UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
- -----------------------------------------------------------------
Commission file number 1-3215
JOHNSON & JOHNSON
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1024240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization)
Identification No.)
One Johnson & Johnson Plaza 08933
New Brunswick, New Jersey (Zip code)
(Address of principal executive offices)
732-524-0400
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
On July 30, 1999, 1,344,444,809 shares of Common Stock,
$1.00 par value, were outstanding.
- 1 -
JOHNSON & JOHNSON AND SUBSIDIARIES
TABLE OF CONTENTS
Part I - Financial Information
Page No.
Item 1. Financial Statements
Consolidated Balance Sheet -
July 4, 1999 and January 3, 1999 3
Consolidated Statement of Earnings for the
Fiscal Quarter Ended July 4, 1999 and
June 28, 1998 5
Consolidated Statement of Earnings for the
Fiscal Six Months Ended July 4, 1999 and
June 28, 1998 6
Consolidated Statement of Cash Flows for the
Fiscal Six Months Ended July 4, 1999 and
June 28, 1998 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 24
Part II - Other Information
Item 1 - Legal Proceedings 24
Item 4 - Submission of Matters to a Vote of Security Holders
26
Item 6 - Exhibits and Reports on Form 8-K 26
Signatures 27
- 2 -
Part I - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in Millions)
ASSETS
July 4, January
3,
1999 1999
Current Assets:
Cash and cash equivalents $ 2,024 1,927
Marketable securities, at cost 811 651
Accounts receivable, trade, less
allowances $357 (1998 - $385) 4,173 3,661
Inventories (Note 3) 2,968 2,853
Deferred taxes on income 1,098 1,180
Prepaid expenses and other
receivables 1,077 860
Total current assets 12,151 11,132
Marketable securities, non-current 409 416
Property, plant and equipment, at cost 10,273 10,024
Less accumulated depreciation and
amortization 4,260 3,784
6,013 6,240
Intangible assets, net (Note 4) 7,335 7,209
Deferred taxes on income 138 102
Other assets 1,080 1,112
Total assets $ 27,126 26,211
See Notes to Consolidated Financial Statements
- 3 -
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in Millions)
LIABILITIES AND SHAREOWNERS' EQUITY
July 4, January
3,
1999 1999
Current Liabilities:
Loans and notes payable $ 2,566 2,747
Accounts payable 1,609 1,861
Accrued liabilities 2,793 2,920
Accrued salaries, wages and commissions528 428
Taxes on income 390 206
Total current liabilities 7,886 8,162
Long-term debt 1,210 1,269
Deferred tax liability 568 578
Employee related obligations 1,787 1,738
Other liabilities 931 874
Shareowners' equity:
Preferred stock - without par value
(authorized and unissued 2,000,000
shares) - -
Common stock - par value $1.00 per share
(authorized 2,160,000,000 shares;
issued 1,534,863,000 shares and
1,534,824,000 shares) 1,535 1,535
Note receivable from employee stock
ownership plan (41) (44)
Accumulated other comprehensive
income (Note 7) (495) (328)
Retained earnings 15,259 13,928
16,258
15,091
Less common stock held in treasury,
at cost (190,595,000 & 190,773,000
shares) 1,514 1,501
Total shareowners' equity 14,744 13,590
Total liabilities and shareowners'
equity $27,126 26,211
See Notes to Consolidated Financial Statements
- 4 -
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited; dollars & shares in millions
except per share figures)
Fiscal Quarter Ended
July 4, Percent June 28,
Percent
1999 to Sales 1998 to
Sales
Sales to customers (Note 5) $6,854 100.0 5,783 100.0
Cost of products sold 2,086 30.4 1,803 31.2
Gross profit 4,768 69.6 3,980 68.8
Selling, marketing and
administrative expenses 2,549 37.2 2,114 36.5
Research expense 574 8.4 532 9.2
Interest income (51) (.7) (64) (1.1)
Interest expense, net of
portion capitalized 48 .7 26 .5
Other (income)expense, net 34 .5 1 -
3,154 46.1 2,609 45.1
Earnings before provision
for taxes on income 1,614 23.5 1,371 23.7
Provision for taxes on
income (Note 2) 459 6.6 366 6.3
NET EARNINGS $1,155 16.9 1,005 17.4
NET EARNINGS PER SHARE (Note 6)
Basic $ .86 .75
Diluted $ .84 .74
CASH DIVIDENDS PER SHARE $ .28 .25
AVG. SHARES OUTSTANDING
Basic 1,344.8 1,344.8
Diluted 1,374.8 1,369.4
See Notes to Consolidated Financial Statements
- 5 -
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited; dollars & shares in millions
except per share figures)
Fiscal Six Months Ended
______
July 4, Percent June 28,
Percent
1999 to Sales 1998 to
Sales
Sales to customers (Note 5)$13,492 100.0 11,566 100.0
Cost of products sold 4,124 30.5 3,580 30.9
Gross profit 9,368 69.5 7,986 69.1
Selling, marketing and
administrative expenses 4,952 36.7 4,214 36.4
Research expense 1,110 8.2 1,026 8.9
Interest income (103) (.7) (125) (1.1)
Interest expense, net of
portion capitalized 97 .7 54 .5
Other (income)expense, net 93 .7 12 .1
6,149 45.6 5,181 44.8
Earnings before provision
for taxes on income 3,219 23.9 2,805 24.3
Provision for taxes on
income (Note 2) 936 7.0 790 6.9
NET EARNINGS $ 2,283 16.9 2,015 17.4
NET EARNINGS PER SHARE (Note 6)
Basic $ 1.70 1.50
Diluted $ 1.66 1.47
CASH DIVIDENDS PER SHARE $ .53 .47
AVG. SHARES OUTSTANDING
Basic 1,344.7 1,345.1
Diluted 1,373.5 1,372.1
See Notes to Consolidated Financial Statements
- 6 -
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; Dollars in Millions)
Fiscal Six Months
Ended
July 4,
June 28,
1999
1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $2,283 2,015
Adjustments to reconcile net earnings to
cash flows:
Depreciation and amortization of
property and intangibles 724 613
Increase in accounts receivable, trade,
less allowances (721) (236)
Increase in inventories (251) (240)
Changes in other assets and liabilities 347 50
NET CASH FLOWS FROM OPERATING ACTIVITIES 2,382 2,202
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment(612) (527)
Proceeds from the disposal of assets 5 11
Acquisition of businesses, net of cash
acquired (188) (78)
Other, principally marketable securities (227) (125)
NET CASH USED BY INVESTING ACTIVITIES (1,022) (719)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to shareowners (713) (632)
Repurchase of common stock (402) (506)
Proceeds from short-term debt 6,071 159
Retirement of short-term debt (6,149) (163)
Proceeds from long-term debt 4 -
Retirement of long-term debt (140) (139)
Proceeds from the exercise of stock
options 139 171
NET CASH USED BY FINANCING
ACTIVITIES (1,190) (1,110)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (73) (12)
(DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS 97 361
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,927 2,753
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,024 3,114
See Notes to Consolidated Financial Statements
- 7 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - The accompanying interim financial statements and
related notes should be read in conjunction with the Consolidated
Financial Statements of Johnson & Johnson and Subsidiaries (the
"Company") and related notes as contained in the Annual Report on
Form 10-K for the fiscal year ended January 3, 1999. The interim
financial statements include all adjustments (consisting only of
normal recurring adjustments) and accruals necessary in the
judgment of management for a fair presentation of such
statements.
NOTE 2 - INCOME TAXES
The effective income tax rates for the first half of 1999 and
1998 are 29.1% and 28.2%, respectively, as compared to the U.S.
federal statutory rate of 35%. The difference from the statutory
rate is primarily the result of domestic subsidiaries operating
in Puerto Rico under a grant for tax relief expiring on December
31, 2007 and the result of subsidiaries manufacturing in Ireland
under an incentive tax rate expiring on December 21, 2010.
