UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 FORM 10-Q

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: SeptemberDecember 27, 2014
OR
[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 001-36353

Perrigo Company plc
(Exact name of registrant as specified in its charter)

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 -
(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)
________________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    YES [X]    NO  [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  [X]   NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  [X]  Accelerated filer  [  ]
Non-accelerated filer  [  ]  Smaller reporting company  [  ]
(Do not check if a smaller reporting company)   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   [ ]  YES  [X] NO
As of October 31, 2014,January 30, 2015, there were 133,955,980140,794,919 ordinary shares outstanding.

Table of Contents

PERRIGO COMPANY PLC
FORM 10-Q
INDEX
 
 
PAGE
NUMBER
Cautionary Note Regarding Forward-Looking Statements
1
  
PART I. FINANCIAL INFORMATION 
  
Item 1. Financial Statements (Unaudited)
 
  
Condensed Consolidated Statements of Operations - For the three and six months ended SeptemberDecember 27, 2014 and SeptemberDecember 28, 2013
2
  
Condensed Consolidated Statements of Comprehensive Income (Loss) - For the three and six months ended SeptemberDecember 27, 2014 and SeptemberDecember 28, 2013
3
  
Condensed Consolidated Balance Sheets - SeptemberDecember 27, 2014 and June 28, 2014
4
  
Condensed Consolidated Statements of Cash Flows - For the threesix months ended SeptemberDecember 27, 2014 and SeptemberDecember 28, 2013
5
  
Notes to the Condensed Consolidated Financial Statements
6
  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
3429
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
4342
  
Item 4. Controls and Procedures
4342
  
PART II. OTHER INFORMATION 
  
Item 1. Legal Proceedings
4443
  
Item 1A. Risk Factors
4443
  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
4546
  
Item 6. Exhibits
4547
  
SIGNATURES
4649

Table of Contents

Cautionary Note Regarding Forward-Looking Statements
    
Certain statements in this report are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. These statements relate to future events or the Company’s future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the Company or its industry to be materially different from those expressed or implied by any forward-looking statements. In particular, statements about the Company’s expectations, beliefs, plans, objectives, assumptions, future events or future performance contained in this report, including certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential” or the negative of those terms or other comparable terminology.

Please see Item 1A of the Company’s Form 10-K for the year ended June 28, 2014 and Part II, Item 1A of this Form 10-Q for a discussion of certain important risk factors that relate to forward-looking statements contained in this report. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company’s control. These and other important factors may cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements in this report are made only as of the date hereof, and unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


1
Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements (Unaudited)

PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
 
Three Months EndedThree Months Ended Six Months Ended
September 27,
2014		 September 28,
2013		December 27,
2014		 December 28,
2013		 December 27,
2014		 December 28,
2013
Net sales$951.5
 $933.4
$1,071.7
 $979.0
 $2,023.1
 $1,912.4
Cost of sales629.7
 577.1
687.9
 618.3
 1,317.6
 1,195.4
Gross profit321.8
 356.3
383.8
 360.7
 705.5
 717.0
          
Operating expenses          
Distribution14.4
 13.2
14.8
 14.0
 29.2
 27.2
Research and development36.6
 32.3
53.2
 37.5
 89.8
 69.8
Selling50.4
 50.2
44.9
 47.3
 95.3
 97.6
Administration81.5
 78.8
84.1
 154.4
 165.5
 233.2
Write-off of in-process research and development—
 6.0
 —
 6.0
Restructuring1.7
 2.1
2.4
 14.9
 4.2
 17.0
Total operating expenses184.6
 176.6
199.4
 274.1
 384.0
 450.8
          
Operating income137.2
 179.7
184.4
 86.6
 321.5
 266.2
          
Interest expense, net25.9
 21.4
30.8
 29.7
 56.7
 51.1
Other expense (income), net2.7
 1.0
Income before income taxes108.6
 157.3
Income tax expense12.3
 45.9
Net income$96.3
 $111.4
Other expense, net59.3
 4.1
 61.9
 5.1
Loss on extinguishment of debt9.6
 165.8
 9.6
 165.8
Income (loss) before income taxes84.7
 (113.0) 193.3
 44.2
Income tax expense (benefit)14.5
 (27.0) 26.8
 18.9
Net income (loss)$70.2
 $(86.0) $166.5
 $25.3
          
Earnings per share   
Basic earnings per share$0.72
 $1.18
Diluted earnings per share$0.72
 $1.18
Earnings (loss) per share       
Basic earnings (loss) per share$0.52
 $(0.87) $1.23
 $0.26
Diluted earnings (loss) per share$0.51
 $(0.87) $1.23
 $0.26
          
Weighted average shares outstanding          
Basic133.9
 94.2
136.3
 98.7
 135.1
 96.4
Diluted134.4
 94.7
136.8
 98.7
 135.6
 96.9
          
Dividends declared per share$0.105
 $0.09
$0.105
 $0.09
 $0.21
 $0.18
  
See accompanying Notes to the Condensed Consolidated Financial Statements.

2
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PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
(unaudited)
 Three Months Ended
 September 27, 2014 September 28, 2013
Net income$96.3
 $111.4
Other comprehensive income (loss):   
Foreign currency translation adjustments(63.8) 36.6
Change in fair value of derivative financial instruments, net of tax of ($1.1) million and ($4.6) million, respectively(2.1) (9.2)
Change in fair value of investment securities, net of tax of $0.3 million and $0 million, respectively0.6
 —
Change in post-retirement and pension liability adjustments, net of tax of $0 million and $0 million, respectively—
 (0.1)
Other comprehensive income (loss), net of tax(65.3) 27.3
Comprehensive income$31.0
 $138.7
 Three Months Ended Six Months Ended
 December 27, 2014 December 28, 2013 December 27,
2014		 December 28,
2013
Net income (loss)$70.2
 $(86.0) $166.5
 $25.3
Other comprehensive income (loss):       
Foreign currency translation adjustments(60.4) 16.5
 (124.2) 53.1
Change in fair value of derivative financial instruments, net of tax(3.7) (1.4) (5.8) (10.6)
Change in fair value of investment securities, net of tax(1.1) (4.8) (0.5) (4.8)
Change in post-retirement and pension liability adjustments, net of tax(1.7) —
 (1.7) (0.1)
Other comprehensive income (loss)(66.9) 10.3
 (132.2) 37.6
Comprehensive income (loss)$3.3
 $(75.7) $34.3
 $62.9
See accompanying Notes to the Condensed Consolidated Financial Statements.


3
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PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
September 27,
2014		 June 28,
2014		December 27,
2014		 June 28,
2014
Assets      
Current assets      
Cash and cash equivalents$891.5
 $799.5
$3,596.1
 $799.5
Investment securities21.6
 5.9
20.0
 5.9
Accounts receivable, net of allowance for doubtful accounts of $2.6 million and $2.7 million, respectively869.4
 935.1
Accounts receivable, net of allowance for doubtful accounts of $3.3 million and $2.7 million, respectively924.7
 935.1
Inventories656.8
 631.6
641.8
 631.6
Current deferred income taxes64.6
 62.8
66.6
 62.8
Prepaid expenses and other current assets130.1
 116.0
115.0
 116.0
Total current assets2,634.0
 2,550.9
5,364.2
 2,550.9
Non-current assets      
Property and equipment, net761.7
 779.9
756.8
 779.9
Goodwill and other indefinite-lived intangible assets3,503.0
 3,543.8
3,481.3
 3,543.8
Other intangible assets, net6,671.8
 6,787.0
6,637.2
 6,787.0
Non-current deferred income taxes28.5
 23.6
29.4
 23.6
Other non-current assets182.0
 195.0
191.8
 195.0
Total non-current assets11,147.0
 11,329.3
11,096.5
 11,329.3
Total assets$13,781.0
 $13,880.2
$16,460.7
 $13,880.2
Liabilities and Shareholders’ Equity      
Current liabilities      
Accounts payable$309.0
 $364.3
$302.7
 $364.3
Short-term debt—
 2.1
—
 2.1
Payroll and related taxes77.0
 112.3
85.7
 112.3
Accrued customer programs274.5
 256.5
310.3
 256.5
Accrued liabilities179.9
 179.4
230.1
 179.4
Accrued income taxes31.7
 17.4
29.4
 17.4
Current deferred income taxes4.3
 1.1
4.5
 1.1
Current portion of long-term debt141.5
 141.6
362.3
 141.6
Total current liabilities1,017.9
 1,074.7
1,325.0
 1,074.7
Non-current liabilities      
Long-term debt, less current portion3,050.8
 3,090.5
4,439.4
 3,090.5
Non-current deferred income taxes708.7
 727.9
690.0
 727.9
Other non-current liabilities286.9
 293.4
291.1
 293.4
Total non-current liabilities4,046.4
 4,111.8
5,420.5
 4,111.8
Total liabilities5,064.3
 5,186.5
6,745.5
 5,186.5
Commitments and contingencies - Note 12   
Commitments and Contingencies - Note 12   
Shareholders’ equity      
Controlling interest:      
Preferred shares, $0.0001 par value, 10 million shares authorized—
 —
—
 —
Ordinary shares, €0.001 par value, 10 billion shares authorized6,685.2
 6,678.2
7,695.2
 6,678.2
Accumulated other comprehensive income74.3
 139.6
7.4
 139.6
Retained earnings1,957.2
 1,875.1
2,012.6
 1,875.1
8,716.7
 8,692.9
9,715.2
 8,692.9
Noncontrolling interest—
 0.8
—
 0.8
Total shareholders’ equity8,716.7
 8,693.7
9,715.2
 8,693.7
Total liabilities and shareholders' equity$13,781.0
 $13,880.2
$16,460.7
 $13,880.2
      
Supplemental Disclosures of Balance Sheet Information      
Preferred shares, issued and outstanding—
 —
—
 —
Ordinary shares, issued and outstanding133.9
 133.8
140.8
 133.8

See accompanying Notes to the Condensed Consolidated Financial Statements.

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PERRIGO COMPANY PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three Months EndedSix Months Ended
September 27, 2014 September 28, 2013December 27, 2014 December 28, 2013
Cash Flows From (For) Operating Activities      
Net income$96.3
 $111.4
Net income (loss)$166.5
 $25.3
Adjustments to derive cash flows      
Depreciation and amortization126.6
 47.7
253.7
 110.4
Loss on acquisition-related foreign currency derivatives26.4
 —
Share-based compensation8.8
 5.9
16.2
 13.6
Unrealized loss on equity method investments3.1
 —
Loss on extinguishment of debt9.6
 165.8
Non-cash restructuring charges1.7
 1.9
4.2
 14.3
Income tax benefit from exercise of stock options1.5
 1.8
Excess tax benefit of stock transactions(4.3) (7.2)(3.8) (6.9)
Deferred income taxes(20.1) (14.6)(38.2) (5.4)
Other non-cash adjustments8.6
 6.3
Subtotal213.6
 146.9
443.2
 323.4
Changes in operating assets and liabilities, net of acquisitions   
Increase (decrease) in cash due to:   
Accounts receivable57.3
 (45.7)(4.5) (65.1)
Inventories(29.7) (12.0)(17.7) 10.5
Accounts payable(32.5) (67.6)(46.8) (70.8)
Payroll and related taxes(34.9) (8.6)(26.3) 13.7
Accrued customer programs18.1
 27.5
51.8
 72.8
Accrued liabilities0.6
 21.2
52.0
 2.0
Accrued income taxes14.6
 34.6
32.4
 (50.4)
Other(12.0) 2.4
(16.4) (15.8)
Subtotal(18.5) (48.2)24.5
 (103.1)
Net cash from (for) operating activities195.1
 98.7
467.7
 220.3
Cash Flows From (For) Investing Activities      
Acquisitions of businesses, net of cash acquired(83.0) (1,527.9)
Additions to property and equipment(31.7) (40.4)(48.0) (77.8)
(Purchase) return of investment(0.1) —
Proceeds from sale of business1.1
 —
Proceeds from sale of land—
 4.6
Settlement of acquisition-related foreign currency derivatives(26.4) —
Other investing0.8
 6.2
Net cash from (for) investing activities(30.7) (35.8)(156.6) (1,599.5)
Cash Flows From (For) Financing Activities      
Repayments of long-term debt(39.5) —
Issuances of debt2,504.5
 3,293.6
Payments on long-term debt(934.5) (1,965.0)
Deferred financing fees(24.8) (48.8)
Premium on early debt retirement—
 (133.5)
Issuance of ordinary shares1,039.4
 6.7
Equity issuance costs(35.7) —
Excess tax benefit of stock transactions3.8
 6.9
Repurchase of ordinary shares(7.7) (7.3)
Cash dividends(14.1) (8.5)(29.0) (18.0)
Repurchase of common stock(7.5) (7.3)
Settlements of contingent consideration(5.0) —
Borrowings (repayments) of short-term debt, net(2.1) 1.1
Issuance of common stock2.6
 3.5
Excess tax benefit of stock transactions4.3
 7.2
Deferred financing fees—
 (24.8)
Purchase of noncontrolling interest—
 (7.2)
Other financing(7.0) (5.0)
Net cash from (for) financing activities(61.3) (28.8)2,509.0
 1,122.4
Effect of exchange rate changes on cash(11.1) 2.6
(23.5) (2.0)
Net increase (decrease) in cash and cash equivalents92.0
 36.7
2,796.6
 (258.8)
Cash and cash equivalents, beginning of period799.5
 779.9
799.5
 779.9
Cash and cash equivalents, end of period$891.5
 $816.6
$3,596.1
 $521.1
      
Supplemental Disclosures of Cash Flow Information      
Cash paid/received during the period for:      
Interest paid$5.2
 $1.7
$56.9
 $49.1
Interest received$0.2
 $0.2
$0.4
 $1.6
Income taxes paid$10.9
 $22.1
$20.8
 $73.9
Income taxes refunded$0.5
 $0.8
$7.5
 $3.6

See accompanying Notes to the Condensed Consolidated Financial Statements.

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PERRIGO COMPANY PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SeptemberDecember 27, 2014

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Perrigo Company plc (formerly known as Perrigo Company Limited, and prior thereto, Blisfont Limited) ("Perrigo" or "the Company"), was incorporated under the laws of Ireland on June 28, 2013, and became the successor registrant of Perrigo Company on December 18, 2013 in connection with the consummation of the acquisition of Elan Corporation, plc ("Elan"), which is discussed further in Note 2. From its beginnings as a packager of home remedies in 1887, Perrigo has grown to become a leading global healthcare supplier. Perrigo develops, manufactures, and distributes over-the-counter ("OTC") and generic prescription ("Rx") pharmaceuticals, nutritional products, and active pharmaceutical ingredients ("API"), and has a specialty sciences business comprised of assets focused predominantly on the treatment of Multiple Sclerosis (Tysabri®(Tysabri®). The Company is the world's largest manufacturer of OTC healthcare products for the store brand market. Perrigo's mission is to offer uncompromised "Quality Affordable Healthcare Products®Products®", and it does so across a wide variety of product categories primarily in the United States, United Kingdom, Mexico, Israel, and Australia, as well as many other key markets worldwide, including Canada, China, and Latin America.
    
Basis of presentationPresentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes included in Perrigo Company plc's Annual Report on Form 10-K for the year ended June 28, 2014. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included.
    
The Company’s sales of OTC pharmaceutical products are subject to the seasonal demands for cough/cold/flu and allergy products and consumer dynamics in the retail environments in which our customers operate. In addition, the Company's animal health products are subject to the seasonal demand for flea and tick products, which typically peaks during the warmer weather months. Accordingly, operating results for the three and six months ended SeptemberDecember 27, 2014 are not necessarily indicative of the results that may be expected for a full fiscal year.

Change in Fiscal Year

On December 18, 2014, the Board of Directors of the Company determined that the Company's fiscal year-end shall begin on January 1 and end on December 31 of each year, starting on January 1, 2016. The Company's current fiscal year will end on June 27, 2015, followed by a transition period from June 28, 2015 to December 31, 2015. The Company plans to disclose the results of the transition period on a Form 10-KT transition report.

Principles of consolidationConsolidation

The condensed consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries, and for the three months ended September 28, 2013, a variable-interest entity ("VIE"). Activities related to the VIE were immaterial.subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.


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Recently adopted accounting standardsAdopted Accounting Standards
    
In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists" ("ASU 2013-11"). The amendments in ASU 2013-11 provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The Company prospectively adopted this guidance in fiscal 2015, and has presented $90.2$90.2 million as a reclassification from Non-current deferred income taxes to Other non-current liabilities onupon adoption.

NOTE 2 – ACQUISITIONS

Pending Acquisition

Omega Pharma Invest NV

On November 6, 2014, the Condensed Consolidated Balance Sheets.Company entered into an Agreement for the Sale and Purchase of 685,348,257 Shares (the "Shares") of Omega Pharma Invest NV (“Omega”) (the “Share Purchase Agreement”) with Alychlo NV (“Alychlo”) and Holdco I BE NV (“Holdco” and, together with Alychlo, the “Sellers”), limited liability companies incorporated under the laws of Belgium, pursuant to which the Company will purchase (the “Acquisition”) from the Sellers the Shares of 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.

The Company agreed to acquire Omega for a total value of €3.6 billion in equity and cash, which includes the assumption of €1.1 billion in debt. The consideration will consist of cash of €1.8 billion (the “Cash Consideration”) and 5,397,711 shares of the Company issued to Alychlo (the “Non-Cash Consideration” and, together with the Cash Consideration, the “Acquisition Consideration”). 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 Cash Consideration will be financed by a combination of equity that was issued by the Company on November 26, 2014 and debt that was issued by the Company's finance subsidiary on December 2, 2014, as further described in Notes 8 and 9.

The Sellers have agreed to indemnify the Company for certain potential future losses. The Sellers’ indemnification and other obligations to the Company under the Share Purchase Agreement will be secured up to €248.0 million.

In connection with the Acquisition, the Company will assume or repay/redeem all outstanding indebtedness of Omega and its subsidiaries, which includes:

i.€135.0 million of 5.1045% senior notes due 2023 and $20.0 million (after hedging arrangements, €16.2 million) of 6.19% senior notes due 2016;
ii.€300.0 million of 5.125% retail bonds due 2017, €180.0 million of 4.500% retail bonds due 2017, and €120.0 million of 5.000% retail bonds due 2019;
iii.approximately €390.0 million outstanding (with additional amounts available to be drawn) under certain credit and overdraft facilities; and
iv.amounts incurred under various cash pooling and overdraft arrangements.

The Acquisition is conditioned upon customary closing conditions, including antitrust approval, accuracy of representations and warranties, compliance with covenants, and no material adverse effect. The Company is obligated to use its best efforts to satisfy the antitrust approval condition, including making any required divestitures. Subject to the closing conditions, the Acquisition is expected to be completed during the second half of fiscal 2015.

Under the terms of the Share Purchase Agreement, Alychlo and its affiliates will be subject to a three-year non-compete in Europe, and the Sellers will be subject to a two-year non-solicit, in each case subject to certain exceptions. The Share Purchase Agreement contains other customary representations, warranties, and covenants of the parties thereto.

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NOTE 2 – ACQUISITIONS
As of December 27, 2014, the Company incurred and expensed acquisition-related costs in connection with the pending acquisition. These costs were recorded in unallocated expenses and related to general transaction costs (legal, banking and other professional fees), financing fees, and debt extinguishment. The table below details these transaction costs and where they were recorded (in millions):
Line item Fiscal 2015
Administration $11.6
Interest expense, net 5.0
Other expense, net 65.8
Loss on extinguishment of debt 9.6
Total acquisition-related costs $92.0

See Note 7 for further details on losses on Omega-related hedging activities shown above in Other expense, net, and Note 8 for details on the Loss on extinguishment of debt.

Completed Acquisitions

All of the below acquisitions, with the exception of the Vedants transaction, have been accounted for under the acquisition method of accounting, and the related assets acquired and liabilities assumed were recorded at fair value as of the acquisition date. Fair value estimates are based on a complex series of judgments about future events and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets and liabilities assumed, as well as asset lives, can materially impact the Company's results of operations.

The effects of all acquisitions described below were included in the Condensed Consolidated Financial Statements prospectively from the date of acquisition. Unless otherwise indicated, acquisition costs incurred were immaterial and were recorded in administrationAdministration expense.

Fiscal 2014 acquisitions2015 Acquisitions

Lumara Health, Inc.

On October 31, 2014, the Company acquired a portfolio of women's healthcare products from Lumara Health, Inc., a privately-held, Chesterfield, Missouri-based specialty pharmaceutical company for cash consideration of $83.0 million. The acquisition of this portfolio further expanded the Company's women's healthcare product offerings. Operating results attributable to the acquired Lumara products are included in the Rx Pharmaceuticals segment.

The intangible assets acquired consisted of three product formulations with useful lives ranging from 8 to 12 years. Management is still in the process of verifying data and finalizing information related to the valuation of the assets acquired and liabilities assumed. The Company expects to finalize these matters by the end of fiscal 2015. The goodwill recorded is not deductible for tax purposes.


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The below table indicates the preliminary purchase price allocation based on valuation information, estimates, and assumptions available at December 27, 2014 (in millions).
 Lumara
Total purchase consideration$83.0
  
Assets acquired: 
Accounts receivable, net2.0
Inventories1.4
Prepaid expenses and other current assets0.5
Property and equipment, net0.1
Goodwill0.9
Intangible assets - formulations82.0
Total assets86.9
Liabilities assumed: 
Accrued liabilities3.9
Net assets acquired$83.0

Fiscal 2014 Acquisitions

Aspen Global Inc.–

On February 28, 2014, the Company acquired a basket of value-brand OTC products sold in Australia and New Zealand from Aspen Global Inc. ("Aspen"). The acquisition of this product portfolio broadened the Company's product offering in Australia and New Zealand and furthered the Company's strategy to expand the Consumer Healthcare portfolio internationally. Operating results attributable to the acquired Aspen products are included in the Consumer Healthcare segment.
    
