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Mallinckrodt plc Reports Earnings Results for Second Quarter of Fiscal 2017

02:03 EDT 8 Aug 2017 | PR Newswire

STAINES-UPON-THAMES, United Kingdom, Aug. 8, 2017 /PRNewswire/ -- Mallinckrodt plc (NYSE: MNK), a leading global specialty pharmaceutical company, today reported results for the three-month and six-month periods ended June 30, 2017. Unless otherwise noted, all comparisons are to the prior year comparable three-month and six-month periods ended June 24, 2016.

Net sales were $824.5 million in the second quarter, down 4.9%, or 4.6% on a constant-currency basis. GAAP gross profit was $416.1 million with gross profit as a percentage of net sales of 50.5%, compared with 56.4%, impacted by continued pricing pressure within the Specialty Generics segment. Adjusted gross profit was $591.9 million, compared with $666.0 million. Adjusted gross profit as a percentage of net sales was 71.8% versus 76.9%.

"Mallinckrodt delivered another solid quarter, executing against our strategy to become a high-performing, specialty pharmaceutical company," said Mark Trudeau, Chief Executive Officer and President, Mallinckrodt. "We have made notable progress this quarter in advancing our organic pipeline in Specialty Brands and Specialty Generics. In addition, most recently we announced our planned acquisition of InfaCare and its new chemical entity stannsoporfin, a unique drug in late-stage development for treatment of severe hyperbilirubinemia, or jaundice, in newborns."

"Mallinckrodt continues to build a differentiated, durable portfolio of branded therapies and with this addition, in particular, we are further benefiting fragile pediatric patients and the healthcare system today and in the future," Trudeau concluded.

GAAP selling, general and administrative (SG&A) expenses were $232.1 million, compared with $224.9 million, representing 28.2% and 26.0% of net sales, respectively. Adjusted SG&A expenses were $226.3 million or 27.4% of net sales, compared with $226.6 million or 26.1%. Research and development expenses in the second quarter were $69.2 million or 8.4% of net sales, compared with $74.8 million or 8.6%.

Income tax benefit was $40.1 million versus $98.1 million, resulting in GAAP effective tax rates of negative 131.5% and 124.8%, respectively. The adjusted effective tax rate was 15.0% in the second quarter compared with 17.2%.

GAAP diluted earnings per share results from continuing operations were $0.72 in the second quarter compared with $1.62. The reduction in earnings per share from continuing operations reflects continued weakness in the Specialty Generics business impacting both net sales and gross margin, partially offset by $6.6 million of gain in other income related to debt repurchases. Adjusted diluted earnings per share were $1.85 versus $2.03.

Six-Month Fiscal 2017 ResultsNet sales were $1.635 billion, down 2.8% compared with $1.682 billion. The decrease came primarily from continued pressure in the Specialty Generics segment.

On a GAAP basis, income from continuing operations was $99.5 million, compared with $275.2 million. Diluted earnings per share from continuing operations were $0.98 compared with $2.48, reflecting the impact of various transactions including legal settlements and defined benefit pension termination expenses, offset by a gain on the divesture of the Intrathecal Therapy business.

On an adjusted basis, adjusted net income was $356.4 million, compared with $424.6 million. Adjusted diluted earnings per share were $3.52, compared with $3.83.  The company is reiterating its adjusted diluted earnings per share guidance of $7.40 to $8.00 for fiscal 2017.

BUSINESS SEGMENT RESULTS

Specialty Brands SegmentNet sales for the Specialty Brands segment were $594.5 million in the second quarter, compared with $589.3 million, or an increase of 0.9%, or 1.2% on a constant-currency basis.

H.P. Acthar® Gel net sales were $319.4 million in the second quarter period, a 7.1%2  increase over $298.3 million. INOMAX® (nitric oxide) gas, for inhalation, generated net sales of $125.5 million, up 3.6%2 over $121.1 million. OFIRMEV® (acetaminophen) injection net sales were $75.7 million compared with $70.7 million, an increase of 7.1%2.

