NOTE 1 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. General Information
The Company
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 global over-the-counter ("OTC") consumer goods and specialty pharmaceutical company, offering patients and customers high quality products at affordable prices. From our beginning in 1887 as a packager of home remedies, we have grown to become the world's largest manufacturer of OTC healthcare products and supplier of infant formulas for the store brand market. We are also a leading provider of generic extended topical prescription products, and we receive royalties from sales of the multiple sclerosis drug Tysabri
®
. We provide “Quality Affordable Healthcare Products
®
” across a wide variety of product categories and geographies, primarily in North America, Europe, and Australia, as well as in other markets, including Israel, China, and Latin America.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and footnotes included in our Transition Report on Form 10-KT for the transition period from
June 28, 2015
to
December 31, 2015
. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included. The Condensed Consolidated Financial Statements include our accounts and the accounts of all majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Our fiscal year previously consisted of a 52- or 53-week year ending on or around June 30 of each year with each quarter ending on the Saturday closest to each calendar quarter-end. Beginning on January 1, 2016, we changed our fiscal year to begin on January 1 and end on December 31 of each year. We will continue to cut off 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.
During the three months ended April 2, 2016, we identified certain errors in our consolidated financial statements for the transition period of June 28, 2015 to December 31, 2015, related primarily to the accrual estimates associated with product returns and tax-related items in our Branded Consumer Healthcare ("BCH") segment. These errors were corrected during the three months ended April 2, 2016 by increasing the consolidated operating loss by
$14.5 million
, which when combined with tax-related items, increased the consolidated net loss by
$13.7 million
within the Condensed Consolidated Statements of Operations. We concluded that these errors were not material to the consolidated financial statements for the transition period of June 28, 2015 to December 31, 2015 and are not expected to be material to the consolidated financial statements for the year ending December 31, 2016.
Perrigo Company plc
- Item 1
Note 1
b. Recent Accounting Standard Pronouncements
Below are recent accounting standard updates that we are still assessing to determine the effect on our consolidated financial statements. We do not believe that any other recently issued accounting standards could have a material effect on our consolidated financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
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Recently Issued Accounting Standards Not Yet Adopted
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Standard
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Description
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Effective Date
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Effect on the Financial Statements or Other Significant Matters
|
Improvements to Employee Share-Based Payment Accounting
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This guidance is intended to simplify several aspects of the accounting for share-based payment award transactions. It will require all income tax effects of awards to be recorded through the income statement when they vest or settle as opposed to certain amounts being recorded in additional paid-in capital. An entity will also have to elect whether to account for forfeitures as they occur or by estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change (as currently required). The guidance will also increase the amount an employer can withhold to cover income taxes on awards. Early adoption is permitted.
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January 1, 2017
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We are currently evaluating the implications of adoption on our consolidated financial statements.
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Revenue from Contracts with Customers
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The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity satisfies a performance obligation. This guidance allows for two adoption methods, full retrospective approach or modified retrospective approach. Early adoption is not permitted.
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January 1, 2018
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We are currently evaluating the possible adoption methodologies and the implications of adoption on our consolidated financial statements.
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Leases
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This guidance was issued to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. For leases with a term of 12 months or less, lessees are permitted to make an election to not recognize right-of-use assets and lease liabilities. Upon adoption, lessees will apply the new standard as of the beginning of the earliest comparative period presented in the financial statements, however lessees will be able to exclude leases that expire as of the implementation date. Early adoption is permitted.
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January 1, 2019
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We are currently evaluating the implications of adoption on our consolidated financial statements and considering whether to early adopt the standard.
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Perrigo Company plc
- Item 1
Note 1
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Recently Issued Accounting Standards Not Yet Adopted (continued)
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Standard
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Description
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Effective Date
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Effect on the Financial Statements or Other Significant Matters
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Measurement of Credit Losses on Financial Instruments
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This guidance changes the impairment model for most financial assets and certain other instruments, replacing the current "incurred loss" approach with an "expected loss" credit impairment model, which will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, and off-balance sheet credit exposures such as letters of credit. Early adoption is permitted.
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January 1, 2020
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We are currently evaluating the new standard for potential impacts on our receivables, debt, and other financial instruments and considering whether to early adopt the standard.
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NOTE 2 –
ACQUISITIONS AND DIVESTITURES
All of the below acquisitions, with the exception of the generic Benzaclin™ product purchase, have been accounted for under the acquisition method of accounting based on our analysis of the acquired inputs and processes, and the related assets acquired and liabilities assumed were recorded at fair value as of the acquisition date.
Fair value estimates are based on a complex series of judgments about future events and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations.
The effects of all of the acquisitions described below are included in the Condensed Consolidated Financial Statements prospectively from the date of each acquisition. Unless otherwise indicated, acquisition costs incurred were immaterial and were recorded in Administration expense.
Current Year Acquisitions
Generic Benzaclin
™
Product
On
August 2, 2016
, we purchased the remaining
60.9%
product rights to a generic Benzaclin™ product ("Generic Benzaclin™"), which we had developed and marketed in collaboration with Barr Laboratories, Inc. ("Barr"), a subsidiary of Teva Pharmaceuticals, for
$62.0 million
in cash. In September 2007, we entered into an initial development, marketing and commercialization agreement with Barr, in which Barr contributed to the product's development costs and we developed and marketed the product in the U.S. and Israel. Under this agreement, we paid Barr a percentage of net income from the product's sales in these territories, adjusted for Barr's contributions to the product's development costs. By purchasing the remaining product right from Barr, we are now entitled to 100% of income from sales of the product. Operating results attributable to Generic Benzaclin™ are included within our Prescription Pharmaceuticals ("Rx") segment. The intangible asset acquired is a distribution and license agreement with a
nine
-year useful life.
Tretinoin Product Portfolio
On
January 22, 2016
, we acquired a portfolio of generic dosage forms and strengths of
Retin-A
®
(tretinoin), a topical prescription acne treatment, from Matawan Pharmaceuticals, LLC, for
$416.4 million
in cash ("Tretinoin Products"), which further expanded our extended topicals portfolio. We were the authorized generic distributor of these products from 2005 to 2013. Operating results attributable to the acquisition are included within our Rx segment. The intangible assets acquired included generic product rights valued using the multi-period excess earnings method and assigned a
20
-year useful life, and non-compete agreements valued using the lost income method and assigned a
five
-year useful life. The goodwill acquired is deductible for tax purposes.
Perrigo Company plc
- Item 1
Note 2
Development-Stage Rx Products
In May 2015, we entered into an agreement with a clinical stage biotechnology company for two specialty pharmaceutical products in development ("Development-Stage Rx Products"). We paid
$18.0 million
for an option to acquire the two products, which was recorded in Research and Development expense. On
March 1, 2016
, to further invest in our specialty Rx portfolio, we exercised the option for both products, which requires us to make contingent payments if we obtain regulatory approval and achieve certain sales milestones. We will also be obligated to make certain royalty payments over periods ranging from
seven
to
ten
years from the launch of each product.
We accounted for the option exercise as a business acquisition within our Rx segment, recording IPR&D and contingent consideration on the balance sheet. The IPR&D was valued using the multi-period excess earnings method and has an indefinite useful life until such time as the research is completed (at which time it will become a definite-lived intangible asset), or is determined to have no future use (at which time it would be impaired). The contingent consideration is an estimate of the future milestone payments and royalties based on probability-weighted outcomes, sensitivity analysis, and discount rates reflective of the risk involved. The amount of contingent consideration recognized was
$24.9 million
and was recorded in
Other non-current liabilities
.
Perrigo Company plc
- Item 1
Note 2
Purchase Price Allocation of Current Year Acquisitions
The purchase accounting allocation for four small product acquisitions in our Consumer Healthcare ("CHC") and Rx segments (included in "All Other" in the table below) are preliminary a
nd are
based on the valuation information, estimates, and assumptions available at
October 1, 2016
. As we finalize the fair value estimate, additional purchase price adjustments may be recorded during the measurement period to contingent consideration and intangible assets.
The below table indicates the purchase price allocation for acquisitions completed in the current year (in millions):
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Tretinoin Products
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Development-Stage Rx Products
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All Other
(1)
*
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Purchase price paid
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$
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416.4
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$
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—
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$
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21.9
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Contingent consideration
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—
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24.9
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30.6
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Total purchase consideration
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$
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416.4
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$
|
24.9
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$
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52.5
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Assets acquired:
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Cash and cash equivalents
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$
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—
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$
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—
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$
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3.8
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Accounts receivable
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—
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—
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4.9
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Inventories
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1.4
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—
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7.1
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Prepaid expenses and other current assets
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—
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—
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0.1
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Property and equipment
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—
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—
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1.2
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Goodwill
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1.7
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—
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0.2
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Definite-lived intangibles
:
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Distribution and license agreements, supply agreements
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—
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—
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3.4
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Developed product technology, formulations, and product rights
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411.0
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—
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23.3
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Customer relationships and distribution networks
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—
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—
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8.2
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Non-compete agreements
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2.3
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—
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—
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Indefinite-lived intangibles
:
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In-process research and development
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—
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24.9
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7.0
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Total intangible assets
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$
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413.3
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$
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24.9
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$
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41.9
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Total assets
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$
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416.4
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$
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24.9
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$
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59.2
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Liabilities assumed:
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Accounts payable
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$
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—
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$
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—
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$
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2.8
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Accrued liabilities
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—
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—
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0.1
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Long-term debt
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—
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—
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3.3
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Net deferred income tax liabilities
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—
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—
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0.5
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Total liabilities
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$
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—
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$
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—
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$
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6.7
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Net assets acquired
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$
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416.4
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$
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24.9
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$
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52.5
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* Opening balance sheet is preliminary
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(1)
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Consists of
four
product acquisitions in the CHC and Rx segments
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Perrigo Company plc
- Item 1
Note 2
Prior Year Acquisitions
Entocort
®
On
December 15, 2015
, we completed our acquisition of Entocort
®
(budesonide) capsules, as well as the authorized generic capsules, for sale within the U.S., from AstraZeneca plc for
$380.2 million
in cash. Entocort
®
is a gastroenterology medicine for patients with mild to moderate Crohn's disease. The acquisition complemented our Rx portfolio. Operating results attributable to the acquisition are included within our Rx segment. The intangible assets acquired included branded and authorized generic product rights with useful lives of
10
and
15
years, respectively, which were valued using the multi-period excess earnings method.
Naturwohl Pharma GmbH
On
September 15, 2015
, we completed our acquisition of
100%
of Naturwohl Pharma GmbH ("Naturwohl"), a Munich, Germany-based nutritional business known for its leading German dietary supplement brand, Yokebe
®
. The acquisition built on our BCH segment's OTC product portfolio and European commercial infrastructure. The assets were purchased through an all-cash transaction valued at
€133.5 million
(
$150.4 million
). Operating results attributable to Naturwohl are included in the BCH segment. The intangible assets acquired included a trademark with a
20
-year useful life, customer relationships with a
15
-year useful life, non-compete agreements with a
three
-year useful life, and a licensing agreement with a
three
-year useful life. We utilized the relief from royalty method for valuing the trademark, the multi-period excess earnings method for valuing the customer relationships, and the lost income method for valuing the non-compete agreements and the licensing agreement. The goodwill acquired is not deductible for tax purposes.
