Perrigo Company plc — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report; the supplied filing text does not provide clear standalone Q4 consolidated results. Perrigo is a self-care products company operating through Consumer Self-Care Americas (CSCA) and Consumer Self-Care International (CSCI). Figures below are in U.S. dollars.
Financial performance and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Net sales | $4,655.6 million | $4,451.6 million |
| Gross profit / margin | $1,680.4 million / 36.1% | $1,455.4 million / 32.7% |
| Operating income / margin | $151.9 million / 3.3% | $78.9 million / 1.8% |
| Net loss | $12.7 million | $140.6 million |
| Net cash from operating activities | $405.5 million | $307.3 million |
| Capital expenditures | $101.7 million | $96.4 million |
Operating cash flow less capital expenditures was approximately $303.8 million in 2023; this is a simple calculation, not a company-reported free-cash-flow measure. Cash, cash equivalents and restricted cash were $751.3 million at year-end, versus $600.7 million a year earlier. Working capital, as defined by the company, was $935.9 million, down from $1,041.8 million.
Total borrowings were $4.073 billion, compared with $4.107 billion at year-end 2022; $440.6 million was classified as current indebtedness. Net interest expense was $173.8 million, up from $156.0 million. Perrigo reported compliance with its debt covenants and no borrowings under its $1.0 billion revolving credit facility at year-end.
Changes versus the prior year
- Sales increased 4.6%. The filing attributes growth to acquisitions, strategic pricing and higher volume in some categories, partly offset by exited product lines, divestitures, and lower infant-formula output and legacy nutrition sales.
- Gross margin expanded 340 basis points, primarily reflecting pricing, product mix and supply-chain program benefits. Operating income nearly doubled, although results included a $90.0 million goodwill impairment charge in Rare Diseases.
- CSCA sales rose 1.2% to $2.962 billion, with operating income of $389.6 million. CSCI sales rose 11.0% to $1.693 billion, but the segment recorded an operating loss of $35.2 million, including the Rare Diseases impairment.
- Operating cash flow increased $98.2 million. The prior-year investing cash outflow included substantial acquisition spending; 2023 investing cash outflow was $77.5 million.
- Net loss improved from $140.6 million to $12.7 million. The company still reported a loss from continuing operations of $4.4 million. The effective tax rate was 47.2% on a pre-tax loss, with tax audit settlements and the mix of earnings among the factors cited.
Outlook, management commentary and risks
- Infant formula: FDA inspection observations and evolving regulatory expectations led to enhanced cleaning, testing and quality procedures, lower output and a temporary production pause at the Wisconsin facility; it returned to production after a plant-wide reset. The company estimates $35 million to $45 million of 2024 cash costs for remediation and expects infant-formula results in 2024 to be below 2023 levels. Other U.S. formula facilities were undergoing or scheduled for resets.
- Cost and efficiency programs: The Supply Chain Reinvention Program targets $200 million to $300 million of annual run-rate savings by the end of 2028, with estimated implementation costs of $350 million to $570 million. Perrigo reported about $40 million of net savings in 2023, partly offset by about $28 million of restructuring expense. Project Energize, launched in 2024, targets $140 million to $170 million of annualized pre-tax savings by 2026; the company expects to reinvest $40 million to $60 million and incur $140 million to $160 million of charges and investments. The program is expected to reduce total roles by approximately 6%.
- Investment: 2024 capital expenditures are forecast at $130 million to $180 million, depending in part on formula-plant investment and strategic program timing. No clear consolidated earnings or revenue guidance for 2024 is provided in the supplied text.
- Product opportunity: FDA approval made Opill the first birth-control pill approved for OTC use in the U.S.; Perrigo expected to launch it in Q1 2024. Execution, consumer uptake and regulatory requirements remain relevant uncertainties.
- Debt and financing: In December 2023 Perrigo borrowed $300 million under its Term B facility and used the proceeds to tender for $300 million of 2024 notes. Credit ratings at year-end included Ba2 (negative) from Moody’s, BB (stable) from S&P and BB+ (negative) from Fitch. A 1% rise in interest rates was estimated to add about $3.6 million of 2024 annual interest expense.
- Contingencies and other exposures: Risks include generic-drug pricing and securities litigation, product-liability claims, tax disputes, foreign exchange, inflation, supply-chain disruption and geopolitical events. Litigation accruals were $66.9 million, with a separate $28.7 million insurance-recovery receivable. Uncertain tax liabilities, including interest and penalties, were approximately $314.2 million; timing and ultimate outcomes remain uncertain.
- Management cited inflation, interest rates, foreign exchange, the Ukraine and Israel-Hamas conflicts, customer concentration and regulatory change as factors that could affect performance. Walmart represented 11.8% of 2023 sales. Management stated liquidity resources were sufficient for short- and long-term needs, subject to risks and contingencies.
Important facts for investors to verify
- Whether the 2024 formula-plant resets restore production, yields and sales, and whether remediation costs remain within the $35 million to $45 million estimate.
- Actual savings, implementation costs and execution progress for the Supply Chain Reinvention Program and Project Energize against their stated targets.
- CSCI’s path back to operating profitability, including the performance of Rare Diseases and realization of HRA Pharma integration benefits.
- Debt maturities, refinancing terms, interest costs, credit ratings and covenant headroom, especially given the remaining 2024 notes and leverage.
- Developments in material tax disputes and litigation, insurance coverage and potential payments; the filing says some possible losses cannot be reasonably estimated.
- Opill’s launch and commercial performance, and any standalone fourth-quarter results or updated 2024 guidance not set out clearly in the supplied filing text.