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OC[OC] Johnson & Johnson income statement (earnings were just released) (i.redd.it)

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[–]buck54321OC: 3 299 points300 points  (3 children)

Restructuring is spelled wrong

[–]Nanohaystack 1278 points1279 points  (47 children)

That's what you call diversified risks.

[–]IncomeStatementGuy[S] 272 points273 points  (3 children)

The JNJ ETF

[–]ThrillSurgeon 45 points46 points  (2 children)

10 Billion on surgery. https://archive.ph/WWzMX

[–]lookinathesun 2 points3 points  (1 child)

$7 billion on neuroscience.

[–]_HiWay 131 points132 points  (26 children)

Medical Devices is a joke too for that large of a piece of their pie. Some may be worth some money, but a lot of their "network medical devices" are ancient technology with a medical brand name on it acting as nothing more than a wireless bridge for some scanner with an absurd pricetag. A friend who is network architect for a hospital said half the crap he has to plan for still uses classful routing, screwing up all of their smart fabric.

[–][deleted] 144 points145 points  (13 children)

The majority of their medical device spending is on surgery and orthopedics, not scanners. And they are one of the top companies in orthopedics manufacturing. So, I definitely wouldn’t call it a joke for that being a large piece of their pie.

[–]ThatSonOfAGun 82 points83 points  (4 children)

Yup something like 80+% of all sutures in the US, not to mention staplers, cutters, sealants, patches, hemp stats, etc.

Most med students learn using JNJ products in school. It’s a beast in surgery and not going anywhere anytime soon.

[–]peacemaker2007 19 points20 points  (2 children)

hemp stats

I'm guessing this was hemostats, but now I'm just imagining a surgeon mid surgery rattling off CBD market statistics to his registrar

[–]0pimo 14 points15 points  (0 children)

“Nurse, hemp me stat!”

“Right away Dr. Snoop Dogg”

[–]pent-pro-bro 3 points4 points  (0 children)

Whats wrong with the THC market statistics? Theyve been pretty high lately

[–][deleted] 16 points17 points  (0 children)

Yeah, I work at an orthopedic manufacturing company, we make some JnJ parts. With our aging population, even just that part of their business is absolutely booming. We were/ are at record growth even during and through Covid.

[–]ReddFro 3 points4 points  (0 children)

Yup they have 3D printed implantable devices, use advanced vision systems (machine learning enabled camera systems) for defect identification, etc. Not saying they’re beyond other leaders in these areas but they’re in the top tier for sure.

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    [–]mohammedgoldstein 14 points15 points  (0 children)

    The captial equipment you're referring to isn't the type of medical devices that J&J gets much of it's revenue from. Most are from sterile implanted things that stay in your body or specialized sterile surgical tools used for endoscopic surgery.

    [–]half_integer 13 points14 points  (4 children)

    This is 25 years ago, but I remember that our MRI consoles were just Sun workstations inside, and running two-major-versions out of date OS with default passwords too. Good thing we kept them on a private network.

    Was handy though as I could get raw data files off just using FTP.

    [–]FeloniousFerret79 7 points8 points  (2 children)

    This isn’t that bad. 25 years ago telnet was still in wide spread use and why would an MRI machine be directly connected to the internet anyway (even now why would such a machine be directly connected). Running an appliance like an MRI machine on an older OS is not a bad thing. It has (hopefully) been extensively tested with that combination of software and hardware. Software upgrading frequently requires hardware upgrades (especially back then). Any software changes (and os updates are big changes) require significant retesting and validation for potentially little reward. Look at Redhat today, they don’t change kernel versions frequently. They will back port required features instead of upgrading the whole OS because it is easier to revalidate.

    Look at the case of the Therac-25 X ray machine. Software changes including upgrading the OS exposed bugs including a timer issue that caused several people to receive massive doses of radiation and resulted in deaths.

    [–]mschuster91 1 point2 points  (1 child)

    25 years ago telnet was still in wide spread use and why would an MRI machine be directly connected to the internet anyway (even now why would such a machine be directly connected).

    Indirect exposure. You want these machines to be connected to the hospital network so that imagery, lab results etc. show up directly in the medical records of the patient without quality or feature loss, and at the same time the hospital computers need to be connected to the Internet as well so that the staff can exchange records with others (e.g. specialty practices, GPs) or do research.

    Now the problem is when a threat actor gains code execution on a hospital computer. They pivot and establish persistence on such old appliances.

    [–][deleted] 2 points3 points  (0 children)

    remember that medical devices have to go through the same or similar process as drug development. so any changes after commercialization are never worthwhile and a huge pain in the ass

    [–]the_clash_is_back 7 points8 points  (3 children)

    This camera for tv? $2000.

    This exact same camera but for medical usage? Add as many 0s as you like.

    [–]noodles_jd 4 points5 points  (0 children)

    Those extra 0's buy you more 9's of uptime.

    [–]RandomThrowaway410 1 point2 points  (1 child)

    Yeah it is an absolute mystery how medical/pharma companies don't make 400% profit every year. All of your raw materials are so cheap, and our medical costs in the US are quadruple the price of basically every other country...

