Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
JNJ > SEC Filings for JNJ > Form 10-Q on 1-Aug-2014All Recent SEC Filings

Show all filings for JOHNSON & JOHNSON

Form 10-Q for JOHNSON & JOHNSON


1-Aug-2014

Quarterly Report


Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Analysis of Consolidated Sales

For the fiscal six months of 2014, worldwide sales were $37.6 billion, a total increase of 6.3%, including operational growth of 7.4% as compared to 2013 fiscal six months sales of $35.4 billion. Currency fluctuations had a negative impact of 1.1% for the fiscal six months of 2014. Worldwide sales for the fiscal six months of 2013 were positively impacted by an adjustment to previous estimates for Managed Medicaid rebates under the Affordable Care Act, primarily related to new data received from the states in the fiscal first quarter of 2013. This negatively impacted the fiscal six months of 2014 worldwide sales growth by 0.6% as compared to 2013.

Sales by U.S. companies were $17.3 billion in the fiscal six months of 2014, which represented an increase of 8.5% as compared to the prior year. Sales by international companies were $20.3 billion, which represented a total increase of 4.4%, including an operational increase of 6.4%, and a negative currency impact of 2.0% as compared to the fiscal six months sales of 2013.

Sales by companies in Europe achieved growth of 8.6%, including operational growth of 5.3%, and a positive currency impact of 3.3%. Sales by companies in the Western Hemisphere, excluding the U.S., experienced a decline of 3.5%, including operational growth of 6.8%, and a negative currency impact of 10.3%. Sales by companies in the Asia-Pacific, Africa region achieved sales growth of 3.1%, including operational growth of 7.7%, and a negative currency impact of 4.6%.

For the fiscal second quarter of 2014, worldwide sales were $19.5 billion, a total increase of 9.1%, including operational growth of 9.4% as compared to 2013 fiscal second quarter sales of $17.9 billion. Currency fluctuations had a negative impact of 0.3% for the fiscal second quarter of 2014.

Sales by U.S. companies were $9.1 billion in the fiscal second quarter of 2014, which represented an increase of 14.9% as compared to the prior year. Sales by international companies were $10.4 billion, which represented a total increase of 4.4%, including an operational increase of 5.0%, and a negative currency impact of 0.6% as compared to the fiscal second quarter sales of 2013.

Sales by companies in Europe achieved growth of 8.2%, including operational growth of 4.1%, and a positive currency impact of 4.1%. Sales by companies in the Western Hemisphere, excluding the U.S., experienced a decline of 2.2%, including operational growth of 6.5%, offset by a negative currency impact of 8.7%. Sales by companies in the Asia-Pacific, Africa region achieved growth of 2.7%, including operational growth of 5.3% and a negative currency impact of 2.6%.


Table of Contents

ANALYSIS OF SALES BY BUSINESS SEGMENTS

Consumer
Consumer segment sales in the first fiscal six months of 2014 were $7.3 billion, a decrease of 0.4% as compared to the same period a year ago, including an operational increase of 1.5% and a negative currency impact of 1.9%. U.S. Consumer segment sales decreased by 1.7%. International Consumer segment sales increased by 0.3%, including operational growth of 3.3% and a negative currency impact of 3.0%.

Major Consumer Franchise Sales - Fiscal Six Months Ended

                                                               Total     Operations    Currency
(Dollars in Millions)    June 29, 2014      June 30, 2013      Change      Change       Change
OTC                     $         2,014    $         1,974      2.0  %         3.0 %     (1.0 )%
Skin Care                         1,882              1,810      4.0            4.8       (0.8 )
Baby Care                         1,152              1,150      0.2            4.6       (4.4 )
Oral Care                           824                809      1.9            3.9       (2.0 )
Wound Care/Other                    760                778     (2.3 )         (1.7 )     (0.6 )
Women's Health                      669                812    (17.6 )        (13.4 )     (4.2 )
Total Consumer Sales    $         7,301    $         7,333     (0.4 )%         1.5 %     (1.9 )%

Consumer segment sales in the fiscal second quarter of 2014 were $3.7 billion, an increase of 2.4% as compared to the same period a year ago, including an operational increase of 3.6% and a negative currency impact of 1.2%. U.S. Consumer segment sales decreased by 0.5%. International Consumer segment sales increased by 3.9%, including operational growth of 5.8% and a negative currency impact of 1.9%.

