PERRIGO Co plc 10-Q for FY2024 Q1
PERRIGO Co plc (PRGO)
10-Q
2024-05-07
For: 2024-03-30
View Original
Added on
April 09, 2026
About this 10-Q
PERRIGO Co plc filed this 10-Q on May 7, 2024, covering the quarter ended March 30, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.08B
- down 8.4% from $1.18B a year earlier
- Net income
- $2M
- compared with a net loss of $3M a year earlier
- Diluted EPS
- $0.01
- compared with -$0.02 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________________
FORM 10-Q
_______________________________________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
Commission file number 001-36353
_______________________________________________
(Exact name of registrant as specified in its charter)
_______________________________________________
| Not Applicable | ||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
+353 1 7094000
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |||||||||||||||||||||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of May 3, 2024, there were 136,320,433 ordinary shares outstanding.
PERRIGO COMPANY PLC
FORM 10-Q
INDEX
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| PART I. FINANCIAL INFORMATION | ||||||||
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| 16 | ||||||||
| PART II. OTHER INFORMATION | ||||||||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this report are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our, or our industry’s actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions, future events or future performance contained in this report, including certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” "forecast," “predict,” “potential” or the negative of those terms or other comparable terminology.
The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company’s control, including: supply chain impacts on the Company’s business, including those caused or exacerbated by armed conflict, trade and other economic sanctions and/or disease; general economic, credit, and market conditions; the impact of the war in Ukraine and any escalation thereof, including the effects of economic and political sanctions imposed by the United States, United Kingdom, European Union, and other countries related thereto; the outbreak or escalation of conflict in other regions where we do business; future impairment charges, if we determine that the carrying amount of specific assets may not be recoverable from the expected future cash flows of such assets; customer acceptance of new products; competition from other industry participants, some of whom have greater marketing resources or larger market shares in certain product categories than the Company does; pricing pressures from customers and consumers; resolution of uncertain tax positions and any litigation relating thereto, ongoing or future government investigations and regulatory initiatives; uncertainty regarding the Company’s ability to obtain and maintain its regulatory approvals; potential costs and reputational impact of product recalls or sales halts; potential adverse changes to U.S. and foreign tax, healthcare and other government policy; the effect of the coronavirus (COVID-19) pandemic and its variants, or other epidemic or pandemic disease; the timing, amount and cost of any share repurchases (or the absence thereof) and/or any refinancing of outstanding debt at or prior to maturity; fluctuations in currency exchange rates and interest rates; the consummation and success of the proposed sale of the HRA Rare Diseases portfolio, including the risk that the parties fail to obtain the required regulatory approvals or to fulfill the other conditions to closing on the expected timeframe or at all, the occurrence of any other event, change or circumstance that could delay the transaction or result in the termination of the sale agreement or that the Company faces higher than anticipated costs in connection with the proposed sale; the risk that potential costs or liabilities incurred or retained in connection with the sale of the Company's Rx business may exceed the Company’s estimates or adversely affect the Company’s business or operations; the Company’s ability to achieve the benefits expected from the acquisitions of Héra SAS ("HRA Pharma") and Nestlé’s Gateway infant formula plant along with the U.S. and Canadian rights to the GoodStart® infant formula brand and other related formula brands ("Gateway") and/or the risks that the Company’s synergy estimates are inaccurate or that the Company faces higher than anticipated integration or other costs in connection with the acquisitions; risks associated with the integration of HRA Pharma and Gateway, including the risk that growth rates are adversely affected by any delay in the integration of sales and distribution networks; the consummation and success of other announced and unannounced acquisitions or dispositions, and the Company’s ability to realize the desired benefits thereof; and the Company’s ability to execute and achieve the desired benefits of announced cost-reduction efforts and other strategic initiatives and investments, including the Company’s ability to achieve the expected benefits from its ongoing restructuring programs described herein. Adverse results with respect to pending litigation could have a material adverse impact on the Company's operating results, cash flows and liquidity, and could ultimately require the use of corporate assets to pay damages, reducing assets that would otherwise be available for other corporate purposes. These and other important factors, including those discussed in our Form 10-K for the year ended December 31, 2023, this report under “Risk Factors” and in any subsequent filings with the United States Securities and Exchange Commission, may cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements in this report are made only as of the date hereof, and unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
This report contains trademarks, trade names and service marks that are the property of Perrigo Company plc, as well as, for informational purposes, trademarks, trade names, and service marks that are the property of other organizations. Solely for convenience, certain trademarks, trade names, and service marks referred to in this report appear without the ®, ™ and SM symbols, but those references are not intended to indicate that we or the applicable owner, as the case may be, will not assert, to the fullest extent under applicable law, our or their rights to such trademarks, trade names, and service marks.
3
Perrigo Company plc - Item 1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
| Three Months Ended | |||||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | ||||||||||||||||||||||
| Net sales | $ | $ | |||||||||||||||||||||
| Cost of sales | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Distribution | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling | |||||||||||||||||||||||
| Administration | |||||||||||||||||||||||
| Restructuring | |||||||||||||||||||||||
| Other operating expense (income), net | ( | ||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating (loss) income | ( | ||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Other (income) expense, net | |||||||||||||||||||||||
| Income (loss) from continuing operations before income taxes | ( | ||||||||||||||||||||||
| Income tax (benefit) expense | ( | ||||||||||||||||||||||
| Income (loss) from continuing operations | ( | ||||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | ( | ( | |||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ||||||||||||||||||||
Earnings (loss) per share | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Continuing operations | $ | $ | ( | ||||||||||||||||||||
| Discontinued operations | ( | ( | |||||||||||||||||||||
| Basic earnings (loss) per share | $ | $ | ( | ||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Continuing operations | $ | $ | ( | ||||||||||||||||||||
| Discontinued operations | ( | ( | |||||||||||||||||||||
| Diluted earnings (loss) per share | $ | $ | ( | ||||||||||||||||||||
| Weighted-average shares outstanding | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
4
Perrigo Company plc - Item 1
PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
| Three Months Ended | |||||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | ||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ||||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ||||||||||||||||||||||
| Change in fair value of derivative financial instruments, net of tax | ( | ||||||||||||||||||||||
| Change in post-retirement and pension liability, net of tax | ( | ( | |||||||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | ||||||||||||||||||||||
| Comprehensive income (loss) | $ | ( | $ | ||||||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
5
Perrigo Company plc - Item 1
PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
(unaudited)
| March 30, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Cash, cash equivalents and restricted cash | $ | $ | |||||||||
Accounts receivable, net of allowance for credit losses of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Operating lease assets | |||||||||||
| Goodwill and indefinite-lived intangible assets | |||||||||||
| Definite-lived intangible assets, net | |||||||||||
| Deferred income taxes | |||||||||||
| Other non-current assets | |||||||||||
| Total non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Shareholders’ Equity | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Payroll and related taxes | |||||||||||
| Accrued customer programs | |||||||||||
| Other accrued liabilities | |||||||||||
| Accrued income taxes | |||||||||||
| Current indebtedness | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, less current portion | |||||||||||
| Deferred income taxes | |||||||||||
| Other non-current liabilities | |||||||||||
| Total non-current liabilities | |||||||||||
| Total liabilities | |||||||||||
| Contingencies - Refer to Note 15 | |||||||||||
| Shareholders’ equity | |||||||||||
| Controlling interests: | |||||||||||
Preferred shares, $ | |||||||||||
Ordinary shares, € | |||||||||||
| Accumulated other comprehensive income | ( | ||||||||||
| Retained earnings (accumulated deficit) | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| Total liabilities and shareholders' equity | $ | $ | |||||||||
| Supplemental Disclosures of Balance Sheet Information | |||||||||||
Preferred shares, issued and outstanding | |||||||||||
Ordinary shares, issued and outstanding | |||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
6
Perrigo Company plc - Item 1
PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions, except per share amounts)
(unaudited)
| Ordinary Shares Issued | Accumulated Other Comprehensive Income | Retained Earnings (Accumulated Deficit) | Total | ||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
| Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ||||||||||||||||||||||||||
| Restricted stock plan | — | — | — | — | |||||||||||||||||||||||||
| Compensation for restricted stock | — | — | — | ||||||||||||||||||||||||||
Cash dividends, $ | — | ( | — | — | ( | ||||||||||||||||||||||||
| Shares withheld for payment of employees' withholding tax liability | ( | ( | — | — | ( | ||||||||||||||||||||||||
| Balance at April 1, 2023 | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
| Ordinary Shares Issued | Accumulated Other Comprehensive Income | Retained Earnings (Accumulated Deficit) | Total | ||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||
| Other comprehensive income | — | — | ( | — | ( | ||||||||||||||||||||||||
| Compensation for restricted stock | — | — | |||||||||||||||||||||||||||
Cash dividends, $ | — | ( | — | — | ( | ||||||||||||||||||||||||
| Shares withheld for payment of employees' withholding tax liability | ( | ( | — | — | ( | ||||||||||||||||||||||||
| Balance at March 30, 2024 | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
7
Perrigo Company plc - Item 1
PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
| Three Months Ended | |||||||||||
| March 30, 2024 | April 1, 2023 | ||||||||||
| Cash Flows From (For) Operating Activities | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Adjustments to derive cash flows: | |||||||||||
| Depreciation and amortization | |||||||||||
| Restructuring charges | |||||||||||
| Share-based compensation | |||||||||||
| Amortization of debt discount | |||||||||||
| Gain on sale of assets | ( | ||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Other non-cash adjustments, net | ( | ||||||||||
| Subtotal | |||||||||||
| Increase (decrease) in cash due to: | |||||||||||
| Accrued income taxes | ( | ||||||||||
| Accounts receivable | ( | ( | |||||||||
| Payroll and related taxes | ( | ( | |||||||||
| Accounts payable | ( | ( | |||||||||
| Prepaid expenses and other current assets | ( | ||||||||||
| Inventories | ( | ||||||||||
| Accrued customer programs | |||||||||||
| Accrued liabilities | |||||||||||
| Other operating, net | |||||||||||
| Subtotal | ( | ( | |||||||||
| Net cash (for) from operating activities | ( | ||||||||||
| Cash Flows From (For) Investing Activities | |||||||||||
| Additions to property, plant and equipment | ( | ( | |||||||||
| Proceeds from sale of assets | |||||||||||
| Proceeds from royalty rights | |||||||||||
| Net cash for investing activities | ( | ( | |||||||||
| Cash Flows For Financing Activities | |||||||||||
| Cash dividends | ( | ( | |||||||||
| Payments on long-term debt | ( | ( | |||||||||
| Other financing, net | ( | ( | |||||||||
| Net cash for financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash of continuing operations, beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash of continuing operations, end of period | $ | $ | |||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
8
Perrigo Company plc - Item 1
Note 1
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Information
Perrigo Company plc was incorporated under the laws of Ireland on June 28, 2013 and became the successor registrant of Perrigo Company, a Michigan corporation, on December 18, 2013 in connection with the acquisition of Elan Corporation, plc ("Elan"). Unless the context requires otherwise, the terms "Perrigo," the "Company," "we," "our," "us," and similar pronouns used herein refer to Perrigo Company plc, its subsidiaries, and all predecessors of Perrigo Company plc and its subsidiaries.
We are a leading provider of over-the-counter ("OTC") health and wellness solutions that are designed to enhance individual well-being and empower consumers to proactively prevent or treat conditions that can be self-managed. Our vision is to provide the best self-care for everyone. We are headquartered in Ireland and sell our products primarily in North America and Europe as well as in other markets around the world.
Basis of Presentation
Segment Reporting
Our reporting and operating segments are as follows:
•Consumer Self-Care Americas ("CSCA") comprises our consumer self-care business in the U.S. and Canada.
•Consumer Self-Care International ("CSCI") comprises our consumer self-care business outside of the U.S. and Canada, primarily in Europe and Australia.
We previously had an Rx segment which was comprised of our generic prescription pharmaceuticals business in the U.S., and other pharmaceuticals and diagnostic business in Israel, which have been divested. Following the divestiture, there were no substantial assets or operations left in this segment. The Rx segment was reported as Discontinued Operations in 2021, and is presented as such for all periods in this report (refer to Note 3).
Foreign Currency Translation and Transactions
We translate our non-U.S. dollar-denominated operations’ assets and liabilities into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in the cumulative translation account, a component of Accumulated other comprehensive income (loss) ("AOCI"). Gains or losses from foreign currency transactions are included in Other (income) expense, net.
9
Perrigo Company plc - Item 1
Note 1
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist primarily of demand deposits and other short-term investments with maturities of three months or less at the date of purchase.
Allowance for Credit Losses
Expected credit losses on trade receivables and contract assets are measured collectively by geographic location. Historical credit loss experience provides the primary basis for estimation of expected credit losses and is adjusted for current conditions and for reasonable and supportable forecasts. Receivables that do not share risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. The following table presents the allowance for credit losses activity (in millions):
| Three Months Ended | |||||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | ||||||||||||||||||||||
| Balance at beginning of period | $ | $ | |||||||||||||||||||||
| Provision for credit losses, net | |||||||||||||||||||||||
| Receivables written-off | ( | ||||||||||||||||||||||
| Recoveries collected | |||||||||||||||||||||||
| Currency translation adjustment | ( | ||||||||||||||||||||||
| Balance at end of period | $ | $ | |||||||||||||||||||||
10
Perrigo Company plc - Item 1
Note 2
NOTE 2 - REVENUE RECOGNITION
The following is a summary of our net sales by category (in millions):
| Three Months Ended | |||||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | ||||||||||||||||||||||
CSCA(1) | |||||||||||||||||||||||
| Upper Respiratory | $ | $ | |||||||||||||||||||||
| Digestive Health | |||||||||||||||||||||||
| Nutrition | |||||||||||||||||||||||
| Pain and Sleep-Aids | |||||||||||||||||||||||
| Healthy Lifestyle | |||||||||||||||||||||||
| Oral Care | |||||||||||||||||||||||
| Skin Care | |||||||||||||||||||||||
| Women's Health | |||||||||||||||||||||||
| Vitamins, Minerals, and Supplements ("VMS") | |||||||||||||||||||||||
Other CSCA(2) | |||||||||||||||||||||||
| Total CSCA | $ | $ | |||||||||||||||||||||
| CSCI | |||||||||||||||||||||||
| Skin Care | $ | $ | |||||||||||||||||||||
| Upper Respiratory | |||||||||||||||||||||||
| Healthy Lifestyle | |||||||||||||||||||||||
| Pain and Sleep-Aids | |||||||||||||||||||||||
| VMS | |||||||||||||||||||||||
| Women's Health | |||||||||||||||||||||||
| Oral Care | |||||||||||||||||||||||
| Digestive Health | |||||||||||||||||||||||
Other CSCI(3) | |||||||||||||||||||||||
| Total CSCI | |||||||||||||||||||||||
| Total net sales | $ | $ | |||||||||||||||||||||
(1) We updated our global reporting product categories as a result of legacy Rx sales being moved out of Other CSCA and into respective categories. These product categories have been adjusted retroactively to reflect the changes and have no impact on historical financial position, results of operations, or cash flows.
(2) Consists primarily of product sales and royalty income related to supply and distribution agreements and other miscellaneous or otherwise uncategorized product lines and markets, none of which is greater than 10% of the segment net sales.
(3) Consists primarily of our Rare Diseases business and other miscellaneous or otherwise uncategorized product lines and other adjustments, none of which is greater than 10% of the segment net sales.
While the majority of revenue is recognized at a point in time, certain of our product revenue is recognized over time. Customer contracts recognized over time exist predominately in contract manufacturing arrangements, which occur in both the CSCA and CSCI segments. Contract manufacturing revenue was $72.2 million for the three months ended March 30, 2024, and $90.0 million for the three months ended April 1, 2023.
We also recognize a portion of the store brand OTC product revenues in the CSCA segment on an over time basis; however, the timing difference between over time and point in time revenue recognition for store brand contracts is not significant due to the short time period between the customization of the product and shipment or delivery.
The following table provides information about contract assets from contracts with customers (in millions):
| Balance Sheet Location | March 30, 2024 | December 31, 2023 | |||||||||||||||
| Short-term contract assets | Prepaid expenses and other current assets | $ | $ | ||||||||||||||
11
Perrigo Company plc - Item 1
Note 2
We generated net sales in the following geographic locations(1) (in millions):
| Three Months Ended | |||||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | ||||||||||||||||||||||
| U.S. | $ | $ | |||||||||||||||||||||
Europe(2) | |||||||||||||||||||||||
All other countries(3) | |||||||||||||||||||||||
| Total net sales | $ | $ | |||||||||||||||||||||
(1) The net sales by geography are derived from the location of the entity that sells to a third party.