Net sales of the Therakos® immunology platform were $51.2 million compared with $52.5 million, a decrease of 2.5%; an increase of 1.2% on a constant-currency basis. While the kit supply issue was resolved in the first quarter, the company underestimated the complexity of the conversion from the XTS to Cellex devices, resulting in lower than anticipated net sales. These transitional issues will likely continue for the next several quarters; however, longer term the company believes the product will return to its normal expected growth range.

Specialty Generics SegmentNet sales in the second quarter decreased 18.0% to $216.0 million, compared with $263.4 million, better than expectations due to continued solid performance by the active pharmaceutical ingredients products, as well as the segment's other controlled substances and other products categories. On a constant-currency basis, segment net sales declined 17.8%.

LIQUIDITYMallinckrodt's cash provided by operating activities was $319.9 million in the second quarter with free cash flow of $270.9 million.

During the second quarter, the company continued share repurchases, buying 2.4 million ordinary shares for $100.7 million, bringing the total shares repurchased in the six-month period to 8.0 million ordinary shares. In addition to normal debt service, the company reduced its accounts receivable securitization by $25.0 million and repurchased $53.9 million in debt during the second quarter, resulting in a $6.6 million gain in other income. The company has repaid $292.8 million in debt during the six-months ended June 30, 2017.

Despite the significant capital allocation activities undertaken in the quarter, Mallinckrodt's cash balance increased from the prior quarter to $330.2 million at the end of the second quarter, and its $900.0 million revolver remains undrawn.

CONFERENCE CALL AND WEBCASTMallinckrodt will hold a conference call on Tuesday, August 8, 2017, beginning at 8:30 a.m. U.S. Eastern Time. This call can be accessed in three ways:

  • At the Mallinckrodt website: http://www.mallinckrodt.com/investors.
  • By telephone: For both listen-only participants and those who wish to take part in the question-and-answer portion of the call, the telephone dial-in number in the U.S. is (877) 359-9508. For participants outside the U.S., the dial-in number is (224) 357-2393. Callers will need to provide the Conference ID of 44423295.
  • Through an audio replay: A replay of the call will be available beginning at 11:30 a.m. Eastern Time on Tuesday, Aug. 8, 2017, and ending at 11:59 p.m. Eastern Time on Tuesday, Aug. 22, 2017. Dial-in numbers for U.S.-based participants are (855) 859-2056 or (800) 585-8367. Participants outside the U.S. should use the replay dial-in number of (404) 537-3406. All callers will be required to provide the Conference ID of 44423295.

ABOUT MALLINCKRODTMallinckrodt is a global business that develops, manufactures, markets and distributes specialty pharmaceutical products and therapies. Areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; and analgesics and hemostasis products. The company's core strengths include the acquisition and management of highly regulated raw materials and specialized chemistry, formulation and manufacturing capabilities. The company's Specialty Brands segment includes branded medicines and its Specialty Generics segment includes specialty generic drugs, active pharmaceutical ingredients and external manufacturing. To learn more about Mallinckrodt, visit www.mallinckrodt.com.

Mallinckrodt uses its website as a channel of distribution of important company information, such as press releases, investor presentations and other financial information. It also uses its website to expedite public access to time-critical information regarding the company in advance of or in lieu of distributing a press release or a filing with the U.S. Securities and Exchange Commission (SEC) disclosing the same information. Therefore, investors should look to the Investor Relations page of the website for important and time-critical information. Visitors to the website can also register to receive automatic e-mail and other notifications alerting them when new information is made available on the Investor Relations page of the website.

NON-GAAP FINANCIAL MEASURESThis press release contains financial measures, including adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted SG&A, net sales growth on a constant-currency basis, adjusted effective tax rate, and free cash flow, which are considered "non-GAAP" financial measures under applicable SEC rules and regulations.

Adjusted net income, adjusted gross profit and adjusted SG&A represent amounts prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) and adjusted for certain items that management believes are not reflective of the operational performance of the business. The adjustments for these items are on a pre-tax basis for adjusted gross profit and adjusted SG&A and on an after-tax basis for adjusted net income. Adjustments to GAAP amounts include, as applicable to each measure, restructuring and related charges, net; amortization and impairment charges; discontinued operations; acquisition-related expenses; changes in fair value of contingent consideration obligations; inventory step-up expenses; significant legal and environmental charges; pension settlement charges; recurrent cash tax payments to the IRS associated with internal installment sales transactions; and other items identified by the company. Adjusted diluted earnings per share represent adjusted net income divided by the number of diluted shares.

