0001193125-14-419138.txt : 20141120 0001193125-14-419138.hdr.sgml : 20141120 20141120064500 ACCESSION NUMBER: 0001193125-14-419138 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20141120 ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20141120 DATE AS OF CHANGE: 20141120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERRIGO Co plc CENTRAL INDEX KEY: 0001585364 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 STATE OF INCORPORATION: L2 FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-36353 FILM NUMBER: 141237423 BUSINESS ADDRESS: STREET 1: TREASURY BUILDING STREET 2: LOWER GRAND CANAL STREET CITY: DUBLIN STATE: L2 ZIP: 2 BUSINESS PHONE: 269-673-8451 MAIL ADDRESS: STREET 1: 515 EASTERN AVENUE CITY: ALLEGAN STATE: MI ZIP: 49010 FORMER COMPANY: FORMER CONFORMED NAME: PERRIGO Co Ltd DATE OF NAME CHANGE: 20130828 8-K 1 d823877d8k.htm 8-K 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 20, 2014

 

 

PERRIGO COMPANY PLC

(Exact name of registrant as specified in its charter)

 

 

Commission file number 001-36353

 

Ireland   Not Applicable

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland   Not Applicable
(Address of principal executive offices)   (Zip Code)

+353 1 7094000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 8.01 Other Events.

As previously announced in the Current Report on Form 8-K filed by Perrigo Company plc (the “Company”) with the Securities and Exchange Commission on November 12, 2014, the Company entered into an Agreement for the Sale and Purchase of 685,348,257 Shares (the “Share Purchase Agreement”), dated as of November 6, 2014, with Alychlo NV (“Alychlo”) and Holdco I BE NV (“Holdco” and, together with Alychlo, the “Sellers”), pursuant to which, upon the terms and subject to the conditions set forth in the Share Purchase Agreement, the Company has agreed to purchase (the “Acquisition of Omega”) from the Sellers 685,348,257 shares of Omega Pharma Invest NV (“Omega”), a limited liability company incorporated under the laws of Belgium, representing 95.77% of the issued and outstanding share capital of Omega. The remaining shares of Omega (30,243,983 shares) will be held by Omega as treasury shares. Subject to the satisfaction (or waiver of) certain closing conditions, the Acquisition of Omega is expected to be completed during the third quarter of the Company’s fiscal 2015.

In consideration for the Shares, the Company will pay the Sellers EUR 1,845,983,131 in cash (the “Cash Consideration”) and issue to Alychlo 5,397,711 shares of the Company (the “Non-Cash Consideration” and, together with the Cash Consideration, the “Acquisition Consideration”). The Company will also assume or repay/redeem all outstanding indebtedness of Omega and its subsidiaries. The Acquisition Consideration will be increased by interest from September 30, 2014 until the completion date on an amount of EUR 2.48 billion starting at a rate of 5%, subject to monthly increases as set forth in the Share Purchase Agreement. The Cash Consideration will be financed by borrowings under credit facilities of the Company, an issuance of equity of the Company (the “Equity Offering”) and borrowings under a bridge facility of the Company (the “Bridge Financing”) or another issuance of debt of the Company and/or its subsidiaries.

The following unaudited pro forma condensed consolidated financial statements of the Company are filed as Exhibit 99.1 hereto and incorporated herein by reference:

 

    balance sheet as of September 27, 2014, which gives effect to the Acquisition of Omega, the Equity Offering and the Bridge Financing as if they had occurred on September 27, 2014;

 

    statement of operations for the three months ended September 27, 2014, which gives effect to the Acquisition of Omega, the Equity Offering and the Bridge Financing as if they had occurred on June 30, 2013; and

 

    statement of operations for the fiscal year ended June 28, 2014, which gives effect to the Acquisition of Omega, the Equity Offering, the Bridge Financing and the acquisition of Elan Corporation, plc (which was completed on December 18, 2013, as previously reported) as if they had occurred on June 30, 2013.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit 99.1    Unaudited pro forma condensed consolidated balance sheet as of September 27, 2014, which gives effect to the Acquisition of Omega, the Equity Offering and the Bridge Financing as if they had occurred on September 27, 2014, the unaudited pro forma condensed consolidated statement of operations for the three months ended September 27, 2014, which gives effect to the Acquisition of Omega, the Equity Offering and the Bridge Financing as if they had occurred on June 30, 2013, and the unaudited pro forma condensed consolidated statement of operations for the fiscal year ended June 28, 2014, which gives effect to the Acquisition of Omega, the Equity Offering, the Bridge Financing and the acquisition of Elan Corporation, plc (which was completed on December 18, 2013, as previously reported) as if they had occurred on June 30, 2013.


Signature

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    PERRIGO COMPANY PLC
    (Registrant)
    By:   /s/ Judy L. Brown
     

 

Dated: November 20, 2014       Judy L. Brown
      Executive Vice President and
      Chief Financial Officer
      (Principal Accounting and Financial Officer)


Exhibit Index

 

Exhibit 99.1    Unaudited pro forma condensed consolidated balance sheet as of September 27, 2014, which gives effect to the Acquisition of Omega, the Equity Offering and the Bridge Financing as if they had occurred on September 27, 2014, the unaudited pro forma condensed consolidated statement of operations for the three months ended September 27, 2014, which gives effect to the Acquisition of Omega, the Equity Offering and the Bridge Financing as if they had occurred on June 30, 2013, and the unaudited pro forma condensed consolidated statement of operations for the fiscal year ended June 28, 2014, which gives effect to the Acquisition of Omega, the Equity Offering, the Bridge Financing and the acquisition of Elan Corporation, plc (which was completed on December 18, 2013, as previously reported) as if they had occurred on June 30, 2013.
EX-99.1 2 d823877dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(Dollar amounts presented in millions, except per share amounts)

The following unaudited pro forma condensed combined financial information is presented to illustrate the estimated effects of the pending acquisition (the “Acquisition”) of Omega Pharma Invest NV (“Omega”) by Perrigo Company plc (“Perrigo” or “the Company”) and certain of the contemporaneous financing transactions (collectively, the “Transaction”), which were announced on November 6, 2014.

The following unaudited pro forma condensed combined balance sheet as of September 27, 2014 and the unaudited pro forma condensed combined statements of operations for the fiscal year ended June 28, 2014 and for the three months ended September 27, 2014 are based upon, derived from and should be read in conjunction with the historical audited financial statements of Perrigo for the fiscal year ended June 28, 2014 (which are available in Perrigo’s Annual Report on Form 10-K for the fiscal year ended June 28, 2014), the historical audited financial statements of Omega for the year ended December 31, 2013 (which have been filed as Exhibit 99.1 to the Current Report on Form 8-K of Perrigo dated November 20, 2014), the historical unaudited financial statements of Perrigo for the three-month period ended September 27, 2014 (which are available in Perrigo’s Form 10-Q for the period ended September 27, 2014) and the historical unaudited financial information of Omega for the nine-month periods ended September 30, 2014 and September 30, 2013 (which have been filed as Exhibit 99.2 to the Current Report on Form 8-K of Perrigo dated November 20, 2014). Omega’s three-month period ended September 30, 2014 unaudited financial information was derived from Omega’s accounting records.

Perrigo prepares its financial information in accordance with accounting principles generally accepted in the United States (“US GAAP”) with all amounts stated in U.S. dollars. Omega prepares its financial information in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) with all amounts presented in Euro. Amounts which reference the transfer of consideration are translated from Euro to U.S. dollars using the spot rate of $1.25 to €1.00.