The intangible assets acquired consisted of trademarks and trade names, customer relationships, and non-compete agreements. Customer relationships were assigned a 15-year useful life. Trademarks and trade names were assigned a 25-year useful life and non-compete agreements were assigned a 5-year useful life. The goodwill that was recorded is deductible for tax purposes.

Fera Pharmaceuticals, LLC–

On February 18, 2014, the Company acquired a distribution and license agreement for the marketing and sale of methazolomide from Fera Pharmaceuticals, LLC ("Fera"), a privately-held specialty pharmaceutical company. The acquisition of this agreement further expanded the Company's ophthalmic offerings. Operating results attributable to this agreement are included in the Rx Pharmaceuticals segment. The intangible asset acquired was assigned a 15-year useful life.


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Elan Corporation, plc–

On December 18, 2013, the Company acquired Elan in a cash and stock transaction as follows (in millions, except per share data):
Elan shares outstanding as of December 18, 2013 515.7
Exchange ratio per share 0.07636
Total Perrigo shares issued to Elan shareholders 39.4
Perrigo per share value at transaction close on December 18, 2013 $155.34
Total value of Perrigo shares issued to Elan shareholders 6,117.2
Cash consideration paid at $6.25 per Elan share 3,223.2
Cash consideration paid for vested Elan stock options and share awards 111.5
Total consideration $9,451.9

In addition, the Company paid cash consideration of $16.1 million to the Elan stock option and share award holders for the unvested portion of their awards, which was charged to earnings during fiscal 2014.

At the completion of the transaction, the holder of each Elan ordinary share and each Elan American Depositary Share received from Perrigo $6.25 in cash and 0.07636 of a Perrigo ordinary share. As a result of the transaction, based on the number of outstanding shares of Perrigo and Elan as of December 18, 2013, former Perrigo and Elan shareholders held approximately 71% and 29%, respectively, of Perrigo's ordinary shares immediately after giving effect to the acquisition.
    
Elan, headquartered in Dublin, Ireland, provided the Company with assets focused on the treatment of Multiple Sclerosis (Tysabri®(Tysabri®). The Company's management believed the acquisition of Elan would provide recurring annual operational synergies, related cost reductions, and tax savings. Certain of these synergies resulted

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from the elimination of redundant public company costs while optimizing back-office support. The jurisdictional mix of income and the new corporate structure have, and will continue to, result in a lower worldwide effective tax rate.

The operating results for Elan are included in the Specialty Sciences segment. During fiscal 2014, the Company incurred and expensed acquisition-related costs totaling $284.9 million, which were expensed as incurred. These costs were recorded in unallocated expenses andexpenses. The costs related primarily to general transaction costs (legal, banking and other professional fees), financing fees, and debt extinguishment. See Note 8 for further details on the lossLoss on extinguishment of debt. The table below details these transaction costs and where they were recorded in the Consolidated Statement of Income for fiscal 2014 (in millions).:
Line item Fiscal 2014 Fiscal 2014
Administration $108.9
 $108.9
Interest expense, net 10.0
 10.0
Other expense (income), net 0.2
Other expense, net 0.2
Loss on extinguishment of debt 165.8
 165.8
Total acquisition-related costs $284.9
 $284.9

The Company acquired two definite-lived intangible assets in the acquisition, both of which are exclusive technology agreements:
    
Tysabri®Tysabri®: The Company is entitled to royalty payments from Biogen Idec Inc. ("Biogen") based on its Tysabri®Tysabri® revenues in all indications and geographies. The royalty was 12% for the 12-month period ended May 1, 2014. Subsequent to May 1, 2014, the Company is entitled to 18% royalty payments on annual sales up to $2.0 billion and 25% royalty payments on annual sales above $2.0 billion. The asset's value is $5.8 billion, which is being amortized over a useful life of 20 years.

Prialt: The Company is also entitled to royalty payments based on Prialt revenues. The royalty rates range from 7% to 17.5% based on specific levels of annual U.S. sales. The asset's value is $11.0 million, which is being amortized over a useful life of 10 years.


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Additionally, the Company recorded $2.3 billion of goodwill, which is not deductible for tax purposes, that represents the expected synergies of the combined company, as described above. The following table reflects the allocation by reportable segment (in millions):
Segment Goodwill
Consumer Healthcare $1,110.0
Rx Pharmaceuticals 845.1
Nutritionals 177.4
Specialty Sciences 200.6
Total $2,333.1
    
Purchase price allocationPrice Allocation of fiscalFiscal 2014 acquisitionsAcquisitions

The purchase price allocation for Elan was finalized during the first quarter of fiscal 2015. Since June 28, 2014, revisions included a $13.0 million decrease in net tax-related liabilities, resulting in a corresponding decrease in goodwill.

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The below table indicates the purchase price allocation for fiscal 2014 acquisitions (in millions):
 Aspen Fera Elan
Purchase price paid$53.7
 $17.3
 $9,451.9
Contingent consideration—
 0.8
 —
Total purchase consideration$53.7
 $18.1
 $9,451.9
      
Assets acquired:     
Cash and cash equivalents$—
 $—
 $1,807.3
Investment securities—
 —
 100.0
Accounts receivable—
 —
 44.2
Inventories2.7
 0.3
 —
Prepaid expenses and other current assets—
 —
 27.1
Property and equipment—
 —
 9.2
Goodwill4.6
 —
 2,333.1
Intangible assets:     
Trade names and trademarks34.8
 —
 —
Customer relationships9.8
 —
 —
Non-competition agreements1.8
 —
 —
Distribution and license agreements—
 17.8
 5,811.0
Intangible assets46.4
 17.8
 5,811.0
Other non-current assets—
 —
 93.4
Total assets53.7
 18.1
 10,225.3
Liabilities assumed:     
Accounts payable—
 —
 2.0
Accrued liabilities—
 —
 120.8
Deferred tax liabilities—
 —
 631.8
Other non-current liabilities—
 —
 18.8
Total liabilities—
 —
 773.4
Net assets acquired$53.7
 $18.1
 $9,451.9


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Vedants Drug & Fine Chemicals Private Limited–

To further improve the long-term cost position of its API business, on August 6, 2009, the Company acquired an 85% stake in Vedants Drug & Fine Chemicals Private Limited ("Vedants"), an API manufacturing facility in India, for $11.5 million in cash. The Company purchased the remaining 15% stake in Vedants during the second quarter of fiscal 2014 for $7.2 million in cash. The transaction was accounted for as an equity transaction and resulted in the elimination of the noncontrolling interest.


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NOTE 3 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill    

Changes in the carrying amount of goodwill, by reportable segment, were as follows (in millions):
Reporting Segments: Balance at June 28, 2014 Business acquisitions Purchase accounting adjustments Currency translation adjustment Balance at September 27, 2014 Balance at June 28, 2014 Business acquisitions Purchase accounting adjustments Currency translation adjustment Balance at December 27, 2014
Consumer Healthcare $1,406.3
 $—
 $(6.2) $(4.6) $1,395.5
 $1,406.3
 $—
 $(6.2) $(9.1) $1,391.0
Nutritionals 510.1
 —
 (1.0) —
 509.1
 510.1
 —
 (1.0) —
 509.1
Rx Pharmaceuticals 1,258.3
 —
 (4.7) (12.9) 1,240.7
 1,258.3
 0.9
 (4.7) (24.2) 1,230.3
API 97.6
 —
 —
 (6.7) 90.9
 97.6
 —
 —
 (12.1) 85.5
Specialty Sciences 201.8
 —
 (1.1) —
 200.7
 201.8
 —
 (1.1) —
 200.7
Total goodwill $3,474.1
 $—
 $(13.0) $(24.2) $3,436.9
 $3,474.1
 $0.9
 $(13.0) $(45.4) $3,416.6

Intangible assetsAssets

Other intangible assets and related accumulated amortization consisted of the following (in millions):
September 27, 2014 June 28, 2014December 27, 2014 June 28, 2014
Gross Accumulated Amortization Gross Accumulated AmortizationGross Accumulated Amortization Gross Accumulated Amortization
Amortizable intangibles:
              
Distribution and license agreements$6,026.5
 $269.4
 $6,027.3
 $192.1
$6,107.8
 $348.0
 $6,027.3
 $192.1
Developed product technology/formulation and product rights916.9
 316.5
 931.7
 302.5
902.4
 330.9
 931.7
 302.5
Customer relationships369.2
 101.8
 372.0
 97.5
366.7
 106.3
 372.0
 97.5
Trade names and trademarks47.5
 5.8
 47.8
 5.6
47.2
 6.0
 47.8
 5.6
Non-compete agreements15.1
 9.9
 15.3
 9.4
14.8
 10.5
 15.3
 9.4
Total$7,375.2
 $703.4
 $7,394.1
 $607.1
$7,438.9
 $801.7
 $7,394.1
 $607.1
Non-amortizable intangibles:
              
Trade names and trademarks$58.4
 $—
 $59.5
 $—
$57.4
 $—
 $59.5
 $—
In-process research and development7.7
 —
 10.2
 —
7.3
 —
 10.2
 —
Total66.1
 —
 69.7
 —
64.7
 —
 69.7
 —
Total other intangible assets$7,441.3
 $703.4
 $7,463.8
 $607.1
$7,503.6
 $801.7
 $7,463.8
 $607.1
Certain intangible assets are denominated in currencies other than the U.S. dollar; therefore, their gross and net carrying values are subject to foreign currency movements.

The Company recorded amortization expense of $106.5$214.2 million and $29.8$73.6 million for the threesix months ended SeptemberDecember 27, 2014 and SeptemberDecember 28, 2013, respectively. The increase in amortization expense was due primarily to the incremental amortization expense incurred on the amortizable intangible assets acquired as part of the Elan acquisition.


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NOTE 4 – INVENTORIES

Major components of inventory at SeptemberDecember 27, 2014 and June 28, 2014, were as follows (in millions):
 
September 27,
2014		 June 28,
2014		December 27,
2014		 June 28,
2014
Finished goods$322.9
 $307.0
$306.1
 $307.0
Work in process154.3
 146.7
158.1
 146.7
Raw materials179.6
 177.9
177.6
 177.9
Total inventories$656.8
 $631.6
$641.8
 $631.6

NOTE 5 – FAIR VALUE MEASUREMENTS

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.

Level 1:Quoted prices for identical instruments in active markets.

Level 2:Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

Level 3:Valuations derived from valuation techniques in which one or more significant inputs are not observable.

The following tables summarize the valuation of the Company’s financial instruments carried at fair value by the above pricing categories at SeptemberDecember 27, 2014 and June 28, 2014 (in millions):
 
September 27, 2014December 27, 2014
Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
Assets:              
Investment securities$21.6
 $—
 $—
 $21.6
$20.0
 $—
 $—
 $20.0
Foreign currency forward contracts—
 1.1
 —
 1.1
—
 2.4
 —
 2.4
Funds associated with Israeli post employment benefits—
 18.1
 —
 18.1
—
 17.2
 —
 17.2
Total assets$21.6
 $19.2
 $—
 $40.8
$20.0
 $19.6
 $—
 $39.6
Liabilities:              
Contingent consideration$—
 $—
 $12.4
 $12.4
$—
 $—
 $12.4
 $12.4
Interest rate swap agreements—
 6.9
 —
 6.9
—
 5.8
 —
 5.8
Foreign currency forward contracts—
 6.5
 —
 6.5
—
 45.3
 —
 45.3
Total liabilities$—
 $13.4
 $12.4
 $25.8
$—
 $51.1
 $12.4
 $63.5
 June 28, 2014
 Level 1 Level 2 Level 3 Total
Assets:       
Investment securities$20.7
 $—
 $—
 $20.7
Foreign currency forward contracts—
 3.1
 —
 3.1
Funds associated with Israeli post-employment benefits—
 19.3
 —
 19.3
Total assets$20.7
 $22.4
 $—
 $43.1
Liabilities:       
Contingent consideration$—
 $—
 $17.4
 $17.4
Interest rate swap agreements—
 8.3
 —
 8.3
Foreign currency forward contracts—
 0.8
 —
 0.8
Total liabilities$—
 $9.1
 $17.4
 $26.5

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The tablestable below present a reconciliation for assets and liabilitiespresents changes in the liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended SeptemberDecember 27, 2014 and SeptemberDecember 28, 2013 (in millions):
 Balance at June 28, 2014Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)Net change in unrealized appreciation (depreciation) included in other comprehensive income (loss)Purchases or AdditionsSalesSettlementsBalance at September 27, 2014
Liabilities:       
Contingent consideration$17.4
$—
$—
$—
$—
$(5.0)$12.4
Balance at June 29, 2013Net realized investment gains (losses) and net change in unrealized appreciation (depreciation) included in net income (loss)Net change in unrealized appreciation (depreciation) included in other comprehensive income (loss)Purchases or AdditionsSalesSettlementsBalance at September 28, 2013Three Months Ended Six Months Ended
Liabilities: 
December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
Contingent Consideration$22.2
$—
$—
$—
$—
$—
$22.2
       
Beginning balance:$12.4
 $22.2
 $17.4
 $22.2
Net realized investment gains (losses) and net
change in unrealized appreciation (depreciation)
included in net income (loss)		—
 (4.9) —
 (4.9)
Settlements—
 —
 (5.0) —
Ending balance:$12.4
 $17.3
 $12.4
 $17.3
Net realized gains (losses) in the tablestable above were recorded in Other expense (income), net inAdministration expense. During the Condensed Consolidated Statements of Operations. Therethree and six months endedDecember 27, 2014 there were no transfers between LevelLevels 1, 2, and 3 during three months ended September 27, 2014 and September 28, 2013.3. The Company’s policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period. See Note 6 for information on the Company's investment securities. See Note 7 for a discussion of derivatives.

Israeli post-employment benefits represent amounts the Company has deposited in funds managed by financial institutions that are designated by management to cover post-employment benefits for its Israeli employees that are required by Israeli law. The funds are recorded in Other non-current assets on the Condensed Consolidated Balance Sheets and values are determined using prices for recently traded financial instruments with similar underlying terms, as well as directly or indirectly observable inputs, such as interest rates and yield curves, that are observable at commonly quoted intervals.
 
Contingent consideration represents milestone payment obligations obtained through product acquisitions and is valued using estimates that utilize probability-weighted outcomes, sensitivity analysis, and discount rates reflective of the risk involved. The estimates are updated quarterly and the liabilities are adjusted to fair value depending on a number of assumptions, including the competitive landscape and regulatory approvals that may impact the future sales of a product.

As of SeptemberDecember 27, 2014, and June 28, 2014, the carrying value and the fair value of the Company’s fixed rate long-term debt was $2.3consisted of public bonds with a carrying value of $3.9 billion and $2.4 billion, respectively.a fair value of $4.0 billion. The fair value was based on quoted market prices (Level 1). As of September 27, 2014 and June 28, 2014, the Company's fixed rate long-term debt consisted of private placement senior notes with registration rights.rights with a carrying value of $2.3 billion and a fair value of $2.4 billion. The fair value was determined by discounting the future cash flows of the financial instruments to their present value, using interest rates currently offered for borrowings and deposits of similar nature and remaining maturities (Level 2).

The carrying amounts of the Company’s other financial instruments, consisting of cash and cash equivalents, accounts receivable, accounts payable, short-term debt, and variable rate long-term debt approximate their fair value.
    

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NOTE 6 – INVESTMENTS

Available for sale securitiesSale Securities
    
The Company's available for sale securities totaled $21.6$20.0 million at SeptemberDecember 27, 2014 and wereare reported in Investment securities on the Condensed Consolidated Balance Sheets.securities. At June 28, 2014, available for sale securities totaled $20.7 million, of which $5.9 million wereare reported in Investment securities and $14.8 million wereare reported in Other non-current assets on the Condensed Consolidated Balance Sheets.assets.

Net unrealized investment gains (losses) on available for sale securities were as follows (in millions):
September 27, 2014 June 28,
2014		December 27, 2014 June 28,
2014
Net unrealized investment gains (losses):   
Equity securities, at cost less impairments$17.1
 $17.1
$17.1
 $17.1
Gross unrealized gains4.9
 3.8
3.4
 3.8
Gross unrealized losses(0.4) (0.2)(0.5) (0.2)
Estimated fair value of equity securities$21.6
 $20.7
$20.0
 $20.7

The factors affecting the assessment of impairments include both general financial market conditions and factors specific to a particular company. The equity securities in a gross unrealized loss position at SeptemberDecember 27, 2014 were in that position for less than 12 months.

Cost method investmentsMethod Investments

The Company's cost method investments totaled $8.7$8.4 million and $9.0 million at SeptemberDecember 27, 2014 and June 28, 2014, respectively, and are included in Other non-current assets on the Condensed Consolidated Balance Sheets.assets.

Equity method investmentsMethod Investments

The Company's equity method investments totaled $55.6$52.5 million and $57.4 million at SeptemberDecember 27, 2014 and June 28, 2014, respectively, and are included in Other non-current assets on the Condensed Consolidated Balance Sheets.assets. The Company recorded net losses of $3.1 million and $6.3 million during the three and six months endedDecember 27, 2014, respectively, and a net loss of $3.1$1.3 million during the three and six months ended September 27, 2014 related toDecember 28, 2013 for the Company's proportionate share of the equity method investments, which is includedinvestment earnings or losses. The amounts are recorded in Other expense, (income), net on the Condensed Consolidated Statements of Operations. No material gains or losses on equity method investments were recorded during the three months ended September 28, 2013.net.

NOTE 7 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
    
The Company enters into certain derivative financial instruments, when available on a cost-effective basis, to mitigate its risk associated with changes in interest rates and foreign currency exchange rates as follows:

Interest rate risk management - The Company is exposed to the impact of interest rate changes. The Company's objective is to manage the impact of interest rate changes on cash flows and the market value of the Company's borrowings. The Company utilizes a mix of debt maturities along with both fixed-rate and variable-rate debt to manage changes in interest rates. In addition, the Company may enter into treasury-lock agreements ("T-Locks") and interest rate swap agreements on certain investing and borrowing transactions to manage its interest rate changes and to reduce its overall cost of borrowing.

Foreign currency exchange risk management - The Company conducts business in several major international currencies and is subject to risks associated with changing foreign exchange rates. The Company's objective is to reduce cash flow volatility associated with foreign exchange rate changes on a consolidated basis to allow management to focus its attention on business operations. Accordingly, the Company enters into various contracts that change in value as foreign exchange rates change to protect the value of existing foreign currency assets and liabilities, commitments, and anticipated foreign currency revenue and expenses.
    

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All derivative instruments are managed on a consolidated basis to efficiently net exposures and thus take advantage of any natural offsets. Gains and losses related to the derivative instruments are expected to be offset largely offset by gains and losses on the original underlying asset or liability. The Company does not use derivative financial instruments for speculative purposes. The notional amount of all derivatives outstanding was $441.0 million and $468.5 million at September 27, 2014 and June 28, 2014, respectively.
Derivatives instruments designated as hedges


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At SeptemberDecember 27, 2014 and June 28, 2014, all of the Company's designated hedging instrumentsderivatives were classified as cash flow hedges. For cash flow hedges thatDesignated derivatives meet hedge accounting criteria, which means that the fair value of the hedge is recorded in shareholders’ equity as a component of Other comprehensive income ("OCI"), net of tax. TheseThe deferred gains and losses are recognized in income in the period in which the hedged item and hedging instrument affectaffects earnings. Any ineffective portion of the change in fair value of the derivative is immediately recognized in earnings. All of the Company's designated derivatives are assessed for hedge effectiveness quarterly.

The Company also has economic non-designated derivatives that do not meet hedge accounting criteria. These derivative instruments are adjusted to current market value at the end of each period through earnings. Gains or losses on these instruments are offset substantially by the remeasurement adjustment on the hedged item.
Interest rate swapsRate Swaps and Treasury Locks

Interest rate swap agreements are contracts to exchange floating rate for fixed rate payments (or vice versa) over the life of the agreement without the exchange of the underlying notional amounts. The notional amounts of the interest rate swap agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. The differential paid or received on the interest rate swap agreements is recognized as an adjustment to interest expense. All of the Company's interest rate swaps qualify for hedge accounting.

During the second quarter of 2014, theThe Company entered into a $1.0 billion Term Loan Agreementhas term loans with floating interest rates priced off the LIBOR yield curve, as described in Note 8. TheTo hedge the change in the LIBOR rate, the Company had preexistinghas outstanding forward interest rate swap agreements with a notional amount totaling $240.0 million to hedge the change in the LIBOR rate of its previous term loans that were used to hedge the new Term Loan.million. The after-tax loss for the effective portion of the hedge remains in accumulated other comprehensive income ("AOCI") and continues to beis being amortized to earnings over the life of the debt.

During the second quarter of fiscal 2015, the Company entered into forward interest rate swaps and treasury locks (together "Rate Locks") to hedge against changes in the interest rates between the date the Rate Locks were entered into and the date of the issuance of the Company's 2014 Bonds (discussed in Note 8). These Rate Locks were designated as cash flow hedges of expected future debt issuances with a notional amount totaling $750.0 million. The Rate Locks were settled upon the issuance of an aggregate of $1.6 billion principal amount on December 2, 2014 for a cumulative after-tax loss of $5.8 million after recording $1.1 million of ineffectiveness.

During the first quarter of fiscal 2014, the Company entered into forward interest rate swap agreements to hedge against changes in the benchmark interest rate between the date the swap agreements were entered into and the date of the issuance of the Company's new senior notes2013 Bonds (discussed collectively in Note 8 as the "Bonds"). These swaps were designated as cash flow hedges of expected future debt issuances with a notional amount totaling $725.0 million. The interest rate swaps were settled upon the issuance of an aggregate of $2.3 billion principal amount on December 18, 2013 for a cumulative after-tax gainloss of $12.8 million which was recordedafter recording $0.5 million of ineffectiveness.

In addition, due to the retirement of the underlying private placement senior notes (described in Note 8 as "the Notes")on December 23, 2013, the Company wrote-off the amounts remaining in OCI and is being amortizedassociated with the cash flow hedges related to earnings over the lifeNotes, resulting in a loss of the debt.$2.6 million recorded against earnings.