Major Consumer Franchise Sales - Fiscal Second Quarters Ended

                                                               Total     Operations    Currency
(Dollars in Millions)    June 29, 2014      June 30, 2013      Change      Change       Change
OTC                     $         1,003    $           931      7.7  %         7.8 %     (0.1 )%
Skin Care                           968                908      6.6            6.8       (0.2 )
Baby Care                           607                586      3.6            7.2       (3.6 )
Oral Care                           413                406      1.7            2.9       (1.2 )
Wound Care/Other                    411                416     (1.2 )         (1.0 )     (0.2 )
Women's Health                      342                411    (16.8 )        (13.5 )     (3.3 )
Total Consumer Sales    $         3,744    $         3,658      2.4  %         3.6 %     (1.2 )%

The OTC franchise achieved operational growth of 7.8% as compared to the prior year fiscal second quarter. Strong sales of U.S. children's analgesics were driven by market share gains as products return to the marketplace. Additional contributors to sales growth were upper respiratory products as well as anti-smoking and digestive health products.

The Skin Care franchise achieved operational growth of 6.8% as compared to the prior year, primarily driven by sales of NEUTROGENA® and AVEENO® products.

The Baby Care franchise achieved operational growth of 7.2% as compared to the prior year, primarily due to growth in Asia Pacific, which includes newly acquired products from the acquisition of Elsker Mother & Baby Co., Ltd. in China and growth in Latin America.

The Oral Care franchise achieved operational growth of 2.9% as compared to the prior year. The growth was driven by increased international sales of LISTERINE® as a result of new product launches and successful marketing campaigns.

The Wound Care/Other franchise experienced an operational decline of 1.0% as compared to the prior year, due to lower sales of nutritional products.


Table of Contents

The Women's Health franchise experienced an operational decline of 13.5% as compared to the prior year, primarily due to the divestiture of women's sanitary protection products in the U.S., Canada and Caribbean, which was completed in the fiscal fourth quarter of 2013. This was partially offset by growth in emerging markets.

Pharmaceutical
Pharmaceutical segment sales in the first fiscal six months of 2014 were $16.0 billion, a total increase of 16.1% as compared to the same period a year ago, with an operational increase of 16.8% and a negative currency impact of 0.7%. U.S. Pharmaceutical sales increased by 22.0% as compared to the same period a year ago. International Pharmaceutical sales increased by 10.2%, including operational growth of 11.6% and a negative currency impact of 1.4%. In the first fiscal six months of 2013, Pharmaceutical segment sales included a positive adjustment to previous estimates for Managed Medicaid rebates. This negatively impacted 2014 first fiscal six months Pharmaceutical operational sales growth by 1.7%.

