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<SEC-DOCUMENT>0000950123-01-002941.txt : 20010402
<SEC-HEADER>0000950123-01-002941.hdr.sgml : 20010402
ACCESSION NUMBER: 0000950123-01-002941
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010330
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: 0103
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-03215
FILM NUMBER: 1586732
BUSINESS ADDRESS:
STREET 1: ONE JOHNSON & JOHNSON PLZ
CITY: NEW BRUNSWICK
STATE: NJ
ZIP: 08933
BUSINESS PHONE: 9085240400
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>y46182e10-k405.txt
<DESCRIPTION>JOHNSON & JOHNSON
<TEXT>
<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 COMMISSION FILE NUMBER 1-3215
JOHNSON & JOHNSON
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEW JERSEY 22-1024240
(State of (I.R.S. Employer
Incorporation) Identification No.)
ONE JOHNSON & JOHNSON PLAZA
NEW BRUNSWICK, NEW JERSEY 08933
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (732) 524-0400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Common Stock, Par Value $1.00 New York Stock Exchange
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
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]
The aggregate market value of the voting stock held by non-affiliates of
the registrant on February 27, 2001 was approximately $133.8 billion.
On February 27, 2001 there were 1,397,232,658 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<S> <C>
Parts I and Portions of registrant's annual report to shareowners for
II: fiscal year 2000.
Part III: Portions of registrant's proxy statement for its 2001 annual
meeting of shareowners.
</TABLE>
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<PAGE> 2
PART I
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C> <C>
1. Business....................................................
General.....................................................
Segments of Business; Geographic Areas......................
Consumer....................................................
Pharmaceutical..............................................
Professional................................................
International...............................................
Raw Materials...............................................
Patents and Trademarks......................................
Seasonality.................................................
Competition.................................................
Research....................................................
Environment.................................................
Regulation..................................................
2. Properties..................................................
3. Legal Proceedings...........................................
4. Submission of Matters to a Vote of Security Holders.........
Executive Officers of the Registrant........................
PART II
5. Market for the Registrant's Common Equity and Related
Shareowner Matters..........................................
6. Selected Financial Data.....................................
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................
7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................
8. Financial Statements and Supplementary Data.................
9. Changes in and Disagreements on Accounting and Financial
Disclosure..................................................
PART III
10. Directors and Executive Officers of the Registrant..........
11. Executive Compensation......................................
12. Security Ownership of Certain Beneficial Owners and
Management..................................................
13. Certain Relationships and Related Transactions..............
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.........................................................
Signatures..................................................
Report of Independent Accountants...........................
Exhibit Index...............................................
</TABLE>
Form 10-Q Quarterly Reports Available. A copy of Johnson & Johnson's
Quarterly Report on Form 10-Q for any of the first three quarters of the current
fiscal year, without exhibits, will be provided without charge to any shareowner
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.
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Johnson & Johnson, employing approximately 98,500 people worldwide, is
engaged in the manufacture and sale of a broad range of products in the health
care field. It conducts business in virtually all countries of the world.
Johnson & Johnson's primary interest, both historically and currently, has been
in products related to human health and well-being. Johnson & Johnson was
organized in the State of New Jersey in 1887.
Johnson & Johnson is organized on the principle of decentralized
management. The Executive Committee of Johnson & Johnson is the principal
management group responsible for the operations and allocation of the resources
of the Company. This Committee oversees and coordinates the activities of
domestic and international companies related to each of the Consumer,
Pharmaceutical and Professional businesses. 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.
Additional information required by this item is incorporated herein by reference
to the narrative and tabular (but not the graphic) descriptions of segments and
geographic areas captioned "Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Segments of Business, Consumer,
Pharmaceutical, Professional and Geographic Areas" on pages 28 through 31 and 49
of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000.
CONSUMER
The Consumer segment's principal products are personal care and hygienic
products, including nonprescription drugs, adult skin and hair care products,
baby care products, oral care products, first aid products and sanitary
protection products. Major brands include AVEENO skin care products; BAND-AID
Brand Adhesive Bandages; BENECOL food products; CAREFREE Panty Shields; CLEAN &
CLEAR teen skin care products; IMODIUM A-D, an antidiarrheal; JOHNSON'S Baby
line of products; JOHNSON'S pH 5.5 skin and hair care products; LACTAID
lactose-intolerance products; MONISTAT, a remedy for vaginal yeast infections;
adult and children's MOTRIN IB ibuprofen products; 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; PENATEN and NATUSAN baby care products; PIZ BUIN and SUNDOWN sun care
products; REACH toothbrushes; RoC skin care products; SHOWER TO SHOWER personal
care products; SPLENDA, a non-caloric sugar substitute; STAYFREE 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
antifungal, anti-infective, cardiovascular, dermatology, gastrointestinal,
hematology, immunology, neurology, oncology, pain management, psychotropic and
women's health fields. These products are distributed both directly and through
wholesalers for use by health care professionals and the general public.
Prescription drugs in the antifungal field include NIZORAL (ketoconazole),
SPORANOX (itraconazole), TERAZOL (terconazole) and DAKTARIN (miconazole nitrate)
antifungal products. Prescription drugs in the anti-infective field include
FLOXIN (ofloxacin) and LEVAQUIN (levofloxacin). Prescription drugs in the
cardiovascular field include RETAVASE (reteplase), a recombinant biologic
cardiology care product for the treatment of acute myocardial infarction to
improve blood flow to the heart, and REOPRO (abciximab) for the treatment of
<PAGE> 4
acute cardiac disease. Prescriptions drugs in the dermatology field include
RETIN-A MICRO (tretinoin), a dermatological cream for acne. Prescription drugs
in the gastrointestinal field include ACIPHEX (rabeprazole sodium), a proton
pump inhibitor for treating erosive gastroesophageal reflux disease (GERD) and
duodenal ulcers; IMODIUM (loperamide HCl), an antidiarrheal; MOTILIUM
(domperidone), a gastrointestinal mobilizer; and REMICADE (infliximab), a novel
monoclonal antibody for treatment of certain Crohn's disease patients. REMICADE
is also indicated for the treatment of rheumatoid arthritis.
Prescription drugs in the hematology field include PROCRIT (epoetin alfa,
sold outside the U.S. as EPREX), a biotechnology derived version of the human
hormone erythropoietin that stimulates red blood cell production. Prescription
drugs in the immunology field include ORTHOCLONE OKT-3 (muromonab-CD3), for
reversing the rejection of kidney, heart and liver transplants. Prescription
drugs in the neurology field include REMINYL (galantamine), TOPAMAX (topiramate)
and STUGERON (cinnarizine). Prescription drugs in the oncology field include
ERGAMISOL (levamisole hydrochloride), a colon cancer drug, and LEUSTATIN
(cladribine), for hairy cell leukemia. Prescription drugs in the pain management
field include DURAGESIC (fentanyl transdermal system, sold abroad as DUROGESIC),
a transdermal patch for chronic pain; and ULTRAM (tramadol hydrochloride), an
analgesic for moderate to moderately severe pain. Prescription drugs in the
psychotropics field include RISPERDAL (risperidone), an antipsychotic drug, and
HALDOL (haloperidol). Prescription drugs in the women's health field include
ORTHO-NOVUM (norethindrone/ethinyl estradiol) and TRICILEST
(norgestimate/ethinyl estradiol, sold in the U.S. as ORTHO TRI-CYCLEN) group of
oral contraceptives and ORTHO-PREFEST (17 (beta)-estradiol/norgestimate) for
hormone replacement therapy.
PROFESSIONAL
The Professional segment includes a broad range of products used by or
under the direction of health care professionals, including, suture and
mechanical wound closure products, surgical equipment and devices, wound
management and infection prevention products, interventional and diagnostic
cardiology products, diagnostic equipment and supplies, joint replacements and
disposable contact lenses. These products are used principally in the
professional fields by physicians, nurses, therapists, hospitals, diagnostic
laboratories and clinics. Distribution to these markets is done both directly
and through surgical supply and other dealers.
INTERNATIONAL
The international business of Johnson & Johnson is conducted by
subsidiaries located in 50 countries outside the United States, which are
selling products in more than 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.
2
<PAGE> 5
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.
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 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 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 $2,926, $2,600, and
$2,336 million for fiscal years 2000, 1999 and 1998, 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, investigation and regulation by governmental agencies and legislative
bodies in the United States and other countries. In the
3
<PAGE> 6
United States, attention has been focused on drug prices and profits and
programs that encourage doctors to write prescriptions for particular drugs or
recommend particular medical devices. 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 and medical device
pricing, appropriate drug and medical device 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.
ITEM 2. PROPERTIES
Johnson & Johnson and its worldwide subsidiaries operate 140 manufacturing
facilities occupying approximately 16.4 million square feet of floor space.
The manufacturing facilities are used by the industry segments of Johnson &
Johnson's business approximately as follows:
<TABLE>
<CAPTION>
SQUARE FEET
SEGMENT (IN THOUSANDS)
------- --------------
<S> <C>
Consumer.................................................... 5,196
Pharmaceutical.............................................. 4,577
Professional................................................ 6,612
------
Worldwide total................................... 16,385
======
</TABLE>
Within the United States, 10 facilities are used by the Consumer segment, 8
by the Pharmaceutical segment and 44 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:
<TABLE>
<CAPTION>
NUMBER
OF SQUARE FEET
GEOGRAPHIC AREA FACILITIES (IN THOUSANDS)
--------------- ---------- --------------
<S> <C> <C>
United States............................................... 62 7,388
Europe...................................................... 34 4,730
Western Hemisphere excluding U.S.A.......................... 17 2,442
Africa, Asia and Pacific.................................... 27 1,825
--- ------
Worldwide total................................... 140 16,385
=== ======
</TABLE>
In addition to the manufacturing facilities discussed above, Johnson &
Johnson maintains numerous office and warehouse facilities throughout the world.
Research facilities are also discussed in Item 1 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 4 "Rental Expense and
Lease Commitments" under "Notes to Consolidated Financial Statements" on page 38
of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000.
Segment information on additions to Johnson & Johnson's property, plant and
equipment is contained on page 49 of Johnson & Johnson's Annual Report to
Shareowners for fiscal year 2000. For information regarding plans to close
certain manufacturing facilities, see Note 14 "Restructuring and In-Process
Research and Development Charges" under "Notes to Consolidated Financial
Statements" on page 44 of Johnson & Johnson's Annual Report to Shareowners for
fiscal year 2000.
4
<PAGE> 7
ITEM 3. LEGAL PROCEEDINGS
The information set forth in Note 18 "Legal Proceedings" under "Notes to
Consolidated Financial Statements" on page 46 of Johnson & Johnson's Annual
Report to Shareowners for fiscal year 2000 is incorporated herein by reference.
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.
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
23, 2001, 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 Shareowners 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 4 through 8 of Johnson & Johnson's Proxy Statement dated
March 14, 2001.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert J. Darretta..................... 54 Member, Executive Committee; Vice President,
Finance(a)
Russell C. Deyo........................ 51 Member, Executive Committee; Vice President,
Administration(b)
Michael J. Dormer...................... 49 Member, Executive Committee; Franchise Group
Chairman for Medical Devices(c)
Roger S. Fine.......................... 58 Member, Executive Committee; Vice President, General
Counsel(d)
JoAnn Heffernan Heisen................. 51 Member, Executive Committee; Vice President, Chief
Information Officer(e)
Christian A. Koffmann.................. 60 Member, Executive Committee; Worldwide Chairman,
Consumer & Personal Care Group(f)
Ralph S. Larsen........................ 62 Chairman, Board of Directors and Chief Executive
Officer; Chairman, Executive Committee
James T. Lenehan....................... 52 Vice Chairman, Board of Directors; Member, Executive
Committee; Worldwide Chairman, Medical Devices &
Diagnostics Group
Brian D. Perkins....................... 47 Member, Executive Committee; Worldwide Chairman,
Consumer Pharmaceuticals & Nutritionals Group(g)
Robert G. Savage....................... 47 Member, Executive Committee; Worldwide Chairman,
Pharmaceuticals Group(h)
William C. Weldon...................... 52 Vice Chairman, Board of Directors; Member, Executive
Committee
Robert N. Wilson....................... 60 Senior Vice Chairman, Board of Directors; Vice
Chairman Executive Committee
</TABLE>
- ---------------
(a) Mr. R. J. Darretta joined the Company in 1968 and held various positions
before becoming President of Iolab Corporation in 1988 and Treasurer of the
Company in 1995. He became a Member of the Executive Committee and Vice
President, Finance in 1997.
5
<PAGE> 8
(b) Mr. R. C. Deyo joined the Company in 1985 and became Associate General
Counsel in 1991. He became a Member of the Executive Committee and Vice
President, Administration in 1996.
(c) Mr. M. J. Dormer joined the Company in 1998 as Company Group Chairman,
Worldwide Franchise Chairman for DePuy and Codman, when the Company acquired
DePuy, Inc. At the time of that acquisition, he had been Chief Operating
Officer of DePuy, Inc. since 1996. Mr. Dormer served as President of DePuy
International Ltd. from 1992 to 1996. Mr. Dormer became a Member of the
Executive Committee and Franchise Group Chairman for Medical Devices in
February 2001.
(d) Mr. R. S. Fine joined the Company in 1974 and became a Member of the
Executive Committee and Vice President, Administration in 1991 and Vice
President, General Counsel in 1996.
(e) Ms. J. H. Heisen joined the Company in 1989 and became Treasurer in 1991 and
Controller in 1995. She became a Member of the Executive Committee and Vice
President, Chief Information Officer in 1997.
(f) 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 & Personal Care Group in 1995.
(g) Mr. B. D. Perkins joined the Company in 1980 and held various positions
before becoming President of McNeil Consumer Products Company in 1994 and
Company Group Chairman for OTC Pharmaceuticals in 1999. He became a Member
of the Executive Committee and Worldwide Chairman, Consumer Pharmaceuticals
& Nutritionals Group in 1999.
(h) Mr. Savage joined the Company in 1996 as Vice President, Marketing & Sales,
Ortho-McNeil Pharmaceutical. He was named President of Ortho-McNeil
Pharmaceutical in 1998 and Company Group Chairman -- North America,
Pharmaceuticals Group in 2000. Mr. Savage became a member of the Executive
Committee and Worldwide Chairman, Pharmaceuticals Group in February 2001.