Foreign currency forward contractsCurrency Derivatives

The Company enters into foreign currency forward contracts, both designated and non-designated, in order to hedgemanage the impact of fluctuations of foreign exchange on expected future purchases and related payables denominated in a foreign currency and to hedge the impact of fluctuations of foreign exchange on expected future sales and related receivables denominated in a foreign currency. Both types of forward contracts have a maximum maturity date of 15 months. The total notional amount for these contracts was $442.4 million and $228.5 million as of December 27, 2014 and June 28, 2014, respectively.

In November 2014, in order to economically hedge the foreign currency exposure associated with the planned payment of the euro-denominated purchase price for Omega, the Company entered into non-designated option contracts with a total notional amount of €2.0 billion. The contracts settled in December 2014, resulting in a loss of $26.4 million recorded in Other expense, net. The option contracts were replaced with non-designated forward contracts with a total notional amount of €2.0 billion that will mature in the third quarter of fiscal 2015. The Company recorded a loss of $38.3 million for the change in fair value of the forward contracts during the three

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months ended December 27, 2014 in Other expense, net. Gains or losses on the derivatives due to changes in the EUR/USD exchange rate prior to the close of the acquisition will be economically offset at closing in the final settlement of the euro-denominated Omega purchase price. Because these derivatives are economically hedging a future acquisition, the cash outflow associated with their settlement is shown as an investing activity on the Condensed Consolidated Statements of Cash Flows.
Fair value hedgesValue Hedges

During the first quarter of 2014, the Company entered into three pay-floating interest rate swaps with a total notional amount of $425.0 million to hedge changes in the fair value of the Company's senior notes from fluctuations in interest rates. These swaps were designated and qualified as fair value hedges of the Company's fixed rate debt. Accordingly, the gain or loss recorded on the pay-floating interest rate swaps was directly offset by the change in fair value of the underlying debt. Both the derivative instrument and the underlying debt were adjusted to market value at the end of each period with any resulting gain or loss recorded in Other expense, (income), net. As a result, the Company recorded a netThe hedge loss of $1.7 million in Other expense (income), net during the three months ended September 28, 2013. Due to the retirement of the underlying senior noteswas terminated in the second quarter of fiscal year 2014 due to the hedge was terminated.


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Derivative instruments not designated as hedgesthe underlying senior notes.

Effects of Derivatives on the Financial Statements
The Company also has forward foreign currency contracts that are not designated as hedging instruments. Accordingly, thesebelow tables indicate the effects of all derivative instruments are adjusted to current market value at the end of each period through earnings. The gains or losses on these instruments are substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability. The settlement of the derivative instrumentCompany's consolidated financial statements. All amounts exclude income tax effects and the remeasurement adjustment on the foreign currency denominated asset or liability are both recordedpresented in Other expense (income), net at the end of each period. The Company recorded losses of $3.3 million and $1.5 million related to these contracts for the three months ended September 27, 2014 and September 28, 2013, respectively.millions.

The balance sheet location and gross fair value of the Company's outstanding derivative instruments at SeptemberDecember 27, 2014 and June 28, 2014 were as follows (in millions):follows:
  Asset Derivatives
  Balance Sheet Location Fair Value
    September 27, 2014 June 28, 2014
Hedging derivatives:     
Foreign currency forward contractsOther current assets $0.4
 $2.8
Total hedging derivatives  $0.4
 $2.8
Non-hedging derivatives:     
Foreign currency forward contractsOther current assets $0.7
 $0.3
Total non-hedging derivatives  $0.7
 $0.3
 Asset Derivatives
 Balance Sheet Location Fair Value
   December 27, 2014 June 28, 2014
Designated derivatives:     
Foreign currency forward contractsOther current assets $1.4
 $2.8
Total designated derivatives  $1.4
 $2.8
Non-designated derivatives:     
Foreign currency forward contractsOther current assets $1.0
 $0.3
Total non-designated derivatives  $1.0
 $0.3
  Liability Derivatives
  Balance Sheet Location Fair Value
    September 27, 2014 June 28, 2014
Hedging derivatives:     
Foreign currency forward contractsAccrued liabilities $4.1
 $0.7
Interest rate swap agreementsOther non-current liabilities 6.9
 8.3
Total hedging derivatives  $11.0
 $9.0
Non-hedging derivatives:     
Foreign currency forward contractsAccrued liabilities $2.4
 $0.1
Total non-hedging derivatives  $2.4
 $0.1
 Liability Derivatives
 Balance Sheet Location Fair Value
   December 27, 2014 June 28, 2014
Designated derivatives:     
Foreign currency forward contractsAccrued liabilities $4.8
 $0.7
Interest rate swap agreementsOther non-current liabilities 5.8
 8.3
Total designated derivatives  $10.6
 $9.0
Non-designated derivatives:     
Foreign currency forward contractsAccrued liabilities $40.5
 $0.1
Total non-designated derivatives  $40.5
 $0.1


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The effects (gross of tax)gains (losses) recognized in OCI for the effective portion of the Company's designated cash flow hedges on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Other Comprehensive Income at September 27, 2014 and September 28, 2013 were as follows (in millions):follows:
Derivatives Qualifying for Cash
Flow Hedging
 
Amount of Gain/
(Loss) Recognized in OCI on Derivative (Effective Portion)
 
Location and Amount of Gain/(Loss)
Reclassified from Accumulated OCI into Income
(Effective Portion)
 
Location and Amount of Gain/(Loss) 
Recognized in Income on Derivative
(Ineffective Portion and Amount Excluded from Effectiveness Testing)
   September 27, 2014 September 28, 2013   September 27, 2014 September 28, 2013   September 27, 2014 September 28, 2013
T-Locks $—
 $—
 Interest expense, net $—
 $0.1
 Interest expense, net $—
 $—
Interest rate swap agreements 2.7
 (15.7) Interest expense, net (0.9) (1.3) Interest expense, net —
 —
Foreign currency forward contracts (5.2) 2.7
 Net sales 0.6
 0.7
 Net sales —
 —
      Cost of sales 0.4
 (1.0) Cost of sales —
 (0.4)
      Interest expense, net —
 0.1
      
      Other expense (income), net (0.8) 1.0
      
Total $(2.5) $(13.0)   $(0.7) $(0.4)   $—
 $(0.4)
  Amount of Gain/(Loss) Recorded in OCI
(Effective Portion)
  Three Months Ended Six Months Ended
Designated Cash Flow Hedges December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
Treasury locks $(2.7) $—
 $(2.7) $—
Interest rate swap agreements (0.8) 1.6
 1.9
 (14.1)
Foreign currency forward contracts (2.0) 2.9
 (6.6) 5.6
  $(5.5) $4.5
 $(7.4) $(8.5)

The effects (grossgains (losses) reclassified from AOCI into income for the effective portion of tax)the Company's designated cash flow hedges were as follows:
Designated Cash Flow Hedges Income Statement Location Amount of Gain/(Loss) Reclassified from AOCI to Income
(Effective Portion)
    Three Months Ended Six Months Ended
    December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
Treasury locks Interest expense, net $—
 $0.1
 $—
 $0.2
Interest rate swap agreements Interest expense, net 0.9
 (1.5) 1.8
 (2.8)
Foreign currency forward contracts Net sales (0.5) 0.5
 0.1
 1.2
  Cost of sales (0.1) 3.8
 0.4
 2.8
  Interest expense, net —
 0.1
 —
 0.1
  Other expense, net (3.2) 0.6
 (4.0) 1.7
    $(2.9) $3.6
 $(1.7) $3.2

The gross amount expected to be reclassified out of AOCI into income during the next 12 months is a gain of $1.5 million.

The gains (losses) recognized in income for the ineffective portion of the Company's designated cash flow hedges were as follows:
Designated Cash Flow Hedges Income Statement Location Amount of Gain/(Loss) Recognized in Income
(Ineffective Portion)
    Three Months Ended Six Months Ended
    December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
Treasury locks Other expense, net $(0.4) $2.3
 $(0.4) $2.2
Interest rate swap agreements Other expense, net (0.7) (5.4) (0.7) (5.4)
Foreign currency forward contracts Net sales 0.1
 —
 0.2
 —
  Cost of sales 0.2
 0.5
 0.1
 (0.1)
Total   $(0.8) $(2.6) $(0.8) $(3.3)


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The effects of the Company's fair value hedges on the Condensed Consolidated Statements of Operations for three months ended September 28, 2013 were as follows (in millions):follows:
Fair Value Hedges Location and Amount of (Gain)/Loss Recognized into Income Related Hedged Item Location and Amount of (Gain)/Loss Recognized in Income on Related Hedged Item
Designated Fair Value Hedges Income Statement Location Amount of Gain/(Loss) Recognized in Income
 Three Months Ended Six Months Ended
 September 28, 2013 September 28, 2013 December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
Interest rate swap agreements Other expense (income), net$(6.7) Fixed-rate debt Other expense (income), net$8.4
 Other expense, net $—
 $(5.8) $—
 $0.9
Fixed-rate debt Other expense, net —
 4.3
 —
 (4.1)
Net hedge $—
 $(1.5) $—
 $(3.2)

The effects of the Company's non-designated derivatives on the Condensed Consolidated Statements of Operations were as follows:
Non-Designated Derivatives Income Statement Location Amount of Gain/(Loss) Recognized in Income
    Three Months Ended Six Months Ended
    December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
Foreign currency forward contracts Other expense, net $(41.3) $2.2
 $(44.9) $0.4
  Interest expense, net (0.3) (0.1) 0.1
 0.2
Foreign exchange option contracts Other expense, net (26.4) —
 (26.4) —
Total   $(68.0) $2.1
 $(71.2) $0.6


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NOTE 8 – INDEBTEDNESS

Debt

Total borrowings outstanding are summarized as follows (in millions):
September 27,
2014		 June 28,
2014		December 27,
2014		 June 28,
2014
Short term debt$—
 $2.1
$—
 $2.1
Term loans      
2014 Term Loan due December 18, 2015300.0
 —
2014 Term Loan due December 5, 2019608.9
 —
2013 Term Loan due December 15, 2015300.0
 300.0
—
 300.0
2013 Term Loan due December 15, 2018595.0
 630.0
—
 630.0
895.0
 930.0
908.9
 930.0
Senior notes      
1.30% Unsecured Senior Notes due November 8, 2016, including unamortized discount of $0.4 million(1)
499.6
 499.6
2.30% Unsecured Senior Notes due November 8, 2018, including unamortized discount of $0.7 million(1)
599.3
 599.3
4.00% Unsecured Senior Notes due November 15, 2023, including unamortized discount of $3.1 million(1)
796.8
 796.8
5.30% Unsecured Senior Notes due November 15, 2043, including unamortized discount of $1.7 million(1)
398.3
 398.3
3.50% Unsecured Senior Notes due December 15, 2021, including unamortized discount of $0.3 million(1)
499.7
 —
3.90% Unsecured Senior Notes due December 15, 2024, including unamortized discount of $2.9 million(1)
697.1
 —
4.90% Unsecured Senior Notes due December 15, 2044, including unamortized discount of $1.2 million(1)
398.8
 —
1.30% Unsecured Senior Notes due November 8, 2016, including unamortized discount of $0.3 million(2)
499.7
 499.6
2.30% Unsecured Senior Notes due November 8, 2018, including unamortized discount of $0.7 million(2)
599.3
 599.3
4.00% Unsecured Senior Notes due November 15, 2023, including unamortized discount of $3.0 million(2)
797.0
 796.8
5.30% Unsecured Senior Notes due November 15, 2043, including unamortized discount of $1.6 million(2)
398.4
 398.3
2,294.0
 2,294.0
3,890.0
 2,294.0
Other financing3.3
 8.1
2.8
 8.1
Total borrowings outstanding3,192.3
 3,234.2
4,801.7
 3,234.2
Less short-term debt and current portion of long-term debt(141.5) (143.7)(362.3) (143.7)
Total long-term debt, less current portion$3,050.8
 $3,090.5
$4,439.4
 $3,090.5

(1)Public bonds issued on December 2, 2014, discussed below collectively as the "2014 Bonds".
(2) Private placement unsecured senior notes with registration rights as of June 28, 2014 and public bonds as of October 1, 2014, discussed below collectively as the "Bonds."2013 Bonds."

Unamortized deferred financing fees totaled $26.2$43.9 million at SeptemberDecember 27, 2014 and $27.4 million at June 28, 2014. The Company was in compliance with all covenants under its various debt agreements at September 27, 2014.

Omega Financing

Bridge agreements    agreement

In connection with the Elanpending Omega acquisition, on November 6, 2014, the Company entered into a €1.75 billion senior unsecured 364-day bridge loan facility (the "Bridge Loan Facility"). Upon issuance of the Company's permanent debt financing described below, the Bridge Loan Facility was terminated on December 3, 2014. At no time did the Company draw under the Bridge Loan Facility.

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Debt issuance

On December 5, 2014, Perrigo Finance plc, a 100% owned finance subsidiary of the Company ("Perrigo Finance") entered into a term loan agreement consisting of two tranches: a $300.0 million tranche maturing December 18, 2015 and a €500.0 million tranche maturing December 5, 2019, as well as a $600.0 million Revolving Credit Agreement (the "2014 Revolver") (together, the "2014 Credit Agreements"). The 2014 Credit Agreements allow for the issuance of an additional €300.0 million term loan tranche and an increase in the borrowing capacity under the 2014 Revolver to $1.0 billion upon closing the Omega acquisition. There were no borrowings outstanding under the 2014 Revolver as of December 27, 2014.

On December 2, 2014, Perrigo Finance issued $500.0 million aggregate principal amount of 3.50% senior notes due 2021 (the "2021 Notes”), $700.0 million aggregate principal amount of 3.90% senior notes due 2024 (the “2024 Notes”) and $400.0 million aggregate principal amount of 4.90% senior notes due 2044 (the “2044 Notes” and, together with the 2021 Notes and the 2024 Notes, the “2014 Bonds”). Interest on the 2014 Bonds is payable semiannually in arrears in June and December of each year, beginning in June 2015. The 2014 Bonds are governed by a base indenture and a first supplemental indenture (collectively the "2014 Indenture"). The 2014 Bonds are fully and unconditionally guaranteed on a senior unsecured basis by the Company, and no other subsidiary of the Company guarantees the 2014 Bonds. There are no restrictions under the 2014 Bonds on the Company's ability to obtain funds from its subsidiaries. The Company received net proceeds of approximately $1.6 billion from issuance of the 2014 Bonds after fees and market discount. The 2014 Bonds are subject to a mandatory redemption if the Company does not consummate the Omega acquisition by, or if the Share Purchase Agreement is terminated at any time prior to, August 6, 2015. The Company may redeem the 2014 Bonds in whole or in part at any time for cash at the redemption prices described in the 2014 Indenture.

Debt extinguishment

On December 5, 2014, the Company repaid the remaining $895.0 million outstanding under its 2013 Term Loan, then terminated both the 2013 Term Loan and 2013 Revolver described below in Note 2,"Elan financing". The Company recorded a $9.6 million loss on extinguishment of debt during the second quarter of fiscal 2015, which consisted largely of the interest on the Bridge Loan Facility.

Elan Financing

Bridge agreement

In connection with the Elan acquisition, on July 28, 2013, the Company entered into a $2.65 billion Debt Bridge Credit Agreementdebt bridge credit agreement (the "Debt Bridge") and a $1.7 billion Cash Bridge Credit Agreementcash bridge credit agreement (the "Cash Bridge") with HSBC Bank USA, N.A. as Syndication Agent, Barclays Bank PLC as Administrative Agent and certain other participant banks (together, the "Bridge Credit Agreements"). The funding commitmentcommitments under the Debt Bridge was reduced by $1.0 billion on September 6, 2013 upon completion ofand the Company’s Term Loan Agreement (see below) and by an additional $1.65 billionCash Bridge agreements were terminated on November 8, 2013 upon funding into escrow of the Company’s public bond offering (see below), at which time the Debt Bridge was terminated. The commitments under the Cash Bridge were terminated onand December 24, 2013.2013, respectively. At no time did the Company draw under the Bridge Credit Agreements.

Debt issuance

On September 6, 2013, the Company entered into a $1.0 billion term loan agreement (the "2013 Term Loan") and a $600.0 million revolving credit agreement (the "2013 Revolver") (together, the "2013 Credit Agreements"). The 2013 Term Loan consisted of a $300.0 million tranche maturing December 18, 2015 and a $700.0 million tranche maturing December 18, 2018. Both tranches were drawn in full on December 18, 2013. Amounts outstanding under the 2013 Credit Agreements bore interest at the Company’s option (a) at the alternative base rate or (b) the eurodollar rate plus, in either case, applicable margins as set forth in the 2013 Credit Agreements. Obligations of the Company under the 2013 Credit Agreements were guaranteed by Perrigo Company plc, certain U.S. subsidiaries of Perrigo Company plc, Elan, and certain Irish subsidiaries of Elan until November 21, 2014, at which time the terms of the 2013 Credit Agreements were amended to remove all guarantors.

On November 8, 2013, the Company issued $500.0 million aggregate principal amount of its 1.30% senior notes due 2016 (the "2016 Notes"), $600.0 million aggregate principal amount of its 2.30% senior notes due 2018 (the "2018 Notes"), $800.0 million aggregate principal amount of its 4.00% senior notes due 2023 (the "2023 Notes") and $400.0 million aggregate principal amount of its 5.30% senior notes due 2043 (the "2043 Notes" and, together with the 2016 Notes, the 2018 Notes and the 2023 Notes, the "2013 Bonds") in a private placement with registration rights. Interest on the 2013 Bonds is payable semiannually in arrears in May and November of each

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year, beginning in May 2014. The 2013 Bonds are governed by a base indenture and a first supplemental indenture (collectively the "2013 Indenture"). The 2013 Bonds are the Company’s unsecured and unsubordinated obligations, ranking equally in right of payment to all of the Company’s existing and future unsecured and unsubordinated indebtedness. The Company received net proceeds of $2.3 billion from issuance of the 2013 Bonds after fees and market discount. The 2013 Bonds are not entitled to mandatory redemption or sinking fund payments. The Company may redeem the 2013 Bonds in whole or in part at any time for cash at the redemption prices described in the 2013 Indenture. The 2013 Bonds were guaranteed on an unsubordinated, unsecured basis by the same entities that guaranteed the 2013 Credit Agreement until November 21, 2014, at which time the 2013 Indenture was amended to remove all guarantors.

On September 2, 2014, the Company offered to exchange its private placement senior notes with public bonds (the "Exchange Offer"). The Exchange Offer expired on October 1, 2014, at which time substantially all of the private placement notes had been exchanged for bonds registered with the Securities and Exchange Commission. As a result of the changes in the guarantor structure noted above, the Company is no longer required to present guarantor financial statements.

Debt extinguishment

On December 18, 2013, the Company repaid the remaining principal balance with accrued interest and fees of $360.0 million then outstanding under its credit agreement dated as of October 26, 2011, with JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Morgan Stanley Senior Funding, Inc., as Syndication Agents and certain other participant banks (the "2011 Credit Agreement"). Upon completion of such payment,then terminated the 2011 Credit Agreement was terminatedagreement in its entirety.

On November 20, 2013, the Company priced a Tender Offertender offer and Consent Solicitationconsent solicitation in regard to the 2.95% Notes which were issued pursuant to the Indentureindenture dated as of May 16, 2013 between the Company and Wells Fargo Bank, National Association (the "Indenture").2013. The total tender consideration was $578.3 million. On

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December 26, 2013 pursuant to the Indenture, notice was given to holders that the remaining notes not duly tendered would be redeemed on December 27, 2013 at a redemption price of par plus accrued interest. On December 27, 2013, the redemption was completed for a total payment of $28.5 million. Upon completion of the redemption, the Indentureindenture was terminated.

On December 23, 2013, the Company completed the prepayment of all obligations under its private placement senior notes (the "Notes"). All of the Notes were outstanding under the Master Note Purchase Agreementmaster note purchase agreement dated May 29, 2008 with various institutional investors (the "Note Agreement"). The terms of the Note Agreement provided for prepayment at any time at the Company's option together with applicable make-whole premiums and accrued interest, which totaled $1,099.6 million.$1.1 billion. Upon completion of the prepayment, the Note Agreement was terminated.

As a result of the debt retirements, the Company recorded a loss of $165.8 million during the second quarter of fiscal 2014 as follows (in millions):
Make-whole payments $133.5
Write-off of financing fees on Bridge Credit Agreements 19.0
Write-off of deferred financing fees 10.5
Write-off of unamortized discount 2.8
Total loss on extinguishment of debt $165.8

Debt issuance

On September 6, 2013, the Company entered into a $1.0 billion Term Loan Agreement (the "Term Loan") and a $600.0 million Revolving Credit Agreement (the "Revolver") with Barclays Bank PLC as Administrative Agent, HSBC Bank USA, N.A. as Syndication Agent, Bank of America, N.A., JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A. as Documentation Agents and certain other participant banks (together, the "Permanent Credit Agreements"). The Term Loan consists of a $300.0 million tranche maturing December 18, 2015 and a $700.0 million tranche maturing December 18, 2018. Both tranches were drawn in full on December 18, 2013. No amounts were outstanding under the Revolver as of September 27, 2014 or June 28, 2014.

Obligations of the Company under the Permanent Credit Agreements are guaranteed by the Company, certain U.S. subsidiaries of the Company, Elan, and certain Irish subsidiaries of Elan. Amounts outstanding under each of the Permanent Credit Agreements will bear interest at the Company’s option (a) at the alternative base rate or (b) the eurodollar rate plus, in either case, applicable margins as set forth in the Permanent Credit Agreements.

