Item 2.02 Results of Operations and Financial Condition.
On August 11, 2022, Mallinckrodt plc (the "Company" or "Mallinckrodt") provided its financial results for the three months ended July 1, 20221 in the attached Exhibit 99.1.
The information in this Current Report on Form 8-K, including Exhibit 99.1, should be read in conjunction with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2022.
The information contained in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as otherwise expressly set forth by specific reference in such a filing.
NON-GAAP FINANCIAL MEASURES
Exhibit 99.1 contains financial measures, including adjusted EBITDA, adjusted gross profit, adjusted SG&A, adjusted R&D, net sales growth on a constant-currency basis, and net debt, which are considered "non-GAAP" financial measures under applicable SEC rules and regulations.
Adjusted EBITDA represents net income or loss 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. Adjustments to GAAP amounts include, as applicable to each measure, interest expense, net; income taxes; depreciation; amortization; restructuring charges, net; non-restructuring impairment charges; discontinued operations; changes in fair value of contingent consideration obligations; significant legal and environmental charges; separation costs; unrealized gain or loss on equity investment; reorganization items, net; share-based compensation; fresh-start inventory-related expenses; and other items identified by the company.
Segment net sales growth on a constant-currency basis measures the change in segment net sales between current- and prior-year periods using a constant currency, the exchange rate in effect during the applicable prior-year period.
Net debt represents the total principal debt outstanding less cash, 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. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are included in Exhibit 99.1.
Predecessor – Successor Presentation
The financial results for the period June 17, 2022 through July 1, 2022 reflects the Successor period, while the period April 2, 2022 through, and including, June 16, 2022 and the period January 1, 2022 through, and including, June 16, 2022 reflects the Predecessor periods. As a result of the application of fresh-start accounting, the financial statements for periods prior to the Effective Date are not comparable to those for periods subsequent to the Effective Date. Operating results for the Successor and Predecessor periods are not necessarily indicative of the results to be expected for a full fiscal year.
Results of operations as reported in the unaudited condensed consolidated financial statements for the Successor and Predecessor periods are in accordance with GAAP. The presentation of the combined financial information of the Predecessor and Successor for the three and six months ended July 1, 2022 is not in accordance with GAAP. However, the company believes that for purposes of discussion and analysis, the combined financial information is useful for management and investors to assess our ongoing financial and operational performance and trends.
1 As a result of emerging from Chapter 11, the Company’s second quarter ended July 1, 2022, includes a predecessor period from April 2, 2022, to June 16, 2022, and a successor period from June 17, 2022 to July 1, 2022.