Prior to joining the Company, he served in various management positions at
Hoffmann-La Roche
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREOWNER
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 32 of Johnson & Johnson's Annual Report to Shareowners
for fiscal year 2000.
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 1990-2000"
on page 50 of Johnson & Johnson's Annual Report to Shareowners for fiscal year
2000.
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 narrative and tabular (but not the graphic) material included in the
material captioned "Management's Discussion and Analysis of Results of
Operations and Financial Condition" on pages 26 through 32 of Johnson &
Johnson's Annual Report to Shareowners for fiscal year 2000.
On March 27, 2001, the Company announced that it had entered into a
definitive merger agreement with ALZA Corporation, a research-based
pharmaceutical company and a leader in drug delivery technologies. ALZA
shareholders will receive a fixed exchange ratio of .49 shares of Johnson &
Johnson common stock for each share of ALZA in a tax-free transaction. On a
fully diluted basis, Alza has approximately 295 million shares outstanding.
Johnson & Johnson intends to account for the transaction as a pooling of
interests. The boards of directors of the Company and ALZA have given approvals
to the merger. While the transaction is expected to close by the early part of
the third quarter of 2001, the merger is subject to clearance under the
Hart-Scott-Rodino Antitrust Improvements Act and the European Union merger
control regulation, and other customary closing conditions. The agreement will
also require the approval of ALZA's shareholders.
On January 26, 2001, the Company announced that it had entered into a
definitive agreement to acquire Heartport, Inc., a manufacturer of less invasive
cardiac surgery products. The transaction is valued at
6
<PAGE> 9
approximately $81 million. Heartport, Inc. develops, manufactures and sells less
invasive cardiac surgery products that enable surgeons to perform a wide range
of less invasive open-chest and minimally invasive heart operations. The
companies expect the transaction to be completed during the second quarter of
2001, subject to customary conditions, including approval by a majority of the
shareowners of Heartport and Hart-Scott-Rodino clearance.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 -- Financial Instruments" on page 31 of
Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000.
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 33 through 48 of Johnson &
Johnson's Annual Report to Shareowners for fiscal year 2000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this item is incorporated herein by reference
to (a) the material under the caption "Election of Directors -- Nominees" on
pages 3 through 8 of Johnson & Johnson's Proxy Statement dated March 14, 2001,
(b) the material in Part I hereof under the caption "Executive Officers of the
Registrant" and (c) the material under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 11 of Johnson & Johnson's Proxy
Statement dated March 14, 2001.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this item is incorporated herein by reference
to the following sections of Johnson & Johnson's Proxy Statement dated March 14,
2001: "Election of Directors -- Directors' Fees, Committees and Meetings" on
pages 9 through 10; "Compensation Committee Report on Executive Compensation" on
pages 12 through 15; "Shareowner Return Performance Graphs" on pages 16 through
17; and "Executive Compensation" on pages 18 through 21.
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 "Election of Directors--Stock Ownership/Control" on
pages 8 through 9 of Johnson & Johnson's Proxy Statement dated March 14, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
7
<PAGE> 10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report
1. Financial Statements
The following Consolidated Financial Statements and the Notes thereto and
the Independent Auditor's Report on pages 33 through 48 of Johnson & Johnson's
Annual Report to Shareowners for fiscal year 2000 are incorporated herein by
reference:
Consolidated Balance Sheets at end of Fiscal Years 2000 and 1999
Consolidated Statements of Earnings for Fiscal Years 2000, 1999 and 1998
Consolidated Statements of Equity for Fiscal Years 2000, 1999 and 1998
Consolidated Statements of Cash Flows for Fiscal Years 2000, 1999 and
1998
Notes to Consolidated Financial Statements
Independent Auditor's Report
2. Financial Statement Schedules
Schedule 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 item is incorporated herein by reference
to the Exhibit Index in this report.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the fourth quarter of fiscal year
2000.
8
<PAGE> 11
JOHNSON & JOHNSON AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS ENDED DECEMBER 31, 2000, JANUARY 2, 2000 AND JANUARY 3, 1999
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DEDUCTIONS FROM RESERVES
ADDITIONS ---------------------------------------------------
BALANCE AT CHARGED BALANCE
BEGINNING TO COSTS AND AT END
OF PERIOD EXPENSES(A) DESCRIPTION AMOUNT OF PERIOD
---------- ------------ ----------- ------ ---------
<S> <C> <C> <C> <C> <C>
2000
Reserves deducted from
accounts receivable, trade
Reserve for doubtful
accounts............... $193 34 Write-offs less recoveries..... 55
Currency adjustments........... 7 165
Reserve for customer
rebates................ 135 1,215 Customer rebates allowed....... 1,170
Currency adjustments........... 2 178
Cash discounts allowed......... 484
Reserve for cash
discounts.............. 61 493 Currency adjustments........... 2 68
---- ----- ----- ---
$389 1,742 1,720 411
==== ===== ===== ===
1999
Reserves deducted from
accounts receivable, trade
Reserve for doubtful
accounts............... $184 53 Write-offs less recoveries..... 63
Currency adjustments........... (19) 193
Reserve for customer
rebates................ 157 1,028 Customer rebates allowed....... 1,056
Currency adjustments........... (6) 135
Reserve for cash
discounts.............. 47 520 Cash discounts allowed......... 506 61
---- ----- ----- ---
$388 1,601 1,600 389
==== ===== ===== ===
1998
Reserves deducted from
accounts receivable, trade
Reserve for doubtful
accounts............... $152 42 Write-offs less recoveries..... 15
Currency adjustments........... (5) 184
Reserve for customer
rebates................ 164 978 Customer rebates allowed....... 993
Currency adjustments........... (8) 157
Cash discounts allowed......... 429
Reserve for cash
discounts.............. 42 431 Currency adjustments........... (3) 47
---- ----- ----- ---
$358 1,451 1,421 388
==== ===== ===== ===
</TABLE>
- ---------------
(A) Charges related to customer rebates and cash discounts are reflected as
reductions of sales to customers.
9
<PAGE> 12
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 26, 2001 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 signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ R. S. LARSEN Chairman, Board of Directors and March 26, 2001
- ------------------------------------------ Chief Executive Officer, and
R. S. Larsen Director (Principal Executive
Officer)
/s/ R. J. DARRETTA Vice President -- Finance March 21, 2001
- ------------------------------------------ (Principal Financial Officer)
R. J. Darretta
/s/ C. E. LOCKETT Controller March 22, 2001
- ------------------------------------------
C. E. Lockett
/s/ G. N. BURROW Director March 20, 2001
- ------------------------------------------
G. N. Burrow
/s/ J. G. COONEY Director March 19, 2001
- ------------------------------------------
J. G. Cooney
/s/ J. G. CULLEN Director March 24, 2001
- ------------------------------------------
J. G. Cullen
/s/ M. J. FOLKMAN Director March 20, 2001
- ------------------------------------------
M. J. Folkman
/s/ A. D. JORDAN Director March 20, 2001
- ------------------------------------------
A. D. Jordan
/s/ A. G. LANGBO Director March 20, 2001
- ------------------------------------------
A. G. Langbo
Vice Chairman, Board of Directors March , 2001
- ------------------------------------------ and Director
J.T. Lenehan
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. S. MAYO Director March 20, 2001
- ------------------------------------------
J. S. Mayo
/s/ L.F. MULLIN Director March 21, 2001
- ------------------------------------------
L.F. Mullin
/s/ H. B. SCHACHT Director March 20, 2001
- ------------------------------------------
H. B. Schacht
/s/ M. F. SINGER Director March 20, 2001
- ------------------------------------------
M. F. Singer
/s/ J. W. SNOW Director March 21, 2001
- ------------------------------------------
J. W. Snow
/s/ W.C. WELDON Vice Chairman, Board of Directors March 23, 2001
- ------------------------------------------ and Director
W.C. Weldon
/s/ R. N. WILSON Senior Vice Chairman, Board of March 23, 2001
- ------------------------------------------ Directors and Director
R. N. Wilson
</TABLE>
11
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareowners and Board of Directors of
Johnson & Johnson:
Our audits of the consolidated financial statements of Johnson & Johnson
referred to in our report dated January 22, 2001 appearing in the Johnson &
Johnson 2000 Annual Report to Shareowners (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the financial statement schedule listed in Item
14 of this Form 10-K.
In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
New York, New York
January 22, 2001
12
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
REG. S-K
EXHIBIT TABLE DESCRIPTION
ITEM NO. OF EXHIBIT
- ------------- -----------
<C> <S>
3(a)(i) Restated Certificate of Incorporation dated April 26,
1990 -- Incorporated herein by reference to Exhibit 3(a) of
the Registrant's Form 10-K Annual Report for the year ended
December 30, 1990.
3(a)(ii) Certificate of Amendment to the Restated Certificate of
Incorporation of the Company 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(a)(iii) Certificate of Amendment to the Restated Certificate of
Incorporation of the Company dated May 21,
1996 -- Incorporated herein by reference to Exhibit
3(a)(iii) of the Registrant's Form 10-K Annual Report for
the year ended December 29, 1996.
3(b) By-Laws of the Company, as amended effective April 23,
1999 -- Incorporated herein by reference to Exhibit 3 of the
Registrant's Form 10-Q Quarterly Report for the quarter
ended July 4, 1999.
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) Stock Option Plan for Non-Employee Directors -- Incorporated
herein by reference to Exhibit 10(a) of the Registrant's
Form 10-K Annual Report for the year ended December 29,
1996.*
10(b) 2000 Stock Option Plan -- Filed with this document.*
10(c) 1995 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, 1999.*
10(d) 1991 Stock Option Plan (as amended) -- Incorporated herein
by reference to Exhibit 10(c) of the Registrant's Form 10-K
Annual Report for the year ended December 28, 1997.*
10(e) 2000 Stock Compensation Plan -- Filed with this document.*
10(f) Executive Incentive Plan (as amended) -- Filed with this
document.*
10(g) Domestic Deferred Compensation Plan (as
amended) -- Incorporated herein by reference to Exhibit
10(g) of the Registrant's Form 10-K Annual Report for the
year ended December 29, 1996.*
10(h) Deferred Fee Plan for Directors (as amended) -- Incorporated
herein by reference to Exhibit 10(h) of the Registrant's
Form 10-K Annual Report for the year ended December 29,
1996.*
10(i) Executive Income Deferral Plan (as amended) -- Incorporated
herein by reference to Exhibit 10(i) of the Registrant's
Form 10-K Annual Report for the year ended January 2, 2000.*
10(j) Excess Savings Plan -- Incorporated herein by reference to
Exhibit 10(j) of the Registrant's Form 10-K Annual Report
for the year ended December 29, 1996.*
10(k) 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(l) 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.*
10(m) Stock Option Gain Deferral Plan -- Incorporated herein by
reference to Exhibit 10(m) of the Registrant's Form 10-K
Annual Report for the year ended January 2, 2000.*
10(n) Estate Preservation Plan -- Incorporated herein by reference
to Exhibit 10(n) of the Registrant's Form 10-K Annual Report
for the year ended January 2, 2000.*
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
REG. S-K
EXHIBIT TABLE DESCRIPTION
ITEM NO. OF EXHIBIT
- ------------- -----------
<C> <S>
12 -- Statement of Computation of Ratio of Earnings to Fixed
Charges -- Filed with this document.
13 -- Pages 26 through 50 of the Company's Annual Report to
Shareowners for fiscal year 2000 (only those portions of the
Annual Report incorporated by reference in this report are
deemed "filed") -- Filed with this document.
21 -- Subsidiaries -- Filed with this document.
23 -- Consent of Independent Accountants -- Filed with this
document.
99(a) -- Annual Reports on Form 11-K for the Johnson & Johnson
Savings Plans, to be filed on or before June 30, 2001.
99(b) -- Cautionary Statement pursuant to Private Securities
Litigation Reform Act of 1995: "Safe Harbor" for
Forward-Looking Statements -- Filed with this document.
</TABLE>
- ---------------
* Management contracts and compensatory plans and arrangements required to be
filed as Exhibits to this form pursuant to Item 14(c) of the report.
A copy of any of the Exhibits listed above will be provided without charge
to any shareowner submitting a written request specifying the desired exhibit(s)
to the Secretary at the principal executive offices of the Company.
14
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.B
<SEQUENCE>2
<FILENAME>y46182ex10-b.txt
<DESCRIPTION>2000 STOCK OPTION PLAN
<TEXT>
<PAGE> 1
JOHNSON & JOHNSON
2000 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Johnson & Johnson 2000 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 continue to serve as a member of such
Committee unless such person is a "Non-Employee Director" 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. The Committee 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 shareowners, unless such approval is required
by law. Notwithstanding the foregoing, except for any stock split, adjustment or
other change in the corporate structure or shares of the Company as contemplated
under Section 6(A)(v) hereof, the Company shall neither lower the exercise price
of any option granted under the Plan nor grant any option hereunder in
replacement of an option which had previously been granted at a higher exercise
price, without the approval of the shareowners.
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 or financial performance
of the Company or its subsidiaries.
<PAGE> 2
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.
4. ALLOTMENT OF SHARES
The amount of Common Stock of the Company (par value $1.00 per share) that may
be made subject to grants of options under the Plan in any calendar year shall
not exceed an amount equal to 1.6 percent of the issued shares of the Company's
Common Stock (including Treasury Shares) on January 1 of such year, plus (i) the
number of shares that were available for grants in the previous year under the
Plan but were not made subject to a grant in such previous year and (ii) the
number of shares that were covered by options granted under the Plan which
options lapsed, expired or terminated in the previous year without being
exercised. Notwithstanding the foregoing, no more than 75 million shares in the
aggregate shall be available for issuance as incentive stock options under the
Plan.
The total number of shares which may be awarded under the Plan to any optionee
in any one year shall not exceed the lesser of (x) 5% of the total shares
allotted to the Plan for such year and (y) 2 million shares. The Committee may,
in its discretion, issue upon exercise of any option Treasury Shares or
authorized but unissued shares.
5. EFFECTIVE DATE AND TERM OF PLAN
The Plan, if approved by the shareowners of the Company, shall become effective
on April 19, 2000. No option shall be granted pursuant to this Plan later than
April 18, 2005, but the rights of optionees under options theretofore granted to
them will not be affected, and all unexpired options will continue in force and
operation thereafter, except as such options may lapse or be terminated in
accordance with their terms and conditions.
