UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
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Item 2.02 Results of Operations and Financial Condition
On October 23, 2019, Johnson & Johnson issued the attached earnings schedules for the third quarter ended September 29, 2019. These schedules have been amended to reflect the information referenced in Item 7.01.
Item 7.01 Regulation FD Disclosure
Johnson & Johnson and its U.S.-based Janssen Pharmaceutical Companies confirm an agreement in principle to settle opioid litigation as publicly announced and outlined by a committee of State Attorneys General on October 21, 2019. The Company would contribute $4 billion, subject to various conditions and an agreement being finalized. The agreement in principle is intended to provide certainty for involved parties and critical assistance for families and communities in need. This agreement in principle is not an admission of liability or wrong-doing and would resolve opioid lawsuits filed and future claims by states, cities and counties. The Company cannot predict if or when the agreement will be finalized.
This agreement in principle is a recognized subsequent event and previously reported GAAP net earnings for the fiscal third quarter and nine months ended September 29, 2019 is reduced from $4.8 billion to $1.8 billion and $14.2 billion to $11.1 billion, respectively. Previously reported earnings per share (EPS) for the fiscal third quarter and nine months ended September 29, 2019 is reduced from $1.81 to $0.66 and $5.28 to $4.13, respectively. There is no impact to previously reported Adjusted Earnings, Adjusted EPS and Adjusted Operational EPS for each of the periods reported.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
Exhibit No. | Description of Exhibit |
Condensed Consolidated Statement of Earnings for the third quarter. | |
104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL. |
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 hereunto duly authorized.
Johnson & Johnson | ||||
(Registrant) | ||||
Date: | October 23, 2019 | By: | /s/ Ronald A. Kapusta | |
Ronald A. Kapusta Controller (Principal Accounting Officer) | ||||
Exhibit 99.2
Johnson & Johnson and Subsidiaries | |||||||||||
Condensed Consolidated Statement of Earnings | |||||||||||
(Unaudited; in Millions Except Per Share Figures) | THIRD QUARTER | ||||||||||
2019 | 2018 | Percent | |||||||||
Percent | Percent | Increase | |||||||||
Amount | to Sales | Amount | to Sales | (Decrease) | |||||||
Sales to customers | $ 20,729 | 100.0 | $ 20,348 | 100.0 | 1.9 | ||||||
Cost of products sold | 6,867 | 33.1 | 6,589 | 32.4 | 4.2 | ||||||
Gross Profit | 13,862 | 66.9 | 13,759 | 67.6 | 0.7 | ||||||
Selling, marketing and administrative expenses | 5,374 | 26.0 | 5,543 | 27.3 | (3.0) | ||||||
Research and development expense | 2,599 | 12.5 | 2,508 | 12.3 | 3.6 | ||||||
In-process research and development | — | — | 1,126 | 5.6 | |||||||
Interest (income) expense, net | (41) | (0.2) | 68 | 0.3 | |||||||
Other (income) expense, net | 4,214 | 20.3 | 3 | 0.0 | |||||||
Restructuring | 69 | 0.4 | 88 | 0.4 | |||||||
Earnings before provision for taxes on income | 1,647 | 7.9 | 4,423 | 21.7 | (62.8) | ||||||
Provision for/(Benefit from) taxes on income | (106) | (0.6) | 489 | 2.4 | (121.7) | ||||||
Net earnings | $ 1,753 | 8.5 | $ 3,934 | 19.3 | (55.4) | ||||||
Net earnings per share (Diluted) | $ 0.66 | $ 1.44 | (54.2) | ||||||||
Average shares outstanding (Diluted) | 2,669.9 | 2,727.6 | |||||||||
Effective tax rate | (6.4) | % | 11.1 | % | |||||||
Adjusted earnings before provision for taxes and net earnings (1) (A) | |||||||||||
Earnings before provision for taxes on income | $ 7,116 | 34.3 | $ 6,780 | 33.3 | 5.0 | ||||||
Net earnings | $ 5,672 | 27.4 | $ 5,590 | 27.5 | 1.5 | ||||||
Net earnings per share (Diluted) | $ 2.12 | $ 2.05 | 3.4 | ||||||||
Effective tax rate | 20.3 | % | 17.6 | % | |||||||
(1) See Reconciliation of Non-GAAP Financial Measures. | |||||||||||