Major Pharmaceutical Therapeutic Area Sales - Fiscal Six Months Ended*

                                                                                 Total     Operations    Currency
(Dollars in Millions)                    June 29, 2014       June 30, 2013      Change       Change       Change
Total Immunology                       $         4,974     $         4,445       11.9  %        12.9 %     (1.0 )%
   REMICADE®                                     3,414               3,272        4.3            5.5       (1.2 )
   SIMPONI®/SIMPONI® ARIA™                         541                 412       31.3           32.8       (1.5 )
   STELARA®                                        984                 717       37.2           36.8        0.4
   Other Immunology                                 35                  44      (20.5 )        (14.6 )     (5.9 )
Total Infectious Diseases                        2,962               1,785       65.9           65.5        0.4
   EDURANT®                                        173                  99       74.7           71.0        3.7
   INCIVO®                                         183                 334      (45.2 )        (44.8 )     (0.4 )
   OLYSIO®/SOVRIAD®                              1,185                   -         **             **        0.0
   PREZISTA®                                       937                 802       16.8           16.4        0.4
   Other Infectious Diseases                       484                 550      (12.0 )        (11.9 )     (0.1 )
Total Neuroscience                               3,265               3,424       (4.6 )         (3.5 )     (1.1 )
   CONCERTA®/methylphenidate                       295                 471      (37.4 )        (35.8 )     (1.6 )
   INVEGA®                                         323                 282       14.5           15.3       (0.8 )
   INVEGA® SUSTENNA®/XEPLION®                      767                 574       33.6           33.2        0.4
   RISPERDAL® CONSTA®                              612                 671       (8.8 )         (8.7 )     (0.1 )
   Other Neuroscience                            1,268               1,426      (11.1 )         (8.9 )     (2.2 )
Total Oncology                                   2,133               1,679       27.0           27.2       (0.2 )
   VELCADE®                                        811                 732       10.8           12.2       (1.4 )
   ZYTIGA®                                       1,074                 739       45.3           44.4        0.9
   Other Oncology                                  248                 208       19.2           19.2        0.0
Total Other                                      2,673               2,460        8.7            9.0       (0.3 )
   PROCRIT®/EPREX®                                 629                 713      (11.8 )        (11.7 )     (0.1 )
   XARELTO®                                        680                 347       96.0           96.0        0.0
   Other                                         1,364               1,400       (2.6 )         (2.0 )     (0.6 )
Total Pharmaceutical Sales             $        16,007     $        13,793       16.1  %        16.8 %     (0.7 )%

*Prior year amounts have been reclassified to conform to current year product disclosure.
** Percentage greater than 100%

Pharmaceutical segment sales in the fiscal second quarter of 2014 were $8.5 billion, an increase of 21.1% versus the prior year on a total and operational basis. U.S. Pharmaceutical sales increased by 36.6% as compared to the same period a year ago. International Pharmaceutical sales increased by 6.8%, including operational growth of 6.9% and a negative currency impact of 0.1%.


Table of Contents

Major Pharmaceutical Therapeutic Area Sales - Fiscal Second Quarters Ended*

                                                                                 Total     Operations    Currency
(Dollars in Millions)                    June 29, 2014       June 30, 2013      Change       Change       Change
Total Immunology                       $         2,631     $         2,241       17.4  %        17.9 %     (0.5 )%
   REMICADE®                                     1,804               1,672        7.9            8.7       (0.8 )
   SIMPONI®/SIMPONI® ARIA™                         282                 175       61.1           61.5       (0.4 )
   STELARA®                                        528                 371       42.3           41.3        1.0
   Other Immunology                                 17                  23      (26.1 )        (22.7 )     (3.4 )
Total Infectious Diseases                        1,762                 970       81.6           80.9        0.7
   EDURANT®                                         92                  56       64.3           60.0        4.3
   INCIVO®                                          97                 172      (43.6 )        (42.5 )     (1.1 )
   OLYSIO®/SOVRIAD®                                831                   -         **             **        0.0
   PREZISTA®                                       492                 435       13.1           12.4        0.7
   Other Infectious Diseases                       250                 307      (18.6 )        (19.0 )      0.4
Total Neuroscience                               1,627               1,680       (3.2 )         (3.1 )     (0.1 )
   CONCERTA®/methylphenidate                       145                 215      (32.6 )        (31.6 )     (1.0 )
   INVEGA®                                         158                 150        5.3            5.0        0.3
   INVEGA® SUSTENNA®/XEPLION®                      394                 290       35.9           34.4        1.5
   RISPERDAL® CONSTA®                              302                 336      (10.1 )        (11.1 )      1.0
   Other Neuroscience                              628                 689       (8.9 )         (7.8 )     (1.1 )
Total Oncology                                   1,111                 885       25.5           24.6        0.9
   VELCADE®                                        403                 379        6.3            6.2        0.1
   ZYTIGA®                                         562                 395       42.3           40.7        1.6
   Other Oncology                                  146                 111       31.5           30.6        0.9
Total Other                                      1,378               1,249       10.3           10.3        0.0
   PROCRIT®/EPREX®                                 319                 335       (4.8 )         (5.1 )      0.3
   XARELTO®                                        361                 189       91.0           91.0        0.0
   Other                                           698                 725       (3.7 )         (3.6 )     (0.1 )
Total Pharmaceutical Sales             $         8,509     $         7,025       21.1  %        21.1 %      0.0  %

