE") in the Millsboro public water supply at levels that exceeded the federal drinking water standards. Further investigation to identify the TCE plume in the ground water indicated that the plume has extended to property owned by a third party near the Millsboro Site. The Company, and another former owner, have assumed responsibility for the Millsboro Site cleanup under the Alternative Superfund Program administered by the EPA. The companies have entered into three AOCs with the EPA to perform investigations to abate, mitigate or eliminate the release or threat of release of hazardous substances at the Millsboro Site and to conduct an Engineering Evaluation/Cost Analysis ("EE/CA") to characterize the nature and extent of the contamination. In January 2017, the EPA issued its Action Memorandum regarding the EE/CA. While it is not possible at this time to determine with certainty the ultimate outcome of this matter, the Company believes, given the information currently available, that the ultimate resolution of all known claims, after taking into account amounts already accrued, will not have a material adverse effect on its financial condition, results of operations and cash flows.

Crab Orchard National Wildlife Refuge Superfund Site, near Marion, Illinois. Between 1967 and 1982, International Minerals and Chemicals Corporation ("IMC"), a predecessor in interest to the Company, leased portions of the Additional and Uncharacterized Sites ("AUS") Operable Unit at the Crab Orchard Superfund Site ("the CO Site") from the government and manufactured various explosives for use in mining and other operations. In March 2002, the Department of Justice, the U.S. Department of the Interior and the EPA (together, "the Government Agencies") issued a special notice letter to General Dynamics Ordnance and Tactical Systems, Inc. ("General Dynamics"), one of the other potentially responsible parties ("PRPs") at the CO Site, to compel General Dynamics to perform the RI/FS for the AUS Operable Unit. General Dynamics negotiated an AOC with the Government Agencies to conduct an extensive RI/FS at the CO Site under the direction of the U.S. Fish and Wildlife Service. General Dynamics asserted in August 2004 that the Company is jointly and severally liable, along with approximately eight other lessees and operators at the AUS Operable Unit, for costs associated with alleged contamination of soils and groundwater resulting from historic operations, and the parties have entered into a non-binding mediation process. While it is not possible at this time to determine with certainty the ultimate outcome of this matter, the Company believes, given the information currently available, that the final resolution of all known claims, after taking into account amounts already accrued, will not have a material adverse effect on its financial condition, results of operations and cash flows.

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Products Liability Litigation

Beginning with lawsuits brought in July 1976, the Company is named as a defendant in personal injury lawsuits based on alleged exposure to asbestos-containing materials. A majority of the cases involve product liability claims based principally on allegations of past distribution of products containing asbestos. A limited number of the cases allege premises liability based on claims that individuals were exposed to asbestos while on the Company's property. Each case typically names dozens of corporate defendants in addition to the Company. The complaints generally seek monetary damages for personal injury or bodily injury resulting from alleged exposure to products containing asbestos. The Company's involvement in asbestos cases has been limited because it did not mine or produce asbestos. Furthermore, in the Company's experience, a large percentage of these claims have never been substantiated and have been dismissed by the courts. The Company has not suffered an adverse verdict in a trial court proceeding related to asbestos claims and intends to continue to defend these lawsuits. When appropriate, the Company settles claims; however, amounts paid to settle and defend all asbestos claims have been immaterial. As of December 27, 2019, there were approximately 11,800 asbestos-related cases pending against the Company.

The Company estimates pending asbestos claims, claims that were incurred but not reported and related insurance recoveries, which are recorded on a gross basis in the consolidated balance sheets. The Company's estimate of its liability for pending and future claims is based on claims experience over the past five years and covers claims either currently filed or expected to be filed over the next seven years. The Company believes that it has adequate amounts recorded related to these matters. While it is not possible at this time to determine with certainty the ultimate outcome of these asbestos-related proceedings, the Company believes, given the information currently available, that the ultimate resolution of all known and anticipated future claims, after taking into account amounts already accrued, along with recoveries from insurance, will not have a material adverse effect on its financial condition, results of operations and cash flows.

Interest-Bearing Deferred Tax Obligation

As part of the integration of Questcor, the Company entered into an internal installment sale transaction related to certain Acthar Gel intangible assets during the three months ended December 26, 2014. The installment sale transaction resulted in a taxable gain. In accordance with Internal Revenue Code Section 453A ("Section 453A") the gain is considered taxable in the period in which installment payments are received. During the three months ended December 25, 2015, the Company entered into similar transactions with certain intangible assets acquired in the acquisitions of Ikaria and Therakos.

During fiscal 2019, the Company completed its reorganization of its intercompany financing and associated legal entity ownership. As a result, the Company had no remaining interest-bearing U.S. deferred tax liabilities as of December 27, 2019, compared to $227.5 million as of December 28, 2018. See Note 8 for further details regarding this reorganization. The GAAP calculation of interest associated with these deferred tax liabilities was subject to variable interest rates. The Company recognized interest expense associated with these deferred tax liabilities of $23.7 million, and $69.3 million for fiscal 2018 and 2017, respectively. Fiscal 2017 included a one-time charge of $8.4 million resulting primarily from the reorganization of its legal entity ownership.

The Company has reported Section 453A interest on its tax returns on the basis of its interpretation of the U.S. Internal Revenue Code and Regulations. Alternative interpretations of these provisions could result in additional interest payable on the deferred tax liability. Due to the inherent uncertainty in these interpretations, the Company has deferred the recognition of the benefit associated with the Company's interpretation and maintains a corresponding liability of $47.4 million and $56.0 million as of December 27, 2019 and December 28, 2018, respectively. The decrease of $8.6 million was recognized as a benefit to interest expense during fiscal 2019 due to a lapse of certain statute of limitations. Further favorable resolution of this uncertainty would likely result in a material reversal of this liability and a benefit being recorded to interest expense within the consolidated statements of operations.

Tax Matters

The Company continues to be subject to examination by the IRS for tax years 2014 to 2018. On August 5, 2019, the IRS proposed an adjustment to the taxable income of MHP as a result of its findings in the audit of MHP's tax year ended September 26, 2014. MHP, formerly known as Cadence Pharmaceuticals, Inc. (“Cadence”), was acquired by the Company as a U.S. subsidiary on March 19, 2014. Following the acquisition of Cadence, the Company transferred certain rights and risks in Ofirmev intellectual property (“Transferred IP”) to a wholly owned non-U.S. subsidiary of the Company. The transfer occurred at a price (“Transfer Price”) determined in conjunction with the Company's external advisors, in accordance with applicable Treasury Regulations and with reference to the $1,329.0 million taxable consideration paid by the Company to the shareholders of Cadence. The IRS asserts the value of the Transferred IP exceeds the value of the acquired Cadence shares and, further, partially disallows the Company's control premium subtraction. The proposed adjustment to taxable income of $871.0 million, excluding potential associated interest and penalties, is proposed as a multi-year adjustment and may result in a non-cash reduction of the Company's U.S. Federal net operating loss carryforward of $782.0 million. The Company strongly disagrees with the proposed increase to the Transfer Price and intends to contest it through all available administrative and judicial remedies, which may take a number of years to conclude. The final outcome

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cannot be reasonably quantified at this time, however, the proposed adjustment may be material. The Company believes its reserve for income tax contingencies is adequate. See Note 8 for further information.

Other Matters

The Company is a defendant in a number of other pending legal proceedings relating to present and former operations, acquisitions and dispositions. The Company does not expect the outcome of these proceedings, either individually or in the aggregate, to have a material adverse effect on its financial condition, results of operations and cash flows.