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
<PAGE> 3
stock option shall be subject to the provisions of Section 6B(ii) or
6C(iii), as the case may be. The Committee shall determine, either at the
time of grant or later, whether and to what extent and under what
circumstances, the delivery of shares issuable in connection with the
exercise of a non-qualified option may be deferred at the election of the
optionee.
(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 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, the number and kind of shares covered by the options granted,
the number of shares which may be awarded to an optionee in any one year,
and the option price.
(vi) Rights after Termination of Employment
(1) In the event of termination of employment due to any cause
other than death, disability or retirement, rights to exercise
the stock option shall cease, except for those which have
accrued to and including the "date of termination" (as defined
below), unless the Committee shall otherwise specify. These
rights shall remain exercisable for a period of three (3)
months after the date of termination, or such longer period
(not to exceed three (3) years) as the Committee shall
provide.
(2) In the event of termination of employment due to death or
disability, rights to exercise the stock option shall cease,
except for those which have accrued to and including the date
of termination, unless the Committee shall otherwise specify.
These rights shall remain exercisable for a period of three
(3) years or such longer period (not to exceed the term of the
option) as the Committee shall provide.
<PAGE> 4
Notwithstanding the above, in the event such termination of
employment due to death or disability occurs with optionee
having at least ten (10) years of service, any unexercised or
unexercisable portion of the stock option may be exercised in
whole or in part during the remaining term of the option at
such times and to the extent the optionee could have exercised
such stock option had the optionee's employment not
terminated.
(3) In the event of retirement (unrelated to termination for
cause, as defined below, which shall be governed by the
provisions of (1) above) rights to exercise the stock option
shall cease, except for those which have accrued to and
including the date of termination, unless the Committee shall
otherwise specify. These rights shall remain exercisable for a
period of three (3) years, or such longer period (not to
exceed the term of the option) as the Committee shall provide,
provided, however, that in the event the optionee is "employed
by a competitor" (as defined below) within two (2) years from
the date of such retirement, no rights may be exercisable
beyond a date which is three (3) months after the commencement
of such employment with a competitor.
Notwithstanding the above, in the event such retirement
(unrelated to termination for cause which shall be governed by
the provisions of (1) above) occurs with optionee having at
least ten (10) years of service, any unexercised or
unexercisable portions of the stock option may be exercised in
whole or in part during the remaining term of the stock option
at such times and to the extent the optionee could have
exercised such stock option had the optionee's employment not
terminated, provided, however, that in the event the optionee
is employed by a competitor within two (2) years from the date
of such retirement, (i) any unexercisable portion of the stock
option shall terminate immediately and (ii) no rights may be
exercisable beyond a date which is three (3) months after the
commencement of such employment with a competitor.
(4) No 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. In
addition, any stock option granted within six (6) months of
termination of employment due to any cause whatsoever shall be
void unless the Committee shall otherwise provide.
(5) As used in the Plan:
(i) The term "termination for cause" shall mean optionee's
termination by the Company or any of its subsidiaries in
connection with the violation of any federal or state law,
dishonesty, the willful and deliberate failure on the part of
an optionee to perform his/her employment duties in any
material respect or such other events, including the existence
of a conflict of interest, as the Management Compensation
Committee may determine. Such committee shall have the sole
discretion to determine whether a "termination for cause"
exists, and its determination shall be final.
(ii) The term "employed by a competitor" shall mean the
optionee's engaging in any activity or providing services,
whether as director, employee, advisor, consultant or
otherwise, for any corporation or
<PAGE> 5
other entity which is a competitor of the Company or any of
its subsidiaries. The Management Compensation Committee shall
have the sole discretion to determine if an optionee is
"employed by a competitor", and its determination shall be
final.
(iii) The term "date of termination" shall mean the last date
on which the optionee was in an active employment status.
Specifically, in the event an optionee is covered by a
severance agreement or arrangement, the "date of termination"
shall be the last day date of active employment, not the date
corresponding to the end of the severance period.
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. Where payment of the
option price is to be made with Common Stock acquired under a Company
compensation plan (within the meaning 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.
(ii) Period of Option
The exercise period of each non-qualified stock option by its terms
shall not be more than 10 years from the date the option is granted as
specified by the Committee.
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 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
<PAGE> 6
which first become vested in any calendar year (under all incentive stock
option plans of the Company and its subsidiaries) 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 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) 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.
02.16.00
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.E
<SEQUENCE>3
<FILENAME>y46182ex10-e.txt
<DESCRIPTION>2000 STOCK COMPENSATION PLAN
<TEXT>
<PAGE> 1
JOHNSON & JOHNSON 2000 STOCK COMPENSATION PLAN
Johnson & Johnson's 2000 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
internationally. The Plan continues a practice of the Company which began in
1922. An award is by way of a bonus to the employee and is not regarded as part
of the employee's regular compensation. The Plan, in the judgment 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 ensuring
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
5,000,000 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). Shareowners
have no preemptive rights with respect to these shares.
Participants are to be selected by the Board of Directors of the Company, or a
committee appointed thereby, 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 shareowners of the Company, the Plan shall become
effective April 19, 2000. The term of the Plan expires on April 18, 2005. 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, determine the number of shares to be awarded to each participant
and designate how the Plan will be administered, if necessary, in any individual
country or countries. 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, or a committee appointed thereby, shall
make such adjustment as it may deem equitably required in the number and kind of
shares authorized by and for the Plan.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.F
<SEQUENCE>4
<FILENAME>y46182ex10-f.txt
<DESCRIPTION>EXECUTIVE INCENTIVE PLAN
<TEXT>
<PAGE> 1
JOHNSON & JOHNSON EXECUTIVE INCENTIVE PLAN
~ Plan Document ~
(Amended as of December 31, 2000)
I. PURPOSE
The purpose of the Johnson & Johnson Executive Incentive Plan (the "Plan") is to
attract and retain highly qualified individuals as executive officers; to obtain
from each the best possible performance; to underscore the importance to them of
achieving particular business objectives established for Johnson & Johnson; and
to include in their compensation package a bonus component which is intended to
qualify as performance-based compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), which
compensation would be deductible by Johnson & Johnson under the Internal Revenue
Code.
II. DEFINITIONS
For the purposes of the Plan, the following terms shall have the following
meanings:
a) AWARDS. The cash and/or stock bonus awards made pursuant to the Plan.
b) BOARD OF DIRECTORS. The Board of Directors of Johnson & Johnson.
c) COMMITTEE. The Compensation Committee of the Board of Directors or any
successor thereto.
d) COMMON STOCK. The common stock of the Corporation, par value $1.00 per
share.
e) CONSOLIDATED EARNINGS. Consolidated net income for the year for which an
Award is made, adjusted to omit the effects of extraordinary items,
discontinued operations and the cumulative effects of changes in
accounting principles, all as shown on the audited consolidated statement
of income of the Corporation and its subsidiaries and as determined in
accordance with generally accepted accounting principles.
f) CORPORATION. Johnson & Johnson.
g) ELIGIBLE EMPLOYEE. An Employee who is an Executive Officer of the
Corporation.
h) EMPLOYEE. An individual who is on the active payroll of the Corporation or
a subsidiary of the Corporation at any time during the period for which an
Award is made.
i) EXECUTIVE OFFICER. The Chairman and any Vice Chairman of the Board of
Directors and any other officer of the Corporation who has been designated
a part of the Office of the Chairman or elected a Member of the Executive
Committee of the Corporation.
j) FAIR MARKET VALUE. The average between the highest and lowest quoted
selling price per share of Common Stock on the New York Stock Exchange
Composite Transactions Tape on the grant date, provided that if there
shall be no sales of shares of Common Stock on such date, the Fair Market
Value shall be deemed equal to the average between the highest and lowest
sales price of a share of Common Stock on such Composite Tape for the last
preceding date on which sales of shares of Common Stock were reported.
III. EFFECTIVE DATE; TERM
The Plan is effective as of January 1, 1996, was approved by the Corporation's
stockholders at the Corporation's 1996 Annual Meeting of Stockholders, and shall
remain in effect until such time as it shall be terminated by the Board of
Directors.
IV. AMOUNTS AVAILABLE FOR AWARDS; SHARES SUBJECT TO THE PLAN
a) Awards with respect to any taxable year of the Corporation shall not
exceed the limitations specified in Section VI of the Plan.
<PAGE> 2
b) Awards that are granted under the Plan in the form of stock, in whole or
in part, may be made from the aggregate number of shares of Common Stock
authorized to be issued under and otherwise in accordance with the terms
of the 2000 Stock Compensation Plan of the Corporation (or any successor
stock compensation plan approved by the stockholders of the Corporation),
subject in each case, to adjustment as hereinafter provided. These shares
may, in the discretion of the Committee, consist either in whole or in
part of authorized but unissued shares of Common Stock or shares of Common
Stock held in the treasury of the Corporation.
c) In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, any separation
(including a spinoff or other distribution of stock or property), any
partial or complete liquidation or any other change in the corporate
structure or shares of the Corporation, the committee shall make such
adjustment as is equitably required in the number and kind of shares
authorized by and for the Plan or in the number of shares of Common Stock
covered by any outstanding deferred Award.
V. ELIGIBILITY FOR AWARDS
a) Awards for any period may be granted to those Eligible Employees who are
selected by the Committee. Such selections, except in the case of the
Corporation's Chairman, shall be made after considering the
recommendations of the Chairman. The Committee shall also give
consideration to the contribution made by the Eligible Employee to
achievement of the Corporation's established objectives and such other
matters as it shall deem relevant.
b) In the discretion of the Committee, Awards may be made to Eligible
Employees who have retired or whose employment has terminated after the
beginning of the year for which an Award is made, or to the designee or
estate of an Eligible Employee who died during such period.
VI. DETERMINATION OF AMOUNTS OF AWARDS
a) The maximum Award payable with respect to any taxable year of the
Corporation to any Eligible Employee who is the Chairman or a Vice
Chairman of the Board of Directors or any other officer who has been
designated a part of the Corporation's Office of the Chairman during all
or any portion of such taxable year shall not exceed .08% of Consolidated
Earnings for such year. The maximum Award payable with respect to any
taxable year of the Corporation to any other Eligible Employee shall not
exceed .04% of Consolidated Earnings for such year. The amounts of Awards
to Eligible Employees shall be determined by the Committee acting in its
discretion subject to the maximum amounts set forth above. Such
determinations, except in the case of the Award for the Chairman, shall be
made after considering the recommendations of the Chairman and such other
matters as the Committee shall deem relevant. The Committee, acting in its
discretion, may determine to pay a lesser award than the maximum specified
herein.
b) Awards may be made at any time following the end of the taxable year;
provided, however, that no Awards shall be made until the Committee
receives assurances from both the Corporation's Chief Financial Officer
and its independent accountants that the amount of such Award does not
exceed the applicable limitation under this Section VI and the Committee
certifies in writing that such limitation has not been exceeded. For
purposes of making these determinations, the value of the Common Stock
component of any Award shall be its Fair Market Value.
VII. FORM OF AWARDS
Awards under the Plan shall be made in cash or Common Stock, as the
Committee shall determine, subject to the limitations set forth in Section
IV.
VIII. PAYMENT OF AWARDS
a) Awards under the Plan shall be paid currently, unless the Committee shall
determine that any Award in cash or Common Stock or any portion thereof shall
be deferred. Deferred Awards may be made in one lump sum or in installments
and may bear interest in the case of any deferred cash Award or dividend
equivalents in the case of any deferred Common Stock Award, all as the
Committee shall determine.
<PAGE> 3
b) When an Award is made, the Corporation shall cause the cash or Common Stock
to be paid or issued to the Eligible Employee at the time or times specified
by the Committee or, if no time or times is specified, as soon as practicable
after the Award is made.
IX. SPECIAL AWARDS AND OTHER PLANS
a) Nothing contained in the Plan shall prohibit the Corporation or any of its
subsidiaries from establishing other special awards or incentive compensation
plans providing for the payment of incentive compensation to Employees
(including Eligible Employees).
b) Payments or benefits provided to an Eligible Employee under any stock,
deferred compensation, savings, retirement or other employee benefit plan are
governed solely by the terms of such plan.
X. ADMINISTRATION, AMENDMENT AND INTERPRETATION OF THE PLAN
a) Except as otherwise provided in the Plan, the Committee shall administer the
Plan. The Committee shall consist of not less than three members of the Board
of Directors. No director 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. Committee members
shall not be eligible to participate in the Plan while members of the
Committee. The Committee shall have full power to construe and interpret the
Plan, establish and amend rules and regulations for its administration, and
perform all other acts relating to the Plan, including the delegation of
administrative responsibilities, that it believes reasonable and proper and
in conformity with the purposes of the Plan.
b) The Committee shall have the right to amend the Plan from time to time or to
repeal it entirely or to direct the discontinuance of Awards either
temporarily or permanently; provided, however, that (i) no amendment of the
Plan shall operate to annul, without the consent of the Eligible Employee, an
Award already made hereunder, and (ii) no amendment of the Plan that (x)
changes the maximum Award payable to any Eligible Employee, as set forth in
Section V1, (y) materially amends the definition of Consolidated Earnings or
(z) increases the amount of shares available for awards under the Plan
(except as contemplated by Section IV.C.) shall be effective before approval
by the affirmative vote of a majority of shares voting at a meeting of the
stockholders of the Corporation.
c) Any decision made, or action taken, by the Committee arising out of or in
connection with the interpretation and/or administration of the Plan shall be
final, conclusive and binding on all persons affected thereby.
XI. RIGHTS OF ELIGIBLE EMPLOYEES
a) Neither the Plan, nor the adoption or operation of the Plan, nor any
documents describing or referring to the Plan (or any part hereof) shall
confer upon any Employee any right to continue in the employ of the
Corporation or a subsidiary of the Corporation.
b) No individual to whom an Award has been made or any other party shall have
any interest in the cash or Common Stock, or any other asset of the
Corporation until such amount has been paid or issued. To the extent that any
party acquires a right to receive payments of cash and/or share certificates
under the Plan, such party shall have the status of unsecured creditor of the
Corporation with respect to such right.
c) No right or interest of any Eligible Employee in the Plan shall be assignable
or transferable, or subject to any claims of any creditor or subject to any
lien.