*Prior year amounts have been reclassified to conform to current year product disclosure.
** Percentage greater than 100%

Immunology products achieved operational sales growth of 17.9% as compared to the same period a year ago. Increased sales of STELARA® (ustekinumab) and SIMPONI®/SIMPONI® ARIA™ (golimumab) were primarily due to market growth and market share gains. REMICADE® (infliximab) growth was primarily due to market growth. The patents for REMICADE® in certain countries in Europe (Germany, Spain, United Kingdom, Sweden, Austria, Belgium, Switzerland, Denmark, France, Greece, Italy, Luxembourg and the Netherlands) expire in February 2015. If a biosimilar version of REMICADE® were to be approved and introduced to the market, loss of exclusivity would likely result in a reduction in sales.

Infectious disease products achieved operational sales growth of 80.9% as compared to the same period a year ago. Major contributors to the growth were the recent launch of OLYSIO®/SOVRIAD® (simeprevir); PREZISTA® (darunavir), due to market share growth; and sales of EDURANT® (rilpivirine). This was partially offset by lower sales of INCIVO® (telaprevir), due to competitive pressures. Competitive products for the Company's Hepatitis C products, OLYSIO®/SOVRIAD® (simeprevir) and INCIVO® (telaprevir), may be approved in 2014, and if approved, will have a negative impact on future sales.

Neuroscience products experienced an operational decline of 3.1% as compared to the same period a year ago. Strong sales of INVEGA® SUSTENNA®/XEPLION® (paliperidone palmitate) were offset by a decline in sales of CONCERTA®/methylphenidate as well as lower sales of RISPERDAL® (risperidone) and TOPAMAX® (topiramate) due to continued generic competition.


Table of Contents

Oncology products achieved strong operational sales growth of 24.6% as compared to the same period a year ago. Major contributors to the growth were strong sales of ZYTIGA®(abiraterone acetate), due to market growth, increased market share and increased penetration, as well as the recent launch of IMBRUVICA® (ibrutinib) and sales growth of VELCADE® (bortezomib).

In the fiscal second quarter of 2014, Other Pharmaceutical sales achieved operational sales growth of 10.3% as compared to the same period a year ago. Strong sales of XARELTO®(rivaroxaban) and INVOKANA®(canagliflozin) were partially offset by lower sales of ACIPHEX®(rabeprazole sodium) due to the expiration of the U.S. patent exclusivity period and the termination of the co-promotion agreement with Eisai Inc., and due to generic competition outside the U.S.

Medical Devices and Diagnostics
Medical Devices and Diagnostics segment sales in the first fiscal six months of
2014 were $14.3 billion, a total increase of 0.3% as compared to the same period
a year ago, with an operational increase of 1.3% and a negative currency impact
of 1.0%. U.S. Medical Devices and Diagnostics sales decreased 1.5%.
International Medical Devices and Diagnostics sales increased by 1.8%, including
operational growth of 3.6% and a negative currency impact of 1.8%.

