Johnson & Johnson Reports Declining Profits Due to DePuy ASR Recall and Litigation Costs
On July 19, 2011, Johnson & Johnson, the parent company of DePuy Orthopaedics, announced its second-quarter results for 2011. The company reported a 20 percent decrease in second-quarter profits, citing litigation expenses, recall costs, restructuring, and increased spending on research and manufacturing as responsible factors. Notably, Johnson & Johnson also cited one-time items in the second-quarter totaling $991 million, which included $363 million for litigation matters, and $54 million associated with the recall of its defective DePuy ASR hip implants. The company stated that its net income was $2.78 billion, or $1 per share. Excluding those one-time items, income would have been $3.55 billion, or $1.28 per share.
Litigation expenses and costs associated with the DePuy ASR recall have continued to rise since the first quarter of 2011. In that quarter, the company reported a 23 percent decline in profits and took after-tax charges totaling $271 million for litigation and costs associated with the DePuy ASR recall.
In addition to the fallout associated with the DePuy ASR recall and the resulting wave of nationwide litigation, Johnson & Johnson has also had to recall non-prescription medications such as Tylenol and Motrin, close a Pennsylvania plant, and restructure manufacturing operations. However, even with the declining profits, the company maintains that they are actively addressing manufacturing issues, and are in the process of launching new drugs and medical devices. That being said, as the number of DePuy ASR lawsuits continues to mount against Johnson & Johnson, litigation costs are likely to rise.