XII. MISCELLANEOUS
a) All expenses and costs incurred in connection with the operation of the Plan
shall be borne by the Corporation, and no part therefor (other than the
amounts of Awards under the Plan) shall be charged against the maximum
limitation of Section VI.
<PAGE> 4
b) All Awards under the Plan are subject to withholding, where applicable, for
federal, state and local taxes.
c) Any provision of the Plan that is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of the Plan.
d) The Plan and the rights and obligations of the parties to the Plan shall be
governed by, and construed and interpreted in accordance with, the law of the
State of New Jersey (without regard to principles of conflicts of law).
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>5
<FILENAME>y46182ex12.txt
<DESCRIPTION>STATEMENT OF COMPUTATION OF RATIO OF EARNINGS
<TEXT>
<PAGE> 1
EXHIBIT 12
JOHNSON & JOHNSON AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------------
DECEMBER 31, JANUARY 2, JANUARY 3, DECEMBER 28, DECEMBER 29,
2000 2000 1999(2) 1997 1996
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Determination of Earnings:
Earnings Before Provision for Taxes
on Income......................... $6,622 5,753 4,182 4,587 4,020
Fixed Charges........................ 230 275 210 203 213
------ ----- ----- ----- -----
Total Earnings as Defined.... $6,852 6,028 4,392 4,790 4,233
====== ===== ===== ===== =====
Fixed Charges and Other:
Rents................................ 84 78 81 79 80
Interests............................ 146 197 129 124 133
------ ----- ----- ----- -----
Fixed Charges................ 230 275 210 203 213
Capitalized Interest................. 96 81 72 40 55
------ ----- ----- ----- -----
Total Fixed Charges.......... $ 326 356 282 243 268
====== ===== ===== ===== =====
Ratio of Earnings to Fixed Charges..... 21.02 16.93 15.57 19.71 15.79
====== ===== ===== ===== =====
</TABLE>
- ---------------
(1) The ratio of earnings to fixed charges represents the historical ratio of
the Company and is calculated on a total enterprise basis. The ratio is
computed by dividing the sum of earnings before provision for taxes and
fixed charges (excluding capitalized interest) by fixed charges. Fixed
charges represent interest (including capitalized interest) and amortization
of debt discount and expense and the interest factor of all rentals,
consisting of an appropriate interest factor on operating leases.
(2) Earnings for the year ended January 3, 1999 include charges related to
restructuring of $613 million and in-process research and development
charges of $298 million. Excluding the effect of these charges, the ratio of
earnings to fixed charges would have been 18.80.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>6
<FILENAME>y46182ex13.txt
<DESCRIPTION>PAGES OF THE COMPANY'S ANNUAL REPORT
<TEXT>
<PAGE> 1
EXHIBIT 13
Management's Discussion and Analysis of Results of Operations and Financial
Condition Overview
In 2000, the Company achieved solid financial results highlighted by a
number of significant events. The Pharmaceutical segment continued its rapid
growth while successfully integrating Centocor into the Johnson & Johnson Family
of Companies, the Professional segment experienced the resurgence of its
cardiology franchise, and the Company completed the restructuring of its
worldwide manufacturing operations that was announced at year-end 1998. Also
during 2000, it became necessary to restrict access to PROPULSID (cisapride) in
a number of markets around the world. Despite the loss of over $660 million of
PROPULSID sales, the Company was able to achieve strong financial results
reflecting the strength of the Company's diverse portfolio of products and
services.
The balance sheet remains strong with cash generated from worldwide
operations at a record $6.6 billion in 2000. Cash dividends per share paid to
shareowners in 2000 increased by 13.8% over 1999 and represented the 38th
consecutive year of dividend increases. The Company continues to be one of a few
companies with a Triple A credit rating.
The Company's objective is to achieve superior levels of capital
efficient profitable growth. To accomplish this, the Company's management
operates the business consistent with certain strategic principles that have
proven successful over time. To this end, the Company participates in growth
areas in human health care and is committed to attain leadership positions in
these growth segments through the development of innovative products and
services. In 2000, $2.9 billion or 10% of sales was invested in research and
development, recognizing the importance of rapid and accurate identification of
new and differentiated products and services.
The Company's system of management operates on a decentralized basis.
With 194 operating companies located in 51 countries, the Company views this
management philosophy as an asset and fundamental to the success of a broadly
based business. It also fosters an entrepreneurial spirit, combining the
extensive resources of a large organization with the ability to react quickly to
local market changes and challenges. Businesses are managed for the long term in
order to sustain leadership positions and growth while continuing to be a source
of enduring value to shareowners.
Unifying the management team and the Company's dedicated employees in
achieving these objectives is the Johnson & Johnson Credo. The Credo provides a
common set of values and serves as a constant reminder of the Company's
responsibilities to its customers, employees, communities and shareowners. The
Company believes that these basic principles, along with its overall mission of
improving the quality of life for people everywhere, will enable Johnson &
Johnson to continue to be among the leaders in the health care industry.
Description of Business
The Company has 98,500 employees worldwide and is engaged in the
manufacture and sale of a broad range of products in the health care field. It
conducts business in virtually all countries of the world. The Company's primary
interest, both historically and currently, has been in products related to human
health and well-being.
The Company is organized on the principle of decentralized management.
The Executive Committee of Johnson & Johnson is the principal management group
responsible for the operations and allocation of the resources of the Company.
This Committee oversees and coordinates the activities of domestic and
international companies related to each of the Consumer, Pharmaceutical and
Professional businesses. Each international subsidiary is, with some exceptions,
managed by citizens of the country where it is located.
In all its product lines, the Company competes with companies both
large and small, located in the United States 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 and the improvement
of new and
<PAGE> 2
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.
Sales and Earnings
In 2000, worldwide sales increased 6.1% to $29.1 billion, compared to increases
of 14.5% in 1999 and 5.1% in 1998. Excluding the impact of foreign currencies,
worldwide sales increased 9.4% in 2000, 16.4% in 1999 and 7.6% in 1998. The
continued strength of our pharmaceutical business and growth in several
professional business franchises such as DePuy, Cordis and Ethicon Endo-Surgery
were the primary reasons for the sales increase in 2000.
Worldwide net earnings for 2000 were $4.8 billion, reflecting a 15.2%
increase over 1999. Worldwide net earnings per share for 2000 equaled $3.40 per
share, an increase of 15.6% from the $2.94 net earnings per share in 1999.
Excluding the impact of special charges, worldwide net earnings and net earnings
per share increased 14.8% and 15.2%, respectively, over 1999. The special charge
taken in 2000 includes in-process research and development (IPR&D) costs
associated with the acquisition of Atrionix, Inc., net of a favorable adjustment
to the costs associated with the 1998 global manufacturing restructuring charge.
Other income and expense includes gains related to the sale of certain equity
securities.
Worldwide net earnings for 1999, including the impact of special
charges, were $4.2 billion, reflecting a 38.8% increase over 1998. Worldwide net
earnings per share for 1999 equaled $2.94 per share, an increase of 38.7% from
the $2.12 net earnings per share in 1998. Excluding the impact of special
charges, both worldwide net earnings and net earnings per share increased 13.8%
over 1998. The special charges included costs associated with the Centocor
merger in 1999 and the reconfiguration of the worldwide manufacturing network
and IPR&D charges in 1998.
Worldwide net earnings for 1998, including the impact of the
Restructuring and IPR&D charges, were $3.0 billion, reflecting a 9.3% decrease
from 1997. Worldwide net earnings per share for 1998 equaled $2.12 per share, a
decrease of 9.4% from the $2.34 net earnings per share in 1997.
Excluding the impact of Restructuring and IPR&D charges, worldwide net earnings
for 1998 were $3.7 billion, reflecting an 11.7% increase over 1997. Excluding
the impact of these charges, worldwide net earnings per share for 1998 equaled
$2.61 per share, an increase of 11.5% over the $2.34 net earnings per share in
1997.
Average diluted shares of common stock outstanding were 1.42 billion in
2000, 1999 and 1998.
Sales by domestic companies were $17.0 billion in 2000, $15.4 billion
in 1999 and $12.9 billion in 1998. This represents an increase of 10.5% in 2000,
19.7% in 1999 and 8.0% in 1998.
Sales by international companies were $12.1 billion in 2000, $12.1 billion in
1999 and $11.1 billion in 1998. This represents an increase of 0.4% in 2000,
8.4% in 1999 and 1.9% in 1998. Excluding the impact of the foreign currency
fluctuations over the past three years, international company sales increased
7.9% in 2000, 12.4% in 1999 and 7.1% in 1998.
All geographic areas throughout the world posted operational gains
during 2000. Excluding the effect of exchange rate fluctuations between the U.S.
dollar and foreign currencies, sales increased 7.4% in Europe, 4.3% in the
Western Hemisphere (excluding the U.S.) and 10.9% in the Asia-Pacific, Africa
regions.
The Company achieved an annual compound growth rate of 9.9% for
worldwide sales for the 10-year period since 1990 with domestic sales growing at
a rate of 12.0% and international sales growing at a rate of 7.6%. Worldwide net
earnings achieved a 10-year annual growth rate of 16.4%, while earnings per
share grew at a rate of 16.0%. For the last five years, the annual compound
growth rate for sales was 9.0%. The annual compound growth rate for net earnings
was 15.2%, and the annual compound growth rate for earnings per share was 14.2%.
<PAGE> 3
Cost and Expenses
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, excluding the special charges of IPR&D, were as follows:
(Millions of Dollars) 2000 1999 1998
Research expense $2,926 2,600 2,336
Percent increase
over prior year 12.5% 11.3% 5.7%
Percent of sales 10.0 9.5 9.7
Research expense as a percent of sales for the Pharmaceutical segment
was 15.9% for 2000, 15.0% for 1999 and 15.9% for 1998 while averaging 6.0%, 6.0%
and 6.1% in the other two segments.
Advertising expenses, which are comprised of television, radio and
print media, as well as Internet advertising, were $1.32 billion in 2000, $1.39
billion in 1999 and $1.19 billion in 1998. Additionally, 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 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 27.5% in 2000, 27.6% in 1999 and
28.2% in 1998. Refer to Note 8 for additional information.
Distribution of Sales Revenues
The distribution of sales revenues for 2000, 1999 and 1998 were:
2000 1999 1998
Employment costs 23.6% 23.1% 24.0%
Costs of materials
and services 47.9 50.1 48.9
Depreciation and
amortization of
property and
intangibles 5.2 5.3 5.4
Taxes other than
payroll 6.7 6.3 6.3
Earnings reinvested
in business 10.6 9.8 7.1
Cash dividends paid 5.9 5.4 5.4
Restructuring/IPR&D 0.1 -- 2.9
<PAGE> 4
Segments of Business
Financial information for the Company's three worldwide business segments is
summarized below. See Note 12 for additional information on segments of
business.
Sales Increase
(Millions of Dollars) 2000 1999 Amount Percent
Consumer $ 6,904 6,864 40 0.6%
Pharmaceutical 11,954 10,694 1,260 11.8
Professional 10,281 9,913 368 3.7
Worldwide total $29,139 27,471 1,668 6.1%
Operating Profit Percent
of Sales
(Millions of Dollars) 2000(1) 1999(2) 2000 1999
Consumer $ 867 683 12.6% 10.0%
Pharmaceutical 4,175 3,595 34.9 33.6
Professional 1,696 1,632 16.5 16.5
Segments total 6,738 5,910 23.1 21.5
Expenses not
allocated to
segments (116) (157)
Earnings before
taxes on income $6,622 5,753 22.7% 20.9%
(1) 2000 results include special charges related to In-Process Research and
Development and a gain related to restructuring. Excluding these charges,
operating profit as a percentage of sales was: Consumer segment 12.2%,
Pharmaceutical segment 34.9%, Professional segment 17.0%.
(2) 1999 results include special charges related to the Centocor merger.
Excluding these charges, operating profit as a percentage of sales for the
Pharmaceutical segment was 34.1%.
(3) 1998 results including Restructuring and In-Process Research and Development
charges. Excluding these charges, operating profits by segment of business were:
Consumer 12.7%, Pharmaceutical 60.2%, and Professional 27.1%.
Consumer
The Consumer segment's principal products are personal care and
hygienic products, including nonprescription drugs, adult skin and hair care
products, baby care products, oral care products, first aid products and
sanitary protection products. Major brands include AVEENO skin care products;
BAND-AID Brand Adhesive Bandages; BENECOL food products; CAREFREE Panty Shields;
CLEAN & CLEAR teen skin care products; IMODIUM A-D, an antidiarrheal; JOHNSON'S
Baby line of products; JOHNSON'S pH5.5 skin and hair care products; MONISTAT, a
remedy for vaginal yeast infections; adult and children's MOTRIN IB analgesic
products; MYLANTA gastrointestinal products and PEPCID AC Acid Controller from
the Johnson & Johnson o Merck Consumer Pharmaceuticals Co.; NEUTROGENA skin and
hair care products; o.b. Tampons; PENATEN and NATUSAN baby care products; PIZ
BUIN and SUNDOWN sun care products; REACH toothbrushes; RoC skin care products;
SHOWER TO SHOWER personal care products; SPLENDA, a non-caloric sugar
substitute; STAYFREE 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 2000 were $6.9 billion, an increase of .6%
over 1999. Domestic sales increased by 2.5% while international sales gains in
local currency of 5.0% were offset by a negative currency impact of 6.6%.
Consumer sales were led by continued strength in the skin care franchise, which
includes the
<PAGE> 5
NEUTROGENA, RoC, AVEENO and CLEAN & CLEAR product lines, as well as strong
performances from the JOHNSON'S line of baby skin care products. During the
fourth quarter, the Company acquired the ST. JOSEPH aspirin business. The
acquisition is the first entry into the cardio-protective aspirin market by
McNeil Consumer Healthcare, the world leader in over-the-counter analgesics.
Consumer segment sales in 1999 were $6.86 billion, an increase of 5.2%
over 1998. Domestic sales increased by 10.4% while international sales declined
by .2%. International sales gains in local currency of 7.0% were offset by a
negative currency impact of 7.2%. During 1999, the Company launched various
products that included BENECOL, the dietary ingredient stanol ester that aids in
the reduction of cholesterol and also completed the acquisition of the AVEENO
brand products.
