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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 1, 1995 COMMISSION FILE NUMBER 1-3215
JOHNSON & JOHNSON
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
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)
</TABLE>
Registrant's telephone number, including area code (908) 524-0400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Common Stock, Par Value $1.00 New York Stock Exchange
</TABLE>
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 February 28, 1995 was approximately $36.0 billion.
On February 28, 1995 there were 643,101,424 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<S> <C>
Parts I and II: Portions of registrant's annual report to stockholders for fiscal year 1994.
Part III: Portions of registrant's proxy statement for its 1995 annual meeting of
stockholders.
</TABLE>
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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PART I
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C> <C>
l. Business....................................................................... 1
General...................................................................... 1
Segments of Business; Geographic Areas....................................... 1
Consumer..................................................................... 1
Pharmaceutical............................................................... 1
Professional................................................................. 2
International................................................................ 2
Raw Materials................................................................ 2
Patents and Trademarks....................................................... 2
Seasonality.................................................................. 2
Competition.................................................................. 2
Research..................................................................... 3
Environment.................................................................. 3
Regulation................................................................... 3
2. Properties..................................................................... 4
3. Legal Proceedings.............................................................. 5
4. Submission of Matters to a Vote of Security Holders............................ 5
Executive Officers of the Registrant........................................... 5
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters.......... 6
6. Selected Financial Data........................................................ 6
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................... 6
8. Financial Statements and Supplementary Data.................................... 6
9. Disagreements on Accounting and Financial Disclosure........................... 6
PART III
10. Directors and Executive Officers of the Registrant............................. 6
11. Executive Compensation......................................................... 6
12. Security Ownership of Certain Beneficial Owners and Management................. 6
13. Certain Relationships and Related Transactions................................. 6
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............... 7
Signatures..................................................................... 9
Report of Independent Auditors................................................. 11
Consent of Independent Auditors................................................ 12
Exhibit Index.................................................................. 13
</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 Secretary at the principal
executive offices of the Company or by calling 800-328-9033. Each report will be
available about 45 days after the end of the quarter to which it relates.
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PART I
ITEM 1. BUSINESS
GENERAL
Johnson & Johnson, employing approximately 81,500 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 Group Operating
Committees, which are comprised of managers who represent key operations within
the group, 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
Chairman, President, General Manager or Managing Director who reports directly
to 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 1994 are
incorporated herein by reference thereto.
CONSUMER
The Consumer segment's principal products are personal care and hygienic
products, including oral 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; RoC skin care products, SHOWER TO SHOWER personal care powder
products; STAYFREE and SURE & NATURAL sanitary protection products; IMODIUM A-D,
an antidiarrheal; JOHNSON'S Baby line of 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;
NEUTROGENA skin and hair products; PEDIACARE children's cold and allergy
medications; PENATEN and NATUSAN baby care products; PIZ BUIN and SUNDOWN sun
care products; 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.
PHARMACEUTICAL
The Pharmaceutical segment's principal worldwide franchises are in the
allergy, antifungal, biotech, central nervous system, contraceptive,
dermatology, gastrointestinal and immunobiology 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;
<PAGE> 4
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; RETIN-A, a dermatological
cream for acne; and RISPERDAL, an antipsychotic drug.
PROFESSIONAL
The Professional segment includes suture and mechanical wound closure
products, less-invasive surgical instruments, 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 40 countries outside the United States and selling
in over 175 countries throughout 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.
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
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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 $1,278, $1,182 and
$1,127 million for fiscal years 1994, 1993 and 1992, 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.
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. 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 that encourage doctors to
write prescriptions for particular drugs. Even in the absence of new government
regulation, managed care has become a more potent force in the market place and
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
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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.
ITEM 2. PROPERTIES
Johnson & Johnson and its worldwide subsidiaries operate 154 manufacturing
facilities occupying approximately 16 million square feet of floor space.
The manufacturing facilities are used by the industry segments of Johnson &
Johnson's business approximately as follows:
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SQUARE FEET
SEGMENT (IN THOUSANDS)
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Consumer............................................................... 6,703
Pharmaceutical......................................................... 2,765
Professional........................................................... 6,819
------
Worldwide total.............................................. 16,287
======
</TABLE>
Within the United States, 12 facilities are used by the Consumer segment, 7
by the Pharmaceutical segment and 35 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:
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NUMBER OF SQUARE FEET
GEOGRAPHIC AREA FACILITIES (IN THOUSANDS)
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United States................................................ 54 7,980
Europe....................................................... 42 3,829
Western Hemisphere excluding U.S.A........................... 19 2,428
Africa, Asia and Pacific..................................... 39 2,050
--- ------
Worldwide total.................................... 154 16,287
=== ======
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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 1994.
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 1994.
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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 1994 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 its results of
operations, cash flows or financial position.
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, 1995, 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 9, 1995.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Roger S. Fine.................... 52 Member, Executive Committee; Vice President,
Administration(a)
George S. Frazza................. 61 Member, Executive Committee; Vice President,
General Counsel
Ronald G. Gelbman................ 47 Member, Executive Committee; Worldwide Chairman,
Pharmaceutical and Diagnostics Group(b)
Clark H. Johnson................. 59 Member, Executive Committee; Vice President,
Finance
Ralph S. Larsen.................. 56 Chairman, Board of Directors and Chief Executive
Officer; Chairman, Executive Committee
Peter N. Larson.................. 55 Member, Executive Committee; Worldwide Chairman,
Consumer and Personal Care Group
James T. Lenehan................. 46 Member, Executive Committee; Worldwide Chairman,
Consumer Pharmaceuticals and Professional
Group(c)
Robert N. Wilson................. 54 Vice-Chairman, Board of Directors; Vice-Chairman
Executive Committee
</TABLE>
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(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. R. G. Gelbman joined the Company in 1972 and became a Company Group
Chairman in 1987. He became a Member of the Executive Committee and
Worldwide Chairman, Pharmaceutical and Diagnostics Group in 1994.
(c) Mr. J. T. Lenehan joined the Company in 1976 and became a Company Group
Chairman in 1993. He became a Member of the Executive Committee and
Worldwide Chairman, Consumer Pharmaceuticals and Professional Group in 1994.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCK-
HOLDER 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 1994.
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 1984-1994"
on page 42 of Johnson & Johnson's Annual Report to Stockholders for fiscal year
1994.
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 26, of Johnson & Johnson's Annual Report to Stockholders for
fiscal year 1994.
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 1994.
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 9, 1995.
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 9, and 14 through 17
of Johnson & Johnson's Proxy Statement dated March 9, 1995.
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 "General Information--Principal Stockholder" and
"Election of Directors--Stock Ownership/Control" on pages 2 and 8 of Johnson &
Johnson's Proxy Statement dated March 9, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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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 1994.
2. Financial Statement Schedules
II Reserves
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 60l 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
The following reports on Form 8-K were filed during the last quarter of the
period covered by this report:
(1) A report on Form 8-K was filed on October 5, 1994, which included
the following pro forma financial information prepared to reflect the two
acquisitions by the Company referred to in Note 18 under "Johnson & Johnson
and Subsidiaries -- Notes to Consolidated Financial Statements" on page 38
of Johnson & Johnson's Annual Report to Stockholders for the fiscal year
1994: (i) Unaudited Pro Forma Condensed Consolidated Statements of Income
for the six months ended July 3, 1994 and the year ended January 2, 1994,
(ii) Unaudited Pro Forma Condensed Consolidated Balance Sheet as of July 3,
1994 and (iii) the Notes thereto.
(2) A report on Form 8-K was filed on December 2, 1994, which included
the following pro forma financial information prepared to reflect the two
acquisitions by the Company referred to in (1) above: (i) Unaudited Pro
Forma Condensed Consolidated Statements of Income for the nine months ended
October 2, 1994 and the year ended January 2, 1994, (ii) Unaudited Pro
Forma Condensed Consolidated Balance Sheet as of October 2, 1994 and (iii)
the Notes thereto.
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JOHNSON & JOHNSON AND SUBSIDIARIES
SCHEDULE II -- RESERVES
FISCAL YEARS ENDED JANUARY 1, 1995, JANUARY 2, 1994 AND JANUARY 3, 1993
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DEDUCTIONS FROM RESERVES
ADDITIONS -------------------------------------------
BALANCE AT CHARGED BALANCE
BEGINNING TO COSTS AND AT END
OF PERIOD EXPENSES(1) DESCRIPTION AMOUNT OF PERIOD
----------- ------------- ----------- ------ ---------
<S> <C> <C> <C> <C> <C>
1994
Reserves deducted from
accounts receivable, trade
Reserve for doubtful Write-offs less
accounts............... $ 56 35 recoveries.............. 17 77
Currency adjustments...... (3)
Reserve for customer Customer rebates
rebates................ 87 452 allowed................. 447
Currency adjustments...... (1) 93
Reserve for cash
discounts.............. 27 276 Cash discounts allowed.... 274
Currency adjustments...... (1) 30
---- --- --- ---
$170 763 733 200
==== === === ===
1993
Reserves deducted from
accounts receivable, trade
Reserve for doubtful Write-offs less
accounts............... $ 57 26 recoveries.............. 24
Currency adjustments...... 3 56
Reserve for customer Customer rebates
rebates................ 60 406 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 Write-offs less
accounts............... $ 58 23 recoveries.............. 20
Currency adjustments...... 4 57
Reserve for customer Customer rebates
rebates................ 51 343 allowed................... 334 60
Reserve for cash
discounts.............. 27 232 Cash discounts allowed.... 233 26
---- --- --- ---
$136 598 591 143
==== === === ===
</TABLE>
- ---------------
(1) Charges related to customer rebates and cash discounts are reflected as
reductions of sales to customers.
8
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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 31, 1995 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
- ----------------------------------- ------------------------------------ ---------------
<C> <S> <C>
/s/ R. S. LARSEN Chairman, Board of Directors and March 31, 1995
------------------ Chief Executive Officer, and
R. S. Larsen Director (Principal Executive
Officer)
/s/ C. H. JOHNSON Vice President -- Finance and March 31, 1995
------------------ Director (Principal Financial
C. H. Johnson Officer)
/s/ A. W. ROULSTON Controller March 21, 1995
------------------
A. W. Roulston
/s/ J. W. BLACK Director March 31, 1995
------------------
J. W. Black
/s/ G. N. BURROW Director March 31, 1995
------------------
G. N. Burrow
/s/ J. G. COONEY Director March 31, 1995
------------------
J. G. Cooney
/s/ P. M. HAWLEY Director March 31, 1995
------------------
P. M. Hawley
/s/ A. D. JORDAN Director March 23, 1995
------------------
A. D. Jordan
/s/ A. G. LANGBO Director March 30, 1995
------------------
A. G. Langbo
/s/ P. N. LARSON Director March 31, 1995
------------------
P. N. Larson
</TABLE>
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<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. S. MAYO Director March 23, 1995
------------------------------
J. S. Mayo
/s/ T. S. MURPHY Director March 23, 1995
------------------------------
T. S. Murphy
/s/ P. J. RIZZO Director March 24, 1995
------------------------------
P. J. Rizzo
/s/ M. F. SINGER Director March 23, 1995
------------------------------
M. F. Singer
/s/ R. B. SMITH Director March 31, 1995
------------------------------
R. B. Smith
/s/ R. N. WILSON Director March 31, 1995
------------------------------
R. N. Wilson
</TABLE>
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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 1994 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 schedule listed in the index in
Item 14 of this Form 10-K.
In our opinion, the financial statement schedule 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.
