Johnson & Johnson Vision Care Inc. is one of Jacksonville’s biggest companies, with about 2,000 local employees and annual sales of nearly $3 billion.
But the Jacksonville-based contact lens maker usually registers just a blip on Johnson & Johnson’s quarterly earnings report.
However, when the health products giant reported second-quarter earnings last week, a Johnson & Johnson executive took time to discuss Vision Care’s outlook in great detail after several quarters of declining sales.
The company continues to lead the global market with its Acuvue brand of contact lenses, but sales in the second quarter dropped by 8.6 percent to $646 million, continuing a downward trend.
That was partly due to currency impacts on international sales, but U.S. sales fell 7.3 percent.
“It’s no secret that we faced capacity and portfolio issues in Vision Care in 2012 and 2013,” Group Worldwide Chairman Sandi Peterson said in Johnson & Johnson’s conference call with analysts last week.
“At the same time, competition intensified and consumer preferences shifted. The market structure has evolved in response, driving increased emphasis on e-commerce and increased price competition between channels,” she said.
Because of the market changes, Johnson & Johnson last fall reset its contact lens pricing “to bring more value to consumers in close partnership with eye care professionals,” Peterson said.
The repricing produced a sharp drop in sales in the third quarter last year, but that means shareholders should being to see “revenue momentum” in the third quarter this year as sales are compared with last year’s third quarter, she said.
Peterson said Vision Care is committed to new product development to grow sales.
“We anticipate at least one major product launch in each of the next three years, including innovations with the potential to disrupt the category,” she said.
“Though we are still in the throes of rejuvenating our eye care business, we have made considerable progress, which will continue this year and into the next,” she said.
Johnson & Johnson’s total second quarter sales fell 8.8 percent to $17.8 billion, largely due to currency impacts.
Its adjusted earnings fell by 7 cents to $1.71 a share, but that was 4 cents higher than the average forecast of analysts surveyed by Thomson Financial.
Remy agrees to buyout
Fidelity National Financial Inc. no longer owns an interest in Remy International Inc., but it seems Remy retained Fidelity’s deal-making appetite after it left the Fidelity umbrella.
Just six months after Fidelity spun out its majority stake in Remy, the auto-parts manufacturer agreed last week to a $1.2 billion buyout from another auto parts company, BorgWarner Inc.
Fidelity acquired a large stake in Remy when the Indiana-based company emerged from Chapter 11 bankruptcy in 2007 and it bought additional shares in August 2012 to take a majority position.
Remy became part of Fidelity National Financial Ventures when Fidelity created FNFV last year as a tracking stock to represent its investments in non-real estate businesses.
With Fidelity always looking at ways to monetize its portfolio of investments, the company distributed its Remy shares to FNFV stockholders at the end of 2014. They received 0.17879 shares of Remy for every FNFV share they owned.
For FNFV shareholders who held on to their Remy shares, the BorgWarner buyout is a good deal. Remy was trading at about $20 when Fidelity distributed the shares and was trading at $20.53 last Monday morning when BorgWarner announced it agreed to pay $29.50 a share in cash to buy Remy.
“This transaction provides substantial value to our shareholders, our employees and business partners around the globe. It provides an opportunity to market our products to a much broader and diverse group of original equipment manufacturers. The product and technology synergies are obvious, resulting from each company’s historical focus on separate areas of the global powertrain market,” Remy Chairman John Weber said in a news release.
Remy produces alternators, starter motors and electric traction motors. BorgWarner says it produces highly engineered components and systems for powertrains.
Michigan-based BorgWarner reported sales of $8.3 billion last year, while Remy had sales of $1.2 billion.
Remy’s stock actually traded as high as $29.73 last week after the buyout agreement was announced, indicating that investors are betting that a higher offer may come in.
Given Remy’s past affiliation with a dealmaker like Fidelity, it’s not a stretch to think we may see more deals in the works from this company.
Analyst upgrades CSX
After CSX Corp. last week reported better-than-expected second-quarter earnings, RBC Capital Markets analyst John Barnes upgraded the Jacksonville-based railroad company from “sector perform” to “outperform.”
“We are encouraged by CSX’s improving pricing and efficiency trends that in our opinion are sustainable,” Barnes said in his research note.
“Though we recognize that coal conditions remain challenging, we expect broader volume strength will partially offset further coal pressures, produce a more favorable volume mix, and help drive CSX to outperform,” he said.
Despite a continued drop in coal shipments, which is CSX’s biggest business segment, CSX’s earnings were helped by improved pricing for its freight shipments and a reduction in operating expenses. Its operating ratio –– operating expenses dividend by revenue –– fell from 69.3 percent in the 2014 second quarter to 66.8 percent this year.
A major goal for CSX is to have a sustained operating ratio in the mid-60s.
“We were encouraged by management’s comments on pricing and efficiency efforts that should continue to drive improved metrics through the back half of 2015. Further, with intermodal and automotive carload growth expected to partially offset coal pressure, we are optimistic that business mix can improve,” Barnes said.
ISA becomes Duos Technologies
After acquiring Jacksonville-based Duos Technologies Group Inc. in April, Information Systems Associates Inc. has officially changed its name to Duos Technologies.
Duos, which provides intelligent security analytical technology solutions, became the main business of Information Systems Associates after the buyout and it moved the corporate headquarters from Coral Springs to Jacksonville.
In addition to the name change, the company’s ticker symbol was changed from “IOSA” to “DUOT.” The stock trades on the OTCQB market.
“This name and symbol change is the final step in our recently closed merger,” Duos CEO Gianni Arcaini said in a news release.
“We look forward to continuing to share our business progress and strategy for growth with our shareholders and the Wall Street community,” he said.
General Employment plans stock sale
General Employment Enterprises Inc. may be getting into an expansion mode under new CEO Derek Dewan.
The staffing company announced a secondary stock offering of 10 million shares of common stock. According to its prospectus filed with the Securities and Exchange Commission, General Employment plans to use the proceeds from the stock sale for general corporate purposes which could include “paying for possible acquisitions or the expansion of our business.”
Dewan became CEO when Illinois-based General Employment acquired Jacksonville-based Scribe Solutions Inc. in April. Dewan was Scribe’s CEO before the buyout.
Dewan is best known as the former CEO of Jacksonville-based MPS Group Inc., which he helped grow into a major staffing company before it was acquired by Adecco Group Inc. in 2009.
General Employment did not list a price for the shares on its prospectus, but its stock has been trading at slightly below $1 recently. That means the stock sale would likely raise between $9 million and $10 million.
General Employment listed 30.9 million shares outstanding in its last quarterly report.
Medtronic making more acquisitions
Although Medtronic plc is still digesting its $49.9 billion acquisition of Covidien plc in January, the medical device company continues to make deals.
Last week it announced a $235 million agreement to buy RF Surgical Systems Inc., a California company that produces a detection system for retained surgical items.
RF Surgical’s product uses a low radio frequency signal to detect gauze, sponges and towels that can sometimes be left in a patient after surgery. The fact that a product like this is needed is a scary thought.
Medtronic said the earnings impact of this deal is not expected to be material, but it is part of the company’s “economic value strategy” to “offer products and services that deliver clinical and economic value to the healthcare system.”