Consumer segment sales in 1998 were $6.53 billion, an increase of .4%
over 1997. Domestic sales increased by 2.6% while international declined by
1.7%. International sales gains in local currency of 5.2% were offset by a
negative currency impact of 6.9%. The 1998 special pre-tax charge for the
Consumer segment was $244 million. See Note 14 for detailed discussion on the
Restructuring charges.
Pharmaceutical
The Pharmaceutical segment's principal worldwide franchises are in the
antifungal, anti-infective, cardiovascular, contraceptive, dermatology,
gastrointestinal, hematology, immunology, neurology, oncology, pain management
and psychotropic fields. These products are distributed both directly and
through wholesalers for use by health care professionals and the general public.
Prescription drugs in the antifungal field include NIZORAL (ketoconazole),
SPORANOX (itraconazole), TERAZOL (terconazole) and DAKTARIN (miconazole nitrate)
antifungal products. Prescription drugs in the anti-infective field include
FLOXIN (ofloxacin) and LEVAQUIN (levofloxacin). Prescription drugs in the
cardiovascular field include RETAVASE (reteplase), a recombinant biologic
cardiology care product for the treatment of acute myocardial infarction to
improve blood flow to the heart and REOPRO (abciximab) for the treatment of
acute cardiac disease. Prescription drugs in the contraceptive field include
ORTHO-NOVUM (norethindrone/ethinyl estradiol) and TRICILEST
(norgestimate/ethinyl estradiol, sold in the U.S. as ORTHO TRI-CYCLEN) group of
oral contraceptives. Prescription drugs in the dermatology field include RETIN-A
MICRO (tretinoin), a dermatological cream for acne. Prescription drugs in the
gastrointestinal field include ACIPHEX (rabeprazole sodium), a proton pump
inhibitor for treating erosive gastroesophageal reflux disease (GERD) and
duodenal ulcers; IMODIUM (loperamide HCl), an antidiarrheal; MOTILIUM
(domperidone), a gastrointestinal mobilizer; and REMICADE (infliximab), a novel
monoclonal antibody for treatment of certain Crohn's disease patients. REMICADE
is also indicated for the treatment of rheumatoid arthritis.
Prescription drugs in the hematology field include EPREX (Epoetin alfa,
sold in the U.S. as PROCRIT), a biotechnology derived version of the human
hormone erythropoietin that stimulates red blood cell production. Prescription
drugs in the immunology field include ORTHOCLONE OKT-3 (muromonab-CD3), for
reversing the rejection of kidney, heart and liver transplants. Prescription
drugs in the neurology field include TOPAMAX (topiramate) and STUGERON
(cinnarizine). Prescription drugs in the oncology field include ERGAMISOL
(levamisole hydrochloride), a colon cancer drug and LEUSTATIN (cladribine), for
hairy cell leukemia. Prescription drugs in the psychotropics field include
RISPERDAL (risperidone), an antipsychotic drug and HALDOL (haloperidol).
Prescription drugs in the pain management field include DURAGESIC (fentanyl
transdermal system, sold abroad as DUROGESIC), a transdermal patch for chronic
pain; and ULTRAM (tramadol hydrochloride), an analgesic for moderate to
moderately severe pain.
Johnson & Johnson markets over 100 prescription drugs around the world,
with 35.3% of the sales generated outside the United States. Thirty-one drugs
sold by the Company had 2000 sales in excess of $50 million, with 20 of them in
excess of $100 million.
Pharmaceutical segment sales in 2000 were $12.0 billion, an increase of
11.8% over 1999 including 20.5% growth in domestic sales. Operationally,
international sales increased 7.6% but were more than offset by a negative
currency impact of
<PAGE> 6
8.9%. Worldwide sales gains in local currency of 15.2% were partially offset by
a negative currency impact of 3.4%.
Sales growth reflects the strong performance of PROCRIT/EPREX, RISPERDAL,
DURAGESIC, LEVAQUIN, REMICADE, ULTRAM, TOPAMAX, ACIPHEX/PARIET and the oral
contraceptive line of products. Sales growth was partially offset by the
restricted access of PROPULSID in a number of markets around the world. During
the fourth quarter, the Company received expanded labeling from the FDA for
REMICADE (infliximab) for the treatment of rheumatoid arthritis. REMICADE is the
first drug to be granted a label indicating that, in combination with
methotrexate, it inhibits the progression of structural damage in patients with
moderately to severely active rheumatoid arthritis who have had an inadequate
response to methotrexate. The Company also filed a new drug application with the
U.S. Food and Drug Administration for the ORTHO EVRA transdermal seven-day
contraceptive patch.
During the fourth quarter, the Company announced a co-marketing
agreement with its McNeil Consumer Healthcare unit and 3M Pharmaceuticals for
3M's new asthma drug, QVAR Inhalation Aerosol (beclomethasone diproprionate
HFA.) QVAR is approved for the maintenance treatment of asthma, a chronic
inflammatory disease of the large and small airways affecting an estimated 15
percent of the U.S. population.
Pharmaceutical segment sales in 1999 were $10.69 billion, an increase
of 20.2% over 1998, including 28.6% growth in domestic sales. International
sales increased 9.4% as sales gains in local currency of 13.5% were offset by a
negative currency impact of 4.1%. Worldwide growth reflected the strong
performance of PROCRIT, RISPERDAL, DURAGESIC, LEVAQUIN, and the oral
contraceptive line of products. During the fourth quarter, the Company received
approval from the FDA for ORTHO-PREFEST (17(beta)-estradiol/norgestimate) for
hormone replacement therapy and an additional indication for REMICADE for the
treatment of rheumatoid arthritis.
Pharmaceutical segment sales in 1998 were $8.90 billion, an increase of
12.7% over 1997 including 24.3% growth in domestic sales. International sales
increased .6% as sales gains in local currency of 5.4% were offset by a negative
currency impact of 4.8%. Worldwide growth reflected the strong performance of
PROCRIT, RISPERDAL, DURAGESIC, LEVAQUIN, and the oral contraceptive line of
products. At year-end 1998, the Company received approval from the FDA for
LEVAQUIN (levofloxacin) for the indication of uncomplicated urinary tract
infection. Additionally, the Company completed the acquisition of the U.S. and
Canadian product rights for RETAVASE (reteplase), an acute-care cardiovascular
drug, from Roche Healthcare.
The 1998 special pre-tax charge for the Pharmaceutical segment was $65
million. See Note 14 for detailed discussion on the Restructuring and IPR&D
charges.
Significant research activities continued in the Pharmaceutical
segment, increasing to $1.9 billion in 2000, or an 18.6% increase over 1999.
This represents 15.9% of 2000 Pharmaceutical sales and a compound annual growth
rate of approximately 13.1% for the five-year period since 1995. Worldwide
Pharmaceutical research organizations include Janssen Research Foundation,
headquartered in Belgium, and the R.W. Johnson Pharmaceutical Research
Institute, located in La Jolla, California and Raritan, New Jersey. Additional
research is conducted by Centocor and through a collaboration with the James
Black Foundation in London, England.
Professional
The Professional segment includes a broad range of products used by or
under the direction of health care professionals. These would include suture and
mechanical wound closure products, surgical equipment and devices, wound
management and infection prevention products, interventional and diagnostic
cardiology products, diagnostic equipment and supplies, joint replacements and
disposable contact lenses. These products are used principally in the
professional fields by physicians, nurses, therapists, hospitals, diagnostic
laboratories and clinics. Acquisitions and divestitures in the Professional
segment during recent years are part of an ongoing process to transform this
segment from a medical supply business to one serving a range of higher
technology medical specialties.
<PAGE> 7
Worldwide sales in 2000 of $10.3 billion in the Professional segment
represented an increase of 3.7% over 1999. Domestic sales were up 4.0%, while
international sales increased 3.4% as sales gains in local currency of 10.3%
were offset by a negative currency impact of 6.9%. Worldwide sales gains in
local currency of 6.9% were reduced by 3.2% due to the strength of the U.S.
dollar. Strong sales growth from Cordis' coronary and endovascular stents,
DePuy's spinal products, Ethicon's MITEK suture anchors and Gynecare's women's
health products, Ethicon Endo-Surgery's MAMMOTOME breast biopsy system and
ULTRACISION Harmonic scalpel and Vistakon's disposable contact lens products
were the primary contributors to the Professional segment growth. In the fourth
quarter, Cordis announced the U.S. market introduction of its new Bx VELOCITY
Coronary Stent with Hepacoat -- the first drug-coated stent utilizing a
proprietary heparin coating to receive regulatory approval in the U.S. and
Europe. The proprietary heparin coating retains its properties for periods
lasting several months when implanted into blood vessels. Cordis also received
favorable jury verdicts in its stent patent infringement cases against Boston
Scientific Corporation and Medtronic AVE, Inc. For additional information, see
Note 18.
In addition, Cordis completed the acquisition of Atrionix, Inc., valued
at $62.8 million. Atrionix is developing a proprietary, catheter-based system
for the treatment of atrial fibrillation, a disruption in the heart's normal
sinus rhythm.
Worldwide sales in 1999 of $9.91 billion in the Professional segment
represented an increase of 15.7% over 1998. Domestic sales increased 16.9%,
while international sales gains in local currency of 15.7% were partially offset
by the strength of the U.S. dollar. In the fourth quarter, Cordis launched the
new Bx VELOCITY coronary stent in Europe, where it has been well received by the
medical community. Ethicon's new products included: PRONOVA Poly
(hexafluoropropylene-VDF) Suture, a synthetic nonabsorbable monofilament for
cardiovascular and vascular surgery and SURGIFOAM Absorbable Gelatin Sponge USP,
which is proven in surgery for over 50 years in Europe and has given Ethicon a
full line of hemostasis products. Ethicon also received a fourth quarter
approval for Gynecare's THERMACHOICE II Uterine Balloon Therapy System, the
latex-free next generation ablation technology system used for excessive uterine
bleeding.
1998 worldwide sales of $8.57 billion in the Professional segment
represented an increase of 1.6% over 1997. Domestic sales decreased 2.4%, while
international sales gains in local currency of 10.7% were partially offset by
the strength of the U.S. dollar. During the fourth quarter of 1998, the Company
completed the acquisition of DePuy, one of the world's leading orthopaedic
products companies with products in reconstructive, spinal, trauma and sports
medicine. The Company also completed the acquisition of FemRx, a leader in the
development of proprietary surgical systems that enable surgeons to perform less
invasive alternatives to hysterectomy. The 1998 special pre-tax charge for the
Professional segment for restructuring was $304 million. See Note 14 and Note 17
for detailed discussion on Restructuring and IPR&D charges and Acquisitions.
Geographic Areas
The Company further categorizes its sales by major geographic area as presented
below:
<TABLE>
<CAPTION>
Sales Increase
(Millions of Dollars) 2000 1999 Amount Percent
<S> <C> <C> <C> <C>
United States $17,000 15,385 1,615 10.5%
Europe 6,365 6,711 (346) (5.2)
Western Hemisphere
excluding U.S. 2,084 2,023 61 3.0
Asia-Pacific, Africa 3,690 3,352 338 10.1
Worldwide total $29,139 27,471 1,668 6.1%
</TABLE>
International sales were negatively impacted by the translation of
local currency operating results into U.S dollars in all regions. Average
exchange rates
<PAGE> 8
to the dollar have declined each year since 1995. See Note 12 for
additional information on geographic areas.
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 $5.74 billion at the end of 2000 as
compared with $3.88 billion at the end of 1999.
Total unused credit available to the Company approximates $3.0 billion,
including $1.5 billion of credit commitments with various banks worldwide that
expire on October 4, 2001.
The Company's shelf registration filed with the Securities and Exchange
Commission enables the Company to issue up to $2.59 billion of unsecured debt
securities and warrants to purchase debt securities under its medium term note
(MTN) program. No MTN's were issued in 2000. At December 31, 2000, the Company
had $1.79 billion remaining on its shelf registration. A summary of borrowings
can be found in Note 6.
Total borrowings at the end of 2000 and 1999 were $3.52 billion and
$4.26 billion, respectively. In 2000 net cash (cash and current marketable
securities net of debt) was $2.23 billion. In 1999, net debt (debt net of cash
and current marketable securities) was 2.3% of net capital (shareowners' equity
and net debt). Total debt represented 15.7% of total capital (shareowners'
equity and total debt) in 2000 and 20.8% of total capital in 1999. Shareowners'
equity per share at the end of 2000 was $13.52 compared with $11.67 at year-end
1999, an increase of 15.9%. For the period ended December 31, 2000, there were
no material cash commitments.
Financial Instruments
The Company uses financial instruments to manage the impact of foreign
exchange rate changes on cash flows. Accordingly, the Company enters into
forward foreign exchange contracts to protect the value of existing foreign
currency assets and liabilities and to hedge future foreign currency product
costs. Gains or losses on these contracts are offset by the gains or losses on
the underlying transactions. A 10% appreciation of the U.S. Dollar from December
31, 2000 market rates would increase the unrealized value of the Company's
forward contracts by $266 million. Conversely, a 10% depreciation of the U.S.
Dollar from December 31, 2000 market rates would decrease the unrealized value
of the Company's forward contracts by $206 million. In either scenario, the gain
or loss on the forward contract would be offset by the gain or loss on the
underlying transaction and therefore would have no impact on future earnings and
cash flows.
The Company enters into currency swap contracts to manage the Company's
exposure to changes in currency exchange rates and hedge foreign currency
denominated assets and liabilities. The impact of a 1% change in interest rates
on the Company's interest rate sensitive financial instruments would be
immaterial.
The Company does not enter into financial instruments for trading or
speculative purposes. Further, 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 the risk of loss is remote.
Changing Prices and Inflation
Johnson & Johnson is aware that its products are used in a setting
where, for more than a decade, policymakers, 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 1990 - 2000, in the United States, the weighted
average compound annual growth rate of Johnson & Johnson 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.
<PAGE> 9
Inflation rates, even though moderate in many parts of the world during 2000,
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 periodic price increases.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). The standard was most recently amended in
June 2000 by Statement of Financial Accounting Standards No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities -- an amendment of
FASB Statement No. 133." The standards are collectively referred to as SFAS 133.
The Company adopted SFAS 133 effective January 1, 2001.