/s/ COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
New York, New York
January 23, 1995
11
<PAGE> 14
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in Registration
Statements No. 33-52252, 33-40294, 33-40295, 33-32875, 2-67443 and 33-7634 on
Form S-8, No. 33-55977 and 33-47424 on Form S-3 and No. 33-57583 on Form S-4 and
related Prospectuses of our report dated January 23, 1995 on our audits of the
consolidated financial statements and financial statement schedule of Johnson &
Johnson and subsidiaries as of January 1, 1995 and January 2, 1994, and for each
of the three years in the period ended January 1, 1995, which reports are
included or incorporated by reference in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
New York, New York
January 23, 1995
12
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
REG. S-K
EXHIBIT TABLE DESCRIPTION
ITEM NO. OF EXHIBIT
- ------------- -----------
<S> <C>
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) 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(d) 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(e) 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(f) 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(g) 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.*
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 1994 (only those portions
incorporated by reference in this document are deemed "filed") -- Filed with
this document.
21 -- Subsidiaries -- Filed with this document.
27 -- Financial Data Schedule for Year Ended January 1, 1995 -- Filed with this
document.
28 -- Form 11-K for the Johnson & Johnson Savings Plan to be filed on or before
June 30, 1995.
</TABLE>
- ---------------
* Management contracts and compensatory plans and arrangements required to be
filed as Exhibits to this form pursuant to Item 14(c) of the 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.
13
<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 1, JANUARY 2, JANUARY 3, DECEMBER 29, DECEMBER 30,
1995 1994 1993 1991 1990
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1. Net Earnings........................ $2,006 1,787 1,030 1,461 1,143
------ ----- ----- ----- -----
2. Average number of shares outstanding
during the year..................... 643.1 651.7 659.5 666.1 666.1
------ ----- ----- ----- -----
3. Earnings per share based upon
average outstanding shares
(1 / 2)............................. $ 3.12 2.74 1.56 2.19 1.72
====== ===== ===== ===== =====
4. Fully diluted earnings per share:
a. Average number of shares
outstanding during the year.... 643.1 651.7 659.5 666.1 666.1
b. Shares issuable under stock
compensation agreements at
year-end....................... .1 .3 .7 .8 .8
c. Shares reserved under the stock
option plans for which the
market price at fiscal year-end
exceeds the option price....... 35.9 29.0 26.9 29.0 25.8
d. Aggregate proceeds to the
Company from the exercise of
options in 4c.................. 1,499 998 894 902 546
e. Market price of the Company's
common stock at fiscal
year-end....................... 54.75 44.88 50.50 57.25 35.88
f. Shares which could be
repurchased under the treasury
stock method (4d / 4e)......... 27.4 22.2 17.7 15.8 15.2
g. Addition to average outstanding
shares(4b + 4c - 4f)........... 8.6 7.1 9.9 14.0 11.4
h. Shares for fully diluted
earnings per share
calculation(4a + 4g)........... 651.7 658.8 669.4 680.1 677.5
====== ===== ===== ===== =====
i. Fully diluted earnings per
share (1 / 4h)................. $ 3.08 2.71 1.54 2.15 1.69
====== ===== ===== ===== =====
</TABLE>
- ---------------
(A) All share and per share amounts have been adjusted for the two-for-one stock
split in 1992.
14
<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 1, JANUARY 2, JANUARY 3, DECEMBER 29, DECEMBER 30,
1995 1994 1993 1991 1990(2)
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Determination of Earnings:
Earnings Before Provision for
Taxes on Income and
Cumulative Effect of
Accounting Changes........ $2,681 2,332 2,207 2,038 1,623
Fixed Charges................ 234 211 210 209 275
------ ----- ----- ----- -----
Total Earnings as
Defined............ $2,915 2,543 2,417 2,247 1,898
====== ===== ===== ===== =====
Fixed Charges and Other:
Rents........................ $ 92 85 86 80 74
Interests.................... 142 126 124 129 201
------ ----- ----- ----- -----
Fixed Charges........ 234 211 210 209 275
Capitalized Interest......... 44 48 53 46 41
------ ----- ----- ----- -----
Total Fixed Charges.. $ 278 259 263 255 316
====== ===== ===== ===== =====
Ratio of Earnings to Fixed
Charges...................... 10.49 9.82 9.19 8.81 6.01
====== ===== ===== ===== =====
</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.
15
<PAGE> 1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
Record sales of $15.73 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
international markets and the growth of managed health care organizations in the
U.S., sales growth was solid. Worldwide sales increased 11.3% over 1993
primarily due to volume, with price changes less than the rate of inflation.
During 1994, the Company invested $1.28 billion in research and
development, emphasizing its commitment to achieving significant advances in
health care through the discovery and development of innovative, cost effective
products that prolong and enhance the quality of life. In addition to the
research and development effort, new products were obtained through two
significant acquisitions during the year, Neutrogena, a producer of high quality
skin and hair care products, and Eastman Kodak's Clinical Diagnostics Division.
The acquisition of Neutrogena was an important addition to the Company's
worldwide skin and hair care business, while the Clinical Diagnostics Division
purchase allows the Company to participate in a much larger segment of the
laboratory diagnostics market. As a result of the acquisition of Clinical
Diagnostics, Johnson & Johnson is now the third largest laboratory diagnostics
company in the world.
Throughout 1994, the Company continued several initiatives to streamline
its businesses worldwide to make the organization more cost effective. These
initiatives include the creation of programs to share administrative, financial
and information services among companies and locations; the merging of operating
companies; the consolidation of manufacturing locations and others.
In the U.S. and in countries around the world, health care systems continue
to be transformed. The Company feels that it is well positioned to take
advantage of these changes due to its diversification in health care, global
reach, extensive research and development, decentralized management, dedicated
employees and strong Credo values.
SALES AND EARNINGS
In 1994, worldwide sales increased 11.3% to $15.73 billion compared to
increases of 2.8% and 10.5% in 1993 and 1992, respectively. Excluding the impact
of the relatively weaker dollar in 1994 and 1992, and the stronger dollar in
1993, relative to international currencies, worldwide sales increased 10.7%,
7.0% and 10.0% in 1994, 1993 and 1992, respectively.
Chart 1: Bar graph showing Sales to Customers for the years 1985 through 1994.
See appendix for a complete description.
Worldwide net earnings exceeded $2 billion for the first time in 1994,
totaling $2.01 billion, or $3.12 per share, reflecting increases of 12.3% and
13.9% over 1993, respectively. The income margin for 1994 was 12.7%, a slight
improvement over last year despite an increase of almost two percentage points
in the effective tax rate.
The Company elected early adoption of Statement of Financial Accounting
Standard (SFAS) No. 116, "Accounting for Contributions Received and
Contributions Made." This standard requires that an unconditional promise of a
contribution be recognized as an expense in the period made. The cumulative
effect and impact on the current year's financial statements of adopting SFAS
No. 116 was not significant.
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
per 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
F-1
<PAGE> 2
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.
Average shares of common stock outstanding in 1994 were 643.1 million
compared with 651.7 million and 659.5 million in 1993 and 1992, respectively.
Chart 2: Bar graph showing Net Earnings for the years 1985 through 1994. See
appendix for a complete description.
Sales by domestic companies were $7.81, $7.20 and $6.90 billion in 1994,
1993 and 1992, representing increases of 8.5%, 4.3% and 10.5%, respectively. The
increase in domestic sales in 1994 was the result of new product launches as
well as continued growth of existing products.
Sales by international companies were $7.92, $6.94 and $6.85 billion in
1994, 1993 and 1992, representing increases of 14.2%, 1.2% and 10.5%,
respectively. All geographic areas throughout the world posted strong gains
during 1994. Sales in the Africa, Asia-Pacific region increased 20.2%, while
revenues in the Western Hemisphere, (excluding the U.S.) and Europe grew 14.0%
and 11.9%, respectively. Excluding the impact of the relatively weaker dollar in
1994 and 1992 and the stronger dollar in 1993, relative to international
currencies, international company sales increased 13.0%, 9.6% and 9.5% in 1994,
1993 and 1992, respectively.
The Company achieved an annual compound growth rate of 9.9% for worldwide
sales for the ten-year period since 1984 with domestic and international sales
growing at rates of 7.7% and 12.7%, respectively. For the same ten-year period,
worldwide net earnings achieved an annual growth rate of 14.6%, while earnings
per share grew at a rate of 16.3%. For the last five years, annual compound
growth rates for sales, net earnings and earnings per share were 10.0%, 13.1%
and 14.0%, 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
1994 was 104,700. The composite market price ranges for Johnson & Johnson common
stock during 1994 and 1993 were:
<TABLE>
<CAPTION>
1994 1993
-------------- -------------
HIGH LOW HIGH LOW
----- ---- ---- ----
<S> <C> <C> <C> <C>
First quarter.................................... $45 3/4 36 50 3/8 37 5/8
Second quarter................................... 44 5/8 36 1/4 45 3/4 38 3/8
Third quarter.................................... 52 3/8 42 1/4 41 3/4 35 5/8
Fourth quarter................................... 56 1/2 49 1/2 45 5/8 38 1/2
Year-end close................................... 54 3/4 44 7/8
</TABLE>
CASH DIVIDENDS PAID
Cash dividends paid were $1.13 per share in 1994 and $1.01 per share in
1993, an increase of 11.9% and 13.5% over 1993 and 1992, respectively. The
dividends were distributed as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- ----
<S> <C> <C> <C>
First quarter................................................ $ .26 .23 .20
Second quarter............................................... .29 .26 .23
Third quarter................................................ .29 .26 .23
Fourth quarter............................................... .29 .26 .23
----- ----- ----
Total................................................... $1.13 1.01 .89
===== ===== ====
</TABLE>
On January 3, 1995, the Board of Directors declared a regular cash dividend
of $.29 per share, paid on March 7, 1995 to stockholders of record on February
14, 1995.
The Company expects to continue the practice of paying regular cash
dividends.
F-2
<PAGE> 3
Chart 3: Bar graph showing Net Earnings Per Share and Cash Dividends Paid Per
Share for the years 1985 through 1994. See appendix for a complete
description.
COSTS AND EXPENSES
The percentage relationships of costs and expenses to sales for 1994, 1993
and 1992 were:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Employment costs...................................................... 27.2% 28.8% 29.4%
Cost of materials and services........................................ 50.6 49.7 49.9
Depreciation and amortization of property and intangibles............. 4.6 4.4 4.1
Taxes other than payroll.............................................. 4.9 4.5 4.8
Cumulative effect of accounting changes............................... -- -- 4.3
</TABLE>
Chart 4: Pie chart showing Distribution of Sales Revenues for 1994. 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, 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:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Research expense................................................ $1,278 1,182 1,127
Percent increase over prior year................................ 8.1% 4.9% 15.0%
Percent of sales................................................ 8.1 8.4 8.2
</TABLE>
Research expense as a percent of sales for the Pharmaceutical segment was
14.9%, 15.2% and 14.8% in 1994, 1993 and 1992, respectively, while averaging
4.8%, 5.2% and 5.1% in the other segments.
Chart 5: Bar graph showing Research Expense for the years 1985 through 1994.
See appendix for a complete description.
Advertising expenses worldwide, which are comprised of television, radio
and print media, were $800 million in 1994, $753 million in 1993 and $694
million in 1992. Additionally, significant expenditures were incurred for
promotional activities such as couponing and performance allowances. In
December, 1993, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) No. 93-7, "Reporting on Advertising Costs", which
provides guidance on the financial reporting of advertising costs. The new
statement, which will be adopted in the first quarter of 1995, will not have an
effect on the Company's results of operations, cash flows or financial position.
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
results of operations, cash flows or 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.
The worldwide effective income tax rate was 25.2% in 1994, 23.4% in 1993
and 26.4% in 1992. See page 33 for additional information.
