-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dp9870vy2bSQArwqqdPsMKzPgsSc3bIgGK+zgzAjrEZImLg7DTl3pMC2/6OYSVpC yRpljlx4IBj5lRS7kmFy4Q== 0000950123-96-001496.txt : 19960402 0000950123-96-001496.hdr.sgml : 19960402 ACCESSION NUMBER: 0000950123-96-001496 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOHNSON & JOHNSON CENTRAL INDEX KEY: 0000200406 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221024240 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-03215 FILM NUMBER: 96542448 BUSINESS ADDRESS: STREET 1: ONE JOHNSON & JOHNSON PLZ CITY: NEW BRUNSWICK STATE: NJ ZIP: 08933 BUSINESS PHONE: 9085240400 10-K405 1 JOHNSON & JOHNSON 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-3215 JOHNSON & JOHNSON (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW JERSEY 22-1024240 (State of (I.R.S. Employer Incorporation) Identification No.) ONE JOHNSON & JOHNSON PLAZA NEW BRUNSWICK, NEW JERSEY 08933 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 524-0400 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - -------------------------------------------- -------------------------------------------- Common Stock, Par Value $1.00 New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / The aggregate market value of the voting stock held by non-affiliates of the registrant on February 29, 1996 was approximately $58.9 billion. On February 29, 1996 there were 666,316,374 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Parts I and II: Portions of registrant's annual report to stockholders for fiscal year 1995. Part III: Portions of registrant's proxy statement for its 1996 annual meeting of stockholders.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K /X/ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I
ITEM PAGE - ---- ---- l. Business....................................................................... 1 General........................................................................ 1 Segments of Business; Geographic Areas......................................... 1 Consumer....................................................................... 1 Pharmaceutical................................................................. 1 Professional................................................................... 2 International.................................................................. 2 Raw Materials.................................................................. 2 Patents and Trademarks......................................................... 2 Seasonality.................................................................... 2 Competition.................................................................... 3 Research....................................................................... 3 Environment.................................................................... 3 Regulation..................................................................... 3 2. Properties..................................................................... 4 3. Legal Proceedings.............................................................. 4 4. Submission of Matters to a Vote of Security Holders............................ 5 Executive Officers of the Registrant........................................... 5 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters.......... 5 6. Selected Financial Data........................................................ 6 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................... 6 8. Financial Statements and Supplementary Data.................................... 6 9. Disagreements on Accounting and Financial Disclosure........................... 6 PART III 10. Directors and Executive Officers of the Registrant............................. 6 11. Executive Compensation......................................................... 6 12. Security Ownership of Certain Beneficial Owners and Management................. 6 13. Certain Relationships and Related Transactions................................. 6 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............... 7 Signatures..................................................................... 9 Report of Independent Auditors................................................. 11 Consent of Independent Auditors................................................ 12 Exhibit Index.................................................................. 13
Form 10-Q Quarterly Reports Available. A copy of Johnson & Johnson's Quarterly Report on Form 10-Q for any of the first three quarters of the current fiscal year, without exhibits, will be provided without charge to any stockholder submitting a written request to the Secretary at the principal executive offices of the Company or by calling 800-328-9033. Each report will be available about 45 days after the end of the quarter to which it relates. 3 PART I ITEM 1. BUSINESS GENERAL Johnson & Johnson, employing approximately 82,300 people worldwide, is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. Johnson & Johnson's primary interest, both historically and currently, has been in products related to health and well-being. Johnson & Johnson was organized in the State of New Jersey in 1887. Johnson & Johnson is organized on the principles of decentralized management. The Executive Committee of Johnson & Johnson is the principal management group responsible for the operations of Johnson & Johnson. In addition, three Executive Committee members are Chairmen of Group Operating Committees, which are comprised of managers who represent key operations within the group, as well as management expertise in other specialized functions. These Committees oversee and coordinate the activities of domestic and international companies related to each of the Consumer, Pharmaceutical, Professional and Diagnostic businesses. Operating management of each company is headed by a Chairman, President, General Manager or Managing Director who reports directly to or through a Company Group Chairman. In line with this policy of decentralization, each international subsidiary is, with some exceptions, managed by citizens of the country where it is located. SEGMENTS OF BUSINESS; GEOGRAPHIC AREAS Johnson & Johnson's worldwide business is divided into three segments: Consumer, Pharmaceutical and Professional. Johnson & Johnson further categorizes its sales and operating profit by major geographic areas of the world. The narrative and tabular (but not the graphic) descriptions of segments and geographic categories captioned "Management's Discussion and Analysis of Results of Operations and Financial Condition -- Segments of Business, Consumer, Pharmaceutical, Professional and Geographic Areas" on pages 26 through 28 and 41 of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1995 are incorporated herein by reference thereto. CONSUMER The Consumer segment's principal products are personal care and hygienic products, including oral and baby care products, first aid products, nonprescription drugs, sanitary protection products and adult incontinence products. Major brands include ACT Fluoride Rinse; BAND-AID Brand Adhesive Bandages; CAREFREE Panty Shields; CLEAN & CLEAR skin care products; IMODIUM A-D, an antidiarrheal; JOHNSON'S line of baby products; MONISTAT 7, an over-the-counter remedy for vaginal yeast infections; MYLANTA gastrointestinal products and PEPCID AC Acid Controller from Johnson & Johnson - Merck Consumer Pharmaceuticals & Co.; NEUTROGENA skin and hair products; o.b. Tampons; PEDIACARE children's cold and allergy medications; PENATEN and NATUSAN baby care products; PIZ BUIN and SUNDOWN sun care products; REACH toothbrushes; RoC skin care products; SERENITY incontinence products; SHOWER TO SHOWER personal care powder products; STAYFREE and SURE & NATURAL sanitary protection products; and the broad family of TYLENOL acetaminophen products. These products are marketed principally to the general public and distributed both to wholesalers and directly to independent and chain retail outlets. PHARMACEUTICAL The Pharmaceutical segment's principal worldwide franchises are in the allergy, antifungal, biotech, central nervous system, contraceptive, dermatology, gastrointestinal and immunobiology fields. These products are distributed both directly and through wholesalers for use by health care professionals and the general public. Prescription drugs include DURAGESIC (sold outside the U.S. as DUROGESIC), a transdermal patch for chronic pain; EPREX (sold in the U.S. as PROCRIT), a biotechnology derived version of the human hormone erythropoietin, which stimulates red blood cell production; ERGAMISOL, a colon cancer 4 drug; FLOXIN, an antibacterial; HISMANAL, the once-a-day less sedating antihistamine; IMODIUM, an antidiarrheal; LEUSTATIN, for hairy cell leukemia; MOTILIUM, a gastrointestinal mobilizer; NIZORAL, SPORANOX and TERAZOL, antifungals; ORTHOCLONE OKT-3, for reversing the rejection of kidney, heart and liver transplants; ORTHO-NOVUM group of oral contraceptives; PREPULSID (sold in the U.S. as PROPULSID), a gastrointestinal prokinetic; RETIN-A, a dermatological cream for acne; RISPERDAL, an antipsychotic drug; and ULTRAM, a new centrally acting prescription analgesic for moderate to moderately severe pain. PROFESSIONAL The Professional segment includes suture and mechanical wound closure products, less-invasive surgical instruments, diagnostic products, medical equipment and devices, disposable contact lenses, surgical instruments, joint replacements and products for wound management and infection prevention. These products are used principally in the professional fields by physicians, dentists, nurses, therapists, hospitals, diagnostic laboratories and clinics. Distribution to these markets is done both directly and through surgical supply and other dealers. In February 1996 Johnson & Johnson acquired Cordis Corporation which provides devices and systems for markets that include cardiology, electrophysiology, radiology and interventional neuroradiology. INTERNATIONAL The international business of Johnson & Johnson is conducted by subsidiaries manufacturing in 39 countries outside the United States and selling in over 175 countries throughout the world. The products made and sold in the international business include many of those described above under "Business -- Consumer, Pharmaceutical and Professional." However, the principal markets, products and methods of distribution in the international business vary with the country and the culture. The products sold in the international business include not only those which were developed in the United States but also those which were developed by subsidiaries abroad. Investments and activities in some countries outside the United States are subject to higher risks than comparable domestic activities because the investment and commercial climate is influenced by restrictive economic policies and political uncertainties. RAW MATERIALS Raw materials essential to Johnson & Johnson's business are generally readily available from multiple sources. PATENTS AND TRADEMARKS Johnson & Johnson has made a practice of obtaining patent protection on its products and processes where possible. Johnson & Johnson owns or is licensed under a number of patents relating to its products and manufacturing processes, which in the aggregate are believed to be of material importance in the operation of its business. However, it is believed that no single patent or related group of patents is material in relation to Johnson & Johnson as a whole. Johnson & Johnson has made a practice of selling its products under trademarks and of obtaining protection for these trademarks by all available means. Johnson & Johnson's trademarks are protected by registration in the United States and other countries where its products are marketed. Johnson & Johnson considers these trademarks in the aggregate to be of material importance in the operation of its business. SEASONALITY Worldwide sales do not reflect any significant degree of seasonality; however spending has been heavier in the fourth quarter of each year than in other quarters. This reflects increased spending decisions, principally for advertising and research grants. 2 5 COMPETITION In all its product lines, Johnson & Johnson companies compete with companies both large and small, located in the United States and abroad. Competition is strong in all segments without regard to the number and size of the competing companies involved. Competition in research, involving the development of new products and processes and the improvement of existing products and processes, is particularly significant and results from time to time in product and process obsolescence. The development of new and improved products is important to Johnson & Johnson's success in all areas of its business. This competitive environment requires substantial investments in continuing research and in multiple sales forces. In addition, the winning and retention of customer acceptance of Johnson & Johnson's consumer products involve heavy expenditures for advertising, promotion and selling. RESEARCH Research activities are important to all segments of Johnson & Johnson's business. Major research facilities are located not only in the United States but also in Australia, Belgium, Brazil, Canada, Germany, Switzerland and the United Kingdom. The costs of Johnson & Johnson's worldwide research activities relating to the development of new products, the improvement of existing products, technical support of products and compliance with governmental regulations for the protection of the consumer amounted to $1,634, $1,278 and $1,182 million for fiscal years 1995, 1994 and 1993, respectively. These costs are charged directly to income in the year in which incurred. All research was sponsored by Johnson & Johnson. ENVIRONMENT During the past year Johnson & Johnson was subject to a variety of federal, state and local environmental protection measures. Johnson & Johnson believes that its operations comply in all material respects with applicable environmental laws and regulations. Johnson & Johnson's compliance with these requirements did not and is not expected to have a material effect upon its capital expenditures, earnings or competitive position. REGULATION Most of Johnson & Johnson's business is subject to varying degrees of governmental regulation in the countries in which operations are conducted, and the general trend is toward regulation of increasing stringency. In the United States, the drug, device, diagnostics and cosmetic industries have long been subject to regulation by various federal, state and local agencies, primarily as to product safety, efficacy, advertising and labeling. The exercise of broad regulatory powers by the Food and Drug Administration (the "FDA") continues to result in increases in the amounts of testing and documentation required for FDA clearance of new drugs and devices and a corresponding increase in the expense of product introduction. Similar trends toward product and process regulation are also evident in a number of major countries outside of the United States, especially in the European Economic Community where efforts are continuing to harmonize the internal regulatory systems. The costs of human health care have been and continue to be a subject of study and investigation by governmental agencies and legislative bodies in the United States and other countries. In the United States, attention has been focused on drug prices and profits and programs that encourage doctors to write prescriptions for particular drugs. Even in the absence of new government regulation, managed care has become a more potent force in the market place and it is likely that increased attention will be paid to drug pricing, appropriate drug utilization and the quality of health care. The regulatory agencies under whose purview Johnson & Johnson operates have administrative powers that may subject Johnson & Johnson to such actions as product recalls, seizure of products and other civil and criminal sanctions. In some cases Johnson & Johnson may deem it advisable to initiate product recalls voluntarily. 3 6 ITEM 2. PROPERTIES Johnson & Johnson and its worldwide subsidiaries operate 165 manufacturing facilities occupying approximately 15 million square feet of floor space. The manufacturing facilities are used by the industry segments of Johnson & Johnson's business approximately as follows:
SQUARE FEET SEGMENT (IN THOUSANDS) ----------------------------------------------------------------------- -------------- Consumer............................................................... 5,877 Pharmaceutical......................................................... 2,966 Professional........................................................... 6,210 ------- Worldwide total.............................................. 15,053 ===========
Within the United States, 12 facilities are used by the Consumer segment, 7 by the Pharmaceutical segment and 40 by the Professional segment. Johnson & Johnson's manufacturing operations outside the United States are often conducted in facilities which serve more than one segment of the business. The locations of the manufacturing facilities by major geographic areas of the world are as follows:
NUMBER OF SQUARE FEET GEOGRAPHIC AREA FACILITIES (IN THOUSANDS) ------------------------------------------------------------- ---------- -------------- United States................................................ 59 7,119 Europe....................................................... 44 3,622 Western Hemisphere excluding U.S.A........................... 24 2,428 Africa, Asia and Pacific..................................... 38 1,884 --- ------- Worldwide total.................................... 165 15,053 ======= ===========
In addition to the manufacturing facilities discussed above, Johnson & Johnson maintains numerous office and warehouse facilities throughout the world. Research facilities are also discussed under "Business -- Research." Johnson & Johnson generally seeks to own its manufacturing facilities, although some, principally in locations abroad, are leased. Office and warehouse facilities are often leased. Johnson & Johnson's properties are maintained in good operating condition and repair and are well utilized. For information regarding lease obligations see Note 9 "Rental Expenses and Lease Commitments" under "Johnson & Johnson and Subsidiaries -- Notes to Consolidated Financial Statements" on page 34 of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1995. Segment information on additions to Johnson & Johnson's property, plant and equipment is contained on page 41 of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1995. ITEM 3. LEGAL PROCEEDINGS The information set forth in Note 18 "Pending Legal Proceedings" under "Johnson & Johnson and Subsidiaries -- Notes to Consolidated Financial Statements" on page 39 of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1995 is incorporated herein by reference. The Company or its subsidiaries are parties to a number of administrative and judicial environmental proceedings, including proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund, and comparable state laws. The primary relief sought in these proceedings is the cost of past and future remediation. While it is not feasible to predict or determine the outcome of these proceedings, in the opinion of the Company, such proceedings should not ultimately result in any liability which would have a material adverse effect on its results of operations, cash flows or financial position. 4 7 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT Listed below are the executive officers of Johnson & Johnson as of March 15, 1996, each of whom, unless otherwise indicated below, has been an employee of the Company or its affiliates and held the position indicated during the past five years. There are no family relationships between any of the executive officers, and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected. At the annual meeting of the Board of Directors which follows the Annual Meeting of Stockholders executive officers are elected by the Board to hold office for one year and until their respective successors are elected and qualified, or until earlier resignation or removal. Information with regard to the directors of the Company, including those of the following executive officers who are directors, is incorporated herein by reference to pages 3 through 7 of Johnson & Johnson's Proxy Statement dated March 12, 1996.
