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Form 10-Q PERRIGO Co plc For: Apr 02

May 11, 2022 3:52 PM EDT

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prgo-20220402
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________________
 FORM 10-Q
_______________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: April 2, 2022

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 001-36353
_______________________________________________
Perrigo Company plc
(Exact name of registrant as specified in its charter)
_______________________________________________
Ireland Not Applicable
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)

The Sharp Building, Hogan Place, Dublin 2, Ireland D02 TY74
+353 1 7094000
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary shares, €0.001 par valuePRGONew York Stock Exchange
4.000% Notes due 2023PRGO23New York Stock Exchange
3.900% Notes due 2024PRGO24New York Stock Exchange
4.375% Notes due 2026PRGO26New York Stock Exchange
3.150% Notes due 2030
PRGO30New York Stock Exchange
5.300% Notes due 2043PRGO43New York Stock Exchange
4.900% Notes due 2044PRGO44New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
   Yes   No
As of May 6, 2022, there were 134,551,671 ordinary shares outstanding.



PERRIGO COMPANY PLC
FORM 10-Q
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Subsequent Events
PART II. OTHER INFORMATION



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our, or our industry’s actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions, future events or future performance contained in this report, including certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” "forecast," “predict,” “potential” or the negative of those terms or other comparable terminology.

The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company’s control, including: the effect of the coronavirus (COVID-19) pandemic and its variants and associated supply chain impacts on the Company’s business; general economic, credit, and market conditions; the impact of the war in Ukraine and any escalation thereof, including the effects of economic and political sanctions imposed by the United States, United Kingdom, European Union, and other countries related thereto; the outbreak or escalation of conflict in other regions where we do business; future impairment charges; customer acceptance of new products; competition from other industry participants, some of whom have greater marketing resources or larger market shares in certain product categories than the Company does; pricing pressures from customers and consumers; resolution of uncertain tax positions, including the Company’s appeal of the draft and final Notices of Proposed Assessment (“NOPAs”) issued by the U.S. Internal Revenue Service and the impact that an adverse result in any such proceedings would have on operating results, cash flows, and liquidity; pending and potential third-party claims and litigation, including litigation relating to the Company’s restatement of previously-filed financial information and litigation relating to uncertain tax positions, including the NOPAs; potential impacts of ongoing or future government investigations and regulatory initiatives; potential costs and reputational impact of product recalls or sales halts; the impact of tax reform legislation and/or changes in healthcare policy; the timing, amount and cost of any share repurchases; fluctuations in currency exchange rates and interest rates; the Company’s ability to achieve the benefits expected from the sale of its RX business and the risk that potential costs or liabilities incurred or retained in connection with that transaction may exceed the Company’s estimates or adversely affect the Company’s business or operations; the Company’s ability to achieve the benefits expected from the acquisition of Héra SAS ("HRA Pharma") and the risks that the Company’s synergy estimates are inaccurate or that the Company faces higher than anticipated integration or other costs in connection with the acquisition; risks associated with the integration of HRA Pharma, including the risk that growth rates are adversely affected by any delay in the integration of sales and distribution networks; the consummation and success of other announced and unannounced acquisitions or dispositions, and the Company’s ability to realize the desired benefits thereof; and the Company’s ability to execute and achieve the desired benefits of announced cost-reduction efforts and strategic and other initiatives. An adverse result with respect to the Company’s appeal of any material outstanding tax assessments or pending litigation, including securities or drug pricing matters, could ultimately require the use of corporate assets to pay such assessments, damages from third-party claims, and related interest and/or penalties, and any such use of corporate assets would limit the assets available for other corporate purposes. These and other important factors, including those discussed in our Form 10-K for the year ended December 31, 2021, this report under “Risk Factors” and in any subsequent filings with the United States Securities and Exchange Commission, may cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements in this report are made only as of the date hereof, and unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

TRADEMARKS, TRADE NAMES AND SERVICE MARKS

This report contains trademarks, trade names and service marks that are the property of Perrigo Company plc, as well as, for informational purposes, trademarks, trade names, and service marks that are the property of other organizations. Solely for convenience, certain trademarks, trade names, and service marks referred to in this report appear without the ®, ™ and SM symbols, but those references are not intended to indicate that we or the applicable owner, as the case may be, will not assert, to the fullest extent under applicable law, our or their rights to such trademarks, trade names, and service marks.
1