(2) Includes Ireland net sales of $4.3 million for the three months ended March 30, 2024, and $7.3 million for the three months ended April 1, 2023.
(3) Includes net sales generated primarily in Australia and Canada.
NOTE 3 - DISCONTINUED OPERATIONS
Our discontinued operations primarily consist of our former Rx segment, which held our prescription pharmaceuticals business in the U.S. and our pharmaceuticals and diagnostic businesses in Israel (collectively, the “Rx business”).
On July 6, 2021, we completed the sale of the Rx business to Altaris Capital Partners, LLC ("Altaris") for aggregate consideration of $1.55 billion. The consideration included a $53.3 million reimbursement related to Abbreviated New Drug Application (“ANDA") for a generic topical lotion which Altaris delivered in cash to Perrigo pursuant to the terms of the definitive agreement during the first quarter of 2022.
Under the terms of a transition services agreement ("TSA"), we provided transition services which were substantially completed as of the end of the third quarter of 2022. We also entered into reciprocal supply agreements pursuant to which Perrigo will supply certain products to the Rx business and the Rx business will supply certain products to Perrigo. The supply agreements have a term of four years , extendable up to seven years by the party who is the purchaser of the products under such agreement. We also extended distribution rights to the Rx business for certain OTC products owned and manufactured by Perrigo that may be fulfilled through pharmacy channels, in return for a share of the net profits.
In connection with the sale, Perrigo retained certain pre-closing liabilities arising out of antitrust (refer to Note 15 - Contingencies under the header "Price-Fixing Lawsuits") and opioid matters and the Company’s Albuterol recall, subject to, in each case, Altaris' obligation to indemnify the Company for fifty percent of these liabilities up to an aggregate cap on Altaris' obligation of $50.0 million. We have not requested payments from Altaris related to the indemnity of these liabilities during the three months ended March 30, 2024.
NOTE 4 - INVENTORIES
Major components of inventory were as follows (in millions):
| March 30, 2024 | December 31, 2023 | ||||||||||
| Finished goods | $ | $ | |||||||||
| Work in process | |||||||||||
| Raw materials | |||||||||||
| Total inventories | $ | $ | |||||||||
12
Perrigo Company plc - Item 1
Note 5
NOTE 5 - INVESTMENTS
The following table summarizes the measurement category, balance sheet location, and balances of our equity securities (in millions):
| Measurement Category | Balance Sheet Location | March 30, 2024 | December 31, 2023 | |||||||||||||||||
| Fair value method | Prepaid expenses and other current assets | $ | $ | |||||||||||||||||
Fair value method(1) | Other non-current assets | $ | $ | |||||||||||||||||
| Equity method | Other non-current assets | $ | $ | |||||||||||||||||
(1) Measured at fair value using the Net Asset Value practical expedient.
The following table summarizes the expense recognized in earnings of our equity securities (in millions):
| Three Months Ended | ||||||||||||||||||||||||||||||||
| Measurement Category | Income Statement Location | March 30, 2024 | April 1, 2023 | |||||||||||||||||||||||||||||
| Fair value method | Other operating expense (income), net | $ | $ | |||||||||||||||||||||||||||||
| Equity method | Other operating expense (income), net | $ | $ | |||||||||||||||||||||||||||||
NOTE 6 - LEASES
The balance sheet locations of our lease assets and liabilities were as follows (in millions):
| Assets | Balance Sheet Location | March 30, 2024 | December 31, 2023 | |||||||||||||||||
| Operating | Operating lease assets | $ | $ | |||||||||||||||||
| Finance | ||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||
| Liabilities | Balance Sheet Location | March 30, 2024 | December 31, 2023 | |||||||||||||||||
| Current | ||||||||||||||||||||
| Operating | $ | $ | ||||||||||||||||||
| Finance | ||||||||||||||||||||
| Non-Current | ||||||||||||||||||||
| Operating | ||||||||||||||||||||
| Finance | ||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||
13
Perrigo Company plc - Item 1
Note 6
The below tables show our lease assets and liabilities by reporting segment (in millions):
| Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating | Financing | |||||||||||||||||||||||||||||||||||||||||||||||||
| March 30, 2024 | December 31, 2023 | March 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| CSCA | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| CSCI | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Unallocated | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Operating | Financing | |||||||||||||||||||||||||
| March 30, 2024 | December 31, 2023 | March 30, 2024 | December 31, 2023 | |||||||||||||||||||||||
| CSCA | $ | $ | $ | $ | ||||||||||||||||||||||
| CSCI | ||||||||||||||||||||||||||
| Unallocated | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
Lease expense was as follows (in millions):
| Three Months Ended | ||||||||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | |||||||||||||||||||||||||
Operating leases(1) | $ | $ | ||||||||||||||||||||||||
| Finance leases | ||||||||||||||||||||||||||
| Amortization | $ | $ | ||||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||||
| Total finance leases | $ | $ | ||||||||||||||||||||||||
(1) Includes short-term leases and variable lease costs, which are immaterial.
The annual future maturities of our leases as of March 30, 2024 are as follows (in millions):
| Operating Leases | Finance Leases | Total | ||||||||||||||||||
| 2024 | $ | $ | $ | |||||||||||||||||
| 2025 | ||||||||||||||||||||
| 2026 | ||||||||||||||||||||
| 2027 | ||||||||||||||||||||
| 2028 | ||||||||||||||||||||
| After 2028 | ||||||||||||||||||||
| Total lease payments | $ | $ | $ | |||||||||||||||||
| Less: Interest | ||||||||||||||||||||
| Present value of lease liabilities | $ | $ | $ | |||||||||||||||||
14
Perrigo Company plc - Item 1
Note 6
Our weighted average lease terms and discount rates are as follows:
| March 30, 2024 | April 1, 2023 | |||||||||||||
| Weighted-average remaining lease term (in years) | ||||||||||||||
| Operating leases | ||||||||||||||
| Finance leases | ||||||||||||||
| Weighted-average discount rate | ||||||||||||||
| Operating leases | % | % | ||||||||||||
| Finance leases | % | % | ||||||||||||
Our lease cash flow classifications are as follows (in millions):
| Three Months Ended | ||||||||||||||
| March 30, 2024 | April 1, 2023 | |||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||
| Operating cash flows for operating leases | $ | $ | ||||||||||||
| Operating cash flows for finance leases | $ | $ | ||||||||||||
| Financing cash flows for finance leases | $ | $ | ||||||||||||
| Leased assets obtained in exchange for new finance lease liabilities | $ | $ | ||||||||||||
| Leased assets obtained in exchange for new operating lease liabilities | $ | $ | ||||||||||||
NOTE 7 - GOODWILL AND INTANGIBLE ASSETS
Goodwill
Changes in the carrying amount of goodwill, by reportable segment, were as follows (in millions):
| December 31, 2023 | Currency translation adjustments | March 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||
CSCA(1) | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
CSCI(2) | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total goodwill | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||||||
(1) We had accumulated goodwill impairments of $6.1
(2) We had accumulated goodwill impairments of $968.4
15
Perrigo Company plc - Item 1
Note 7
Intangible Assets
Intangible assets and related accumulated amortization consisted of the following (in millions):
| March 30, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Gross | Accumulated Amortization | Gross | Accumulated Amortization | ||||||||||||||||||||||||||||||||
Indefinite-lived intangibles:(1) | |||||||||||||||||||||||||||||||||||
| Trademarks, trade names, and brands | $ | $ | — | $ | $ | — | |||||||||||||||||||||||||||||
| In-process research and development | — | — | |||||||||||||||||||||||||||||||||
| Total indefinite-lived intangibles | $ | $ | — | $ | $ | — | |||||||||||||||||||||||||||||
Definite-lived intangibles: | |||||||||||||||||||||||||||||||||||
| Distribution and license agreements and supply agreements | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Developed product technology, formulations, and product rights | |||||||||||||||||||||||||||||||||||
| Customer relationships and distribution networks | |||||||||||||||||||||||||||||||||||
| Trademarks, trade names, and brands | |||||||||||||||||||||||||||||||||||
| Non-compete agreements | |||||||||||||||||||||||||||||||||||
| Total definite-lived intangibles | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
We recorded amortization expense of $58.4 million and $65.4 million for the three months ended March 30, 2024 and April 1, 2023, respectively.
NOTE 8 - FAIR VALUE MEASUREMENTS
The table below summarizes the valuation of our financial instruments carried at fair value by the applicable pricing categories (in millions):
| March 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
| Measured at fair value on a recurring basis: | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||
| Investment securities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | ||||||||||||||||||||||||||||||||||||||
| Interest rate swap agreements | ||||||||||||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||
| Cross-currency swap | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | ||||||||||||||||||||||||||||||||||||||
| Interest rate swap agreements | ||||||||||||||||||||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Measured at fair value on a non-recurring basis: | ||||||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||
Goodwill(1) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
There were no transfers within Level 3 fair value measurements during the three months ended March 30, 2024 or the year ended December 31, 2023.
16
Perrigo Company plc - Item 1
Note 8
Non-recurring Fair Value Measurements
Non-recurring fair values represent only those assets whose carrying values were adjusted to fair value during the reporting period.
Fixed Rate Long-term Debt
Our fixed rate long-term debt consisted of the following (in millions):
| March 30, 2024 | December 31, 2023 | ||||||||||||||||
| Public Bonds | Level 1 | Level 1 | |||||||||||||||
| Carrying value (excluding discount) | $ | $ | |||||||||||||||
| Fair value | $ | $ | |||||||||||||||
The fair values of our public bonds for all periods were based on quoted market prices. The fair values of our private placement notes for all periods were based on interest rates offered for borrowings of a similar nature and remaining maturities.
NOTE 9 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Interest Rate Swaps
In April 2022, to economically hedge the interest rate risk of the Senior Secured Credit Facilities (as defined in Note 10), we entered into five variable-to-fixed interest rate swap agreements. Three of the interest rate swaps were designated as cash flow hedges to fix the interest rate on a substantial portion of the Term Loan B Facility (as defined in Note 10). The interest rate swaps cover an interest period ranging from June 1, 2022, through April 1, 2029, on notional balances that decline from $1.0 billion to $812.5 million over the term. The other two interest rate swaps were designated as cash flow hedges to fix the interest rate on a substantial portion of the Term Loan A Facility (as defined in Note 10). The interest rate swaps cover an interest period ranging from June 1, 2022, through April 1, 2027, on notional balances that decline from $487.5 million to $387.5 million over the term.
In December 2023, to economically hedge the interest rate risk of the Term B Loans (as defined in Note 10), we entered into four variable-to-fixed interest rate swap agreements. The interest rate swaps were designated as cash flow hedges to fix the interest rate on a substantial portion of the Term B Loans (as defined in Note 10). The interest rate swaps cover an interest period from December 15, 2023 through April 20, 2029, on notional balances that decline from $300 million to $229 million over the term.
As a designated cash flow hedge, gains and losses will be deferred in AOCI and recognized within Interest expense, net when interest is paid on the Senior Secured Credit Facilities.
Cross-currency Swaps
In October 2022, we entered into three fixed-for-fixed cross currency interest rate swaps at market rates and designated the instruments as net investment hedges on our investment in European operations. The following are the terms and notional amounts outstanding:
•$700 million notional amount outstanding from October 25, 2022 through December 15, 2024;
•$700 million notional amount outstanding from October 25, 2022 through March 15, 2026; and
•$100 million notional amount outstanding from October 25, 2022 through June 15, 2030.
On November 21, 2023, we entered into fixed-for-fixed cross currency interest rate swaps designated as net investment hedges to hedge the EUR currency exposure of our investment in European operations. The following are the terms and notional amount outstanding:
17
Perrigo Company plc - Item 1
Note 9
•$300 million notional amount outstanding from November 21, 2023 through April 20, 2027.
Foreign Currency Forwards
Notional amounts of foreign currency forward contracts were as follows (in millions):
| March 30, 2024 | December 31, 2023 | |||||||||||||
| British Pound (GBP) | $ | $ | ||||||||||||
| Swedish Krona (SEK) | ||||||||||||||
| European Euro (EUR) | ||||||||||||||
| Danish Krone (DKK) | ||||||||||||||
| United States Dollar (USD) | ||||||||||||||
| Canadian Dollar (CAD) | ||||||||||||||
| Chinese Yuan (CNH) | ||||||||||||||
| Polish Zloty (PLZ) | ||||||||||||||
| Norwegian Krone (NOK) | ||||||||||||||
| Hungarian Forint (HUF) | ||||||||||||||
Other (1) | ||||||||||||||
| Total | $ | $ | ||||||||||||
(1) Number consists of various currencies notional amounts, none of which individually exceed $10
The maximum term of our forward currency exchange contracts is 60 months.
