UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-3215
JOHNSON & JOHNSON
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1024240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
New Brunswick, New Jersey 08933
(Address of principal executive offices, including zip code)
908-524-0400
Registrant's telephone number, including area code
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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
On July 30, 1993, 653,512,528 shares of Common Stock, $1.00
par value, were outstanding.
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JOHNSON & JOHNSON AND SUBSIDIARIES
TABLE OF CONTENTS
Part I - Financial Information Page No.
Consolidated Balance Sheet -
July 4, 1993 and January 3, 1993 3
Consolidated Statement of Earnings for the
Six Months Ended July 4, 1993 and June 28, 1992 5
Consolidated Statement of Cash Flows
for the Six Months Ended July 4, 1993
and June 28, 1992 7
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
Signatures 17
Part II - Other Information
Item 4 - Submission of Matters to a
Vote of Security Holders 15
Items 1, 2, 3, and 5 are not applicable
Exhibit Index 16
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Part I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in Millions)
ASSETS
July 4, January 3,
1993 1993
Current Assets:
Cash and cash equivalents $ 595 745
Marketable securities, at cost which
approximates market value 114 133
Accounts receivable, trade, less
allowances $151 (1992 - $143) 2,146 1,855
Inventories (Note 4) 1,856 1,742
Deferred taxes on income 284 327
Prepaid expenses and other
receivables 588 621
Total current assets 5,583 5,423
Marketable securities, non-current,
at cost, which approximates market
value 395 355
Property, plant and equipment, at cost 6,525 6,303
Less accumulated depreciation and
amortization 2,370 2,188
4,155 4,115
Intangible assets, net (Note 5) 692 716
Deferred taxes on income 566 506
Other assets 822 769
Total Assets $ 12,213 11,884
See Notes to Consolidated Financial Statements
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JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in Millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
July 4, January 3,
1993 1993
Current Liabilities:
Loans and notes payable $ 809 1,032
Accounts payable 832 910
Accrued liabilities 1,105 1,302
Taxes on income 291 183
Total current liabilities 3,037 3,427
Long-term debt 1,424 1,365
Deferred tax liability 86 91
Certificates of extra compensation 83 94
Other liabilities 1,878 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 767,367,000 and
767,366,000 shares) 767 767
Note receivable from employee stock
ownership plan (84) (92)
Cumulative currency translation
adjustments (255) (146)
Retained earnings 7,304 6,648
7,732 7,177
Less common stock held in treasury,
at cost (112,455,000 & 111,970,000
shares) 2,027 2,006
Total stockholders' equity 5,705 5,171
Total liabilities and stockholders'
equity $ 12,213 11,884
See Notes to Consolidated Financial Statements
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JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited; dollars & shares in millions
except per share figures)
Fiscal Quarter Ended
July 4, Percent June 28, Percent
1993 to Sales 1992 to Sales
Sales to customers (Note 6) $3,541 100.0 3,413 100.0
Cost of products sold 1,148 32.4 1,119 32.8
Selling, marketing and
administrative expenses 1,432 40.4 1,389 40.7
Research expense 286 8.1 268 7.9
Interest income (15) (.4) (34) (1.0)
Interest expense, net of
portion capitalized 33 .9 27 .8
Other (income) expense (13) (.3) 8 .2
2,871 81.1 2,777 81.4
Earnings before provision
for taxes on income 670 18.9 636 18.6
Provision for taxes on
income (Note 3) 175 4.9 184 5.4
NET EARNINGS $ 495 14.0 452 13.2
NET EARNINGS PER SHARE $ .75 .68
CASH DIVIDENDS PER SHARE $ .26 .23
AVG. SHARES OUTSTANDING 655.3 660.8
See Notes to Consolidated Financial Statements
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JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited; dollars & shares in millions
except per share figures)
Fiscal Six Months Ended
July 4, Percent June 28, Percent
1993 to Sales 1992 to Sales
Sales to customers (Note 6) $ 7,101 100.0 6,770 100.0
Cost of products sold 2,311 32.5 2,246 33.2
Selling, marketing and
administrative expenses 2,868 40.4 2,744 40.5
Research expense 567 8.0 530 7.8
Interest income (35) (.5) (54) (.8)
Interest expense, net of
portion capitalized 64 .9 48 .7
Other income (44) (.6) (24) (.3)
5,731 80.7 5,490 81.1
Earnings before provision for
taxes on income and
cumulative effect of
accounting changes 1,370 19.3 1,280 18.9
Provision for taxes on
income (Note 3) 372 5.2 376 5.5
Earnings before cumulative
effect of acctg changes 998 14.1 904 13.4
Cumulative effect of
accounting changes, net
of taxes (Note 2) - - (595) N.M.
