PERRIGO Co plc
For the period ended Mar 29, 2025. Filed May 7, 2025.
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Mar 29, 2025 · Filed May 7, 2025
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Derivative Instruments and Hedging Activities
NOTE 10 -DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Interest Rate Swaps
We have $1.2 billion notional amount of variable-to-fixed interest rate swaps used to economically hedge interest rate risk on a substantial portion of our Term A and Term B Loans (as defined in Note 11).The interest rate swaps were designated as cash flow hedges to fix the variable interest rate. As a designated cash flow hedge, changes in fair value will be deferred in AOCI and recognized within Interest expense, net when interest is paid on the Term A and Term B Loans.
As of March 29, 2025, the designated instruments used to hedge the exposure to variable interest on the Senior Secured Credit Facilities totaling $1.2 billion notional amount of which $487.5 million and $712.5 million notional amount are effective through April 2027 and April 2029, respectively.
In September 2024, we reduced our variable debt outstanding on the Senior Secured Credit Facilities, as a result, we discontinued hedge accounting on $300.0 million notional amount of variable-to-fixed interest rate swaps. To economically offset the impact of these undesignated instruments, we entered into $300.0 million notional amount of
Note 10
offsetting fixed-for-variable interest rate swaps. Changes in fair value of the derivative instruments are recognized in Interest expense, net.
As of March 29, 2025, the undesignated economically offsetting interest rate swaps totaling$600.0 million are effective through April 2029.
Cross-currency Swaps
We have $2.3 billion notional amount fixed-for-fixed cross currency interest rate swaps designated as net investment hedges to hedge the EUR currency exposure of our investment in European operations. As designated net investment hedges, gains and losses related to the EUR spot exchange rate will be deferred within the Cumulative Translation Adjustment, a component of AOCI, and recognized in the Condensed Consolidated Statements of Operations when the hedged EUR net investment is substantially liquidated. Gains and losses on excluded components (e.g., interest differentials) will be recorded in Interest expense, net on a systematic and rational basis.
As of March 29, 2025, the fixed-for-fixed cross currency swaps total $2.3 billion notional amount, of which $515.0 million, $1.0 billion, $300.0 million, $315.0 million, and $200.0 million notional amount is effective through March 2026, April 2027, September 2028, December 2030, and March 2033, respectively.
Other Hedging Instruments
The €350.0 million 2032 Notes (as defined in Note 11) are designated as a net investment hedge on our investment in European operations.
As a designated net investment hedge, gains and losses related to the EUR spot exchange rate will be deferred within the Cumulative Translation Adjustment, a component of AOCI, and recognized in the Condensed Consolidated Statements of Operations when the hedged EUR net investment is substantially liquidated.
Foreign Currency Forwards
Notional amounts of foreign currency forward contracts were as follows (in millions):
| March 29, 2025 | December 31, 2024 | |
|---|---|---|
| British Pound (GBP) | $109.6 | $101.3 |
| United States Dollar (USD) | 74.4 | 97.9 |
| European Euro (EUR) | 52.6 | 54.9 |
| Swedish Krona (SEK) | 51.1 | 66.5 |
| Danish Krone (DKK) | 46.9 | 57.8 |
| Polish Zloty (PLZ) | 30.8 | 26.7 |
| Chinese Yuan (CNH) | 24.7 | 31.9 |
| Canadian Dollar (CAD) | 19.8 | 35.5 |
| Norwegian Krone (NOK) | 9.3 | 6.8 |
| Hungarian Forint (HUF) | 8.2 | 6.3 |
| Other(1) | 18.1 | 16.9 |
| Total | $445.5 | $502.5 |
(1) Number consists of various currencies notional amounts, none of which individually exceed $10.0 million in either year presented.
The maximum term of our forward currency exchange contracts is 60 months.