20.	Financial Instruments and Fair Value Measurements

Fair value is defined as the exit price that would be received from the sale of an asset or paid to transfer a liability, using assumptions that market participants would use in pricing an asset or liability. The fair value guidance establishes a three-level fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs used in measuring fair value. The levels within the hierarchy are as follows:

Level 1— observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2— significant other observable inputs that are observable either directly or indirectly; and

Level 3— significant unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.

The following tables provide a summary of the significant assets and liabilities that are measured at fair value on a recurring basis at the end of each period:

	December 27, 2019				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Debt and equity securities held in rabbi trusts	$	30.6			$	21.0			$	9.6			$	—
Equity securities	26.2				26.2				—				—
	$	56.8			$	47.2			$	9.6			$	—
Liabilities:
Deferred compensation liabilities	$	39.2			$	—			$	39.2			$	—
Contingent consideration and acquired contingent liabilities	69.3				—				—				69.3
	$	108.5			$	—			$	39.2			$	69.3

	December 28, 2018				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Debt and equity securities held in rabbi trusts	$	33.1			$	22.4			$	10.7			$	—
	$	33.1			$	22.4			$	10.7			$	—
Liabilities:
Deferred compensation liabilities	$	38.5			$	—			$	38.5			$	—
Contingent consideration and acquired contingent liabilities	151.4				—				—				151.4
	$	189.9			$	—			$	38.5			$	151.4

Debt and equity securities held in rabbi trusts. Debt securities held in rabbi trusts primarily consist of U.S. government and agency securities and corporate bonds. When quoted prices are available in an active market, the investments are classified as level

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1. When quoted market prices for a security are not available in an active market, they are classified as level 2. Equity securities held in rabbi trusts primarily consist of U.S. common stocks, which are valued using quoted market prices reported on nationally recognized securities exchanges.

Equity securities. Equity securities consist of shares in Silence, for which quoted prices are available in an active market; therefore, the investment is classified as level 1 and is valued based on quoted market prices reported on an internationally recognized securities exchange.

In July 2019, the Company remitted $5.0 million of consideration to Silence in exchange for equity shares. As part of this equity investment, the Company took a non-executive Director seat on the Silence Board of Directors. The Company's investment in Silence qualifies for equity method accounting given its ability to exercise significant influence; however, the Company elected the fair value method to account for its investment in Silence. During fiscal 2019, the Company recognized an unrealized gain of $20.2 million related to this investment within other income (expense), net in the consolidated statement of operations.

Deferred compensation liabilities. The Company maintains a non-qualified deferred compensation plan in the U.S., which permits eligible employees of the Company to defer a portion of their compensation. A recordkeeping account is set up for each participant and the participant chooses from a variety of funds for the deemed investment of their accounts. The recordkeeping accounts generally correspond to the funds offered in the Company's U.S. tax-qualified defined contribution retirement plan and the account balance fluctuates with the investment returns on those funds.

Contingent consideration and acquired contingent liabilities. As of December 27, 2019, the Company maintains various contingent consideration and acquired contingent liabilities associated with the acquisitions of Questcor, Stratatech Corporation ("Stratatech") and Ocera.

In August 2014, the Company recorded acquired contingent liabilities of $195.4 million from the acquisition of Questcor. The contingent liabilities relate to Questcor's contingent obligations associated with their acquisition of an exclusive, perpetual and irrevocable license to develop, market, manufacture, distribute, sell and commercialize MNK-1411 ("Synacthen") from Novartis and their acquisition of BioVectra. Under the terms of the license agreement with Novartis, the Company made a $25.0 million payment in fiscal 2019 and is obligated to make annual payments of $25.0 million subsequent to fiscal 2019 until such time that the Company obtains FDA approval of Synacthen and makes a $25.0 million payment upon obtaining FDA approval of Synacthen. The terms of the license agreement allow the Company to terminate the license agreement upon the occurrence of certain events following the fiscal 2020 payment. The Company measured the fair value of the contingent payments based on a probability-weighted present value of the consideration expected to be transferred using a discount rate of 4.7%. The Company determined the fair value of these contingent consideration obligations associated with the acquisition of Questcor at December 27, 2019 and December 28, 2018 was $24.5 million and $76.2 million, respectively.

As part of the acquisition of Stratatech in August 2016, the Company provided contingent consideration to the prior shareholders of Stratatech, primarily in the form of regulatory filing and approval milestones associated with the deep partial thickness and full thickness indications associated with StrataGraft^®. The Company assesses the likelihood of and timing of making such payments at each balance sheet date. The fair value of the contingent payments was measured based on the net present value of a probability-weighted assessment. The Company determined the fair value of the contingent consideration associated with the acquisition of Stratatech to be $29.0 million and $53.7 million at December 27, 2019 and December 28, 2018, respectively.

As part of the Ocera Acquisition, the Company provided contingent consideration to the prior shareholders of Ocera in the form of both patient enrollment clinical study milestones for intravenous and oral formulations of MNK-6105 and MNK-6106 and sales-based milestones associated with MNK-6105 and MNK-6106. The Company determined the fair value of the contingent consideration based on an option pricing model to be $15.8 million and $21.5 million as of December 27, 2019 and December 28, 2018, respectively.

Of the total fair value of the contingent consideration of $69.3 million, $57.8 million was classified as current and $11.5 million was classified as non-current in the consolidated balance sheet as of December 27, 2019. The following table summarizes the fiscal 2019 activity for contingent consideration:

Balance as of December 28, 2018	$	151.4
Payments	(25.0		)
Accretion expense	3.1
Fair value adjustment	(60.2		)
Balance as of December 27, 2019	$	69.3

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Financial Instruments Not Measured at Fair Value

The following methods and assumptions were used by the Company in estimating fair values for financial instruments not measured at fair value as of December 27, 2019 and December 28, 2018:

•

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and the majority of other current assets and liabilities approximate fair value because of their short-term nature. The Company classifies cash on hand and deposits in banks, including commercial paper, money market accounts and other investments it may hold from time to time, with an original maturity of three months or less, as cash and cash equivalents (level 1). The fair value of restricted cash was equivalent to its carrying value of $31.7 million and $18.6 million as of December 27, 2019 and December 28, 2018, (level 1), respectively, which was included in other assets on the consolidated balance sheets.

•

The Company received a portion of consideration as part of contingent earn-out payments related to the sale of the Nuclear Imaging business in the form of preferred equity certificates during fiscal 2019 and 2018. These securities are classified as held-to-maturity and are carried at amortized cost, which approximates fair value (level 3), of $18.9 million and $9.0 million as December 27, 2019 and December 28, 2018, respectively. These securities are included in other assets on the consolidated balance sheets.

•

The Company's life insurance contracts are carried at cash surrender value, which is based on the present value of future cash flows under the terms of the contracts (level 3). Significant assumptions used in determining the cash surrender value include the amount and timing of future cash flows, interest rates and mortality charges. The fair value of these contracts approximates the carrying value of $51.1 million and $66.4 million at December 27, 2019 and December 28, 2018, respectively. These contracts are included in other assets on the consolidated balance sheets.