NAME AGE POSITION - --------------------------------- --- --------------------------------------------------- Roger S. Fine.................... 53 Member, Executive Committee; Vice President, Administration George S. Frazza................. 62 Member, Executive Committee; Vice President, General Counsel Ronald G. Gelbman................ 48 Member, Executive Committee; Worldwide Chairman, Pharmaceutical and Diagnostics Group(a) Clark H. Johnson................. 60 Member, Executive Committee; Vice President, Finance Christian A. Koffmann............ 55 Member, Executive Committee; Worldwide Chairman, Consumer and Personal Care Group(b) Ralph S. Larsen.................. 57 Chairman, Board of Directors and Chief Executive Officer; Chairman, Executive Committee James T. Lenehan................. 47 Member, Executive Committee; Worldwide Chairman, Consumer Pharmaceuticals and Professional Group(c) Robert N. Wilson................. 55 Vice-Chairman, Board of Directors; Vice-Chairman Executive Committee
- --------------- (a) Mr. R. G. Gelbman joined the Company in 1972 and became a Company Group Chairman in 1987. He became a Member of the Executive Committee and Worldwide Chairman, Pharmaceutical and Diagnostics Group in 1994. (b) Mr. C. A. Koffmann joined the Company in 1989 as a Company Group Chairman. He became a Member of the Executive Committee and Worldwide Chairman, Consumer and Personal Care Group in 1995. (c) Mr. J. T. Lenehan joined the Company in 1976 and became a Company Group Chairman in 1993. He became a Member of the Executive Committee and Worldwide Chairman, Consumer Pharmaceuticals and Professional Group in 1994. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCK- HOLDER MATTERS The information called for by this item is incorporated herein by reference to the material captioned "Management's Discussion and Analysis of Results of Operations and Financial Condition--Common Stock Market Prices"and "Cash Dividends Paid" on page 24 of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1995. 5 8 ITEM 6. SELECTED FINANCIAL DATA The information called for by this item is incorporated herein by reference to the material captioned "Summary of Operations and Statistical Data 1985-1995" on page 42 of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1995. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information called for by this item is incorporated herein by reference to the material captioned "Management's Discussion and Analysis of Results of Operations and Financial Condition--Overview, Sales and Earnings, Costs and Expenses, Liquidity and Capital Resources and Changing Prices and Inflation" on pages 23 through 26 of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1995. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by this item is incorporated herein by reference to the consolidated financial statements and the notes thereto and the material captioned "Independent Auditor's Report," on pages 29 through 40 of Johnson & Johnson's Annual Report to Stockholders for fiscal year 1995. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to executive officers is presented at the end of Part I hereof. Information with respect to directors is incorporated herein by reference to the material captioned "Election of Directors-- Nominees" on pages 2 through 7 of Johnson & Johnson's Proxy Statement dated March 12, 1996. ITEM 11. EXECUTIVE COMPENSATION The information called for by this item is incorporated herein by reference to the material captioned "Election of Directors--Directors' Fees, Committees and Meetings" and "Executive Compensation" on pages 8 and 9, and 14 through 17 of Johnson & Johnson's Proxy Statement dated March 12, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information called for by this item is incorporated herein by reference to the material captioned "General Information--Principal Stockholder" and "Election of Directors--Stock Ownership/Control" on pages 2 and 8 of Johnson & Johnson's Proxy Statement dated March 12, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. 6 9 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Financial Statements The financial statements to be included in this report are incorporated in Part II, Item 8 hereof by reference to Johnson & Johnson's Annual Report to Stockholders for fiscal year 1995. 2. Financial Statement Schedules II Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because they are not required or are not applicable. 3. Exhibits Required to be Filed by Item 60l of Regulation S-K The information called for by this paragraph is incorporated herein by reference to the Exhibit Index of this report. (b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of 1995. 7 10 JOHNSON & JOHNSON AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FISCAL YEARS ENDED DECEMBER 31, 1995, JANUARY 1, 1995 AND JANUARY 2, 1994 (DOLLARS IN MILLIONS)
DEDUCTIONS FROM RESERVES ADDITIONS -------------------------------------------- BALANCE AT CHARGED BALANCE BEGINNING TO COSTS AND AT END OF PERIOD EXPENSES(A) DESCRIPTION AMOUNT OF PERIOD ----------- ------------- ------------------------- ------ --------- 1995 Reserves deducted from accounts receivable, trade Reserve for doubtful Write-offs less accounts............... $ 77 46 recoveries............... 15 Currency adjustments..... (1) 109 Reserve for customer Customer rebates rebates................ 93 575 allowed.................. 553 115 Reserve for cash discounts.............. 30 355 Cash discounts allowed... 351 34 ----------- ------ ------ --------- $ 200 976 918 258 ========= ========== ====== ======= 1994 Reserves deducted from accounts receivable, trade Reserve for doubtful Write-offs less accounts............... $ 56 35 recoveries............... 17 Currency adjustments..... (3) 77 Reserve for customer Customer rebates rebates................ 87 452 allowed.................. 447 Currency adjustments..... (1) 93 Reserve for cash discounts.............. 27 276 Cash discounts allowed... 274 Currency adjustments..... (1) 30 ----------- ------ ------ --------- $ 170 763 733 200 ========= ========== ====== ======= 1993 Reserves deducted from accounts receivable, trade Reserve for doubtful Write-offs less accounts............... $ 57 26 recoveries............... 24 Currency adjustments..... 3 56 Reserve for customer Customer rebates rebates................ 60 406 allowed.................. 379 87 Reserve for cash discounts.............. 26 245 Cash discounts allowed... 244 27 ----------- ------ ------ --------- $ 143 677 650 170 ========= ========== ====== =======
- --------------- (A) Charges related to customer rebates and cash discounts are reflected as reductions of sales to customers. 8 11 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 25, 1996 JOHNSON & JOHNSON (Registrant) By /s/ R. S. LARSEN -------------------------------- R. S. Larsen, Chairman, Board of Directors and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been duly signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ----------------------------------- ------------------------------------ --------------- /s/ R. S. LARSEN Chairman, Board of Directors and March 25, 1996 - ----------------------------------- Chief Executive Officer, and R. S. Larsen Director (Principal Executive Officer) /s/ C. H. JOHNSON Vice President -- Finance and March 25, 1996 - ----------------------------------- Director (Principal Financial C. H. Johnson Officer) /s/ J. H. HEISEN Controller March 27, 1996 - ----------------------------------- J. H. Heisen /s/ J. W. BLACK Director March 21, 1996 - ----------------------------------- J. W. Black /s/ G. N. BURROW Director March 21, 1996 - ----------------------------------- G. N. Burrow /s/ J. G. COONEY Director March 21, 1996 - ----------------------------------- J. G. Cooney /s/ J. G. CULLEN Director March 27, 1996 - ----------------------------------- J. G. Cullen /s/ P. M. HAWLEY Director March 22, 1996 - ----------------------------------- P. M. Hawley /s/ A. D. JORDAN Director March 21, 1996 - ----------------------------------- A. D. Jordan /s/ A. G. LANGBO Director March 27, 1996 - ----------------------------------- A. G. Langbo
9 12
SIGNATURE TITLE DATE - ----------------------------------- ------------------------------------ --------------- /s/ J. S. MAYO Director March 21, 1996 - ----------------------------------- J. S. Mayo /s/ T. S. MURPHY Director March 22, 1996 - ----------------------------------- T. S. Murphy /s/ P. J. RIZZO Director March 22, 1996 - ----------------------------------- P. J. Rizzo /s/ M. F. SINGER Director March 22, 1996 - ----------------------------------- M. F. Singer /s/ R. B. SMITH Director March 22, 1996 - ----------------------------------- R. B. Smith /s/ R. N. WILSON Vice Chairman, Board of Directors March 25, 1996 - ----------------------------------- and Director R. N. Wilson
10 13 REPORT OF INDEPENDENT AUDITORS To the Stockholders and Board of Directors of Johnson & Johnson: Our report on the consolidated financial statements of Johnson & Johnson and subsidiaries has been incorporated by reference in this Form 10-K from the Johnson & Johnson 1995 Annual Report to Stockholders and appears on page 40 therein. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the index in Item 14 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. /s/ COOPERS & LYBRAND L.L.P. COOPERS & LYBRAND L.L.P. New York, New York January 23, 1996, except for Note 20, as to which the date is February 23, 1996 11 14 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statements No. 33-52252, 33-40294, 33-40295, 33-32875, 2-67443, 33-7634 and 033-59009 on Form S-8, No. 33-55977 and 33-47424 on Form S-3 and No. 33-57583 and 333-00391 on Form S-4 and related Prospectuses of our reports dated January 23, 1996, except for Note 20, as to which the date is February 23, 1996, on our audits of the consolidated financial statements and financial statement schedule of Johnson & Johnson and subsidiaries as of December 31, 1995 and January 1, 1995, and for each of the three years in the period ended December 31, 1995, which reports are included or incorporated by reference in this Annual Report on Form 10-K. /s/ COOPERS & LYBRAND L.L.P. COOPERS & LYBRAND L.L.P. New York, New York March 28, 1996 12 15 EXHIBIT INDEX
REG. S-K EXHIBIT TABLE DESCRIPTION ITEM NO. OF EXHIBIT - ------------- -------------------------------------------------------------------------------- 3(a) Certificate of Amendment to the Restated Certificate of Incorporation of the Company and Restated Certificate of Incorporation, dated May 20, 1992 -- Incorporated herein by reference to Exhibit 3(a) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1993. 3(b) By-Laws of the Company, as amended April 26, 1990 -- Incorporated herein by reference to Exhibit 3(b) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1993. 4(a) Upon the request of the Securities and Exchange Commission, the Registrant will furnish a copy of all instruments defining the rights of holders of long term debt of the Registrant. 10(a) 1995 Stock Option Plan (as amended) -- Filed with this document.* 10(b) 1991 Stock Option Plan -- Incorporated by reference to Registration Statement No. 33-40294, Exhibit 4(a).* 10(c) 1986 Stock Option Plan (as amended) -- Incorporated herein by reference to Exhibit 10(b) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1993.* 10(d) 1980 Stock Option Plan (as amended) -- Incorporated herein by reference to Exhibit 10(d) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1993.* 10(e) 1995 Stock Compensation Plan -- Filed with this document.* 10(f) Domestic Deferred Compensation Plan -- Incorporated herein by reference to Exhibit 10(g) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1993.* 10(g) Deferred Fee Plan for Directors (as amended) -- Filed with this document.* 10(h) Supplemental Retirement Plan -- Incorporated herein by reference to Exhibit 10(h) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1993.* 10(i) Executive Life Insurance Plan -- Incorporated herein by reference to Exhibit 10(i) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1993.* 11 -- Calculation of Earnings Per Share -- Filed with this document. 12 -- Statement of Computation of Ratio of Earnings to Fixed Charges -- Filed with this document. 13 -- Pages 23-42 of the Company's Annual Report to Stockholders for fiscal year 1995 (only those portions of the Annual Report incorporated by reference in this document are deemed "filed") -- Filed with this document. 21 -- Subsidiaries -- Filed with this document. 27 -- Financial Data Schedule for Year Ended December 31, 1995 -- Filed with this document. 99 -- Form 11-K for the Johnson & Johnson Savings Plan to be filed on or before June 30, 1996.
- --------------- * Management contracts and compensatory plans and arrangements required to be filed as Exhibits to this form pursuant to Item 14(c) of the report. A copy of any of the Exhibits listed above will be provided without charge to any stockholder submitting a written request specifying the desired exhibit(s) to the Secretary at the principal executive offices of the Company. 13 EX-10.A 2 1995 STOCK OPTION PLAN 1 EXHIBIT 10(a) JOHNSON & JOHNSON 1995 STOCK OPTION PLAN (EFFECTIVE APRIL 27, 1995, AS AMENDED NOVEMBER 30, 1995) 1. PURPOSE The purpose of the Johnson & Johnson 1995 Stock Option Plan (the "Plan") is to promote the interests of Johnson & Johnson (the "Company") by ensuring continuity of management and increased incentive on the part of officers and executive employees responsible for major contributions to effective management, through facilitating their acquisition of an equity interest in the Company on reasonable terms. 2. ADMINISTRATION The Plan shall be administered by the Compensation Committee of the Board of Directors (the "Committee"). The Committee shall consist of not less than three directors. No person shall be eligible to serve as a member of such Committee unless such person is a "disinterested person" within the meaning of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, and an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). Committee members shall not be eligible to participate in the Plan while members of the Committee. It shall have the power to select optionees, to establish the number of shares and other terms applicable to each such option, to construe the provisions of the Plan, and to adopt rules and regulations governing the administration of the Plan. The Board of Directors, within its discretion, shall have authority to amend the Plan and the terms of any option issued hereunder without the necessity of obtaining further approval of the stockholders, unless such approval is required by law. 3. ELIGIBILITY Those eligible to participate in the Plan will be selected by the Committee from the following: (1) Directors who are employees of the Company or its domestic subsidiaries (excluding members from time to time of the Committee). (2) Officers and other key employees of the Company and its domestic subsidiaries. (3) Key employees of subsidiaries outside the United States. (4) Key employees of a joint venture operation of the Company or its subsidiaries and key employees of joint venture partners who are assigned to such a joint venture. In all cases, optionees shall be selected on the basis of demonstrated ability to contribute substantially to the effective management of the Company. In no event shall an option be granted to any individual who, immediately after such option is granted, is considered to own stock possessing more than 10% of the combined voting power of all classes of stock of Johnson & Johnson or any of its subsidiaries within the meaning of Section 422 of the Internal Revenue Code. 1 2 4. ALLOTMENT OF SHARES A maximum of 28,000,000 authorized but unissued shares of the Common Stock of the Company (par value $1.00) will be allotted to the Plan, subject to the required approval by the stockholders. The total number of shares which may be awarded under the Plan to any optionee in any one year shall not exceed 5% of the total shares allotted to the Plan. The Committee may, in its discretion, use Treasury shares in lieu of authorized but unissued shares for the options. To the extent this is done, the number of authorized but unissued shares to be used for the Plan will be reduced. Shares covered by options which lapse or have been terminated during the duration of this Plan may be reallocated by the Committee. 5. EFFECTIVE DATE AND TERM OF PLAN The Plan shall become effective on April 27, 1995. No option shall be granted pursuant to this Plan later than April 26, 2000, but options theretofore granted may extend beyond that date in accordance with their terms. 6. TERMS AND CONDITIONS A. All Options The following shall apply to all options granted under the Plan: (i) Option Price The option price per share for each stock option shall be determined by the Committee and shall not be less than the fair market value on the date the option is granted. The fair market value shall be determined as prescribed by the Internal Revenue Code and Regulations. (ii) Time of Exercise of Option The Committee shall establish the time or times within the option period when the stock option may be exercised in whole or in such parts as may be specified from time to time by the Committee. With respect to an optionee whose employment has terminated by reason of death, disability or retirement, the Committee may in its discretion accelerate the time or times when any particular stock option held by said optionee may be so exercised so that such time or times are earlier than those originally provided in said option. In all cases exercise of a stock option shall be subject to the provisions of Section 6B(ii) or 6C(iii), as the case may be. (iii) Payment The entire option price may be paid at the time the option is exercised. When an option is exercised prior to termination of employment, the Committee shall have the discretion to arrange for the payment of such price, in whole or in part, in installments. In such cases, the Committee shall obtain such evidence of the optionee's obligation, establish such interest rate and require such security as it may deem appropriate for the adequate protection of the Company. (iv) Non-Transferability of Option Unless otherwise specified by the Committee to the contrary, an option by its terms shall not be transferable by the optionee otherwise than by will or by the laws of descent and distribution and 2 3 shall be exercisable during the optionee's lifetime only by the optionee. The Committee may, in the manner established by the Committee, provide for the transfer, without payment of consideration, of a non-qualified option by an optionee to a member of the optionee's immediate family or to a trust or partnership whose beneficiaries are members of the optionee's immediate family. In such case, the option shall be exercisable only by such transferee. For purposes of this provision, an optionee's "immediate family" shall mean the holder's spouse, children and grandchildren. (v) Adjustment in Event of Recapitalization of the Company In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or shares of the Company, the Board of Directors shall make such adjustment as it may deem equitably required in the number and kind of shares authorized by and for the Plan, in the number and kind of shares covered by the options granted, in the number of shares which may be awarded to an optionee in any one year, and in the option price. B. Non-Qualified Stock Options The Committee may, in its discretion, grant options under the Plan which, in whole or in part, do not qualify as incentive stock options under Section 422 of the Internal Revenue Code. In addition to the terms and conditions set forth in Section 6A above, the following terms and conditions shall govern any option (or portion thereof) to the extent that it does not so qualify. (i) Form of Payment Payment of the option price of any option (or portion thereof) not qualifying as an incentive stock option shall be made in cash or, in the discretion of the Committee, in the Common Stock of the Company valued at its fair market value (as the same shall be determined by the Committee), or a combination of such Common Stock and cash. (ii) Rights after Termination of Employment In the event of termination of employment due to any cause including death, disability or retirement, rights to exercise the stock option shall cease, except for those which have accrued to the date of termination, unless the Committee shall otherwise specify. These rights shall remain exercisable for a period of three months, or such longer period (not to exceed three years) as the Committee shall provide, following termination for any cause other than death, disability or retirement and for a period of three years following termination due to death, disability or retirement, unless the Committee otherwise specifies. The Committee may, in its discretion, extend the period within which any particular option may be exercised beyond the expiration date originally provided in said option. However, no stock option shall, in any event, be exercised after the expiration of the full term of the option. (iii) Period of Option The exercise period of each non-qualified stock option shall be specified by the Committee at the time of grant. C. Incentive Stock Options The Committee may, in its discretion, grant options under the Plan which qualify in whole or in part as incentive stock options under Section 422 of the Internal Revenue Code. In addition to the terms and 3 4 conditions set forth in Section 6A above, the following terms and conditions shall govern any option (or portion thereof) to the extent that it so qualifies: (i) Maximum Fair Market Value of Incentive Stock Options The aggregate fair market value (determined as of the time such option is granted) of the Common Stock for which any optionee may have stock options which first became vested in any calendar year (under all incentive stock option plans of the Company and its parent and subsidiary corporations) shall not exceed $100,000. (ii) Form of Payment Payment of the option price for incentive stock options shall be made in cash or in the Common Stock of the Company valued at its fair market value (as the same shall be determined by the Committee), or a combination of such Common Stock and cash. Where payment of the option price is to be made with Common Stock acquired under a Company compensation plan (within the meaning of paragraph 11(g) of Opinion No. 25 of the Accounting Principles Board), such Common Stock will not be accepted as payment unless the optionee has beneficially owned such Common Stock for at least six months (increased to one year if such Common Stock was acquired under an incentive stock option) prior to such payment. (iii) Rights after Termination of Employment In the event of termination of employment due to any cause including death, disability or retirement, rights to exercise the stock option shall cease, except for those which have accrued to the date of termination, unless the Committee shall otherwise specify. These rights shall remain exercisable for a period of three months, or such longer period (not to exceed three years) as the Committee shall provide, following termination for any cause other than death, disability or retirement and for a period of three years following termination due to death, disability or retirement, unless the Committee otherwise specifies. However, no incentive stock option shall, in any event, be exercised after the expiration of 10 years from the date such option is granted, or such earlier date as may be specified in the option. (iv) Period of Option The exercise period of each incentive stock option by its terms shall not be more than 10 years from the date the option is granted as specified by the Committee. 4 EX-10.E 3 1995 STOCK COMPENSATION PLAN 1 EXHIBIT 10(e) JOHNSON & JOHNSON 1995 STOCK COMPENSATION PLAN The Johnson & Johnson 1995 Stock Compensation Plan (the "Plan") provides, in general, for the awarding of shares of Common Stock of Johnson & Johnson (the "Company") to employees of the Company (including executive officers and officers), its subsidiaries and affiliates, both in the United States and abroad. The Plan continues a practice of the Company which began in 1922. An award is by way of a bonus to the employees and is not regarded as part of the employee's regular compensation. The Plan, in the judgement of the Board of Directors, promotes the interests of the Company by insuring continuity of management and increased incentive on the part of the participants by insuring their acquisition of an equity interest in the Company and by providing an adequate overall compensation level. The Common Stock to be distributed in the operation of the Plan will not exceed 4,000,000 shares of the Company's authorized but unissued shares (to be reduced in all events by the number of Treasury shares used for the Plan). Stockholders have no preemptive rights with regard to these shares. Participants are to be selected by the Board of Directors of the Company from the group of key management personnel, generally at the supervisor level and above, and sales personnel of the Company and its domestic and international subsidiaries and affiliates. Under certain conditions, and with the approval of the Management Compensation Committee of the Company, or its delegate, awards may be granted to employees not meeting the above criteria. Participants are to be selected on the basis of demonstrated ability and potential to contribute substantially to the Company's success. Subject to the approval of stockholders of the Company, the Plan shall become effective April 27, 1995. The term of the Plan expires on April 26, 2000. The Plan does not provide any maximum on the number of shares which can be awarded to an employee. The Board of Directors, or a committee appointed thereby, shall have full power and authority to administer the Plan, including the authority to select participants and to determine the number of shares to be awarded to each participant. In the event of a reorganization, recapitalization, stock split, stock dividend or any other change in the corporate structure or shares of the Company, the Board of Directors shall make such adjustment as it may deem equitably required in the number and kind of shares authorized by and for the Plan. EX-10.G 4 DEFERRED FEE PLAN FOR DIRECTORS 1 EXHIBIT 10(g) Amended as of January 1, 1995 JOHNSON & JOHNSON DEFERRED FEE PLAN FOR DIRECTORS 1. Purpose. The purpose of the Johnson & Johnson Deferred Fee Plan for Directors (the "Plan") is to provide outside Directors of Johnson & Johnson (the "Company") the opportunity to defer receipt of compensation earned as a Director to a date following termination of such service. The provision of such an opportunity is designed to aid the Company in attracting and retaining as members of its Board of Directors persons whose abilities, experience and judgment can contribute to the well being of the Company. 2. Effective Date. The effective date of the Plan was January 1, 1983. The Plan was amended in its entirety, effective as of January 1, 1995. 3. Eligibility. Any Director of the Company who is not also an Employee of the Company or any related company shall participate in the Plan. 4. Deferred Compensation Account. A deferred compensation account shall be established for each Director. 5. Amount of Deferral. Each participant shall be required to defer receipt of Fifteen Thousand Dollars ($15,000.) of his/her annual fee for serving on the Board of Directors (the "Required Deferral"). In addition, a participant may elect to defer receipt of all or a specified part of any remaining compensation payable to the participant for serving on the Board of Directors or for serving on committees of the Board of Directors of the Company. An amount equal to all deferred compensation will be credited to the participant's deferred compensation account as of the 15th day of the month in which such compensation is payable (the "Payment Date"). 