The Acquisition will be accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (“ASC”) 805, “Business Combinations” (“ASC 805”). The unaudited pro forma condensed combined financial information set forth below gives effect to the following:

 

    The issuance of 5,678,233 shares of Perrigo, or approximately $900 based on the share price of Perrigo at the close of the last trading day prior to the Share Purchase Agreement, or November 5, 2014, of $158.50 per share (“Equity Offering”);

 

    The incurrence of $737 under the Senior Unsecured 364-Day Bridge Facility Commitment Letter (“Bridge Financing”); and

 

    The consummation of the pending acquisition of Omega in exchange for the issuance of 5,397,111 shares of Perrigo and $2,307 in cash consideration, which consists of $670 of Perrigo cash on hand and the proceeds from the Equity Offering and Bridge Financing.

On December 18, 2013, Perrigo acquired Elan Corporation (the “Elan Acquisition”) for $9,500, which consisted of cash consideration totaling approximately $3,300 and Perrigo share consideration valued at approximately $6,200. The historical audited financial statements of Perrigo for the fiscal year ended June 28, 2014 include the results of operations of Elan Corporation from December 18, 2013, the date of the Elan Acquisition, through June 28, 2014. The unaudited pro forma condensed combined statements of operations for the fiscal year ended June 28, 2014 give effect to the Elan Acquisition as if it had occurred on June 30, 2013. Financial information for Elan Corporation for the three months ended September 30, 2013 was derived from the historical unaudited financial statements of Elan Corporation for the three-month period ended September 30, 2013 (which is available in Perrigo’s Report on Form 8-K furnished with the SEC on August 15, 2014). Elan’s 79-day period ended December 18, 2013 was derived from Elan’s accounting records.

The pro forma adjustments are preliminary and are based upon available information and certain assumptions which management believes are reasonable under the circumstances and which are described in the accompanying notes to the unaudited pro forma condensed combined financial information. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. Under ASC 805, generally all assets acquired and liabilities assumed are recorded at their acquisition date fair value. For purposes of the unaudited pro forma condensed consolidated financial information, the fair value of Omega’s identifiable tangible and intangible assets acquired and liabilities assumed are based on a preliminary estimate of fair value as of September 27, 2014. Any excess of the purchase price over the fair value of identified assets acquired and liabilities assumed will be recognized as goodwill. Perrigo used certain current market-based assumptions, which will be updated upon completion of the Acquisition. Management believes the fair values recognized for the assets to be acquired and liabilities to be assumed are based on reasonable estimates and assumptions. Preliminary fair value estimates may change as additional information becomes available, and such changes could be material.

 

Page 1 of 22


The unaudited pro forma condensed combined statements of operations for the fiscal year ended June 28, 2014 and the three months ended September 27, 2014 assume the completion of the Acquisition, the Equity Offering and the Bridge Financing occurred on June 30, 2013. The unaudited pro forma condensed combined statement of operations for the fiscal year ended June 28, 2014 assumes the completion of the Elan Acquisition occurred on June 30, 2013. The unaudited pro forma condensed combined balance sheet as of September 27, 2014 assumes the Transaction occurred on September 27, 2014. The unaudited pro forma condensed combined financial information is not necessarily indicative of the combined financial position or results of operations that would have been realized had the Acquisition occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that Perrigo will experience after the Acquisition or the Elan Acquisition. In addition, the accompanying unaudited pro forma condensed combined statement of operations does not include any expected cost savings, operating synergies, or revenue enhancements that may be realized subsequent to the Acquisition, or the impact of any non-recurring activity and one-time transaction-related or integration-related costs. No material transactions existed between Perrigo and Omega during the pro forma period.

This unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes and assumptions as well as the historical consolidated financial statements and related notes of Perrigo and Omega incorporated by reference herein.

Perrigo’s fiscal year is a 52- or 53-week period, which ends the Saturday on or about June 30. In 2014, Perrigo’s fiscal year ended June 28. Omega’s fiscal year ends on December 31. As the fiscal years differ by more than 93 days, financial information for Omega for the twelve months ended December 31, 2013 and the six-month periods ended June 30, 2014 and June 30, 2013 has been used in preparation of the unaudited pro forma consolidated financial statements. The Omega unaudited financial information for the twelve-month period ended June 30, 2014 was derived by adding the audited consolidated statement of operations of Omega for the year ended December 31, 2013 to the unaudited consolidated statement of operations of Omega for the six months ended June 30, 2014 and deducting the unaudited consolidated statement of operations of Omega for the six months ended June 30, 2013 (see Note 4). Financial information for the unaudited pro forma condensed combined balance sheet as of September 27, 2014 and the unaudited pro forma condensed combined statements of operations for the three months ended September 27, 2014 was derived from the historical unaudited financial statements for the three months ended September 27, 2014 of Perrigo, which is Perrigo’s first fiscal quarter, and the historical unaudited accounting records for the three months ended September 30, 2014 of Omega, which is Omega’s third fiscal quarter. Omega’s third fiscal quarter was derived from taking unaudited historical accounting records for the nine months ended September 30, 2014 and deducting the unaudited historical statement of operations for the six months ended June 30, 2014.

 

Page 2 of 22


Perrigo Company plc

Unaudited Pro Forma Condensed Combined Balance Sheet

As of September 27, 2014

 

(In millions)   Historical
Perrigo As
Reported
    Historical Omega,
Adjusted for U.S.
GAAP and
Reclassifications
Note (5)
    Adjustments
for the Omega
Acquisition
    Footnote
Reference
  Adjustments
for Financing
    Footnote
Reference
  Pro Forma  

Assets

             

Current assets:

             

Cash and cash equivalents

  $ 891.5      $ 27.4      $ (2,307.0   6a   $ 737.0      6i   $ 177.2   
        (28.0   6h     (13.7   6i  
            900.0      6j  
            (30.0   6j  

Investment securities

    21.6        —          —            —            21.6   

Accounts receivable, net

    869.4        312.1        —            —            1,181.5   

Inventories

    656.8        264.7        16.0      6d     —            937.5   

Current deferred income taxes

    64.6        6.3        —            —            70.9   

Prepaid expenses and other current assets

    130.1        60.7        —            13.7      6i     204.5   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current assets

    2,634.0        671.2        (2,319.0       1,607.0          2,593.2   

Non-current assets:

             

Fixed assets, net

    761.7        86.2        —            —            847.9   

Goodwill and other indefinite-lived intangible assets

    3,503.0        1,929.8        (1,929.8   6f     —            7,883.1   
        2,998.0      6e      
        1,382.1      6f      

Other intangible assets, net

    6,671.8        16.0        (16.0   6f     —            7,395.8   
    —          —          724.0      6e     —            —     

Non-current deferred income taxes

    28.5        106.0        —            —            134.5   

Other non-current assets

    182.0        41.7            —            223.7   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total non-current assets

    11,147.0        2,179.7        3,158.3          —            16,485.0   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total assets

  $ 13,781.0      $ 2,850.9      $ 839.3        $ 1,607.0        $ 19,078.2   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Liabilities and Shareholders’ Equity

             

Current liabilities:

             

Accounts payable

  $ 309.0      $ 246.1      $ —          $ —          $ 555.1   

Payroll and related taxes

    77.0        27.8        —            —            104.8   

Accrued customer programs

    274.5        33.4        —            —            307.9   

Accrued liabilities

    179.9        61.4        —            —            241.3   

Accrued income taxes

    31.7        42.7        —            —            74.4   

Current deferred income taxes

    4.3        —          —            —            4.3   

Current portion of long-term debt

    141.5        43.3        —            737.0      6i     921.8   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

    1,017.9        454.7        —            737.0          2,209.6   

Non-current liabilities:

             