Note 10
Effects of Derivatives on the Financial Statements
The below tables indicate the effects of all derivative instruments on the Condensed Consolidated Financial Statements. All amounts exclude income tax effects. The balance sheet location and gross fair value of our derivative instruments were as follows (in millions):
| Balance Sheet Location | March 29, 2025 | December 31, 2024 | |
|---|---|---|---|
| Designated derivative assets: | |||
| Foreign currency forward contracts | Prepaid expenses and other current assets | $1.3 | $2.1 |
| Cross-currency swaps | Other non-current assets | — | 14.2 |
| Interest rate swap agreements | Interest rate swap agreements | 5.3 | 9.3 |
| Total designated derivative assets | $6.6 | $25.6 | |
| Non-designated derivative assets: | |||
| Foreign currency forward contracts | Prepaid expenses and other current assets | $0.8 | $3.4 |
| Total non-designated derivatives | $0.8 | $3.4 | |
| Designated derivative liabilities: | |||
| Foreign currency forward contracts | Other accrued liabilities | $3.0 | $4.1 |
| Cross-currency swaps | Other accrued liabilities | 51.1 | — |
| Cross-currency swaps | Other non-current liabilities | 47.4 | 46.8 |
| Interest rate swap agreements | Other non-current liabilities | 17.5 | 9.0 |
| Total designated derivative liabilities | $119.0 | $59.9 | |
| Non-designated derivative liabilities: | |||
| Foreign currency forward contracts | Other accrued liabilities | $2.6 | $1.5 |
| Interest rate swap agreements | Other non-current liabilities | 12.9 | 13.6 |
| Total non-designated derivative liabilities | $15.5 | $15.1 | |
The amounts of (income)/expense recognized in earnings related to our non-designated derivatives on the Condensed Consolidated Statements of Operations were as follows (in millions):
| Three Months Ended | |||
|---|---|---|---|
| Non-Designated Derivatives | Income Statement Location | March 29, 2025 | March 30, 2024 |
| Foreign currency forward contracts | Other (income) expense, net | $(4.8) | $(2.1) |
| Interest rate swap agreements | Interest expense, net | $0.2 | $— |
Note 10
The following tables summarize the effect of derivative instruments designated as hedging instruments in AOCI (in millions):
| Gain or (Loss) Reclassified from AOCI into Earnings | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Related to Amounts Included in Effectiveness Testing · Related to Amounts Excluded from Effectiveness Testing | |||||||||
| Amount of Gain or (Loss) Recognized in OCI(1) · Location of Gain or (Loss) · Amount Reclassified(2) · Location of Gain or (Loss) · Amount Reclassified(2) | |||||||||
| Cash flow hedges | |||||||||
| Interest rate swap agreements | $(11.1) | Interest expense, net | $4.7 | Interest expense, net | $— | ||||
| Foreign currency forward contracts | 0.5 | Net sales | — | Net sales | (0.1) | ||||
| Cost of sales | 0.4 | Cost of sales | 0.1 | ||||||
| Total Cash flow hedges | $(10.6) | $5.1 | $— | ||||||
| Net investment hedges | |||||||||
| Cross-currency swaps | $59.9 | Interest expense, net | $9.4 | ||||||
| Euro Notes Due 2032 | (16.4) | ||||||||
| Total Net investment hedges | $43.5 | $9.4 | |||||||
| Cash flow hedges | |||||||||
| Interest rate swap agreements | $33.5 | Interest expense, net | $7.8 | Interest expense, net | $— | ||||
| Foreign currency forward contracts | 0.9 | Net sales | 0.1 | Net sales | (0.3) | ||||
| Cost of sales | — | Cost of sales | (0.2) | ||||||
| Total Cash flow hedges | $34.4 | $7.9 | $(0.5) | ||||||
| Net investment hedges | |||||||||
| Cross-currency swaps | $48.9 | Interest expense, net | $7.3 | ||||||
(1) Net income of $25.3 million is expected to be reclassified out of AOCI into earnings during the next 12 months.
(2) For additional details about the effect of the amounts reclassified from AOCI refer to Note 13.
Note 10
The classification and amount of gain/(loss) recognized in earnings on fair value and hedging relationships were as follows (in millions):
| Net Sales | Cost of Sales | Interest Expense, net | Other (Income) Expense, net | |
|---|---|---|---|---|
| Total amounts of income and expense line items presented on the Condensed Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded | $1,043.9 | $651.6 | $39.0 | $(0.4) |
| Gain (loss) on cash flow hedging relationships | ||||
| Foreign currency forward contracts | ||||
| Amount of gain or (loss) reclassified from AOCI into earnings | $— | $0.4 | $— | $— |
| Amount excluded from effectiveness testing recognized using a systematic and rational amortization approach | $(0.1) | $0.1 | $— | $— |
| Interest rate swap agreements | ||||
| Amount of gain or (loss) reclassified from AOCI into earnings | $— | $— | $4.7 | $— |
| Total amounts of income and expense line items presented on the Condensed Consolidated Statements of Operations in which the effects of fair value or cash flow hedges are recorded | $1,082.1 | $724.4 | $43.0 | $0.4 |
| Gain (loss) on cash flow hedging relationships | ||||
| Foreign currency forward contracts | ||||
| Amount of gain or (loss) reclassified from AOCI into earnings | $0.1 | $— | $— | $— |
| Amount excluded from effectiveness testing recognized using a systematic and rational amortization approach | $(0.3) | $(0.2) | $— | $— |
| Interest rate swap agreements | ||||
| Amount of gain or (loss) reclassified from AOCI into earnings | $— | $— | $7.8 | $— |
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