<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 1994 Commission file number 1-3215
J O H N S O N & J O H N S O N
(Exact name of registrant as specified in its charter)
New Jersey 22-1024240
(State of (I.R.S. Employer
Incorporation) Identification No.)
One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 524-0400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, Par Value $1.00 New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
The aggregate market value of the voting stock held by non-affiliates of
the registrant on March 1, 1994 was approximately $23.6 billion.
On March 1, 1994 there were 643,161,600 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II: Portions of registrant's annual report to stockholders
for fiscal year 1993.
Part III: Portions of registrant's proxy statement for its 1994
annual meeting of stockholders.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K / X /
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<PAGE> 2
PART I
<TABLE>
<CAPTION>
Item Page
---- -----
<S> <C>
1. Business................................................ 2
General........................................ 2
Segments of Business; Geographic Areas......... 2
Consumer....................................... 2
Pharmaceutical................................. 3
Professional................................... 3
International.................................. 3
Raw Materials.................................. 3
Patents and Trademarks......................... 4
Seasonality.................................... 4
Competition.................................... 4
Research....................................... 4
Environment.................................... 4
Regulation..................................... 5
2. Properties.............................................. 6
3. Legal Proceedings....................................... 7
4. Submission of Matters to a Vote of Security Holders..... 7
Executive Officers of the Registrant........................ 7
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters.................................... 9
6. Selected Financial Data................................. 9
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 9
8. Financial Statements and Supplementary Data............. 9
9. Disagreements on Accounting and Financial Disclosure.... 9
PART III
10. Directors and Executive Officers of the Registrant...... 9
11. Executive Compensation.................................. 10
12. Security Ownership of Certain Beneficial Owners
and Management......................................... 10
13. Certain Relationships and Related Transactions.......... 10
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................... 10
Signatures.................................................. 17
Independent Auditor's Report and Consent.................... 19
Exhibit Index............................................... 20
</TABLE>
Form 10-Q Quarterly Reports Available. A copy of Johnson & Johnson's
Quarterly Report on Form 10-Q for any of the first three quarters of the
current fiscal year, without exhibits, will be provided without charge to any
stockholder submitting a written request to the Vice President, Finance at the
principal executive offices of the company. Each report will be available
about 45 days after the end of the quarter to which it relates.
1
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PART I
Item 1. BUSINESS
GENERAL
Johnson & Johnson, employing approximately 81,600 people worldwide, is
engaged in the manufacture and sale of a broad range of products in the health
care field in many countries of the world. Johnson & Johnson's primary
interest, both historically and currently, has been in products related to
health and well-being.
Johnson & Johnson is organized on the principles of decentralized
management. The Executive Committee of Johnson & Johnson is the principal
management group responsible for the operations of Johnson & Johnson. In
addition, three Executive Committee members are Chairmen of Sector Operating
Committees, which are comprised of managers who represent key operations within
the sector, as well as management expertise in other specialized functions.
These Committees oversee and coordinate the activities of domestic and
international companies related to each of the consumer, pharmaceutical,
professional and diagnostic businesses. Operating management of each company
is headed by a President, General Manager or Managing Director who reports
directly or through a Company Group Chairman. In line with this policy of
decentralization, each international subsidiary is, with some exceptions,
managed by citizens of the country where it is located.
SEGMENTS OF BUSINESS; GEOGRAPHIC AREAS
Johnson & Johnson's worldwide business is divided into three segments:
Consumer, Pharmaceutical and Professional. Johnson & Johnson further
categorizes its sales and operating profit by major geographic areas of the
world. The narrative and tabular (but not the graphic) descriptions of
segments and geographic categories captioned "Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Segments of
Business, Consumer, Pharmaceutical, Professional and Geographic Areas" on pages
26 through 28 and 41 of Johnson & Johnson's annual report to stockholders for
fiscal year 1993 are incorporated herein by reference thereto.
CONSUMER
The Consumer segment's principal products are toiletries and hygienic
products, including dental and baby care products, first aid products,
nonprescription drugs, sanitary protection products and adult incontinence
products. Major brands include ACT Fluoride Rinse; BAND-AID Brand Adhesive
Bandages; CAREFREE Panty Shields; 'o.b.' Tampons; CLEAN & CLEAR Skin Care
Products; SHOWER TO SHOWER toiletries products; STAYFREE and SURE & NATURAL
sanitary protection products; IMODIUM A-D, an antidiarrheal; JOHNSON'S baby
products; MONISTAT 7, an over-the counter remedy for vaginal yeast infections;
MYLANTA gastrointestinal products from the Johnson & Johnson and Merck & Co.,
Inc. joint venture; PEDIACARE children's cold and allergy medications; PENATEN
and NATUSAN baby toiletries; PIZ BUIN and SUNDOWN sun care products; PREVENT
and REACH toothbrushes; SERENITY incontinence products; and the broad family of
TYLENOL acetaminophen products. These products are marketed principally to the
general public and distributed both to wholesalers and directly to independent
and chain retail outlets.
2
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PHARMACEUTICAL
The Pharmaceutical segment's principal worldwide franchises are in the
allergy and asthma, antifungal, central nervous system, contraceptive,
dermatology, gastrointestinal, immunobiology and biotech fields. These
products are distributed both directly and through wholesalers for use by
health care professionals and the general public. Prescription drugs include
DURAGESIC, a transdermal patch for chronic pain; EPREX (sold in the U.S. as
PROCRIT), a biotechnology derived version of the human hormone erythropoietin,
which stimulates red blood cell production; ERGAMISOL, a colon cancer drug;
FLOXIN, an antibacterial; HISMANAL, the once-a-day less sedating antihistamine;
IMODIUM, an antidiarrheal; LEUSTATIN, for hairy cell leukemia; MOTILIUM, a
gastrointestinal mobilizer; NIZORAL, SPORANOX and TERAZOL, antifungals;
ORTHOCLONE OKT-3, for reversing the rejection of kidney transplants;
ORTHO-NOVUM group of oral contraceptives; PREPULSID (sold in the U.S. as
PROPULSID), a gastrointestinal prokinetic; and RETIN-A, a dermatological cream
for acne.
PROFESSIONAL
The Professional segment includes suture and mechanical wound closure
products, less-invasive surgical instruments, dental products, diagnostic
products, medical equipment and devices, ophthalmic products, surgical
instruments, joint replacements and products for wound management and infection
prevention. These products are used principally in the professional fields by
physicians, dentists, nurses, therapists, hospitals, diagnostic laboratories
and clinics. Distribution to these markets is done both directly and through
surgical supply and other dealers.
INTERNATIONAL
The international business of Johnson & Johnson is conducted by
subsidiaries manufacturing in 43 countries outside the United States and
selling in most countries of the world. The products made and sold in the
international business include many of those described above under
"Business--Consumer, Pharmaceutical and Professional." However, the principal
markets, products and methods of distribution in the international business
vary with the country and the culture. The products sold in the international
business include not only those which were developed in the United States but
also those which were developed by subsidiaries abroad.
Investments and activities in some countries outside the United States are
subject to higher risks than comparable domestic activities because the
investment and commercial climate is influenced by restrictive economic
policies and political uncertainties.
RAW MATERIALS
Raw materials essential to Johnson & Johnson's business are generally
readily available from multiple sources.
3
<PAGE> 5
PATENTS AND TRADEMARKS
Johnson & Johnson has made a practice of obtaining patent protection on
its products and processes where possible. Johnson & Johnson owns or is
licensed under a number of patents relating to its products and manufacturing
processes, which in the aggregate are believed to be of material importance in
the operation of its business. However, it is believed that no single patent
or related group of patents is material in relation to Johnson & Johnson as a
whole.
Johnson & Johnson has made a practice of selling its products under
trademarks and of obtaining protection for these trademarks by all available
means. Johnson & Johnson's major trademarks are protected by registration in
the United States and other countries where its products are marketed. Johnson
& Johnson considers these trademarks in the aggregate to be of material
importance in the operation of its business.
SEASONALITY
Worldwide sales do not reflect any significant degree of seasonality;
however spending has been heavier in the fourth quarter of each year than in
other quarters. This reflects increased spending decisions, principally for
advertising and research grants.
COMPETITION
In each of its segments, Johnson & Johnson companies compete with
companies both large and small, located in the United States and abroad.
Competition is strong in all segments without regard to the number and size of
the competing companies involved. Competition in research, involving the
development of new products and processes and the improvement of existing
products and processes, is particularly significant and results from time to
time in product and process obsolescence. The development of new and improved
products is important to Johnson & Johnson's success in all areas of its
business. This competitive environment requires substantial investments in
continuing research and in multiple sales forces. In addition, the winning and
retention of customer acceptance of Johnson & Johnson's consumer products
involve heavy expenditures for advertising, promotion and selling.
RESEARCH
Research activities are important to all segments of Johnson & Johnson's
business. Major research facilities are located not only in the United States
but also in Australia, Belgium, Brazil, Canada, Switzerland, the United Kingdom
and Germany. The costs of Johnson & Johnson's worldwide research activities
relating to the development of new products, the improvement of existing
products, technical support of products and compliance with governmental
regulations for the protection of the consumer amounted to $1,182; $1,127 and
$980 million for fiscal years 1993, 1992 and 1991, respectively. These costs
are charged directly to income in the year in which incurred. All research was
sponsored by Johnson & Johnson.
ENVIRONMENT
During the past year Johnson & Johnson was subject to a variety of Federal,
state and local environmental protection measures. Johnson & Johnson believes
that its operations comply in all material respects with applicable
environmental laws and regulations. Johnson & Johnson's compliance with these
requirements did not and is not expected to have a material effect upon its
capital expenditures, earnings or competitive position.
4
<PAGE> 6
REGULATION
Most of Johnson & Johnson's business is subject to varying degrees of
governmental regulation in the countries in which operations are conducted, and
the general trend is toward regulation of increasing stringency. In the United
States, the drug, device, diagnostics and cosmetic industries have long been
subject to regulation by various federal, state and local agencies, primarily
as to product safety, efficacy, advertising and labeling. The exercise of
broad regulatory powers by the Food and Drug Administration (the "FDA")
continues to result in increases in the amounts of time, testing and
documentation required for FDA clearance of new drugs and devices and a
corresponding increase in the expense of product introduction. In addition,
reapproval and reporting requirements with respect to broad classes of medical
devices and diagnostics may result in an increase in the expense required to
maintain some existing products on the market. Similar trends toward product
and process regulation are also evident in a number of major countries outside
of the United States, especially in the European Economic Community where
efforts are continuing to harmonize the internal regulatory systems.
The costs of human health care have been and continue to be a subject of
study and investigation by governmental agencies and legislative bodies in the
United States and other countries; most recently in the United States by the
Administration's health reform task force. In the United States, attention has
been focused on drug prices and profits and programs to encourage doctors to
write prescriptions that can or must be filled with generic substitutes rather
than with drugs bearing a specified trademark. It is likely that increased
attention will be paid to drug pricing and appropriate drug utilization. For
example, the 1990 Omnibus Budget Reconciliation Act included a provision
requiring pharmaceutical companies to rebate to states a portion of the
revenues from pharmaceutical products dispensed to state Medicaid recipients.
The Veterans Health Care Act of 1992 granted state and local facilities
receiving Public Health Service Funds the right to purchase drugs at Medicaid
prices. The same Act mandated discount prices for drug sales to the Department
of Veterans Affairs and other Federal Supply Schedule purchasers.
Further, the Federal government has established a diagnosis related
group ("DRG") payment system for certain institutional services provided under
Medicare or Medicaid. The DRG system entitles an institution to a fixed amount
(based on discharge diagnosis) for operating costs incurred in treatment of
each Medicare or Medicaid beneficiary. Under prior law, payments for such
services had been predicated almost entirely on reimbursement of the allowable
historical costs of the individual hospital or health care facility providing
the services. The DRG payment system has resulted in increased incentives for
health care facilities to limit or control expenditures for many of the
products sold by Johnson & Johnson. Johnson & Johnson encounters regulations
and legislation similar to the foregoing in most of the countries where it does
business.
The regulatory agencies under whose purview Johnson & Johnson operates
have administrative powers that may subject Johnson & Johnson to such actions
as product recalls, seizure of products and other civil and criminal sanctions.
In some cases Johnson & Johnson may deem it advisable to initiate product
recalls voluntarily.
5
<PAGE> 7
Item 2. PROPERTIES
Johnson & Johnson and its worldwide subsidiaries operate 163 manufacturing
facilities occupying approximately 15 million square feet of floor space.
The manufacturing facilities are used by the industry segments of Johnson
& Johnson's business approximately as follows:
Square Feet
Segment (in thousands)
------- --------------
Consumer...................................... 6,223
Pharmaceutical................................ 2,730
Professional.................................. 6,583
------
Worldwide total......................... 15,536
======
Within the United States, 12 facilities are used by the Consumer segment,
8 by the Pharmaceutical segment and 46 by the Professional segment. Johnson &
Johnson's manufacturing operations outside the United States are often
conducted in facilities which serve more than one segment of the business.
The locations of the manufacturing facilities by major geographic areas of
the world are as follows:
Number of Square Feet
Geographic Area Facilities (in thousands)
--------------- ---------- --------------
United States....................... 61 7,605
Europe.............................. 43 3,572
Western Hemisphere excluding U.S.A.. 20 2,345
Africa, Asia and Pacific............ 39 2,014
--- ------
Worldwide total............... 163 15,536
=== ======
In addition to the manufacturing facilities discussed above, Johnson &
Johnson maintains numerous office and warehouse facilities throughout the
world. Research facilities are also discussed under "Business--Research."
Johnson & Johnson generally seeks to own its manufacturing facilities,
although some, principally in locations abroad, are leased. Office and
warehouse facilities are often leased.
Johnson & Johnson's properties are maintained in good operating condition
and repair and are well utilized.
For information regarding lease obligations see Note 9 under "Johnson &
Johnson and Subsidiaries--Notes to Consolidated Financial Statements" on page
34 of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1993.
Segment information on additions to Johnson & Johnson's property, plant and
equipment is contained on page 41 of Johnson & Johnson's Annual Report to
Stockholders for fiscal year 1993.
6
<PAGE> 8
Item 3. LEGAL PROCEEDINGS
The information set forth in Note 19 "Pending Legal Proceedings" on page
39 of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1993 is
incorporated herein by reference.
The Company or its subsidiaries are parties to a number of administrative
and judicial environmental proceedings, including proceedings brought under the
Comprehensive Environmental Response, Compensation, and Liability Act, commonly
known as Superfund, and comparable state laws. The primary relief sought in
these proceedings is the cost of past and future remediation. While it is not
feasible to predict or determine the outcome of these proceedings, in the
opinion of the Company, such proceedings should not ultimately result in any
liability which would have a material adverse effect on the operations or
financal position of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the executive officers of Johnson & Johnson as of March
15, 1994, each of whom has been an employee of the Company or its affiliates
during the past five years, except as otherwise noted. There are no family
relationships between any of the executive officers, and there is no
arrangement or understanding between any executive officer and any other person
pursuant to which the executive officer was selected. At the annual meeting of
the Board of Directors which follows the Annual Meeting of Stockholders
executive officers are elected by the Board to hold office for one year and
until their respective successors are elected and qualified, or until earlier
resignation or removal.
Information with regard to the directors of the Company, including those
of the following executive officers who are directors, is incorporated by
reference to pages 2 through 7 of Johnson & Johnson's Proxy Statement dated
March 10, l994.
7
<PAGE> 9
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Robert E. Campbell 60 Vice-Chairman, Board of
Directors; Chairman, Professional
Sector Operating Committee; Member,
Executive Committee
Roger S. Fine 51 Member, Executive Committee;
Vice President, Administration (a)
George S. Frazza 60 Member, Executive Committee;
Vice President, General Counsel
Clark H. Johnson 58 Member, Executive Committee;
Vice President, Finance
Ralph S. Larsen 55 Chairman, Board of Directors
and Chief Executive Officer;
Chairman, Executive Committee
Peter N. Larson 54 Chairman, Consumer Sector Operating
Committee; Member, Executive
Committee (b)
Robert N. Wilson 53 Vice-Chairman, Board of Directors;
Chairman, Pharmaceutical Sector
Operating Committee; Member,
Executive Committee
</TABLE>
_________________
(a) Mr. R. S. Fine joined the Company in 1974 and became Assistant General
Counsel in 1978 and Associate General Counsel in 1984. He became a
Member of the Executive Committee and Vice President, Administration in
1991.
(b) Mr. P. N. Larson joined the Company in 1991 as a Company Group Chairman.
He became Chairman of a Sector Operating Committee and a Member of the
Executive Committee in 1992. Prior to joining the Company in 1991, Mr.