F-3
<PAGE> 4
For 1994, 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 included a change in the tax code which will reduce
the benefit the Company receives from its operations in Puerto Rico by 60%
gradually over a five-year period. In addition, the Company has subsidiaries
manufacturing in Ireland under an incentive tax rate expiring on December 31,
2010.
A summary of operations and related statistical data for the years
1984-1994 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 $704 million at the end of 1994 as compared with
$476 million at the end of 1993.
Effective January 3, 1994, the Company adopted Statement of Financial
Accounting Standard (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. See page 37 for additional
information on the fair value of investment securities.
Total unused credit available to the Company approximates $3.0 billion,
including $1,175 million of credit commitments with various worldwide banks,
$900 million of which expires on October 6, 1995 and $275 million on December
31, 1995.
During 1994, the Company issued $300 million of 8.72% Debentures due 2024
from a $2.59 billion shelf registration filed with the Securities and Exchange
Commission on October 18, 1994. At January 1, 1995, the Company had $2.29
billion remaining on its shelf registration, which included $585 million from a
prior shelf registration. A summary of additional debt issued during 1994 can be
found on page 33.
Total borrowings at the end of 1994 and 1993 were $3.1 billion and $2.4
billion, respectively. In 1994 and 1993, net debt (debt net of cash and current
marketable securities) was 25.2% and 25.8% of net capital (stockholders' equity
and net debt), respectively. Total debt represented 30.3% and 30.2% of total
capital (stockholders' equity and total borrowings) in 1994 and 1993,
respectively. Stockholders' equity per share at the end of 1994 was $11.08
compared with $8.66 at year-end 1993, an increase of 27.9%.
Financial instruments are used to manage interest rate and foreign exchange
risks. The Company does not enter into derivative financial instruments for
trading or speculative purposes. The principal financial instruments used are
forward exchange contracts and interest rate swaps. Management believes that the
risk of incurring losses related to these instruments is remote and that such
losses, if any, would be immaterial. See page 37 for additional information.
Additions to property, plant and equipment amounting to $937, $975 and
$1,103 million in 1994, 1993 and 1992, 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
1994.
During 1994, 1993 and 1992, certain businesses were acquired amounting to
$1,932, $266 and $47 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 1994, the Company repurchased 3.8 million shares of its common stock at a
total cost of $185 million for use in the Company's employee benefit plans; 1993
and 1992 repurchases for this purpose totaled 3.0 million and 4.8 million shares
at a cost of $132 million and $240 million, respectively. In 1993 and 1992, the
Company also repurchased 12.4 million and 10.6 million shares of its common
stock for general corporate purposes at a cost of $500 million each year.
F-4
<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 1980-1993, 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. This was true
again in 1994.
Inflation rates, even though moderate in many parts of the world during
1994, 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 1992
through 1994. See appendix for a complete description.
<TABLE>
<CAPTION>
INCREASE
------------------
SALES 1994 1993 AMOUNT PERCENT
- ----- ------- ------- ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Consumer............................................. $ 5,251 4,824 427 8.9%
Pharmaceutical....................................... 5,158 4,490 668 14.9
Professional......................................... 5,325 4,824 501 10.4
------- ------- ------
Worldwide total................................. $15,734 14,138 1,596 11.3%
======= ======= ======
</TABLE>
Chart 7: Bar graph showing Operating Profit by Segment of Business for the
years 1992 through 1994. See appendix for a complete description.
<TABLE>
<CAPTION>
PERCENT OF
SALES
---------------
OPERATING PROFIT 1994 1993 1994 1993
- ---------------- ------ ------ ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Consumer................................................. $ 443 521 8.4% 10.8%
Pharmaceutical........................................... 1,669 1,406 32.4 31.3
Professional............................................. 843 655 15.8 13.6
------ ------
Segments total...................................... 2,955 2,582 18.8 18.3
Expenses not allocated to segments....................... (274) (250) (1.8) (1.8)
------ ------
Earnings before taxes on income.......................... $2,681 2,332 17.0% 16.5%
====== ======
</TABLE>
CONSUMER
The Consumer segment's principal products are personal care and hygienic
products, including oral 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; RoC skin care products; SHOWER TO SHOWER personal care powder
products; STAYFREE and SURE & NATURAL sanitary protection products; IMODIUM A-D,
an antidiarrheal; JOHNSON'S Baby line of 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;
NEUTROGENA skin and hair care products; PEDIACARE children's cold and allergy
medications; PENATEN and NATUSAN baby care products; PIZ BUIN and SUNDOWN sun
care products; REACH toothbrushes; SERENITY incontinence products;
F-5
<PAGE> 6
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 in 1994 were $5.25 billion, an increase of 8.9% over
1993. Sales by domestic companies accounted for 51.3% of the total segment,
while international companies accounted for 48.7%. The worldwide Consumer
segment sales increase includes the acquisitions of RoC S.A. in late 1993 and
Neutrogena, a producer of high quality skin and hair care products, at the end
of the third quarter of 1994. Additionally, new products such as TYLENOL
Extended Relief, MYLANTA Soothing Lozenges, the ARTHRITIS FOUNDATION line of
pain relievers and JOHNSON'S HEALTHFLOW Infant Feeding System were introduced
during the year.
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.
Acquisition and divestitures during 1994 and 1993 are described in more
detail 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,
antifungal, biotech, central nervous system, contraceptive, dermatology,
gastrointestinal and immunobiology 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, heart and liver transplants; ORTHO-NOVUM group of oral
contraceptives; PREPULSID (sold in the U.S. as PROPULSID), a gastrointestinal
prokinetic; RETIN-A, a dermatological cream for acne; and RISPERDAL, an
antipsychotic drug.
Johnson & Johnson markets more than 80 prescription drugs around the world,
with 58.5% of the sales generated outside the United States. Twenty-four drugs
sold by the Company had 1994 sales in excess of $50 million, with 18 of them in
excess of $100 million.
Pharmaceutical segment sales in 1994 were $5.16 billion, an increase of
14.9% over 1993. Domestic sales advanced 20.7%, while international sales rose
11.0%. The worldwide sales increase is attributed to the outstanding February,
1994 launch of RISPERDAL, an antipsychotic drug, and the continued strong growth
of PROPULSID first introduced in late 1993. The sales increase was also led by
the strong growth of EPREX, PROCRIT, SPORANOX, DURAGESIC and FLOXIN.
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.
F-6
<PAGE> 7
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.
Significant research activities continued in Pharmaceutical segment
companies, increasing to $767 million in 1994, or $84 million over 1993. This
represents 14.9% of 1994 Pharmaceutical sales and a compound growth rate of 15%
for the ten-year period since 1984.
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
collaborations with the Scripps Clinic and Research Foundation in La Jolla,
California and the James Black Foundation in London, England.
PROFESSIONAL
The Professional segment includes suture and mechanical wound closure
products, less-invasive surgical instruments, 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.
In 1994, Professional segment sales increased 10.4% over 1993, to $5.33
billion. Domestic sales posted a 6.4% increase, while international sales rose
15.8%. The worldwide Professional segment sales increase is attributed to the
continued growth of ACUVUE disposable contact lenses; ONE TOUCH II blood glucose
self monitoring systems; the PALMAZ-SCHATZ Stent, a balloon-expandable device
for narrowed or blocked arteries and various Ethicon Endo-Surgery devices for
less invasive surgery. Base businesses, such as Ethicon sutures, also
contributed significantly to the increase. The acquisition of Eastman Kodak's
Clinical Diagnostics business was completed on November 30, 1994; however, the
increase in sales resulting from the acquisition was offset by the divestitures
of the "A" Company and the ophthalmic pharmaceutical business of IOLAB. Of the
1994 Professional segment sales, domestic and international companies accounted
for 55.9% and 44.1% of the total, respectively.
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. 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 Professional led the segment with higher sales volume gains in
the U.S. and abroad.
The acquisition of the Clinical Diagnostics Division is further described
on page 38.
F-7
<PAGE> 8
GEOGRAPHIC AREAS
The Company further categorizes its sales and operating profit by major
geographic area as presented for the years 1994 and 1993:
<TABLE>
<CAPTION>
INCREASE
----------------
SALES 1994 1993 AMOUNT PERCENT
- ------------------------------------------------------------ ------- ------- ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
United States............................................... $ 7,812 7,203 609 8.5%
Europe...................................................... 4,504 4,024 480 11.9
Western Hemisphere excluding U.S............................ 1,511 1,325 186 14.0
Africa, Asia and Pacific.................................... 1,907 1,586 321 20.2
------- ------- ------
Worldwide total........................................ $15,734 14,138 1,596 11.3%
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
SALES
-------------
OPERATING PROFIT 1994 1993 1994 1993
- ------------------------------------------------------------ ------ ------ ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
United States............................................... $1,534 1,209 19.6% 16.8%
Europe...................................................... 1,050 1,036 23.3 25.7
Western Hemisphere excluding U.S. .......................... 173 156 11.4 11.8
Africa, Asia and Pacific.................................... 198 181 10.4 11.4
------ ------
Segments total......................................... $2,955 2,582 18.8% 18.3%
====== ======
</TABLE>
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 1994 than in 1993. 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.
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
1992 through 1994. See appendix for a complete description.
Chart 9: Bar graph showing Operating Profit by Geographic Area of Business for
the years 1992 through 1994. See appendix for a complete description.
DESCRIPTION OF BUSINESS
The Company, employing 81,500 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 Group Operating Committees, which are
comprised of managers who represent key operations within the group, 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 Chairman, President, General
Manager or Managing Director who reports directly to or through a Company Group
Chairman.
F-8
<PAGE> 9
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 40 countries outside the United States and selling in over 175
countries throughout 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.
