What changed in PERRIGO Co plc's 10-K — 2023 vs 2024

Item 1. Note 1 8 for additional information. On December 20, 2023 the IRS Examination Team confirmed its application of interest rates agreed with IRS Appeals to all remaining tax years with deductible interest expense relating to such intercompany debt.

RESULTS OF OPERATIONS Currency Translation Currency translation effects described below represent estimates of the net differences between translation of foreign currency transactions into U.S. dollars for the year ended December 31, 2023 at the average exchange rates for the reporting period and average exchange rates for the year ended December 31, 2022. 39 Perrigo Company plc - Item 7 Consolidated CONSOLIDATED Consolidated Financial Results Year Ended (in millions, except percentages) December 31, 2023 December 31, 2022 Net sales $ 4,655.6 $ 4,451.6 Gross profit $ 1,680.4 $ 1,455.4 Gross profit % 36.1 % 32.7 % Operating income $ 151.9 $ 78.9 Operating income % 3.3 % 1.8 % Net sales increased $204.0 million, or 4.6%, primarily due to: • $195.9 million increase from our acquisitions, comprised of ten additional months of Gateway (acquired on November 1, 2022) inclusive of an unfavorable impact of $9.2 million from a voluntary product recall and four additional months of HRA Pharma (acquired on April 29, 2022) inclusive of an unfavorable impact of $19.8 million due to distributor transitions as part of the integration strategy to capture synergies from the acquisition of HRA Pharma; and • $73.8 million increase, or 1.7%, due primarily to approximately $209 million in strategic pricing actions and higher sales volume in the Skin Care, Healthy Lifestyle and Upper Respiratory product categories.

E-commerce and new products also contributed to category growth.

The increase was partially offset by lower net sales stemming from the evolving FDA regulatory expectations for infant formula manufacturing, declines in legacy nutrition in the CSCA segment due primarily to purposeful SKU prioritization actions to focus capacity on higher margin products and $9.4 million due to distributor transition in addition to the impacts noted above; partially offset by • $49.9 million decrease from exited product lines and $19.3 million decrease from the divestitures of the Latin American businesses and ScarAway ® brand asset in the prior year.

Operating income increased $73.0 million, or 92.5%, due to: • $225.0 million increase in gross profit driven by higher net sales flow through and the benefits from our supply chain reinvention program primarily within CSCA.

These were partially offset by lower infant formula productivity within U.S. nutrition stemming from the evolving FDA regulatory expectations for infant formula manufacturing and unfavorable cost of goods sold inflation primarily in Europe.

Gross profit as a percentage of net sales increased 340 basis points compared to the prior year driven by strategic pricing actions, benefits from purposeful SKU prioritization actions and higher margin new products.

These positive initiatives were partially offset by higher cost of goods sold inflation in the E.U. and lower manufacturing productivity in U.S. nutrition. • $152.0 million increase in operating expenses due primarily to $90.0 million in goodwill impairment charges related to the Rare Diseases reporting unit in the CSCI segment, the acquisition of HRA Pharma and Gateway, and higher employee expenses, partially offset by decreased acquisition and integration expenses compared to the prior year period. 40 Perrigo Company plc - Item 7 CSCA CONSUMER SELF-CARE AMERICAS Segment Financial Results Year Ended (in millions, except percentages) December 31, 2023 December 31, 2022 Net sales $ 2,962.3 $ 2,925.9 Gross profit $ 908.4 $ 787.2 Gross profit % 30.7 % 26.9 % Operating income $ 389.6 $ 366.1 Operating income % 13.2 % 12.5 % Net sales increased $36.4 million, or 1.2% primarily due to: • $127.6 million increase from our acquisitions, comprised of ten additional months of Gateway (acquired on November 1, 2022) inclusive of an unfavorable impact of $9.2 million from a voluntary product recall and four additional months of HRA Pharma (acquired on April 29, 2022); partially offset by • $38.1 million decrease, or 1.3%, due primarily to lower net sales stemming from the evolving FDA regulatory expectations for infant formula manufacturing and declines in legacy nutrition due primarily to purposeful SKU prioritization actions to focus capacity on higher margin products, partially offset by approximately $100 million of strategic pricing actions in addition to new products; and • $32.5 million decrease from exited product lines and $19.3 million decrease from the divestitures of the Latin American businesses and the ScarAway ® brand asset in the prior year.