P. N. Larson was a member of a partnership managing consumer businesses.
He had previously been employed by Kimberly-Clark Corporation since 1978
in a variety of assignments, including President of their Health Care
Sector and member of their Board of Directors.
8
<PAGE> 10
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information called for by this item is incorporated herein by
reference to the material captioned "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Common Stock Market Prices and
Cash Dividends Paid " on page 24 of Johnson & Johnson's Annual Report to
Stockholders for fiscal year 1993.
Item 6. SELECTED FINANCIAL DATA
The information called for by this item is incorporated herein by
reference to the material captioned "Summary of Operations and Statistical Data
1983-1993" on page 42 of Johnson & Johnson's Annual Report to Stockholders for
fiscal year 1993.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information called for by this item is incorporated herein by
reference to the material captioned "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Overview, Sales and Earnings,
Costs and Expenses, Liquidity and Capital Resources and Changing Prices and
Inflation" on pages 23 through 25, of Johnson & Johnson's Annual Report to
Stockholders for fiscal year 1993.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is incorporated herein by
reference to the consolidated financial statements and the notes thereto and
the material captioned "Independent Auditor's Report", on pages 29 through 40
of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1993.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to executive officers is presented at the end of
Part I hereof. Information with respect to directors is incorporated herein by
reference to the material captioned "Election of Directors--Nominees" on pages
2 through 7 of Johnson & Johnson's proxy statement dated March 10, 1994.
9
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Item 11. EXECUTIVE COMPENSATION
The information called for by this item is incorporated herein by
reference to the material captioned "Election of Directors--Directors' Fees,
Committees and Meetings" and "Executive Compensation" on pages 8 and 13 through
16 of Johnson & Johnson's proxy statement dated March 10, 1994.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this item is incorporated herein by
reference to the material captioned " Information--Principal Stockholder" and
"Election of Directors--Nominees and Stock Ownership/Control" on pages 2
through 8 of Johnson & Johnson's proxy statement dated March 10, 1994.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements to be included in this report are
incorporated in Part II, Item 8 hereof by reference to Johnson &
Johnson's Annual Report to Stockholders for fiscal year 1993.
2. Financial Statement Schedules
V Property, Plant and Equipment
VI Accumulated Depreciation of Property, Plant and Equipment
VIII Reserves
IX Short Term Borrowings
X Supplementary Income Statement Information
Schedules other than those listed above are omitted because they
are not required or are not applicable.
3. Exhibits Required to be Filed by Item 601 of Regulation S-K
The information called for by this paragraph is incorporated herein
by reference to the Exhibit Index of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
10
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JOHNSON & JOHNSON AND SUBSIDIARIES
SCHEDULE V-PROPERTY, PLANT AND EQUIPMENT
Fiscal Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(Dollars in Millions)
<TABLE>
<CAPTION>
Balance at Retirements Other Changes Balance
Beginning Additions Or Sales --------------- at End
Classification of Period At Cost (Note A) Debit Credit of Period
-------------- --------- ------- -------- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1993
- ----
Land and land improvements $ 262 23 4 2(C) 276
3(D)
Buildings and building equipment 2,226 255 56 7(B) 49(D) 2,389
6(C)
Machinery and equipment 3,143 697 323 8(B) 4(C) 3,454
67(D)
Construction in progress 672 - 1 7(D) 664
------ ----- --- -- --- -----
$6,303 975 384 21 132 6,783
====== ===== === == === =====
1992
- ----
Land and land improvements $ 245 24 2 1(C) 6(D) 262
Buildings and building equipment 2,049 309 59 65(D) 2,226
8(C)
Machinery and equipment 2,762 721 256 6(C) 93(D) 3,143
3(B)
Construction in progress 635 49 - 1(C) 13(D) 672
------ ----- --- -- --- -----
$5,691 1,103 317 11 185 6,303
====== ===== === == === =====
1991
- ----
Land and land improvements $ 245 14 14 1(D) 1(C) 245
Buildings and building equipment 1,890 238 79 1(C) 1(D) 2,049
Machinery and equipment 2,474 588 302 3(B) 1(C) 2,762
Construction in progress 489 147 - 1(C) 2(D) 635
------ ----- --- -- --- -----
$5,098 987 395 6 5 5,691
====== ===== === == === =====
</TABLE>
Note A - Includes write-off of fully depreciated assets.
Note B - Represents assets of companies acquired during the period.
Note C - Represents transfers between account classifications.
Note D - Represents the cumulative currency translation adjustment.
11
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JOHNSON & JOHNSON AND SUBSIDIARIES
SCHEDULE VI-ACCUMULATED DEPRECIATION
OF PROPERTY, PLANT AND EQUIPMENT
Fiscal Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(Dollars in Millions)
<TABLE>
<CAPTION>
Deductions
from
Reserve
Additions ------------
Charged Retirements,
Balance at to Costs Renewals and Other Changes Balance
Beginning and Replacements ---------------- at End
Classification of Period Expenses (Note A) Debit Credit of Period
-------------- --------- -------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1993
- ----
Land and land improvements $ 52 5 16 41
Buildings and building equipment 754 106 36 17(C) 1(B) 808
1(B)
Machinery and equipment 1,382 442 266 29(C) 1,528
------ --- --- -- --- -----
$2,188 553 318 47 1 2,377
====== === === == === =====
1992
- ----
Land and land improvements $ 35 20 2 1(C) 52
Buildings and building equipment 714 101 45 20(C) 4(B) 754
4(B)
Machinery and equipment 1,275 378 224 43(C) 1,382
------ --- --- -- --- -----
$2,024 499 271 68 4 2,188
====== === === == === =====
1991
- ----
Land and land improvements $ 34 4 3 35
1(B)
Buildings and building equipment 650 94 32 1(C) 714
Machinery and equipment 1,167 340 234 1(B) 3(C) 1,275
------ --- --- -- --- -----
$1,851 438 269 1 5 2,024
====== === === == === =====
</TABLE>
Note A - Includes write-off of fully depreciated assets.
Note B - Represents transfers between account classifications.
Note C - Represents the cumulative currency translation adjustment.
12
<PAGE> 14
The following estimated useful lives have been used as a basis for the
calculation of depreciation on the significant portions of the respective
classes of assets:
<TABLE>
<CAPTION>
Years
-----------
<S> <C>
Land improvements...................................... 5 to 40
Buildings and building equipment....................... 10 to 50
Machinery and equipment................................ 3 to 15
Furniture and fixtures................................. 5 to 12
</TABLE>
The cost of improvements to leased properties is written off over the
terms of the respective leases or useful lives, whichever is shorter.
The cost of maintenance, repairs, and renewals is charged against income
in the year in which incurred, while the cost of betterments and replacements
is capitalized by charges to the respective asset accounts.
Upon retirement or other disposal of fixed assets, the cost and related
amount of accumulated depreciation or amortization are eliminated from the
asset and reserve accounts respectively. The difference, if any, between the
net asset value and the proceeds is adjusted to income. The cost of assets
still in use which have been fully depreciated is eliminated from the asset and
related reserve accounts.
13
<PAGE> 15
JOHNSON & JOHNSON AND SUBSIDIARIES
SCHEDULE VIII - RESERVES
Fiscal Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(Dollars in Millions)
<TABLE>
<CAPTION>
Additions(1)
Charged
Balance at to Costs Deductions from Reserves Balance
Beginning and ---------------------------- at End
of Period Expenses Description Amount of Period
--------- -------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C>
1993
- ----
Reserves deducted from
accounts receivable, trade
Reserve for doubtful
accounts $ 57 26 Write-offs less recoveries 24
Currency adjustments 3 56
Reserve for customer
rebates 60 406 Customer rebates allowed 379 87
Reserve for cash
discounts 26 245 Cash discounts allowed 244 27
---- --- --- ---
$143 677 650 170
==== === === ===
1992
- ----
Reserves deducted from
accounts receivable, trade
Reserve for doubtful
accounts $ 58 23 Write-offs less recoveries 20
Currency adjustments 4 57
Reserve for customer
rebates 51 343 Customer rebates allowed 334 60
Reserve for cash
discounts 27 232 Cash discounts allowed 233 26
---- --- --- ---
$136 598 591 143
==== === === ===
1991
- ----
Reserves deducted from
accounts receivable, trade
Reserve for doubtful
accounts $ 52 16 Write-offs less recoveries 10 58
Reserve for customer Customer rebates allowed 340
rebates 49 341 Currency adjustments (1) 51
Reserve for cash Cash discounts allowed 225
discounts 23 226 Currency adjustments (3) 27
---- --- --- ---
$124 583 571 136
==== === === ===
</TABLE>
(1) Charges related to customer rebates and cash discounts are reflected as
reductions of sales to customers.
q
14
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JOHNSON & JOHNSON AND SUBSIDIARIES
SCHEDULE IX - SHORT TERM BORROWINGS
Fiscal Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(Dollars in Millions)
<TABLE>
<CAPTION>
Weighted Weighted
Balance Average Maximum Average Average
at Interest Rate Amount Amount Interest Rate
Category Year-End At Year-End Outstanding Outstanding(B) During Year(C)
- -------- -------- ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
1993
- ----
Commercial Paper $ 126 3.2% $ 448 274 3.2%
Notes Payable (A) 436 8.2% 436 296 9.3%
------ ------ ------
Total $ 562 7.1% $ 884 570 6.4%
====== ====== ======
1992
- ----
Commercial Paper $ 263 3.4% $ 644 307 4.1%
Notes Payable (A) 327 12.4% 393 330 13.8%
------ ------ ------
Total $ 590 8.5% $1,037 637 9.1%
======= ====== ======
1991
- ----
Commercial Paper $ 65 4.2% $ 347 85 6.5%
Notes Payable (A) 393 10.9% 408 377 10.3%
------ ------ ------
Total $ 458 9.9% $ 755 462 9.6%
====== ====== ======
</TABLE>
Note A - Consists primarily of international notes payable to banks.
Note B - Reflects five quarter average balance.
Note C - Reflects five quarter average balance and related interest expense for
the year.
15
<PAGE> 17
JOHNSON & JOHNSON AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Fiscal Years Ended January 2, 1994, January 3, 1993 and December 29, 1991
(Dollars in Millions)
<TABLE>
<CAPTION>
Charges to Costs and Expenses
--------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs $202 $210 $203
Depreciation of property 553 499 438
Advertising media costs 753 694 675
Royalties Expense 165 132 106
</TABLE>
16
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: March 28, 1994 JOHNSON & JOHNSON
-----------------------------------------
(Registrant)
By /S/ R. S. Larsen
-----------------------------------------
R. S. Larsen, Chairman, Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been duly signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ R. S. Larsen Chairman,
- --------------------------- Board of Directors and
R. S. Larsen Chief Executive
Officer, and Director
(Principal
Executive Officer)
March 28, 1994
/S/ C. H. Johnson Vice President-Finance
- -------------------------- and Director
C. H. Johnson (Principal Financial
Officer)
March 31, 1994
/S/ A. W. Roulston Controller March 28, 1994
- --------------------------
A. W. Roulston
/S/ J. W. Black Director March 29, 1994
- --------------------------
J. W. Black
/S/ G. N. Burrow Director March 29, 1994
- --------------------------
G. N. Burrow
/S/ R. E. Campbell Director March 28, 1994
- --------------------------
R. E. Campbell
/S/ J. G. Cooney Director March 29, 1994
- --------------------------
J. G. Cooney
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ P.M. Hawley Director March 28, 1994
- --------------------------
P. M. Hawley
Director March , 1994
- --------------------------
A. D. Jordan
/s/ A. G. Langbo Director March 29, 1994
- --------------------------
A. G. Langbo
Director March , 1994
- -------------------------
J. S. Mayo
/s/ T. S. Murphy Director March 28, 1994
- --------------------------
T. S. Murphy
/s/ P. J. Rizzo Director March 29, 1994
- --------------------------
P. J. Rizzo
/s/ M. F. Singer Director March 28, 1994
- ---------------------------
M. F. Singer
/s/ R. B. Smith Director March 30, 1994
- --------------------------
R. B. Smith
/s/ R. N. Wilson Director March 28, 1994
- --------------------------
R. N. Wilson
</TABLE>
18
<PAGE> 20
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors of
Johnson & Johnson:
Our report on the consolidated financial statements of Johnson & Johnson
and subsidiaries has been incorporated by reference in this Form 10-K from the
Johnson & Johnson 1993 Annual Report to Stockholders and appears on page 40
therein. In connection with our audits of such financial statements, we have
also audited the related financial statement schedules listed in the index in
Item 14 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND
New York, New York
January 31, 1994
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in Registration
Statements No. 33-52260, 33-40294, 33-40295, 33-32875, 2-67443, 2-77153,
2-78905 and 33-7634 on Form S-8 and No. 33-47424 and 33-37040 on Form S-3 and
related Prospectuses of our report dated January 31, 1994 on our audits of the
consolidated financial statements and financial statement schedules of Johnson
& Johnson and subsidiaries as of January 2, 1994 and January 3, 1993, and for
each of the three years in the period ended January 2, 1994, which reports are
included or incorporated by reference in this Annual Report on Form 10-K.
COOPERS & LYBRAND
New York, New York
January 31, 1994
19
<PAGE> 21
EXHIBIT INDEX
Reg. S-K
Exhibit Table Description
Item No. of Exhibit
------------- -----------
3(a) Certificate of Amendment to the Restated Certificate of
Incorporation of the Company and Restated Certificate of
Incorporation, dated May 20, 1992 -- Incorporated herein
by reference to Exhibit 3(a) of the Registrant's Form 10-K
Annual Report for the year ended January 3, 1993.
3(b) By-Laws of the Company, as amended April 26, 1990 --
Incorporated herein by reference to Exhibit 3(b) of the
Registrant's Form 10-K Annual Report for the year ended
January 3, 1993.
10(a) 1991 Stock Option Plan -- Incorporated by reference to
Registration Statement No. 33-40294, Exhibit 4(a).*
10(b) 1986 Stock Option Plan (as amended) -- Incorporated herein
by reference to Exhibit 10(b) of the Registrant's Form
10-K Annual Report for the year ended January 3, 1993.*
10(c) 1981 Incentive Stock Option Plan (as amended) --
Incorporated herein by reference to Exhibit 10(c) of the
Registrant's Form 10-K Annual Report for the year ended
January 3, 1993.*
10(d) 1980 Stock Option Plan (as amended) -- Incorporated herein
by reference to Exhibit 10(d) of the Registrant's Form
10-K Annual Report for the year ended January 3, 1993.*
10(e) 1991 Stock Compensation Plan -- Incorporated herein by
reference to Exhibit 10(e) of the Registrant's Form 10-K
Annual Report for the year ended January 3, 1993.*
10(f) 1986 Stock Compensation Plan -- Incorporated herein by
reference to Exhibit 10(f) of the Registrant's Form 10-K
Annual Report for the year ended January 3, 1993.*
10(g) Domestic Deferred Compensation Plan -- Incorporated herein
by reference to Exhibit 10(g) of the Registrant's Form
10-K Annual Report for the year ended January 3, 1993.*
10(h) Supplemental Retirement Plan -- Incorporated herein by
reference to Exhibit 10(h) of the Registrant's Form 10-K
Annual Report for the year ended January 3, 1993.*
10(i) Executive Life Insurance Plan -- Incorporated herein by
reference to Exhibit 10(i) of the Registrant's Form 10-K
Annual Report for the year ended January 3, 1993.*
20
<PAGE> 22
11 -Calculation of Earnings Per Share -- Filed with this
document.
12 -Statement of Computation of Ratio of Earnings to Fixed
Charges -- Filed with this document.
13 -Annual report to stockholders for fiscal year 1993 (only
those portions incorporated by reference in this document
are deemed "filed") -- Filed with this document.
21 -Subsidiaries -- Filed with this document.
28 -Form 11-K for the Johnson & Johnson Savings Plan to be
filed on or before June 30, 1994.
* Management contracts and compensatory plans and arrangements required
to be filed as exhibits to this form pursuant to Item 14(c) of this
report.
A copy of any of the exhibits listed above will be provided without charge
to any stockholder submitting a written request specifying the desired
exhibit(s) to the Secretary at the principal executive offices of the Company.