F-9
<PAGE> 10
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AT JANUARY 1, 1995 AND JANUARY 2, 1994
(DOLLARS IN MILLIONS) (NOTE 1)
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents (Notes 1 and 17)............................. $ 636 372
Marketable securities at cost (Note 17)................................ 68 104
Accounts receivable trade, less allowances $200 (1993, $170)........... 2,601 2,107
Inventories (Notes 1 and 2)............................................ 2,161 1,717
Deferred taxes on income (Note 6)...................................... 582 399
Prepaid expenses and other receivables................................. 632 518
------- -------
Total current assets................................................ 6,680 5,217
======= =======
Marketable securities, non-current (Note 17)........................... 354 437
Property, plant and equipment, net (Notes 1 and 3)..................... 4,910 4,406
Intangible assets, net (Notes 1 and 4)................................. 2,403 925
Deferred taxes on income (Note 6)...................................... 262 484
Other assets........................................................... 1,059 773
------- -------
Total assets........................................................ $15,668 12,242
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loans and notes payable (Note 5)....................................... $ 899 915
Accounts payable....................................................... 1,192 901
Accrued liabilities.................................................... 1,602 1,079
Accrued salaries, wages and commissions................................ 257 204
Taxes on income........................................................ 316 113
------- -------
Total current liabilities........................................... 4,266 3,212
======= =======
Long-term debt (Note 5)................................................ 2,199 1,493
Deferred tax liability (Note 6)........................................ 130 122
Certificates of extra compensation (Note 11)........................... 85 91
Other liabilities...................................................... 1,866 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 767,392,000 and 767,372,000 shares).................. 767 767
Note receivable from employee stock ownership plan (Note 14)........... (73) (84)
Cumulative currency translation adjustments (Note 7)................... (35) (338)
Retained earnings...................................................... 8,966 7,727
------- -------
9,625 8,072
Less common stock held in treasury, at cost (124,382,000 and
124,391,000 shares).................................................... 2,503 2,504
------- -------
Total stockholders' equity.......................................... 7,122 5,568
======= =======
Total liabilities and stockholders' equity.......................... $15,668 12,242
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
F-10
<PAGE> 11
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(DOLLARS IN MILLIONS EXCEPT PER SHARE FIGURES) (NOTE 1)
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Sales to customers............................................ $15,734 14,138 13,753
======= ======= =======
Cost of products sold......................................... 5,299 4,791 4,678
Selling, marketing and administrative expenses................ 6,350 5,771 5,671
Research expense.............................................. 1,278 1,182 1,127
Interest income............................................... (60) (80) (93)
Interest expense, net of portion capitalized (Note 3)......... 142 126 124
Other expense, net............................................ 44 16 39
------- ------- -------
13,053 11,806 11,546
------- ------- -------
Earnings before provision for taxes on income and cumulative
effect of accounting changes................................ 2,681 2,332 2,207
Provision for taxes on income (Note 6)........................ 675 545 582
------- ------- -------
Earnings before cumulative effect of accounting changes....... 2,006 1,787 1,625
Cumulative effect of accounting changes, net of tax
(Notes 6, 15 and 16)........................................ -- -- (595)
------- ------- -------
Net earnings.................................................. $ 2,006 1,787 1,030
======= ======= =======
Net earnings per share (Note 1):
Before cumulative effect of accounting changes.............. $ 3.12 $ 2.74 $ 2.46
Cumulative effect of accounting changes, net of tax
(Notes 6, 15 and 16)..................................... -- -- (.90)
------- ------- -------
Net earnings per share........................................ $ 3.12 2.74 1.56
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
F-11
<PAGE> 12
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMMON STOCK,
RETAINED EARNINGS AND TREASURY STOCK
(DOLLARS IN MILLIONS; SHARES IN THOUSANDS) (NOTES 1 & 10)
<TABLE>
<CAPTION>
COMMON
STOCK ISSUED TREASURY STOCK
---------------- RETAINED ----------------
SHARES AMOUNT EARNINGS SHARES AMOUNT
-------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C>
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
======= ====== ====== ======= ======
Net earnings........................................ -- -- 2,006 -- --
Cash dividends paid (per share: $1.13).............. -- -- (727) -- --
Employee compensation and stock option plans........ -- -- (78) (3,855) (186)
Repurchase of common stock.......................... -- -- -- 3,846 185
Other............................................... 20 -- 38 -- --
-------- ------ -------- ------- ------
Balance, January 1, 1995............................ 767,392 $767 $8,966 124,382 $2,503
======= ====== ====== ======= ======
</TABLE>
See Notes to Consolidated Financial Statements
F-12
<PAGE> 13
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN MILLIONS) (NOTE 1)
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings................................................ $ 2,006 1,787 1,030
Adjustments to reconcile net earnings to cash flows:
Cumulative effect of accounting changes.................. -- -- 595
Depreciation and amortization of property and
intangibles............................................ 724 617 560
Tax deferrals............................................ (66) (19) (8)
Changes in assets and liabilities, net of effects from
acquisition of businesses:
Increase in accounts receivable, less allowances....... (239) (310) (211)
Increase in inventories................................ (162) (29) (142)
Increase (decrease) in accounts payable and accrued
liabilities......................................... 462 (3) 345
(Increase) decrease in other current and non-current
assets.............................................. (112) 102 (199)
Increase in other current and non-current
liabilities......................................... 362 23 179
------- ------- -------
Net cash flows from operating activities............ 2,975 2,168 2,149
======= ======= =======
Cash flows from investing activities
Additions to property, plant and equipment.................. (937) (975) (1,103)
Proceeds from the disposal of assets........................ 332 66 91
Acquisition of businesses, net of cash acquired (Note 18)... (1,932) (266) (47)
Other, principally marketable securities.................... (19) (86) (114)
------- ------- -------
Net cash used by investing activities............... (2,556) (1,261) (1,173)
======= ======= =======
Cash flows from financing activities
Dividends to stockholders................................... (727) (659) (587)
Repurchase of common stock.................................. (185) (632) (740)
Proceeds from short-term debt............................... 328 297 409
Retirement of short-term debt............................... (263) (336) (237)
Proceeds from long-term debt................................ 960 511 560
Retirement of long-term debt................................ (363) (468) (264)
Proceeds from the exercise of stock options................. 62 43 74
------- ------- -------
Net cash used by financing activities............... (188) (1,244) (785)
======= ======= =======
Effect of exchange rate changes on cash and cash
equivalents................................................. 33 (36) (35)
------- ------- -------
Increase (decrease) in cash and cash equivalents.............. 264 (373) 156
Cash and cash equivalents, beginning of year (Note 1)......... 372 745 589
------- ------- -------
Cash and cash equivalents, end of year (Note 1)............... $ 636 372 745
======= ======= =======
Supplemental cash flow data
Cash paid during the year for:
Interest, net of portion capitalized..................... $ 133 118 124
Income taxes............................................. 612 665 561
Supplemental schedule of noncash investing and financing
activities
Treasury stock issued for employee compensation and stock
option plans, net of cash proceeds....................... $ 133 95 163
Acquisitions of businesses
Fair value of assets acquired............................... $ 2,279 339 47
Fair value of liabilities assumed........................... (347) (73) --
------- ------- -------
Net cash payments................................... $ 1,932 266 47
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
F-13
<PAGE> 14
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Revenue Recognition
The Company recognizes revenue from product sales when the goods are
shipped to the customer.
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. Property, plant and equipment placed in service
prior to January 1, 1989 is generally depreciated 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. The
Company continually evaluates the carrying value of goodwill and other
intangible assets. Any impairments would be recognized when the expected future
operating cash flows derived from such intangible assets is less than their
carrying value.
Financial Instruments
Gains and losses on foreign currency hedges of existing assets or
liabilities, or hedges of firm commitments are deferred and are recognized in
income as part of the related transaction.
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 1,
1995 and January 2, 1994, the cumulative amount of undistributed international
earnings was approximately $3.7 billion and $3.0 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.
F-14
<PAGE> 15
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
Reclassification
Certain prior year amounts have been reclassified to conform with current
year presentation.
2. INVENTORIES
At the end of 1994 and 1993, inventories comprised:
<TABLE>
<CAPTION>
1994 1993
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Raw materials and supplies....................................... $ 477 448
Goods in process................................................. 640 485
Finished goods................................................... 1,044 784
------ ------
$2,161 1,717
====== ======
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
At the end of 1994 and 1993, property, plant and equipment at cost and
accumulated depreciation comprised:
<TABLE>
<CAPTION>
1994 1993
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Land and land improvements....................................... $ 300 276
Buildings and building equipment................................. 2,521 2,389
Machinery and equipment.......................................... 4,102 3,454
Construction in progress......................................... 732 664
------ ------
7,655 6,783
Less accumulated depreciation.................................... 2,745 2,377
------ ------
$4,910 4,406
====== ======
</TABLE>
The Company capitalizes interest expense as part of the cost of
construction of facilities and equipment. Interest expense capitalized in 1994,
1993 and 1992 was $44, $48 and $53 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 1994 and 1993, intangible assets, consisting primarily of
patents and goodwill, comprised:
<TABLE>
<CAPTION>
1994 1993
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Intangible assets................................................ $2,667 1,255
Less accumulated amortization.................................... 264 330
------ ------
$2,403 925
====== ======
</TABLE>
F-15
<PAGE> 16
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The increase in intangible assets is due primarily to the acquisition of
businesses during 1994. See page 38 for additional information.
5. BORROWINGS
The Company has access to substantial sources of funds at numerous banks
worldwide. Total unused credit available to the Company approximates $3.0
billion, including $1,175 million of credit commitments with various worldwide
banks, $900 million of which expire on October 6, 1995 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.
Long-term debt comprised:
<TABLE>
<CAPTION>
EFF. EFF.
1994 RATE 1993 RATE
------ ---- ------ -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
8.72% Debentures due 2024............................... $ 300 8.72% -- --
8 1/2% Notes due 1995................................... 250 8.50 250 8.50
6.73% Debentures due 2023............................... 250 6.73 250 6.73
7 3/8% Eurodollar Notes due 1997........................ 200 7.40 -- --
8% Notes due 1998....................................... 200 7.97 200 7.97
7 3/8% Notes due 2002................................... 198 7.46 198 7.46
8.25% Eurodollar Notes due 2004......................... 198 8.24 -- --
9% European Currency Unit Notes due 1997(1)............. 185 6.80 167 6.82
7.38% to 8.38% Medium Term Notes due 1993 -- 8.......... 160 8.23 250 7.89
11 1/4% Italian Lire Notes due 1998(1).................. 125 5.53 -- --
5 3/8% Swiss Franc Notes due 1997(1).................... 117 5.31 -- --
8.82% Italian Lire Notes due 2003(1).................... 94 4.07 89 2.86
Industrial Revenue Bonds................................ 73 4.87 81 4.18
4 1/2% Currency Indexed Notes due 1998(1)............... 66 4.08 73 2.82
Floating Rate Medium Term Notes due 1994................ -- -- 150 2.87
7% Swiss Franc Notes due 1994(1)........................ -- -- 101 2.46
Other, principally international........................ 44 -- 37 --
------ ------
2,460 1,846
Less current portion.................................... 261 353
------ ------
$2,199 1,493
====== ======
</TABLE>
- ---------------
(1) These debt issues include the effect of foreign currency movements in the
principal amounts shown. Such debt was converted to fixed or floating rate
U.S. dollar liabilities via interest rate and currency swaps. Unrealized
gains (losses) on the 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). Also, see Note 17.
In 1994, the Company filed a shelf registration with the Securities and
Exchange Commission, and in combination with $585 million remaining from a prior
shelf registration, initiated a third series of its Medium Term Note Program
(MTN) for the issuance of up to $2,585 million of unsecured debt securities and
warrants to purchase debt securities. No MTN's were issued during 1994, while
$150 million of MTN's were issued in 1993. In addition, in 1994, the Company
issued $300 million of 8.72% Debentures due 2024 from the
F-16
<PAGE> 17
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shelf registration and $127.5 million equivalent of 11.25% Italian Lire Notes
due 1998, $116.4 million equivalent of 5.375% Swiss Franc Bonds due 1997, $200
million 7.375% Eurodollar Notes due 1997 and $200 million 8.25% Eurodollar Notes
due 2004. The proceeds were used for general corporate purposes, including the
retirement of commercial paper and financing acquisitions. At January 1, 1995,
the Company had $2,285 million remaining on its shelf registration.
Short-term borrowings amounted to $899 million at the end of 1994. These
borrowings are composed of $295 million of U.S. commercial paper, $250 million
equivalent 8.5% Notes due 1995, $354 million of local borrowings principally by
international subsidiaries.
Interest rates on the Industrial Revenue Bonds vary from 5% to 6%, while
rates on other long-term obligations vary from 2% to 16% according to local
conditions.
Aggregate maturities of long-term obligations for each of the next five
years commencing in 1995 are:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ---
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
$261 116 509 466 15
</TABLE>
6. INCOME TAXES
The provision for taxes on income consist of:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Currently payable:
U.S. taxes on domestic income............................... $318 190 179
U.S. taxes on international income.......................... (30) (1) (14)
International taxes......................................... 404 345 403
U.S. state and local taxes.................................. 49 30 22
---- ---- ----
741 564 590
---- ---- ----
Deferred:
U.S. taxes.................................................. (36) (26) (29)
International taxes......................................... (30) 7 21
---- ---- ----
(66) (19) (8)
---- ---- ----
$675 545 582
==== ==== ====
</TABLE>
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 required 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.