    [–]inj3ct10n 1 point2 points  (0 children)

    You are paying for authenticity of the material supply chain and the validation that what you buy is to to the exact design and specifications given. That is the difference between a consumer vs medical product.

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      [–]Luddites_Unite 0 points1 point  (0 children)

      Exactly what I was thinking too. The company is a juggernaut

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        [–]Deathchariot 183 points184 points  (29 children)

        Can you make a legend for the abbreviations?

        [–]IncomeStatementGuy[S] 62 points63 points  (28 children)

        Good idea

        [–]SooSkilled 37 points38 points  (27 children)

        I'm not English, what are SG&A and R&D?

        [–]iohexol 92 points93 points  (18 children)

        SG&A = selling, general, and administrative expenses

        R&D = research and development

        [–]GonzoTheWhatever 15 points16 points  (10 children)

        How is it that these expenses aren’t counted under “Cost Of Revenue” ?

        [–]juice920 45 points46 points  (5 children)

        Cost of revenue is normally the actual cost to produce. So if one pill sold for 100 and it cost 1 to make, revenue would be 100 and cost of revenue would be 1.

        [–]Killfile 4 points5 points  (3 children)

        And if it cost $10 million to work out how to make it and get it through human trials, that would be R&D but wouldn't be factored into the cost of revenue.

        J&J has a REALLY low R&D budget for a medical company

        No they don't; I totally missed that R&D is broken out into two sections of the diagram and I only saw the smaller one.

        [–]juice920 0 points1 point  (0 children)

        I wouldn't say it's really low, most of that r&d is probably for the pharma business. They probably are not doing a lot of brand new products in their med device and consumer division each year. And even if they are, the cost of those studies are a lot cheaper then a pharma study. Especially if those new products are small changes on a current product.

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          [–]GonzoTheWhatever 2 points3 points  (0 children)

          Ahhhh I see. Thanks!

          [–]DanDierdorf 0 points1 point  (0 children)

          This isn't an actual financial report, but a re-do of one according to their likes. Not entirely sure of the point? Their financials are public if you're interested.

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              [–]mechanate82 8 points9 points  (6 children)

              SG&A is generally an abbreviation for Selling, General, and Administrative expenses.

              R&D is generally an abbreviation for Research and Development.

              [–]Riverfreak_Naturebro 3 points4 points  (5 children)

              What does SG&A mean in practice? General expenses isn't super specific

              [–]mechanate82 22 points23 points  (3 children)

              Honestly, and I don't mean this to be dismissive of you or your question or anything, but it's probably best to look up the terms and find some articles on what they can cover. It is indeed a rather broad category of expenses and reading some articles will do much more for understanding it all than I can explain. Here's one that should give anyone curious a decent start.

              https://www.investopedia.com/terms/s/sga.asp

              [–]Riverfreak_Naturebro 1 point2 points  (2 children)

              Thanks for the link! For any who want to know: SG&A is: Advertising Rent of facilities Insurance Pay of IT/sales A lot more

              Now what I'd like to know is what percentage is advertising?

              [–]SavingBooRadley 5 points6 points  (0 children)

              Advertising expense is typically a required disclosure in the filed annual FS. You could look up the 10K and find your answer.

              [–]georgiedawn 2 points3 points  (0 children)

              It's much more than that. In layman's terms, SG&A is essentially all overhead charges minus research costs. Office supplies for examples go into SG&A.

              [–][deleted] 0 points1 point  (0 children)

              In the particular case of medical sales, SG&A means physician outreach and gratuities, tickets to lavish medical conferences in exotic vacation destinations, commissions for sexy 3rd party distributors - and outright bribes.

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                [–][deleted] 526 points527 points  (106 children)

                So the interesting part to me is that Gross Profit and Operating Profit were essentially flat, but Net Profit was down 14% yoy. And the only number that seems to account for that is Tax being up 99% yoy and whatever "Other" is?

                I mean, I'm glad they pay taxes, but what in the world is that about.

                I find this interesting because it is either a counterexample for all the "its not real inflation, companies are posting record profits" or an example of the effects of some weird tax policy nobody talks about

                EDIT: I also find the restructuring cost interesting. I don't know shit about J&J but every corporation I've worked for in the past 20 years restructures internally like every 8 months just to redraw org charts and boxes and shit. It's like a weird addiction MBAs have. Why doesn't the market punish them for wasting money on this shit if it's being called out explicitly?

                [–]Fatalorian 316 points317 points  (19 children)

                JNJ is currently spinning off the consumer business, the cost of which is the bulk of that “restructuring” line.

                It isn’t MBAs redrawing boxes, but pulling out a segment and standing it up to operate independently.

                [–][deleted] 41 points42 points  (0 children)

                That makes far more sense!

                [–]switch495 18 points19 points  (17 children)

                Why would you pull out an integrated segment and pay extra over head for it to operate independently? Is it so you can sell it off?

                [–]Fatalorian 164 points165 points  (13 children)

                The Consumer segment is being spun off - this is different than a sale.

                Starting sometime in ‘23, Consumer will operate as its own separate company following an IPO, although JNJ plans to retain a chunk of that stock.

                JNJ is doing this for a few reasons, none of which are directly talc liability related (since JNJ will retain that liability).

