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 2, 1995
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 April 28, 1995, 645,347,135 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 -
April 2, 1995 and January 1, 1995 3
Consolidated Statement of Earnings for the
Three Months Ended April 2, 1995 and
April 3, 1994 5
Consolidated Statement of Cash Flows
for the Three Months Ended April 2, 1995
and April 3, 1994 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Signatures 14
Part II - Other Information
Items 1 through 5 are not applicable
Item 6 - Exhibits and Reports on Form 8-K 13
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Part I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in Millions)
ASSETS
April 2, January 1,
1995 1995
Current Assets:
Cash and cash equivalents $ 460 636
Marketable securities at cost 554 68
Accounts receivable, trade, less
allowances $208 (1994 - $200) 2,837 2,601
Inventories (Note 3) 2,326 2,161
Deferred taxes on income 655 582
Prepaid expenses and other
receivables 731 632
Total current assets 7,563 6,680
Marketable securities, non-current 373 354
Property, plant and equipment, at cost 7,697 7,655
Less accumulated depreciation and
amortization 2,864 2,745
4,833 4,910
Intangible assets, net (Note 4) 2,453 2,403
Deferred taxes on income 401 262
Other assets 1,016 1,059
Total Assets $ 16,639 15,668
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
April 2, January 1,
1995 1995
Current Liabilities:
Loans and notes payable $ 526 899
Accounts payable 1,122 1,192
Accrued liabilities 1,761 1,602
Accrued salaries, wages and commissions 349 257
Taxes on income 412 316
Total current liabilities 4,170 4,266
Long-term debt 2,210 2,199
Deferred tax liability 146 130
Certificates of extra compensation 70 85
Other liabilities 2,162 1,866
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 767,393,000 and 767,392,000
shares) 767 767
Note receivable from employee stock
ownership plan (64) (73)
Cumulative currency translation
adjustments 306 (35)
Retained earnings 9,379 8,966
10,388 9,625
Less common stock held in treasury,
at cost (124,393,000 & 124,382,000
shares) 2,507 2,503
Total stockholders' equity 7,881 7,122
Total liabilities and stockholders'
equity $16,639 15,668
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
April 2, Percent April 3, Percent
1995 to Sales 1994 to Sales
Sales to customers (Note 5) $4,496 100.0 3,690 100.0
Cost of products sold 1,447 32.2 1,181 32.0
Selling, marketing and
administrative expenses 1,720 38.2 1,480 40.1
Research expense 353 7.9 289 7.8
Other expense (income) 28 .6 (22) (.6)
3,548 78.9 2,928 79.3
Earnings before interest and
taxes on income 948 21.1 762 20.7
Interest income 18 .4 10 .2
Interest expense, net of
portion capitalized (45) (1.0) (36) (1.0)
Earnings before provision
for taxes on income 921 20.5 736 19.9
Provision for taxes on
income (Note 2) 267 6.0 192 5.2
NET EARNINGS $ 654 14.5 544 14.7
NET EARNINGS PER SHARE $ 1.02 .85
CASH DIVIDENDS PER SHARE $ .29 .26
AVG. SHARES OUTSTANDING 643.1 643.1
See Notes to Consolidated Financial Statements
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JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; Dollars in Millions)
Fiscal Quarter Ended
April 2, April 3,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 654 544
Adjustments to reconcile net earnings to
cash flows:
Depreciation and amortization of
property and intangibles 204 175
Increase in accounts receivable, trade,
less allowances (163) (141)
Increase in inventories (54) (68)
Changes in other assets and liabilities 71 45
NET CASH FLOWS FROM OPERATING ACTIVITIES 712 555
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (218) (141)
Proceeds from the disposal of assets 395 18
Other, principally marketable securities (476) (76)
NET CASH USED BY INVESTING ACTIVITIES (299) (199)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to stockholders (187) (167)
Repurchase of common stock (77) (34)
Proceeds from short-term debt 72 152
Retirement of short-term debt (447) (333)
Proceeds from long-term debt 3 8
Retirement of long-term debt (2) (46)
Proceeds from the exercise of stock
options 29 15
NET CASH USED BY FINANCING
ACTIVITIES (609) (405)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 20 11
DECREASE IN CASH AND CASH EQUIVALENTS (176) (38)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 636 372
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 460 334
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 1, 1995. 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 - INCOME TAXES
The effective income tax rates for the first three months of 1995
and 1994 are 29.0% and 26.1%, 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 3 - INVENTORIES
(Dollars in Millions) April 2, 1995 Jan. 1, 1995
Raw materials and supplies $ 655 477
Goods in process 665 640
Finished goods 1,006 1,044
$ 2,326 2,161
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NOTE 4 - INTANGIBLE ASSETS
(Dollars in Millions) April 2, 1995 Jan. 1, 1995
Intangible assets $ 2,779 2,667
Less accumulated amortization 326 264
$ 2,453 2,403
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.