Long-term debt, less current portion

    3,050.8        1,384.9        —            —            4,435.7   

Non-current deferred income taxes

    708.7        157.5        826.0      6g     —            1,692.2   

Other non-current liabilities

    286.9        39.6        —            —            326.5   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total non-current liabilities

    4,046.4        1,582.0        826.0          —            6,454.4   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities

    5,064.3        2,036.7        826.0          737.0          8,664.0   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Shareholders’ Equity:

             

Controlling interest:

             

Ordinary shares

    6,685.2        494.2        855.5      6b     (30.0   6j     8,410.7   
        (494.2   6c     900.0      6j  

Accumulated other comprehensive income

    74.3        (10.5     10.5      6c     —            74.3   

Retained earnings

    1,957.2        331.0        (331.0   6c     —            1,929.2   
        (28.0   6h      
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 
    8,716.7        814.7        12.8          870.0          10,414.2   

Noncontrolling interest:

    —          0.5        (0.5   6c     —            —     
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total shareholders’ equity

    8,716.7        814.2        13.3          870.0          10,414.2   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities and shareholders’ equity

  $ 13,781.0      $ 2,850.9      $ 839.3        $ 1,607.0        $ 19,078.2   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

See the accompanying notes to the unaudited pro forma condensed combined balance sheet.

 

Page 3 of 22


Perrigo Company plc

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Three Months Ended September 27, 2014

 

(In millions, except per share amounts)   Historical
Perrigo As
Reported
    Historical Omega,
Adjusted for U.S.
GAAP and
Reclassifications
Note (5)
    Adjustments for
the Omega
Acquisition
    Footnote
Reference
  Adjustments
for Financing
    Footnote
Reference
  Pro
Forma
 

Net sales

  $ 951.5      $ 412.4      $ —          $ —          $ 1,363.9   

Cost of sales

    629.7        184.1        (0.2   7a     —            813.6   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Gross profit

    321.8        228.3        0.2          —            550.3   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating expenses

             

Distribution

    14.4        21.0        —            —            35.4   

Research and development

    36.6        11.2        —            —            47.8   

Selling and administration

    131.9        134.5        (5.6   7a     —            273.7   
        12.9      7a      

Restructuring

    1.7        1.4        —            —            3.1   

Other operating income expense, net

    —          (2.2     —            —            (2.2
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total operating expenses

    184.6        165.9        7.3          —            357.8   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating income

    137.2        62.4        (7.1       —            192.5   

Interest expense, net

    25.9        13.8        —            2.8      7c     42.5   

Other expense, (income), net

    2.7        5.7        —            —            8.4   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Income before income taxes

    108.6        42.9        (7.1       (2.8       141.6   

Income tax expense

    12.3        (6.5     (1.9   7b     (0.4   7b     3.5   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net income (loss)

  $ 96.3      $ 49.4      $ (5.2     $ (2.4     $ 138.1   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Earnings per share:

             

Basic earnings per share

  $ 0.72                $ 0.95   
 

 

 

             

 

 

 

Diluted earnings per share

  $ 0.72                $ 0.95   
 

 

 

             

 

 

 

Weighted average shares outstanding:

             

Basic

    133.9                  145.0   
 

 

 

             

 

 

 

Diluted

    134.4                  145.5   
 

 

 

             

 

 

 

See the accompanying notes to the unaudited pro forma combined statement of operations.

 

Page 4 of 22


Perrigo Company plc

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Fiscal Year Ended June 28, 2014

 

(In millions, except per share amounts)   Historical
Perrigo as
Reported
    Elan Pro Forma
Adjustments
Note (9)
    Historical
Omega, Adjusted
for U.S. GAAP
and
Reclassifications
Note (5)
    Adjustments for
the Omega
Acquisition
    Footnote
Reference
  Adjustments
for Financing
    Footnote
Reference
  Pro
Forma
 

Continuing operations

               

Net sales

  $ 4,060.8      $ 92.2      $ 1,698.6      $ —          $ —          $ 5,851.6   

Cost of sales

    2,613.1        137.8        791.4        (0.6   8a     —            3,541.7   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Gross profit

    1,447.7        (45.6     907.2        0.6          —            2,309.9   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating expenses

               

Distribution

    55.3        —          95.2        —            —            150.5   

Research and development

    152.5        32.6        47.6        —            —            232.7   

Selling and administration

    619.9        (68.1     535.0        (24.0   8a     —            1,114.6   
          51.8      8a      

Write-off of in-process research and development

    6.0        —          —          —            —            6.0   

Restructuring

    47.0        74.2        11.2        —            —            132.4   

Other operating income expense, net

    —          39.3        (8.7     —            —            30.6   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total operating expenses

    880.7        78.0        680.3        27.8          —            1,666.8   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating income (loss)

    567.0        (123.6     226.9        (27.2       —            643.1   

Interest, net

    103.5        4.2        59.0        —            11.1      8c     191.5   
              13.7      8c  

Other expense (income), net

    12.4        18.6        25.8        —            —            56.8   

Loss on sales of investments

    12.7        —          —          —            —            12.7   

Loss on extinguishment of debt

    165.8        (165.8     —          —            —            —     
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Income from continuing operations before income taxes

    272.6        19.4        142.1        (27.2       (24.8       382.1   

Income tax expense

    67.3        88.5        30.6        (7.3   8b     (3.1   8b     176.0   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net income (loss)

  $ 205.3      $ (69.1   $ 111.5      $ (19.9     $ (21.7     $ 206.1   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Earnings (loss) per share:

               

Basic

  $ 1.78                  $ 1.63   
 

 

 

               

 

 

 

Diluted

  $ 1.77                  $ 1.63   
 

 

 

               

 

 

 

Weighted average shares outstanding:

               

Basic

    115.1                    126.2   
 

 

 

               

 

 

 

Diluted

    115.6                    126.7   
 

 

 

               

 

 

 

See the accompanying notes to the unaudited pro forma combined statement of operations.

 

Page 5 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

1. Description of Transactions

On November 6, 2014, Perrigo entered into an Agreement for the Sale and Purchase (the “Share Purchase Agreement”) of Omega from Alychlo NV (“Alychlo”) and Holdco I BE NV (“Holdco” and, together with Alychlo, the “Sellers”), pursuant to which the Company will purchase (the “Acquisition”) from the Sellers 685,348,257 shares (the “Shares”) of Omega. Amounts which reference the transfer of consideration are translated from Euro to U.S. dollars using the spot rate of $1.25 to €1.00.

In consideration for the Shares, the Company will pay the Sellers $2,307 in cash (the “Cash Consideration”) and issue to Alychlo 5,397,711 shares of the Company (the “Non-Cash Consideration” and, together with the Cash Consideration, the “Acquisition Consideration”). The Company will also assume all outstanding indebtedness of Omega and its subsidiaries, as described below. The Acquisition Consideration will be increased by interest from September 30, 2014 until the completion date on an amount of €2.48 billion starting at a rate of 5%, subject to monthly increases as set forth in the Share Purchase Agreement.

The unaudited pro forma condensed combined financial information gives effect to the following:

 

    The issuance of 5,678,233 shares of Perrigo, or approximately $900 based on the share price of Perrigo at the close of the last trading day prior to the Share Purchase Agreement, or November 5, 2014, of $158.50 per share (“Equity Offering”);

 

    The incurrence of $737 under the Senior Unsecured 364-Day Bridge Facility Commitment Letter (“Bridge Financing”); and

 

    The consummation of the pending acquisition of Omega in exchange for the issuance of 5,397,111 shares of Perrigo and $2,307 in cash consideration, which consists of $670 of Perrigo cash on hand and the proceeds from the Equity Offering and Bridge Financing.

The Share Purchase Agreement contains customary representations, warranties, and covenants of the parties thereto.

