Johnson & Johnson Q3 2014 Results Earnings Call Transcript

Edited Transcript of Johnson & Johnson Q3 2014 Earnings Conference Call..

Company: Johnson & Johnson (JNJ)

Event Name: Q3 2014 Results Earnings Conference Call

Date: October 14, 2014 8:30 AM ET

Johnson & Johnson Q3 2014 Earnings Call – Webcast audio


Operator: Good morning and welcome to Johnson & Johnson’s third quarter 2014 earnings conference call. (Operator Instructions)I would now like to turn the conference over to Johnson & Johnson. You may begin.

Louise Mehrotra – VP, IR

Good morning and welcome. I’m Louise Mehrotra, Vice President of Investor Relations for Johnson & Johnson. And it is my pleasure this morning to review our business results for the third quarter of 2014.

Joining me on the call today is Dominic Caruso, Vice President, Finance and Chief Financial Officer. A few logistics before we get into the details.

This review is being made available via webcast accessible through the Investor Relations section of the Johnson & Johnson website at I’ll begin by briefly reviewing third quarter results for the corporation and for our three business segments. Following my remarks, Dominic will provide some additional commentary on the business, review the income statement and provide guidance for 2014. We will then open the call to your questions. We expect the call to last approximately one hour.

Included with the press release that was issued earlier this morning is a schedule of sales for key products and/or businesses to facilitate updating your models. These schedules are available on the Johnson & Johnson website as is the press release. Please note we will be using a presentation to complement today’s commentary. The presentation is also available on our website.

Before we begin, let me remind you that some of the statements made during this review are or may be considered forward-looking statements. The 10-K for the fiscal year 2013 and the company’s subsequent filings identify certain factors that could cause the company’s actual results to differ materially from those projected in any forward-looking statements made today.

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The company does not undertake to update any forward-looking statements as a result of new information or future events or developments. Our SEC filings, including the 10-K, are available through the company and on our website.

During the review, non-GAAP financial measures are used to provide information pertinent to ongoing business performance. These non-GAAP financial measures should not be considered replacements for GAAP results. Tables reconciling these measures to the most comparable GAAP measures are available in the press release and on the Investor Relations section of the Johnson & Johnson website.

Now, I would like to review our results for the third quarter of 2014.

Worldwide sales to customers were $18.5 billion for the third quarter of 2014, up 5.1%. On an operational basis, sales were up 5.8% and currency had a negative impact of 0.7%. In the U.S., sales were up 11.6%. In regions outside the U.S., our operational growth was 1%, while the effect of currency exchange rates negatively impacted our reported results by 1.3%.

On an operational basis, the Western Hemisphere excluding the U.S. grew by 3.5%; Asia Pacific, Africa region grew 2% and Europe declined 0.8%. The success of new product launches and continued growth of key products in all regions was partially offset by divestitures, the most significant one being Ortho-Clinical Diagnostics. Excluding the impact of divestitures, underlying operational growth was approximately 9%.

Turning now to earnings. Net earnings were $4.7 billion and earnings per share were $1.66 versus $1.04 a year ago. As referenced in the table reconciling non-GAAP measures, 2014 third quarter net earnings were adjusted to exclude a net gain of $457 million for after-tax special items.

Third quarter 2013 net earnings were adjusted to exclude a charge of $937 million for after-tax special items. Dominic will discuss special items in his remarks.

Excluding special items for both periods, net earnings for the current quarter were $4.3 billion and diluted earnings per share were $1.50, representing increases of 9.5% and 10.3%, respectively, as compared to the same period in 2013.

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Turning now to business segment highlights. Please note percentages quoted represents operational sales change in comparison to the third quarter of 2013 unless otherwise stated and therefore, exclude the currency translational impact.

I’ll begin with the Consumer segment.

Worldwide Consumer segment sales of $3.6 billion increased 0.3% with U.S. sales down 4.2%, while outside the U.S. sales grew 2.6%. Excluding the impact of divestitures, worldwide growth was approximately 2.5% with U.S. growth of approximately 1.5% and growth outside the U.S. of approximately 3%.

Major drivers of the results were over-the-counter and oral care products offset by the divestiture of the North American Sanitary Protection business. OTC sales growth was driven by upper respiratory products and analgesics. Upper respiratory products grew 10% worldwide driven by sales growth outside the U.S., which included an early seasonal inventory build.

Analgesic growth was 7% in U.S. driven by market share gains, partially offset by comparisons to the third quarter 2013 trade inventory build related to the re-launch of the products.

In the U.S. adult analgesic market share was approximately 11%, up from 8.5% a year ago, while U.S. pediatric share was over 40%, up from 26% a year ago. Oral care results were driven by strong results for LISTERINE due to new product launches and successful marketing campaigns.

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