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INDEX TO FINANCIAL STATEMENTS

Mallinckrodt Specialty Generics Business

A Business of Mallinckrodt plc

Condensed Combined Financial Statements (Unaudited)

As of June 27, 2025 and December 27, 2024 and for the six month period ended June 27, 2025 and June 28, 2024

Condensed Combined Statements of Operations (Unaudited)

(in millions)

The accompanying notes are an integral part of these Condensed Combined Financial Statements (Unaudited).

Condensed Combined Statements of Comprehensive Operations (Unaudited)

(in millions)

The accompanying notes are an integral part of these Condensed Combined Financial Statements (Unaudited).

Condensed Combined Balance Sheets (Unaudited)

(in millions)

The accompanying notes are an integral part of these Condensed Combined Financial Statements (Unaudited).

Condensed Combined Statements of Cash Flows (Unaudited)

(in millions)

The accompanying notes are an integral part of these Condensed Combined Financial Statements (Unaudited).

Condensed Combined Statements of Changes in Parent Company Net Investment (Unaudited)

 (in millions)

The accompanying notes are an integral part of these Condensed Combined Financial Statements (Unaudited).

Notes to the Condensed Combined Financial Statements (Unaudited)

(in millions)

Note 1 – Description of the Business and Basis of Presentation

Description of the Business

The Mallinckrodt Specialty Generics Business (“Company”) is primarily comprised of the Mallinckrodt plc (the “Parent” or “Mallinckrodt”) Specialty Generics reportable segment and certain other assets and liabilities related to the Specialty Generics Business. The Company is focused on providing its customers high-quality specialty generic drugs and active pharmaceutical ingredients (“API(s)”), including acetaminophen (“APAP”). Specialty Generics includes a variety of product formulations, such as hydrocodone-containing tablets, oxycodone-containing tablets and several other controlled substances indicated for the treatment of pain. Other controlled substances products include medicines used to treat attention-deficit/hyperactivity disorder (“ADHD”) and addiction treatment medications. The Company provides bulk active pharmaceutical ingredients, including acetaminophen, stimulants, opioids and stearates, to a wide variety of pharmaceutical companies.

The Company supplies finished dose products principally through drug distributors, retail pharmacy chains, food store chains with pharmacies, hospital buying groups, and direct contracts with the United States (“U.S.”) government. APIs and excipients are supplied directly to over 200 manufacturers in over 45 countries.

The Company is primarily based in the United States and operates five manufacturing facilities in the United States, along with distribution and sales offices in the United Kingdom and the Netherlands.

Basis of Presentation

The accompanying interim unaudited condensed combined financial statements have been prepared in U.S. dollars and in accordance with generally accepted accounting principles in the U.S. (“GAAP”). The preparation of the unaudited condensed combined 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 unaudited financial statements have been prepared on a condensed combined basis and include certain legal entities dedicated to the Company, as well as costs, assets and liabilities carved-out of certain shared legal entities of the Parent. In the opinion of management, all adjustments necessary for a fair statement of results of operations, cash flows and financial position have been made.

For the periods presented in these interim unaudited condensed combined financial statements, the Company primarily operated as a reportable segment of Mallinckrodt. As such, separate financial statements have not historically been prepared for the Company. The interim unaudited condensed combined financial statements have been derived from the consolidated financial statements and accounting records of Mallinckrodt, but do not include all of the annual disclosures required by GAAP; accordingly these unaudited condensed combined financial statements should be read in conjunction with the Company's audited annual combined financial statements. Significant accounting policies have remained unchanged from the previously mentioned audited annual combined financial statements. The interim unaudited condensed combined financial statements reflect the combined historical results of operations, financial position and cash flows of the Company for the periods presented as historically managed by Mallinckrodt.

The interim unaudited condensed combined financial statements may not be indicative of the Company’s future performance and do not necessarily reflect what the results of operations, financial position and cash flows would have been had it operated as an independent business during the periods presented. The interim unaudited condensed combined statements of operations include all revenues and costs directly attributable to the Company, including costs for facilities, functions and services used by the Company. The Company has historically functioned together with the other businesses controlled by Mallinckrodt. Accordingly, the Company relied on certain of Mallinckrodt’s corporate and shared services. Certain corporate and shared costs have been allocated to the Company including costs related to support functions that are provided on a centralized basis within Mallinckrodt, such as expenses for executive oversight, treasury, tax, finance, legal, human resources, shared services, compliance, information technology, selling, research and development (“R&D”) and other corporate functions. These expenses have been allocated to the Company based on a specific identification basis or, when specific identification is not practicable, a proportional cost allocation method primarily based on net sales or headcount depending on the nature of the services. The charges for these corporate and shared functions are deemed settled in cash by the Company in the period in which the costs were recorded within cost of sales, selling, general and administrative (“SG&A”) and R&D in the unaudited condensed combined statements of comprehensive operations.

Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented, though the allocations may not be indicative of the actual costs that would have been incurred had the Company operated as a stand-alone company. Actual costs that may have been incurred if the Company had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by the Company’s employees, and other strategic decisions. In addition, the future results of operations, financial position and cash flows could differ materially from the historical results presented herein.

Mallinckrodt utilizes a centralized approach to treasury, cash management and financing its operations. The cash, cash equivalents, and restricted cash held by Mallinckrodt at the corporate level are not specifically identifiable to the Company and therefore have not been reflected in the Company’s unaudited condensed combined balance sheets. Cash and cash equivalents in the unaudited condensed combined balance sheets represent cash, cash equivalents, and restricted cash held by legal entities of the Company that are specifically attributable to the Company.

Mallinckrodt’s external debt and related interest expense have not been attributed to the Company for the periods presented because Mallinckrodt’s borrowings are neither directly attributable to the Company nor is the Company the legal obligor of such borrowings. However, certain of the Company's subsidiaries are currently guarantors of certain debt facilities of Parent and certain assets of such entities have been pledged as collateral. The unaudited condensed combined balance sheets include certain assets and liabilities that have historically been held at the Mallinckrodt corporate level but are specifically identifiable or otherwise attributable to the Company.

All intracompany transactions and balances within the Company have been eliminated. Transactions under legal agreements and historically settled in cash between the Company and the Parent have been reflected in the unaudited condensed combined balance sheets as related party receivable or related party payable with the aggregate net effect of these related party transactions reflected in the unaudited condensed combined statements of cash flows. Amounts advanced for or repayments received from related party notes receivable have been classified in investing activities. Proceeds from or payments on related party payables have been classified within financing activities. Other balances between the Company and Mallinckrodt are considered to be effectively settled in the unaudited condensed combined financial statements at the time the transactions are recorded. The aggregate net effect of transactions between the Company and the Parent that are not historically settled in cash have been reflected in the interim unaudited condensed combined balance sheets as Net parent investment and in the interim unaudited condensed combined statements of cash flows as Net transfers from Parent within financing activities. See Note 2 for further information.

Fiscal Year

The Company reports its results based on a “52-53 week” year ending on the last Friday of December. Unless otherwise indicated, the six months ended June 27, 2025 and June 28, 2024 refer to the 26 week periods ended June 27, 2025 and June 28, 2024, respectively.