                JNJ does have a decentralized leadership structure, the enterprise as a whole is more like a large ship than a nimble speed boat. This management style works well in spaces like Pharma or Med Device where disease area strongholds are reshaped once a decade and not so well in Consumer when certain products are subject to rapid fashion/beauty trends.

                For example, JNJ now has an absurd Multiple Myeloma portfolio and pipeline after choosing to make it a disease area stronghold and investing 5+ billion in R&D on DARZALEX, CARVYKTI, TECVAYLI, talquetemab, etc. But this portfolio took over 10 years to develop with various stepping stones to ensure the science was sound and the investment was smart. That’s just incompatible with a Consumer business where, especially in the beauty segment, things can go in and out of style within a year.

                In theory, the Consumer segment as a standalone business will be more nimble and thus more competitive in the market place because leadership won’t have to compete with Pharm/Med Device for resources or be subject to their diligence requirements.

                There’s also a valuation component that I think is a big driver behind this spin-off. Analysts have been arguing for the split-up of JNJ since at least 2011. The Pharm segment (being high growth) is just a more attractive business for investors. Consumer is seen as “dead weight” on the stock price by some, especially after the consent decree and factory shutdown over a decade ago. So I think there’s an element of stock price appreciation factoring into this decision too.

                [–]switch495 38 points39 points  (2 children)

                Thanks for that thorough explanation. What's your day job?

                [–]WeathermanDan 12 points13 points  (0 children)

                guessing an equity research analyst, or an MBA student that just did a case study on JNJ

                [–]mightysmiley 5 points6 points  (3 children)

                Interesting that GSK just did the same thing

                [–]NextWhiteDeath 1 point2 points  (0 children)

                They did it for a similar reason valuation. This isn't the 20th century where conglomerates where the thing. Now companies get valued by its worst part. Consumer businesses for these companies are stable but low growth/margin. At the same time via purchases and internal development medical side is either high growth or high margin. You can ask for a lot if you have a cure for a rare disease that has no other cure. Consumer side is generally out of patent protection range and has generics to compete with.

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                  [–]Zero36 1 point2 points  (0 children)

                  Remember what happened when HP splits into HPE and HP Inc? HPE was seen as the fast growth cloud/networking/storage segment and HP Inc was seen as the mature PC and Print. HPE got their ass handed to them and failed to take Market leadership while HP Inc maintained it.

                  [–]wontonstew 1 point2 points  (0 children)

                  Jesus Christ its Jason Bourne

                  [–]doonspriggan 1 point2 points  (0 children)

                  r/bestof stuff here.

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                    [–]heelstoo 2 points3 points  (0 children)

                    Maybe for selling. Maybe for diversifying risk in some way. Given that it’s the healthcare industry, and there have been a lot of class action lawsuits against medical device manufacturers and pharmaceutical companies, diversifying risk may be a factor.

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                      [–]Glenster118 51 points52 points  (1 child)

                      It's wrong to think of J&J as a single company. It's about 400 business units who, in a perfect world, go through a cycle of acquisition, rapid expansion, significant cost cutting and spin off.

                      Restructuring is part of life.

                      [–]OhFuuuuuuuuuuuudge 5 points6 points  (0 children)

                      It makes sense to spend the money to do what you need to do and reduce your tax liability. Obviously you don’t need to unnecessarily spend your profits but if there’s stuff that needs doing you may as well do it. Restructuring sets them up for the next cycle.

                      [–]IncomeStatementGuy[S] 93 points94 points  (58 children)

                      Agree, that stands out.
                      They paid only $1.8B in income tax last year, which was an extremely low rate.

                      I don't know what makes up their "other expenses" but it went up from $489M to $1,871M from 2021 to 2022.

                      [–]Big_Joosh 21 points22 points  (4 children)

                      They paid only $1.8B in income tax last year

                      A more accurate measure of how much they actually paid in taxes is the amount of cash taxes paid, which was:

                      FY20: $4.619 billion
                      FY21: $4.768 billion
                      FY22: We don't know because they haven't released their 10-K yet

                      Also, in terms of what "Other" means, you can find it on their previous 10-K.

                      Other (income) expense, net is the account where the Company records gains and losses related to the sale and write-down of certain investments in equity securities held by Johnson & Johnson Innovation - JJDC, Inc. (JJDC), unrealized gains and losses on investments, income and losses associated with certain employee benefit programs, gains and losses on divestitures, certain transactional currency gains and losses, acquisition-related costs, litigation accruals and settlements, as well as royalty income.

                      [–][deleted] 20 points21 points  (2 children)

                      Do you think Cash Flow Statement Guy could help solve this mystery?

                      [–]IncomeStatementGuy[S] 21 points22 points  (0 children)

                      Haha, yes we need him!

                      Accounting Tricks Guy could be useful too.

                      [–]notcrying 8 points9 points  (0 children)

                      out of the loop, who is this guy?

                      [–]PoopIsAlwaysSunny 71 points72 points  (41 children)

                      $95B revenue, $18B profit, $1.8B tax, and people wonder why big corporations are so much more successful than small businesses

                      [–]danielv123 22 points23 points  (4 children)

                      Yes, but if reinvesting that in R&D had a big tax advantage over taking profits with a measly 10% tax then they wouldn't take advantage of investing in R&D using pretax funds or whatever the argument is.

