EX-99.2 2 a2019q3exhibit992tobeu.htm EXHIBIT 99.2 Exhibit

Exhibit 99.2

Johnson & Johnson and Subsidiaries
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statement of Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited; in Millions Except Per Share Figures)
THIRD QUARTER
 
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
Percent
 
 
 
Percent
 
 
 
Percent
 
Increase
 
Amount
 
to Sales
 
Amount
 
to Sales
 
(Decrease)
Sales to customers
 $ 20,729

 
      100.0

 
 $ 20,348
 
      100.0
 
1.9
Cost of products sold
          6,867

 
        33.1

 
          6,589
 
        32.4
 
4.2
Gross Profit
        13,862

 
        66.9

 
        13,759
 
        67.6
 
0.7
Selling, marketing and administrative expenses
          5,374

 
        26.0

 
          5,543
 
        27.3
 
(3.0)
Research and development expense
          2,599

 
        12.5

 
          2,508
 
        12.3
 
3.6
In-process research and development
—

 
—

 
          1,126
 
          5.6
 
 
Interest (income) expense, net
             (41)

 
        (0.2)

 
               68
 
          0.3
 
 
Other (income) expense, net
          4,214

 
        20.3

 
                 3
 
          0.0
 
 
Restructuring
               69

 
          0.4

 
               88
 
          0.4
 
 
Earnings before provision for taxes on income
          1,647

 
          7.9

 
          4,423
 
        21.7
 
(62.8)
Provision for/(Benefit from) taxes on income
           (106)

 
        (0.6)

 
             489
 
          2.4
 
(121.7)
Net earnings
 $ 1,753

 
          8.5

 
 $ 3,934
 
        19.3
 
(55.4)
 
 
 
 
 
 
 
 
 
 
Net earnings per share (Diluted)
 $ 0.66

 
 
 
 $ 1.44
 
 
 
(54.2)
 
 
 
 
 
 
 
 
 
 
Average shares outstanding (Diluted)
2,669.9

 
 
 
2,727.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate
(6.4)

%
 
 
11.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted earnings before provision for taxes and net earnings (1) (A)
 
 
 
 
 
 
 
Earnings before provision for taxes on income
 $ 7,116

 
34.3

 
 $ 6,780
 
33.3
 
5.0
Net earnings
 $ 5,672

 
27.4

 
 $ 5,590
 
27.5
 
1.5
Net earnings per share (Diluted)
 $ 2.12

 
 
 
 $ 2.05
 
 
 
3.4
Effective tax rate
20.3

%
 
 
17.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) See Reconciliation of Non-GAAP Financial Measures.
 
 
 
 
 
 
 
 
 
 
(A) NON-GAAP FINANCIAL MEASURES "Adjusted earnings before provision for taxes on income," "adjusted net earnings," "adjusted net earnings per share (diluted)," and "adjusted effective tax rate" are non-GAAP financial measures and should not be considered replacements for GAAP results. The Company provides earnings before provision for taxes on income, net earnings, net earnings per share (diluted), and effective tax rate on an adjusted basis because management believes that these measures provide useful information to investors. Among other things, these measures may assist investors in evaluating the Company's results of operations period over period. In various periods, these measures may exclude such items as intangible asset amortization expense, significant costs associated with acquisitions, restructuring, litigation, and changes in applicable laws and regulations (including significant accounting or tax matters). Special items may be highly variable, difficult to predict, and of a size that sometimes has substantial impact on the Company's reported results of operations for a period. Management uses these measures internally for planning, forecasting and evaluating the performances of the Company's businesses, including allocating resources and evaluating results relative to employee performance compensation targets. Unlike earnings before provision for taxes on income, net earnings, net earnings per share (diluted), and effective tax rate prepared in accordance with GAAP, adjusted earnings before provision for taxes on income, adjusted net earnings, adjusted net earnings per share (diluted), and adjusted effective tax rate may not be comparable with the calculation of similar measures for other companies. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of the Company's results of operations without including all events during a period, such as intangible asset amortization expense, the effects of an acquisition, restructuring, litigation, and changes in applicable laws and regulations (including significant accounting or tax matters) and do not provide a comparable view of the Company's performance to other companies in the health care industry. Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP.