•

The carrying value of the Company's revolving credit facility approximates the fair value due to the short-term nature of this instrument and is therefore classified as level 1. The Company's 4.75%, 4.875%, 5.50%, 5.625%, 5.75% and 10.00% notes are classified as level 1, as quoted prices are available in an active market for these notes. Since the quoted market prices for the Company's term loans and 8.00% and 9.50% debentures are not available in an active market, they are classified as level 2 for purposes of developing an estimate of fair value. The following table presents the carrying values and estimated fair values of the Company's debt as of the end of each period:

		December 27, 2019								December 28, 2018
		Carrying Value				Fair Value				Carrying Value				Fair Value
Level 1:
4.875% senior notes due April 2020		$	614.8			$	480.0			$	700.0			$	676.6
Variable-rate receivable securitization due July 2020		—				—				250.0				250.0
5.75% senior notes due August 2022		610.3				251.0				835.2				713.6
4.75% senior notes due April 2023		133.7				53.7				500.2				336.7
5.625% senior notes due October 2023		514.7				193.2				731.4				557.0
5.50% senior notes due April 2025		387.2				135.5				692.1				479.1
10.00% senior notes due April 2025		322.9				253.8				—				—
Revolving credit facility		900.0				900.0				220.0				220.0
Level 2:
9.50% debentures due May 2022		10.4				5.4				10.4				9.7
8.00% debentures due March 2023		4.4				2.0				4.4				3.8
Term loan due September 2024		1,520.8				1,240.0				1,613.8				1,472.4
Term loan due February 2025		403.6				326.2				597.0				548.0
Level 3:
Other		—				—				2.2				2.2
Total Debt		$	5,422.8			$	3,840.8			$	6,156.7			$	5,269.1

Concentration of Credit and Other Risks

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of accounts receivable. The Company generally does not require collateral from customers. A portion of the Company's accounts receivable outside the U.S. includes sales to government-owned or supported healthcare systems in several countries, which are subject to payment delays. Payment is dependent upon the financial stability and creditworthiness of those countries' national economies.

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The following table shows net sales attributable to distributors that accounted for 10.0% or more of the Company's total net sales:

	Fiscal Year
	2019			2018			2017
CuraScript, Inc.	29.7	%		35.2	%		40.1	%
AmerisourceBergen Corporation	10.2	%		*			*

* Net sales to this distributor were less than 10.0% of total net sales during the respective periods presented above.

The following table shows accounts receivable attributable to distributors that accounted for 10.0% or more of the Company's gross accounts receivable at the end of each period:

	December 27, 2019			December 28, 2018
AmerisourceBergen Corporation	31.3	%		25.7	%
McKesson Corporation	15.3	%		21.9	%
CuraScript, Inc.	12.1	%		13.1	%

The following table shows net sales attributable to products that accounted for 10.0% or more of the Company's total net sales:

	Fiscal Year
	2019			2018			2017
Acthar Gel	30.1	%		34.5	%		37.1	%
INOmax	18.1	%		16.9	%		15.7	%
Ofirmev	12.1	%		10.6	%		*

* Net sales from this product were less than 10.0% of total net sales during the respective period presented above.

The Company operates in two reportable segments, which are further described below:

•	Specialty Brands includes innovative specialty pharmaceutical brands; and

•	Specialty Generics includes niche specialty generic drugs and API(s).

All prior period segment information has been recast to reflect the realignment of the Company's reportable segments on a comparable bases, as previously discussed in Note 1.

Management measures and evaluates the Company's operating segments based on segment net sales and operating income. Management excludes corporate expenses from segment operating income. In addition, certain amounts that management considers to be non-recurring or non-operational are excluded from segment operating income because management evaluates the operating results of the segments excluding such items. These items include, but are not limited to, intangible asset amortization, net restructuring and related charges, non-restructuring impairments and separation costs. Although these amounts are excluded from segment operating income, as applicable, they are included in reported consolidated operating (loss) income and in the following reconciliations presented below.

Management manages assets on a total company basis, not by operating segment. The Company's chief operating decision maker does not regularly review any asset information by operating segment and, accordingly, the Company does not report asset information by operating segment. Total assets were approximately $10,338.9 million and $10,877.3 million at December 27, 2019 and December 28, 2018, respectively.

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Selected information by business segment was as follows:

	Fiscal Year
	2019				2018				2017
Net sales:
Specialty Brands	$	2,423.8			$	2,496.7			$	2,352.0
Specialty Generics	738.7				718.9				869.6
Net sales	3,162.5				3,215.6				3,221.6
Operating (loss) income:
Specialty Brands	$	1,174.5			$	1,093.1			$	1,146.3
Specialty Generics	108.1				89.3				266.4
Segment operating income	1,282.6				1,182.4				1,412.7
Unallocated amounts:
Corporate and unallocated expenses (1)	(137.8		)		(155.8		)		(125.2		)
Intangible asset amortization	(853.4		)		(740.2		)		(694.5		)
Restructuring and related charges, net (2)	1.7				(108.2		)		(36.4		)
Non-restructuring impairment charges	(388.0		)		(3,893.1		)		(63.7		)
Separation costs (3)	(63.9		)		(6.0		)		—
R&D upfront payment (4)	(20.0		)		—				—
Opioid-related litigation settlement charge (5)	(1,643.4		)		—				—
Operating (loss) income	$	(1,822.2	)		$	(3,720.9	)		$	492.9
Depreciation and amortization:
Specialty Brands	$	862.4			$	762.5			$	712.0
Specialty Generics	88.7				89.6				96.3
	$	951.1			$	852.1			$	808.3

(1)	Includes administration expenses and certain compensation, legal, environmental and other costs not charged to the Company's reportable segments.

(2)	Includes restructuring-related accelerated depreciation.

(3)	Represents costs incurred related to the separation of the Company's Specialty Generics segment, inclusive of costs related to the suspended spin-off of that business and rebranding costs associated with the Specialty Brands ongoing transformation, all of which are included in SG&A.

(4)	Represents R&D expense incurred related to an upfront payment made to Silence in connection with the license and collaboration agreement entered into in July 2019. See Note 6 for further information.

(5)	Subsequent to December 27, 2019, the Company announced an agreement in principle on the terms of a global settlement of all opioid-related claims against the Company and its subsidiaries. See Note 24 for further information.

Net sales by product family within the Company's reportable segments were as follows:

	Fiscal Year
	2019				2018				2017
Acthar Gel	$	952.7			$	1,110.1			$	1,195.1
INOmax	571.4				542.7				505.2
Ofirmev	384.0				341.9				302.5
Therakos	246.9				231.2				214.9
Amitiza (1)	208.5				183.8				—
BioVectra (2)	40.1				53.1				54.7
Other	20.2				33.9				79.6
Specialty Brands	2,423.8				2,496.7				2,352.0
Hydrocodone (API) ad hydrocodone-containing tablets	76.3				65.9				85.3
Oxycodone (API) and oxycodone-containing tablets	74.9				66.1				88.0
Acetaminophen (API)	189.9				192.7				185.5
Other controlled substances	352.5				343.8				412.0
Other	45.1				50.4				98.8
Specialty Generics	738.7				718.9				869.6
Net Sales	$	3,162.5			$	3,215.6			$	3,221.6

(1)	Amitiza net sales consist of both product and royalty net sales. Refer to Note 4 for further details on Amitiza's revenues.

---

(2)	In November 2019, the Company completed the sale of BioVectra. Refer to Note 5 for further details.

Selected information by geographic area was as follows:

	Fiscal Year
	2019				2018				2017
Net sales (1):
U.S.	$	2,765.6			$	2,834.5			$	2,899.0
Europe, Middle East and Africa	281.8				256.8				242.3
Other	115.1				124.3				80.3
	$	3,162.5			$	3,215.6			$	3,221.6
Long-lived assets (2):
U.S.	$	734.3			$	770.7
Europe, Middle East and Africa (3)	169.9				146.7
Other	4.8				76.8
	$	909.0			$	994.2

(1)	Net sales are attributed to regions based on the location of the entity that records the transaction, none of which relate to the country of Ireland.

(2)	Long-lived assets are primarily composed of property, plant and equipment, net.

(3)	Includes long-lived assets located in Ireland of $168.4 million and $145.2 million as of December 27, 2019 and December 28, 2018, respectively.