                      [–][deleted] 41 points42 points  (25 children)

                      that's about a 20% net and a 10% tax burden. Not much different than your average small business. We shoot for 25% and 20%, but usually get it to 20/10 with reinvestment and depreciation but we didn't pay taxes once for like 2 years because of carry over losses and whatnot. Point is, their numbers actually look way more normal than your average mega corp.

                      [–]needathrowaway321 17 points18 points  (1 child)

                      $95B revenue, $18B profit, $1.8B tax

                      Did you misread the data or are you purposefully mixing and matching to create a misleading statement that fits your narrative? The data posted clearly shows $4b tax on $18b net income, which is 22%. The corporate tax rate is 21% so that’s right smack on the money.

                      I don’t know what their net income was last year and I haven’t confirmed the $1.8b tax expense number the other poster said, but you can’t just take LAST year’s tax expense and compare it to THIS year’s net income. It’s wrong at best, disinformation at worst. There’s plenty of issues to address but this doesn’t help your case, not a good look for you.

                      [–]Big_Joosh 4 points5 points  (0 children)

                      A more accurate measure of how much they actually paid in taxes is the amount of cash taxes paid, which was:

                      FY20: $4.619 billion --> implies ~28% rate (4.619/16.497)
                      FY21: $4.768 billion --> implies ~21% rate (4.768 / 22.776)
                      FY22: We don't know because they haven't released their 10-K yet

                      To water it down quite a bit, cash taxes paid / EBT is a very good proxy of what their actual tax rate was, without having access to their tax return.

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                        [–]Andrew5329 2 points3 points  (0 children)

                        I don't know what makes up their "other expenses"

                        Could be it's the loss on their Covid vaccine hitting the balance sheet. They spent a fortune on getting their vaccine through the clinic and building capacity to potentially dose billions only for it to tank. They recouped a lot of the startup cost in 2021, but they missed their vaccine revenue projection for 2022 by a mile after it's usage more or less stopped cold.

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                          [–]Diligent-Road-6171 1 point2 points  (0 children)

                          Why doesn't the market punish them for wasting money on this shit if it's being called out explicitly?

                          Because it's not wasting money

                          [–]StoicSpartanAurelius -1 points0 points  (4 children)

                          Raw materials for things like titanium and cobalt chrome likely make up this delta. Along with inflated shipping costs. These containers used to cost ~8k for a full shipment now cost something like ~50k. Costs for medical device companies have skyrocketed. Keep in mind there are massive titanium deposits all over war torn Ukraine and Russia. Anyways, F*** J&J. They know how to make money but so does the mob and cartels.

                          [–][deleted] 7 points8 points  (2 children)

                          Cost of raw materials is way higher up in the chain under COGS which is probably part of Cost of Revenue in this breakdown. It's been a long time since Accounting 1/2. By the time you're talking about Operating Profit you've already factored in the cost of raw materials. It would be nearly impossible to believe that core components of manufacturing, processing, or distribution would be categorized as "Other" ...ever.

                          [–]StoicSpartanAurelius 1 point2 points  (1 child)

                          It’s “spot buys” for raw mats.

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                            [–]wannabesq 0 points1 point  (1 child)

                            It kinda irks me that they aren't paying nearly the same rate that workers pay on gross revenue. I wish I could only pay taxes after paying my bills...

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                              [–]IncomeStatementGuy[S] 52 points53 points  (3 children)

                              [–]davideverlong 1 point2 points  (1 child)

                              These are so good! I'm glad you do them..do you have a favorite yet?

                              [–]IncomeStatementGuy[S] 3 points4 points  (0 children)

                              No favorite yet, I like how visually different the Sankeys can be.

                              Apple as the biggest company by market cap and with their well known products as revenue flows is a cool Sankey though.

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                                [–]Candid_Tie_7659 34 points35 points  (1 child)

                                Are we just going to have 3 weeks of these for every company on earth?

                                [–]3ryon 23 points24 points  (0 children)

                                Companies should have such a graph in their quarterly statements

                                [–]TrustM3ImAnEngineer 215 points216 points  (41 children)

                                I wish I could deduct my cost of living as the “cost of revenue” before taxes. I have to eat in order to work. Same thing, right?

                                [–]IncomeStatementGuy[S] 87 points88 points  (0 children)

                                You should set up the "TrustM3ImAnEngineer Inc" and marry an accountant

                                [–]Kered13 39 points40 points  (2 children)

                                That's what the lower tax brackets do. Corporate income tax is flat.

                                [–]Tommyblockhead20 18 points19 points  (1 child)

                                Ya, income below ~$42,000 is taxed at half the corporate rate (before deductions), so if it was a flat tax like corporations, you are basically paying no tax on the first $21,000. That’s enough to pay for the average 1 bedroom apartment, utilities, and groceries. Certainly not a life of luxury, but it is doable (as long as you don’t have any medical issues or children).