NOTE 3 - INVENTORIES
(Dollars in Millions) July 4, 1999 Jan. 3,
1999
Raw materials and supplies $ 836 770
Goods in process 462 489
Finished goods 1,670 1,594
$ 2,968 2,853
- 8 -
NOTE 4 - INTANGIBLE ASSETS
(Dollars in Millions) July 4, 1999 January 3,
1999
Intangible assets $ 8,285 8,042
Less accumulated amortization 950 833
$ 7,335 7,209
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 up to 40 years.
The cost of other acquired intangibles is amortized on a
straight-line basis over their estimated useful lives.
NOTE 5 - SEGMENTS OF BUSINESS AND GEOGRAPHIC AREAS
(Dollars in Millions)
SALES BY SEGMENT OF BUSINESS
Second Quarter Six Months
Percent Percent
1999 1998 Increase 1999 1998 Increase
(Decrease) (Decrease)
Consumer
Domestic $ 873 753 15.9 1,801 1,593 13.1
International 814 818 (.5) 1,615 1,616 (.1)
1,687 1,571 7.4% 3,416 3,209 6.5%
Pharmaceutical
Domestic 1,617 1,178 37.3 3,057 2,347 30.3
International 1,095 984 11.3 2,131 1,908 11.7
2,712 2,162 25.4% 5,188 4,255 21.9%
Professional
Domestic 1,315 1,071 22.8 2,604 2,157 20.7
International 1,140 979 16.4 2,284 1,945 17.4
2,455 2,050 19.8% 4,888 4,102 19.2%
Domestic 3,805 3,002 26.7 7,462 6,097 22.4
International 3,049 2,781 9.6 6,030 5,469 10.3
Worldwide $6,854 5,783 18.5% 13,492 11,566 16.7%
- 9 -
NOTE 5 - SEGMENTS OF BUSINESS AND GEOGRAPHIC AREAS
(Dollars in Millions)
OPERATING PROFIT BY SEGMENT OF BUSINESS
Second Quarter Six Months
Percent
Increase Percent
1999 1998(Decrease) 1999 1998 Increase
Consumer 156 179 (12.8) 380 375 1.3
Pharmaceutical 1,079 931 15.9 2,046 1,756 16.5
Professional 430 321 34.0 883 752 17.4
Segments total 1,665 1,431 16.4 3,309 2,883 14.8
Expenses not allocated
to segments (51) (60) (90) (78)
Worldwide total$1,6141,371 17.7 3,219 2,805 14.8
SALES BY GEOGRAPHIC AREA
Second Quarter Six Months
Percent Percent
Increase/ Increase/
1999 1998(Decrease) 1999 1998 (Decrease)
U.S. $3,805 3,002 26.7 7,462 6,097 22.4
Europe 1,695 1,586 6.9 3,429 3,125 9.7
Western Hemisphere
excluding U.S. 503 533 (5.6) 981 1,040 (5.7)
Asia-Pacific,
Africa 851 662 28.5 1,620 1,304 24.2
Worldwide $6,854 5,783 18.5% 13,492 11,566 16.7%
NOTE 6 - EARNINGS PER SHARE
The following is a reconciliation of basic net earnings per
share to diluted net earnings per share for the six months ended
July 4, 1999 and June 28, 1998:
Fiscal Fiscal
Quarter Ended Six
Months Ended
July 4, June 28, July 4, June 28,
1999 1998 1999
1998
Basic net earnings per share$ .86 .75 1.70 1.50
Average shares outstanding
- basic 1,344.8 1,344.8 1,344.7 1,345.1
Potential shares exercisable
under stock option plans 69.9 68.0 69.9 70.6
Less: shares which could be
repurchased under treasury
stock method (39.9) (43.4) (41.1) (43.6)
Adjusted averages shares
outstanding - diluted 1,374.8 1,369.4 1,373.5 1,372.1
Diluted earnings per share $ .84 .74 1.66 1.47
- 10 -
NOTE 7 - ACCUMULATED OTHER COMPREHENSIVE INCOME
During 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting and
display of an alternative income statement and its components
(revenue, expenses, gains and losses) in a full set of general
purpose financial statements. The total comprehensive income for
the six months ended July 4, 1999 is $2,134 million, compared
with $1,903 million for the same period a year ago. Total
comprehensive income includes net earnings, net unrealized
currency gains and losses on translation and net unrealized gains
and losses on available for sale securities.
NOTE 8 - ACQUISITIONS
During the first quarter, the Company completed the acquisition
of the dermatological skin care business of S.C. Johnson & Son,
Inc. The S.C. Johnson dermatological business is composed of
specialty brands marketed in the U.S., Canada and Western Europe.
The primary brand involved in the transaction, AVEENO, is a line
of skin care products including specialty soaps, bath, and anti-
itch treatments.
Pro forma results of the acquisition, assuming that the
transaction was consummated at the beginning of each year
presented, would not be materially different from the results
reported.
NOTE 9 - NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). This standard, as amended is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000.
- 11 -
NOTE 9 - NEW ACCOUNTING PRONOUNCEMENT (Continued)
SFAS 133 requires that all derivative instruments be recorded
on the balance sheet at their respective fair values. Changes in
the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on the
designation of the hedge transaction. For fair-value hedge
transactions in which the Company is hedging changes in the fair
value of an asset, liability or firm commitment, changes in the
fair value of the derivative instrument will generally be offset
by changes in the fair value of the hedged item. For cash flow
hedge transactions in which the Company is hedging the
variability of cash flows related to a variable rate asset,
liability or forecasted transaction, changes in the fair value of
the derivative instrument will be reported in other comprehensive
income. The gains and losses on the derivative instrument that
are reported in other comprehensive income will be recognized in
earnings in the periods in which earnings are impacted by the
variability of the cash flows of the hedged item.
The Company will adopt SFAS 133 in the first quarter of 2001
and does not expect it to have a material effect on the Company's
results of operations, cash flows or financial position.
NOTE 10 - RESTRUCTURING AND SPECIAL CHARGES
In 1998,the Company approved a plan to reconfigure its global
network of manufacturing and operating facilities with the
objective of enhancing operating efficiencies. It is expected
that the plan will be completed over the next twelve months.
Among the initiatives supporting this plan were the closure of
inefficient manufacturing facilities, exiting certain businesses
which were not providing an acceptable return and related
employee separations.
-12-
NOTE 10 - RESTRUCTURING AND SPECIAL CHARGES (Continued)
The estimated cost of this plan is $613 million. The charge
consisted of employee separation costs of $161 million, asset
impairments of $322 million, impairments of intangibles of $52
million, and other exit costs of $78 million. Employee
separations will occur primarily in manufacturing and operations
facilities affected by the plan. The decision to exit certain
facilities and businesses decreased expected future cash flows
triggering the asset impairment. The amount of impairment of
such assets was calculated using discounted cash flows or
appraisals.
The status of the remaining accruals is summarized as follows:
Fiscal Six Months Ended
July 4, 1999
Beginning Cash Remaining
(Dollars in Millions) Accrual Outlays
Accrual
Restructuring charges:
Employee Separations $ 158 22 136
Other exit costs 78 14 64
$ 236 36 200
The $161 million for employee separations reflects the
termination of approximately 5,100 employees of which 800 have
been separated as of July 4, 1999.
NOTE 11 - PENDING LEGAL PROCEEDINGS
The information called for by this footnote is incorporated
herein by reference to Item 1 ("Legal Proceedings") included in
Part II of this Report on Form 10-Q.
- 13 -
NOTE 12 - SUBSEQUENT EVENT
On July 21, 1999 Johnson & Johnson and Centocor, Inc. announced
that they have entered into a definitive agreement under which
Johnson & Johnson will merge with Centocor in a stock-for-stock
exchange. The transaction has a total equity value of $4.9
billion, based upon Centocor's approximately 83 million fully
diluted shares outstanding net of cash acquired.