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22.	Selected Quarterly Financial Data (Unaudited)

A summary of quarterly financial information for fiscal 2019 and 2018 is as follows:

	For the Quarter Ended
	March 29, 2019				June 28, 2019				September 27, 2019				December 27, 2019
Net sales	$	790.6			$	823.3			$	743.7			$	804.9
Gross profit	335.1				388.9				324.3				373.1
Income (loss) from continuing operations (1)	155.2				(0.5		)		(0.9		)		(1,161.0		)
(Loss) income from discontinued operations	(0.3		)		7.3				(0.2		)		3.9
Net income (loss)	154.9				6.8				(1.1		)		(1,157.1		)
Basic earnings (loss) per share from continuing operations (2)	$	1.86			$	(0.01	)		$	(0.01	)		$	(13.80	)
Diluted earnings (loss) per share from continuing operations (2)	1.83				(0.01		)		(0.01		)		(13.80		)
	For the Quarter Ended (3)
	March 30, 2018				June 29, 2018				September 28, 2018				December 28, 2018
Net sales	$	755.3			$	825.5			$	799.9			$	834.9
Gross profit	347.5				394.0				366.4				363.3
(Loss) income from continuing operations (4)	(20.9		)		3.2				114.2				(3,718.4		)
Income (loss) from discontinued operations	2.9				12.4				(0.4		)		—
Net (loss) income	(18.0		)		15.6				113.8				(3,718.4		)
Basic (loss) earnings per share from continuing operations (2)	$	(0.24	)		$	0.04			$	1.37			$	(44.64	)
Diluted (loss) earnings per share from continuing operations (2)	(0.24		)		0.04				1.34				(44.64		)

(1)	Loss from continuing operations for the quarter ended December 27, 2019 reflects the opioid-related litigation settlement charge of $1,643.4 million. See Note 24 for further information.

(2)	Quarterly and annual computations are prepared independently. Therefore, the sum of each quarter may not necessarily total the fiscal period amounts noted elsewhere within this Annual Report on Form 10-K.

(3)

The "Specialty Generics Disposal Group" was included within discontinued operations during the first three quarters of fiscal 2018, and was subsequently recast to be included within continuing operations during the fourth quarter of fiscal 2018. In accordance with U.S. GAAP, depreciation and amortization are not recorded during the period in which a disposal group is classified as held-for-sale, thus the Company's financial results during the first three quarters of fiscal 2018 did not include $17.7 million and $6.8 million of depreciation and amortization expense, respectively, related to the Specialty Generics Disposal Group. During the fourth quarter of fiscal 2018, the Specialty Generics Disposal Group was reclassified to held and used and measured at its carrying amount before it was classified as held-for-sale, adjusted for depreciation and amortization expense that would have been recognized had the disposal group been continuously classified as held and used. The total adjustment of $24.5 million was reflected in loss from continuing operations during the fourth quarter of fiscal 2018, the period in which the held-for-sale criteria were no longer met. The Specialty Generics Disposal Group included (1) the Company's Specialty Generics business comprised of what was the Company's Specialty Generics segment in fiscal 2017, with the exception of BioVectra; (2) certain of the Company's non-promoted brands business; and (3) the Company's post-divestiture supply agreement with the acquirer of the contrast media and delivery systems ("CMDS") business.

(4)	Loss from continuing operations for the quarter ended December 28, 2018 reflects impairment charges for goodwill and an IPR&D asset. See Note 13 for further information.

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23.	Condensed Consolidating Financial Statements

MIFSA is an indirectly 100.0%-owned subsidiary of Mallinckrodt plc established to own, directly or indirectly, substantially all of the operating subsidiaries of the Company, to issue debt securities and to perform treasury operations.

MIFSA is the borrower under the April 2023 Notes, which are fully and unconditionally guaranteed by Mallinckrodt plc. The following information provides the composition of the Company's comprehensive operations, assets, liabilities, equity and cash flows by relevant group within the Company: Mallinckrodt plc as guarantor of the April 2023 Notes, MIFSA as issuer of the April 2023 Notes and the operating companies that represent assets of MIFSA. There are no subsidiary guarantees related to the April 2023 Notes.

Set forth below are the condensed consolidating balance sheets as of December 27, 2019 and December 28, 2018 and condensed consolidating statements of comprehensive operations and cash flows for the fiscal three years ended December 27, 2019. Eliminations represent adjustments to eliminate investments in subsidiaries and intercompany balances and transactions between or among Mallinckrodt plc, MIFSA and the other subsidiaries. Condensed consolidating financial information for Mallinckrodt plc and MIFSA, on a standalone basis, has been presented using the equity method of accounting for subsidiaries.

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MALLINCKRODT PLC

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 27, 2019

(in millions)

	Mallinckrodt plc				Mallinckrodt International Finance S.A.				Other Subsidiaries				Eliminations				Consolidated
Assets
Current Assets:
Cash and cash equivalents	$	0.8			$	124.7			$	665.4			$	—			$	790.9
Accounts receivable, net	—				—				577.5				—				577.5
Inventories	—				—				312.1				—				312.1
Prepaid expenses and other current assets	9.0				0.3				140.9				—				150.2
Intercompany receivable	138.8				31.8				249.1				(419.7		)		—
Total current assets	148.6				156.8				1,945.0				(419.7		)		1,830.7
Property, plant and equipment, net	—				—				896.5				—				896.5
Intangible assets, net	—				—				7,018.0				—				7,018.0
Investment in subsidiaries	1,602.0				7,457.6				2,812.0				(11,871.6		)		—
Intercompany loan receivable	416.5				—				1,782.8				(2,199.3		)		—
Other assets	—				—				593.7				—				593.7
Total Assets	$	2,167.1			$	7,614.4			$	15,048.0			$	(14,490.6	)		$	10,338.9
																	—
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	—			$	614.2			$	19.4			$	—			$	633.6
Accounts payable	0.1				—				139.7				—				139.8
Accrued payroll and payroll-related costs	—				—				105.2				—				105.2
Accrued interest	—				29.4				33.5				—				62.9
Accrued and other current liabilities	2.3				0.4				482.7				—				485.4
Intercompany payable	180.6				10.5				228.6				(419.7		)		—
Total current liabilities	183.0				654.5				1,009.1				(419.7		)		1,426.9
Long-term debt	—				1,946.4				2,794.8				—				4,741.2
Pension and postretirement benefits	—				—				62.4				—				62.4
Environmental liabilities	—				—				60.0				—				60.0
Deferred income taxes	—				—				11.0				—				11.0
Other income tax liabilities	—				—				227.1				—				227.1
Opioid-related litigation settlement liability	43.4				—				1,600.0				—				1,643.4
Intercompany loans payable	—				2,199.3				—				(2,199.3		)		—
Other liabilities	—				2.2				224.0				—				226.2
Total liabilities	226.4				4,802.4				5,988.4				(2,619.0		)		8,398.2
Shareholders' equity	1,940.7				2,812.0				9,059.6				(11,871.6		)		1,940.7
Total Liabilities and Shareholders' Equity	$	2,167.1			$	7,614.4			$	15,048.0			$	(14,490.6	)		$	10,338.9

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MALLINCKRODT PLC

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 28, 2018

(in millions)

