UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-3215
JOHNSON & JOHNSON
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1024240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization)
Identification No.)
One Johnson & Johnson Plaza
New Brunswick, New Jersey
08933
(Address of principal executive offices) (Zip code)
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 April 28, 2000, 1,390,893,277 shares of Common Stock,
$1.00 par value, were outstanding.
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JOHNSON & JOHNSON AND SUBSIDIARIES
TABLE OF CONTENTS
Part I - Financial Information
Page No.
Item 1. Financial Statements
Consolidated Balance Sheet -
April 2, 2000 and January 2, 2000 3
Consolidated Statement of Earnings for the
Three Months Ended April 2, 2000 and
April 4, 1999 5
Consolidated Statement of Cash Flows for the
Three Months Ended April 2, 2000 and
April 4, 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17
Part II - Other Information
Item 1 - Legal Proceedings 17
Item 5 - Other Information 18
Item 6 - Exhibits and Reports on Form 8-K 18
Signatures 19
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Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in Millions)
ASSETS
April 2, January
2,
2000
2000
Current Assets:
Cash and cash equivalents $ 2,663 2,363
Marketable securities, at cost 1,537 1,516
Accounts receivable, trade, less
allowances $375 (1999 - $389) 4,365 4,233
Inventories (Note 3) 3,052 3,095
Deferred taxes on income 1,101 1,105
Prepaid expenses and other
receivables 1,258 888
Total current assets 13,976 13,200
Marketable securities, non-current 421 441
Property, plant and equipment, at cost 11,073 11,046
Less accumulated depreciation and
amortization 4,424 4,327
6,649 6,719
Intangible assets, net (Note 4) 7,528 7,571
Deferred taxes on income 68 104
Other assets 1,321 1,128
Total assets $29,963 29,163
See Notes to Consolidated Financial Statements
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JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited; Dollars in Millions)
LIABILITIES AND SHAREOWNERS' EQUITY
April 2, January
2,
2000 2000
Current Liabilities:
Loans and notes payable $ 1,217 1,806
Accounts payable 1,724 2,003
Accrued liabilities 3,054 2,972
Accrued salaries, wages and commissions498 467
Taxes on income 635 206
Total current liabilities 7,128 7,454
Long-term debt 2,443 2,450
Deferred tax liability 276 287
Employee related obligations 1,913 1,749
Other liabilities 1,053 1,010
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 1,534,917,000 and
1,534,916,000 shares) 1,535 1,535
Note receivable from employee stock
ownership plan (36) (41)
Accumulated other comprehensive income(343) (396)
(Note 7)
Retained earnings 17,076 16,192
18,232
17,290
Less common stock held in treasury,
at cost (144,592,000 & 145,233,000
shares) 1,082 1,077
Total shareowners' equity 17,150 16,213
Total liabilities and shareowners'
equity $29,963 29,163
See Notes to Consolidated Financial Statements
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JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited; dollars & shares in millions
except per share figures)
Fiscal Quarter Ended
April 2, Percent April 4,
Percent
2000 to Sales 1999 to
Sales
Sales to customers (Note 5) $7,319 100.0 6,739 100.0
Cost of products sold 2,241 30.6 2,070 30.7
Gross Profit 5,078 69.4 4,669 69.3
Selling, marketing and
administrative expenses 2,609 35.6 2,437 36.1
Research expense 637 8.7 557 8.3
Interest income (77) (1.0) (54) (.8)
Interest expense, net of
portion capitalized 46 .6 54 .8
Other (income)expense, net (29) (.4) 53 .8
3,186 43.5 3,047 45.2
Earnings before provision
for taxes on income 1,892 25.9 1,622 24.1
Provision for taxes on
income (Note 2) 578 7.9 484 7.2
NET EARNINGS $1,314 18.0 1,138 16.9
NET EARNINGS PER SHARE (Note 6)
Basic $ .95 .82
Diluted $ .93 .80
CASH DIVIDENDS PER SHARE $ .28 .25
AVG. SHARES OUTSTANDING
Basic 1,389.7 1,390.2
Diluted 1,411.0 1,419.7
See Notes to Consolidated Financial Statements
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JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited; Dollars in Millions)
