J&J loses $10 billion after tax changes

Johnson & Johnson posted a rare quarterly loss, a whopping $10.71 billion, because of a $13.6 billion charge related to last month’s U.S. tax overhaul.

While the loss was expected and the company’s adjusted results beat Wall Street expectations, shares fell more than 4 percent, an unusually big swing for the health care giant.

On Tuesday, J&J reported a big jump in sales, but that was offset by sharply higher spending on production, marketing, administration and research, partly because of one-time charges.

The $13.6 billion charge is for a tax payment on years of accumulated foreign earnings, now being brought back to the U.S., that amount to more than $66 billion, Chief Financial Officer Dominic Caruso said in an interview. About $18 billion of that was held in cash and was taxed at 15 percent, while the remainder was taxed at a low 8 percent rate.

Caruso told analysts on a conference call that “$12 billion will come back immediately. We’ll immediately use that to fund operations in the U.S.”

That will include investing in innovative products and paying shareholder dividends, he said. J&J won’t necessarily go on a shopping spree, having made 16 acquisitions totaling $35 billion last year, including its biggest-ever, $30 billion to buy Swiss biopharmaceutical company Actelion to enter the lung blood pressure niche.

“This was a strong quarter for Johnson & Johnson, as the pharmaceutical segment … continues to drive solid growth for the company,” Edward Jones analyst Ashtyn Evans wrote to investors.

Despite that, J&J shares closed down $6.31 at $141.83.