Johnson & Johnson 10-Q for FY2020 Q1

Johnson & Johnson (JNJ)

10-Q 2020-04-29 For: 2020-03-29

Added on April 02, 2026

About this 10-Q

Johnson & Johnson filed this 10-Q on April 29, 2020, covering the quarter ended March 29, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 29, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $20.69B; up 3.3% from $20.02B a year earlier
Net income: $5.8B; up 54.6% from net income of $3.75B a year earlier
Diluted EPS: $2.17; up 56.1% from $1.39 a year earlier

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New Jersey		22-1024240
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, Par Value $1.00	JNJ	New York Stock Exchange
0.250% Notes Due January 2022	JNJ	New York Stock Exchange
0.650% Notes Due May 2024	JNJ	New York Stock Exchange
5.50% Notes Due November 2024	JNJ	New York Stock Exchange
1.150% Notes Due November 2028	JNJ	New York Stock Exchange
1.650% Notes Due May 2035	JNJ	New York Stock Exchange



		Page
		No.
Part I — Financial Information		1

Item 1. Financial Statements (unaudited)		1

Consolidated Balance Sheets — March 29, 2020 and December 29, 2019		1

Consolidated Statements of Earnings for the Fiscal First Quarter Ended March 29, 2020 and March 31, 2019		2

Consolidated Statements of Comprehensive Income for the Fiscal First Quarter Ended March 29, 2020 and March 31, 2019		3

Consolidated Statements of Equity for the Fiscal First Quarter Ended March 29, 2020 and March 31, 2019		4

Consolidated Statements of Cash Flows for the Fiscal Three Months Ended March 29, 2020 and March 31, 2019		5

Notes to Consolidated Financial Statements		6

Item 1A. Risk Factors		42

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		43

Item 3. Quantitative and Qualitative Disclosures About Market Risk		54

Item 4. Controls and Procedures		54

Part II — Other Information		55

Item 1 - Legal Proceedings		55

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds		55

Item 6 - Exhibits		56

Signatures		57



	March 29, 2020			December 29, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	15,530		17,305
Marketable securities	2,494			1,982
Accounts receivable, trade, less allowances for doubtful accounts and credit losses $234 (2019, $226)	14,874			14,481
Inventories (Note 2)	8,868			9,020
Prepaid expenses and other	2,358			2,392
Assets held for sale (Note 10)	102			94
Total current assets	44,226			45,274
Property, plant and equipment at cost	43,247			43,332
Less: accumulated depreciation	(25,846		)	(25,674	)
Property, plant and equipment, net	17,401			17,658
Intangible assets, net (Note 3)	47,338			47,643
Goodwill (Note 3)	33,471			33,639
Deferred taxes on income (Note 5)	7,539			7,819
Other assets	5,042			5,695
Total assets	$	155,017		157,728
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Loans and notes payable	$	2,190		1,202
Accounts payable	7,411			8,544
Accrued liabilities	8,384			9,715
Accrued rebates, returns and promotions	11,608			10,883
Accrued compensation and employee related obligations	2,166			3,354
Accrued taxes on income (Note 5)	1,930			2,266
Total current liabilities	33,689			35,964
Long-term debt (Note 4)	25,393			26,494
Deferred taxes on income (Note 5)	5,766			5,958
Employee related obligations (Note 6)	10,529			10,663
Long-term taxes payable (Note 5)	7,402			7,444
Other liabilities	10,944			11,734
Total liabilities	93,723			98,257
Commitments and Contingencies (Note 11)
Shareholders’ equity:
Common stock — par value $1.00 per share (authorized 4,320,000,000 shares; issued 3,119,843,000 shares)	$	3,120		3,120
Accumulated other comprehensive income (loss) (Note 7)	(16,243		)	(15,891	)
Retained earnings	112,901			110,659
Less: common stock held in treasury, at cost (487,451,000 and 487,336,000 shares)	38,484			38,417
Total shareholders’ equity	61,294			59,471
Total liabilities and shareholders' equity	$	155,017		157,728




