Item 7.01
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Regulation FD Disclosure.
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Tax Cut and Jobs Act
On December 22, 2017, the TCJA was enacted into law by President Donald Trump. Allergan is providing the following guidance on the expected
impact of the TCJA on the Company.
Overall, Allergan anticipates the future impact of the TCJA will be broadly neutral to the
Companys non-GAAP effective tax rate over time, with a moderate increase for 2018 as compared to full year 2017. The Company will provide further information on its expected effective tax rate as determined under GAAP and its non-GAAP
effective tax rate as part of our fourth quarter and full-year 2017 earnings report.
Under the TCJA, income earned by the Companys
United States (U.S.) subsidiaries will generally be subject to U.S. federal income taxes at a rate of 21%. A portion of this income will be eligible for a reduced rate of approximately 13%.
Income earned by the Companys
non-U.S.
subsidiaries that are treated as controlled foreign
corporations under the new law will generally be subject to U.S. federal income taxes at a rate of 10.5%, reduced in part by foreign tax credits. This represents the majority of the Companys
non-U.S.
income. The Companys estimates reflect this as an increase in its GAAP and
non-GAAP
effective tax rates for 2018 and going forward. However, we are
continuing to assess the appropriate accounting treatment of this item, including whether or not deferred tax liabilities should be recorded for certain book in excess of tax basis differences in the Companys
non-U.S.
subsidiaries. The Company expects the Financial Accounting Standards Board to issue guidance addressing this matter before the filing of its Form
10-K.
The Company currently anticipates recording in the fourth quarter ended December 31, 2017 a net deferred tax benefit of $3.5 billion
to $4.0 billion related to a reduction in deferred tax liabilities attributable to changes in the U.S. federal income tax rate from 35% to 21% and a reduction in deferred tax liabilities previously provided on the untaxed earnings of certain
foreign subsidiaries. This amount is provisional and will be finalized after we complete the relevant calculations. This amount will not impact the Companys
non-GAAP
tax expense for 2017. These amounts
do not consider any deferred tax liabilities we may determine are appropriate to record with respect to the book in excess of tax basis differences of the Companys
non-U.S.
subsidiaries, which may be
material.
The TCJA also requires the Company to pay a
one-time
tax or toll charge on
previously unremitted earnings of certain
non-U.S.
subsidiaries. The company anticipates recording in the fourth quarter of 2017 tax expense of
$700-$800 million
related to the toll charge net of estimated foreign tax credits. This amount will not impact the Companys
non-GAAP
tax expense for 2017. This amount is the Companys provisional estimate
of the toll-charge and will be subject to adjustment as we finalize the relevant computations. In addition, future IRS guidance may impact the final calculation. The toll charge is payable in installments over 8 years beginning in 2018.
In addition, the TCJA contains additional provisions which may impact the company prospectively, including the Base Erosion Anti-Abuse
Tax which requires the Company to determine its U.S. tax liability without regard to deductions of certain payments to affiliates. We do not anticipate that these provisions will impact the Companys effective tax rate for 2018, but may
impact the Company in future years.
The information furnished in this report (including the exhibits) pursuant to Items 2.02, 7.01
and 9.01 shall not be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing of Allergan plc, except as shall be expressly set forth by specific
reference in such filing.
Forward-Looking Statements
Statements contained in this report that refer to future events or other
non-historical
facts are
forward-looking statements that reflect Allergans current perspective on existing trends and information as of the date of this report. Actual results may differ materially from Allergans current expectations depending upon a number of
factors affecting Allergans business. These factors include, among others, the difficulty of predicting the timing or outcome of FDA approvals or actions, if any; the impact of competitive products and pricing; market acceptance of and
continued demand for Allergans products; the impact of uncertainty around timing of generic entry related to key products on Allergans financial results; uncertainty associated with financial projections, projected cost reductions,
projected synergies, restructurings, increased costs, and adverse tax consequences; difficulties or delays in manufacturing; and other risks and uncertainties detailed in Allergans periodic public filings with the Securities and Exchange
Commission, including but not limited to Allergans Annual Report on Form
10-K
for the year ended December 31, 2016 and Allergans Quarterly Report on Form
10-Q
for the period ended September 30, 2017. Except as expressly required by law, Allergan disclaims any intent or obligation to update these forward-looking statements.
Non-GAAP
Financial Measures
In this report, the Company presents items not prepared in accordance with GAAP, or
non-GAAP
financial
measures (as defined in Regulation G promulgated by the U.S. Securities and Exchange Commission), that exclude certain significant charges or credits that are important to an understanding of the Companys ongoing operations. The Company
believes that its
non-GAAP
measures provide useful information to investors because these are the financial measures used by our management team to evaluate our operating performance, make day to day operating
decisions, prepare internal forecasts, communicate external forward looking guidance to investors, compensate management and allocate the Companys resources. We believe this presentation also increases comparability of period to period
results. The Companys determination of significant charges or credits may not be comparable to similar measures used by other companies and may vary from period to period. The Company uses both GAAP financial measures and the disclosed
non-GAAP
adjusted financial measures internally. These
non-GAAP
adjusted financial measures are in addition to, not a substitute for, or superior to, measures of financial
performance prepared in accordance with GAAP.