(A) NON-GAAP FINANCIAL MEASURES "Adjusted earnings before provision for taxes on income," "adjusted net earnings," "adjusted net earnings per share (diluted)," and "adjusted effective tax rate" are non-GAAP financial measures and should not be considered replacements for GAAP results. The Company provides earnings before provision for taxes on income, net earnings, net earnings per share (diluted), and effective tax rate on an adjusted basis because management believes that these measures provide useful information to investors. Among other things, these measures may assist investors in evaluating the Company's results of operations period over period. In various periods, these measures may exclude such items as intangible asset amortization expense, significant costs associated with acquisitions, restructuring, litigation, and changes in applicable laws and regulations (including significant accounting or tax matters). Special items may be highly variable, difficult to predict, and of a size that sometimes has substantial impact on the Company's reported results of operations for a period. Management uses these measures internally for planning, forecasting and evaluating the performances of the Company's businesses, including allocating resources and evaluating results relative to employee performance compensation targets. Unlike earnings before provision for taxes on income, net earnings, net earnings per share (diluted), and effective tax rate prepared in accordance with GAAP, adjusted earnings before provision for taxes on income, adjusted net earnings, adjusted net earnings per share (diluted), and adjusted effective tax rate may not be comparable with the calculation of similar measures for other companies. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of the Company's results of operations without including all events during a period, such as intangible asset amortization expense, the effects of an acquisition, restructuring, litigation, and changes in applicable laws and regulations (including significant accounting or tax matters) and do not provide a comparable view of the Company's performance to other companies in the health care industry. Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP. | |||||||||||
Johnson & Johnson and Subsidiaries | |||||||||
Condensed Consolidated Statement of Earnings | |||||||||
(Unaudited; in Millions Except Per Share Figures) | NINE MONTHS | ||||||||
2019 | 2018 | Percent | |||||||
Percent | Percent | Increase | |||||||
Amount | to Sales | Amount | to Sales | (Decrease) | |||||
Sales to customers | $ 61,312 | 100.0 | $ 61,187 | 100.0 | 0.2 | ||||
Cost of products sold | 20,422 | 33.3 | 20,130 | 32.9 | 1.5 | ||||
Gross Profit | 40,890 | 66.7 | 41,057 | 67.1 | (0.4) | ||||
Selling, marketing and administrative expenses | 16,139 | 26.3 | 16,549 | 27.1 | (2.5) | ||||
Research and development expense | 8,123 | 13.3 | 7,551 | 12.3 | 7.6 | ||||
In-process research and development | 890 | 1.4 | 1,126 | 1.8 | |||||
Interest (income) expense, net | (43) | (0.1) | 340 | 0.6 | |||||
Other (income) expense, net | 2,509 | 4.1 | 427 | 0.7 | |||||
Restructuring | 162 | 0.3 | 187 | 0.3 | |||||
Earnings before provision for taxes on income | 13,110 | 21.4 | 14,877 | 24.3 | (11.9) | ||||
Provision for taxes on income | 2,001 | 3.3 | 2,622 | 4.3 | (23.7) | ||||
Net earnings | $ 11,109 | 18.1 | $ 12,255 | 20.0 | (9.4) | ||||
Net earnings per share (Diluted) | $ 4.13 | $ 4.49 | (8.0) | ||||||
Average shares outstanding (Diluted) | 2,688.1 | 2,729.6 | |||||||
Effective tax rate | 15.3 | % | 17.6 | % | |||||
Adjusted earnings before provision for taxes and net earnings (1) (A) | |||||||||
Earnings before provision for taxes on income | $ 22,597 | 36.9 | $ 20,652 | 33.8 | 9.4 | ||||
Net earnings | $ 18,283 | 29.8 | $ 16,943 | 27.7 | 7.9 | ||||
Net earnings per share (Diluted) | $ 6.80 | $ 6.21 | 9.5 | ||||||
Effective tax rate | 19.1 | % | 18.0 | % | |||||
(1) See Reconciliation of Non-GAAP Financial Measures. | |||||||||
