Company: PRGO
Filing Date: 2025-05-07
Form Type: 10-Q
Source: 0001585364-25-000056
Chunk: 52

Company: PERRIGO Co plc
Filing Date: 2025-05-07
Form: 10-Q
Item: Item 1
Chunk 52
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 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, and with supply chain shortages due to the Middle East Conflict. Inflationary pressures are still a factor on cost in major economies globally across food, energy and labor. We continue to experience employment vacancies and attrition in the labor market which negatively impacts productivity and has driven 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 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 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 facility, which was acquired in November 2022. While we worked to resolve the issues raised in the August 30 letter, on November 29, 2023, we received notice from the FDA of additional inspection observations relating to Perrigo Wisconsin. Consistent with our commitment to quality, we temporarily