Fiscal Quarter
Ended
April 2,
April 4,
2000
1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $1,314 1,138
Adjustments to reconcile net earnings to
cash flows:
Depreciation and amortization of
property and intangibles 431 419
Accounts receivable reserves (10) 8
Changes in assets and liabilities, net
of effects from acquisition of
businesses:
Increase in accounts receivable (190) (417)
Increase in inventories (6) (211)
Changes in other assets and liabilities 226 208
NET CASH FLOWS FROM OPERATING ACTIVITIES 1,765 1,145
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment(310) (334)
Proceeds from the disposal of assets 18 2
Acquisition of businesses, net of cash
acquired (7) (188)
Purchases of investments (817) (857)
Sales of investments 765 717
Other 16 (66)
NET CASH USED BY INVESTING ACTIVITIES (335) (726)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to shareowners (381) (336)
Repurchase of common stock (208) (131)
Proceeds from short-term debt 280 93
Retirement of short-term debt (865) (249)
Proceeds from long-term debt 8 9
Retirement of long-term debt (15) (6)
Proceeds from the exercise of stock options 71 99
NET CASH USED BY FINANCING ACTIVITIES (1,110) (521)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (20) (51)
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS300 (153)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,363 1,994
CASH AND CASH EQUIVALENTS, END OF PERIOD 2,663 1,841
ACQUISITION OF BUSINESSES
Fair value of assets acquired 83 188
Fair value of liabilities assumed (1) -
82 188
Treasury stock issued at fair value (75) -
Net cash payments $ 7 188
See Notes to Consolidated Financial Statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - The accompanying unaudited 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 2,
2000. The unaudited financial statements have been prepared to
give retroactive effect to the merger with Centocor on October 6,
1999. The unaudited 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 three months of 2000
and 1999 are 30.5% and 29.8%, 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) April 2, 2000 January 2,
2000
Raw materials and supplies $ 596 663
Goods in process 450 416
Finished goods 2,006 2,016
$ 3,052 3,095
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NOTE 4 - INTANGIBLE ASSETS
(Dollars in Millions) April 2, 2000 January 2,
2000
Intangible assets $ 8,792 8,755
Less accumulated amortization 1,264 1,184
$ 7,528 7,571
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
First Quarter
Percent
2000 1999 Increase
Consumer
Domestic $ 943 927 1.7
International 809 801 1.0
1,752 1,728 1.4%
Pharmaceutical
Domestic $ 1,949 1,529 27.5
International 1,093 1,048 4.3
3,042 2,577 18.0%
Professional
Domestic $ 1,311 1,289 1.7
International 1,214 1,145 6.0
2,525 2,434 3.7%
Domestic $ 4,203 3,745 12.2
International 3,116 2,994 4.1
Worldwide $ 7,319 6,739 8.6%
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NOTE 5 - SEGMENTS OF BUSINESS AND GEOGRAPHIC AREAS
(Dollars in Millions)
OPERATING PROFIT BY SEGMENT OF BUSINESS
First Quarter
Percent
2000 1999 Change
Consumer $ 222 223 (.5)
Pharmaceutical 1,265 987 28.2
Professional 458 455 .7
Segments total 1,945 1,665 16.8
Expenses not allocated
to segments (53) (43)
Worldwide total $ 1,892 1,622 16.7%
SALES BY GEOGRAPHIC AREA
First Quarter
Percent
Increase
2000 1999 (Decrease)
U.S. $ 4,203 3,745 12.2
Europe 1,678 1,746 (3.9)
Western Hemisphere
Excluding U.S. 516 478 7.9
Asia-Pacific, Africa 922 770 19.7
Total $ 7,319 6,739 8.6%
NOTE 6 - EARNINGS PER SHARE
The following is a reconciliation of basic net earnings per share
to diluted net earnings per share for the three months ended April
2, 2000 and April 4, 1999:
(Shares in Millions) April 2, April 4,
2000 1999
Basic net earnings per share $ .95 .82
Average shares outstanding - basic 1,389.7 1,390.2
Potential shares exercisable under
stock option plans 55.2 72.3
Less: shares which could be repurchased
under treasury stock method (33.9) (42.8)
Adjusted average shares outstanding - diluted1,411.0 1,419.7
Diluted earnings per share $ .93 .80