21
<PAGE> 1
EXHIBIT 11
JOHNSON & JOHNSON AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE(A)
(Dollars and shares in millions except per share figures)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
January January December December December
2, 1994 3, 1993 29, 1991 30, 1990 31, 1989
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1. Net Earnings $ 1,787 1,030 1,461 1,143 1,082
------- ------- -------- -------- --------
2. Average number of shares outstanding
during the year 651.7 659.5 666.1 666.1 666.2
------- ------- -------- -------- --------
3. Earnings per share based upon average
outstanding shares (1 / 2) $ 2.74 1.56 2.19 1.72 1.62
======= ======= ======== ======== ========
4. Fully diluted earnings per share:
a. Average number of shares outstanding
during the year 651.7 659.5 666.1 666.1 666.2
b. Shares issuable under stock compensation
agreements at year-end .3 .7 .8 .8 .8
c. Shares reserved under the stock option plans
for which the market price at fiscal year-end
exceeds the option price 29.0 26.9 29.0 25.8 32.6
d. Aggregate proceeds to the Company from
the exercise of options in 4c 998 894 902 546 621
e. Market price of the Company's common
stock at fiscal year-end 44.88 50.50 57.25 35.88 29.63
f. Shares which could be repurchased under
the treasury stock method (4d / 4e) 22.2 17.7 15.8 15.2 21.0
g. Addition to average outstanding shares
(4b + 4c - 4f) 7.1 9.9 14.0 11.4 12.4
h. Shares for fully diluted earnings per share
calculation (4a + 4g) 658.8 669.4 680.1 677.5 678.6
======= ======= ======== ======== ========
i. Fully diluted earnings per share (1 / 4h) $ 2.71 1.54 2.15 1.69 1.59
======= ======= ======== ======== ========
</TABLE>
(A) All share and per share amounts have been adjusted for the two-for-one
stock split in 1992.
22
<PAGE> 1
EXHIBIT 12
JOHNSON & JOHNSON AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1)
(Dollars in Millions)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------
January January December December December
2, 1994 3, 1993 29, 1991 30, 1990(2) 31, 1989
------- ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Determination of Earnings:
Earnings Before Provision for
Taxes on Income and Cumulative
effect of Accounting Changes $ 2,332 2,207 2,038 1,623 1,514
Fixed Charges 211 210 209 275 214
------- ------- -------- ------- -------
Total Earnings as Defined $ 2,543 2,417 2,247 1,898 1,728
======= ======= ======== ======= =======
Fixed Charges and Other:
Rents $ 85 86 80 74 73
Interests 126 124 129 201 141
------- ------- -------- ------- -------
Fixed Charges 211 210 209 275 214
Capitalized Interest 48 53 46 41 41
------- ------- -------- ------- -------
Total Fixed Charges $ 259 263 255 316 255
======= ======= ======== ======= =======
Ratio of Earnings to Fixed Charges 9.82 9.19 8.81 6.01 6.78
======= ======= ======== ======= =======
</TABLE>
1) The ratio of earnings to fixed charges represents the historical ratio of
the Company and is calculated on a total enterprise basis. The ratio is
computed by dividing the sum of earnings before provision for taxes and
fixed charges (excluding capitalized interest) by fixed charges. Fixed
charges represent interest (including capitalized interest) and amortization
of debt discount and expense and the interest factor of all rentals,
consisting of an appropriate interest factor on operating leases.
2) 1990 earnings include Latin America non-recurring charges of $140 million.
Excluding the effect of these charges, the ratio of earnings to fixed
charges would have been 7.15.
23
<PAGE> 1
Management's Discussion and Analysis
of Results of Operations and Financial Condition
Overview
Record sales of $14.14 billion reinforced the Company's position as the largest
and most comprehensive health care company in the world. Despite continued
cost containment measures by our customers and government agencies in Europe,
notably Germany and Italy, and the progressive shift towards managed health
care in the U.S., sales growth in local currency was still solid. Almost two-
thirds of the operational sales gain represents strong unit growth. The
Company invested $1.2 billion in research and development, emphasizing its
commitment to achieving significant advances in health care through the
discovery and development of innovative products that save lives, enhance the
quality of life and are cost effective.
During 1993, the Company streamlined its business worldwide to make
the organization more cost effective. The Company has put in place many
initiatives in recent years. These have included the creation of programs to
share administrative, financial and information services among companies and
locations, mergers of operating companies, consolidation of manufacturing
locations, a voluntary early retirement program domestically and others. The
Company's work force has been reduced from 84,900 in 1992 to 81,600 in 1993, a
net reduction of 3,300, despite the addition of 900 employees from the recent
acquisition of RoC S.A., a consumer skin care products company in France.
In the United States and in countries around the world, the health
care system is being transformed. The Company feels it is well positioned to
take advantage of these changes due to its diversification in health care;
global reach; extensive research and development; dedicated employees; strong
Credo values and decentralized management.
Sales and Earnings
In 1993, worldwide sales increased 2.8% to $14.14 billion compared to increases
of 10.5% and 10.8% in 1992 and 1991, respectively. Excluding the impact of the
relatively stronger dollar in 1993 and 1991, and the weaker dollar in 1992
relative to international currencies, worldwide sales increased 7.0%, 10.0% and
11.7% in 1993, 1992 and 1991, respectively.
Chart 1: Bar graph showing Sales to Customers for the years 1984 through
1993. See appendix for a complete description.
Worldwide net earnings for 1993 were $1.79 billion, or $2.74 per
share. In 1992, the Company recorded a one-time after-tax charge of $595
million, or $.90 a share, due to the Company's adoption of three new accounting
standards for postretirement benefits, postemployment benefits, and income
taxes, resulting in 1992 worldwide net earnings of $1.03 billion, or $1.56 per
share. Worldwide net earnings for 1992, before these one-time charges, were
$1.63 billion, or $2.46 per share. Excluding the effect of these one-time
charges, worldwide net earnings and earnings per share for 1993 increased 10.0%
and 11.4% over 1992, respectively, while 1992 worldwide net earnings and
earnings per share increased 11.2% and 12.3% over 1991, respectively. In 1991,
worldwide net earnings and earnings per share increased 15.2% and 15.3% over
1990, excluding 1990 Latin America non-recurring charges of $125 million
after-tax, or $.19 per share.
Average shares of common stock outstanding in 1993 were 651.7 million
compared with 659.5 million and 666.1 million in 1992 and 1991, respectively.
<PAGE> 2
Chart 2: Bar graph showing Net Earnings for the years 1984 through 1993.
See appendix for a complete description.
Sales by domestic companies were $7.20, $6.90 and $6.25 billion in
1993, 1992 and 1991, respectively, representing an increase of 4.3% in 1993,
10.5% in 1992 and 15.1% in 1991. The increase in domestic sales in 1993 was
the result of new product launches in all three segments. In the United
States, the Federal Government mandated that, starting in 1991, the Company
must rebate to the states a portion of its sales on products dispensed to state
Medicaid recipients.
Sales by international companies were $6.94 billion in 1993, $6.85
billion in 1992 and $6.20 billion in 1991, representing increases of 1.2%,
10.5% and 6.8%, respectively. Excluding the impact of the relatively stronger
dollar in 1993 and 1991, and the weaker dollar in 1992 relative to
international currencies, international sales increased 9.6%, 9.5% and 8.6% in
1993, 1992 and 1991, respectively.
The Company achieved an annual compound growth rate of 9.0% for
worldwide sales for the ten-year period since 1983 with domestic and
international sales growing at rates of 7.1% and 11.4%, respectively. For the
same ten-year period, worldwide net earnings achieved an annual growth rate of
13.8%, while earnings per share grew at a rate of 15.7%. For the last five
years, annual compound growth rates for sales, net earnings and earnings per
share were 9.5%, 12.9% and 13.9%, respectively.
Common Stock Market Prices
The Company's common stock is listed on the New York Stock Exchange under the
symbol JNJ. The approximate number of stockholders of record at year-end 1993
was 96,100. The composite market price ranges for Johnson & Johnson common
stock during 1993 and 1992 were:
1993 1992
---------------- ---------------
High Low High Low
------- ------ ------ ------
First quarter $50 3/8 37 5/8 58 3/4 47
Second quarter 45 3/4 38 3/8 51 3/8 43
Third quarter 41 3/4 35 5/8 52 7/8 44 5/8
Fourth quarter 45 5/8 38 1/2 54 3/4 43 1/4
Year-end close 44 7/8 50 1/2
Cash Dividends Paid
Cash dividends paid in 1993 and in 1992 totaled $1.01 and $.89 per share,
respectively, an increase of 13.5% over 1992 and 15.6% over 1991. They were
distributed as follows:
1993 1992 1991
---- ---- ----
First quarter $ .23 .20 .17
Second quarter .26 .23 .20
Third quarter .26 .23 .20
Fourth quarter .26 .23 .20
---- ---- ----
Total $1.01 .89 .77
==== ==== ====
On January 4, 1994, the Board of Directors declared a regular cash dividend of
$.26 per share, paid on March 8, 1994 to stockholders of record on February 15,
1994.
The Company expects to continue the practice of paying regular cash
dividends.
Chart 3: Bar graph showing Net Earnings Per Share and Cash Dividends
Paid Per Share for the years 1984 through 1993. See appendix
for a complete description.
31
<PAGE> 3
Costs and Expenses
The percentage relationships of costs and expenses to sales for 1993, 1992 and
1991 were:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Employment costs 28.8% 29.4% 28.2%
Cost of materials and services 49.7 49.9 50.8
Depreciation and amortization of
property and intangibles 4.4 4.1 4.0
Taxes other than payroll 4.5 4.8 5.3
Cumulative effect of accounting
changes - 4.3 -
</TABLE>
Chart 4: Pie chart showing Distribution of Sales Revenues - 1993. See
appendix for a complete description.
Research activities represent a significant part of the Company's business.
These expenditures relate to the development of new products, the improvement
of existing products, technical support of products and compliance with
governmental regulations for the protection of the consumer. Worldwide costs
of research activities were as follows:
(Dollars in Millions) 1993 1992 1991
- --------------------- ---- ---- ----
Research expense $1,182 1,127 980
Percent increase over prior year 4.9% 15.0% 17.5%
Percent of sales 8.4% 8.2% 7.9%
Research expense as a percent of sales for the Pharmaceutical segment was
15.2%, 14.8% and 15.0% in 1993, 1992 and 1991, respectively, while averaging
5.2%, 5.1% and 4.8% in the other segments.
Chart 5: Bar graph showing Research Expense for the years 1984 through
1993. See appendix for a complete description.
Advertising expenses worldwide, which are comprised of television,
radio and print media, were $753 million in 1993, $694 million in 1992 and $675
million in 1991. Additionally, significant expenditures were incurred for
promotional activities such as couponing and performance allowances.
The Company believes that its operations comply in all material
respects with applicable environmental laws and regulations. The Company
or its subsidiaries are parties to a number of proceedings brought under the
Comprehensive Environmental Response, Compensation, and Liability Act, commonly
known as Superfund, and comparable state laws, in which the primary relief
sought is the cost of past and future remediation. While it is not feasible to
predict or determine the outcome of these proceedings, in the opinion of the
Company, such proceedings would not have a material adverse effect on the
financial position of the Company.
Worldwide sales do not reflect any significant degree of seasonality;
however, spending has been heavier in the fourth quarter of each year than in
other quarters. This reflects increased spending decisions, principally for
advertising and research grants.
32
<PAGE> 4
The Omnibus Budget Reconciliation Act of 1993 includes a change in
the tax code which will gradually reduce the benefit the Company receives from
its operations in Puerto Rico by 60% over the next five years. This
legislation will have an unfavorable impact on the Company's effective tax
rate of 2 to 3 percentage points. The worldwide effective income tax rate was
23.4% in 1993, 26.4% in 1992 and 28.3% in 1991. See page 33 for additional
information.
A summary of operations and related statistical data for the years 1983
- - 1993 can be found on page 42.
Liquidity and Capital Resources
Cash generated from operations and selected borrowings provide the major
sources of funds for the growth of the business, including working capital,
additions to property, plant and equipment and acquisitions. Cash and current
marketable securities totaled $476 million at the end of 1993 as compared with
$878 million at the end of 1992.
Total unused credit available to the Company approximates $2.4 billion,
including $735 million of credit commitments with various worldwide banks, $460
million of which expires on December 9, 1994 and $275 million on December 31,
1995.
During 1993, the Company issued $150 million of Medium Term Notes
(MTN's), with maturities of less than two years, and $250 million of 6.73%
Debentures due 2023 from a $1.25 billion shelf registration filed with the
Securities and Exchange Commission in 1992. At January 2, 1994, the Company had
$585 million remaining on its shelf registration. In addition, the Company
issued $95.4 million equivalent of 8.82% Italian Lire Notes due 2003. The
proceeds were used for general corporate purposes, including the refinancing of
maturing debt issues. Commercial paper borrowings were $126 million at the end
of 1993 and $263 million at the end of 1992.
Total borrowings at the end of both 1993 and 1992 were $2.4 billion
each year. In 1993 and 1992, net debt (net of cash and current marketable
securities) was 25.8% and 22.7% of net capital (stockholders' equity and net
debt), respectively. Total debt represented 30.2% and 31.7% of total capital
(stockholders' equity and total borrowings) in 1993 and 1992, respectively.
Stockholders' equity per share at the end of 1993 was $8.66 compared with $7.89
at year-end 1992, an increase of 9.8%.
Additions to property, plant and equipment amounting to $975, $1,103
and $987 million in 1993, 1992 and 1991, respectively, were made primarily to
increase the capacity of facilities for existing and new products. The Company
intends to continue this level of investment to support the business
operations. No material commitments for capital expenditures were outstanding
at the end of 1993.
During 1993, 1992 and 1991, certain businesses were acquired amounting
to $266, $47 and $125 million, respectively. See page 38 for additional
information.
The Company annually repurchases a sufficient amount of its common
stock in the open market to replace shares issued under various employee stock
plans. During 1993, the Company repurchased 3.0 million shares of its common
stock at a total cost of $132 million for use in the Company's employee
benefit plans; 1992 and 1991 repurchases for this purpose totaled 4.8 million
and 4.9 million shares at a cost of $240 million and $222 million,
respectively. In 1993 and 1992, the Company also repurchased 12.4 and 10.6
million shares of its common stock for general corporate purposes at a cost of
$500 million each year.
33
<PAGE> 5
Changing Prices and Inflation
Johnson & Johnson is aware that its products are used in a setting where, for
more than a decade, policy makers, consumers and businesses have expressed
concern about the rising cost of health care. In response to these concerns,
Johnson & Johnson has a long standing policy of pricing products responsibly.
For the period 1980-1991, in the United States, the weighted average compound
growth rate of Johnson & Johnson's price increases for health care products
(prescription and over-the-counter drugs, hospital and professional products)
was below the U.S. Consumer Price Index (CPI) for the period. That was true in
1992 and again in 1993.
Inflation rates, even though moderate in many parts of the world during
1993, continue to have an effect on worldwide economies and, consequently, on
the way companies operate. In the face of increasing costs, the Company strives
to maintain its profit margins through cost reduction programs, productivity
improvements and timely price increases.
Segments of Business
Financial information for the Company's three worldwide business segments is
summarized below. Refer to page 41 for additional information on segments of
business.
Chart 6: Bar graph showing Sales by Segment of Business for the years
1991 through 1993. See appendix for a complete description.
<TABLE>
<CAPTION>
Sales Increase
-------------------
(Dollars in Millions) 1993 1992 Amount Percent
- --------------------- ------- ------ ------ -------
<S> <C> <C> <C> <C>
Consumer $ 4,824 4,780 44 .9%
Pharmaceutical 4,490 4,340 150 3.5
Professional 4,824 4,633 191 4.1
------ ------ ---
Worldwide total $14,138 13,753 385 2.8%
====== ====== ===
</TABLE>
Chart 7: Bar graph showing Operating Profit by Segment of Business for
the years 1991 through 1993. See appendix for a complete
description.
<TABLE>
<CAPTION>
Percent of Sales
Operating Profit -------------------
(Dollars in Millions) 1993 1992 1993 1992
- --------------------- ------ ------ ---- ----
<S> <C> <C> <C> <C>
Consumer $ 521 501 10.8% 10.5%
Pharmaceutical 1,406 1,364 31.3 31.4
Professional 655 598 13.6 12.9
----- ------
Segments total 2,582 2,463 18.3 17.9
Expenses not
allocated to segments (250) (256) (1.8) (1.9)
----- -----
Earnings before taxes
on income and cumulative
effect of accounting
changes $2,332 2,207 16.5% 16.0%
===== ======
</TABLE>
34
<PAGE> 6
Consumer
The Consumer segment's principal products are toiletries and hygienic products,
including dental and baby care products, first aid products, nonprescription
drugs, sanitary protection products and adult incontinence products. Major
brands include ACT Fluoride Rinse; BAND-AID Brand Adhesive Bandages; CAREFREE
Panty Shields; 'o.b.' Tampons; CLEAN & CLEAR skin care products; SHOWER TO
SHOWER toiletries products; STAYFREE and SURE & NATURAL sanitary protection
products; IMODIUM A-D, an antidiarrheal; JOHNSON'S baby products; MONISTAT 7,
an over-the-counter remedy for vaginal yeast infections; MYLANTA
gastrointestinal products from the Johnson & Johnson and Merck & Co., Inc.
joint venture; PEDIACARE children's cold and allergy medications; PENATEN and
NATUSAN baby toiletries; PIZ BUIN and SUNDOWN sun care products; PREVENT and
REACH toothbrushes; SERENITY incontinence products; and the broad family of
TYLENOL acetaminophen products. These products are marketed principally to the
general public and distributed both to wholesalers and directly to independent
and chain retail outlets.