2. Basis of Presentation

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of Perrigo, Omega, and Elan. The acquisition method of accounting, based on ASC 805, uses the fair value concepts defined in ASC 820, “Fair Value Measurement” (“ASC 820”). The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are (i) directly attributable to the acquisition, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the consolidated results.

ASC 820 defines fair value, establishes the framework for measuring fair value for any asset acquired or liability assumed under US GAAP, expands disclosures about fair value measurements and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. Market participants are assumed to be buyers or sellers in the most advantageous market for the asset or liability. Fair value measurement for an asset assumes the highest and best use by these market participants, and as a result, assets may be required to be recorded which are not intended to be used or sold and/or assets may be required to be valued at a fair value measurement that do not reflect management’s intended use for those assets. Fair value measurements can be highly subjective and it is possible the application of reasonable judgment could develop different assumptions resulting in a range of alternative estimates using the same facts and circumstances.

ASC 805 requires, among other things, that most assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date and that the fair value of acquired in-process research and development (“IPR&D”) be recorded on the balance sheet.

Assets acquired and liabilities assumed in a business combination that arise from contingencies must be recognized at fair value if the fair value can be reasonably estimated. If the fair value of an asset or liability that arises from a contingency cannot be determined, the asset or liability would be recognized in accordance with ASC 450, “Disclosure of Certain Loss Contingencies” (“ASC 450”). If the fair value is not determinable and the ASC 450 criteria are not met, no asset or liability would be recognized. At this time, to the extent they exist, management does not have sufficient information to determine the fair value of contingencies of Omega to be acquired. If information becomes available which would permit management to determine the fair value of these acquired contingencies, these amounts will be adjusted in accordance with ASC 820.

 

Page 6 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

The unaudited pro forma condensed combined balance sheet gives effect to the acquisition of Omega as if the acquisition occurred on September 27, 2014. The pro forma adjustments to reflect the acquired assets and assumed liabilities of Omega are based on the fair value of Omega assets and liabilities as of September 30, 2014, which is the last day of the third quarter of Omega’s 2014 fiscal year. Given the proximity of these balance sheet dates, no adjustment was deemed necessary to align these dates in the presentation of the unaudited pro forma condensed combined balance sheet. Similarly, the unaudited historical Omega statements of operations information are based upon the periods from July 1, 2013 to June 30, 2014 and July 1, 2014 to September 30, 2014. Management is not aware of any material transactions entered into by Omega from June 29, 2014 to June 30, 2014 or from September 28, 2014 to September 30, 2014.

The unaudited pro forma combined statement of operations for the fiscal year ended June 28, 2014, gives effect to the historical results of Elan for the period June 30, 2013 through December 18, 2013 (the date of the Elan Acquisition) and related pro forma adjustments.

The date of the Share Purchase Agreement is November 6, 2014. For purposes of the unaudited pro forma condensed combined financial information, the valuation of consideration transferred is based on, among other things, the share price of Perrigo at the close of the last trading day prior to the Share Purchase Agreement, or November 5, 2014, of $158.50 per share. The consideration transferred will ultimately be based on the closing date share price of Perrigo’s ordinary shares on the acquisition date (generally the closing date), and could materially change. The fair value of ordinary shares was estimated based on Perrigo’s closing share price at November 5, 2014, of $158.50 per share. An increase of 20% in Perrigo’s share price would increase the total consideration by $171.1, and a decrease of 20% in Perrigo’s share price would decrease the total consideration by $171.1. The actual purchase price will fluctuate until the closing of the acquisition.

3. Accounting Policies

Acquisition accounting rules require evaluation of certain assumptions, estimates or determination of financial statement classifications which are completed during the measurement period as defined in current accounting standards. Adjustments were made to: convert the financial statements of Omega from IFRS to US GAAP, conform to the Company’s classifications and translate the Euro amounts into U.S. dollars, as set out further in Note 5. For the purposes of preparing this unaudited pro forma condensed combined financial information, management has prepared these adjustments based on a preliminary analysis of the adjustments required to convert the Omega financial statements from IFRS to US GAAP. Apart from these adjustments, the accounting policies of Perrigo may materially vary from those of Omega. During the preparation of this unaudited pro forma condensed combined financial information, management has performed a preliminary analysis of Omega’s accounting policies. The Company’s assessment is ongoing and, at the time of preparing the unaudited pro forma condensed combined financial information, other than the adjustments made herein, the Company is not aware of any other material differences. Accordingly, this unaudited pro forma condensed combined financial information assumes no other material differences in accounting policies between the two companies. Following the acquisition, management will conduct a final review of Omega’s accounting policies in an effort to determine if additional differences in accounting policies and/or additional differences between IFRS and US GAAP require adjustment or reclassification of Omega’s results of operations or require reclassification of assets or liabilities to conform to Perrigo’s accounting policies and classifications, or US GAAP or other adjustments which may be required by acquisition accounting rules. As a result of that review, management may identify differences that, when conformed, could have a material impact on this unaudited pro forma condensed combined financial information.

 

Page 7 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

4. Reconciliation of Omega’s Unaudited Historical Statement of Operations

Reconciliations of Omega’s unaudited historical statement of operations for the three-month period ended September 30, 2014 and the twelve-month period ended June 30, 2014, respectively, are as follows:

 

     Unaudited        
     As Reported By Omega        
           Less:        
(in € millions)    Nine Months Ended
September 30, 2014
    Six Months Ended
June 30, 2014
    Three Months Ended
September 30, 2014
 

Net sales

   960.7      649.8      310.9   

Cost of goods sold

     (427.4     (290.2     (137.2
  

 

 

   

 

 

   

 

 

 

Gross margin

     533.3        359.6        173.7   

Distribution expenses

     (48.9     (33.0     (15.9

Sales and marketing expenses

     (268.5     (177.0     (91.5

General administrative expenses

     (42.5     (27.7     (14.8

Other operating income/expense, net

     (3.8     (2.8     (1.0

Non recurring result

     11.1        11.0        0.1   
  

 

 

   

 

 

   

 

 

 

Operating profit

     180.7        130.1        50.6   

Finance income

     3.0        2.4        0.6   

Finance cost

     (48.6     (33.3     (15.3
  

 

 

   

 

 

   

 

 

 

Net finance cost

     (45.6     (30.9     (14.7
  

 

 

   

 

 

   

 

 

 

Result before income tax

     135.1        99.2        35.9   

Income tax (expense) benefit

     (14.9     (18.8     3.9   
  

 

 

   

 

 

   

 

 

 

Result after income tax

   120.2      80.4      39.8   
  

 

 

   

 

 

   

 

 

 

Financial information for the unaudited pro forma condensed combined balance sheet as of September 27, 2014 and the unaudited pro forma condensed combined statements of operations for the three months ended September 27, 2014 was derived from the historical unaudited financial statements for the three months ended September 27, 2014 of Perrigo, which is Perrigo’s first fiscal quarter, and historical unaudited accounting records for the three months ended September 30, 2014 of Omega, which is Omega’s third fiscal quarter. Omega’s third fiscal quarter was derived from taking historical accounting records for the nine months ended September 30, 2014 and deducting the historical statement of operations for the six months ended June 30, 2014.