The adjusted effective tax rate is calculated as the income tax effects on continuing and discontinued operations plus the income tax impact included in Mallinckrodt's reconciliation of net income, divided by income from continuing and discontinued operations plus the pre-tax, non-income, tax-related adjustments included in its reconciliation of adjusted net income (excluding dilutive share impact). The income tax impact item included in its reconciliation of adjusted net income primarily represents the tax impact of adjustments between net income and adjusted net income as well as deferred tax benefits recognized upon pay down of intercompany installment notes created by internal sales of acquired intangible assets.

Net sales growth on a constant-currency basis measures the change in net sales between current- and prior-year periods using a constant currency, the exchange rate in effect during the applicable prior-year period.

Free cash flow for the second quarter represents net cash provided by operating activities of $319.9 million less capital expenditures of $49.0 million, each as prepared in accordance with GAAP. Free cash flow for the six-month period represents net cash provided by operating activities of $222.5 million less capital expenditures of $101.6 million, each as prepared in accordance with GAAP.

The company has provided these adjusted financial measures because they are used by management, along with financial measures in accordance with GAAP, to evaluate the company's operating performance. In addition, the company believes that they will be used by certain investors to measure Mallinckrodt's operating results. Management believes that presenting these adjusted measures provides useful information about the company's performance across reporting periods on a consistent basis by excluding items that the company does not believe are indicative of its core operating performance.

These adjusted measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. The company's definition of these adjusted measures may differ from similarly titled measures used by others.

Because adjusted financial measures exclude the effect of items that will increase or decrease the company's reported results of operations, management strongly encourages investors to review the company's consolidated financial statements and publicly filed reports in their entirety. A reconciliation of certain of these historical adjusted financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this release.

Further information regarding non-GAAP financial measures can be found on the Investor Relations page of the company's website.

CAUTIONARY STATEMENTS RELATED TO FORWARD-LOOKING STATEMENTSStatements in this document that are not strictly historical, including statements regarding future financial condition and operating results, economic, business, competitive and/or regulatory factors affecting Mallinckrodt's businesses and any other statements regarding events or developments that we believe or anticipate will or may occur in the future, may be "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve a number of risks and uncertainties.

There are a number of important factors that could cause actual events to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include risks and uncertainties related to, among other things: general economic conditions and conditions affecting the industries in which Mallinckrodt operates; the commercial success of Mallinckrodt's products; Mallinckrodt's ability to realize anticipated growth, synergies and cost savings from acquisitions; conditions that could necessitate an evaluation of Mallinckrodt's goodwill and/or intangible assets for possible impairment; changes in laws and regulations; Mallinckrodt's ability to successfully integrate acquisitions of operations, technology, products and businesses generally and to realize anticipated growth, synergies and cost savings; Mallinckrodt's ability to successfully develop or commercialize new products; Mallinckrodt's ability to protect intellectual property rights; Mallinckrodt's ability to receive procurement and production quotas granted by the U.S. Drug Enforcement Administration; customer concentration; Mallinckrodt's reliance on certain individual products that are material to its financial performance; cost containment efforts of customers, purchasing groups, third-party payers and governmental organizations; the reimbursement practices of a small number of public or private insurers; pricing pressure on certain of Mallinckrodt's products due to legal changes or changes in insurers' reimbursement practices resulting from recent increased public scrutiny of healthcare and pharmaceutical costs; limited clinical trial data for H.P. Acthar Gel; complex reporting and payment obligations under healthcare rebate programs; Mallinckrodt's ability to navigate price fluctuations; future changes to U.S. and foreign tax laws; Mallinckrodt's ability to achieve expected benefits from restructuring activities; complex manufacturing processes; competition; product liability losses and other litigation liability; ongoing governmental investigations; material health, safety and environmental liabilities; retention of key personnel; conducting business internationally; the effectiveness of information technology infrastructure; and cybersecurity and data leakage risks.