Johnson & Johnson and Subsidiaries
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statement of Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Unaudited; in Millions Except Per Share Figures)
NINE MONTHS
 
 
 
 
 
 
 
 
 
 
 
2019
 
2018
 
Percent
 
 
 
Percent
 
 
 
Percent
 
Increase
 
Amount
 
to Sales
 
Amount
 
to Sales
 
(Decrease)
Sales to customers
 $ 61,312
 
      100.0
 
 $ 61,187
 
      100.0
 
0.2
Cost of products sold
        20,422
 
        33.3
 
        20,130
 
        32.9
 
1.5
Gross Profit
        40,890
 
        66.7
 
        41,057
 
        67.1
 
(0.4)
Selling, marketing and administrative expenses
        16,139
 
        26.3
 
        16,549
 
        27.1
 
(2.5)
Research and development expense
          8,123
 
        13.3
 
          7,551
 
        12.3
 
7.6
In-process research and development
             890
 
          1.4
 
          1,126
 
          1.8
 
 
Interest (income) expense, net
             (43)
 
        (0.1)
 
             340
 
          0.6
 
 
Other (income) expense, net
          2,509
 
          4.1
 
             427
 
          0.7
 
 
Restructuring
             162
 
          0.3
 
             187
 
          0.3
 
 
Earnings before provision for taxes on income
        13,110
 
        21.4
 
        14,877
 
        24.3
 
(11.9)
Provision for taxes on income
          2,001
 
          3.3
 
          2,622
 
          4.3
 
(23.7)
Net earnings
 $ 11,109
 
        18.1
 
 $ 12,255
 
        20.0
 
(9.4)
 
 
 
 
 
 
 
 
 
 
Net earnings per share (Diluted)
 $ 4.13
 
 
 
 $ 4.49
 
 
 
(8.0)
 
 
 
 
 
 
 
 
 
 
Average shares outstanding (Diluted)
2,688.1
 
 
 
2,729.6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate
15.3
%
 
 
17.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted earnings before provision for taxes and net earnings (1) (A)
 
 
 
 
 
 
 
Earnings before provision for taxes on income
 $ 22,597
 
36.9
 
 $ 20,652
 
33.8
 
9.4
Net earnings
 $ 18,283
 
29.8
 
 $ 16,943
 
27.7
 
7.9
Net earnings per share (Diluted)
 $ 6.80
 
 
 
 $ 6.21
 
 
 
9.5
Effective tax rate
19.1
%
 
 
18.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) See Reconciliation of Non-GAAP Financial Measures.
 
 
 
 
 
 
 
 
 
 
(A) NON-GAAP FINANCIAL MEASURES "Adjusted earnings before provision for taxes on income," "adjusted net earnings," "adjusted net earnings per share (diluted)," and "adjusted effective tax rate" are non-GAAP financial measures and should not be considered replacements for GAAP results. The Company provides earnings before provision for taxes on income, net earnings, net earnings per share (diluted), and effective tax rate on an adjusted basis because management believes that these measures provide useful information to investors. Among other things, these measures may assist investors in evaluating the Company's results of operations period over period. In various periods, these measures may exclude such items as intangible asset amortization expense, significant costs associated with acquisitions, restructuring, litigation, and changes in applicable laws and regulations (including significant accounting or tax matters). Special items may be highly variable, difficult to predict, and of a size that sometimes has substantial impact on the Company's reported results of operations for a period. Management uses these measures internally for planning, forecasting and evaluating the performances of the Company's businesses, including allocating resources and evaluating results relative to employee performance compensation targets. Unlike earnings before provision for taxes on income, net earnings, net earnings per share (diluted), and effective tax rate prepared in accordance with GAAP, adjusted earnings before provision for taxes on income, adjusted net earnings, adjusted net earnings per share (diluted), and adjusted effective tax rate may not be comparable with the calculation of similar measures for other companies. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of the Company's results of operations without including all events during a period, such as intangible asset amortization expense, the effects of an acquisition, restructuring, litigation, and changes in applicable laws and regulations (including significant accounting or tax matters) and do not provide a comparable view of the Company's performance to other companies in the health care industry. Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with GAAP.














Johnson & Johnson and Subsidiaries
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Financial Measures
 
 
 
 
 
 
 
 
 
 
Third Quarter
 
% Incr. /
 
(Dollars in Millions Except Per Share Data)
 
2019
 
2018
 
(Decr.)
 