Centocor is a leading biopharmaceutical company that creates,
acquires and markets cost-effective therapies that yield long
term benefits for patients and the health care community. Its
products, developed primarily through monoclonal antibody
technology, help physicians deliver innovative treatments to
improve human health and restore patients' quality of life.
The Board of Directors of both Johnson & Johnson and Centocor
have given approval to the merger, which is subject to various
conditions including: (i) receipt of the approval of the Merger
Agreement by Centocor shareholders; (ii) termination or
expiration of the applicable waiting period (or any extension
thereof) under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976; (iii) receipt of opinions as to the tax and accounting
treatment of certain aspects of the Merger; and (iv) satisfaction
of certain other conditions.
- 14 -
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES AND EARNINGS
Consolidated sales for the first six months of 1999 were $13.49
billion, which exceeded sales of $11.57 billion for the first six
months of 1998 by 16.7%. The strength of the U.S. dollar
relative to the foreign currencies decreased sales for the first
six months of 1999 by 1.3%. Excluding the effect of the stronger
U.S. dollar relative to foreign currencies, sales increased 18.0%
on an operational basis for the first six months of 1999.
Consolidated net earnings for the first six months of 1999 were
$2.28 billion, compared with net earnings of $2.02 billion for
the first six months of 1998. Worldwide basic net earnings per
share for the first six months of 1999 were $1.70, compared with
$1.50 for the same period in 1998, an increase of 13.3%.
Worldwide diluted net earnings per share for the first six months
of 1999 were $1.66, compared with $1.47 for the same period in
1998, an increase of 12.9%
Consolidated sales for the second quarter of 1999 were $6.85
billion, an increase of 18.5% over 1998 second quarter sales of
$5.78 billion. The effect of the stronger U.S. dollar relative
to foreign currencies decreased second quarter sales by 2.1%.
Consolidated net earnings for the second quarter of 1999 were
$1.16 billion, compared with $1.01 billion for the same period a
year ago, an increase of 14.9%. Worldwide basic net earnings per
share for the second quarter of 1999 rose 14.7% to $.86, compared
with $.75 in the 1998 period. Worldwide diluted net earnings per
share for the second quarter of 1999 rose 13.5% to $.84, compared
with $.74 in 1998.
Domestic sales for the first six months of 1999 were $7.46
billion, an increase of 22.4% over 1998 domestic sales of $6.10
billion for the same period a year ago. Sales by international
subsidiaries were $6.03 billion for the first six months of 1999
compared with $5.47 billion for the same period a year ago, an
increase of 10.3%. Excluding the impact of the stronger value of
the dollar, international sales increased by 13.2%.
- 15 -
Worldwide Consumer segment sales for the second quarter of 1999
were $1.69 billion, an increase of 7.4% versus the same period a
year ago. Domestic sales were up 15.9% while international sales
gains in local currency of 6.5% were more than offset by a
negative currency impact of 7.0%. Consumer sales were led by
continued strength in the skin care franchise, which includes the
NEUTROGENA, RoC and CLEAN & CLEAR product lines, as well as
strong performance from McNeil Consumer Healthcare, which markets
the TYLENOL family of products, BENECOL and NIZORAL A-D product
lines.
During the quarter, the Company launched BENECOL in the United
States in both a regular and low fat margarine spread. BENECOL
contains the dietary ingredient stanol ester, which is patented
for use in reducing cholesterol. The Company has a licensing
agreement with Raisio Group of Finland for the worldwide
marketing rights (ex-Finland) to BENECOL.
In addition, the Company launched over-the-counter NIZORAL A-D
(ketoconazole 1%) shampoo, the first non-prescription, anti-
fungal dandruff shampoo specifically formulated to treat a
leading cause of dandruff.
Worldwide pharmaceutical sales of $2.71 billion for the quarter
increased 25.4% over the same period in 1998, including 37.3%
growth in domestic sales. International sales increased 11.3%.
Sales gains in local currency of 15.3% were offset by a negative
currency impact of 4.0%. This growth reflects the strong
performance of PROCRIT, for the treatment of anemia; RISPERDAL,
an antipsychotic medication; DURAGESIC, a transdermal patch for
chronic pain; LEVAQUIN; an anti-infective, ULTRAM, an analgesic,
and the oral contraceptive line of products. The Company
received FDA approval for two new lower doses of RISPERDAL --
the most widely prescribed antipsychotic in the United States.
The 0.25 and 0.5mg RISPERDAL tablets will make it possible for
physicians to better customize their care of patients with
psychosis that require antipsychotics.
- 16 -
Worldwide sales of $2.46 billion in the Professional segment
represented an increase of 19.8% over the second quarter of 1998.
In local currency, worldwide sales increased 21.0% before
adjusting for a negative 1.2% currency impact. The 1998
acquisition of DePuy Inc., a leading orthopaedic products
manufacturer, contributed to the strong sales growth in the
Professional segment. In addition, strong sales performance was
achieved by Ethicon Endo-Surgery's laparoscopy and wound closure
products; Lifescan's blood glucose monitoring systems; Ethicon's
Mitek suture anchors; Gynecare women's health products and
Vistakon's disposable contact lens product.
During the quarter, the Company launched ACUVUE 2, a new and
improved disposable contact lens that has substantially improved
handleability, while maintaining the visual acuity, comfort and
other features of the original ACUVUE product. Also in the
quarter, the Company received FDA approval to market its new MINI
Crown Stent specifically engineered for smaller coronary vessels.
The MINI Crown Stent has been carefully designed to offer easy
deliverability in patients with small, tight lesions while
minimizing the risks of edge dissection and stent embolization.
The product has been very well received in the marketplace. In
addition, FDA approval was received to market the PALMAZ
CORINTHIAN Transhepatic Biliary Stent and Delivery System for
biliary obstructions.
Average basic shares of common stock outstanding in the first
half of 1999 were 1,344.7 million, compared with 1,345.1 million
for the same period a year ago.
- 17 -
LIQUIDITY AND CAPITAL RESOURCES
Cash and current marketable securities increased $257 million
during the first six months of 1999 to $2,835 million at July 4,
1999. Total borrowings decreased $240 million during the first
six months of 1999 to $3,776 million. Net debt (debt net of cash
and current marketable securities) as of July 4, 1999 was 6.0% of
net capital (shareowners' equity and net debt) compared with 9.6%
at the end of 1998. Total debt represented 20.4% of total
capital (shareowners' equity and total borrowings) at quarter end
compared with 22.8% at the end of 1998.
Additions to property, plant and equipment were $612 million
for the first six months of 1999, compared with $527 million for
the same period in 1998.
On July 19, 1999, the Board of Directors approved a regular
quarterly dividend rate of 28 cents per share, payable on
September 7, 1999 to shareowners of record as of August 17, 1999.
YEAR 2000 COMPUTER SYSTEMS COMPLIANCE
The "Year 2000" issue relates to potential problems resulting
from a practice of computer programmers. For some time, calendar
years have frequently been represented in computer programs by
their last two digits. Thus, "1998" would be rendered "98". The
logic of the programs frequently assumes that the first two
digits of a year given in this format are "19". It is unclear
what would happen with respect to such computer programs upon the
change in calendar year from 1999 to 2000. The program or device
might interpret "00" as "2000", "1900", an error or some other
input. In such a case, the computer program or device might
cease to function, function improperly, provide an erroneous
result or act in some unpredictable manner.
- 18 -
The Company has had a program in place since the fourth quarter
of 1996 to address Year 2000 issues in critical business areas
related to its products, information management systems, non-
information systems with embedded technology, suppliers and
customers. A report on the progress of this program has been
provided to the Audit Committee of the Company's Board of
Directors. The Company has completed its review of its critical
automated information systems and the remediation phase with
respect to such critical systems is substantially complete. Full
completion is expected during the fourth quarter of 1999.