6. Deferred Compensation Account - Hypothetical Investment Options. (a) All Required Deferrals and, unless otherwise specified by the participant pursuant to the terms of paragraph (b) of this Section 6, all amounts elected to be deferred under this Plan for any calendar year shall be credited to the participant's deferred compensation account, converted into equivalent units of 2 2 Johnson & Johnson Common Stock ("Company Stock") and adjusted as if the compensation deferred had been invested in Company Stock as of the Payment Date, until the date of final payment pursuant to Section 9 hereof ("Company Stock Equivalent Units"). The number of Company Stock Equivalent Units shall be determined by dividing the amount of compensation payable by the average of the high and low price of the Company Stock on the Payment Date, as reported by the Wall Street Journal. The number of Company Stock Equivalent Units included in a participant's deferred compensation account shall be adjusted to reflect dividends and the value of such account shall be adjusted to reflect increases or decreases in market value which would have resulted had funds equal to the balance of the participant's deferred compensation account been invested in Company Stock. Nothing herein obligates the Company to purchase any such Company Stock; and if such Company Stock is purchased, it shall remain the sole property of the Company. (b) Except with respect to the Required Deferral amount, at the election of each participant, to be made as provided for in Section 7, each deferred compensation account will be credited with interest from the Payment Date, until the date of final payment pursuant to Section 9 hereof, at a rate equal to the annual rate of growth of investment in the Johnson & Johnson Domestic Deferred Compensation Plan (the "CEC Plan"), for the prior year provided, however, that the computation of said growth rate shall not include dividend equivalents paid under the CEC Plan. The election permitted under this Section 6(b) shall not be available to any participant who becomes a participant in the Plan after December 31, 1995. (c) With respect to Company Stock Equivalent Units in a deferred compensation account, the Company shall credit such account on each dividend payment date declared with respect to the Company's Stock, a number of Company Stock Equivalent Units equal to: (i) the product of (y) the dividend per share of the Company's Stock which is payable as of the dividend payment date, multiplied by (z) the number of Company Stock Equivalent Units credited to such account as of the applicable dividend record date, divided by (ii) the average of the high and low price of the Company Stock on the dividend payment date as reported by the Wall Street Journal. Fractional Company Stock Equivalent Units shall be carried forward and fractional dividend equivalent units shall be payable thereon. (d) All account balances in Company Stock Equivalent Units from the Company's Retirement Plan for Nonemployee Directors which have been transferred to his/her deferred compensation account under this Plan, as of January 1, 1995, by reason of the termination of such Retirement Plan, shall be treated for purposes of this Plan as Required Deferrals. 3 3 7. Time of Election of Deferral. Except as to Required Deferrals, which shall at all times be held in Company Stock Equivalent Units, a participant may change (i) the amount of compensation deferred and/or (ii) the option elected under Section 6 with respect to his/her account and deferrals for subsequent years, once annually in December by completing forms provided by the Company for that purpose. Any such change shall become effective on January 1 of the following year. If a participant elects to change his/her investment option available under Section 6, the participant's account shall be valued as of December 31 with that value being entered into his/her account under the new investment option as of the following January 1 (except if such change is to Company Stock Equivalent Units, the first trading day following such January 1 shall be used). 8. Value of Deferred Compensation Account. The value of each participant's deferred compensation account shall, as the case may be, include compensation deferred, interest credited thereon, if any, and any adjustments for dividends, and increases or decreases in the market value of Company Stock, pursuant to the option selected under Section 6 or as otherwise required under the Plan. If the Company Stock does not trade on any date a calculation of Common Stock Equivalent Units is to be made hereunder, the next preceding date on which such stock was traded shall be utilized. 9. Payment of Deferred Compensation. Upon ceasing to be a member of the Board of Directors, each participant (or in the event of the participant's death, the named beneficiary) shall be entitled to receive in cash in a lump sum the value of his/her deferred compensation account as of the date of such termination. Company Stock Equivalent Units shall be valued at the average of the high and low price of the Company's Stock on such date as reported by the Wall Street Journal. No withdrawal may be made from the participant's deferred compensation account prior to termination of the participant's service as a Director. The value of a participant's deferred compensation account shall be paid as soon as practicable following the termination of said service or death. 10. Designation of Beneficiary. Each participant may, from time to time, by writing filed with the Secretary of the Company, designate any legal or natural person or persons (who may be designated contingently or successively) to whom payments of a participant's deferred compensation account are to be made if a participant dies prior to the receipt of payment of such account. A beneficiary designation will be effective only if the signed form is filed with the Secretary of the Company while the participant is alive and will cancel all beneficiary designation forms filed earlier. If a participant fails to designate a beneficiary as provided above, or if all designated beneficiaries die before the participant or before complete payment of the deferred compensation 4 4 account, such account shall be paid to the estate of the last to die of the participant and designated beneficiaries as soon as practicable after such death. 11. Participant's Rights Unsecured. The right of any participant to receive payment under the provisions of the Plan shall be an unsecured claim against the general assets of the Company, and no provisions contained in the Plan shall be construed to give any participant or beneficiary at any time a security interest in any deferred compensation account or any other asset in trust with the Company for the benefit of any participant or beneficiary. 12. Statement of Account. A statement will be sent to participants as soon as practical following the end of each year as to the value of his/her deferred compensation account as of December 31 of such year. 13. Assignability. No right to receive payments hereunder shall be transferable or assignable by a participant or a beneficiary, except by will or by the laws of descent and distribution. 14. Administration of the Plan. The Plan shall be administered by a Committee appointed by and responsible to the Board of Directors. The Committee shall consist of three officers of the Company. The Committee shall act by vote or written consent of a majority of its members. 15. Amendment or Termination of Plan. This Plan may at any time or from time to time be amended, modified or terminated by the Board of Directors of the Company. No amendment, modification or termination shall, without the consent of a participant, adversely affect such participant's accruals in his deferred compensation accounts. 16. Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of New Jersey. EX-11 5 CALCULATION OF EARNINGS PER SHARE 1 EXHIBIT 11 JOHNSON & JOHNSON AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE(A) (DOLLARS AND SHARES IN MILLIONS EXCEPT PER SHARE FIGURES)
FISCAL YEAR ENDED ---------------------------------------------------------------------- DECEMBER 31, JANUARY 1, JANUARY 2, JANUARY 3, DECEMBER 29, 1995 1995 1994 1993 1991 ------------ ---------- ------------ ------------ ------------ 1. Net Earnings...................... $2,403 2,006 1,787 1,030 1,461 ------------ ---------- ------ ------ ------ 2. Average number of shares outstanding during the year....... 645.9 643.1 651.7 659.5 666.1 ------------ ---------- ------ ------ ------ 3. Earnings per share based upon average outstanding shares (1 / 2)................................ $ 3.72 3.12 2.74 1.56 2.19 ========== ======== ========== ========== ========== 4. Fully diluted earnings per share: a. Average number of shares outstanding during the year......................... 645.9 643.1 651.7 659.5 666.1 b. Shares issuable under stock compensation agreements at year-end..................... -- .1 .3 .7 .8 c. Shares reserved under the stock option plans for which the market price at fiscal year-end exceeds the option price........................ 31.4 35.9 29.0 26.9 29.0 d. Aggregate proceeds to the Company from the exercise of options in 4c................ 1,551 1,499 998 894 902 e. Market price of the Company's common stock at fiscal year-end..................... 85.50 54.75 44.88 50.50 57.25 f. Shares which could be repurchased under the treasury stock method (4d / 4e)..................... 18.1 27.4 22.2 17.7 15.8 g. Addition to average outstanding shares(4b + 4c - 4f).......................... 13.3 8.6 7.1 9.9 14.0 h. Shares for fully diluted earnings per share calculation(4a + 4g)......... 659.2 651.7 658.8 669.4 680.1 ========== ======== ========== ========== ========== i. Fully diluted earnings per share (1 / 4h)...................... $ 3.65 3.08 2.71 1.54 2.15 ========== ======== ========== ========== ==========
- --------------- (A) All share and per share amounts have been adjusted for the two-for-one stock split in 1992. 14 EX-12 6 STATEMENT OF COMPUTATION OF RATIO OF EARNINGS 1 EXHIBIT 12 JOHNSON & JOHNSON AND SUBSIDIARIES STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1) (DOLLARS IN MILLIONS)
FISCAL YEAR ENDED ------------------------------------------------------------------------------ DECEMBER 31, JANUARY 1, JANUARY 2, JANUARY 3, DECEMBER 29, 1995 1995 1994 1993 1991 ------------ ---------- ------------ ------------ ------------ Determination of Earnings: Earnings Before Provision for Taxes on Income and Cumulative Effect of Accounting Changes...... $3,317 2,681 2,332 2,207 2,038 Fixed Charges.............. 219 234 211 210 209 ------------ ---------- ------ ------ ------ Total Earnings as Defined.......... $3,536 2,915 2,543 2,417 2,247 ========== ======= ========== ========== ========== Fixed Charges and Other: Rents...................... $ 76 92 85 86 80 Interests.................. 143 142 126 124 129 ------------ ---------- ------ ------ ------ Fixed Charges...... 219 234 211 210 209 Capitalized Interest....... 70 44 48 53 46 ------------ ---------- ------ ------ ------ Total Fixed Charges.......... $ 289 278 259 263 255 ========== ======= ========== ========== ========== Ratio of Earnings to Fixed Charges.................... 12.24 10.49 9.82 9.19 8.81 ========== ======= ========== ========== ==========
- --------------- (1) The ratio of earnings to fixed charges represents the historical ratio of the Company and is calculated on a total enterprise basis. The ratio is computed by dividing the sum of earnings before provision for taxes and fixed charges (excluding capitalized interest) by fixed charges. Fixed charges represent interest (including capitalized interest) and amortization of debt discount and expense and the interest factor of all rentals, consisting of an appropriate interest factor on operating leases. 15 EX-13 7 ANNUAL REPORT 1 ================================================================================ MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - -------------------------------------------------------------------------------- OVERVIEW Record sales of $18.84 billion reinforced the Company's position as the largest and most comprehensive health care company in the world. Worldwide sales increased for the sixty-third consecutive year, growing $3.11 billion or 19.8% over 1994, primarily due to volume, with a total price increase of only .2%. This year's volume growth was primarily the result of new product introductions and the continued expansion of base businesses. Growth through new products is being driven by the Company's commitment to investing in research and development. During 1995, $1.63 billion was invested in research and development, the highest level in the Company's history, emphasizing its commitment to achieving significant advances in health care through the discovery and development of innovative, cost effective products that prolong and enhance the quality of life. In addition to the research and development effort, strategic acquisitions have also enabled the Company to achieve gains in sales. During 1995, the Company continued initiatives to streamline its businesses worldwide and to make the organization more cost effective. These initiatives, implemented during the last few years, have increased productivity and are showing positive results. The Company views the reengineering effort as a continuous process, and one that is essential to compete effectively and to constrain price increases while providing resources for investing in advertising, marketing and research and development. The continued growth in sales and increased profitability during 1995 resulted in a 19.2% increase in earnings per share to $3.72. Earnings in 1995 generated $3.38 billion in cash from operations. When combined with $2.98 billion of cash generated from operations in 1994, the $6.36 billion in cash from operations financed capital investments and acquisitions during the past two years, and reduced net debt (debt net of cash and current marketable securities) by 44.9% since 1993 to $1.06 billion. In the U.S. and in countries around the world, health care systems continue to be transformed. The Company feels that it is well positioned to take advantage of these changes due to its diversification in health care, global reach, development of cost effective unique new products, decentralized management, dedicated employees and strong Credo values. SALES AND EARNINGS In 1995, worldwide sales increased 19.8% to $18.84 billion compared to increases of 11.3% and 2.8% in 1994 and 1993, respectively. Excluding the impact of the relatively weaker dollar in 1995 and 1994, and the relatively stronger dollar in 1993, compared to international currencies, worldwide sales increased 16.7%, 10.7% and 7% in 1995, 1994 and 1993, respectively. CHART 1: Bar graph showing Sales to customers for years 1986 through 1995. See appendix for a complete description. Worldwide net earnings totaled $2.4 billion, or $3.72 per share, reflecting increases of 19.8% and 19.2% over 1994, respectively. The income margin for 1995 was 12.8%, the highest in the Company's history, despite an increase of over two percentage points in the effective tax rate over 1994. Worldwide net earnings for 1994 were $2.01 billion, or $3.12 per share, representing increases of 12.3% and 13.9% over 1993, respectively. In 1993, worldwide net earnings of $1.79 billion, or $2.74 per share, increased 10% and 11.4% over 1992, excluding the 1992 one-time charge for the adoption of three new accounting standards for postretirement benefits, postemployment benefits and income taxes. Average shares of common stock outstanding in 1995 were 645.9 million compared with 643.1 million and 651.7 million in 1994 and 1993, respectively. CHART 2: Bar graph showing Net Earnings for the years 1986 through 1995. See appendix for a complete description. Sales by domestic companies were $9.19, $7.81 and $7.2 billion in 1995, 1994 and 1993, representing increases of 17.6%, 8.5% and 4.3%, respectively. The increase in domestic sales in 1995 was the result of new product launches as well as continued growth of base businesses. Sales by international companies were $9.65, $7.92 and $6.94 billion in 1995, 1994 and 1993, representing increases of 21.8%, 14.2% and 1.2%, respectively. All geographic areas throughout the world posted strong gains during 1995. Sales in Europe increased 23.7%, while revenues in the Asia-Pacific, Africa region and the Western Hemisphere (excluding the U.S.) increased 23.1% and 14.6%, respectively. Excluding the impact of the relatively weaker dollar in 1995 and 1994 and the stronger dollar in 1993, compared to international currencies, international company sales increased 15.6%, 13% and 9.6% in 1995, 1994 and 1993, respectively. 23 2 ================================================================================ The Company achieved an annual compound growth rate of 11.4% for worldwide sales for the ten-year period since 1985 with domestic and international sales growing at rates of 8.7% and 14.8%, respectively. For the same ten-year period, worldwide net earnings achieved an annual growth rate of 14.6%, while earnings per share grew at a rate of 16%. For the last five years, annual compound growth rates for sales, net earnings and earnings per share were 10.9%, 16% and 16.7%, respectively. COMMON STOCK MARKET PRICES The Company's common stock is listed on the New York Stock Exchange under the symbol JNJ. The approximate number of stockholders of record at year-end 1995 was 113,500. The composite market price ranges for Johnson & Johnson common stock during 1995 and 1994 were:
1995 1994 - -------------------------------------------------------------------------------- HIGH LOW High Low - -------------------------------------------------------------------------------- First quarter $63 53 5/8 45 3/4 36 Second quarter 71 1/4 58 3/8 44 5/8 36 1/4 Third quarter 74 7/8 64 3/8 52 3/8 42 1/4 Fourth quarter 92 3/8 73 1/8 56 1/2 49 1/2 Year-end close 85 1/2 54 3/4
CASH DIVIDENDS PAID The Company increased its dividend in 1995 for the thirty-third consecutive year. Cash dividends paid were $1.28 per share in 1995 and $1.13 per share in 1994, an increase of 13.3% and 11.9% over 1994 and 1993, respectively. The dividends were distributed as follows:
1995 1994 1993 - -------------------------------------------------------------------------------- First quarter $ .29 .26 .23 Second quarter .33 .29 .26 Third quarter .33 .29 .26 Fourth quarter .33 .29 .26 -------------------------------- Total $1.28 1.13 1.01 ================================
On January 2, 1996, the Board of Directors declared a regular cash dividend of $.33 per share, paid on March 12, 1996 to stockholders of record on February 20, 1996. The Company expects to continue the practice of paying regular cash dividends. CHART 3: Bar graph showing Net Earnings Per Share and Cash Dividends Paid Per Share for the years 1986 through 1995. See appendix for a complete description. COSTS AND EXPENSES The percentage relationships of costs and expenses to sales for 1995, 1994 and 1993 were:
1995 1994 1993 - -------------------------------------------------------------------------------- Employment costs 25.0% 27.2% 28.8% Cost of materials and services 52.3 50.6 49.7 Depreciation and amortization of property and intangibles 4.5 4.6 4.4 Taxes other than payroll 5.4 4.9 4.5
CHART 4: Pie chart showing Distribution of Sales Revenue for 1995. See appendix for a complete description. Research activities represent a significant part of the Company's business. These expenditures relate to the development of new products, improvement of existing products, technical support of products and compliance with governmental regulations for the protection of the consumer. Worldwide costs of research activities were as follows:
(Dollars in Millions) 1995 1994 1993 - -------------------------------------------------------------------------------- Research expense $1,634 1,278 1,182 Percent increase over prior year 27.9% 8.1% 4.9% Percent of sales 8.7 8.1 8.4
Research expense as a percent of sales for the Pharmaceutical segment was 15.3%, 14.9% and 15.2% in 1995, 1994 and 1993, respectively, while averaging 5.4%, 4.8% and 5.2% in the other two segments. CHART 5: Bar graph showing Research Expense for the years 1986 through 1995. See appendix for a complete description. 24 3 ================================================================================ Advertising expenses worldwide, which are comprised of television, radio and print media, were $1.03 billion in 1995, $800 million in 1994 and $753 million in 1993. Additionally, significant expenditures were incurred for promotional activities such as couponing and performance allowances. The Company believes that its operations comply in all material respects with applicable environmental laws and regulations. The Company or its subsidiaries are parties to a number of proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund, and comparable state laws, in which the primary relief sought is the cost of past and future remediation. While it is not feasible to predict or determine the outcome of these proceedings, in the opinion of the Company, such proceedings would not have a material adverse effect on the results of operations, cash flows or financial position of the Company. Worldwide sales do not reflect any significant degree of seasonality; however, spending has been heavier in the fourth quarter of each year than in other quarters. This reflects increased spending decisions, principally for advertising and research grants. The worldwide effective income tax rate was 27.6% in 1995, 25.2% in 1994 and 23.4% in 1993. See page 33 for additional information. For 1995, the Company has subsidiaries operating in Puerto Rico under a grant for tax relief expiring December 31, 2007. The Omnibus Budget Reconciliation Act of 1993 included a change in the tax code which will reduce the benefit the Company receives from its operations in Puerto Rico by 60% gradually over a five-year period. In addition, the Company has subsidiaries manufacturing in Ireland under an incentive tax rate expiring on December 31, 2010. A summary of operations and related statistical data for the years 1985 - 1995 can be found on page 42. LIQUIDITY AND CAPITAL RESOURCES Cash generated from operations and selected borrowings provide the major sources of funds for the growth of the business, including working capital, additions to property, plant and equipment and acquisitions. Cash and current marketable securities totaled $1.36 billion at the end of 1995 as compared with $704 million at the end of 1994. Total unused credit available to the Company approximates $3.4 billion, including $1.2 billion of credit commitments with various worldwide banks, $800 million of which expires on October 4, 1996 and $400 million on October 6, 2000. During 1995, the Company did not issue any long-term public debt. At December 31, 1995, the Company had $2.29 billion remaining on its shelf registration, which was filed for $2.59 billion in October 1994. A summary of borrowings can be found on page 33. Total borrowings at the end of 1995 and 1994 were $2.43 billion and $3.1 billion, respectively. In 1995 and 1994, net debt (debt net of cash and current marketable securities) was 10.5% and 25.2% of net capital (stockholders' equity and net debt), respectively. Total debt represented 21.2% and 30.3% of total capital (stockholders' equity and total debt) in 1995 and 1994, respectively. Stockholders' equity per share at the end of 1995 was $13.97 compared with $11.08 at year-end 1994, an increase of 26.1%. Financial instruments are used to manage interest rate and foreign exchange risks. The Company does not enter into derivative financial instruments for trading or speculative purposes. The principal financial instruments used are forward exchange contracts and interest rate swaps. Management believes that the risk of incurring losses related to these instruments is remote and that such losses, if any, would be immaterial. See page 37 for additional information. Additions to property, plant and equipment amounting to $1,256, $937 and $975 million in 1995, 1994 and 1993, respectively, were made primarily to increase the capacity of facilities for existing and new products. The Company intends to continue this level of investment to support the business operations. No material commitments for capital expenditures were outstanding at the end of 1995. Statement of Financial Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of," requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset in question may not be recoverable. The new standard, which will be adopted in 1996, will not have an effect on the Company's results of operations, cash flows or financial position as the Company's current policy is similiar, in all material aspects, to SFAS No. 121. During 1995, 1994 and 1993, certain businesses were acquired amounting to $456 ($154 million in cash and 4,656,000 shares of the Company's common stock issued from treasury valued at $302 million), $1,932 and $266 million, respectively. See page 38 for additional information. The Company annually repurchases a sufficient amount of its common stock in the open market to replace shares issued under various employee stock plans. During 1995, the Company repurchased 4.6 million shares of its common stock at a total cost of $322 million for use in the Company's employee benefit plans; 1994 and 1993 repurchases for this purpose totaled 3.8 million and 3.0 million shares at a cost of $185 million and $132 million, respectively. In 1993, the Company also repurchased 12.4 million shares of its common stock for general corporate purposes at a cost of $500 million. Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation," requires companies to measure employee stock compensation plans based on the fair value method of accounting. However, the statement allows the alternative of continued use of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," with pro forma disclosure of net income and earnings per share determined as if the fair value based method had been applied in measuring compensation cost. The Company will adopt the new standard in 1996 and expects to elect the continued use of APB Opinion No. 25. Pro forma disclosure is expected to be immaterial. 25 4 ================================================================================ CHANGING PRICES AND INFLATION Johnson & Johnson is aware that its products are used in a setting where, for more than a decade, policy makers, consumers and businesses have expressed concern about the rising cost of health care. In response to these concerns, Johnson & Johnson has a long standing policy of pricing products responsibly. For the period 1980-1994, in the United States, the weighted average compound growth rate of Johnson & Johnson's price increases for health care products (prescription and over-the-counter drugs, hospital and professional products) was below the U.S. Consumer Price Index (CPI) for the period. This was true again in 1995. Inflation rates, even though moderate in many parts of the world during 1995, continue to have an effect on worldwide economies and, consequently, on the way companies operate. In the face of increasing costs, the Company strives to maintain its profit margins through cost reduction programs, productivity improvements and timely price increases. SEGMENTS OF BUSINESS Financial information for the Company's three worldwide business segments is summarized below. Refer to page 41 for additional information on segments of business. Chart 6: Bar graph Showing Sales by Segment of Business for the years 1993 through 1995. See appendix for a complete description.