(A) NON-GAAP FINANCIAL MEASURES "Adjusted earnings before provision for taxes on income," "adjusted net earnings," "adjusted net earnings per share (diluted)," and "adjusted effective tax rate" are non-GAAP financial measures and should not be considered replacements for GAAP results. The Company provides earnings before provision for taxes on income, net earnings, net earnings per share (diluted), and effective tax rate on an adjusted basis because management believes that these measures provide useful information to investors. Among other things, these measures may assist investors in evaluating the Company's results of operations period over period. In various periods, these measures may exclude such items as intangible asset amortization expense, significant costs associated with acquisitions, restructuring, litigation, and changes in applicable laws and regulations (including significant accounting or tax matters). Special items may be highly variable, difficult to predict, and of a size that sometimes has substantial impact on the Company's reported results of operations for a period. Management uses these measures internally for planning, forecasting and evaluating the performances of the Company's businesses, including allocating resources and evaluating results relative to employee performance compensation targets. Unlike earnings before provision for taxes on income, net earnings, net earnings per share (diluted), and effective tax rate prepared in accordance with GAAP, adjusted earnings before provision for taxes on income, adjusted net earnings, adjusted net earnings per share (diluted), and adjusted effective tax rate may not be comparable with the calculation of similar measures for other companies. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of the Company's results of operations without including all events during a period, such as intangible asset amortization expense, the effects of an acquisition, restructuring, litigation, and changes in applicable laws and regulations (including significant accounting or tax matters) and do not provide a comparable view of the Company's performance to other companies in the health care industry. Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP. | |||||||||
Johnson & Johnson and Subsidiaries | |||||||||||
Reconciliation of Non-GAAP Financial Measures | |||||||||||
Third Quarter | % Incr. / | ||||||||||
(Dollars in Millions Except Per Share Data) | 2019 | 2018 | (Decr.) | ||||||||
Earnings before provision for taxes on income - as reported | $ 1,647 | 4,423 | (62.8) | % | |||||||
Intangible asset amortization expense | 1,138 | 1,085 | |||||||||
In-process research and development | — | 1,126 | |||||||||
Litigation expense, net | 4,000 | — | |||||||||
Restructuring/Other (1) | 128 | 190 | |||||||||
Actelion acquisition related cost | 33 | 40 | |||||||||
Auris Health acquisition related cost | 65 | — | |||||||||
AMO acquisition related cost | 9 | 36 | |||||||||
Unrealized loss/(gain) on securities | 89 | 9 | |||||||||
Contingent liability reversal | — | (184) | |||||||||
Diabetes asset impairment | — | — | |||||||||
Other | 7 | 55 | |||||||||
Earnings before provision for taxes on income - as adjusted | $ 7,116 | 6,780 | 5.0 | % | |||||||
Net Earnings - as reported | $ 1,753 | 3,934 | (55.4) | % | |||||||
Intangible asset amortization expense | 1,011 | 968 | |||||||||
In-process research and development | — | 859 | |||||||||
Litigation expense, net | 3,080 | — | |||||||||
Restructuring/Other | 106 | 162 | |||||||||
Actelion acquisition related cost | 30 | 37 | |||||||||
Auris Health acquisition related cost | 51 | — | |||||||||
AMO acquisition related cost | 7 | 29 | |||||||||
Unrealized loss/(gain) on securities | 71 | 8 | |||||||||
Contingent liability reversal | — | (184) | |||||||||
Diabetes asset impairment | — | — | |||||||||
Impact of tax legislation (2) | (391) | (265) | |||||||||
Other | (46) | 42 | |||||||||
Net Earnings - as adjusted | $ 5,672 | 5,590 | 1.5 | % | |||||||
Diluted Net Earnings per share - as reported | $ 0.66 | 1.44 | (54.2) | % | |||||||
Intangible asset amortization expense | 0.38 | 0.35 | |||||||||
In-process research and development | — | 0.32 | |||||||||
Litigation expense, net | 1.15 | — | |||||||||
Restructuring/Other | 0.04 | 0.06 | |||||||||
Actelion acquisition related cost | 0.01 | 0.02 | |||||||||
Auris Health acquisition related cost | 0.02 | — | |||||||||
AMO acquisition related cost | — | 0.01 | |||||||||
Unrealized loss/(gain) on securities | 0.03 | — | |||||||||
Contingent liability reversal | — | (0.07) | |||||||||
