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 April 3, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
- -----------------------------------------------------------------
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 April 29, 1994, 643,188,466 shares of Common Stock, $1.00
par value, were outstanding.
- 1 -
<PAGE>
JOHNSON & JOHNSON AND SUBSIDIARIES
TABLE OF CONTENTS
Part I - Financial Information Page No.
Consolidated Balance Sheet -
April 3, 1994 and January 2, 1994 3
Consolidated Statement of Earnings for the
Three Months Ended April 3, 1994 and
April 4, 1993 5
Consolidated Statement of Cash Flows
for the Three Months Ended April 3, 1994
and April 4, 1993 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Signatures 13
Part II - Other Information
Items 1 through 6 are not applicable
Exhibit Index 14
- 2 -
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in Millions)
ASSETS
April 3, January 2,
1994 1994
Current Assets:
Cash and cash equivalents $ 334 372
Marketable securities, at cost which
approximates market value (Note 2) 99 104
Accounts receivable, trade, less
allowances $210 (1993 - $170) 2,296 2,107
Inventories (Note 4) 1,834 1,717
Deferred taxes on income 429 399
Prepaid expenses and other
receivables 675 518
Total current assets 5,667 5,217
Marketable securities, non-current,
at cost, which approximates market
value 437 437
Property, plant and equipment, at cost 6,985 6,783
Less accumulated depreciation and
amortization 2,567 2,377
4,418 4,406
Intangible assets, net (Note 5) 969 925
Deferred taxes on income 476 484
Other assets (Note 2) 859 773
Total Assets $ 12,826 12,242
See Notes to Consolidated Financial Statements
- 3 -
<PAGE>
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in Millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
April 3, January 2,
1994 1994
Current Liabilities:
Loans and notes payable $ 696 915
Accounts payable 762 901
Accrued liabilities 1,460 1,283
Taxes on income 228 113
Total current liabilities 3,146 3,212
Long-term debt 1,505 1,493
Deferred tax liability 129 122
Certificates of extra compensation 81 91
Other liabilities 1,873 1,756
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 767,390,000 and
767,372,000 shares) 767 767
Note receivable from employee stock
ownership plan (74) (84)
Cumulative currency translation
adjustments (212) (338)
Retained earnings (Note 2) 8,112 7,727
8,593 8,072
Less common stock held in treasury,
at cost (124,388,000 & 124,391,000
shares) 2,501 2,504
Total stockholders' equity 6,092 5,568
Total liabilities and stockholders'
equity $12,826 12,242
See Notes to Consolidated Financial Statements
- 4 -
<PAGE>
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited; dollars & shares in millions
except per share figures)
Fiscal Quarter Ended
April 3, Percent April 4, Percent
1994 to Sales 1993 to Sales
Sales to customers (Note 6) $3,690 100.0 3,560 100.0
Cost of products sold 1,181 32.0 1,163 32.7
Selling, marketing and
administrative expenses 1,480 40.1 1,436 40.3
Research expense 289 7.8 281 7.9
Other income (22) (.6) (31) (.9)
2,928 79.3 2,849 80.0
Earnings before interest and
taxes on income 762 20.7 711 20.0
Interest income 10 .2 20 .6
Interest expense, net of
portion capitalized (36) (1.0) (31) (.9)
Earnings before provision
for taxes on income 736 19.9 700 19.7
Provision for taxes on
income (Note 3) 192 5.2 197 5.6
NET EARNINGS $ 544 14.7 503 14.1
NET EARNINGS PER SHARE $ .85 .77
CASH DIVIDENDS PER SHARE $ .26 .23
AVG. SHARES OUTSTANDING 643.1 655.4
See Notes to Consolidated Financial Statements
- 5 -
<PAGE>
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; Dollars in Millions)
Fiscal Quarter Ended
April 3, April 4,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 544 503
Adjustments to reconcile net earnings to
cash flows from operating activities:
Depreciation and amortization of
property and intangibles 175 158
Increase in accounts receivable, trade,
less allowances (141) (233)
Increase in inventories (68) (58)
Changes in other assets and liabilities 45 (79)
NET CASH FLOWS FROM OPERATING ACTIVITIES 555 291
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (141) (187)
Proceeds from the disposal of assets 18 11
Acquisition of businesses, net of cash
acquired - (19)
Other, principally marketable securities (76) 16
NET CASH USED BY INVESTING ACTIVITIES (199) (179)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to stockholders (167) (151)
Repurchase of common stock (34) (21)
Proceeds from short-term debt 152 69
Retirement of short-term debt (333) (326)
Proceeds from long-term debt 8 55
Retirement of long-term debt (46) (1)
Proceeds from the exercise of stock
options 15 8
NET CASH USED BY FINANCING
ACTIVITIES (405) (367)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 11 (2)
DECREASE IN CASH AND CASH EQUIVALENTS (38) (257)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 372 745
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 334 488
See Notes to Consolidated Financial Statements
- 6 -
<PAGE>
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 2, 1994. 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. 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. 115 - Effective January 3, 1994,
the Company adopted statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". Investments subject to this standard are
required to be carried at fair value, unless they are held to
maturity. There was no effect on income as a result of adopting
SFAS No. 115.