Effects of Derivatives on the Financial Statements
The below tables indicate the effects of all derivative instruments on the Condensed Consolidated Financial Statements. All amounts exclude income tax effects. The balance sheet location and gross fair value of our derivative instruments were as follows (in millions):
| Balance Sheet Location | March 30, 2024 | December 31, 2023 | |||||||||||||||
| Designated derivative assets: | |||||||||||||||||
| Foreign currency forward contracts | Prepaid expenses and other current assets | $ | $ | ||||||||||||||
| Foreign currency forward contracts | Other non-current assets | ||||||||||||||||
| Interest rate swap agreements | Other non-current assets | ||||||||||||||||
| Total designated derivative assets | $ | $ | |||||||||||||||
| Non-designated derivative assets: | |||||||||||||||||
| Foreign currency forward contracts | Prepaid expenses and other current assets | $ | $ | ||||||||||||||
| Total non-designated derivative assets | $ | $ | |||||||||||||||
| Designated derivative liabilities: | |||||||||||||||||
| Foreign currency forward contracts | Other accrued liabilities | $ | $ | ||||||||||||||
| Cross-currency swap | Other accrued liabilities | ||||||||||||||||
| Cross-currency swap | Other non-current liabilities | ||||||||||||||||
Interest rate swap agreements | Other non-current liabilities | ||||||||||||||||
| Total designated derivative liabilities | $ | $ | |||||||||||||||
| Non-designated derivative liabilities: | |||||||||||||||||
| Foreign currency forward contracts | Other accrued liabilities | $ | $ | ||||||||||||||
18
Perrigo Company plc - Item 1
Note 9
The amounts of (income)/expense recognized in earnings related to our non-designated derivatives on the Consolidated Statements of Operations were as follows (in millions):
| Three Months Ended | ||||||||||||||||||||||||||||||||
| Non-Designated Derivatives | Income Statement Location | March 30, 2024 | April 1, 2023 | |||||||||||||||||||||||||||||
| Foreign currency forward contracts | Other (income) expense, net | $ | ( | $ | ( | |||||||||||||||||||||||||||
| Interest expense, net | ( | |||||||||||||||||||||||||||||||
| $ | ( | $ | ( | |||||||||||||||||||||||||||||
The following tables summarize the effect of derivative instruments designated as hedging instruments in AOCI (in millions):
| Gain/(Loss) | ||||||||||||||||||||||||||||||||
| Reclassified from AOCI into Earnings | Related to Amounts Excluded from Effectiveness Testing | |||||||||||||||||||||||||||||||
Amount Recorded in OCI(1) | Classification | Amount(2) | Classification | Amount Recognized in Earnings on Derivatives | ||||||||||||||||||||||||||||
| Three Months Ended March 30, 2024 | ||||||||||||||||||||||||||||||||
| Cash flow hedges | ||||||||||||||||||||||||||||||||
| Interest rate swap agreements | $ | Interest expense, net | $ | Interest expense, net | $ | |||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | Net sales | $ | Net sales | $ | ( | ||||||||||||||||||||||||||
| Cost of sales | $ | Cost of sales | $ | ( | ||||||||||||||||||||||||||||
| Other (income) expense, net | $ | |||||||||||||||||||||||||||||||
| Total Cash flow hedges | $ | $ | $ | ( | ||||||||||||||||||||||||||||
| Net investment hedges | ||||||||||||||||||||||||||||||||
| Cross-currency swap | $ | Interest expense, net | $ | |||||||||||||||||||||||||||||
| Three Months Ended April 1, 2023 | ||||||||||||||||||||||||||||||||
| Cash flow hedges | ||||||||||||||||||||||||||||||||
| Interest rate swap agreements | $ | Interest expense, net | $ | Interest expense, net | $ | |||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | ( | Net sales | Net sales | $ | |||||||||||||||||||||||||||
| Cost of sales | ( | Cost of sales | $ | |||||||||||||||||||||||||||||
| Other (income) expense, net | $ | |||||||||||||||||||||||||||||||
| Total Cash flow hedges | $ | $ | $ | |||||||||||||||||||||||||||||
| Net investment hedges | ||||||||||||||||||||||||||||||||
| Cross-currency swap | $ | ( | Interest expense, net | $ | ( | |||||||||||||||||||||||||||
(1) Net income of $23.7 million is expected to be reclassified out of AOCI into earnings during the next 12 months
19
Perrigo Company plc - Item 1
Note 9
The classification and amount of gain/(loss) recognized in earnings on fair value and hedging relationships were as follows (in millions):
| Net Sales | Cost of Sales | Interest Expense, net | Other (Income) Expense, net | |||||||||||||||||||||||
| Three Months Ended March 30, 2024 | ||||||||||||||||||||||||||
Total amounts of income and expense line items presented on the Condensed Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded | $ | $ | $ | $ | ||||||||||||||||||||||
| Gain (loss) on cash flow hedging relationships | ||||||||||||||||||||||||||
| Foreign currency forward contracts | ||||||||||||||||||||||||||
| Amount of gain or (loss) reclassified from AOCI into earnings | $ | $ | $ | $ | ||||||||||||||||||||||
| Amount excluded from effectiveness testing recognized using a systematic and rational amortization approach | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||
| Interest rate swap agreements | ||||||||||||||||||||||||||
| Amount of gain or (loss) reclassified from AOCI into earnings | $ | $ | $ | $ | ||||||||||||||||||||||
| Three Months Ended April 1, 2023 | ||||||||||||||||||||||||||
Total amounts of income and expense line items presented on the Condensed Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded | $ | $ | $ | $ | ||||||||||||||||||||||
| Gain (loss) on cash flow hedging relationships | ||||||||||||||||||||||||||
| Foreign currency forward contracts | ||||||||||||||||||||||||||
| Amount of gain or (loss) reclassified from AOCI into earnings | $ | $ | ( | $ | $ | |||||||||||||||||||||
| Amount excluded from effectiveness testing recognized using a systematic and rational amortization approach | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest rate swap agreements | ||||||||||||||||||||||||||
| Amount of gain or (loss) reclassified from AOCI into earnings | $ | $ | $ | $ | ||||||||||||||||||||||
20
Perrigo Company plc - Item 1
Note 10
NOTE 10 - INDEBTEDNESS
Total borrowings are summarized as follows (in millions):
| March 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Term loans | |||||||||||||||||||||||
Term A Loans due April 20, 2027(1) | $ | $ | |||||||||||||||||||||
Term B Loans due April 20, 2029(1) | |||||||||||||||||||||||
| Total term loans | $ | $ | |||||||||||||||||||||
| Notes and Bonds | |||||||||||||||||||||||
| Coupon | Due | ||||||||||||||||||||||
| December 15, 2024 | $ | $ | |||||||||||||||||||||
| March 15, 2026 | |||||||||||||||||||||||
June 15, 2030(2) | |||||||||||||||||||||||
| November 15, 2043 | |||||||||||||||||||||||
| December 15, 2044 | |||||||||||||||||||||||
| Total notes and bonds | |||||||||||||||||||||||
| Other financing | |||||||||||||||||||||||
| Unamortized premium (discount), net | ( | ( | |||||||||||||||||||||
| Deferred financing fees | ( | ( | |||||||||||||||||||||
| Total borrowings outstanding | |||||||||||||||||||||||
| Current indebtedness | ( | ( | |||||||||||||||||||||
| Total long-term debt less current portion | $ | $ | |||||||||||||||||||||
(1) Discussed below collectively as the "Senior Secured Credit Facilities"
(2) The coupon rate noted above is as of March 30, 2024. This will increase from 4.650 % to 4.900 % on payments starting after June 15, 2024, following a credit rating downgrade by S&P global in the first quarter of 2024. Future interest rate adjustments are subject to a 2.0 % total cap above the original 3.150 % interest rate based on certain rating events as specified in the Note’s Supplemental Indenture No. 3, dated as of June 19, 2020, among Perrigo Finance Unlimited Company, Perrigo Company plc, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee.
Credit Agreements
On April 20, 2022, we and our indirect wholly owned subsidiary, Perrigo Investments, LLC, (the "Borrower") entered into the senior secured credit facilities, which consisted of (i) a $1.0 billion five-year revolving credit facility (the “Revolver”), (ii) a $500.0 million five-year Term Loan A facility (the “Term Loan A Facility” and the Term A Loans thereunder, the "Term A Loans"), and (iii) a $1.1 billion seven-year Term Loan B facility (the “Term Loan B Facility” and the Term B Loans thereunder borrowed on April 20, 2022, the "2022 Term B Loans” and, together with the Revolver and Term Loan A Facility, the "Senior Secured Credit Facilities"), pursuant to a Term Loan and Revolving Credit Agreement (the "Credit Agreement").
On December 15, 2023, we and the Borrower, entered into Amendment No. 1, an Incremental Assumption Agreement (the "Amendment") to the Credit Agreement. The Amendment provides for a fungible add on to the 2022 Term B Loans in an aggregate principal amount of $300.0 million (the "Incremental Term B Loans" and together with the 2022 Term B Loans, the “Term B Loans”). The terms of the Incremental Term B Loans, including pricing and maturity, are identical to the 2022 Term B Loans. The Term B Loans will mature on April 20, 2029. The net proceeds from the Incremental Term B Loans were used to settle the cash tender offer by Perrigo Finance Unlimited Company ("Perrigo Finance") for $300.0 million in aggregate principal amount of 3.900 % Senior Notes due 2024 ("2024 Notes"). The tender offer was settled on December 15, 2023, and Perrigo Finance accepted for purchase $300.0 million of the 2024 Notes and paid approximately $295.1 million in aggregate cash consideration (excluding accrued interest).
21
Perrigo Company plc - Item 1
Note 10
The Senior Secured Credit Facilities are guaranteed, along with any hedging or cash management obligations entered into with a lender, by us, and certain of our direct and indirect wholly-owned subsidiaries organized in the United States, Ireland, Belgium and England and Wales (subject to certain exceptions) (the “Guarantor Subsidiaries”). Additionally, the Borrower and the Guarantor Subsidiaries provide full and unconditional guarantees, jointly and severally, on a senior unsecured basis, of the 5.300 % Notes due 2043 issued by the Company, and the Guarantor Subsidiaries, the Company and the Borrower provide full and unconditional guarantees, jointly and severally, on a senior unsecured basis, of the 3.900 % Notes due 2024, the 4.375 % Notes due 2026, the 4.650 % Notes due 2030 and the 4.900 % Notes due 2044 issued by Perrigo Finance Unlimited Company, a wholly-owned subsidiary.
We are subject to financial covenants in the Senior Secured Credit Facilities. The agreements contain financial covenants that require the Borrower and its restricted subsidiaries to (a) not exceed a maximum first lien secured net leverage ratio of 3.00 to 1.00 at the end of each fiscal quarter and (b) not fall below a minimum interest coverage ratio of 3.00 to 1.00 at the end of each fiscal quarter, provided that such covenants apply only to the Revolver and the Term Loan A Facility. If we consummate certain qualifying acquisitions during the term of the loan, the maximum first lien secured net leverage ratio covenant would increase to 3.25 to 1.00 for such quarter and the three following fiscal quarters thereafter.
During the three months ended March 30, 2024, principal repayments of $6.3 million and $3.5 million were made on the Term Loan A Facility and Term Loan B Facility, respectively.
There were no
We are in compliance with all the covenants under our debt agreements as of March 30, 2024.
Other Financing
We have overdraft facilities available that we use to support our cash management operations. We report any balances outstanding in the above table under "Other financing". There were no
We have financing leases that are reported in the above table under "Other financing" (refer to Note 6).
NOTE 11 - EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY
Earnings per Share
A reconciliation of the numerators and denominators used in our basic and diluted earnings per share ("EPS") calculation is as follows (in millions):
| Three Months Ended | |||||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Income (loss) from continuing operations | $ | $ | ( | ||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | ( | ( | |||||||||||||||||||||
| Net income (loss) | $ | $ | ( | ||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average shares outstanding for basic EPS | |||||||||||||||||||||||
| Dilutive effect of share-based awards | |||||||||||||||||||||||
Weighted average shares outstanding for diluted EPS (1) | |||||||||||||||||||||||
(1) In the period of a net loss from continuing operations, diluted shares equal basic shares.
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Shareholders' Equity
NOTE 12 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Changes in our AOCI balances, net of tax were as follows (in millions):
| Fair Value of Derivative Financial Instruments, net of tax | Foreign Currency Translation Adjustments | Post-Employment Plan Adjustments, net of tax | Total AOCI | ||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||
| OCI before reclassifications | ( | ( | ( | ||||||||||||||||||||||||||
| Amounts reclassified from AOCI | ( | ( | |||||||||||||||||||||||||||
| Other comprehensive income (loss) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||
| Balance at March 30, 2024 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||
NOTE 13 - RESTRUCTURING CHARGES
We periodically take action to reduce redundant expenses and improve operating efficiencies. Restructuring activity includes severance, lease exit costs, asset impairments, and related consulting fees. The following reflects our restructuring activity (in millions):
| Three Months Ended | |||||||||||||||||||||||
| March 30, 2024 | |||||||||||||||||||||||
| Supply Chain Reinvention | HRA Pharma Integration | Project Energize | Other Initiatives | Total | |||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | $ | ||||||||||||||||||
| Additional charges | |||||||||||||||||||||||
| Payments | ( | ( | ( | ( | ( | ||||||||||||||||||
| Non-cash adjustments | ( | ( | |||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | ||||||||||||||||||
| Three Months Ended | ||||||||||||||
| April 1, 2023 | ||||||||||||||
| Supply Chain Reinvention | HRA Pharma Integration | Other Initiatives | Total | |||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||
| Additional charges | ||||||||||||||
| Payments | ( | ( | ( | ( | ||||||||||
| Non-cash adjustments | ||||||||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||
The charges incurred during the three months ended March 30, 2024 and April 1, 2023 were primarily associated with actions taken on supply chain restructuring, Project Energize and HRA Pharma integration activities.
Of the amount recorded during the three months ended March 30, 2024, $15.5 million was related to our CSCI segment and $16.5 million related to our CSCA segment, and $12.3 million was related to our Unallocated segment. For all segments, amounts were due primarily to Project Energize. Of the amount recorded during the three months ended April 1, 2023, $0.9 million was related to our CSCI segment, and $1.2 million was related to our CSCA
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segment, and $1.3 million was related to our Unallocated segment. For all segments, amounts were due primarily to supply chain restructuring.
There were no other material restructuring programs for the periods presented. All charges are recorded in Restructuring expense on the Condensed Consolidated Statements of Operations. The remaining $41.0 million liability for employee severance benefits and consulting fees is expected to be mostly paid within the next year.
NOTE 14 - INCOME TAXES
The effective tax rates were as follows:
| Three Months Ended | ||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | |||||||||||||||||||
| % | % | |||||||||||||||||||
The effective tax rate on the pre-tax loss for the three months ended March 30, 2024 was largely impacted by the year-to-date losses recognized in the various tax jurisdictions as well as the impacts of accounting for income taxes in interim reporting periods. As a result, a significant variation in the customary relationship between income tax expense and pre-tax book income may occur. Due to the net impact of planned inter-company intellectual property sales, estimated worldwide non-deductible expenses, as well as establishing a partial valuation allowance in the United.States, we are projecting an income tax expense for the full year ended December 31, 2024, which results in an unusually high annual effective tax rate when applied to the forecasted pre-tax income for the year.
The Organization for Economic Co-operation and Development (“OECD”), which represents a coalition of member countries, has recommended changes to numerous long-standing tax principles. In particular, the OECD’s Pillar Two initiative introduces a global per-country minimum tax of 15%. Pillar Two legislation has been enacted or substantively enacted in many of the jurisdictions in which we operate. The legislation is effective for our financial year beginning January 1, 2024. We are in scope of the enacted or substantively enacted legislation and have performed an assessment of our potential exposure to Pillar Two income taxes.
The assessment of the potential exposure to Pillar Two income taxes is based on the most recent tax filings, country-by-country reporting and financial statements for our constituent entities. Based on the assessment, the Pillar Two effective tax rates in most of the jurisdictions in which we operate are above 15%. However, there are a limited number of jurisdictions where the transitional safe harbor reliefs do not apply, and the Pillar Two effective tax rate is below 15%. We do not expect a material exposure to Pillar Two income taxes in those jurisdictions.
Internal Revenue Service Audits of Perrigo Company, a U.S. Subsidiary
Perrigo Company, our U.S. subsidiary ("Perrigo U.S."), is engaged in a series of tax disputes in the U.S. relating primarily to transfer pricing adjustments including income in connection with the purchase, distribution, and sale of store-brand OTC pharmaceutical products in the United States, including the heartburn medication omeprazole. On August 27, 2014, we received a statutory notice of deficiency from the Internal Revenue Service ("IRS") relating to our fiscal tax years ended June 27, 2009, and June 26, 2010 (the “2009 tax year” and “2010 tax year”, respectively). On April 20, 2017, we received a statutory notice of deficiency from the IRS for the years ended June 25, 2011 and June 30, 2012 (the “2011 tax year” and “2012 tax year”, respectively). Specifically, both statutory notices proposed adjustments related to the offshore reporting of profits on sales of omeprazole in the United States resulting from the assignment of an omeprazole distribution contract to an Israeli affiliate. In addition to the transfer pricing adjustments, which applied to all four tax years, the statutory notice of deficiency for the 2011 and 2012 tax years included adjustments requiring the capitalization and amortization of certain legal expenses that were deducted when paid or incurred in defending against certain patent infringement lawsuits related to Abbreviated New Drug Applications ("ANDAs") filed with a Paragraph IV Certification.
We do not agree with the audit adjustments proposed by the IRS in either of the notices of deficiency. We paid the assessed amounts of tax, interest, and penalties set forth in the statutory notices and timely filed claims for refund on June 11, 2015 for the 2009 and 2010 tax years, and on June 7, 2017, for the 2011 and 2012 tax years. On August 15, 2017, following disallowance of such refund claims, we timely filed a complaint in the United States
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District Court for the Western District of Michigan seeking refunds of tax, interest, and penalties of $27.5 million for the 2009 tax year, $41.8 million for the 2010 tax year, $40.1 million for the 2011 tax year, and $24.7 million for the 2012 tax year, for a total of $134.1 million, plus statutory overpayment interest thereon from the dates of payment. The amounts sought in the complaint for the 2009 and 2010 tax years were recorded as deferred charges in Other non-current assets on our balance sheet during the three months ended March 28, 2015, and the amounts sought in the complaint for the 2011 and 2012 tax years were recorded as deferred charges in Other non-current assets on our balance sheet during the three months ended July 1, 2017.
A bench trial was held during the period May 25, 2021 to June 7, 2021 for the refund case in the United States District Court for the Western District of Michigan. The total amount of cumulative deferred charge that we are seeking to receive in this litigation is approximately $113.3 million, which reflects the impact of conceding that Perrigo U.S. should have received a 5.24 % royalty on all omeprazole sales. That concession was previously paid and is the subject of the above refund claims. The issues outlined in the statutory notices of deficiency described above are continuing in nature, and the IRS will likely carry forward the adjustments set forth therein as long as the OTC medication is sold, in the case of the omeprazole issue, and for all post-2012 Paragraph IV filings that trigger patent infringement suits, in the case of the ANDA issue. Post-trial briefings were completed on September 24, 2021 and the case is now fully submitted for the court’s decision. On April 30, 2021, we filed a Notice of New Authority in our refund case in the Western District of Michigan alerting the court to a United States Tax Court decision in Mylan v. Comm'r that ruled in favor of the taxpayer on nearly identical ANDA issues as we have before the court. On January 28, 2022, the IRS filed a Notice of Appeal with the United States Court of Appeals of the Third Circuit to appeal the United States Tax Court's decision in Mylan v. Comm'r. Briefing to the appellate court was completed during 2022, oral argument was held before the Third Circuit on January 12, 2023, and on July 27, 2023, the Third Circuit Court affirmed the decision of the Tax Court. On August 1, 2023, we filed a Notice of New Authority in our refund case in the Western District of Michigan alerting the court to the Third Circuit Court decision in Mylan v. Comm’r that ruled in favor of the taxpayer on nearly identical ANDA issues that we have before the court. On August 22, 2022, the parties filed a Notice of New Authority in the refund case alerting the court to a United States Court of Federal Claims decision in Actavis Laboratories v. United States that also ruled in favor of the taxpayer on the ANDA issues. The government appealed the Actavis Laboratories decision to the United States court of Appeals for the Federal Circuit in December of 2022; briefing to the appellate court has been completed and the case is awaiting oral argument.