                                [–]bebe_bird 1 point2 points  (0 children)

                                Depends on where you live. My rent alone in a shitty 2-bedroom apartment built in 1910s cost more than $21k/year, before utilities and food and stuff. But, that's where my husband and I found two jobs (and had to commute over an hour in opposite directions, so our choice of location was really limited).

                                I do wish tax deductions and tax rates took cost of living differences into account, but that'd just make our taxes even more complicated, which I wouldn't like.

                                [–]cyberentomologyOC: 1 67 points68 points  (10 children)

                                You do. It’s called the Standard Deduction and the personal exemption.

                                [–]Infamous_Package1776 15 points16 points  (7 children)

                                No. Most people’s standard deduction would be almost 1:1 or more of their income (with millions of Americans being able to write off debt as business losses and then making $80K ontop of that).

                                Corporate taxation is so much more favorable to corporate entities than Personal taxation.

                                [–]cyberentomologyOC: 1 5 points6 points  (0 children)

                                Oh, and corporate profits are double taxed. So there’s that too.

                                [–]cyberentomologyOC: 1 2 points3 points  (5 children)

                                The standard deduction for an individual works out to about $1000/month in rent and the exemption works out to another $400 or so per month.

                                That’s a pretty good chunk of the basic costs of living.

                                [–]Infamous_Package1776 12 points13 points  (4 children)

                                Many rents are well above $1K and $400 is a decent amount for food. Now add in utilities (heat/electric/cellphone/internet/pest control/etc), health/dental/vision, insurance costs (car/house/etc), transportation costs, clothing, depreciation of all assets, education, etc.

                                It’s no where even close currently - not compared to the accounting capabilities of corporations.

                                [–]cyberentomologyOC: 1 2 points3 points  (0 children)

                                Go compare your taxable income to your gross. If you’re at median wage, your taxable income is a lot lower, and with tax credits, your tax liability on that taxable income is damn near zero, if not actually negative (depending on where you land with the EITC)

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                                    [–]Drunk_Dino 36 points37 points  (9 children)

                                    You do, its called a standardized deduction.

                                    [–]travybongos69 7 points8 points  (8 children)

                                    $12,950 for 2022. If only someone could live on a little over $1k per year month... This isn't 1997 anymore

                                    [–]Drunk_Dino 15 points16 points  (4 children)

                                    …? What? The deduction reduces your taxable income. You can choose to itemize your deductions but for a vast majority of people the standard deduction is higher.

                                    Can we please educate ourselves before we shit on corporations? Otherwise were just going to look like idiots.

                                    [–]MagnetsCarlsbrain 32 points33 points  (0 children)

                                    You can choose to itemize your deductions but for a vast majority of people the standard deduction is higher.

                                    You can't deduct living expenses, which is what the question was about (otherwise of course everyone would vastly exceed the standard deduction).

                                    I'm not taking a position on whether itemizing food, etc. would make sense or not, just pointing out how the goalpost got moved here.

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                                        [–]Wishihadagirl 1 point2 points  (10 children)

                                        Cost of revenue? Like visa fees? How is it over 30%?

                                        [–]TrustM3ImAnEngineer 16 points17 points  (7 children)

                                        Like a car to get to work. Gasoline to go back and forth. Buying the cell phone I use for work. The clothes I need to wear at work.

                                        [–]LessThanCleverName 4 points5 points  (1 child)

                                        Some of those are probably deductible, no?

                                        [–]Swampy1741 4 points5 points  (4 children)

                                        Those are deductible. The standard deduction is probably higher for you though.

                                        [–]limitedmage 6 points7 points  (3 children)

                                        Those expenses are not deductible. Only a small amount of expenses are deductible, like mortgage interest.

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                                            [–]naththegrath10 137 points138 points  (13 children)

                                            J&J's new CEO Joaquin Duato, recorded $13.8 million in total pay last year. J&J has received over $1.5 billion is taxpayer funding for R&D. They increased their prices by an average of 4% and did a $5 billion stock buyback.

                                            [–]greysnowcone 40 points41 points  (0 children)

                                            Inflation is 8% so the on a real basis they cut drug prices.

                                            [–]Artanthos 45 points46 points  (1 child)

                                            They increased prices by less than the inflation rate.

                                            And by less than the median wage increase.

                                            [–]krurran -3 points-2 points  (0 children)

                                            Although that's nice, it doesn't mean they were reasonable to begin with.

                                            [–]Reverie_39 1 point2 points  (0 children)

                                            That’s honestly pretty low pay for a major CEO I feel like.

                                            [–]sfhitz -2 points-1 points  (0 children)

                                            Why are people working so hard in this thread to defend this? Why can you people not envision a better world? Why do you think a faceless entity is deserving of this extreme excess? They're smart for taking as much as they possibly can?

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                                              [–]Dplayerx 4 points5 points  (1 child)

                                              18% pure profit is kinda insane..

                                              [–]UsedUpSunshine 3 points4 points  (0 children)

                                              That’s a sign that people aren’t getting paid enough.

                                              [–]xAmorphous 19 points20 points  (0 children)

                                              Is the "other" 2b their Texas Two Step maneuver?

                                              [–]MaterialLogical1682 13 points14 points  (5 children)

                                              How did you make this visual?