The Company is also in the process of reviewing and
remediating, where necessary, its other automated systems. The
Company has substantially completed the assessment and
remediation of all such other automated systems and full
completion is expected during the fourth quarter of 1999.
The Company has a plan for assessment and testing of all of its
products and has made substantial progress toward completion of
such assessment and testing. The Company has substantially
completed this plan and full completion is expected during the
third quarter of 1999.
The Company has engaged additional outside consultants to
examine selected critical areas in certain of it major
franchises. In addition, the Company has contracted with
independent third party consultants to conduct audits of critical
sites worldwide to evaluate our programs, processes and progress
and to identify any remaining areas of effort required to achieve
compliance.
The total costs of addressing the Company's Year 2000 readiness
issues are not expected to be material to the Company's financial
condition or results of operations. Since initiation of its
program in 1996, the Company estimates that is has expensed
approximately $165 million, on a worldwide basis, in internal and
external costs on a pre-tax basis to address its Year 2000
readiness issues.
- 19 -
These expenditures include information system replacement and
embedded technology upgrade costs of $94 million, supplier and
customer compliance costs of $14 million and all other costs of
$57 million. The Company currently estimates that the total of
such costs for addressing its internal Year 2000 readiness, on a
worldwide basis, will approximate
$200 million in the aggregate on a pre-tax basis. These costs
are being expensed as they are incurred and are being funded
through operating cash flows. No projects material to the
financial condition or results of operations of the Company have
been deferred or delayed as a result of this project.
The ability of the Company to implement and effect its Year
2000 readiness program and the related costs or the costs of non-
implementation, cannot be accurately determined at this time.
The Company's automated systems (both information technology and
non-information systems) are generally complex but are
decentralized.
Although a failure to complete remediation of one system may
adversely affect other systems, the Company does not currently
believe that such effects are likely. If, however, a significant
number of such failures should occur, some of such systems might
be rendered inoperable and would require manual back-up methods
or other alternatives, where available. In such a case, the
speed of processing business transactions, manufacturing and
otherwise conducting business would likely decrease significantly
and the cost of such activities would increase, if they could be
carried on at all. That could have a material adverse effect on
the financial condition and results of operations of the
business.
- 20 -
The Company has highly integrated relationships with certain of
its suppliers and customers. These include among others:
providers of energy, telecommunications, and raw materials and
components, financial institutions, managed care organizations
and large retail establishments. The Company has been reviewing,
and continues to review, with its critical suppliers and major
customers the status of their Year 2000 readiness. The Company
has in place a program of requesting assurances of Year 2000
readiness from such suppliers. However, many critical suppliers
have either declined to provide the requested assurances or have
limited the scope of assurances to which they are willing to
commit. The Company has established a plan for ongoing
monitoring of critical suppliers during 1999.
The Year 2000 readiness of certain major customers is unclear.
The Company has established a program to contact major customers
to assess their readiness to deal with Year 2000 issues. If a
significant number of such suppliers and customers were to
experience business disruptions as a result of their of lack of
Year 2000 readiness, their problems could have a material adverse
effect on the financial position and results of operations of the
Company. This analysis of potential exposures includes both the
domestic and international operations of the Company.
The Company believes that its most reasonably likely "worst
case scenario" would occur if a significant number of its key
suppliers or customers were not fully Year 2000 functional, in
which case the Company estimates that up to a 10 business day
disruption in business operations could occur. In order to
address this situation, the Company is formulating contingency
plans intended to deal with the impact on the Company of Year
2000 problems that may be experienced by such critical suppliers
and major customers.
- 21 -
With respect to critical suppliers, these plans may include,
among others, arranging availability of substitute sources of
utilities, closely managing appropriate levels of inventory and
identifying alternate sources of supply of raw materials. The
Company is also alerting customers to their need to address these
problems, but the Company has few alternatives available, other
than reversion to manual methods, for avoiding or mitigating the
effects of lack of Year 2000 readiness by major customers. In
any event, even where the Company has contingency plans, there
can be no assurance that such plans will address all the
problems that may arise, or that such plans, even if implemented,
will be successful.
Notwithstanding the foregoing, the Company has no reason to
believe that its exposure to the risks of supplier and customer
Year 2000 readiness is any greater than the exposure to such risk
that affects its competitors generally. Further, the Company
believes that its programs for Year 2000 readiness will
significantly improve its ability to deal with its own Year 2000
readiness issues and those of suppliers and customers over what
would have occurred in the absence of such a program. That does
not, however, guarantee that some material adverse effects will
not occur.
The descriptions of Year 2000 issues set forth in this section
is subject to the qualifications set forth herein under the
heading "Cautionary Factors that May Affect Future Results".
- 22 -
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
This Form 10-Q contains "forward-looking statements" that
anticipate results based on management's plans that are subject
to uncertainty. Forward-looking statements do not relate
strictly to historical or current facts and may be identified by
their use of words like "plans," "expects," "will,"
"anticipates," "estimates," and other words of similar meaning.
These statements may address, among other things, the Company's
strategy for growth, product development, regulatory approvals,
market position, expenditures, financial results and the effect
of Year 2000 readiness issues.
Forward-looking statements are based on current expectations of
future events. The Company cannot guarantee that any forward-
looking statement will be accurate, although the Company believes
that is has been reasonable in its expectations and assumptions.
Investors should realize that if underlying assumptions prove
inaccurate or that unknown risks or uncertainties materialize,
actual results could differ materially from our projections. The
Company assumes no obligation to update any forward-looking
statements as a result of new information or future events or
developments.
The Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1999 contains, in Exhibit 99(b), a discussion of
various factors that could cause actual results to differ from
expectations. That Exhibit from the Form 10-K is incorporated in
this filing by reference. The Company notes these factors as
permitted by the Private Securities Litigation Reform Act of
1995. Investors are cautioned not to place undue reliance on any
forward-looking statements. Investors also should understand
that it is not possible to predict or identify all such factors
and should not consider this list to be a complete statement of
all potential risks and uncertainties.
- 23 -
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
There has been no material change in the Company's assessment of
its sensitivity to market risk since its presentation set forth
in Item 7A, "Quantitative and Qualitative Disclosures About
Market Risk," in its Annual Report on Form 10-K for the fiscal
year ended January 3, 1999.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in numerous product liability cases in
the United States, many of which concern adverse reactions to
drugs and medical devices. The damages claimed are substantial,
and while the Company is confident of the adequacy of the
warnings which accompany such products, it is not feasible to
predict the ultimate outcome of litigation. However, the Company
believes that if any liability results from such cases, it will
be substantially covered by reserves established under its self-
insurance program and by commercially available excess liability
insurance.
The Company, along with numerous other pharmaceutical
manufacturers and distributors, is a defendant in large number of
individual and class actions brought by retail pharmacies in
state and federal courts under the antitrust laws. These cases
assert price discrimination and price-fixing violations resulting
from an alleged industry-wide agreement to deny retail
pharmacists price discounts on sales of brand name prescription
drugs. The Company believes the claims against the Company in
these actions are without merit and is defending them vigorously.
The Company, together with another contact lens manufacturer, a
trade association and various individual defendants, is a
defendant in several consumer class actions and an action brought
by multiple State Attorneys General on behalf of consumers
alleging violations of federal and state antitrust laws. These
cases assert that enforcement of the Company's long-standing
policy of selling contact lenses only to licensed eye care
professionals is a result of an unlawful conspiracy to eliminate
alternative distribution channels from the disposable contact
lens market. The Company believes that these actions are without
merit and is defending them vigorously.