SFAS 133 requires that all derivative instruments be recorded on the
balance sheet at their respective fair values. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether the derivative is designated as part of a hedge
transaction and, if it is, depending on the type of hedge transaction. For fair
value hedge transactions in which the Company is hedging changes in the fair
value of assets, liabilities or firm commitments, changes in the fair value of
the derivative instrument will generally be offset in earnings by changes in the
hedged item's fair value. For cash flow hedge transactions in which the Company
is hedging the variability of cash flows related to a variable rate asset,
liability or forecasted transaction, changes in the fair value of the derivative
instrument will be reported in other comprehensive income. The gains and losses
on the derivative instrument that are reported in other comprehensive income
will be recognized in earnings in the periods in which earnings are impacted by
the variability of the cash flows of the hedged item.
The Company uses forward exchange contracts to manage its exposure to
the variability of cash flows primarily related to the foreign exchange rate
changes of future foreign currency product costs. The Company also uses currency
swaps to manage currency risk primarily related to borrowings. Effective with
the adoption of SFAS 133, the Company designated both of these types of
derivatives as cash flow hedges.
On January 1, 2001 the Company recorded a $17 million net-of-tax
cumulative effect adjustment gain in accumulated other comprehensive income to
recognize at fair value all derivative instruments designated as cash flow
hedges. The Company also determined that the adjustment to net earnings was
immaterial.
In May 2000, the Emerging Issues Task Force (EITF) reached a consensus
on Issue 00-14, Accounting for Certain Sales Incentives, addressing both the
recognition and income statement classification of certain sales incentives. The
Company currently recognizes the expense related to coupons and certain sales
incentives upon issuance and classifies these expenses as selling, marketing and
administrative expense. The amount of such sales incentives for fiscal years
2000, 1999 and 1998 is estimated to be $112 million, $112 million, and $107
million, respectively. EITF 00-14 is expected to take effect in the second
quarter of fiscal 2001 and the impact on the Company will be the
reclassification of the above-mentioned amounts from expense to a reduction of
sales.
The Company has adopted EITF Issue 00-10, Accounting for Shipping and
Handling Fees and Costs. The amount of revenue received for shipping and
handling is immaterial for all periods presented. Additional disclosure related
to the costs of shipping and handling is provided in Note 1 of the financial
statements.
<PAGE> 10
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 shareowners of record at
year-end 2000 was 164,158. The composite market price ranges for Johnson &
Johnson common stock during 2000 and 1999 were:
2000 1999
High Low High Low
First quarter $ 96.94 66.13 94 77
Second quarter 101.88 70 103 87.81
Third quarter 101.44 90.25 105.88 90
Fourth quarter 105.94 89.19 106.88 90.13
Year-end close 105.06 93.25
Cash Dividends Paid
The Company increased its dividends in 2000 for the 38th consecutive
year. Cash dividends paid were $1.24 per share in 2000 compared with dividends
of $1.09 per share in 1999 and $.97 per share in 1998. The dividends were
distributed as follows:
2000 1999 1998
First quarter $ .28 .25 .22
Second quarter .32 .28 .25
Third quarter .32 .28 .25
Fourth quarter .32 .28 .25
Total $ 1.24 1.09 .97
On January 2, 2001, the Board of Directors declared a regular cash
dividend of $.32 per share, paid on March 13, 2001 to shareowners of record on
February 20, 2001.
The Company expects to continue the practice of paying regular cash
dividends.
Cautionary Factors That May Affect Future Results
This Annual Report contains forward-looking statements. Forward-looking
statements do not relate strictly to historical or current facts and anticipate
results based on management's plans that are subject to uncertainty.
Forward-looking statements may be identified by the use of words like "plans,"
"expects," "will," "anticipates," "estimates" and other words of similar meaning
in conjunction with, among other things, discussions of future operations,
financial performance, the Company's strategy for growth, product development,
regulatory approval, market position and expenditures.
Forward-looking statements are based on current expectations of future events.
The Company cannot guarantee that any forward-looking statement will be
accurate, although the Company believes that it has been reasonable in its
expectations and assumptions. Investors should realize that if underlying
assumptions prove inaccurate or that unknown risks or uncertainties materialize,
actual results could vary materially from the Company's expectations and
projections. Investors are therefore cautioned not to place undue reliance on
any forward-looking statements. Furthermore, the Company assumes no obligation
to update any forward-looking statements as a result of new information or
future events or developments. The Company's report on Form 10-K for the year
ended December 31, 2000 that will be filed in March 2001, will contain, as an
Exhibit, a discussion of various factors that could cause actual results to
differ from expectations. Prior to that filing, investors should reference the
Company's report on Form 10-K for the fiscal year ended January 2, 2000. The
Company notes these factors as permitted by the Private Securities Litigation
Reform Act of 1995.
<PAGE> 11
<TABLE>
<CAPTION>
Consolidated Balance Sheets
At December 31, 2000 and January 2, 2000
(Dollars in Millions) (Note 1) 2000 1999
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents (Notes 1 and 16) $ 3,411 2,363
Marketable securities (Notes 1 and 16) 2,333 1,516
Accounts receivable trade, less allowances $411 (1999, $389) 4,464 4,233
Inventories (Notes 1 and 2) 2,842 3,095
Deferred taxes on income (Note 8) 1,151 1,105
Prepaid expenses and other receivables 1,249 888
Total current assets 15,450 13,200
Marketable securities, non-current (Notes 1 and 16) 269 441
Property, plant and equipment, net (Notes 1, 3 and 14) 6,971 6,719
Intangible assets, net (Notes 1, 7 and 14) 7,256 7,571
Deferred taxes on income (Note 8) 54 104
Other assets 1,321 1,128
Total assets $ 31,321 29,163
Liabilities and Shareowners' Equity
Current liabilities
Loans and notes payable (Note 6) $ 1,479 1,806
Accounts payable 2,083 2,003
Accrued liabilities 2,776 2,972
Accrued salaries, wages and commissions 488 467
Taxes on income 314 206
Total current liabilities 7,140 7,454
Long-term debt (Note 6) 2,037 2,450
Deferred tax liability (Note 8) 255 287
Employee related obligations (Note 5) 1,753 1,749
Other liabilities 1,328 1,010
Shareowners' equity
Preferred stock -- without par value
(authorized and unissued 2,000,000 shares) -- --
Common stock -- par value $1.00 per share (Note 20)
(authorized 2,160,000,000 shares; issued 1,534,921,000
and 1,534,916,000 shares) 1,535 1,535
Note receivable from employee stock ownership plan (Note 15) (35) (41)
Accumulated other comprehensive income (Note 11) (470) (396)
Retained earnings 18,812 16,192
19,842 17,290
Less: common stock held in treasury, at cost (Note 20)
(143,984,000 and 145,233,000) 1,034 1,077
Total shareowners' equity 18,808 16,213
Total liabilities and shareowners' equity $ 31,321 29,163
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 12
<TABLE>
<CAPTION>
Consolidated Statement of Earnings
(Dollars in Millions Except Per Share Figures)
(Note 1) 2000 1999 1998
<S> <C> <C> <C>
Sales to customers $ 29,139 27,471 23,995
Cost of products sold (1998 includes
$60 of inventory write-offs for restructuring) 8,861 8,442 7,604
Gross profit 20,278 19,029 16,391
Selling, marketing and administrative expenses 10,875 10,503 9,027
Research expense 2,926 2,600 2,336
Purchased in-process research and
development (Notes 14 and 17) 54 - 298
Interest income (379) (246) (277)
Interest expense, net of portion
capitalized (Note 3) 146 197 129
Other expense, net 67 222 143
Restructuring charge (Note 14) (33) - 553
13,656 13,276 12,209
Earnings before provision for taxes on income 6,622 5,753 4,182
Provision for taxes on income (Note 8) 1,822 1,586 1,179
Net earnings $ 4,800 4,167 3,003
Basic net earnings per share (Notes 1 and 19) $ 3.45 3.00 2.16
Diluted net earnings per share (Notes 1 and 19) $ 3.40 2.94 2.12
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 13
<TABLE>
<CAPTION>
Consolidated Statements of Equity
Note
(Dollars in Millions) (Note 1) Receiv Accum Common
EE Other Stk Treas
Comp Retained Stk Comp Issued Stk
Total Income Earnings (ESOP) Inc Amt Amt
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 28, 1997 $ 12,866 12,747 (51) (370) 1,535 (995)
Net earnings 3,003 3,003 3,003
Cash dividends paid (1,305) (1,305)
Employee compensation
and stock option plans 378 (484) 862
Repurchase of common stock (930) (930)
Business combinations 10 7 3
Other comprehensive income,
net of tax:
Currency translation adj 89 89 89
Unrealized gains (losses)
on securities (41) (41) (41)
Reclassification adjustment 33
Total comprehensive income 3,084
Note receivable from ESOP 7 7
Balance, January 3, 1999 $ 14,077 13,968 (44) (322) 1,535 (1,060)
Net earnings 4,167 4,167 4,167
Cash dividends paid (1,479) (1,479)
Employee compensation
and stock option plans 357 (464) 821
Repurchase of common stock (840) (840)
Business combinations 2 2
Other comprehensive income,
net of tax:
Currency translation adj (155) (155) (155)
Unrealized gains (losses)
on securities 81 81 81
Reclassification adjustment 17
Total comprehensive income 4,110
Note receivable from ESOP 3 3
Balance, January 2, 2000 $ 16,213 16,192 (41) (396) 1,535 (1,077)
Net earnings 4,800 4,800 4,800
Cash dividends paid (1,724) (1,724)
Employee compensation
and stock option plans 483 (524) 1,007
Repurchase of common stock (973) (973)
Business combinations 77 68 9
Other comprehensive income,
net of tax:
Currency translation adj (45) (45) (45)
Unrealized gains (losses)
on securities (14) (14) (14)
EMinimum pension liability (15) (15) (15)
Reclassification adjustment (46)
Total comprehensive income 4,680
Note receivable from ESOP 6 6
Balance, December 31, 2000 $ 18,808 18,812 (35) (470) 1,535 (1,034)
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 14
Consolidated Statements of Cash Flows
(Dollars in Millions) (Note 1) 2000 1999 1998
Cash flows from operating activities
Net earnings $ 4,800 4,167 3,003
Adjustments to reconcile
net earnings to cash flows:
Depreciation and amortization
of property and intangibles 1,515 1,444 1,285
Purchased in-process research
and development 54 -- 298
Increase in deferred taxes (167) (7) (297)
Accounts receivable reserves 33 11 24
Changes in assets and liabilities,
net of effects from acquisition of
businesses:
Increase in accounts receivable (451) (671) (163)
Decrease (increase) in inventories 125 (333) (100)
Increase in accounts payable and
accrued liabilities 57 242 646
Decrease in other current and
non-current assets 143 457 142
Increase in other current and
non-current liabilities 454 450 153
Net cash flows from operating activities 6,563 5,760 4,991
Cash flows from investing activities
Additions to property, plant and
equipment (1,646) (1,728) (1,545)
Proceeds from the disposal of assets 161 35 108
Acquisition of businesses, net
of cash acquired (Note 17) (68) (271) (3,818)
Purchases of investments (5,383) (3,538) (1,005)
Sales of investments 4,670 2,817 400
Other (102) (257) (205)
Net cash used by investing activities (2,368) (2,942) (6,065)
Cash flows from financing activities
Dividends to shareowners (1,724) (1,479) (1,305)
Repurchase of common stock (973) (840) (930)
Proceeds from short-term debt 814 3,208 2,424
Retirement of short-term debt (1,485) (4,063) (226)
Proceeds from long-term debt 4 793 535
Retirement of long-term debt (28) (176) (471)
Proceeds from the exercise of
stock options 292 180 178
Net cash (used by) provided by
financing activities (3,100) (2,377) 205
Effect of exchange rate changes
on cash and cash equivalents (47) (72) 24
Increase (decrease) in cash
and cash equivalents 1,048 369 (845)
Cash and cash equivalents,
beginning of year (Note 1) 2,363 1,994 2,839
Cash and cash equivalents,
end of year (Note 1) $ 3,411 2,363 1,994
<PAGE> 15
Consolidated Statements of Cash Flows
(continued)
(Dollars in Millions) (Note 1) 2000 1999 1998
Supplemental cash flow data
Cash paid during the year for:
Interest $ 191 207 174
Income taxes 1,627 1,406 1,310
Supplemental schedule of noncash
investing and financing activities
Treasury stock issued for employee
compensation and stock option plans,
net of cash proceeds $ 754 675 717
Acquisitions of businesses
Fair value of assets acquired $ 158 271 4,659
Fair value of liabilities assumed
(including $296 of assumed debt in 1998) (5) -- (545)
153 271 4,114
Treasury stock issued at fair value (85) -- --
Net purchase price $ 68 271 4,114
See Notes to Consolidated Financial Statements
<PAGE> 16
1 Summary of Significant Accounting Principles
Principles of Consolidation
The 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.
Investments
Short-term marketable securities are carried at cost, which approximates fair
value. Long-term debt securities that the Company has the ability and intent to
hold until maturity are carried at amortized cost which also approximates fair
value. Gross unrealized holding gains and losses are not material. Management
determines the appropriate classification of its investments in debt and equity
securities at the time of purchase and reevaluates such determination at each
balance sheet date.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost. The Company utilizes the
straight-line method of depreciation over the estimated useful lives of the
assets:
Building and building equipment 20-40 years
Land and land improvements 10-20 years
Machinery and equipment 2-13 years
Revenue Recognition
The Company recognizes revenue from product sales when the goods are shipped and
title passes to the customer. In instances where title does not pass to the
customer upon shipment, the Company recognizes revenue upon delivery. The
Company has adopted Staff Accounting Bulletin (SAB) 101, Revenue Recognition in
Financial Statements, the effects of which are immaterial for all periods
presented.
Sales Incentives
The Company currently recognizes the expense related to coupons and certain
sales incentives upon issuance and classifies these expenses as selling,
marketing and administrative expense. The amount of such sales incentives for
2000, 1999 and 1998 is estimated to be $112 million, $112 million, and $107
million, respectively. EITF 00-14 is expected to take effect in the second
quarter of 2001 and the impact on the Company will be the reclassification of
the above mentioned amounts from expense to a reduction of sales.
Shipping and Handling
Shipping and handling costs incurred were $492 million, $470 million and $401
million in 2000, 1999 and 1998, respectively, and are included in selling,
marketing and administrative expense. The amount of revenue received for
shipping and handling is immaterial for all periods presented.