SALES Increase ---------------- (Dollars in Millions) 1995 1994 Amount Percent - -------------------------------------------------------------------------------- Consumer $ 5,831 5,251 580 11.0% Pharmaceutical 6,274 5,158 1,116 21.6 Professional 6,737 5,325 1,412 26.5 ---------------------------- Worldwide total $18,842 15,734 3,108 19.8% ============================
Chart 7: Bar graph showing Operating Profit by Segment of Business for the years 1993 through 1995. See appendix for a complete description.
OPERATING PROFIT Percent of Sales ---------------- (Dollars in Millions) 1995 1994 1995 1994 - --------------------------------------------------------------------------------- Consumer $ 298 443 5.1% 8.4% Pharmaceutical 2,073 1,669 33.0 32.4 Professional 1,203 843 17.9 15.8 ---------------- Segments total 3,574 2,955 19.0 18.8 Expenses not allocated to segments (257) (274) (1.4) (1.8) ---------------- Earnings before taxes on income $3,317 2,681 17.6% 17.0% ================
CONSUMER The Consumer segment's principal products are personal care and hygienic products, including oral and baby care products, first aid products, nonprescription drugs, sanitary protection products and adult incontinence products. Major brands include ACT Fluoride Rinse; BAND-AID Brand Adhesive Bandages; CAREFREE Panty Shields; CLEAN & CLEAR skin care products; IMODIUM A-D, an antidiarrheal; JOHNSON'S Baby line of products; MONISTAT 7, a remedy for vaginal yeast infections; MYLANTA gastrointestinal products and PEPCID AC Acid Controller from the Johnson & Johnson - Merck Consumer Pharmaceuticals Co.; NEUTROGENA skin and hair care products; `o.b.' Tampons; PEDIACARE children's cold and allergy medications; PENATEN and NATUSAN baby care products; PIZ BUIN and SUNDOWN sun care products; REACH toothbrushes; RoC skin care products; SERENITY incontinence products; SHOWER TO SHOWER personal care products; STAYFREE and SURE & NATURAL sanitary protection products; and the broad family of TYLENOL acetaminophen products. These products are marketed principally to the general public and distributed both to wholesalers and directly to independent and chain retail outlets. Consumer segment sales in 1995 were $5.83 billion, an increase of 11% over 1994. Sales by domestic companies accounted for 49% of the total segment, while international companies accounted for 51%. Growth was led by the addition of the Neutrogena line of high quality hair and skin care products, which was acquired in the third quarter of 1994; the U.S. launch of PEPCID AC Acid Controller, by Johnson & Johnson - Merck Consumer Pharmaceuticals Co., and the continued growth in international markets, most notably Brazil. In addition to PEPCID AC, Children's MOTRIN, a nonprescription children's fever and pain reliever that lasts up to eight hours, was introduced as an over-the-counter product. Consumer segment sales in 1994 were $5.25 billion, an increase of 8.9% over 1993. Sales by domestic companies accounted for 51.3% of the total segment, while international companies accounted for 48.7%. The worldwide Consumer segment sales increase included the acquisitions of RoC S.A. in late 1993 and Neutrogena at the end of the third quarter of 1994. Additionally, new products such as TYLENOL Extended Relief, MYLANTA Soothing Lozenges, the ARTHRITIS FOUNDATION line of pain relievers and 26 5 ================================================================================ JOHNSON'S HEALTHFLOW Infant Feeding System were introduced during the year. Consumer segment sales were $4.82 billion in 1993. Sales by domestic companies accounted for 54.5% of the total segment and international subsidiaries accounted for 45.5%. Domestic Consumer sales growth was slowed by a sluggish retail environment and fierce competition faced by MONISTAT 7. International Consumer sales reflected improvements in Latin America, Asia and Africa, which reduced the substantial decline in the U.S. dollar value of sales from European operations. Acquisitions and divestitures during 1995 and 1994 are described in more detail on page 38. PHARMACEUTICAL The Pharmaceutical segment represents over 50% of operating profit for all segments. The Pharmaceutical segment's principal worldwide franchises are in the allergy, antifungal, biotech, central nervous system, contraceptive, dermatology, gastrointestinal and immunobiology fields. These products are distributed both directly and through wholesalers for use by health care professionals and the general public. Prescription drugs include DURAGESIC, a transdermal patch for chronic pain; EPREX (sold in the U.S. as PROCRIT), a biotechnology derived version of the human hormone erythropoietin, which stimulates red blood cell production; ERGAMISOL, a colon cancer drug; FLOXIN, an antibacterial; HISMANAL, the once-a-day less sedating antihistamine; IMODIUM, an antidiarrheal; LEUSTATIN, for hairy cell leukemia; MOTILIUM, a gastrointestinal mobilizer; NIZORAL, SPORANOX and TERAZOL, antifungals; ORTHOCLONE OKT-3, for reversing the rejection of kidney, heart and liver transplants; ORTHO-NOVUM group of oral contraceptives; PREPULSID (sold in the U.S. as PROPULSID), a gastrointestinal prokinetic; RETIN-A, a dermatological cream for acne; RISPERDAL, an antipsychotic drug; and ULTRAM, a new centrally acting prescription analgesic for moderate to moderately severe pain. Johnson & Johnson markets more than 90 prescription drugs around the world, with 57% of the sales generated outside the United States. Twenty-seven drugs sold by the Company had 1995 sales in excess of $50 million, with 19 of them in excess of $100 million. Pharmaceutical segment sales in 1995 were $6.27 billion, an increase of 21.6% over 1994. Domestic sales advanced 25.9%, while international sales rose 18.6%. The worldwide sales growth reflects the outstanding performances of RISPERDAL, PROPULSID, SPORANOX, DURAGESIC and PROCRIT. Additionally, ULTRAM, launched in late March, was also an important contributor to sales growth. Pharmaceutical segment sales in 1994 were $5.16 billion, an increase of 14.9% over 1993. Domestic sales advanced 20.7%, while international sales rose 11%. The worldwide sales increase was attributed to the outstanding February, 1994 launch of RISPERDAL and the continued strong growth of PROPULSID, first introduced in late 1993. The sales increase was also led by the strong growth of EPREX, PROCRIT, SPORANOX, DURAGESIC and FLOXIN. In 1993, Pharmaceutical segment sales increased 3.5% over 1992, to $4.49 billion. This growth was led by sales gains from PREPULSID, PROPULSID, SPORANOX, EPREX, PROCRIT, FLOXIN, LEUSTATIN and DURAGESIC. Domestic Pharmaceutical sales advanced 7.4%, while international sales were negatively impacted by the strength of the U.S. dollar relative to international currencies as well as the pressure on pharmaceutical prices in Germany and Italy. Significant research activities continued in Pharmaceutical segment companies, increasing to $961 million in 1995, or $194 million over 1994. This represents 15.3% of 1995 Pharmaceutical sales and a compound growth rate of 16% for the ten-year period since 1985. Pharmaceutical research is led by two worldwide organizations, Janssen Research Foundation headquartered in Belgium and the R.W. Johnson Pharmaceutical Research Institute headquartered in the United States. Other research involves collaborations with the Scripps Clinic and Research Foundation in La Jolla, California and the James Black Foundation in London, England. PROFESSIONAL The Professional segment includes suture and mechanical wound closure products, less invasive surgical instruments, diagnostic products, medical equipment and devices, disposable contact lenses, surgical instruments, joint replacements and products for wound management and infection prevention. These products are used principally in the professional fields by physicians, dentists, nurses, therapists, hospitals, diagnostic laboratories and clinics. Distribution to these markets is done both directly and through surgical supply and other dealers. In 1995, Professional segment sales increased 26.5% over 1994, to $6.74 billion. Strong sales growth continued to be fueled by the rapid market acceptance of the PALMAZ-SCHATZ Coronary Stent due to its efficiency in reducing restenosis, or recurring blockage of coronary arteries following balloon angioplasty. LifeScan's blood glucose monitoring systems, Vistakon's disposable contact lenses, Ethicon Endo-Surgery's minimally invasive surgical instruments and Ethicon sutures continued to deliver solid growth. Johnson & Johnson Clinical Diagnostics, the diagnostic business acquired from Eastman Kodak in November 1994, also contributed to significant sales growth in the Professional segment. Of the 1995 Professional segment sales, domestic and international companies accounted for 54% and 46% of the total, respectively. In 1994, Professional segment sales increased 10.4% over 1993, to $5.33 billion. Domestic sales posted a 6.4% increase, while international sales rose 15.8%. The worldwide Professional segment sales increase was attributed to the continued growth of ACUVUE disposable contact lenses; ONE TOUCH II blood glucose monitoring systems; the PALMAZ-SCHATZ Stent and various Ethicon Endo-Surgery devices for less invasive surgery. Base businesses, such as Ethicon sutures, also contributed significantly to the increase. The acquisition of Eastman Kodak's Clinical Diagnostics business was completed on November 30, 1994; however, the increase in sales resulting from the acquisition was reduced by the divestitures of the "A" Company and 27 6 ================================================================================ the ophthalmic pharmaceutical business of IOLAB. Sales by domestic companies accounted for 55.9% of the total segment, while international companies accounted for 44.1%. In 1993, Professional segment sales increased 4.1% over 1992, to $4.82 billion. Worldwide sales gains were led by LifeScan, Ethicon Endo-Surgery and Vistakon. Domestic sales posted a 5.8% gain, aided by strong sales of PROTECTIV catheter safety system products, the DINAMAP Plus vital signs monitor and P.F.C. Hip and Knee orthopaedic joint reconstruction products. These gains were reduced by a decline in sales at Johnson & Johnson Medical, Inc., due to a reduction in inventories at hospitals and distributors. International sales rose 1.9%, despite the adverse impact of the stronger U.S. dollar relative to international currencies. Acquisitions and divestitures during 1995 and 1994 are described in more detail on page 38. GEOGRAPHIC AREAS The Company further categorizes its sales and operating profit by major geographic area as presented for the years 1995 and 1994:
SALES Increase ----------------- (Dollars in Millions) 1995 1994 Amount Percent - -------------------------------------------------------------------------------- United States $ 9,190 7,812 1,378 17.6% Europe 5,573 4,504 1,069 23.7 Western Hemisphere excluding U.S. 1,731 1,511 220 14.6 Asia-Pacific, Africa 2,348 1,907 441 23.1 ---------------------------- Worldwide total $18,842 15,734 3,108 19.8% ============================
OPERATING PROFIT Percent of Sales ---------------- (Dollars in Millions) 1995 1994 1995 1994 - -------------------------------------------------------------------------------- United States $1,872 1,534 20.4% 19.6% Europe 1,267 1,050 22.7 23.3 Western Hemisphere excluding U.S. 195 173 11.3 11.4 Asia-Pacific, Africa 240 198 10.2 10.4 ---------------- Segments total $3,574 2,955 19.0% 18.8% ================
International sales and operating profit were favorably impacted in 1995 and 1994 by the translation of local currency operating results into U.S. dollars at higher average exchange rates than in 1994 and 1993, respectively. Operating profit reported above is before deduction of taxes on income and certain income and expense items not allocated to segments, such as interest expense, minority interests and general corporate income and expense. See page 41 for additional information on geographic areas. Chart 8: Bar graph showing Sales by Geographic Area of Business for the years 1993 through 1995. See appendix for a complete description. Chart 9: Bar graph showing Operating Profit by Geographic Area of Business for the years 1993 through 1995. See appendix for a complete description. DESCRIPTION OF BUSINESS The Company, employing 82,300 employees worldwide, is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. The Company's primary interest, both historically and currently, has been in products related to health and well-being. The Company is organized on the principles of decentralized management. The Executive Committee of Johnson & Johnson is the principal management group responsible for the operations of the Company. In addition, three Executive Committee members are Chairmen of Group Operating Committees, which are comprised of managers who represent key operations within the group, as well as management expertise in other specialized functions. These Committees oversee and coordinate the activities of domestic and international companies related to each of the Consumer, Pharmaceutical, Professional and Diagnostic businesses. Operating management of each company is headed by a Chairman, President, General Manager or Managing Director who reports directly to or through a Company Group Chairman. In line with this policy of decentralization, each international subsidiary is, with some exceptions, managed by citizens of the country where it is located. The Company's international business is conducted by subsidiaries manufacturing in 39 countries outside the United States and selling in over 175 countries throughout the world. In all its product lines, the Company competes with companies both large and small, located in the U.S. and abroad. Competition is strong in all lines without regard to the number and size of the competing companies involved. Competition in research, involving the development of new products and processes and the improvement of existing products and processes, is particularly significant and results from time to time in product and process obsolescence. The development of new and improved products is important to the Company's success in all areas of its business. This competitive environment requires substantial investments in continuing research and in multiple sales forces. In addition, the winning and retention of customer acceptance of the Company's consumer products involves heavy expenditures for advertising, promotion and selling. 28 7 ================================================================================ CONSOLIDATED BALANCE SHEET Johnson & Johnson and Subsidiaries
At December 31, 1995 and January 1, 1995 (Dollars in Millions) (Note 1) 1995 1994 - ------------------------------------------------------------------------------------------------------- ASSETS - ------------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and cash equivalents (Notes 1 and 16) $ 1,201 636 Marketable securities at cost (Note 16) 163 68 Accounts receivable trade, less allowances $258 (1994, $200) 2,903 2,601 Inventories (Notes 1 and 2) 2,276 2,161 Deferred taxes on income (Note 6) 717 582 Prepaid expenses and other receivables 678 632 --------------------- TOTAL CURRENT ASSETS 7,938 6,680 ===================== Marketable securities, non-current (Note 16) 338 354 Property, plant and equipment, net (Notes 1 and 3) 5,196 4,910 Intangible assets, net (Notes 1 and 4) 2,950 2,403 Deferred taxes on income (Note 6) 307 262 Other assets 1,144 1,059 --------------------- TOTAL ASSETS $ 17,873 15,668 ===================== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES Loans and notes payable (Note 5) $ 321 899 Accounts payable 1,602 1,192 Accrued liabilities 1,949 1,602 Accrued salaries, wages and commissions 292 257 Taxes on income 224 316 --------------------- TOTAL CURRENT LIABILITIES 4,388 4,266 ===================== Long-term debt (Note 5) 2,107 2,199 Deferred tax liability (Note 6) 156 130 Certificates of extra compensation (Note 11) 86 85 Other liabilities 2,091 1,866 STOCKHOLDERS' EQUITY Preferred stock-without par value (authorized and unissued 2,000,000 shares) -- -- Common stock-par value $1.00 per share (authorized 1,080,000,000 shares; issued 767,412,000 and 767,392,000 shares) 767 767 Note receivable from employee stock ownership plan (Note 14) (64) (73) Cumulative currency translation adjustments (Note 7) 148 (35) Retained earnings 10,511 8,966 --------------------- 11,362 9,625 Less common stock held in treasury, at cost (119,732,000 and 124,382,000 shares) 2,317 2,503 --------------------- TOTAL STOCKHOLDERS' EQUITY 9,045 7,122 ===================== TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,873 15,668 =====================
See Notes to Consolidated Financial Statements 29 8 ================================================================================ CONSOLIDATED STATEMENT OF EARNINGS Johnson & Johnson and Subsidiaries
(Dollars in Millions Except Per Share Figures) (Note 1) 1995 1994 1993 - ------------------------------------------------------------------------------------------- SALES TO CUSTOMERS $ 18,842 15,734 14,138 ================================== Cost of products sold 6,235 5,299 4,791 Selling, marketing and administrative expenses 7,462 6,350 5,771 Research expense 1,634 1,278 1,182 Interest income (115) (60) (80) Interest expense, net of portion capitalized (Note 3) 143 142 126 Other expense, net 166 44 16 ---------------------------------- 15,525 13,053 11,806 ---------------------------------- Earnings before provision for taxes on income 3,317 2,681 2,332 Provision for taxes on income (Note 6) 914 675 545 ---------------------------------- NET EARNINGS $ 2,403 2,006 1,787 ================================== NET EARNINGS PER SHARE (Note 1) $ 3.72 3.12 2.74 ==================================
================================================================================ CONSOLIDATED STATEMENT OF COMMON STOCK, RETAINED EARNINGS AND TREASURY STOCK
Common Stock Issued Treasury Stock -------------------- Retained --------------------- (Dollars in Millions; Shares in Thousands) (Notes 1, 10 and 17) Shares Amount Earnings Shares Amount - ------------------------------------------------------------------------------------------------------------------------------- BALANCE, JANUARY 3, 1993 767,366 $ 767 $ 6,648 111,970 $ 2,006 ============================================================= Net earnings -- -- 1,787 -- -- Cash dividends paid (per share: $1.01) -- -- (659) -- -- Employee compensation and stock option plans -- -- (49) (3,066) (134) Repurchase of common stock -- -- -- 15,487 632 Other 6 -- -- -- -- ------------------------------------------------------------- BALANCE, JANUARY 2, 1994 767,372 767 7,727 124,391 2,504 ============================================================= Net earnings -- -- 2,006 -- -- Cash dividends paid (per share: $1.13) -- -- (727) -- -- Employee compensation and stock option plans -- -- (78) (3,855) (186) Repurchase of common stock -- -- -- 3,846 185 Other 20 -- 38 -- -- ------------------------------------------------------------- BALANCE, JANUARY 1, 1995 767,392 767 8,966 124,382 2,503 ============================================================= Net earnings -- -- 2,403 -- -- Cash dividends paid (per share: $1.28) -- -- (827) -- -- Employee compensation and stock option plans -- -- (35) (4,576) (309) Repurchase of common stock -- -- -- 4,582 322 Acquisitions -- -- -- (4,656) (199) Other 20 -- 4 -- -- ------------------------------------------------------------- BALANCE, DECEMBER 31, 1995 767,412 $ 767 $ 10,511 119,732 $ 2,317 =============================================================