Diabetes asset impairment | — | — | |||||||||
Impact of tax legislation | (0.15) | (0.10) | |||||||||
Other | (0.02) | 0.02 | |||||||||
Diluted Net Earnings per share - as adjusted | $ 2.12 | 2.05 | 3.4 | % | |||||||
Operational Diluted Net Earnings per share - as adjusted | |||||||||||
at 2017 foreign currency exchange rates | 2.08 | ||||||||||
Impact of currency at 2018 foreign currency exchange rates | 0.05 | (0.03) | |||||||||
Operational Diluted Net Earnings per share - as adjusted | |||||||||||
at 2018 foreign currency exchange rates | $ 2.17 | 2.05 | 5.9 | % | |||||||
(1) Includes $20M recorded in cost of products sold and $39M recorded in other (income) expense for the third quarter 2019. Includes $23M recorded in cost of products sold and $79M recorded in other (income) expense for the third quarter 2018. | |||||||||||
(2) Includes foreign currency translation | |||||||||||
Johnson & Johnson and Subsidiaries | |||||||||||
Reconciliation of Non-GAAP Financial Measures | |||||||||||
Nine Months YTD | % Incr. / | ||||||||||
(Dollars in Millions Except Per Share Data) | 2019 | 2018 | (Decr.) | ||||||||
Earnings before provision for taxes on income - as reported | $ 13,110 | 14,877 | (11.9) | % | |||||||
Intangible asset amortization expense | 3,386 | 3,284 | |||||||||
In-process research and development | 890 | 1,126 | |||||||||
Litigation expense, net | 4,832 | 703 | |||||||||
Restructuring/Other (1) | 360 | 473 | |||||||||
Actelion acquisition related cost | 123 | 200 | |||||||||
Auris Health acquisition related cost | 56 | — | |||||||||
AMO acquisition related cost | 50 | 82 | |||||||||
Unrealized loss/(gain) on securities | (217) | (3) | |||||||||
Contingent liability reversal | — | (184) | |||||||||
Diabetes asset impairment | — | 4 | |||||||||
Other | 7 | 90 | |||||||||
Earnings before provision for taxes on income - as adjusted | $ 22,597 | 20,652 | 9.4 | % | |||||||
Net Earnings - as reported | $ 11,109 | 12,255 | (9.4) | % | |||||||
Intangible asset amortization expense | 2,836 | 2,931 | |||||||||
In-process research and development | 703 | 859 | |||||||||
Litigation expense, net | 3,764 | 609 | |||||||||
Restructuring/Other | 297 | 395 | |||||||||
Actelion acquisition related cost | 114 | 193 | |||||||||
Auris Health acquisition related cost | 44 | — | |||||||||
AMO acquisition related cost | 40 | 68 | |||||||||
Unrealized loss/(gain) on securities | (171) | (2) | |||||||||
Contingent liability reversal | — | (184) | |||||||||
Diabetes asset impairment | — | 3 | |||||||||
Impact of tax legislation (2) | (391) | (253) | |||||||||
Other | (62) | 69 | |||||||||
Net Earnings - as adjusted | $ 18,283 | 16,943 | 7.9 | % | |||||||
Diluted Net Earnings per share - as reported | $ 4.13 | 4.49 | (8.0) | % | |||||||
Intangible asset amortization expense | 1.06 | 1.07 | |||||||||
In-process research and development | 0.26 | 0.32 | |||||||||
Litigation expense, net | 1.40 | 0.22 | |||||||||
Restructuring/Other | 0.11 | 0.15 | |||||||||
Actelion acquisition related cost | 0.04 | 0.07 | |||||||||
Auris Health acquisition related cost | 0.02 | — | |||||||||
AMO acquisition related cost | 0.01 | 0.02 | |||||||||
Unrealized loss/(gain) on securities | (0.06) | — | |||||||||
Contingent liability reversal | — | (0.07) | |||||||||
Diabetes asset impairment | — | — | |||||||||
Impact of tax legislation | (0.15) | (0.09) | |||||||||
Other | (0.02) | 0.03 | |||||||||
Diluted Net Earnings per share - as adjusted | $ 6.80 | 6.21 | 9.5 | % | |||||||
Operational Diluted Net Earnings per share - as adjusted | |||||||||||
at 2017 foreign currency exchange rates | 6.04 | ||||||||||
Impact of currency at 2018 foreign currency exchange rates | 0.18 | 0.17 | |||||||||
Operational Diluted Net Earnings per share - as adjusted | |||||||||||
at 2018 foreign currency exchange rates | $ 6.98 | 6.21 | 12.4 | % | |||||||
(1) Includes $81M recorded in cost of products sold and $117M recorded in other (income) expense for nine months 2019 YTD. Includes $73M recorded in cost of products sold and $213M recorded in other (income) expense for nine months 2018 YTD. | |||||||||||
(2) Includes foreign currency translation | |||||||||||