Inventories
Inventories are stated at the lower of cost or market determined by the
first-in, first-out 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
<PAGE> 17
recognized when the expected future operating cash flows derived from such
intangible assets is less than their carrying value.
Financial Instruments
Gains and losses on foreign currency hedges of existing assets or liabilities,
or hedges of firm commitments, are deferred and recognized in income as part of
the related transaction.
Unrealized gains and losses on currency swaps that hedge third party
debt are classified in the balance sheet as other assets or liabilities.
Interest expense under these agreements, and on the debt instruments they hedge,
are recorded at the net effective interest rate of the hedge transaction. In the
event of early termination of a currency swap contract that hedges third party
debt, the gain or loss on the swap contract is amortized over the remaining life
of the related transaction. If the underlying transaction associated with a
swap, or other derivative contract, is accounted for as a hedge and is
terminated early, the related derivative contract is terminated simultaneously
and any gains or losses would be included in income immediately.
The Company adopted SFAS 133 effective January 1, 2001. The Company
uses forward exchange contracts to manage its exposure to the variability of
cash flows primarily related to the foreign exchange rate changes of future
foreign currency product costs. The Company also uses currency swaps to manage
currency risk primarily related to borrowings. Effective with the adoption of
SFAS 133, the Company designated both of these types of derivatives as cash flow
hedges.
On January 1, 2001 the Company recorded a $17 million net-of-tax cumulative
effect adjustment gain in accumulated other comprehensive income to recognize at
fair value all derivative instruments that will be designated as cash flow
hedges. The Company determined that the cumulative effect adjustment to net
earnings was immaterial.
Advertising
Costs associated with advertising are expensed in the year incurred. Advertising
expenses worldwide, which are comprised of television, radio, print media as
well as Internet advertising were $1.32 billion in 2000, $1.39 billion in 1999
and $1.19 billion in 1998.
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, 2000, and January 2, 2000 the cumulative amount of undistributed
international earnings was approximately $9.5 billion and $8.3 billion,
respectively.
Net Earnings Per Share
Basic earnings per share is computed by dividing net income available to common
shareowners by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock.
Risks and Uncertainties
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported.
Actual results may or may not 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
<PAGE> 18
weeks, but every five or six years, as was the case in 1998, 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 2000 and 1999, inventories were comprised of:
(Dollars in Millions) 2000 1999
Raw materials and supplies $ 702 663
Goods in process 458 416
Finished goods 1,682 2,016
$ 2,842 3,095
3 Property, Plant and Equipment
At the end of 2000 and 1999, property, plant and equipment at cost and
accumulated depreciation were:
(Dollars in Millions) 2000 1999
Land and land improvements $ 393 375
Buildings and building equipment 3,345 3,164
Machinery and equipment 6,065 6,070
Construction in progress 1,445 1,437
11,248 11,046
Less accumulated depreciation 4,277 4,327
$ 6,971 6,719
The Company capitalizes interest expense as part of the cost of construction of
facilities and equipment. Interest expense capitalized in 2000, 1999 and 1998
was $96, $81 and $72 million, respectively.
Upon retirement or 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. For additional discussion on
property, plant and equipment, see Note 14.
4 Rental Expense and Lease Commitments
Rentals of space, vehicles, manufacturing equipment and office and data
processing equipment under operating leases amounted to approximately $251
million in 2000, $233 million in 1999 and $243 million in 1998. The approximate
minimum rental payments required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year at December 31, 2000
are:
<TABLE>
<CAPTION>
(Dollars After
in Millions) 2001 2002 2003 2004 2005 2005 Total
<S> <C> <C> <C> <C> <C> <C> <C>
$ 98 85 66 51 37 87 424
</TABLE>
Commitments under capital leases are not significant.
5 Employee Related Obligations
At the end of 2000 and 1999, employee related obligations were:
(Dollars in Millions) 2000 1999
Postretirement benefits $ 822 805
Post employment benefits 101 111
Pension liabilities 601 647
Certificates of extra compensation 229 186
Employee related obligations $1,753 1,749
<PAGE> 19
6 Borrowings
The components of long-term debt are as follows:
Eff. Eff.
(Dollars in Millions) 2000 Rate% 1999 Rate%
4.75% Convertible
Subordinated Debentures
due 2005(2) $ 460 4.75 460 4.75
8.72% Debentures
due 2024 300 8.72 300 8.72
6.95% Notes due 2029 293 7.14 293 7.14
6.73% Debentures
due 2023 250 6.73 250 6.73
6% Eurodollar due 2001 250 6.02 250 6.02
7.375% Notes due 2002 200 7.49 199 7.49
8.25% Eurodollar Notes
due 2004 199 8.37 199 8.37
6.625% Notes due 2009 198 6.80 197 6.80
5% Deutsche Mark Notes
due 2001(3) 85 1.98 93 1.98
5.12% Notes due 2003(4) 60 0.82 60 0.82
Industrial Revenue Bonds 44 5.77 47 5.78
Other, principally
international 87 -- 128 --
2,426 6.42(1) 2,476 6.42(1)
Less current portion 389 26
$ 2,037 2,450
(1) Weighted average effective rate.
(2) Represents 4.75% convertible subordinated debt issued by Centocor prior to
the merger with Johnson & Johnson. Centocor exercised its option to redeem the
debentures and set February 21, 2001 as the redemption date, at a price equal to
102.714% of the principal amount plus accrued interest. The debentures are
convertible by the holders into approximately 5,987,000 shares of Johnson &
Johnson stock at a conversion price of $77.091 per share. The option expired at
the close of business of' February 14, 2001.
(3) Represents 5% Deutsche Mark notes due 2001 issued by a Japanese subsidiary
and converted to a 1.98% fixed rate yen note via a currency swap.
(4) Represents 5.12% U.S. Dollar notes due 2003 issued by a Japanese subsidiary
and converted to a 0.82% fixed rate yen note via a currency swap. The Company
has access to substantial sources of funds at numerous banks worldwide. Total
unused credit available to the Company approximates $3.0 billion, including $1.5
billion of credit commitments with various banks worldwide that expire on
October 4, 2001. Interest charged on borrowings under the credit line agreements
is 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.
The Company's shelf registration filed with the Securities and Exchange
Commission enables the Company to issue up to $2.6 billion of unsecured debt
securities and warrants to purchase debt securities under its medium term note
(MTN) program. No MTN's were issued in 2000. At December 31, 2000, the Company
had $1.8 billion remaining on its shelf registration.
Short-term borrowings and current portion of long-term debt amounted to
$1.5 billion at the end of 2000. These borrowings are comprised of $0.8 billion
of U.S. commercial paper, at an average interest rate of 6.5%, and $0.7 billion
of local borrowings, principally by international subsidiaries.
Aggregate maturities of long-term obligations commencing in 2001 are:
After
(Dollars in Millions) 2001 2002 2003 2004 2005 2005
$ 389 216 66 214 467 1,074
<PAGE> 20
7 Intangible Assets
At the end of 2000 and 1999, the gross and net amounts of intangible assets
were:
(Dollars in Millions) 2000 1999
Goodwill - gross $ 4,377 4,270
Less accumulated amortization 540 424
Goodwill - net $ 3,837 3,846
Patents and trademarks - gross $ 1,948 2,014
Less accumulated amortization 457 399
Patents & trademarks - net $ 1,491 1,615
Other intangibles - gross $ 2,401 2,471
Less accumulated amortization 473 361
Other intangibles - net $ 1,928 2,110
Total intangible assets - gross $ 8,726 8,755
Less accumulated amortization 1,470 1,184
Total intangible assets - net $ 7,256 7,571
The weighted average amortization periods for goodwill, patents and trademarks
and other intangibles are 32 years, 21 years and 18 years, respectively. For
additional discussion on intangible assets, see Note 14.
8 Income Taxes
The provision for taxes on income consists of:
(Dollars in Millions) 2000 1999 1998
Currently payable:
U.S. taxes $ 1,321 994 991
International taxes 668 599 485
1,989 1,593 1,476
Deferred:
U.S. taxes (75) 94 (180)
International taxes (92) (101) (117)
(167) (7) (297)
$ 1,822 1,586 1,179
A comparison of income tax expense at the federal statutory rate of 35% in 2000,
1999 and 1998, to the Company's effective tax rate is as follows:
(Dollars in Millions) 2000 1999 1998
U.S. $ 3,646 3,241 2,522
International 2,976 2,512 1,660
Earnings before taxes
on income: $ 6,622 5,753 4,182
Statutory taxes $ 2,318 2,014 1,464
Tax rates:
Statutory 35.0% 35.0% 35.0%
Puerto Rico and
Ireland operations (5.2) (5.5) (5.5)
Research tax credits (0.6) (0.6) (0.3)
Domestic state and local 0.7 0.9 1.0
International
subsidiaries
excluding Ireland (3.0) (2.4) (3.3)
IPR&D 0.3 -- 1.3
All other 0.3 0.2 --
Effective tax rate 27.5% 27.6% 28.2%
The reduction in the 2000 worldwide effective tax rate was primarily
due to a greater proportion of the Company's taxable income derived from lower
tax rate
<PAGE> 21
countries offset by the Company's fourth quarter purchased IPR&D charge which is
not tax deductible.
During 2000, the Company had subsidiaries operating in Puerto Rico
under a tax incentive grant expiring December 31, 2007. In addition, the Company
has subsidiaries manufacturing in Ireland under an incentive tax rate effective
through the year 2010.
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.
Temporary differences and carryforwards for 2000 are as follows:
Deferred Tax
(Dollars in Millions) Asset Liability
Employee related obligations $ 597
Depreciation (317)
Non-deductible intangibles (734)
International R&D capitalized for tax 156
Reserves & liabilities 512
Income reported for tax purposes 270
Miscellaneous international 274 (217)
Loss carryforwards 72
Miscellaneous U.S. 275
Total deferred income taxes $ 2,156 (1,268)
The difference between the net deferred tax on income per the balance
sheet and the net deferred tax is reflected in Taxes on Income.
9 International Currency Translation
For translation of its non-U.S. dollar 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 shareowners' 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 which are reflected in operating results.
An analysis of the changes during 2000 and 1999 for foreign currency
translation adjustments is included in Note 11.
Net currency transaction and translation gains and losses included in
other expense were after-tax losses of $67 million in 2000, after-tax losses of
$48 million in 1999 and after-tax losses of $15 million in 1998.
10 Common Stock, Stock Option Plans and Stock
Compensation Agreements
At December 31, 2000 the Company had 15 stock-based compensation plans. Under
the 2000 Stock Option Plan, the Company may grant options to its employees for
up to 1.6% of the issued shares of the Company's Common Stock, plus the number
of shares available from the previous year that were not issued, as well as
shares issued under the Plan that expired or terminated without being exercised.
The shares outstanding are for contracts under the Company's 1986, 1991, 1995
and 2000 Stock Option Plans, the 1997 Non-Employee Director's Plan and the
Mitek, Cordis, Biosense, Gynecare, Centocor and Innovasive Stock Option plans.
Stock options expire 10 years from the date they are granted and vest over
service periods that range from one to six years. All options granted are valued
at current market price. Shares available for future grants are based on 1.6% of
the issued shares each year. Based on current issued shares, 24.6 million shares
could be granted each year during the years 2001 through 2005. Shares available
for future
<PAGE> 22
grants under the previous plan were 3.0 million, and 15.0 million at the end of
1999 and 1998, respectively.
A summary of the status of the Company's stock option plans as of December 31,
2000, January 2, 2000 and January 3, 1999 and changes during the years ending on
those dates, is presented below:
Weighted
Options Average
(Shares in Thousands) Outstanding Exercise Price
Balance at December 28, 1997 81,261 $ 34.51
Options granted 10,852 78.20
Options exercised (11,414) 18.65
Options cancelled/forfeited (2,304) 44.92
Balance at January 3, 1999 78,395 42.55
Options granted 13,113 97.87
Options exercised (9,235) 23.84
Options cancelled/forfeited (1,722) 55.53
Balance at January 2, 2000 80,551 53.40
Options granted 20,876 99.87
Options exercised (10,429) 30.99
Options cancelled/forfeited (2,628) 74.81
Balance at December 31, 2000 88,370 $ 66.39
The Company applies the provision of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," that calls for companies to
measure employee stock compensation expense based on the fair value method of
accounting. However, as allowed by the Statement, the Company elected continued
use of Accounting Principle 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 method had been applied in measuring
compensation cost. Had the fair value method been applied, net income would have
been reduced by $168 million or $.12 per share in 2000, $116 million or $.08 per
share in 1999 and $77 million or $.05 per share in 1998. These calculations only
take into account the options issued since January 1, 1995. The average fair
value of options granted was $29.57 in 2000, $30.00 in 1999 and $19.62 in 1998.
The fair value was estimated using the Black-Scholes option pricing model based
on the weighted average assumptions of:
2000 1999 1998
Risk-free rate 5.45% 6.32% 4.52%
Volatility 27.0% 24.0% 22.0%
Expected life 5.0 yrs 5.0 yrs 5.0 yrs
Dividend yield 1.40% 1.13% 1.30%
The following table summarizes stock options outstanding and exercisable at
December 31, 2000:
(Shares in Thousands) Outstanding Exercisable
Average Average
Exercise Average Exercise Exercise
Price Range Options Life(a) Price Options Price
$8.00-$29.93 20,084 2.8 $ 23.79 20,050 $ 23.79
$30.98-$64.44 17,857 5.3 47.00 12,925 46.34
$64.63-$93.25 19,214 7.5 72.95 8,966 65.10
$93.31-$127.66 31,215 9.5 100.84 66 101.35
$8.00-$127.66 88,370 6.7 $ 66.39 42,007 $ 39.67
(a) Average contractual life remaining in years.
<PAGE> 23
11 Accumulated Other Comprehensive Income
Components of other comprehensive income/(loss) consist of the following:
Accumulated
Foreign Unrealized Pension Other
Currency Gains/(Losses) Liab Comprehensive
(Dollars in Millions) Translat on Securities Adj Income/(Loss)
December 28, 1997 $ (411) 41 (370)
1998 change 89 (41) 48
January 3, 1999 (322) - (322)
1999 change (155) 81 (74)
January 2, 2000 (477) 81 (396)
2000 change (45) (14) (15) (74)
December 31, 2000 $ (522) 67 (15) (470)
Total other comprehensive income for 2000 includes reclassification adjustment
gains of $71 million realized from the sale and write-down of equity securities
and the associated tax expense of $25 million. In 1999, total other
comprehensive income included reclassification adjustment losses of $27 million
and the associated tax benefit of $10 million. The tax effect on these
unrealized gains/(losses) on equity securities is an expense of $43 million in
2000 and $50 million in 1999 and a benefit of $19 million in 1998.