 
 
 
 
 
 
 
 
 
 
Earnings before provision for taxes on income - as reported
 $ 1,647

 
      4,423

 
      (62.8)
%
Intangible asset amortization expense
 
 
      1,138

 
      1,085

 
 
 
In-process research and development
 
 
—

 
      1,126

 
 
 
Litigation expense, net
 
 
 
      4,000

 
—

 
 
 
Restructuring/Other (1)
 
 
 
         128

 
        190

 
 
 
Actelion acquisition related cost
 
 
           33

 
          40

 
 
 
Auris Health acquisition related cost
 
 
           65

 
—

 
 
 
AMO acquisition related cost
 
 
             9

 
          36

 
 
 
Unrealized loss/(gain) on securities
 
 
           89

 
            9

 
 
 
Contingent liability reversal
 
 
 
—

 
       (184)

 
 
 
Diabetes asset impairment
 
 
 
—

 
—

 
 
 
Other
 
 
 
             7

 
          55

 
 
 
Earnings before provision for taxes on income - as adjusted
 $ 7,116

 
      6,780

 
         5.0
 %
 
 
 
 
 
 
 
 
 
 
Net Earnings - as reported
 
 
 
 $ 1,753

 
      3,934

 
      (55.4)
%
Intangible asset amortization expense
 
 
      1,011

 
        968

 
 
 
In-process research and development
 
 
—

 
        859

 
 
 
Litigation expense, net
 
 
 
      3,080

   
—

   
 
 
Restructuring/Other
 
 
 
         106

 
        162

 
 
 
Actelion acquisition related cost
 
 
           30

 
          37

 
 
 
Auris Health acquisition related cost
 
 
           51

 
—

 
 
 
AMO acquisition related cost
 
 
             7

 
          29

 
 
 
Unrealized loss/(gain) on securities
 
 
           71

 
            8

 
 
 
Contingent liability reversal
 
 
 
—

 
       (184)

 
 
 
Diabetes asset impairment
 
 
 
—

 
—

 
 
 
Impact of tax legislation (2)
 
 
 
        (391)

 
       (265)

 
 
 
Other
 
 
 
          (46)

 
          42

 
 
 
Net Earnings - as adjusted
 
 
 
 $ 5,672

 
      5,590

 
         1.5
 %
 
 
 
 
 
 
 
 
 
 
Diluted Net Earnings per share - as reported
 
 $ 0.66

 
       1.44

 
      (54.2)
%
Intangible asset amortization expense
 
 
        0.38

 
       0.35

 
 
 
In-process research and development
 
 
—

 
       0.32

 
 
 
Litigation expense, net
 
 
 
        1.15

 
—

 
 
 
Restructuring/Other
 
 
 
        0.04

 
       0.06

 
 
 
Actelion acquisition related cost
 
 
        0.01

 
       0.02

 
 
 
Auris Health acquisition related cost
 
 
        0.02

 
—

 
 
 
AMO acquisition related cost
 
 
—

 
       0.01

 
 
 
Unrealized loss/(gain) on securities
 
 
        0.03

 
—

 
 
 
Contingent liability reversal
 
 
 
—

 
      (0.07)

 
 
 
Diabetes asset impairment
 
 
 
—

 
—

 
 
 
Impact of tax legislation
 
 
 
       (0.15)

 
      (0.10)

 
 
 
Other
 
 
 
       (0.02)

 
       0.02

 
 
 
Diluted Net Earnings per share - as adjusted
 
 $ 2.12

 
       2.05

 
         3.4
 %
 
 
 
 
 
 
 
 
 
 
Operational Diluted Net Earnings per share - as adjusted
 
 
 
 
 
 
at 2017 foreign currency exchange rates
 
 
 
       2.08

 
 
 
 
 
 
 
 
 
 
 
 
 
Impact of currency at 2018 foreign currency exchange rates
        0.05

 
      (0.03)

 
 
 
 
 
 
 
 
 
 
 
 
 
Operational Diluted Net Earnings per share - as adjusted
 
 
 
 
 
 
at 2018 foreign currency exchange rates
 
 $ 2.17

 
       2.05

 
         5.9
 %
 
 
 
 
 
 
 
 
 
 
(1) Includes $20M recorded in cost of products sold and $39M recorded in other (income) expense for the third quarter 2019. Includes $23M recorded in cost of products sold and $79M recorded in other (income) expense for the third quarter 2018.
 
 
 
 
 
 
 
 
 
 
(2) Includes foreign currency translation





Johnson & Johnson and Subsidiaries
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Financial Measures
 
 
 
 
 
 
 
 
 
 
Nine Months YTD
 
% Incr. /
 
(Dollars in Millions Except Per Share Data)
 
2019
 
2018
 
(Decr.)
 