See Notes to Consolidated Financial Statements 30 9 ================================================================================ CONSOLIDATED STATEMENT OF CASH FLOWS Johnson & Johnson and Subsidiaries
(Dollars in Millions) (Note 1) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 2,403 2,006 1,787 Adjustments to reconcile net earnings to cash flows: Depreciation and amortization of property and intangibles 857 724 617 Tax deferrals (63) (66) (19) Changes in assets and liabilities, net of effects from acquisition of businesses: Increase in accounts receivable, less allowances (265) (239) (310) Increase in inventories (9) (162) (29) Increase (decrease) in accounts payable and accrued liabilities 617 462 (3) (Increase) decrease in other current and non-current assets (294) (112) 102 Increase in other current and non-current liabilities 136 362 23 --------------------------------- NET CASH FLOWS FROM OPERATING ACTIVITIES 3,382 2,975 2,168 ================================= CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (1,256) (937) (975) Proceeds from the disposal of assets 465 332 66 Acquisition of businesses, net of cash acquired (Note 17) (154) (1,932) (266) Other, principally marketable securities (151) (19) (86) --------------------------------- NET CASH USED BY INVESTING ACTIVITIES (1,096) (2,556) (1,261) ================================= CASH FLOWS FROM FINANCING ACTIVITIES Dividends to stockholders (827) (727) (659) Repurchase of common stock (322) (185) (632) Proceeds from short-term debt 197 328 297 Retirement of short-term debt (634) (263) (336) Proceeds from long-term debt -- 960 511 Retirement of long-term debt (260) (363) (468) Proceeds from the exercise of stock options 112 62 43 --------------------------------- NET CASH USED BY FINANCING ACTIVITIES (1,734) (188) (1,244) ================================= Effect of exchange rate changes on cash and cash equivalents 13 33 (36) --------------------------------- Increase (decrease) in cash and cash equivalents 565 264 (373) Cash and cash equivalents, beginning of year (Note 1) 636 372 745 --------------------------------- CASH AND CASH EQUIVALENTS, END OF YEAR (Note 1) $ 1,201 636 372 ================================= - -------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL CASH FLOW DATA Cash paid during the year for: Interest, net of portion capitalized $ 137 133 118 Income taxes 1,071 612 665 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Treasury stock issued for employee compensation and stock option plans, net of cash proceeds $ 212 133 95 ACQUISITIONS OF BUSINESSES Fair value of assets acquired $ 493 2,279 339 Fair value of liabilities assumed (37) (347) (73) --------------------------------- 456 1,932 266 Treasury stock issued (302) -- -- --------------------------------- Net cash payments $ 154 1,932 266 =================================
See Notes to Consolidated Financial Statements 31 10 ================================================================================ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Johnson & Johnson and Subsidiaries - -------------------------------------------------------------------------------- 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Johnson & Johnson and subsidiaries. Intercompany accounts and transactions are eliminated. CASH EQUIVALENTS The Company considers securities with maturities of three months or less, when purchased, to be cash equivalents. REVENUE RECOGNITION The Company recognizes revenue from product sales when the goods are shipped to the customer. INVENTORIES Inventories are stated at the lower of cost (determined principally by the first-in, first-out method) or market. DEPRECIATION OF PROPERTY The Company utilizes the straight-line method of depreciation for financial statement purposes for all additions to property, plant and equipment placed in service after January 1, 1989. Property, plant and equipment placed in service prior to January 1, 1989 is generally depreciated using an accelerated method. INTANGIBLE ASSETS The excess of the cost over the fair value of net assets of purchased businesses is recorded as goodwill and is amortized on a straight-line basis over periods of 40 years or less. The cost of other acquired intangibles is amortized on a straight-line basis over their estimated useful lives. The Company continually evaluates the carrying value of goodwill and other intangible assets. Any impairments would be recognized when the expected future operating cash flows derived from such intangible assets is less than their carrying value. LONG-LIVED ASSETS Statement of Financial Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of," requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset in question may not be recoverable. The new standard, which will be adopted in 1996, will not have an effect on the Company's results of operations, cash flows or financial position as the Company's current policy is similiar, in all material aspects, to SFAS No. 121. FINANCIAL INSTRUMENTS Gains and losses on foreign currency hedges of existing assets or liabilities, or hedges of firm commitments are deferred and are recognized in income as part of the related transaction. INCOME TAXES The Company intends to continue to reinvest its undistributed international earnings to expand its international operations; therefore, no tax has been provided to cover the repatriation of such undistributed earnings. At December 31, 1995 and January 1, 1995 the cumulative amount of undistributed international earnings was approximately $4.7 billion and $3.7 billion, respectively. NET EARNINGS PER SHARE Net earnings per share are calculated using the average number of shares outstanding during each year. Shares issuable under stock option and compensation plans would not materially reduce net earnings per share. All share and per share amounts have been restated to retroactively reflect prior year stock splits. RISKS AND UNCERTAINTIES The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results are not expected to differ from those estimates. ANNUAL CLOSING DATE The Company follows the concept of a fiscal year which ends on the Sunday nearest to the end of the month of December. Normally each fiscal year consists of 52 weeks, but every five or six years, as was the case in 1992, the fiscal year consists of 53 weeks. RECLASSIFICATION Certain prior year amounts have been reclassified to conform with current year presentation. - -------------------------------------------------------------------------------- 2 INVENTORIES At the end of 1995 and 1994, inventories comprised:
(Dollars in Millions) 1995 1994 - -------------------------------------------------------------- Raw materials and supplies $ 625 477 Goods in process 519 640 Finished goods 1,132 1,044 ------------------ $2,276 2,161 ==================
- -------------------------------------------------------------------------------- 3 PROPERTY, PLANT AND EQUIPMENT At the end of 1995 and 1994, property, plant and equipment at cost and accumulated depreciation comprised:
(Dollars in Millions) 1995 1994 - -------------------------------------------------------------- Land and land improvements $ 344 300 Buildings and building equipment 2,611 2,521 Machinery and equipment 4,217 4,102 Construction in progress 1,003 732 ----------------- 8,175 7,655 Less accumulated depreciation 2,979 2,745 ----------------- $5,196 4,910 =================
32 11 ================================================================================ The Company capitalizes interest expense as part of the cost of construction of facilities and equipment. Interest expense capitalized in 1995, 1994 and 1993 was $70, $44 and $48 million, respectively. Upon retirement or other disposal of fixed assets, the cost and related amount of accumulated depreciation or amortization are eliminated from the asset and reserve accounts, respectively. The difference, if any, between the net asset value and the proceeds is adjusted to income. - -------------------------------------------------------------------------------- 4 INTANGIBLE ASSETS At the end of 1995 and 1994, intangible assets, consisting primarily of patents, trademarks and goodwill, comprised:
(Dollars in Millions) 1995 1994 - -------------------------------------------------------------- Intangible assets $3,345 2,667 Less accumulated amortization 395 264 ----------------- $2,950 2,403 =================
- -------------------------------------------------------------------------------- 5 BORROWINGS The components of long-term debt are as follows:
EFF. EFF. (Dollars in Millions) 1995 RATE 1994 RATE - --------------------------------------------------------------- 8.72% Debentures due 2024 $ 300 8.72% 300 8.72% 8 1/2% Notes due 1995 - - 250 8.50 6.73% Debentures due 2023 250 6.73 250 6.73 7 3/8% Eurodollar Notes due 1997 200 7.43 200 7.40 8% Notes due 1998 200 8.00 200 7.97 7 3/8% Notes due 2002 198 7.49 198 7.46 8.25% Eurodollar Notes due 2004 198 8.37 198 8.24 9% European Currency Unit Notes due 1997(1) 192 6.84 185 6.80 7.38% to 8.38% Medium Term Notes due 1996-8 160 8.05 160 8.23 5 3/8% Swiss Franc Notes due 1997(1) 132 5.13 117 5.31 11 1/4% Italian Lire Notes due 1998(1) 128 5.33 125 5.53 8.82% Italian Lire Notes due 2003(1) 96 5.58 94 4.07 Industrial Revenue Bonds 66 4.90 73 4.87 4 1/2% Currency Indexed Notes due 1998(1) 57 5.69 66 4.08 Other, principally international 46 - 44 - ------ ----- 2,223 7.20(2) 2,460 7.24(2) Less current portion 116 261 ------ ----- $2,107 2,199 ====== =====
(1) These debt issues include the effect of foreign currency movements in the principal amounts shown. Such debt was converted to fixed or floating rate U.S. dollar liabilities via interest rate and currency swaps. Unrealized currency gains (losses) on currency swaps are not included in the basis of the related debt transactions which such swaps hedge and are classified in the balance sheet as other assets (liabilities). Also, see Note 16. (2) Weighted average effective rate. The Company has access to substantial sources of funds at numerous banks worldwide. Total unused credit available to the Company approximates $3.4 billion, including $1.2 billion of credit commitments with various worldwide banks, $800 million of which expire on October 4, 1996 and $400 million on October 6, 2000. Borrowings under the credit line agreements will bear interest based on either bids provided by the banks, the prime rate or London Interbank Offered Rates (LIBOR), plus applicable margins. Commitment fees under the agreements are not material. In 1994, the Company filed a shelf registration with the Securities and Exchange Commission, and in combination with $585 million remaining from a prior shelf registration, initiated a third series of its Medium Term Note Program (MTN) for the issuance of up to $2.59 billion of unsecured debt securities and warrants to purchase debt securities. No MTN's were issued during 1995 or 1994. The Company did not issue any long-term public debt in 1995. In 1994, the Company issued $300 million of 8.72% Debentures due 2024 from the shelf registration and $127.5 million equivalent of 11.25% Italian Lire Notes due 1998; $116.4 million equivalent of 5.375% Swiss Franc Bonds due 1997; $200 million 7.375% Eurodollar Notes due 1997; and $200 million 8.25% Eurodollar Notes due 2004. The proceeds were used for general corporate purposes, including the retirement of commercial paper and financing of acquisitions. At December 31, 1995, the Company had $2.29 billion remaining on its shelf registration. Short-term borrowings amounted to $321 million at the end of 1995. These borrowings are composed of $95 million of medium term notes and $226 million of local borrowings principally by international subsidiaries. Interest rates on the Industrial Revenue Bonds vary from 4% to 6%, while rates on other long-term obligations vary from 2% to 20% according to local conditions. Aggregate maturities of long-term obligations for each of the next five years commencing in 1996 are:
(Dollars in Millions) 1996 1997 1998 1999 2000 - -------------------------------------------------------------- $116 533 461 15 7
- -------------------------------------------------------------------------------- 6 INCOME TAXES The provision for taxes on income consists of:
(Dollars in Millions) 1995 1994 1993 - -------------------------------------------------------------- Currently payable: U.S. taxes on domestic income $480 348 191 U.S. tax benefit on international income (33) (30) (1) International taxes 468 374 344 U.S. state and local taxes 62 49 30 --------------------------- 977 741 564 --------------------------- Deferred: U.S. taxes (42) (36) (26) International taxes (21) (30) 7 --------------------------- (63) (66) (19) --------------------------- $914 675 545 ===========================
Deferred income taxes are recognized for tax consequences of "temporary differences" by applying enacted statutory tax rates, applicable to future years, to differences between the financial reporting and the tax basis of existing assets and liabilities. 33 12 ================================================================================ Temporary differences and carryforwards for 1995 are as follows:
Deferred Tax ----------------- (Dollars in Millions) Asset Liability - -------------------------------------------------------------- Postretirement benefits $ 275 - Postemployment benefits 102 - Employee benefit plans 97 - Depreciation - 251 Non-deductible intangibles - 136 Alternative minimum tax credits 101 - International R&D capitalized for tax 95 - Reserves & liabilities 293 - Income reported for tax purposes 174 - Miscellaneous international 100 138 Miscellaneous U.S. 257 149 ----------------- Total deferred income taxes $1,494 674 =================
A comparison of income tax expense at the federal statutory rate of 35% in 1995, 1994, and 1993 to the Company's effective tax rate is as follows:
(Dollars in Millions) 1995 1994 1993 - ---------------------------------------------------------------- Earnings before taxes on income: U.S. $1,642 1,317 1,006 International 1,675 1,364 1,326 ----------------------------- Worldwide $3,317 2,681 2,332 ============================= Statutory taxes $1,161 938 816 Tax rates: Statutory 35.0% 35.0% 35.0% Puerto Rico & Ireland operations (7.3) (9.2) (9.7) Research tax credits (0.2) (0.5) (0.7) Domestic state and local 1.2 1.2 0.8 International subsidiaries excluding Ireland (1.7) (1.8) (2.4) All other 0.6 0.5 0.4 ----------------------------- Effective tax rate 27.6% 25.2% 23.4% =============================
The increase in the 1995 worldwide effective tax rate was primarily due to the increase in income subject to tax in the United States. For 1995, the Company has subsidiaries operating in Puerto Rico under a grant for tax relief expiring December 31, 2007. The Omnibus Budget Reconciliation Act of 1993 includes a change in the tax code which will reduce the benefit the Company receives from its operations in Puerto Rico by 60% gradually over a five-year period. In addition, the Company has subsidiaries manufacturing in Ireland under an incentive tax rate expiring on December 31, 2010. - -------------------------------------------------------------------------------- 7 INTERNATIONAL CURRENCY TRANSLATION For translation of its international currencies, the Company has determined that the local currencies of its international subsidiaries are the functional currencies except those in highly inflationary economies, which are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years. In consolidating international subsidiaries, balance sheet currency effects are recorded as a separate component of stockholders' equity. This equity account includes the results of translating all balance sheet assets and liabilities at current exchange rates, except for those located in highly inflationary economies, principally Latin America, which are reflected in operating results. An analysis of the changes during 1995 and 1994 in the separate component of stockholders' equity for cumulative currency translation adjustments follows:
(Dollars in Millions) 1995 1994 - -------------------------------------------------------------- Beginning of year $(35) (338) Translation adjustments 183 303 ---------------- End of year $148 (35) ================
Net currency transaction and translation gains and losses included in other expense were after-tax losses of $14, $4 and $5 million in 1995, 1994 and 1993, respectively, incurred principally in Latin America. - -------------------------------------------------------------------------------- 8 INTERNATIONAL SUBSIDIARIES The following amounts are included in the consolidated financial statements for international subsidiaries:
(Dollars in Millions) 1995 1994 - -------------------------------------------------------------- Current assets $4,488 3,702 Current liabilities 2,234 1,970 Net property, plant and equipment 2,298 1,893 Parent company equity in net assets 5,525 4,514 Excess of parent company equity over investments 4,953 4,030
International sales to customers were $9,652, $7,922 and $6,935 million for 1995, 1994 and 1993, respectively. - -------------------------------------------------------------------------------- 9 RENTAL EXPENSE AND LEASE COMMITMENTS Rentals of space, vehicles, manufacturing equipment and office and data processing equipment under operating leases amounted to approximately $227 million in 1995, $207 million in 1994 and $254 million in 1993. The approximate minimum rental payments required under operating leases that have initial or remaining noncancellable lease terms in excess of one year at December 31, 1995 are:
After (Dollars in Millions) 1996 1997 1998 1999 2000 2000 Total - ----------------------------------------------------------------- $83 69 53 34 24 68 331
Commitments under capital leases are not significant. 34 13 ================================================================================ - -------------------------------------------------------------------------------- 10 COMMON STOCK, STOCK OPTION PLANS AND STOCK COMPENSATION AGREEMENTS The Company has stock option plans which provide for the granting of options to certain officers and employees to purchase shares of its common stock within prescribed periods at prices equal to the fair market value on the date of grant. Share activity during 1995 and 1994 under the Company's stock option plans is summarized below:
(Shares in Thousands, Price Per Share) 1995 1994 - --------------------------------------------------------------- Held at beginning of year by 3,591 employees (1994-3,304) 36,272 34,995 Granted to 2,957 employees (1994-1,850) 8,451 5,709 --------------------- 44,723 40,704 Exercised (1993-2,182) (4,092) (3,169) Cancelled or expired (1,319) (1,263) --------------------- Held at end of year by 3,931 employees (1994-3,591) 39,312 36,272 ===================== Shares exercisable, end of year (1993-13,880) 15,724 14,566 ===================== Shares available for future grants, end of year (1993-8,883) 20,026 4,125 ===================== Price range of options exercised $ 8.91 to 8.85 to (1993-$8.85 to $35.66) $ 50.69 50.28 ===================== $12.69 to 8.91 to Price range of options held, end of year $ 86.25 57.75 =====================