- 24 -
The Company's Ortho Biotech subsidiary is party to an
arbitration proceeding filed against it by Amgen, Ortho's
licensor of U.S. non-dialysis rights to EPO, in which Amgen seeks
to terminate Ortho's U.S. license rights based on alleged
deliberate EPO sales by Ortho during the early 1990's into
Amgen's reserved dialysis market. The Company believes no basis
exists for terminating Ortho's U.S. license rights and is
vigorously contesting Amgen's claims. However, Ortho's U.S.
license rights to EPO are material to the Company; thus, an
unfavorable outcome could have a material adverse effect on the
Company's consolidated financial position, liquidity or results
of operations.
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, except as
noted above, would not have a material adverse effect on its
results of operations, cash flows or financial position.
- 25 -
Item 4. Submission of Matters to a Vote of Security Holders
(a) The
annual meeting of the shareowners of the
Company was held on April 22, 1999.
(b) The shareowners elected all the Company's
nominees for director, and approved the
appointment of PricewaterhouseCoopers LLP
as the Company's independent auditors for
1999.
1. Election of Directors:
For Withheld
G. N. Burrow 1,140,450,351 5,156,211
J. G. Cooney 1,140,132,717 5,473,845
J. G. Cullen 1,140,558,100 5,048,462
M. J. Folkman 1,140,348,833 5,257,729
A. D. Jordan 1,140,172,940 5,433,622
A. G. Langbo 1,140,474,624 5,131,938
R. S. Larsen 1,140,804,183 4,802,379
J. S. Mayo 1,140,352,040 5,254,522
P. J. Rizzo 1,139,757,045 5,849,517
H. B. Schacht 1,140,059,783 5,546,779
M. F. Singer 1,140,365,792 5,240,770
J. W. Snow 1,140,372,359 5,234,203
R. N. Wilson 1,140,853,803 4,752,759
2. Approval of Appointment
of PricewaterhouseCoopers LLP
For 1,139,759,354
Against 2,249,213
Abstain 3,597,995
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Numbers
(1) Exhibit 3 - By-Laws, as amended effective
April 23, 1999
(2) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K
during
the three month period ended July 4, 1999.
- 26 -
SIGNATURES
Pursuant to the requirements 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.
JOHNSON & JOHNSON
(Registrant)
Date: August 13, 1999 By R. J. DARRETTA
R. J. DARRETTA
Vice President, Finance
Date: August 13, 1999 By C. E. LOCKETT
C. E. LOCKETT
Controller
(Chief Accounting Officer)
- 27 -
Johnson & Johnson
BY-LAWS
EFFECTIVE July 1, 1980
Amended
February 16, 1987 April 26, 1989 April
26, 1990
October 20, 1997 April 23, 1999
- 28
Exhibit 3
Article I
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting
A meeting of the stockholders of the Corporation shall be held
annually on such business day and at such time and at such place
within or without the State of New Jersey as may be designated by
the Board of Directors and stated in the notice of the meeting,
for the purpose of electing directors and for the transaction of
all other business that is properly brought before the meeting in
accordance with these By-Laws.
Section 2. Special Meetings
A special meeting of the stockholders may be called at any time
by the Chairman of the Board of Directors, by a Vice-Chairman of
the Board of Directors, by the Chairman of the Executive
Committee, by a Vice-Chairman of the Executive Committee, by the
President, or by a majority of the Board of Directors and shall
be held on such business day and at such time and at such place
within or without the State of New Jersey as is stated in the
notice of the meeting.
Section 3. Adjournment of Meetings
Any meeting of the stockholders of the Corporation may be
adjourned from time to time by the affirmative vote of the
holders of a majority of the issued and outstanding stock
entitled to vote at such meeting present in person or represented
by proxy, for a period not exceeding one month at any one time
and upon such notice, if any, as may be determined by the vote.
At any adjourned meeting at which a quorum shall be present any
business may be transacted which might have been transacted at
the meeting as originally called.
Section 4. Notices of Meetings
(A) Notices.
At least ten (l0) but not more than sixty (60) days before the
date designated for the holding of any meeting of the
stockholders, except as otherwise provided herein for adjourned
meetings, written or printed notice of the time, place and
purpose or purposes of such meeting shall be served by mail,
telegram, radiogram, telex, or cablegram upon each stockholder of
record entitled to vote at such meeting.
(B) Service of Notice.
A notice of meeting shall be deemed duly served when deposited in
the United States Mail with postage fully paid, or placed in the
hands of an agent of a telegraph, radio, or cable or other
transmitting company with all transmittal fees fully paid, and
plainly addressed to the stockholder at his latest address
appearing in the stock records of the Corporation.
Section 5. Quorum
At any meeting of the stockholders, the holders of a majority of
the issued and outstanding stock entitled to vote at such meeting
shall be present in person or represented by proxy in order to
constitute a quorum.
- 29 -
Exhibit 3
Section 6. Voting
(A) Vote Necessary.
At any meeting of the stockholders, all questions, except as
otherwise expressly provided by statute, the Certificate of
Incorporation, or these By-Laws, shall be determined by vote of
the holders of a majority of the issued and outstanding stock
present in person or represented by proxy at such meeting and
entitled to vote.
(B) Inspectors.
At any meeting of the stockholders, if the chairman of the
meeting so directs or if before the voting begins, any
stockholder present so requests, the polls shall be opened and
closed, the proxies and ballots shall be received and taken in
charge, and all questions with respect to the qualifications of
voters, the validity of proxies, and the acceptance or rejection
of votes, shall be decided by three (3) inspectors to be
appointed by the chairman of the meeting.
(C) Eligibility to Vote.
Each stockholder shall have one vote for each share of stock
entitled to vote as provided in the Certificate of Incorporation
or otherwise by law and registered in his name in the stock
records of the Corporation as of the record date.
(D) Methods of Voting.
At any meeting of the stockholders each stockholder shall be
entitled to vote either in person or by proxy appointed either by
instrument in writing subscribed by such stockholder, or by his
duly authorized attorney or agent, or by cable, telegram or by
any means of electronic communication which results in a writing
from such stockholder or his duly authorized attorney or agent,
and delivered to the Secretary or to the inspectors at or before
the meeting.
(E) Record Date.
The Board of Directors may fix in advance, a date, not less than
ten (l0) but not more than sixty (60) days preceding the date of
any meeting as the record date for determining the stockholders
entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, notwithstanding any transfer of any
stock in the stock records of the Corporation after any such
record date designated as aforesaid.
(F) List of Stockholders.
The Board of Directors shall cause the officer or agent, who has
charge of the stock transfer books of the Corporation, to make a
complete list of all the stockholders entitled to vote at a
stockholders' meeting or any adjournment thereof, arranged in
alphabetical order, together with the latest address of each
stockholder appearing upon the stock records of the Corporation
and the number of shares held by each.
The Board of Directors shall cause such list of stockholders to
be produced (or available by means of a visual display) at the
time and place of every meeting of stockholders and shall be open
to examination by any stockholder listed therein for reasonable
periods during the meeting.
- 30 -
Exhibit 3
Section 7. Transaction of Business at Annual Meeting
At any annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting,
business must be (A) specified in the notice of meeting given by
or at the direction of the Board of Directors (including
stockholder proposals included in the Corporation's proxy
materials pursuant to applicable rules and regulations), (B)
otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (C) otherwise properly
brought before the meeting by a stockholder. For business
(including, but not limited to, any nominations for director) to
be properly brought before an annual meeting by a stockholder:
(i) the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and (ii) the subject
matter thereof must be a matter which is a proper subject matter
for stockholder action at such meeting. To be considered timely
notice, a stockholder's notice must be received by the Secretary
at the principal office of the Corporation not less than 120
calendar days before the date of the Corporation's proxy
statement released to stockholders in connection with the prior
year's annual meeting. However, if no annual meeting was held in
the prior year, or if the date of the applicable annual meeting
has been changed by more than 30 days from the date contemplated
at the time of the prior year's proxy statement, then a
stockholder's notice, in order to be considered timely, must be
received by the Secretary not later than 60 days before the date
the Corporation commences mailing of its proxy materials in
connection with the applicable annual meeting. A stockholder's
notice to the Secretary to submit business to an annual meeting
must set forth: (i) the name and address of the stockholder, (ii)
the number of shares of stock held of record and beneficially by
such stockholder, (iii) the name in which all such shares of
stock are registered on the stock transfer books of the
Corporation, (iv) a brief description of the business desired to
be brought before the meeting and the reasons therefor, (v) any
personal or other material interest of the stockholder in the
business to be submitted and (vi) all other information relating
to the proposed business which may be required to be disclosed
under applicable law. In addition, a stockholder seeking to
submit such business at an annual meeting shall promptly provide
any other information reasonably requested by the Corporation.