These and other factors are identified and described in more detail in the "Risk Factors" sections of Mallinckrodt's Annual Report on Form 10-K for the fiscal year ended September 30, 2016. The forward-looking statements made herein speak only as of the date hereof and Mallinckrodt does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise, except as required by law.

CONTACTS

Investor RelationsColeman N. Lannum, CFA
Senior Vice President, Investor Strategy and IRO
314-654-6649
cole.lannum@mallinckrodt.com

Daniel J. Speciale, CPA
Director, Investor Relations
314-654-3638
daniel.speciale@mallinckrodt.com

MediaRhonda Sciarra
Senior Communications Manager
908-238-6765
rhonda.sciarra@mallinckrodt.com

Meredith Fischer
Chief Public Affairs Officer
314-654-3318
meredith.fischer@mallinckrodt.com

MALLINCKRODT PLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in millions, except per share data)

Three Months Ended

June 30,2017

Percent ofNet sales

June 24,2016

Percent ofNet sales

Net sales

$

824.5

100.0

%

$

866.6

100.0

%

Cost of sales

408.4

49.5

377.8

43.6

Gross profit

416.1

50.5

488.8

56.4

Selling, general and administrative expenses

232.1

28.2

224.9

26.0

Research and development expenses

69.2

8.4

74.8

8.6

Restructuring charges, net

0.6

0.1

14.0

1.6

Loss on divestiture and license

2.1

0.3

Operating income

112.1

13.6

175.1

20.2

Interest expense

(92.2)

(11.2)

(95.6)

(11.0)

Interest income

0.6

0.1

0.4

Other income (expense), net

10.0

1.2

(1.3)

(0.2)

Income from continuing operations before income taxes

30.5

3.7

78.6

9.1

Income tax benefit

(40.1)

(4.9)

(98.1)

(11.3)

Income from continuing operations

70.6

8.6

176.7

20.4

(Loss) income from discontinued operations, net of income taxes

(7.8)

(0.9)

22.6

2.6

Net income

$

62.8

7.6

%

$

199.3

23.0

%

Basic earnings per share:

Income from continuing operations

$

0.72

$

1.63

(Loss) income from discontinued operations

(0.08)

0.21

Net income

0.64

1.84

Diluted earnings per share:

Income from continuing operations

$

0.72

$

1.62

(Loss) income from discontinued operations

(0.08)

0.21

Net income

0.64

1.82

Weighted-average number of shares outstanding:

Basic

98.5

108.6

Diluted

98.7

109.4

MALLINCKRODT PLC

NON-GAAP MEASURES

(unaudited, in millions except per share data)

Three Months Ended

June 30, 2017

June 24, 2016

Gross
profit

Selling,
general
and
administrative
expenses

Net
income

Dilutednet
income
per share

Gross
profit

Selling,
general
and
administrative
expenses

Net
income

Dilutednet
income
per share

GAAP

$

416.1

$

232.1

$

62.8

$

0.64

$

488.8

$

224.9

$

199.3

$

1.82

Adjustments:

Intangible asset amortization

172.4

(2.3)

174.7

1.77

174.0

(1.8)

175.8

1.61

Restructuring and related charges, net (1)

0.5

(0.4)

1.5

0.02

0.6

(0.7)

15.2

0.14

Inventory step-up expense

2.9

2.9

0.03

2.6

2.6

0.02

Income from discontinued operations

7.8

0.08

(22.6)

(0.21)

Change in contingent consideration fair value

(2.0)

2.0

0.02

4.3

(4.3)

(0.04)

Acquisition related expenses

(1.1)

1.1

0.01

(0.1)

0.1

Intrathecal divestiture

2.1

0.02

Income taxes (2)

(72.3)

(0.73)

(144.3)

(1.32)

As adjusted

$

591.9

$

226.3

$

182.6

$

1.85

$

666.0

$

226.6

$

221.8

$

2.03

Percent of net sales

71.8

%

27.4

%

22.1

%

76.9

%

26.1

%

25.6

%

(1)

Includes pre-tax accelerated depreciation.