On January 13, 2021, the IRS issued a 30-day letter and Revenue Agent's Report ("RAR") with respect to its audit of our fiscal tax years ended June 29, 2013, June 28, 2014, and June 27, 2015. The 30-day letter proposed, among other modifications, transfer pricing adjustments in connection with the distribution of omeprazole in the aggregate amount of $141.6 million and ANDA-related adjustments in the aggregate amount of $21.9 million. The 30-day letter also set forth adjustments described in the next two paragraphs. We timely filed a protest to the 30-day letter for those additional adjustments but noting that due to the pending refund litigation described above, IRS Appeals would not consider the merits of the omeprazole or ANDA matters. We believe that we should prevail on the merits on both carryforward issues and have reserved for taxes and interest payable on the 5.24 % deemed royalty on omeprazole through the tax year ended December 31, 2018. Beginning with the tax year ended December 31, 2019, we began reporting income commensurate with the 5.24 % deemed royalty. We have not reserved for the ANDA-related issue described above. While we believe we should prevail on the merits of this case, the outcome remains uncertain. If our litigation position on the omeprazole issue is not sustained, the outcome for the 2009–2012 tax years could range from a reduction in the refund amount to denial of any refund. In addition, we expect that the outcome of the refund litigation could effectively bind future tax years. In that event, an adverse ruling on the omeprazole issue could have a material impact on subsequent periods, with additional tax liability in the range of $25.0 million to $124.0 million, not including interest and any applicable penalties.
The 30-day letter for the 2013-2015 tax years also proposed to reduce Perrigo U.S.'s deductible interest expense for the 2014 tax year and the 2015 tax year on $7.5 billion in certain intercompany debts owed by it to Perrigo Company plc. The debts were incurred in connection with the 2013 Elan merger transaction in 2013. On May 7, 2020, the IRS issued a Notice of Proposed Adjustment ("NOPA") capping the interest rate on the debts for U.S. federal tax purposes at 130.0 % of the Applicable Federal Rate ("AFR") (a blended rate reduction of 4.0 % per annum) on the stated ground that the loans were not negotiated on an arms-length basis. The May 7, 2020 NOPA proposed a reduction in gross interest expense of approximately $414.7 million for tax years 2014 and 2015. On January 13, 2021, we received a RAR, together with the 30-day letter, requiring our filing of a written protest to request IRS Appeals consideration. The protest was timely filed with the IRS on February 26, 2021. On January 20,
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2022, the IRS responded to our protest with its rebuttal in which it revised its position on this interest rate issue by reasserting that implicit parental support considerations are necessary to determine the arm's length interest rates and proposed revised interest rates that are higher than the interest rates proposed under its 130.0 % of AFR assertion. The blended interest rate proposed by the IRS rebuttal was 4.36 %, an increase from the blended interest rate in the RAR of 2.57 % but lower than the stated blended interest rate of the loans of 6.8 %. An IRS Appeals conference for the interest rate issue was held during March 7, 2023 through March 9, 2023. On May 5, 2023, we finalized an agreement with IRS Appeals resulting in settlement of the May 7, 2020 NOPA of $153.4 million of gross interest expense reduction for the 2014-2015 tax years. This implies a blended interest rate of 5.44 %. In addition, based on the above agreement with IRS Appeals, we will apply similar adjustments for all remaining tax years through 2018. On December 20, 2023, the IRS Examination Team confirmed that the interest rates agreed with IRS Appeals for the 2014-2015 tax years will be applied to the future tax years through 2018. In the second and fourth quarters of fiscal year 2023 we adjusted our previously established reserves related to this matter to account for the agreed reduction of the interest rates. On March 28, 2024, we received a Notice of Assessment and on April 10, 2024, subsequent to the quarter end, we made the settlement payment.
On December 2, 2021, the IRS commenced an audit of our federal income tax returns for the tax years ended December 31, 2015, through December 31, 2019.
Internal Revenue Service Audit of Athena Neurosciences, Inc., a U.S. Subsidiary
On December 22, 2016, we received a NOPA for the year ended December 31, 2011, denying the deductibility of settlement costs incurred in 2011 by Athena's parent company Elan Pharmaceuticals, Inc. ("EPI") related to illegal marketing of Zonegran by EPI's employees in the United States raised in a Qui Tam action under the U.S. False Claims Act. We strongly disagreed with the IRS' position on this issue. Because we believed that any concession on this issue in Appeals would be contrary to our evaluation of the issue and to avoid double taxation of the same income in the United States and Ireland, we pursued our remedies under the Mutual Agreement Procedure ("MAP") of the U.S.-Ireland Income Tax Treaty to alleviate double taxation. On October 20, 2020, we requested Competent Authority assistance and the request was accepted. This issue remains pending in the MAP and is being considered by the U.S. and Irish Competent Authorities.
Summary
Although we believe that our tax estimates are reasonable and that we prepare our tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audit and any related litigation could be materially different from our estimates or from our historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments.
Based on the final resolution of tax examinations, judicial or administrative proceedings, changes in facts or law, expirations of statute of limitations in specific jurisdictions or other resolutions of, or changes in, tax positions - one or more of which may occur within the next twelve months - it is reasonably possible that unrecognized tax benefits for certain tax positions taken on previously filed tax returns may change materially from those recorded as of March 30, 2024. However, we are not able to estimate a reasonably possible range of how these events may impact our unrecognized tax benefits in the next twelve months.
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NOTE 15 - CONTINGENCIES
In view of the inherent difficulties of predicting the outcome of various types of legal proceedings, we cannot determine the ultimate resolution of the matters described below. We establish reserves for litigation and regulatory matters when losses associated with the claims become probable and the amounts can be reasonably estimated. The actual costs of resolving legal matters may be substantially higher or lower than the amounts reserved for those matters. For matters where the likelihood or extent of a loss is not probable or cannot be reasonably estimated as of March 30, 2024, we have not recorded a loss reserve. If certain of these matters are determined against us, there could be a material adverse effect on our financial condition, results of operations, or cash flows. We currently believe we have valid defenses to the claims in these lawsuits and intend to defend these lawsuits vigorously regardless of whether or not we have a loss reserve. Other than what is disclosed below, we do not expect the outcome of the litigation matters to which we are currently subject to, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations, or cash flows.
Price-Fixing Lawsuits Related to the Company's Former Rx Business
Beginning in 2016, the Company, along with other manufacturers, was named as a defendant in lawsuits in the United States and Canada generally alleging anticompetitive conduct with respect to the sale of generic drugs by the Company’s former Rx business. The complaints – which have been filed by putative classes of direct purchasers, end payors, and indirect resellers, as well as individual direct and indirect purchasers and certain cities and counties – allege a conspiracy to fix, maintain, stabilize, and/or raise prices, rig bids, and allocate markets or customers for various generic drugs in violation of federal and state antitrust and consumer protection laws. While most of the class complaints involve alleged single-drug conspiracies, the three putative classes and many of the opt out plaintiffs have each filed an over-arching conspiracy complaint alleging that Perrigo and other manufacturers (and some individuals) entered into an “overarching conspiracy” that involved allocating customers, rigging bids, and raising, maintaining, and fixing prices for various products. The vast majority of the lawsuits described in this paragraph have been consolidated in the In re Generic Pharmaceuticals Pricing Antitrust Litigation multidistrict litigation ("MDL") MDL No. 2724 (United States District Court for Eastern District of Pennsylvania).
The Court has designated three sets of cases to proceed as "bellwethers," meaning that they will proceed on a more expedited basis than the other cases in the MDL. Those cases are (a) class actions alleging "single drug" conspiracies involving Clobetasol and Clomipramine; and (b) the third Complaint filed by the State Attorneys General alleging an overarching conspiracy concerning various topical products (described below). Perrigo was initially named as a defendant in the Clobetasol class bellwether cases, but the classes voluntarily dismissed their claims against Perrigo relating to “single drug” conspiracies involving Clobetasol in May 2023. Discovery closed in the bellwether cases on October 2, 2023. Summary judgment motions in the State bellwether case are due September 23, 2024. No trial dates have been set for any of the bellwether cases, or any of the other cases in the MDL.
State Attorney General Complaint
On June 10, 2020, the Connecticut Attorney General’s office filed a lawsuit on behalf of Connecticut and 50 other states and territories against Perrigo, 35 generic pharmaceutical manufacturers, and certain individuals (including two former Perrigo employees), alleging an overarching conspiracy to allocate customers and/or fix, raise, or stabilize prices of eighty products. This case is included among the “bellwether cases” designated to follow the expedited schedule described above. On April 19, 2024, this case was remanded from the MDL and transferred to the District of Connecticut. No trial date has been set for this case.
Canadian Class Action Complaint
In June 2020, an end payor filed a class action in Ontario, Canada against Perrigo and 29 manufacturers alleging an overarching conspiracy to allocate customers and/or fix, raise or stabilize prices of dozens of products, most of which were neither made nor sold by Perrigo's former Rx business. The product conspiracies allegedly involving Perrigo focus on the same products as those involved in other MDL complaints naming Perrigo: Clobetasol, Desonide, Econazole, and Nystatin. In December 2020, Plaintiffs amended their complaint to add additional claims based on the State Attorney General Complaint of June 2020.
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Hospitals Complaint
On June 30, 2023, a group of 150 hospitals filed a complaint against Perrigo and 35 other generic drug manufacturers alleging a conspiracy to fix, raise, or stabilize prices of 228 products. Perrigo's former Rx business made and sold 33 of these products. Most of the product conspiracies allegedly involving Perrigo focus on products that are the same as the products involved in other MDL complaints naming Perrigo. This case was transferred to the MDL on September 15, 2023 for all pre-trial proceedings.
At this stage, we cannot reasonably estimate the outcome of the liability if any, associated with the claims listed above. We intend to defend each of these lawsuits vigorously.
Self-Insured Employer Complaint
On April 4, 2024, nine corporate employers with self-insured health and benefit plans filed a complaint against Perrigo and 35 other generic drug manufacturers alleging a conspiracy to fix, raise, or stabilize prices of scores of generic drug products, most of which were neither made nor sold by Perrigo. The allegations in this complaint, and the products at issue, parallel the allegations in other complaints in the MDL. This case is in the process of being transferred into the MDL for pretrial proceedings.
At this stage, we cannot reasonably estimate the outcome of the liability if any, associated with the claims listed above. We intend to defend each of these lawsuits vigorously.
Securities Litigation
In the United States (cases related to events in 2015-2017)
Beginning in May 2016, purported class action complaints were filed against the Company and our former CEO, Joseph Papa, in the U.S. District Court for the District of New Jersey (Roofers’ Pension Fund v. Papa, et al.) purporting to represent a class of shareholders for the period from April 21, 2015 through May 11, 2016, inclusive. The original complaint alleged violations of federal securities laws in connection with the actions taken by us and the former executive to defend against the unsolicited takeover bid by Mylan in the period from April 21, 2015 through November 13, 2015. The plaintiff also alleged that the defendants provided inadequate disclosure concerning alleged business developments during the alleged class period including integration problems related to the Omega acquisition.
The operative complaint is the first amended complaint filed on June 21, 2017, and named as defendants us and 11 current or former directors and officers of Perrigo (Mses. Judy Brown, Laurie Brlas, Jacqualyn Fouse, Ellen Hoffing, and Messrs. Joe Papa, Marc Coucke, Gary Cohen, Michael Jandernoa, Gerald Kunkle, Herman Morris, and Donal O’Connor). The amended complaint alleges violations of federal securities laws arising out of the actions taken by us and the former directors and executives to defend against the unsolicited takeover bid by Mylan in the period from April 21, 2015 through November 13, 2015 and the allegedly inadequate disclosure throughout the entire class period related to the business developments during that longer period (April 2015 to May 2017) including purported integration problems related to the Omega acquisition, alleges incorrect reporting of organic growth at the Company and at Omega, alleges price fixing activities with respect to six generic prescription pharmaceuticals, and alleges improper accounting for the Tysabri® royalty stream. During 2017, the defendants filed motions to dismiss, which the plaintiffs opposed. On July 27, 2018, the court issued an opinion and order granting the defendants’ motions to dismiss in part and denying the motions to dismiss in part. The court dismissed without prejudice defendants Laurie Brlas, Jacqualyn Fouse, Ellen Hoffing, Gary Cohen, Michael Jandernoa, Gerald Kunkle, Herman Morris, Donal O’Connor, and Marc Coucke. The court also dismissed without prejudice claims arising from the Tysabri® accounting issue described above and claims alleging incorrect disclosure of organic growth described above. The defendants who were not dismissed are the Company, Joe Papa, and Judy Brown. The claims (described above) that were not dismissed relate to the integration issue regarding the Omega acquisition, the defense against the Mylan tender offer, and the alleged price fixing activities with respect to six generic prescription pharmaceuticals. The defendants who remain in the case (us, Mr. Papa, and Ms. Brown) have filed answers denying liability.
On November 14, 2019, the court granted the lead plaintiffs’ motion and certified three classes for the case: (i) all those who purchased shares between April 21, 2015 through May 2, 2017 inclusive on a U.S. exchange and were
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damaged thereby; (ii) all those who purchased shares between April 21, 2015 through May 2, 2017 inclusive on the Tel Aviv exchange and were damaged thereby; and (iii) all those who owned shares as of November 12, 2015 and held such stock through at least 8:00 a.m. on November 13, 2015 (whether or not a person tendered shares in response to the Mylan tender offer) (the "tender offer class"). Plaintiffs' counsels sent notices during 2020 to the alleged classes.
The parties took discovery from 2018 through 2020. After discovery ended, defendants filed motions for summary judgement and to exclude plaintiffs' experts, which were fully briefed. On August 17, 2023, the court granted summary judgment to Ms. Brown on all claims and dismissed her from the case; the court granted summary judgment in part to Mr. Papa terminating the claim against him that he made false statements with respect to alleged collusive pricing at the Generic Rx business. The court did not grant summary judgment on statements made about the integration of Omega during 2015. Thereafter, parties engaged in court-ordered settlement conferences.
On April 5, 2024, the class plaintiffs filed papers seeking Court approval of a settlement between the alleged classes and the defendants for $97 million. Perrigo and the remaining individual defendant agreed to the proposed settlement without any concession of liability or wrongdoing. Because this is a settlement of a class action lawsuit, Court oversight and approval is required. On April 23, 2024, the Court issued an Order of Preliminary Approval of the proposed settlement. A hearing on final approval of the proposed settlement is set for September 5, 2024. If the Court issues a Final Approval Judgment and Order after the final approval hearing, the case will be settled and terminated as to Perrigo, its co-defendant, and other individuals who previously had been named as defendants. We recorded an additional loss provision of $34 million during the quarter as a result of the pending settlement. The expense is presented within Other operating expense (income), net on the Condensed Consolidated Statements of Operations for the three months ended March 30, 2024.