Note 2 – Related Parties

These unaudited condensed combined financial statements have been derived from the consolidated financial statements and accounting records of the Parent. The following discussion summarizes transactions between the Company and the Parent (and its subsidiaries that are not part of the Specialty Generics Business).

Corporate and shared cost allocations

The unaudited condensed combined financial statements include general corporate expenses and shared expenses of the Parent that were charged to the Company for certain support functions, including, but not limited to, management, legal, human resources, finance, accounting, treasury, tax, information technology, employee benefits, communications, and compliance, that are provided on a centralized basis. The Company considers the inclusion of these expenses to be a reasonable reflection of the utilization of services by, or the benefits provided to, the Company. These expenses are included in the unaudited condensed combined statements of operations within cost of sales, SG&A and R&D expenses.

The following table reflects these allocations as described above and in Note 1:

These unaudited condensed combined financial statements may not reflect the actual expenses that would have been incurred and may not reflect the Company’s unaudited condensed combined results of operations, financial position and cash flows had it been a stand-alone company during the period presented. Actual costs that may have been incurred if the Company had been a stand-alone company would depend on multiple factors, including organizational structure, whether functions were outsourced or performed by Company’s employees, and other strategic decisions.

Centralized cash pooling arrangements

The Company historically has entered into intercompany agreements with subsidiaries of Parent related to cash pooling. The Company operates its own cash pooling program through one of its entities and also participates in the Parent’s centralized treasury and cash management program. Agreements between entities included within the Specialty Generics business and those included within the Parent are considered as related party agreements, and the related activities and balances are included within the unaudited condensed combined financial statements. The Company incurs interest expense and interest income on cash borrowed from and contributed to the cash pool, respectively. Interest expense and income are presented within interest income, net on the unaudited condensed combined statements of operations. The Company's cash that is included in physical cash pooling of dedicated entities is classified as cash and cash equivalents on the unaudited condensed combined balance sheets. The Parent will continue to provide cash management and financing to support the Company’s ongoing operations, which will be reflected in Parent company net investment.

Related party receivable

Related party receivables are included within related party receivable in the unaudited condensed combined balance sheets as follows:

Interest income is included within interest income, net in the unaudited condensed combined statements of operations as follows:

Related party payable

The Company has borrowings due to related parties that will be settled in cash. Balances are recorded in related party payable in the unaudited condensed combined balance sheets as follows:

Interest expense is included within Interest income, net in the unaudited condensed combined statements of operations as follows:

Related party licensing agreement

In March 2024, the Company entered into a related party agreement with a subsidiary of Parent granting the Company a license to sell a certain pharmaceutical product. As part of the agreement, the Company remits a quarterly royalty payment to the Parent’s subsidiary. The related party royalty expense included in the unaudited condensed combined statements of operations within cost of sales was $1.5 million and $0.4 million for the six months ended June 27, 2025 and June 28, 2024, respectively.

Parent Company Net Investment

The net transfers to the Parent are included within “Parent company net investment” on the unaudited condensed combined statements of parent company net investment. The components of the transfers to Parent were as follows:

Note 3 – Revenue from Contract with Customers

Product Sales Revenue

See Note 11 for presentation of the Company's net sales by product family.

Reserve for variable consideration

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

Note 4 – Income Taxes

ASC Topic 740, Income Taxes requires companies to recognize the effects of tax law changes in the period of enactment, which for the Company is the third quarter of 2025. The Company is currently analyzing the OBBBA provisions and the impact on its combined financial statements.

The Company recognized an income tax expense of $15.4 million on income from continuing operations before income taxes of $70.3 million for the six months ended June 27, 2025. This resulted in an effective tax rate of 21.9%. The Company recognized an income tax expense of $11.2 million on income from continuing operations before income taxes of $51.8 million for the six months ended June 28, 2024. This resulted in an effective tax rate of 21.6%. The increase in the effective tax rate for the six months ended June 27, 2025, compared to the six months ended June 28, 2024, is primarily due to decreased benefits from the foreign derived intangible income deduction.

As of June 27, 2025 and December 27, 2024, the Company has not recorded any amount of gross unrecognized tax benefits for uncertain tax positions.

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

Note 5 – Inventories

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

Note 6 – 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:

Depreciation expense was as follows:

Note 7 – Intangible Assets

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

Intangible assets amortization expense was as follows:

As of June 27, 2025, the estimated aggregate amortization expense is expected to be as follows:

Note 8 - 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 liability relating to all of these indemnification obligations was governed by a contract that was rejected as part of the 2020 Chapter 11 proceedings and the Irish examinership proceedings (together, the “2020 Bankruptcy Proceedings”) and is no longer a liability subsequent to June 16, 2022. The Company was required to pay $30.0 million into an escrow account as collateral to the purchaser. The contract governing the escrow account was assumed in the 2020 Bankruptcy Proceedings.

As of June 27, 2025 and December 27, 2024, the Company had various other letters of credit, guarantees and surety bonds totaling $10.6 million and $9.2 million, respectively. As of June 27, 2025 and December 27, 2024, the Company had restricted cash of $13.9 million and $13.8 million, respectively, held in segregated accounts primarily to collateralize surety bonds for the Company's environmental liabilities.

Note 9 – Commitments and Contingencies

The Company and Parent are subject to various legal proceedings and claims, including government investigations, environmental matters, product liability matters, patent infringement claims, antitrust matters, securities class action lawsuits, personal injury claims, employment disputes, contractual and other commercial disputes, and other legal proceedings, all in the ordinary course of business. Although it is not feasible to predict the outcome of these matters, the Company and Parent believe given the 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

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 (“EDPA”) pursuant to which the Antitrust Division of the Department of Justice is seeking documents regarding generic products and pricing, communications with generic competitors and other related matters. The Company produced documents in early 2019 and is otherwise cooperating in the investigation.

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 (“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 (“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 (“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.

U.S. Attorney’s Office Subpoena W.D. Va. In February 2025, the Company received a subpoena duces tecum from the U.S. Attorney’s Office for the Western District of Virginia (“WDVA USAO”) seeking production of data and information for the time period from January 1, 1996 to the present relating to pharmacy benefit managers, including remuneration provided to or rebates negotiated with pharmacy benefit managers, and also including communications with pharmacy benefit managers related to the prescription, administration, or safety or efficacy of opioids. The Company has since received two additional subpoenas from WDVA USAO seeking related material as recently as April 2025. The Company is in the process of responding to the subpoena and is cooperating with the investigation. The Company cannot predict the eventual scope, duration or outcome of this matter at this time.

U.S. Department of Justice Civil Investigative Demand. In March 2025, the Company received a Civil Investigative Demand (“CID”) issued by the U.S. Department of Justice under the False Claims Act seeking production of data and information from the time period of January 1, 2018 to the present relating to hydrocodone/acetaminophen products manufactured in the Company’s Hobart, NY facility, including documentation pertaining to whether those products contain the amount of hydrocodone they purport to contain. The Company is in the process of responding to the CID and is cooperating with the investigation. The Company cannot predict the eventual scope, duration or outcome of this matter at this time.

