Johnson and Johnson 2014 Annual Report Download - page 13

In order to remain a leader in health care, the Company strives to maintain a purpose-driven organization and is committed
to developing global business leaders who can achieve these growth objectives. Businesses are managed for the
long-term in order to sustain market leadership positions and enable growth, which provides an enduring source of value
to our shareholders.
Our Credo unifies all Johnson & Johnson employees in achieving these objectives, and provides a common set of values
that serve as the foundation of the Company’s responsibilities to its customers, employees, communities and shareholders.
The Company believes that these basic principles and growth drivers, along with its overall mission of improving the quality
of life for people across the globe, will enable Johnson & Johnson to continue to be a leader in the health care industry.
Results of Operations
Analysis of Consolidated Sales
In 2014, worldwide sales increased 4.2% to $74.3 billion, compared to increases of 6.1% in 2013 and 3.4% in 2012.
These sales changes consisted of the following:
Sales increase/(decrease) due to: 2014 2013 2012
Volume 6.3% 7.6 5.7
Price (0.2) 0.1 0.4
Currency (1.9) (1.6) (2.7)
Total 4.2% 6.1 3.4
In 2014, sales of the Company’s Hepatitis C products, OLYSIO®/SOVRIAD®(simeprevir) and INCIVO®(telaprevir), had
a positive impact of 2.8%, and the divestiture of the Ortho-Clinical Diagnostics business had a negative impact of 1.4% on
the worldwide operational growth. The acquisition of Synthes, Inc., net of the related divestiture, increased worldwide
operational growth by 2.5% and 3.1% in 2013 and 2012, respectively.
Sales by U.S. companies were $34.8 billion in 2014, $31.9 billion in 2013 and $29.8 billion in 2012. This represents increases
of 9.0% in 2014, 7.0% in 2013 and 3.2% in 2012. Sales by international companies were $39.5 billion in 2014, $39.4 billion
in 2013 and $37.4 billion in 2012. This represents increases of 0.4% in 2014, 5.4% in 2013 and 3.5% in 2012.
The five-year compound annual growth rates for worldwide, U.S. and international sales were 3.7%, 2.4% and 5.0%,
respectively. The ten-year compound annual growth rates for worldwide, U.S. and international sales were 4.6%, 2.3% and
7.3%, respectively.
Sales in Europe achieved growth of 1.9% as compared to the prior year, including operational growth of 2.6% partially
offset by a negative currency impact of 0.7%. Sales in the Western Hemisphere (excluding the U.S.) experienced a decline
of 3.5% as compared to the prior year, including operational growth of 5.2% offset by a negative currency impact of 8.7%.
Sales in the Asia-Pacific, Africa region achieved growth of 0.4% as compared to the prior year, including operational
growth of 4.4% and a negative currency impact of 4.0%.
In 2014, the Company had one wholesaler distributing products for all three segments that represented approximately
11.0% of the total consolidated revenues. In 2013 and 2012, the Company did not have a customer that represented
10% or more of total consolidated revenues.
U.S. Health Care Reform
Under the provisions of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation
Act of 2010, beginning in 2013, the Company began paying a tax deductible 2.3% excise tax imposed on the sale of
certain medical devices. The full-year impact of the excise tax was approximately $180 million in 2014 and $200 million in
2013.
On July 28, 2014, the Internal Revenue Service issued final regulations for the Branded Prescription Drug Fee, an annual
non-tax deductible fee imposed on entities engaged in the business of manufacturing or importing branded prescription
drugs (covered entities) enacted by section 9008 of the Patient Protection and Affordable Care Act. The final regulations
accelerated the expense recognition criteria for the fee obligation by one year, from the year in which the fee is paid to the
year in which the sales used to calculate the fee occur. This change impacted covered entities and resulted in the need for
all entities to record an additional expense in 2014 for the fee that would have otherwise been expensed when paid in
2015. The Company accrued an additional $220 million in the fiscal third quarter of 2014 due to this change. The fee
associated with this accelerated expense will be paid, as scheduled in 2015 and therefore had no cash impact in 2014.
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