10-Q: Perrigo Announces Restricted Stock Unit Awards Under 2019 Long-Term Incentive Plan

Perrigo grants service-based and performance-based restricted stock units to participants under its 2019 Long-Term Incentive Plan.

Summary

• Perrigo Company plc has granted awards under the Perrigo Company plc 2019 Long-Term Incentive Plan.
• The awards consist of service-based restricted stock units (RSUs) and performance-based restricted stock units (PSUs).
• Each RSU entitles the recipient to one ordinary share of the Company on the applicable RSU Vesting Date, provided the vesting conditions are satisfied.
• The number of PSUs that vest, if any, will be determined based on the average level of attainment of annual Performance Measures for each fiscal year in the Performance Period.
• The Committee shall establish annually one or more Performance Measures and the Performance Goals with respect to each Performance Measure that must be attained for Threshold, Target and Maximum performance for a fiscal year.
• The percentage of the Target Award that would be payable under the schedule shall be adjusted, pro rata, to reflect the attained performance between Threshold and Target, and Target and Maximum.
• At the end of the Performance Period, the percentage payout for each fiscal year in the Performance Period will be averaged to determine the actual percentage of Target Award PSUs that will vest and be payable on the PSU Vesting Date.
• The awards are subject to various terms and conditions, including forfeiture upon termination of employment under certain circumstances.
• The issuance of Ordinary Shares will be subject to and conditioned upon compliance by the Company and you, including any written representations, warranties and agreements as the Administrator may request of you for compliance with all (i) applicable U.S. state and federal laws and regulations, (ii) applicable laws of the country where you reside pertaining to the issuance or sale of Ordinary Shares, and (iii) applicable requirements of any stock exchange or automated quotation system on which the Company’s Ordinary Shares may be listed or quoted at the time of such issuance or transfer.

Sentiment

Score: 6

Explanation: The document is neutral in tone, primarily outlining the terms and conditions of the stock unit awards. While it mentions some challenges like supply chain disruptions and litigation, it also highlights strategic initiatives and potential benefits, resulting in a moderately positive sentiment.

Positives

• The awards provide employees with an incentive to contribute to the company's long-term success.
• The vesting schedules encourage continued service and performance.
• Special vesting rules provide some protection in the event of death, disability, retirement, or involuntary termination following a Change in Control.

Negatives

• The awards are subject to forfeiture under certain circumstances, such as termination for cause or failure to meet performance goals.
• The non-competition and non-solicitation clauses may restrict employees' future employment opportunities.
• The value of the awards is subject to the fluctuations of the company's stock price.

Risks

• The vesting conditions for the awards may not be satisfied for reasons beyond the employee's control.
• The value of the shares may rise and fall according to investor sentiment, general economic conditions, and other factors.
• There may be taxation implications arising from participating in the plan.
• Exchange control regulations in certain countries may require reporting of foreign assets.
• The company's clawback policy may require reimbursement of payments if the company is required to prepare an accounting restatement due to misconduct.

Future Outlook

The company expects to recoup its investment in the Nutrition Network Optimization project within two years post project completion.

Management Comments

• Perrigo is a leading pure-play self-care company with more than a century of providing high-quality health and wellness solutions to meet the evolving needs of consumers.
• As one of the originators of the over-the-counter ("OTC") self-care market, Perrigo is led by its vision "To Provide The Best Self-Care For Everyone" and its purpose to "Make Lives Better Through Trusted Health and Wellness Solutions, Accessible To All".
• Perrigo works to fulfill its vision and purpose as a top-tier consumer self-care company with a focused portfolio based on consumer-led innovation, which meets societal needs for: Access, Value, and Reliability.

Industry Context

The announcement of restricted stock unit awards is a common practice in the pharmaceutical industry to incentivize employees and align their interests with the company's long-term performance. Companies like Teva Pharmaceutical Industries, Mylan (now Viatris), and Johnson & Johnson also utilize similar equity compensation plans to attract and retain talent.

Comparison to Industry Standards

• Perrigo's equity compensation plan is similar to those offered by other large pharmaceutical companies, such as Teva, Mylan (Viatris), and Johnson & Johnson.
• These companies also use a mix of time-based and performance-based vesting schedules to incentivize employees.
• The specific performance metrics used by Perrigo, such as relative total shareholder return (rTSR), are also common in the industry.
• The non-competition and non-solicitation clauses are also standard in executive compensation agreements in the pharmaceutical industry.

Legal Proceedings

• The Company is involved in price-fixing lawsuits related to its former Rx business, alleging anticompetitive conduct with respect to the sale of generic drugs.
• The Company is also involved in securities litigation in the United States and Israel, alleging violations of securities laws.
• The Company is named in product liability lawsuits alleging that the use of body powder products containing talcum powder causes mesothelioma and lung cancer.
• The Company is also involved in litigation related to ranitidine and acetaminophen.

Stakeholder Impact

• Employees: The stock unit awards provide an incentive for employees to contribute to the company's success.
• Shareholders: The company's performance and financial condition will impact the value of the stock unit awards.
• Customers: The company's ability to provide high-quality products and services will be impacted by its strategic initiatives and investments.

Next Steps

• Employees must acknowledge receipt of the Plan and the Award.
• The Committee will determine the percentage of Target Award PSUs that would be payable for each fiscal year, based on the attainment of the Performance Goals for each Performance Measure(s) established by the Committee for that fiscal year.
• The company will continue to defend itself against claims in the MDL and state court matters.
• The company will continue to monitor regulatory developments to ensure ongoing compliance with the OECD's Pillar Two framework.

Key Dates

Keywords

Restricted Stock Units, Performance-Based Vesting, Long-Term Incentive Plan, Stock Options, Equity Compensation, Perrigo, Awards, Incentive