(2)

Includes tax effects of above adjustments as well as the elimination of deferred tax benefits recognized upon pay down of intercompany installment notes created by internal sales of acquired intangible assets.

MALLINCKRODT PLC

SEGMENT NET SALES AND CONSTANT-CURRENCY GROWTH

(unaudited, in millions)

Three Months Ended

June 30,2017

June 24,2016

Percentchange

Currency
impact

Constant-
currencygrowth

Specialty Brands

$

594.5

$

589.3

0.9

%

(0.3)

%

1.2

%

Specialty Generics

216.0

263.4

(18.0)

(0.2)

(17.8)

810.5

852.7

(4.9)

(0.3)

(4.6)

Other(1)

14.0

13.9

0.7

0.7

Net sales

$

824.5

$

866.6

(4.9)

%

(0.3)

%

(4.6)

%

(1)

Represents net sales from an ongoing, post-divestiture supply agreement with the acquirer of the CMDS business. Amounts for periods prior to the divestiture represent the reclassification of intercompany sales to third-party sales to conform with the presentation of the ongoing supply agreement.

MALLINCKRODT PLC

SELECT PRODUCT LINE NET SALES

(unaudited, in millions)

Three Months Ended

June 30,2017

June 24,2016

Percentchange

Currency
impact

Constant-
currency
growth

Specialty Brands

Acthar

$

319.4

$

298.3

7.1

%

%

7.1

%

Inomax

125.5

121.1

3.6

3.6

Ofirmev

75.7

70.7

7.1

7.1

Therakos immunotherapy

51.2

52.5

(2.5)

(3.7)

1.2

Hemostasis products

13.5

13.9

(2.9)

(0.1)

(2.8)

Other

9.2

32.8

(72.0)

(0.1)

(71.9)

Specialty Brands Total

$

594.5

$

589.3

0.9

%

(0.3)

%

1.2

%

Specialty Generics

Hydrocodone (API) and hydrocodone-containing tablets

$

23.0

$

38.2

(39.8)

%

%

(39.8)

%

Oxycodone (API) and oxycodone-containing tablets

25.1

30.6

(18.0)

(18.0)

Methylphenidate ER

20.2

24.3

(16.9)

(16.9)

Other controlled substances

107.7

124.7

(13.6)

(13.6)

Other products

40.0

45.6

(12.3)

(1.4)

(10.9)

Specialty Generics Total

$

216.0

$

263.4

(18.0)

%

(0.2)

%

(17.8)

%

MALLINCKRODT PLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in millions, except per share data)

Six Months Ended

June 30,2017

Percent ofNet sales

June 24,2016

Percent ofNet sales

Net sales

$

1,635.4

100.0

%

$

1,682.4

100.0

%

Cost of sales

800.7

49.0

768.5

45.7

Gross profit

834.7

51.0

913.9

54.3

Selling, general and administrative expenses

540.2

33.0

434.2

25.8

Research and development expenses

131.4

8.0

132.9

7.9

Restructuring charges, net

17.8

1.1

22.4

1.3

Non-restructuring impairments

16.9

1.0

Gains on divestiture and license

(57.0)

(3.5)

Operating income

202.3

12.4

307.5

18.3

Interest expense

(186.4)

(11.4)

(192.8)

(11.5)

Interest income

1.5

0.1

0.6

Other income (expense), net

2.5

0.2

(2.0)

(0.1)

Income from continuing operations before income taxes

19.9

1.2

113.3

6.7

Income tax benefit

(79.6)

(4.9)

(161.9)

(9.6)

Income from continuing operations

99.5

6.1

275.2

16.4

Income from discontinued operations, net of income taxes

362.5

22.2

42.4

2.5

Net income

$

462.0

28.2

%

$

317.6

18.9

%

Basic earnings per share:

Income from continuing operations

$

0.99

$

2.50

Income from discontinued operations

3.59

0.39

Net income

4.58

2.89

Diluted earnings per share:

Income from continuing operations

$

0.98

$

2.48

Income from discontinued operations

3.58

0.38

Net income

4.57

2.87

Weighted-average number of shares outstanding:

