Johnson and Johnson 2015 Annual Report Download - page 23

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employees, communities and shareholders. The Company believes that these foundational values, its strategic framework
and long-term growth drivers, along with its overall mission of improving the quality of life for people around the world, will
enable Johnson & Johnson to continue to be a leader in the health care industry.
Results of Operations
Analysis of Consolidated Sales
In 2015, worldwide sales decreased 5.7% to $70.1 billion, compared to increases of 4.2% in 2014 and 6.1% in 2013.
These sales changes consisted of the following:
Sales increase/(decrease) due to: 2015 2014 2013
Volume 1.2% 6.3 7.6
Price 0.6 (0.2) 0.1
Currency (7.5) (1.9) (1.6)
Total (5.7)% 4.2 6.1
In 2015, the introduction of competitive products to the Company’s Hepatitis C products, OLYSIO®/SOVRIAD®
(simeprevir) and INCIVO®(telaprevir), had a negative impact of 2.7% on the worldwide operational sales growth. In 2015,
the impact of acquisitions and divestitures on the worldwide operational sales growth was negative 2.0%.
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. In 2013, the acquisition of Synthes, Inc., net of the related divestiture, increased
worldwide operational growth by 2.5%.
Sales by U.S. companies were $35.7 billion in 2015, $34.8 billion in 2014 and $31.9 billion in 2013. This represents
increases of 2.6% in 2015, 9.0% in 2014 and 7.0% in 2013. Sales by international companies were $34.4 billion in 2015,
$39.5 billion in 2014 and $39.4 billion in 2013. This represents a decrease of 13.1% in 2015, and increases of 0.4% in
2014 and 5.4% in 2013.
The five-year compound annual growth rates for worldwide, U.S. and international sales were 2.6%, 3.9% and 1.4%,
respectively. The ten-year compound annual growth rates for worldwide, U.S. and international sales were 3.3%, 2.3% and
4.5%, respectively.
Sales by companies in Europe experienced a decline of 15.6% as compared to the prior year, including operational growth
of 1.1%, offset by a negative currency impact of 16.7%. Sales by companies in the Western Hemisphere (excluding the
U.S.) experienced a decline of 15.6% as compared to the prior year, including operational growth of 2.6% offset by a
negative currency impact of 18.2%. Sales by companies in the Asia-Pacific, Africa region experienced a decline of 8.1%
as compared to the prior year, including operational growth of 0.3% and a negative currency impact of 8.4%.
2015 results benefited from the inclusion of a 53rd week. (See Note 1 to the Consolidated Financial Statements for
Annual Closing Date details). The Company estimated that the fiscal year 2015 growth rate was enhanced by
approximately 1.0%. While the additional week added a few days to sales, it also added a full week’s worth of operating
costs; therefore, the net earnings impact was negligible.
In 2015 and 2014, the Company had one wholesaler distributing products for all three segments that represented
approximately 12.5% and 11.0%, respectively, of the total consolidated revenues. In 2013, the Company did not have a
customer that represented 10% or more of total consolidated revenues.
U.S. Health Care Reform
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 was paid, as scheduled, in 2015 and had no cash impact in 2014.
Johnson & Johnson 2015 Annual Report •11