Specialty Generics Grand Jury Subpoenas

U.S. Attorney's Office Subpoena W.D. Va. In August 2023, the Company received a grand jury subpoena from the WDVA USAO. Subsequently, the Company received additional grand jury subpoenas from the WDVA USAO, most recently in July 2025. The subpoenas seek production of certain data and information for the time period from July 17, 2012 to the present, including information and data relating to the Company’s Specialty Generics controlled substances compliance program, the Company's reporting of suspicious orders for controlled substances, chargebacks and other transactions, financial accounts related to these issues, financial transactions involving prescription drug products, and communications between the Company and the U.S. Drug Enforcement Administration.

U.S. Attorney's Office Subpoena E.D.PA. In May 2024, the Company received a grand jury subpoena from the U.S. Attorney's Office for the Eastern District of Pennsylvania seeking production of data and information with respect to a customer for the time period from January 1, 2020 to May 2024, including information and data relating to potentially suspicious orders for controlled substances. The Company suspended sales to this customer in October 2023 prior to receipt of the subpoena.

The Company is in the process of responding to the subpoenas from both U.S. Attorney Offices and is cooperating in the investigations. The Company cannot predict the eventual scope, duration or outcome of the investigations at this time.

Patent litigation

Generic Products. The Company continues to pursue development of a portfolio of generic products, some of which require submission of a Paragraph IV certification against patents listed in the FDA's Orange Book for the Parent’s Branded product asserting that the Company's proposed generic product does not infringe and/or the Orange Book patent(s) are invalid and/or unenforceable. In the case of litigation filed against Company for such potential generic products, those litigation matters can either be settled or the litigation pursued through a trial and any potential appeals of the lower court decision in order to successfully launch those generic products in the future.

Generic Pharmaceutical Antitrust Multi-District Litigation

In August 2016, a multi-district litigation (“MDL”) was established in the EDPA relating to allegations of antitrust violations with respect to generic pharmaceutical pricing (“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. The Generic Pricing MDL includes lawsuits against the Company and dozens of other pharmaceutical companies, including a complaint filed by Attorneys General for 51 States, Territories and the District of Columbia seeking monetary damages and injunctive relief (“AG Litigation”). Since its inception, the Generic Pricing MDL has expanded to encompass dozens of pharmaceutical companies and more than 200 generic pharmaceutical drugs. Although the AG Litigation had been consolidated in the EDPA in the Generic Pricing MDL, a recent legislative change exempted state antitrust enforcement actions arising under federal antitrust law from MDLs. As a result, the plaintiffs sought and won a remand to the jurisdiction in which the case was filed, the District of Connecticut. As a result of this change and resulting action, the Company filed its answer to the plaintiffs’ amended complaint in September 2024. While the Company is not subject to monetary damages in connection with these matters, as a result of the 2020 Bankruptcy Proceedings and vigorously disagrees with the plaintiffs' characterization of the facts and law, the Company is not able to reasonably estimate whether any injunctive relief will be granted, and if granted, whether it will materially impact the Company's financial position or operations. The joint defense group filed joint motions for summary judgment that are fully briefed before the court.

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 as 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 June 27, 2025, it was probable that it would incur remediation costs in the range of $16.4 million to $50.8 million. The Company also concluded that, as of June 27, 2025, the best estimate within this range was $35.0 million, of which $1.0 million was included in accrued and other current liabilities and the remainder was included in environmental liabilities on the unaudited condensed combined balance sheet as of June 27, 2025. 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 with the Environmental Protection Agency (“EPA”) to perform a remedial investigation and feasibility study (“RI/FS”) of the 17-mile stretch known as the Lower Passaic River Study Area (“River”). The Company's potential liability stems from former operations at Lodi and Belleville, New Jersey (the “Lodi facility” and the “Belleville facility” respectively). 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 that 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. In March 2016, the EPA issued the Record of Decision (“ROD(s)”) 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. In October 2016, the EPA announced that Occidental Chemicals Corporation had entered into an agreement to develop the remedial design.

In August 2018, the EPA finalized a buyout offer of $0.3 million with the Company, limited to its former Lodi facility, for the lower 8 miles of the River. In September 2021, the EPA issued the ROD for the upper 9 miles of the River selecting source control as the remedy for the upper 9 miles with an estimated cost of $441.0 million. In September 2022, the Company entered into a conditional $0.3 million Early Cash-Out Consent Decree (“CD”) with the EPA as a buyout for its portion of the upper part of the River related to its former Lodi facility; finalization of the CD is subject to the EPA approval following the public comment period. The comment period resulted in a modification to the CD by the EPA which includes a cost reopener of $3.7 billion to the covenant not to sue. In January 2024, the United States filed the modified CD with the U.S. District Court for the District of New Jersey, and a motion for entry and response to comments was filed. One of the parties, OxyChem, filed a brief in opposition to the motion to enter the modified CD. In December 2024, the judge granted the motion to enter the modified CD and the requests from OxyChem for discovery, oral argument and a hearing were denied. In January 2025, Nokia of America appealed the judge’s decision to the Third Circuit Court of Appeals.

The portion of the liability related to the Belleville facility was discharged against the Company as a result of the plan of reorganization effective June 16, 2022. The portion of the liability related to the Lodi facility remains a part of the reserve until the CD is lodged.

As of June 27, 2025, the Company estimated that its remaining liability related to the River was $21.1 million, which was included within environmental liabilities on the unaudited condensed combined balance sheet as of June 27, 2025. Despite the issuance of the revised FFS and the RODs for both the lower and upper River by the EPA, the RI/FS by the CPG, and the conditional CD 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.

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.

Note 10 – 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:

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:

Debt and equity securities held in rabbi trust. Debt securities held in the rabbi trust 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 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 the rabbi trust primarily consist of U.S. common stocks, which are valued using quoted market prices reported on nationally recognized securities exchanges. During the six months ended June 28, 2024, proceeds from debt and equity securities held in rabbi trusts were $22.6 million.

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 liabilities. Parent will provide consideration for the Terlivaz® contingent value right agreement (“CVR”) primarily based upon the achievement of a cumulative net sales milestone. Parent assesses the likelihood and timing of making such payments at each balance sheet date. The fair value of the contingent payment was measured based on the net present value of a probability-weighted assessment.

Certain legal entities within the Company are obligated to contribute a portion of the liability. The Company’s share of the fair value of the Terlivaz CVR as of June 27, 2025 and December 27, 2024 to be $2.2 million and $2.1 million, respectively. The contingent consideration liability was classified within other liabilities in the unaudited condensed combined balance sheets as of June 27, 2025 and December 27, 2024. The six months ended June 27, 2025 included $0.1 million of expense within SG&A in the unaudited condensed combined statements of operations, while the six months ended June 28, 2024 included $0.3 million of expense.

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 June 27, 2025 and December 27, 2024:

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.

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

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:

Note 11 – Product and Geographical Data

Net sales by product were as follows:

Selected information by geographic area was as follows:

Note 12 – Subsequent Events

The Company evaluated subsequent events through October 24, 2025, the date the financial statements were available to be issued.