☑		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934




☐		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to


•	Challenges and uncertainties inherent in innovation and development of new and improved products and technologies on which the Company’s continued growth and success depend, including uncertainty of clinical outcomes, additional analysis of existing clinical data, obtaining regulatory approvals, health plan coverage and customer access, and initial and continued commercial success;


•	Challenges to the Company’s ability to obtain and protect adequate patent and other intellectual property rights for new and existing products and technologies in the United States and other important markets;


•	The impact of patent expirations, typically followed by the introduction of competing biosimilars and generics and resulting revenue and market share losses;


•	Competition in research and development of new and improved products, processes and technologies, which can result in product and process obsolescence;


•	Competition to reach agreement with third parties for collaboration, licensing, development and marketing agreements for products and technologies;


•	Competition based on cost-effectiveness, product performance, technological advances and patents attained by competitors; and


•	Allegations that the Company’s products infringe the patents and other intellectual property rights of third parties, which could adversely affect the Company’s ability to sell the products in question and require the payment of money damages and future royalties.


•	Product efficacy or safety concerns, whether or not based on scientific evidence, potentially resulting in product withdrawals, recalls, regulatory action on the part of the United States Food and Drug Administration (or international counterparts), declining sales, reputational damage, increased litigation expense and share price impact;


•	Impact of an adverse judgment or settlement and the adequacy of reserves related to legal proceedings, including patent litigation, product liability, personal injury claims, securities class actions, government investigations, employment and other legal proceedings;


•	Increased scrutiny of the health care industry by government agencies and state attorneys general resulting in investigations and prosecutions, which carry the risk of significant civil and criminal penalties, including, but not limited to, debarment from government business;


•	Failure to meet compliance obligations in the McNEIL-PPC, Inc. Consent Decree or any other compliance agreements with governments or government agencies, which could result in significant sanctions;


•	Potential changes to applicable laws and regulations affecting United States and international operations, including relating to: approval of new products; licensing and patent rights; sales and promotion of health care products; access to, and reimbursement and pricing for, health care products and services; environmental protection and sourcing of raw materials;


•	Impact, including declining sales and reputational damage, of significant litigation or government action adverse to the Company, including product liability claims and allegations related to pharmaceutical marketing practices and contracting strategies;


•	Compliance with local regulations and laws that may restrict the Company’s ability to manufacture or sell its products in relevant markets including, requirements to comply with medical device reporting regulations and other requirements such as the European Union's Medical Devices Regulation;


•	Changes in domestic and international tax laws and regulations, including changes related to The Tax Cuts and Jobs Act in the United States, the Federal Act on Tax Reform and AHV Financing in Switzerland, increasing audit scrutiny by tax authorities around the world and exposures to additional tax liabilities potentially in excess of existing reserves; and


•	Issuance of new or revised accounting standards by the Financial Accounting Standards Board and regulations by the Securities and Exchange Commission.


•	Restricted spending patterns of individual, institutional and governmental purchasers of health care products and services due to economic hardship and budgetary constraints;


•	Challenges to the Company’s ability to realize its strategy for growth including through externally sourced innovations, such as development collaborations, strategic acquisitions, licensing and marketing agreements, and the potential heightened costs of any such external arrangements due to competitive pressures;


•	The potential that the expected strategic benefits and opportunities from any planned or completed acquisition or divestiture by the Company may not be realized or may take longer to realize than expected; and


•	The potential that the expected benefits and opportunities related to past and ongoing restructuring actions may not be realized or may take longer to realize than expected.


•	The risks associated with global operations, including the impact of global public health crises and pandemics, such as the outbreak of the novel coronavirus (COVID-19), on the Company and its customers and suppliers, including foreign governments in countries in which the Company operates.