On November 8, 2013, the Company issued $500.0 million aggregate principal amount of its 1.30% Senior Notes due 2016 (the "2016 Notes"), $600.0 million aggregate principal amount of its 2.30% Senior Notes due 2018 (the "2018 Notes"), $800.0 million aggregate principal amount of its 4.00% Senior Notes due 2023 (the "2023 Notes") and $400.0 million aggregate principal amount of its 5.30% Senior Notes due 2043 (the "2043 Notes" and, together with the 2016 Notes, the 2018 Notes and the 2023 Notes, the "Bonds") in a private placement with registration rights. Interest on the Bonds is payable semiannually in arrears in May and November of each year, beginning in May 2014. The Bonds are governed by a Base Indenture and a First Supplemental Indenture between the Company and Wells Fargo Bank N.A., as trustee (collectively the "2013 Indenture"). The Bonds are the Company’s unsecured and unsubordinated obligations, ranking equally in right of payment to all of the Company’s existing and future unsecured and unsubordinated indebtedness and are guaranteed on an unsubordinated, unsecured basis by the Company's subsidiaries that guarantee the Permanent Credit Agreements. The Company received net proceeds of $2.3 billion from issuance of the Bonds after fees and market discount. The Bonds are not entitled to mandatory redemption or sinking fund payments. The Company may redeem the Bonds in whole or in part at any time and from time to time for cash at the redemption prices described in the 2013 Indenture.

On September 2, 2014, the Company offered to exchange its private placement senior notes with public bonds (the "Exchange Offer"). The Exchange Offer expired on October 1, 2014, at which time a substantial majority of the private placement notes had been exchanged for bonds registered with the Securities and Exchange Commission.


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Table of Contents

Accounts receivable securitizationReceivable Securitization

The Company has a one year$200.0 million accounts receivable securitization program, with Wells Fargo Bank, National Association ("Wells Fargo") as sole agent, which was renewed onexpires in June 13, 2014.2015. Under the terms of the securitization program, the subsidiaries can sell certain eligible trade accounts receivables to a wholly owned bankruptcy-remote special purpose entity, ("SPE"), Perrigo Receivables, LLC. The Company has retained servicing responsibility for those receivables. The SPE will then transfer an interest in the receivables to the Committed Investors. Under the terms of the securitization program, Wells Fargo has committed $200.0 million, effectively allowing the Company to borrow up to that amount, subject to a maximum net investment calculation as defined in the agreement. At September 27, 2014, the entire $200.0 million committed amount of the securitization program was available under this calculation. The annual interest rate on any borrowing is equal to thirty-day LIBOR plus 0.375%. In addition, an annual facility fee of 0.375% is applied to the entire $200.0 million commitment whether borrowed or undrawn. Under the terms of the securitization program, the Company may elect to have the entire amount or any portion of the facility unutilized. There were no borrowings outstanding under the securitization program at SeptemberDecember 27, 2014 or June 28, 2014.


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NOTE 9 – EARNINGS PER SHARE AND SHAREHOLDERS' EQUITY

Earnings per shareShare

A reconciliation of the numerators and denominators used in the basic and diluted earnings per share ("EPS") calculation is as follows (in millions):
Three Months EndedThree Months Ended Six Months Ended
September 27,
2014		 September 28,
2013		December 27,
2014		 December 28,
2013		 December 27,
2014		 December 28,
2013
Numerator:          
Net income$96.3
 $111.4
Net income (loss)$70.2
 $(86.0) $166.5
 $25.3
          
Denominator:          
Weighted average shares outstanding for basic EPS133.9
 94.2
136.3
 98.7
 135.1
 96.4
Dilutive effect of share-based awards0.5
 0.5
0.5
 —
 0.5
 0.5
Weighted average shares outstanding for diluted EPS134.4
 94.7
136.8
 98.7
 135.6
 96.9
          
Anti-dilutive share-based awards excluded from computation of diluted EPS0.1
 0.1
0.2
 0.2
 0.1
 0.1

Shareholders' equityEquity

Perrigo Company plc (formerly known as Perrigo Company Limited, and prior thereto, Blisfont Limited) was incorporated under the laws of Ireland on June 28, 2013 and became the successor registrant to Perrigo Company on December 18, 2013 in connection with the consummation of the acquisition of Elan.Elan acquisition. Perrigo Company shares were canceled and exchanged for Perrigo Company plc shares on a one-for-one basis (together with the payment of $0.01 in cash per Perrigo Company share). All the remaining unsold shares of Perrigo Company were deregistered. Perrigo Company plc began trading on the New York Stock Exchange on December 19, 2013 and the Tel Aviv Stock Exchange on December 22, 2013 under the same symbol used by Perrigo Company ("PRGO") prior to December 18, 2013. See Note 2 for additional information about the acquisition of Elan.

The Company issued 18640 thousand and 26470 thousand shares related to the exercise and vesting of share-based compensation during the three months ended SeptemberDecember 27, 2014 and SeptemberDecember 28, 2013, respectively. The Company issued 226 thousand and 334 thousand shares related to the exercise and vesting of share-based compensation during six months ended December 27, 2014 and December 28, 2013, respectively.

In addition, to partially finance the pending Omega acquisition, the Company issued 6,809,210 ordinary shares at $152.00 per share in a public offering that closed on November 26, 2014. The offering raised approximately $1.0 billion, offset by $35.7 million of issuance costs.

The Company does not currently have an ordinary share repurchase program.
    

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NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes in the Company's AOCI balances, net of tax, for the threesix months ended SeptemberDecember 27, 2014 were as follows (in millions):
Foreign
currency
translation
adjustments		 
Fair value
of derivative
financial
instruments,
net of tax
 Fair value of
investment
securities,
net of tax		 Post-
retirement and pension
liability
adjustments,
net of tax		 Total AOCIForeign
currency
translation
adjustments		 
Fair value
of derivative
financial
instruments,
net of tax
 Fair value of
investment
securities,
net of tax		 Post-
retirement and pension
liability
adjustments,
net of tax		 Total AOCI
Balance at June 28, 2014$164.4
 $(16.1) $2.4
 $(11.1) $139.6
$164.4
 $(16.1) $2.4
 $(11.1) $139.6
OCI before reclassifications(63.8) (1.7) 0.6
 —
 (64.9)(124.2) (7.3) (0.5) (1.7) (133.7)
Amounts reclassified from AOCI—
 (0.4) —
 —
 (0.4)—
 1.5
 —
 —
 1.5
Other comprehensive income(63.8) (2.1) 0.6
 —
 (65.3)(124.2) (5.8) (0.5) (1.7) (132.2)
Balance at September 27, 2014$100.6
 $(18.2) $3.0
 $(11.1) $74.3
Balance at December 27, 2014$40.2
 $(21.9) $1.9
 $(12.8) $7.4

NOTE 11 – INCOME TAXES

The effective tax rate for the three months ended SeptemberDecember 27, 2014 was 11.4%17.1% on income compared to 29.2%a benefit of 23.9% on a net loss for the three months ended SeptemberDecember 28, 2013. The effective tax raterates on income for the six months ended December 27, 2014 and December 28, 2013 were 13.9% and 42.7%, respectively. The effective tax rates for the three and six months ended SeptemberDecember 27, 2014 waswere impacted by changes to the estimated jurisdictional mix of income and the new corporate structure attributable to the acquisition of Elan.income. Additionally, the effective tax rate for the threesix months ended SeptemberDecember 28, 2013 was unfavorably impacted by Israel tax rate changes in the amount of $1.8 million and favorably impacted by United Kingdom tax rate changes in the amount of $4.7 million as discussed further below.

In fiscal 2011, Israel enacted new tax legislation that reduced the effective tax rate to 10% for 2011 and 2012, 7% for 2013 and 2014, and 6% thereafter for certain qualifying entities that elect to be taxed under the new legislation. This legislation was rescinded as announced in the Official Gazette on August 5, 2013. The new legislation enacted a 9% rate for certain qualifying entities that elect to be taxed under the new legislation. The Company has two entities that had previously elected the new tax legislation for years after fiscal 2011. For all other entities that do not qualify for this reduced rate, the tax rate has been increased from 25% to 26.5%. These rates were applicable to Perrigo as of the first quarter of fiscal 2014 and unfavorably impacted the effective tax rate in the amount of $1.8 million.

In July 2013, the United Kingdom passed legislation reducing the statutory rate to 21% and 20% effective April 1, 2014 and April 1, 2015, respectively. These rates were applicable to Perrigo as of the first quarter of fiscal 2014 and favorably impacted the effective tax rate in the amount of $4.7 million.

In December 2013, Mexico enacted legislation to rescind the scheduled rate reductions and maintain the 30% corporate tax rate for 2014 and future years. This rate was applicable to Perrigo as of June 30, 2013.

The Company's tax rate is subject to adjustment over the balance of the fiscal year due to, among other things, income tax rate changes by governments; the jurisdictions in which the Company's profits are determined to be earned and taxed, and the relative amounts of income in these jurisdictions; changes in the valuation of the Company's deferred tax assets and liabilities; adjustments to estimated taxes upon finalization of various tax returns; the resolution of any pending or future tax audit, examination or challenge; adjustments to the Company's interpretation of transfer pricing standards, changes in available tax credits, grants and other incentives; changes in stock-based compensation expense; changes in tax laws or the interpretation of such tax laws (for example, proposals for fundamental U.S. international tax reform); changes in U.S. generally accepted accounting principles; expiration or the inability to renew tax rulings or tax holiday incentives; and the repatriation of earnings with respect to which the Company has not previously provided for taxes.

The total liability for uncertain tax positions was $291.5$301.6 million and $205.4 million as of SeptemberDecember 27, 2014 and June 28, 2014, respectively, before considering the federal tax benefit of certain state and local items. This increase is due primarily due to the adoption of ASU 2013-11 concerning the offset of applicable deferred tax assets for net operating loss, tax credit or other similar carryforwards. See Note 1 for additional information regarding the adoption.


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The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. The total amount accrued for interest and penalties in the liability for uncertain tax positions was $42.3$44.8 million and $45.3 million as of SeptemberDecember 27, 2014 and June 28, 2014, respectively.

The Company’s primary income tax jurisdictions are Ireland, the U.S. and Israel. Because the Company files income tax returns in Ireland, the U.S. (including various state and local jurisdictions), Israel and numerous other jurisdictions, it is subject to audits by tax authorities from several jurisdictions.

Although we believethe Company believes that ourits tax estimates are reasonable and that we prepare ourthe Company's tax filings are prepared in accordance with all applicable tax laws, the final determination with respect to any tax audit, and any related litigation, could be materially different from ourthe Company's estimates or from ourthe Company's historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on operating results or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, or interest assessments.

    Currently, the IRSThe Company is auditing fiscal years 2009 and 2010, andcurrently under audit by the Israel Tax Authority is auditingfor fiscal years 2011 and 2012. In regards toDecember 2014, the IRS notified the Company that it will conduct an audit forof fiscal years2011 and 2012. The IRS audit of fiscal 2009 and 2010 had previously concluded with the issuance of a statutory notice of deficiency on August 27, 2014. While the Company hashad previously agreed on certain adjustments and has made associated payments of $8.0 million inclusive of interest but remains under audit for those years. On August 27,in November 2014 the Company received a statutory notice of deficiency fromasserted various additional positions, including transfer pricing, relative to the IRS related tosame fiscal years 2009 and 2010.2010 audit. The statutory notice asserted an incremental tax liability asserted by the IRS for these periods isobligation of approximately $43.0$69.2 million, exclusiveinclusive of interest and penalties. The IRS has asserted various positions, including transfer pricing. As the Company disagrees with the IRS’s positions asserted byin the IRS, it intendsnotice of deficiency and plans to contest them in U.S. Federal court. In January 2015, the Company paid this amount, a prerequisite to being able to contest the IRS’s positions through applicable procedures in either the U.S. Tax Court or U.S. Federal court,court. The payment was recorded in the latter of which would requirethird fiscal quarter as a deferred charge on the Companybalance sheet given the Company’s anticipated action to pay the asserted liability, plus interest and penalties, prior to initiating any refund litigation. Therecover this amount. An unfavorable resolution of this matter could have a material impact on the Company's consolidated financial statements in future periods. There are numerous other income tax jurisdictions for which tax returns are not yet settled, none of which are individually significant. At this time, the Company cannot predict the outcome of any audit or related litigation.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

In addition to the discussions below, the Company has pending certain other legal actions and claims incurred in the normal course of business. The Company records accruals for such contingencies when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. As of SeptemberDecember 27, 2014, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals for new information and further development. Other than the items disclosed below, the Company considers the remainder of litigation matters to be immaterial individually and in the aggregate.

Texas Medicaid

In June 2013, the Company received notices from the Office of the Attorney General for the State of Texas, of civil investigative demands to two of the Company’s affiliates, Perrigo Pharmaceuticals Company and Paddock Laboratories, LLC, for information under the Texas Medicaid Fraud Prevention Act relating to the submission of prices to Texas Medicaid in claims for reimbursement for drugs. The Company has cooperated with requests for information and is in the process of evaluating this and other information. While the Company does not know the full extent of its potential liability at this time and intends to vigorously defend against any claims, the Company could be subject to material penalties and damages. The Company has established a contingency loss accrual of $15.0 million to cover potential settlement or other outcomes. The Company cannot predict whether settlement on terms acceptable to it will occur, or that a settlement or potential liability for these claims will not be higher than the amount recorded.


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Eltroxin

During October and November 2011, nine applications to certify a class action lawsuit were filed in various courts in Israel related to Eltroxin, a prescription thyroid medication manufactured by a third party and distributed in Israel by Perrigo Israel Agencies Ltd. The respondents include Perrigo Israel Pharmaceuticals Ltd. and/or Perrigo

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Israel Agencies Ltd., the manufacturers of the product, and various health care providers who provide health care services as part of the compulsory health care system in Israel.
    
The nine applications arose from the 2011 launch of a reformulated version of Eltroxin in Israel. The applications generally alleged that the respondents (a) failed to timely inform patients, pharmacists and physicians about the change in the formulation; and (b) failed to inform physicians about the need to monitor patients taking the new formulation in order to confirm patients were receiving the appropriate dose of the drug. As a result, claimants allege they incurred the following damages: (a) purchases of product that otherwise would not have been made by patients had they been aware of the reformulation; (b) adverse events to some patients resulting from an imbalance of thyroid functions that could have been avoided; and (c) harm resulting from the patients' lack of informed consent prior to the use of the reformulation.

All nine applications were transferred to one court in order to determine whether to consolidate any of the nine applications. On July 19, 2012, the court dismissed one of the applications and ordered that the remaining eight applications be consolidated into one application. On September 19, 2012, a consolidated motion to certify the eight individual motions was filed by lead counsel for the claimants. Generally, the allegations in the consolidated motion are the same as those set forth in the individual motions; however, the consolidated motion excluded the manufacturer of the reformulated Eltroxin as a respondent. Several hearings on whether or not to certify the consolidated application took place in December 2013 and January 2014.As this matter is in its early stages, the Company cannot reasonably predict at this time the outcome or the liability, if any, associated with these claims.

Tysabri® Product Liability Lawsuits

The Company and collaborator Biogen are co-defendants in product liability lawsuits arising out of the occurrence of Progressive Multifocal Leukoencephalopathy ("PML"), a serious brain infection, and serious adverse events, including deaths, which occurred in patients taking Tysabri®. The Company and Biogen will each be responsible for 50% of losses and expenses arising out of any Tysabri® product liability claims. While these lawsuits will be vigorously defended, management cannot predict how these cases will be resolved. Adverse results in one or more of these lawsuits could result in substantial judgments against the Company.

Neot Hovav
    
In March and June of 2007, lawsuits were filed by three separate groups against both the State of Israel and the Council of Neot Hovav in connection with waste disposal and pollution from several companies, including the Company, that have operations in the Neot Hovav region of Israel. These lawsuits were subsequently consolidated into a single proceeding in the District Court of Beer-Sheva. The Council of Neot Hovav, in June 2008, and the State of Israel, in November 2008, asserted third-party claims against several companies, including the Company. The pleadings allege a variety of personal injuries arising out of the alleged environmental pollution. Neither the plaintiffs nor the third-party claimants were required to specify a maximum amount of damages, but the pleadings allege damages in excess of $72.5 million, subject to foreign currency fluctuations between the Israeli shekel and the U.S. dollar. On January 9, 2013, the District Court of Beer-Sheva ruled in favor of the Company. On September 29, 2014, the Supreme Court of Israel affirmed the ruling of the District Court in favor of the Company and as a result, the matter is now closed.

Tysabri® product liability lawsuits

The Company and collaborator Biogen are co-defendants in product liability lawsuits arising out of the occurrence of Progressive Multifocal Leukoencephalopathy ("PML"), a serious brain infection, and serious adverse events, including deaths, which occurred in patients taking Tysabri®. The Company and Biogen will each be responsible for 50% of losses and expenses arising out of any Tysabri® product liability claims. While these lawsuits will be vigorously defended, management cannot predict how these cases will be resolved. Adverse results in one or more of these lawsuits could result in substantial judgments against the Company.


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NOTE 13 – RESTRUCTURING CHARGES

The Company periodically takes actions to reduce redundant expenses and improve operating efficiencies, typically in connection with its business acquisitions. The following summarizes the Company's restructuring activity for the three and six months ended SeptemberDecember 27, 2014 and SeptemberDecember 28, 2013 (in millions):
Three Months EndedThree Months Ended Six Months Ended
September 27, 2014 September 28, 2013December 27,
2014		 December 28,
2013		 December 27,
2014		 December 28,
2013
Beginning balance$16.4
 $2.9
$3.9
 $3.6
 $16.4
 $2.9
Additional charges1.7
 2.1
2.4
 14.9
 4.2
 17.0
Payments(13.5) (1.4)(2.5) (4.2) (16.0) (5.6)
Non-cash adjustments(0.7) —
(0.6) —
 (1.4) —
Ending balance$3.9
 $3.6
$3.2
 $14.3
 $3.2
 $14.3

Restructuring activity includes severance, lease exit costs, and asset impairments. Charges are shownreported in Restructuring onexpense. The charges during the Company's Condensed Consolidated Statements of Operations.three and six months ended December 28, 2013 were due primarily to Elan. Substantially all of the liability remaining liability for employee severance benefits and lease exit costs willat December 27, 2014 is expected to be paid within the fiscal year.

NOTE 14 – SEGMENT INFORMATION

The Company has five reportable segments, aligned primarily by type of product: Consumer Healthcare, Nutritionals, Rx Pharmaceuticals, API, and Specialty Sciences, along with an Other category. In conjunction with the Elan acquisition of Elan on December 18, 2013, the Company expanded its operating segments to include the Specialty Sciences segment, which is comprised of assets focused on the treatment of Multiple Sclerosis (Tysabri®(Tysabri®). The majority of corporate expenses, which generally represent shared services, are charged to operating segments as part of a corporate allocation. Unallocated expenses relate to certain corporate services that are not allocated to the segments.
Three Months EndedThree Months Ended Balance at December 27, 2014
September 27, 2014December 27, 2014 
Net Sales Operating Income (Loss) Amortization of Intangibles Total AssetsNet Sales Operating Income (Loss) Amortization of Intangibles Total Assets
Consumer Healthcare$493.3
 $65.3
 $8.6
 $3,828.0
$529.6
 $74.9
 $8.7
 $6,310.9
Nutritionals125.3
 8.6
 7.2
 1,072.6
130.6
 7.2
 7.2
 1,057.2
Rx Pharmaceuticals194.5
 64.7
 17.0
 2,509.1
276.6
 109.7
 18.0
 2,612.9
API24.8
 7.1
 0.5
 251.2
30.0
 7.4
 0.5
 255.2
Specialty Sciences91.9
 14.9
 72.8
 6,023.0
86.6
 9.5
 72.8
 6,135.6
Other21.7
 0.9
 0.4
 97.1
18.3
 1.1
 0.4
 88.9
Unallocated expenses—
 (24.3) —
 —
—
 (25.4) —
 —
Total$951.5
 $137.2
 $106.5
 $13,781.0
$1,071.7
 $184.4
 $107.6
 $16,460.7
              
Three Months EndedThree Months EndedBalance at December 28, 2013
September 28, 2013December 28, 2013
Net Sales Operating Income (Loss) Amortization of Intangibles Total AssetsNet Sales Operating Income (Loss) Amortization of Intangibles Total Assets
Consumer Healthcare$538.5
 $89.9
 $5.3
 $2,508.6
$536.3
 $89.5
 $5.3
 $2,345.5
Nutritionals129.0
 7.7
 7.4
 930.7
139.7
 13.3
 7.4
 1,014.0
Rx Pharmaceuticals203.6
 83.1
 16.2
 1,669.0
246.6
 100.4
 21.5
 1,940.1
API43.2
 22.4
 0.5
 295.2
30.0
 8.2
 0.5
 284.7
Specialty Sciences—
 —
 —
 —
7.4
 (19.0) 8.7
 8,023.8
Other19.1
 1.2
 0.4
 105.3
19.0
 0.6
 0.4
 104.7
Unallocated expenses—
 (24.6) —
 —
—
 (106.4) —
 —
Total$933.4
 $179.7
 $29.8
 $5,508.8
$979.0
 $86.6
 $43.8
 $13,712.8


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NOTE 15 – GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The Company and certain other of its principal 100% owned subsidiaries (the "Guarantors") fully and unconditionally guaranteed, on a joint and several basis, the Bonds. The following tables present condensed consolidated financial information for (a) the Company (for purposes of this discussion and table, "Parent"); (b) the guarantors of the Bonds, which include substantially all of the U.S., 100% owned subsidiaries of the Parent and specific Elan subsidiaries ("Subsidiary Guarantors"); and (c) the wholly- and partially-owned non-U.S. subsidiaries of the Parent, which do not guarantee the Notes ("Non-Guarantor Subsidiaries"). Separate financial statements of the Subsidiary Guarantors are not presented because they are fully and unconditionally, jointly and severally liable under the guarantees. The consolidating adjustments primarily relate to eliminations of investments in subsidiaries and intercompany balances and transactions. The condensed consolidating financial statements present investments in subsidiaries using the equity method of accounting.

Perrigo Company plc, which was formed on December 18, 2013, is the Parent Company. For periods prior to December 18, 2013, the Parent entity is Perrigo Company, which is a guarantor, therefore no Parent column is presented for the three months ended September 28, 2013.


