Summary
Johnson & Johnson (JNJ) filed an 8-K on October 23, 2019, detailing a significant development in its opioid litigation. The company announced an agreement in principle to settle opioid lawsuits with a U.S. committee of State Attorneys General for $4 billion. This settlement, if finalized, aims to resolve claims from states, cities, and counties and provide assistance to affected communities. While this agreement is not an admission of liability, it has a material impact on reported GAAP net earnings and EPS for the third quarter and year-to-date periods of 2019. Specifically, the GAAP net earnings for the third quarter ended September 29, 2019, were reduced from $4.8 billion to $1.8 billion, and EPS decreased from $1.81 to $0.66. For the nine months ended September 29, 2019, GAAP net earnings were lowered from $14.2 billion to $11.1 billion, with EPS falling from $5.28 to $4.13. Importantly, these adjustments do not affect the company's Adjusted Earnings, Adjusted EPS, or Adjusted Operational EPS, indicating that the underlying operational performance remains strong.
Key Highlights
- 1Johnson & Johnson reached an agreement in principle to settle opioid litigation for $4 billion.
- 2The settlement is with a committee of State Attorneys General and aims to resolve claims from states, cities, and counties.
- 3The agreement in principle is a recognized subsequent event impacting reported GAAP financial results.
- 4Reported GAAP net earnings for Q3 2019 were reduced by $3.0 billion (from $4.8B to $1.8B) due to the settlement.
- 5Reported GAAP EPS for Q3 2019 decreased significantly from $1.81 to $0.66.
- 6Adjusted Earnings, Adjusted EPS, and Adjusted Operational EPS remain unaffected by this settlement.
- 7The company emphasizes the agreement is not an admission of liability or wrongdoing.