NOTE 5 - SALES TO CUSTOMERS BY SEGMENT OF BUSINESS AND GEOGRAPHIC
AREAS
(Dollars in Millions)
SALES BY SEGMENT OF BUSINESS
First Quarter
Percent
1995 1994 Increase
Consumer
Domestic $ 729 670 8.8
International 707 609 16.1
1,436 1,279 12.3%
Pharmaceutical
Domestic $ 607 496 22.4
International 876 694 26.2
1,483 1,190 24.6%
Professional
Domestic $ 840 681 23.3
International 737 540 36.5
1,577 1,221 29.2%
Domestic $ 2,176 1,847 17.8
International 2,320 1,843 25.9
Worldwide $ 4,496 3,690 21.8%
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NOTE 5 - SALES TO CUSTOMERS BY SEGMENT OF BUSINESS AND GEOGRAPHIC
AREAS
SALES BY GEOGRAPHIC AREA
First Quarter
Percent
1995 1994 Increase
U.S. $ 2,176 1,847 17.8
Europe 1,356 1,073 26.4
Western Hemisphere
excluding U.S. 406 331 22.7
Africa, Asia, & Pacific 558 439 27.1
Total $ 4,496 3,690 21.8%
NOTE 6 - DIVESTITURES
On March 31, 1995, the Company sold IOLAB's worldwide ophthalmic
surgical business to Chiron Vision, a division of Chiron
Corporation. This transaction, together with the sale last year of
IOLAB's ophthalmic pharmaceutical business furthers the Company's
ability to focus resources on other business areas that provide
greater opportunities for continued growth and profitability.
On March 15, 1995, the Company divested Johnson & Johnson
Advanced Materials Company and Chicopee B.V., Netherlands,
worldwide developers and marketers of non-woven materials used in
a broad range of health care, consumer and industrial applications.
These divestitures resulted in an after-tax capital gain of $103
million, which was offset by write-offs of certain assets in
connection with re-engineering programs.
NOTE 7 - SUBSEQUENT EVENT
On April 4, 1995, the Company completed the acquisition of Mitek
Surgical Products, Inc., a developer and manufacturer of suture
anchor products marketed for soft tissue reattachment.
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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 quarter of 1995 were $4,496
million, an increase of 21.8% over 1994 first quarter sales of
$3,690 million. The effect of the weaker dollar relative to
foreign currencies increased first quarter's sales by 4.2%.
Excluding the positive effect of currency, sales grew 17.6% on an
operational basis for the first quarter of 1995. Consolidated net
earnings for the first quarter of 1995 were $654 million, compared
with $544 million for the same period a year ago, an increase of
20.2%. Earnings per share for the period were $1.02, compared with
$.85 for the same period in 1994, an increase of 20.0%.
Domestic sales for the first three months of 1995 were $2,176
million, an increase of 17.8% over 1994 domestic sales of $1,847
million for the same period. Sales by international subsidiaries
were $2,320 million for the first quarter of 1995 compared with
$1,843 million for the same period a year ago, an increase of
25.9%. Excluding the impact of the lower value of the dollar,
international sales increased by 17.5% for the quarter.
Domestic consumer sales increased 8.8% for the quarter. Growth
was led by the addition of Neutrogena, a line of high quality skin
and hair care products, which was acquired at the end of the third
quarter of 1994. International consumer sales increased 16.1%,
primarily from the strong performance of our business in Brazil,
where the local economy has recovered from a year ago. Consumer
business in Europe and Asia-Pacific regions also performed well.