Consumer segment sales were $4.82 billion in 1993. Sales by domestic
companies accounted for 54.5% of the total segment and international
subsidiaries accounted for 45.5%. Domestic Consumer sales growth was slowed by
a sluggish retail environment and fierce competition faced by MONISTAT 7.
International Consumer sales reflected improvements in Latin America, Asia and
Africa, which offset a substantial decline in the U.S. dollar value of sales
from European operations.
Consumer segment sales in 1992 were $4.78 billion, an increase of 4.3%
over 1991. Domestic sales improved 6.0% in 1992, led by higher sales of
MONISTAT 7 and strong sales gains by the SERENITY and TYLENOL product lines.
International Consumer sales increased 2.3% in 1992, despite the adverse impact
of sluggish international economies.
Consumer segment sales in 1991 were $4.58 billion, an increase of 8.8%
over 1990. Domestic sales in 1991 improved 17.8% over 1990, led by the positive
impact of the MONISTAT 7 launch as an over-the-counter product, as well as an
outstanding performance by the expanded line of nonprescription cold and flu
medications under the TYLENOL brand. International Consumer sales were flat in
1991, reflecting a substantial decline in the U.S. dollar value of sales from
Brazilian operations, which offset sales improvements in Canada, Europe, Asia
and Africa.
Acquisitions made during 1993 and 1992 impacting the Consumer segment
are described on page 38.
Pharmaceutical
The Pharmaceutical segment represents over 50% of total operating profit. The
Pharmaceutical segment's principal worldwide franchises are in the allergy and
asthma, antifungal, central nervous system, contraceptive, dermatology,
gastrointestinal and immunobiology and biotech fields. These products are
distributed both directly and through wholesalers for use by health care
professionals and the general public.
35
<PAGE> 7
Prescription drugs include DURAGESIC, a transdermal patch for chronic
pain; EPREX (sold in the U.S. as PROCRIT), a biotechnology derived version of
the human hormone erythropoietin, which stimulates red blood cell production;
ERGAMISOL, a colon cancer drug; FLOXIN, an antibacterial; HISMANAL, the
once-a-day less sedating antihistamine; IMODIUM, an antidiarrheal; LEUSTATIN,
for hairy cell leukemia; MOTILIUM, a gastrointestinal mobilizer; NIZORAL,
SPORANOX and TERAZOL, antifungals; ORTHOCLONE OKT-3, for reversing the
rejection of kidney, heart and liver transplants; ORTHO-NOVUM group of oral
contraceptives; PREPULSID (sold in the U.S. as PROPULSID), a gastrointestinal
prokinetic; and RETIN-A, a dermatological cream for acne.
Johnson & Johnson markets more than 80 prescription drugs around the
world, with 60.5% of the sales generated outside the United States.
Twenty-five drugs sold by the Company had 1993 sales in excess of $50 million,
with 13 of them in excess of $100 million.
In 1993, Pharmaceutical segment sales increased 3.5% over 1992, to
$4.49 billion. This growth was led by sales gains from PREPULSID, PROPULSID,
SPORANOX, EPREX, PROCRIT, FLOXIN, LEUSTATIN and DURAGESIC. Domestic
Pharmaceutical sales advanced 7.4%, due to higher sales by Janssen and Ortho
Biotech. International sales, through Janssen Pharmaceutica, headquartered in
Belgium, and Cilag, were negatively impacted by the strength of the U.S. dollar
relative to international currencies as well as the pressure on pharmaceutical
prices in Germany and Italy.
In 1992, Pharmaceutical segment sales increased 14.4% over 1991, to
$4.34 billion. This growth reflected the continued market penetration of key
pharmaceuticals such as PREPULSID, EPREX, PROCRIT, FLOXIN, SPORANOX, DURAGESIC
and ORTHO-CYCLEN, an oral contraceptive introduced in 1992. Domestic
Pharmaceutical sales advanced 7.8%, due to higher sales by Janssen and Ortho
Biotech. International sales increased 18.8%, led by strong performances for
EPREX, PREPULSID and SPORANOX.
In 1991, Pharmaceutical segment sales increased 14.9% over 1990, to
$3.80 billion. Continued market penetration of key pharmaceuticals and the
introductions of DURAGESIC, FLOXIN and PROCRIT in the U.S. contributed to the
sales growth. Domestic Pharmaceutical sales advanced 16.4%, due to higher
sales by Janssen, Ortho Biotech and McNeil Pharmaceutical. International sales
increased 13.9%, despite a stronger U.S. dollar.
Significant research activities continued in Pharmaceutical segment
companies, increasing to $683 million in 1993, or $40 million over 1992. This
represents 15.2% of 1993 Pharmaceutical sales and a compound growth rate of
14.5% for the ten-year period since 1983. The pipeline for new products
continued to be healthy in 1993 as evidenced by six new drugs and new medical
indications approved by the U.S. FDA during the year. PROCRIT was introduced
for patients undergoing chemotherapy, ORTHOCLONE OKT-3 was approved for
reversing the rejection of heart and liver transplants, LEUSTATIN for hairy
cell leukemia, and PROPULSID for nighttime heartburn associated with
gastrointestinal esophageal reflux disease. In the fourth quarter of 1993, the
Company received U.S. FDA approval for LIVOSTIN, for allergic conjunctivitis,
and RISPERDAL, a new anti-psychotic medication.
Pharmaceutical research is led by two worldwide organizations, Janssen
Research Foundation headquartered in Belgium and the R.W. Johnson
Pharmaceutical Research Institute headquartered in the United States. Other
research involves the Immunobiology Research Institute of New Jersey, as well
as collaborations with the Scripps Clinic and Research Foundation in La Jolla,
California and the James Black Foundation in London, England.
36
<PAGE> 8
Professional
The Professional segment includes suture and mechanical wound closure products,
less-invasive surgical instruments, dental products, diagnostic products,
medical equipment and devices, ophthalmic products, surgical instruments, joint
replacements and products for wound management and infection prevention. These
products are used principally in the professional fields by physicians,
dentists, nurses, therapists, hospitals, diagnostic laboratories and clinics.
Distribution to these markets is done both directly and through surgical supply
and other dealers.
Of the total Professional segment sales in 1993, domestic companies
accounted for 58.0% and international subsidiaries 42.0%.
In 1993, Professional segment sales increased 4.1% over 1992, to $4.82
billion. Worldwide sales gains were led by LifeScan, Ethicon Endo-Surgery and
Vistakon. Domestic sales posted a 5.8% gain, aided by strong sales of PROTECTIV
catheter safety system products, the DINAMAP Plus vital signs monitor and
P.F.C. Hip and Knee orthopaedic joint reconstruction products. These gains
offset a decline in sales at Johnson & Johnson Medical, Inc., due to the
continued reduction in inventories at hospitals and distributors given the
uncertain health care environment. International sales rose 1.9%, despite the
adverse impact of the stronger U.S. dollar relative to international
currencies.
In 1992, Professional segment sales increased 13.9% over 1991, to
$4.63 billion. Domestic sales posted a 17.2% gain, and international sales
improved 9.8%. Ethicon Endo-Surgery, Vistakon, LifeScan, Ortho Diagnostic
Systems and Johnson & Johnson Orthopaedics led the segment with higher sales
volume gains in the United States and abroad.
In 1991, Professional segment sales increased 9.4% over 1990, to $4.07
billion. Domestic sales posted an 11.6% gain, and international sales improved
6.9%. Vistakon, Ethicon, LifeScan, Codman & Shurtleff and Johnson & Johnson
Orthopaedics led the segment with higher sales volume gains in the United
States and abroad.
Geographic Areas
The Company further categorizes its sales and operating profit by major
geographic area as presented for the years 1993 and 1992:
<TABLE>
<CAPTION>
Increase/(Decrease)
Sales -------------------
(Dollars in Millions) 1993 1992 Amount Percent
- --------------------- ------ ----- ------ -------
<S> <C> <C> <C> <C>
United States $ 7,203 6,903 300 4.3%
Europe 4,024 4,246 (222) (5.2)
Western Hemisphere excluding
U.S. 1,325 1,206 119 9.9
Africa, Asia and Pacific 1,586 1,398 188 13.4
------ ------ ---
Worldwide total $ 14,138 13,753 385 2.8%
====== ====== ===
</TABLE>
<TABLE>
<CAPTION>
Percent of Sales
Operating Profit ---------------
(Dollars in Millions) 1993 1992 1993 1992
- --------------------- ------ ----- ---- ----
<S> <C> <C> <C> <C>
United States $ 1,209 1,052 16.8% 15.2%
Europe 1,036 1,125 25.7 26.5
Western Hemisphere excluding
U.S. 156 132 11.8 10.9
Africa, Asia and Pacific 181 154 11.4 11.0
------- ------
Segments total $ 2,582 2,463 18.3% 17.9%
======= ======
</TABLE>
37
<PAGE> 9
International sales and operating profit were unfavorably impacted by the
translation of local currency operating results into U.S. dollars at lower
average exchange rates in 1993 than in 1992. International sales and operating
profit were favorably impacted by the translation of local currency operating
results into U.S. dollars at higher average exchange rates in 1992 than in
1991.
Operating profit reported above is before deduction of taxes on income
and certain income and expense items not allocated to segments, such as
interest expense, minority interests and general corporate income and expense.
See page 41 for additional information on geographic areas.
Chart 8: Bar graph showing Sales by Geographic Area of Business for the
years 1991 through 1993. See appendix for a complete
description.
Chart 9: Bar graph showing Operating Profit by Geographic Area of
Business for the years 1991 through 1993. See appendix for a
complete description.
Description of Business
The Company, employing 81,600 people worldwide, is engaged in the manufacture
and sale of a broad range of products in the health care field in many
countries of the world. The Company's primary interest, both historically and
currently, has been in products related to health and well-being.
The Company is organized on the principles of decentralized
management. The Executive Committee of Johnson & Johnson is the principal
management group responsible for the operations of the Company. In addition,
three Executive Committee members are Chairmen of Sector Operating Committees,
which are comprised of managers who represent key operations within the sector,
as well as management expertise in other specialized functions. These
Committees oversee and coordinate the activities of domestic and international
companies related to each of the Consumer, Pharmaceutical, Professional and
Diagnostic businesses. Operating management of each company is headed by a
President, General Manager or Managing Director who reports directly or through
a Company Group Chairman.
In line with this policy of decentralization, each international
subsidiary is, with some exceptions, managed by citizens of the country where
it is located. The Company's international business is conducted by
subsidiaries manufacturing in 43 countries outside the United States and
selling in most countries of the world.
In all its product lines, the Company competes with companies both
large and small, located in the U.S. and abroad. Competition is strong in all
lines without regard to the number and size of the competing companies
involved. Competition in research, involving the development of new products
and processes and the improvement of existing products and processes, is
particularly significant and results from time to time in product and process
obsolescence. The development of new and improved products is important to the
Company's success in all areas of its business. This competitive environment
requires substantial investments in continuing research and in multiple sales
forces. In addition, the winning and retention of customer acceptance of the
Company's consumer products involves heavy expenditures for advertising,
promotion and selling.
38
<PAGE> 10
CONSOLIDATED BALANCE SHEET Johnson & Johnson and Subsidiaries
<TABLE>
<CAPTION>
At January 2, 1994 and January 3, 1993
- --------------------------------------
(Dollars in Millions) (Note 1) 1993 1992
- ------------------------------ ------ ------
<S> <C> <C>
Assets
- ------
Current assets
Cash and cash equivalents (Notes 1 and 17) $ 372 745
Marketable securities, at cost (Note 17) 104 133
Accounts receivable, trade, less
allowances $170 (1992, $143) 2,107 1,855
Inventories (Notes 1 and 2) 1,717 1,742
Deferred taxes on income (Note 6) 399 327
Prepaid expenses and other receivables 518 621
------ ------
Total current assets 5,217 5,423
------ ------
Marketable securities, non-current,
at cost (Note 17) 437 355
Property, plant and equipment, net
(Notes 1 and 3) 4,406 4,115
Intangible assets, net (Notes 1 and 4) 925 716
Deferred taxes on income (Note 6) 484 506
Other assets 773 769
------ ------
Total assets $12,242 11,884
====== ======
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities
Loans and notes payable (Note 5) $ 915 1,032
Accounts payable 901 910
Accrued liabilities 1,283 1,302
Taxes on income 113 183
------ ------
Total current liabilities 3,212 3,427
------ ------
Long-term debt (Note 5) 1,493 1,365
Deferred tax liability (Note 6) 122 91
Certificates of extra compensation (Note 11) 91 94
Other liabilities 1,756 1,736
Stockholders' equity
Preferred stock-without par value
(authorized and unissued 2,000,000 shares) - -
Common stock-par value $1.00 per share
(authorized 1,080,000,000 shares; issued 767,372,000
and 767,366,000 shares) 767 767
Note receivable from employee stock ownership
plan (Note 14) (84) (92)
Cumulative currency translation adjustments
(Note 7) (338) (146)
Retained earnings 7,727 6,648
------ ------
8,072 7,177
Less common stock held in treasury, at cost
(124,391,000 and 111,970,000 shares) 2,504 2,006
------ ------
Total stockholders' equity 5,568 5,171
------ ------
Total liabilities and stockholders' equity $12,242 11,884
====== ======
See Notes to Consolidated Financial Statements
</TABLE>
39
<PAGE> 11
CONSOLIDATED STATEMENT OF EARNINGS
Johnson & Johnson and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in Millions Except Per Share Figures) (Note 1)
------------------------------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Sales to customers $14,138 13,753 12,447
------ ------ ------
Cost of products sold 4,791 4,678 4,204
Selling, marketing and administrative
expenses 5,771 5,671 5,099
Research expense 1,182 1,127 980
Interest income (80) (93) (88)
Interest expense, net of portion
capitalized (Note 3) 126 124 129
Other expense, net 16 39 85
------ ------ ------
11,806 11,546 10,409
------- ------ ------
Earnings before provision for taxes
on income and cumulative effect of
accounting changes 2,332 2,207 2,038
Provision for taxes on income (Note 6) 545 582 577
------ ------ ------
Earnings before cumulative effect of
accounting changes 1,787 1,625 1,461
Cumulative effect of accounting changes,
net of tax (Notes 6, 15 and 16) - (595) -
------ ------ ------
Net earnings $ 1,787 1,030 1,461
====== ====== ======
Net earnings per share (Note 1):
Before cumulative effect of accounting
changes $ 2.74 2.46 2.19
Cumulative effect of accounting changes,
net of tax (Notes 6, 15 and 16) - (.90) -
------ ------ ------
Net earnings per share $ 2.74 1.56 2.19
====== ====== ======
</TABLE>
40
<PAGE> 12
CONSOLIDATED STATEMENT OF COMMON STOCK, RETAINED EARNINGS AND TREASURY STOCK
(Dollars in Millions; Shares in Thousands) (Notes 1 & 10)
<TABLE>
<CAPTION>
Common
Stock Treasury
Issued Stock
------------------ Retained -------------------
Shares Amount Earnings Shares Amount
------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C>
Balance,
December 30, 1990 767,354 $767 $5,480 101,201 $1,488
======= === ===== ======= =====
Net earnings - - 1,461 - -
Cash dividends paid
(per share: $.77) - - (513) - -
Employee compensation and
stock option plans - - (115) (5,045) (222)
Repurchase of common stock - - - 4,869 222
Other 2 - - - -
------- --- ----- ------- -----
Balance,
December 29, 1991 767,356 767 6,313 101,025 1,488
======= === ===== ======= =====
Net earnings - - 1,030 - -
Cash dividends paid
(per share: $.89) - - (587) - -
Employee compensation and
stock option plans - - (108) (4,417) (222)
Repurchase of common stock - - - 15,362 740
Other 10 - - - -
------- --- ----- ------- -----
Balance,
January 3, 1993 767,366 767 6,648 111,970 2,006
======= === ===== ======= =====
Net earnings - - 1,787 - -
Cash dividends paid
(per share: $1.01) - - (659) - -
Employee compensation and
stock option plans - - (49) (3,066) (134)
Repurchase of common stock - - - 15,487 632
Other 6 - - - -
------- --- ----- ------- -----
Balance,
January 2, 1994 767,372 $767 $7,727 124,391 $2,504
======= === ===== ======= =====
</TABLE>
See Notes to Consolidated Financial Statements
41
<PAGE> 13
CONSOLIDATED STATEMENT OF CASH FLOWS
Johnson & Johnson and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in Millions) (Note 1) 1993 1992 1991
------- ----- ------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings $ 1,787 1,030 1,461
Adjustments to reconcile net earnings
to cash flows:
Cumulative effect of accounting changes - 595 -
Depreciation and amortization of property
and intangibles 617 560 493
Tax deferrals (19) (8) (22)
Changes in assets and liabilities, net
of effects from acquisition of businesses:
Increase in accounts receivable, trade,
less allowances (310) (211) (244)
Increase in inventories (29) (142) (165)
(Decrease) increase in accounts payable
and accrued liabilities (3) 345 156
Decrease (increase) in other current and
non-current assets 102 (199) (328)
Increase in other current and non-current
liabilities 23 179 324
------ ------ ------
Net cash flows from operating activities 2,168 2,149 1,675
====== ====== ======
Cash flows from investing activities
Additions to property, plant and equipment (975) (1,103) (987)
Proceeds from the disposal of assets 66 91 257
Acquisition of businesses, net of cash
acquired (Note 18) (266) (47) (125)
Other, principally marketable securities (86) (114) (173)
------ ------ ------
Net cash used by investing activities (1,261) (1,173) (1,028)
====== ====== ======
Cash flows from financing activities
Dividends to stockholders (659) (587) (513)
Repurchase of common stock (632) (740) (222)
Proceeds from short-term debt 297 409 726
Retirement of short-term debt (336) (237) (1,125)
Proceeds from long-term debt 511 560 473
Retirement of long-term debt (468) (264) (278)
Proceeds from the exercise of stock options 43 74 66
----- ------ ------
Net cash used by financing activities (1,244) (785) (873)
====== ===== =====
Effect of exchange rate changes on cash
and cash equivalents (36) (35) (11)
------ ----- -----
(Decrease) increase in cash and cash
equivalents (373) 156 (237)
Cash and cash equivalents, beginning of
year (Note 1) 745 589 826
------- ------ ------
Cash and cash equivalents, end of year
(Note 1) $ 372 745 589
======= ====== ======
Supplemental cash flow data
Cash paid during the year for:
Interest, net of portion capitalized $ 118 124 127
Income taxes 665 561 629
Supplemental schedule of noncash investing
and financing activities
Treasury stock issued for employee
compensation and stock option plans, net
of cash proceeds $ 95 163 182
</TABLE>
See Notes to Consolidated Financial Statements
42
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Johnson & Johnson and Subsidiaries
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Johnson & Johnson
and subsidiaries. Intercompany accounts and transactions are eliminated.