Notwithstanding the foregoing provisions of this Section 7, a
stockholder who seeks to have any proposal included in the
Corporation's proxy materials must provide notice as required by
and otherwise comply with the applicable requirements of the
rules and regulations under the Securities Exchange Act of 1934,
as amended. The chairman of an annual meeting shall determine
all matters relating to the conduct of the meeting, including,
but not limited to, determining whether any item of business has
been properly brought before the meeting in accordance with these
By-Laws, and if the chairman should so determine and declare
that any item of business has not been properly brought before an
annual meeting, then such business shall not be transacted at
such meeting.
- 31 -
Exhibit 3
Article II
BOARD OF DIRECTORS
Section l. Number of Members and Qualification
The number of directors of the Corporation shall be not less than
nine (9) nor more than eighteen (18) as determined by the Board
of Directors from time to time.
Section 2. Term of Office
Each director shall hold office for one (l) year and until his
successor, if any, is duly elected and qualified, provided,
however, that any director may be removed from office, with
cause, at any time by a majority vote of the stockholders
entitled to vote.
Section 3. Annual Meeting
At the place of holding the annual meeting of the stockholders,
and immediately following the same, the Board of Directors, as
constituted upon final adjournment of such annual meeting, shall
convene without further notice for the purpose of electing
officers and transacting all other business properly brought
before it.
Section 4. Regular Meetings
Regular meetings of the Board of Directors shall be held at such
places, either within or without the State of New Jersey, and on
such business days and at such times as the Board may from time
to time determine.
Section 5. Special Meetings
Special meetings of the Board of Directors may be held at any
time and place whenever called by the Chairman of the Board of
Directors, by a Vice-Chairman of the Board of Directors, by the
Chairman of the Executive Committee, by a Vice-Chairman of the
Executive Committee, by the President, by a Vice- President, by
the Secretary, or by any three (3) or more directors.
Section 6. Notices of Meetings
(A) Notice Required.
If so determined by a majority of the Board of Directors, no
advance notice need be given; in the absence of such
determination then, at least two (2) days prior to the date
designated for the holding of any regular or special meeting of
the Board, notice of the time, and place, and purpose of such
meeting shall be served in person, by mail or other notice in
writing, or by telegram, telephone, radiogram, telex, or
cablegram, upon each member of the Board.
(B) Waiver of Notice.
Notice of the time, place, and purpose of any meeting of the
Board of Directors may be waived, before or after any meeting, by
instrument in writing or by telegram, radiogram, telex, or
cablegram.
- 32 -
Exhibit 3
Section 7. Quorum and Participation
(A) Quorum.
A majority of the Board of Directors shall constitute a quorum
for all purposes and at all meetings.
(B) Participation.
Any or all directors may participate in a meeting of the Board of
Directors by means of conference telephone or any means of
communications by which all persons participating in the meeting
are able to hear each other.
Section 8. Manner of Acting
The act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of
Directors.
Section 9. Action without a Meeting
Any action required or permitted to be taken pursuant to
authorization voted at a meeting of the Board of Directors may be
taken without a meeting if, prior to or subsequent to such
action, all members of the Board of Directors consent thereto in
writing and such written consents are filed with the minutes of
the proceedings of the Board of Directors.
Article III
POWERS OF BOARD OF DIRECTORS
Section l. General Powers
The business, property, and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. In
the management and control of the property, business, and affairs
of the Corporation, the Board is hereby vested with all powers
possessed by the Corporation itself insofar as this delegation of
authority is not inconsistent with or repugnant to the laws of
the State of New Jersey, the Corporation's Certificate of
Incorporation, or these By-Laws or any amendments of them. The
Board shall have discretionary power to determine what
constitutes net earnings, profits, and surplus, what amount shall
be reserved for working capital and for any other purposes, and
what amount shall be declared as dividends. Such determinations
by the Board shall be final and conclusive.
Section 2. Specific Powers
(A) Power to Make and Amend By-Laws.
Subject to the limitations contained in Article X hereof, the
Board of Directors shall have power to make, alter, amend, and
repeal any By-Law, including a By-Law designating the number of
directors, provided that the Board shall not make, alter, amend,
or repeal any By-Law designating the qualification or term of
office of any member or members of the then existing Board.
- 33 -
Exhibit 3
(B) Power to Elect Officers.
The Board of Directors shall elect all officers of the
Corporation.
(C) Power to Remove Officers.
Any officer or divisional officer, any agent of the Board of
Directors, or any member of any committee or of any Management
Board may be removed by the Board of Directors with or without
cause, whenever in its sole judgment the interests of the
Corporation will be served by such removal.
(D) Power to Fill Vacancies.
Vacancies in the Board of Directors, however created, shall be
filled by appointment made by a majority of the remaining
directors. The Board shall have power to fill any vacancy in any
office.
(E) Power to Fix Record Date.
The Board of Directors may fix in advance a date as the record
date for determining the Corporation's stockholders with regard
to any corporate action or event and, in particular, for
determining the stockholders entitled to receive payment of any
dividend or allotment of any right. The record date may in no
case be more than sixty (60) days prior to the corporate action
or event to which it relates.
Section 3. Committees and Delegation of Powers
(A) Committees of the Board.
The Board of Directors may appoint, from among its members, from
time to time one or more committees, each committee to have such
name or names and to have such powers and duties as may be
determined from time to time by the Board. All committees shall
report to the Board. The Board shall have the power to fill
vacancies in, to change the membership of, or to dissolve any
committee. Each committee may hold meetings and make rules for
the conduct of its business and appoint such sub-committees and
assistants as it shall from time to time deem necessary. A
majority of the members of a committee shall constitute a quorum
for all purposes and at all meetings.
(B) Finance Committee.
The Finance Committee, if one shall be appointed, shall consist
of two (2) or more of the directors of the Corporation and shall
have and may exercise all of the powers of the Board insofar as
may be permitted by law, the Corporation's Certificate of
Incorporation or these By-Laws, or any amendments of them, in the
management of the business, affairs and property of the
Corporation during the intervals between the meetings of the
Board. The Finance Committee, however, shall not have the power
to make, alter or repeal any By-Law of the Corporation; elect or
appoint any director, or remove any officer or director; change
the membership of, or fill vacancies in, the Finance Committee;
submit to stockholders any action that requires stockholders'
approval; nor amend or repeal any resolution theretofore adopted
by the Board which by its terms is amendable or repealable only
by the Board.
(C) Emergency Management Committee.
If, as a result of a physical disaster, war, nuclear attack, or
other emergency conditions, a quorum of the Board of Directors
cannot be convened to act, an Emergency Management Committee,
consisting of all readily available
- 34 -
Exhibit 3
members of the Board of Directors, shall automatically be formed.