ScarAway
®
On
August 28, 2015
, we completed our acquisition of ScarAway
®
, a leading U.S. OTC scar management brand portfolio comprised of five products, from Enaltus, LLC, for
$26.7 million
in cash. This acquisition served as our entry into the niche branded OTC business in the U.S. Operating results attributable to ScarAway
®
are included in the CHC segment. The intangible assets acquired included a trademark with a
25
-year useful life, non-compete agreements with a
four
-year useful life, developed product technology with an
eight
-year useful life, and customer relationships with a
15
-year useful life. We utilized the relief from royalty method for valuing the trademark and developed product technology, the multi-period excess earnings method for valuing the customer relationships, and the lost income method for valuing the non-compete agreements. The goodwill acquired is deductible for tax purposes.
GlaxoSmithKline
Consumer Healthcare Product Portfolio
On
August 28, 2015
, we completed our acquisition of a portfolio of well-established OTC brands from GlaxoSmithKline Consumer Healthcare (“GSK Products”). This acquisition further leveraged our European market share and expanded our product offerings. The assets were purchased through an all-cash transaction valued at
€200.0 million
(
$223.6 million
). Operating results attributable to the acquired GSK Products are included primarily in the BCH segment. The intangible assets acquired included trademarks with a
20
-year useful life and customer relationships with a
15
-year useful life. We utilized the relief from royalty method for valuing the trademarks and the multi-period excess earnings method for valuing the customer relationships. The goodwill acquired is deductible for tax purposes and recorded primarily in the BCH segment.
Gelcaps Exportadora de Mexico, S.A. de C.V.
On
May 12, 2015
, we completed our acquisition of
100%
of Gelcaps Exportadora de Mexico, S.A. de C.V. ("Gelcaps"), the Mexican operations of Durham, North Carolina-based Patheon Inc., for
$37.9 million
in cash. The acquisition added softgel manufacturing technology to our supply chain capabilities and broadened our presence, product portfolio, and customer network in Mexico. Operating results attributable to Gelcaps are included in the CHC segment. The intangible assets acquired included a trademark with a
25
-year useful life and customer relationships with a
20
-year useful life. We utilized the relief from royalty method for valuing the trademark and the multi-period excess earnings method for valuing the customer relationships.
Perrigo Company plc
- Item 1
Note 2
Based on valuation estimates utilizing the comparative sales method, a step-up in the value of inventory of
$0.6 million
was recorded in the opening balance sheet, which was charged to cost of goods sold during the three months ended June 27, 2015. In addition, property, plant and equipment was written up by
$0.9 million
to its estimated fair market value based on a valuation method that included both the cost and market approaches. This additional step-up in value is being depreciated over the estimated remaining useful lives of the assets. The goodwill recorded is not deductible for tax purposes.
Omega Pharma Invest N.V.
On
March 30, 2015
, we completed our acquisition of Omega Pharma Invest N.V. ("Omega"), a limited liability company incorporated under the laws of Belgium. Omega was a leading European OTC company and is providing us several key benefits, including advancing our growth strategy outside the U.S. by providing access across a larger global platform with critical mass in key European countries, establishing commercial infrastructure in the high barrier-to-entry European OTC marketplace, strengthening our product portfolio while enhancing scale and distribution, and expanding our international management capabilities.
We purchased
95.77%
of the issued and outstanding share capital of Omega (
685,348,257
shares) from Alychlo N.V. (“Alychlo”) and Holdco I BE N.V. (together with Alychlo, the “Sellers”), limited liability companies incorporated under the laws of Belgium, under the terms of the Share Purchase Agreement dated November 6, 2014 (the "Share Purchase Agreement"). Omega holds the remaining
30,243,983
shares as treasury shares.
The acquisition was a cash and stock transaction made up of the following consideration (in millions except per share data):
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Perrigo ordinary shares issued
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5.4
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Perrigo per share price at transaction close on March 30, 2015
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$
|
167.64
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Total value of Perrigo ordinary shares issued
|
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$
|
904.9
|
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Cash consideration
|
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2,078.3
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Total consideration
|
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$
|
2,983.2
|
|
The cash consideration shown in the above table was financed by a combination of debt and equity. We issued
$1.6 billion
of debt as described in
Note 10
, and issued
6.8 million
ordinary shares, which raised
$999.3 million
, net of issuance costs.
The Sellers agreed to indemnify us for certain potential future losses. The Sellers’ indemnification and other obligations to us under the Share Purchase Agreement are secured by up to
€120.9 million
(
$135.9 million
as of October 1, 2016) in cash that has been escrowed or is committed to be escrowed and
1.08 million
of our ordinary shares, which are both being held in escrow to secure such obligations. Under the terms of the Share Purchase Agreement, Alychlo and its affiliates are subject to a
three
-year non-compete in Europe, and the Sellers are subject to a
two
-year non-solicit, in each case subject to certain exceptions. The Share Purchase Agreement contains other customary representations, warranties, and covenants of the parties thereto. Our Board of Directors has authorized us to issue an arbitral claim against the sellers, which we plan to do.
The operating results attributable to Omega are included in the BCH segment. We incurred general transaction costs (legal, banking and other professional fees), financing fees, and debt extinguishment charges in connection with the Omega acquisition. The amounts recorded were not allocated to a reporting segment. The table below details the acquisition costs, as well as losses on hedging activities associated with the acquisition purchase price, and where they were recorded for the
nine months ended
September 26, 2015
(in millions):
Perrigo Company plc
- Item 1
Note 2
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Nine Months Ended
|
Line item
|
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September 26, 2015
|
Administration
|
|
$
|
18.1
|
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Interest expense, net
|
|
18.7
|
|
Other expense, net
|
|
258.2
|
|
Total acquisition-related costs
|
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$
|
295.0
|
|
See
Note 8
for further details on losses on the Omega-related hedging activities shown above in Other expense, net, and
Note 10
for details on the loss on extinguishment of debt.
We acquired the following intangible assets: indefinite-lived brands, a definite-lived trade name with an
eight
-year useful life, definite-lived brands with a
22
-year useful life, a distribution network with a
21
-year useful life, and developed product technology with useful lives ranging from
four
to
13
years. We also recorded goodwill, which is not deductible for tax purposes and represents the value we assigned to the expected synergies described above, in our BCH segment. We utilized the multi-period excess earnings method to value the indefinite-lived brands, the definite-lived brands, and distribution network. We utilized the relief from royalty method to value the developed product technology and definite-lived trade name.
Based on valuation estimates utilizing the comparative sales method, a step-up in the value of inventory of
$15.1 million
was recorded in the opening balance sheet and was charged to cost of goods sold during the three months ended June 27, 2015. In addition, property, plant and equipment were written up
$41.5 million
to their estimated fair market value based on a valuation method that included both the cost and market approaches. This additional step-up in value is being depreciated over the estimated remaining useful lives of the assets. Additionally, the fair value of the debt assumed
on the date of acquisition exceeded par value by
$101.9 million
, which was recorded as part of the carrying value of the underlying debt and will be amortized as a reduction of interest expense over the remaining terms of the respective debt instruments. For more information on the debt we assumed from Omega and our subsequent payments on the debt, see
Note 10
.
Perrigo Company plc
- Item 1
Note 2
Purchase Price Allocation of Prior Year Acquisitions
The purchase accounting allocation for the Entocort
®
and GSK Products acquisitions were finalized during the three months ended April 2, 2016. Changes to the allocations were due to adjustments to the intangible asset valuation assumptions. The purchase accounting for all other prior year acquisitions was final as of
December 31, 2015
.
The below table indicates the purchase price allocation for acquisitions completed during the
year ended
December 31, 2015
(in millions):
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Entocort
®
|
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Naturwohl
|
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ScarAway
®
|
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GSK Products
|
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Gelcaps
|
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Omega
|
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All Other
(1)
|
Purchase price paid
|
$
|
380.2
|
|
|
$
|
150.4
|
|
|
$
|
26.7
|
|
|
$
|
223.6
|
|
|
$
|
37.9
|
|
|
$
|
2,983.2
|
|
|
$
|
15.3
|
|
Contingent consideration
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13.9
|
|
Total purchase consideration
|
$
|
380.2
|
|
|
$
|
150.4
|
|
|
$
|
26.7
|
|
|
$
|
223.6
|
|
|
$
|
37.9
|
|
|
$
|
2,983.2
|
|
|
$
|
29.2
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Assets acquired:
|
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|
|
|
|
|
|
|
|
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Cash and cash equivalents
|
$
|
—
|
|
|
$
|
4.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4.6
|
|
|
$
|
14.7
|
|
|
$
|
—
|
|
Accounts receivable
|
—
|
|
|
3.3
|
|
|
—
|
|
|
—
|
|
|
7.3
|
|
|
260.1
|
|
|
—
|
|
Inventories
|
0.2
|
|
|
1.5
|
|
|
1.0
|
|
|
—
|
|
|
7.2
|
|
|
202.5
|
|
|
—
|
|
Prepaid expenses and other current assets
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.1
|
|
|
39.2
|
|
|
—
|
|
Property and equipment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.0
|
|
|
130.8
|
|
|
—
|
|
Goodwill
|
—
|
|
|
61.0
|
|
|
3.5
|
|
|
32.6
|
|
|
6.0
|
|
|
1,900.4
|
|
|
—
|
|
Definite-lived intangibles
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution and license agreements, supply agreements
|
—
|
|
|
21.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Developed product technology, formulations, and product rights
|
380.0
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
27.2
|
|
|
—
|
|
Customer relationships and distribution networks
|
—
|
|
|
25.9
|
|
|
9.8
|
|
|
61.5
|
|
|
6.6
|
|
|
1,056.3
|
|
|
—
|
|
Trademarks, trade names, and brands
|
—
|
|
|
64.2
|
|
|
11.4
|
|
|
129.5
|
|
|
—
|
|
|
287.5
|
|
|
—
|
|
Non-compete agreements
|
—
|
|
|
0.3
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Indefinite-lived intangibles
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks, trade names, and brands
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
|
2,003.8
|
|
|
—
|
|
In-process research and development
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29.2
|
|
Total intangible assets
|
$
|
380.0
|
|
|
$
|
111.8
|
|
|
$
|
22.2
|
|
|
$
|
191.0
|
|
|
$
|
11.0
|
|
|
$
|
3,374.8
|
|
|
$
|
29.2
|
|
Other non-current assets
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
2.4
|
|
|
—
|
|
Total assets
|
$
|
380.2
|
|
|
$
|
182.2
|
|
|
$
|
26.7
|
|
|
$
|
223.6
|
|
|
$
|
44.6
|
|
|
$
|
5,924.9
|
|
|
$
|
29.2
|
|
Liabilities assumed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
2.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.3
|
|
|
$
|
243.1
|
|
|
$
|
—
|
|
Short-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24.6
|
|
|
—
|
|
Accrued liabilities
|
—
|
|
|
1.6
|
|
|
—
|
|
|
—
|
|
|
1.6
|
|
|
43.9
|
|
|
—
|
|
Payroll and related taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51.3
|
|
|
—
|
|
Accrued customer programs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39.8
|
|
|
—
|
|
Long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,471.0
|
|
|
—
|
|
Net deferred income tax liabilities
|
—
|
|
|
27.4
|
|
|
—
|
|
|
—
|
|
|
1.4
|
|
|
1,014.5
|
|
|
—
|
|
Other non-current liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
53.5
|
|
|
—
|
|
Total liabilities
|
—
|
|
|
31.8
|
|
|
—
|
|
|
—
|
|
|
6.7
|
|
|
2,941.7
|
|
|
—
|
|
Net assets acquired
|
$
|
380.2
|
|
|
$
|
150.4
|
|
|
$
|
26.7
|
|
|
$
|
223.6
|
|
|
$
|
37.9
|
|
|
$
|
2,983.2
|
|
|
$
|
29.2
|
|
|
|
(1)
|
Consists of
eight
product acquisitions in the CHC, BCH, and Rx segments
|
Perrigo Company plc
- Item 1
Note 2
Actual and Unaudited Pro Forma Impact of Acquisitions
Our Condensed Consolidated Financial Statements include operating results from the Tretinoin Products, Entocort
®
, Naturwohl, GSK Products, ScarAway
®
, Omega, and Gelcaps acquisitions, as well as from four small product acquisitions, from the date of each acquisition through
October 1, 2016
. Net sales and operating
income
attributable to acquisitions completed in the current year and included in our financial statements totaled
$25.3 million
and
$13.0 million
, respectively, for the
three months ended
October 1, 2016
and totaled
$47.7 million
and
$31.3 million
, respectively, for the
nine months ended
October 1, 2016
.
