This summary is based on the third quarter fiscal 2008 earnings call conducted by Johnson & Johnson. (JNJ) on Ovtober 14, 2008.
Management:
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Company Group Chairman, Global Research and Development Pharmaceuticals Group: Paul Stoffels
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Vice Chairman, Board of Directors and Worldwide Chairman Pharmaceuticals Group: Chris Poon
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Vice President, Finance and Chief Financial Officer: Dominic Caruso -
Vice President, Investor Relations: Louise Mehrotra
Key Investors Issues
- Sales to customers were $15.9 billion, up 6.4% from $14.97 billion in 2007.
- Net earnings were up 32% to $3.3 billion or $1.17 a share.
Year to Date Highlights:
- Consolidated sales were $48.6 billion an increase of 7.6% as compared to the same period a year ago.
- Net earnings were $10.3 billion or $3.61 per share up 7.7% and 10.4% respectively.
Third Quarter Highlights
Worldwide sales to customers were $15.9 billion, up 6.4% from $14.97 billion in the prior year with operational growth of 3.3% and currency added 3.1%.
- In regions outside the US, operational growth was 6.5%, while the effect of currency exchange rates positively impacted reported results by 6.6 points.
- The strongest performing region was the Western Hemisphere excluding the US which grew 15.3% on an operational basis.
- The Asia/Pacific/Africa region grew by 11.3% operationally while Europe grew 1% operationally.
Net earnings on a reported basis were $3.3 billion or $1.17 a share, up 32% from $2.5 billion or 88 cents in the same period in 2007 on revenue growth.
- Cost of goods sold at 30% was up 150 basis points versus the same period in 2007 and half of the increase is due to changing mix within businesses while the remaining half is due to additional costs incurred in the manufacturing operation.
- Selling, marketing, and administrative expenses of 32.6% of sales were down 10 basis points versus last year.
- Cost containment efforts more than offset the impact of the change in mix of the business driven by the strong growth of the consumer business.
Investment in research and development as a percent to sales was 11.7%, 60 basis points less than 2007 due to a combination of the change of mix of businesses and the timing of expenditures.
- Interest expense net of interest income of $25 million compares to $52 million of net interest income in the prior year with the increase due to a higher average debt position on continued share buybacks.
- Other income net of other expense was $224 million compared to $2 million of net other expense in the same period last year.
- The Company increased its earnings guidance for the full-year 2008 to $4.50 - $4.53 per share.
Business Segment Highlights:
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Worldwide consumer segment sales of $4.1 billion increased 13.1% as compared to the third quarter of 2007.
- Operational growth was 9.4% while currency added 3.7 points with US sales up 11.2% while international sales grew 8.1% on an operational basis.
- Sales for the over the counter pharmaceuticals and nutritionals increased 11% on an operational basis.
- Sales in the US were up 19% while sales outside the US were up 3% operationally with the successful US launch this year of Zyrtec a major contributor to this increase.
Skin care business achieved operational sales growth of 12% with sales in the US growing at 15% and sales outside the US up 10% on an operational basis.
- Strong growth was driven by Neutrogena, Clean & Clear, Aveeno and Johnson’s Adult, due to a combination of new product launches and strength in the core businesses.
- Also contributing to the strong growth in the quarter were the newly acquired products from Dabao the leading moisturizer in China.
- Baby care products achieved operational growth of 9% when compared to the third quarter of 2007 as sales in the US grew by 1% with some softness in category growth.
Women’s health achieved operational growth of 6% and sales in the US were up 10% due to the successful launch of the new products in the KY line.
- Operational sales growth in the oral care franchise was 7% with US sales down 3% as significant new product launches in the third quarter 2007 impacted the US growth comparisons.
- Sales outside the US increased 18% operationally driven by very strong growth for Listerine across the major regions.