F-17
<PAGE> 18
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Temporary differences and carryforwards for 1994 are as follows:
<TABLE>
<CAPTION>
DEFERRED TAX
--------------------
ASSET LIABILITY
------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Postretirement benefits................................................... $ 255 --
Postemployment benefits................................................... 104 --
Employee benefit plans.................................................... 93 --
Depreciation.............................................................. -- 214
Non-deductible intangibles................................................ -- 157
Alternative minimum tax credits........................................... 101 --
International R&D capitalized for tax..................................... 81 --
Reserves & liabilities.................................................... 286 --
Income reported for tax purposes.......................................... 112 --
Miscellaneous international............................................... 65 157
Miscellaneous U.S......................................................... 237 126
------ ------
Total deferred income taxes.......................................... $1,334 654
====== ======
</TABLE>
A comparison of income tax expense at the federal statutory rate of 35% in
1994 and 1993, and 34% in 1992 to the Company's effective tax rate is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Earnings before taxes on income:
U.S........................................................... $1,317 1,006 863
International................................................. 1,364 1,326 1,344
------ ------ ------
Worldwide..................................................... $2,681 2,332 2,207
====== ====== ======
Statutory taxes................................................. $ 938 816 750
Tax Rates:
Statutory..................................................... 35.0% 35.0% 34.0%
Puerto Rico & Ireland operations.............................. (9.2) (9.7) (9.6)
Research tax credits.......................................... (0.5) (0.7) (0.3)
Domestic state and local...................................... 1.2 0.8 0.7
International subsidiaries excluding Ireland.................. (1.8) (2.4) 0.7
All other..................................................... 0.5 0.4 0.9
------ ------ ------
Effective tax rate.............................................. 25.2% 23.4% 26.4%
====== ====== ======
</TABLE>
The increase in the 1994 worldwide effective tax rate was primarily due to
the increase in income subject to tax in the United States.
For 1994, 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 reduce
the benefit the Company receives from its operations in Puerto Rico by 60%
gradually over a five-year period. In addition, the Company has subsidiaries
manufacturing in Ireland under an incentive tax rate expiring on December 31,
2010.
F-18
<PAGE> 19
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INTERNATIONAL 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.
An analysis of the changes during 1994 and 1993 in the separate component
of stockholders' equity for cumulative currency translation adjustments follows:
<TABLE>
<CAPTION>
1994 1993
----- ------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Beginning of year................................................. $(338) (146)
Translation adjustments........................................... 303 (192)
----- -----
End of year....................................................... $ (35) (338)
===== =====
</TABLE>
Net currency transaction and translation gains and losses included in other
expense were after-tax losses (gains) of $4, $5 and $(12) million in 1994, 1993
and 1992, respectively, incurred principally in Latin America.
8. INTERNATIONAL SUBSIDIARIES
The following amounts are included in the consolidated financial statements
for international subsidiaries:
<TABLE>
<CAPTION>
1994 1993
------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Current assets................................................... $3,702 3,049
Current liabilities.............................................. 1,970 1,693
Net property, plant and equipment................................ 1,893 1,619
Parent company equity in net assets.............................. 4,514 3,563
Excess of parent company equity over investments................. 4,030 3,093
</TABLE>
International sales to customers were $7,922, $6,935 and $6,850 million for
1994, 1993 and 1992, 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 $276
million in 1994, $254 million in 1993 and $259 million in 1992.
The approximate minimum rental payments required under operating leases
that have initial or remaining noncancellable lease terms in excess of one year
at January 1, 1995 are:
<TABLE>
<CAPTION>
AFTER
1995 1996 1997 1998 1999 2000 TOTAL
---- ---- ---- ---- ---- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
$103 83 50 32 21 67 356
</TABLE>
F-19
<PAGE> 20
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Commitments under capital leases are not significant.
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 1994 and 1993 under the Company's stock option
plans is summarized below:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(SHARES IN THOUSANDS,
PRICE PER SHARE)
<S> <C> <C>
Held at beginning of year by 3,304 employees (1993-3,002)....... 34,995 26,986
Granted to 1,850 employees (1993-2,578)......................... 5,709 11,272
-------- --------
40,704 38,258
Exercised (1992-3,928).......................................... (3,169) (2,182)
Cancelled or expired............................................ (1,263) (1,081)
-------- --------
Held at end of year by 3,591 employees (1993-3,304)............. 36,272 34,995
======== =======
Shares exercisable, end of year (1992-11,947)................... 14,566 13,880
======== =======
Shares available for future grants, end of year (1992-19,693)... 4,125 8,883
======== =======
Price range of options exercised (1992-$7.39 to $35.66)......... $8.85 to 8.85 to
$ 50.28 35.66
======== =======
Price range of options held, end of year........................ $8.91 to 8.85 to
$ 57.75 57.75
======== =======
</TABLE>
At year-end, the Company was obligated to deliver, over a period of not
more than two years, 115 thousand shares of common stock (1993-298) in
performance of outstanding stock compensation agreements with 1,944 employees
(1993-6,930).
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 sponsors various retirement and pension plans, including
defined benefit, defined contribution and termination indemnity plans, which
cover most employees worldwide.
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.
The Company's objective in funding its domestic plans is to accumulate funds
sufficient to provide for all accrued benefits. International subsidiaries have
plans under which funds are deposited with trustees, annuities are purchased
under group contracts, or reserves are provided.
F-20
<PAGE> 21
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In certain countries other than the United States, 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.
Net pension expense for the Company's defined benefit plans for 1994, 1993
and 1992 included the following components:
<TABLE>
<CAPTION>
1994 1993 1992
----- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Service cost-benefits earned during period................... $ 120 109 110
Interest cost on projected benefit obligations............... 188 168 163
Actual return on plan assets................................. (3) (350) (163)
Net amortization and deferral................................ (199) 149 (31)
Curtailment losses(gains).................................... 1 (5) --
----- ---- ----
Net periodic pension cost.................................... $ 107 71 79
===== ==== ====
</TABLE>
The net periodic pension cost attributable to domestic plans and included
above was $49 million in 1994, $27 million in 1993 and $36 million in 1992.
The following tables provide the domestic assumptions and range of
international assumptions, which are based on the economic environment of each
applicable country, used to develop net periodic pension cost and the actuarial
present value of projected benefit obligations:
<TABLE>
<CAPTION>
DOMESTIC PENSION PLANS 1994 1993 1992
---------------------- ---- ---- ----
<S> <C> <C> <C>
Expected long-term rate of return on plan assets................ 9.0 % 9.0% 9.5%
Weighted average discount rate.................................. 8.75 7.5 8.5
Rate of increase in compensation levels......................... 5.5 5.5 7.0
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL PENSION PLANS 1994 1993 1992
--------------------------- -------- ------- --------
<S> <C> <C> <C>
Expected long-term rate of return on plan assets...... 5.0-10.0% 5.0-9.5% 5.0-11.0%
Weighted average discount rates....................... 4.5-10.0 4.5-9.5 5.0-11.0
Rate of increase in compensation levels............... 3.0-7.0 3.0-6.5 3.5-8.0
</TABLE>
F-21
<PAGE> 22
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the actuarial present value of benefit
obligations and funded status at year-end 1994 and 1993 for the Company's
defined benefit plans:
<TABLE>
<CAPTION>
YEAR-END 1994
------------------------------
INTERNATIONAL
-----------------
OVER- UNDER-
DOMESTIC FUNDED FUNDED
-------- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Plan assets at fair value, primarily stocks and bond...... $1,540 814 22
------ ----- ------
Actuarial present value of benefit obligations:
Vested benefits......................................... 1,349 519 158
Nonvested benefits...................................... 17 33 26
Accumulated benefit obligation............................ 1,366 552 184
Effect of projected future salary increases............... 208 186 38
Projected benefit obligation.............................. 1,574 738 222
(34) 76 (200)
Unrecognized prior service cost........................... 70 28 4
Unrecognized net (gain) loss.............................. (273) 17 1
Unamortized net transition (assets) liabilities........... (24) (79) 10
Additional minimum liability.............................. (12) -- (7)
Net pension (liability) asset included in the balance
sheet................................................... $ (273) 42 (192)
</TABLE>
<TABLE>
<CAPTION>
YEAR-END 1993
------------------------------
INTERNATIONAL
-----------------
OVER- UNDER-
DOMESTIC FUNDED FUNDED
-------- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Plan assets at fair value, primarily stocks and bond...... $1,659 719 38
Actuarial present value of benefit obligations:
Vested benefits...................................... 1,313 435 142
Nonvested benefits................................... 20 7 32
Accumulated benefit obligation............................ 1,333 442 174
Effect of projected future salary increases............... 349 153 63
Projected benefit obligation.............................. 1,682 595 237
(23) 124 (199)
Unrecognized prior service cost........................... 132 22 3
Unrecognized net (gain) loss.............................. (298) 14 (1)
Unamortized net transition (assets) liabilities........... (30) (92) 21
Additional minimum liability.............................. (16) -- (4)
Net pension (liability) asset included in the balance
sheet................................................... $ (235) 68 (180)
</TABLE>
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, with the match percentage applying
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
F-22
<PAGE> 23
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $41 million in 1994, $42
million in 1993 and $40 million in 1992.
15. OTHER POSTRETIREMENT BENEFITS
The Company provides postretirement benefits, primarily health care, 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 ($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 retirees included the
following components:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Service cost-benefits earned during the current year............. $16 18 19
Interest cost on accumulated postretirement benefit obligation... 44 57 49
Actual return on plan assets..................................... -- (4) (4)
Net amortization and deferral.................................... (3) (1) --
--- --- ---
Net periodic postretirement benefit cost......................... $57 70 64
=== === ===
</TABLE>
The plans' status as of year-end 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
YEAR-END
-----------------
1994 1993
---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................................ $344 320
Fully eligible active participants.............................. 62 148
Other active participants....................................... 100 164
---- ----
Accumulated postretirement benefit obligation..................... 506 632
Life insurance plan assets at fair value.......................... 36 39
---- ----
Accumulated postretirement benefit obligation in excess of plans'
assets.......................................................... 470 593
---- ----
Unrecognized net gain............................................. 188 37
Unrecognized prior service cost................................... 5 12
---- ----
Accrued postretirement benefit cost............................... $663 642
==== ====
</TABLE>
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 11% for employees
under age 65 and 8% 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
F-23
<PAGE> 24
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accumulated postretirement benefit obligation at year-end by $66 million and the
service and interest cost components of the net periodic postretirement benefit
cost for 1994 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:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Expected long-term rate of return on plan assets................. 9.0 % 9.0% 9.5%
Weighted average discount rate................................... 8.75 7.5 8.5
Rate of increase in compensation levels.......................... 5.5 5.5 7.0
</TABLE>
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
Derivative Financial Instrument Risk
The Company uses derivative financial instruments to reduce exposures to
market risks resulting from fluctuations in interest rates and foreign exchange.
The Company does not enter into financial instruments for trading or speculative
purposes.
The Company has a policy of only entering into contracts with parties that
have at least an "A" (or equivalent) credit rating. The counter-parties to these
contracts are major financial institutions and the Company does not have
significant exposure to any one counter-party. Management believes that risk of
loss is remote and in any event would be immaterial.
Interest Rate Risk Management
The Company uses interest rate and currency swaps to manage interest rate
risk related to borrowing. Interest rate and currency swap agreements which
hedge third party debt issues mature with these borrowings and are described in
Note 5.
Forward rate agreements are used by the Company to fix the rates received
on short-term floating-rate investments and mature within 1 year.
The following table illustrates the notional amounts outstanding, maturity
dates, and the weighted average receive and pay rates of interest rate hedge
agreements by type. (Notional amounts provide an
F-24
<PAGE> 25
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
indication of the extent of the Company's involvement in such agreements but do
not represent its exposure to market risk.)