	Mallinckrodt plc				Mallinckrodt International Finance S.A.				Other Subsidiaries				Eliminations				Consolidated
Assets
Current Assets:
Cash and cash equivalents	$	0.4			$	140.8			$	207.7			$	—			$	348.9
Accounts receivable, net	—				—				623.3				—				623.3
Inventories	—				—				322.3				—				322.3
Prepaid expenses and other current assets	3.9				0.2				128.6				—				132.7
Intercompany receivable	131.1				29.2				1,087.9				(1,248.2		)		—
Total current assets	135.4				170.2				2,369.8				(1,248.2		)		1,427.2
Property, plant and equipment, net	—				—				982.0				—				982.0
Intangible assets, net	—				—				8,282.8				—				8,282.8
Investment in subsidiaries	2,481.6				25,506.1				8,362.1				(36,349.8		)		—
Intercompany loan receivable	497.7				—				12,343.0				(12,840.7		)		—
Other assets	—				—				185.3				—				185.3
Total Assets	$	3,114.7			$	25,676.3			$	32,525.0			$	(50,438.7	)		$	10,877.3
Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt	$	—			$	22.1			$	0.3			$	—			$	22.4
Accounts payable	0.1				—				147.4				—				147.5
Accrued payroll and payroll-related costs	—				—				124.0				—				124.0
Accrued interest	—				48.7				28.9				—				77.6
Accrued and other current liabilities	0.6				0.4				571.2				—				572.2
Intercompany payable	226.7				827.8				193.7				(1,248.2		)		—
Total current liabilities	227.4				899.0				1,065.5				(1,248.2		)		943.7
Long-term debt	—				3,566.9				2,502.3				—				6,069.2
Pension and postretirement benefits	—				—				60.5				—				60.5
Environmental liabilities	—				—				59.7				—				59.7
Deferred income taxes	—				—				324.3				—				324.3
Other income tax liabilities	—				—				228.0				—				228.0
Intercompany loans payable	—				12,840.7				—				(12,840.7		)		—
Other liabilities	—				7.6				297.0				—				304.6
Total liabilities	227.4				17,314.2				4,537.3				(14,088.9		)		7,990.0
Shareholders' equity	2,887.3				8,362.1				27,987.7				(36,349.8		)		2,887.3
Total Liabilities and Shareholders' Equity	$	3,114.7			$	25,676.3			$	32,525.0			$	(50,438.7	)		$	10,877.3

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MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE OPERATIONS

Fiscal year ended December 27, 2019

(in millions)

	Mallinckrodt plc				Mallinckrodt International Finance S.A.				Other Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	—			$	3,162.5			$	—			$	3,162.5
Cost of sales	1.9				—				1,739.2				—				1,741.1
Gross (loss) profit	(1.9		)		—				1,423.3				—				1,421.4
Selling, general and administrative expenses	43.9				1.6				785.5				—				831.0
Research and development expenses	5.2				—				344.2				—				349.4
Restructuring charges, net	—				—				(1.7		)		—				(1.7		)
Non-restructuring impairment charges	—				—				388.0				—				388.0
Loss on divestiture	4.2				—				29.3				—				33.5
Opioid-related litigation settlement charge	43.4				—				1,600.0				—				1,643.4
Operating loss	(98.6		)		(1.6		)		(1,722.0		)		—				(1,822.2		)
Interest expense	(5.8		)		(282.1		)		(235.9		)		214.8				(309.0		)
Interest income	9.8				1.3				213.2				(214.8		)		9.5
Gains on debt extinguishment, net	—				420.9				45.7				—				466.6
Other income, net	9.2				—				54.4				—				63.6
Intercompany interest and fees	(20.4		)		(0.1		)		20.5				—				—
Equity in net income of subsidiaries	(895.8		)		(933.4		)		(787.0		)		2,616.2				—
Loss from continuing operations before income taxes	(1,001.6		)		(795.0		)		(2,411.1		)		2,616.2				(1,591.5		)
Benefit from income taxes	(5.1		)		(2.6		)		(576.6		)		—				(584.3		)
Loss from continuing operations	(996.5		)		(792.4		)		(1,834.5		)		2,616.2				(1,007.2		)
Income from discontinued operations, net of income taxes	—				5.4				5.3				—				10.7
Net loss	(996.5		)		(787.0		)		(1,829.2		)		2,616.2				(996.5		)
Other comprehensive income, net of tax	15.9				15.9				30.0				(45.9		)		15.9
Comprehensive loss	$	(980.6	)		$	(771.1	)		$	(1,799.2	)		$	2,570.3			$	(980.6	)

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MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE OPERATIONS

Fiscal year ended December 28, 2018

(in millions)

	Mallinckrodt plc				Mallinckrodt International Finance S.A.				Other Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	—			$	3,215.6			$	—			$	3,215.6
Cost of sales	2.0				—				1,742.4				—				1,744.4
Gross (loss) profit	(2.0		)		—				1,473.2				—				1,471.2
Selling, general and administrative expenses	38.8				0.7				794.6				—				834.1
Research and development expenses	4.7				—				356.4				—				361.1
Restructuring charges, net	—				—				103.0				—				103.0
Non-restructuring impairments	—				—				3,893.1				—				3,893.1
Gains on divestiture	—				—				0.8				—				0.8
Operating loss	(45.5		)		(0.7		)		(3,674.7		)		—				(3,720.9		)
Interest expense	(7.8		)		(460.8		)		(63.4		)		161.8				(370.2		)
Interest income	9.5				2.5				158.0				(161.8		)		8.2
Gains on debt extinguishment, net	—				8.5				—				—				8.5
Other income (loss), net	9.9				0.2				12.3				—				22.4
Intercompany interest and fees	(18.5		)		(0.1		)		18.6				—				—
Equity in net income of subsidiaries	(3,561.0		)		(2,726.0		)		(3,170.9		)		9,457.9				—
Loss from continuing operations before income taxes	(3,613.4		)		(3,176.4		)		(6,720.1		)		9,457.9				(4,052.0		)
Benefit from income taxes	(6.4		)		(5.4		)		(418.3		)		—				(430.1		)
Loss from continuing operations	(3,607.0		)		(3,171.0		)		(6,301.8		)		9,457.9				(3,621.9		)
Income from discontinued operations, net of income taxes	—				0.1				14.8				—				14.9
Net loss	(3,607.0		)		(3,170.9		)		(6,287.0		)		9,457.9				(3,607.0		)
Other comprehensive loss, net of tax	(9.9		)		(9.9		)		(20.5		)		30.4				(9.9		)
Comprehensive loss	$	(3,616.9	)		$	(3,180.8	)		$	(6,307.5	)		$	9,488.3			$	(3,616.9	)

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MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE OPERATIONS

Fiscal year ended December 29, 2017

(in millions)

	Mallinckrodt plc				Mallinckrodt International Finance S.A.				Other Subsidiaries				Eliminations				Consolidated
Net sales	$	—			$	—			$	3,221.6			$	—			$	3,221.6
Cost of sales	2.6				—				1,561.5				—				1,564.1
Gross (loss) profit	(2.6		)		—				1,660.1				—				1,657.5
Selling, general and administrative expenses	59.5				0.7				789.5				—				849.7
Research and development expenses	5.1				—				271.8				—				276.9
Restructuring charges, net	—				—				31.2				—				31.2
Non-restructuring impairments	—				—				63.7				—				63.7
Operating (loss) income	(67.2		)		(0.7		)		560.8				—				492.9
Interest expense	(13.8		)		(353.9		)		(74.2		)		72.8				(369.1		)
Interest income	7.3				1.2				68.9				(72.8		)		4.6
Gains on debt extinguishment, net	—				8.3				—				—				8.3
Other income (expense), net	20.3				(10.0		)		(85.4		)		—				(75.1		)
Intercompany interest and fees	(18.3		)		—				18.3				—				—
Equity in net income of subsidiaries	2,200.0				2,901.8				2,549.9				(7,651.7		)		—
Income from continuing operations before income taxes	2,128.3				2,546.7				3,038.3				(7,651.7		)		61.6
Benefit from income taxes	(6.1		)		(5.3		)		(1,698.2		)		—				(1,709.6		)
Income from continuing operations	2,134.4				2,552.0				4,736.5				(7,651.7		)		1,771.2
(Loss) income from discontinued operations, net of income taxes	—				(2.1		)		365.3				—				363.2
Net income	2,134.4				2,549.9				5,101.8				(7,651.7		)		2,134.4
Other comprehensive income, net of tax	59.6				59.6				118.2				(177.8		)		59.6
Comprehensive income	$	2,194.0			$	2,609.5			$	5,220.0			$	(7,829.5	)		$	2,194.0