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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 27 2014
(in millions)
 Unconsolidated    
 Perrigo Company plc Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminating Entries Consolidated
          
Net sales$—
 $829.7
 $263.7
 $(141.9) $951.5
Cost of sales—
 582.1
 169.2
 (121.6) 629.7
Gross profit—
 247.6
 94.5
 (20.3) 321.8
          
Operating expenses         
Distribution—
 11.0
 3.4
 —
 14.4
Research and development—
 21.7
 14.9
 —
 36.6
Selling—
 39.8
 10.6
 —
 50.4
Administration13.7
 51.1
 17.2
 (0.5) 81.5
Restructuring—
 1.7
 —
 —
 1.7
Total operating expenses13.7
 125.3
 46.1
 (0.5) 184.6
          
Operating income (loss)(13.7) 122.3
 48.4
 (19.8) 137.2
          
Interest expense, net23.9
 192.6
 (190.5) (0.1) 25.9
Other expense (income), net—
 (1.8) 3.8
 0.7
 2.7
Income (loss) before income taxes and equity in net income (loss) of subsidiaries(37.6) (68.5) 235.1
 (20.4) 108.6
Income tax expense(1.6) 3.6
 10.3
 —
 12.3
Income (loss) before equity in net income (loss) of subsidiaries(36.0) (72.1) 224.8
 (20.4) 96.3
Equity in net income (loss) of subsidiaries132.3
 54.6
 35.8
 (222.7) —
Net income (loss)$96.3
 $(17.5) $260.6
 $(243.1) $96.3





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CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended September 27, 2014
(in millions)

 Unconsolidated    
 Perrigo Company plc Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminating Entries Consolidated
          
Net income (loss)$96.3
 $(17.5) $260.6
 $(243.1) $96.3
Other comprehensive income (loss):         
Foreign currency translation adjustments(63.8) (0.2) (63.6) 63.8
 (63.8)
Change in fair value of derivative financial instruments, net of tax(2.1) 0.9
 (0.5) (0.4) (2.1)
Change in fair value of investment securities, net of tax0.6
 (1.3) 3.0
 (1.7) 0.6
Change in post-retirement and pension liability adjustments, net of tax—
 —
 —
 —
 —
Other comprehensive income (loss), net of tax(65.3) (0.6) (61.1) 61.7
 (65.3)
Comprehensive income (loss)$31.0
 $(18.1) $199.5
 $(181.4) $31.0








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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 28, 2013
(in millions)

 Unconsolidated    
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminating Entries Consolidated
        
Net sales$802.1
 $276.4
 $(145.1) $933.4
Cost of sales537.0
 168.2
 (128.1) 577.1
Gross profit265.1
 108.2
 (17.0) 356.3
        
Operating expenses       
Distribution10.6
 2.6
 —
 13.2
Research and development21.8
 10.5
 —
 32.3
Selling39.8
 10.4
 —
 50.2
Administration71.0
 7.8
 —
 78.8
Restructuring2.1
 —
 —
 2.1
Total operating expenses145.3
 31.3
 —
 176.6
        
Operating income (loss)119.8
 76.9
 (17.0) 179.7
        
Interest expense, net20.1
 1.3
 —
 21.4
Other expense (income), net0.9
 0.1
 —
 1.0
Income (loss) before income taxes and equity in net income (loss) of subsidiaries98.8
 75.5
 (17.0) 157.3
Income tax expense42.2
 3.7
 —
 45.9
Income (loss) before equity in net income (loss) of subsidiaries56.6
 71.8
 (17.0) 111.4
Equity in net income (loss) of subsidiaries54.8
 30.8
 (85.6) —
Net income (loss)$111.4
 $102.6
 $(102.6) $111.4

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CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME
For the Three Months Ended September 28, 2013
(in millions)

 Unconsolidated    
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminating Entries Consolidated
        
Net income$111.4
 $102.6
 $(102.6) $111.4
Other comprehensive income (loss):       
Foreign currency translation adjustments36.6
 37.2
 (37.2) 36.6
Change in fair value of derivative financial instruments, net of tax(9.2) 0.3
 (0.3) (9.2)
Change in fair value of investment securities, net of tax—
 —
 —
 —
Change in post-retirement and pension liability adjustments, net of tax(0.1) —
 —
 (0.1)
Other comprehensive income (loss), net of tax27.3
 37.5
 (37.5) 27.3
Comprehensive income$138.7
 $140.1
 $(140.1) $138.7










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CONDENSED CONSOLIDATING BALANCE SHEET
September 27, 2014
(in millions)
 Unconsolidated    
 Perrigo Company plc Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminating Entries Consolidated
Assets         
Cash and cash equivalents$424.7
 $233.6
 $233.2
 $—
 $891.5
Investment securities—
 16.5
 5.1
 —
 21.6
Accounts receivable, net2.0
 283.0
 1,822.6
 (1,238.2) 869.4
Inventories—
 658.4
 148.1
 (149.7) 656.8
Current deferred income taxes—
 61.3
 3.3
 —
 64.6
Prepaid expenses and other current assets20.6
 60.1
 49.4
 —
 130.1
Total current assets447.3
 1,312.9
 2,261.7
 (1,387.9) 2,634.0
Property and equipment, net—
 526.4
 235.3
 —
 761.7
Goodwill and other indefinite-lived intangible assets—
 3,065.3
 437.7
 —
 3,503.0
Other intangible assets, net—
 6,475.4
 196.4
 —
 6,671.8
Non-current deferred income taxes14.4
 10.9
 3.2
 —
 28.5
Other non-current assets23.0
 74.5
 84.5
 —
 182.0
Intercompany loans receivable7,300.0
 2,065.7
 14,242.3
 (23,608.0) —
Investments in subsidiaries6,284.9
 8,538.3
 367.5
 (15,190.7) —
Total non-current assets13,622.3
 20,756.5
 15,566.9
 (38,798.7) 11,147.0
Total assets$14,069.6
 $22,069.4
 $17,828.6
 $(40,186.6) $13,781.0
Liabilities and Shareholders’ Equity        

Accounts payable$40.4
 $1,254.0
 $252.2
 $(1,237.6) $309.0
Payroll and related taxes0.1
 56.2
 20.7
 —
 77.0
Accrued customer programs—
 35.0
 239.5
 —
 274.5
Accrued liabilities32.5
 102.2
 45.6
 (0.4) 179.9
Accrued income taxes(0.6) 12.7
 19.6
 —
 31.7
Current deferred income taxes—
 4.3
 —
 —
 4.3
Current portion of long-term debt140.0
 1.5
 —
 —
 141.5
Total current liabilities212.4
 1,465.9
 577.6
 (1,238.0) 1,017.9
Long-term debt, less current portion3,049.2
 1.6
 —
 —
 3,050.8
Non-current deferred income taxes—
 692.2
 16.5
 —
 708.7
Other non-current liabilities—
 192.4
 94.5
 —
 286.9
Intercompany loans payable2,091.3
 13,849.0
 7,667.7
 (23,608.0) —
Total non-current liabilities5,140.5
 14,735.2
 7,778.7
 (23,608.0) 4,046.4
Total liabilities5,352.9
 16,201.1
 8,356.3
 (24,846.0) 5,064.3
Shareholders’ equity8,716.7
 5,868.3
 9,472.3
 (15,340.6) 8,716.7
Total liabilities and shareholders' equity$14,069.6
 $22,069.4
 $17,828.6
 $(40,186.6) $13,781.0


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CONDENSED CONSOLIDATING BALANCE SHEET
June 28, 2014
(in millions)
 Unconsolidated    
 Perrigo Company plc Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminating Entries Consolidated
Assets         
Cash and cash equivalents$323.4
 $245.2
 $230.9
 $—
 $799.5
Investment securities—
 —
 5.9
 —
 5.9
Accounts receivable, net1.4
 463.9
 4,495.7
 (4,025.9) 935.1
Inventories—
 613.9
 148.1
 (130.4) 631.6
Current deferred income taxes—
 59.8
 3.0
 —
 62.8
Prepaid expenses and other current assets9.9
 62.7
 43.4
 —
 116.0
Total current assets334.7
 1,445.5
 4,927.0
 (4,156.3) 2,550.9
Property and equipment, net—
 532.4
 247.5
 —
 779.9
Goodwill and other indefinite-lived intangible assets—
 3,078.3
 465.5
 —
 3,543.8
Other intangible assets, net—
 6,583.8
 203.2
 —
 6,787.0
Non-current deferred income taxes16.0
 —
 23.6
 (16.0) 23.6
Other non-current assets23.8
 84.5
 86.7
 —
 195.0
Intercompany loans receivable7,300.0
 2,145.7
 11,444.1
 (20,889.8) —
Investments in subsidiaries6,218.9
 7,826.9
 325.2
 (14,371.0) —
Total non-current assets13,558.7
 20,251.6
 12,795.8
 (35,276.8) 11,329.3
Total assets$13,893.4
 $21,697.1
 $17,722.8
 $(39,433.1) $13,880.2
Liabilities and Shareholders’ Equity        

Accounts payable$35.2
 $3,998.0
 $487.3
 $(4,156.2) $364.3
Short-term debt—
 —
 2.1
 —
 2.1
Payroll and related taxes0.1
 79.9
 32.3
 —
 112.3
Accrued customer programs—
 65.6
 190.9
 —
 256.5
Accrued liabilities11.4
 121.8
 46.7
 (0.5) 179.4
Accrued income taxes—
 3.4
 14.0
 —
 17.4
Current deferred income taxes—
 1.1
 —
 —
 1.1
Current portion of long-term debt140.0
 1.6
 —
 —
 141.6
Total current liabilities186.7
 4,271.4
 773.3
 (4,156.7) 1,074.7
Long-term debt, less current portion3,084.0
 1.9
 4.6
 —
 3,090.5
Non-current deferred income taxes—
 709.6
 34.3
 (16.0) 727.9
Other non-current liabilities—
 182.6
 110.8
 —
 293.4
Intercompany loans payable1,929.0
 11,291.5
 7,667.8
 (20,888.3) —
Total non-current liabilities5,013.0
 12,185.6
 7,817.5
 (20,904.3) 4,111.8
Total liabilities5,199.7
 16,457.0
 8,590.8
 (25,061.0) 5,186.5
Controlling interest8,693.7
 5,240.1
 9,131.2
 (14,372.1) 8,692.9
Non-controlling interest—
 —
 0.8
 —
 0.8
Shareholders’ equity8,693.7
 5,240.1
 9,132.0
 (14,372.1) 8,693.7
Total liabilities and shareholders' equity$13,893.4
 $21,697.1
 $17,722.8
 $(39,433.1) $13,880.2






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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended September 27, 2014
(in millions)

 Unconsolidated    
 Perrigo Company plc Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminating Entries Consolidated
          
Net cash from (for) operating activities$(91.2) $211.3
 $75.0
—
$—
 $195.1
Cash Flows From (For) Investing Activities         
Additions to property and equipment—
 (18.4) (13.3) —
 (31.7)
(Purchase) return of investment—
 1.2
 (1.3) —
 (0.1)
Proceeds from sale of business—
 —
 1.1
 —
 1.1
Intercompany notes issued—
 (202.1) (243.6) 445.7
 —
Net cash from (for) investing activities—
 (219.3) (257.1) 445.7
 (30.7)
Cash Flows From (For) Financing Activities        —
Repayments of long-term debt(35.0) —
 (4.5) —
 (39.5)
Cash dividends(14.1) —
 —
 —
 (14.1)
Repurchase of common stock(7.5) —
 —
 —
 (7.5)
Settlements of contingent consideration—
 (5.0) —
 —
 (5.0)
Borrowings (repayments) of short-term debt, net—
 —
 (2.1) —
 (2.1)
Issuance of common stock2.6
 —
 —
 —
 2.6
Excess tax benefit of stock transactions4.3
 —
 —
 —
 4.3
Intercompany notes borrowed242.2
 1.4
 202.1
 (445.7) —
Net cash from (for) financing activities192.5
 (3.6) 195.5
 (445.7) (61.3)
Effect of exchange rate changes on cash—
 —
 (11.1) —
 (11.1)
Net increase (decrease) in cash and cash equivalents101.3
 (11.6) 2.3
 —
 92.0
Cash and cash equivalents, beginning of period323.4
 245.2
 230.9
 —
 799.5
Cash and cash equivalents, end of period$424.7
 $233.6
 $233.2
 $—
 $891.5




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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Three Months Ended September 28, 2013
(in millions)
 Unconsolidated    
 Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminating Entries Consolidated
        
Net cash from (for) operating activities$52.9
 $45.8
 $—
 $98.7
Cash Flows From (For) Investing Activities       
Additions to property and equipment(31.2) (9.2) —
 (40.4)
Proceeds from sale of land—
 4.6
 —
 4.6
Net cash from (for) investing activities(31.2) (4.6) —
 (35.8)
Cash Flows From (For) Financing Activities      —
Cash dividends(8.5) —
 —
 (8.5)
Repurchase of common stock(7.3) —
 —
 (7.3)
Borrowings (repayments) of short-term debt, net—
 1.1
 —
 1.1
Issuance of common stock3.5
 —
 —
 3.5
Excess tax benefit of stock transactions7.2
 —
 —
 7.2
Deferred financing fees(24.8) —
 —
 (24.8)
Net cash from (for) financing activities(29.9) 1.1
 —
 (28.8)
Effect of exchange rate changes on cash—
 2.6
 —
 2.6
Net increase (decrease) in cash and cash equivalents(8.2) 44.9
 —
 36.7
Cash and cash equivalents, beginning of period519.6
 260.3
 —
 779.9
Cash and cash equivalents, end of period$511.4
 $305.2
 $—
 $816.6

NOTE 16 – SUBSEQUENT EVENTS

Omega Pharma Invest NV - On November 6, 2014, the Company entered into an Agreement for the Sale and Purchase of 685,348,257 Shares of Omega Pharma Invest NV (“Omega”) (the “Share Purchase Agreement”) with Alychlo NV (“Alychlo”) and Holdco I BE NV (“Holdco” and, together with Alychlo, the “Sellers”), limited liability companies incorporated under the laws of Belgium, pursuant to which the Company will purchase (the “Acquisition”) from the Sellers 685,348,257 shares (the “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.

The Company agreed to acquire Omega for a total value of EUR 3.6 billion in equity and cash, which includes the assumption of EUR 1.1 billion in debt. The consideration will consist of cash of EUR 1.8 billion (the “Cash Consideration”) and 5,397,711 shares of the Company issued to Alychlo (the “Non-Cash Consideration” and, together with the Cash Consideration, the “Acquisition Consideration”). 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 and/or issuances of debt and/or equity of the Company and/or its subsidiaries.

The Sellers have agreed to indemnify the Company for certain losses. The Sellers’ indemnification and other obligations to the Company under the Share Purchase Agreement will be secured up to EUR 248.0 million.

In connection with the Acquisition, the Company will assume or repay/redeem all outstanding indebtedness of Omega and its subsidiaries, which includes (i) EUR 135.0 million of 5.1045% senior notes due 2023 and USD 20.0 million (after hedging arrangements, EUR 16.2 million) of 6.19% senior notes due 2016, (ii) EUR 300.0 million of 5.125% retail bonds due 2017, EUR 180.0 million of 4.500% retail bonds due 2017, and EUR 120.0 million of 5.000% retail bonds due 2019, (iii) approximately EUR 390.0 million outstanding (with additional amounts available

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to be drawn) under certain credit and overdraft facilities, and (iv) amounts incurred under various cash pooling and overdraft arrangements.
 Six Months Ended
 December 27, 2014
 Net Sales Operating Income (Loss) Amortization of Intangibles
Consumer Healthcare$1,022.9
 $140.2
 $17.4
Nutritionals255.8
 15.7
 14.4
Rx Pharmaceuticals471.2
 174.4
 35.0
API54.8
 14.4
 1.0
Specialty Sciences178.4
 24.4
 145.6
Other40.0
 2.0
 0.8
Unallocated expenses—
 (49.6) —
Total$2,023.1
 $321.5
 $214.2
      
 Six Months Ended
 December 28, 2013
 Net Sales Operating Income (Loss) Amortization of Intangibles
Consumer Healthcare$1,074.8
 $179.5
 $10.6
Nutritionals268.7
 21.0
 14.7
Rx Pharmaceuticals450.2
 183.5
 37.7
API73.2
 30.6
 1.0
Specialty Sciences7.4
 (19.0) 8.7
Other38.1
 1.8
 0.9
Unallocated expenses—
 (131.2) —
Total$1,912.4
 $266.2
 $73.6

NOTE 15 – COLLABORATIVE ARRANGEMENTS

The Acquisition is conditioned upon customary closing conditions, including antitrust approval, accuracy of representations and warranties, compliance with covenants and no material adverse effect. The Company is obligated to use its best efforts to satisfy the antitrust approval condition, including making any required divestitures. Subject to the closing conditions, the Acquisition is expected to be completed during the third quarter of fiscal 2015.

Under the terms of the Share Purchase Agreement, Alychlo and its affiliates will be subject to a three-year non-compete in Europe and Belgium, and the Sellers will be subject to a two-year non-solicit, in each case subject to certain exceptions.
The Share Purchase Agreement contains other customary representations, warranties, and covenants of the parties thereto.

Also on November 6,In December 2014, the Company entered into a Senior Unsecured 364-Day Bridge Facility Commitment Letter (the “Bridge Commitment Letter”) andcollaboration agreement with a Senior Unsecured Credit Facilities Commitment Letter (the “Senior Commitment Letter” and, together with the Bridge Commitment Letter, the “Commitment Letters” and, the commitments thereunder, the “Commitments”)clinical stage biotechnology company, pursuant to which JPMorgan Chase Bank, N.A.the parties will collaborate in the ongoing development of a topical OTC drug product. The Company will provide assistance including non-clinical, clinical, and Barclays Bank PLC have committed to: (i) provide upmanufacturing activities in support of an NDA submission to EUR 1.75 billion under a 364-day senior unsecured bridge loan facility (the “Bridge Loan Facility”); (ii) (x) solicit consents to amend the termsFDA. As part of the Company’s existing term loan credit agreement (the “Existing Term Loan Credit Agreement”) to permit the Acquisition, (y) replace the Existing Term Loan Credit Agreement with a backstop term loan facility permitting the Acquisition and otherwise containing the same terms and commitments as the Existing Term Loan Agreement, or (z) replace the Existing Term Loan Credit Agreement by entering into a new term loan credit agreement providing for increased commitments up to an aggregate principal amount of USD 300.0 million and EUR 800.0 million (any such amended, backstop, or new agreement, the “New Term Loan Facility”);Company paid $10.0 million for an exclusive option to purchase and (iii) (x) solicit consents to amendlicense certain assets as specified in separate asset purchase and license agreements. The $10.0 million fee is reported in Research and development expense. If the terms of the Company’s existing revolving credit agreement (the “Existing Revolving Credit Agreement”) to permit the Acquisition, (y) replace the Existing Revolving Credit Agreement with a backstop revolving facility permitting the Acquisition and otherwise containing the same terms and commitments as the Existing Revolving Credit Agreement, or (z) replace the Existing Revolving Credit Agreement by entering into a new revolving credit agreement providing for increased commitments up to an aggregate principal amount of USD 1.0 billion (any such amended, backstop, or new agreement, the “New Revolving Facility” and, together with the Bridge Facility and the New Term Loan Facility, the “New Facilities”). The Commitments are subject to various conditions, including the absence of any Material Adverse Effect (as definedproduct is successful in the Commitment Letters) on Omega and its subsidiaries, the negotiation of definitive documentation with respect to the New Facilities, and the other closing conditions set forth in the Commitment Letters.

Concurrent with the announcement of the Acquisition,Phase 3 clinical trials, the Company entered into foreign currencyis required to make an additional option contracts to partly mitigate the currency exchange risk associated with the payment of $5.0 million. If the Euro-denominatedCompany exercises its purchase price.  These foreign currency option, contracts will not be designated as hedging instruments and therefore changes in the derivatives fair valueit will be recorded in Other expense/income (net) on the Condensed Consolidated Statementrequired to pay a purchase price of Operations.

Lumara Health, Inc. - On September 29, 2014, the Company announced a definitive agreement to acquire a portfolio of women's healthcare products from Lumara Health, Inc., a privately-held, Chesterfield, Missouri-based specialty pharmaceutical company, for $83.0$10.0 million as well as certain contingent milestone payments, which could total $50.0 million in cash. The acquisition was completed on October 31, 2014.


aggregate.


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Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRSTSECOND QUARTER OFAND YEAR-TO-DATE FOR FISCAL YEARS 2015 AND 2014

EXECUTIVE OVERVIEW

Perrigo Company plc (formerly known as Perrigo Company Limited, and prior thereto, Blisfont Limited) ("Perrigo" or "the Company"), was incorporated under the laws of Ireland on June 28, 2013, and became the successor registrant of Perrigo Company on December 18, 2013 in connection with the consummation of the acquisition of Elan Corporation, plc ("Elan"), which is discussed further in Note 2 to the Notes of Condensed Consolidated Statements. From its beginnings in 1887 as a small local proprietor selling medicinals to regional grocers, Perrigo has evolved into a leading global pharmaceutical company that manufactures and distributes more than 47 billion oral solid doses and more than 2 billion liquid doses, as well as dozens of other product dosage forms, each year. The Company’s mission is to offer “Quality Affordable Healthcare Products®Products®”, and it does so across a wide variety of product categories primarily in the United States, United Kingdom, Mexico, Israel, and Australia, as well as many other key markets worldwide, including Canada, China, and Latin America.
    
Segments –

The Company has five reportable segments, aligned primarily by type of product: Consumer Healthcare, Nutritionals, Rx Pharmaceuticals, API, and Specialty Sciences. In addition, the Company has an Other category that consists of the Israel Pharmaceutical and Diagnostic Products operating segment, which does not individually meet the quantitative thresholds required to be a separately reportable segment.

The Consumer Healthcare ("CHC") segment is the world’s largest store brand marketer and manufacturer of over-the-counter ("OTC") pharmaceutical products. Major product categories include analgesics, cough/cold/allergy/sinus, gastrointestinal, smoking cessation, animal health, and secondary product categories include feminine hygiene, diabetes care and dermatological care.