Business Combination with Endo

On March 13, 2025, Parent entered into a Transaction Agreement (as amended on April 23, 2025) (“Transaction Agreement”), with Endo, a Delaware corporation, which has been converted into Endo LP, a Delaware limited partnership, and Salvare Merger Sub LLC, a Delaware limited liability company and Parent’s wholly owned subsidiary (“Merger Sub”). On July 31, 2025, Parent completed the Business Combination, whereby Parent acquired all of the issued and outstanding shares of common stock of Endo from Endo in exchange for a combination of cash and Parent’s ordinary shares in accordance with the Transaction Agreement. Outstanding shares of common stock of Endo were cancelled and converted into the right to receive approximately $1.31 in cash (“Per Share Cash Consideration”) and 0.2575 of a Mallinckrodt ordinary share (“Per Share Stock Consideration”), without interest and subject to applicable withholding.

Parent acquired Endo by means of the merger of Merger Sub with and into Endo, with Endo continuing as the surviving entity in the merger and a wholly-owned subsidiary of Mallinckrodt (“Business Combination”). On July 31, 2025, prior to the completion of the Business Combination, the memorandum and articles of association of Parent were amended by means of a scheme of arrangement (“Scheme”) under the Companies Act 2014 of Ireland (as amended) and certain other amendments that had been previously approved by Parent’s shareholders (the “constitution amendment,” and, together with the Scheme and the Business Combination, the “Transactions”).

Parent is in the process of determining the accounting treatment of the Business Combination and the related push-down impact on the unaudited combined financial statements, as applicable. There is no impact to these unaudited condensed combined financial statements presented at this time.

Transaction Incentive Plan

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

Business Combination A&R TrIP

The Business Combination, as mentioned above, qualified as a Qualifying Transaction and a qualifying significant event under the A&R TrIP. The Company expects to incur A&R TrIP expenses related to the Business Combination with respect to Mallinckrodt Specialty Generics participants in the A&R TrIP within 30 days of July 31, 2025. As the Business Combination was not considered probable until it closed, the Company did not record any expense related to the A&R TrIP payments associated with the Business Combination during the six months ended June 27, 2025.

The Final Payment Date was accelerated upon closing of the Business Combination from December 31, 2026 to within 30 days of the closing of the Business Combination, which occurred on July 31, 2025.

Planned Separation

On March 13, 2025, as part of the broader merger announcement, Parent announced its intent to separate the historical “Specialty Generics” reporting segment of Parent and the historical “Generic Pharmaceuticals” and “Sterile Injectables” reporting segments of Endo (“Separation”). The Company currently anticipates consummating the Separation in the fourth quarter of 2025; however, no assurance can be given as to the timing of the Separation, or that the Separation will occur at all, as the Separation is subject to approval by the Mallinckrodt Board of Directors (“Board”) and other conditions.

New Credit Agreement

On July 31, 2025, in connection with the consummation of the Business Combination, ST 2020, Inc., a wholly owned subsidiary of the Company (“Borrower”), entered into a credit agreement (“New Credit Agreement”) with the lenders named therein, Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent, and OPY Credit Corp., as trading agent, providing for $1,350.0 million in aggregate principal amount of senior secured credit facilities (“Facilities”), comprising (i) a $1.2 billion senior secured term loan facility (“Term Facility”) and (ii) a $150.0 million senior secured revolving credit facility (“Revolving Facility”). The Borrower borrowed $1.2 billion under the Term Facility on August 1, 2025. The Facilities mature on July 31, 2030, unless extended pursuant to the terms of the New Credit Agreement.

The Term Facility will amortize in quarterly installments as follows: (i) commencing with the fiscal quarter ending December 31, 2025 through (and including) the fiscal quarter ending September 30, 2026, 0.625% of the initial aggregate principal amount of the Term Facility, (ii) from the last day of the fiscal quarter ending December 31, 2026 through (and including) the last day of the fiscal quarter ending September 30, 2027, 1.25% of the initial aggregate principal amount of the Term Facility, (iii) from the last day of the fiscal quarter ending December 31, 2027 through (and including) the last day of the fiscal quarter ending September 30, 2028, 1.875% of the initial aggregate principal amount of the Term Facility and (iv) from the last day of the fiscal quarter ending December 31, 2028 through the maturity date of the Term Facility, 2.50% of the initial aggregate principal amount of the Term Facility, with the balance payable on the maturity date of the Term Facility.

There is no impact related to the unaudited condensed combined financial statements presented at this time.

Mallinckrodt Specialty Generics Business

A Business of Mallinckrodt plc

Combined Financial Statements

As of December 27, 2024 (Successor) and December 29, 2023 (Successor) and for the year ended December 27, 2024 (Successor), for the period from November 15, 2023 through December 29, 2023 (Successor), and for the period from December 31, 2022 through November 14, 2023 (Predecessor)

With Report of Independent Auditors

Report of Independent Auditors

To the Board of Directors of Mallinckrodt plc

Opinion

We have audited the accompanying combined financial statements of the Mallinckrodt Specialty Generics Business, a business of Mallinckrodt plc, (Successor) (the “Company”), which comprise the combined balance sheets as of December 27, 2024 and December 29, 2023 and the related combined statements of operations, of comprehensive operations, of changes in parent company net investment and of cash flows for the period from November 15, 2023 through December 29, 2023 and for the year ended December 27, 2024, including the related notes (collectively referred to as the “combined financial statements”).

In our opinion, the accompanying combined financial statements present fairly, in all material respects, the financial position of the Company as of December 27, 2024 and December 29, 2023, and the results of its operations and its cash flows for the period from November 15, 2023 through December 29, 2023 and for the year ended December 27, 2024 in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Combined Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter

As discussed in Notes 1, 2, and 3 to the combined financial statements, the United States Bankruptcy Court for the District of Delaware confirmed the Mallinckrodt plc Plan of Reorganization (the “2023 Plan”) on October 10, 2023. Subsequent to the Bankruptcy Court’s order confirming the 2023 Plan, the High Court of Ireland made an order confirming a scheme of arrangement on November 10, 2023, which is based on and consistent in all respects with the 2023 Plan ("2023 Scheme of Arrangement"). The 2023 Plan and 2023 Scheme of Arrangement became effective on November 14, 2023, and Mallinckrodt plc emerged from the 2023 Chapter 11 Cases and the Irish examinership proceedings (together, the "2023 Bankruptcy Proceedings") on that date. In connection with the 2023 Bankruptcy Proceedings, Mallinckrodt plc adopted fresh start accounting as of November 14, 2023. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Combined Financial Statements

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America; and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the combined financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the combined financial statements are available to be issued.

Auditors’ Responsibilities for the Audit of the Combined Financial Statements

Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined financial statements.

In performing an audit in accordance with US GAAS, we:

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

/s/ PricewaterhouseCoopers LLP

St. Louis, Missouri

October 24, 2025

Report of Independent Auditors

To the Board of Directors of Mallinckrodt plc

Opinion

We have audited the accompanying combined statements of operations, of comprehensive operations, of changes in parent company net investment and of cash flows of the Mallinckrodt Specialty Generics Business, a business of Mallinckrodt plc, (Predecessor) (the “Company”) for the period from December 31, 2022 through November 14, 2023, including the related notes (collectively referred to as the “combined financial statements”).