Cash Equivalents
The Company considers securities with maturities of three months or less, when
purchased, to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (determined principally by the
first-in, first-out method) or market.
Depreciation of Property
The Company utilizes the straight-line method of depreciation for financial
statement purposes for all additions to property, plant and equipment placed in
service after January 1, 1989. Depreciation of property, plant and equipment
for assets placed in service prior to January 1, 1989 is generally determined
using an accelerated method.
Intangible Assets
The excess of the cost over the fair value of net assets of purchased
businesses is recorded as goodwill and is amortized on a straight-line basis
over periods of 40 years or less. The cost of other acquired intangibles is
amortized on a straight-line basis over their estimated useful lives.
Income Taxes
The Company intends to continue to reinvest its undistributed international
earnings to expand its international operations; therefore, no tax has been
provided to cover the repatriation of such undistributed earnings. At January
2, 1994 and January 3, 1993, the cumulative amount of undistributed
international earnings was approximately $3.0 billion and $2.5 billion,
respectively.
Net Earnings Per Share
Net earnings per share are calculated using the average number of shares
outstanding during each year. Shares issuable under stock option and
compensation plans would not materially reduce net earnings per share. All
share and per share amounts have been restated to retroactively reflect prior
year stock splits.
Annual Closing Date
The Company follows the concept of a fiscal year which ends on the Sunday
nearest to the end of the month of December. Normally each fiscal year
consists of 52 weeks, but every five or six years, as was the case in 1992, the
fiscal year consists of 53 weeks.
43
<PAGE> 15
2. Inventories
At the end of 1993 and 1992, inventories comprised:
(Dollars in Millions) 1993 1992
----- -----
Raw materials and supplies $ 448 415
Goods in process 485 457
Finished goods 784 870
----- -----
$1,717 1,742
===== =====
3. Property, Plant and Equipment
At the end of 1993 and 1992, property, plant and equipment at cost and
accumulated depreciation comprised:
(Dollars in Millions) 1993 1992
---- -----
Land and land improvements $ 276 262
Buildings and building equipment 2,389 2,226
Machinery and equipment 3,454 3,143
Construction in progress 664 672
----- -----
6,783 6,303
Less accumulated depreciation 2,377 2,188
----- -----
$4,406 4,115
===== =====
The Company capitalizes interest expense as part of the cost of construction of
facilities and equipment. Interest expense capitalized in 1993, 1992 and 1991
was $48, $53 and $46 million, respectively.
Upon retirement or other disposal of fixed assets, the cost and
related amount of accumulated depreciation or amortization are eliminated from
the asset and reserve accounts, respectively. The difference, if any, between
the net asset value and the proceeds is adjusted to income.
4. Intangible Assets
At the end of 1993 and 1992, intangible assets, consisting primarily of patents
and goodwill, comprised:
(Dollars in Millions) 1993 1992
---- -----
Intangible assets $1,255 1,012
Less accumulated amortization 330 296
----- -----
$ 925 716
===== =====
5. Borrowings
The Company has access to substantial sources of funds at numerous banks
worldwide. Total unused credit available to the Company approximates $2.4
billion, including $735 million of credit commitments with various worldwide
banks, $460 million of which expire on December 9, 1994 and $275 million on
December 31, 1995. Borrowings under the credit line agreements will bear
interest based on either bids provided by the banks or the prime rate, London
Interbank Offered Rates (LIBOR) or Certificate of Deposit rates, plus
applicable margins. Commitment fees under the agreements are not material.
44
<PAGE> 16
In 1992, the Company filed a shelf registration with the Securities
and Exchange Commission, and in combination with $100 million remaining from a
prior shelf registration, initiated a second series of its Medium Term Note
Program (MTN) for the issuance of up to $1,350 million of unsecured debt
securities and warrants to purchase debt securities. During 1993 and 1992,
$150 and $165 million of MTN's were issued, respectively. In addition, in
1993, the Company issued $250 million of 6.73% Debentures due 2023 from the
shelf registration and $95.4 million equivalent of 8.82% Italian Lire Notes due
2003. The proceeds were used for general corporate purposes, including the
refinancing of maturing debt issues. At January 2, 1994, the Company had $585
million remaining on its shelf registration.
Short-term borrowings amounted to $915 million at the end of 1993.
These borrowings are composed of $126 million of U.S. commercial paper, $101
million equivalent 7% Swiss Franc Notes due 1994, $240 million of MTN's and
$448 million of local borrowings principally by international subsidiaries.
Long-term debt comprised:
<TABLE>
<CAPTION>
(Dollars in Millions) 1993 1992
- --------------------- ---- -----
<S> <C> <C>
8 1/2% Notes due 1995 $ 250 250
7.38% to 8.38% Medium Term Notes
due 1993-8 250 350
6.73% Debentures due 2023 250 -
8% Notes due 1998 200 200
7 3/8% Notes due 2002 198 198
9% European Currency Unit Notes
due 1997(1) 167 181
Floating Rate Medium Term Notes
due 1994 150 100
7% Swiss Franc Notes due 1994(1) 101 104
8.82% Italian Lire Notes due 2003(1) 89 -
Industrial Revenue Bonds 81 86
4 1/2% Currency Indexed Notes
due 1998(1) 73 73
10% European Currency Unit Notes
due 1993(1) - 121
12 7/8% Italian Lire Notes due 1993(1) - 68
Other, principally international 37 76
----- -----
1,846 1,807
Less current portion 353 442
----- -----
$1,493 1,365
===== =====
</TABLE>
(1) These debt issues include the effect of foreign currency movements in the
principal amounts shown. These debt issues were converted to fixed or floating
rate U.S. dollar liabilities via interest rate and currency swaps. Unrealized
gains (losses) on the currency swaps are classified in the balance sheet as
other assets (liabilities).
Interest rates on the Industrial Revenue Bonds vary from 3% to 7%, while rates
on other long-term obligations vary from 4% to 20% according to local
conditions.
45
<PAGE> 17
Aggregate maturities of long-term obligations for each of the next five years
commencing in 1994 are:
(Dollars in Millions) 1994 1995 1996 1997 1998
---- ---- ---- ---- ----
$353 263 104 175 349
6. Income Taxes
The provision for taxes on income consist of:
(Dollars in Millions) 1993 1992 1991
---- ---- ----
Currently payable:
U.S. taxes on domestic income $190 179 121
U.S. taxes on international income (1) (14) 15
International taxes 345 403 440
U.S. state and local taxes 30 22 23
---- ---- ----
564 590 599
---- ---- ----
Deferred:
U.S. taxes (26) (29) (21)
International taxes 7 21 (1)
---- ---- ----
(19) (8) (22)
---- ---- ----
$545 582 577
==== ==== ====
Deferred taxes result from the effect of transactions which are recognized in
different periods for financial and tax reporting purposes and relate primarily
to employee benefits, depreciation and other valuation allowances.
Effective December 30, 1991, the Company adopted the provisions of
Statement of Financial Accounting Standard (SFAS) No. 109, "Accounting for
Income Taxes." The cumulative effect of $35 million, or $.05 per share, is
reported as a one-time charge in the 1992 Consolidated Statement of Earnings.
Prior years' financial statements have not been restated to apply the
provisions of SFAS No. 109. The standard requires a change from the deferred
to the liability method of computing deferred income taxes. Deferred income
taxes are recognized for tax consequences of "temporary differences" by
applying enacted statutory tax rates, applicable to future years, to
differences between the financial reporting and the tax basis of existing
assets and liabilities.
Temporary differences and carryforwards for 1993 are as follows:
<TABLE>
<CAPTION>
Deferred Tax
--------------------
(Dollars in Millions) Asset Liability
- --------------------- ----- ---------
<S> <C> <C>
Postretirement benefits $ 248 -
Postemployment benefits 108 -
Employee benefit plans 120 20
Depreciation - 151
Alternative minimum tax credits 99 -
International R&D capitalized for tax 63 -
Reserves & liabilities 192 -
Income reported for tax purposes 95 -
Miscellaneous international 11 116
Miscellaneous U.S. 170 58
----- -----
Total deferred income taxes $1,106 345
===== =====
</TABLE>
46
<PAGE> 18
A comparison of income tax expense at the federal statutory rate of 35% in 1993
and 34% in 1992 and 1991 to the Company's provision for taxes on income is as
follows:
(Dollars in Millions) 1993 1992 1991
---- ----- -----
Earnings before taxes on income:
U.S. $1,006 863 797
International 1,326 1,344 1,241
----- ----- -----
Worldwide $2,332 2,207 2,038
===== ===== =====
Statutory taxes $ 816 750 693
Puerto Rico operations (170) (159) (158)
Research tax credits (17) (7) (18)
Domestic state and local 18 15 15
International subsidiaries (113) (37) 32
All other 11 20 13
----- ---- ----
Provision for taxes on income $ 545 582 577
===== ==== ====
Effective tax rate 23.4% 26.4% 28.3%
The reduction in the 1993 worldwide effective tax rate was primarily due to a
lower international effective tax rate resulting from a greater proportion of
taxable income derived from lower tax rate countries. The effective tax rate
was also favorably impacted by the Omnibus Budget Reconciliation Act of 1993,
which extended the research tax credit retroactively from July 1992.
For 1993, the Company has subsidiaries operating in Puerto Rico under
a grant for tax relief expiring December 31, 2007. The Omnibus Budget
Reconciliation Act of 1993 includes a change in the tax code which will
gradually reduce the benefit the Company receives from its operations in Puerto
Rico by 60% over the next five years. This legislation will have an
unfavorable impact on the Company's effective tax rate of 2 to 3 percentage
points.
7. Foreign Currency Translation
For translation of its international currencies, the Company has determined
that the local currencies of its international subsidiaries are the functional
currencies except those in highly inflationary economies, which are defined as
those which have had compound cumulative rates of inflation of 100% or more
during the past three years.
In consolidating international subsidiaries, balance sheet currency
effects are recorded as a separate component of stockholders' equity. This
equity account includes the results of translating all balance sheet assets and
liabilities at current exchange rates, except for those located in highly
inflationary economies, principally Brazil, which are reflected in operating
results. These translation adjustments do not exist in terms of functional
cash flows; such adjustments are not reported as part of operating results
since realization is remote unless the international businesses were sold or
liquidated.
47
<PAGE> 19
An analysis of the changes during 1993 and 1992 in the separate
component of stockholders' equity for cumulative currency translation
adjustments follows:
(Dollars in Millions) 1993 1992
- --------------------- ----- ----
Beginning of year $(146) 134
Translation adjustments (192) (280)
----- ----
End of year $(338) (146)
===== ====
Net currency transaction and translation gains and losses included in other
expense were after-tax losses (gains) of $5, $(12) and $62 million in 1993,
1992 and 1991, respectively, incurred principally in Latin America.
8. International Subsidiaries
The following amounts are included in the consolidated financial statements for
international subsidiaries:
(Dollars in Millions) 1993 1992
- --------------------- ------ -----
Current assets $3,049 3,072
Current liabilities 1,693 1,576
Net property, plant and equipment 1,619 1,566
Parent company equity in net assets 3,563 3,051
Excess of parent company equity
over investments 3,093 2,588
International sales to customers were $6,935, $6,850 and $6,199 million for
1993, 1992 and 1991, respectively.
9. Rental Expense and Lease Commitments
Rentals of space, vehicles, manufacturing equipment and office and data
processing equipment under operating leases amounted to approximately $254
million in 1993, $259 million in 1992 and $239 million in 1991.
The approximate minimum rental payments required under operating leases that
have initial or remaining noncancellable lease terms in excess of one year at
January 2, 1994 are:
After
(Dollars in Millions) 1994 1995 1996 1997 1998 1998 Total
- --------------------- ---- ---- ---- ---- ---- ---- -----
$92 79 61 41 29 54 356
Commitments under capital leases are not significant.
48
<PAGE> 20
10. Common Stock, Stock Option Plans and Stock Compensation Agreements
The Company has stock option plans which provide for the granting of options to
certain officers and employees to purchase shares of its common stock within
prescribed periods at prices equal to the fair market value on the date of
grant. Share activity during 1993 and 1992 under the Company's stock option
plans is summarized below:
(Shares in Thousands, Price Per Share) 1993 1992
- -------------------------------------- -------- --------
Held at beginning of year by 3,002 employees
(1992-2,810) 26,986 28,912
Granted to 2,578 employees (1992-1,056) 11,272 2,737
-------- --------
38,258 31,649
Exercised (1991-4,318) (2,182) (3,928)
Cancelled or expired (1,081) (735)
-------- --------
Held at end of year by 3,304 employees
(1992-3,002) 34,995 26,986
======== ========
Shares exercisable, end of year (1991-11,768) 13,880 11,947
======== ========
Shares available for future grants, end of year
(1991-22,324) 8,883 19,693
======== ========
Price range of options exercised
(1991-$1.76 to $28.94) $8.85 to 7.39 to
$ 35.66 35.66
======== ========
Price range of options held, end of year $8.85 to 8.85 to
$ 57.75 57.75
======== ========
At year-end, the Company was obligated to deliver, over a period of not more
than two years, 298 thousand shares of common stock (1992-699) in performance
of outstanding stock compensation agreements with 6,930 employees (1992-7,508).
11. Certificates of Extra Compensation
The Company has a deferred compensation program for senior management and other
key personnel. The value of units awarded under the program is related to the
net asset value of the Company and historical earning power of its common
stock. Amounts earned under the program are payable only after employment with
the Company has ended.
12. Segments of Business and Geographic Areas
See page 41 for information on segments of business and geographic areas.