 

          Unaudited        
          As Reported By Omega        
          Less:     Add:        
(in € millions)   Year Ended
December 31, 2013
Audited
    Six Months Ended
June 30, 2013
Unaudited
    Six Months Ended
June 30, 2014
Unaudited
    Twelve-Months Ended
June 30, 2014
 

Net sales

  1,213.4      611.1      649.8      1,252.1   

Cost of goods sold

    (559.4     (279.9     (290.2     (569.7
 

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

    654.0        331.2        359.6        682.4   

Distribution expenses

    (69.9     (34.4     (33.0     (68.5

Sales and marketing expenses

    (348.4     (174.7     (177.0     (350.7

General administrative expenses

    (59.1     (28.2     (27.7     (58.6

Other operating income/expense, net

    3.1        3.2        (2.8     (2.9

Non recurring expenses

    (42.1     (15.6     11.0        (15.5
 

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

    137.6        81.5        130.1        186.2   

Finance income

    4.6        1.0        2.4        6.0   

Finance cost

    (67.9     (32.7     (33.3     (68.5
 

 

 

   

 

 

   

 

 

   

 

 

 

Net finance cost

    (63.3     (31.7     (30.9     (62.5
 

 

 

   

 

 

   

 

 

   

 

 

 

Result before income tax

    74.3        49.7        99.2        123.8   

Income tax expense

    (19.8     (10.5     (18.8     (28.1
 

 

 

   

 

 

   

 

 

   

 

 

 

Result after income tax

  54.5      39.2      80.4      95.7   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 8 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

Perrigo’s fiscal year is a 52- or 53-week period, which ends the Saturday on or about June 30. In 2014, Perrigo’s fiscal year ended June 28. Omega’s fiscal year ends on December 31. As the fiscal years differ by more than 93 days, financial information for Omega for the twelve months ended December 31, 2013 and the six-month periods ended June 30, 2014 and June 30, 2013 has been used in preparation of the unaudited pro forma consolidated financial statements. The Omega financial information for the twelve-month period ended June 30, 2014 was derived by adding the audited consolidated statement of operations of Omega for the year ended December 31, 2013 to the unaudited consolidated statement of operations of Omega for the six months ended June 30, 2014 and deducting the unaudited consolidated statement of operations of Omega for the six months ended June 30, 2013.

The unaudited historical statement of operations of Omega includes certain charges which management believes will not have a continuing impact on the combined business. These have not been removed from the unaudited pro forma condensed combined statement of operations, as they are not directly attributable to the transaction. Refer to Note 5 for adjustments to the above reconciliation for the conversion from IFRS to US GAAP and from Euro to U.S. dollars.

5. IFRS to US GAAP Adjustments, Foreign Currency Translation and Reclassifications

The historical financial information of Omega was prepared in accordance with IFRS as issued by the IASB with all amounts presented in Euro. The Omega unaudited financial information reflected in the pro forma financial information has been adjusted for the identified preliminary differences between IFRS and US GAAP and translated from the Euro amounts into U.S. dollars. In addition, certain balances were reclassified from the Omega unaudited historical financial statements so that their presentation would be consistent with the Company’s presentation. These adjustments and reclassifications are based on management’s preliminary analysis. When management conducts a final review in an effort to determine whether additional differences in accounting policies require adjustment or reclassification of Omega’s results of operations or reclassification of assets or liabilities to conform to Perrigo’s accounting policies and classifications or are required by acquisition accounting rules, additional differences may be identified that, when conformed, could have a material impact on these unaudited pro forma condensed combined financial statements.

 

Page 9 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

Unaudited Pro Forma Omega Balance Sheet presented in US GAAP as of September 30, 2014

The following table reflects the adjustments made to the Omega unaudited pro forma condensed consolidated balance sheet as of September 30, 2014 to convert from IFRS to US GAAP and from Euro to U.S. dollars using the spot rate of $1.2685 to €1.00 as of September 30, 2014.

 

(in millions)    Omega
IFRS
(Euro)
    IFRS to US GAAP
Adjustments
(Euro)
    Omega
US GAAP
(Euro)
    Omega
US GAAP
(USD)
 

Assets

        

Current assets:

        

Inventories

   208.7      —        208.7      $ 264.7   

Trade receivables

     220.8        —          220.8        280.1   

Other current assets

     51.7        —          51.7        65.6   

Of which Income tax assets1

     5.0        —          5.0        6.3   

Cash and cash equivalents

     21.6        —          21.6        27.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     502.8        —          502.8        637.8   

Non-current assets:

        

Intangible assets

     1,629.5        (83.2 )5a      1,533.9        1,945.8   
       (12.4 )5b     

Of which Consolidation goodwill2

     607.6        —          607.6        770.7   

Property, plant and equipment

     85.5        12.4  5b      97.9        124.2   

Deferred income tax assets

     59.5        24.1  5a      83.6        106.0   

Other non-current assets

     2.9        —          2.9        3.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current assets

     1,777.4        (59.1     1,718.3        2,179.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   2,280.2      (59.1   2,221.1      $ 2,817.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

        

Current liabilities:

        

Borrowings (current financial liabilities)

   34.2      —        34.2      $ 43.4   

Trade payables

     194.0        —          194.0        246.1   

Taxes, remuneration and social security

     55.6        —          55.6        70.4   

Other current payables

     48.3        —          48.3        61.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     332.1        —          332.1        421.3   

Non-current liabilities:

        

Provisions

     1.8        —          1.8        2.3   

Pension obligations

     13.8        —          13.8        17.5   

Deferred income tax liabilities

     124.2        —          124.2        157.5   

Retail bond

     600.0        —          600.0        761.1   

Borrowings (non-current financial liabilities)

     491.8        —          491.8        623.8   

Other non-current liabilities

     1.1        —          1.1        1.4   

Derivative financial instruments

     14.5        —          14.5        18.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current liabilities

     1,247.2        —          1,247.2        1,582.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     1,579.3        —          1,579.3        2,003.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity:

        

Equity attributable to the shareholders of the parent company

        

Share capital and share premium

     424.5        —          424.5        538.5   

Retained earnings

     320.0        (59.1 )5a      260.9        331.0   

Treasury shares

     (34.9     —          (34.9     (44.3

Fair value and other reserves

     (9.3     —          (9.3     (11.8

Cumulative translation adjustments

     1.0        —          1.0        1.3   
  

 

 

   

 

 

   

 

 

   

 

 

 
           —     

Equity attributable to non-controlling interests

     (0.4     —          (0.4     (0.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     700.9        (59.1     641.8        814.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   2,280.2      (59.1   2,221.1      $ 2,817.5   
  

 

 

   

 

 

   

 

 

   

 

 

 
(1) Amount is included within Other current assets
(2) Amount is included within Intangible assets

 

Page 10 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

(a) To eliminate capitalized development costs having a net book value of €83.2 and to record the related deferred tax asset of €24.1. Under IFRS, development costs can be capitalized under certain conditions. These costs do not qualify for capitalization under US GAAP and will be expensed as incurred.
(b) To reclassify capitalized software from intangibles to property, plant and equipment. These assets are not classified as intangible assets under US GAAP.

Unaudited Pro Forma Omega Statement of Operations presented in US GAAP for the Three Months Ended September 30, 2014

The following table reflects the adjustments made to the Omega unaudited pro forma condensed consolidated statement of operations for the three months ended September 30, 2014 to convert from IFRS to US GAAP and from Euro to U.S. dollars using a historical average exchange rate of $1.3266 to €1.00 from July 1, 2014 to September 30, 2014.