In addition to the class action, the following opt-out cases have been filed against us, and in some cases, Mr. Papa and Ms. Brown. We intend to defend these lawsuits vigorously. These cases in the New Jersey federal court currently are stayed pending further developments in the Roofers' case (discussed above). We anticipate that one or more of the opt-out plaintiffs will take a position that the settlement of the Roofer’s case does not have any direct effect on the opt out cases discussed below. The following lawsuits contain factual allegations and claims that are similar to some or all of the factual allegations and claims in the class actions, but involve different evidence, expert witnesses, and theories of liability:
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| Case | Date Filed | ||||
| Carmignac Gestion, S.A. v. Perrigo Company plc, et al. | 11/1/2017 | ||||
| First Manhattan Co. v. Perrigo Company plc, et al. | 2/16/2018; amended 4/20/2018 | ||||
| Nationwide Mutual Funds, et al. v. Perrigo Company plc, et al. | 10/29/2018 | ||||
| Schwab Capital Trust, et al. v. Perrigo Company plc, et al. | 1/31/2019 | ||||
| Aberdeen Canada Funds -- Global Equity Fund, et al. v. Perrigo Company plc, et al. | 2/22/2019 | ||||
| Principal Funds, Inc., et al. v. Perrigo Company plc, et al. | 3/5/2020 | ||||
| Kuwait Investment Authority, et al. v. Perrigo Company plc, et al. | 3/31/2020 | ||||
| Mason Capital L.P., et al. v. Perrigo Company plc, et al. | 1/26/2018 | ||||
Pentwater Equity Opportunities Master Fund Ltd., et al. v. Perrigo Company plc, et al. | 1/26/2018 | ||||
| WCM Alternatives: Event-Drive Fund, et al. v. Perrigo Co., plc, et al. | 11/15/2018 | ||||
| Hudson Bay Master Fund Ltd., et al. v. Perrigo Co., plc, et al. | 11/15/2018 | ||||
| Discovery Global Citizens Master Fund, Ltd., et al. v. Perrigo Co. plc, et al. | 12/18/2019 | ||||
| York Capital Management, L.P., et al. v. Perrigo Co. plc, et al. | 12/20/2019 | ||||
| Burlington Loan Management DAC v. Perrigo Co. plc, et al. | 2/12/2020 | ||||
| Universities Superannuation Scheme Limited v. Perrigo Co. plc, et al. | 3/2/2020 | ||||
| Harel Insurance Company, Ltd., et al. v. Perrigo Company plc, et al. | 2/13/2018 | ||||
| TIAA-CREF Investment Management, LLC., et al. v. Perrigo Company plc, et al. | 4/20/2018 | ||||
| Sculptor Master Fund (f/k/a OZ Master Fund, Ltd.), et al. v. Perrigo Company plc, et al. | 2/6/2019 | ||||
| BlackRock Global Allocation Fund, Inc., et al. v. Perrigo Co. plc, et al. | 4/21/2020 | ||||
| Starboard Value and Opportunity C LP, et al. v. Perrigo Company plc, et al. | 2/25/2021 | ||||
In June 2020, three Highfields Capital entities filed a lawsuit in Massachusetts State Court with factual allegations that generally were similar to the factual allegations in the Amended Complaint in the Roofers' Pension Fund case described above, except that the Highfields plaintiffs did not include allegations about alleged collusive pricing of generic prescription drugs, and alleged Massachusetts state law claims under the Massachusetts Unfair Business Methods Law (chapter 93A) and Massachusetts common law claims of tortious interference with prospective economic advantage, common law fraud, negligent misrepresentation, and unjust enrichment. In December 2021, the Massachusetts State Court granted Defendants’ motion to dismiss in part and denied it in part. Defendants filed their answers in January 2022 denying liability. This is the only opt out case that has not been stayed during the summary judgment proceedings in the New Jersey federal court. The fact discovery phase in this case ended in March 2024 and expert discovery is underway (including discovery related to some factual allegations that were not part of the discovery in the actions in New Jersey federal court). The Court's current scheduling order provides for the end of expert discovery in August 2024, and a post-discovery court conference in September 2024. We intend to defend the lawsuit vigorously.
In Israel (cases related to events in 2015-2017)
On June 28, 2017, a plaintiff filed a complaint in Tel Aviv District Court styled Israel Elec. Corp. Employees’ Educ. Fund v. Perrigo Company plc, et al. The lead plaintiff seeks to represent a class of shareholders who purchased Perrigo stock on the Tel Aviv exchange during the period from April 24, 2015 through May 3, 2017 and also a claim for those that owned shares on the final day of the Mylan tender offer (November 13, 2015). The complaint names as defendants the Company, Ernst & Young LLP (the Company’s auditor), and 11 current or former directors and officers of Perrigo (Mses. Judy Brown, Laurie Brlas, Jacqualyn Fouse, Ellen Hoffing, and Messrs. Joe Papa, Marc Coucke, Gary Cohen, Michael Jandernoa, Gerald Kunkle, Herman Morris, and Donal O’Connor). The complaint alleges violations under Israeli securities laws that are similar to U.S. Securities Exchange Act sections 10(b) (and Rule 10b‑5) and 14(e) against all defendants and 20(a) control person liability against the 11 individuals or, in the alternative, under other Israeli securities laws. In general, the allegations in Israel are similar to the factual allegations in the Roofers' Pension Fund case in the U.S. as described above. The plaintiff indicates an initial, preliminary class damages estimate of 2.7 billion NIS (approximately $760.0 million at 1 NIS = 0.28 cents). After the other two cases filed in Israel were voluntarily dismissed, the plaintiff in this case agreed to stay this case pending
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the outcome of the Roofers’ Pension Fund case in the U.S. (described above). The Israeli court approved the stay, and this case is now stayed. We intend to defend the lawsuit vigorously.
In Israel (case related to Irish Tax events)
On December 31, 2018, a shareholder filed an action against the Company, our former CEO Murray Kessler, and our former CFO Ronald Winowiecki in Tel Aviv District Court (Baton v. Perrigo Company plc, et. al.). The case is a securities class action brought in Israel making similar factual allegations for the same period as those asserted in a securities class action case (for those who purchased on a U.S. exchange) in New York federal court in which the settlement received final approval in February 2022. The Baton case alleges that persons who purchased securities through the Tel Aviv stock exchange and suffered damages can assert claims under Israeli securities law that will follow the liability principles of Sections 10(b) and 20(a) of the U.S. Securities Exchange Act. The plaintiff does not provide an estimate of class damages. Since 2019, the court granted several requests by Perrigo to stay the proceedings pending the resolution of proceedings in the New York federal court. During 2022, the case was reassigned to a newly-appointed judge. After the settlement of the U.S. case in New York federal court, Perrigo's counsel informed the Israeli Court of the final approval of the settlement of the U.S. case. The parties then sought further stays of the case while they attempted mediation, which the Court granted. In April 2023, the parties reported to the Court that the mediation had led to a preliminary agreement on settlement. The parties submitted settlement papers to the Court on November 17, 2023. The Court set a deadline of early January 2024 for objections to the proposed class settlement, and a hearing on the motion to certify the settlement is scheduled for May 15, 2024.
Other Matters
Talcum Powder
The Company has been named, together with other manufacturers, in product liability lawsuits in a variety of state courts alleging that the use of body powder products containing talcum powder causes mesothelioma and lung cancer due to the presence of asbestos. All but one of these cases involve legacy talcum powder products that have not been manufactured by the Company since 1999. One of the pending actions involves a current prescription product that contains talc as an excipient. As of March 30, 2024, the Company has been named in approximately 110 individual lawsuits seeking compensatory and punitive damages. The Company has several defenses and intends to aggressively defend these lawsuits. Trials for these lawsuits are currently scheduled throughout 2024 and 2025.
Ranitidine
After regulatory bodies announced worldwide that ranitidine may potentially contain N-nitrosodimethylamine ("NDMA"), the Company promptly began testing its externally-sourced ranitidine API and ranitidine-based products. On October 8, 2019, the Company halted shipments of the product based upon preliminary results and on October 23, 2019, the Company made the decision to conduct a voluntary retail market withdrawal.
In February 2020, the resulting actions involving Zantac® and other ranitidine products were transferred for coordinated pretrial proceedings to a Multi-District Litigation ("MDL") (In re Zantac®/Ranitidine Products Liability Litigation, MDL No. 2924) in the U.S. District Court for the Southern District of Florida. The Company successfully moved to dismiss the first set of Master Complaints in the MDL, which the Court granted without prejudice.
After the filing of Amended Complaints, on June 30, 2021, the Court then dismissed all claims against the retail and distributor defendants with prejudice and on July 8, 2021, the Court dismissed all claims against the Company with prejudice. Appeals of these dismissal orders to the U.S. Court of Appeals for the 11th Circuit have been filed, as well as several state level claims related to the theories advanced in the MDL litigation. The Company will continue to vigorously defend each of these lawsuits. In December 2022 the Court granted in full the brand defendants' Daubert motions, finding no scientific causation, and in turn granted summary judgment dismissing the actions with prejudice. The Court later ruled that it was appropriate to apply the same standards to the retail and distributor defendants as well as the generic defendants, and the Court thereby ruled that its Daubert decision applied equally to these defendants as well. Appeals of these orders have been filed to the 11th Circuit.
Excepting the MDL due to the nature of the multiple dismissals as described above, as of March 30, 2024, the Company has been named in approximately 190 personal injury lawsuits, primarily in the state courts of California
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Perrigo Company plc - Item 1
Note 15
and Pennsylvania. The Company is named in these lawsuits with manufacturers of the national brand Zantac® and other manufacturers of ranitidine products, as well as distributors, repackagers, and/or retailers. The Company believes that it has strong defenses to such claims based on a significant body of scientific evidence, and pursuant to the doctrine of federal preemption. As noted above, the Company has won multiple motions to dismiss in the MDL, most recently in Illinois where the Circuit Court granted in full the Company's motions to dismiss based on federal preemption, as well as additional state court actions in California and Maryland. The Company has also been dismissed from additional state court actions in Ohio, New York and New Jersey.
The Company, along with other manufacturers has also been named in a Complaint brought by the New Mexico Attorney General based on nuisance and negligence theories. The Company's motions to dismiss the action were denied. The Company will continue to vigorously defend this lawsuit.
Some of the Company’s retailer customers are seeking indemnity from the Company for a portion of their defense costs and liability relating to these cases.
Acetaminophen
In October 2022, the Judicial Panel on Multidistrict Litigation consolidated a number of pending actions filed in various federal courts alleging that prenatal exposure to acetaminophen is purportedly associated with the development of autism spectrum disorder (“ASD”) and attention-deficit/hyperactivity disorder (“ADHD”). The acetaminophen MDL is styled In re: Acetaminophen – ASD/ADHD Products Liability Litigation (MDL No. 3043) and is pending before the U.S. District Court for the Southern District of New York. Plaintiffs in the MDL have asserted claims against Johnson & Johnson Consumer, Inc. (“JJCI”) and various retailer chains alleging that plaintiff-mothers took acetaminophen products while pregnant and that plaintiff-children developed ASD and/or ADHD as a result of prenatal exposure to these acetaminophen products. As of March 30, 2024, the Company has not been named as a defendant in any Complaints filed in the MDL. Certain of the Company’s customers have made requests regarding indemnity from the Company for a portion of their defense costs and potential liability. On December 18, 2023, the Court granted in full defendants' motions to exclude testimony of Plaintiffs' general causation expert witnesses, finding Plaintiffs presented no credible evidence of scientific causation between prenatal ingestion of acetaminophen and ASD or ADHD in children. Final judgment has been entered as to the majority of pending cases with an appeal to proceed in the Second Circuit. A small minority of cases have been exempted from the Court’s dismissal, and will be evaluated through a similar process as the larger majority later this year to determine if they can withstand scientific causation through a new expert. Currently, it is not possible to assess reliably the outcome of these cases or any potential future financial impact on the Company.
Phenylephrine
In September 2023, the FDA’s Advisory Committee on Nonprescription Drugs issued an advisory opinion calling into question the efficacy of orally administered phenylephrine (PE) containing products as a nasal decongestant. While the FDA itself has thus far taken no action in response to the Advisory Committee opinion, several putative class action lawsuits have been filed asserting various economic injury claims to consumers. On December 6, 2023, a number of the pending PE actions filed in various federal courts were consolidated into a multi-district litigation ("MDL") (In re: Oral Phenylephrine Marketing and Sales Practices Litigation, MDL No. 3089), pending before the U.S. District Court for the Eastern District of New York. A smaller group of putative class-action lawsuits alleging various PE products also were mislabeled as "Maximum Strength" were initially excluded from the consolidation, but have recently been joined to the MDL. Several individual arbitrations have also been threatened or filed with the American Arbitration Association with similar efficacy allegations.
At this time, the MDL proceedings are in the early stages. Currently, it is not possible to assess reliably the outcome of these cases or any potential future financial impact on the Company. Certain of the Company’s customers have made requests regarding indemnity from the Company for a portion of their defense costs and potential liability.
Contingencies Accruals
As a result of the matters discussed in this Note, the Company has established a loss accrual for litigation contingencies where we believe a loss to be probable and for which an amount of loss can be reasonably estimated. However, we cannot determine a reasonable estimate of the maximum possible loss or range of loss for these matters given that they are at various stages of the litigation process and each case is subject to inherent
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Perrigo Company plc - Item 1
Note 15
uncertainties of litigation. At March 30, 2024, the loss accrual for litigation contingencies reflected on the balance sheet in Other accrued liabilities was $100.9 million. The Company also recorded an insurance recovery receivable reflected on the balance sheet in Prepaid expenses and other current assets of $25.5 million related to these litigation contingencies because it believes such amount is recoverable based on communications with its insurers to date; however, the Company may erode this insurance receivable as it incurs defense costs associated with defending the matters. The Company’s management believes these accruals for contingencies are reasonable and sufficient based upon information currently available to management; however, there can be no assurance that final costs related to these contingencies will not exceed current estimates or that all of the final costs related to these contingencies will be covered by insurance. (See "Insurance Coverage Litigation," below.) In addition, we have other litigation matters pending for which we have not recorded any accruals because our potential liability for those matters is not probable or cannot be reasonably estimated based on currently available information. For those matters where we have not recorded an accrual but a loss is reasonably possible, we cannot determine a reasonable estimate of the maximum possible loss or range of loss for these matters given that they are at various stages of the litigation process and each case is subject to the inherent uncertainties of litigation.
Insurance Coverage Litigation
In May 2021, insurers on multiple policies of D&O insurance filed an action in the High Court in Dublin against the Company and multiple current and former directors and officers of the Company seeking declaratory judgments on certain coverage issues. Those coverage issues include claims that policies for periods beginning in December 2015 (the "2015 Policy" and December 2016 (the "2016 Policy"), respectively, do not have to provide coverage for the securities actions described above pending in the District of New Jersey or in Massachusetts state court concerning the events of 2015-2017. The policy for the period beginning December 2014 (the "2014 Policy") is currently providing coverage for those matters. However, if the insurers were successful, the total amount of insurance coverage available to defend such lawsuits and to satisfy any judgment or settlement costs thereunder would be limited to one policy period. The insurers’ lawsuit also challenges aspects of coverage for Krueger derivatively on behalf of nominal defendant Perrigo Company plc v. Alford et al., a prior derivative action filed in the District of New Jersey that was dismissed in August 2020, and for the counterclaims brought in the Omega arbitration proceedings. Perrigo responded on November 1, 2021; Perrigo’s defense and counterclaim included its position that the 2015 Policy and 2016 Policy also provide coverage for the underlying securities litigation matters and sought a ruling to that effect. The discovery stage of the case occurred in 2022, and a bench trial was held in mid-November 2023. In January 2024, the Court issued an opinion rejecting the insurers' position that Perrigo's insurance coverage is limited to the 2014 Policy. The Court held an additional hearing in April 2024 to hear the parties' submissions concerning under which of the 2014, 2015, and 2016 Policies Perrigo is entitled to coverage. Insurers now claim the cover is limited to the 2015 Policy year. The insurers have 28 days after the order is finalized to seek an appeal of the Court's January 2024 decision.
NOTE 16 - SEGMENT INFORMATION
The tables below show select financial measures by reporting segment (in millions):
| Total Assets | ||||||||||||||
| March 30, 2024 | December 31, 2023 | |||||||||||||
| CSCA | $ | $ | ||||||||||||
| CSCI | ||||||||||||||
| Total | $ | $ | ||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | ||||||||||||||||||||||||||||||||||
| Net Sales | Operating Income (Loss) | Intangible Asset Amortization | Net Sales | Operating Income (Loss) | Intangible Asset Amortization | ||||||||||||||||||||||||||||||
| CSCA | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| CSCI | |||||||||||||||||||||||||||||||||||
| Unallocated | ( | ( | |||||||||||||||||||||||||||||||||
| Continuing Operations Total | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||
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Perrigo Company plc - Item 2
Note 16
NOTE 17 - SUBSEQUENT EVENTS
Divestitures
On April 25, 2024, we announced a binding offer to sell our HRA Pharma Rare Diseases business ("Rare Disease") to Esteve Healthcare, S.L. ("ESTEVE") for total consideration of up to €275 million, consisting of an upfront cash payment of €190 million and up to €85 million in potential earnout payments based on the Rare Diseases business achieving certain sales milestones. Following an information and consultation process with HRA Pharma Works Council in France, Perrigo would be able to exercise the put option granted by ESTEVE and enter into a definitive agreement with ESTEVE for the sale of the Rare Diseases business. The transaction is expected to close during the third quarter of 2024.