13. Retirement and Pension Plans
The Company has various retirement and pension plans, including defined
benefit, defined contribution and termination indemnity plans, which cover most
employees worldwide. Total pension expense related to these plans amounted to
$71 million in 1993, $80 million in 1992, and $69 million in 1991.
Plan benefits are primarily based on the employee's compensation
during the last three to five years before retirement and the number of years
of service.
49
<PAGE> 21
Domestic Pension Plans
The Company's objective in funding its domestic plans is to accumulate funds
sufficient to provide for all accrued benefits. Net pension expense for the
domestic defined benefit plans for 1993, 1992 and 1991 included the following
components:
(Dollars in Millions) 1993 1992 1991
- --------------------- ----- ---- ----
Service cost-benefits earned during period $ 59 60 54
Interest cost on projected benefit obligations 114 107 95
Investment gain on plan assets (201) (95) (358)
Net amortization and deferral 55 (36) 242
----- --- ----
Net periodic pension cost $ 27 36 33
===== === ====
The following table sets forth the actuarial present value of benefit
obligations and funded status at year-end 1993 and 1992 for the Company's
domestic plans:
(Dollars in Millions) 1993 1992
- --------------------- ------ -----
Plan assets at fair value, primarily stocks and
bonds $1,659 1,519
------ -----
Actuarial present value of benefit obligations:
Vested benefits 1,313 1,032
Nonvested benefits 20 17
------ -----
Accumulated benefit obligation 1,333 1,049
Effect of projected future salary increases 349 317
------ -----
Projected benefit obligation 1,682 1,366
------ -----
(Under) overfunded (23) 153
------ -----
Unrecognized prior service costs 132 53
Unrecognized net gain (298) (321)
Unamortized net transition assets (30) (35)
Voluntary supplemental benefits liability (16) (6)
------ -----
Net pension liability included in the balance sheet $ (235) (156)
====== =====
The domestic pension data includes unrecognized prior service cost of $11
million in 1993 and $6 million in 1992 and a net pension liability of $12
million in 1993 and $6 million in 1992, related to unfunded supplemental
pension benefits.
Assumptions used to develop domestic net periodic pension expense and
the actuarial present value of projected benefit obligations were as follows:
Domestic Pension Plans 1993 1992 1991
- ---------------------- ---- ---- ----
Expected long-term rate of return on plan assets 9.0% 9.5% 9.5%
Weighted average discount rate 7.5 8.5 8.5
Rate of increase in compensation levels 5.5 7.0 7.0
International Pension Plans
International subsidiaries have plans under which funds are deposited with
trustees, annuities are purchased under group contracts, or reserves are
provided. Net pension expense for international defined benefit plans for
1993, 1992 and 1991 included the following components:
(Dollars in Millions) 1993 1992 1991
- --------------------- ----- ---- ----
Service cost-benefits earned during period $ 50 50 46
Interest cost on projected benefit obligations 54 56 52
Investment gain on plan assets (149) (68) (114)
Net amortization and deferral 94 5 52
Curtailment gains (5) - -
----- ---- ----
Net periodic pension cost $ 44 43 36
===== ==== ====
50
<PAGE> 22
In certain countries, the funding of pension plans is not a common practice as
funding provides no economic benefit. Consequently, the Company has pension
plans which are underfunded. The following table sets forth the actuarial
present value of benefit obligations and funded status at year-end 1993 and
1992 for the Company's international plans:
Year-end 1993 Year-end 1992
-------------- --------------
Over- Under- Over- Under-
(Dollars in Millions) funded funded funded funded
- --------------------- ------ ------ ------ ------
Plan assets at fair value, primarily
stocks and bonds $719 38 618 31
---- ---- ---- ----
Actuarial present value of benefit
obligations:
Vested benefits 435 142 371 131
Nonvested benefits 7 32 5 37
---- ---- ---- ----
Accumulated benefit obligation 442 174 376 168
Effect of projected future salary
increases 153 63 141 59
---- ---- ---- ----
Projected benefit obligation 595 237 517 227
---- ---- ---- ----
Funded status 124 (199) 101 (196)
---- ---- ---- ----
Unrecognized prior service cost 22 3 18 3
Unrecognized net loss (gain) 14 (1) 70 (9)
Additional minimum liability - (4) - (2)
Unamortized net transition (assets)
liabilities (92) 21 (105) 27
---- ---- ---- ----
Net pension asset (liability) included
in the balance sheet $ 68 (180) 84 (177)
==== ==== ==== ====
The following table provides the range of assumptions, which are based on the
economic environment of each applicable country, used to develop international
net periodic pension expense and the actuarial present value of projected
benefit obligations for international plans:
International Pension Plans 1993 1992 1991
- --------------------------- ------- -------- --------
Expected long-term rate of return
on plan assets 5.0-9.5% 5.0-11.0% 5.0-11.0%
Weighted average discount rates 4.5-9.5 5.0-11.0 5.0-11.0
Rate of increase in compensation
levels 3.0-6.5 3.5-8. 0 3.5- 8.0
51
<PAGE> 23
14. Savings Plan
The Company has a voluntary 401(k) savings plan designed to enhance the
existing retirement program covering eligible domestic employees. The Company
matches 75% of each employee's contributions, up to a maximum of 6% of base
salary.
One-third of the Company match is paid in Company stock under an
employee stock ownership plan (ESOP). In 1990, to establish the ESOP, the
Company loaned $100 million to the ESOP Trust to purchase shares of Company
stock on the open market. In exchange, the Company received a note, the
balance of which is recorded as a reduction of stockholders' equity.
Company contributions to the savings plan were $42 million in 1993,
$40 million in 1992 and $34 million in 1991.
15. Other Postretirement Benefits
The Company provides postretirement health care and other benefits to all
domestic retired employees and their dependents. Most international employees
are covered by government-sponsored programs and the cost to the Company is not
significant. The Company does not fund retiree health care benefits in advance
and has the right to modify these plans in the future.
Effective December 30, 1991, the Company adopted the provisions of
Statement of Financial Accounting Standard (SFAS) No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions." SFAS No. 106
requires accrual accounting for these benefits rather than accounting for them
on a cash basis. Upon adoption, the Company elected to record the accumulated
obligation of $549 million pretax ($340 million after-tax or $.52 per share) as
a one-time charge against earnings in the form of a cumulative effect of an
accounting change.
The net periodic postretirement benefit costs for domestic retirees
amounted to $70 million in 1993 and $64 million in 1992 and included the
following components:
(Dollars in Millions) 1993 1992
- --------------------- ----- ----
Service cost-benefits earned during the current year $ 18 19
Interest cost on accumulated postretirement benefit
obligation 57 49
Expected return on plan assets (4) (4)
Net amortization and deferral (1) -
----- --
Net periodic postretirement benefit cost $ 70 64
===== ==
The plans' status as of year-end 1993 and 1992 was as follows:
Year-End
------------
(Dollars in Millions) 1993 1992
- --------------------- ----- ----
Accumulated postretirement benefit obligation:
Retirees $ 320 298
Fully eligible active participants 148 158
Other active participants 164 182
----- -----
Accumulated postretirement benefit obligation 632 638
Life insurance plan assets at fair value 39 44
----- -----
Accumulated postretirement benefit obligation in
excess of plans' assets 593 594
----- -----
Unrecognized net gain 37 -
Unrecognized prior service cost 12 -
----- -----
Accrued postretirement benefit cost $ 642 594
----- -----
52
<PAGE> 24
The postretirement benefit obligation was determined by application of the
terms of the various plans, together with relevant actuarial assumptions.
Health care cost trends are projected at annual rates grading from 13% for
employees under age 65 and 9% for employees over age 65 down to 5% for both
groups by the year 2006 and beyond. The effect of a 1% annual increase in
these assumed cost trend rates would increase the accumulated postretirement
benefit obligation at year-end by $89 million and the service and interest cost
components of the net periodic postretirement benefit cost for 1993 by a total
of $9 million.
Assumptions used to develop net periodic postretirement benefit cost
and the actuarial present value of projected postretirement benefit obligations
were as follows:
(Dollars in Millions) 1993 1992
- --------------------- ---- ----
Expected long-term rate of return on
plan assets 9.0% 9.5%
Weighted average discount rate 7.5 8.5
Rate of increase in compensation levels 5.5 7.0
16. Other Postemployment Benefits
The Company provides certain other postemployment benefits to qualified former
or inactive employees. The Company does not fund these benefits and has the
right to modify these plans in the future.
Effective December 30, 1991, the Company adopted the provisions of
Statement of Financial Accounting Standard (SFAS) No. 112 "Employers'
Accounting for Postemployment Benefits." SFAS No. 112 requires accrual
accounting for these benefits rather than the cash method of accounting. Upon
adoption, the Company elected to record the accumulated obligation of $343
million ($220 million after-tax or $.33 per share) as a one-time charge against
earnings in the form of a cumulative effect of an accounting change.
17. Financial Instruments
Off-Balance Sheet Risk
The Company enters into contracts to hedge interest rate and currency risk.
These contracts are used to minimize exposure and to reduce risk from exchange
rate and interest rate fluctuations in the regular course of the Company's
global business. Gains, unrealized non-permanent losses, premiums and
discounts are deferred and included in the cost of related transactions.
As of January 2, 1994, the Company had approximately $2.6 billion of
currency contracts outstanding in various currencies, principally U.S. Dollars,
Japanese Yen and European currencies. The Company also has interest rate
contracts on a notional principal amount of approximately $460 million. These
contracts generally mature within twelve months.
In addition, interest rate and currency swap agreements which hedge
third party debt issues are described in Note 5. Interest expense under these
agreements, and the respective debt instruments that they hedge, are recorded
at the net effective interest rate of the hedged transactions. Unrealized
currency gains (losses) on currency swaps are not included in the basis of the
related debt transactions which such swaps hedge and are classified in the
balance sheet as other assets (liabilities).
53
<PAGE> 25
The Company has a policy of only entering into interest rate and
currency contracts with parties that have at least an "A" (or equivalent)
credit rating. Cash flows from hedging instruments are classified consistent
with the item being hedged.
Concentration of Credit Risk
The Company invests its excess cash in both deposits with major banks
throughout the world and other high quality short-term liquid money market
instruments (commercial paper, government and government agency notes and
bills, etc.). The Company has a policy of making investments only with
institutions that have at least an "A" (or equivalent) credit rating. The
investments generally mature within six months. The Company has not incurred
losses related to these investments.
The Company sells a broad range of products in the health care field
in most countries of the world. Concentrations of credit risk with respect to
trade receivables are limited due to the large number of customers comprising
the Company's customer base. Ongoing credit evaluations of customers'
financial condition are performed and, generally, no collateral is required.
The Company maintains reserves for potential credit losses and such losses, in
the aggregate, have not exceeded management's expectations.
Disclosures about Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents approximates fair value due to
the short-term maturities of these instruments. The fair value of current and
non-current marketable securities, long-term debt and foreign interest rate and
currency swap agreements (used to hedge third party debt issues) were estimated
based on quotes obtained from brokers for those or similar instruments. The
fair value of foreign interest rate and currency contracts (used for hedging
purposes) and long-term investments were estimated based on quoted market
prices at year-end.
The estimated fair value of the Company's financial instruments are as
follows:
1993 1992
---------------- ----------------
Carrying Fair Carrying Fair
(Dollars in Millions) Amount Value Amount Value
- -------------------- -------- ----- -------- -----
Cash and cash equivalents $ 372 372 745 745
Marketable securities - current 104 109 133 134
Marketable securities - non-current 437 440 355 361
Long-term investments 41 103 48 75
Long-term debt and related interest
rate and currency swap agreements 1,846 1,937 1,807 1,850
Foreign currency and interest rate
contracts receivable, net - 57 - 40
18. Acquisitions and Divestitures
During 1993 and 1992, certain businesses were acquired for $266 million and $47
million, respectively, and accounted for under the purchase method.
The 1993 acquisitions include the purchase of the RoC S.A. group of
companies in Europe, which market hypo-allergenic skin, body and beauty care
products worldwide under the RoC, KEFRANE and KEOPS trademarks from LVMH, Inc.
and the ORTHOXICOL line of cough and cold products from Upjohn in Australia.
The 1992 acquisitions include the purchase of the SAVLON antiseptic
business from ICI Industries PLC, the STERION sterilization container system
from Monarch Inc. and the PLAX dental rinse business in Japan from Colgate
Palmolive Company.
54
<PAGE> 26
The results of operations of the acquired businesses have been
included in the accompanying consolidated financial statements from their
respective dates of acquisition. Had the results of these businesses been
included commencing with operations in 1991, the reported results would not
have been materially affected.
In 1993, the Company completed the sale of the Sterile Design division
of Johnson & Johnson Medical, Inc. and the CHUX disposable wiping cloth
business in Australia and New Zealand.
In December 1992, the Company completed the sale of selected
professional dental products DISPERSALLOY, UNISON, DELTON, NUPRO and dental
composites. The after-tax gain was reinvested in restructuring certain base
businesses.
19. Pending Legal Proceedings
The Company is involved in numerous product liability cases in the United
States, many of which concern adverse reactions to drugs and medical devices.
The damages claimed are substantial, and while the Company is confident of the
adequacy of the warnings which accompany such products, it is not feasible to
predict the ultimate outcome of litigation. However, the Company believes that
if any liability results from such cases for injuries occurring on or before
December 31, 1985, it will be substantially covered by insurance.
Due to the general unavailability of traditional liability insurance,
including product liability insurance, the Company is substantially uninsured
for injuries occurring on or after January 1, 1986. The Company has a
self-insurance program which provides reserves for such injuries based on
claims experience.
The Company is also involved in a number of patent, trademark and
other lawsuits incidental to its business.
The Company believes that the above proceedings in the aggregate will
not have a material adverse effect on its operations or financial position.
55
<PAGE> 27
20 Selected Quarterly Financial Data (Unaudited)
Selected unaudited quarterly financial data for the years 1993 and 1992 is
summarized below:
1993
--------------------------------------
(Dollars in Millions First Second Third Fourth
Except Per Share Figures) Quarter Quarter Quarter Quarter
- ------------------------- ------- ------- ------- -------
Segment sales to customers
Consumer $ 1,277 1,184 1,215 1,148
Pharmaceutical 1,112 1,119 1,111 1,148
Professional 1,171 1,238 1,180 1,235
------- ------ ------ ------
Total sales 3,560 3,541 3,506 3,531
======= ======= ====== ======
Gross margin 2,397 2,393 2,318 2,239
Earnings before provision for
taxes on income and cumulative
effect of accounting changes 700 670 582 380
Earnings before cumulative
effect of accounting changes 503 495 454 335
Net earnings (loss) (1) $ 503 495 454 335
Net earnings (loss) per share:
Before cumulative effect of
accounting changes $ .77 .75 .70 .52
Net earnings (loss) (1) $ .77 .75 .70 .52
1992
--------------------------------------
(Dollars in Millions First(2) Second(2) Third(2) Fourth
Except Per Share Figures) Quarter Quarter Quarter Quarter
- ------------------------- ------- ------- ------- -------
Segment sales to customers
Consumer $ 1,232 1,165 1,239 1,144
Pharmaceutical 1,031 1,083 1,093 1,133
Professional 1,094 1,165 1,148 1,226
------- ------ ------ ------
Total sales 3,357 3,413 3,480 3,503
======= ====== ====== ======
Gross margin 2,230 2,294 2,282 2,269
Earnings before provision for
taxes on income and cumulative
effect of accounting changes 644 636 568 359
Earnings before cumulative
effect of accounting changes 452 452 414 307
Net earnings (loss) (1) $ (143) 452 414 307
Net earnings (loss) per share:
Before cumulative effect of
accounting changes $ .68 .68 .63 .47
Net earnings (loss) (1) $ (.22) .68 .63 .47
(1) First quarter 1992 results reflect a one-time after-tax charge of $595
million, or $.90 a share, due to the Company's adoption of accounting changes
for postretirement benefits, postemployment benefits and income taxes.
(2) First, second and third quarter results have been restated to include the
incremental charges attributable to the accounting changes of $12, $12 and $11
million, respectively.
56
<PAGE> 28
Report of Management
The management of Johnson & Johnson is responsible for the integrity and
objectivity of the accompanying financial statements and related information.
The statements have been prepared in conformity with generally accepted
accounting principles, and include amounts that are based on our best
judgements with due consideration given to materiality. The financial
statements are consistent in all material respects with standards issued to
date by the International Accounting Standards Committee.
Management maintains a system of internal accounting controls
monitored by a corporate staff of professionally trained internal auditors who
travel worldwide. This system is designed to provide reasonable assurance, at
reasonable cost, that assets are safeguarded and that transactions and events
are recorded properly. While the Company is organized on the principles of
decentralized management, appropriate control measures are also evidenced by
well-defined organizational responsibilities, management selection, development
and evaluation processes, communicative techniques, financial planning and
reporting systems and formalized procedures.