 
 
 
 
 
 
 
 
 
 
Earnings before provision for taxes on income - as reported
 $ 13,110

 
    14,877

 
      (11.9)
%
Intangible asset amortization expense
 
 
     3,386

 
     3,284

 
 
 
In-process research and development
 
 
        890

 
     1,126

 
 
 
Litigation expense, net
 
 
 
     4,832

 
        703

 
 
 
Restructuring/Other (1)
 
 
 
        360

 
        473

 
 
 
Actelion acquisition related cost
 
 
        123

 
        200

 
 
 
Auris Health acquisition related cost
 
 
          56

 
—

 
 
 
AMO acquisition related cost
 
 
          50

 
          82

 
 
 
Unrealized loss/(gain) on securities
 
 
       (217)

 
           (3)

 
 
 
Contingent liability reversal
 
 
 
—

 
       (184)

 
 
 
Diabetes asset impairment
 
 
 
—

 
            4

 
 
 
Other
 
 
 
            7

 
          90

 
 
 
Earnings before provision for taxes on income - as adjusted
 $ 22,597

 
    20,652

 
         9.4
 %
 
 
 
 
 
 
 
 
 
 
Net Earnings - as reported
 
 
 
 $ 11,109

 
    12,255

 
        (9.4)
%
Intangible asset amortization expense
 
 
     2,836

 
     2,931

 
 
 
In-process research and development
 
 
        703

 
        859

 
 
 
Litigation expense, net
 
 
 
     3,764

 
        609

 
 
 
Restructuring/Other
 
 
 
        297

 
        395

 
 
 
Actelion acquisition related cost
 
 
        114

 
        193

 
 
 
Auris Health acquisition related cost
 
 
          44

 
—

 
 
 
AMO acquisition related cost
 
 
          40

 
          68

 
 
 
Unrealized loss/(gain) on securities
 
 
       (171)

 
           (2)

 
 
 
Contingent liability reversal
 
 
 
—

 
       (184)

 
 
 
Diabetes asset impairment
 
 
 
—

 
            3

 
 
 
Impact of tax legislation (2)
 
 
 
       (391)

 
       (253)

 
 
 
Other
 
 
 
         (62)

 
          69

 
 
 
Net Earnings - as adjusted
 
 
 
 $ 18,283

 
    16,943

 
         7.9
 %
 
 
 
 
 
 
 
 
 
 
Diluted Net Earnings per share - as reported
 
 $ 4.13

 
       4.49

 
        (8.0)
%
Intangible asset amortization expense
 
 
       1.06

 
       1.07

 
 
 
In-process research and development
 
 
       0.26

 
       0.32

 
 
 
Litigation expense, net
 
 
 
       1.40

 
       0.22

 
 
 
Restructuring/Other
 
 
 
       0.11

 
       0.15

 
 
 
Actelion acquisition related cost
 
 
       0.04

 
       0.07

 
 
 
Auris Health acquisition related cost
 
 
       0.02

 
—

 
 
 
AMO acquisition related cost
 
 
       0.01

 
       0.02

 
 
 
Unrealized loss/(gain) on securities
 
 
      (0.06)

 
—

 
 
 
Contingent liability reversal
 
 
 
—

 
      (0.07)

 
 
 
Diabetes asset impairment
 
 
 
—

 
—

 
 
 
Impact of tax legislation
 
 
 
      (0.15)

 
      (0.09)

 
 
 
Other
 
 
 
      (0.02)

 
       0.03

 
 
 
Diluted Net Earnings per share - as adjusted
 
 $ 6.80

 
       6.21

 
         9.5
 %
 
 
 
 
 
 
 
 
 
 
Operational Diluted Net Earnings per share - as adjusted
 
 
 
 
 
 
at 2017 foreign currency exchange rates
 
 
 
       6.04

 
 
 
 
 
 
 
 
 
 
 
 
 
Impact of currency at 2018 foreign currency exchange rates
       0.18

 
       0.17

 
 
 
 
 
 
 
 
 
 
 
 
 
Operational Diluted Net Earnings per share - as adjusted
 
 
 
 
 
 
at 2018 foreign currency exchange rates
 
 $ 6.98

 
       6.21

 
       12.4
 %
 
 
 
 
 
 
 
 
 
 
(1) Includes $81M recorded in cost of products sold and $117M recorded in other (income) expense for nine months 2019 YTD. Includes $73M recorded in cost of products sold and $213M recorded in other (income) expense for nine months 2018 YTD.
 
 
 
 
 
 
 
 
 
 
(2) Includes foreign currency translation