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J&J to lay off 4,100
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December 3, 1998: 7:42 p.m. ET
Johnson & Johnson will take $800 million charge in restructuring move
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NEW YORK (CNNfn) - Johnson & Johnson announced plans Thursday to cut 4,100 jobs, or 4 percent of its work force, in an effort to reduce costs in the face of stagnant sales growth.
In a statement issued after the stock market had closed, Johnson & Johnson said it will take a $800 million after-tax charge against fourth quarter earnings to cover costs of the restructuring and for research and development projects associated with the recent acquisition of DePuy Inc.
The New Brunswick, N.J.-based health care products giant said the move will save the company $250 million to $300 million a year.
Johnson & Johnson Chief Financial Officer Robert Darretta told CNNfn in an interview that some of the savings from the plant closing will be spent on research and development projects.
"Obviously given the nature of our business the two areas we'd be looking to make further investments would be in the area of research and development," he said. "Next year, for example, we intend to spend in excess of $2.5 billion in research and development, and of course investments in the form of advertising and promotion to establish new brands we will be launching in the years to come."
2,500 job cuts in the United States
Johnson & Johnson makes a variety of health care-related items, including Band-Aids, Tylenol, Reach toothbrushes and AcuVue contact lenses. Last year, the company reported $22.6 billion in sales, with about half coming from outside the United States.
The restructuring will eliminate about 5,800 positions, but add 1,700 others. Of the total net reductions, 2,500 will occur in the U.S. and the remaining 1,600 will take place in 20 other countries.
Johnson & Johnson, one of the world's largest healthcare product makers, has been using cost cuts to keep earnings growth moving forward in the face of stagnant sales.
Over the last 12 months, J&J's sales have grown only 2 percent, versus a 12-percent growth rate for the pharmaceutical industry and 14.8 percent for the healthcare sector.
However, J&J's earnings per share have grown almost 11 percent over the same period, compared to 17 percent for the pharmaceutical industry and 13 percent for the healthcare sector.
Number of manufacturing plants to be cut
In its statement, Johnson and Johnson said the majority of the employees affected by the job cuts are in manufacturing and operations where the company plans to reduce the number of manufacturing facilities around the world from 158 to 122 over the next 12 to 18 months.
"This initiative takes into account rapid changes that are occurring in health care systems around the world and is consistent with our continuous process of improving all aspects of our operations as we strive to keep the company vital and growing," Ralph Larsen, chairman and chief executive officer said. "We anticipate that this realignment will enhance our efforts to provide good value to our customers and achieve superior financial performance."
Johnson & Johnson (JNJ) was down 15/16 at 79-9/16 at the end of trading Thursday.
The company said $300 million of the $800 million charge will cover purchased in-process research and development costs associated with the recent acquisition of DePuy, Inc. for $3.5 billion. 
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Johnson & Johnson
DePuy
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