The criteria for reporting our Rare Disease disposal group as held for sale were met after the balance sheet date, and therefore we classified the business as held and used as of March 30, 2024. The total carrying amounts of our Rare Disease Business assets and liabilities that will be disposed, excluding cash, were approximately $325.6 million and $57.2 million, respectively, as of March 30, 2024. After considering estimates for the fair value of the contingent milestones and the remaining costs to sell, we expect to recognize an impairment loss between $20 and $30 million resulting from the measurement as held for sale during the second quarter of 2024.
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Perrigo Company plc - Item 2
Executive Overview
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis ("MD&A") is intended to provide readers with an understanding of our financial condition, results of operations, and cash flows by focusing on changes in certain key measures from year to year. This MD&A is provided as a supplement to, and should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying Notes found in Item I included in this Form 10-Q, and our Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). These historical financial statements may not be indicative of our future performance. This discussion contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks referred to under “Risk Factors” in Item 1A of our 2023 Form 10-K and Part II. Item 1A of this Form 10-Q.
Perrigo Company plc was incorporated under the laws of Ireland on June 28, 2013 and became the successor registrant of Perrigo Company, a Michigan corporation, on December 18, 2013 in connection with the acquisition of Elan Corporation, plc ("Elan"). Unless the context requires otherwise, the terms "Perrigo," the "Company," "we," "our," "us," and similar pronouns used herein refer to Perrigo Company plc, its subsidiaries, and all predecessors of Perrigo Company plc and its subsidiaries.
EXECUTIVE OVERVIEW
Perrigo is a leading pure-play self-care company with more than a century of innovation and experience serving the health and wellness needs of consumers. As one of the originators of the over-the-counter ("OTC") self-care market, Perrigo has a powerful legacy and vast scale in producing high-quality self-care products through a proven ability to proactively shape its portfolio to meet the evolving needs of consumers and customers.
Perrigo provides access to trusted self-care products that can be procured without the need to visit a doctor for a prescription. Guided by our vision and purpose, our strategic goal is to create a sustainable and value accretive growth engine by 1) delivering consumer preferred brands and innovation, 2) driving category growth with our customers, 3) powering our business with our world-class quality and supply chain, including a focus on sustainability with meaningful goals to reduce greenhouse gas emissions, water, and waste, in addition to improving the recyclability of our packaging, and 4) evolving our global organization to a single operating model. Our unique competency is to deliver a blended-branded business model of branded, value and store brand product offerings that provide consumers access to self-care products across the value spectrum.
Perrigo's broad offerings are well diversified across several major product categories as well as across geographies, primarily in North America and Europe with no one product representing more than 3% of total revenue. In North America, Perrigo is the leading store brand private label provider of self-care products in many categories, including upper respiratory, nutrition and women's health, along with brands including Opill® and Merderma®. In Europe, our portfolio consists primarily of brands, including Compeed®, EllaOne®, Solpadeine®, and ACO®.
Several initiatives are anticipated to advance our self-care strategy, including the implementation of our Supply Chain Reinvention Program and Project Energize, a global investment and efficiency program. In addition, we continue to invest in other initiatives, including innovation, information systems and tools, and our people to drive consistent and sustainable results.
Our fiscal year begins on January 1 and ends on December 31. We end our quarterly accounting periods on the Saturday closest to the end of the calendar quarter, with the fourth quarter ending on December 31 of each year.
Our Segments
Our reporting and operating segments reflect the way our chief operating decision maker, who is our CEO, makes operating decisions, allocates resources and manages the growth and profitability of the Company. Our reporting and operating segments are:
•Consumer Self-Care Americas ("CSCA") comprises our consumer self-care business in the U.S. and Canada.
•Consumer Self-Care International ("CSCI") comprises our consumer self-care business outside of the U.S. and Canada, primarily in Europe and Australia.
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Perrigo Company plc - Item 2
Executive Overview
We previously had an Rx segment comprised of our generic prescription pharmaceuticals business in the U.S. and other pharmaceuticals and diagnostic businesses in Israel, which have been divested. The Rx segment was reported as Discontinued Operations in 2021, and is presented as such for all periods in this report. See Item 1. Note 3 for more information.
Recent Highlights
•On February 27, 2024, we launched Project Energize - a global investment and efficiency program to drive the next evolution of capabilities and organizational agility.
•During the first quarter, we launched Opill®, the first-ever over-the-counter oral contraceptive in the U.S., at more than 65,000 retail stores nationwide.
•On April 25, 2024, we announced a binding offer to sell our HRA Pharma Rare Diseases business ("Rare Disease") to Esteve Healthcare, S.L. ("ESTEVE") for total consideration of up to €275 million, consisting of an upfront cash payment of €190 million and up to €85 million in potential earnout payments based on the Rare Diseases business achieving certain sales milestones.
•On May 7, 2024, we announced that Svend Andersen, Executive Vice President and President, CSCI, intends to retire from the Company in December of this year. Roberto Khoury, a strong leader with more than 20 years of experience cultivating successful branded consumer products and pan-European brands, will be appointed to lead the business.
Supply Chain Reinvention Program
In 2022, we initiated our Supply Chain Reinvention Program to reduce structural costs, improve profitability and our service levels to our retail partners, and strengthen our resiliency by streamlining and simplifying our global supply chain. Through this initiative, we are reducing portfolio complexity, investing in advanced planning capabilities, diversifying sourcing, and optimizing our manufacturing assets and distribution models. We have identified a total annual run-rate potential savings opportunity by the end of fiscal year 2028 of between an estimated $200 million to $300 million per year (not including related depreciation expense on capital investments) if all facets of the Program are successfully implemented and executed. To obtain these potential benefits, we anticipate incurring aggregate costs of between $350 million to $570 million by the end of fiscal year 2028 to complete the program implementation, including capital investments, restructuring expenses, and implementation costs. A significant portion of the annual run-rate potential savings of the Program, between $150 million to $200 million per year (not including related depreciation expense on capital investments), are anticipated by the end of fiscal year 2025, along with associated potential spend of between $300 million and $450 million. Refer to Item 1. Note 13 for further details on restructuring charges.
Project Energize
Perrigo has successfully transformed into a pure-play consumer self-care company and is now embarking on the next stage of its self-care journey - evolving to One Perrigo. This evolution will create sustainable, value accretive growth through a blended-branded business model that better positions the Company to win in self-care.
As part of the Company's sustainable, value accretive growth strategy, the Company launched Project Energize - a global investment and efficiency program to drive the next evolution of capabilities and organizational agility. This three-year program is expected to produce significant benefits in the Company’s long-term business performance by enabling our One Perrigo growth strategy, increasing organizational agility and mitigating impacts from stabilizing and strengthening the infant formula business.
Project Energize was initiated in the first quarter of 2024, subject to local law and consultation requirements, and is expected to deliver an annualized pre-tax savings in the range of $140 million to $170 million by 2026. The Company expects to reinvest approximately $40 million to $60 million of these savings to drive its blended-branded business model. Restructuring and related charges associated with these actions are estimated to be in the range of $140 million to $160 million, including $20 million to $40 million in investments to enhance capabilities, and are
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Perrigo Company plc - Item 2
Executive Overview
expected to be substantially incurred by the end of 2026. Restructuring activities as part of Project Energize are expected to result in the net reduction of approximately 6% of total Perrigo roles. To date, Project Energize has achieved approximately $17 million in savings.
Market Factors and Trends
Economic Uncertainty
Current macroeconomic conditions remain very dynamic, including impacts from rising inflation and interest rates, volatile changes in foreign currency exchange rates, political unrest and legislative and regulatory changes. Any causes of market size contraction could reduce our sales or erode our operating margin and consequently reduce our net earnings and cash flows.
Our interest expense is impacted by the overall global economic and interest rate environment. We manage interest rate risk through our capital structure and the use of interest rate swaps to fix the interest rate on greater than 90% of our outstanding debt.
Inflationary Costs and Supply Chain
As the war in Ukraine continues, supply chain disruptions in specific categories such as oil, agricultural and paper based commodities continue to lead to inflationary pressures in those respective areas. Additionally, we experienced employment vacancies and attrition as the labor market negatively impacted productivity and drove the need for wage rate increases and other retention benefits. We implemented a series of actions to substantially mitigate these and other inflationary cost pressures such as strategic pricing and our Supply Chain Reinvention Program. Benefits from our actions have begun to substantially offset inflationary pressures, and the global freight constraints in availability of freight containers and truck drivers has normalized. However, future supply chain disruptions and inflationary pressures from the continuation of the war in Ukraine and the more recent events from the war in Israel are uncertain.
Infant Formula
As part of its efforts to prevent supply interruptions and risk of Cronobacter spp. illnesses associated with powdered infant formula, in March 2023, the FDA released an “Immediate National Strategy to Increase the Resiliency of the U.S. Infant Formula Market” and issued a letter to the powdered infant formula industry to share information to assist the industry in improving the microbiologic safety of powdered infant formula. In response to those changes, we made considerable investments in all our infant formula manufacturing sites, including enhanced cleaning and sanitation protocols, enhancements to our environmental monitoring programs and additional quality personnel. These changes resulted in higher costs and lower manufacturing output and production yields across our infant formula network.
As previously disclosed, the Company received a warning letter from the FDA on August 30, 2023 relating to the Perrigo Wisconsin infant formula facility, which was acquired from a third party in November 2022. While the Company worked to resolve the issues raised in the August 30 letter, on November 29, 2023, the Company received notice from the FDA of additional inspection observations relating to Perrigo Wisconsin. Consistent with the Company’s commitment to quality, the Company temporarily paused all production at that facility and conducted an extended site-wide assessment and cleaning.
The Company also bolstered its internal resources and brought in additional outside expertise to help revise, enhance and strengthen comprehensive standards and processes across our infant formula network, including in some instances, pausing production for comprehensive cleaning and infrastructure improvements. Currently, any planned large-scale manufacturing plant resets have been completed, and we are progressing the next phase of our quality enhancements.
This next phase of enhancements includes further protocol, process and procedural improvements at the site level, and we are making additional investments to upgrade infrastructure. We do not expect these continuing improvements to result in extended shutdowns beyond normal maintenance activities.
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Perrigo Company plc - Item 2
Executive Overview
We have incurred and expect to incur certain extraordinary non-recurring costs associated with the evolving U.S. infant formula regulatory landscape, including consulting and legal fees relating to the Company’s responses to the FDA and the development and institution of new protocols across our infant formula manufacturing sites, as well as other costs relating to the extended cleaning and sanitization and the pausing and restarting of production. Cash costs in 2024 to achieve this remediation plan are estimated at $35 to $45 million. We also expect higher ongoing operating costs at our infant formula manufacturing sites moving forward as we continue to implement our enhanced program with additional internal capabilities. Due to these costs and the unabsorbed overhead and depressed sales volumes resulting from these actions, infant formula results in 2024 are expected to be below 2023 levels.
War in Ukraine
The invasion of Ukraine by Russia and resulting economic and political sanctions imposed by the United States, United Kingdom, European Union, and other countries on Russia, Belarus, and occupied regions in Ukraine have negatively impacted our results from operations in the region. We currently have 67 employees working in our Ukraine subsidiary. We do not have a subsidiary or employees in Russia. We have no manufacturing facilities in either Russia or Ukraine and we previously sold products into Russia entirely through distributors. In March 2022, we halted all sales to distributors in Russia and sales in Ukraine were severely depressed. Future impacts are difficult to predict due to the high level of uncertainty related to the war's duration, evolution and resolution. If the conflict spreads or materially escalates, or economic conditions deteriorate, the impact on our business and results of operations could be material.
Israel-Hamas War
We continue to closely monitor the ongoing Israel/Hamas conflict and the social, political and economic environment in Israel and in the surrounding region to evaluate the impacts on our operations and supply chain. Israel is a global technology research and development center that plays a critical role to the global API market, as a number of key suppliers are located within Israel. The Company sources some raw materials and finished goods from suppliers in Israel for certain self-care products, including Omeprazole. Despite this situation, to date, Perrigo has confirmed that our suppliers in the region have active operations and continue to manufacture materials for us, and we have not received any reports of restrictions on imports or exports in Israel. However, there is potential for some disruption as it relates to in-country logistics, including freight. As a precaution, Perrigo has engaged alternate suppliers to help minimize a potential supply disruption. If the conflict spreads or materially escalates, or if the conflict leads to further volatility and uncertainty in financial markets or economic conditions, the impact on our business and results of operations could be material.
Foreign Exchange
We have both translation and transaction exposure to the fluctuation of exchange rates. Translation exposures relate to exchange rate impacts of measuring income statements of foreign subsidiaries that do not use the U.S. dollar as their functional currency. Transaction exposures relate to 1) the impact from input costs that are denominated in a currency other than the local reporting currency and 2) the revaluation of transaction-related working capital balances denominated in currencies other than the functional currency. Significant exchange rate fluctuations, especially in the Euro or the British Pound Sterling, have had, and could continue to have, a significant impact on our net sales, net earnings and cash flows.
RESULTS OF OPERATIONS
Currency Translation
Any currency translation effects described below represent estimates of the net differences between translation of foreign currency transactions into U.S. dollars for the three months ended March 30, 2024 at the average exchange rates for the reporting period and average exchange rates for the three months ended April 1, 2023.
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Perrigo Company plc - Item 2
Consolidated
CONSOLIDATED FINANCIAL RESULTS
| Three Months Ended | ||||||||||||||
| (in millions, except percentages) | March 30, 2024 | April 1, 2023 | ||||||||||||
| Net sales | $ | 1,082.1 | $ | 1,181.7 | ||||||||||
| Gross profit | $ | 357.7 | $ | 413.8 | ||||||||||
| Gross profit % | 33.1 | % | 35.0 | % | ||||||||||
| Operating income | $ | (55.2) | $ | 48.5 | ||||||||||
Operating income % | (5.1) | % | 4.1 | % | ||||||||||
Net sales decreased $99.6 million, or 8.4%, due primarily to:
•$81.4 million decrease, or 7.0%, due primarily to lower net sales in U.S. Nutrition driven by actions to augment and strengthen the infant formula network and purposeful SKU prioritization actions to enhance margins as part of the Company's Supply Chain Reinvention Program across most product categories. These factors were partially offset by strategic pricing actions and new products. The primary product category drivers are the previously discussed issues relating to infant formula in Nutrition, and lower sales in Upper Respiratory and Oral Care from lost distribution, partially offset by growth in Women's Health and Skincare; and
•$15.3 million decrease from exited product lines.
Operating income decreased $103.7 million, or 213.8%, due primarily to:
•$56.1 million decrease in gross profit driven by lower manufacturing productivity within U.S. Nutrition driven by actions to augment and strengthen the infant formula network, lower volume, and higher cost of goods sold inflation primarily in CSCI, partially offset by strategic pricing actions, higher margin new products and savings achieved through our restructuring programs. Gross profit as a percentage of net sales decreased 190 basis points compared to the prior year due to the same factors that drove gross profit partially offset by benefits from purposeful SKU prioritization actions in CSCA.
•$47.6 million increase in operating expenses due primarily to increased expenses associated with an additional provision for securities litigation contingencies and increased restructuring expenses; which were partially offset by decreased selling expenses and savings from Project Energize.
CONSUMER SELF-CARE AMERICAS FINANCIAL RESULTS
| Three Months Ended | |||||||||||||||||||||||
| (in millions, except percentages) | March 30, 2024 | April 1, 2023 | |||||||||||||||||||||
| Net sales | $ | 644.1 | $ | 763.7 | |||||||||||||||||||
| Gross profit | $ | 153.5 | $ | 210.8 | |||||||||||||||||||
| Gross profit % | 23.8 | % | 27.6 | % | |||||||||||||||||||
| Operating income | $ | 15.7 | $ | 83.2 | |||||||||||||||||||
| Operating income % | 2.4 | % | 10.9 | % | |||||||||||||||||||
Net sales decreased $119.6 million, or 15.7%, due primarily to:
•$110.2 million decrease, or 14.6%, due primarily to lower net sales in U.S. Nutrition driven by actions to augment and strengthen the infant formula network, purposeful SKU prioritization actions to enhance margins as part of the Company's Supply Chain Reinvention program across most product categories, reduced inventories at retail customers resulting in lower net sales of store brand offerings and lower distribution in Oral Care. These factors were partially offset by growth in e-commerce and new products, including the launch of Opill® in the U.S.; and
•$9.4 million decrease from exited product lines.
