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The New Brunswick, New Jersey-based company said that the restructuring initiatives aims at a $1.4 billion - $1.7 billion cost savings when fully implemented in 2011, with $800 million - $900 million expected to be achieved in 2010.
The cost savings will be achieved primarily by reducing layers of management, increasing individual spans of control, and simplifying business structures and processes across the company's global operations. Further, the company said initiatives would be implemented at the operating company levels to be certain that businesses can meet needs of customers they serve on a day-to-day basis.
The company is taking steps to prioritize its innovation efforts around the many growth opportunities in health care and to execute aggressively on bringing key new products to market. The company plans to invest in new growth platforms, to ensure the successful launch of its many new products and continued growth of its core businesses and to provide flexibility to adjust to the changed and evolving global environment, by manipulating the additional resources provided by the cost saving measures.
Commenting on the initiatives, Johnson & Johnson chairman and chief executive officer, William Weldon said, "These types of changes are difficult under any circumstances, and will have a very personal impact on people who have been dedicated to the mission of Johnson & Johnson. We recognize their contributions to the achievements of our business, and are committed to treating them fairly and with respect throughout this process."
In addition, the company expects to record an associated pre-tax, restructuring charge in the range of $1.1 billion - $1.3 billion in the fourth quarter of 2009, treated as a special item.
The company also reaffirmed its fiscal 2009 earnings guidance of $4.54 - $4.59 per share, excluding the impact of special items such as restructuring charges.
On average, twenty analysts polled by Thomson Reuters currently expect the company to earn $4.58 per share for fiscal year 2009. Analysts estimates typically exclude special items.
In the third quarter, Johnson & Johnson posted higher profit for the third quarter, despite a 5.3% downturn in sales, as weak sales of its prescription drugs Topamax and Risperdal were negatively impacted by generic competition. On a per share basis, earnings improved 2.6% from last year and topped Street view.
Shares of Johnson & Johnson have been trading between $46.25 and $63.01 in the past 52 weeks. The stock is currently trading at $59.10, down $0.39 or 0.66% on a volume of 7.23 million shares on the NYSE.
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