10-QPeriod: Q3 FY2005

JOHNSON & JOHNSON Quarterly Report for Q3 Ended Jul 3, 2005

Filed August 10, 2005For Securities:JNJ

Summary

Johnson & Johnson reported strong top-line growth for the second quarter and the first six months of 2005, with worldwide sales increasing by 11.1% year-over-year to $12.8 billion for the quarter and $25.6 billion for the six-month period. This growth was driven by robust performance across all business segments, particularly in the Medical Devices and Diagnostics segment which saw a 19.7% increase in quarterly sales, largely due to the success of the CYPHER(r) Sirolimus-eluting Stent. The Pharmaceutical segment also showed resilience, with notable growth in key products like RISPERDAL(r), REMICADE(r), and TOPAMAX(r), although PROCRIT(r)/EPREX(r) experienced a decline due to competition. Net earnings for the second quarter were $2.7 billion, a 9.1% increase compared to $2.5 billion in the prior year. Diluted earnings per share rose to $0.89 from $0.82. The company also demonstrated a commitment to shareholder returns by increasing its quarterly dividend by 15.8% and continuing its share repurchase program. While the company faces ongoing legal proceedings and patent challenges, particularly in the pharmaceutical and medical device sectors, management believes these matters, net of accrued liabilities, will not have a material adverse effect on the company's financial position, though they could impact quarterly results.

Key Highlights

  • 1Worldwide sales increased by 11.1% year-over-year for both the second quarter ($12.8 billion) and the first six months ($25.6 billion) of 2005.
  • 2The Medical Devices and Diagnostics segment showed significant growth, with quarterly sales up 19.7%, driven by the CYPHER(r) Sirolimus-eluting Stent.
  • 3Pharmaceutical segment sales grew 3.7% in the quarter, boosted by strong performance in RISPERDAL(r), REMICADE(r), and TOPAMAX(r), while PROCRIT(r)/EPREX(r) faced competitive pressures.
  • 4Net earnings for the second quarter reached $2.7 billion, an increase of 9.1% over the prior year, with diluted EPS growing to $0.89.
  • 5The company declared a 15.8% increase in its quarterly cash dividend, reflecting confidence in its financial health and commitment to shareholder returns.
  • 6Significant investment in Research & Development, with a 25.8% increase in R&D spending for the second quarter, signaling a focus on future innovation.
  • 7The company is actively managing a portfolio of acquisitions, including recent ones like TransForm Pharmaceuticals, CLOSURE Medical, and Peninsula Pharmaceuticals, while continuing its defense in numerous legal proceedings and patent disputes.

Frequently Asked Questions

Johnson & Johnson reported strong financial results for the second quarter of 2005. Worldwide sales increased by 11.1% to $12.8 billion compared to the same period in 2004. Net earnings rose by 9.1% to $2.7 billion, and diluted earnings per share increased to $0.89 from $0.82.

All three major business segments demonstrated growth. The Medical Devices and Diagnostics segment experienced the highest growth rate at 19.7% for the quarter, largely driven by the success of the CYPHER(r) Sirolimus-eluting Stent. The Consumer segment grew by 13.9%, and the Pharmaceutical segment increased by 3.7%, supported by key products like RISPERDAL(r) and REMICADE(r).

Johnson & Johnson is involved in numerous legal proceedings, including patent litigation and product liability cases. The company actively defends itself against these claims, while also pursuing settlements where deemed appropriate. Management believes that the ultimate outcome of these matters, net of liabilities already accrued, is not expected to have a material adverse effect on the company's financial position, though resolution could impact results in a specific period.

The company continues to prioritize shareholder returns, as evidenced by a 15.8% increase in its quarterly cash dividend and ongoing share repurchases. Simultaneously, Johnson & Johnson is significantly investing in its future, with a 25.8% increase in research and development spending for the quarter, indicating a commitment to innovation and product development across its segments.