CSCA net sales by product category were as follows: Sales Year Ended (in millions, except percentages) December 31, 2023 December 31, 2022 $ Change % Change Nutrition $ 563.2 $ 564.6 $ (5.4) (1.0) % Upper Respiratory 559.2 520.4 42.8 8.2 % Digestive Health 505.3 495.5 9.8 2.0 % Pain and Sleep-Aids 396.4 412.2 (15.8) (3.8) % Oral Care 313.9 312.9 1.0 0.3 % Healthy Lifestyle 311.7 288.9 22.8 7.9 % Skin Care 196.2 187.8 8.4 4.5 % Women's Health 46.9 45.2 1.7 3.8 % Vitamins, Minerals, and Supplements ("VMS") 17.5 27.9 (10.4) (37.3) % Other CSCA 52.0 70.5 (18.5) (26.2) % Total CSCA $ 2,962.3 $ 2,925.9 $ 36.4 1.2% Sales in each category were driven primarily by: • Nutrition: Net sales of $563.2 million increased 8.2% driven by the Gateway acquisition and strong growth in contract infant formula, partially offset by lower net sales in legacy infant formula and lower manufacturing productivity stemming from the FDA's evolving industry guidelines on infant formula manufacturing; • Upper Respiratory: Net sales of $559.2 million decreased 1.0% due primarily to lower net sales of allergy products driven by a weaker and later start to the allergy season compared to the prior year, a voluntary OTC product recall, the divested Latin American businesses and exited product lines.

These factors were partially offset by higher net sales of cough cold products, led by store brand Guaifenesin-based offerings, and the new product launch of store brand Cough Relief Liquid Honey ; 41 Perrigo Company plc - Item 7 CSCA • Digestive Health: Net sales of $505.3 million increased 2.0% due primarily to increased manufacturing capacity and demand for Polyethylene Glycol 3350 as well as new products, including Omeprazole Mini Capsules and Polyethylene Glycol 3350 Orange ; partially offset by the divested Latin American businesses; • Pain and Sleep-Aids: Net sales of $396.4 million decreased 3.8% due primarily to purposeful SKU prioritization actions in adult analgesic offerings to focus capacity on higher margin products as well as the divested Latin American businesses, partially offset by new products, including store brand Dual Action Acetaminophen 250mg and Ibuprofen 125mg Tablets, and higher demand for children's analgesics products; • Oral Care: Net sales of $313.9 million increased 0.3% due primarily to the normalization of supply chain disruptions that impacted net sales in the prior year and strong consumer demand for oral care products, partially offset by purposeful SKU prioritization actions; • Healthy Lifestyle: Net sales of $311.7 million increased 7.9% due primarily to higher volumes and market share gains in smoking cessation products; • Skin Care: Net sales of $196.2 million increased 4.5% due primarily to the addition of HRA Pharma brands, including Mederma ® and Compeed ® , partially offset by the divested Latin American businesses and ScarAway ® brand, and exited product lines; • Women's Health: Net sales of $46.9 million increased 3.8% due primarily to the addition of HRA Pharma brands, including ella ® , partially offset by purposeful SKU prioritization actions in feminine hygiene; • VMS and Other: Net sales of $69.5 million decreased 29.4% due primarily to the divested Latin American businesses and purposeful SKU prioritization actions.

Operating income increased $23.5 million, or 6.4%, due primarily to: • $121.2 million increase in gross profit driven by higher net sales flow through and the benefits from our supply chain reinvention program; partially offset by lower infant formula manufacturing productivity in U.S. nutrition stemming from the evolving FDA regulatory expectations for infant formula manufacturing.

Gross profit as a percentage of net sales increased 380 basis points compared to the prior year driven by strategic pricing actions and benefits from purposeful SKU prioritization actions to focus capacity on higher margin products, partially offset by lower manufacturing productivity in U.S. nutrition. • $97.7 million increase in operating expenses due primarily to the addition of HRA Pharma and Gateway as well as higher advertising and promotion costs on branded business, and higher administration costs, partially offset by reduced distribution costs compared to the prior year.