Major Medical Devices and Diagnostics Franchise Sales - Fiscal Six Months Ended*
                                                                                       Total     Operations    Currency
(Dollars in Millions)                           June 29, 2014       June 30, 2013      Change      Change       Change
Orthopaedics                                  $         4,890     $         4,770       2.5  %        3.0 %      (0.5 )%
Surgical Care                                           3,083               3,096      (0.4 )         0.8        (1.2 )
Specialty Surgery/Other                                 1,779               1,729       2.9           4.2        (1.3 )
Vision Care                                             1,468               1,470      (0.1 )         2.2        (2.3 )
Cardiovascular Care                                     1,108               1,042       6.3           7.2        (0.9 )
Diabetes Care                                           1,070               1,189     (10.0 )        (9.5 )      (0.5 )
Diagnostics                                               904                 960      (5.8 )        (4.7 )      (1.1 )
Total Medical Devices and Diagnostics Sales   $        14,302     $        14,256       0.3  %        1.3 %      (1.0 )%

* Prior year amounts have been reclassified to conform to current year presentation. Infection Prevention is included in Specialty Surgery/Other.

Medical Devices and Diagnostics segment sales in the fiscal second quarter of 2014 were $7.2 billion, a total increase of 0.7% as compared to the same period a year ago, with an operational increase of 0.9% and a negative currency impact of 0.2%. U.S. Medical Devices and Diagnostics sales decreased 1.4%.
International Medical Devices and Diagnostics sales increased by 2.3%, including operational growth of 2.6% and a negative currency impact of 0.3%.

Major Medical Devices and Diagnostics Franchise Sales - Fiscal Second Quarters

Ended*
                                                                                       Total      Operations    Currency
(Dollars in Millions)                           June 29, 2014       June 30, 2013      Change       Change       Change
Orthopaedics                                  $         2,469     $         2,385       3.5  %       3.3  %        0.2  %
Surgical Care                                           1,575               1,588      (0.8 )       (0.4 )        (0.4 )
Specialty Surgery/Other                                   905                 890       1.7          2.2          (0.5 )
Vision Care                                               707                 730      (3.2 )       (2.7 )        (0.5 )
Cardiovascular Care                                       567                 529       7.2          7.3          (0.1 )
Diabetes Care                                             558                 589      (5.3 )       (5.3 )         0.0
Diagnostics                                               461                 483      (4.6 )       (4.1 )        (0.5 )

Total Medical Devices and Diagnostics Sales $ 7,242 $ 7,194 0.7 % 0.9 % (0.2 )%

* Prior year amounts have been reclassified to conform to current year presentation. Infection Prevention is included in Specialty Surgery/Other.

The Orthopaedics franchise achieved operational sales growth of 3.3% as compared to the prior year fiscal second quarter. Growth was primarily driven by sales of trauma and hip products. The growth was impacted by continued pricing pressure.


Table of Contents

The Surgical Care franchise experienced an operational sales decline of 0.4% as compared to the prior year fiscal second quarter primarily due to lower sales of women's health and urology products partially offset by the success of the ECHELON FLEX™ powered ENDOPATH® Stapler outside the U.S. and sales of sutures.

The Specialty Surgery/Other franchise achieved operational sales growth of 2.2% as compared to the prior year fiscal second quarter. Growth was attributable to new product launches and market growth for biosurgical products outside the U.S., energy products and MENTOR® products.

The Vision Care franchise experienced an operational sales decline of 2.7% as compared to the prior year fiscal second quarter primarily due to increased competition and the reversal of the inventory build in the first quarter of 2014 due to customer buying patterns.

The Cardiovascular Care franchise achieved operational sales growth of 7.3% as compared to the prior year fiscal second quarter. Growth was driven by sales of Biosense Webster products due to new catheter launches and continued market expansion.

The Diabetes Care franchise experienced an operational sales decline of 5.3% as compared to the prior year fiscal second quarter. U.S. sales declined due to the impact of lower prices primarily related to competitive bidding. This was partially offset by growth in emerging markets and the rollout of the Animas® Vibe™ outside the U.S.

The Diagnostics franchise experienced an operational sales decline of 4.1% as compared to the prior year fiscal second quarter. The decline was primarily due to lower sales in donor screening. On June 30, 2014, the Company completed the divestiture of the Ortho-Clinical Diagnostics business (the Diagnostics franchise) to The Carlyle Group. The Diagnostics franchise sales for the second fiscal six months of 2013 were $925 million. For additional details see Note 10 to the Consolidated Financial Statements.