The CHC business markets products that are comparable in quality and effectiveness to national brand products. The cost to the retailer of a store brand product is significantly lower than that of a comparable nationally advertised brand-name product. Generally, the retailers’ dollar profit per unit of store brand product is greater than the dollar profit per unit of the comparable national brand product. The retailer, therefore, can price a store brand product below the competing national brand product and realize a greater profit margin. The consumer benefits by receiving a high quality product at a price below the comparable national brand product. Therefore, the Company's business model saves consumers on their healthcare spending. The Company, one of the original architects of private label pharmaceuticals, is the market leader for consumer healthcare products in many of the geographies where it currently competes – the U.S., U.K., and Mexico – and is developing its position in Australia. The Company's market share of OTC store brand products has grown in recent years as new products, retailer efforts to increase consumer education and awareness, and economic conditions have directed consumers to the value of store brand product offerings.
 
The Nutritionals segment develops, manufactures, markets and distributes store brand infant and toddler formula products, infant and toddler foods, and vitamin, mineral and dietary supplement ("VMS") products to retailers, distributors and consumers primarily in the U.S., Canada, Mexico, and China. Similar to the Consumer Healthcare segment, this business markets store brand products that are comparable in quality and formulation to the national brand products. The cost to the retailer of a store brand product is significantly lower than that of a comparable nationally advertised brand-name product. The retailer, therefore, can price a store brand product below the competing national brand product yet realize a greater profit margin. All infant formulas sold in the U.S. are subject to the same regulations governing manufacturing and ingredients under the Infant Formula Act of 1980, as amended. Store brands, which offer substantial savings to consumers, must meet the same U.S. Food and Drug Administration ("FDA") requirements as the national brands. Substantially all products are developed using ingredients and formulas comparable to those of national brand products. In most instances, packaging is designed to increase visibility of store brand products and to invite and reinforce comparison to national brand products in order to communicate store brand value to the consumer.


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The Rx Pharmaceuticals segment develops, manufactures and markets a portfolio of generic prescription ("Rx") drugs primarily for the U.S. market. The Company defines this portfolio as predominantly “extended topical” and "specialty" as it encompasses a broad array of topical dosage forms such as creams, ointments, lotions, gels, shampoos, foams, suppositories, sprays, liquids, suspensions, solutions and powders. The portfolio also includes select controlled substances, injectables, hormones, oral solid dosage forms and oral liquid formulations. The strategy in the Rx Pharmaceuticals segment is to be the first to market with those new products that are exposed to less competition because they have formulations that are more difficult and costly to develop and launch (e.g., extended topicals, specialty solutions or products containing controlled substances). In addition, the Rx Pharmaceuticals segment offers OTC products through the prescription channel (referred to as “ORx®” marketing). ORx® products are OTC products available for pharmacy fulfillment and healthcare reimbursement when prescribed by a physician. The Company offers over 100 ORx® products that are reimbursable through many health plans and Medicaid and Medicare programs.
•
The Rx Pharmaceuticals segment develops, manufactures and markets a portfolio of prescription ("Rx") drugs primarily for the U.S. market. The Company defines this portfolio as predominantly “extended topical” and "specialty" as it encompasses a broad array of topical dosage forms such as creams, ointments, lotions, gels, shampoos, foams, suppositories, sprays, liquids, suspensions, solutions and powders. The portfolio also includes select controlled substances, injectables, hormones, oral solid dosage forms and oral liquid formulations. The strategy in the Rx Pharmaceuticals segment is to be the first to market with those new products that are exposed to less competition because they have formulations that are more difficult and costly to develop and launch (e.g., extended topicals, specialty solutions or products containing controlled substances). In addition, the Rx Pharmaceuticals segment offers OTC products through the prescription channel (referred to as “ORx®” marketing). ORx® products are OTC products available for pharmacy fulfillment and healthcare reimbursement when prescribed by a physician. The Company offers over 100 ORx® products that are reimbursable through many health plans and Medicaid and Medicare programs.

The API segment develops, manufactures and markets active pharmaceutical ingredients ("API") used worldwide by the generic drug industry and branded pharmaceutical companies. The API business identifies APIs critical to its pharmaceutical customers’ future product launches and then works closely with these customers on the development processes. API development is focused on the synthesis of less common molecules for the U.S., European and other international markets. The Company is also focusing development activities on the synthesis of molecules for use in its own OTC and Rx pipeline products. This segment is undergoing a strategic platform transformation, moving certain production from Israel to the acquired API manufacturing facility in India to allow for lower cost production and to create space for other, more complex production in Israel.

As a result of the Elan acquisition on December 18, 2013, the Company expanded its operating segments to include the Specialty Sciences segment, which is comprised of assets focused on the treatment of Multiple Sclerosis (Tysabri®
•
As a result of the Elan acquisition on December 18, 2013, the Company expanded its operating segments to include the Specialty Sciences segment, which is comprised of assets focused on the treatment of Multiple Sclerosis (Tysabri®).
 
In addition to general management and strategic leadership, each business segment has its own sales and marketing teams focused on servicing the specific requirements of its customer base. Each of these business segments share Research & Development, Supply Chain, Information Technology, Finance, Human Resources, Legal, and Quality services.

Seasonality –

The Company’s sales of OTC pharmaceutical products are subject to theCompany historically has been impacted by seasonal demands for cough/cold/flu and allergy productsdemand and consumer dynamics in the retail environment in which our customers operate. In addition, the Company's animal health products are subject to the seasonal demand for flea and tick products, which typically peaks during the warmer weather months.Accordingly, operating results for the three and six months ended SeptemberDecember 27, 2014 are not necessarily indicative of the results that may be expected for a full fiscal year.  The Company’s sales of OTC pharmaceutical products typically are subject to seasonal demands for cough/cold/flu products in its second and third fiscal quarters and allergy products in its first and fourth fiscal quarters. In addition, the Company's animal health products are subject to seasonal demand for flea and tick products, which typically peaks during the warmer weather months. 

For fiscal 2015, the Company’s Consumer Healthcare segment has been unfavorably impacted in the first half of the fiscal year as a result of category decreases, driven primarily by timing differences related to seasonal promotions and lower contract sales. In addition, the Company’s Nutritionals segment has been impacted by competitive market dynamics in the VMS and infant foods categories. These factors have resulted in lower sales in these segments for the first half of fiscal 2015 as compared to fiscal 2014. Other than the market dynamics in the VMS and infant foods categories, the Company does not expect these trends to continue. The Company anticipates that the absence of these trends, combined with expected higher new product sales in the second half of fiscal 2015, will result in atypically stronger second half results compared to historical fiscal year comparisons.

Consolidated Results
 Three Months Ended Increase/(Decrease) % Change
($ in millions)September 27,
2014		 September 28,
2013		  
Net sales$951.5
 $933.4
 $18.1
 2 %
Gross profit$321.8
 $356.3
 $(34.5) (10)%
Gross profit %33.8% 38.2%    
Operating expenses$184.6
 $176.6
 $8.0
 5 %
Operating expenses %19.4% 18.9%    
Operating income$137.2
 $179.7
 $(42.5) (24)%
Operating income %14.4% 19.3%    
Interest and other, net$28.6
 $22.4
 $6.2
 28 %
Income tax expense$12.3
 $45.9
 $(33.6) (73)%
Net income$96.3
 $111.4
 $(15.1) (14)%


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Consolidated Results

Quarter-to-date
 Three Months Ended Increase/(Decrease) % Change
($ in millions)December 27,
2014		 December 28,
2013		  
Net sales$1,071.7
 $979.0
 $92.7
 9 %
Gross profit$383.8
 $360.7
 $23.1
 6 %
Gross profit %35.8% 36.8%    
Operating expenses$199.4
 $274.1
 $(74.7) (27)%
Operating expenses %18.6% 28.0%    
Operating income$184.4
 $86.6
 $97.8
 113 %
Operating income %17.2% 8.8%    
Interest and other, net$99.7
 $199.6
 $(99.9) (50)%
Income tax expense (benefit)$14.5
 $(27.0) $41.5
 154 %
Net income (loss)$70.2
 $(86.0) $156.2
 182 %

The increase in net sales of $18.1$92.7 million for the firstsecond quarter of fiscal 2015 was driven primarily by $91.9$79.2 million of incremental net sales attributable to the Elan acquisition and by new product sales of $23.5$53.9 million. This increase was offset partially by lower sales volumes on certain products in the Consumer HealthcareCHC and API segments.

FirstNutritional segments, as well as $6.7 million of unfavorable changes in foreign currency exchange rates. Second quarter fiscal 2015 gross profit andincreased due mainly to increased sales in the Rx segment. The gross profit percentage decreased due primarily to increased intangible asset amortization incurred and changes in product mix.

Operating expenses increaseddecreased due largely to incremental expenses attributablethe absence of acquisition costs related to corporate business development, integration technology, and planned higher new product development spending.Elan. The decrease in Interest and other, net, included interest expensewas due primarily to the decreased loss on incrementalextinguishment of debt, outstandingoffset partially by losses the Company incurred in the current year related to the Company's derivative activities in connection with the Elanpending Omega acquisition. See "Interest and Other (Consolidated)" for further details.

Year-to-date
 Six Months Ended Increase/(Decrease) % Change
($ in millions)December 27,
2014		 December 28,
2013		  
Net sales$2,023.1
 $1,912.4
 $110.7
 6 %
Gross profit$705.5
 $717.0
 $(11.5) (2)%
Gross profit %34.9% 37.5%    
Operating expenses$384.0
 $450.8
 $(66.8) (15)%
Operating expenses %19.0% 23.6%    
Operating income$321.5
 $266.2
 $55.3
 21 %
Operating income %15.9% 13.9%    
Interest and other, net$128.2
 $222.0
 $(93.8) (42)%
Income tax expense (benefit)$26.8
 $18.9
 $7.9
 42 %
Net income (loss)$166.5
 $25.3
 $141.2
 558 %

The year-to-date increase in net sales of $110.7 million was driven primarily by $171.0 million of incremental net sales attributable to the Elan acquisition and by new product sales of $77.4 million. This increase was offset partially by lower sales volumes on certain products in the CHC and Nutritional segments, as well as lower U.S. sales of temozolomide due to the expiration of a 180-day exclusivity period that was in effect during the first half of fiscal 2014, and $3.2 million of unfavorable changes in foreign currency exchange rates. Gross profit for fiscal 2015 decreased due primarily to lower sales in the CHC segment, as well as the loss of the exclusivity rights on the product mentioned above, offset partially by the incremental net sales attributable to the Elan acquisition. The gross profit percentage decreased due primarily to increased intangible asset amortization and changes in product mix. Operating expenses decreased due largely to the absence of acquisition costs related to Elan. The

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decrease in Interest and other, net, was due primarily to the decreased loss on extinguishment of debt, offset partially by losses the Company incurred in the current year related to the Company's derivative activities in connection with the pending Omega acquisition.

Further details related to current year results, including results by segment, are included below under Results"Results of Operations.Operations".

Events impacting future resultsImpacting Future Results

Pending Omega acquisition

On November 6, 2014, the Company entered into a Share Purchase Agreement, pursuant to which the Company will purchase 685,348,257 shares of Omega, representing 95.77% of the issued and outstanding share capital of Omega. The remaining 30,243,983 shares of Omega will be held by Omega as treasury shares.

The Company agreed to acquire Omega for a total value of EUR 3.6€3.6 billion in equity and cash, which includes the assumption of EUR 1.1€1.1 billion in debt. The consideration will consist of cash of EUR 1.8€1.8 billion and 5,397,711 shares of the Company issued to Alychlo. The Acquisition Consideration will be increased by interest from September 30, 2014 until the completion date on an amount of EUR 2.48€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 and/or issuances of debt and/or equity of the Company and/or its subsidiaries.

The completion of the Acquisition is conditioned upon customary closing conditions, including antitrust approval, accuracy of representations and warranties, compliance with covenants, and no material adverse effect.

Also on November 6, 2014, in connection with the entry into the Share Purchase Agreement, the Company entered into Commitment Letters, pursuant to which JPMorgan Chase Bank, N.A. and Barclays Bank PLC have committed to (i) provide the Bridge Loan Facility; (ii) (x) solicit consents to amend the terms of the Existing Term Loan Credit Agreement to permit the Acquisition (y) replace the Existing Term Loan Credit Agreement with a backstop term loan facility to permit the Acquisition, or (z) replace the Existing Term Loan Credit Agreement by entering into a New Term Loan Facility; and (iii) (x) solicit consents to amend the terms of the Existing Revolving Credit Agreement to permit the Acquisition, (y) replace the Existing Term Loan Credit Agreement with a backstop term loan facility to permit the Acquisition, or (z) replace the Existing Revolving Credit Agreement by entering into a New Revolving Facility.
For additional details on the Share Purchase Agreement, the Acquisitionacquisition, and therelated financing, commitments, see Note 16 of the Notes to the Condensed Consolidated Financial Statements.
As discussed in NoteNotes 2 of the Notes to the Condensed Consolidated Financial Statements, the Company's subsidiary Elan has the right to receive royalties from Biogen Idec Inc. ("Biogen"). The amount of royalties received under this agreement is expected to be material to the future results of operations, 7, 8 and cash flows. For the three months ended September 27, 2014, Elan recorded $91.9 million in royalties associated with this agreement. Further, Elan incurs costs associated with the ongoing business operations and maintains investments in various equity interests. In addition, the Company expects to incur approximately $218.3 million of amortization expense annually associated with the intangible assets acquired with the acquisition of Elan discussed in Note 29 of the Notes to the Condensed Consolidated Financial Statements.

The Acquisition is expected to provide the Company realizes recurring annual operating expensewith a larger product portfolio, broader global reach, and tax savings associatedenhanced scale. The Acquisition is expected to be completed during the second half of fiscal 2015.In connection with the acquisition of Elan. Certain of these savings result fromAcquisition, the elimination of redundant public company costs while optimizing

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back-office support. Additionally, for the remainder of fiscal 2015, the Company expects to have a lower annual effective tax rate compared to fiscal 2014 due to changes to the estimated jurisdictional mix of income and the new corporate structure attributable to the acquisition of Elan.
The Company is in the process of transitioning its long-term strategy for its API business from primarily third-party to a dual focus on third-party business, including products to be manufactured in India, and vertical integration of high value and more difficult-to-manufacture inputs to the Consumer Healthcare and Rx businesses in an effort to gain efficiencies and lower costs, thus increasing margins. With a limited pipeline of products in development for future third-party customer new product introductions, the API segment revenues will likely decrease in the future, while intercompany vertical integration revenues (which will be eliminated in consolidation) will potentially increase. The Company plans to continue to seek and execute upon niche, complex differentiated new product APIs opportunistically forreevaluate its overall portfolio, commence production inreporting segments so that they align with the combined Company's new API site in India, and strive to develop unique collaborations and profit sharing agreements between the Company's API business and pharmaceutical companies globally.operations.

Competitors

Beginning in the third quarter of fiscal 2010, a branded competitor in the OTC market began to experience periodic interruptions of distribution of certain of its products in the adult and pediatric analgesic categories. These interruptions have included periods of time where supply of certain products has been suspended altogether. Due to this situation, which continued through fiscal 2013, the Company experienced an increase in demand for certain adult and pediatric analgesic products. This increased demand generally had a positive impact on the Consumer Healthcare segment’s net sales over that period of time. The branded competitor re-entered the market in fiscal 2014 and continues to gain market position. The Company believes that this re-entry shouldis largely be complete over the next three to six months.at this point. The Company is considering the impact of this ongoing development in its forward-looking sales forecast, but it cannot predict the extent of consumers' re-acceptance of the branded products, the extent of the branded competitor's marketing activities, or the ultimate market share this competitor can be expected to achieve.


The Company has filed breach of contract litigation against a third party as it believes the third party has wrongfully enabled a competitor against the Company on a new product line in the animal health category. The Company has an intangible asset with a net book value of $110.1 million as of December 27, 2014 related to the market exclusivity of the new product line recorded in Intangibles, net. The Company also had a supply agreement with this third party that expired at the end of calendar year 2014 and has not been renewed.


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RESULTS OF OPERATIONS

Consumer Healthcare

Quarter-to-date
 
Three Months Ended Increase/(Decrease) % ChangeThree Months Ended Increase/(Decrease) % Change
($ in millions)September 27, 2014 September 28, 2013 December 27, 2014 December 28, 2013 
Net sales$493.3
 $538.5
 $(45.2) (8)%$529.6
 $536.3
 $(6.7) (1)%
Gross profit$152.8
 $176.9
 $(24.1) (14)%$168.8
 $171.7
 $(2.9) (2)%
Gross profit %31.0% 32.9%    31.9% 32.0%    
Operating expenses$87.5
 $87.0
 $0.5
 1 %$93.9
 $82.2
 $11.7
 14 %
Operating expenses %17.7% 16.2%    17.7% 15.3%    
Operating income$65.3
 $89.9
 $(24.6) (27)%$74.9
 $89.5
 $(14.6) (16)%
Operating income %13.2% 16.7%    14.1% 16.7%    
    
FirstSecond quarter fiscal 2015 net sales decreased $45.2$6.7 million compared to the prior year. This includedAn increase of $13.2 million in the smoking cessation category due, in part, to certain national brand products not being available to consumers due to manufacturing and supply issues, as well as a $13.4 million increase in new product sales and sales attributed to the Aspen acquisition, was offset by a $29.8 million decrease primarily in the contract manufacturing, analgesics, and animal health categories, and $3.0 million in discontinued products. The contract manufacturing and analgesics categories decreased due to a branded customer's return to the market. The animal health category decreased due primarily to the failure to renew a supply agreement with a third party as previously mentioned. Second quarter fiscal 2015 gross profit decreased in line with the decrease in sales. Second quarter fiscal 2015 operating expenses increased $11.7 million compared to the prior year due primarily to a $10.0 million option payment related to a collaboration agreement (refer to Note 15 to the Condensed Consolidated Financial Statements for additional information).

Year-to-date
 Six Months Ended Increase/(Decrease) % Change
($ in millions)December 27, 2014 December 28, 2013  
Net sales$1,022.9
 $1,074.8
 $(51.9) (5)%
Gross profit$321.6
 $348.7
 $(27.1) (8)%
Gross profit %31.4% 32.4%    
Operating expenses$181.4
 $169.2
 $12.2
 7 %
Operating expenses %17.7% 15.7%    
Operating income$140.2
 $179.5
 $(39.3) (22)%
Operating income %13.7% 16.7%    
Year-to-date fiscal 2015 net sales decreased $51.9 million compared to the prior year. An increase of $78.2$32.6 million in the smoking cessation category due, in part, to certain national brand products not being available to consumers due to manufacturing and supply issues, as well as a $26.9 million increase from new product sales and sales attributable to the Aspen acquisition, was offset by a $106.2 million decrease primarily in the contract manufacturing, cough/cold, analgesics, gastrointestinal, and animal health categories. A significant portion of the category decreases were driven by timing differences relatedcategories, and $5.4 million in discontinued products. The contract manufacturing and analgesics categories decreased due to seasonal promotions in fiscal 2015 compared to fiscal 2014, lower contract sales, a cough/cold product that was taken off the market but was relaunched during the second quarter of fiscal 2015, and the previously mentioned branded competitor returningcustomer's return to the market. The year-to-date fiscal 2015 gross profit decrease was offset partially by andue primarily to lower sales and incremental amortization expense attributable to the Aspen acquisition, which also impacted the gross profit percentage compared to the prior year. Year-to-date fiscal 2015 operating expenses increased $12.2 million compared to the prior year due primarily to a $10.0 million option payment related to a collaboration agreement made in fiscal 2015 (refer to Note 15 to the Condensed Consolidated Financial Statements for additional information).


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Nutritionals

Quarter-to-date
 Three Months Ended Increase/(Decrease) % Change
($ in millions)December 27, 2014 December 28, 2013  
Net sales$130.6
 $139.7
 $(9.1) (7)%
Gross profit$31.8
 $38.7
 $(6.9) (18)%
Gross profit %24.4% 27.7%    
Operating expenses$24.7
 $25.4
 $(0.7) (3)%
Operating expenses %18.9% 18.2%    
Operating income$7.2
 $13.3
 $(6.1) (46)%
Operating income %5.5% 9.6%    

Second quarter fiscal 2015 net sales decreased $9.1 million compared to the prior year. An increase of $32.9$11.7 million in new product sales was offset primarily by $8.2 million in discontinued products and by a $12.0 million decrease in the smoking cessationinfant food and VMS categories. The decrease in the VMS category as well as incrementalwas due primarily to increased competition in the marketplace and pricing pressures. Infant food category sales attributedwere lower due primarily to new products sales and the Aspen acquisition.
Firstdecreased customer promotional activity. Second quarter fiscal 2015 gross profit and gross profit percentage decreased compared to prior year due primarily due to product mixpricing pressure in the VMS category as well as incremental amortization expense attributablea $2.5 million charge related to a specific, isolated inventory loss, which the Aspen acquisition.

FirstCompany expects to recover in the future through an insurance claim. Second quarter fiscal 2015 operating expenses were $87.5 million for the firstin line with second quarter of fiscal 2015, which was comparable to the first quarter of fiscal 2014.

Nutritionals
Year-to-date
Three Months Ended Increase/(Decrease) % ChangeSix Months Ended Increase/(Decrease) % Change
($ in millions)September 27, 2014 September 28, 2013 December 27, 2014 December 28, 2013 
Net sales$125.3
 $129.0
 $(3.7) (3)%$255.8
 $268.7
 $(12.9) (5)%
Gross profit$33.4
 $30.8
 $2.6
 8 %$65.3
 $69.6
 $(4.3) (6)%
Gross profit %26.7% 23.9%    25.5% 25.9%    
Operating expenses$24.9
 $23.1
 $1.8
 8 %$49.6
 $48.5
 $1.1
 2 %
Operating expenses %19.9% 17.9%    19.4% 18.1%    
Operating income$8.6
 $7.7
 $0.9
 12 %$15.7
 $21.0
 $(5.3) (25)%
Operating income %6.8% 6.0%    6.1% 7.8%    

First quarterYear-to-date fiscal 2015 net sales decreased $3.7$12.9 million compared to the prior year due primarily to a decrease in salesyear. An increase of $6.3$19.1 million in the infant/toddler food and multi-vitamin categories as well as $4.6new product sales was offset primarily by $12.8 million in discontinued products offsetand by a $19.6 million decrease in the infant food and VMS categories. The decrease in the VMS category was due primarily by an increase of $7.4 millionto increased competition in new product sales.