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NOTE 7 - ACCUMULATED OTHER COMPREHENSIVE INCOME
The total comprehensive income for the three months ended April 2,
2000 is $1,337 million, compared with $1,017 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 quarter, the Company completed the acquisition of
Innovasive Devices and Medtrex. Innovasive Devices manufactures
and sells devices for sport medicine surgery for soft tissue
injuries. Medtrex develops and manufactures electrosurgical
generators (HydrocoolT) and disposable products (EncoreT pencil).
Pro forma results of the acquisitions, assuming that the
transactions were consummated at the beginning of each year
presented, would not be materially different from the results
reported.
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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 was amended by Statement of Financial
Accounting Standards No. 137 "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133" and changed the effective date for SFAS 133 to
all fiscal quarters of fiscal years beginning after June 15, 2000.
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 assets, liabilities or firm commitments, changes in the
fair value of the derivative instrument will generally be offset by
changes in the hedged item's fair value. 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, as amended, 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.
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NOTE 10 - RESTRUCTURING AND SPECIAL CHARGES
In the fourth quarter of 1998, the Company approved a plan to
reconfigure its global network of manufacturing and operating
facilities with the objective of enhancing operating efficiencies.
This plan is currently underway and is targeted for completion in
2000. Among the initiatives supporting this plan were the closures
of inefficient manufacturing facilities, exiting certain businesses
which were not providing an acceptable return and related employee
separations.
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.
Of the separation costs of $161 million, $3 million were paid in
1998 and $58 million were paid in 1999. With regard to the exit
costs of $78 million, $38 million were paid in 1999. Payments made
through three months ended April 2, 2000 of these severance and
other exit costs are as follows:
Remaining Remaining
Accrual @ Cash Accrual @
January 2, 2000
Outlays April 2, 2000
Employee Separations $ 100 11 89
Other exit costs:
Distributor terminations 11 - 11
Disposal costs 10 2 8
Lease termination 7 7 -
Customer compensation 1 - 1
Other 11 6 5
Total other costs 40 15 25
$ 140 26 114
The restructuring plan consisted of the reduction of manufacturing
facilities around the world by 36, from 159 to 123 plants. None of
the assets affected by this plan were held for disposal. Changes
in estimates to date have been immaterial. The headcount reduction
related to this plan through April 2, 2000 was approximately 1,900
employees.
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NOTE 11 - 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.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SALES AND EARNINGS
Consolidated sales for the first quarter of 2000 were $7.32
billion, an increase of 8.6% over 1999 first quarter sales of $6.74
billion. The effect of the stronger dollar relative to foreign
currencies decreased first quarter sales by 2.5%. The operational
sales increase of 11.1% included a positive price change effect of
.5%.
Consolidated net earnings for the first quarter of 2000 were
$1.31 billion, compared with $1.14 billion for the same period a
year ago, an increase of 15.5%. Other income and expense reflects
gains related to the sale of certain equity securities. Also
included in other income and expense is the write-down of certain
intangible assets to their realizable market value for potential
sale. Worldwide basic net earnings per share for the period were
$.95, compared with $.82 for the same period in 1999, an increase
of 15.9%. Worldwide diluted net earnings per share for the period
were $.93, compared with $.80 for the same period in 1999, an
increase of 16.3%.
