10-QPeriod: Q3 FY2002

JOHNSON & JOHNSON Quarterly Report for Q3 Ended Jul 30, 2002

Filed August 12, 2002For Securities:JNJ

Summary

Johnson & Johnson reported a strong second quarter of 2002, demonstrating robust sales growth across its core segments. Worldwide sales increased by 10.9% to $9.07 billion compared to the same period last year. This growth was driven by solid performance in the Pharmaceutical segment, up 10.2%, and notable acceleration in Medical Devices & Diagnostics, up 13.7%. The Consumer segment also saw healthy growth of 7.8%, bolstered by key brands in skincare and nutritional products. Net earnings increased by 11.6% to $1.65 billion, with diluted earnings per share rising to $0.54 from $0.48 in the prior year's quarter. The company also repurchased a significant amount of its stock during the period, completing a $5 billion program. For the first six months of 2002, sales reached $17.82 billion, an 11.1% increase year-over-year. Net earnings for the six-month period were $3.49 billion, up 15.0% from the previous year. The company successfully integrated recent acquisitions, including Tibotec-Virco NV and Obtech Medical AG, though these resulted in after-tax charges for in-process research and development. Johnson & Johnson continues to invest in its product pipeline and research, as evidenced by increased research expenses. The company highlighted ongoing legal proceedings, particularly related to the drug PROPULSID, while expressing confidence in managing potential liabilities.

Key Highlights

  • 1Worldwide sales for the second quarter of 2002 reached $9.07 billion, an increase of 10.9% compared to the prior year's quarter.
  • 2Net earnings for the quarter were $1.65 billion, a 11.6% increase, with diluted EPS rising to $0.54 from $0.48.
  • 3The Pharmaceutical segment showed strong growth with sales up 10.2%, driven by key products like PROCRIT/EPREX and REMICADE.
  • 4The Medical Devices & Diagnostics segment experienced significant growth of 13.7%, fueled by circulatory disease management, orthopaedics, and surgical products.
  • 5Johnson & Johnson completed a $5 billion stock repurchase program, demonstrating a commitment to returning capital to shareholders.
  • 6The company incurred $189 million in after-tax charges for in-process research and development related to the acquisitions of Tibotec-Virco NV and Obtech Medical AG.
  • 7Significant legal proceedings, particularly concerning the drug PROPULSID, are ongoing, with the company confident in managing potential liabilities.

Frequently Asked Questions

Johnson & Johnson reported strong financial results for the second quarter of 2002. Worldwide sales increased by 10.9% to $9.07 billion, and net earnings rose by 11.6% to $1.65 billion. Diluted earnings per share improved to $0.54 from $0.48 in the same period last year.

The Pharmaceutical segment was a key driver of growth, with sales up 10.2%. The Medical Devices & Diagnostics segment also showed robust performance, increasing sales by 13.7%. The Consumer segment contributed with a 7.8% increase in sales.

The company completed acquisitions of Tibotec-Virco NV and Obtech Medical AG. These acquisitions resulted in after-tax charges for in-process research and development totaling $189 million ($0.05 per share for Tibotec-Virco and $0.01 per share for Obtech Medical) in the second quarter of 2002. These charges impacted reported net earnings for the quarter.

Johnson & Johnson generated significant operating cash flow. The company also completed a $5 billion stock repurchase program during the period, demonstrating a commitment to returning value to shareholders. Additionally, a regular quarterly dividend of $0.205 per share was declared.

The company is involved in numerous legal proceedings, most notably concerning the drug PROPULSID. Approximately 950 cases are pending, involving around 3,500 plaintiffs, some of whom allege death from the drug's use. While damages sought are substantial, Johnson & Johnson disputes the claims and believes its self-insurance reserves and excess insurance will cover potential liabilities. The company is also involved in an arbitration with Amgen regarding PROCRIT license rights.