In such case, two members shall constitute a quorum. If, as a
result of such circumstances, a quorum of the Board of Directors
cannot readily be convened to act, but a quorum of the Finance
Committee can be so convened, the Finance Committee shall
automatically become the Emergency Management Committee. All of
the powers and duties vested in the Board of Directors, except
the power to fill vacancies in the Board of Directors, shall vest
automatically in the Emergency Management Committee. Other
provisions of these By-Laws notwithstanding, the Emergency
Management Committee (l) shall call a meeting of the Board of
Directors as soon as circumstances permit for the purpose of
filling vacancies on the Board of Directors and its committees
and to take such other action as may be appropriate, and (2) if
the Emergency Management Committee determines that less than a
majority of the members of the Board of Directors are available
for service, the Committee shall issue a call for a special
meeting of stockholders to be held at the earliest date
practicable for the election of directors.
(D) Delegation of Duties.
The Board of Directors may delegate from time to time to an
officer or a committee of officers and/or directors any duties
that are authorized or required to be executed during the
intervals between meetings of the Board, and such officer or
committee shall report to the Board when and as required by the
Board. Each committee so established by the Board may hold
meetings and make rules for the conduct of its business and
appoint such sub-committees and assistants as it shall from time
to time deem necessary. A majority of the members of such a
committee shall constitute a quorum for all purposes and at all
meetings.
(E) Executive Committee.
The Executive Committee, if one shall be appointed, shall be the
management committee of the Corporation. Its members shall be
elected by the Board of Directors and thereby become officers of
the Corporation. The Executive Committee shall not be a
committee of the Board. The Executive Committee shall be
responsible for the operation of the business of the Corporation
on a day-to-day basis and for establishing and executing
operating practices and policies of the Corporation. It shall
also perform such other duties as the Board shall designate from
time to time.
Section 4. Designation of Depositories
The Board of Directors shall designate or shall delegate to the
Treasurer, or such other officer as it deems advisable, the
responsibility to designate the trust company or trust companies,
or the bank or banks, in which shall be deposited the moneys and
securities of the Corporation.
Section 5. Power to Establish Divisions
The Board of Directors may establish administrative or operating
divisions of the Corporation. Each such division may have a
Management Board, the Chairman of which shall be appointed by the
Chairman of the Board of Directors. The Chairman of the
Management Board of a division shall appoint the other members of
its Management Board and that Board may in turn appoint a
President, one or more Vice-Presidents, a Treasurer and such
other division officers as it may
- 35 -
Exhibit 3
determine to be necessary or desirable. The Management Board and
the officers of the division shall perform the same duties and,
except for the power to designate depositories, shall have the
same powers as to their division as pertain, respectively, to a
board of directors and officers of a corporation. The powers
granted in the preceding sentence include, without limitation,
the power to execute and deliver on behalf of the Corporation
contracts, conveyances and other instruments. Such power and any
other power granted in this Section shall at all times be subject
to the right of the Board of Directors to act or direct action in
the premises.
Article IV
OFFICERS
Section l. Enumeration of Officers.
The officers of the Corporation shall be a Chairman of the Board
of Directors, a Chairman of the Executive Committee, a President,
a Treasurer, and a Secretary. The officers of the Corporation
may include one or more Vice-Chairmen of the Board of Directors,
one or more Vice-Chairmen of the Executive Committee, one or more
Executive Committee members, one or more Vice-Presidents, one or
more Assistant Treasurers, one or more Assistant Secretaries, and
such other officers as from time to time shall be designated and
elected by the Board of Directors.
Section 2. Election and Removal of Officers
All officers of the Corporation shall be elected at the first
meeting of the Board of Directors after the annual election of
directors, and shall hold office for one (l) year and until their
respective successors, if any, shall have been duly elected and
qualified, provided, however, that all officers, agents, and
employees of the Corporation shall be subject to removal at any
time, with or without cause, by the affirmative vote of a
majority of the Board. At its discretion, the Board may leave
unfilled, for such period as it may deem proper, any office
except that of President, Treasurer, and Secretary. Failure to
elect any such officer shall be considered an exercise of this
discretionary power.
Section 3. Eligibility of Officers
The Chairman of the Board, the Vice-Chairmen of the Board and the
President shall be chosen from the members of the Board of
Directors. No other person need be a director or a stockholder
in order to qualify for office. The same person may hold, at the
same time, one or more offices.
Section 4. Duties of Officers
(A) Chairman of the Board of Directors.
The Chairman of the Board of Directors shall be the Chief
Executive Officer of the Corporation and shall preside at all
meetings of stockholders and directors. When presiding at such
meetings of stockholders and directors, the Chairman of the Board
shall establish and apply such rules of order as may be
- 36 -
Exhibit 3
advisable in his discretion. Except where by law the signature
of the President is required, the Chairman of the Board shall
possess the same power as the President to sign all certificates,
contracts and other instruments of the Corporation authorized by
the Board of Directors. He shall have all powers and shall
perform all duties commonly incident to and vested in the office
of Chairman of the Board of a corporation. He shall also perform
such other duties as the Board shall designate from time to time.
(B) Vice-Chairman of the Board of Directors.
A Vice-Chairman of the Board of Directors shall perform the
duties and have the powers of the Chairman during the absence or
disability of the Chairman, and shall also perform such other
duties as the Board shall designate from time to time.
(C) Chairman of the Executive Committee.
The Chairman of the Executive Committee shall preside at all
meetings of the Executive Committee. During the absence or
disability of the Chairman of the Board and the Vice-Chairman of
the Board, he shall perform the duties and have the powers of the
Chairman of the Board, and shall also perform such other duties
as the Board shall designate from time to time.
(D) Vice-Chairman of the Executive Committee.
A Vice-Chairman of the Executive Committee shall perform the
duties and have the powers of the Chairman of the Executive
Committee during the absence or disability of the Chairman of the
Executive Committee, and shall also perform such other duties as
the Board shall designate from time to time.
(E) Executive Committee Member.
In addition to the powers and duties incident to his membership
on the Executive Committee, an Executive Committee Member, in his
individual capacity, shall have all powers and shall perform all
duties commonly incident to and vested in an executive officer of
a corporation. He shall also perform such other duties as the
Board shall designate from time to time.
(F) President.
The President shall have general charge and supervision of the
operations of the Corporation itself, and shall have all powers
and shall perform all duties commonly incident to and vested in
the office of President of a corporation. He shall also perform
such other duties as the Board shall designate from time to time.
(G) Vice-President.
A Vice-President shall perform such duties and have such powers
as the Board of Directors, the Chairman of the Board, a Vice-
Chairman of the Board, or the President shall designate from time
to time.
(H) Treasurer.
The Treasurer shall have the care and custody of the funds of the
Corporation, and shall have and exercise, under the supervision
of the Board of Directors, all powers and duties commonly
incident to the office of Treasurer. He shall deposit all funds
of the Corporation in such trust company or trust companies, or
bank or banks, as the Board, the Treasurer, or any other officer
to whom the Board shall have delegated the authority, shall
designate from time to
- 37 -
Exhibit 3
time. He shall endorse for deposit or collection all checks,
notes, and drafts payable to the Corporation or to its order, and
make drafts on behalf of the Corporation. He shall keep accurate
books of accounts of the Corporation's transactions, which books
shall be the property of the Corporation, and, together with all
its property in his possession, shall be subject at all times to
the inspection and control of the Board. He shall have all
powers and shall perform all duties commonly incident to and
vested in the office of Treasurer of a corporation. He shall
also have such other duties as the Board may designate from time
to time.
(I) Assistant Treasurer.
An Assistant Treasurer shall perform the duties and have the
powers of the Treasurer during the absence or disability of the
Treasurer, and shall perform such other duties and have such
other powers as the Board of Directors or Treasurer shall
designate from time to time.
(J) Secretary.