NET EARNINGS $ 998 14.1 309 N.M.
NET EARNINGS PER SHARE (Note 2)
Before cumulative effect of
accounting changes $ 1.52 1.36
Cumulative effect of accounting
changes, net of taxes
(Note 2) - (.90)
NET EARNINGS PER SHARE $ 1.52 .46
CASH DIVIDENDS PER SHARE $ .49 .43
AVG. SHARES OUTSTANDING 655.4 663.0
N.M. - not meaningful
See Notes to Consolidated Financial Statements
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JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; Dollars in Millions)
Fiscal
Six Months Ended
July 4, June 28,
1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 998 309
Adjustments to reconcile net earnings to
cash flows from operating activities:
Cumulative effect of accounting changes - 595
Depreciation and amortization of
property and intangibles 316 280
Increase in accounts receivable, trade,
less allowances (317) (400)
Increase in inventories (153) (199)
Changes in other assets and liabilities (50) 56
NET CASH FLOWS FROM OPERATING ACTIVITIES 794 641
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (375) (417)
Proceeds from the disposal of assets 14 21
Acquisition of businesses, net of cash
acquired (24) (10)
Other, principally marketable securities (18) (91)
NET CASH USED BY INVESTING ACTIVITIES (403) (497)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to stockholders (321) (285)
Repurchase of common stock (64) (576)
Employee stock ownership plan note
repayment 8 8
Proceeds from short-term debt 100 644
Retirement of short-term debt (380) (125)
Proceeds from long-term debt 155 192
Retirement of long-term debt (17) (157)
Proceeds from the exercise of stock
options 17 23
NET CASH USED BY FINANCING
ACTIVITIES (502) (276)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (39) (5)
DECREASE IN CASH AND CASH EQUIVALENTS (150) (137)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 745 589
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 595 452
See Notes to Consolidated Financial Statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - The accompanying interim financial statements and
related notes should be read in conjunction with the Consolidated
Financial Statements of Johnson & Johnson and Subsidiaries and
related notes as contained in the Annual Report on Form 10-K for
the fiscal year ended January 3, 1993. The interim financial
statements include all adjustments (consisting only of normal
recurring adjustments) and accruals necessary in the judgment of
management for a fair presentation of such statements. However,
the information contained therein is subject to year-end
adjustments and audit by independent public accountants.
Earnings per share were calculated on the basis of the average
number of shares of common stock outstanding during the
applicable period.
NOTE 2 - ADOPTION OF SFAS NO. 106, SFAS NO. 109 & SFAS NO. 112
The Company adopted the provisions of Statement of Financial
Accounting Standards SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," in 1992. 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.
In 1992, the Company also elected early adoption 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
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Statements of Earnings. 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.
In 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." SFAS 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.
1992 results have been restated to reflect a one-time after-tax
charge of $595 million or $.90 a share, due to the company's
early adoption of accounting changes for postretirement benefits,
income taxes and postemployment benefits. In addition, second
quarter and six months results have been restated to include
incremental after-tax charges, attributable to these accounting
changes, of $12 million and $24 million, respectively.
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NOTE 3 - INCOME TAXES
The effective income tax rates for 1993 and 1992 are as
follows:
1993 1992
First Quarter 28.1% 29.8%
Second Quarter 26.1 28.9
First Half 27.2 29.4
The effective income tax rates for the first half of 1993 and
1992 are 27.2% and 29.4%, respectively, as compared to the U.S.
federal statutory rate of 34%. The major reason for this
difference is the result of domestic subsidiaries operating in
Puerto Rico under a grant providing for tax relief.
NOTE 4 - INVENTORIES
(Dollars in Millions) July 4, 1993 Jan. 3, 1993
Raw materials and supplies $ 540 415
Goods in process 372 457
Finished goods 944 870
$ 1,856 1,742
NOTE 5 - INTANGIBLE ASSETS
(Dollars in Millions) July 4, 1993 Jan. 3, 1993
Intangible assets $ 1,017 1,012
Less accumulated amortization 325 296
$ 692 716
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.
