Company: PRGO
Filing Date: 2025-05-07
Form Type: 10-Q
Source: 0001585364-25-000056
Chunk: 254

Company: PERRIGO Co plc
Filing Date: 2025-05-07
Form: 10-Q
Item: Item 15
Chunk 254
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Perrigo Company plc - Item 2Executive Overview

changes. Any causes of market size contraction could reduce our sales or erode our operating margin and consequently reduce our net earnings and cash flows. As a result of these dynamic conditions and uncertainties, we have modified, and may further modify, our operations and strategic initiatives, including by adjusting our investment priorities, reallocating resources, or delaying specific initiatives, such as deferring capital expenditures on the Nutrition Network Optimization project and seeking further working capital improvements.

Current uncertainties arising from increased tariffs on imported products could have an adverse effect on our Company. In 2025, the U.S. government announced new or additional tariffs on products imported from all countries and individualized reciprocal tariffs on countries with which the U.S. has the largest trade deficits. While most of the individualized reciprocal tariffs have been suspended, as of May 7, 2025, there remains a global 10% baseline tariff on goods imported into the United States and a 125% individualized reciprocal tariff on products imported from China (both subject to sectoral exclusions, including for pharmaceutical materials). Accordingly, while the effective tariffs on our products vary, many of our non-pharmaceutical products imported from China, including in our Oral Care product category, are subject to a 145% tariff.

Based on current assessments, excluding any potential impact from pharmaceutical tariffs that may cover ingredients used in the manufacturing of OTC products, the Company estimates a gross increase to global cost of goods sold in 2025 beginning in the fourth quarter of more than 1%, or approximately $30 million to $40 million, and approximately 5.5%, or approximately $145 million to $155 million, on a full-year basis (high-single digit percentage to CSCA), 80% of which stems from CSCA's Oral Care product category, as approximately 50% of procured goods in the category are currently sourced from China. The Company plans to offset these impacts through a combination of strategic pricing actions, insourcing to its U.S.-based manufacturing facilities and other supply chain actions. 

In addition, our interest expense is impacted by the overall global economic and interest rate environment. We manage interest rate risk through our capital structure and the use of interest rate swaps to fix the interest rate on greater than 90% of our outstanding debt. 

For additional information, refer to Item 1A - Risk Factors. 

Inflationary Costs and Supply Chain

Supply chain disruptions continue in specific categories such as agricultural commodities due to climate impacts