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Perrigo Company plc - Item 2
CSCA
CSCA net sales by product category were as follows:
| Sales | Three Months Ended | ||||||||||||||||||||||
(in millions, except percentages)(1) | March 30, 2024 | April 1, 2023 | $ Change | % Change | |||||||||||||||||||
| Upper Respiratory | $ | 130.3 | $ | 153.7 | $ | (23.4) | (15.2) | % | |||||||||||||||
| Digestive Health | 122.2 | 124.0 | (1.8) | (1.5) | % | ||||||||||||||||||
| Nutrition | 90.6 | 138.5 | (47.9) | (34.6) | % | ||||||||||||||||||
| Pain and Sleep-Aids | 82.6 | 103.4 | (20.8) | (20.1) | % | ||||||||||||||||||
| Healthy Lifestyle | 71.3 | 73.4 | (2.1) | (2.9) | % | ||||||||||||||||||
| Oral Care | 64.7 | 83.3 | (18.6) | (22.3) | % | ||||||||||||||||||
| Skin Care | 49.6 | 69.8 | (20.2) | (28.9) | % | ||||||||||||||||||
| Women's Health | 27.2 | 12.3 | 14.9 | 121.1 | % | ||||||||||||||||||
| Vitamins, Minerals, and Supplements ("VMS") | 4.2 | 4.5 | (0.3) | (6.7) | % | ||||||||||||||||||
| Other CSCA | 1.4 | 0.8 | 0.6 | 75.0 | % | ||||||||||||||||||
| Total CSCA | $ | 644.1 | $ | 763.7 | $ | (119.6) | (15.7)% | ||||||||||||||||
(1) We updated our global reporting product categories as a result of legacy Rx sales being moved out of Other CSCA and into respective categories. These product categories have been adjusted retroactively to reflect the changes and have no impact on historical financial position, results of operations, or cash flows.
Sales in each category were driven primarily by:
•Upper Respiratory: Net sales of $130.3 million decreased 15.2% due primarily to inventory de-stocking at U.S. retail customers, resulting in lower net sales of cough cold and allergy products, in addition to strong net sales in the prior year quarter. The category was also impacted by a 2.7 percentage points reduction from exited product lines and portfolio optimization actions;
•Digestive Health: Net sales of $122.2 million decreased 1.5% as higher volumes of laxative products, including Polyethylene Glycol, were more than offset by a 5.3 percentage points reduction from portfolio optimization actions;
•Nutrition: Net sales of $90.6 million decreased 34.6% due primarily to lower shipments to customers as the company works through its infant formula plant remediation plans, in addition to a 1.8 percentage points decline from exited product lines in the category;
•Pain and Sleep-aids: Net sales of $82.6 million decreased 20.1% due primarily to purposeful SKU prioritization actions and exited product lines which had an aggregate negative impact of 13.0 percentage points. In addition, inventory reductions by U.S. retail customers resulted in lower net sales of pain and sleep-aid products. These impacts more than offset new products, including store brand Acetaminophen 250mg and Ibuprofen 125mg Tablets;
•Healthy Lifestyle: Net sales of $71.3 million decreased 2.9% due primarily to inventory de-stocking at U.S. retail customers, resulting in lower net sales of smoking cessation products, and lower category consumption compared to the prior year.;
•Oral Care: Net sales of $64.7 million decreased 22.3% due primarily to lower distribution at specific retail customers and the comparison to strong sales in the prior year quarter as customers normalized inventories;
•Skin Care: Net sales of $49.6 million decreased 28.9% due primarily to portfolio optimization actions and exited product lines, which had an aggregate negative impact of 30.9 percentage points. These headwinds more than offset strong, double digit, growth of Mederma®;
•Women's Health: Net sales of $27.2 million increased 121.1% due primarily to the launch of Opill®, which was partially offset by an 11.7 percentage point reduction from exited product lines and portfolio optimization actions; and
•VMS and Other: Net sales of $5.6 million increased 5.7% due primarily to volume growth in the VMS category.
40
Perrigo Company plc - Item 2
CSCA
Operating income decreased $67.5 million, or 81.1%, due primarily to:
•$57.3 million decrease in gross profit due primarily to lower manufacturing productivity in U.S. Nutrition driven by actions to augment and strengthen the infant formula network; partially offset by Supply Chain Reinvention savings. Gross profit as a percentage of net sales decreased 380 basis points compared to the prior year due to the same factors that impacted gross profit, partially offset by benefits from purposeful SKU prioritization actions and high margin new products, including Opill®.
•$10.3 million increase in operating expenses due primarily to higher restructuring expenses; which were partially offset by decreased selling expenses and savings from Project Energize.
CONSUMER SELF-CARE INTERNATIONAL FINANCIAL RESULTS
| Three Months Ended | |||||||||||
| (in millions, except percentages) | March 30, 2024 | April 1, 2023 | |||||||||
| Net sales | $ | 437.9 | $ | 418.1 | |||||||
| Gross profit | $ | 204.2 | $ | 203.0 | |||||||
| Gross profit % | 46.6 | % | 48.6 | % | |||||||
| Operating income | $ | 26.5 | $ | 21.3 | |||||||
| Operating income % | 6.1 | % | 5.1 | % | |||||||
Net sales increased $19.8 million, or 4.7%, due primarily to:
•$28.7 million increase, or 7.0%, due primarily to strategic pricing actions in addition to new products, and a favorable impact from the absence of distributor transition sales returns recognized in the prior year period. Product category growth was driven primarily by increased sales in Skin Care and Women's Health; partially offset by
•$5.9 million decrease from exited product lines and lower net sales in Upper Respiratory and VMS due primarily to supply constraints.
CSCI net sales by product category were as follows:
| Sales | Three Months Ended | ||||||||||||||||||||||
(in millions, except percentages) | March 30, 2024 | April 1, 2023 | $ Change | % Change | |||||||||||||||||||
| Skin Care | $ | 114.7 | $ | 83.4 | $ | 31.3 | 37.5 | % | |||||||||||||||
| Upper Respiratory | 69.1 | 84.8 | (15.7) | (18.5) | % | ||||||||||||||||||
| Healthy Lifestyle | 64.6 | 66.4 | (1.8) | (2.7) | % | ||||||||||||||||||
| Pain and Sleep-Aids | 51.4 | 49.9 | 1.5 | 3.0 | % | ||||||||||||||||||
| VMS | 44.6 | 47.8 | (3.2) | (6.7) | % | ||||||||||||||||||
| Women's Health | 32.0 | 29.1 | 2.9 | 10.0 | % | ||||||||||||||||||
| Oral Care | 28.7 | 29.1 | (0.4) | (1.4) | % | ||||||||||||||||||
| Digestive Health | 9.5 | 8.8 | 0.7 | 8.0 | % | ||||||||||||||||||
| Other CSCI | 23.3 | 18.8 | 4.5 | 23.9 | % | ||||||||||||||||||
| Total CSCI | $ | 437.9 | $ | 418.1 | $ | 19.8 | 4.7 | % | |||||||||||||||
Sales in each category were driven primarily by:
•Skin Care: Net sales of $114.7 million increased 37.5%, inclusive of a 3.4% unfavorable effect of currency translation, due to strong growth in Compeed driven by the new product launch of Compeed Spots, and the absence of prior year distribution transitions sales returns. Category growth was also driven by performance of ACO® and Sebamed®, partially offset by a 2.2 percentage point reduction from exited product lines;
•Upper Respiratory: Net sales of $69.1 million decreased 18.5%, inclusive of a 1.7% favorable effect of currency translation, due primarily to lower net sales of cough cold products stemming from lower incidence
41
Perrigo Company plc - Item 2
CSCI
of cough cold throughout the E.U. compared to the prior year and supply constraints on several products in the category. The category was also impacted by a 2.4 percentage points reduction from exited product lines;
•Healthy Lifestyle: Net sales of $64.6 million decreased 2.7%, inclusive of a 7.4% unfavorable effect of currency translation, due primarily to the seasonal sell in of anti-parasite products including, Jungle Formula and Paranix, partially offset by lower category consumption in weight loss, impacting XLS Medical. The category was impacted by a 1.3 percentage points reduction from exited product lines;
•Pain & Sleep-Aids: Net sales of $51.4 million increased 3.0%, inclusive of a 3.8% favorable effect of currency translation, due primarily to lower net sales of store brand products;
•VMS: Net sales of $44.6 million decreased 6.7%, inclusive of a 1.0% favorable effect of currency translation, due primarily to timing of sales of Granufink and Abte, in addition to promotional phasing of Davitamon;
•Women's Health: Net sales of $32.0 million increased 10.0%, inclusive of a 0.3% favorable effect of currency translation, due primarily to higher net sales of contraceptive products including EllaOne, driven by the absence of prior year distribution transitions sales returns;
•Oral Care: Net sales of $28.7 million decreased 1.4%, inclusive of a 2.0% favorable effect of currency translation, due primarily to lower net sales of store brand offerings;
•Digestive Health and Other: Net sales of $32.8 million increased 18.8%, inclusive of a 1.0% favorable effect of currency translation, due primarily to higher net sales of store brand digestive health products.
Operating income increased $5.2 million, or 24.4%, due primarily to:
•$1.2 million increase in gross profit due primarily to strategic pricing actions, higher margin new products, and Supply Chain Reinvention savings, partially offset by lower volume/mix and higher cost of goods sold inflation. Gross profit as a percentage of net sales decreased 200 basis points compared to the prior year due to the same factors impacting gross profit being more than offset by higher cost of goods sold inflation and unfavorable product mix driven in part by supply constraints; and
•$4.1 million decrease in operating expenses due primarily to lower operating expenses driven by Project Energize cost savings and HRA synergies, partially offset by increased restructuring expenses.
Unallocated Expenses
Unallocated expenses are comprised of certain corporate services not allocated to our reporting segments and are recorded in Operating income on the Consolidated Statements of Operations. Unallocated expenses were as follows (in millions):
| Three Months Ended | ||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | |||||||||||||||||||
| $ | 97.4 | $ | 56.0 | |||||||||||||||||
The increase of $41.4 million in unallocated expenses during the three months ended March 30, 2024, compared to the prior year period was due primarily to an increase in expenses associated with our securities litigation settlement and restructuring expenses associated primarily with Project Energize.
Interest expense, net, and Other (income) expense, net
| Three Months Ended | |||||||||||||||||||||||
| (in millions) | March 30, 2024 | April 1, 2023 | |||||||||||||||||||||
| Interest expense, net | $ | 43.0 | $ | 43.7 | |||||||||||||||||||
| Other (income) expense, net | $ | 0.4 | $ | 0.5 | |||||||||||||||||||
The $0.7 million decrease in Interest Expense, net during the three months ended March 30, 2024 compared to the prior year period was due primarily to an increase in interest income partially offset by increasing interest rates on debt (see Item 1. Note 10 for further detail).
42
Perrigo Company plc - Item 2
Unallocated, Interest, Other, and Taxes
Other (Income) Expense, net for the three months ended March 30, 2024 was comparable to the prior year period.
Income Taxes (Consolidated)
The effective tax rates were as follows:
| Three Months Ended | ||||||||||||||||||||||||||||||||
| March 30, 2024 | April 1, 2023 | |||||||||||||||||||||||||||||||
| 104.2 | % | 123.8 | % | |||||||||||||||||||||||||||||
The effective tax rate on the pre-tax loss for the three months ended March 30, 2024 was largely impacted by the year-to-date losses recognized in the various tax jurisdictions as well as the impacts of accounting for income taxes in interim reporting periods. As a result, a significant variation in the customary relationship between income tax expense and pre-tax book income may occur. Due to the net impact of planned inter-company intellectual property sales, estimated worldwide non-deductible expenses, as well as establishing a partial valuation allowance in the United States, we are projecting an income tax expense for the full year ended December 31, 2024, which results in an unusually high annual effective tax rate when applied to the forecasted pre-tax income for the year.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
Overview
We finance our operations with internally generated funds, supplemented by credit arrangements with third parties and capital market financing. We routinely monitor current and expected operational requirements and financial market conditions to evaluate other available financing sources including term and revolving bank credit and securities offerings. In determining our future capital requirements, we regularly consider, among other factors, known trends and uncertainties, such as the war in Ukraine and Israel, inflation and interest rates, the status of material contingent liabilities, recent financial market volatility and other uncertainties. Subject to relevant restrictions under our debt agreements, our cash requirements for other purposes and other factors management deems relevant, we may from time to time use available funds to redeem, repurchase or refinance our debt in privately negotiated or open market transactions, by tender offer or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms we deem appropriate (which may be below par).
Based on the foregoing, management believes that our operations and borrowing resources are sufficient to provide for our short-term and long-term capital requirements, as described below. However, an adverse result with respect to our appeal of any material outstanding tax assessments or litigation, including securities or drug pricing matters and product liability cases, damages resulting from third-party claims, and related interest and/or penalties, could ultimately require the use of corporate assets to pay such assessments and any such use of corporate assets would limit the assets available for other corporate purposes. As such, we continue to evaluate the impact of the above factors on liquidity and may determine that modifications to our capital structure are appropriate if market conditions deteriorate, favorable capital market opportunities become available, or any change in conditions relating to the war in Ukraine and Israel, inflation and interest rates, the status of material contingent liabilities, financial market volatility or other uncertainties have a material impact on our capital requirements.
Cash, Cash Equivalents and Restricted Cash
| (in millions) | March 30, 2024 | December 31, 2023 | |||||||||
| Cash, cash equivalents and restricted cash | $ | 658.5 | $ | 751.3 | |||||||
Working capital(1) | $ | 1,034.0 | $ | 935.9 | |||||||
(1) Working capital represents current assets less current liabilities, excluding cash, cash equivalents and restricted cash and excluding current indebtedness.
Cash, cash equivalents, restricted cash, cash flows from operations, and borrowings available under our credit facilities are expected to be sufficient to finance our liquidity and capital expenditures in both the short and long term. Although our lenders have made commitments to make funds available to us in a timely fashion under our revolving credit agreements and overdraft facilities, if economic conditions worsen or new information becomes publicly available impacting the institutions’ credit rating or capital ratios, these lenders may be unable or unwilling to
43
Perrigo Company plc - Item 2
Financial Condition, Liquidity and Capital Resources
lend money pursuant to our existing credit facilities. Should our outlook on liquidity requirements change substantially from current projections, we may seek additional sources of liquidity in the future.
Cash Flows
The following table includes summarized cash flow activities:
| Three Months Ended | |||||||||||||||||
| (in millions) | March 30, 2024 | April 1, 2023 | $ Change | ||||||||||||||
| Net cash (for) from operating activities | $ | (1.4) | $ | 19.4 | $ | (20.8) | |||||||||||
| Net cash for investing activities | (23.5) | (19.6) | (3.9) | ||||||||||||||
| Net cash for financing activities | (60.4) | (50.7) | (9.7) | ||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (7.5) | 3.2 | (10.7) | ||||||||||||||
| Net decrease in cash and cash equivalents | $ | (92.8) | $ | (47.7) | $ | (45.1) | |||||||||||
Net cash (for) from Operating Activities
The $20.8 million decrease in operating cash flow was primarily driven by the change in accrued income taxes, partially offset by an increase in cash flow from the change in net earnings after adjustments for items including depreciation and amortization, restructuring and share-based compensation.
Net cash for Investing Activities
The $3.9 million decrease in investing cash flow was due to increased capital expenditures and the absence of proceeds in the prior year from the sale of a brand asset.
Net cash for Financing Activities
The $9.7 million decrease in financing cash flow was due primarily to payments on our Senior Secured Credit Facilities and an increase in dividend payments compared to the prior year.
Borrowings and Capital Resources
Credit Agreements
On April 20, 2022, we and our indirect wholly-owned subsidiary, Perrigo Investments, LLC (the "Borrower") entered into the senior secured credit facilities, which consisted of (i) a $1.0 billion five-year revolving credit facility (the "Revolver"), (ii) a $500.0 million five-year Term Loan A facility (the "Term Loan A Facility" and the Term A Loans thereunder, the "Term A Loans"), and (iii) a $1.1 billion seven-year Term Loan B facility (the "Term Loan B Facility" and the Term B loans thereunder borrowed on April 20, 2022, the "2022 Term B Loans"), all pursuant to a Term Loan and Revolving Credit Agreement (the "Credit Agreement").