At year-end, the Company was obligated to deliver, over a period of not more than two years, 33 thousand shares of common stock (1994-115) in performance of outstanding stock compensation agreements with 826 employees (1994-1,944). Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation," requires companies to measure employee stock compensation plans based on the fair value method of accounting. However, the statement allows the alternative of continued use of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," with pro forma disclosure of net income and earnings per share determined as if the fair value based method had been applied in measuring compensation cost. The Company will adopt the new standard in 1996 and expects to elect the continued use of APB Opinion No. 25. Pro forma disclosure is expected to be immaterial. - -------------------------------------------------------------------------------- 11 CERTIFICATES OF EXTRA COMPENSATION The Company has a deferred compensation program for senior management and other key personnel. The value of units awarded under the program is related to the net asset value of the Company and historical earning power of its common stock. Amounts earned under the program are payable only after employment with the Company has ended. - -------------------------------------------------------------------------------- 12 SEGMENTS OF BUSINESS AND GEOGRAPHIC AREAS See page 41 for information on segments of business and geographic areas. - -------------------------------------------------------------------------------- 13 RETIREMENT AND PENSION PLANS The Company sponsors various retirement and pension plans, including defined benefit, defined contribution and termination indemnity plans, which cover most employees worldwide. Plan benefits are primarily based on the employee's compensation during the last three to five years before retirement and the number of years of service. The Company's objective in funding its domestic plans is to accumulate funds sufficient to provide for all accrued benefits. International subsidiaries have plans under which funds are deposited with trustees, annuities are purchased under group contracts, or reserves are provided. In certain countries other than the United States, the funding of pension plans is not a common practice as funding provides no economic benefit. Consequently, the Company has several pension plans which are not funded. Net pension expense for the Company's defined benefit plans for 1995, 1994 and 1993 included the following components:
(Dollars in Millions) 1995 1994 1993 - -------------------------------------------------------------- Service cost-benefits earned during period $ 121 120 109 Interest cost on projected benefit obligations 207 188 168 Actual return on plan assets (555) (3) (350) Net amortization and deferral 310 (199) 149 Curtailment and settlement losses (gains) 25 1 (5) ---------------------------- Net periodic pension cost $ 108 107 71 ============================
The net periodic pension cost attributable to domestic plans and included above was $43 million in 1995, $49 million in 1994 and $27 million in 1993. The following tables provide the domestic assumptions and the range of international assumptions, which are based on the economic environment of each applicable country, used to develop net periodic pension cost and the actuarial present value of projected benefit obligations:
DOMESTIC PENSION PLANS 1995 1994 1993 - -------------------------------------------------------------- Expected long-term rate of return on plan assets 9.0% 9.0% 9.0% Weighted average discount rate 7.25 8.75 7.5 Rate of increase in compensation levels 5.5 5.5 5.5 INTERNATIONAL PENSION PLANS - ------------------------------------------------------------- Expected long-term rate of return on plan assets 5.0-10.0% 5.0-10.0% 5.0-9.5% Weighted average discount rates 4.25-9.5 4.5-10.0 4.5-9.5 Rate of increase in compensation levels 3.0-7.0 3.0-7.0 3.0-6.5
35 14 ================================================================================ The following table sets forth the actuarial present value of benefit obligations and funded status at year-end 1995 and 1994 for the Company's defined benefit plans:
Year-end 1995 Year-end 1994 ---------------------------------- ---------------------------------- Domestic International Domestic International ---------------------------------- ---------------------------------- Over- Under- Over- Under- (Dollars in Millions) funded funded funded funded - ---------------------------------------------------------------------------------------------------------------------------------- Plan assets at fair value, primarily stocks and bonds $ 1,893 883 76 1,540 814 22 Book reserves (prepaids) 323 (77) 250 273 (42) 192 ------------------------------------------------------------------------ Total assets and reserves 2,216 806 326 1,813 772 214 ------------------------------------------------------------------------ Actuarial present value of benefit obligations: Vested benefits 1,670 575 224 1,349 519 158 Nonvested benefits 17 24 42 17 33 26 ------------------------------------------------------------------------ Accumulated benefit obligation 1,687 599 266 1,366 552 184 Effect of projected future salary increases 336 196 82 208 186 38 ------------------------------------------------------------------------ Projected benefit obligation 2,023 795 348 1,574 738 222 ------------------------------------------------------------------------ Assets and reserves in excess of (less than) projected benefit obligation $ 193 11 (22) 239 34 (8) ======================================================================== Components of assets and reserves in excess of (less than) projected benefit obligation: Unrecognized prior service cost $ (68) (27) (4) (70) (28) (4) Unrecognized net gain (loss) 227 (46) -- 273 (17) (1) Unamortized net transition assets (liabilities) 19 84 (23) 24 79 (10) Additional minimum liability 15 -- 5 12 -- 7 ------------------------------------------------------------------------ Total $ 193 11 (22) 239 34 (8) ======================================================================== Assets and reserves in excess of accumulated benefit obligation $ 529 207 60 447 220 30 ========================================================================
- -------------------------------------------------------------------------------- 14 SAVINGS PLAN The Company has several voluntary 401(k) savings plans designed to enhance the existing retirement programs covering eligible employees. The Company matches a percentage of each employee's contributions consistent with the provisions of the plan for which he/she is eligible. In the U.S. salaried plan, one-third of the Company match is paid in Company stock under an employee stock ownership plan (ESOP). In 1990, to establish the ESOP, the Company loaned $100 million to the ESOP Trust to purchase shares of Company stock on the open market. In exchange, the Company received a note, the balance of which is recorded as a reduction of stockholders' equity. Total Company contributions to the plans were $45 million in 1995, $41 million in 1994 and $42 million in 1993. - -------------------------------------------------------------------------------- 15 OTHER POSTRETIREMENT BENEFITS The Company provides postretirement benefits, primarily health care, to all domestic retired employees and their dependents. Most international employees are covered by government-sponsored programs and the cost to the Company is not significant. The Company does not fund retiree health care benefits in advance and has the right to modify these plans in the future. The net periodic postretirement benefit costs for retirees included the following components:
(Dollars in Millions) 1995 1994 1993 - -------------------------------------------------------------- Service cost-benefits earned during the current year $12 16 18 Interest cost on accumulated postretirement benefit obligation 44 44 57 Actual return on plan assets (3) - (4) Net amortization and deferral (7) (3) (1) -------------------------- Net periodic postretirement benefit cost $46 57 70 ==========================
The plans' status as of year-end 1995 and 1994 was as follows:
Year-end ----------------- (Dollars in Millions) 1995 1994 - -------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $ 394 344 Fully eligible active participants 76 62 Other active participants 140 100 ----------------- Accumulated postretirement benefit obligation 610 506 Life insurance plan assets at fair value 38 36 ----------------- Accumulated postretirement benefit obligation in excess of plans' assets 572 470 ------------------ Unrecognized net gain 112 188 Unrecognized prior service cost 6 5 ----------------- Accrued postretirement benefit cost $ 690 663 =================
36 15 ================================================================================ The postretirement benefit obligation was determined by application of the terms of the various plans, together with relevant actuarial assumptions. Health care cost trends are projected at annual rates grading from 11% for employees under age 65 and 8% for employees over age 65 down to 5% for both groups by the year 2006 and beyond. The effect of a 1% annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation at year-end by $69 million and the service and interest cost components of the net periodic postretirement benefit cost for 1995 by a total of $7 million. Assumptions used to develop net periodic postretirement benefit cost and the actuarial present value of projected postretirement benefit obligations were as follows:
1995 1994 1993 - ---------------------------------------------------------------- Expected long-term rate of return on plan assets 9.0% 9.0% 9.0% Weighted average discount rate 7.25 8.75 7.5 Rate of increase in compensation levels 5.5 5.5 5.5
The Company also provides postemploymemt benefits to qualified former or inactive employees. The Company does not fund these benefits and has the right to modify these plans in the future. - -------------------------------------------------------------------------------- 16 FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENT RISK The Company uses derivative financial instruments to reduce exposures to market risks resulting from fluctuations in interest rates and foreign exchange. The Company does not enter into financial instruments for trading or speculative purposes. The Company has a policy of only entering into contracts with parties that have at least an "A" (or equivalent) credit rating. The counterparties to these contracts are major financial institutions and the Company does not have significant exposure to any one counterparty. Management believes that risk of loss is remote and in any event would be immaterial. INTEREST RATE RISK MANAGEMENT The Company uses interest rate and currency swaps to manage interest rate risk related to borrowings. Interest rate and currency swap agreements which hedge third party debt issues mature with these borrowings and are described in Note 5. Forward rate agreements are used by the Company to fix the rates received on short-term floating-rate investments and mature within 1 year. The following table illustrates the notional amounts outstanding, maturity dates, and the weighted average receive and pay rates of interest rate hedge agreements by type. (Notional amounts provide an indication of the extent of the Company's involvement in such agreements but do not represent its exposure to market risk.)
1995 ----------------------------------------- Weighted Avg. Rate National Maturity ------------------ (Dollars in Millions) Amounts Date Receive Pay - -------------------------------------------------------------------------------- Interest rate and currency swaps Pay variable(1) $116 1997 5.4% 5.1% 193 1998 9.0 5.5 95 2003 8.8 5.6 Pay fixed $188 1997 9.0 6.8 Forward rate agreements $680 1996 6.8% 3.8%
(1) Variable rates are primarily indexed to the Federal Reserve H.15 30 day commercial paper rate. Interest expense under these agreements, and the respective debt instruments that they hedge, are recorded at the net effective interest rate of the hedged transactions. FOREIGN EXCHANGE RISK MANAGEMENT The Company enters into forward exchange contracts to hedge product costs and revenues that are denominated in foreign currencies and currency swaps to hedge foreign currency denominated debt. These hedging instruments are classified consistent with the item being hedged. The Company enters into various types of foreign exchange contracts maturing within five years and almost always acts as a buyer. The Company has forward exchange contracts outstanding at year-end in various currencies principally in U.S. Dollars, Japanese Yen and German Marks. In addition, the Company has currency swaps outstanding principally in Swiss Francs, Italian Lire and British Pounds. Deferred unrealized gains and losses, based on dealer-quoted prices, from hedging firm commitments are presented in the following table:
1995 --------------------------------------- Notional (Dollars in Millions) Amounts Gains Losses - -------------------------------------------------------------- Forwards $2,382 54 31 Currency swaps 1,932 15 6
FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of cash and cash equivalents approximates fair value due to the short-term maturities of these instruments. The fair value of current and non-current marketable securities, long-term debt and foreign interest rate and currency swap agreements (used to hedge third party debt issues) were estimated based on quotes obtained from brokers for those or similar instruments. The fair value of foreign interest rate and currency contracts (used for hedging purposes) and long-term investments were estimated based on quoted market prices at year-end. 37 16 ================================================================================ The estimated fair value of the Company's financial instruments are as follows:
1995 1994 ------------------------------------------- (Dollars in CARRYING FAIR Carrying Fair Millions) AMOUNT VALUE Amount Value - -------------------------------------------------------------- NONDERIVATIVES Cash and cash equivalents $1,201 1,201 636 636 Marketable securities - current 163 164 68 68 Marketable securities - non-current 338 341 354 354 Long-term investments(1) 192 196 147 149 Long-term debt 2,223 2,345 2,460 2,387 DERIVATIVES Other assets (liabilities): Currency swaps (net) - 9 - - Forwards (net) - 23 - (11) Forward rate agreements - 5 - 5 Interest and currency swap agreements related to debt (13) 28 5 (13)
(1) Included in other assets on the balance sheet. The carrying amounts in the table are included in the statement of financial position under the indicated captions. CONCENTRATION OF CREDIT RISK The Company invests its excess cash in both deposits with major banks throughout the world and other high quality short-term liquid money market instruments (commercial paper, government and government agency notes and bills, etc.). The Company has a policy of making investments only with commercial institutions that have at least an "A" (or equivalent) credit rating. These investments generally mature within six months and the Company has not incurred any related losses. The Company sells a broad range of products in the health care field in most countries of the world. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base. Ongoing credit evaluations of customers' financial condition are performed and, generally, no collateral is required. The Company maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management's expectations. - -------------------------------------------------------------------------------- 17 ACQUISITIONS AND DIVESTITURES During 1995 and 1994, certain businesses were acquired for $456 million ($154 million in cash and 4,656,000 shares of the Company's common stock issued from treasury valued at $302 million) and $1,932 million, respectively. These acquisitions were accounted for by the purchase method and accordingly the results of operations of the acquired businesses have been included in the accompanying consolidated financial statements from their respective dates of acquisition. The 1995 acquisitions included: Mitek Surgical Products, Inc., a manufacturer and marketer of suture anchor products for soft tissue reattachment; Menlo Care, Inc., a manufacturer and marketer of vascular access products to hospital and home health care professionals; Joint Medical Products Inc., a developer and marketer of artificial hips (S-Rom(TM)) and knee joints; Gyno Pharma, Inc., the exclusive licensor and marketer of the PARAGARD T380A (intrauterine device) in the United States and UltraCision, Inc., the developer and manufacturer of ultrasonic surgical instruments (Harmonic Scalpel(TM)). The excess of purchase price over the estimated fair market value of 1995 acquisitions amounted to $435 million. This amount has been allocated to identifiable intangibles and goodwill. Pro forma information is not provided for 1995 as the impact of the acquisitions does not have a material effect on operating results. On September 27, 1994, the Company acquired substantially all of the outstanding shares of the Neutrogena Corporation pursuant to a cash tender offer. On October 3, 1994 the Company consummated a short form merger pursuant to which the remaining shares were acquired. The price, net of cash acquired, was $924 million. Neutrogena Corporation is a manufacturer of high quality skin and hair care products. On November 30, 1994 the Company acquired Eastman Kodak's Clinical Diagnostics business, a worldwide supplier of diagnostic products, for $1,008 million. The fair market value of net assets acquired in the Neutrogena and Clinical Diagnostics acquisitions was $360 million. The excess of purchase price over the fair value has been allocated to identifiable intangibles ($877 million) and goodwill ($695 million). Identifiable intangibles and goodwill are being amortized on a straight line basis over periods of 15 to 40 years. Summarized below are unaudited pro forma combined results of operations for the years ended January 1, 1995 and January 2, 1994 assuming the Neutrogena and Clinical Diagnostics acquisitions occurred at the beginning of each year presented:
(Dollars in Millions Except Per Share Figures) 1994 1993 - -------------------------------------------------------------------------- Sales $16,414 14,955 Net earnings 1,980 1,770 Net earnings per share 3.08 2.72