CONSUMER SELF-CARE INTERNATIONAL Segment Financial Results Year Ended (in millions, except percentages) December 31, 2023 December 31, 2022 Net sales $ 1,693.3 $ 1,525.7 Gross profit $ 772.0 $ 668.2 Gross profit % 45.6 % 43.8 % Operating income (loss) $ (35.2) $ (30.0) Operating income % (2.1) % (2.0) % Net sales increased $167.6 million, or 11.0% primarily due to: • $111.9 million, or 7.4%, net increase due primarily to approximately $108 million of strategic pricing actions, and higher sales volume in certain product categories driven by new products, partially offset by an unfavorable impact of $9.4 million due to distributor transitions as part of the integration strategy to capture synergies after the twelve month anniversary of the HRA Pharma acquisition; and 42 Perrigo Company plc - Item 7 CSCI • $68.3 million increase from twelve months HRA Pharma in the current year versus eight months in the prior year, inclusive of an unfavorable impact of $19.8 million due to distributor transitions as part of the integration strategy to capture synergies from the acquisition of HRA Pharma in addition to the impacts noted above; partially offset by • $17.5 million decrease from exited product lines.

CSCI net sales by product category were as follows: Sales Year Ended (in millions, except percentages) December 31, 2023 December 31, 2022 (1) $ Change % Change Skin Care $ 372.5 $ 334.6 $ 37.9 11.3 % Upper Respiratory 299.1 268.7 30.4 11.3 % Healthy Lifestyle 225.7 209.7 16.0 7.6 % Pain and Sleep-Aids 222.9 200.2 22.7 11.3 % VMS 185.5 183.9 1.6 0.9 % Women's Health 119.7 96.1 23.6 24.6 % Oral Care 101.5 94.8 6.7 7.1 % Digestive Health 41.0 35.5 5.5 15.5 % Other CSCI 125.4 102.2 23.2 22.7 % Total CSCI $ 1,693.3 $ 1,525.7 $ 167.6 11.0% (1) We updated our global reporting product categories as a result of our product portfolio reconfiguration.

These product category updates have been adjusted retroactively to reflect the changes and have no impact on historical financial position, results of operations, or cash flows. Refer to Item 8. Note 2 .

Sales in each category were driven primarily by: • Skin Care: Net sales of $372.5 million increased 11.3%, inclusive of a 3.0% unfavorable effect of currency translation, driven primarily by the addition of HRA brands, including Compeed ® , and strong sales within the Sebamed and ACO brand lines; • Upper Respiratory: Net sales of $299.1 million increased 11.3%, inclusive of a 1.5% favorable effect of currency translation, due primarily to increased demand for cough/cold products, including Bronchostop and Coldrex stemming from a 2022/2023 strong cough/cold and flu season, and higher net sales of allergy products, including Beconase ; • Healthy Lifestyle: Net sales of $225.7 million increased 7.6%, inclusive of a 1.1% favorable effect of currency translation, due primarily to higher net sales of anti-parasite offerings, including Paranix and Jungle Formula , and higher demand for smoking cessation products, partially offset by lower category consumption in weight loss, impacting XLS Medical ; • Pain & Sleep-Aids: Net sales of $222.9 million increased 11.3%, inclusive of a 1.8% favorable effect of currency translation, due primarily to higher demand for Solpadeine , U.K. store brand products and higher net sales for Nytol ; • VMS : Net sales of $185.5 million increased 0.9%, inclusive of a 2.2% favorable effect of currency translation, due primarily to increased net sales of Davitamon and Abtei , partially offset by lower category consumption; • Women's Health : Net sales of $119.7 million increased 24.6%, inclusive of a 2.0% favorable effect of currency translation, due primarily to the addition of HRA brands, including ellaOne ® and NorLevo ® ; • Oral Care: Net sales of $101.5 million increased 7.1% inclusive of a 1.4% favorable effect of currency translation, due primarily to strong growth of store brand oral care products; • Digestive Health and Other: Net sales of $166.4 million increased 20.8%, inclusive of a 1.9% unfavorable effect of currency translation, due primarily to the addition of the HRA Pharma Rare Diseases portfolio in the Other category and higher net sales of store brand digestive health products and distribution brands. 43 Perrigo Company plc - Item 7 CSCI Operating income decreased $5.2 million, or 17.3%, due to: • $103.8 million increase in gross profit driven by higher net sales flow through and the addition of HRA Pharma, partially offset by cost of goods sold inflation.