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MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Fiscal year ended December 27, 2019

(in millions)

	Mallinckrodt plc				Mallinckrodt International Finance S.A.				Other Subsidiaries				Eliminations				Consolidated
Cash Flows From Operating Activities:
Net cash from operating activities	$	(65.9	)		$	46.8			$	765.8			$	(3.8	)		$	742.9
Cash Flows From Investing Activities:
Capital expenditures	—				—				(133.0		)		—				(133.0		)
Proceeds from divestiture, net of cash	—				—				95.1				—				95.1
Intercompany loan investment	91.1				—				(1,124.0		)		1,032.9				—
Investment in subsidiary	—				(975.4		)		—				975.4				—
Other	—				—				29.6				—				29.6
Net cash from investing activities	91.1				(975.4		)		(1,132.3		)		2,008.3				(8.3		)
Cash Flows From Financing Activities:
Issuance of external debt	—				—				695.0				—				695.0
Repayment of external debt	—				(135.2		)		(809.9		)		—				(945.1		)
Debt financing costs	—				(10.1		)		—				—				(10.1		)
Proceeds from exercise of share options	0.6				—				—				—				0.6
Intercompany loan borrowings	(24.9		)		1,057.8				—				(1,032.9		)		—
Intercompany dividends	—				—				(3.8		)		3.8				—
Capital contribution	—				—				975.4				(975.4		)		—
Repurchase of shares	(2.6		)		—				—				—				(2.6		)
Other	2.1				—				(20.0		)		—				(17.9		)
Net cash from financing activities	(24.8		)		912.5				836.7				(2,004.5		)		(280.1		)
Effect of currency rate changes on cash	—				—				0.6				—				0.6
Net change in cash, cash equivalents and restricted cash	0.4				(16.1		)		470.8				—				455.1
Cash, cash equivalents and restricted cash at beginning of period	0.4				140.8				226.3				—				367.5
Cash, cash equivalents and restricted cash at end of period	$	0.8			$	124.7			$	697.1			$	—			$	822.6
Cash and cash equivalents at end of period	$	0.8			$	124.7			$	665.4			$	—			$	790.9
Restricted cash included in other long-term assets at end of period	—				—				31.7				—				31.7
Cash, cash equivalents and restricted cash at end of period	$	0.8			$	124.7			$	697.1			$	—			$	822.6

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MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Fiscal year ended December 28, 2018

(in millions)

	Mallinckrodt plc				Mallinckrodt International Finance S.A.				Other Subsidiaries				Eliminations				Consolidated
Cash Flows From Operating Activities:
Net cash from operating activities	$	438.9			$	80.1			$	1,702.5			$	(1,556.0	)		$	665.5
Cash Flows From Investing Activities:
Capital expenditures	—				—				(127.0		)		—				(127.0		)
Acquisitions, net of cash acquired	—				—				(699.9		)		—				(699.9		)
Proceeds from divestiture, net of cash	—				—				313.0				—				313.0
Intercompany loan investment	(385.6		)		(90.1		)		(502.0		)		977.7				—
Investment in subsidiary	—				(220.0		)		—				220.0				—
Other	—				—				33.6				—				33.6
Net cash from investing activities	(385.6		)		(310.1		)		(982.3		)		1,197.7				(480.3		)
Cash Flows From Financing Activities:
Issuance of external debt	—				600.0				90.3				—				690.3
Repayment of external debt	—				(1,289.4		)		(404.2		)		—				(1,693.6		)
Debt financing costs	—				(12.1		)		—				—				(12.1		)
Proceeds from exercise of share options	1.0				—				—				—				1.0
Intercompany loan borrowings	—				977.7				—				(977.7		)		—
Intercompany dividends	—				(814.2		)		(741.8		)		1,556.0				—
Capital contribution	—				—				220.0				(220.0		)		—
Repurchase of shares	(57.5		)		—				—				—				(57.5		)
Other	2.9				—				(26.0		)		—				(23.1		)
Net cash from financing activities	(53.6		)		(538.0		)		(861.7		)		358.3				(1,095.0		)
Effect of currency rate changes on cash	—				—				(1.8		)		—				(1.8		)
Net change in cash, cash equivalents and restricted cash	(0.3		)		(768.0		)		(143.3		)		—				(911.6		)
Cash, cash equivalents and restricted cash at beginning of period	0.7				908.8				369.6				—				1,279.1
Cash, cash equivalents and restricted cash at end of period	$	0.4			$	140.8			$	226.3			$	—			$	367.5
Cash and cash equivalents at end of period	$	0.4			$	140.8			$	207.7			$	—			$	348.9
Restricted cash included in other long-term assets at end of period	—				—				18.6				—				18.6
Cash, cash equivalents and restricted cash at end of period	$	0.4			$	140.8			$	226.3			$	—			$	367.5

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MALLINCKRODT PLC

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Fiscal year ended December 29, 2017

(in millions)

	Mallinckrodt plc				Mallinckrodt International Finance S.A.				Other Subsidiaries				Eliminations				Consolidated
Cash Flows From Operating Activities:
Net cash from operating activities	$	1,233.2			$	1,139.4			$	2,274.9			$	(3,920.2	)		$	727.3
Cash Flows From Investing Activities:
Capital expenditures	—				—				(186.1		)		—				(186.1		)
Acquisitions, net of cash acquired	—				—				(76.3		)		—				(76.3		)
Proceeds from disposal of discontinued operations, net of cash	—				—				576.9				—				576.9
Intercompany loan investment	(589.5		)		—				(1,157.9		)		1,747.4				—
Investment in subsidiary	—				(1,475.3		)		—				1,475.3				—
Other	—				—				3.9				—				3.9
Net cash from investing activities	(589.5		)		(1,475.3		)		(839.5		)		3,222.7				318.4
Cash Flows From Financing Activities:
Issuance of external debt	—				1,400.0				65.0				—				1,465.0
Repayment of external debt and capital leases	—				(764.5		)		(152.7		)		—				(917.2		)
Debt financing costs	—				(12.7		)		—				—				(12.7		)
Proceeds from exercise of share options	4.1				—				—				—				4.1
Intercompany loan borrowings	—				1,747.4				—				(1,747.4		)		—
Intercompany dividends	—				(1,170.0		)		(2,750.2		)		3,920.2				—
Capital contribution	—				—				1,475.3				(1,475.3		)		—
Repurchase of shares	(651.7		)		—				—				—				(651.7		)
Other	4.1				—				(21.8		)		—				(17.7		)
Net cash from financing activities	(643.5		)		1,200.2				(1,384.4		)		697.5				(130.2		)
Effect of currency rate changes on cash	—				—				2.5				—				2.5
Net change in cash, cash equivalents and restricted cash	0.2				864.3				53.5				—				918.0
Cash, cash equivalents and restricted cash at beginning of period	0.5				44.5				316.1				—				361.1
Cash, cash equivalents and restricted cash at end of period	$	0.7			$	908.8			$	369.6			$	—			$	1,279.1
Cash and cash equivalents at end of period	$	0.7			$	908.8			$	351.4			$	—			$	1,260.9
Restricted cash included in other long-term assets at end of period	—				—				18.2				—				18.2
Cash, cash equivalents and restricted cash at end of period	$	0.7			$	908.8			$	369.6			$	—			$	1,279.1

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24.	Subsequent Events

Commitments and Contingencies

Certain litigation matters occurred in fiscal 2019 or prior but had subsequent updates through the date of this report. See further discussion below and in Note 19 to the consolidated financial statements.