On December 15, 2023, we and the Borrower entered into Amendment No. 1, an Incremental Assumption Agreement (the "Amendment") to the Credit Agreement. The Amendment provides for a fungible add on to the 2022 Term B Loans in an aggregate principal amount of $300.0 million (the "Incremental Term B Loans" and together with the 2022 Term B Loans, the “Term B Loans”). The terms of the Incremental Term B Loans, including pricing and maturity, are identical to the 2022 Term B Loans. The Term B Loans will mature on April 20, 2029. The net proceeds from the Incremental Term B Loans were used to settle the cash tender offer by Perrigo Finance for $300.0 million in aggregate principal amount of 3.900% Senior Notes due 2024 ("2024 Notes"). The tender offer was settled on December 15, 2023, and Perrigo Finance accepted for purchase $300.0 million of the 2024 Notes and paid approximately $295.1 million in aggregate cash consideration (excluding accrued interest). Refer to Item 1. Note 10.
As of March 30, 2024 and December 31, 2023, we had $1,848.3 million and $1,858.1 million, respectively, outstanding under our Term Loan A Facility and Term Loan B Facility. Our short-term debt as of March 30, 2024 of $440.6 million is comprised of (i) the remaining portion of the 3.900% Senior Notes due 2024, (ii) amortization payments for the Term A Loans and the Term B Loans and (iii) lease payments.
44
Perrigo Company plc - Item 2
Financial Condition, Liquidity and Capital Resources
The interest rate net of derivatives results in a fixed rate on a substantial portion of our long-term debt, the earliest of which matures in December 2024.
We are in compliance with all the covenants under our debt agreements as of March 30, 2024.
Other Financing
We have overdraft facilities available that we may use to support our cash management operations. There were no borrowings outstanding under the overdraft facilities as of March 30, 2024 or December 31, 2023.
Leases
We had $194.0 million and $202.2 million of lease liabilities and $190.1 million and $197.3 million of lease assets as of March 30, 2024 and December 31, 2023, respectively. For information on our operating and finance lease obligations and the amount and timing of future payments refer to Item 1. Note 6.
Credit Ratings
Our credit ratings on March 30, 2024 were Ba2 (negative), BB- (stable), and BB+ (negative), by Moody's Investor Services, S&P Global Ratings, and Fitch Ratings Inc., respectively. On March 25, 2024, S&P downgraded our issuer credit rating to BB- from BB, senior secured notes ratings to BB from BB+ and senior unsecured notes ratings to B+ from BB- and the rating outlooks remained stable. On April 16, 2024, Fitch downgraded our issuer credit rating to BB from BB+ and the rating outlooks remained negative.
Due to the downgrade by S&P Global Ratings, the interest of the 3.150% Senior Notes due 2030 will step up from 4.650% to 4.900% on payments made after June 15, 2024. There was no impact to our interest rates as a result of the Fitch downgrade. Future interest rate adjustments of the 3.150% Senior Notes due 2030 are subject to a 2.0% total cap above the original 3.150% interest rate based on certain rating events as specified in the Note’s Supplemental Indenture No. 3, dated as of June 19, 2020, among Perrigo Finance Unlimited Company, Perrigo Company plc and Wells Fargo Bank, National Association, as trustee.
Guarantor Financial Information
As detailed in Item 1. Note 10, the Guarantor Subsidiaries and the Borrower provide full and unconditional guarantees, jointly and severally, on a senior unsecured basis, of the 5.300% Notes due 2043 issued by the Company, and the Loan Parties provide full and unconditional guarantees, jointly and severally, on a senior unsecured basis, of the 3.900% Notes due 2024, the 4.375% Notes due 2026, the 4.650% Notes due 2030 and the 4.900% Notes due 2044 issued by Perrigo Finance Unlimited Company ("Perrigo Finance").
The guarantees of the Guarantor Subsidiaries, the Company and the Borrower are subject to release in limited circumstances only upon the occurrence of certain customary conditions. The guarantees of the Guarantor Subsidiaries, the Company and the Borrower rank senior in right of payment to any future subordinated indebtedness of the Company, equal in right of payment with all of the Company’s existing and future senior indebtedness and effectively subordinated to any of the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness.
Basis of Presentation
The following tables include summarized financial information of the obligor groups of debt issued by Perrigo Finance and the Company. The summarized financial information of each obligor group is presented on a combined basis with balances and transactions within the obligor group eliminated. Investments in and the equity in earnings of non-guarantor subsidiaries, which would otherwise be consolidated in accordance with U.S. GAAP, are excluded from the below summarized financial information pursuant to SEC Regulation S-X Rule 13-01.
The summarized balance sheet information for the consolidated obligor group of debt issued by Perrigo Finance and the Company is presented in the table below:
45
Perrigo Company plc - Item 2
Financial Condition, Liquidity and Capital Resources
| March 30, 2024 | December 31, 2023 | ||||||||||
| Current Assets | $ | 1,894.0 | $ | 1,999.9 | |||||||
| Non-current Assets | $ | 4,548.6 | $ | 4,596.2 | |||||||
| Current liabilities | $ | 1,158.9 | $ | 1,888.8 | |||||||
| Non-current liabilities | $ | 11,463.6 | $ | 11,498.4 | |||||||
| Due to non-guarantors | $ | 7,368.7 | $ | 7,355.3 | |||||||
The summarized results of operations information for the consolidated obligor group of debt issued by Perrigo Finance and the Company is presented in the table below:
| Three Months Ended | ||||||||
| March 30, 2024 | ||||||||
| Total Revenues | $ | 748.9 | ||||||
| Gross Profit | $ | 188.8 | ||||||
| Operating Income (loss) | $ | (106.6) | ||||||
| Net Income (loss) | $ | (18.9) | ||||||
| Revenue from non-guarantors | $ | 86.4 | ||||||
| Operating Expenses to non-guarantors | $ | (1.1) | ||||||
| Other (income) expense to non-guarantors | $ | (14.7) | ||||||
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have a material current effect or that are reasonably likely to have a material future effect on our financial condition, changes in financial condition, net sales or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Contractual Obligations
There were no material changes in contractual obligations as of March 30, 2024 from those provided in our 2023 Form 10-K.
Significant Accounting Policies
There have been no material changes to the significant accounting policies as disclosed in our 2023 Form 10-K.
Critical Accounting Estimates
The determination of certain amounts in our financial statements requires the use of estimates. These estimates are based upon our historical experiences combined with management’s understanding of current facts and circumstances. Although the estimates are considered reasonable based on the currently available information, actual results could differ from the estimates we have used. There have been no material changes to the critical accounting estimates as disclosed in our 2023 Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our quantitative or qualitative disclosures found in Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," of our 2023 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or
46
Perrigo Company plc - Item 4
Controls and Procedures
15d-15(e) of the Exchange Act) as of March 30, 2024. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in ensuring that all material information relating to us and our consolidated subsidiaries required to be included in our periodic SEC filings would be made known to them by others within those entities in a timely manner and that no changes are required at this time.
Evaluation of the Effectiveness of Internal Control over Financial Reporting
Our management assessed the effectiveness of our internal control over financial reporting as of March 30, 2024. The framework used in carrying out our evaluation was the 2013 Internal Control - Integrated Framework published by the Committee of Sponsoring Organizations ("COSO") of the Treadway Commission. In evaluating our information technology controls, we also used components of the framework contained in the Control Objectives for Information and related Technology, which was developed by the Information Systems Audit and Control Association’s IT Governance Institute, as a complement to the COSO internal control framework. Management has concluded that our internal control over financial reporting was effective as of March 30, 2024. The results of management’s assessment have been reviewed with our Audit Committee.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ended March 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to Item 1. Note 14 and Item 1. Note 15 of the Notes to the Condensed Consolidated Financial Statements.
ITEM 1A. RISK FACTORS
Our Annual Report on Form 10-K for the year ended December 31, 2023 includes a detailed discussion of our risk factors. At the time of this filing, there have been no material changes to the risk factors that were included in the Form 10-K.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the three months ended March 30, 2024, no director or executive officer adopted terminated
47
Perrigo Company plc - Item 6
Exhibits
ITEM 6. EXHIBITS
Exhibit Number | Description | ||||||||||
| 3.1 | |||||||||||
| 3.2 | |||||||||||
10.1* | |||||||||||
| 22 | List of Guarantor Subsidiaries (filed herewith). | ||||||||||
| 31.1 | |||||||||||
| 31.2 | |||||||||||
| 32 | |||||||||||
| 101. INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document. | ||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | ||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | ||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | ||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | ||||||||||
| 104 | Cover Page Interactive Date File, formatted in Inline XBRL (contained in Exhibit 101). | ||||||||||
*Denotes management contract or compensatory plan or arrangement.
48
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| PERRIGO COMPANY PLC | |||||||||||
| (Registrant) | |||||||||||
| Date: | May 7, 2024 | /s/ Patrick Lockwood-Taylor | |||||||||
| Patrick Lockwood-Taylor | |||||||||||
| Chief Executive Officer and President | |||||||||||
| (Principal Executive Officer) | |||||||||||
| Date: | May 7, 2024 | /s/ Eduardo Bezerra | |||||||||
| Eduardo Bezerra | |||||||||||
| Chief Financial Officer | |||||||||||
| (Principal Accounting and Financial Officer) | |||||||||||
49
Exhibit 22
Subsidiary Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize Securities of the Registrant
As of March 30, 2024, the obligors under (i) the 5.300% Notes due 2043 issued by the Company (the “Company Notes”) consisted of the subsidiaries listed in the following table and (ii) the 3.900% Notes due 2024, the 4.375% Notes due 2026, the 4.650% Notes due 2030 and the 4.900% Notes due 2044 issued by Perrigo Finance Unlimited Company (collectively, the “Perrigo Finance Notes”) consisted of the Company, as a guarantor, and its subsidiaries listed in the following table.
| Name of Entity | Obligor Type (Company Notes) | Obligor Type (Perrigo Finance Notes) | ||||||
| Athena Neurosciences, LLC | Guarantor | Guarantor | ||||||
| Chefaro Ireland Designated Activity Company | Guarantor | Guarantor | ||||||
| Elan Pharmaceuticals, LLC | Guarantor | Guarantor | ||||||
| Galpharm Healthcare Limited | Guarantor | Guarantor | ||||||
| Galpharm International Limited | Guarantor | Guarantor | ||||||
| Gr8ness, LLC | Guarantor | Guarantor | ||||||
| L. Perrigo Company | Guarantor | Guarantor | ||||||
| Medgenix Benelux NV | Guarantor | Guarantor | ||||||
| OCE-BIO BV | Guarantor | Guarantor | ||||||
| Perrigo Belgium NV | Guarantor | Guarantor | ||||||
| Perrigo Capital NV | Guarantor | Guarantor | ||||||
| Omega Pharma Innovation & Development NV | Guarantor | Guarantor | ||||||
| Omega Pharma International NV | Guarantor | Guarantor | ||||||
| Omega Pharma Limited | Guarantor | Guarantor | ||||||
| Omega Pharma Trading NV | Guarantor | Guarantor | ||||||
| Omega Teknika Designated Activity Company | Guarantor | Guarantor | ||||||
| PBM Canada Holdings, LLC | Guarantor | Guarantor | ||||||
| PBM Nutritionals, LLC | Guarantor | Guarantor | ||||||
| PBM Products, LLC | Guarantor | Guarantor | ||||||
| Perrigo America Holdings, Inc | Guarantor | Guarantor | ||||||
| Perrigo Company | Guarantor | Guarantor | ||||||
| Perrigo Company Plc | Issuer | Guarantor | ||||||
| Perrigo Corporation Designated Activity Company | Guarantor | Guarantor | ||||||
| Perrigo Diabetes Care, LLC | Guarantor | Guarantor | ||||||
| Perrigo Direct, Inc. | Guarantor | Guarantor | ||||||
| Perrigo Europe Invest NV | Guarantor | Guarantor | ||||||
| Perrigo Finance (US) LLC | Guarantor | Guarantor | ||||||
| Perrigo Finance Unlimited Company | Guarantor | Guarantor | ||||||
| Perrigo Florida, Inc. | Guarantor | Guarantor | ||||||
| Perrigo Holding NV | Guarantor | Guarantor | ||||||
| Perrigo Holdings Unlimited Company | Guarantor | Guarantor | ||||||
| Perrigo International Finance Designated Activity Company | Guarantor | Guarantor | ||||||
| Perrigo International Holdings II, Inc. | Guarantor | Guarantor | ||||||
| Perrigo International Holdings, LLC | Guarantor | Guarantor | ||||||
| Perrigo International, Inc. | Guarantor | Guarantor | ||||||
| Perrigo Investments, LLC | Guarantor | Guarantor | ||||||
| Perrigo Ireland 1 Designated Activity Company | Guarantor | Guarantor | ||||||
| Perrigo Ireland 10 Unlimited Company | Guarantor | Guarantor | ||||||
| Perrigo Supply Chain International Designated Activity Company | Guarantor | Guarantor | ||||||
| Perrigo Ireland 13 Designated Activity Company | Guarantor | Guarantor | ||||||
| Perrigo Ireland 2 Designated Activity Company | Guarantor | Guarantor | ||||||
| Perrigo Ireland 4 Unlimited Company | Guarantor | Guarantor | ||||||
| Perrigo Ireland 5 Unlimited Company | Guarantor | Guarantor | ||||||
| Perrigo Ireland 6 Unlimited Company | Guarantor | Guarantor | ||||||
| Perrigo Ireland 9 Unlimited Company | Guarantor | Guarantor | ||||||
| Perrigo Management Company | Guarantor | Guarantor | ||||||
| Perrigo Mexico Investment Holdings, LLC | Guarantor | Guarantor | ||||||
| Perrigo New York, Inc. | Guarantor | Guarantor | ||||||
| Perrigo Pharma International Designated Activity Company | Guarantor | Guarantor | ||||||
| Perrigo Pharma Limited | Guarantor | Guarantor | ||||||
| Perrigo Research & Development Company | Guarantor | Guarantor | ||||||
| Perrigo Sales Corporation | Guarantor | Guarantor | ||||||
| Perrigo Science One Unlimited Company | Guarantor | Guarantor | ||||||
| Perrigo UK Acquisition Limited | Guarantor | Guarantor | ||||||
| PMI Branded Pharmaceuticals, Inc. | Guarantor | Guarantor | ||||||
| Ranir Global Holdings, LLC | Guarantor | Guarantor | ||||||
| Ranir (Holdings) Limited | Guarantor | Guarantor | ||||||
| Ranir, LLC | Guarantor | Guarantor | ||||||
Exhibit 31.1
CERTIFICATION
I, Patrick Lockwood-Taylor, certify that:
1.I have reviewed this report on Form 10-Q of Perrigo Company plc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 7, 2024
| /s/ Patrick Lockwood-Taylor | ||
| Patrick Lockwood-Taylor | ||
| Chief Executive Officer and President | ||
Exhibit 31.2
CERTIFICATION
I, Eduardo Bezerra, certify that:
1.I have reviewed this report on Form 10-Q of Perrigo Company plc;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 7, 2024
| /s/ Eduardo Bezerra | ||
| Eduardo Bezerra | ||
| Chief Financial Officer | ||
Exhibit 32
The following statement is being made to the Securities and Exchange Commission solely for the purposes of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), which carries with it certain criminal penalties in the event of a knowing or willful misrepresentation.
Securities and Exchange Commission
100 F Street NE
Washington, D.C. 20549
| Re: | Perrigo Company plc | |||||||
Ladies and Gentlemen:
In accordance with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), each of the undersigned hereby certifies that:
(i)this Quarterly Report on Form 10-Q for the period ended March 30, 2024 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(ii)the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of Perrigo Company plc.
| Date: | May 7, 2024 | /s/ Patrick Lockwood-Taylor | |||||||||
| Patrick Lockwood-Taylor | |||||||||||
| Chief Executive Officer and President | |||||||||||
| Date: | May 7, 2024 | /s/ Eduardo Bezerra | |||||||||
| Eduardo Bezerra | |||||||||||
| Chief Financial Officer | |||||||||||