The fair value of investment securities subject to the
provisions of SFAS No. 115, totaled $209 million at April 3,
1994, which exceeded the carrying amount by $43 million.
This unrealized gain was credited to Stockholders' Equity at
April 3, 1994 net of deferred income taxes of $15 million. These
investment securities are included in Marketable Securities
Current and Other Assets on the balance sheet.
- 7 -
<PAGE>
NOTE 3 - INCOME TAXES
The effective income tax rates for the first three months of 1994
and 1993 are 26.1% and 28.1%, respectively, as compared to the
U.S. federal statutory rate of 35%. 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) April 3, 1994 Jan. 2, 1994
Raw materials and supplies $ 500 448
Goods in process 519 485
Finished goods 815 784
$ 1,834 1,717
NOTE 5 - INTANGIBLE ASSETS
(Dollars in Millions) April 3, 1994 Jan. 2, 1994
Intangible assets $ 1,320 1,255
Less accumulated amortization 351 330
$ 969 925
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.
- 8 -
<PAGE>
NOTE 6 - SALES TO CUSTOMERS BY SEGMENT OF BUSINESS AND GEOGRAPHIC
AREAS
(Dollars in Millions)
SALES BY SEGMENT OF BUSINESS
First Quarter
Percent
Increase
1994 1993 (Decrease)
Consumer
Domestic $ 670 702 (4.6)
International 609 575 5.9
1,279 1,277 .2%
Pharmaceutical
Domestic $ 496 429 15.6
International 694 683 1.6
1,190 1,112 7.0%
Professional
Domestic $ 681 669 1.8
International 540 502 7.6
1,221 1,171 4.3%
Domestic $ 1,847 1,800 2.6
International 1,843 1,760 4.7
Worldwide $ 3,690 3,560 3.7%
SALES BY GEOGRAPHIC AREAS
First Quarter
Percent
Increase
1994 1993 (Decrease)
U.S. $ 1,847 1,800 2.6
Europe 1,073 1,052 2.0
Western Hemisphere
excluding U.S. 331 334 (.9)
Africa, Asia, & Pacific 439 374 17.4
Total $ 3,690 3,560 3.7%
- 9 -
<PAGE>
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES AND EARNINGS
Consolidated sales for the first quarter of 1994 were $3,690
million, an increase of 3.7% over 1993 first quarter sales of
$3,560 million. The effect of the stronger dollar relative to
foreign currencies decreased first quarter's sales by 2.1%.
Excluding the negative effect of currency, sales grew 5.8% on an
operational basis for the first quarter of 1994. Consolidated
net earnings for the first quarter of 1994 were $544 million,
compared with $503 million for the same period a year ago, an
increase of 8.2%. Earnings per share for the period were $.85,
compared with $.77 for the same period in 1993, an increase of
10.4%.
Domestic sales for the first three months of 1994 were $1,847
million, an increase of 2.6% over 1993 domestic sales of $1,800
million for the same period. Sales by international subsidiaries
were $1,843 million for the first quarter of 1994 compared with
$1,760 million for the same period a year ago, an increase of
4.7%. Excluding the impact of the higher value of the dollar,
international sales increased by 9.0% for the quarter.
Worldwide consumer sales were even for the quarter, versus the
same period a year ago. International sales increased 5.9% while
domestic sales declined 4.6%. McNeil Consumer, manufacturer of
TYLENOL, IMODIUM and other over-the-counter drugs, posted higher
sales, but the increase was offset by the inventory reduction at
the wholesalers' level experienced by Johnson & Johnson Consumer
Products Inc. and the fierce competition in the over-the-counter
market for vaginal yeast infection remedies encountered by
MONISTAT. The increase in international sales was led by the
- 10 -
<PAGE>
addition of RoC, the adult skin care business acquired in
December, 1993 as well as a strong performance in Asia-Pacific.
