Company: PRGO
Filing Date: 2025-08-06
Form Type: 10-Q
Source: 0001585364-25-000122
Chunk: 262

Company: PERRIGO Co plc
Filing Date: 2025-08-06
Form: 10-Q
Item: Item 15
Chunk 262
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 rates of tariffs.

Based on current assessments, excluding any potential impact from pharmaceutical tariffs that may cover ingredients used in the manufacturing of OTC products, we estimate a gross increase to global cost of goods sold in 2025 beginning in the fourth quarter of approximately $10 million to $20 million, and approximately $50 million to $60 million, on a full-year basis. We plan to offset these impacts through a combination of strategic pricing actions, insourcing to our U.S.-based manufacturing facilities and other supply chain actions.

In addition, our interest expense can be 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. 

Inflationary Costs and Supply Chain

Supply chain disruptions continue in specific categories such as agricultural commodities due to climate impacts, and supply chain shortages continue due to the Middle East Conflict. Inflationary pressures are still a factor on cost in major economies globally across food, energy and labor. We previously experienced employment vacancies and attrition in the labor market which negatively impacted productivity and drove the need for wage rate increases and other retention benefits. We implemented a series of actions to substantially mitigate these and other inflationary cost pressures, such as strategic pricing and our Supply Chain Reinvention Program. Benefits from our actions have substantially offset the impacts of inflation to date. However, future supply chain disruptions and inflationary pressures from the continuation of the conflicts between Russia and Ukraine, any escalating conflicts in the Middle East and neighboring regions and the impact of tariff and trade policy are uncertain. 

Infant Formula

As part of its efforts to prevent supply interruptions and risk of Cronobacter spp. illnesses associated with powdered infant formula, in March 2023, the Federal Drug Administration ("FDA") released an “Immediate National Strategy to Increase the Resiliency of the U.S. Infant Formula Market” and issued a letter to the powdered infant formula industry to share information to assist the industry in improving the microbiologic safety of powdered infant formula. In response to those changes, we made considerable investments in all our infant formula manufacturing sites, including enhanced cleaning and sanitation protocols, enhancements to our environmental monitoring programs, enhanced quality oversight and increased the number of quality and operations personnel. These changes have resulted in higher costs and lower manufacturing output and production yields across our infant formula network.

As previously disclosed, we received a warning letter from the FDA on August 30, 2023 relating to the Perrigo Wisconsin infant formula