<TABLE>
<CAPTION>
1994
----------------------------------------------
WEIGHTED AVG. RATE
NOTIONAL MATURITY ------------------
(Dollars in Millions) AMOUNTS DATE RECEIVE PAY
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate and currency swaps
Pay variable(1)........................ $116 1997 5.4% 5.8%
193 1998 9.0 5.2
95 2003 8.8 4.3
Pay fixed.............................. $188 1997 9.0 6.8
Forward rate agreements..................... $628 1995 6.8% 6.0%
</TABLE>
- ---------------
(1) Variable rates are primarily indexed to the Federal Reserve H.15 30 day
commercial paper rate.
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.
Foreign Exchange Risk Management
The Company enters into forward exchange contracts to hedge product costs
and revenues that are denominated in foreign currencies and currency swaps to
hedge foreign currency denominated debt. These hedging instruments are
classified consistent with the item being hedged.
The Company enters into various types of foreign exchange contracts
maturing within five years and almost always acts as a buyer. The Company has
forward exchange contracts outstanding at year-end in various currencies
principally in U.S. Dollars, Japanese Yen and German Marks. In addition, the
Company has currency swaps outstanding principally in Swiss Francs, Italian Lire
and British Pounds. Deferred unrealized gains and losses, based on dealer-quoted
prices, from hedging firm commitments are presented in the following table:
<TABLE>
<CAPTION>
1994
-----------------------------
NOTIONAL
AMOUNTS GAINS LOSSES
-------- ----- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Forwards................................................... $1,605 19 30
Currency swaps............................................. 1,714 13 13
</TABLE>
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.
F-25
<PAGE> 26
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The estimated fair value of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1994 1993
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Nonderivatives
Cash and cash equivalents.................... $ 636 636 372 372
Marketable securities -- current............. 68 68 104 109
Marketable securities -- non-current......... 354 354 437 440
Long-term investments(1)..................... 147 149 41 103
Long-term debt............................... 2,460 2,387 1,846 1,934
Derivatives
Other assets (liabilities):
Currency swaps (net)...................... -- -- -- 13
Forwards (net)............................ -- (11) -- 44
Forward rate agreements................... -- 5 -- --
Interest and currency swap agreements
related to debt......................... 5 (13) 24 (3)
</TABLE>
- ---------------
(1) Included in other assets on the balance sheet.
The carrying amounts in the table are included in the statement of
financial position under the indicated captions.
Effective January 3, 1994, the Company adopted Statement of Financial
Accounting Standard (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 classified as available for sale,
totaled $151 million at January 1, 1995, which exceeded the carrying amount by
$58 million. This unrealized gain was credited to stockholders' equity net of
deferred income taxes of $20 million. These investment securities are included
in marketable securities current ($17 million) and other assets ($134 million)
on the balance sheet. All other investments are classified as held to maturity
and carried at amortized cost.
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 commercial
institutions that have at least an "A" (or equivalent) credit rating. These
investments generally mature within six months and the Company has not incurred
any related losses.
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.
F-26
<PAGE> 27
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. ACQUISITIONS AND DIVESTITURES
During 1994 and 1993, certain businesses were acquired for $1,932 million
and $266 million, respectively. These acquisitions were accounted for by the
purchase method and accordingly the results of operations of the acquired
businesses have been included in the accompanying consolidated financial
statements from their respective dates of acquisition.
On September 27, 1994, the Company acquired substantially all of the
outstanding shares of the Neutrogena Corporation pursuant to a cash tender
offer. On October 3, 1994 the Company consummated a short form merger pursuant
to which the remaining shares were acquired. The price, net of cash acquired,
was approximately $924 million. Neutrogena Corporation is a manufacturer of high
quality skin and hair care products.
On November 30, 1994 the Company acquired Eastman Kodak's Clinical
Diagnostics business, a worldwide supplier of diagnostic products, for $1,008
million.
The estimated fair market value of net assets acquired in the Neutrogena
and Clinical Diagnostics acquisitions is $439 million. The excess of purchase
price over the estimated fair value has been allocated to identifiable
intangibles ($849 million) and goodwill ($644 million). Identifiable intangibles
and goodwill are being amortized on a straight line basis over periods of 15 to
40 years.
Summarized below are unaudited pro forma combined results of operations for
the years ended January 1, 1995 and January 2, 1994 assuming the Neutrogena and
Clinical Diagnostics acquisitions occurred at the beginning of each year
presented:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(DOLLARS IN MILLIONS
(EXCEPT PER SHARE FIGURES)
<S> <C> <C>
Sales......................................................... $16,414 14,955
Net earnings.................................................. 1,980 1,770
Net earnings per share........................................ 3.08 2.72
</TABLE>
The unaudited pro forma combined results of operations are not necessarily
indicative of the results of operations that would have occurred had the
businesses actually been combined during the periods presented; nor is this
information indicative of future combined results of operations.
The 1993 acquisitions include the purchase of the RoC S.A. group of
Companies 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.
In 1994, the Company completed the sales of the Janssen Chimica prepak and
bulk chemical supply business and the "A" Company orthodontic supplies business.
In addition, the Company sold the ophthalmic pharmaceutical product line of
IOLAB Corporation to Ciba Vision for approximately $300 million.
In 1993, the Company completed the sale of the Sterile Design division of
Johnson & Johnson Medical Products, Inc. and the CHUX disposable wiping cloth
business in Australia and New Zealand.
The after-tax gain on the sale of the above businesses, was reinvested in
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
F-27
<PAGE> 28
JOHNSON & JOHNSON AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 would not
have a material adverse effect on its results of operations, cash flows or
financial position.
20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data for the years 1994 and 1993 is
summarized below:
<TABLE>
<CAPTION>
1994
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(DOLLARS IN MILLIONS EXCEPT PER SHARE FIGURES)
<S> <C> <C> <C> <C>
Segment sales to customers
Consumer...................................... $1,279 1,270 1,374 1,328
Pharmaceutical................................ 1,190 1,308 1,347 1,313
Professional.................................. 1,221 1,338 1,317 1,449
Total sales..................................... 3,690 3,916 4,038 4,090
Gross margin.................................... 2,509 2,629 2,674 2,623
Earnings before provision for taxes on income... 736 762 713 470
Net earnings.................................... 544 559 525 378
Net earnings per share........................ $ .85 .86 .82 .59
</TABLE>
<TABLE>
<CAPTION>
1993
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(DOLLARS IN MILLIONS EXCEPT PER SHARE FIGURES)
<S> <C> <C> <C> <C>
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... 700 670 582 380
Net earnings.................................... 503 495 454 335
Net earnings per share........................ $ .77 .75 .70 .52
</TABLE>
21. SUBSEQUENT EVENT
In January 1995, the Company announced that it had agreed in principle to
sell the Advanced Materials and Chicopee B.V., Netherlands nonwoven businesses.
The decision to divest the nonwoven operations is consistent with the Company's
strategy to focus its resources on its primary health care mission. The terms of
the agreement have not been finalized. The disposition of Advanced Materials and
Chicopee B.V. will not have a material effect on the Company's financial
position or operating results.
F-28
<PAGE> 29
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 L.L.P., independent auditors, is engaged to audit our
financial statements. Coopers & Lybrand L.L.P. 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.
<TABLE>
<S> <C>
RALPH S. LARSEN CLARK H. JOHNSON
Chairman, Board of Directors Vice President, Finance
and Chief Executive Officer and Chief Financial Officer
</TABLE>
F-29
<PAGE> 30
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of Johnson & Johnson:
We have audited the consolidated balance sheet of Johnson & Johnson and
subsidiaries as of January 1, 1995 and January 2, 1994, 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 1, 1995. 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 1, 1995 and January 2, 1994, and the
results of its operations and its cash flows for each of the three years in the
period ended January 1, 1995, 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 L.L.P.
New York, New York
January 23, 1995
F-30
<PAGE> 31
JOHNSON & JOHNSON AND SUBSIDIARIES
SEGMENTS OF BUSINESS(1)
<TABLE>
<CAPTION>
SALES TO CUSTOMERS(2)
-------------------------------
1994 1993 1992
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Consumer-Domestic............................................. $ 2,692 2,631 2,608
International...................................... 2,559 2,193 2,172
------- ------- -------
Total.............................................. 5,251 4,824 4,780
------- ------- -------
Pharmaceutical-Domestic....................................... 2,143 1,775 1,652
International...................................... 3,015 2,715 2,688
------- ------- -------
Total.............................................. 5,158 4,490 4,340
------- ------- -------
Professional-Domestic......................................... 2,977 2,797 2,643
International...................................... 2,348 2,027 1,990
------- ------- -------
Total.............................................. 5,325 4,824 4,633
------- ------- -------
Worldwide total............................................... $15,734 14,138 13,753
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT IDENTIFIABLE ASSETS
------------------------ ---------------------------
1994 1993 1992 1994 1993 1992
------ ------ ------ ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Consumer.................................. $ 443 521 501 4,489 3,452 3,359
Pharmaceutical............................ 1,669 1,406 1,364 4,756 3,815 3,733
Professional.............................. 843 655 598 5,765 4,365 4,216
------ ------ ------ ------- ------- -------
Segments total............................ 2,955 2,582 2,463 15,010 11,632 11,308
Expenses not allocated to
segments(3)............................. (274) (250) (256)
General corporate......................... 658 610 576
------ ------ ------ ------- ------- -------
Worldwide total........................... $2,681 2,332 2,207 15,668 12,242 11,884
====== ====== ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
ADDITIONS TO PROPERTY, DEPRECIATION AND
PLANT & EQUIPMENT AMORTIZATION
------------------------ ----------------------
1994 1993 1992 1994 1993 1991
---- ---- ------ ---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Consumer.................................... $218 260 273 241 205 191
Pharmaceutical.............................. 327 313 317 183 159 151
Professional................................ 365 368 462 268 221 191
---- ---- ------ ---- ---- ----
Segments total.............................. 910 941 1,052 692 585 533
General corporate........................... 27 34 51 32 32 27
---- ---- ------ ---- ---- ----
Worldwide total............................. $937 975 1,103 724 617 560
==== ==== ====== ==== ==== ====
</TABLE>
F-31
<PAGE> 32
GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
SALES TO CUSTOMERS(2) OPERATING PROFIT IDENTIFIABLE ASSETS
----------------------------- -------------------------- -----------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
------- ------- ------- ------ ------ ------ ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States.......... $ 7,812 7,203 6,903 1,534 1,209 1,052 8,430 6,252 6,102
Europe................. 4,504 4,024 4,246 1,050 1,036 1,125 4,271 3,625 3,430
Western Hemisphere
excluding U.S........ 1,511 1,325 1,206 173 156 132 970 742 805
Africa, Asia and
Pacific.............. 1,907 1,586 1,398 198 181 154 1,339 1,013 971
------- ------- ------- ------ ------ ------ ------- ------- -------
Segments total......... 15,734 14,138 13,753 2,955 2,582 2,463 15,010 11,632 11,308
------- ------- ------- ------ ------ ------ ------- ------- -------
Expenses not allocated
to segments(3)....... (274) (250) (256)
General corporate...... 658 610 576
------- ------- ------- ------ ------ ------ ------- ------- -------
Worldwide total........ $15,734 14,138 13,753 2,681 2,332 2,207 15,668 12,242 11,884
======= ======= ======= ====== ====== ====== ======= ======= =======
</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.
