J&J’s Q4 Results Take Big Hit on Special Charges, Full-Year Sales Up

Johnson & Johnson’s full year and fourth-quarter 2011 earnings sales and earnings report was a mixed bag. The world’s largest medical device company saw sales rise, while profits took a hit from product liability charges and legal fees.

The New Brunswick, N.J.-based company posted $65.03 billion in sales for 2011, a 5.6 percent increase from the $61.59 billion sold in 2010. Earnings, however, dropped 27.5 percent to $9.67 billion, or $3.49 earned per diluted share, a significant decrease from the previous year’s $13.33 billion, or $4.78 per diluted share.

Excluding special items J&J would have posted $13.9 billion in earnings last, or $5.00 earned per diluted share, representing a 4.4 percent increase from 2010, according to a news release issued by the company.

Worldwide medical devices and diagnostic sales grew 4.8 percent to $25.8 billion in 2011, and 40 percent of the company’s sales last year. Growth was driven by the Ethicon division’s surgical products, Diabetes Care’s glucose monitoring and insulin management devices, Biosense Webster’s electrophysiology business and Vistakon’s disposable contact lenses, according to the release. Growth was slowed by lower sales in the company’s cardiovascular care business. Cardiovascular sales were down 14.5 percent globally, which the company attributed to continued market and competitive pressures.

For the fiscal year, the company paid $4.2 billion in 2011 for product liability expenses, litigation settlements, the DePuy ASR hip recall, restructuring for its Cordis division, and the pending acquisition of Synthes.

Looking forward, the company is making progress in a wide restructuring of its device business by reorganizing into three global business groups: surgery, medical solutions and orthopedics

J&J’s 4th quarter earnings were more dramatically affected by one-time charges—almost $3 billion, in large part due to the ASR hip recall. The company posted an jaw-dropping 88.8 percent drop in earnings to $218 million, or 8 cents per diluted share, compared to $1.95 billion in earnings, or 70 cents per diluted share, during the same period in 2010.

Sales during Q4 2011 were $16.26 billion, a 4 percent increase compared with the $15.64 billion reported the year before.

“The current challenges in several medical device and diagnostics markets, as well as our own issues with the DePuy ASR hip have been well documented,” Bill Weldon, J&J’s CEO, on a conference call with analysts, noting that European austerity measures, pricing pressures and a slowdown in elective surgeries also have contributed to “more tempered” growth rates.

“Despite these challenges, our MD&D (medical device and diagnostics) businesses are competing well in a market that has undergone dynamic change. In 2011, MD&D showed strong double-digit growth in emerging markets. We introduced many innovative products, for example in Asia-Pacific and Europe, we have been rolling out one-day Acuvue Mois for astigmatism. We’ve also continued the global expansion of our highly accurate OneTouch Verio blood glucose-monitoring platform for diabetes patients. The OneTouch Verio system, which was introduced in Canada last September, has just been launched in the U.S. this month and we plan to launch it globally in the near future.”

Weldon also said the company is increasing investments in emerging markets with recently opened innovation centers in India and China, while continuing to support dozens of training institutes around the world.