Perrigo Company plc - Item 1
PART I.     FINANCIAL INFORMATION

ITEM 1.        FINANCIAL STATEMENTS (UNAUDITED)

PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
 
 Three Months Ended
 April 2,
2022
April 3,
2021
Net sales$1,074.5 $1,010.0 
Cost of sales736.7 641.6 
Gross profit337.8 368.4 
Operating expenses
Distribution24.4 21.6 
Research and development29.3 31.1 
Selling135.6 135.5 
Administration122.3 127.1 
Restructuring3.6 1.7 
Other operating expense, net0.9  
Total operating expenses316.1 317.0 
Operating income21.7 51.4 
Interest expense, net35.8 32.0 
Other (income) expense, net(1.1)2.4 
Income (loss) from continuing operations before income taxes(13.0)17.0 
Income tax expense (benefit)(11.7)14.2 
Income (loss) from continuing operations(1.3)2.8 
Income (loss) from discontinued operations, net of tax(1.1)35.3 
Net income (loss)$(2.4)$38.1 
Earnings (loss) per share
Basic
Continuing operations$(0.01)$0.02 
Discontinued operations(0.01)0.27 
Basic earnings (loss) per share$(0.02)$0.29 
Diluted
Continuing operations$(0.01)$0.02 
Discontinued operations(0.01)0.26 
Diluted earnings (loss) per share$(0.02)$0.28 
Weighted-average shares outstanding
Basic134.0 133.2 
Diluted134.0 134.6 

See accompanying Notes to the Condensed Consolidated Financial Statements.
2

Perrigo Company plc - Item 1
PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
Three Months Ended
April 2,
2022
April 3,
2021
Net income (loss)$(2.4)$38.1 
Other comprehensive income (loss):
Foreign currency translation adjustments(24.6)(111.6)
Change in fair value of derivative financial instruments, net of tax10.4 (6.0)
Change in post-retirement and pension liability, net of tax(6.3)(0.7)
Other comprehensive income (loss), net of tax(20.5)(118.3)
Comprehensive income (loss)$(22.9)$(80.2)

See accompanying Notes to the Condensed Consolidated Financial Statements.

3

Perrigo Company plc - Item 1
PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
(unaudited)

April 2,
2022
December 31,
2021
Assets
Cash and cash equivalents$1,965.5 $1,864.9 
Accounts receivable, net of allowance for credit losses of $7.1 and $7.2, respectively
679.3 652.9 
Inventories1,022.4 1,020.2 
Prepaid expenses and other current assets268.3 305.8 
Current assets held for sale 16.1 
Total current assets3,935.5 3,859.9 
Property, plant and equipment, net846.3 864.1 
Operating lease assets195.7 166.9 
Goodwill and indefinite-lived intangible assets2,975.9 3,004.7 
Definite-lived intangible assets, net2,053.7 2,146.1 
Deferred income taxes6.7 6.5 
Other non-current assets375.7 377.5 
Total non-current assets6,454.0 6,565.8 
Total assets$10,389.5 $10,425.7 
Liabilities and Shareholders’ Equity
Accounts payable$479.6 $411.2 
Payroll and related taxes88.6 118.5 
Accrued customer programs132.3 125.6 
Other accrued liabilities270.8 279.4 
Accrued income taxes5.4 16.5 
Current indebtedness4.6 603.8 
Current liabilities held for sale 32.9 
Total current liabilities981.3 1,587.9 
Long-term debt, less current portion3,510.6 2,916.7 
Deferred income taxes238.9 239.3 
Other non-current liabilities554.2 530.1 
Total non-current liabilities4,303.7 3,686.1 
Total liabilities5,285.0 5,274.0 
Contingencies - Refer to Note 15
Shareholders’ equity
Controlling interests:
Preferred shares, $0.0001 par value per share, 10 shares authorized
  
Ordinary shares, €0.001 par value per share, 10,000 shares authorized
7,018.9 7,043.2 
Accumulated other comprehensive income15.0 35.5 
Retained earnings (accumulated deficit)(1,929.4)(1,927.0)
Total shareholders’ equity5,104.5 5,151.7 
Total liabilities and shareholders' equity$10,389.5 $10,425.7 
Supplemental Disclosures of Balance Sheet Information
Preferred shares, issued and outstanding
  