In our opinion, the accompanying combined financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the period from December 31, 2022 through November 14, 2023 in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Combined Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter

As discussed in Notes 1, 2, and 3 to the combined financial statements, Mallinckrodt plc filed a petition on August 28, 2023 with the United States Bankruptcy Court for the District of Delaware for reorganization under the provisions of Chapter 11 of the Bankruptcy Code. Mallinckrodt plc’s Plan of Reorganization (the “2023 Plan”) was confirmed on October 10, 2023. Subsequent to the Bankruptcy Court’s order confirming the 2023 Plan, the High Court of Ireland made an order confirming a scheme of arrangement on November 10, 2023, which is based on and consistent in all respects with the 2023 Plan ("2023 Scheme of Arrangement"). The 2023 Plan and 2023 Scheme of Arrangement became effective on November 14, 2023, and Mallinckrodt plc emerged from the 2023 Chapter 11 Cases and the Irish examinership proceedings (together, the "2023 Bankruptcy Proceedings") on that date. In connection with the 2023 Bankruptcy Proceedings, Mallinckrodt plc adopted fresh start accounting. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Combined Financial Statements

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America; and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the combined financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the combined financial statements are available to be issued.

Auditors’ Responsibilities for the Audit of the Combined Financial Statements

Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined financial statements.

In performing an audit in accordance with US GAAS, we:

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

/s/ PricewaterhouseCoopers LLP

St. Louis, Missouri

October 24, 2025 

Combined Statements of Operations 

(in millions)

The accompanying notes are an integral part of these Combined Financial Statements.

Combined Statements of Comprehensive Operations 

(in millions)

The accompanying notes are an integral part of these Combined Financial Statements.

Combined Balance Sheets

(in millions)

The accompanying notes are an integral part of these Combined Financial Statements.

Combined Statements of Cash Flows

(in millions)

The accompanying notes are an integral part of these Combined Financial Statements.

Combined Statements of Changes in Parent Company Net Investment

 (in millions)

The accompanying notes are an integral part of these Combined Financial Statements.

Notes to the Combined Financial Statements

(in millions)

Note 1 – Description of the Business and Basis of Presentation

Description of the Business

The Mallinckrodt Specialty Generics Business (“Company”) is primarily comprised of the Mallinckrodt plc (the “Parent” or “Mallinckrodt”) Specialty Generics reportable segment and certain other assets and liabilities related to the Specialty Generics Business. The Company is focused on providing its customers high-quality specialty generic drugs and active pharmaceutical ingredients (“API(s)”), including acetaminophen (“APAP”). Specialty Generics includes a variety of product formulations, such as hydrocodone-containing tablets, oxycodone-containing tablets and several other controlled substances indicated for the treatment of pain. Other controlled substances products include medicines used to treat attention-deficit/hyperactivity disorder ("ADHD") and addiction treatment medications. The Company provides bulk active pharmaceutical ingredients, including acetaminophen, stimulants, opioids and stearates, to a wide variety of pharmaceutical companies.

The Company supplies finished dose products principally through drug distributors, retail pharmacy chains, food store chains with pharmacies, hospital buying groups, and direct contracts with the United States (“U.S.”) government. APIs and excipients are supplied directly to over 200 manufacturers in over 45 countries.

The Company is primarily based in the United States and operates five manufacturing facilities in the United States, along with distribution and sales offices in the United Kingdom and the Netherlands.

Basis of Presentation

The accompanying combined financial statements have been prepared in U.S. dollars and in accordance with generally accepted accounting principles in the U.S. (“GAAP”) applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements have been prepared on a combined basis and include certain legal entities dedicated to the Company, as well as, costs, assets and liabilities carved-out of certain shared legal entities of the Parent. The preparation of the combined 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.

For the periods presented in these combined financial statements, the Company primarily operated as a reportable segment of Mallinckrodt. As such, separate financial statements have not historically been prepared for the Company. The combined financial statements have been derived from the consolidated financial statements and accounting records of Mallinckrodt. The combined financial statements reflect the combined historical results of operations, financial position and cash flows of the Company for the periods presented as historically managed by Mallinckrodt.

The combined financial statements may not be indicative of the Company’s future performance and do not necessarily reflect what the results of operations, financial position and cash flows would have been had it operated as an independent business during the periods presented. The combined statements of operations include all revenues and costs directly attributable to the Company, including costs for facilities, functions and services used by the Company. The Company has historically functioned together with the other businesses controlled by Mallinckrodt. Accordingly, the Company relied on certain of Mallinckrodt’s corporate and shared services. Certain corporate and shared costs have been allocated to the Company, including costs related to support functions that are provided on a centralized basis within Mallinckrodt, such as expenses for executive oversight, treasury, tax, finance, legal, human resources, shared services, compliance, information technology, selling, research and development (“R&D”) and other corporate functions. These expenses have been allocated to the Company based on a specific identification basis or, when specific identification is not practicable, a proportional cost allocation method primarily based on net sales or headcount, depending on the nature of the services. The charges for these corporate and shared functions are deemed settled in cash by the Company in the period in which the costs were recorded within cost of sales, selling, general and administrative (“SG&A”) and R&D in the combined statements of comprehensive operations.

Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented, though the allocations may not be indicative of the actual costs that would have been incurred had the Company operated as a stand-alone company. Actual costs that may have been incurred if the Company had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by the Company’s employees, and other strategic decisions. In addition, the future results of operations, financial position and cash flows could differ materially from the historical results presented herein.

Mallinckrodt utilizes a centralized approach to treasury, cash management and financing its operations. The cash and cash equivalents held by Mallinckrodt at the corporate level are not specifically identifiable to the Company and therefore have not been reflected in the Company’s combined balance sheets. Cash, cash equivalents, and restricted cash in the combined balance sheets represent cash, cash equivalents, and restricted cash held by legal entities of the Company that are specifically attributable to the Company.

Mallinckrodt’s external debt and related interest expense have not been attributed to the Company for the periods presented because Mallinckrodt’s borrowings are neither directly attributable to the Company nor is the Company the legal obligor of such borrowings. However, certain of the Company's subsidiaries are currently guarantors of certain debt facilities of Parent and certain assets of such entities have been pledged as collateral. The combined balance sheets include certain assets and liabilities that have historically been held at the Mallinckrodt corporate level but are specifically identifiable or otherwise attributable to the Company.

All intracompany transactions and balances within the Company have been eliminated. Transactions under legal agreements and historically settled in cash between the Company and the Parent have been reflected in the combined balance sheets as Related party receivable or Related party payable with the aggregate net effect of these related party transactions reflected in the combined statements of cash flows. Amounts advanced for or repayments received from related party notes receivable have been classified in investing activities. Proceeds from or payments on related party payables have been classified within financing activities. Other balances between the Company and Mallinckrodt are considered to be effectively settled in the combined financial statements at the time the transactions are recorded. The aggregate net effect of transactions between the Company and the Parent that are not historically settled in cash have been reflected in the combined balance sheets as Net parent investment and in the combined statements of cash flows as Net transfers (to) from Parent within financing activities. See Note 5 for further information.