Basic

100.9

109.9

Diluted

101.2

110.8

MALLINCKRODT PLC

NON-GAAP MEASURES

(unaudited, in millions except per share data)

Six Months Ended

June 30, 2017

June 24, 2016

Gross
profit

Selling,
general
and
administrative
expenses

Net
income

Dilutednet
income
per share

Gross
profit

Selling,
general
and
administrative
expenses

Net
income

Dilutednet
income
per share

GAAP

$

834.7

$

540.2

$

462.0

$

4.57

$

913.9

$

434.2

$

317.6

$

2.87

Adjustments:

Intangible asset amortization

345.2

(4.6)

349.8

3.46

347.2

(3.6)

350.8

3.17

Restructuring and related charges, net (1)

1.0

(1.4)

20.2

0.20

1.2

(1.8)

25.3

0.23

Inventory step-up expense

5.9

5.9

0.06

4.7

4.7

0.04

Income from discontinued operations

(362.5)

(3.58)

(42.4)

(0.38)

Change in contingent consideration fair value

(0.2)

0.2

10.6

(10.6)

(0.10)

Acquisition related expenses

(1.1)

1.1

0.01

(2.0)

2.0

0.02

Non-restructuring impairment charges

16.9

0.15

Debt refinancing

10.0

0.10

Pension settlement charge

(69.2)

69.2

0.68

Intrathecal divestiture

(57.0)

(0.56)

Income taxes (2)

(142.5)

(1.41)

(239.7)

(2.16)

As adjusted

$

1,186.8

$

463.7

$

356.4

$

3.52

$

1,267.0

$

437.4

$

424.6

$

3.83

Percent of net sales

72.6

%

28.4

%

21.8

%

75.3

%

26.0

%

25.2

%

(1)

Includes pre-tax accelerated depreciation.

(2)

Includes tax effects of above adjustments as well as the elimination of deferred tax benefits recognized upon pay down of intercompany installment notes created by internal sales of acquired intangible assets.

MALLINCKRODT PLC

SEGMENT NET SALES AND CONSTANT-CURRENCY GROWTH

(unaudited, in millions)

Six Months Ended

June 30,2017

June 24,2016

Percentchange

Currency
impact

Constant-
currency
growth

Specialty Brands

$

1,151.7

$

1,124.3

2.4

%

(0.4)

%

2.8

%

Specialty Generics

454.6

527.8

(13.9)

(13.9)

1,606.3

1,652.1

(2.8)

(0.3)

(2.5)

Other(1)

29.1

30.3

(4.0)

(4.0)

Net sales

$

1,635.4

$

1,682.4

(2.8)

%

(0.3)

%

(2.5)

%

(1)

Represents net sales from an ongoing, post-divestiture supply agreement with the acquirer of the CMDS business. Amounts for periods prior to the divestiture represent the reclassification of intercompany sales to third-party sales to conform with the presentation of the ongoing supply agreement.

MALLINCKRODT PLC

SELECT PRODUCT LINE NET SALES

(unaudited, in millions)

Six Months Ended

June 30,2017

June 24,2016

Percentchange

Currency
impact

Constant-
currency
growth

Specialty Brands

Acthar

$

591.2

$

546.7

8.1

%

%

8.1

%

Inomax

253.9

236.6

7.3

7.3

Ofirmev

149.1

141.8

5.1

5.1

Therakos immunotherapy

102.4

102.7

(0.3)

(4.3)

4.0

Hemostasis products

26.6

25.3

5.1

(0.1)

5.2

Other

28.5

71.2

(60.0)

(0.1)

(59.9)

Specialty Brands Total

$

1,151.7

$

1,124.3

2.4

%

(0.4)

%

2.8

%

Specialty Generics

Hydrocodone (API) and hydrocodone-containing tablets

$

53.3

$

79.0

(32.5)

%

%

(32.5)

%

Oxycodone (API) and oxycodone-containing tablets

47.2

68.5

(31.1)

(31.1)

Methylphenidate ER

43.9

48.9

(10.2)

(10.2)