Domestic sales for the first three months of 2000 were $4.20
billion, an increase of 12.2% over 1999 domestic sales of $3.75
billion for the same period. Sales by international subsidiaries
were $3.12 billion for the first quarter of 2000 compared with
$2.99 billion for the same period a year ago, an increase of 4.1%.
Excluding the impact of the higher value of the dollar,
international sales increased by 9.6% for the quarter.
Worldwide Consumer segment sales for the first quarter of 2000
were $1.8 billion, an increase of 1.4% versus the same period a
year ago. Domestic sales were up 1.7% while international sales
gains in local currency of 6.0% were partially offset by a negative
currency impact of 5.0%. Consumer sales were led by continued
strength in the skin care franchise, which includes the NEUTROGENA
and RoC product lines. During the quarter, the Company launched
AFLEXA, a glucosamine product that helps promote and maintain
healthy joint tissue.
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Worldwide pharmaceutical sales of $3.0 billion for the quarter
increased 18.0% over the same period in 1999, including 27.5%
growth in domestic sales and a 4.3% increase in international
sales. International sales gains in local currency of 11.5% were
partially offset by a negative currency impact of 7.2%. Sales
growth reflects the strong performance of PROCRIT/EPREX, for the
treatment of anemia; RISPERDAL, an antipsychotic medication;
DURAGESIC, a transdermal patch for chronic pain; LEVAQUIN, an anti-
infective; ULTRAM, an analgesic; REMICADE, a treatment for
rheumatoid arthritis and Crohn's disease; and the oral
contraceptive line of products. The sales growth was partially
offset by a decline in sales of PROPULSID (cisapride), a
gastrointestinal prokinetic. In January, the Company revised its
marketing of Propulsid to doctors to include more comprehensive
directions to ensure appropriate use. The primary revisions to the
prescribing information included a requirement for physicians to
conduct certain tests to identify patients who are not appropriate
candidates for Propulsid therapy. The updated labeling states that
an initial electrocardiogram must be conducted to exclude patients
with cardiac abnormalities, along with an assessment of
electrolytes (calcium, magnesium and potassium) and creatinine, a
substance excreted by the kidneys. In March, the Company announced
a limited-access program for PROPULSID and that the product will no
longer be marketed in the United States. As a result, the Company
recorded reserves related to inventory and sales returns associated
with this limited-access program for PROPULSID.
During the quarter, the Company received approval from the U.S.
Food and Drug Administration (FDA) for an additional indication for
LEVAQUIN (levofloxacin) for the treatment of penicillin-resistant
streptococcus pheumoniae in community-acquired pneumonia (CAP).
This new indication makes LEVAQUIN the first prescription
antimicrobial agent specifically indicated for CAP caused by this
resistant bacterium. The Company also received European approval
for an expanded indication for EPREX (epoetin alfa) for anemia
associated with non-platinum chemotherapy, which includes solid
tumors, malignant lymphoma and multiple myeloma. EPREX is highly
effective in increasing hemoglobin, reducing transfusion
requirements, reducing fatigue and increasing the overall quality
of life in cancer patients receiving chemotherapy. The Company
also received its first regulatory approval within the European
Union from Sweden for REMINYL (galantamine) for the treatment of
Alzheimer's Disease.
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Worldwide sales of $2.5 billion in the Professional segment
represented an increase of 3.7% over the first quarter of 1999.
Domestic sales were up 1.7% while international sales were up 6.0%.
International sales gains in local currency of 10.5% were partially
offset by a negative currency impact of 4.5%. Strong sales
performance by DePuy's orthopaedic joint reconstruction and spinal
products, Vistakon's disposable contact lens products and Cordis'
coronary and endovascular stents were partially offset by a decline
in sales of LifeScan's blood glucose monitoring systems.