Gross profit as a percentage of net sales increased 180 basis points due primarily to strategic pricing actions and the acquisition of higher margin HRA products partially offset by less favorable product mix and higher cost of goods sold inflation; and • $109.0 million increase in operating expenses due primarily to $90.0 million in goodwill impairment charges related to the Rare Diseases reporting unit in the CSCI segment and higher selling and administrative expenses as a result of twelve months of HRA Pharma expenses in the current year versus eight months in the prior year, partially offset by lower operating expenses driven by HRA cost synergies realized as part of the integration actions and lower restructuring expenses compared to the prior year.

Unallocated Expenses Unallocated expenses are comprised of certain corporate services not allocated to our reporting segments and are recorded above Operating income on the Consolidated Statements of Operations.

Unallocated expenses were as follows (in millions): Year Ended December 31, 2023 December 31, 2022 $ 202.4 $ 257.2 The decrease of $54.8 million in unallocated expenses during the year ended December 31, 2023 compared to the prior year period was due primarily to a decrease in acquisition and integration expenses associated with the HRA Pharma and Gateway acquisitions.

Interest expense, net, Other (income) expense, net and (Gain) Loss on extinguishment of debt (Consolidated) Year Ended (in millions) December 31, 2023 December 31, 2022 Interest expense, net $ 173.8 $ 156.0 Other (income) expense, net $ (10.4) $ 53.1 (Gain) loss on extinguishment of debt $ (3.2) $ 8.9 Interest Expense, net The $17.8 million increase during the year ended December 31, 2023 compared to the prior year was due primarily to an increase in interest expense associated with an increase in outstanding borrowings under our Senior Secured Credit Facilities.

Other (Income) Expense, Net The $63.5 million decrease in expense during the year ended December 31, 2023 compared to the prior year was due primarily to unfavorable changes in revaluation of foreign currency expense associated with the acquisition of HRA Pharma and termination expense of the forward currency options related to the acquisition of HRA Pharma in the prior year.

(Gain) Loss on extinguishment of debt The $3.2 million gain on extinguishment of debt during the year ended December 31, 2023 is related to the debt refinancing and tender offer activity during the fourth quarter of 2023.

The $8.9 million loss on extinguishment of debt during the year ended December 31, 2022 is related to the write-off of certain new and previously deferred financing fees and make whole payments due in connection with repaying outstanding borrowings prior to maturity (refer to Item 8.

Note 12 ). 44 Perrigo Company plc - Item 7 Unallocated, Interest, Other, and Taxes Income Taxes (Consolidated) The effective tax rates were as follows: Year Ended December 31, 2023 December 31, 2022 47.2 % 5.9 % The effective tax rate on the pre-tax loss for the year ended December 31, 2023, increased when compared to the effective tax rate on the pre-tax loss for the year ended December 31, 2022, primarily due to audit settlements in the current year and changes in the jurisdictional mix of earnings, offset by the non-deductibility of certain charges and expenses in 2023.

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES Overview We finance our operations with internally generated funds, supplemented by credit arrangements with third parties and capital market financing. We routinely monitor current and expected operational requirements and financial market conditions to evaluate other available financing sources including term and revolving bank credit and securities offerings.

In determining our future capital requirements, we regularly consider, among other factors, known trends and uncertainties, such as the wars in Ukraine and Israel, inflation and interest rates, the status of material contingent liabilities, recent financial market volatility, the COVID-19 pandemic and other uncertainties.

Subject to relevant restrictions under our debt agreements, our cash requirements for other purposes and other factors management deems relevant, we may from time to time use available funds to redeem, repurchase or refinance our debt in privately negotiated or open market transactions, by tender offer or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms we deem appropriate (which may be below par).

Based on the foregoing, management believes that our operations and borrowing resources are sufficient to provide for our short-term and long-term capital requirements, as described below.

