Johnson & Johnson Q3 2013 Results

Worldwide sales to customers were $17.6 billion for the third quarter of 2013, up 3.1% as compared to the third quarter of 2012.

On an operational basis, sales were up 4.7% and currency had a negative impact of 1.6%.

In the U.S., sales were up 1.7%. In regions outside the U.S., operational growth was 7.1%, while the effect of currency exchange rates negatively impacted reported results by 2.9 points.

Europe grew 8.4% on an operational basis while the western hemisphere, excluding the U.S., grew by 8% operationally.

Asia-Pacific/Africa region grew 5.1% operationally. The success of new product launches made strong contributions to the results in all regions.

Business Segment Highlights:

Worldwide consumer segment sales for the third quarter of 2013 of $3.6 billion, increased 0.8% as compared to the same period last year. On an operational basis, sales increased 2%, while the impact of currency was negative 1.2%.

U.S. sales were up 0.9%, while international sales grew 2.6% on an operational basis.

Excluding the impact of divestitures net of acquisitions, operational growth was approximately 2.5%.

Baby care products increased on an operational basis by 2.6% when compared to the third quarter of 2012, due primarily to the impact of the health care products acquired earlier this year.

Sales in the Oral Care business decreased 3% operationally. Excluding the impact of the divestiture of manual toothbrushes in North America, operational sales were essentially flat.

For the third quarter of 2013, sales for OTC Pharmaceuticals increased 6.5% on an operational basis compared to the same period in 2012. U.S. sales were up 17.9%, driven by strong growth in analgesics and other key brands as Johnson & Johnson continue to make progress in returning in reliable supply products to the marketplace.

International sales were up 2% operationally. Skin care business grew 2.7% on an operational basis in the third quarter of 2013. Strong results for AVEENO were partially offset by the impact of divestitures. Excluding divestitures, operational growth was approximately 4%.

Women's health grew 2.5% on an operational basis due to growth in international women's sanitary protection products. Wound care other sales decreased 6.9% on an operational basis impacted by competitive pressures as well as divestitures.

Review of the Consumer Segment:

Worldwide net sales for the third quarter of $7 billion increased 9.9% versus the same period last year.

On an operational basis, sales increased 10.9% with a negative currency impact of one point.

Sales in the U.S. increased 7.9%, while sales outside the U.S. increased on an operational basis by 14%.

Review of the Medical Devices and Diagnostics Segment Results:

Worldwide medical devices and diagnostic segment sales of $6.9 billion, declined 2% versus the same period last year.

On an operational basis, sales increased 0.3% with a negative currency impact of 2.3 points.

Sales in the U.S. declined 4.2%, while sales outside the U.S. increased on an operational basis by 4.2%.

Adjusted for divestitures and exits from certain businesses, underlying growth was approximately 1% reflecting continued market and pricing pressure.

Guidance:

At the end of the third quarter, Johnson & Johnson had approximately $10 billion of net cash. This consists of approximately $25 billion of cash and marketable securities and $15 billion of debt.

Johnson & Johnson continued to generate strong cash flows from operations which in this quarter were essentially offset by the finalization and related cash settlement of the accelerated share repurchase program that was initiated in conjunction with the acquisition of Synthes.

With that program now completed, Johnson & Johnson have resumed their normal share repurchases related to employee compensation programs. For purposes of models, assuming no major acquisitions, the management suggests to consider modeling net interest expense of between $350 million and $400 million slightly lower than their previous guidance.