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totaled $33.1 billion at the end of 2014, and averaged $31.1 billion as compared to the $25.2 billion average cash
balance in 2013. The increase in the year-end cash balance was primarily due to cash generated from operating activities.
Interest expense in 2014 increased by $51 million as compared to 2013 due to a higher average debt balance. The
average debt balance was $18.5 billion in 2014 versus $17.2 billion in 2013. The total debt balance at the end of 2014
was $18.8 billion as compared to $18.2 billion at the end of 2013. The higher debt balance of approximately $0.6 billion
was due to increased borrowings in November 2014. The Company increased borrowings, capitalizing on favorable terms
in the capital markets. The proceeds of the borrowings will be used for general corporate purposes.
Interest income in 2013 increased by $10 million as compared to the prior year. Cash, cash equivalents and marketable
securities totaled $29.2 billion at the end of 2013, and averaged $25.2 billion as compared to the $26.7 billion average
cash balance in 2012. The increase in the year end cash balance was due to cash generated from operating activities.
Interest expense in 2013 decreased by $50 million as compared to 2012 due to a lower average debt balance. The
average debt balance was $17.2 billion in 2013 versus $17.9 billion in 2012. The total debt balance at the end of 2013
was $18.2 billion as compared to $16.2 billion at the end of 2012. The higher debt balance of approximately $2.0 billion
was due to increased borrowings in December 2013. The Company increased borrowings, capitalizing on favorable terms
in the capital markets. The proceeds of the borrowings were used for general corporate purposes.
Segment Pre-Tax Profit
Pre-tax profits by segment of business were as follows:
Percent of
Segment Sales
(Dollars in Millions) 2014 2013 2014 2013
Consumer $1,941 1,973 13.4% 13.4
Pharmaceutical 11,696 9,178 36.2 32.6
Medical Devices 7,953 5,261 28.9 18.5
Total(1) 21,590 16,412 29.0 23.0
Less: Expenses not allocated to segments(2) 1,027 941
Earnings before provision for taxes on income $20,563 15,471 27.7% 21.7
(1) See Note 18 to the Consolidated Financial Statements for more details.
(2) Amounts not allocated to segments include interest (income) expense, noncontrolling interests, and general corporate (income)
expense.
Consumer Segment: In 2014, Consumer segment pre-tax profit as a percent to sales was 13.4%, flat to the prior year.
In 2013, Consumer segment pre-tax profit as a percent to sales was 13.4% versus 11.7% in 2012. The favorable pre-tax
profit in 2013 versus 2012 was primarily due to a gain of $55 million on the sale of intangible and other assets as well as
cost containment initiatives. Included in 2012 were intangible asset write-downs of $0.3 billion. In addition, 2012 included
higher gains on divestitures of $0.1 billion.
Pharmaceutical Segment: In 2014, Pharmaceutical segment pre-tax profit as a percent to sales was 36.2% versus
32.6% in 2013. The favorable pre-tax profit was attributable to strong sales volume growth, particularly sales of OLYSIO®
/SOVRIAD®(simeprevir), positive sales mix of higher margin products and cost containment initiatives realized in selling,
marketing and administrative expenses. This was partially offset by $0.2 billion for an additional year of the Branded
Prescription Drug Fee and a $0.1 billion intangible asset write-down related to INCIVO®(telaprevir). Additionally, 2013
included a net gain of $0.4 billion on equity investment transactions, primarily the sale of Elan American Depositary
Shares, and a positive adjustment of $0.2 billion to previous estimates for Managed Medicaid rebates, partially offset by
higher write-downs of $0.4 billion for the impairment of IPR&D as compared to 2014. In 2013, Pharmaceutical segment
pre-tax profit as a percent to sales was 32.6% versus 24.0% in 2012. The favorable pre-tax profit was attributable to
positive sales mix of higher margin products, lower costs associated with strong volume growth, a net gain of $0.4 billion
on equity investment transactions, primarily the sale of Elan American Depositary Shares, a positive adjustment of $0.2
billion to previous estimates for Managed Medicaid rebates and cost containment initiatives. This was partially offset by
increased amortization expense as a result of the royalty buyout agreement with Vertex for INCIVO®. Additionally, 2012
included higher net litigation expense of $0.4 billion and higher write-downs of intangible assets and in-process research
and development of $0.9 billion. This was partially offset by higher gains on divestitures of $0.3 billion.
10 •Johnson & Johnson 2014 Annual Report