During the quarter, the Company completed its previously
announced merger with Innovasive Devices, Inc., a manufacturer of
surgical devices and instrumentation. Innovasive's products are
used in sports medicine surgery and address soft tissue injuries in
the knee, shoulder and other small joints.
LIQUIDITY AND CAPITAL RESOURCES
Cash and current marketable securities increased $321 million
during the first three months of 2000 to $4,200 million at April 2,
2000. Total borrowings decreased $596 million during the first
three months of 2000 to $3,660 million. Net cash (cash and current
marketable securities net of debt) as of April 2, 2000 was $540
million. Net debt (debt net of cash and current marketable
securities) as of the end of 1999 was $377 million. Total debt
represented 17.6% of total capital (shareowners' equity and total
debt) at quarter end compared with 20.8% at the end of 1999. For
the period ended April 2, 2000, there were no material cash
commitments.
Additions to property, plant and equipment were $310 million for
the first three months of 2000, compared with $334 million for the
same period in 1999.
On April 19, 2000, the Board of Directors approved a 14.3%
increase in the quarterly dividend rate from 28 cents per share to
32 cents per share. The dividend is payable on June 13, 2000 to
shareowners of record as of May 23, 2000.
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CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS
This Form 10-Q contains "forward-looking statements." Forward-
looking statements do not relate strictly to historical or current
facts and anticipate results based on management's plans that are
subject to uncertainty. Forward-looking statements may be
identified by the use of words like "plans," "expects," "will,"
"anticipates," "estimates" and other words of similar meaning in
conjunction with, among other things, discussions of future
operations, financial performance, the Company's strategy for
growth, product development, regulatory approvals, market position
and expenditures.
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 it has been reasonable in its expectations and assumptions.
Investors should realize that if underlying assumptions prove
inaccurate or unknown risks or uncertainties materialize, actual
results could vary materially from the Company's expectations and
projections. Investors are therefore cautioned not to place undue
reliance on any forward-looking statements. Furthermore, 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 2, 2000 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.
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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 2, 2000.
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 and
instructions for use 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 a 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's subsidiary, Johnson & Johnson Vision Care Inc.
(Vision Care), 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, which were filed
between July 1994 and December 1996 and are consolidated before the
United States district Court for the Middle District of Florida,
assert that enforcement of Vision Care'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.
- 17 -
Johnson & Johnson Vision Care is also a defendant in a nationwide
consumer class action brought on behalf of purchasers of its ACUVUE
brand contact lenses. The plaintiffs in that action, which was
filed in 1996 in New Jersey State Court, allege that Vision Care
sold its 1-DAY ACUVUE lens at a substantially cheaper price than
ACUVUE and misled consumers into believing these were different
lenses when, in fact, they were allegedly "the same lenses."
Plaintiffs are seeking substantial damages and an injunction
against supposed improper conduct. The Company believes these
claims are without merit and is defending the action vigorously.
The Company's Ortho Biotech subsidiary is party to an arbitration
proceeding filed against it in 1995 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 and collect substantial damages 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 or for
obtaining damages 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.
Item 5. Other Information
Amgen is proceeding to trial this month in Boston, Massachusetts,
in its patent infringement action against Transkaryotic Therapies,
Inc. (TKT), the developer of a gene-activated EPO product, and
Aventis S.A., which holds marketing rights to the TKT product. TKT
and Aventis are seeking to invalidate the Amgen patents asserted
against them, which patents are exclusively licensed to Ortho
Biotech in the U.S. for non-dialysis indications. Ortho Biotech is
not a party to the action and is not in a position to express views
as to its probable outcome.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Numbers
(1) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the three month period ended April 2, 2000.
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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: May 12, 2000 By /s/ R. J. DARRETTA
R. J. DARRETTA
Vice President, Finance
Date: May 12, 2000 By /s/ C. E. LOCKETT
C. E. LOCKETT
Controller
(Chief Accounting Officer)
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0
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