                                              [–]IncomeStatementGuy[S] 25 points26 points  (4 children)

                                              I read their earnings report and used a tool I created to visualize income statements.

                                              The tool is online at SankeyArt.com

                                              [–]SubCircus 1 point2 points  (1 child)

                                              Great stuff. Im subscribing! Thanks

                                              [–]IncomeStatementGuy[S] 0 points1 point  (0 children)

                                              Happy to hear that! If you have ideas for improvements or if there is anything else, hit me up. Email or reddit DM 😁

                                              [–]ThatSonOfAGun 3 points4 points  (0 children)

                                              Each year, Pharma division (Jansen) becomes bigger % of the company, in terms of profits, revenue, etc.

                                              When the Consumer division is spun off into its own company (Kenvue), Pharma will grow to be ~2/3 of the company. I’ve always preferred JNJ over other Pharma companies like Pfizer, Merck, etc. bc their Med Device and Consumer segments just seemed more stable and tangible to me. I worry that they are drifting towards just being another huge Pharma company

                                              [–]Dirtydog693 8 points9 points  (2 children)

                                              This might be stupid of me but are they just taxed on profits? It makes my 30-40% of gross income seem even more painful

                                              [–]Prasiatko 13 points14 points  (0 children)

                                              Yes else stuff like Costco the other day with a 1% profit margin would go bust.

                                              [–]IncomeStatementGuy[S] 9 points10 points  (0 children)

                                              Yes, income tax is applied to income/profits.

                                              [–]privated1ck 4 points5 points  (0 children)

                                              18 billion profit on 95 billion revenue is pretty much 20%, which is an insanely fat margin.

                                              [–]Frackenn 2 points3 points  (0 children)

                                              Earnings call, there must’ve been 8 questions on Stelara biosimiliars, yeesh

                                              [–]Sev3n 2 points3 points  (0 children)

                                              Hmm. they spent 4billion on taxes. they're doing something wrong.

                                              /s

                                              [–]zakats 52 points53 points  (91 children)

                                              17% tax, are you fucking kidding me?

                                              I pay more in taxes than that and I don't make profits in the tens of billions. Fuck you J&J.

                                              [–]DarudeSandstorrn 157 points158 points  (62 children)

                                              J&J is not a human being. Their shareholders will pay taxes when they receive profits as dividends (assuming there has been no funny business). So the profits are taxed both when they are inside J&J and then taxed as capital income.

                                              [–]zakats 22 points23 points  (14 children)

                                              How much tax do mom and pop shops pay? My CPA friend told me that his local clients are usually around double that.

                                              [–]BlackWindBears 28 points29 points  (1 child)

                                              In the US "mom and pop" shops are organized as S-corps or other types of pass through entities. They pay Z E R O corporate income tax and just let the earnings hit your personal income taxes directly, paying a rate between 20-30%.

                                              If you own a C corp (JNJ's structure) you first pay corporate income tax (17% here) and then also pay a tax when it hits your personal income taxes (15%-20% usually). The total taxes paid on realized income here is 32-37%.

                                              Therefore it's usually very advantageous for mom and pop shops to be organized as pass through entities, because even Johnson and Johnson's accountants wind up with this big tax bill for the dollar to get to the point where you can spend it

                                              [–]DarudeSandstorrn 28 points29 points  (5 children)

                                              I’m not American and am not familiar with specific tax rates. But the taxes relevant for “mom and pop-shops”, is this before the owners also pay capital income tax? Or are these taxes the only taxes that are paid on this profit before it lands in the pockets of “mom and pop”?

                                              [–]VanGarrett 16 points17 points  (0 children)

                                              "Mom and Pop" typically don't have much of an income, but a good deal of their living expenses are included in the operating costs of the business. If their home is a part of the property that the business operates out of, for example, that's rent or mortgage covered by the business, as well as all utilities. If their merchandise includes food, then they can obtain most or all of their own food at Cost, further reducing their cost of living. It's normal for them to prioritize the business over their personal bank accounts, so whatever income they have tends to be pretty minimal.

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                                                [–]coke_and_coffee 3 points4 points  (0 children)

                                                Depends how they structure their business. Sole proprietors pay on income while corporations pay corporate tax rates.

                                                [–]Artanthos 1 point2 points  (0 children)

                                                Mom and Pop businesses are frequently pass through.

                                                Look up S corps for an explanation.

                                                [–]jub-jub-bird 1 point2 points  (0 children)

                                                How much tax do mom and pop shops pay?

                                                Usually zero. Generally just paying income taxes on what they take as profits/salary.

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                                                    [–]PolicyArtistic8545 10 points11 points  (0 children)

                                                    Most Americans don’t. While marginal tax brackets are higher than 17% for lots of Americans, effective tax is roughly around that rate or less.

                                                    A single American paying 17% in effective federal income tax rate is making $135k when you take into account the standard dedication and marginal tax brackets.

                                                    [–]anotheralpaca69 26 points27 points  (12 children)

                                                    To be fair the vast majority of American's pay under 17%.

                                                    [–]alonjar 0 points1 point  (5 children)

                                                    It's actually closer to 50% once you include all forms of taxation and government revenue collection.