•	Impact of inflation and fluctuations in interest rates and currency exchange rates and the potential effect of such fluctuations on revenues, expenses and resulting margins;


•	Potential changes in export/import and trade laws, regulations and policies of the United States and other countries, including any increased trade restrictions or tariffs and potential drug reimportation legislation;


•	The impact on international operations from financial instability in international economies, sovereign risk, possible imposition of governmental controls and restrictive economic policies, and unstable international governments and legal systems;


•	Changes to global climate, extreme weather and natural disasters that could affect demand for the Company's products and services, cause disruptions in manufacturing and distribution networks, alter the availability of goods and services within the supply chain, and affect the overall design and integrity of the Company's products and operations;


•	The impact of armed conflicts and terrorist attacks in the United States and other parts of the world including social and economic disruptions and instability of financial and other markets; and


•	Difficulties and delays in manufacturing, internally through third party providers or otherwise within the supply chain, that may lead to voluntary or involuntary business interruptions or shutdowns, product shortages, withdrawals or suspensions of products from the market, and potential regulatory action;


•	Interruptions and breaches of the Company's information technology systems or those of the Company's vendors which, could result in reputational, competitive, operational or other business harm as well as financial costs and regulatory action;


•	Reliance on global supply chains and production and distribution processes that are complex and subject to increasing regulatory requirements that may adversely affect supply, sourcing and pricing of materials used in the Company’s products; and



	Fiscal First Quarter Ended
	March 29, 2020			Percent to Sales		March 31, 2019			Percent to Sales
Sales to customers (Note 9)	$	20,691		100.0	%	$	20,021		100.0	%
Cost of products sold	7,062			34.1		6,615			33.0
Gross profit	13,629			65.9		13,406			67.0
Selling, marketing and administrative expenses	5,203			25.1		5,219			26.1
Research and development expense	2,580			12.5		2,858			14.3
In-process research and development	—			—		890			4.4
Interest income	(67		)	(0.3	)	(99		)	(0.5	)
Interest expense, net of portion capitalized	25			0.1		102			0.5
Other (income) expense, net	(679		)	(3.3	)	(22		)	(0.1	)
Restructuring (Note 12)	58			0.3		36			0.2
Earnings before provision for taxes on income	6,509			31.5		4,422			22.1
Provision for taxes on income (Note 5)	713			3.5		673			3.4
NET EARNINGS	$	5,796		28.0	%	$	3,749		18.7	%

NET EARNINGS PER SHARE (Note 8)
Basic	$	2.20				$	1.41
Diluted	$	2.17				$	1.39

AVG. SHARES OUTSTANDING
Basic	2,633.7					2,660.8
Diluted	2,671.0					2,698.8



	Fiscal First Quarter Ended
	March 29, 2020			March 31, 2019
Net earnings	$	5,796		3,749

Other comprehensive income (loss), net of tax
Foreign currency translation	(1,519		)	(258	)

Securities:
Unrealized holding gain (loss) arising during period	2			—
Reclassifications to earnings	—			—
Net change	2			—

Employee benefit plans:
Prior service cost amortization during period	(6		)	(7	)
Gain (loss) amortization during period	201			176
Net change	195			169

Derivatives & hedges:
Unrealized gain (loss) arising during period	832			(302	)
Reclassifications to earnings	138			96
Net change	970			(206	)

Other comprehensive income (loss)	(352		)	(295	)

Comprehensive income	$	5,444		3,454



	Total			Retained Earnings		Accumulated Other Comprehensive Income		Common Stock Issued Amount	Treasury Stock Amount
Balance, December 29, 2019	$	59,471		110,659		(15,891	)	3,120	(38,417	)
Net earnings	5,796			5,796		—		—	—
Cash dividends paid ($0.95 per share)	(2,505		)	(2,505	)	—		—	—
Employee compensation and stock option plans	595			(1,049	)	—		—	1,644
Repurchase of common stock	(1,711		)	—		—		—	(1,711	)
Other comprehensive income (loss), net of tax	(352		)	—		(352	)	—	—
Balance, March 29, 2020	$	61,294		112,901		(16,243	)	3,120	(38,484	)