2023 Chapter 11 Cases

On August 28, 2023 ("2023 Petition Date"), Mallinckrodt and certain of its subsidiaries, including those that operated the Specialty Generics Business, voluntarily initiated proceedings ("2023 Chapter 11 Cases") under chapter 11 of title 11 ("Chapter 11") of the United States Code ("Bankruptcy Code") in the U.S. Bankruptcy Court for the District of Delaware ("Bankruptcy Court"). On September 20, 2023, the directors of the Parent initiated examinership proceedings with respect to Mallinckrodt plc by presenting a petition to the High Court of Ireland pursuant to Section 510(1)(b) of the Companies Act 2014 seeking the appointment of an examiner to Mallinckrodt plc. On October 10, 2023, the Bankruptcy Court entered an order confirming a plan of reorganization ("2023 Plan"). Subsequent to the Bankruptcy Court’s order confirming the 2023 Plan, the High Court of Ireland made an order confirming a scheme of arrangement on November 10, 2023, which is based on and consistent in all respects with the 2023 Plan ("2023 Scheme of Arrangement"). The 2023 Plan and the 2023 Scheme of Arrangement became effective on November 14, 2023 ("2023 Effective Date"), and Mallinckrodt emerged from the 2023 Chapter 11 Cases and the Irish examinership proceedings (together, the "2023 Bankruptcy Proceedings") on that date. See Note 2 for further information on the 2023 Plan and emergence from the 2023 Bankruptcy Proceedings.

Previous Chapter 11 Cases

On October 12, 2020, Mallinckrodt and substantially all of its U.S. subsidiaries, including certain subsidiaries of Mallinckrodt that operated the Specialty Generics business and the Specialty Brands business, and certain of its international subsidiaries (collectively, the "2020 Debtors") voluntarily initiated proceedings ("2020 Chapter 11 Cases") under Chapter 11 the Bankruptcy Code. On March 2, 2022, the Bankruptcy Court entered an order confirming the fourth amended plan of reorganization (with technical modifications) ("2020 Plan"). Subsequent to the filing of the 2020 Chapter 11 Cases, Chapter 11 proceedings commenced by a limited subset of the 2020 Debtors were recognized and given effect in Canada, and separately the High Court of Ireland made an order confirming a scheme of arrangement on April 27, 2022, which was based on and consistent in all respects with the 2020 Plan ("2020 Scheme of Arrangement"). On June 8, 2022, the Bankruptcy Court entered an order approving a minor modification to the 2020 Plan. The 2020 Plan became effective on June 16, 2022 ("2020 Effective Date"), and on such date the Parent emerged from the Chapter 11 and the 2020 Scheme of Arrangement became effective concurrently. See Note 2 for further information on the 2023 Plan and emergence from the 2023 Bankruptcy Proceedings.

Adoption of Fresh-Start Accounting - Parent

Upon emergence from the 2023 Bankruptcy Proceedings on November 14, 2023, the Parent adopted fresh-start accounting in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 852 – Reorganizations (“ASC 852”) and became a new entity for financial reporting purposes as of the 2023 Effective Date. References to “Successor Parent” relate to the financial position of Parent as of December 27, 2024 and December 29, 2023 and results of operations of the reorganized Parent subsequent to November 14, 2023, while references to “Predecessor Parent” relate to the financial position of Parent as of December 30, 2022 and results of operations of the Parent for the period from December 31, 2022 through November 14, 2023. Upon the Parent’s application of fresh-start accounting, an election was made to push-down the Parent’s basis to the Company. Accordingly, the combined financial statements for the Successor Company (“Successor”) are not comparable to the combined financial statements for the Predecessor Company (“Predecessor”) periods. Refer to Note 3 for considerations around eligibility of fresh-start accounting for the Company and Predecessor and Successor considerations for the Company.

Fiscal Year

The Company reports its results based on a “52-53 week” year ending on the last Friday of December. The year ended December 27, 2024 (Successor) (“fiscal 2024”), the combined periods of December 31, 2022 through November 14, 2023 (Predecessor) and November 15, 2023 through December 29, 2023 (Successor) (“fiscal 2023”) consisted of 52 weeks.

Note 2 – Emergence from Voluntary Reorganization

During the pendency of the 2023 Bankruptcy Proceedings, the Parent and each of the respective debtors, including those that operated Specialty Generics Business, and debtors in-possession in the 2023 Chapter 11 Cases ("2023 Debtors") operated their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As debtors-in-possession, the 2023 Debtors were authorized to continue to operate as ongoing businesses and were allowed to pay all debts and honor all obligations arising in the ordinary course of their businesses after the respective 2023 Petition Date. However, the 2023 Debtors were not allowed to pay third-party claims or creditors on account of obligations arising before the respective 2023 Petition Date or engage in transactions outside the ordinary course of business without approval of the Bankruptcy Court.

Under the Bankruptcy Code, third-party actions to collect pre-petition indebtedness owed by the 2023 Debtors, as well as most litigation pending against the Company as of the 2023 Petition Date, were subject to an automatic stay. “Plan of Reorganization” below summarizes components relevant for the Company from the Parent’s plan.

Plan of Reorganization

2023 Plan and 2020 Plan

In accordance with the 2023 Plan, the following significant transactions related to the Company occurred upon the Parent's emergence from the 2023 Bankruptcy Proceedings on the 2023 Effective Date:

In accordance with the 2020 Plan, the following significant transactions related to the Company occurred upon the Parent's emergence from the 2020 Bankruptcy Proceedings on the 2020 Effective Date:

Note 3 – Push-Down Accounting

2023 Fresh-Start Accounting —Parent

The Parent qualified for and adopted fresh-start accounting as of the 2023 Effective Date in accordance with ASC 852 as (i) the reorganization value of the assets of the Parent immediately prior to the date of effectuation of the 2023 Plan was less than the post-petition liabilities and allowed claims and (ii) the holders of the voting shares of the Predecessor Parent immediately before effectuation of the 2023 Plan received less than 50% of the voting shares of the Successor Parent.

Reorganization Value

Reorganization value represents the Parent’s fair value of the Successor Parent’s total assets and is intended to approximate the amount a willing buyer would pay for the assets immediately after restructuring. Upon the application of fresh-start accounting, the Parent allocated the reorganization value to its individual assets, including the assets of the Company, based on their estimated fair values in accordance with ASC Topic 805 – Business Combinations. Deferred income tax amounts were determined in accordance with ASC Topic 740 – Income Taxes.