Opioid-Related Matters

On February 25, 2020, the Company announced that it has reached an agreement in principle on the terms of a global settlement that would resolve all opioid-related claims against the Company and its subsidiaries (“Litigation Settlement”). The Litigation Settlement has been reached with a court-appointed plaintiffs' executive committee representing the interests of thousands of plaintiffs in the MDL and is supported by a broad-based group of 47 state and U.S. Territory Attorneys General (the "Plaintiffs"). The Litigation Settlement contemplates the filing of voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”) by certain subsidiaries of Mallinckrodt plc operating the Specialty Generics business (the “Specialty Generics Subsidiaries”) and the establishment of a trust for the benefit of plaintiffs holding opioid-related claims against the Company (the “Opioid Claimant Trust”). Subject to the Settlement Closing (as defined below), the Company has agreed to the payment of certain structured payments to the Opioid Claimant Trust. Pursuant to the terms of a channeling injunction and third-party release, which are subject to court approval, all persons or entities asserting opioid-related claims against the Company would recover solely from the Opioid Claimant Trust on account of such claims. All other claims against, and equity interests in, the Specialty Generics Subsidiaries will be unimpaired and it is expected that all contracts to which the Specialty Generics Subsidiaries are party will be assumed. The Litigation Settlement also provides for:

•	the payment of $300.0 million upon Specialty Generics' emergence from the completed Chapter 11 case;

•	the payment to the Opioid Claimant Trust of additional cash totaling $1,300.0 million, consisting of $200.0 million on each of the first and second anniversaries of emergence and $150.0 million on each of the third through eighth anniversaries of emergence; and

•

the issuance of warrants ("Settlement Warrants") upon emergence from the contemplated Chapter 11 process to the Opioid Claimant Trust to purchase ordinary shares of the Company with an eight year term at a strike price of $3.15 per ordinary share that would represent approximately 19.99% of the Company's fully diluted outstanding shares, including after giving effect to the exercise of the warrants, provided that such warrants may not be exercised during any calendar quarter in a quantity that would exceed 5.0% of the number of shares outstanding.

The consummation of the Litigation Settlement (such consummation, the "Settlement Closing") is conditioned upon, among other things, bankruptcy court approval of the bankruptcy plan effectuating the Litigation Settlement, the emergence of the Specialty Generics Subsidiaries from bankruptcy and:

•	the exchange of the 2020 Notes and the 2022 Notes into new secured notes on terms reasonably satisfactory to the Company;

•	the coordination of the action filed by the State of New York against the Company to allow the Specialty Generics Subsidiaries sufficient time to arrange for pre-arranged filings under Chapter 11;

•	the support and participation of a supermajority of all claimants with opioid-related claims, including a future claims representative (if one is deemed necessary by the Company in consultation with an ad hoc committee of certain Supporting Claimants or their representatives (the "AHC")), against the Company on terms satisfactory to the Company;

•	the resolution of U.S. Department of Justice civil and criminal claims against the Company on reasonable terms;

•

the agreement by and between the Company and the Supporting Claimants to an injunction governing the sale and distribution of opioids by the Specialty Generics Subsidiaries, compliance with which is expected to protect the Company from further opioid-related liability, on terms satisfactory to the Company, with such terms to be binding on the Specialty Generics Subsidiaries and any buyers thereof or successors thereto;

•	the treatment of potential indemnification claims of Covidien plc on terms satisfactory to the Company and the AHC;

•	the disclosure by the Company of a subset of its litigation documents to be made publicly available as part of an industry-wide document disclosure program, subject to scope and protocols to be negotiated by the parties’ informed representatives;

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•	the entry of a judgment between the Company and the CMS and the entry by the Company into any other legal judgments or settlements, each on such terms and at such levels as may be acceptable to the Company, such that the Company is able to make all payments required under the terms of the Litigation Settlement;

•

the resolution and settlement of certain outstanding intercompany indebtedness between the Specialty Generics Subsidiaries and the Company’s other subsidiaries and the entry into a shared services agreement between the Specialty Generics Subsidiaries and certain other subsidiaries of the Company, as the case may be, in each case on terms reasonably satisfactory to the Company, subject to consent of the AHC;

•	a rights offering or a shareholder vote to satisfy any applicable legal requirements relating to the issuance of the warrants, in a manner reasonably acceptable to the Company and the AHC; and

•	the satisfaction such other conditions as may be mutually agreed to by the Company and the AHC.

Although the term sheet relating to the Litigation Settlement had included a reference to the Company making an exchange offer for the 2020 Notes, the Company currently plans to enter into the Amendment (as defined below), and to use the proceeds of the new term loan to refinance the 2020 Notes, in lieu of any exchange offer for the 2020 Notes.

As a result of the Litigation Settlement, the Company recorded an accrual for this contingency of $1,600.0 million related to the structured cash payments and $43.4 million related to the Settlement Warrants in the consolidated balance sheet as of December 27, 2019, with a corresponding non-cash charge to the consolidated statement of operations as a component of operating expenses.

The fair value of the Settlement Warrants to be issued upon the Settlement Closing has been estimated using the Black-Scholes pricing model. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. The expected volatility assumption is based on the historical and implied volatility of the Company's peer group with similar business models. The expected term assumption is based on the contractual term of the Settlement Warrants, including the maximum exercise restriction of 5.0% per calendar quarter, which resulted in the valuation of four separate tranches. The expected annual dividend per share is based on the Company's current intentions regarding payment of cash dividends. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term assumed. The estimated fair value for the Settlement Warrants will be subject to revaluation at each balance sheet date with any changes in fair value recorded as a non-cash gain or (loss) in the consolidated statements of operations until the Settlement Warrants are issued, at which point they will be recorded as equity or as a liability based upon the facts and circumstances at the time of issuance.

The key assumptions used to estimate the fair value of the Settlement Warrants as of December 27, 2019 were as follows:

Expected share price volatility	54.4		%
Weighted-average risk-free rate	1.8		%
Expected annual dividend per share	—		%
Weighted-average expected term (in years)	7.6
Share price	$	3.45

Financing Activities

Support and Exchange Agreement

On February 25, 2020, the Company and the Issuers entered into a support and exchange agreement with Aurelius Capital Master, Ltd., Franklin Advisers, Inc. and Capital Research and Management Company (collectively, the "Noteholder Parties", and such agreement, the “Exchange Agreement”) pursuant to which, among other things, the Issuers agreed to use commercially reasonable efforts to commence, by no later than March 20, 2020, a private offer to exchange any and all of the 2022 Notes held by such noteholders for an equal principal amount of new second lien secured notes (such new notes, the "Exchange Offer Notes" and, such private offer to exchange, the "2022 Exchange Offer") at a rate of $1,000 of Exchange Offer Notes for every $1,000 of 2022 Notes exchanged. Pursuant to the Exchange Agreement, the Issuers also agreed to use commercially reasonable efforts to commence, by no later than March 20, 2020, a solicitation of consents from holders of the 2022 Notes to certain amendments to eliminate or waive substantially all of the restrictive covenants contained in the 2022 Notes and the applicable indenture, and eliminate certain events of default, modify covenants regarding mergers and the transfer of assets, and modify and eliminate certain other provisions, including covenants regarding future guarantors and certain provisions relating to defeasance (such solicitation of consents, the "2022 Consent Solicitation"). The closing of the 2022 Exchange Offer will be conditioned on, among other things, the absence of events materially and adversely affecting the ability to implement the Litigation Settlement, and the funding of the new term loans and the effectiveness of the Amendment (as defined below). The noteholders have agreed to tender in the 2022 Exchange Offer all of their 2022 Notes, deliver their consents in the 2022 Consent Solicitation and if the aggregate