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NOTE 6 - SALES TO CUSTOMERS BY SEGMENT OF BUSINESS AND GEOGRAPHIC
AREAS
(Dollars in Millions)
SALES BY SEGMENT OF BUSINESS
Second Quarter Six Months
Percent
Increase Percent
1993 1992 (Decrease) 1993 1992 Increase
Consumer
Domestic $ 608 601 1.2 $ 1,310 1,301 .7
Int'l 576 564 2.1 1,151 1,096 5.0
1,184 1,165 1.6% 2,461 2,397 2.7%
Pharmaceutical
Domestic $ 428 391 9.5 $ 857 777 10.3
Int'l 691 692 (.1) 1,374 1,337 2.8
1,119 1,083 3.3% 2,231 2,114 5.5%
Professional
Domestic $ 712 654 8.9 $ 1,381 1,257 9.9
Int'l 526 511 2.9 1,028 1,002 2.6
1,238 1,165 6.3% 2,409 2,259 6.6%
Domestic $ 1,748 1,646 6.2 $ 3,548 3,335 6.4
Int'l 1,793 1,767 1.5 3,553 3,435 3.4
Worldwide $ 3,541 3,413 3.8% $ 7,101 6,770 4.9%
SALES BY GEOGRAPHIC AREAS
Second Quarter Six Months
Percent Percent
Increase Increase
1993 1992 (Decrease) 1993 1992 (Decrease)
U.S. $ 1,748 1,646 6.2 $ 3,548 3,335 6.4
Europe 1,078 1,108 (2.7) 2,130 2,145 (.7)
West. Hemis.
excl. U.S.A. 326 299 9.0 660 590 11.9
Africa, Asia,
& Pacific 389 360 8.1 763 700 9.0
Total $ 3,541 3,413 3.8% $ 7,101 6,770 4.9%
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Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES AND EARNINGS
Consolidated sales for the first six months of 1993 of $7,101
million exceeded sales of $6,770 million for the first six months
of 1992 by 4.9%. The strength of the U.S. dollar relative to
foreign currencies decreased sales for the first six months of
1993 by 3.2%. Excluding currency, sales increased 8.1% on an
operational basis for the first six months of 1993. Consolidated
net earnings for the first six months of 1993 were $998 million,
compared with net earnings of $904 million for the first six
months of 1992, before the cumulative effect of 1992 accounting
changes.
Consolidated net earnings and earnings per share in 1992 were
reduced by $595 million, or $.90 per share, due to the company's
adoption of accounting changes for postretirement benefits,
income taxes, and postemployment benefits. Excuding the one-time
charge in 1992, net earnings and earnings per share rose to 10.4%
and 11.8%, respectively.
Consolidated sales for the second quarter of 1993 were $3,541
million, an increase of 3.8% over 1992 second quarter sales of
$3,413 million. The effect of a stronger U.S. dollar relative to
foreign currencies decreased second quarter sales by 3.2%.
Excluding the effect of currency exchange rates, sales would have
increased 7.0%. Consolidated net earnings for the second quarter
of 1993 were $495 million, compared with $452 million for the
same period a year ago, an increase of 9.5%. Earnings per share
for the second quarter of 1993 rose 10.3% to $.75 compared with
$.68 in the 1992 period.
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Domestic sales for the first six months of 1993 were $3,548
million, an increase of 6.4% over 1992 domestic sales of $3,335
million for the same period a year ago. Sales by international
subsidiaries were $3,553 million for the first six months of 1993
compared with $3,435 million for the same period a year ago, an
increase of 3.4%. Excluding the impact of the stronger value of
the dollar, international sales increased by 9.7%.
Johnson & Johnson consumer sales increased 1.6% worldwide for the
quarter versus the same period a year ago. There was sales
improvement in the domestic over-the-counter business,
particularly the TYLENOL family of products. The international
business growth was slowed by the strong dollar relative to
foreign currencies and weakness in many international economies.
Pharmaceutical sales for the quarter grew 3.3% worldwide.
Domestic pharmaceutical sales increased 9.5%, led by the
introduction of PROCRIT for treating anemia associated with
cancer patients on chemotherapy, LEUSTATIN, introduced late in
the first quarter of 1993 for the treatment of hairy cell
leukemia, SPORANOX, an antifungal, DURAGESIC, the transdermal
patch for chronic cancer pain, and growth in the oral
contraceptive business. These gains were reduced by a sales
decline in HISMANAL, the once-a-day, less sedating antihistamine.
Sales growth for the international pharmaceutical business was
slowed by health care system adjustments in Germany and Italy, in
addition to the negative impact of the strong U.S. dollar.
However, international sales of PREPULSID, a gastrointestinal
product, and SPORANOX, an anti-anemia drug, showed strong growth
for the period.
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Professional sales increased 6.3% worldwide. Strong growth of
the Ethicon Endo-Surgery less-invasive products business, the
continued expansion of the disposable contact lens business with
ACUVUE and SUREVUE, and the further market penetration of the ONE
TOUCH II blood glucose monitoring system aided this worldwide
sales growth. In addition, domestic professional sales growth of
8.9% for the period was influenced by strong performances in the
PROTECTIV catheter safety system products, the DINAMAP Plus vital
signs monitor, and P.F.C. Hip and Knee orthopaedic joint
reconstruction products.