However, an adverse result with respect to our appeal of any material outstanding tax assessments or litigation, including securities or drug pricing matters and product liability cases, damages resulting from third-party claims, and related interest and/or penalties, could ultimately require the use of corporate assets to pay such assessments, and any such use of corporate assets would limit the assets available for other corporate purposes.

As such, we continue to evaluate the impact of the above factors on liquidity and may determine that modifications to our capital structure are appropriate if market conditions deteriorate, favorable capital market opportunities become available, or any change in conditions relating to the wars in Ukraine and Israel, inflation and interest rates, the status of material contingent liabilities, financial market volatility, the COVID-19 pandemic or other uncertainties have a material impact on our capital requirements.

Cash, Cash Equivalents and Restricted Cash Year Ended (in millions) December 31, 2023 December 31, 2022 Cash, cash equivalents and restricted cash $ 751.3 $ 600.7 Working capital (1) $ 935.9 $ 1,041.8 (1) Working capital represents current assets less current liabilities, excluding cash, cash equivalents and restricted cash, assets and liabilities held for sale, and excluding current indebtedness.

Cash, cash equivalents, restricted cash, cash flows from operations, and borrowings available under our credit facilities are expected to be sufficient to finance our liquidity and capital expenditures in both the short and long term.

Although our lenders have made commitments to make funds available to us in a timely fashion under our revolving credit agreements and overdraft facilities, if economic conditions worsen or new information becomes publicly available impacting the institutions’ credit rating or capital ratios, these lenders may be unable or unwilling to lend money pursuant to our existing credit facilities.

Should our outlook on liquidity requirements change substantially from current projections, we may seek additional sources of liquidity in the future. 45 Perrigo Company plc - Item 7 Financial Condition, Liquidity and Capital Resources Cash Flows The following table includes summarized cash flow activities: Year Ended (in millions) December 31, 2023 December 31, 2022 $ Change Net cash from operating activities $ 405.5 $ 307.3 $ 98.2 Net cash (for) from investing activities (77.5) (1,958.6) 1,881.1 Net cash (for) from financing activities (187.2) 421.6 (608.8) Effect of exchange rate changes on cash and cash equivalents 9.8 (48.9) 58.7 Net increase (decrease) in cash and cash equivalents $ 150.6 $ (1,278.6) $ 1,429.2 Net cash from Operating Activities The $98.2 million increase in operating cash inflow was primarily driven by an increase in cash flow from the change in net earnings after adjustments, partially offset by higher working capital needs, primarily related to timing of sales and payments received and made.

Net cash (for) from Investing Activities The $1.9 billion increase in cash from investing cash flow was due primarily to the absence of $1.9 billion cash paid in the prior year for the acquisitions of HRA Pharma and a $16.5 million increase in proceeds from royalty rights primarily driven by higher milestone income related to legacy royalty rights in the current year.

Capital expenditures totaled approximately $101.7 million in 2023. We anticipate 2024 capital expenditures to be between $130 million and $180 million, depending on the progression of infant formula plant investments, our Supply Chain Reinvention Program, Project Energize, and project timelines related to manufacturing productivity and efficiency upgrades, software and technology initiatives, and general plant maintenance.

We expect to fund these estimated capital expenditures with funds from operating cash flows. Net cash (for) from Financing Activities The $608.8 million decrease in financing cash flow was due primarily to a decrease in cash of $1.6 billion from the issuance of our Senior Secured Credit Facilities and related financing fees in the prior year.

We refinanced a portion of the 3.900% Notes due in 2024 with a $300 million fungible add on to the existing 2022 Term B Loan in December 2023 (refer to Item 8. Note 12 ). Long term debt payments and payments for debt issuance costs decreased $666.2 million compared to the prior year.

Additionally, we increased our dividend payment by $7.3 million compared to the prior year. Share Repurchases In October 2018, our Board of Directors authorized up to $1.0 billion of share repurchases with no expiration date, subject to the Board of Directors’ approval of the pricing parameters and amount that may be repurchased under each specific share repurchase program.

We did not repurchase any shares during the year ended December 31, 2023 or December 31, 2022. The future repurchase of shares, if any, is subject to the discretion of our Board of Directors. Dividends In January 2003, the Board of Directors adopted a policy of paying quarterly dividends.