The following unaudited pro forma information gives effect to the Tretinoin Products, Entocort
®
, Naturwohl, GSK Products, ScarAway
®
, Omega, and Gelcaps acquisitions, as well as four small product acquisitions, as if the acquisitions had occurred on the first day of the
nine months ended
September 26, 2015
and had been included in our Results of Operations for all periods presented thereafter (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
(Unaudited)
|
October 1,
2016
|
|
September 26,
2015
|
|
October 1,
2016
|
|
September 26,
2015
|
Net sales
|
$
|
1,359.6
|
|
|
$
|
1,429.9
|
|
|
$
|
4,243.3
|
|
|
$
|
4,451.4
|
|
Net income (loss)
|
$
|
(1,254.9
|
)
|
|
$
|
142.0
|
|
|
$
|
(1,392.8
|
)
|
|
$
|
154.7
|
|
The historical consolidated financial information of Perrigo, and the Tretinoin Products, Entocort
®
, Naturwohl, GSK Products, ScarAway
®
, Omega and Gelcaps acquisitions and the four small product acquisitions, has been adjusted in the pro forma information to give effect to pro forma events that are (1) directly attributable to the transactions, (2) factually supportable and (3) expected to have a continuing impact on combined results. In order to reflect the occurrence of the acquisitions on the first day of the
nine months ended
September 26, 2015
as required, the unaudited pro forma results include adjustments to reflect the incremental amortization expense to be incurred based on the current values of each acquisition's identifiable intangible and tangible assets, along with the reclassification of acquisition-related costs from the
nine months ended
October 1, 2016
to the
nine months ended
September 26, 2015
. The unaudited pro forma results do not reflect future events that have occurred or may occur after the acquisitions.
Current Year Divestitures
On
August 5, 2016
, we completed the sale of our U.S. Vitamins, Minerals, and Supplements ("VMS") business within our CHC segment to International Vitamins Corporation ("IVC") for
$61.8 million
inclusive of an estimated working capital adjustment. The assets and liabilities related to this sale were classified as held-for-sale at December 31, 2015. Prior to closing the sale, we determined that the carrying value of the VMS business exceeded its fair value less the cost to sell, resulting in an impairment charge of
$6.2 million
, which was recorded in Impairment charges on the Condensed Consolidated Statements of Operations during the
nine months ended
October 1, 2016
.
NOTE 3 –
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Changes in the carrying amount of goodwill, by reportable segment, were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Segments:
|
|
December 31, 2015
|
|
Business acquisitions
|
|
Business divestitures
|
|
Impairments
|
|
Changes in assets held for sale
|
|
Currency translation adjustment
|
|
October 1,
2016
|
CHC
|
|
$
|
1,890.0
|
|
|
$
|
0.2
|
|
|
$
|
(8.5
|
)
|
|
$
|
—
|
|
|
$
|
13.0
|
|
|
$
|
(6.8
|
)
|
|
$
|
1,887.9
|
|
BCH
|
|
1,980.5
|
|
|
—
|
|
|
—
|
|
|
(967.5
|
)
|
|
—
|
|
|
92.4
|
|
|
1,105.4
|
|
Rx
|
|
1,222.2
|
|
|
1.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13.7
|
)
|
|
1,210.2
|
|
Specialty Sciences
|
|
200.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
200.7
|
|
Other
|
|
71.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11.7
|
|
|
3.2
|
|
|
86.4
|
|
Total goodwill
|
|
$
|
5,364.9
|
|
|
$
|
1.9
|
|
|
$
|
(8.5
|
)
|
|
$
|
(967.5
|
)
|
|
$
|
24.7
|
|
|
$
|
75.1
|
|
|
$
|
4,490.6
|
|
Perrigo Company plc
- Item 1
Note 3
In connection with the preparation of our financial statements for the three-month period ended April 2, 2016, we identified indicators of goodwill impairment in our BCH - rest of world (“BCH - ROW”) reporting unit, which comprises primarily operations attributable to the Omega acquisition in all geographic regions except for Belgium. The primary impairment indicators included the decline in our 2016 performance expectations and a reduction in our long-range revenue growth forecast. Step one of the goodwill impairment test involved determining the fair value of the reporting unit using a discounted cash flow technique and comparing it to the reporting unit’s carrying value. The main assumptions supporting the cash flow projections used to determine the reporting unit’s fair value included revenue growth based on product line extensions, product life cycle strategies, and geographical expansion within the markets in which the reporting unit distributes products, gross margins consistent with historical trends, and advertising and promotion investments largely consistent with the reporting unit's growth plans. The BCH - ROW reporting unit did not pass step one of goodwill impairment testing. The change in fair value from previous estimates was due primarily to the changes in the market and performance of certain brands such that the evaluation of brand prioritization and product extensions or launches in new regions are being more focused to maximize the potential of all brands in the segment's portfolio.
The second step of the goodwill impairment test required that we determine the implied fair value of the BCH - ROW reporting unit’s goodwill, which involved determining the value of the reporting unit’s individual assets and liabilities. Due to the complex and time-consuming nature of step two, based on our evaluation and initial estimates of the fair values of the assets and liabilities and the deficit of the fair value when compared to the related book value, we recorded an estimated impairment charge of
$193.6 million
for the three months ended April 2, 2016. We finalized the step two fair value calculation during the three months ended July 2, 2016, which resulted in a
$30.3 million
reduction to the estimated impairment charge recorded during the three months ended April 2, 2016.
In connection with the preparation of our financial statements for the three months ended October 1, 2016, we identified additional indicators of goodwill impairment in both our BCH - ROW and our BCH - Belgium reporting units. With respect to both reporting units, the primary impairment indicators included an additional decline in our 2016 performance expectations for the remainder of the year and a reduction in our long-range revenue growth and margin forecasts due to the factors outlined below. Step one of the goodwill impairment test involved determining the fair value of the reporting units using a discounted cash flow technique and comparing it to the respective reporting units' carrying value. The main assumptions supporting the cash flow projections used to determine each reporting unit’s fair value included revenue growth based on product line extensions, product life cycle strategies, and geographical expansion within the markets in which the reporting unit distributes products, gross margins consistent with historical trends and including supply chain cost improvement plans, and advertising and promotion investments largely consistent with the reporting unit's growth plans. Both the BCH - ROW and the BCH - Belgium reporting units did not pass step one of goodwill impairment testing. As it relates to the BCH - ROW reporting unit, the changes in fair value from previous estimates were due primarily to (1) changes in the market and performance of certain brands due to moderated new product launch assumptions, (2) execution of certain key product strategies falling short of expectations causing a reduction to baseline forecast models in France, Germany and Italy, (3) certain macro-economic factors having continued to impact the business more than expected in France, Russia and Turkey in addition to unfavorable foreign currency impacts experienced primarily in the UK related to Brexit. As it relates to BCH - Belgium reporting unit, the changes in fair value from previous estimates due to change in the forecast as a result of a reduction in volume with a major wholesaler due to factors consistent with those outlined for BCH - ROW.
The second step of the goodwill impairment test required that we determine the implied fair value of both the BCH - ROW and BCH - Belgium reporting units' goodwill, which involved determining the value of each reporting unit’s individual assets and liabilities. Based on our evaluation and initial estimates of the fair values of the assets and liabilities and the deficit of the fair value when compared to the related book value, we recorded an estimated impairment charge of
$734.7 million
related to the BCH - ROW reporting unit and
$69.4 million
related to the BCH - Belgium reporting unit for the three months ended October 1, 2016. Both charges were recorded in Impairment charges on the Condensed Consolidated Statements of Operations within our BCH segment. Due to the complex and time-consuming nature of step two, we expect to finalize the fair value calculation during the fourth quarter of 2016, which could result in an adjustment to the estimated impairment charge. As of October 1, 2016, the implied fair value of goodwill that remains in the BCH - ROW and BCH - Belgium reporting units is
$1.0 billion
and
$70.2 million
, respectively.
Perrigo Company plc
- Item 1
Note 3
While no impairment charges were recorded as a result of the goodwill impairment testing for the transition period of
June 28, 2015
to
December 31, 2015
, our Specialty Sciences reporting unit's fair value exceeded the carrying value by less than 10%. Management evaluated the primary source of cash flow in this segment, the Tysabri
®
royalty stream, based on a combination of factors including independent external research, information provided from our royalty partner, and internal estimates. Based on this information, management’s assessment of future cash flow from this royalty stream has been reduced primarily due to anticipated new competitors entering the market and unfavorable currency exchange effects. Future performance different from the assumptions utilized in our quantitative analysis may further reduce the fair value of the reporting unit, which may result in the fair value no longer exceeding the carrying value. In February 2016, a competitor's pipeline product, Ocrevus
®
, received breakthrough therapy designation from the FDA and could potentially be approved in 2016. The product would compete with Tysabri
®
and could have a significant negative impact on the royalty we receive from Biogen Idec, Inc. ("Biogen") and the performance of the Specialty Sciences segment. We continue to monitor the progress of all potential competing products and assess the reporting unit for potential impairment should impairment indicators arise, as applicable, and at least annually during our fourth quarter impairment testing.
During the
three months ended
June 27, 2015, we performed our annual goodwill impairment testing, which indicated that our CHC Mexico reporting unit's goodwill fair value was below its net book value as of March 28, 2015. As a result, we initiated the second step of the goodwill impairment test to measure the amount of impairment. We concluded that the goodwill was fully impaired and recorded an impairment of
$6.8 million
in the CHC segment during the
nine months ended
September 26, 2015
in Other expense, net.
Intangible Assets
Other intangible assets and related accumulated amortization consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1, 2016
|
|
December 31, 2015
|
|
Gross
|
|
Accumulated Amortization
|
|
Gross
|
|
Accumulated Amortization
|
Definite-lived intangibles
:
|
|
|
|
|
|
|
|
Distribution and license agreements, supply agreements
|
$
|
6,122.3
|
|
|
$
|
914.0
|
|
|
$
|
6,053.4
|
|
|
$
|
667.2
|
|
Developed product technology, formulations, and product rights
|
1,805.9
|
|
|
529.0
|
|
|
1,383.5
|
|
|
426.0
|
|
Customer relationships and distribution networks
|
1,564.0
|
|
|
288.8
|
|
|
1,520.7
|
|
|
193.0
|
|
Trademarks, trade names, and brands
|
631.6
|
|
|
54.7
|
|
|
539.4
|
|
|
22.8
|
|
Non-compete agreements
|
14.6
|
|
|
11.0
|
|
|
15.2
|
|
|
12.7
|
|
Total definite-lived intangibles
|
$
|
10,138.4
|
|
|
$
|
1,797.5
|
|
|
$
|
9,512.2
|
|
|
$
|
1,321.7
|
|
Indefinite-lived intangibles
:
|
|
|
|
|
|
|
|
Trademarks, trade names, and brands
|
$
|
724.2
|
|
|
$
|
—
|
|
|
$
|
1,868.1
|
|
|
$
|
—
|
|
In-process research and development
|
67.9
|
|
|
—
|
|
|
48.2
|
|
|
—
|
|
Total indefinite-lived intangibles
|
792.1
|
|
|
—
|
|
|
1,916.3
|
|
|
—
|
|
Total other intangible assets
|
$
|
10,930.5
|
|
|
$
|
1,797.5
|
|
|
$
|
11,428.5
|
|
|
$
|
1,321.7
|
|
Certain intangible assets are denominated in currencies other than the U.S. dollar; therefore, their gross and net carrying values are subject to foreign currency movements.