 

     Omega
IFRS
    IFRS to US
GAAP
Adjustments
    Omega
US GAAP
    Omega
US GAAP
 
(in millions)    (Euro)     (Euro)     (Euro)     (USD)  

Net sales

   310.9      —        310.9      $ 412.4   

Cost of goods sold

     (137.2     (0.9 )5c      (138.1     (183.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     173.7        (0.9     172.8        229.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Distribution expenses

     (15.9     (0.1 )5c      (16.0     (21.2

Sales and marketing expenses

     (91.5     (1.9 )5c      (93.4     (124.0

General administrative expenses

     (14.8     (0.5 )5c      (15.3     (20.4

Other operating income/expense, net

     (1.0     —          (1.0     (1.3

Non recurring result

     0.1        —          0.1        0.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     50.6        (3.4     47.2        62.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

     0.6        —          0.6        0.8   

Finance cost

     (15.3     —          (15.3     (20.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Net finance cost

     (14.7     —          (14.7     (19.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Result before income tax

     35.9        (3.4     32.5        42.9   

Income tax benefit

     3.9        1.0  5d      4.9        6.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Result after income tax

   39.8      (2.4   37.4      $ 49.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(c) Represents the recognition of development costs for an amount of €8.4, which costs were capitalized under IFRS but cannot be capitalized under US GAAP, and the reversal of the amortization charges for an amount €5.0 with respect to the capitalized development costs.
(d) Represents the income tax impact of the pre-tax IFRS to US GAAP adjustments based on the weighted average statutory tax rates of 29%.

 

Page 11 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

Unaudited Pro Forma Omega Statement of Operations presented in US GAAP for the Twelve-Months Ended June 30, 2014

The following table reflects the adjustments made to the Omega unaudited pro forma consolidated statement of operations for the twelve months ended June 30, 2014 to convert from IFRS to US GAAP and Euro to U.S. dollars using a historical average exchange rate of $1.3566 to €1.00 from July 1, 2013 to June 30, 2014.

 

     Omega
IFRS
    IFRS to US
GAAP
Adjustments
    Omega
US GAAP
    Omega
US GAAP
 
     (Euro)     (Euro)     (Euro)     (USD)  
(in millions)                         

Net sales

   1,252.1      —        1,252.1      $ 1,698.6   

Cost of goods sold

     (569.7     (4.3 )5e      (574.0     (778.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     682.4        (4.3     678.1        919.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Distribution expenses

     (68.5     (0.5 )5e      (69.0     (93.6

Sales and marketing expenses

     (350.7     (12.3 )5e      (363.0     (492.3

General administrative expenses

     (58.6     (2.0 )5e      (60.6     (82.2

Other operating income/expense, net

     (2.9     —          (2.9     (3.9

Non recurring expenses

     (15.5     —          (15.5     (21.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     186.2        (19.1     167.1        226.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Finance income

     6.0        —          6.0        8.1   

Finance cost

     (68.5     —          (68.5     (92.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Net finance cost

     (62.5     —          (62.5     (84.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Result before income tax

     123.7        (19.1     104.6        142.1   

Income tax (expense) benefit

     (28.1     5.5  5f      (22.6     (30.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Result after income tax

   95.6      (13.6   82.0      $ 111.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(e) Represents the recognition of development costs for an amount of €35.1, which costs were capitalized under IFRS but cannot be capitalized under US GAAP, and the reversal of the amortization charges for an amount €16.1 with respect to the capitalized development costs.
(f) Represents the income tax impact of the pre-tax IFRS to US GAAP adjustments based on the weighted average statutory tax rates of 29%.

 

Page 12 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

Reclassifications

Certain balances were reclassified from the financial statement line items as shown within the unaudited pro forma Omega Balance Sheet presented in US GAAP as of September 30, 2014 so their presentation would be consistent with the financial statement line items for Perrigo and reconcile from Note 5 to the Unaudited Pro Forma Condensed Combined Balance Sheet as of September 27, 2014:

 

     Increase/(Decrease)  

Assets

  

Current assets:

  

Accounts receivable, net

     32.0   

Current deferred income taxes

     6.3   

Prepaid expenses and other current assets

     (4.9

Non-current assets:

  

Fixed assets, net

     (38.0

Goodwill and other indefinite-lived intangible assets

     (16.0

Other intangible assets, net

     16.0   

Other non-current assets

     38.0   
  

 

 

 

Total Assets

     33.4   
  

 

 

 

Liabilities and Shareholders’ Equity

  

Current liabilities:

  

Payroll and related taxes

     (42.7

Accrued customer programs

     33.4   

Accrued income taxes

     42.7   

Non-current liabilities:

  

Provisions

     (2.3

Other non-current liabilities

     (1.4

Derivative financial instruments

     (18.4

Pension obligations

     (17.5

Other non-current liabilities

     38.2   
  

 

 

 

Total Liabilities

     33.4   
  

 

 

 

Shareholders’ Equity:

  

Controlling interest:

  

Share capital and share premium

     (538.5

Treasury shares

     44.3   

Ordinary shares

     494.2   

Fair value and other reserves

     11.8   

Cumulative translation adjustments

     (1.3

Accumulated other comprehensive income

     (10.5
  

 

 

 

Total Equity

     0.0   
  

 

 

 

 

Page 13 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

Certain financial statement line items were reclassified from the unaudited pro forma Omega statement of operations presented in US GAAP for the three-month period ended September 30, 2014 so their presentation would be consistent with the financial statement line items for Perrigo and reconcile from Note 5 to the Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended September 27, 2014:

 

     Increase/(Decrease)  

Cost of sales

   $ 0.9   

Operating Expenses

  

Distribution

     (0.2

Research and development

     11.2   

Selling and administration

     (9.8

Restructuring

     1.5   

Other operating income expense, net

     (3.6

Interest expense, net

     (5.7

Other expense, (income), net

     5.7   

Certain financial statement line items were reclassified from the unaudited pro forma Omega statement of operations presented in US GAAP for the twelve-month period ended June 30, 2014 so their presentation would be consistent with the financial statement line items for Perrigo and reconcile from Note 5 to the Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended June 28, 2014:

 

     Increase/(Decrease)  

Cost of sales

   $ 12.7   

Operating Expenses

  

Distribution

     1.6   

Research and development

     47.6   

Selling and administration

     (39.5

Restructuring

     (9.8

Other operating income expense, net

     (12.6

Interest, net

     (25.8

Other expense (income), net

     25.8   

 

Page 14 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

6. Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

The estimated purchase price and the allocation of the estimated purchase price discussed below are preliminary. An independent third-party appraiser assisted in performing a preliminary valuation. The final allocation of the purchase price will be determined at a later date and is dependent on a number of factors, including the final evaluation of the fair value of Omega’s tangible and identifiable intangible assets acquired and liabilities assumed. Such final adjustments, which may include the further identification of in-process research and development or other increases or decreases to amortization resulting from the allocation of the purchase price to amortizable tangible and intangible assets, may be material.

 

Page 15 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

The preliminary consideration and allocation of the purchase price to the fair value of Omega’s assets acquired and liabilities assumed as if the acquisition date were September 27, 2014 is presented as follows. Amounts which reference the transfer of consideration are translated from Euro to U.S. dollars using the spot rate of $1.25 to €1.00.