Ordinary shares, issued and outstanding
134.6 133.8 

See accompanying Notes to the Condensed Consolidated Financial Statements.
4

Perrigo Company plc - Item 1
PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions, except per share amounts)
(unaudited)
 Ordinary Shares
Issued
Accumulated
Other
Comprehensive
Income
Retained
Earnings
(Accumulated Deficit)
Total
 SharesAmount
Balance at December 31, 2020133.1 $7,118.2 $395.0 $(1,858.1)$5,655.1 
Net income— — — 38.1 38.1 
Other comprehensive loss— — (118.3)— (118.3)
Restricted stock plan0.6 — — — — 
Compensation for stock options— 0.4 — — 0.4 
Compensation for restricted stock— 24.6 — — 24.6 
Cash dividends, $0.24 per share
— (32.6)— — (32.6)
Shares withheld for payment of employees' withholding tax liability(0.2)(9.3)— — (9.3)
Balance at April 3, 2021133.5 $7,101.3 $276.7 $(1,820.0)$5,558.0 

 Ordinary Shares
Issued
Accumulated
Other
Comprehensive
Income
Retained
Earnings
(Accumulated Deficit)
Total
 SharesAmount
Balance at December 31, 2021133.8 $7,043.2 $35.5 $(1,927.0)$5,151.7 
Net income (loss)— — — (2.4)(2.4)
Other comprehensive loss— — (20.5)— (20.5)
Restricted stock plan1.2 — — — — 
Compensation for restricted stock— 26.3 — — 26.3 
Cash dividends, $0.26 per share
— (34.2)— — (34.2)
Shares withheld for payment of employees' withholding tax liability(0.4)(16.4)— — (16.4)
Balance at April 2, 2022134.6 $7,018.9 $15.0 $(1,929.4)$5,104.5 

See accompanying Notes to the Condensed Consolidated Financial Statements.
5

Perrigo Company plc - Item 1
PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months Ended
 April 2,
2022
April 3,
2021
Cash Flows From (For) Operating Activities
Net income (loss)$(2.4)$38.1 
Adjustments to derive cash flows:
Depreciation and amortization69.5 90.4 
Loss (Gain) on sale of business1.4  
Share-based compensation26.3 25.0 
Loss (Gain) on sale of assets(5.8) 
Restructuring charges3.6 1.7 
Deferred income taxes5.1 (21.9)
Amortization of debt premium(0.2)(0.7)
Other non-cash adjustments, net(17.5)7.9 
Subtotal80.0 140.5 
Increase (decrease) in cash due to:
Accounts receivable(38.1)(30.3)
Inventories(10.5)(83.2)
Prepaid expenses(0.1)(14.7)
Accounts payable72.6 18.5 
Payroll and related taxes(31.8)(45.9)
Accrued customer programs8.9 (42.7)
Accrued liabilities23.7 8.5 
Accrued income taxes(33.9)27.0 
Other, net 8.3 22.5 
Subtotal(0.9)(140.3)
Net cash from (for) operating activities79.1 0.2 
Cash Flows From (For) Investing Activities
Proceeds from royalty rights1.4 1.4 
Asset acquisitions (70.3)
Additions to property, plant and equipment(20.3)(45.4)
Net proceeds from sale of businesses58.7  
Proceeds from sale of assets22.9  
Other investing, net 0.3 
Net cash from (for) investing activities62.7 (114.0)
Cash Flows From (For) Financing Activities
Cash dividends(34.2)(32.6)
Other financing, net(17.7)(10.7)
Net cash from (for) financing activities(51.9)(43.3)
Effect of exchange rate changes on cash and cash equivalents(3.7)(3.9)
Net increase (decrease) in cash and cash equivalents86.2 (161.0)
Cash and cash equivalents of continuing operations, beginning of period1,864.9 631.5 
Cash and cash equivalents held for sale, beginning of period14.4 10.0 
Less cash and cash equivalents held for sale, end of period (9.6)
Cash and cash equivalents of continuing operations, end of period$1,965.5 $470.9 

See accompanying Notes to the Condensed Consolidated Financial Statements.