We recorded amortization expense of
$162.1 million
and
$147.6 million
for the
three months ended
October 1, 2016
and
September 26, 2015
, respectively, and
$481.8 million
and
$397.9 million
for the
nine months ended
October 1, 2016
and
September 26, 2015
, respectively. The increase in amortization expense for the 2016 nine-month period was due primarily to the incremental amortization expense incurred on the definite-lived intangible assets acquired from the Omega, Entocort
®
,
and Tretinoin Products acquisitions.
During our impairment testing for the transition period of
June 28, 2015
to
December 31, 2015
, we identified an impairment of certain indefinite-lived intangible assets purchased in conjunction with the Omega acquisition based on management’s expectations of the prospects for future revenues, profits, and cash flows associated with
Perrigo Company plc
- Item 1
Note 3
these assets. The assessment resulted in an impairment charge of
$185.1 million
within our BCH segment, which represented the difference between the carrying amount of the intangible assets and their estimated fair value. See our Transition Report on Form 10-KT filed on February 25, 2016 for a further discussion of this impairment charge.
In connection with the preparation of our financial statements for the three-month period ended April 2, 2016, we identified indicators of impairment associated with certain indefinite-lived intangible assets acquired in conjunction with the Omega acquisition. The primary impairment indicators included the decline in our 2016 performance expectations and a reduction in our long-range revenue growth forecast. The assessment utilized the excess earnings method to determine fair value and resulted in an impairment charge of
$273.4 million
in
Impairment charges
on the Condensed Consolidated Statements of Operations within our BCH segment, which represented the difference between the carrying amount of the intangible assets and their estimated fair value. The change in fair value from previous estimates was due primarily to the changes in the market and performance of the brands such that the evaluation of brand prioritization and product extensions or launches in new regions are being more focused to maximize the potential of all brands in the segment's portfolio. The main assumptions supporting the fair value of these assets and cash flow projections included revenue growth based on product line extensions, product life cycle strategies, and geographical expansion within the markets in which the BCH segment distributes products, gross margins consistent with historical trends, and advertising and promotion investments largely consistent with the segment's growth plans.
In connection with the preparation of our financial statements for the three months ended October 1, 2016, we identified additional indicators of impairment associated with certain indefinite-lived and definite-lived intangible brand category assets acquired in conjunction with the Omega acquisition. The primary impairment indicators are discussed above in goodwill. The assessment of the indefinite-lived assets utilized the excess earnings method to determine fair value and resulted in an impairment charge of
$575.7 million
for the three months ended October 1, 2016. With regards to the definite-lived asset, it was determined that the carrying value of the asset group was not recoverable based on an assessment of the undiscounted future cash flows expected to be generated by the asset group. Given this, the excess earnings method was utilized to determine fair value of the definite-lived asset and resulted in an impairment charge of
$290.2 million
for the
three months ended
October 1, 2016
. Both charges, which represented the difference between the carrying amount of the intangible assets and their estimated fair value, were recorded in Impairment charges on the Condensed Consolidated Statements of Operations within our BCH segment. The main assumptions supporting the fair value of these assets and cash flow projections are included in the goodwill discussions above.
The carrying value for certain intangible assets and goodwill equals estimated and implied fair values, respectively, and as a result, any further deterioration in those assets' fair value would lead to a further impairment charge. Future performance different from the assumptions utilized in our quantitative analyses may result in additional changes in the fair value. We will continue to monitor and assess these assets for potential impairment should further impairment indicators arise. We will complete our required annual impairment testing during the fourth quarter of 2016.
In addition, given the additional change in performance expectations for our remaining impaired cough/cold/allergy, anti-parasite, personal care and natural health brands previously recorded as indefinite-lived assets, we reclassified the remaining asset balance of
$672.4 million
related to these four assets to definite-lived assets with a
20
-year useful life and began amortizing the assets as of October 2, 2016.
NOTE 4 -
ACCOUNTS RECEIVABLE FACTORING
We have multiple accounts receivable factoring arrangements with non-related third-party financial institutions (the “Factors”). Pursuant to the terms of the arrangements, we sell to the Factors certain of our accounts receivable balances on a non-recourse basis for credit approved accounts. An administrative fee ranging from
0.14%
to
0.15%
per invoice is charged on the gross amount of accounts receivables assigned to the Factors, plus interest is calculated at the applicable EUR LIBOR rate plus 70 basis points. The total amount factored and excluded from accounts receivable was
$36.4 million
and
$106.7 million
at
October 1, 2016
and
December 31, 2015
, respectively.
Perrigo Company plc
- Item 1
Note 5
NOTE 5 –
INVENTORIES
Major components of inventory were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
October 1,
2016
|
|
December 31,
2015
|
Finished goods
|
$
|
511.6
|
|
|
$
|
483.4
|
|
Work in process
|
171.0
|
|
|
151.4
|
|
Raw materials
|
202.0
|
|
|
209.6
|
|
Total inventories
|
$
|
884.6
|
|
|
$
|
844.4
|
|
NOTE 6 –
FAIR VALUE MEASUREMENTS
Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.
|
|
Level 1:
|
Quoted prices for identical instruments in active markets.
|
|
|
Level 2:
|
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
|
|
|
Level 3:
|
Valuations derived from valuation techniques in which one or more significant inputs are not observable.
|
The following table summarizes the valuation of our financial instruments carried at fair value and measured at fair value on a recurring and non-recurring basis by the above pricing categories (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Fair Value Hierarchy
|
|
October 1,
2016
|
|
December 31,
2015
|
Measured at fair value on a recurring basis:
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
Investment securities
|
|
Level 1
|
|
$
|
53.0
|
|
|
$
|
14.9
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
Level 2
|
|
$
|
5.2
|
|
|
$
|
4.8
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
Level 2
|
|
$
|
—
|
|
|
$
|
0.3
|
|
Foreign currency forward contracts
|
|
Level 2
|
|
0.8
|
|
|
3.9
|
|
Total level 2 liabilities
|
|
|
|
$
|
0.8
|
|
|
$
|
4.2
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
Level 3
|
|
$
|
75.0
|
|
|
$
|
17.9
|
|
|
|
|
|
|
|
|
Measured at fair value on a non-recurring basis:
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
Goodwill
(1)
|
|
Level 3
|
|
$
|
1,105.4
|
|
|
$
|
—
|
|
Indefinite-lived intangible assets
(2)
|
|
Level 3
|
|
672.4
|
|
|
1,031.8
|
|
Definite-lived intangible assets
(3)
|
|
Level 3
|
|
66.9
|
|
|
—
|
|
Assets held for sale, net
|
|
Level 3
|
|
14.1
|
|
|
37.5
|
|
Total level 3 assets
|
|
|
|
$
|
1,858.8
|
|
|
$
|
1,069.3
|
|
|
|
(1)
|
Goodwill with a carrying amount of
$1.9 billion
was written down to its implied fair value of
$1.1 billion
, resulting in an impairment charge of
$804.1 million
for the
three months ended
October 1, 2016
; impairment charges totaled
$967.5 million
for the
nine months ended
October 1, 2016
and are included in
Impairment charges
on the Condensed Consolidated Statements of Operations.
|
Perrigo Company plc
- Item 1
Note 6
|
|
(2)
|
Indefinite-lived intangible assets with a carrying amount of
$1.2 billion
were written down to a fair value of
$672.4 million
resulting in total impairment charges of
$575.7 million
for the
three months ended
October 1, 2016
; impairment charges totaled
$849.1 million
for the
nine months ended
October 1, 2016
and are included in
Impairment charges
on the Condensed Consolidated Statements of Operations.
|
|
|
(3)
|
Definite-lived intangible assets with a carrying amount of
$357.1 million
were written down to a fair value of
$66.9 million
resulting in an impairment charge of
$290.2 million
for the
three and nine months ended
October 1, 2016
, which is included in
Impairment charges
on the Condensed Consolidated Statements of Operations.
|
There were no transfers among Level 1, 2, and 3 during the
three and nine months ended
October 1, 2016
and
September 26, 2015
. Our policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period. See
Note 7
for information on our investment securities. See
Note 8
for a discussion of derivatives.
Contingent consideration represents milestone payment obligations obtained through product acquisitions, which are valued using estimates based on probability-weighted outcomes, sensitivity analysis, and discount rates reflective of the risk involved. The estimates are updated quarterly and the liabilities are adjusted to fair value depending on a number of assumptions, including the competitive landscape and regulatory approvals that may impact the future sales of a product.
The non-recurring fair values included in the table above represent only those assets whose carrying values were adjusted to fair value during the reporting period. See
Note 3
for a more detailed discussion of the impaired goodwill and indefinite-lived intangible assets and the valuation methods used, and
Note 9
for information on the impaired assets held for sale, net.
The table below presents a reconciliation for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in millions). Net realized losses in the table were recorded in Administrative expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 1,
2016
|
|
September 26,
2015
|
|
October 1,
2016
|
|
September 26,
2015
|
Contingent Consideration
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
44.9
|
|
|
$
|
—
|
|
|
$
|
17.9
|
|
|
$
|
12.4
|
|
Net realized (gains) losses
|
(0.4
|
)
|
|
—
|
|
|
(4.0
|
)
|
|
(12.4
|
)
|
Purchases or additions
|
30.6
|
|
|
—
|
|
|
61.1
|
|
|
—
|
|
Foreign currency effect
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Settlements
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
Ending balance
|
$
|
75.0
|
|
|
$
|
—
|
|
|
$
|
75.0
|
|
|
$
|
—
|
|
As of
October 1, 2016
and
December 31, 2015
, our fixed rate long-term debt consisted of public bonds, a private placement note, and retail bonds. As of
October 1, 2016
, the public bonds and private placement note had a carrying value of
$4.6 billion
and a fair value of
$4.7 billion
, based on quoted market prices (Level 1). As of
December 31, 2015
, the public bonds and private placement note had a carrying value of
$3.9 billion
and fair value of
$3.8 billion
, based on quoted market prices (Level 1). As of
October 1, 2016
, our retail bonds had a carrying value of
$826.4 million
(excluding a premium of
$60.7 million
) and a fair value of
$891.4 million
. As of
December 31, 2015
, our retail bonds had a carrying value of
$798.3 million
(excluding a premium of
$82.5 million
) and a fair value of
$859.8 million
. The fair value of our related bonds for both periods was based on interest rates offered for borrowings of a similar nature and remaining maturities (Level 2).
The carrying amounts of our other financial instruments, consisting of cash and cash equivalents, accounts receivable, accounts payable, short-term debt and variable rate long-term debt, approximate their fair value.