38 17 ================================================================================ The unaudited pro forma combined results of operations are not necessarily indicative of the results of operations that would have occurred had the businesses actually been combined during the periods presented; nor is this information indicative of future combined results of operations. In 1995, the Company completed the sales of Johnson & Johnson Advanced Materials Company and Chicopee B.V., Netherlands, worldwide developers and marketers of non-woven materials used in a broad range of health care, consumer and industrial applications. In addition, the Company sold the IOLAB ophthalmic surgical business to Chiron Vision, a division of Chiron Corporation. In 1994, the Company completed the sales of the Janssen Chimica prepak and bulk chemical supply business and the "A" Company orthodontic supplies business. In addition, the Company sold the ophthalmic pharmaceutical product line of IOLAB Corporation to Ciba Vision for approximately $300 million. The 1995 divestitures resulted in an after-tax capital gain of $103 million. The after-tax gains on the 1995 and 1994 divestitures were reinvested in certain base businesses. - -------------------------------------------------------------------------------- 18 PENDING LEGAL PROCEEDINGS The Company is involved in numerous product liability cases in the United States, many of which concern adverse reactions to drugs and medical devices. The damages claimed are substantial, and while the Company is confident of the adequacy of the warnings which accompany such products, it is not feasible to predict the ultimate outcome of litigation. However, the Company believes that if any liability results from such cases for injuries occurring on or before December 31, 1985, it will be substantially covered by insurance. Due to the general unavailability of traditional liability insurance, including product liability insurance, the Company is substantially uninsured for injuries occurring on or after January 1, 1986. The Company has a self-insurance program which provides reserves for such injuries based on claims experience. Additionally, 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 is also involved in a number of patent, trademark and other lawsuits incidental to its business. The Company believes that the above proceedings in the aggregate would not have a material adverse effect on its results of operations, cash flows or financial position. - -------------------------------------------------------------------------------- 19 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected unaudited quarterly financial data for the years 1995 and 1994 is summarized below:
1995 1994 ------------------------------------------ ------------------------------------------ (Dollars in Millions FIRST SECOND THIRD FOURTH First Second Third Fourth Except Per Share Figures) QUARTER QUARTER QUARTER QUARTER Quarter Quarter Quarter Quarter - --------------------------------------------------------------------------------------------------------------------------------- SEGMENT SALES TO CUSTOMERS Consumer $1,436 1,469 1,461 1,465 1,279 1,270 1,374 1,328 Pharmaceutical 1,483 1,620 1,598 1,573 1,190 1,308 1,347 1,313 Professional 1,577 1,673 1,679 1,808 1,221 1,338 1,317 1,449 --------------------------------------------------------------------------------------- TOTAL SALES 4,496 4,762 4,738 4,846 3,690 3,916 4,038 4,090 ======================================================================================= Gross margin 3,049 3,200 3,195 3,163 2,509 2,629 2,674 2,623 Earnings before provision for taxes on income 921 931 872 593 736 762 713 470 NET EARNINGS 654 661 623 465 544 559 525 378 ======================================================================================= NET EARNINGS PER SHARE $ 1.02 1.02 .96 .72 .85 .86 .82 .59 =======================================================================================
- -------------------------------------------------------------------------------- 20 SUBSEQUENT EVENT On November 13, 1995, Johnson & Johnson and Cordis Corporation announced the signing of a definitive merger agreement for a $109 per share stock-for-stock merger of the two companies. The shareholders of Cordis Corporation approved the merger on February 23, 1996. Cordis has approximately 18.0 million shares outstanding on a fully diluted basis, giving the merger a total equity value, net of cash, of approximately $1.8 billion. Cordis is a leader in angiography and angioplasty (balloon catheters). The combination of Cordis and Johnson & Johnson's interventional cardiology business is an important strategic step for both companies to meet the challenge of providing for customer needs in the fast changing healthcare industry. 39 18 ================================================================================ REPORT OF MANAGEMENT - -------------------------------------------------------------------------------- The management of Johnson & Johnson is responsible for the integrity and objectivity of the accompanying financial statements and related information. The statements have been prepared in conformity with generally accepted accounting principles, and include amounts that are based on our best judgements with due consideration given to materiality. Management maintains a system of internal accounting controls monitored by a corporate staff of professionally trained internal auditors who travel worldwide. This system is designed to provide reasonable assurance, at reasonable cost, that assets are safeguarded and that transactions and events are recorded properly. While the Company is organized on the principles of decentralized management, appropriate control measures are also evidenced by well-defined organizational responsibilities, management selection, development and evaluation processes, communicative techniques, financial planning and reporting systems and formalized procedures. It has always been the policy and practice of the Company to conduct its affairs ethically and in a socially responsible manner. This responsibility is characterized and reflected in the Company's Credo and Policy on Business Conduct which are distributed throughout the Company. Management maintains a systematic program to ensure compliance with these policies. Coopers & Lybrand L.L.P., independent auditors, is engaged to audit our financial statements. Coopers & Lybrand L.L.P. obtains and maintains an understanding of our internal control structure and conducts such tests and other auditing procedures considered necessary in the circumstances to express the opinion in the report that follows. The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with the independent auditors, management and internal auditors to review their work and confirm that they are properly discharging their responsibilities. In addition, the independent auditors, the General Counsel and the Vice President, Internal Audit are free to meet with the Audit Committee without the presence of management to discuss the results of their work and observations on the adequacy of internal financial controls, the quality of financial reporting and other relevant matters. /s/ Ralph S. Larsen /s/ Clark H. Johnson - ---------------------------- --------------------------- Ralph S. Larsen Clark H. Johnson Chairman, Board of Directors Vice President, Finance and Chief Executive Officer and Chief Financial Officer ================================================================================ INDEPENDENT AUDITOR'S REPORT - -------------------------------------------------------------------------------- To the Stockholders and Board of Directors of Johnson & Johnson: We have audited the consolidated balance sheet of Johnson & Johnson and subsidiaries as of December 31, 1995 and January 1, 1995, and the related consolidated statement of earnings, consolidated statement of common stock, retained earnings and treasury stock, and consolidated statement of cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Johnson & Johnson and subsidiaries as of December 31, 1995 and January 1, 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P - --------------------------- New York, New York January 23, 1996, except for Note 20, as to which the date is February 23, 1996 40 19 ================================================================================ SEGMENTS OF BUSINESS(1) Johnson & Johnson and Subsidiaries
SALES TO CUSTOMERS(2) - -------------------------------------------------------------------------------- (Dollars in Millions) 1995 1994 1993 ----------------------------------- Consumer-Domestic $ 2,858 2,692 2,631 International 2,973 2,559 2,193 ----------------------------------- Total 5,831 5,251 4,824 ----------------------------------- Pharmaceutical-Domestic 2,697 2,143 1,775 International 3,577 3,015 2,715 ----------------------------------- Total 6,274 5,158 4,490 ----------------------------------- Professional-Domestic 3,635 2,977 2,797 International 3,102 2,348 2,027 ----------------------------------- Total 6,737 5,325 4,824 ----------------------------------- Worldwide total $18,842 15,734 14,138 ===================================
OPERATING PROFIT IDENTIFIABLE ASSETS ------------------------------- ---------------------------- (Dollars in Millions) 1995 1994 1993 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------- Consumer $ 298 443 521 4,852 4,489 3,452 Pharmaceutical 2,073 1,669 1,406 5,129 4,756 3,815 Professional 1,203 843 655 6,679 5,765 4,365 ----------------------------------------------------------------- Segments total 3,574 2,955 2,582 16,660 15,010 11,632 Expenses not allocated to segments(3) (257) (274) (250) General corporate 1,213 658 610 ----------------------------------------------------------------- Worldwide total $ 3,317 2,681 2,332 17,873 15,668 12,242 =================================================================
ADDITIONS TO PROPERTY, DEPRECIATION AND PLANT & EQUIPMENT AMORTIZATION ----------------------- -------------------- (Dollars in Millions) 1995 1994 1993 1995 1994 1993 - -------------------------------------------------------------------------------- Consumer $ 264 218 260 254 241 205 Pharmaceutical 427 327 313 219 183 159 Professional 472 365 368 322 268 221 ---------------------------------------------- Segments total 1,163 910 941 795 692 585 General corporate 93 27 34 62 32 32 ---------------------------------------------- Worldwide total $1,256 937 975 857 724 617 ==============================================
================================================================================ GEOGRAPHIC AREAS
SALES TO CUSTOMERS(2) OPERATING PROFIT IDENTIFIABLE ASSETS ---------------------------- -------------------------- -------------------------- (Dollars in Millions) 1995 1994 1993 1995 1994 1993 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------------- United States $ 9,190 7,812 7,203 1,872 1,534 1,209 8,472 8,430 6,252 Europe 5,573 4,504 4,024 1,267 1,050 1,036 5,633 4,271 3,625 Western Hemisphere excluding U.S. 1,731 1,511 1,325 195 173 156 1,072 970 742 Asia-Pacific, Africa 2,348 1,907 1,586 240 198 181 1,483 1,339 1,013 ----------------------------------------------------------------------------------------- Segments total 18,842 15,734 14,138 3,574 2,955 2,582 16,660 15,010 11,632 Expenses not allocated to segments(3) (257) (274) (250) General corporate 1,213 658 610 ----------------------------------------------------------------------------------------- Worldwide total $18,842 15,734 14,138 3,317 2,681 2,332 17,873 15,668 12,242 =========================================================================================
(1) See Management's Discussion and Analysis, pages 26 to 28, for a description of the segments in which the Company does business. (2) Export sales and intersegment sales are not significant. No single customer represents 10% or more of total sales. (3) Expenses not allocated to segments include interest expense, minority interests and general corporate income and expense. 41 20
================================================================================================================================ SUMMARY OF OPERATIONS AND STATISTICAL DATA 1985-1995 Johnson & Johnson and Subsidiaries (Dollars in Millions Except Per Share Figures) 1995 1994 1993 1992 1991 1990 1989 1988 1987 - -------------------------------------------------------------------------------------------------------------------------------- Sales to customers - Domestic $ 9,190 7,812 7,203 6,903 6,248 5,427 4,881 4,576 4,167 Sales to customers - International 9,652 7,922 6,935 6,850 6,199 5,805 4,876 4,424 3,845 ---------------------------------------------------------------------------------------- TOTAL SALES 18,842 15,734 14,138 13,753 12,447 11,232 9,757 9,000 8,012 ======================================================================================== Cost of products sold 6,235 5,299 4,791 4,678 4,204 3,937 3,480 3,292 2,958 Selling, marketing and administrative expenses 7,462 6,350 5,771 5,671 5,099 4,469 3,897 3,630 3,228 Research expense 1,634 1,278 1,182 1,127 980 834 719 674 617 Permanent impairment of certain assets and operations in Latin America - - - - - 104 - - - Redirection charges - - - - - - - - - Interest income (115) (60) (80) (93) (88) (98) (87) (72) (95) Interest expense, net of portion capitalized 143 142 126 124 129 201(4) 141 104 116 Other expense (income), net 166 44 16 39 85 162 93 (24) (5) ---------------------------------------------------------------------------------------- 15,525 13,053 11,806 11,546 10,409 9,609 8,243 7,604 6,819 ---------------------------------------------------------------------------------------- Earnings before provision for taxes on income 3,317 2,681 2,332 2,207 2,038 1,623 1,514 1,396 1,193 Provision for taxes on income 914 675 545 582 577 480 432 422 360 ---------------------------------------------------------------------------------------- Earnings before cumulative effect of accounting changes 2,403 2,006 1,787 1,625 1,461 1,143 1,082 974 833 Cumulative effect of accounting changes (net of tax) - - - (595) - - - - - ---------------------------------------------------------------------------------------- NET EARNINGS $ 2,403 2,006 1,787 1,030 1,461 1,143 1,082 974 833 ======================================================================================== Percent of sales to customers 12.8 12.7 12.6 7.5(1) 11.7 10.2(2) 11.1 10.8 10.4 NET EARNINGS PER SHARE OF COMMON STOCK $ 3.72 3.12 2.74 1.56 2.19 1.72 1.62 1.43 1.21 ======================================================================================== PERCENT RETURN ON AVERAGE STOCKHOLDERS' EQUITY 29.7 31.6 33.3 19.1(1) 27.8 25.3(2) 28.3 27.9 26.4 ======================================================================================== PERCENT INCREASE (DECREASE) OVER PREVIOUS YEAR: Sales to customers 19.8 11.3 2.8 10.5 10.8 15.1 8.4 12.3 14.4 NET EARNINGS PER SHARE 19.2 13.9 75.6(1) (28.8)(1) 27.3(2) 6.2(2) 13.3 18.2 -(3) ======================================================================================== SUPPLEMENTARY EXPENSE DATA: Cost of materials and services(5) $ 9,852 7,952 7,033 6,857 6,329 5,728 4,908 4,528 4,030 Total employment costs 4,707 4,282 4,066 4,044 3,507 3,195 2,871 2,639 2,388 Depreciation and amortization 857 724 617 560 493 474 414 391 356 Maintenance and repairs(6) 252 217 202 210 203 185 193 191 180 Total tax expense(7) 1,433 1,142 968 1,000 966 825 708 678 591 TOTAL TAX EXPENSE PER SHARE(7) 2.22 1.78 1.49 1.52 1.45 1.24 1.06 1.00 .86 ======================================================================================== SUPPLEMENTARY BALANCE SHEET DATA: Property, plant and equipment, net $ 5,196 4,910 4,406 4,115 3,667 3,247 2,846 2,493 2,250 Additions to property, plant and equipment 1,256 937 975 1,103 987 830 750 664 515 Total assets 17,873 15,668 12,242 11,884 10,513 9,506 7,919 7,119 6,546 Long-term debt 2,107 2,199 1,493 1,365 1,301 1,316 1,170 1,166 733 ======================================================================================== COMMON STOCK INFORMATION: Dividends paid per share $ 1.28 1.13 1.01 .89 .77 .66 .56 .48 .40 Stockholders' equity per share $ 13.97 11.08 8.66 7.89 8.44 7.36 6.23 5.26 5.06 Market price per share (year-end close) $85 1/2 54 3/4 44 7/8 50 1/2 57 1/4 35 7/8 29 5/8 21 1/4 18 3/4 Average shares outstanding (millions) 645.9 643.1 651.7 659.9 666.1 666.1 666.2 681.2 690.3 STOCKHOLDERS OF RECORD (THOUSANDS) 113.5 104.7 96.1 84.1 69.9 64.6 60.5 54.5 51.2 ======================================================================================== EMPLOYEES (THOUSANDS) 82.3 81.5 81.6 84.9 82.7 82.2 83.1 81.3 78.2 ======================================================================================== (Dollars in Millions Except Per Share Figures) 1986 1985 - ------------------------------------------------------------- Sales to customers - Domestic 3,972 3,990 Sales to customers - International 3,031 2,431 ------------------ TOTAL SALES 7,003 6,421 ================== Cost of products sold 2,632 2,592 Selling, marketing and administrative expenses 2,868 2,516 Research expense 521 471 Permanent impairment of certain assets and operations in Latin America - - Redirection charges 540 - Interest income (100) (107) Interest expense, net of portion capitalized 66 46 Other expense (income), net 85 4 ------------------ 6,612 5,522 ------------------ Earnings before provision for taxes on income 391 899 Provision for taxes on income 61 285 ------------------ Earnings before cumulative effect of accounting changes 330 614 Cumulative effect of accounting changes (net of tax) - - ------------------ NET EARNINGS 330 614 ================== Percent of sales to customers 4.7(3) 9.6 NET EARNINGS PER SHARE OF COMMON STOCK .46 .84 ================== PERCENT RETURN ON AVERAGE STOCKHOLDERS' EQUITY 10.7(3) 19.5 ================== PERCENT INCREASE (DECREASE) OVER PREVIOUS YEAR: Sales to customers 9.1 4.8 NET EARNINGS PER SHARE (45.2)(3) 21.7 ================== SUPPLEMENTARY EXPENSE DATA: Cost of materials and services(5) 3,642 3,274 Total employment costs 2,091 1,941 Depreciation and amortization 291 262 Maintenance and repairs(6) 170 133 Total tax expense(7) 284 466 TOTAL TAX EXPENSE PER SHARE(7) .40 .64 ================== SUPPLEMENTARY BALANCE SHEET DATA: Property, plant and equipment, net 1,916 1,840 Additions to property, plant and equipment 446 366 Total assets 5,877 5,095 Long-term debt 242 185 ================== COMMON STOCK INFORMATION: Dividends paid per share .34 .32 Stockholders' equity per share 4.09 4.58 Market price per share (year-end close) 16 7/8 13 1/8 Average shares outstanding (millions) 713.6 731.5 STOCKHOLDERS OF RECORD (THOUSANDS) 52.1 53.5 ================== EMPLOYEES (THOUSANDS) 77.1 74.9 ================== (1) After the cumulative effect of accounting changes of $595 million. - 1992 earnings percent of sales to customers before accounting changes is 11.8%. - 1992 earnings percent return on average stockholders' equity before accounting changes is 28.5%. - 1993 net earnings per share percent increase over prior year before accounting change is 11.4%; 1992 is 12.3%. (2) After Latin America non-recurring charges of $125 million. - 1990 net earnings percent of sales to customers before non-recurring charges is 11.3%. - 1990 percent return on average stockholders' equity before non-recurring charges is 27.6%. - 1991 net earnings per share percent increase over prior year before non-recurring charges is 15.3%; 1990 is 17.3%. (3) After one-time charges of $380 million. - 1986 earnings percent of sales before one-time charges is 10.1%. - 1986 percent return on average stockholders' equity before one-time charges is 21.6%. - 1987 net earnings per share percent increase over prior year before one-time charges is 22.2%; 1986 is 17.9%. (4) Includes Latin America non-recurring charge of $36 million for the liquidation of Argentine debt. (5) Net of interest and other income. (6) Also included in cost of materials and services category. (7) Includes taxes on income, payroll, property and other business taxes.