Push-Down Accounting

The Company assessed the fresh-start accounting qualification criteria as follows (i) whether the reorganization value of the assets of the Company immediately prior to the date of effectuation of the 2023 Plan was less than the post-petition liabilities and allowed claims and (ii) whether the holders of the voting shares of the Predecessor immediately before effectuation of the 2023 Plan received less than 50% of the voting shares of the Successor. The Company did not meet the reorganization value criteria mentioned previously as the reorganization value of the assets of the Company immediately prior to the date of effectuation of the 2023 Plan exceeded the post-petition liabilities and allowed claims. Given the reorganization value of the assets of the Company was greater than the post-petition liabilities and allowed claims, the criteria was not met. As both criteria must be met to qualify for fresh-start accounting, the control test was not assessed. Parent’s emergence from bankruptcy and application of fresh-start accounting resulted in a new basis of accounting for the Parent and constituted a change-in-control event. As a result of the change-in-control event of the Parent, the Company elected to push-down the Parent’s new basis of accounting at the change-in-control date. Any impacts from the step up in fair value are recognized in Net Parent Investment in the Company’s Combined Balance Sheets. The Company’s combined financial statements and footnotes include a black line division between the columns titled Predecessor and Successor. References to “Successor” relate to the financial position of the Company as of December 27, 2024 and December 29, 2023 and results of operations of the Company reflecting the costs and activities as well as the recognition of the assets and liabilities of the Company at their fair values pursuant to the election of pushdown accounting as the consummation of the 2023 Effective date. “Predecessor” relates to the financial position of the Company as of December 30, 2022 and results of operations of the Company for the period from December 31, 2022 through November 14, 2023. Due to the application of fresh-start accounting by the Parent and the election of push-down accounting, the results of operations, cash flows, and other financial information for the Successor period are not comparable to the Predecessor period.

Combined Balance Sheet

The following table summarizes the push-down accounting of the Parent’s basis to the Company’s Opening balances for the Successor period:

Push-Down of Parent’s fair value adjustment

Reorganization items, net

During the period December 31, 2022 through November 14, 2023 (Predecessor), the Company recognized reorganization expense in accordance with ASC 852 for professional fees directly related to the 2023 Chapter 11 Cases and for an adjustment to an allowed claim.

Note 4 – Summary of Significant Accounting Policies

Significant accounting policies remained unchanged between the Predecessor and Successor periods of the Company, with the exception of bankruptcy related items that only apply to the Predecessor period, such as liabilities subject to compromise.

Revenue Recognition

Product Sales Revenue

The Company principally sells its generics products through independent distributors who resell the products to retail pharmacies, institutions and end user customers. The Company also enters into arrangements with indirect customers, such as health care providers and payers, wholesalers, government agencies, institutions, and managed care organizations to establish contract pricing for certain products that provide for government-mandated and/or privately-negotiated rebates, sales incentives, chargebacks, distribution service agreements fees, fees for services and administration fees, and discounts with respect to the purchase of the Company's products.

API products are sold directly to manufacturing customers and distributors, typically under supply agreements. API sales do not involve bundled services or products, significant financing components, or non-cash consideration. Returns are limited to non-conforming products.

Reserve for Variable Consideration

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 either on a monthly or quarterly basis (dependent on the deduction type). 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 at a point in time for all product sales, generally upon delivery to the customer site.

Transaction price allocated to the remaining performance obligations

The Company’s contracts are generally 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 SG&A in the combined statements of operations.

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 in continuing operations were as follows:

Research and Development

Internal R&D costs are expensed as incurred. 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 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.

Liabilities Management and Separation Costs

The Company recognizes a portion of professional fees incurred during Parent’s evaluation of strategic alternatives. Professional fees were specifically identified as related to the Company or allocated to the Company based on net sales of the Company as compared to Parent.

Share-Based Compensation

The Company recognizes the cost of employee services received in exchange for awards of equity of the Parent’s shares based on the grant-date fair value of those awards. That cost is recognized over the requisite service period, which is the period an employee is required to provide service in exchange for the award (generally the vesting period). The cost for liability-based instruments is remeasured accordingly each reporting period throughout the requisite service period.

As of the 2023 Effective Date, the Parent’s ordinary shares were no longer traded on an active market. Accordingly, the fair value of those share-based awards granted after the 2023 Effective Date requires the valuation of the Parent’s equity utilizing the application of significant estimates, assumptions, and judgments. With the assistance of a third-party valuation advisor, the estimated fair value of total share-based awards was based on an income approach, a calculation of the present value of the future cash flows to be generated by the business based on its projection. The basis of the discounted cash flow analysis used in developing the equity value was based on Parent prepared projections that included a variety of estimates and assumptions, including, but not limited to expected future revenue and expenses, future cash flows, discount rates, and the probability of possible future events. While the Parent considers such estimates and assumptions reasonable, they are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond the Parent’s control and, therefore, may not be realized.

Currency translation

For the Company's non-U.S. operations that transact in a functional currency other than U.S. dollars, assets and liabilities are translated into U.S. dollars using closing 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 combined financial statements as a component of accumulated other comprehensive income (loss) within parent company equity. Gains and losses resulting from foreign currency transactions are included in net income (loss).

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. As described in Note 1, the Parent uses a centralized approach to cash management and financing of its operations and, as such, only cash held by dedicated legal entities is included in the combined balance sheets.

Restricted cash

The Company classifies restricted cash as all cash pledged as collateral to secure long-term obligations and all cash whose use is otherwise limited by contractual provisions. Amounts are reported as non-current unless restrictions are expected to be released in the next 12 months. Balances are recorded in other assets on the combined balance sheets.

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivables 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, current facts and circumstances, reasonable and supportable forecasts and other available evidence. Accounts receivables are written off when the Company determines they are uncollectible. Trade accounts receivable are also presented net of reserves related to chargebacks, rebates, and other sales deductions payable to customers for whom the Company has trade accounts receivable and the right of offset exists and is utilized.

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 less accumulated depreciation. 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 of Parent’s pushed-down basis, using the straight-line method:

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 (loss).

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’s operating leases consist of equipment and building leases. The Company’s finance lease consists of a building. Leases with an initial term of 12 months or less are not recorded on the combined balance sheets; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has no lease agreements with variable lease payments or 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 Parent’s incremental borrowing rate based on the information available at commencement date in determining the present value of future lease payments. Most leases include one or more options to terminate or renew, with renewal terms that can extend the lease term by one year. 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 that they are reasonably certain.

Costs associated with operating lease assets are recognized on a straight-line basis over the term of the lease. Finance lease assets are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets based on the Parent’s pushed-down basis or, in the instance where title does not transfer at the end of the lease term, the lease term. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term.

Intangible Assets

Intangible assets recognized under push-down accounting are recorded at fair value. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives based on the Parent’s pushed-down basis. The estimated useful lives of the Company's intangible assets as of December 27, 2024 (Successor) were the following:

Amortization expense related to completed technology and certain other intangible assets is included in cost of sales.

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 will compare the fair value of the assets with their carrying value and record an impairment when the carrying value exceeds the fair value.

Income Taxes

Income taxes as presented are calculated on a separate tax return basis, although the Company's operations have generally historically been included in the Parent's U.S. federal and state tax returns or the tax returns of non-U.S. jurisdictions.

With the exception of certain non-U.S. entities, the Company does not maintain taxes payable to or from the Parent, and the Company is deemed to settle the annual current tax balances immediately with the legal tax-paying entities in the respective jurisdictions. These settlements are reflected as changes in parent company net investment.

Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been reflected in the combined financial statements. Deferred tax assets and liabilities are determined based on the differences between the book and tax basis 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 would be 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.

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% likely of being realized upon resolution of the uncertainty. To the extent that 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, including uncertain tax positions, are included in the provision for income taxes.