Perrigo Company plc
- Item 1
Note 7
NOTE 7 –
INVESTMENTS
Available for Sale Securities
Our available for sale securities are reported in
Prepaid expenses and other current assets
. Unrealized investment gains (losses) on available for sale securities were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
October 1,
2016
|
|
December 31, 2015
|
Equity securities, at cost less impairments
|
$
|
20.1
|
|
|
$
|
6.4
|
|
Gross unrealized gains
|
32.9
|
|
|
9.3
|
|
Gross unrealized losses
|
—
|
|
|
(0.8
|
)
|
Estimated fair value of equity securities
|
$
|
53.0
|
|
|
$
|
14.9
|
|
The factors affecting the assessment of impairments include both general financial market conditions and factors specific to a particular company. We recorded impairment charges of
$1.8 million
related to other-than-temporary impairments of marketable equity securities during the
nine months ended
October 1, 2016
due to prolonged losses incurred on each of the investments.
Cost Method Investments
Our cost method investments totaled
$7.0 million
and
$6.9 million
at
October 1, 2016
and
December 31, 2015
, respectively, and are included in
Other non-current assets
.
Equity Method Investments
Our equity method investments totaled
$4.9 million
and
$45.5 million
at
October 1, 2016
and
December 31, 2015
, respectively, and are included in
Other non-current assets
.
Due to significant and prolonged losses incurred on one of our equity method investments, we recorded a
$22.3 million
impairment in Other expense, net, during the
nine months ended
October 1, 2016
. In addition, during the
nine months ended
October 1, 2016
, one of our equity method investments became publicly traded. As a result, we transferred the
$15.5 million
investment to available for sale and recorded an
$8.7 million
unrealized gain, net of tax, in Other Comprehensive Income ("OCI"), as reflected in the available for sale securities table above.
We recorded a net gain of
$0.1 million
and a net
loss
of
$4.1 million
during the
three months ended
October 1, 2016
and
September 26, 2015
, respectively, and a net loss of
$3.8 million
and
$7.7 million
during the
nine months ended
October 1, 2016
, and
September 26, 2015
, respectively, for our proportionate share of the equity method investment earnings or losses. The gains and losses were recorded in Other expense, net.
NOTE 8 –
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
We enter into certain derivative financial instruments, when available on a cost-effective basis, to mitigate our risk associated with changes in interest rates and foreign currency exchange rates as follows:
Interest rate risk management -
We are exposed to the impact of interest rate changes through our cash investments and borrowings. We utilize a variety of strategies to manage the impact of changes in interest rates including using a mix of debt maturities along with both fixed-rate and variable-rate debt. In addition, we may enter into treasury-lock agreements and interest rate swap agreements on certain investing and borrowing transactions to manage our exposure to interest rate changes and our overall cost of borrowing.
Foreign currency exchange risk management -
We conduct business in several major currencies other than the U.S. dollar and are subject to risks associated with changing foreign exchange rates. Our objective is to reduce cash flow volatility associated with foreign exchange rate changes on a consolidated basis to allow management to focus its attention on business operations. Accordingly, we enter into various contracts that change in value as foreign exchange rates change to protect the value of existing foreign currency assets and liabilities, commitments, and anticipated foreign currency sales and expenses.
Perrigo Company plc
- Item 1
Note 8
All derivative instruments are managed on a consolidated basis to efficiently net exposures and thus take advantage of any natural offsets. Gains and losses related to the derivative instruments are expected to be offset largely by gains and losses on the original underlying asset or liability. We do not use derivative financial instruments for speculative purposes.
All of our designated derivatives were classified as cash flow hedges as of
October 1, 2016
and
December 31, 2015
. Designated derivatives meet hedge accounting criteria, which means the fair value of the hedge is recorded in shareholders’ equity as a component of OCI, net of tax. The deferred gains and losses are recognized in income in the period in which the hedged item affects earnings. Any ineffective portion of the change in fair value of the derivative is immediately recognized in earnings. All of our designated derivatives are assessed for hedge effectiveness quarterly.
We also have economic non-designated derivatives that do not meet hedge accounting criteria. These derivative instruments are adjusted to current market value at the end of each period through earnings. Gains or losses on these instruments are offset substantially by the remeasurement adjustment on the hedged item.
Interest Rate Swaps and Treasury Locks
Interest rate swap agreements are contracts to exchange floating rate for fixed rate payments (or vice versa) over the life of the agreement without the exchange of the underlying notional amounts. The notional amounts of the interest rate swap agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense.
During the
six months ended
December 31, 2015
, we entered into a forward interest rate swap to hedge against changes in the benchmark interest rate between the date the interest rate swap was entered into and the date of expected future debt issuance. The interest rate swap was designated as a cash flow hedge and had a notional amount totaling
$200.0 million
. The interest rate swap was settled upon the issuance of an aggregate
$1.2 billion
principal amount of senior notes on March 7, 2016 for a cumulative after-tax
loss
of
$7.0 million
in OCI during the
nine months ended
October 1, 2016
.
In connection with the Omega acquisition, we assumed a
$20.0 million
private placement note. We also assumed an interest rate swap agreement with a notional amount totaling
$20.0 million
that was in place to hedge the cross currency exchange differences between the U.S. dollar and the euro on the above-mentioned debt. On May 29, 2015, we repaid the loan and the interest rate swap. We also assumed
€500.0 million
(
$544.5 million
) of debt under Omega's revolving credit facility, as well as an interest rate swap agreement with a notional amount of
€135.0 million
(
$147.0 million
) that was in place to hedge the change in the floating rate on that credit facility. On April 8, 2015, we repaid the loan and terminated the interest rate swap. Because both interest rate swaps mentioned above were recorded at fair market value on the date of termination, no gain or loss was recorded. For more information on the acquired debt and termination, see
Note 10
.
During the
nine months ended
September 26, 2015
, we repaid a
$300.0 million
term loan with floating interest rates priced off the LIBOR yield curve, see
Note 10
. As a result of the term loan repayment on June 25, 2015, the forward interest rate swap agreements with notional amounts totaling
$240.0 million
that were in place to hedge the change in the LIBOR rate were terminated as well. We recorded a loss of
$3.6 million
in Other expense, net, during the
nine months ended
September 26, 2015
for the amount remaining in Accumulated Other Comprehensive Income ("AOCI") when the hedges were terminated.
Foreign Currency Derivatives
We enter into foreign currency forward contracts, both designated and non-designated, in order to manage the impact of foreign exchange fluctuations on expected future purchases and related payables denominated in a foreign currency, as well as to hedge the impact of foreign exchange fluctuations on expected future sales and related receivables denominated in a foreign currency. Both types of forward contracts have a maximum maturity date of
15
months. The total notional amount for these contracts was
$482.5 million
and
$755.5 million
as of
October 1, 2016
and
December 31, 2015
, respectively.
Perrigo Company plc
- Item 1
Note 8
In order to economically hedge the foreign currency exposure associated with the planned payment of the euro-denominated purchase price of Omega, we entered into non-designated forward contracts that matured during the
three months ended
March 28, 2015. We recorded losses of
$259.8 million
during the
nine months ended
September 26, 2015
related to the settlement of the forward contracts in Other expense, net. The losses on the derivatives due to changes in the euro-to-U.S. dollar exchange rates were economically offset at closing in the final settlement of the euro-denominated Omega purchase price. In June 2015, in order to economically hedge the foreign currency exposure associated with the planned payment of the euro-denominated GSK Products acquisition discussed in
Note 2
, we entered into a non-designated option contract to protect against a strengthening of the euro relative to the U.S. dollar. We recorded losses of
$1.9 million
for the change in fair value of the option contract during the
nine months ended
September 26, 2015
in Other expense, net. Because these derivatives were economically hedging future acquisitions, the cash outflows associated with their settlement are shown as investing activity on the Consolidated Statements of Cash Flows.
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 and are presented in millions.
The balance sheet location and gross fair value of our outstanding derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
Balance Sheet Location
|
|
Fair Value
|
|
|
|
October 1,
2016
|
|
December 31, 2015
|
Designated derivatives:
|
|
|
|
|
|
Foreign currency forward contracts
|
Other current assets
|
|
$
|
3.8
|
|
|
$
|
3.8
|
|
Total designated derivatives
|
|
|
$
|
3.8
|
|
|
$
|
3.8
|
|
Non-designated derivatives:
|
|
|
|
|
|
Foreign currency forward contracts
|
Other current assets
|
|
$
|
1.4
|
|
|
$
|
1.0
|
|
Total non-designated derivatives
|
|
|
$
|
1.4
|
|
|
$
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives
|
|
Balance Sheet Location
|
|
Fair Value
|
|
|
|
October 1,
2016
|
|
December 31, 2015
|
Designated derivatives:
|
|
|
|
|
|
Foreign currency forward contracts
|
Accrued liabilities
|
|
$
|
0.3
|
|
|
$
|
2.0
|
|
Interest rate swap agreements
|
Other non-current liabilities
|
|
—
|
|
|
0.3
|
|
Total designated derivatives
|
|
|
$
|
0.3
|
|
|
$
|
2.3
|
|
Non-designated derivatives:
|
|
|
|
|
|
Foreign currency forward contracts
|
Accrued liabilities
|
|
$
|
0.5
|
|
|
$
|
1.9
|
|
Total non-designated derivatives
|
|
|
$
|
0.5
|
|
|
$
|
1.9
|
|
The gains (losses) recorded in OCI for the effective portion of our designated cash flow hedges were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain/(Loss) Recorded in OCI
(Effective Portion)
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
Designated Cash Flow Hedges
|
|
October 1,
2016
|
|
September 26,
2015
|
|
October 1,
2016
|
|
September 26,
2015
|
Interest rate swap agreements
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(9.0
|
)
|
|
$
|
(12.0
|
)
|
Foreign currency forward contracts
|
|
3.4
|
|
|
(0.5
|
)
|
|
4.7
|
|
|
(1.6
|
)
|
Total
|
|
$
|
3.4
|
|
|
$
|
(0.5
|
)
|
|
$
|
(4.3
|
)
|
|
$
|
(13.6
|
)
|
Perrigo Company plc
- Item 1
Note 8
The gains (losses) reclassified from AOCI into earnings for the effective portion of our designated cash flow hedges were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain/(Loss) Reclassified from AOCI to Income
(Effective Portion)
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
Designated Cash Flow Hedges
|
|
Income Statement Location
|
|
October 1,
2016
|
|
September 26,
2015
|
|
October 1,
2016
|
|
September 26,
2015
|
Treasury locks
|
|
Interest expense, net
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.1
|
)
|
|
$
|
(0.1
|
)
|
Interest rate swap agreements
|
|
Interest expense, net
|
|
(0.6
|
)
|
|
(0.4
|
)
|
|
(1.7
|
)
|
|
(18.6
|
)
|
Foreign currency forward contracts
|
|
Net sales
|
|
0.1
|
|
|
(0.1
|
)
|
|
1.0
|
|
|
1.8
|
|
|
|
Cost of sales
|
|
0.9
|
|
|
0.2
|
|
|
1.8
|
|
|
(4.4
|
)
|
|
|
Interest expense, net
|
|
(0.4
|
)
|
|
—
|
|
|
(1.3
|
)
|
|
—
|
|
|
|
Other expense, net
|
|
(1.4
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
(0.6
|
)
|
Total
|
|
|
|
$
|
(1.4
|
)
|
|
$
|
(0.4
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
(21.9
|
)
|
The gains (losses) recognized against earnings for the ineffective portion of our designated cash flow hedges were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain/(Loss) Recognized in Income
(Ineffective Portion)
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
Designated Cash Flow Hedges
|
|
Income Statement
Location
|
|
October 1,
2016
|
|
September 26,
2015
|
|
October 1,
2016
|
|
September 26,
2015
|
Interest rate swap agreements
|
|
Other expense, net
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.1
|
)
|
|
$
|
—
|
|
Foreign currency forward contracts
|
|
Net sales
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
(0.3
|
)
|
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
|
Other expense, net
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
Total
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.6
|
|
|
$
|
(0.2
|
)
|
The effects of our non-designated derivatives on the Condensed Consolidated Statements of Operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain/(Loss) Recognized in Income
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
Non-Designated Derivatives
|
|
Income Statement Location
|
|
October 1,
2016
|
|
September 26,
2015
|
|
October 1,
2016
|
|
September 26,
2015
|
Foreign currency forward contracts
|
|
Other expense, net
|
|
$
|
(0.2
|
)
|
|
$
|
(8.9
|
)
|
|
$
|
(8.7
|
)
|
|
$
|
(259.4
|
)
|
|
|
Interest expense, net
|
|
(1.0
|
)
|
|
0.1
|
|
|
(1.5
|
)
|
|
(3.4
|
)
|
Total
|
|
|
|
$
|
(1.2
|
)
|
|
$
|
(8.8
|
)
|
|
$
|
(10.2
|
)
|
|
$
|
(262.8
|
)
|
NOTE 9 –
ASSETS HELD FOR SALE
During the
six months ended
December 31, 2015
, management committed to a plan to sell our U.S. VMS and India Active Pharmaceutical Ingredients ("API") businesses. As a result, the net assets attributable to both businesses were classified as held-for-sale beginning at December 31, 2015. As described in
Note 2
, we completed the sale of our U.S. VMS business to IVC on August 5, 2016. In addition, during the
three months ended
October 1, 2016
, management committed to a plan to sell certain fixed assets associated with our Animal Health pet treats plant. Such assets were classified as held-for-sale beginning at October 1, 2016.