 

     Note    Amount  

Calculation of consideration

     

Cash paid to Omega shareholders comprised of:

     

Proceeds from the Equity Offering (5,678,233 shares)

   6a    $ 900.0   

Proceeds from the Bridge Financing

   6a      737.0   

Historical Perrigo cash

   6a      670.0   
     

 

 

 

Cash paid to Omega shareholders (€ 1,846)

        2,307.0   

Fair value of common stock issued to the Sellers (5,397,711 shares)

   6b      855.5   
     

 

 

 

Fair value of total consideration transferred

      $ 3,162.5   

Recognized amounts of identifiable assets acquired and liabilities assumed

     

Book value of Omega’s net assets

   6c    $ 814.2   

Net fair value adjustments to inventories

   6d      16.0   

Fair value of identifiable intangible assets

     

Indefinite Lived Brands

   6e      2,998.0   

Definite Lived Intangible Assets

     

Omega Pharma Tradename

   6e      46.0   

Other Brands

   6e      547.0   

Distribution/Generic Relationships

   6e      131.0   
     

 

 

 

Total Definite Lived Intangible Assets

        724.0   

Less historical book value of Omega goodwill and other intangible assets

   6f      (1,945.8
     

 

 

 

Net assets to be acquired

        2,606.4   

Deferred tax liabilities

   6g      (826.0
     

 

 

 

Goodwill

   6f    $ 1,382.1   
     

 

 

 

 

Page 16 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

(a) Represents cash consideration transferred to Omega as calculated below:

 

Preliminary estimate of cash paid to Omega shareholders as consideration

  

Cash consideration from Equity Offering proceeds

  

Shares issued in connection with the Equity Offering

     5,678,233   

Value per share on November 5, 2014

   $ 158.50   
  

 

 

 
   $ 900.0   

Cash consideration from Bridge Financing proceeds

     737.0   

Cash consideration from historical Perrigo

     670.0   
  

 

 

 

Total cash paid to Omega shareholders

   $ 2,307.0   
  

 

 

 

 

(b) The acquisition date fair value of Perrigo shares issued to Alychlo shareholders was calculated as shown below:

 

Shares of Perrigo to be issued to Alychlo

     5,397,711   

Value per share on November 5, 2014

   $ 158.50   
  

 

 

 

Fair value of Perrigo stock to be issued

   $ 855.5   
  

 

 

 

 

(c) Reflects the acquisition of the historical book value of Omega’s net assets as of September 27, 2014. Transaction costs are not expected to be incurred by Omega. The Company expects to assume Omega’s outstanding long term debt, consisting of retail bonds with an aggregate principal amount of €600.0 and the borrowings of €491.8, or $761.1 and $623.8, respectively.

 

(d) The fair value of finished goods and work-in-process inventory represents the estimated selling price less cost to dispose and a reasonable profit allowance for completing the selling effort. The fair value of work in process inventory represents the estimated selling price less cost to complete, cost to dispose, and a reasonable profit allowance for completing the manufacturing effort.

 

(e) Of the total estimated consideration, approximately $3,722 relates to other identified intangible assets. The fair value estimate for identifiable intangible assets is preliminary and is determined based on the assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). This preliminary fair value estimate could include assets that are not intended to be used, may be sold or are intended to be used in a manner other than their best use. For purposes of the accompanying unaudited pro forma condensed combined financial information, it is assumed that all assets will be used in a manner that represents their highest and best use. The final fair value determination for identified intangibles may differ from this preliminary determination.

The fair value of identifiable intangible assets is determined primarily using the “income approach”, which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of the identifiable intangible assets valuations, from the perspective of a market participant, include the estimated after-tax cash flows that will be received for the intangible asset, the appropriate discount rate selected in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, competitive trends impacting the asset and each cash flow stream, as well as other factors. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change or the timely completion of each project to commercial success will occur. For these and other reasons, actual results may vary significantly from estimated results. The methodologies and significant assumptions utilized to value the intangible assets are as follows:

 

  1) Indefinite Lived Brands: Omega’s most well-known products that are sold in multiple countries and have a high growth potential. An income approach was utilized to calculate the present value of the projected after-tax cash flows, using a discount rate that reflected the risks inherent in the cash flow stream as well as the nature of the asset.

 

Page 17 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

  2) Omega Pharma Trade name: The Omega trade name is well known and has a strong reputation in the industry. An income approach was utilized to calculate the present value of the projected after-tax royalty savings attributable to owning the intangible asset, using a discount rate that reflected the risks inherent in the cash flow stream as well as the nature of the asset.

 

  3) Other Brands: Products that are country specific. An income approach was utilized to calculate the present value of the projected after-tax cash flows, using a discount rate that reflected the risks inherent in the cash flow stream as well as the nature of the asset.

 

  4) Distribution/Generic Product Relationships: Omega has relationships related to its distribution business and sale of generic products. An income approach was utilized to calculate the present value of the projected after-tax cash flows, using a discount rate that reflected the risks inherent in the cash flow stream as well as the nature of the asset.

 

(f) Prior to the Acquisition, Omega’s historical balance sheet included $16.0 of other intangible assets, $770.7 of goodwill, and $1,159.1 of other indefinite-lived intangible assets. As a result of the transaction, goodwill is calculated as the difference between the fair value of the consideration expected to be transferred and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed.

 

(g) Reflects a non-current deferred income tax liability resulting from fair value adjustments for the identifiable intangible assets of $826.0. This estimate of deferred tax liabilities was determined based on the book and tax basis differences of the fair value step-ups attributable to identifiable assets acquired at a weighted average tax rate. The weighted average tax rate was based upon the jurisdictions of the identifiable intangible assets. This estimate of deferred income tax liabilities is preliminary and is subject to change based upon management’s final determination of the fair values of tangible and identifiable intangible assets acquired by jurisdiction.

 

(h) Represents estimated acquisition-related transaction costs of $28.0. In accordance with ASC 805, acquisition-related transaction costs and certain acquisition restructuring and related charges are not included as a component of consideration transferred but are required to be expensed as incurred. The unaudited pro forma condensed combined balance sheet reflects the $28.0 of costs as a reduction of cash with a corresponding decrease in retained earnings.

 

(i) Represents the issuance of the $737.0 of debt expected to be borrowed under the Bridge Financing. In connection with the incurrence of debt, $13.7 of debt issuance costs are expected to be capitalized and amortized over the life of the underlying issuance, which is 364 days.

 

(j) Represents the issuance under the Equity Offering of approximately 5,678,233 shares of Perrigo, or $900 based on the share price of Perrigo at the close of the last trading day prior to the Share Purchase Agreement, or November 5, 2014, of $158.50 per share. In connection with the Equity Offering, $30.0 in issuance costs are expected to be paid and included in ordinary shares.

 

Page 18 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

7. Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments for the Three Months Ended September 27, 2014

 

(a) Represents the elimination of historic Omega intangible asset amortization of $5.8 and the recorded pro forma amortization expense of $12.9 on the portion of the purchase price allocated to definite-lived intangible assets as follows:

 

     Preliminary Fair
Value
     Estimated Useful
Life (years)
     Estimated
Amortization
 

Omega Pharma tradename

     46.0         7         1.6   

Other brands

     547.0         15         9.1   

Distribution/generic relationships

     131.0         15         2.2   
  

 

 

       

 

 

 
   $ 724.0          $ 12.9   
  

 

 

       

 

 

 

Amortization expense has been calculated on a preliminary basis, using the straight-line method over the estimated useful life.

 

(b) Represents the income tax effect of the pro forma adjustments related to the acquisition of Omega calculated using the Irish statutory income tax rate of 12.5% and an Omega effective income tax rate of 27%. The Omega effective income tax rate of 27% represents a reduction from the Belgian statutory income tax rate of 34% due to the mix of income as well as items that are deductible for tax purposes but not for US GAAP accounting treatment. The effective tax rate of the combined company could be significantly different depending on the mix of post-acquisition income and other activities.

 

(c) Represents $2.8 of interest expense in connection with the financing for Perrigo’s acquisition of Omega. The effective annual interest rate under the Bridge Financing is expected to be a function of LIBOR plus the applicable margin based on Perrigo’s credit rating. For the purposes of these unaudited pro forma condensed combined financial statements, Perrigo has assumed the LIBOR rate was 0.25% plus an applicable margin of 1.25%.

The interest rates used for purposes of preparing the accompanying unaudited pro forma condensed combined financial statements may be considerably different than the actual interest rates incurred based on market conditions at the time of the refinancing. If the interest rate on Perrigo’s Bridge Financing were to increase or decrease by 12.5 basis points, Perrigo’s pro forma net income would increase or decrease by $0.2.