6

Perrigo Company plc - Item 1
Note 1


NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Our vision is to make lives better by bringing Quality, Affordable Self-Care Products that consumers trust everywhere they are sold. We are a leading provider of over-the-counter ("OTC") health and wellness solutions that are designed to enhance individual well-being.

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 Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation of the unaudited Condensed Consolidated Financial Statements have been included and include our accounts and the accounts of all majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Segment Reporting

Our reporting and operating segments are as follows:

Consumer Self-Care Americas ("CSCA") comprises our consumer self-care business (OTC, infant formula, and oral care categories, and contract manufacturing) in the U.S., and Canada, and until it was disposed on March 9, 2022, previously included our Mexico and Brazil-based OTC businesses ("Latin America businesses").
Consumer Self-Care International ("CSCI") comprises our consumer self-care business in Europe and Australia, which are primarily branded, and our store brand business in the United Kingdom and parts of Europe and Asia.

We previously had an RX segment, which was comprised of our prescription pharmaceuticals business in
the U.S., and other pharmaceuticals and diagnostic business in Israel, which businesses have been divested. Following the divestiture, there were no substantial assets or operations left in this segment. The RX segment was reported as Discontinued Operations in 2021, and is presented as such for all periods in this report (refer to Note 8).

Non-U.S. Operations

We translate our non-U.S. dollar-denominated operations’ assets and liabilities into U.S. dollars at current
rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the
reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in the cumulative
translation account, a component of Accumulated other comprehensive income (loss) ("AOCI"). Gains or losses
from foreign currency transactions are included in Other (income) expense, net.

7

Perrigo Company plc - Item 1
Note 1

Allowance for Credit Losses
Expected credit losses on trade receivables and contract assets are measured collectively by geographic location. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and for reasonable and supportable forecasts. Historical credit loss experience provides the primary basis for estimation of expected credit losses. Adjustments to historical loss information may be made for significant changes in a geographic location’s economic conditions. Receivables that do not share risk characteristics are evaluated on an individual basis. These receivables are not included in the collective evaluation.
The allowance for credit losses is a valuation account that is deducted from the instruments’ cost basis to present the net amount expected to be collected. Trade receivables and contract assets are charged off against the allowance when the balance is no longer deemed collectible.
The following table presents the allowance for credit losses activity (in millions):
Three Months Ended
April 2,
2022
April 3,
2021
Balance at beginning of period$7.2 $6.5 
Provision for credit losses, net0.3 2.9 
Receivables written-off(0.8)(0.2)
Recoveries collected  
Currency translation adjustment0.4 (0.1)
Balance at end of period$7.1 $9.1 

NOTE 2 – REVENUE RECOGNITION

Revenue is recognized when or as a customer obtains control of promised products. The amount of revenue recognized reflects the consideration we expect to be entitled to receive in exchange for these products.

Disaggregation of Revenue

We generated net sales in the following geographic locations(1) (in millions):
Three Months Ended
April 2,
2022
April 3,
2021
U.S.$683.1 $611.3 
Europe(2)
351.7 355.3 
All other countries(3)
39.7 43.4 
Total net sales$1,074.5 $1,010.0 

(1) The net sales by geographic locations is derived from the location of the entity that sells to a third party.
(2) Includes Ireland net sales of $6.6 million for the three months ended April 2, 2022, and $4.5 million for the three months ended April 3, 2021.
(3) Includes net sales generated primarily in Mexico, Australia and Canada.
8

Perrigo Company plc - Item 1
Note 2

Product Category
        
The following is a summary of our net sales by category (in millions):
Three Months Ended
April 2,
2022
April 3,
2021
CSCA(1)
Upper respiratory$152.8 $118.6 
Nutrition127.2 92.2 
Digestive health118.6 118.4 
Pain and sleep-aids102.9 95.1 
Oral care70.4 75.0 
Healthy lifestyle68.2 76.7 
Skincare and personal hygiene48.5 55.3 
Vitamins, minerals, and supplements7.7 7.8 
Other CSCA(2)
13.7 1.4 
Total CSCA710.0 640.5 
CSCI
Skincare and personal hygiene101.9 107.0 
Upper respiratory61.4 42.9 
Pain and sleep-aids51.7 49.0 
Vitamins, minerals, and supplements47.9 59.0 
Healthy lifestyle42.7 50.3 
Oral care24.4 25.5 
Digestive health9.2 8.5 
Other CSCI(3)
25.3 27.3 
Total CSCI364.5 369.5 
Total net sales$1,074.5 $1,010.0 

(1) Includes net sales from our OTC contract manufacturing business.
(2) Consists primarily of product sales and royalty income related to supply and distribution agreements, diagnostic products and other miscellaneous or otherwise uncategorized product lines and markets, none of which is greater than 10% of the segment net sales.
(3) Consists primarily of liquid licensed products, our distribution business and other miscellaneous or otherwise uncategorized product lines and markets, none of which is greater than 10% of the segment net sales.