When a group of assets is classified as held-for-sale, the book value is evaluated and adjusted to the lower of its carrying amount or fair value less the cost to sell. At December 31, 2015, we determined that the carrying value of the India API business exceeded its fair value less cost to sell, resulting in an impairment charge of
Perrigo Company plc
- Item 1
Note 9
$29.0 million
. We recorded additional impairment charges totaling
$10.8 million
during the
nine months ended
October 1, 2016
. The API business is reported primarily in our Other segment.
At October 1, 2016, we determined that the carrying value of the fixed assets associated with our Animal Health pet treats plant exceeded the fair value less the cost to sell, resulting in an impairment charge of
$3.4 million
. The assets associated with our Animal Health pet treats plant are reported in our CHC segment.
The assets held-for-sale were reported within
Prepaid expenses and other current assets
and liabilities held-for-sale were reported in
Accrued liabilities
. The amounts consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1,
2016
|
|
December 31,
2015
|
|
CHC
|
|
Other
|
|
CHC
|
|
Other
|
Assets held for sale
|
|
|
|
|
|
|
|
Current assets
|
$
|
—
|
|
|
$
|
7.3
|
|
|
$
|
55.1
|
|
|
$
|
13.6
|
|
Goodwill
|
—
|
|
|
2.8
|
|
|
13.0
|
|
|
14.5
|
|
Property, plant and equipment
|
13.3
|
|
|
34.0
|
|
|
18.8
|
|
|
37.4
|
|
Other assets
|
—
|
|
|
3.2
|
|
|
—
|
|
|
3.2
|
|
Less: impairment reserves
|
(3.4
|
)
|
|
(39.8
|
)
|
|
—
|
|
|
(29.0
|
)
|
Total assets held for sale
|
$
|
9.9
|
|
|
$
|
7.5
|
|
|
$
|
86.9
|
|
|
$
|
39.7
|
|
Liabilities held for sale
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
0.3
|
|
|
$
|
0.9
|
|
|
$
|
30.5
|
|
|
$
|
0.5
|
|
Other liabilities
|
—
|
|
|
2.1
|
|
|
—
|
|
|
1.7
|
|
Total liabilities held for sale
|
$
|
0.3
|
|
|
$
|
3.0
|
|
|
$
|
30.5
|
|
|
$
|
2.2
|
|
Perrigo Company plc
- Item 1
Note 10
NOTE 10 –
INDEBTEDNESS
Total borrowings outstanding are summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 1,
2016
|
|
December 31,
2015
|
Revolving credit agreements
|
|
|
|
|
|
|
2015 Revolver
|
$
|
—
|
|
|
$
|
380.0
|
|
|
2014 Revolver
|
—
|
|
|
300.0
|
|
|
Total revolving credit agreements
|
—
|
|
|
680.0
|
|
Term loans
|
|
|
|
|
|
*
|
2014 Term loan due December 5, 2019
|
463.8
|
|
|
488.8
|
|
Notes and Bonds
|
|
|
|
|
|
|
Coupon
|
Due
|
|
|
|
|
|
|
1.300%
|
November 8, 2016
|
(2)
|
|
—
|
|
|
500.0
|
|
*
|
4.500%
|
May 23, 2017
|
(3)
|
|
202.4
|
|
|
195.5
|
|
*
|
5.125%
|
December 12, 2017
|
(3)
|
|
337.3
|
|
|
325.8
|
|
|
2.300%
|
November 8, 2018
|
(2)
|
|
600.0
|
|
|
600.0
|
|
*
|
5.000%
|
May 23, 2019
|
(3)
|
|
134.9
|
|
|
130.3
|
|
|
3.500%
|
March 15, 2021
|
(4)
|
|
500.0
|
|
|
—
|
|
|
3.500%
|
December 15, 2021
|
(1)
|
|
500.0
|
|
|
500.0
|
|
*
|
5.105%
|
July 19, 2023
|
(3)
|
|
151.8
|
|
|
146.7
|
|
|
4.000%
|
November 15, 2023
|
(2)
|
|
800.0
|
|
|
800.0
|
|
|
3.900%
|
December 15, 2024
|
(1)
|
|
700.0
|
|
|
700.0
|
|
|
4.375%
|
March 15, 2026
|
(4)
|
|
700.0
|
|
|
—
|
|
|
5.300%
|
November 15, 2043
|
(2)
|
|
400.0
|
|
|
400.0
|
|
|
4.900%
|
December 15, 2044
|
(1)
|
|
400.0
|
|
|
400.0
|
|
|
Total notes and bonds
|
|
|
5,426.4
|
|
|
4,698.3
|
|
Other financing
|
4.1
|
|
|
86.0
|
|
Unamortized premium (discount), net
|
43.3
|
|
|
73.4
|
|
Deferred financing fees
|
(34.6
|
)
|
|
(36.6
|
)
|
Total borrowings outstanding
|
5,903.0
|
|
|
5,989.9
|
|
|
Current indebtedness
|
(265.0
|
)
|
|
(1,018.3
|
)
|
Total long-term debt less current portion
|
$
|
5,638.0
|
|
|
$
|
4,971.6
|
|
|
|
(1)
|
Discussed below collectively as the "2014 Notes."
|
|
|
(2)
|
Discussed below collectively as the "2013 Notes."
|
|
|
(3)
|
Debt assumed from Omega.
|
|
|
(4)
|
Discussed below collectively as the "2016 Notes."
|
|
|
*
|
Debt denominated in euros subject to fluctuations in the euro-to-U.S. dollar exchange rate.
|
We were in compliance with all covenants under our debt agreements as of
October 1, 2016
.
Revolving Credit Agreements
On
December 9, 2015
, our 100% owned finance subsidiary, Perrigo Finance Unlimited Company (formerly Perrigo Finance plc) ("Perrigo Finance"), entered into a
$750.0 million
revolving credit agreement (the "2015 Revolver"). On March 15, 2016, we used the proceeds of the long-term debt issuance described below under "2016 Notes" to repay the
$750.0 million
then outstanding under the 2015 Revolver and terminated the facility.
On
March 30, 2015
, we assumed a revolving credit facility with
€500.0 million
(
$544.5 million
) outstanding from Omega. On
April 8, 2015
, the
€500.0 million
(
$539.1 million
) outstanding under the assumed revolving credit facility was repaid and the facility was terminated.
Perrigo Company plc
- Item 1
Note 10
On
December 5, 2014
, Perrigo Finance entered into a
$600.0 million
revolving credit agreement, which we increased to
$1.0 billion
on March 30, 2015 (the "2014 Revolver"). On March 15, 2016, we used the proceeds of the long-term debt issuance described below under "2016 Notes" to repay the
$435.0 million
then outstanding under the 2014 Revolver. There were no borrowings outstanding under the 2014 Revolver as of
October 1, 2016
.
Term Loans
On
December 5, 2014
, Perrigo Finance entered into a term loan agreement consisting of a
€500.0 million
(
$614.3 million
) tranche, with the ability to draw an additional
€300.0 million
(
$368.6 million
) tranche, maturing December 5, 2019, and we entered into a
$300.0 million
term loan tranche maturing December 18, 2015, which we repaid in full on June 25, 2015. During the
nine months ended
October 1, 2016
, we made
$41.9 million
in scheduled principal payments on the euro-denominated term loan.
Notes and Bonds
2016 Notes
On
March 7, 2016
, Perrigo Finance issued
$500.0 million
in aggregate principal amount of
3.500%
senior notes due 2021 and
$700.0 million
in aggregate principal amount of
4.375%
senior notes due 2026 (together, the "2016 Notes") and received net proceeds of
$1.2 billion
after fees and market discount. Interest on the 2016 Notes is payable semiannually in arrears in March and September of each year, beginning in September 2016. The 2016 Notes are governed by a base indenture and a second supplemental indenture (collectively, the "2016 Indenture"). The 2016 Notes are fully and unconditionally guaranteed on a senior basis by Perrigo, and no other subsidiary of Perrigo guarantees the 2016 Notes. The proceeds were used to repay amounts borrowed under the 2015 Revolver and the 2014 Revolver, as mentioned above. There are no restrictions under the 2016 Notes on our ability to obtain funds from our subsidiaries. Perrigo Finance may redeem the 2016 Notes in whole or in part at any time for cash at the make-whole redemption prices described in the 2016 Indenture.
Notes and Bonds Assumed from Omega
In connection with the Omega acquisition, on
March 30, 2015
, we assumed:
|
|
•
|
$20.0 million
in aggregate principal amount of
6.190%
senior notes due
2016
, which was repaid on May 29, 2015 in full;
|
|
|
•
|
€135.0 million
(
$147.0 million
) in aggregate principal amount of
5.1045%
senior notes due
2023
(the "2023 Notes");
|
|
|
•
|
€300.0 million
(
$326.7 million
) in aggregate principal amount of
5.125%
retail bonds due
2017
;
€180.0 million
(
$196.0 million
) in aggregate principal amount of
4.500%
retail bonds due
2017
; and
€120.0 million
(
$130.7 million
) in aggregate principal amount of
5.000%
retail bonds due
2019
(collectively, the "Retail Bonds").
|
The fair value of the 2023 Notes and Retail Bonds
exceeded par value by
€93.6 million
(
$101.9 million
) on the date of the Omega acquisition. As a result, a fair value adjustment was recorded as part of the carrying value of the underlying debt and will be amortized as a reduction of interest expense over the remaining terms of the respective debt instruments. The adjustment does not affect cash interest payments.
