Johnson and Johnson 2011 Annual Report Download - page 59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 57
19. Selected Quarterly Financial Data (unaudited)
Selected unaudited quarterly financial data for the years 2011 and 2010 are summarized below:
2011 2010
First Second Third Fourth First Second Third Fourth
(Dollars in Millions Except Per Share Data) Quarter(1) Quarter(2) Quarter(3) Quarter(4) Quarter(5) Quarter(6) Quarter Quarter(7)
Segment sales to customers
Consumer $ 3,682 3,793 3,740 3,668 3,766 3,647 3,567 3,610
Pharmaceutical 6,059 6,233 5,982 6,094 5,638 5,553 5,495 5,710
6,432 6,571 6,283 6,493 6,227 6,130 5,920 6,324
Total sales $16,173 16,597 16,005 16,255 15,631 15,330 14,982 15,644
Gross profit 11,395 11,425 10,933 10,917 11,103 10,700 10,388 10,604
Earnings before provision for taxes on income 4,510 3,422 4,111 318 6,280 4,220 4,219 2,228
Net earnings 3,476 2,776 3,202 218 4,526 3,449 3,417 1,942
Basic net earnings per share $ 1.27 1.01 1.17 0.08 1.64 1.25 1.24 0.71
Diluted net earnings per share $ 1.25 1.00 1.15 0.08 1.62 1.23 1.23 0.70
(1) The first quarter of 2011 includes an after-tax charge of $271 million from litigation and product liability expenses, and DePuy ASR™ Hip recall costs.
(2) The second quarter of 2011 includes after-tax charges of $549 million for restructuring, $325 million from litigation, product liability expenses and DePuy ASR™ Hip recall costs, partially
offset by a $102 million after-tax gain associated with an adjustment to the value of the currency option related to the planned acquisition of Synthes, Inc.
(3) The third quarter of 2011 includes a $241 million after-tax charge associated with an adjustment to the value of the currency option and deal costs related to the planned acquisition of
Synthes, Inc.
(4) The fourth quarter of 2011 includes after-tax charges of $1,022 million from net litigation settlements, $1,217 million for product liability expenses, $336 million for the cost associated with
the DePuy ASR™ Hip recall program and $338 million associated with an adjustment to the value of the currency option and deal costs related to the planned acquisition of Synthes, Inc.
(5) The first quarter of 2010 includes $910 million after-tax of income from net litigation.
(6) The second quarter of 2010 includes $67 million after-tax of income from net litigation.
(7) The fourth quarter of 2010 includes an after-tax charge of $279 million from net litigation settlements, an after-tax charge of $404 million for product liability expense and an after-tax
charge of $239 million for the cost associated with the DePuy ASR™ Hip recall program.
20. Business Combinations and Divestitures
Certain businesses were acquired for $2,797 million in cash and
$228 million of liabilities assumed during 2011. These acquisitions
were accounted for by the purchase method and, accordingly,
results of operations have been included in the financial statements
from their respective dates of acquisition.
The 2011 acquisitions included: Crucell N.V., a global biophar-
maceutical company focused on the research and development,
production and marketing of vaccines and antibodies against infec-
tious disease worldwide; the over-the-counter (OTC) brands of
J. B. Chemicals & Pharmaceuticals Limited, including RINZA®, Russia’s
leading multi-symptom cough and cold brand, and DOKTOR MOM®,
Russia’s number two selling cough brand, as well as several other
brands; full ownership of the Johnson & Johnson-Merck Consumer
Pharmaceuticals Co. joint venture in the U.S. from Merck Sharp &
Dohme Corp; and SterilMed, Inc., a leader in the reprocessing and
re-manufacturing of medical devices in the U.S.
Theexcessofpurchasepriceovertheestimatedfairvalueof
tangible assets acquired amounted to $2,657 million and has been
assigned to identifiable intangible assets, with any residual recorded
to goodwill. Of this amount, approximately $982 million has been
identified as the value of IPR&D associated with the acquisition of
Crucell N.V.
The IPR&D related to the acquisition of Crucell N.V. of $982 mil-
lion is associated with vaccines and antibodies that prevent and/or
treat infectious diseases. The value of the IPR&D was calculated
using cash flow projections discounted for the risk inherent in such
projects. Probability of success factors ranging from 14–81% were
used to reflect inherent clinical and regulatory risk. The discount rate
applied was 16%.
During the fiscal second quarter of 2011, the Company entered
into a definitive agreement to acquire Synthes, Inc. for approximately
$21.3 billion, approximately $19.3 billion net of cash acquired, subject
to the terms of the merger agreement and currency values at the time
of closing. Under the terms of the agreement, each share of Synthes
common stock, subject to certain conditions, would be exchanged
for approximately 35% in cash and 65% in Johnson & Johnson
common stock. Synthes, Inc. is a premier global developer and
manufacturer of orthopaedics devices. On December 15, 2011, a
special meeting of stockholders was held at the Synthes’ offices and
the Synthes shareholders approved the proposal to adopt the agree-
ment and plan of merger. The acquisition is expected to close in the
first half of 2012.
Certain businesses were acquired for $1,269 million in cash and
$52 million of liabilities assumed during 2010. These acquisitions
were accounted for by the purchase method and, accordingly,
results of operations have been included in the financial statements
from their respective dates of acquisition.
The 2010 acquisitions included: Acclarent, Inc., a privately held
medical technology company dedicated to designing, developing
and commercializing devices that address conditions affecting the
ear, nose and throat (ENT); RespiVert Ltd., a privately held drug
discovery company focused on developing small-molecule, inhaled
therapies for the treatment of pulmonary diseases; and Micrus
Endovascular Corporation, a global developer and manufacturer of
minimally invasive devices for hemorrhagic and ischemic stroke.
The excess of purchase price over the estimated fair value of
tangible assets acquired amounted to $1,185 million and has been
assigned to identifiable intangible assets, with any residual recorded
to goodwill. Of this amount, approximately $213 million has been
identified as the value of IPR&D associated with the acquisitions of
Acclarent, Inc., RespiVert Ltd. and Micrus Endovascular Corporation.
The IPR&D related to the acquisition of Acclarent, Inc. was
$75 million and is associated with novel, endoscopic, catheter-
based devices to meet the needs of ENT patients. The value of the
IPR&D was calculated using cash flow projections discounted for
the risk inherent in such projects. Probability of success factors
ranging from 50–53% were used to reflect inherent clinical and
regulatory risk. The discount rate applied was 16%.
Medical Devices and Diagnostics