Worldwide pharmaceutical sales for the quarter increased 24.6%,
with domestic sales growing 22.4%. Leading the increase in
pharmaceutical sales gains were RISPERDAL, a new anti-psychotic
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drug; PROPULSID, a gastrointestinal product; PROCRIT, for the
treatment of anemia; SPORANOX, a broad spectrum anti-fungal agent.
RISPERDAL, an anti-psychotic medication which helps reduce both the
positive and negative symptoms of schizophrenia, was launched in
the U.S. in February, 1994. The significant sales volume gain
since its launch is a testimony to the drug's efficacy in meeting
clinical needs unresolved by conventional pharmaceutical agents.
RISPERDAL is now being marketed in 25 countries around the world.
On March 7, 1995, the Company received approval from the U.S.
Food and Drug Administration to market a new prescription pain
reliever, ULTRAM. The drug has a dual mechanism of action that
controls pain without the serious gastrointestinal side effects of
many currently available medications.
Worldwide sales for the professional segment increased 29.2%.
Sales gained from Clinical Diagnostics, acquired from Kodak in the
fourth quarter of 1994, were partially offset by the divestitures
of "A" Company, Johnson & Johnson Advanced Materials, Chicopee B.V.
and IOLAB.
Strong sales growth continued to be fueled by the significant
progress made by the PALMAZ-SCHATZ stent, Ethicon Endo-Surgery's
minimally invasive surgical instruments, ACUVUE disposable contact
lenses, and LifeScan's blood glucose monitoring systems. Our base
businesses, such as Ethicon sutures, also contributed significantly
to the growth. Johnson & Johnson Interventional Systems received
approval from the U.S. Food and Drug Administration in August, 1994
to market the PALMAZ-SCHATZ balloon-expandable stent for coronary
artery disease. The market acceptance of this product has been
strong due to its efficacy in reducing restenosis. In some
instances, the use of the stent in the inital procedure has become
the first choice rather than using it only in situations in which
balloon angioplasty alone has not worked.
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Average shares of common stock outstanding in the first three
months of 1995 and 1994 were 643.1 million.
LIQUIDITY AND CAPITAL RESOURCES
Net debt (borrowings net of cash and current marketable
securities) was 17.9% of net capital compared with 25.2% at the end
of 1994. Net debt decreased by $672 million during the first three
months of 1995 to $1.72 billion at April 2, 1995. Total debt
represented 25.8% of total capital (stockholders' equity and total
borrowings) at quarter end, compared with 30.3% at the end of 1994.
Additions to property, plant and equipment were $218 million for
the first three months of 1995, compared with $141 for the same
period in 1994.
On April 27, 1995, the Board of Directors raised the quarterly
dividend from 29 cents per share to 33 cents per share, an increase
of 13.8%. The dividend is payable on June 6, 1995 to shareholders
of record as of May 16, 1995.
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Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Numbers
(1) Exhibit 11 - Calculation of Earnings Per Share
(2) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during
the three month period ended April 2, 1995.
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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: May 12, 1995 By C. H. Johnson
C. H. Johnson
(Vice President, Finance)
Date: May 12, 1995 By J. H. Heisen
J. H. Heisen
(Corporate Controller)
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JOHNSON & JOHNSON AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Dollars and shares in millions except per share figures)
First Quarter Ended
April 2, April 3,
1995 1994
1. Net Earnings ................ $ 654 544
2. Average number of shares outstanding
during the period............ 643.1 643.1
3. Earnings per share based upon average
outstanding shares (1 / 2) $ 1.02 .85
4. Fully diluted earnings per share:
a. Average number of shares out-
standing during the period. 643.1 643.1
b. Shares issuable under stock
compensation agreements at
quarter-end .............. .1 .3
c. Shares reserved under the stock
option plan for which the
market price at end of quarter
exceeds the option price.. 34.6 17.0
d. Aggregate proceeds to the Company
from the exercise of
options in 4c ............ 1,503 422
e. Market price of the Company's
common stock at fiscal
quarter-end............... 59.50 37.75
f. Shares which could be repurchased
under the treasury stock method
(4d / 4e) ................ 25.3 11.2
g. Addition to average outstanding
shares (4b + 4c - 4f)..... 9.4 6.1
h. Shares for fully diluted earnings
per share calculation
(4a + 4g) ................ 652.5 649.2
i. Fully diluted earnings per share
(1 / 4h) ................. $ 1.00 .84
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