2014 Notes
On
December 2, 2014
, Perrigo Finance issued
$500.0 million
in aggregate principal amount of
3.500%
senior notes due
2021
(the "2021 Notes”),
$700.0 million
in aggregate principal amount of
3.900%
senior notes due
2024
(the “2024 Notes”), and
$400.0 million
in aggregate principal amount of
4.900%
senior notes due
2044
(the “2044 Notes” and, together with the 2021 Notes and the 2024 Notes, the “2014 Notes”) and received net proceeds of
$1.6 billion
after fees and market discount. Interest on the 2014 Notes is payable semiannually in arrears in June and December of each year, beginning in June 2015. The 2014 Notes are governed by a base indenture and a first supplemental indenture (collectively, the "2014 Indenture"). The 2014 Notes are fully and unconditionally guaranteed on a senior unsecured basis by Perrigo, and no other subsidiary of Perrigo guarantees the 2014 Notes.
Perrigo Company plc
- Item 1
Note 10
There are no restrictions under the 2014 Notes on our ability to obtain funds from our subsidiaries. Perrigo Finance may redeem the 2014 Notes in whole or in part at any time for cash at the make-whole redemption prices described in the 2014 Indenture.
2013 Notes
On November 8, 2013, Perrigo Company issued
$500.0 million
aggregate principal amount of its 1.300% senior notes due 2016 (the "1.300% 2016 Notes"),
$600.0 million
aggregate principal amount of its 2.300% senior notes due 2018 (the "2018 Notes"),
$800.0 million
aggregate principal amount of its 4.000% senior notes due 2023 (the "4.000% 2023 Notes") and
$400.0 million
aggregate principal amount of its 5.300% senior notes due 2043 (the "2043 Notes" and, together with the 1.300% 2016 Notes, the 2018 Notes and the 4.000% 2023 Notes, the "2013 Notes") in a private placement with registration rights. We received net proceeds of
$2.3 billion
from the issuance of the 2013 Notes after fees and market discount. On September 29, 2016, we repaid all
$500.0 million
of the 1.300% 2016 Notes outstanding.
Interest on the 2013 Notes is payable semiannually in arrears in May and November of each year, beginning in May 2014. The 2013 Notes are governed by a base indenture and a first supplemental indenture (collectively, the "2013 Indenture"). The 2013 Notes are our unsecured and unsubordinated obligations, ranking equally in right of payment to all of our existing and future unsecured and unsubordinated indebtedness. The 2013 Notes are not entitled to mandatory redemption or sinking fund payments. We may redeem the 2013 Notes in whole or in part at any time for cash at the make-whole redemption prices described in the 2013 Indenture. The 2013 Notes were guaranteed on an unsubordinated, unsecured basis by the same entities that guaranteed our then-outstanding credit agreement until November 21, 2014, at which time the 2013 Indenture was amended to remove all guarantors.
Other Financing
Overdraft Facilities
On
March 30, 2015
, we assumed and repaid certain overdraft facilities totaling
€51.4 million
(
$56.0 million
) with the Omega acquisition. Our BCH segment uses overdraft facilities to increase the efficiency of its cash utilization and meet its short-term liquidity needs. We repaid the balance outstanding under the overdraft facilities during the
nine months ended
October 1, 2016
, but retain the ability to use the facilities in our day-to-day cash operations. The balance outstanding under the facilities was
$82.9 million
at
December 31, 2015
and is shown in the above table under "Other Financing".
Perrigo Company plc
- Item 1
Note 11
NOTE 11 –
EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY
Earnings per Share
A reconciliation of the numerators and denominators used in the basic and diluted earnings per share ("EPS") calculation is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 1,
2016
|
|
September 26,
2015
|
|
October 1,
2016
|
|
September 26,
2015
|
Numerator:
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
(1,255.2
|
)
|
|
$
|
112.6
|
|
|
$
|
(1,395.4
|
)
|
|
$
|
74.2
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average shares outstanding for basic EPS
|
143.3
|
|
|
146.3
|
|
|
143.2
|
|
|
144.4
|
|
Dilutive effect of share-based awards*
|
—
|
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
Weighted average shares outstanding for diluted EPS
|
143.3
|
|
|
146.9
|
|
|
143.2
|
|
|
145.0
|
|
|
|
|
|
|
|
|
|
Anti-dilutive share-based awards excluded from computation of diluted EPS*
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
* In the period of a net loss, diluted shares equal basic shares.
Shareholders' Equity
Shares
We issued shares related to the exercise and vesting of share-based compensation as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
October 1,
2016
|
|
September 26,
2015
|
|
October 1,
2016
|
|
September 26,
2015
|
185,000
|
|
|
154,000
|
|
|
283,000
|
|
|
246,000
|
|
Share Repurchases
On October 22, 2015, the Board of Directors approved a share repurchase plan of up to
$2.0 billion
, of which
$1.5 billion
is still available to be repurchased through December 31, 2018. We did not repurchase any shares under the share repurchase plan during the
nine months ended
October 1, 2016
.
NOTE 12 –
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Changes in our AOCI balances, net of tax were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
Fair value of derivative financial instruments, net of tax
|
|
Fair value of investment securities, net of tax
|
|
Post-retirement and pension liability adjustments, net of tax
|
|
Total AOCI
|
Balance at December 31, 2015
|
$
|
(4.4
|
)
|
|
$
|
(14.2
|
)
|
|
$
|
6.3
|
|
|
$
|
(3.2
|
)
|
|
$
|
(15.5
|
)
|
OCI before reclassifications
|
71.8
|
|
|
(3.7
|
)
|
|
17.1
|
|
|
0.3
|
|
|
85.5
|
|
Amounts reclassified from AOCI
|
—
|
|
|
0.2
|
|
|
1.3
|
|
|
—
|
|
|
1.5
|
|
Other comprehensive income (loss)
|
71.8
|
|
|
(3.5
|
)
|
|
18.4
|
|
|
0.3
|
|
|
87.0
|
|
Balance at October 1, 2016
|
$
|
67.4
|
|
|
$
|
(17.7
|
)
|
|
$
|
24.7
|
|
|
$
|
(2.9
|
)
|
|
$
|
71.5
|
|
Perrigo Company plc
- Item 1
Note 13
NOTE 13 –
INCOME TAXES
The effective tax rate for the
three months ended
October 1, 2016
was
20.1%
on a net loss compared to
14.8%
on net income for the
three months ended
September 26, 2015
. The effective tax rate for the
nine months ended
October 1, 2016
was
21.6%
on a net loss reported in the period compared to
60.3%
on net income for the
nine months ended
September 26, 2015
. For the three and nine months ended
October 1, 2016
, we have estimated income taxes using the annual effective tax rate method.
Income taxes recorded through July 2, 2016 were estimated using the discrete method. For the
three and nine months ended
ended
October 1, 2016
, we had significant changes to our estimates related to additional asset impairments recognized in the third quarter and therefore determined that estimating income taxes using the annual effective tax rate method was the more appropriate method for the period ending
October 1, 2016
.
Our tax rate is subject to adjustment over the balance of the fiscal year due to, among other things: income tax rate changes by governments; the jurisdictions in which our profits are determined to be earned and taxed; changes in the valuation of our deferred tax assets and liabilities; adjustments to estimated taxes upon finalization of various tax returns; adjustments based on differing interpretations of the applicable transfer pricing standards; changes in available tax credits, grants and other incentives; changes in stock-based compensation expense; changes in tax laws or the interpretation of such tax laws (for example, proposals for fundamental U.S. international tax reform); changes in U.S. GAAP; expiration of or the inability to renew tax rulings or tax holiday incentives; and the repatriation of earnings with respect to which we have not previously provided for taxes.
Israel passed legislation in January 2016, effective immediately, reducing the tax rate from
26.5%
to
25%
. The impact on our effective tax rate was minimal.
The United Kingdom passed legislation in September 2016, reducing the tax rate effective April 1, 2020, from
18%
to
17%
. We expect the impact on our effective tax rate to be minimal.
The total liability for uncertain tax positions was
$368.4 million
and
$334.7 million
as of
October 1, 2016
and
December 31, 2015
, respectively, before considering the federal tax benefit of certain state and local items.
We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. The total amount accrued for interest and penalties in the liability for uncertain tax positions was
$56.4 million
and
$52.1 million
as of
October 1, 2016
and
December 31, 2015
, respectively.
We file income tax returns in numerous jurisdictions and are therefore subject to audits by tax authorities. Our primary income tax jurisdictions are Ireland, the U.S., Israel, Belgium, France, and the U.K.
Although we believe that the 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 estimates or from historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on our 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.
The IRS audit of our fiscal years ended June 27, 2009 and June 26, 2010 had previously concluded with the issuance of a statutory notice of deficiency on August 27, 2014. While we had previously agreed on certain adjustments and made associated payments of
$8.0 million
(inclusive of interest) in November 2014, the statutory notice of deficiency asserted various additional adjustments, including transfer pricing adjustments. The statutory notice of deficiency's adjustments for fiscal years 2009 and 2010 asserted an incremental tax obligation of approximately
$68.9 million
, inclusive of interest and penalties. We disagree with the IRS’s positions asserted in the statutory notice of deficiency. To contest the IRS's adjustments, in January 2015 we paid the incremental tax obligation (a prerequisite to contesting the proposed adjustments in U.S. district court), and in June 2015, we filed an administrative request for a refund with the IRS. The payment was recorded during the three months ended March 28, 2015 as a deferred charge on the balance sheet given our anticipated action to recover this amount. The IRS subsequently denied our request for a refund. We anticipate filing a complaint in U.S. district court claiming a
Perrigo Company plc
- Item 1
Note 13
refund of the paid amounts prior to August 2017. An unfavorable resolution of this matter could have a material impact on our consolidated financial statements in future periods.
We have ongoing audits in multiple jurisdictions the resolution of which remains uncertain. These jurisdictions include, but are not limited to, the United States and Belgium. The IRS is auditing our fiscal years ended June 25, 2011 and June 30, 2012, and may make adjustments consistent with the adjustments made in the statutory notice of deficiency for fiscal years 2009 and 2010. In February 2016, the Belgium Tax Authority notified us that all Belgium locations will be audited for the years ended December 31, 2013 and December 31, 2014. At this time, we cannot predict the outcome of any audit or related litigation.
NOTE 14 –
COMMITMENTS AND 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 be estimated as of
October 1, 2016
, we have not recorded a loss reserve. If certain of these matters are determined against the Company, 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.
Securities Litigation
On May 18, 2016, a shareholder filed a securities case against the Company and our former CEO, Joseph Papa, in the District of New Jersey (
Roofers’ Pension Fund v. Papa, et al.)
. The plaintiff purports to represent a class of shareholders for the period from April 21, 2015 through May 11, 2016, inclusive. The complaint alleges violations of Securities Exchange Act sections 10(b) (and Rule 10b‑5) and 14(e) against both defendants and 20(a) control person liability against Mr. Papa. In general, the allegations concern the actions taken by the Company and the former executive to defend against the hostile takeover bid by Mylan in the period from April 21, 2015 through November 13, 2015. The plaintiff also alleges that we provided inadequate disclosure concerning alleged integration problems related to the Omega acquisition in the period from April 21, 2015 through May 11, 2016. The case is in an early stage. Four different plaintiff groups have sought appointment as lead plaintiff/lead counsel. The court will decide who will represent the purported class. Once the court has chosen a lead plaintiff, the plaintiff will likely file an amended complaint and the defendants will then have an opportunity to make a motion to dismiss the case.
On July 19, 2016, a shareholder filed a securities class action against the Company and our former CEO, Joseph Papa, in the District of New Jersey. (
Wilson v. Papa, et al
.) The plaintiff purports to represent a class of persons who sold put options on the Company shares between April 21, 2015 and May 11, 2016. In general, the allegations and the claims are the same as those made in the
Roofers' Pension Fund
case described above. Subsequently, this shareholder filed papers in the
Roofers' Pension Fund
case as one of four candidates seeking to be named lead plaintiff or co-lead plaintiff in that case. The
Wilson
plaintiff also filed a motion to have the
Wilson
case consolidated with the
Roofers' Pension Fund
case. The court has not yet acted on the motion to consolidate or the motion for appointment as lead plaintiff.