Other controlled substances

215.1

246.6

(12.8)

(12.8)

Other products

95.1

84.8

12.1

(0.1)

12.2

Specialty Generics Total

$

454.6

$

527.8

(13.9)

%

%

(13.9)

%

MALLINCKRODT PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in millions)

June 30,2017

December 30,2016

Assets

Current Assets:

Cash and cash equivalents

$

330.2

$

342.0

Accounts receivable, net

482.1

431.0

Inventories

339.4

350.7

Prepaid expenses and other current assets

134.0

131.9

Notes receivable

154.0

Current assets held for sale

310.9

  Total current assets

1,439.7

1,566.5

Property, plant and equipment, net

940.7

881.5

Goodwill

3,446.2

3,498.1

Intangible assets, net

8,604.7

9,000.5

Other assets

189.9

259.7

Total Assets

$

14,621.2

$

15,206.3

Liabilities and Shareholders' Equity

Current Liabilities:

Current maturities of long-term debt

$

519.4

$

271.2

Accounts payable

113.9

112.1

Accrued payroll and payroll-related costs

92.8

76.1

Accrued interest

54.1

68.7

Income taxes payable

122.0

101.7

Accrued and other current liabilities

460.2

557.1

Current liabilities held for sale

120.3

  Total current liabilities

1,362.4

1,307.2

Long-term debt

5,338.5

5,880.8

Pension and postretirement benefits

67.7

136.4

Environmental liabilities

73.6

73.0

Deferred income taxes

2,254.4

2,398.1

Other income tax liabilities

67.5

70.4

Other liabilities

361.1

356.1

Total Liabilities

9,525.2

10,222.0

Shareholders' Equity:

Preferred shares

Ordinary shares

23.7

23.6

Ordinary shares held in treasury at cost

(1,296.9)

(919.8)

Additional paid-in capital

5,459.7

5,424.0

Retained earnings

917.5

529.0

Accumulated other comprehensive income

(8.0)

(72.5)

  Total Shareholders' Equity

5,096.0

4,984.3

  Total Liabilities and Shareholders' Equity

$

14,621.2

$

15,206.3

MALLINCKRODT PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

Six Months Ended

June 30,2017

June 24,2016

Cash Flows From Operating Activities:

Net income

$

462.0

$

317.6

Adjustments to reconcile net cash from operating activities:

Depreciation and amortization

406.0

419.0

Share-based compensation

31.8

22.1

Deferred income taxes

(157.6)

(215.4)

Non-cash impairment charges

16.9

Gain on divestitures

(419.1)

(2.1)

Other non-cash items

32.4

18.6

Changes in assets and liabilities, net of the effects of acquisitions:

Accounts receivable, net

(52.6)

(17.2)

Inventories

(8.5)

8.0

Accounts payable

(10.7)

4.4

Income taxes

12.5

58.4

Other

(73.7)

52.7

  Net cash from operating activities

222.5

683.0

Cash Flows From Investing Activities:

Capital expenditures

(101.6)

(84.5)

Acquisitions and intangibles, net of cash acquired

(169.5)

Proceeds from divestitures, net of cash

576.9

3.0

Other

(9.9)

4.6

Net cash from investing activities

465.4

(246.4)

Cash Flows From Financing Activities:

Issuance of external debt

40.0

36.3

Repayment of external debt and capital leases

(332.8)

(177.5)

Debt financing costs

(13.0)

Proceeds from exercise of share options

3.9

4.9

Repurchase of shares

(380.8)

(326.6)

Other

(19.5)

(23.0)

 Net cash from financing activities

(702.2)

(485.9)

Effect of currency rate changes on cash

1.6

2.1

Net change in cash, cash equivalents and restricted cash

(12.7)

(47.2)

Cash, cash equivalents and restricted cash at beginning of period

361.1

588.4

Cash, cash equivalents and restricted cash at end of period

$

348.4

$

541.2

1 Generally accepted accounting principles in the United States
2 The as-reported and constant currency growth percentages are identical for H.P. Acthar Gel, INOMAX and OFIRMEV.

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SOURCE Mallinckrodt plc

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