Contingencies

The Company is subject to various legal proceedings and claims, including government investigations, environmental matters, product liability matters, patent infringement claims, antitrust matters, securities class action lawsuits, personal injury claims, employment disputes, contractual and other commercial disputes, and all other legal proceedings, all in the ordinary course of business as further discussed in Note 14. 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. Legal fees, other than those pertaining to environmental 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.

Liabilities Subject to Compromise

In accordance with ASC 852, pre-petition unsecured and undersecured claims related to the Company entities that were 2023 Debtors that may be impacted by the bankruptcy reorganization process have been classified as Liabilities subject to compromise within Note 3 Push-Down Accounting. Liabilities subject to compromise are recorded at the expected amount of the total allowed claim.

As a result of the commencement of the 2023 Chapter 11 cases, the Company evaluated and determined that the only liability classified as LSTC was its opioid-related settlement obligation. This liability was adjusted to its allowed claim amount in accordance with the 2023 Plan. While the Bankruptcy Court generally restricts payment of pre-petition claims, it granted the Debtors authority to pay certain claims in designated categories under specific terms and conditions to preserve the value of the business and assets. Upon emergence, the opioid-related liability was settled by the Parent pursuant to the terms of the 2023 Plan.

Parent company net investment

Parent company net investment in the combined balance sheets represents Parent’s historical investment in the Company, the accumulated net earnings after taxes and the net effect of the transactions with, and allocations from, Parent. See sections in Note 1 and Note 5 for additional information.

Recently Issued Accounting Pronouncements

No new accounting pronouncement issued or effective during the fiscal year has had, or is expected to have, a material impact on the Company’s combined financial statements.

Note 5 – Related Parties

These combined financial statements have been derived from the consolidated financial statements and accounting records of the Parent. The following discussion summarizes transactions between the Company and the Parent (and its subsidiaries that are not part of the Specialty Generics Business).

The combined financial statements include general corporate expenses and shared expenses of the Parent that were charged to the Company for certain support functions, including, but not limited to, management, legal, human resources, finance, accounting, treasury, tax, information technology, employee benefits, communications, and compliance, that are provided on a centralized basis. The Company considers the inclusion of these expenses to be a reasonable reflection of the utilization of services by, or the benefits provided to, the Company. These expenses are included in the combined statements of operations within cost of sales, SG&A and R&D expenses.

The following table reflects these allocations as described above and in Note 1:

These combined financial statements may not reflect the actual expenses that would have been incurred and may not reflect the Company’s combined results of operations, financial position and cash flows had it been a stand-alone company during the period presented. Actual costs that may have been incurred if the Company had been a stand-alone company would depend on multiple factors, including organizational structure, whether functions were outsourced or performed by Company’s employees, and other strategic decisions.

Centralized cash pooling arrangements

The Company historically has entered into intercompany agreements with subsidiaries of Parent related to cash pooling. The Company operates its own cash pooling program through one of its entities and also participates in the Parent’s centralized treasury and cash management program. Agreements between entities included within the Specialty Generics business and those included within the Parent are considered as related party agreements, and the related activities and balances are included within the financial statements. The Company incurs interest expense and interest income on cash borrowed from and contributed to the cash pool, respectively. Interest expense and income are presented within interest (income) expense, net on the combined statements of operations. The Company's cash that is included in physical cash pooling of dedicated entities is classified as cash and cash equivalents on the combined balance sheets. The Parent will continue to provide cash management and financing to support the Company’s ongoing operations which will be reflected in Parent company net investment.

Related party receivable

Related party receivables are included in the combined balance sheets as follows:

Interest income is included within Interest income (expense), net in the combined statements of operations as follows:

Related party payable

The Company has borrowings due to Related parties that will be settled in cash. Balances are recorded in related party payable in the combined balance sheets as follows:

Interest expense is included within Interest income (expense), net in the combined statements of operations as follows:

Related party licensing agreement

In March 2024 the Company entered into a related party agreement with a subsidiary of Parent granting the Company a license to sell a certain pharmaceutical product. As part of the agreement the Company remits a quarterly royalty payment to the Parent’s subsidiary. The related party royalty expense included in the combined statements of operations within cost of sales is $1.1 million for the year ended December 27, 2024.

Parent Company Net Investment

The net transfers to the Parent are included within “Parent company net investment” on the combined statements of parent company net investment. The components of the transfers to Parent were as follows:

Note 6 – Revenue from Contract with Customers

Product Sales Revenue

See Note 16 for presentation of the Company's net sales by product family.

Reserve for variable consideration

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

Note 7 – Income Taxes

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

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

The domestic current income tax provision reflects a tax benefit of $27.2 million, zero and zero from using a portion of the NOL carryforwards for the year ended December 27, 2024 (Successor), the period November 15, 2023 through December 29, 2023 (Successor), and the period December 31, 2022 through November 14, 2023 (Predecessor), respectively.

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

The Company’s effective income tax rate was 22.3% for the year ended December 27, 2024 (Successor), 24.5% for the period from November 15, 2023 through December 29, 2023 (Successor), and 20.5% for the period from December 31, 2022 through November 14, 2023 (Predecessor).

The emergence from each of the respective 2023 and 2020 Bankruptcy Proceedings resulted in a change in ownership for purposes of IRC Section 382, causing the remaining U.S. tax losses, credits, and certain built in losses ("BILs") to be limited under IRC Sections 382 and 383. The amount of our pre-ownership change U.S. NOLs and BILs that can be utilized generally cannot exceed an amount equal to the product of (a) the applicable federal long-term tax-exempt rate in effect on the date of the ownership change and (b) the value of our U.S. affiliate stock immediately prior to the implementation of each respective plan ("382 Annual Limitation").

As of December 27, 2024 (Successor), the Company has not recorded any amount of gross unrecognized tax benefits for uncertain tax positions. The Company recognizes accrued interest and penalties related to unrecognized tax benefits within the provision for income taxes in the combined statements of operations. There were no accrued interest and penalties as of December 27, 2024 (Successor) or December 29, 2023 (Successor).

The Parent files tax returns in the U.S., Canada, Germany, U.K. and Netherlands jurisdictions on behalf of the Company based on existing tax laws. The Company remains generally subject to examination in these domestic and foreign jurisdictions. The earliest open years subject to examination are from 2015 to present.

Tax receivables were included in the following combined balance sheet caption in the amounts shown:

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:

The deferred tax asset valuation allowances were $0.8 million and $1.3 million as of December 27, 2024 (Successor) and December 29, 2023 (Successor), respectively. The valuation allowances as of both December 27, 2024 (Successor) and December 29, 2023 (Successor) relate primarily to the uncertainty of the utilization of certain international deferred tax assets.

As of December 27, 2024 (Successor), the Company had approximately $23.7 million of domestic NOL carryforwards measured at the applicable statutory rates, which have no expiration date.

As of December 27, 2024 (Successor), the Company has not recorded any deferred tax liabilities for potential repatriation of foreign earnings. The foreign operations act as distributor entities and have limited foreign earnings.

Note 8 – Inventories

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

Note 9 – 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:

Depreciation expense was as follows:

Note 10 – Leases

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