On May 22, 2016, shareholders filed a securities class action against the Company and five individual defendants: Mr. Papa, our former Executive Vice President and General Manager of the BCH segment Marc Coucke, our Chief Executive Officer John Hendrickson, and our Board members Gary Kunkle, Jr. and Laurie Brlas alleging violations of Israeli law in the District Court of Tel Aviv-Jaffa (
Schwieger et al. v. Perrigo Company plc, et al.).
On June 15, 2016, Perrigo filed a motion to stay the case pending the outcome of the securities class action pending in the New Jersey federal court. The plaintiffs did not oppose the motion. The Israeli court granted the motion on the same day, and the action is stayed.
Perrigo Company plc
- Item 1
Note 14
Eltroxin
During October and November 2011, nine applications to certify a class action lawsuit were filed in various courts in Israel related to Eltroxin, a prescription thyroid medication manufactured by a third party and distributed in Israel by our subsidiary, Perrigo Israel Agencies Ltd. The respondents included our subsidiaries, Perrigo Israel Pharmaceuticals Ltd. and/or Perrigo Israel Agencies Ltd., the manufacturers of the product, and various healthcare providers who provide healthcare services as part of the compulsory healthcare system in Israel.
One of the applications was dismissed and the remaining eight applications were consolidated into one application. The applications arose from the 2011 launch of a reformulated version of Eltroxin in Israel. The consolidated application generally alleges that the respondents: (a) failed to timely inform patients, pharmacists and physicians about the change in the formulation; and (b) failed to inform physicians about the need to monitor patients taking the new formulation in order to confirm patients were receiving the appropriate dose of the drug. As a result, claimants allege they incurred the following damages: (a) purchases of product that otherwise would not have been made by patients had they been aware of the reformulation; (b) adverse events to some patients resulting from an imbalance of thyroid functions that could have been avoided; and (c) harm resulting from the patients' lack of informed consent prior to the use of the reformulation.
Several hearings on whether or not to certify the consolidated application took place in December 2013 and January 2014. On May 17, 2015, the District Court certified the motion against Perrigo Israel Agencies Ltd. and dismissed it against the remaining respondents, including Perrigo Israel Pharmaceuticals Ltd.
On June 16, 2015, Perrigo submitted a motion for permission to appeal the decision to certify to the Israeli Supreme Court together with a motion to stay the proceedings of the class action until the motion for permission to appeal is adjudicated. Perrigo has filed its statement of defense to the underlying proceedings and the underlying proceedings have been stayed pending a decision on the motion to appeal.
During a July 11, 2016 hearing on Perrigo’s motion to appeal the certification decision, the court noted that permission should be granted to Perrigo's appeal given issues with the scope of the District Court's decision. The court ultimately recommended the parties pursue mediation, noting that no decision on Perrigo's motion to appeal will be made pending the results of the mediation. The parties are now engaged in the mediation process. At this stage, we cannot reasonably predict the outcome or the liability, if any, associated with this claim.
Tysabri
®
Product Liability Lawsuits
Perrigo and collaborator Biogen are co-defendants in product liability lawsuits arising out of the occurrence of Progressive Multifocal Leukoencephalopathy, a serious brain infection, and serious adverse events, including deaths, which occurred in patients taking Tysabri
®
. Perrigo and Biogen will each be responsible for 50% of losses and expenses arising out of any Tysabri
®
product liability claims. During calendar year 2016, one case in the U.S. was settled and two others were dismissed with prejudice. While the remaining lawsuits will be vigorously defended, management cannot predict how these cases will be resolved. Adverse results in one or more of these lawsuits could result in substantial judgments against the Company.
NOTE 15 –
COLLABORATION AGREEMENTS AND OTHER CONTRACTUAL ARRANGEMENTS
In May 2015, we entered into a development agreement wherein we transferred the ownership rights to two pharmaceutical products to a clinical stage development company to fund and conduct development activities for the products. We do not expect to incur any expense related to the development of either product. If the products are approved by the FDA, we will execute a buy-back agreement to purchase each product for a multiple of the development costs incurred. Based on the initial development budget for each product, the estimated purchase price for both products is approximately
$78.0 million
. If development costs exceed the initial budgeted amounts, the purchase price will increase but will not exceed approximately
$105.0 million
. If the products are approved by the FDA and we purchase the products, we estimate the acquisitions will occur in 2019 and 2020.
Perrigo Company plc
- Item 1
Note 15
In June 2016, we added an additional product to the May 2015 development agreement that is subject to similar buy-back terms if the product is approved by the FDA. The estimated purchase price for this additional product, based on the initial development budget, is approximately
$42.0 million
. If development costs exceed the initial budgeted amounts, the purchase price will increase, but will not exceed approximately
$57.0 million
. If the product is approved by the FDA and we purchase the product, we estimate the acquisition will occur in 2020. There can be no assurance that any such products will be approved by the FDA on the anticipated schedule or at all.
NOTE 16 –
RESTRUCTURING CHARGES
We periodically take action to reduce redundant expenses and improve operating efficiencies, typically in connection with business acquisitions. The following reflects our restructuring activity (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 1,
2016
|
|
September 26,
2015
|
|
October 1,
2016
|
|
September 26,
2015
|
Beginning balance
|
$
|
12.2
|
|
|
$
|
1.7
|
|
|
$
|
20.7
|
|
|
$
|
3.2
|
|
Additional charges
|
6.6
|
|
|
2.2
|
|
|
17.9
|
|
|
3.1
|
|
Payments
|
(8.6
|
)
|
|
(1.9
|
)
|
|
(33.3
|
)
|
|
(4.5
|
)
|
Non-cash adjustments
|
0.1
|
|
|
(0.7
|
)
|
|
5.0
|
|
|
(0.5
|
)
|
Ending balance
|
$
|
10.3
|
|
|
$
|
1.3
|
|
|
$
|
10.3
|
|
|
$
|
1.3
|
|
Restructuring activity includes severance, lease exit costs, and asset impairments. The charges incurred during the
three and nine months ended
October 1, 2016
were associated primarily with actions we took to streamline our organization as announced on October 22, 2015 and did not materially impact any one reportable segment. There were no other material restructuring programs in any of the periods presented. All charges are recorded in Restructuring expense. The remaining
$5.1 million
liability for employee severance benefits will be paid within the next year, while cash expenditures related to the remaining
$5.2 million
liability for lease exit costs will be incurred over the remaining terms of the applicable leases.
NOTE 17 –
SEGMENT INFORMATION
Our reporting segments are as follows:
|
|
•
|
CHC
is focused primarily on the global sale of OTC store brand products including cough, cold, allergy and sinus, analgesic, gastrointestinal, smoking cessation, infant formula and food, animal health, and diagnostic products.
|
|
|
•
|
BCH
develops, manufactures, markets and distributes many well-known European OTC brands in the natural health and vitamins, cough, cold and allergy, smoking cessation, personal care and derma-therapeutics, lifestyle, and anti-parasite categories.
|
|
|
•
|
Rx
develops, manufactures and markets a portfolio of generic and specialty pharmaceutical prescription drugs primarily for the U.S. and U.K. markets.
|
|
|
•
|
Specialty Sciences
is comprised primarily of royalties received from assets focused on the management of multiple sclerosis (Tysabri
®
).
|
We also have an
Other
reporting segment that consists of our API business, which does not meet the quantitative threshold required to be a separately reportable segment. Our segments reflect the way in which our chief operating decision maker reviews our operating results and allocates resources.
Perrigo Company plc
- Item 1
Note 17
The below tables show select financial measures by reporting segment (in millions):
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
October 1,
2016
|
|
December 31, 2015
|
CHC
|
|
$
|
3,873.8
|
|
|
$
|
4,007.8
|
|
BCH
|
|
4,460.2
|
|
|
6,324.0
|
|
Rx
|
|
3,304.0
|
|
|
3,015.5
|
|
Specialty Sciences
|
|
5,634.0
|
|
|
5,833.5
|
|
Other
|
|
195.6
|
|
|
213.1
|
|
Total
|
|
$
|
17,467.6
|
|
|
$
|
19,393.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
October 1, 2016
|
|
September 26, 2015
|
|
Net Sales
|
|
Operating Income (Loss)
|
|
Intangible Asset Amortization
|
|
Net Sales
|
|
Operating Income (Loss)
|
|
Intangible Asset Amortization
|
CHC
|
$
|
669.1
|
|
|
$
|
100.1
|
|
|
$
|
19.2
|
|
|
$
|
675.2
|
|
|
$
|
117.3
|
|
|
$
|
19.4
|
|
BCH
|
304.0
|
|
|
(1,684.3
|
)
|
|
38.9
|
|
|
302.2
|
|
|
4.4
|
|
|
36.3
|
|
Rx
|
267.4
|
|
|
77.9
|
|
|
30.7
|
|
|
260.3
|
|
|
91.0
|
|
|
18.6
|
|
Specialty Sciences
|
93.4
|
|
|
23.3
|
|
|
72.8
|
|
|
84.5
|
|
|
9.0
|
|
|
72.8
|
|
Other
|
21.0
|
|
|
(1.6
|
)
|
|
0.5
|
|
|
22.5
|
|
|
6.2
|
|
|
0.5
|
|
Unallocated
|
—
|
|
|
(30.6
|
)
|
|
—
|
|
|
—
|
|
|
(39.3
|
)
|
|
—
|
|
Total
|
$
|
1,354.9
|
|
|
$
|
(1,515.2
|
)
|
|
$
|
162.1
|
|
|
$
|
1,344.7
|
|
|
$
|
188.6
|
|
|
$
|
147.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
October 1, 2016
|
|
September 26, 2015
|
|
Net Sales
|
|
Operating Income (Loss)
|
|
Intangible Asset Amortization
|
|
Net Sales
|
|
Operating Income (Loss)
|
|
Intangible Asset Amortization
|
CHC
|
$
|
2,055.6
|
|
|
$
|
313.6
|
|
|
$
|
58.1
|
|
|
$
|
2,106.4
|
|
|
$
|
364.8
|
|
|
$
|
52.1
|
|
BCH*
|
1,015.3
|
|
|
(2,128.7
|
)
|
|
113.9
|
|
|
703.4
|
|
|
31.0
|
|
|
70.5
|
|
Rx
|
817.4
|
|
|
262.1
|
|
|
90.1
|
|
|
790.1
|
|
|
290.4
|
|
|
55.5
|
|
Specialty Sciences
|
271.3
|
|
|
49.7
|
|
|
218.3
|
|
|
250.1
|
|
|
21.0
|
|
|
218.4
|
|
Other
|
59.5
|
|
|
2.6
|
|
|
1.4
|
|
|
75.4
|
|
|
18.6
|
|
|
1.4
|
|
Unallocated
|
—
|
|
|
(80.0
|
)
|
|
—
|
|
|
—
|
|
|
(111.1
|
)
|
|
—
|
|
Total*
|
$
|
4,219.1
|
|
|
$
|
(1,580.7
|
)
|
|
$
|
481.8
|
|
|
$
|
3,925.4
|
|
|
$
|
614.7
|
|
|
$
|
397.9
|
|
|
|
*
|
The BCH segment was created on March 30, 2015 as a result of the Omega acquisition, thus data for the
nine months ended
September 26, 2015
includes only six months of results from operations attributable to Omega.
|