42 21 APPENDIX PAGE 1 OF 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION CHART 1 GRAPH PAGE 23 SALES TO CUSTOMERS MILLIONS OF DOLLARS 1986 THROUGH 1995 Bar graph showing ten years of sales to customers. Each bar depicts total sales for the year. Each bar is color coded to show domestic and international sales as a piece of the whole. Bar graph points:
DOMESTIC INTERNATIONAL WORLDWIDE YEAR SALES SALES SALES - ----- -------- ------------- --------- 1986 $3,972 $ 3,031 $ 7,003 1987 4,167 3,845 8,012 1988 4,576 4,424 9,000 1989 4,881 4,876 9,757 1990 5,427 5,805 11,232 1991 6,248 6,199 12,447 1992 6,903 6,850 13,753 1993 7,203 6,935 14,138 1994 7,812 7,922 15,734 1995 9,190 9,652 18,842
CHART 2 GRAPH PAGE 23 NET EARNINGS MILLIONS OF DOLLARS 1986 THROUGH 1995 Bar graph showing ten years of net earnings. Bar graph points:
NET YEAR EARNINGS - ----- -------- 1986 $ 330 1987 833 1988 974 1989 1,082 1990 1,143 1991 1,461 1992 1,030 1993 1,787 1994 2,006 1995 2,403
22 APPENDIX PAGE 2 OF 5 CHART 3 GRAPH PAGE 24 NET EARNINGS PER SHARE AND CASH DIVIDENDS PAID PER SHARE DOLLARS PER SHARE 1986 THROUGH 1995 Bar graph showing ten years of net earnings per share. Additionally, cash dividends paid per share each year is shown on each bar in a different color. Bar graph points:
NET EARNINGS CASH DIVIDENDS YEAR PER SHARE PAID PER SHARE - ----- ------------ -------------- 1986 $ .46 $ .34 1987 1.21 .40 1988 1.43 .48 1989 1.62 .56 1990 1.72 .66 1991 2.19 .77 1992 1.56 .89 1993 2.74 1.01 1994 3.12 1.13 1995 3.72 1.28
CHART 4 PIE CHART PAGE 24 DISTRIBUTION OF SALES REVENUES -- 1995 A pie chart showing how 1995 sales revenues were distributed. Pie chart pieces: Employment Costs............................................ 25.0% Cost of Materials and Services.............................. 52.3 Depreciation and Amortization of Property and Intangibles... 4.5 Taxes Other Than Payroll.................................... 5.4 Cash Dividend Paid.......................................... 4.4 Earnings Reinvested in Business............................. 8.4
23 APPENDIX PAGE 3 OF 5 CHART 5 GRAPH PAGE 24 RESEARCH EXPENSE MILLIONS OF DOLLARS 1986 THROUGH 1995 Bar graph showing ten years of research expense. Bar graph points:
RESEARCH YEAR EXPENSE - ----- -------- 1986 $ 521 1987 617 1988 674 1989 719 1990 834 1991 980 1992 1,127 1993 1,182 1994 1,278 1995 1,634
CHART 6 GRAPH PAGE 26 SALES BY SEGMENT OF BUSINESS MILLIONS OF DOLLARS 1993 THROUGH 1995 Bar graph showing sales by segment of business. Each bar depicts total sales. The segments are shown as a percentage of total sales each year and are displayed in different colors. Bar graph points:
YEAR CONSUMER PHARM PROFESS TOTAL - ----- -------- ----- ------- -------- 1993 34.1% 31.8 % 34.1% $ 14,138 1994 33.4 32.8 33.8 15,734 1995 30.9 33.3 35.8 18,842
24 APPENDIX PAGE 4 OF 5 CHART 7 GRAPH PAGE 26 OPERATING PROFIT BY SEGMENT OF BUSINESS MILLIONS OF DOLLARS 1993 THROUGH 1995 Bar graph showing operating profit by segment of business. Each bar depicts the total of segments operating profit. The segments are shown as a percentage of total segments operating profit each year and are displayed in different colors. Bar graph points:
YEAR CONSUMER PHARM PROFESS TOTAL - ----- -------- ----- ------- ------- 1993 20.2% 54.4 % 25.4% $ 2,582 1994 15.0 56.5 28.5 2,955 1995 8.3 58.0 33.7 3,574
CHART 8 GRAPH PAGE 28 SALES BY GEOGRAPHIC AREA OF BUSINESS MILLIONS OF DOLLARS 1993 THROUGH 1995 Bar graph showing sales by geographic area of business. Each bar depicts total sales. The geographic areas are shown as a percentage of total sales each year and are displayed in different colors. Bar graph points:
AFRICA, UNITED WESTERN ASIA AND STATES EUROPE HEMISPHERE PACIFIC TOTAL ------ ------ ---------- -------- -------- 1993 50.9% 28.5% 9.4% 11.2% $ 14,138 1994 49.7 28.6 9.6 12.1 15,734 1995 48.8 29.6 9.2 12.4 18,842
25 APPENDIX PAGE 5 OF 5 CHART 9 GRAPH PAGE 28 OPERATING PROFIT BY GEOGRAPHIC AREA OF BUSINESS MILLIONS OF DOLLARS 1993 THROUGH 1995 Bar graph showing operating profit by geographic area of business. Each bar depicts the total of segments operating profit. The geographic areas are shown as a percentage of total segments operating profit each year and are displayed in different colors. Bar graph points:
AFRICA, UNITED WESTERN ASIA AND STATES EUROPE HEMISPHERE PACIFIC TOTAL ------ ------ ---------- -------- -------- 1993 46.8% 40.1% 6.1% 7.0% $ 2,582 1994 51.9 35.5 5.9 6.7 2,955 1995 52.4 35.4 5.5 6.7 3,574
EX-21 8 SUBSIDIARIES 1 EXHIBIT 21 SUBSIDIARIES Johnson & Johnson, a New Jersey corporation, has the domestic and international subsidiaries shown below. Certain domestic subsidiaries and international subsidiaries are not named because they are not significant in the aggregate. Johnson & Johnson has no parent.
JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION - ------------------------------------------------------------------------ ------------------ Domestic Subsidiaries: Cordis Corporation.................................................... Florida Cordis International Corporation...................................... Delaware Ethicon Endo-Surgery, Inc. ........................................... Ohio Ethicon, Inc. ........................................................ New Jersey GynoPharma Inc. ...................................................... Delaware Janssen Pharmaceutica Inc. ........................................... New Jersey Janssen Products, Inc. ............................................... Delaware Johnson & Johnson Clinical Diagnostics, Inc. ......................... New York Johnson & Johnson Consumer Products, Inc. ............................ New Jersey Johnson & Johnson (CR), Inc. ......................................... New Jersey Johnson & Johnson Development Corporation............................. New Jersey Johnson & Johnson Finance Corporation................................. New Jersey Johnson & Johnson Health Care Systems Inc. ........................... New Jersey Johnson & Johnson International....................................... New Jersey Johnson & Johnson Japan Inc. ......................................... New Jersey Johnson & Johnson Medical, Inc. ...................................... New Jersey Johnson & Johnson - Merck Consumer Pharmaceuticals Co. ............... New Jersey Johnson & Johnson (Middle East) Inc. ................................. New Jersey Johnson & Johnson Professional, Inc. ................................. New Jersey Johnson & Johnson (Russia), Inc. ..................................... New Jersey Johnson & Johnson S.A., Inc. ......................................... New Jersey Johnson & Johnson Services, Inc. ..................................... New Jersey Johnson & Johnson Slovakia, Ltd. ..................................... New Jersey Johnson & Johnson Vision Products, Inc. .............................. Florida Johnson & Johnson S.E., Inc. ......................................... New Jersey Joint Medical Products Corporation.................................... Delaware JJHC, Inc. ........................................................... Delaware LifeScan, Inc. ....................................................... California McNEIL-PPC, Inc. ..................................................... New Jersey McNeilab, Inc. ....................................................... Pennsylvania Mitek Surgical Products, Inc. ........................................ Delaware Neutrogena Corporation................................................ Delaware Noramco, Inc. ........................................................ Georgia OMJ Pharmaceuticals, Inc. ............................................ Delaware Ortho Biotech Inc. ................................................... New Jersey Ortho Diagnostic Systems Inc. ........................................ New Jersey Ortho Pharmaceutical Corporation...................................... Delaware Raritan Advertising, Inc. ............................................ New Jersey
16 2
JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION - ------------------------------------------------------------------------ ------------------ Somerset Laboratories, Inc. .......................................... New Jersey Therakos, Inc. ....................................................... Florida International Subsidiaries: Centra Healthcare..................................................... United Kingdom Cilag AG International................................................ Switzerland Cilag AG Pharmaceuticals.............................................. Switzerland Cilag de Mexico, S.A. de C.V. ........................................ Mexico Cilag Farmaceutica Ltda. ............................................. Brazil Cilag G.m.b.H. ....................................................... Germany Cilag Holding AG...................................................... Switzerland Cordis A.B. .......................................................... Sweden Cordis A.G. .......................................................... Switzerland Cordis B.V. .......................................................... Netherlands Cordis Espana S.A. ................................................... Spain Cordis Europe N.V. ................................................... Netherlands Cordis France SARL.................................................... France Cordis Ges, m.b.H. ................................................... Austria Cordis Holding (B.V.)................................................. Netherlands Cordis Hungary KFT.................................................... Hungary Cordis International S.A. ............................................ Belgium Cordis Italia S.p.A. ................................................. Italy Cordis Med. App. G.m.b.H. ............................................ Germany Cordis S.A. .......................................................... Belgium Cordis S.A. .......................................................... France Cordis S.A. (PTY) Ltd. ............................................... South Africa Cordis Sp. zoo........................................................ Poland Cordis U.K. Ltd. ..................................................... United Kingdom Ethicon Endo-Surgery (Europe) G.m.b.H. ............................... Germany Ethicon G.m.b.H & Co. KG.............................................. Germany Ethicon Limited....................................................... Scotland Ethicon S.p.A. ....................................................... Italy Ethnor Del Istmo S.A. ................................................ Panama Ethnor (Proprietary) Limited.......................................... South Africa Ethnor S.A. .......................................................... France Greiter AG............................................................ Switzerland Greiter G.m.b.H. ..................................................... Germany Greiter (International) AG............................................ Switzerland Instrumentos Medico-Cirurgico Cordis S.A. ............................ Portugal Janssen Biotech N.V. ................................................. Belgium Janssen-Cilag......................................................... Norway Janssen-Cilag AB...................................................... Sweden Janssen-Cilag AG...................................................... Switzerland Janssen-Cilag A/S..................................................... Denmark Janssen-Cilag Farmaceutica, Ltda. .................................... Portugal Janssen-Cilag K.K. ................................................... Japan Janssen-Cilag Limited................................................. United Kingdom Janssen-Cilag N.V. ................................................... Belgium
17 3
JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION - ------------------------------------------------------------------------ ------------------ Janssen-Cilag OY...................................................... Finland Janssen-Cilag Pharmaceutica B.V. ..................................... Netherlands Janssen-Cilag Pharmaceutica S.A.C.I. ................................. Greece Janssen-Cilag Pharma Vertrieb GmbH.................................... Austria Janssen-Cilag Pty. Limited............................................ Australia Janssen-Cilag S.A. ................................................... Spain Janssen-Cilag S.A. ................................................... France Janssen-Cilag S.p.A. ................................................. Italy Janssen Farmaceutica Ltda............................................. Brazil Janssen Farmaceutica Limitada......................................... Chile Janssen Farmaceutica Portugal, Limitada............................... Portugal Janssen Farmaceutica C.A. ............................................ Venezuela Janssen Farmaceutica S.A ............................................. Spain Janssen Farmaceutica S.A ............................................. Colombia Janssen Farmaceutica, S.A. de C.V. ................................... Mexico Janssen G.m.b.H. ..................................................... Germany Janssen Internationaal N.V. .......................................... Belgium Janssen Korea, Ltd. .................................................. Korea Janssen-Kyowa Co., Ltd. .............................................. Japan Janssenpharma A/S..................................................... Denmark Janssen Pharmaceutica Inc. ........................................... Canada Janssen Pharmaceutica Limited......................................... Thailand Janssen Pharmaceutica N.V. ........................................... Belgium Janssen Pharmaceutica (Proprietary) Limited........................... South Africa Janssen Pharmaceutical Limited........................................ Ireland JHC Nederland B.V. ................................................... Netherlands JHC Ltd. ............................................................. Ireland Johnson & Johnson AB.................................................. Sweden Johnson & Johnson AG.................................................. Switzerland Johnson & Johnson A/S................................................. Denmark Johnson & Johnson S.A. de C.V. ....................................... Mexico Johnson & Johnson de Argentina, S.A.C.e I. ........................... Argentina Johnson & Johnson China, Ltd. ........................................ China Johnson & Johnson Clinical Diagnostics (Europe) S.A. ................. France Johnson & Johnson Clinical Diagnostics Ltd. .......................... England Johnson & Johnson Clinical Diagnostics................................ France Johnson & Johnson Clinical Diagnostics SpA............................ Italy Johnson & Johnson Consumer Europe..................................... France Johnson & Johnson de Chile S.A. ...................................... Chile Johnson & Johnson de Colombia S.A. ................................... Colombia Johnson & Johnson de Costa Rica S.A. ................................. Costa Rica Johnson & Johnson del Ecuador S.A. ................................... Ecuador Johnson & Johnson de Mexico, S.A. de C.V. ............................ Mexico Johnson & Johnson de Uruguay S.A. .................................... Uruguay Johnson & Johnson de Venezuela, S.A. ................................. Venezuela Johnson & Johnson (Dominicana), C. por A. ............................ Dominican Republic Johnson & Johnson Finance Limited..................................... United Kingdom
18 4
JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION - ------------------------------------------------------------------------ ------------------ Johnson & Johnson/Gaba B.V. .......................................... Netherlands Johnson & Johnson G.m.b.H. ........................................... Germany Johnson & Johnson Guatemala, S.A. .................................... Guatemala Johnson & Johnson Hellas S.A. ........................................ Greece Johnson & Johnson Hemisferica S.A. ................................... Puerto Rico Johnson & Johnson Holding GmbH........................................ Germany Johnson & Johnson (Hong Kong) Limited................................. Hong Kong Johnson & Johnson Inc. ............................................... Canada Johnson & Johnson Industria e Comercio Ltda........................... Brazil Johnson & Johnson (Ireland) Limited................................... Ireland Johnson & Johnson (Jamaica) Limited................................... Jamaica Johnson & Johnson (Kenya) Limited..................................... Kenya Johnson & Johnson Korea Ltd. ......................................... Korea Johnson & Johnson Kft. ............................................... Hungary Johnson & Johnson K.K. ............................................... Japan Johnson & Johnson Leasing G.m.b.H. ................................... Germany Johnson & Johnson Limitada............................................ Portugal Johnson & Johnson Limited............................................. United Kingdom Johnson & Johnson Limited............................................. India Johnson & Johnson Ltd. ............................................... Russia Johnson & Johnson Management Limited.................................. United Kingdom Johnson & Johnson Medical B.V. ....................................... Netherlands Johnson & Johnson Medical (China) Ltd. ............................... China Johnson & Johnson Medical G.m.b.H..................................... Austria Johnson & Johnson Medical G.m.b.H. ................................... Germany Johnson & Johnson Medical K.K. ....................................... Japan Johnson & Johnson Medical Korea Limited............................... Korea Johnson & Johnson Medical Mexico S.A., de C.V. ....................... Mexico Johnson & Johnson Medical Ltd. ....................................... United Kingdom Johnson & Johnson Medical Mfg. SDN. BHD. ............................. Malaysia Johnson & Johnson Products Inc. ...................................... Canada Johnson & Johnson Medical Pty. Ltd. .................................. Australia Johnson & Johnson Medical S.A. ....................................... Argentina Johnson & Johnson Morocco S.A. ....................................... Morocco Johnson & Johnson (New Zealand) Limited............................... New Zealand Johnson & Johnson Pacific Pty. Ltd. .................................. Australia Johnson & Johnson Pakistan (Private) Limited.......................... Pakistan Johnson & Johnson Panama, S.A. ....................................... Panama Johnson & Johnson (Philippines), Inc. ................................ Philippines Johnson & Johnson Poland, Inc. Sp. z o.o. ............................ Poland Johnson & Johnson (Private) Limited................................... Zimbabwe Johnson & Johnson Produtos Profissionais Ltda......................... Brazil Johnson & Johnson Professional Products (Pty.) Ltd. .................. South Africa Johnson & Johnson (Proprietary) Limited............................... South Africa Johnson & Johnson Pte. Ltd. .......................................... Singapore Johnson & Johnson Pty. Limited........................................ Australia Johnson & Johnson Research Pty. Limited............................... Australia
19 5
JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION - ------------------------------------------------------------------------ ------------------ Johnson & Johnson S.A. ............................................... France Johnson & Johnson S.A. ............................................... Spain Johnson & Johnson Medical S.A. ....................................... France Johnson & Johnson SDN. BHD. .......................................... Malaysia Johnson & Johnson S.p.A. ............................................. Italy Johnson & Johnson, Spol.s.r.o. ....................................... Czech Republic Johnson & Johnson Taiwan Ltd. ........................................ Taiwan Johnson & Johnson (Thailand) Limited.................................. Thailand Johnson & Johnson (Trinidad) Limited.................................. Trinidad Johnson & Johnson Vision Products AB.................................. Sweden Johnson & Johnson (Zambia) Limited.................................... Zambia Laboratories Janssen -- Cilag S.A..................................... France Laboratoires Polive S.N.C. ........................................... France Lifescan Canada Ltd. ................................................. Canada Medos S.A. ........................................................... Switzerland Nihon RoC K.K. ....................................................... Japan Neutrogena Corp. S.A.R.L. ............................................ France Neutrogena Provence S.A.R.L........................................... France Ortho Diagnostic Systems G.m.b.H. .................................... Germany Ortho Clinical Diagnostics K.K. ...................................... Japan Ortho Diagnostic Systems Limited...................................... United Kingdom Ortho Diagnostic Systems N.V. ........................................ Belgium Ortho Diagnostic Systems S.A. ........................................ France Ortho Diagnostic Systems S.p.A. ...................................... Italy Ortho-McNeil Inc. .................................................... Canada Pharma Argentina S.A. ................................................ Argentina P.T. Johnson & Johnson Indonesia...................................... Indonesia RoC G.m.b.H. ......................................................... Germany RoC K.K. ............................................................. Japan RoC S.A. ............................................................. France RoC S.A./N.V. ........................................................ Belgium RoC Laboratoires de Dermoestetica S.A. ............................... Spain The R.W. Johnson Pharmaceutical Research Institute.................... Switzerland Shanghai Johnson & Johnson Pharmaceuticals Limited.................... China Shanghai Johnson & Johnson Ltd. ...................................... China Surgikos, S.A. de C.V. ............................................... Mexico Tasmanian Alkaloids Pty. Ltd. ........................................ Australia Taxandria Pharmaceutica B.V. ......................................... Netherlands Vania Expansion SNC................................................... France Woelm Pharma G.m.b.H. & Co. Arzneimittelvertrieb oHG.................. Germany Woelm Pharma G.m.b.H. & Co. oHG....................................... Germany Xian-Janssen Pharmaceutical Limited................................... China
20 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000,000 12-MOS DEC-31-1995 DEC-31-1995 1,201 163 3,161 258 2,276 7,938 8,175 2,979 17,873 4,388 2,223 767 0 0 8,278 17,873 18,842 18,842 6,235 6,235 1,634 46 143 3,317 914 2,403 0 0 0 2,403 3.72 3.65
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