Debt issuance costs include upfront fees. The Bridge Financing matures one year after funding. Therefore, all debt issuance costs associated with the Bridge Financing have been recognized in the fiscal year ended June 28, 2014. For the three month period ended September 27, 2014, the Company did not assume any further debt issuance costs related to the Bridge Financing or any other capital the Company may obtain, as there is no factually supportable basis upon which to make such estimate.

8. Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments for the Fiscal Year Ended June 28, 2014

 

(a) Represents the elimination of historic Omega intangible asset amortization of $24.6 and the recorded pro forma amortization expense of $51.8 on the portion of the purchase price allocated to definite-lived intangible assets as follows:

 

     Preliminary Fair
Value
     Estimated Useful
Life (years)
     Estimated
Amortization
 

Omega Pharma tradename

     46.0         7         6.6   

Other brands

     547.0         15         36.5   

Distribution/generic relationships

     131.0         15         8.7   
  

 

 

       

 

 

 
   $ 724.0          $ 51.8   
  

 

 

       

 

 

 

Amortization expense has been calculated on a preliminary basis, using the straight-line method over the estimated useful life.

 

(b)

Represents the income tax effect of the pro forma adjustments related to the acquisition of Omega calculated using the Irish statutory income tax rate of 12.5% and an Omega effective income tax rate of 27%. The Omega effective income tax rate of 27%

 

Page 19 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

  represents a reduction from the Belgian statutory income tax rate of 34% due to the mix of income as well as items that are deductible for tax purposes but not for US GAAP accounting treatment. The effective tax rate of the combined company could be significantly different depending on the mix of post-acquisition income and other activities.

 

(c) Represents $24.8 of interest expense in connection with the financing for Perrigo’s acquisition of Omega, including $13.7 of amortized debt issuance costs. The effective annual interest rate under the Bridge Financing is expected to be a function of LIBOR plus the applicable margin based on Perrigo’s credit rating. For the purposes of these unaudited pro forma condensed combined financial statements, Perrigo has assumed the LIBOR rate was 0.25% plus an applicable margin of 1.25%.

The interest rates used for purposes of preparing the accompanying unaudited pro forma condensed combined financial statements may be considerably different than the actual interest rates incurred based on market conditions at the time of the refinancing. If the interest rate on Perrigo’s Bridge Financing were to increase or decrease by 12.5 basis points, Perrigo’s pro forma net income would increase or decrease by $0.9.

Debt issuance costs include upfront fees. The Bridge Financing matures one year after funding. Therefore, all debt issuance costs associated with the Bridge Financing have been recognized in the fiscal year ended June 28, 2014.

 

Page 20 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

9. The Elan Acquisition and Related Financing

On December 18, 2013, the Company completed the Elan Acquisition. In Perrigo’s historical audited financial statements for the fiscal year ended June 28, 2014, the Company included Elan’s operations for the period from December 18, 2013 through June 28, 2014. The table and adjustments that follow reflect the remaining five months and twenty days of Elan’s operations in 2013 that were not included in Perrigo’s historical audited financial statements for the fiscal year ended June 28, 2014. The fifth column, Elan pro forma adjustments, is used in the unaudited pro forma condensed combined statement of operations for the fiscal year ended June 28, 2014.

 

     Historical Elan     Historical Elan     Adjustments for the
Elan Acquisition and
Related Financing
    Elan
Pro Forma
Adjustments
 
(In Millions)    Three Months Ended
September 30, 2013
    79 Days Ended
December 18, 2013
    171 Days Ended
December 18, 2013
     

Continuing Operations

          

Net sales

   $ 48.6      $ 43.6      $ 92.2      $ —        $ 92.2   

Cost of sales

     —          —          —          137.8     137.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     48.6        43.6        92.2        (137.8     (45.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

          

Distribution

     —          —          —          —          —     

Research and development

     17.4        15.2        32.6        —          32.6   

Selling and administration

     24.1        15.4        39.5        (107.6 )c      (68.1

Other net charges

     11.4        27.9        39.3        —          39.3   

Restructuring

     —          74.2        74.2        —          74.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     52.9        132.7        185.6        (107.6     78.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (4.3     (89.1     (93.4     (30.2     (123.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest, net

     (1.5     (0.4     (1.9     (39.5 )d      4.2   
       —            45.6  

Other expense, net

     0.2        18.4        18.6        —          18.6   

Losses on sales of investments

     —          —          —          —          —     

Net loss on equity method investments

     10.1        (10.1     —          —          —     

Net charge on debt retirement

     —          —          —          (165.8 )f      (165.8

Impairment of investments

     —          —          —          —          —     

Income (loss) from continuing operations

     —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

before income taxes

     (13.1     (97.0     (110.1     129.5        19.4   

Income tax expense (benefit)

     0.7        9.9        10.6        77.9     88.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (13.8   $ (106.9   $ (120.7   $ 51.6      $ (69.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Adjusted by $137.8 to record pro forma annual amortization expense of $290.0 on the portion of the purchase price allocated to definite-lived intangible assets based on the Tysabri® definite-lived intangible asset of $5,800.0 amortized using the straight-line method over the estimated useful life of 20 years.
(b) Represents the income tax effect, including the impact of non-deductible items, of the pro forma adjustments related to the acquisition of Elan calculated using the U.S. statutory income tax rate of 37.0%, state taxes, and the Irish statutory income tax rate of 12.5%. The effective tax rate of the combined company could be significantly different depending on the mix of activities.
(c) Represents $107.6 of Elan acquisition related costs incurred.
(d) Represents $39.5 of interest expense for Perrigo’s historical term loans, senior notes, and public bonds, including $1.2 of debt issuance cost amortization.
(e) Represents $45.6 of interest expense from Perrigo’s transaction financing, including debt issuance cost amortization, debt discount amortization, and interest rate swap amortization. The interest rates under Perrigo’s $1,000.0 term loan credit agreement are a function of LIBOR plus an applicable margin based on Perrigo’s credit rating.
(f) Represents the net charge on debt retirement of $165.8, which consisted of make-whole payments on the public bonds and senior notes of $133.4, write-off of financing fees on the bridge financing of $19.0, and write-off of deferred financing fees and unamortized discount of $13.4.

 

Page 21 of 22


Perrigo Company plc

Notes to the Unaudited Condensed Combined Financial Information

(In millions, except per share amounts)

 

10. Earnings per Share

The unaudited pro forma condensed combined basic and diluted earnings per share calculations are based on the consolidated basic and diluted weighted average shares of Perrigo. The pro forma basic and diluted weighted average shares outstanding are a combination of historic Perrigo shares and the shares issued as part of the Transaction.

 

     Three Months Ended
September 27, 2014
     Fiscal Year Ended
June 28, 2014
 

Continuing operations

     

Pro forma net income (loss) attributable to common shareholders

   $ 138.1       $ 206.0   
  

 

 

    

 

 

 

Basic weighted-average number of common shares outstanding - historical

     133.9         115.1   

Diluted weighted-average number of common shares outstanding - historical

     134.4         115.6   

Common shares issued as part of the Transaction

     

Shares issued in connection with the Equity Offering

     5.7         5.7   

Shares issued to the Sellers

     5.4         5.4   
  

 

 

    

 

 

 

Total shares issued in connection with the Transaction

     11.1         11.1   
  

 

 

    

 

 

 

Basic weighted-average number of common shares outstanding - pro forma

     145.0         126.2   

Diluted weighted-average number of common shares outstanding - pro forma

     145.5         126.7   
  

 

 

    

 

 

 

Net income (loss) per common share

     

Basic - pro forma

   $ 0.95       $ 1.63   

Diluted - pro forma

   $ 0.95       $ 1.63   

 

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