Average shares of common stock outstanding in the first half of
1993 and 1992 were 655.4 million and 663.0 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Net debt (borrowings net of cash and current marketable
securities) was 21.1% of net capital compared with 22.7% at the
end of 1992. Net debt was unchanged during the first six months
of 1993 to remain at $1.52 billion at the end of the second
quarter. Total debt represented 28.1% of total capital
(stockholders' equity and total borrowings) at quarter end,
compared with 31.7% at the end of 1992.
Additions to property, plant and equipment were $375 million for
the first six months of 1993, compared with $417 for the same
period in 1992.
On July 26, 1993, the Board of Directors approved a regular
quarterly dividend of 26 cents per share payable on September 7,
1993 to stockholders of record as of August 17, 1993.
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Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of the stockholders of the Company
was held on April 25, 1991.
(b) At the annual meeting, the stockholders voted on the
following proposals:
1. Approval of the adoption of the 1991 Stock Option
Plan.
The vote on this proposal was as follows:
FOR AGAINST ABSTAIN
257,650,450 12,964,904 2,558,817
2. Approval of the adoption of the 1991 Stock
Compensation Plan.
The vote on this proposal was as follows:
FOR AGAINST ABSTAIN
257,526,933 13,064,459 2,582,779
3. A stockholder proposal on reporting of the
Company's activities in South Africa. The vote on
this proposal was as follows:
FOR AGAINST ABSTAIN
22,522,742 197,256,293 53,395,136
4. A stockholder proposal on animal testing. The
vote on this proposal was as follows:
FOR AGAINST ABSTAIN
6,782,196 218,624,332 47,767,643
Item 6. Exhibits
Calculation of Earnings per Share
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EXHIBIT INDEX
Regulation S-K Description
Exhibit Table of Page
Item No. Exhibit No.
11 Calculation of Earnings 18 - 19
per Share
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
l934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
JOHNSON & JOHNSON
(Registrant)
Date: August 16, 1993 By C. H. Johnson
C. H. Johnson
(Vice President, Finance)
Date: August 16, 1993 By A. W. Roulston
A. W. Roulston
(Vice Pres., Corporate
Controller)
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JOHNSON & JOHNSON AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Dollars and shares in millions except per share figures)
Fiscal
Quarter Ended
July 4, June 28
1993 1992
1. Net Earnings ................ $ 495 452
2. Average number of shares outstanding
during the period............ 655.3 660.8
3. Earnings per share based upon average
outstanding shares (1 / 2) $ .75 .68
4. Fully diluted earnings per share:
a. Average number of shares out-
standing during the period. 655.3 660.8
b. Shares issuable under stock
compensation agreements at
quarter-end .............. .7 .7
c. Shares reserved under the stock
option plan for which the
market price at end of quarter
exceeds the option price.. 19.0 23.8
d. Aggregate proceeds to the Company
from the exercise of
options in 4c ............ 530 636
e. Market price of the Company's
common stock at fiscal
quarter-end............... 39.88 44.75
f. Shares which could be repurchasd
under the treasury stock method
(4d / 4e) ................ 13.3 14.2
g. Addition to average outstanding
shares (4b + 4c - 4f)..... 6.4 10.3
h. Shares for fully diluted earnings
per share calculation
(4a + 4g) ................ 661.7 671.1
i. Fully diluted earnings per share
(1 / 4h) ................. $ .75 .67
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JOHNSON & JOHNSON AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Dollars and shares in millions except per share figures)
Fiscal
Six Months Ended
July 4, June 28,
1993 1992
1. Net Earnings ................. $ 998 309
2. Average number of shares outstanding
during the period............ 655.4 663.0
3. Earnings per share based upon average
outstanding shares (1 / 2).... 1.52 .46
4. Fully diluted earnings per share:
a. Average number of shares out-
standing during the period. 655.4 663.0
b. Shares issuable under stock
compensation agreements at
quarter-end .............. .7 .7
c. Shares reserved under the stock
option plan for which the
market price at end of quarter
exceeds the option price.. 19.0 23.8
d. Aggregate proceeds to the Company
from the exercise of
options in 4c ............ 530 636
e. Market price of the Company's
common stock at fiscal
quarter-end............... 39.88 44.75
f. Shares which could be repurchasd
under the treasury stock method
(4d / 4e)............... 13.3 14.2
g. Addition to average outstanding
shares (4b + 4c - 4f)..... 6.4 10.3
h. Shares for fully diluted earnings
per share calculation
(4a + 4g) ................ 661.8 673.3
i. Fully diluted earnings per share
(1 / 4h)................ $ 1.51 .46
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