First quarterthe marketplace and pricing pressures. Infant food category sales were lower due primarily to decreased customer promotional activity. Year-to-date fiscal 2015 gross profit and gross profit percentage increaseddecreased compared to prior year due primarily to improved product mix and improved efficienciesa $2.5 million charge related to a specific, isolated inventory loss, which the Company expects to recover in manufacturing facilities.

First quarterthe future through an insurance claim. Year-to-date fiscal 2015 operating expenses increased due primarilywere comparable to higher administrative expenses as a result of the higher sales volume, as well as higher selling expenses related to the marketing of certain products.year-to-date fiscal 2014.


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Rx Pharmaceuticals

Quarter-to-date
Three Months Ended Increase/(Decrease) % ChangeThree Months Ended Increase/(Decrease) % Change
($ in millions)September 27, 2014 September 28, 2013 December 27, 2014 December 28, 2013 
Net sales$194.5
 $203.6
 $(9.1) (4)%$276.6
 $246.6
 $30.0
 12%
Gross profit$96.4
 $112.5
 $(16.1) (14)%$149.5
 $128.8
 $20.7
 16%
Gross profit %49.6% 55.2%    54.0% 52.2%    
Operating expenses$31.7
 $29.4
 $2.3
 8 %$39.8
 $28.4
 $11.4
 40%
Operating expenses %16.3% 14.4%    14.4% 11.5%    
Operating income$64.7
 $83.1
 $(18.4) (22)%$109.7
 $100.4
 $9.3
 9%
Operating income %33.3% 40.8%    39.6% 40.7%    

FirstSecond quarter fiscal 2015 net sales decreasedincreased by $9.1$30.0 million compared to prior year. Increased volumes and an increase of $33.0 million in new product launches were offset partially by discontinued products of $14.2 million. Second quarter fiscal 2015 gross profit increased due to the higher sales in the quarter while
the gross profit percentage increased due primarily to lower amortization expense compared to the prior year. Second quarter fiscal 2015 operating expenses increased due to higher research and development expenses resulting from planned higher spending on new product development and increased selling and administration expense related to the specialty pharmaceuticals sales force.

Year-to-date
 Six Months Ended Increase/(Decrease) % Change
($ in millions)December 27, 2014 December 28, 2013  
Net sales$471.2
 $450.2
 $21.0
 5 %
Gross profit$245.9
 $241.3
 $4.6
 2 %
Gross profit %52.2% 53.6%    
Operating expenses$71.5
 $57.8
 $13.7
 24 %
Operating expenses %15.2% 12.8%    
Operating income$174.4
 $183.5
 $(9.1) (5)%
Operating income %37.0% 40.8%    

Year-to-date fiscal 2015 net sales increased by $21.0 million compared to prior year. Increased volumes and $41.0 million of new product launches were offset partially by discontinued products of $25.2 million and planned contractual wholesaler chargebacks and stock adjustments associated with pricing programs which are expected to produceimplemented in the first quarter of 2015. These pricing programs began producing benefits beginning in the second quarter of fiscal 2015, as well as discontinued products of $11.0 million. The decreases were offset partially by $8.1 million related to new product launches and new business opportunities in the market, and $3.8 million incremental sales attributed to the Fera methazolomide acquisition.

First quarter2015. Year-to-date fiscal 2015 gross profit andincreased due to increased sales, while the gross profit percentage decreased due primarily to the explanations discussed above,planned contractual adjustments made during the first quarter of fiscal 2015, offset partially by increases in margin product mix.

First quarterlower amortization expense compared to the prior year. Year-to-date fiscal 2015 operating expenses increased due primarily to higher research and development expenses resulting from planned higher spending on new product development as well asand increased selling and administration primarilyexpense related to the new branded ophthalmicspecialty pharmaceuticals sales force.


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API

Quarter-to-date
 Three Months Ended Increase/(Decrease) % Change
($ in millions)December 27, 2014 December 28, 2013  
Net sales$30.0
 $30.0
 $—
 — %
Gross profit$13.2
 $16.5
 $(3.3) (20)%
Gross profit %43.9% 55.2%    
Operating expenses$5.8
 $8.3
 $(2.5) (31)%
Operating expenses %19.2% 27.8%    
Operating income$7.4
 $8.2
 $(0.8) (10)%
Operating income %24.7% 27.4%    

Second quarter fiscal 2015 net sales were flat with the second quarter of fiscal 2014 due to a slight increase in sales of existing products offset by unfavorable changes in foreign currency exchange rates. The U.S. sales of temozolomide had a 180-day exclusivity period that was in effect during the first half of fiscal 2014. Sales of API are highly dependent on the level of competition in the marketplace for a specific material and the ordering patterns of customers. Second quarter fiscal 2015 gross profit and gross profit percentage decreased due to the loss of exclusivity rights on the product mentioned above. Second quarter fiscal 2015 operating expenses decreased as a result of headcount reduction.

API
Year-to-date
Three Months Ended Increase/(Decrease) % ChangeSix Months Ended Increase/(Decrease) % Change
($ in millions)September 27, 2014 September 28, 2013 December 27, 2014 December 28, 2013 
Net sales$24.8
 $43.2
 $(18.4) (43)%$54.8
 $73.2
 $(18.4) (25)%
Gross profit$13.0
 $29.8
 $(16.8) (56)%$26.2
 $46.4
 $(20.2) (44)%
Gross profit %52.3% 69.1%    47.7% 63.4%    
Operating expenses$5.9
 $7.4
 $(1.5) (20)%$11.8
 $15.7
 $(3.9) (26)%
Operating expenses %24.0% 17.1%    21.3% 21.5%    
Operating income$7.1
 $22.4
 $(15.3) (68)%$14.4
 $30.6
 $(16.2) (53)%
Operating income %28.3% 52.0%    26.4% 41.9%    

First quarterYear-to-date fiscal 2015 net sales decreased $18.4 million compared to the prior year due primarily to a decrease in the U.S. sales of temozolomide relateddue to the expiration of anthe 180-day exclusivity period that was in effect during the first quarterhalf of fiscal 2014, as well as competition on certain products. Sales of API are highly dependent on the level of competition in the marketplace for a specific material and the ordering patterns of customers on a quarter-over-quarter basis.

First quartercustomers. Year-to-date fiscal 2015 gross profit and gross profit percentage decreased in line withdue to the net sales decrease notedloss of exclusivity rights on the product mentioned above.

First quarter Year-to-date fiscal 2015 operating expenses decreased due primarily to lower selling and administrative costs.as a result of headcount reduction.


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Specialty Sciences
 Three Months Ended
($ in millions)September 27, 2014
Net sales$91.9
Gross profit$19.4
Gross profit %21.1%
Operating expenses$4.5
Operating expenses %4.9%
Operating loss$14.9
Operating loss %16.2%

The Specialty Sciences segment was created during the second quarter of fiscal 2014 as a result of the Elan acquisition. First

Quarter-to-date
 Three Months Ended Increase/(Decrease) % Change
($ in millions)December 27, 2014 
December 28, 2013 (1)
  
Net sales$86.6
 $7.4
 $79.2
 1,070 %
Gross profit (loss)$14.1
 $(1.3) $15.4
 1,213 %
Gross profit (loss) %16.3% (17.1)%    
Operating expenses$4.6
 $17.7
 $(13.1) (74)%
Operating expenses %5.3% 239.1 %    
Operating income (loss)$9.5
 $(19.0) $28.5
 150 %
Operating income (loss) %11.0% (256.2)%    
(1) Includes activity from December 18, 2013, the date the Company acquired Elan, through December 28, 2013.

Second quarter fiscal 2015 net sales resulted from royalties received from global sales of the Multiple Sclerosis drug Tysabri®Tysabri®, which is manufactured, marketed, and distributed by Biogen. FirstSecond quarter fiscal 2015 gross profit was impactedconsisted primarily byof net sales less intangible asset amortization of $72.8$72.5 million. The decrease in operating expenses was due primarily to the absence of $14.6 million of restructuring expense recorded in the second quarter fiscal 2014.

Year-to-date
 Six Months Ended Increase/(Decrease) % Change
($ in millions)December 27, 2014 
December 28, 2013 (1)
  
Net sales$178.4
 $7.4
 $171.0
 2,311 %
Gross profit (loss)$33.4
 $(1.3) $34.7
 2,740 %
Gross profit (loss) %18.7% (17.1)%    
Operating expenses$9.0
 $17.7
 $(8.7) (49)%
Operating expenses %5.1% 239.1 %    
Operating income (loss)$24.4
 $(19.0) $43.4
 229 %
Operating income (loss) %13.7% (256.2)%    
(1) Includes activity from December 18, 2013, the date the Company acquired Elan, through December 28, 2013.

Year-to-date fiscal 2015 net sales resulted from royalties received from global sales of Tysabri®. Year-to-date fiscal 2015 gross profit consisted primarily of net sales less intangible asset amortization of $145.0 million. The decrease in operating expenses was due primarily to the absence of $14.6 million of restructuring expense recorded in fiscal 2014.


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Other

The Other category consists of the Company’s Israel Pharmaceutical and Diagnostic Products operating segment, which does not individually meet the quantitative thresholds required to be a reportable segment.

Quarter-to-date
 
Three Months Ended Increase/(Decrease) % ChangeThree Months Ended Increase/(Decrease) % Change
($ in millions)September 27, 2014 September 28, 2013 December 27, 2014 December 28, 2013 
Net sales$21.7
 $19.1
 $2.6
 14 %$18.3
 $19.0
 $(0.7) (3)%
Gross profit$6.7
 $6.3
 $0.4
 6 %$6.4
 $6.1
 $0.3
 5 %
Gross profit %30.9% 32.4%    35.1% 32.3%    
Operating expenses$5.8
 $5.0
 $0.8
 16 %$5.3
 $5.5
 $(0.2) (5)%
Operating expenses %26.9% 26.2%    28.7% 29.1%    
Operating income$0.9
 $1.2
 $(0.3) (25)%$1.1
 $0.6
 $0.5
 91 %
Operating income %4.0% 6.2%    6.4% 3.2%    

FirstSecond quarter fiscal 2015 net sales decreased $0.7 million compared to prior year due primarily to unfavorable changes in foreign currency exchange rates. Gross profit and gross profit percentage increased due to higher sales volume in the diagnostic business, while operatingOTC and Diagnostics product categories, which yield a higher profit margin. Operating expenses decreased due to unfavorable changes in foreign currency exchange rates.

Year-to-date
 Six Months Ended Increase/(Decrease) % Change
($ in millions)December 27, 2014 December 28, 2013  
Net sales$40.0
 $38.1
 $1.9
 5%
Gross profit$13.1
 $12.3
 $0.8
 7%
Gross profit %32.8% 32.3%    
Operating expenses$11.1
 $10.5
 $0.6
 5%
Operating expenses %27.7% 27.6%    
Operating income$2.0
 $1.8
 $0.2
 14%
Operating income %5.1% 4.7%    

Year-to-date fiscal 2015 net sales increased $1.9 million compared fiscal 2014. An increase in sales of $3.0 million was offset by unfavorable changes in foreign currency exchange rates. Gross profit and gross profit percentage increased due to higher sales volume in the OTC and Diagnostics product categories, which yield a higher profit margin. Operating expenses increased due to higher administrative costs.costs offset partially by unfavorable changes in foreign currency exchange rates.


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Unallocated Expenses
     
Unallocated expenses are comprised of certain corporate services that are not allocated to the segments.segments and are recorded above Operating income on the Condensed Consolidated Statements of Operations. Unallocated expenses of $24.2decreased to $25.3 million forduring the second quarter of fiscal 2015 firstfrom $106.4 million in the comparable prior year period. This decrease was due to a reduction in acquisition-related costs such as legal, banking and other professional fees. During the second quarter included business development expenses of $4.1fiscal 2015 these amounts totaled $11.6 million as well as additional planned corporate overhead subsequentand related to the pending Omega acquisition. During the second quarter of fiscal 2014 these amounts totaled $93.7 million and related to the Elan acquisition. Fiscal 2014first quarterYear-to-date unallocated expenses of $24.6decreased to $49.6 million included transaction feesduring fiscal 2015 from $131.2 million in the prior year, also due to the reduction in acquisition-related costs. These costs totaled $11.6 million for year-to-date fiscal 2015 and related to the pending Omega acquisition, and $105.7 million for year-to-date fiscal 2014 and related to the Elan acquisition.

Interest and Other (Consolidated)

Interest expense for the second quarter was $26.1 million and $22.1$31.1 million for the first quarter of fiscal 2015 and $30.3 million for fiscal 2014, respectively.2014. Year-to-date interest expense was $57.1 million for fiscal 2015 and $52.4 million for fiscal 2014. Interest income for the second quarter was $0.3 million for fiscal 2015 and $0.6 million for fiscal 2014. Year-to-date interest income was $0.4 million for fiscal 2015 and $1.3 million for fiscal 2014.

Other expense, net, increased due primarily to the issuance of $2.3 billion of debt in a private placement to complete the Elan transaction, which was completed$55.2 million during the second quarter of fiscal 2014.2015 and $56.8 million during year-to-date fiscal 2015 from the comparable prior year periods. These increases were due primarily to the Company's derivative activity to economically hedge fluctuations in the euro-denominated purchase price of the pending Omega acquisition, which resulted in a loss of $64.7 million during the second quarter of fiscal 2015. Gains or losses on the derivatives due to changes in the EUR/USD exchange rate prior to the close of the acquisition will be economically offset at closing in the final settlement of the euro-denominated Omega purchase price. For further details on the derivative activities, refer to Note 7 to the Condensed Consolidated Financial Statements. The loss from derivative activity was offset partially by a gain of $12.5 million from the transfer of a rights agreement during the second quarter of fiscal 2015.

Interest income was $0.2As a result of the debt retirements and modifications further described in Note 8 to the Condensed Consolidated Financial Statements, the Company recorded a loss on extinguishment of debt of $9.6 million and $0.7 million forduring the firstsecond quarter of fiscal 2015 and $165.8 million during the second quarter of fiscal 2014, respectively.2014.


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Income Taxes (Consolidated)

The effective tax rate for the three months ended SeptemberDecember 27, 2014 was 11.4%17.1% on income compared to 29.2%a benefit of 23.9% on a net loss for the three months ended SeptemberDecember 28, 2013. The effective tax raterates on income for the six months ended December 27, 2014 and December 28, 2013 were 13.9% and 42.7%, respectively. The effective tax rates for the three and six months ended SeptemberDecember 27, 2014 waswere impacted by changes to the estimated jurisdictional mix of income and the new corporate structure attributable to the acquisition of Elan.income. Additionally, the effective tax rate for the threesix months ended SeptemberDecember 28, 2013 was unfavorably impacted by Israel tax rate changes in the amount of $1.8 million and favorably impacted by United Kingdom tax rate changes in the amount of $4.7 million as discussed further below.

Although we believethe Company believes that ourits tax estimates are reasonable and that we prepare ourthe Company's tax filings are prepared in accordance with all applicable tax laws, the final determination with respect to any tax audit, and any related litigation, could be materially different from ourthe Company's estimates or from ourthe Company's historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on operating results or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, or interest assessments.

Currently, the IRSThe Company is auditing fiscal years 2009 and 2010, andcurrently under audit by the Israel Tax Authority is auditingfor fiscal years 2011 and 2012. In regards toDecember 2014, the IRS notified the Company that it will conduct an audit forof fiscal years2011 and 2012. The IRS audit of fiscal 2009 and 2010 had previously concluded with the issuance of a statutory notice of deficiency on August 27, 2014. While the Company hashad previously agreed on certain adjustments and has made associated payments of $8.0 million inclusive of interest but remains under audit for those years. On August 27,in November 2014, the Company received a statutory notice of deficiency fromasserted various additional positions, including transfer pricing, relative to the IRS related tosame fiscal years 2009 and 2010.2010 audit. The statutory notice asserted an incremental tax liability asserted by the IRS for these periods isobligation of approximately $43.0$69.2 million, exclusiveinclusive of interest and penalties. The IRS has asserted various positions, including transfer pricing. As the Company disagrees with the IRS’s positions asserted byin the IRS, it intendsnotice of deficiency and plans to contest them in U.S. Federal

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court. In January 2015, the Company paid this amount, a prerequisite to being able to contest the IRS’s positions through applicable procedures in either the U.S. Tax Court or U.S. Federal court,court. The payment was recorded in the latter of which would requirethird fiscal quarter as a deferred charge on the Companybalance sheet given the Company’s anticipated action to pay the asserted liability, plus interest and penalties, prior to initiating any refund litigation. Therecover this amount. An unfavorable resolution of this matter could have a material impact on the Company's consolidated financial statements in future periods. There are numerous other income tax jurisdictions for which tax returns are not yet settled, none of which are individually significant. At this time, the Company cannot predict the outcome of any audit or related litigation.

For additional information, see Note 11 of the Notes to the Condensed Consolidated Financial Statements.

Financial Condition, Liquidity and Capital Resources

The Company finances its operations with internally-generated funds, supplemented by credit arrangements with third parties and capital market financing. The Company routinely monitors current and expected operational requirements and financial market conditions to evaluate accessing other available financing sources, including revolving bank credit facilities and securities offerings. Based on the Company’s current financial condition and credit relationships, management believes that the Company’s operations and borrowing resources are sufficient to provide for the Company’s current and foreseeable capital requirements. However, the Company continues to evaluate the impact of commercial and capital market conditions on liquidity and may determine that modifications to the Company’s capital structure are appropriate if market conditions deteriorate or if favorable capital market opportunities become available.
  
Cash

At SeptemberDecember 27, 2014, the Company had cash and cash equivalents of $891.5 million,$3.6 billion, an increase of $92.0 million$2.8 billion from June 28, 2014, and working capital, including cash, of $1,616.1 million,$4.0 billion, an increase of $139.9 million$2.6 billion from June 28, 2014. A significant portion of this increase was due to financing activities the Company undertook related to the pending Omega acquisition, as further described below under "Financing activities". The cash will be used both to fund the cash consideration of the purchase price of Omega and to repay a significant portion of Omega's outstanding debt, which the Company will assume upon completion of the acquisition.

Cash, cash equivalents, cash flows from operations, and borrowings available under the Company’s credit facilities are expected to be sufficient to finance the known and/or foreseeable liquidity, capital expenditures, dividends, acquisitions and to the extent authorized, share repurchases of the Company.acquisitions. Although the Company’s lenders have made commitments to make funds available to it in a timely fashion, if economic conditions worsen or new information becomes publicly available impacting the institutions’ credit rating or capital ratios, these lenders may be unable or unwilling to lend money pursuant to the Company’s existing credit facilities.

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Three Months EndedSix Months Ended
(in millions)September 27, 2014 September 28, 2013December 27, 2014 December 28, 2013
Net cash from (for) operating activities$195.1
 $98.7
$467.7
 $220.3
      
Net cash from (for) investing activities$(30.7) $(35.8)$(156.6) $(1,599.5)
      
Net cash from (for) financing activities$(61.3) $(28.8)$2,509.0
 $1,122.4
      

Operating activities

The Company generated $195.1$467.7 million from operating activities during the first quartersix months of fiscal 2015, a $96.4$247.4 million increase over the first quarter ofcomparable period in fiscal 2014. The majorityA significant portion of the increase in cash from operating activities was due to changes in working capital. Cash received from payments on accounts receivable increased $60.6 million due to higher sales in fiscal 2015 compared to fiscal 2014. Cash also increased $95.8 million due to an increase in liabilities due to the timing of payments, as well as inclusion of a $38.3 million derivative liability related to the non-designated foreign currency forward contracts used to economically hedge the euro-denominated purchase price of Omega that will settle in the third quarter. These increases were offset partially by a $28.2 million decrease due to increased inventory levels. The remaining increase in operating cash flow was due to increased net earnings after adjusting for non-cash items such as depreciation and amortization, which resulted in an increase of $66.7$119.8 million during the first quartersix months of fiscal 2015 as compared to the comparable prior year period. This increase was due largely to the Tysabri® royalties received during the first quartersix months of fiscal 2015. The remaining increase in cash from operating activities was due to changes in working capital. Cash received from payments on accounts receivable increased $103.0 million due to higher sales in the fourth quarter of fiscal 2014 than in the fourth quarter of fiscal 2013. This was offset partially by a $76.3 million decrease in accrued liabilities due to the timing of payments.2014.


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Investing activities

Cash used for investing activities totaled $30.7$156.6 million for the first quartersix months of fiscal 2015, a decrease of $5.1$1.4 billion over the comparable period in fiscal 2014. The decrease was due mainly to decreased acquisition activity year-over-year. During fiscal 2015, the Company acquired Lumara for $83.0 million, as comparedwhile in fiscal 2014, the Company acquired Elan for $1.5 billion net of cash received. Fiscal 2015 investing activities also included a $26.4 million cash settlement of non-designated foreign currency option contracts related to the first quarter of fiscal 2014.pending Omega acquistion. A decrease in capital expenditures from $40.4$77.8 million during the first quartersix months of fiscal 2014 to $31.7$48.0 million during the first quartersix months of fiscal 2015 accounted for the majoritysubstantially all of the remaining decrease. During the comparable prior year period, the additional cash used for capital expenditures was offset partially by $4.6 million of proceeds from the sale of land.

Capital expenditures for fiscal 2015 are anticipated to be between $140 million and $170 million, related primarily to manufacturing productivity and capacity projects and investments at newly acquired entities. The Company expects to fund these estimated capital expenditures with funds from operational cash flows or revolving credit facilities.