The Secretary shall attend all meetings of the stockholders, and
of the Board of Directors, and shall keep and preserve in books
of the Corporation true minutes of the proceedings of all such
meetings. He shall have the custody of all valuable papers and
documents of the Corporation, and shall keep the Corporation's
stock books, stock ledgers, and stock transfer books, and shall
prepare, issue, record, transfer, and cancel certificates of
stocks as required by the proper transactions of the Corporation
and its stockholders unless these functions be performed by a
duly appointed and authorized transfer agent or registrar other
than this Corporation. He shall keep in his custody the seal of
the Corporation, and shall have authority to affix same to all
instruments where its use is required. He shall give all notices
required by statute, by the Certificate of Incorporation, or by
the By-Laws. He shall have all powers and shall perform all
duties commonly incident to and vested in the office of Secretary
of a corporation. He shall also perform such other duties as the
Board shall designate from time to time.
(K) Assistant Secretary.
An Assistant Secretary shall perform the duties and have the
powers of the Secretary during the absence or disability of the
Secretary, and shall perform such other duties and have such
other powers as the Board of Directors or Secretary shall
designate from time to time.
Article V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the full extent permitted by the laws of the State of New
Jersey, as they exist on the date hereof or as they may hereafter
be amended, the Corporation shall indemnify any person (an
"Indemnitee") who was or is involved in any manner (including,
without limitation, as a party or witness) in any threatened,
pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative, arbitrative,
legislative or investigative (including, without limitation, any
action, suit or proceeding by or in the right of the Corporation
to procure a judgement in its
favor) (a "Proceeding"), or who is threatened with
being so involved, by reason
of the fact that he or she is or was a director
or officer of the Corporation
- 38 -
Exhibit 3
or, while serving as a director or officer of the Corporation, is
or was at the request of the Corporation also serving as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (including,
without limitation, any employee benefit plan), against all
expenses (including attorneys' fees), judgements, fines,
penalties, excise taxes and amounts paid in settlement actually
and reasonably incurred by the Indemnitee in connection with such
Proceeding, provided that, there shall be no indemnification
hereunder with respect to any settlement or other nonadjudicated
disposition of any threatened or pending Proceeding unless the
Corporation has given its prior consent to such settlement or
disposition. The right of indemnification created by this
Article shall be a contract right enforceable by an Indemnitee
against the Corporation, and it shall not be exclusive of any
other rights to which an Indemnitee may otherwise be entitled.
The provisions of this Article shall inure to the benefit of the
heirs and legal representatives of an Indemnitee and shall be
applicable to Proceedings commenced or continuing after the
adoption of this Article, whether arising from acts or omissions
occurring before or after such adoption. No amendment,
alteration, change, addition or repeal of or to these By-Laws
shall deprive any Indemnitee of any rights under this Article
with respect to any act or omission of such Indemnitee occurring
prior to such amendment, alteration, change, addition or repeal.
ARTICLE VI
STOCK
Section l. Form of Stock Certificate
Each holder of stock of the Corporation shall be entitled to a
stock certificate signed by the President or a Vice-President,
and also by the Treasurer or an Assistant Treasurer, or by the
Secretary or an Assistant Secretary. Any or all signatures upon
a certificate may be facsimiles. The certificates of shares
shall be in such form as shall be prescribed by the Board of
Directors.
Section 2. Loss of Stock Certificate
In the case of loss, mutilation, or destruction of an issued and
outstanding certificate of stock, a duplicate certificate may be
issued upon such terms as the Board of Directors may prescribe.
Section 3. Transfer of Shares of Stock
Shares of stock of the Corporation shall be transferred on the
books of the Corporation only by the registered holder of such
shares in person or by his attorney upon surrender and
cancellation of a certificate or of certificates for an
equivalent number of shares.
- 39 -
Exhibit 3
Article VII
EXECUTION OF INSTRUMENTS
Section l. Checks and Drafts
All checks, drafts, and orders for payment of moneys shall be
signed in the name of the Corporation or one of its divisions,
and in its behalf, by such officers or agents as the Board of
Directors shall designate from time to time.
Section 2. Contracts and Conveyances
Any contract, conveyance, or other instrument may be executed by
the Chairman of the Board of Directors, a Vice-Chairman of the
Board of Directors, any member of the Executive Committee, the
President, or a Vice President in the name and on behalf of the
Corporation and the Secretary or an Assistant Secretary may affix
the Corporate Seal thereto.
Section 3. In General
The Board of Directors shall have power to designate officers and
agents who shall have authority to execute any instrument in
behalf of the Corporation.
Article VIII
VOTING UPON STOCK HELD BY THE CORPORATION
Unless otherwise ordered by the Board of Directors, the Chairman
of the Board of Directors, a Vice-Chairman of the Board of
Directors, the Chairman of the Executive Committee, a Vice-
Chairman of the Executive Committee, any member of the Executive
Committee, the President, any Vice-President, or the Treasurer
shall have full power and authority in behalf of the Corporation
to attend, to act at, and to vote at any meeting of stockholders
of any corporation in which this Corporation may hold stock, and
at any such meeting shall possess, and may exercise all rights
and powers incident to the ownership of such stock which any
owner thereof might possess and exercise if present. Such
officers may also, in behalf of the Corporation, appoint
attorneys and agents as the Corporation's proxy to exercise any
of the foregoing powers. The Board, by resolution, from time to
time, may confer like powers upon any other person or persons.
Article IX
SEAL OF THE CORPORATION
The seal of the Corporation shall consist of a flat-faced
circular die bearing the words and figures "Johnson & Johnson,
Seal l887".
- 40 -
Exhibit
3
Article X
FISCAL YEAR
The fiscal year of the Corporation shall end on the Sunday
closest to the end of the calendar month of December and shall
begin on the Monday following that Sunday.
Article XI
AMENDMENT OF BY-LAWS
These By-Laws may be amended, altered, changed, added to, or
repealed at any annual meeting of the stockholders, or at any
special meeting of the stock- holders, or by the Board of Directors
at any regular or special meeting of the Board, if notice of the
proposed amendment, alteration, change, addition, or repeal be
contained in the notice of such meeting, provided, however, that
action taken by the stockholders intended to supersede action taken
by the Board in making, amending, altering, changing, adding to, or
repealing any By-Laws, shall supersede prior action of the Board
and shall deprive the Board of further jurisdiction in the premises
to the extent indicated in the statement, if any, of the
stockholders accompanying such action of the stockholders.
I, , Secretary of JOHNSON & JOHNSON, a
corporation duly organized and validly existing under the laws of
the State of New Jersey, do hereby certify that the foregoing is
a true, correct and complete copy of the By-Laws of said
Corporation duly adopted by its Board of Directors effective July
1, l980, and amended effective February l6, l987, April 26, l989,
April 26, l990, October 20, 1997 and April 23, 1999, and that the
same have not thereafter been repealed, annulled, altered or
amended in any respect but remain in full force and effect as of
the date hereof.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
the seal of
the said corporation, this day of
__ , _____.
,
Secretary.
- 41 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-END> JUL-04-1999
<CASH> 2,024
<SECURITIES> 811
<RECEIVABLES> 4,530
<ALLOWANCES> 357
<INVENTORY> 2,968
<CURRENT-ASSETS> 12,151
<PP&E> 10,273
<DEPRECIATION> 4,260
<TOTAL-ASSETS> 27,126
<CURRENT-LIABILITIES> 7,886
<BONDS> 1,236
0
0
<COMMON> 1,535
<OTHER-SE> 13,209
<TOTAL-LIABILITY-AND-EQUITY> 27,126
<SALES> 13,492
<TOTAL-REVENUES> 13,492
<CGS> 4,124
<TOTAL-COSTS> 4,124
<OTHER-EXPENSES> 1,110
<LOSS-PROVISION> 23
<INTEREST-EXPENSE> 97
<INCOME-PRETAX> 3,219
<INCOME-TAX> 936
<INCOME-CONTINUING> 2,283
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,283
<EPS-BASIC> 1.70
<EPS-DILUTED> 1.66
</TABLE>
