10-QPeriod: Q1 FY2020

JOHNSON & JOHNSON Quarterly Report for Q1 Ended Mar 29, 2020

Filed April 29, 2020For Securities:JNJ

Summary

Johnson & Johnson reported a 3.3% increase in worldwide sales to $20.7 billion for the fiscal first quarter ended March 29, 2020, compared to the prior year. This growth was primarily driven by operational increases, though partially offset by currency fluctuations and the initial impact of COVID-19. The Pharmaceutical segment showed strong growth, up 8.7%, led by key products like Stelara and Imbruvica. The Consumer Health segment also saw a significant 9.2% increase, largely due to elevated demand for OTC products, likely influenced by the pandemic. However, the Medical Devices segment experienced an 8.2% decline, attributed to the postponement of elective procedures due to COVID-19 and the divestiture of the Advanced Sterilization Products business. Net earnings surged to $5.8 billion, a substantial increase from $3.7 billion in the prior year, leading to a diluted EPS of $2.17, up from $1.39. A significant factor contributing to the increased profitability was a $1.0 billion contingent consideration reversal related to the Auris Health acquisition. The company maintained a strong liquidity position with $15.5 billion in cash and cash equivalents, despite using cash for dividends and stock repurchases. While the company acknowledges the uncertainties posed by COVID-19, it currently does not foresee a material impact on its financial position, attributing this resilience to its diversified business model and robust business continuity plans.

Financial Highlights

53 data points
Beta

Revenue

$20.69B

65.9% Gross Margin

Net Income

$5.80B

28.0% Net Margin

EPS (Diluted)

$2.17

Total Assets

$155.02B

Cash & Equivalents

$15.53B

Free Cash Flow

$2.73B

Financial Statements
Beta
Revenue$20.69B
Cost of Revenue$7.06B
Gross Profit$13.63B
SG&A Expenses$5.20B
Interest Expense$25.00M
Net Income$5.80B
EPS (Basic)$2.20
EPS (Diluted)$2.17
Shares Outstanding (Basic)2.63B
Shares Outstanding (Diluted)2.67B

Key Highlights

  • 1Worldwide sales increased by 3.3% to $20.7 billion, driven by operational growth.
  • 2Net earnings rose significantly to $5.8 billion from $3.7 billion year-over-year.
  • 3Pharmaceutical segment sales grew by 8.7%, with notable strength in Immunology and Oncology.
  • 4Consumer Health segment sales increased by 9.2%, benefiting from increased demand in OTC products.
  • 5Medical Devices segment sales declined by 8.2% due to COVID-19's impact on elective procedures.
  • 6A $1.0 billion contingent consideration reversal related to the Auris Health acquisition significantly boosted net income.
  • 7Diluted EPS increased to $2.17 from $1.39 in the prior year.
  • 8The company maintained a strong liquidity position with $15.5 billion in cash and cash equivalents.

Frequently Asked Questions

The company estimated a negative impact of approximately 1.0% on worldwide operational sales due to COVID-19. While the Medical Devices segment was negatively impacted by reduced procedures, the Consumer Health segment saw a positive impact of about 7.0% due to increased stocking of OTC products. The Pharmaceutical segment experienced a positive impact of about 1.0% from increased prescriptions for essential medicines. Despite these mixed impacts, net earnings significantly increased due to a substantial contingent consideration reversal and strong performance in the Pharmaceutical and Consumer Health segments.

The substantial increase in net earnings was primarily driven by a $1.0 billion contingent consideration reversal related to the Auris Health acquisition, which was recognized in 'Other (income) expense, net'. Additionally, strong sales growth in the Pharmaceutical and Consumer Health segments, coupled with effective cost management in certain areas, contributed to the improved profitability.

The Pharmaceutical segment performed strongly with an 8.7% sales increase, led by the Immunology and Oncology divisions. The Consumer Health segment also showed robust growth of 9.2%, boosted by over-the-counter products likely influenced by the pandemic. Conversely, the Medical Devices segment experienced an 8.2% sales decline, primarily due to the deferral of elective medical procedures and the divestiture of the Advanced Sterilization Products business.

Johnson & Johnson maintained a strong liquidity position, with cash and cash equivalents totaling $15.5 billion at the end of the quarter. Despite using significant cash for dividends and stock repurchases, the company has access to substantial credit facilities and commercial paper markets. Management believes its operating cash flows, borrowing capacity, and market access will provide sufficient resources to fund ongoing operations, including potential settlements for opioid litigation, and does not foresee any incremental significant risk to its liquidity due to COVID-19.