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principal amount of Exchange Offer Notes issued pursuant to the 2022 Exchange Offer is less than approximately $610.3 million (the “Exchange Cap”), exchange the outstanding October 2023 Notes held by the noteholders party to the Exchange Agreement for an amount of Exchange Offer Notes equal to the excess, if any, by which the Exchange Cap exceeds the aggregate principal amount of Exchange Offer Notes to be issued pursuant to the 2022 Exchange Offer, at a rate of $900 of Exchange Offer Notes for every $1,000 of October 2023 Notes exchanged by each noteholder. The noteholders collectively hold approximately $271.0 million aggregate principal amount of the 2022 Notes and approximately $255.0 million aggregate principal amount of the October 2023 Notes. Additionally, pursuant to the Exchange Agreement, the noteholders have consented, in their capacity as holders of the 2020 Notes, to the adoption of an amendment to the 2020 Notes and the indenture governing the 2020 Notes to provide for the reduction of the optional redemption notice period from 30 days to three business days. The 2022 Exchange Offer will be subject to the satisfaction or waiver of certain conditions, and the failure to consummate the 2022 Exchange Offer could adversely affect the implementation and consummation of the Litigation Settlement.

Support Agreement

On February 25, 2020, the Company and the Issuers entered into a support agreement (the "Support Agreement") with the Noteholder Parties, as well as certain existing term lenders under the Credit Agreement (collectively, the "Lender Parties") dated as of March 19, 2014 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”).

The descriptions below of an amendment (the "Amendment") to our existing credit agreement on terms consistent with an agreed term sheet and the New Term Loans (as defined below) are subject to the effectiveness of the Amendment, which is subject to the satisfaction or waiver of the conditions set forth in the term sheet and the Amendment. Conditions to the effectiveness of the Amendment, include, among other things, (i) the consent by certain thresholds of the existing term lenders and revolving lenders (which condition has not yet been satisfied as of this date) and (ii) the commencement of an exchange offer with respect to the 2022 Notes, pursuant to the Exchange Agreement.

The Amendment, if effected, on the terms contemplated by the term sheet, will provide for a commitment from the Noteholder Parties and certain of the Lender Parties (collectively, the "Backstop Lenders") to provide a new $800.0 million senior secured term loan facility (the “New Term Loans”) upon the satisfaction of certain conditions set forth in the term sheet. The New Term Loans will bear interest at an interest rate per annum equal to adjusted LIBOR plus a spread equal to 6.50%.

The New Term Loans will be guaranteed by the Company and the same subsidiaries of the Company that guarantee the Existing Term Loans (as defined below) and secured by liens on the same assets as secure the Existing Term Loans (as amended by the Amendment and, in each case, subject to certain exceptions set forth in the Amendment). The proceeds from the New Term Loans will be used to fund the redemption or repayment of all of the outstanding approximately $614.8 million of the 2020 Notes and additionally to partially repay loans and terminate corresponding commitments under the Company's revolving credit facility in respect of revolving lenders who agree to extend their loans and commitments to March 2024.

The New Term Loans will amortize at an annual rate equal to 5.00% of the initial principal amount of the New Term Loans, payable in equal quarterly payments. The remaining principal amount of the New Term Loans will mature on the fourth anniversary of the borrowing date of the New Term Loans. Amounts outstanding under the New Term Loans may be voluntarily prepaid at any time, subject to a prepayment premium.

Other than with respect to the maturity date, amortization, the applicable interest rate and prepayment premiums, the New Term Loans will have similar terms to the 2017 Term Loan and the 2018 Term Loan (collectively, the “Existing Term Loans”), in each case as amended by the Amendment.

The Amendment would also implement certain amendments to the terms of the Credit Agreement. The interest rate margins applicable to the Existing Term Loans will be increased by 100 basis points. The Existing Term Loans will also amortize at an annual rate increased to 2.00% of the outstanding principal amount of the Existing Term Loans on the effective date of the Amendment, payable in equal quarterly payments. Certain other covenants (including the financial covenant), mandatory prepayments and events of default set forth in the existing Credit Agreement will also be modified pursuant to the Amendment, including to facilitate the implementation of the Litigation Settlement.

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•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets;

•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company's receipts and expenditures are being made only in accordance with authorizations of the Company's management and directors; and

•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

•	Continued to emphasize the importance of, and monitor the sustained compliance with, the execution of our internal controls over financial reporting through, among other activities, numerous meetings and trainings.

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•	Enhanced, and will continue to enhance, the design of internal controls governing oversight and evaluation of future cash flow forecasts used to develop certain management estimates, including those related to goodwill and other intangible assets.

•	Tested the design effectiveness of the enhanced internal controls by performing them to re-evaluate the appropriateness, and test the accuracy, of information used to develop future cash flow forecasts in fiscal 2018.

•	Concluded the enhanced controls were designed effectively and developed a plan to implement them to support future cash flow forecasts.

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1)	Financial Statements. The following are included within Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

•	Report of Independent Registered Public Accounting Firm

•	Consolidated Statements of Operations for the fiscal year ended December 27, 2019, December 28, 2018 and December 29, 2017

•	Consolidated Statements of Comprehensive Operations for the fiscal year ended December 27, 2019, December 28, 2018 and December 29, 2017

•	Consolidated Balance Sheets as of December 27, 2019 and December 28, 2018

•	Consolidated Statements of Cash Flows for the fiscal year ended December 27, 2019, December 28, 2018 and December 29, 2017

•	Consolidated Statements of Changes in Shareholders' Equity for the period from December 30, 2016 to December 27, 2019

•	Notes to Consolidated Financial Statements

2)	Financial Statement Schedules. The financial statement schedule is included below. All other schedules have been omitted because they are not applicable, not required or the information is included in the financial statements or notes thereto.

Schedule II - Valuation and Qualifying Accounts
(in millions)
Description		Balance at Beginning of Period				Charged to Operations				Additions and Other				Deductions				Balance at End of Period
Allowance for doubtful accounts:
Fiscal year ended December 27, 2019		$	5.0			$	1.5			$	—			$	(2.5	)		$	4.0
Fiscal year ended December 28, 2018		3.9				3.8				—				(2.7		)		5.0
Fiscal year ended December 29, 2017		4.0				0.6				—				(0.7		)		3.9
Sales reserve accounts:
Fiscal year ended December 27, 2019		$	405.4			$	2,437.7			$	—			$	(2,505.7	)		$	337.4
Fiscal year ended December 28, 2018		376.6				2,387.5				—				(2,358.7		)		405.4
Fiscal year ended December 29, 2017		391.3				2,008.5				—				(2,023.2		)		376.6
Tax valuation allowance:
Fiscal year ended December 27, 2019		$	2,604.9			$	526.6			$	—			$	—			$	3,131.5
Fiscal year ended December 28, 2018		2,267.9				332.8				4.2				—				2,604.9
Fiscal year ended December 29, 2017		1,398.3				804.6				4.0				61.0				2,267.9

3)	Exhibits. The exhibits are included in the Exhibit Index that appears at the end of this Annual Report on Form 10-K.

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