8-K/AFinancial EventsOther Events

JOHNSON & JOHNSON 8-K/A Report, Material Impairment (Nov 30, 2007)

Filed November 30, 2007For Securities:JNJ

Summary

Johnson & Johnson (JNJ) filed an 8-K/A amendment on November 29, 2007, disclosing two significant non-operational events impacting its fourth quarter 2007 results. The company announced it will record a special after-tax, non-cash charge of approximately $440 million related to the write-down of the intangible asset for NATRECORr (nesiritide). This impairment stems from revised future cash flow estimates due to a recent decline in NATRECORr sales trends, despite management's belief in its clinical utility. Separately, JNJ will recognize a special tax gain of approximately $260 million resulting from the approved restructuring of certain international subsidiaries. Crucially, the company stated that these special items, including the NATRECORr impairment and the international tax gain, will not impact its previously issued earnings per share (EPS) guidance, as the guidance excludes such one-time charges and gains. Investors should note that while these items affect reported earnings in the current quarter, the core operational performance, as reflected in the EPS guidance, remains a key focus.

Key Highlights

  • 1Johnson & Johnson will record a $440 million after-tax, non-cash charge related to the write-down of the NATRECORr (nesiritide) intangible asset.
  • 2The NATRECORr impairment is driven by revised estimates of future cash flows due to a decline in sales trends for the heart failure treatment.
  • 3The company will also record a $260 million special tax gain from the restructuring of certain international subsidiaries.
  • 4Both the NATRECORr charge and the international tax gain are considered 'special items'.
  • 5Johnson & Johnson explicitly stated that these special items will not impact its current earnings per share (EPS) guidance.
  • 6The impairment charge for NATRECORr was recognized on November 26, 2007, and will be reflected in the Q4 2007 results.
  • 7NATRECORr will continue to be marketed by Scios Inc., a JNJ subsidiary.

Frequently Asked Questions

The primary reason is a write-down of the intangible asset associated with NATRECORr. This is due to revised estimates of future cash flows from the product, largely caused by a recent decline in its sales trends. Management concluded this charge was necessary under accounting principles as of November 26, 2007.

These are considered 'special items' by the company. Johnson & Johnson has stated that its EPS guidance excludes such items, meaning these specific gains and charges will not impact the company's previously issued EPS guidance. However, they will be reflected in the company's reported net income for the fourth quarter of 2007.

No, the filing indicates that NATRECORr will continue to be marketed by Scios Inc., a subsidiary of Johnson & Johnson. Management believes it remains an important clinical option for patients with acutely decompensated heart failure.

The $260 million special tax gain is associated with the restructuring of certain international subsidiaries, which received approval from relevant government authorities in the fourth quarter of 2007.