ANALYSIS OF CONSOLIDATED EARNINGS BEFORE PROVISION FOR TAXES ON INCOME Consolidated earnings before provision for taxes on income for the first fiscal six months of 2014 increased to $11.1 billion as compared to $9.1 billion in the first fiscal six months of 2013, an increase of 22.0%. The increase in earnings before provision for taxes of $2.0 billion was primarily due to strong sales volume growth, particularly sales of OLYSIO®/SOVRIAD® (simeprevir), positive mix from higher sales of higher margin products in the Pharmaceutical business and cost reduction efforts across many of the businesses. Additionally, the first fiscal six months of 2013, included higher litigation costs of $0.6 billion, an inventory step-up charge of $0.1 billion related to the Synthes acquisition and costs of $0.1 billion related to the DePuy ASR™ Hip program as compared to the first fiscal six months of 2014. The favorable increase was partially offset by a $0.1 billion intangible asset write-down of INCIVO® (telaprevir) in 2014 and higher gains in the first fiscal six months of 2013, which included a net gain of $0.4 billion on equity investment transactions, primarily the sale of Elan American Depositary Shares, and a gain of $0.1 billion on the sale of intangible and other assets as compared to the first fiscal six months of 2014, which included a gain of $0.3 billion on the divestiture of the K-Y® brand.

Consolidated earnings before provision for taxes on income for the fiscal second quarter of 2014 increased to $5.6 billion as compared to $4.8 billion in the fiscal second quarter of 2013, an increase of 17.4%. The increase in earnings before provision for taxes of $0.6 billion was primarily due to strong sales volume growth, particularly sales of OLYSIO®/SOVRIAD® (simeprevir), positive mix from higher sales of higher margin products in the Pharmaceutical business and cost reduction efforts across many of the businesses. Additionally, the fiscal second quarter of 2013, included higher costs of $0.2 billion primarily related to litigation costs and the DePuy ASR™ Hip program. The favorable increase was partially offset by a $0.1 billion intangible asset write-down of INCIVO® (telaprevir) in 2014 and $0.1 billion of higher gains in the fiscal second quarter of 2013, which included a net gain of $0.4 billion on equity investment transactions, primarily the sale of Elan American Depositary Shares, as compared to the fiscal second quarter of 2014, which included a gain of $0.3 billion on the divestiture of the K-Y® brand.

Cost of Products Sold

Consolidated costs of products sold for the first fiscal six months of 2014 decreased to 30.6% from 31.2% of sales as compared to the same period a year ago. This was primarily due to positive mix from higher sales of higher margin products in the Pharmaceutical business and cost improvements across many of the businesses. In addition, the first fiscal six months of 2013 included an inventory step-up charge of $0.1 billion related to the Synthes acquisition. The amortization expense for the first fiscal six months of 2014 and 2013 was $698 million and $653 million, respectively. Consolidated costs of products sold for the fiscal second quarter of 2014 increased to 31.0% from 30.7% of sales as compared to the same period a year ago


Table of Contents

primarily due to pricing and the impact of the weakening of the Japanese yen as compared to the currencies where products are sourced. This was partially offset by positive mix.

Selling, Marketing and Administrative Expenses

Consolidated selling, marketing and administrative expenses for the first fiscal six months of 2014 decreased to 28.3% from 30.0% of sales as compared to the same period a year ago. Consolidated selling, marketing and administrative expenses for the fiscal second quarter of 2014 decreased to 28.1% from 30.1% of sales as compared to the same period a year ago. The decrease in both periods was due to the leveraged costs resulting from growth in the Pharmaceutical business, particularly sales of OLYSIO®/SOVRIAD® (simeprevir), and cost containment initiatives primarily in the Medical Devices and Diagnostics segment.

. . .

  Add JNJ to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for JNJ - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.