                                                    [–]SmartPatientInvestor 13 points14 points  (0 children)

                                                    That would apply to corporations as well, especially considering dividends are taxed as ordinary income (qualified are still up to 20%)

                                                    [–]anotheralpaca69 0 points1 point  (0 children)

                                                    Ya I am gonna seed a source.

                                                    Edit: no response. Sus 🤔

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                                                      [–]SeriousSamStone -1 points0 points  (5 children)

                                                      Median US salary is ~31k. Subtract ~13k for the standard deduction, that's ~18k taxable income. Federal income tax on that comes out to ~6.5% tax on the overall income. Add the 7.65% FICA taxes and you have an ~14% tax rate. Then there's sales tax, which is 5.09% on average, as well as property tax and any state or local income taxes that are also owed. Seems like the majority of americans pay more than 17% when all of the different types of taxes are considered.

                                                      [–]anotheralpaca69 4 points5 points  (2 children)

                                                      This study says more like 8%

                                                      https://taxfoundation.org/how-much-do-people-pay-taxes/

                                                      [–]jub-jub-bird 1 point2 points  (1 child)

                                                      Then there's sales tax, which is 5.09% on average, as well as property tax and any state or local income taxes that are also owed

                                                      Many of those all also apply to J&J which is paying the other half of your FICA taxes as part of payroll expenses, paying property taxes on the properties it owns etc... and the shareholders who make up the corporation are paying either capital gains or income taxes when they realize those profits.. So those profits are going to be taxed a second time when they're disbursed which doesn't show up on the graph.

                                                      [–]SciK3 5 points6 points  (4 children)

                                                      Ehh, yeah but also they pay out nearly 12B in dividends to shareholders per year, and shareholders have to pay around a 15% tax rate on that. so overall taxed profit is about 5.8B. so 23B - 12B - 5.8B - 2B = 3.2B in profit for JNJ themselves. technically shareholders are apart of the company, but the 12B paid out are not for JNJ to use down the line.

                                                      so overall taxed is 5.8B, JNJ personal profit of 3.2B, 181% tax rate including shareholder dividend taxation. if we use just JNJs tax of 4B, 125%.

                                                      disregard that, i did a funny mixup. refer to logwagons comment below. im not sure why i divided it the way i did.

                                                      E: should also clarify that the 15% dividend rate on shareholders is massively simplified. JNJ is a fairly common dividend stock, so a lot of shareholders may be "qualified dividend" shareholders. basically if you hold the stock for long enough, you get a small tax break on the dividends you receive. this is supposed to help prevent people buying up tons of stock before a dividend payout, only to sell right after.

                                                      [–]logwagon 8 points9 points  (3 children)

                                                      LOL, what are you smoking? You don't divide your taxes paid by net profit (after subtracting taxes) to get your overall tax rate. If tax rate was more than 100% then net profit would be negative...

                                                      Also, dividends are still profit, so you don't get you subtract that from profit just because of how it's being utilized by the company.

                                                      Taking all of your statements as true, then:

                                                      Profit = 23B

                                                      Dividends = 12B

                                                      Corporate taxes = 4B

                                                      Dividend taxes = 1.8B (15% of 12B)

                                                      Total taxes = 5.8B

                                                      Taxes paid/Profit = tax rate

                                                      5.8B/23B = 25.2% tax rate

                                                      [–]SciK3 4 points5 points  (2 children)

                                                      im aware, it started off as me saying most of the gross profit goes to dividends and spiralled into me doing hypothetical funny calculations. lemme fix the calculations real quick.

                                                      also why did you use 2B as the corporate taxes? its 4B + 1.8B of dividend taxes. 5.8B/23B = 25.2%

                                                      [–]logwagon 3 points4 points  (1 child)

                                                      I ninja-edited that right after I commented. Read the 2B other expenses as the taxes paid.

                                                      [–]Anxious-Rutabaga-912 0 points1 point  (0 children)

                                                      companies pay people, who then pay their income taxes. I forget are corporations people or not? If they're people than I assume you supported corporate bailouts? since people receive unemployment

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                                                        [–]the_letter_bee 2 points3 points  (1 child)

                                                        This is really pretty man. Great job!

                                                        [–]IncomeStatementGuy[S] 2 points3 points  (0 children)

                                                        Thanks!

                                                        [–]FFIFISISHFISHFISH 6 points7 points  (16 children)

                                                        The argument for our insane intellectual property laws on medicines is always to protect R&D but its like just 1/7 of revenue....

                                                        [–]surprisedropbears 5 points6 points  (4 children)

                                                        1/7 of Revenue is pretty solid.

                                                        [–]SavingBooRadley 1 point2 points  (10 children)

                                                        In companies like this, a lot of R&D in a given year is capitalized to the balance sheet then amortized out.

                                                        [–]thegoalie 1 point2 points  (1 child)

                                                        What tool do we like to produce sankeys? I’m writing html to do them, which is slow and error prone.

                                                        [–]IncomeStatementGuy[S] 0 points1 point  (0 children)

                                                        This one is produced with SankeyArt, a tool I created to make drawing Sankeys super easy.