F-32
<PAGE> 33
JOHNSON & JOHNSON AND SUBSIDIARIES
SUMMARY OF OPERATIONS AND STATISTICAL DATA 1984-1994
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE FIGURES)
<S> <C> <C> <C>
Sales to customers -- Domestic................................ $ 7,812 7,203 6,903
Sales to customers -- International........................... 7,922 6,935 6,850
------- ------- -------
Total sales................................................... 15,734 14,138 13,753
------- ------- -------
Cost of products sold......................................... 5,299 4,791 4,678
Selling, marketing and administrative expenses................ 6,350 5,771 5,671
Research expense.............................................. 1,278 1,182 1,127
Permanent impairment of certain assets and operations in Latin
America..................................................... -- -- --
Redirection charges........................................... -- -- --
Interest income............................................... (60) (80) (93)
Interest expense, net of portion capitalized.................. 142 126 124
Other expense (income), net................................... 44 16 39
------- ------- -------
13,053 11,806 11,546
------- ------- -------
Earnings before provision for taxes on income................. 2,681 2,332 2,207
Provision for taxes on income................................. 675 545 582
------- ------- -------
Earnings before cumulative effect of accounting changes....... 2,006 1,787 1,625
Cumulative effect of accounting changes (net of tax).......... -- -- (595)
------- ------- -------
Net earnings.................................................. $ 2,006 1,787 1,030
------- ------- -------
Percent of sales to customers................................. 12.7 12.6 7.5 (1)
Net earnings per share of common stock........................ $ 3.12 2.74 1.56
Percent return on average stockholders' equity................ 31.6 33.3 19.1 (1)
Percent increase (decrease) over previous year:
Sales to customers............................................ 11.3 2.8 10.5
Net earnings per share........................................ 13.9 75.6 (1) (28.8)(1)
Supplementary expense data:
Cost of materials and services(5)............................. $ 7,952 7,033 6,857
Total employment costs........................................ 4,282 4,066 4,044
Depreciation and amortization................................. 724 617 560
Maintenance and repairs(6).................................... 217 202 210
Total tax expense(7).......................................... 1,142 968 1,000
Total tax expense per share(7)................................ 1.78 1.49 1.52
Supplementary balance sheet data:
Property, plant and equipment, net............................ $ 4,910 4,406 4,115
Additions to property, plant and equipment.................... 937 975 1,103
Total assets.................................................. 15,668 12,242 11,884
Long-term debt................................................ 2,199 1,493 1,365
Common stock information:
Dividends paid per share...................................... $ 1.13 1.01 .89
Stockholders' equity per share................................ $ 11.08 8.66 7.89
Market price per share (year-end close)....................... $54 3/4 44 7/8 50 1/2
Average shares outstanding (millions)......................... 643.1 651.7 659.5
Stockholders of record (thousands)............................ 104.7 96.1 84.1
Employees (thousands)......................................... 81.5 81.6 84.9
</TABLE>
F-33
<PAGE> 34
JOHNSON & JOHNSON AND SUBSIDIARIES
SUMMARY OF OPERATIONS AND STATISTICAL DATA 1984-1994 -- (CONTINUED)
<TABLE>
<CAPTION>
1991 1990 1989
------- ------- -------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE FIGURES)
<S> <C> <C> <C>
Sales to customers -- Domestic................................ $ 6,248 5,427 4,881
Sales to customers -- International........................... 6,199 5,805 4,876
------- ------- -------
Total sales................................................... 12,447 11,232 9,757
------- ------- -------
Cost of products sold......................................... 4,204 3,937 3,480
Selling, marketing and administrative expenses................ 5,099 4,469 3,897
Research expense 980 834 719
Permanent impairment of certain assets and operations in Latin
America..................................................... -- 104 --
Redirection charges........................................... -- -- --
Interest income............................................... (88) (98) (87)
Interest expense, net of portion capitalized.................. 129 201(4) 141
Other expense (income), net................................... 85 162 93
------- ------- -------
10,409 9,609 8,243
------- ------- -------
Earnings before provision for taxes on income................. 2,038 1,623 1,514
Provision for taxes on income................................. 577 480 432
------- ------- -------
Earnings before cumulative effect of accounting changes....... 1,461 1,143 1,082
Cumulative effect of accounting changes (net of tax).......... -- -- --
------- ------- -------
Net earnings.................................................. $ 1,461 1,143 1,082
------- ------- -------
Percent of sales to customers................................. 11.7 10.2(2) 11.1
Net earnings per share of common stock........................ $ 2.19 1.72 1.62
Percent return on average stockholders' equity................ 27.8 25.3(2) 28.3
Percent increase (decrease) over previous year:
Sales to customers............................................ 10.8 15.1 8.4
Net earnings per share........................................ 27.3(2) 6.2(2) 13.3
Supplementary expense data:
Cost of materials and services(5)............................. $ 6,329 5,728 4,908
Total employment costs........................................ 3,507 3,195 2,871
Depreciation and amortization................................. 493 474 414
Maintenance and repairs(6).................................... 203 185 193
Total tax expense(7).......................................... 966 825 708
Total tax expense per share(7)................................ 1.45 1.24 1.06
Supplementary balance sheet data:
Property, plant and equipment, net............................ $ 3,667 3,247 2,846
Additions to property, plant and equipment.................... 987 830 750
Total assets.................................................. 10,513 9,506 7,919
Long-term debt................................................ 1,301 1,316 1,170
Common stock information:
Dividends paid per share...................................... $ .77 .66 .56
Stockholders' equity per share................................ $ 8.44 7.36 6.23
Market price per share (year-end close)....................... $57 1/4 35 7/8 29 5/8
Average shares outstanding (millions)......................... 666.1 666.1 666.2
Stockholders of record (thousands)............................ 69.9 64.6 60.5
Employees (thousands)......................................... 82.7 82.2 83.1
</TABLE>
F-34
<PAGE> 35
JOHNSON & JOHNSON AND SUBSIDIARIES
SUMMARY OF OPERATIONS AND STATISTICAL DATA 1984-1994 -- (CONTINUED)
<TABLE>
<CAPTION>
1988 1987 1986
------- ------- -------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE FIGURES)
<S> <C> <C> <C>
Sales to customers -- Domestic................................ $ 4,576 4,167 3,972
Sales to customers -- International........................... 4,424 3,845 3,031
------- ------- -------
Total sales................................................... 9,000 8,012 7,003
------- ------- -------
Cost of products sold......................................... 3,292 2,958 2,632
Selling, marketing and administrative expenses................ 3,630 3,228 2,868
Research expense.............................................. 674 617 521
Permanent impairment of certain assets and operations in Latin
America..................................................... -- -- --
Redirection charges........................................... -- -- 540
Interest income............................................... (72) (95) (100)
Interest expense, net of portion capitalized.................. 104 116 66
Other expense (income), net................................... (24) (5) 85
------- ------- -------
7,604 6,819 6,612
------- ------- -------
Earnings before provision for taxes on income................. 1,396 1,193 391
Provision for taxes on income................................. 422 360 61
------- ------- -------
Earnings before cumulative effect of accounting changes....... 974 833 330
Cumulative effect of accounting changes (net of tax).......... -- -- --
------- ------- -------
Net earnings.................................................. $ 974 833 330
------- ------- -------
Percent of sales to customers................................. 10.8 10.4 4.7(3)
Net earnings per share of common stock........................ $ 1.43 1.21 .46
Percent return on average stockholders' equity................ 27.9 26.4 10.7(3)
Percent increase (decrease) over previous year:
Sales to customers............................................ 12.3 14.4 9.1
Net earnings per share........................................ 18.2 --(3) (45.2)(3)
Supplementary expense data:
Cost of materials and services(5)............................. $ 4,528 4,030 3,642
Total employment costs........................................ 2,639 2,388 2,091
Depreciation and amortization................................. 391 356 291
Maintenance and repairs(6).................................... 191 180 170
Total tax expense(7).......................................... 678 591 284
Total tax expense per share(7)................................ 1.00 .86 .40
Supplementary balance sheet data:
Property, plant and equipment, net............................ $ 2,493 2,250 1,916
Additions to property, plant and equipment.................... 664 515 446
Total assets.................................................. 7,119 6,546 5,877
Long-term debt................................................ 1,166 733 242
Common stock information:
Dividends paid per share...................................... $ .48 .40 .34
Stockholders' equity per share................................ $ 5.26 5.06 4.09
Market price per share (year-end close)....................... $21 1/4 18 3/4 16 7/8
Average shares outstanding (millions)......................... 681.2 690.3 713.6
Stockholders of record (thousands)............................ 54.5 51.2 52.1
Employees (thousands)......................................... 81.3 78.2 77.1
</TABLE>
F-35
<PAGE> 36
JOHNSON & JOHNSON AND SUBSIDIARIES
SUMMARY OF OPERATIONS AND STATISTICAL DATA 1984-1994 -- (CONTINUED)
<TABLE>
<CAPTION>
1985 1984
------ ------
(DOLLARS IN MILLIONS
EXCEPT PER SHARE
FIGURES)
<S> <C> <C>
Sales to customers -- Domestic........................................... $3,990 3,736
Sales to customers -- International...................................... 2,431 2,389
------ ------
Total sales.............................................................. 6,421 6,125
------ ------
Cost of products sold.................................................... 2,592 2,485
Selling, marketing and administrative expenses........................... 2,516 2,488
Research expense......................................................... 471 421
Permanent impairment of certain assets and operations in Latin America... -- --
Redirection charges...................................................... -- --
Interest income.......................................................... (107) (84)
Interest expense, net of portion capitalized............................. 46 51
Other expense (income), net.............................................. 4 9
------ ------
5,522 5,370
------ ------
Earnings before provision for taxes on income............................ 899 755
Provision for taxes on income............................................ 285 240
------ ------
Earnings before cumulative effect of accounting changes.................. 614 515
Cumulative effect of accounting changes (net of tax)..................... -- --
------ ------
Net earnings............................................................. $ 614 515
------ ------
Percent of sales to customers............................................ 9.6 8.4
Net earnings per share of common stock................................... $ .84 .69
Percent return on average stockholders' equity........................... 19.5 17.3
Percent increase (decrease) over previous year:
Sales to customers....................................................... 4.8 2.5
Net earnings per share................................................... 21.7 7.8
Supplementary expense data:
Cost of materials and services(5)........................................ $3,274 3,155
Total employment costs................................................... 1,941 1,936
Depreciation and amortization............................................ 262 234
Maintenance and repairs(6)............................................... 133 124
Total tax expense(7)..................................................... 466 418
Total tax expense per share(7)........................................... .64 .56
Supplementary balance sheet data:
Property, plant and equipment, net....................................... $1,840 1,721
Additions to property, plant and equipment............................... 366 366
Total assets............................................................. 5,095 4,541
Long-term debt........................................................... 185 225
Common stock information:
Dividends paid per share................................................. $ .32 .29
Stockholders' equity per share........................................... $ 4.58 4.01
Market price per share (year-end close).................................. $13 1/8 9
Average shares outstanding (millions).................................... 731.5 749.6
Stockholders of record (thousands)....................................... 53.5 53.8
Employees (thousands).................................................... 74.9 74.2
</TABLE>
- ---------------
(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%.
F-36
<PAGE> 37
(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 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.
F-37
<PAGE> 38
APPENDIX
PAGE 1 OF 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
CHART 1
GRAPH PAGE F-1
SALES TO CUSTOMERS
MILLIONS OF DOLLARS
1985 THROUGH 1994
Bar graph showing ten years of sales to customers. Each bar depicts total
sales for the year. Each bar is color coded to show domestic and international
sales as a piece of the whole.
Bar graph points:
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL WORLDWIDE
YEAR SALES SALES SALES
- ----- -------- ------------- ---------
<S> <C> <C> <C>
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
1994 7,812 7,922 15,734
</TABLE>
CHART 2
GRAPH PAGE F-2
NET EARNINGS
MILLIONS OF DOLLARS
1985 THROUGH 1994
Bar graph showing ten years of net earnings.