It has always been the policy and practice of the Company to conduct
its affairs ethically and in a socially responsible manner. This
responsibility is characterized and reflected in the Company's Credo and Policy
on Business Conduct which are distributed throughout the Company. Management
maintains a systematic program to ensure compliance with these policies.
Coopers & Lybrand, independent auditors, is engaged to audit our
financial statements. Coopers & Lybrand obtains and maintains an understanding
of our internal control structure and conducts such tests and other auditing
procedures considered necessary in the circumstances to express the opinion in
the report that follows.
The Audit Committee of the Board of Directors, composed solely of
outside directors, meets periodically with the independent auditors, management
and internal auditors to review their work and confirm that they are properly
discharging their responsibilities. In addition, the independent auditors, the
General Counsel and the Vice President, Internal Audit are free to meet with
the Audit Committee without the presence of management to discuss the results
of their work and observations on the adequacy of internal financial controls,
the quality of financial reporting and other relevant matters.
Ralph S. Larsen Clark H.Johnson
Chairman, Board of Directors Vice President, Finance
and Chief Executive Officer and Chief Financial Officer
57
<PAGE> 29
Independent Auditor's Report
To the Stockholders and Board of Directors of Johnson & Johnson:
We have audited the consolidated balance sheets of Johnson & Johnson and
subsidiaries as of January 2, 1994 and January 3, 1993, and the related
consolidated statement of earnings, consolidated statement of common stock,
retained earnings and treasury stock, and consolidated statement of cash flows
for each of the three years in the period ended January 2, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Johnson & Johnson and subsidiaries as of January 2, 1994 and January 3, 1993,
and the results of its operations and its cash flows for each of the three
years in the period ended January 2, 1994, in conformity with generally
accepted accounting principles.
As discussed in Notes 6, 15 and 16 to the consolidated financial
statements, effective December 30, 1991 the Company changed its method of
accounting for income taxes, postretirement benefits other than pensions and
postemployment benefits.
Coopers & Lybrand
New York, New York
January 31, 1994
58
<PAGE> 30
Segments of Business (1) Johnson & Johnson and Subsidiaries
<TABLE>
<CAPTION>
Sales to Customers(2)
------------------------------------------
(Dollars in Millions) 1993 1992 1991
- -------------------- ------- ------ ------
<S> <C> <C> <C>
Consumer-Domestic $ 2,631 2,608 2,460
International 2,193 2,172 2,124
------ ------ ------
Total 4,824 4,780 4,584
------ ------ ------
Pharmaceutical-Domestic 1,775 1,652 1,532
International 2,715 2,688 2,263
------ ------ ------
Total 4,490 4,340 3,795
------ ------ ------
Professional-Domestic 2,797 2,643 2,256
International 2,027 1,990 1,812
------ ------ ------
Total 4,824 4,633 4,068
------ ------ ------
Worldwide total $14,138 13,753 12,447
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Operating Profit Identifiable Assets(4)
------------------------------- -------------------------------
(Dollars in Millions) 1993 1992 1991 1993 1992 1991
- --------------------- ------- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Consumer $ 521 501 454 3,452 3,359 3,135
Pharmaceutical 1,406 1,364 1,201 3,815 3,733 3,277
Professional 655 598 562 4,365 4,216 3,730
----- ------ ------ ------ ------ ------
Segments total 2,582 2,463 2,217 11,632 11,308 10,142
Expenses not allocated to
segments(3) (250) (256) (179)
General corporate 610 576 371
------ ------ ------ ------ ------ ------
Worldwide total $ 2,332 2,207 2,038 12,242 11,884 10,513
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Additions to Property, Depreciation and
Plant & Equipment Amortization
----------------------------------- -------------------------------
(Dollars in Millions) 1993 1992 1991 1993 1992 1991
- --------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Consumer $ 260 273 281 205 191 168
Pharmaceutical 313 317 317 159 151 126
Professional 368 462 358 221 191 173
------ ------ ------ ------ ------ ------
Segments total 941 1,052 956 585 533 467
General corporate 34 51 31 32 27 26
------ ------ ------ ------ ------ ------
Worldwide total $ 975 1,103 987 617 560 493
====== ====== ====== ====== ====== ======
Geographic Areas
</TABLE>
<TABLE>
<CAPTION>
Sales to Customers(2) Operating Profit Identifiable Assets(4)
---------------------------- -------------------------- -----------------------------
(Dollars in Millions) 1993 1992 1991 1993 1992 1991 1993 1992 1991
- --------------------- ------- ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 7,203 6,903 6,248 1,209 1,052 1,022 6,252 6,102 5,273
Europe 4,024 4,246 3,750 1,036 1,125 934 3,625 3,430 3,231
Western Hemisphere
excluding U.S. 1,325 1,206 1,239 156 132 117 742 805 774
Africa, Asia and
Pacific 1,586 1,398 1,210 181 154 144 1,013 971 864
------ ------ ------ ------ ------ ------ ------ ------ ------
Segments total 14,138 13,753 12,447 2,582 2,463 2,217 11,632 11,308 10,142
Expenses not allocated
to segments(3) (250) (256) (179)
General corporate 610 576 371
------ ------ ------ ------ ------ ------ ------ ------ ------
Worldwide total $14,138 13,753 12,447 2,332 2,207 2,038 12,242 11,884 10,513
====== ====== ====== ====== ====== ====== ====== ====== =======
</TABLE>
(1) See Management's Discussion and Analysis, pages 26 to 28, for a
description of the segments in which the Company does business.
(2) Export sales and intersegment sales are not significant. No single
customer represents 10% or more of total sales.
(3) Expenses not allocated to segments include interest expense, minority
interests and general corporate income and expense.
(4) Certain prior year amounts have been reclassified to conform with current
year presentation.
59
<PAGE> 31
Summary of Operations and Statistical Data 1983-1993 Johnson & Johnson
and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in Millions Except Per Share Figures) 1993 1992 1991
---------------------------------------------- ------- ------ ------
<S> <C> <C> <C>
Sales to customers - Domestic $ 7,203 6,903 6,248
Sales to customers - International 6,935 6,850 6,199
------ ------ ------
Total sales 14,138 13,753 12,447
------ ------ ------
Cost of products sold 4,791 4,678 4,204
Selling, marketing and administrative expenses 5,771 5,671 5,099
Research expense 1,182 1,127 980
Permanent impairment of certain assets and
operations in Latin America - - -
Redirection charges - - -
Interest income (80) (93) (88)
Interest expense, net of portion capitalized 126 124 129
Other expense (income), net 16 39 85
------ ------ ------
11,806 11,546 10,409
------ ------ ------
Earnings before provision for taxes on income 2,332 2,207 2,038
Provision for taxes on income 545 582 577
------ ------ ------
Earnings before
cumulative effect of accounting changes 1,787 1,625 1,461
Cumulative effect of accounting changes
(net of tax) - (595) -
------ ------ ------
Net earnings $ 1,787 1,030 1,461
------ ------ ------
Percent of sales to customers 12.6 7.5(1) 11.7
Net earnings per share of common stock $ 2.74 1.56 2.19
Percent return on average stockholders' equity 33.3 19.1(1) 27.8
Percent increase (decrease) over previous year:
Sales to customers 2.8 10.5 10.8
Net earnings per share 75.6(1) (28.8)(1) 27.3(2)
Supplementary expense data:
Cost of materials and services(5) $ 7,033 6,857 6,329
Total employment costs 4,066 4,044 3,507
Depreciation and amortization 617 560 493
Maintenance and repairs(6) 202 210 203
Total tax expense(7) 968 1,000 966
Total tax expense per share(7) 1.49 1.52 1.45
Supplementary balance sheet data:
Property, plant and equipment, net $ 4,406 4,115 3,667
Additions to property, plant and equipment 975 1,103 987
Total assets 12,242 11,884 10,513
Long-term debt 1,493 1,365 1,301
Common stock information:
Dividends paid per share $ 1.01 .89 .77
Stockholders' equity per share $ 8.66 7.89 8.44
Market price per share (year-end close) $44 7/8 50 1/2 57 1/4
Average shares outstanding (millions) 651.7 659.9 666.1
Stockholders of record (thousands) 96.1 84.1 69.9
Employees (thousands) 81.6 84.9 82.7
</TABLE>
60
<PAGE> 32
<TABLE>
<CAPTION>
(Dollars in Millions Except Per Share Figures) 1990 1989 1988
---------------------------------------------- --------- ------- ------
<S> <C> <C> <C>
Sales to customers - Domestic $ 5,427 4,881 4,576
Sales to customers - International 5,805 4,876 4,424
------ ------ ------
Total sales 11,232 9,757 9,000
------ ------ ------
Cost of products sold 3,937 3,480 3,292
Selling, marketing and administrative expenses 4,469 3,897 3,630
Research expense 834 719 674
Permanent impairment of certain assets and
operations in Latin America 104 - -
Redirection charges - - -
Interest income (98) (87) (72)
Interest expense, net of portion capitalized 201(4) 141 104
Other expense (income), net 162 93 (24)
------ ------ ------
9,609 8,243 7,604
------ ------ ------
Earnings before provision for taxes on income 1,623 1,514 1,396
Provision for taxes on income 480 432 422
------ ------ ------
Earnings before
cumulative effect of accounting changes 1,143 1,082 974
Cumulative effect of accounting changes
(net of tax) - - -
------ ------ ------
Net earnings $ 1,143 1,082 974
------ ------ ------
Percent of sales to customers 10.2(2) 11.1 10.8
Net earnings per share of common stock $ 1.72 1.62 1.43
Percent return on average stockholders' equity 25.3(2) 28.3 27.9
Percent increase (decrease) over previous year:
Sales to customers 15.1 8.4 12.3
Net earnings per share 6.2(2) 13.3 18.2
Supplementary expense data:
Cost of materials and services(5) $ 5,728 4,908 4,528
Total employment costs 3,195 2,871 2,639
Depreciation and amortization 474 414 391
Maintenance and repairs(6) 185 193 191
Total tax expense(7) 825 708 678
Total tax expense per share(7) 1.24 1.06 1.00
Supplementary balance sheet data:
Property, plant and equipment, net $ 3,247 2,846 2,493
Additions to property, plant and equipment 830 750 664
Total assets 9,506 7,919 7,119
Long-term debt 1,316 1,170 1,166
Common stock information:
Dividends paid per share $ .66 .56 .48
Stockholders' equity per share $ 7.36 6.23 5.26
Market price per share (year-end close) $ 35 7/8 29 5/8 21 1/4
Average shares outstanding (millions) 666.1 666.2 681.2
Stockholders of record (thousands) 64.6 60.5 54.5
Employees (thousands) 82.2 83.1 81.3
</TABLE>
61
<PAGE> 33
<TABLE>
<CAPTION>
(Dollars in Millions Except Per Share Figures) 1987 1986 1985
---------------------------------------------- --------- ------ ------
<S> <C> <C> <C>
Sales to customers - Domestic $ 4,167 3,972 3,990
Sales to customers - International 3,845 3,031 2,431
------ ------ ------
Total sales 8,012 7,003 6,421
------ ------ ------
Cost of products sold 2,958 2,632 2,592
Selling, marketing and administrative expenses 3,228 2,868 2,516
Research expense 617 521 471
Permanent impairment of certain assets and
operations in Latin America - - -
Redirection charges - 540 -
Interest income (95) (100) (107)
Interest expense, net of portion capitalized 116 66 46
Other expense (income), net (5) 85 4
------ ------ ------
6,819 6,612 5,522
------ ------ ------
Earnings before provision for taxes on income 1,193 391 899
Provision for taxes on income 360 61 285
------ ------ ------
Earnings before
cumulative effect of accounting changes 833 330 614
Cumulative effect of accounting changes
(net of tax) - - -
------ ------ ------
Net earnings $ 833 330 614
------ ------ ------
Percent of sales to customers 10.4 4.7(3) 9.6
Net earnings per share of common stock $ 1.21 .46 .84
Percent return on average stockholders' equity 26.4 10.7(3) 19.5
Percent increase (decrease) over previous year:
Sales to customers 14.4 9.1 4.8
Net earnings per share -(3) (45.2)(3) 21.7
Supplementary expense data:
Cost of materials and services(5) $ 4,030 3,642 3,274
Total employment costs 2,388 2,091 1,941
Depreciation and amortization 356 291 262
Maintenance and repairs(6) 180 170 133
Total tax expense(7) 591 284 466
Total tax expense per share(7) .86 .40 .64
Supplementary balance sheet data:
Property, plant and equipment, net $ 2,250 1,916 1,840
Additions to property, plant and equipment 515 446 366
Total assets 6,546 5,877 5,095
Long-term debt 733 242 185
Common stock information:
Dividends paid per share $ .40 .34 .32
Stockholders' equity per share $ 5.06 4.09 4.58
Market price per share (year-end close) $ 18 3/4 16 7/8 13 1/8
Average shares outstanding (millions) 690.3 713.6 731.5
Stockholders of record (thousands) 51.2 52.1 53.5
Employees (thousands) 78.2 77.1 74.9
</TABLE>
62
<PAGE> 34
(Dollars in Millions Except Per Share Figures) 1984 1983
---------------------------------------------- --------- ------
Sales to customers - Domestic $ 3,736 3,611
Sales to customers - International 2,389 2,362
----- -----
Total sales 6,125 5,973
----- -----
Cost of products sold 2,485 2,469
Selling, marketing and administrative expenses 2,488 2,353
Research expense 421 405
Permanent impairment of certain assets and
operations in Latin America - -
Redirection charges - -
Interest income (84) (83)
Interest expense, net of portion capitalized 51 51
Other expense (income), net 9 54
----- -----
5,370 5,249
----- -----
Earnings before provision for taxes on income 755 724
Provision for taxes on income 240 235
----- -----
Earnings before
cumulative effect of accounting changes 515 489
Cumulative effect of accounting changes
(net of tax) - -
----- -----
Net earnings $ 515 489
----- -----
Percent of sales to customers 8.4 8.2
Net earnings per share of common stock $ .69 .64
Percent return on average stockholders' equity 17.3 16.8
Percent increase (decrease) over previous year:
Sales to customers 2.5 3.7
Net earnings per share 7.8 1.6
Supplementary expense data:
Cost of materials and services(5) $ 3,155 3,065
Total employment costs 1,936 1,921
Depreciation and amortization 234 219
Maintenance and repairs(6) 124 120
Total tax expense(7) 418 415
Total tax expense per share(7) .56 .54
Supplementary balance sheet data:
Property, plant and equipment, net $ 1,721 1,668
Additions to property, plant and equipment 366 401
Total assets 4,541 4,462
Long-term debt 225 196
Common stock information:
Dividends paid per share $ .29 .27
Stockholders' equity per share $ 4.01 3.96
Market price per share (year-end close) $ 9 10 1/4
Average shares outstanding (millions) 749.6 762.0
Stockholders of record (thousands) 53.8 49.3
Employees (thousands) 74.2 77.4
(1) After the cumulative effect of accounting changes of $595 million.
- 1992 earnings percent of sales to customers before accounting changes
is 11.8%.
- 1992 earnings percent return on average stockholders' equity before
accounting changes is 28.5%.
- 1993 net earnings per share percent increase over prior year before
accounting change is 11.4%; 1992 is 12.3%.
(2) After Latin America non-recurring charges of $125 million.
- 1990 net earnings percent of sales to customers before non-recurring
charges is 11.3%.
- 1990 percent return on average stockholders' equity before
non-recurring charges is 27.6%.
- 1991 net earnings per share percent increase over prior year before
non-recurring charges is 15.3%; 1990 is 17.3%.
(3) After one-time charges of $380 million.
- 1986 earnings percent of sales before one-time charges is 10.1%.
- 1986 percent return on average stockholders' equity before one-time
charges is 21.6%.
- 1987 net earnings per share percent increase over prior year before
one-time charges is 22.2%; 1986 is 17.9%.
(4) Includes Latin America non-recurring charge of $36 million for the
liquidation of
63
<PAGE> 35
Argentine debt.
(5) Net of interest and other income.
(6) Also included in cost of materials and services category.
(7) Includes taxes on income, payroll, property and other business taxes.
64
<PAGE> 36
Appendix
Page 1 of 5
Management's Discussion and Analysis of Results of Operations and Financial
Condition (Graph Page 23):
Sales to Customers
------------------
1984 through 1993
Millions of Dollars
Bar graph showing 10 years of sales to customers. Each bar depicts
total sales for the year and is color coded to reflect the components
of domestic and international sales.