While the majority of revenue is recognized at a point in time, certain of our product revenue is recognized over time. Customer contracts recognized over time exist predominately in contract manufacturing arrangements, which occur in both the CSCA and CSCI segments. Contract manufacturing revenue was $70.8 million for the three months ended April 2, 2022, and $63.1 million for the three months ended April 3, 2021.

We also recognize a portion of the store brand OTC product revenues in the CSCA segment over time; however, the timing difference between over time and point in time revenue recognition for store brand contracts is not significant due to the short time period between the customization of the product and shipment or delivery.

Contract Balances

The following table provides information about contract assets from contracts with customers (in millions):
Balance Sheet LocationApril 2,
2022
December 31,
2021
Short-term contract assetsPrepaid expenses and other current assets$32.5 $40.2 
9

Perrigo Company plc - Item 1
Note 3

NOTE 3 – ACQUISITIONS AND DIVESTITURES
Divestitures During the Three Months Ended April 2, 2022

On March 9, 2022, we completed the sale of our Latin America businesses to Advent International for total consideration of $23.9 million, consisting of $5.4 million in cash, installment receivables due 12 and 18 months from completion totaling $11.3 million based on the Mexican peso exchange rate at the time of sale, and contingent consideration of $7.2 million based on the Brazilian real exchange rate at the time of sale. The sale resulted in a pre-tax loss of $1.4 million, net of professional fees, recorded in Other operating expense, net on the Condensed Statements of Operations.

On March 24, 2022, we completed the sale of ScarAway®, a leading U.S. OTC scar management brand, to Alliance Pharmaceuticals Ltd. for cash consideration of $20.7 million. The sale resulted in a pre-tax gain of $3.6 million recorded in our CSCA segment in Other operating expense, net on the Condensed Statements of Operations.

Acquisitions During the Year Ended December 31, 2021

Héra SAS (“HRA Pharma”) Acquisition Agreement

On September 8, 2021, we and our wholly-owned subsidiary Habsont Unlimited Company (the "Purchaser"), entered into a Put Option Agreement to acquire certain holding companies holding all of the outstanding equity interests of HRA Pharma from funds affiliated with private equity firms Astorg and Goldman Sachs Asset Management (collectively, the "Sellers"). Pursuant to the Put Option Agreement, following completion of the works council consultation process required under French law, the selling shareholders exercised their put option right under the Put Option Agreement and, on October 20, 2021, the Company, the Purchaser and the Sellers entered into a Securities Sale Agreement in the form previously agreed by the parties (the “Purchase Agreement”). Pursuant to the terms and subject to the conditions set forth in the Purchase Agreement, the Purchaser has agreed to acquire certain holding companies holding all of the outstanding equity interests of HRA Pharma from the Sellers for cash. The transaction values HRA Pharma at €1.8 billion, or approximately $1.9 billion, based on exchange rates at the time the transaction closed on April 29, 2022 on an enterprise value basis and using a lockbox mechanism set forth in the Purchase Agreement. Operating results are expected to be reported within both our CSCA and CSCI segments. Refer to Note 18 - Subsequent Events for additional details.

Divestitures During the Year Ended December 31, 2021

RX business

Refer to Note 8 - Discontinued Operations for details on the sale of the RX business.

10

Perrigo Company plc - Item 1
Note 4

NOTE 4 – GOODWILL AND INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill, by reportable segment, were as follows (in millions):

December 31,
2021
Purchase accounting adjustments ImpairmentsCurrency translation adjustmentsApril 2,
2022
CSCA(1)
$1,902.4 $ $ $(0.4)$1,902.0 
CSCI(2)
1,097.0   (28.3)1,068.7 
Total goodwill$2,999.4 $ $ $(28.7)$2,970.7 

(1) We had no accumulated goodwill impairments as of April 2, 2022 and $6.1 million as of December 31, 2021.
(2) We had accumulated goodwill impairments of $878.4 million as of April 2, 2022 and as of December 31, 2021.