Financing activities

Cash used forgenerated from financing activities totaled $61.3 million during$2.5 billion for the first quartersix months of fiscal 2015, an increase of $32.5 million from$1.4 billion over the first quarter ofcomparable period in fiscal 2014. The increase was due mainlyprimarily to the Company using $39.5 millionCompany's financing activities to repay long-term debt duringfund the first quarter of fiscal 2015, as well as an increasepending Omega acquisition, which raised $1.4 billion more than the Company's financing activities in dividends of $5.6 million as compared to the comparable prior year period. During the first quarter of fiscal 2015 the Company also used $5.0 million for a milestone payment on contingent consideration acquired with the acquisition of a distribution and license agreement from Fera Pharmaceuticals, LLC. These outflows were partially offset by the absence of $24.8 million used for deferred financing fees related to the bridge financing associatedconnection with the Elan acquisition in the first quarter of fiscal 2014. Financing for the pending Omega acquisition during fiscal 2015 included a public bond offering and refinancing of the Company's term loans, which together raised $2.5 billion net of discounts and fees, and a public equity offering, which raised $999.3 million net of issuance costs. The Company then used $895.0 million of the proceeds to repay its previous term loans. For more information on these transactions, see Notes 8 and 9 to the Condensed Consolidated Financial Statements.

Cash dividends used for financing activities increased $11.0 million versus the prior year. The declaration and payment of dividends, if any, is subject to the discretion of the Board of Directors and will depend on the earnings, financial condition, availability of distributable reserves and capital and surplus requirements of the Company and other factors the Board of Directors may consider relevant.

Debt and other borrowings

The Company had $2.3$3.9 billion of senior notes and $895.0$908.9 million of term loans outstanding at SeptemberDecember 27, 2014. On September 2, 2014, the Company offered to exchange its private placement senior notes with public bonds (the "Exchange Offer"). The Exchange Offer expired on October 1, 2014, at which timeOther sources of liquidity include a substantial majority of the private placement notes had been exchanged for bonds registered with the Securities$600.0 million revolving credit agreement and Exchange Commission.


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Revolving credit agreement

a $200.0 million accounts receivable securitization program. There were no borrowings outstanding under the Company's $600.0 million Revolving Credit Agreement at September 27, 2014revolving credit agreement or June 28, 2014.

Accounts receivable securitization

There were no borrowings outstanding under the Company's $200.0 million accounts receivable securitization program at Septemberas of December 27, 2014 or June 28, 2014.

Credit ratings

The Company's credit ratings on SeptemberDecember 27, 2014 were Baa3 (stable) and BBB (negative) by Moody's Investors Service and Standard and Poor's Rating Services, respectively. These ratings include the impact of the Company's Omega financing activities described above.

Credit rating agencies review their ratings periodically and, therefore, the credit rating assigned to the Company by each agency may be subject to revision at any time. Accordingly, the Company is not able to predict whether current credit ratings will remain as disclosed above. Factors that can affect the Company's credit ratings include changes in operating performance, the economic environment, the Company's financial position, and changes in business strategy. If changes in the Company's credit ratings were to occur, they could impact, among other things, future borrowing costs, access to capital markets, and vendor financing terms.


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Contractual obligations

Other than the changes to the Company's debt structure in relation to the pending Omega transaction as discussed in Note 8 to the Condensed Consolidated Financial Statements, there were no material changes in contractual obligations during the second quarter of fiscal 2015 from those provided in the Company's Annual Report on Form 10-K for the year ended June 28, 2014. See below for a revised schedule of the Company's enforceable and legally binding obligations as of December 27, 2014 related to its short and long-term debt arrangements.
 Payment Due by Period (in millions)
 
2015(1)
 2016 - 2017 2018 - 2019 After 2019 Total
Short and long-term debt(2)
$149.5
 $1,210.5
 $1,017.4
 $4,451.9
 $6,829.3

(1)Reflects remaining six months of fiscal 2015.
(2)
Short and long-term debt includes interest payments, which were calculated using the effective interest rate at December 27, 2014, as well as capital lease obligations.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the Company's quantitative or qualitative disclosures found in Item 7A, "Quantitative and Qualitative Disclosures about Market Risk", of Perrigothe Company's Annual Report on Form 10-K for the year ended June 28, 2014.

Item 4.Controls and Procedures

Conclusion regardingRegarding the effectivenessEffectiveness of disclosure controlsDisclosure Controls and proceduresProcedures

As of SeptemberDecember 27, 2014, the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that all material information relating to the Company and its consolidated subsidiaries required to be included in the Company’s periodic SEC filings would be made known to them by others within those entities in a timely manner and that no changes are required at this time.
 
Management’s annual reportAnnual Report on internal controlInternal Control over financial reportingFinancial Reporting

In connection with the evaluation by the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the Company’s internal control over financial reporting pursuant to Rule 13a-15(d) of the Securities Exchange Act of 1934, no changes during the quarter ended SeptemberDecember 27, 2014, were identified that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting except as noted below.

Changes in internal controlInternal Control over financial reportingFinancial Reporting

The Company acquired Elan Corporation plc ("Elan") during the the second quarter of fiscal 2014 (see Note 2 of the Notes to the Condensed Consolidated Financial Statements). As permitted by Securities and Exchange Commission Staff interpretive guidance for newly acquired businesses, management excluded Elan from its evaluation of internal control over financial reporting as of SeptemberDecember 27, 2014. The Company is in the process of documenting and testing Elan's internal controls over financial reporting. The Company will incorporate Elan into its annual report on internal control over financial reporting for its fiscal year ending June 27, 2015. As of SeptemberDecember 27, 2014, assets excluded from management's assessment totaled $312.1 million$2.7 billion and contributed $91.8$178.4 million of net sales and $12.6$11.1 million of operating income to the Company's consolidated net sales and operating incomefinancial statements for the threesix months ended SeptemberDecember 27, 2014.


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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

Refer to Note 12 ofto the Notes to Condensed Consolidated Financial Statements.

Item 1A. Risk Factors

The Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2014 includes a detailed discussion of the Company’s risk factors. Other than the item noted below, there have been no material changes during the first quarter of fiscal 2015 to the risk factors that were included in the Form 10-K.

Risks Related to the Pending Omega Acquisition (the "Acquisition")

The Company and Omega must obtain required approvals and governmental and regulatory consents to consummate the Acquisition, which, if delayed, not granted or granted with unacceptable conditions, could delay or jeopardize the consummation of the Acquisition, result in additional expenditures of money and resources and/or reduce the anticipated benefits.

The Acquisition is subject to customary closing conditions. These closing conditions include, among others, the receipt of the relevant approvals under the antitrust laws of certain foreign countries under which filings or approvals are or may be required. The Share Purchase Agreement contemplates applicable approvals, including from the competition authorities of Germany, Poland, the United Kingdom (unless the Acquisition is referred to the European Commission in accordance with Article 4(5) of Council Regulation (EC) No. 139/2004 on the control of concentrations between undertakings (the “EUMR”) or Article 22 of the EUMR), as well as the competition authorities of Russia and Ukraine. In addition, the Share Purchase Agreement requires the Company to accept all conditions, obligations or other requirements imposed or contained in any final decision of these competition authorities with a view to removing any impediment to the related condition in the Share Purchase Agreement. The Company cannot predict whether these competition authorities will approve the Acquisition or whether they may impose any conditions to approval. There can be no assurance the Acquisition will be consummated.

The Share Purchase Agreement contains provisions that could require the Company to pay Omega a termination fee.

Under the Share Purchase Agreement, if the Company is unable to satisfy certain closing conditions in connection with the Acquisition, Omega has the right to terminate the Share Purchase Agreement, and the Company could be required to pay Omega a termination fee equal to approximately €100 million.

While the Acquisition is pending, the Company and Omega will be subject to business uncertainties that could adversely affect their businesses.

Uncertainty about the effect of the Acquisition on employees, customers and suppliers may have a material adverse effect on the Company and Omega. These uncertainties may impair the Company's and Omega’s ability to attract, retain and motivate key personnel until the Acquisition is consummated and for a period of time thereafter, and could cause customers, suppliers and others who deal with the Company and Omega to seek to change existing business relationships with the Company and Omega. Employee retention may be particularly challenging during the pendency of the Acquisition because employees may experience uncertainty about their future roles with the Company. If, despite the Company's and Omega’s retention efforts, key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Perrigo, the business could be seriously harmed.

The Company might not realize all of the anticipated benefits of the Acquisition or those benefits could take longer to realize than expected. The Company may also encounter significant unexpected difficulties in integrating the two businesses.

The Company's ability to realize the anticipated benefits of the Acquisition will depend, to a large extent, on its ability to integrate the Perrigo and Omega businesses. The combination of two independent businesses is a complex, costly and time-consuming process. As a result, the Company has been, and will be required to

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devote significant management attention and resources to integrating the business practices and operations of Perrigo and Omega. The integration process could disrupt the businesses and, if implemented ineffectively, could preclude realization of the full benefits expected by the Company. The failure to meet the challenges involved in the integration process could interrupt, or cause a loss of momentum in, the Company's business and could adversely affect its financial condition and results of operations.

In addition, the overall integration of the businesses could result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of management’s attention. The difficulties of combining the operations of the companies include, among others:

difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects;
difficulties in the integration of operations and systems; and
difficulties in managing the expanded operations of a significantly larger and more complex
company.

Many of these factors will be outside of the Company's control, and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially impact the Company's business, financial condition and results of operations. In addition, even if the business operations of Perrigo and Omega are integrated successfully, the Company might not realize the full benefits of the Acquisition, including the synergies, cost savings or sales or growth opportunities that is expected. These benefits may not be achieved within the anticipated time frame, or at all. Or, additional unanticipated costs could be incurred in the integration of the businesses. All of these factors could cause dilution to the Company's earnings per ordinary share, decrease or delay the expected accretive effect of the Acquisition, and negatively impact the price of the Company's ordinary shares. As a result, the combination of Perrigo's businesses with Omega’s businesses may not result in the realization of the full benefits anticipated from the Acquisition.

The Company's leverage and debt service obligations could adversely affect the business.

The Company's long-term indebtedness as of December 27, 2014 was $4.4 billion, which includes $2.5 billion raised to finance the Acquisition. In connection with the Acquisition, the Company will assume €1.1 billion principal amount of existing Omega debt, which the Company plans to repay or redeem following the closing of the Acquisition. The degree to which the Company will be leveraged following the Acquisition could have important consequences for the Company, including, but not limited to:

increasing the Company's vulnerability to, and reducing its flexibility to respond to, general adverse economic and industry conditions;
requiring the dedication of a substantial portion of the Company's cash flow from operations to the payment of principal of, and interest on, indebtedness, thereby reducing cash flow available to fund working capital, capital expenditures, acquisitions, joint ventures, product research and development or other general corporate purposes;
limiting the Company's flexibility in planning for, or reacting to, changes in the business and the competitive environment and the industry in which the Company operates;
placing the Company at a competitive disadvantage to the extent that its competitors are not as highly leveraged; and
limiting the Company's ability to borrow additional funds and increasing the cost of any such borrowing.

The closing of the Acquisition may trigger early repayment rights under some or all of the outstanding Omega indebtedness.

Certain agreements governing the Omega indebtedness contain change of control and cross-default provisions that may be triggered in connection with the Acquisition. If the Acquisition triggers the change of control provision or cross-default provision under such agreements, these agreements provide (i) an early redemption put right to the note holders requiring the applicable issuer to redeem certain of the notes at 100% of the principal amount thereof and certain of the notes at a premium to the principal amount of up to 101% in each case, plus accrued and unpaid interest, and/ or (ii) lenders with the right to terminate their commitments under Omega’s credit facilities and accelerate repayment of all indebtedness incurred thereunder.


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The Company cannot predict whether Omega’s lenders and/or note holders will exercise these acceleration and cross-default rights. In addition, certain agreements governing the Omega indebtedness do not provide the applicable issuer with prepayment rights in the event of a change of control. If the note holders party to such agreements refuse to allow early prepayment, the Company may not be able to extinguish that indebtedness in connection with the Acquisition.

Risks Related to the Business

The Company has direct interactions with health care professionals, which is often referred to as physician detailing. Failure to comply with applicable laws, rules and regulations may result in governmental investigation, regulatory action, and legal proceedings.

The Company has expanded its pharmaceutical marketing to include direct interactions with health care professionals, which is known as “detailing.” This activity is subject to extensive regulation under a variety of U.S. laws and regulations, including anti-kickback, anti-bribery and false claims laws; the U.S. Federal Food, Drug and Cosmetic Act with respect to claims and off-label promotions; and similar laws in non-U.S. jurisdictions. If any of these activities are found to be improper, the Company could be subject to civil and governmental actions and penalties. These risks may increase as non-U.S. jurisdictions adopt new anti-bribery laws and regulations.

Our increasing role in the global marketplace may place us at greater risk of cyber events or other security incidents adversely affecting our Company’s manufacturing, supply chain, operations and financial position.

The Company's manufacturing operations are concentrated in Michigan, Minnesota, South Carolina, New York, Vermont, Ohio, Nebraska, and Israel. Approximately 80% of the Company's fiscal 2014 revenues were related to these worldwide manufacturing facilities. Company systems, information, operations as well as our independent vendor relationships (where they support information technology and manufacturing infrastructure) are vulnerable to disruption or damage from, but not limited to, security breaches, hacking, data theft, denial of service attacks, human error, natural disasters, power loss, fire, sabotage, industrial espionage, computer viruses, intentional acts of vandalism, insufficient quality, or pandemic at any of the Company’s facilities. These and other similar events could impair the Company’s ability to develop, meet regulatory approval efforts, produce and/or ship products on a timely basis. This would have a material adverse effect on the Company’s manufacturing, supply chain, operations and financial position. Given the Company's position in the pharmaceutical industry, it may be more likely to be a direct target, or an indirect casualty, of such events.

While the Company continues to employ resources to monitor its systems and protect its infrastructure, these measures may prove insufficient depending upon the attack or threat posed. Any system issue, whether as a result of an intentional breach or a natural disaster, could damage the Company's reputation and cause it to lose customers, experience lower sales volume, incur significant liabilities or otherwise have a negative impact on the business, financial condition and operating results. The Company also could incur significant expense in addressing any of these problems and in addressing related data security and privacy concerns.

Tax-related risks

Changes in tax laws or income tax rates could have a material adverse effect on the Company's results of operations and the ability to utilize cash in a tax efficient manner.

The Company believes that under current law, it should be treated as a foreign corporation for U.S. federal tax purposes. However, changes to the inversion rules in section 7874 of the Code, or the IRS Treasury regulations promulgated thereunder, or other IRS guidance, could adversely affect the Company's status as a foreign corporation for U.S. federal tax purposes, and any such changes could have prospective or retroactive application to the Company, Perrigo Company, and/or their respective stockholders, shareholders and affiliates. In addition, recent legislative proposals have aimed to expand the scope of U.S. corporate tax residence, and such legislation, if passed, could have an adverse effect on the Company.

Moreover, the Office of the Revenue Commissioners, U.S. Congress, the OrganisationOrganization for Economic Co-operation and Development and other Government agencies in jurisdictions where the Company and its

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affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. One example is in the area of "base erosion and profit shifting", where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. As a result, the tax laws in the U.S. and other countries in which the Company and its affiliates do business could change on a prospective or retroactive basis, and any such changes could adversely affect the Company.

A number of factors may adversely impact the Company's future effective tax rates, such as income tax rate changes by governments; the jurisdictions in which the Company's profits are determined to be earned and taxed; changes in the valuation of the Company's deferred tax assets and liabilities; adjustments to estimated taxes upon finalization of various tax returns; adjustments to the Company's interpretation of transfer pricing standards, changes in available tax credits, grants and other incentives; changes in stock-based compensation expense; changes in tax laws or the interpretation of such tax laws (e.g., proposals for fundamental U.S. international tax reform); changes in U.S. generally accepted accounting principles; expiration or the inability to renew tax rulings or tax holiday incentives; and the repatriation of non-U.S. earnings with respect to which the Company has not previously provided for U.S. taxes. A change in the Company's effective tax rate due to any of these factors may adversely impact the Company's future results from operations. Also, changes in tax laws could have a material adverse effect on the Company's ability to utilize cash in a tax efficient manner.

Although we believethe Company believes that ourits tax estimates are reasonable and that we prepare ourthe Company's tax filings are prepared in accordance with all applicable tax laws, the final determination with respect to any tax audit, and any related litigation, could be materially different from ourthe Company's estimates or from ourthe Company's historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments.

On August 27,The Company is currently under audit by the Israel Tax Authority for fiscal 2011 and 2012. In December 2014, the IRS notified the Company receivedthat it will conduct an audit of fiscal 2011 and 2012. The IRS audit of fiscal 2009 and 2010 had previously concluded with the issuance of a statutory notice of deficiency fromon August 27, 2014. While the IRS relatedCompany had previously agreed on certain adjustments and made associated payments of $8.0 million inclusive of interest in November 2014, the statutory notice of deficiency asserted various additional positions, including transfer pricing, relative to the same fiscal years 2009 and 2010.2010 audit. The statutory notice asserted an incremental tax liability asserted by the IRS for these periods isobligation of approximately $43.0$69.2 million, exclusiveinclusive of interest and penalties. The IRS has asserted various positions, including transfer pricing. As the Company disagrees with the IRS’s positions asserted byin the IRS, it intendsnotice of deficiency and plans to contest them in U.S. Federal court. In January 2015, the Company paid this amount, a prerequisite to being able to contest the IRS’s positions through applicable procedures in either the U.S. Tax Court or U.S. Federal court,court. The payment was recorded in the latter of which would requirethird fiscal quarter as a deferred charge on the Companybalance sheet given the Company’s anticipated action to pay the asserted liability, plus interest and penalties, prior to initiating any refund litigation. Therecover this amount. An unfavorable resolution of this matter could have a significantmaterial impact on ourthe Company's consolidated financial statements in future periods. There are numerous other income tax jurisdictions for which tax returns are not yet settled, none of which are individually significant. At this time, the Company cannot predict the outcome of any audit or related litigation.


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Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds

The Company does not currently have an ordinary share repurchase program.


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Item 6.Exhibits

Exhibit
Number
 Description
2.1Agreement for the Sale and Purchase of 685,348,257 Shares Of Omega Pharma Invest NV, dated as of November 6, 2014, by and among the Company, Alychlo NV and Holdco I BE NV (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on November 12, 2014).
  
3.1 Certificate of Incorporation of Perrigo Company plc (formerly known as Perrigo Company Limited) (incorporated by reference to Exhibit 4.1 of Perrigo Company plc’sthe Company’s Registration Statement on Form S-8 filed December 19, 2013).
   
3.2 Amended and Restated Memorandum and Articles of Association of Perrigo Company plc (formerly known as Perrigo Company Limited) (incorporated by reference to Exhibit 4.2 of the Company’s Registration Statement on Form S-8 filed December 19, 2013).
   
4.1Base Indenture dated as of December 2, 2014, between Perrigo Finance plc, the Company and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on December 2, 2014).
4.2First Supplemental Indenture dated as of December 2, 2014, between Perrigo Finance plc, the Company and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on December 2, 2014).
4.3Form of 3.500% Senior Notes due 2021 (included as Exhibit A-1 to the First Supplemental Indenture dated as of December 2, 2014, between Perrigo Finance plc, the Company and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on December 2, 2014)).
4.4Form of 3.900% Senior Notes due 2024 (included as Exhibit A-2 to the First Supplemental Indenture dated as of December 2, 2014, between Perrigo Finance plc, the Company and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on December 2, 2014)).
4.5Form of 4.900% Senior Notes due 2044 (included as Exhibit A-3 to the First Supplemental Indenture dated as of December 2, 2014, between Perrigo Finance plc, the Company and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on December 2, 2014)).
10.1Senior Unsecured 364-Day Bridge Facility Commitment Letter by and among the Company, J.P. Morgan Securities LLC, JPMorgan Chase Bank, N.A. and Barclays Bank PLC dated as of November 6, 2014 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on November 12, 2014).
10.2Senior Unsecured Credit Facilities Commitment Letter by and among the Company, J.P. Morgan Securities LLC, JPMorgan Chase Bank, N.A. and Barclays Bank PLC dated as of November 6, 2014 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on November 12, 2014).
10.3Amendment to the Revolving Credit Agreement by and among the Company, Barclays Bank PLC, HSBC Bank USA, N.A., and the other lenders party thereto, dated as of November 19, 2014 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on November 20, 2014).
10.4Amendment to the Term Loan Credit Agreement by and among the Company, Barclays Bank PLC, HSBC Bank USA, N.A., and the other lenders party thereto, dated as of November 19, 2014 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on November 20, 2014).
10.5Revolving Credit Agreement by and among Perrigo Finance plc, the Company, JPMorgan Chase Bank, N.A., Barclays Bank PLC, and the other lenders party thereto, dated as of December 5, 2014 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on December 9, 2014).
10.6Term Loan Credit Agreement by and among Perrigo Finance plc, the Company, JPMorgan Chase Bank, N.A., Barclays Bank PLC, and the other lenders party thereto, dated as of December 5, 2014 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on December 9, 2014).

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10.7Forms of Restricted Stock Unit Award Agreement (Service-Based) under the Company’s 2013 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on November 12, 2014).
31.1 Rule 13a-14(a) Certification by Joseph C. Papa, Chairman, President, and Chief Executive Officer (filed herewith).
   
31.2 Rule 13a-14(a) Certification by Judy L. Brown, Executive Vice President and Chief Financial Officer (filed herewith).
  
32 Certification Pursuant to 18 United States Code 1350 and Rule 13a-14(b) of the Securities Exchange Act of 1934 (filed herewith).
  
101.INS XBRL Instance Document.
  
101.SCH XBRL Taxonomy Extension Schema Document.
  
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
  
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
  
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
   PERRIGO COMPANY PLC
   (Registrant)
    
Date:November 6, 2014February 5, 2015 By: /s/ Joseph C. Papa
   Joseph C. Papa
   Chairman, President and Chief Executive Officer
    
Date:November 6, 2014February 5, 2015 By: /s/ Judy L. Brown
   Judy L. Brown
   Executive Vice President and Chief Financial Officer
   (Principal Accounting and Financial Officer)


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