10-QPeriod: Q3 FY2018

JOHNSON & JOHNSON Quarterly Report for Q3 Ended Jul 1, 2018

Filed August 2, 2018For Securities:JNJ

Summary

Johnson & Johnson reported a strong second quarter for fiscal year 2018, with worldwide sales reaching $20.83 billion, an increase of 10.6% year-over-year. This growth was driven by robust operational performance and a positive impact from currency fluctuations. The Pharmaceutical segment was a significant contributor, showcasing impressive operational growth, particularly in Oncology and Immunology, fueled by strong demand for key products like Stelara and Darzalex. The company's net earnings for the quarter rose to $3.95 billion, translating to diluted earnings per share of $1.45, up from $1.40 in the prior year's second quarter. Cash flow from operations remained strong, providing ample liquidity for investments in growth and shareholder returns. The company also announced strategic initiatives, including pending divestitures of its LifeScan and Advanced Sterilization Products businesses, and the acquisition of Zarbee’s, Inc., signaling a continued focus on portfolio optimization.

Financial Highlights

53 data points
Beta

Revenue

$20.83B

66.7% Gross Margin

Net Income

$3.95B

19.0% Net Margin

EPS (Diluted)

$1.45

Total Assets

$155.70B

Cash & Equivalents

$17.57B

Free Cash Flow

$10.66B

Financial Statements
Beta
Revenue$20.83B
Cost of Revenue$6.59B
Gross Profit$13.90B
SG&A Expenses$5.54B
Interest Expense$243.00M
Net Income$3.95B
EPS (Basic)$1.47
EPS (Diluted)$1.45
Shares Outstanding (Basic)2.68B
Shares Outstanding (Diluted)2.73B

Key Highlights

  • 1Worldwide sales increased by 10.6% to $20.83 billion in Q2 2018, driven by operational growth of 8.7% and a 1.9% positive currency impact.
  • 2Net earnings for the quarter were $3.95 billion, an increase from $3.83 billion in the prior year's second quarter.
  • 3Diluted earnings per share (EPS) improved to $1.45 from $1.40 year-over-year.
  • 4The Pharmaceutical segment showed significant strength, with sales up 19.9% operationally year-over-year, driven by Oncology (42.2% growth) and Immunology (12.8% growth).
  • 5Medical Devices segment sales grew 3.7% operationally year-over-year, with Vision and Interventional Solutions performing particularly well.
  • 6Consumer segment sales saw a modest increase of 0.7% operationally year-over-year, with Beauty and OTC franchises showing growth.
  • 7The company generated strong operating cash flow of $9.685 billion for the first six months of 2018.

Frequently Asked Questions

The primary driver of Johnson & Johnson's sales growth in the second quarter of 2018 was the Pharmaceutical segment, which experienced significant operational growth of 17.6%. This was largely propelled by strong performance in Oncology and Immunology product lines, such as Darzalex, Imbruvica, and Stelara.

Profitability improved compared to the prior year's second quarter. Net earnings increased to $3.95 billion from $3.83 billion, and diluted earnings per share (EPS) rose to $1.45 from $1.40. This indicates improved profitability on a per-share basis.

The filing mentions that Johnson & Johnson announced the acceptance of a binding offer to acquire its LifeScan business for approximately $2.1 billion and its Advanced Sterilization Products (ASP) business for approximately $2.7 billion. Additionally, the company completed the acquisition of BeneVir Biopharm, Inc. and announced plans to acquire Zarbee’s, Inc. Subsequent to the quarter, the company also announced a definitive agreement to acquire Zarbee’s, Inc.

Johnson & Johnson is involved in various significant legal proceedings, including product liability claims related to hip implants, pelvic meshes, talc-based powders, and pharmaceutical products, as well as intellectual property disputes and government investigations. The company accrues for probable and estimable liabilities and believes that the ultimate outcome of these proceedings, net of accrued liabilities, is not expected to have a material adverse effect on its financial position, although it could materially affect results of operations and cash flows in a specific period.