Johnson and Johnson 2015 Annual Report Download - page 31

Download and view the complete annual report

Please find page 31 of the 2015 Johnson and Johnson annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

Interest income in 2014 was comparable to the prior year. A higher balance in cash, cash equivalents and marketable
securities was offset by lower interest rates. Cash, cash equivalents and marketable securities 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 were used for general corporate purposes.
Income Before Tax by Segment
Income before tax by segment of business were as follows:
Percent of
Segment Sales
(Dollars in Millions) 2015 2014 2015 2014
Consumer $1,787 1,941 13.2% 13.4
Pharmaceutical 11,734 11,696 37.3 36.2
Medical Devices 6,826 7,953 27.2 28.9
Total (1) 20,347 21,590 29.0 29.0
Less: Expenses not allocated to segments (2) 1,151 1,027
Earnings before provision for taxes on income $19,196 20,563 27.4% 27.7
(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 2015, the Consumer segment income before tax as a percent to sales was 13.2%, versus
13.4% in 2014, primarily due to lower divestiture gains in 2015 versus 2014. In 2015, the Consumer segment tax
included a gain of $0.3 billion from divestitures, primarily the divestiture of the SPLENDA®brand. In 2014, the Consumer
segment included a gain of $0.5 billion from divestitures, primarily the divestiture of the K-Y®brand. In 2014, the
Consumer segment income before tax as a percent to sales was 13.4%, flat to the prior year.
Pharmaceutical Segment: In 2015, the Pharmaceutical segment income before tax as a percent to sales was 37.3%
versus 36.2% in 2014. The favorable income before tax was primarily due to higher gains recognized in 2015 partially
offset by a sales decline of OLYSIO®/SOVRIAD®(simeprevir), increased investment spending and negative currency
impacts as compared to 2014. Included in 2015 was a gain of $1.0 billion on the U.S. divestiture of NUCYNTA®, as well
as receipt of a contingent payment and a positive adjustment to previous reserve estimates, including Managed Medicaid
rebates. Additionally, the Pharmaceutical segment income before tax in 2014 was negatively impacted by $0.2 billion for
an additional year of the Branded Prescription Drug Fee and higher intangible asset amortization expense of $0.3 billion
primarily related to the write-down of INCIVO®(telaprevir).
In 2014, the Pharmaceutical segment income before tax as a percent to sales was 36.2% versus 32.6% in 2013. The
favorable income before tax 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.
Medical Devices Segment: In 2015, the Medical Devices segment income before tax as a percent to sales was 27.2%
versus 28.9% in 2014 primarily due to a restructuring charge of $0.6 billion, an intangible asset write-down of $0.3 billion
related to Acclarent, and lower gains of $0.5 billion on divestitures as compared to 2014. In 2015, the Medical Devices
segment included gains of $1.4 billion, primarily for the divestiture of the Cordis business versus a gain of $1.9 billion
Johnson & Johnson 2015 Annual Report •19