Worldwide pharmaceutical sales for the quarter increased 7.0%,
with domestic sales growing 15.6%. Leading the increase in
domestic pharmaceutical sales gains were PROCRIT, an anti-anemia
drug; PREPULSID, a gastrointestinal product; DURAGESIC, a
transdermal patch for severe chronic pain; FLOXIN, an anti-
bacterial; SPORANOX, an anti-fungal drug; and the recently
introduced RISPERDAL.
RISPERDAL, a new anti-psychotic medication, reduces both the
positive and negative symptoms of schizophrenia. This drug was
approved by the U.S. Food & Drug Administration in late December
of 1993 and was launched by Janssen in mid-February. Sales to
date substantiated the positive feedback received from
physicians. RISPERDAL is now being marketed in 11 countries
around the world.
International pharmaceutical sales were up 1.6%. Excluding the
negative effect of currency, sales rose in the mid-single digit
range for the quarter. Strong sales were registered by PREPULSID
and SPORANOX. The pharmaceutical business in Europe,
particularly Italy and Germany where drastic adjustments in
government health care systems were made in 1993, is beginning to
stabilize. Japan's results were strong, as were those from
developing pharmaceutical markets, including China.
Worldwide sales for the professional segment increased 4.3%
The increase in domestic sales was limited to 1.8%, primarily due
to adverse comparisons given the second quarter 1993 divestiture
of Sterile Design, a business that packages custom supplies for
surgical procedures. After adjusting for the divestiture,
domestic sales increased by 5%. The growth within the
professional segment
- 11 -
<PAGE>
was led by the outstanding performance of Ethicon Endo-Surgery,
which markets instruments used in less-invasive surgery, and
LifeScan, which markets blood glucose monitoring systems.
International professional business increased 7.6%, or a low
double-digit gain excluding the adverse currency effect. Ethicon
Endo-Surgery and LifeScan were major contributors both
internationally and domestically. Professional products sales in
the Asia-Pacific region also increased significantly.
Average shares of common stock outstanding in the first three
months of 1994 were 643.1 million, compared with 655.4 million
for the same period a year ago, as a result of a $500 million
share repurchase program in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Net debt (borrowings net of cash and current marketable
securities) was 22.5% of net capital compared with 25.8% at the
end of 1993. Net debt decreased by $164 million during the first
three months of 1994 to $1.77 billion at April 3, 1994. Total
debt represented 26.5% of total capital (stockholders' equity and
total borrowings) at quarter end, compared with 30.2% at the end
of 1993.
Additions to property, plant and equipment were $141 million
for the first three months of 1994, compared with $187 for the
same period in 1993.
On April 28, 1994, the Board of Directors raised the quarterly
dividend from 26 cents per share to 29 cents per share, an
increase of 11.5%. The dividend is payable on June 7, 1994 to
shareholders of record as of May 17, 1994.
- 12 -
<PAGE>
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: May 13, 1994 By C. H. Johnson
C. H. Johnson
(Vice President, Finance)
Date: May 13, 1994 By A. W. Roulston
A. W. Roulston
(Vice Pres., Corporate
Controller)
- 13 -
<PAGE>
EXHIBIT INDEX
Regulation S-K Description
Exhibit Table of Page
Item No. Exhibit No.
11 Calculation of Earnings 15
per Share
- 14 -
<PAGE>
JOHNSON & JOHNSON AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Dollars and shares in millions except per share figures)
First Quarter Ended
April 3, April 4,
1994 1993
1. Net Earnings ................ $ 544 503
2. Average number of shares outstanding
during the period............ 643.1 655.4
3. Earnings per share based upon average
outstanding shares (1 / 2) $ .85 .77
4. Fully diluted earnings per share:
a. Average number of shares out-
standing during the period. 643.1 655.4
b. Shares issuable under stock
compensation agreements at
quarter-end .............. .3 .7
c. Shares reserved under the stock
option plan for which the
market price at end of quarter
exceeds the option price.. 17.0 20.0
d. Aggregate proceeds to the Company
from the exercise of
options in 4c ............ 422 536
e. Market price of the Company's
common stock at fiscal
quarter-end............... 37.75 40.13
f. Shares which could be repurchased
under the treasury stock method
(4d / 4e) ................ 11.2 13.4
g. Addition to average outstanding
shares (4b + 4c - 4f)..... 6.1 7.3
h. Shares for fully diluted earnings
per share calculation
(4a + 4g) ................ 649.2 662.7
i. Fully diluted earnings per share
(1 / 4h) ................. $ .84 .76
- 15 -