Bar graph points:
<TABLE>
<CAPTION>
Domestic International Worldwide
Year Sales Sales Sales
---- ------- ------------ ---------
<S> <C> <C> <C>
1984 $3,736 $2,389 $6,125
1985 3,990 2,431 6,421
1986 3,972 3,031 7,003
1987 4,167 3,845 8,012
1988 4,576 4,424 9,000
1989 4,881 4,876 9,757
1990 5,427 5,805 11,232
1991 6,248 6,199 12,447
1992 6,903 6,850 13,753
1993 7,203 6,935 14,138
</TABLE>
(Graph Page 23):
Net Earnings
------------
1984 through 1993
Millions of Dollars
Bar graph with 10 years of net earnings.
Bar graph points:
Net
Year Earnings
---- --------
1984 $ 515
1985 614
1986 330
1987 833
1988 974
1989 1,082
1990 1,143
1991 1,461
1992 1,030
1993 1,787
65
<PAGE> 37
Appendix
Page 2 of 5
Management's Discussion and Analysis of Results of Operations and Financial
Condition (Graph Page 24):
Net Earnings Per Share and
Cash Dividends Paid Per Share
-----------------------------
1984 through 1993
Dollars
Bar graph showing 10 years of earnings per share data. In addition,
cash dividends paid per share each year is shown on each bar in a
different color.
Bar graph points:
<TABLE>
<CAPTION>
Net Earnings Cash Dividends Paid
Year Per Share Per Share
---- ------------ -------------------
<S> <C> <C>
1984 .69 .29
1985 .84 .32
1986 .46 .34
1987 1.21 .40
1988 1.43 .48
1989 1.62 .56
1990 1.72 .66
1991 2.19 .77
1992 1.56 .89
1993 2.74 1.01
</TABLE>
(Pie Chart Page 24):
Distribution of Sales Revenues - 1993
A pie chart showing how 1993 sales revenues were distributed.
Components are depicted as follows:
Employee Costs 28.8%
Cost of Materials and Services 49.7
Depreciation and Amortization 4.4
Taxes Other Than Payroll 4.5
Cash Dividends Paid 4.6
Earnings Reinvested in Business 8.0
-----
100.0%
=====
66
<PAGE> 38
Appendix
Page 3 of 5
Management's Discussion and Analysis of Results of Operations and Financial
Condition (Graph Page 24):
Research Expense
----------------
1984 through 1993
Millions of Dollars
Bar graph showing 10 years of research expense.
Bar graph points:
Research
Year Expense
---- --------
1984 $421
1985 471
1986 521
1987 617
1988 674
1989 719
1990 834
1991 980
1992 1,127
1993 1,182
(Graph Page 26):
Sales by Segment of Busines
---------------------------
1991 through 1993
Million of Dollars
Bar chart showing sales by segment of business. Each bar depicts
total sales. The segments are shown as a percentage of total sales
each year and are displayed in different colors.
Bar graph points:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Consumer 36.8% 34.7% 34.1%
Pharmaceutical 30.5% 31.6% 31.8%
Professional 32.7% 33.7% 34.1%
Total Sales $12,447 $13,753 $14,138
</TABLE>
67
<PAGE> 39
Appendix
Page 4 of 5
Management's Discussion and Analysis of Results of Operations and Financial
Condition (Graph Page 26):
Operating Profit by Segment of Business
---------------------------------------
1991 through 1993
Millions of Dollars
Bar chart showing operating profit by segment of business. Each bar
depicts the total of segments operating profit. The segments are
shown as a percentage of total segments operating profit each year and
are displayed in different colors.
Bar graph points:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Consumer 20.5% 20.3% 20.2%
Pharmaceutical 54.2% 55.4% 54.4%
Professional 25.3% 24.3% 25.4%
Total Segments
Operating Profit $2,217 $2,463 $2,582
</TABLE>
(Graph Page 28):
Sales by Geographic Area of Business
------------------------------------
1991 through 1993
Millions of Dollars
Bar chart showing sales by geographic area of business. Each bar
depicts total sales. The geographic areas are shown as a percentage
of total sales each year and are displayed in different colors.
Bar graph points:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
United States 50.2% 50.2% 50.9%
Europe 30.1% 30.9% 28.5%
Western Hemisphere
excluding U.S. 10.0% 8.8% 9.4%
Africa, Asia and
Pacific 9.7% 10.1% 11.2%
Total Sales $12,447 $13,753 $14,138
</TABLE>
68
<PAGE> 40
Appendix
Page 5 of 5
Management's Discussion and Analysis of Results of Operations and Financial
Condition (Graph Page 28):
Operating Profit by Geographic Area of Business
-----------------------------------------------
1991 through 1993
Millions of Dollars
Bar chart showing operating profit by geographic area of business.
Each bar depicts the total of segments operating profit. The segments
are shown as a percentage of total segments operating profit each year
and are displayed in different colors.
Bar graph points:
<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
United States 46.1% 42.7% 46.8%
Europe 42.1% 45.7% 40.1%
Western Hemisphere
excluding U.S. 5.3% 5.4% 6.1%
Africa, Asia and
Pacific 6.5% 6.2% 7.0%
Total Segments
Operating Profit $2,217 $2,463 $2,582
</TABLE>
69
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
Johnson & Johnson, a New Jersey corporation, has the domestic and
international subsidiaries shown below. Certain domestic subsidiaries and
international subsidiaries are not named because they are not significant in
the aggregate. Johnson & Johnson has no parent.
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Organization
------------------ ---------------
<S> <C>
Domestic Subsidiaries:
"A"- Company a Johnson & Johnson Company..... Delaware
Critikon, Inc. .............................. Florida
Ethicon, Inc. ............................... Ohio
Iolab Corporation............................ California
Janssen Pharmaceutica Inc. .................. New Jersey
Johnson & Johnson Advanced Behavioral
Technologies, Inc.......................... New Jersey
Johnson & Johnson Consumer Products, Inc..... New Jersey
Johnson & Johnson Development Corporation.... New Jersey
Johnson & Johnson Finance Corporation........ New Jersey
Johnson & Johnson Hospital Services, Inc..... New Jersey
Johnson & Johnson International.............. New Jersey
Johnson & Johnson Japan Inc. ................ New Jersey
Johnson & Johnson Medical, Inc. ............. New Jersey
Johnson & Johnson o Merck Consumer
Pharmaceuticals Co. ....................... New Jersey
Johnson & Johnson (Middle East) Inc. ........ New Jersey
Johnson & Johnson Professional, Inc.......... New Jersey
Johnson & Johnson (Russia), Inc. ............ New Jersey
Johnson & Johnson Slovakia, Ltd. ............ New Jersey
Johnson & Johnson Vision Products, Inc. ..... Florida
Johnson & Johnson S.E., Inc.................. New Jersey
JJHC, Inc. .................................. Delaware
LifeScan, Inc. .............................. California
McNEIL-PPC, Inc ............................. New Jersey
McNeilab, Inc. .............................. Pennsylvania
Noramco, Inc. ............................... Georgia
Ortho Biotech, Inc. ......................... New Jersey
Ortho Diagnostic Systems Inc. ............... New Jersey
Ortho Pharmaceutical Corporation............. Delaware
Site Microsurgical Systems, Inc. ............ Pennsylvania
Therakos, Inc................................ Florida
</TABLE>
24
<PAGE> 2
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Organization
------------------ ---------------
<S> <C>
International Subsidiaries:
"A" Company G.m.b.H. ........................ Germany
Chicopee B.V. ............................... Netherlands
Cilag AB..................................... Sweden
Cilag AG..................................... Switzerland
Cilag AG International ...................... Switzerland
Cilag AG Pharmaceuticals .................... Switzerland
Cilag de Mexico, S.A. de C.V. ............... Mexico
Cilag Farmaceutica Ltda. .................... Brazil
Cilag Farmaceutica S.A. ..................... Argentina
Cilag Ges.m.b.H. ............................ Austria
Cilag G.m.b.H. .............................. Germany
Cilag Limited................................ England
Cilag-Medicamenta, Limitada.................. Portugal
Cilag N.V. .................................. Belgium
Cilag Pharmaceutical K.K. ................... Japan
Cilag S.A.R.L. .............................. France
Cilag S.p.A. ................................ Italy
Dial S.A. .................................. France
Dr. Molter G.m.b.H. ......................... Germany
Ethicon Endo-Surgery (Europe) G.m.b.H. ...... Germany
Ethicon G.m.b.H & Co. KG..................... Germany
Ethicon Ltd. ................................ Scotland
Ethicon S.p.A. .............................. Italy
Ethnor Del Istmo S.A. ....................... Panama
Ethnor Limited............................... India
Ethnor (Proprietary) Limited................. South Africa
Ethnor S.A. ................................. France
Greiter AG ................................. Switzerland
Greiter GmbH ............................... Austria
Greiter Distribution AG ..................... Switzerland
Greiter (International) AG .................. Switzerland
Health Care Products S.A. ................... Greece
Janssen Biotech N.V. ........................ Belgium
Janssen-Cilag Pty. Limited................... Australia
Janssen Farmaceutica Ltda.................... Brazil
Janssen Farmaceutica Limitada ............... Chile
Janssen Farmaceutica Portugal, Limitada...... Portugal
Janssen Farmaceutica C.A. ................... Venezuela
Janssen Farmaceutica S.A. .................. Argentina
Janssen Farmaceutica S.A. ................... Spain
Janssen Farmaceutica S.A. ................... Colombia
Janssen Farmaceutica, S.A. de C.V. .......... Mexico
Janssen Farmaceutici S.p.A. ................. Italy
Janssen G.m.b.H. ............................ Germany
Janssen Internationaal N.V. ................. Belgium
Janssen K.K. ................................ Japan
Janssen Korea, Ltd. ......................... Korea
</TABLE>
25
<PAGE> 3
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Organization
------------------ ---------------
<S> <C>
Janssen-Kyowa Co., Ltd. ..................... Japan
Janssen Pharma AB............................ Sweden
Janssenpharma A/S............................ Denmark
Janssen Pharmaceutica AG..................... Switzerland
Janssen Pharmaceutica B.V. .................. Netherlands
Janssen Pharmaceutica G.m.b.H. .............. Austria
Janssen Pharmaceutica Inc. .................. Canada
Janssen Pharmaceutica Limited................ Thailand
Janssen Pharmaceutica N.V. .................. Belgium
Janssen Pharmaceutica (Proprietary)
Limited.................................... South Africa
Janssen Pharmaceutica S.A.C.I. .............. Greece
Janssen Pharmaceutical Limited............... England
Janssen Pharmaceutical Limited............... Ireland
Janssen Products, Inc. ...................... Puerto Rico
Johnson & Johnson AB......................... Sweden
Johnson & Johnson AG......................... Switzerland
Johnson & Johnson AS......................... Denmark
Johnson & Johnson S.A. de C.V. .............. Mexico
Johnson & Johnson (Angola), Limitada......... Angola
Johnson & Johnson de Argentina, S.A.C.e I. .. Argentina
Johnson & Johnson China, Ltd. ............... China
Johnson & Johnson de Colombia S.A. .......... Colombia
Johnson & Johnson de Costa Rica S.A. ........ Costa Rica
Johnson & Johnson del Ecuador S.A. .......... Ecuador
Johnson & Johnson de Uruguay S.A. ........... Uruguay
Johnson & Johnson de Venezuela, S.A. ........ Venezuela
Johnson & Johnson (Dominicana), C. por A. ... Dominican Republic
Johnson & Johnson (Fiji) Limited............. Fiji
Johnson & Johnson/Gaba B.V. ................. Netherlands
Johnson & Johnson G.m.b.H. .................. Austria
Johnson & Johnson G.m.b.H. .................. Germany
Johnson & Johnson Guatemala, S.A. ........... Guatemala
Johnson & Johnson Hellas S.A. ............... Greece
Johnson & Johnson Hemisferica S.A. .......... Puerto Rico
Johnson & Johnson (Hong Kong) Limited........ Hong Kong
Johnson & Johnson Inc. ...................... Canada
Johnson & Johnson Industria e Comercio Ltda.. Brazil
Johnson & Johnson (Ireland) Limited.......... Ireland
Johnson & Johnson (Jamaica) Limited.......... Jamaica
Johnson & Johnson (Kenya) Limited............ Kenya
Johnson & Johnson Korea Ltd.................. Korea
Johnson & Johnson Kft. ...................... Hungary
Johnson & Johnson K.K. ...................... Japan
Johnson & Johnson Limitada................... Portugal
Johnson & Johnson Limited.................... England
Johnson & Johnson Limited.................... India
Johnson & Johnson Ltd. ...................... Russia
Johnson & Johnson Medical Argentina.......... Argentina
Johnson & Johnson Medical B.V................ Netherlands
</TABLE>
26
<PAGE> 4
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Organization
------------------ ---------------
<S> <C>
Johnson & Johnson Medical G.m.b.H............ Germany
Johnson & Johnson Medical K.K. .............. Japan
Johnson & Johnson Medical Korea Limited...... Korea
Johnson & Johnson Medical Mexico S.A.de C.V.. Mexico
Johnson & Johnson Medical Ltd................ England
Johnson & Johnson Medical Mfg. SDN.BHD. ..... Malaysia
Johnson & Johnson Medical Products, Inc. .... Canada
Johnson & Johnson Medical Pty. Ltd........... Australia
Johnson & Johnson Medical S.A.R.L............ France
Johnson & Johnson (New Zealand) Limited...... New Zealand
Johnson & Johnson Pacific Pty. Ltd. ......... Australia
Johnson & Johnson Pakistan (Private) Limited. Pakistan
Johnson & Johnson Panama, S.A. .............. Panama
Johnson & Johnson (Philippines), Inc. ....... Philippines
Johnson & Johnson Poland, Inc. Sp. z o.o. ... Poland
Johnson & Johnson (Private) Limited.......... Zimbabwe
Johnson & Johnson Produtos Profissionais Ltda Brazil
Johnson & Johnson Professional Products Ltd.. England
Johnson & Johnson Professional Products GmbH. Germany
Johnson & Johnson Professional Products
(Pty.) Ltd. ............................ South Africa
Johnson & Johnson (Proprietary) Limited...... South Africa
Johnson & Johnson Pte. Ltd. ................. Singapore
Johnson & Johnson Pty. Limited............... Australia
Johnson & Johnson Research Pty. Limited...... Australia
Johnson & Johnson S.A. ...................... France
Johnson & Johnson S.A. ...................... Spain
Johnson & Johnson Sante' S.A................. France
Johnson & Johnson SDN. BHD. ................. Malaysia
Johnson & Johnson S.p.A. .................... Italy
Johnson & Johnson, Spol.s.r.o. .............. Czech Republic
Johnson & Johnson Taiwan Ltd. ............... Taiwan
Johnson & Johnson (Thailand) Limited......... Thailand
Johnson & Johnson (Trinidad) Limited......... Trinidad
Johnson & Johnson Vision Products AB......... Sweden
Johnson & Johnson (Zambia) Limited........... Zambia
Laboratoires RoC (U.K.) Ltd.................. England
Laboratoires Janssen S.A. ................... France
Laboratoires Polive S.N.C. .................. France
Lifescan Canada Ltd. ........................ Canada
Medos S.A.................................... Switzerland
Nihon RoC K.K................................ Japan
Ortho Diagnostic Systems G.m.b.H. ........... Germany
Ortho Diagnostic Systems K.K. ............... Japan
Ortho Diagnostic Systems Limited............. England
Ortho Diagnostic Systems N.V. ............... Belgium
Ortho Diagnostic Systems S.A. ............... France
Ortho Diagnostic Systems S.p.A. ............. Italy
Ortho-McNeil Inc............................. Canada
Penaten G.m.b.H.............................. Germany
Penaten Korea Limited ....................... Korea
Penaten Pty. Limited ........................ Australia
Produfarma S.A............................... Argentina
</TABLE>
27
<PAGE> 5
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Organization
------------------ --------------
<S> <C>
P.T. Johnson & Johnson Indonesia............. Indonesia
RoC G.m.b.H. ................................ Germany
RoC S.A. .................................... France
RoC S.A./N.V. ............................... Belgium
RoC S.p.A. .................................. Italy
RoC Laboratoires de Dermoestetica S.A. ...... Spain
R.W.Johnson Pharmaceutical Research Institute Switzerland
Shanghai Johnson & Johnson Ltd............... China
Surgikos, S.A. de C.V. ...................... Mexico
Tasmanian Alkaloids Pty. Ltd. ............... Australia
Taxandria Pharmaceutica B.V. ................ Netherlands
Xian-Janssen Pharmaceutical Limited ......... China
</TABLE>
28