                                                        [–]Haru_thefifthnerd 1 point2 points  (0 children)

                                                        Wow they are all so full of it when they try and justify high costs on Research and Design - isn’t comparatively right at all

                                                        [–]thepianoturtle 1 point2 points  (0 children)

                                                        I love these posts so much!

                                                        [–]MrLongJeans 1 point2 points  (0 children)

                                                        I'm a business consultant so i like the topic and KPIs. But I'm not seeing the takeaway story here. Seems like a data dump rather than information.

                                                        [–]kiteboarderni 7 points8 points  (5 children)

                                                        More useless sankey diagrams.

                                                        [–]PM_ME_YOUR_CAMPFIRE 15 points16 points  (1 child)

                                                        the discovery of the Sankey diagram was a disaster for this subreddit

                                                        [–]XXL_Anu_saukko 2 points3 points  (0 children)

                                                        Finally, someone, who agrees with me they are horrible, they look bad and they are hard to understand and convey things very inefficiently

                                                        [–]nearos 9 points10 points  (1 child)

                                                        Wake me up... when the Sankeys end

                                                        [–]g00dis0n 4 points5 points  (0 children)

                                                        Wake me up... when the Sankeys go-go

                                                        [–]SavingBooRadley 2 points3 points  (0 children)

                                                        I'm curious why you think it's useless.

                                                        [–]VFL2015 1 point2 points  (0 children)

                                                        Would love to see the comparison to Bayer since they're we are two of the largest companies with Consumer Health and Pharmaceutical divisions

                                                        [–]iambinksy 1 point2 points  (0 children)

                                                        Those are massive margins.

                                                        [–]Alexander1899 1 point2 points  (0 children)

                                                        But the grocery stores with 2 percent margin are the ones we should all be mad about right?

                                                        [–]VladDaImpaler 1 point2 points  (1 child)

                                                        Where’s the subsidiary that J&J created to hold the ownership of that lead (or some sort of poison) infested baby powder. Is that included? I guess it would be tough because that company with sole ownership also doesn’t make much money and has to declare bankruptcy so that they don’t have to be held accountable or have to pay any fees for their ill gotten gains

                                                        [–]Northstar1989 1 point2 points  (0 children)

                                                        More profit than R&D? For real?

                                                        They definitely need to put some of that money back into their business by investing in R&D...

                                                        [–]TwoWheelsTooGood 0 points1 point  (0 children)

                                                        Why is revenue broken out by type of product/service, but cost and profit by type.of firm activity ?

                                                        [–]Barry-Mcdikkin 0 points1 point  (0 children)

                                                        Now do how many people they knowingly killed

                                                        [–]_Adiack 0 points1 point  (0 children)

                                                        well done my g this is a good grath

                                                        [–]Huddstang 0 points1 point  (2 children)

                                                        Can a kind soul remind me what this type of graph is called please

                                                        [–]IncomeStatementGuy[S] 1 point2 points  (1 child)

                                                        It's a Sankey diagram

                                                        [–]Guses 0 points1 point  (0 children)

                                                        53B revenues on pharmaceuticals against 15B expenses in R&D

                                                        Nice stat to keep handy for that "But R&D is so expensive!!11!1" argument that comes out when talking about inflated drug prices.

                                                        [–]leonl07 0 points1 point  (1 child)

                                                        What software did you use to create the Sankey diagram?

                                                        [–]IncomeStatementGuy[S] 1 point2 points  (0 children)

                                                        SankeyArt.com I am the developer of the software

                                                        [–]aaronwe 0 points1 point  (0 children)

                                                        I'd really appreciate it if all these earnings marked as 1billion, that we've seen over the last week like really brought out that 1 billion is so much money

                                                        [–]pamelolsmil 0 points1 point  (1 child)

                                                        Why are those wavy charts a thing recently?

                                                        [–]royalpheonix 3 points4 points  (0 children)

                                                        They are called Sankey charts and right now they are popular because right now its that time of year where corps are releasing their yearly earnings statements. There are a lot of people who are ignorant about corporate expenses and accounting so I think these are also blowing up because it's changing people's perceptions

                                                        [–]Riverfreak_Naturebro 0 points1 point  (0 children)

                                                        What is cost of revenue and SG&A. Are any of these the wages they pay?

                                                        [–]alien2835 0 points1 point  (0 children)

                                                        On the far right side there’s 2 billion dollar cost simply labeled as “other.” I think that requires some more explaining.

                                                        [–]bikedaybaby 0 points1 point  (0 children)

                                                        Which expenditure is employee salaries?

                                                        [–]daavq 0 points1 point  (0 children)

                                                        What does "cost of revenue" mean?

                                                        [–]gringerOC: 11 0 points1 point  (0 children)

                                                        It would be nice to see SG&A broken down into non-executive salaries, other sales expenses, general, and administrative expenses. The thing I care about most (i.e. worker salaries vs executive salaries) isn't represented or discoverable by this diagram.

                                                        But perhaps that's on purpose. It allows someone to point at a diagram like this and say, "See, we can't double the worker salaries, because the slice of the pie including those is bigger than our net profit slice."

                                                        [although there's definitely room there to increase worker salaries by 50%, even if they took up the entirety of that slice]

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