CSCA Reporting Unit Goodwill

On May 18, 2021, we announced a definitive agreement to sell our Latin America businesses within our CSCA segment, to Advent International. As a result, we prepared a goodwill impairment test. We determined the carrying value of this business exceeded the fair value and recorded an impairment of $6.1 million within our CSCA segment during the three months ended July 3, 2021.

Intangible Assets

Intangible assets and related accumulated amortization consisted of the following (in millions):
 April 2, 2022December 31, 2021
 GrossAccumulated
Amortization
GrossAccumulated
Amortization
Indefinite-lived intangibles:
Trademarks, trade names, and brands$3.5 $— $3.5 $— 
In-process research and development1.7 — 1.8 — 
Total indefinite-lived intangibles$5.2 $— $5.3 $— 
Definite-lived intangibles:
Distribution and license agreements and supply agreements$82.3 $56.6 $73.2 $56.9 
Developed product technology, formulations, and product rights298.7 194.4 300.2 191.4 
Customer relationships and distribution networks1,777.0 891.2 1,820.7 887.8 
Trademarks, trade names, and brands1,438.3 400.4 1,482.3 394.2 
Non-compete agreements2.1 2.1 2.1 2.1 
Total definite-lived intangibles$3,598.4 $1,544.7 $3,678.5 $1,532.4 
Total intangible assets$3,603.6 $1,544.7 $3,683.8 $1,532.4 

We recorded amortization expense of $48.5 million for the three months ended April 2, 2022, and $53.2 million for the three months ended April 3, 2021.

On March 17, 2022, we announced that we received final approval from the U.S. Food and Drug Administration for the over-the-counter use of Nasonex® 24HR Allergy (mometasone furoate monohydrate 50mcg). The approval triggered a $10.0 million milestone payment to the licensor. We accrued the milestone payment and capitalized it as a definite-lived intangible asset, and will make the milestone payment subsequent to April 2, 2022.

11

Perrigo Company plc - Item 1
Note 5

NOTE 5 – INVENTORIES

Major components of inventory were as follows (in millions):

 
April 2,
2022
December 31,
2021
Finished goods$540.9 $549.2 
Work in process263.1 251.9 
Raw materials218.4 219.1 
Total inventories$1,022.4 $1,020.2 

NOTE 6 – FAIR VALUE MEASUREMENTS

The table below summarizes the valuation of our financial instruments carried at fair value by the applicable pricing categories (in millions):
April 2, 2022December 31, 2021
Level 1Level 2Level 3Level 1Level 2Level 3
Measured at fair value on a recurring basis:
Assets:
Investment securities
$0.2 $ $ $0.4 $ $ 
Foreign currency forward contracts
 4.3   5.7  
Foreign currency option contracts 1.5   5.0  
Total assets$0.2 $5.8 $ $0.4 $10.7 $ 
Liabilities:
Cross-currency swap$ $ $ $ $13.8 $ 
Foreign currency forward contracts 3.4   2.4  
Total liabilities$ $3.4 $ $ $16.2 $ 
Measured at fair value on a non-recurring basis:
Assets:
Goodwill(1)
$ $ $ $ $ $71.7 
Total assets$ $ $ $ $ $71.7 
Liabilities
Liabilities held for sale, net(2)
$ $ $ $ $ $16.8 
Total liabilities$ $ $ $ $ $16.8 

(1)     During the year ended December 31, 2021, goodwill with a carrying value of $81.7 million was written down to a fair value of $71.7 million
(2)     We measured the net assets held for sale for impairment purposes and recorded a total impairment of $162.2 million, resulting in a net liability held for sale balance as of December 31, 2021.

There were no transfers within Level 3 fair value measurements during the three months ended April 2, 2022 or the year ended December 31, 2021.

Non-recurring Fair Value Measurements

The non-recurring fair values represent only those assets whose carrying values were adjusted to fair value during the reporting period.
12

Perrigo Company plc - Item 1
Note 6


Fixed Rate Long-term Debt    

Our fixed rate long-term debt consisted of the following (in millions):
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