Bar graph points:
<TABLE>
<CAPTION>
NET
YEAR EARNINGS
- ----- --------
<S> <C>
1985 $ 614
1986 330
1987 833
1988 974
1989 1,082
1990 1,143
1991 1,461
1992 1,030
1993 1,787
1994 2,006
</TABLE>
<PAGE> 39
APPENDIX
PAGE 2 OF 5
CHART 3
GRAPH PAGE F-3
NET EARNINGS PER SHARE AND CASH DIVIDENDS PAID PER SHARE
DOLLARS PER SHARE
1985 THROUGH 1994
Bar graph showing ten years of net earnings per share. Additionally, 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
YEAR PER SHARE PAID PER SHARE
- ----- ------------ --------------
<S> <C> <C>
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
1994 3.12 1.13
</TABLE>
CHART 4
PIE CHART PAGE F-3
DISTRIBUTION OF SALES REVENUES -- 1994
A pie chart showing how 1994 sales revenues were distributed.
Pie chart components:
<TABLE>
<S> <C>
Employment Costs............................................ 27.2%
Cost of Materials and Services.............................. 50.6
Depreciation and Amortization of Property and Intangibles... 4.6
Taxes Other Than Payroll.................................... 4.9
Cash Dividend Paid.......................................... 4.6
Earnings Reinvested in Business............................. 8.1
</TABLE>
<PAGE> 40
APPENDIX
PAGE 3 OF 5
CHART 5
GRAPH PAGE F-3
RESEARCH EXPENSE
MILLIONS OF DOLLARS
1985 THROUGH 1994
Bar graph showing ten years of research expense.
Bar graph points:
<TABLE>
<CAPTION>
RESEARCH
YEAR EXPENSE
- ----- --------
<S> <C>
1985 $ 471
1986 521
1987 617
1988 674
1989 719
1990 834
1991 980
1992 1,127
1993 1,182
1994 1,278
</TABLE>
CHART 6
GRAPH PAGE F-5
SALES BY SEGMENT OF BUSINESS
MILLIONS OF DOLLARS
1992 THROUGH 1994
Bar graph 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>
YEAR CONSUMER PHARM PROFESS TOTAL
- ----- -------- ----- ------- --------
<S> <C> <C> <C> <C>
1992 34.7% 31.6% 33.7% $13,753
1993 34.1 31.8 34.1 14,138
1994 33.4 32.8 33.8 15,734
</TABLE>
<PAGE> 41
APPENDIX
PAGE 4 OF 5
CHART 7
GRAPH PAGE F-5
OPERATING PROFIT BY SEGMENT OF BUSINESS
MILLIONS OF DOLLARS
1992 THROUGH 1994
Bar graph 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>
YEAR CONSUMER PHARM PROFESS TOTAL
- ----- -------- ----- ------- -------
<S> <C> <C> <C> <C>
1992 20.3% 55.4% 24.3% $2,463
1993 20.2 54.4 25.4 2,582
1994 15.0 56.5 28.5 2,955
</TABLE>
CHART 8
GRAPH PAGE F-8
SALES BY GEOGRAPHIC AREA OF BUSINESS
MILLIONS OF DOLLARS
1992 THROUGH 1994
Bar graph 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>
AFRICA,
UNITED WESTERN ASIA AND
STATES EUROPE HEMISPHERE PACIFIC TOTAL
------ ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
1992 50.2% 30.9% 8.8% 10.1% $13,753
1993 50.9 28.5 9.4 11.2 14,138
1994 49.7 28.6 9.6 12.1 15,734
</TABLE>
<PAGE> 42
APPENDIX
PAGE 5 OF 5
CHART 9
GRAPH PAGE F-8
OPERATING PROFIT BY GEOGRAPHIC AREA OF BUSINESS
MILLIONS OF DOLLARS
1992 THROUGH 1994
Bar graph showing operating profit by geographic area of business. Each bar
depicts the total of segments operating profit. The geographic areas are shown
as a percentage of total segments operating profit each year and are displayed
in different colors.
Bar graph points:
<TABLE>
<CAPTION>
AFRICA,
UNITED WESTERN ASIA AND
STATES EUROPE HEMISPHERE PACIFIC TOTAL
------ ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
1992 42.7% 45.7% 5.4% 6.2% $2,463
1993 46.8 40.1 6.1 7.0 2,582
1994 51.9 35.5 5.9 6.7 2,955
</TABLE>
<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:
Ethicon Endo-Surgery, Inc............................................. Ohio
Ethicon, Inc. ........................................................ Ohio
Janssen Pharmaceutica Inc. ........................................... New Jersey
Johnson & Johnson Clinical Diagnostics, Inc........................... New York
Johnson & Johnson Consumer Products, Inc. ............................ New Jersey
Johnson & Johnson Development Corporation............................. New Jersey
Johnson & Johnson Finance Corporation................................. New Jersey
Johnson & Johnson Health Care Systems Inc. ........................... New Jersey
Johnson & Johnson International....................................... New Jersey
Johnson & Johnson Japan Inc. ......................................... New Jersey
Johnson & Johnson Medical, Inc. ...................................... New Jersey
Johnson & Johnson - 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
Neutrogena Corporation................................................ Delaware
Noramco, Inc. ........................................................ Georgia
Ortho Biotech Inc. ................................................... New Jersey
Ortho Diagnostic Systems Inc. ........................................ New Jersey
Ortho Pharmaceutical Corporation...................................... Delaware
RoC USA Corporation................................................... New York
Site Microsurgical Systems, Inc. ..................................... Pennsylvania
Therakos, Inc. ....................................................... Florida
International Subsidiaries:
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 Ges.m.b.H. ..................................................... Austria
Cilag G.m.b.H. ....................................................... Germany
Cilag Holding AG...................................................... Switzerland
</TABLE>
17
<PAGE> 2
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ -----------------
<S> <C>
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 Limited....................................................... 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 AG...................................................... Switzerland
Janssen-Cilag Farmaceutica, Ltda. .................................... Portugal
Janssen-Cilag K.K..................................................... Japan
Janssen-Cilag Limited................................................. England
Janssen-Cilag N.V. ................................................... Belgium
Janssen-Cilag Pharmaceutica B.V....................................... Netherlands
Janssen-Cilag Pharmaceutica S.A.C.I. ................................. Greece
Janssen-Cilag Pty. Limited............................................ Australia
Janssen-Cilag S.A.R.L. ............................................... France
Janssen-Cilag S.A. ................................................... Italy
Janssen Farmaceutica Ltda............................................. Brazil
Janssen Farmaceutica Limitada......................................... Chile
Janssen Farmaceutica Portugal, Limitada............................... Portugal
Janssen Farmaceutica C.A. ............................................ Venezuela
Janssen Farmaceutica S.A ............................................. Spain
Janssen Farmaceutica S.A ............................................. Colombia
Janssen Farmaceutica, S.A. de C.V. ................................... Mexico
Janssen G.m.b.H. ..................................................... Germany
Janssen Internationaal N.V. .......................................... Belgium
Janssen K.K. ......................................................... Japan
Janssen Korea, Ltd. .................................................. Korea
Janssen-Kyowa Co., Ltd. .............................................. Japan
Janssen Pharma AB..................................................... Sweden
Janssenpharma A/S..................................................... Denmark
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 Pharmaceutical Limited........................................ Ireland
Janssen Products, Inc. ............................................... Puerto Rico
Johnson & Johnson AB.................................................. Sweden
</TABLE>
18
<PAGE> 3
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ ------------------
<S> <C>
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 Clinical Diagnostics (Europe) S.A. ................. France
Johnson & Johnson Clinical Diagnostics GmbH........................... Germany
Johnson & Johnson Clinical Diagnostics Ltd. .......................... England
Johnson & Johnson Clinical Diagnostics S.A............................ France
Johnson & Johnson Clinical Diagnostics SpA............................ Italy
Johnson & Johnson de Chile S.A. ...................................... Chile
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 Mexico S.A. de C.V. ............................. Mexico
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 Japan Diagnostics Ltd. ............................. Japan
Johnson & Johnson (Kenya) Limited..................................... Kenya
Johnson & Johnson Korea Ltd. ......................................... Korea
Johnson & Johnson Kft. ............................................... Hungary
Johnson & Johnson K.K. ............................................... Japan
Johnson & Johnson Leasing G.m.b.H. ................................... Germany
Johnson & Johnson Limitada............................................ Portugal
Johnson & Johnson Limited............................................. England
Johnson & Johnson Limited............................................. India
Johnson & Johnson Ltd. ............................................... Russia
Johnson & Johnson Medical B.V. ....................................... Netherlands
Johnson & Johnson Medical (China) Ltd. ............................... China
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
</TABLE>
19
<PAGE> 4
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ ------------------
<S> <C>
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. ....................................... Argentina
Johnson & Johnson Medical S.A.R.L. ................................... France
Johnson & Johnson Morocco S.A. ....................................... Morocco
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 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 Vision Products (Ireland) Limited................... Ireland
Johnson & Johnson (Zambia) Limited.................................... Zambia
Kodak Clinical Diagnostic (Europe) S.A. .............................. France
Kodak Clinical Diagnostics Limited.................................... United Kingdom
Kodak Diagnostic, S.A. ............................................... France
Kodak Diagnostic S.p.A. .............................................. Italy
Kodak Japan Diagnostics Limited....................................... Japan
Laboratoires RoC (U.K.) Ltd. ......................................... England
Laboratoires Polive S.N.C. ........................................... France
Lifescan Canada Ltd. ................................................. Canada
Medos S.A. ........................................................... Switzerland
Nihon RoC K.K. ....................................................... Japan
Neutrogena Corp. S.A.R.L. ............................................ France
Neutrogena Provence S.A.R.L........................................... France
Ortho Diagnostic Systems G.m.b.H. .................................... Germany
Ortho Diagnostic Systems K.K. ........................................ Japan
</TABLE>
20
<PAGE> 5
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ ------------------
<S> <C>
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
Pharma Argentina S.A. ................................................ Argentina
P.T. Johnson & Johnson Indonesia...................................... Indonesia
RoC G.m.b.H. ......................................................... Germany
RoC K.K. ............................................................. Japan
RoC S.A. ............................................................. France
RoC S.A./N.V. ........................................................ Belgium
RoC S.p.A. ........................................................... Italy
RoC Laboratoires de Dermoestetica S.A. ............................... Spain
The 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
Woelm Pharma G.m.b.H. & Co. Arzneimittelvertrieb oHG.................. Germany
Woelm Pharma G.m.b.H. & Co. oHG....................................... Germany
Xian-Janssen Pharmaceutical Limited................................... China
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> JAN-01-1995
<CASH> 636
<SECURITIES> 68
<RECEIVABLES> 2,801
<ALLOWANCES> 200
<INVENTORY> 2,161
<CURRENT-ASSETS> 6,680
<PP&E> 7,655
<DEPRECIATION> 2,745
<TOTAL-ASSETS> 15,668
<CURRENT-LIABILITIES> 4,266
<BONDS> 2,460
<COMMON> 767
0
0
<OTHER-SE> 6,355
<TOTAL-LIABILITY-AND-EQUITY> 15,668
<SALES> 15,734
<TOTAL-REVENUES> 15,734
<CGS> 5,299
<TOTAL-COSTS> 12,867
<OTHER-EXPENSES> 44
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> 2,681
<INCOME-TAX> 675
<INCOME-CONTINUING> 2,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,006
<EPS-PRIMARY> 3.12
<EPS-DILUTED> 3.08
</TABLE>