The currency translation adjustments are not currently adjusted for income taxes
as they relate to permanent investments in non-U.S. subsidiaries.
12 Segments of Business and Geographic Areas
Sales to Customers(2)
(Dollars in Millions) 2000 1999 1998
Consumer - Domestic $ 3,760 3,670 3,325
International 3,144 3,194 3,201
Total 6,904 6,864 6,526
Pharmaceutical - Domestic 7,734 6,419 4,993
International 4,220 4,275 3,907
Total 11,954 10,694 8,900
Professional - Domestic 5,506 5,296 4,530
International 4,775 4,617 4,039
Total 10,281 9,913 8,569
Worldwide total $29,139 27,471 23,995
<TABLE>
<CAPTION>
Operating Profit(3) Identifiable Assets
(Dollars in Millions) 2000(4) 1999(5) 1998(6) 2000 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Consumer $ 867 683 414 4,761 4,901 4,904
Pharmaceutical 4,175 3,595 2,933 7,740 7,483 5,918
Professional 1,696 1,632 941 12,745 12,458 13,244
Segments total 6,738 5,910 4,288 25,246 24,842 24,066
Expenses not allocated
to segments (3) (116) (157) (106)
General corporate(7) 6,075 4,321 3,226
Worldwide total $ 6,622 5,753 4,182 31,321 29,163 27,292
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
Additions to Property, Depreciation and
Plant & Equipment Amortization
(Dollars in Millions) 2000 1999 1998 2000 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Consumer $ 336 412 268 275 277 273
Pharmaceutical 584 666 600 397 341 352
Professional 665 576 627 801 786 629
Segments total 1,585 1,654 1,495 1,473 1,404 1,254
General corporate 61 74 50 42 40 31
Worldwide total $1,646 1,728 1,545 1,515 1,444 1,285
</TABLE>
Geographic Areas(2)
Sales to Customers(2) Long-Lived Assets
(Dollars in Millions) 2000 1999 1998 2000 1999 1998
United States $ 17,000 15,385 12,848 9,326 9,314 8,619
Europe 6,365 6,711 6,354 3,551 3,698 4,135
Western Hemisphere
excluding U.S. 2,084 2,023 2,105 653 550 429
Asia-Pacific, Africa 3,690 3,352 2,688 427 439 402
Segments total 29,139 27,471 23,995 13,957 14,001 13,585
General corporate 255 282 262
Other non long-lived
assets 17,109 14,880 13,445
Worldwide total $ 29,139 27,471 23,995 31,321 29,163 27,292
(1) See Management's Discussion and Analysis for a description of the segments
in which the Company does business.
(2) Export sales and intersegment sales are not significant. No single customer
or country represents 10% or more of total sales.
(3) Amounts not allocated to segments include interest income/expense, minority
interest and general corporate income and expense.
(4) 2000 results excluding Restructuring gain and In-Process Research and
Development charges are: Consumer $843, Pharmaceutical $4,171, Professional
$1,745.
(5) 1999 Pharmaceutical results excluding special charges related to the
Centocor merger equals $3,644.
(6) 1998 results excluding Restructuring and In-Process Research and Development
charges: Consumer $658, Pharmaceutical $3,132, and Professional $1,409. See Note
14 for details of Restructuring and IPR&D charges by segment.
(7) General corporate includes cash and marketable securities.
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. The Company also 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.
Retirement 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.
<PAGE> 25
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. The
Company does not fund retiree health care benefits in advance and has the right
to modify these plans in the future.
Net periodic benefit costs for the Company's defined benefit retirement
plans and other benefit plans for 2000, 1999 and 1998 include the following
components:
<TABLE>
<CAPTION>
Retirement Plans Other Benefit Plans
(Dollars in Millions) 2000 1999 1998 2000 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 201 208 185 20 24 20
Interest cost 295 270 254 51 50 50
Expected return on plan assets (377) (330) (291) (5) (5) (14)
Amortization of prior service cost 21 17 17 (1) (1) 2
Amortization of net trans asset (7) (12) (14) - - -
Recognized actuarial (gain)/loss (81) (17) (24) (10) (2) 8
Curtailments and settlements - 2 2 - - -
Net periodic benefit cost $ 52 138 129 55 66 66
</TABLE>
The net periodic (income) cost attributable to domestic retirement plans
included above was ($19) million in 2000, $56 million in 1999 and $40 million in
1998. The following tables provide the weighted-average assumptions used to
develop net periodic benefit cost and the actuarial present value of projected
benefit obligations:
<TABLE>
<CAPTION>
Retirement Plans Other Benefit Plans
Domestic Benefit Plans 2000 1999 1998 2000 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Weighted average discount rate 7.50% 7.75% 6.75% 7.50% 7.75% 6.75%
Expected long-term rate of return
on plan assets 9.00 9.00 9.00 9.00 9.00 9.00
Rate of increase in compensation
levels 5.00 5.00 5.00 5.00 5.00 5.00
International Benefit Plans
Weighted average discount rate 6.00% 5.75% 5.50% 6.75% 6.75% 6.00%
Expected long-term rate of return
on plan assets 7.50 7.50 7.75 -- -- --
Rate of increase in compensation
levels 3.50 3.50 3.50 4.25 4.50 4.25
</TABLE>
Health care cost trends are projected at annual rates grading from 9% for
employees under age 65 and 7% for employees over age 65 down to 5% for both
groups by the year 2008 and beyond. The effect of a 1% change in these assumed
cost trends on the accumulated postretirement benefit obligation at the end of
2000 would be an $89 million increase or a $78 million decrease and the effect
on the service and interest cost components of the net periodic postretirement
benefit cost for 2000 would be an $11 million increase or a $9 million decrease.
The following tables set forth the change in benefit obligations and change in
plan assets at year-end 2000 and 1999 for the Company's defined benefit
retirement plans and other postretirement plans:
<PAGE> 26
<TABLE>
<CAPTION>
(Dollars in Millions) Retirement Plans Other Benefit Plans
Change in Benefit Obligation 2000 1999 2000 1999
<S> <C> <C> <C> <C>
Benefit obligation - begin of year $4,206 4,315 694 726
Service cost 201 208 20 24
Interest cost 295 270 51 50
Plan participant contributions 14 11 - -
Amendments 2 81 (16) -
Actuarial (gain)/loss 186 (346) 10 (81)
Acquisitions 1 51 - 11
Curtailments & settlements (13) (7) - -
Total benefits paid (219) (210) (35) (36)
Effect of exchange rates (118) (167) (2) -
Benefit obligation - end of year $4,555 4,206 722 694
Change in Plan Assets
Plan assets at fair value
beginning of year $5,254 4,173 62 57
Actual return on plan assets (150) 1,301 (1) 8
Company contributions 62 46 31 32
Plan participant contributions 14 11 - -
Acquisitions (5) 41 - -
Benefits paid from plan assets (209) (198) (34) (35)
Effect of exchange rates (119) (120) - -
Plan assets at fair value
end of year $4,847 5,254 58 62
</TABLE>
Amounts recognized in the Company's balance sheet consist of the following:
Retirement Plans Other Benefit Plans
(Dollars in Millions) 2000 1999 2000 1999
Plan assets in excess of
(less than) projected
benefit obligation $ 292 1,048 (664) (632)
Unrecognized actuarial gains (984) (1,801) (166) (200)
Unrecognized prior
service cost 128 156 (23) (9)
Unrecognized net
transition asset (20) (29) -- --
Total recognized in the
consolidated
balance sheet $ (584) (626) (853) (841)
Book reserves $ (748) (775) (853) (841)
Prepaid benefits 138 120 -- --
Other assets 26 29 -- --
Total recognized in
Consolidated
balance sheet $ (584) (626) (853) (841)
Plans with accumulated benefit obligations in excess of plan assets consist of
the following:
Retirement Plans Other Benefit Plans
(Dollars in Millions) 2000 1999 2000 1999
Accumulated benefit oblig $(451) (411) (692) (696)
Projected benefit obligation $(480) (528) - -
Plan assets at fair value $49 53 88 62
<PAGE> 27
14 Restructuring and In-Process Research and
Development Charges
In the fourth quarter of 1998, the Company approved a plan to reconfigure its
global network of manufacturing and operating facilities with the objective of
enhancing operating efficiencies. This plan was completed at year-end 2000.
Among the initiatives involved in this plan were the closure of inefficient
manufacturing facilities, exiting certain businesses which were not providing an
acceptable return and related employee separations. The closure of these
facilities represented approximately 10% of the Company's manufacturing
capacity.
The estimated cost of this plan was reflected in cost of sales ($60
million) and restructuring charge ($553 million). The charge consisted of
employee separation costs of $161 million, asset impairments of $322 million,
impairments of intangibles of $52 million and other exit costs of $78 million.
Employee separations occurred primarily in manufacturing and operations
facilities affected by the plan. The decision to exit certain facilities and
businesses decreased cash flows triggering the asset impairment. The amount of
impairment of such assets was calculated using discounted cash flows or
appraisals.
The asset impairments that amounted to $322 million consisted of the
following: machinery & equipment of $215 million, inventory of $60 million,
buildings of $32 million and leasehold improvements of $15 million. Intangible
assets of $52 million included Menlo Care of $26 million, Innotech of $20
million and other intangible assets of $6 million. The Menlo Care intangible
asset was related to the Aquavene biomaterial technology that was no longer in
use with all other intangible assets related to products that were abandoned by
the Company due to insufficient financial return.
Other exit costs consisted of the following:
2000
Beginning 2000 Reversed Remaining
(Dollars in Millions) Accrual Cash Outlays to Income Accrual
Restructuring charges:
Employee separations $100 57 25 18
Other exit costs:
Distributor terminations 11 11 -- --
Disposal costs 10 7 3 --
Lease terminations 7 7 -- --
Other costs 12 7 5 --
Total other exit costs 40 32 8 --
$140 89 33 18
At year-end 2000, $33 million of the accrual was reversed to income. This gain
by segment of business was applied as follows: $20 million - Consumer, $5
million - Pharmaceutical and $8 million - Professional. The remaining accrual
represents on-going payments to severed employees to be paid out over the next
six months. The restructuring plan resulted in the reduction of 35 manufacturing
facilities around the world. Additionally, the total headcount reduction due to
the restructuring plan was approximately 4,100 employees worldwide.
In connection with the businesses acquired in 1998, the Company
recognized charges for in-process research and development (IPR&D) in the amount
of $298 million related primarily to the DePuy and RETAVASE acquisitions. The
value of the IPR&D projects was calculated with the assistance of third party
appraisers and was based on the estimated percentage completion of the various
research and development projects being pursued that ranged from 60% to 85%
complete on acquisition date. The calculation reflects cash flow projections
discounted for the risk inherent in such projects that ranged from 13% to 20%.
The remaining effort to complete these projects is not material.
The 1998 special charges impacted the business segments as follows: the
special pre-tax charge for the Consumer segment was $244 million. This charge
<PAGE> 28
reflects $85 million for severance costs associated with the termination of
approximately 2,550 employees; $133 million for the write-down of impaired
assets and $26 million for other exit costs. Acquisitions within the
Pharmaceutical business segment resulted in a $134 million write-off of
purchased IPR&D. Additionally, the Pharmaceutical business segment recorded $65
million of the special charge representing $18 million for severance costs
associated with the termination of approximately 250 employees and $47 million
for the write-down of impaired assets. Acquisitions within the Professional
business segment resulted in a $164 million write-off of purchased IPR&D.
Additionally, the Professional business segment recorded other special charges
of $304 million. This charge included $58 million for severance costs associated
with the termination of approximately 2,300 employees; $194 million for the
write-down of impaired assets and $52 million for other exit costs.
15 Savings Plan
The Company has 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 the Company stock on the open market. In exchange, the
Company received a note, the balance of which is recorded as a reduction of
shareowners' equity.
Total contributions to the plans were $78 million in 2000, $70 million in 1999,
and $65 million in 1998.
16 Financial Instruments
Derivative Financial Instrument Risk
The Company uses derivative financial instruments to manage the impact of
foreign exchange rate changes on cash flows. The Company does not enter into
derivative 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 the risk of
loss is remote.
Foreign Exchange Risk Management
The Company uses currency swaps to manage currency risk related to borrowings.
Currency swap agreements that hedge third party debt mature with these
borrowings and are described in Note 6.
The Company enters into forward foreign exchange and currency swap
contracts maturing within five years to hedge future foreign currency product
costs and other cash flows, and to protect the value of existing foreign
currency assets and liabilities. The Company has forward exchange contracts
outstanding at year-end in various currencies, principally in U.S. Dollars,
Euros and Swiss Francs. In addition, the Company has currency swaps outstanding,
principally in U.S. Dollars and Euros. Unrealized gains and losses, based on
market prices, are presented in the following table:
2000
Notional
(Dollars in Millions) Amounts Gains Losses
Forwards $ 5,548 174 121
Currency swaps 3,223 226 133
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents and current and non-current
marketable securities approximates fair value of these instruments. In addition,
the carrying amount of long-term investments, long-term debt, interest rate
<PAGE> 29
and currency swaps (used to hedge third party debt) approximates fair value of
these instruments for 2000 and 1999. The fair value of current and non-current
marketable securities, long-term debt and currency swap agreements was estimated
based on market prices and quotes obtained from brokers for those or similar
instruments. The fair value of long-term investments was estimated based on
quoted market prices at year-end.
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 Mergers & Acquisitions
Certain businesses were acquired for $158 million during 2000 ($73 million in
cash and debt assumed and 887,916 shares of the Company's common stock issued
from Treasury valued at $77 million). These acquisitions were accounted for by
the purchase method and, accordingly, results of operations have been included
in the accompanying consolidated financial statements from their respective
dates of acquisition.
The 2000 acquisitions included Innovasive Devices, a company that
manufactures and sells devices for sport medicine surgery for soft tissue
injuries, Atrionix, Inc., a development stage company whose primary product is a
pulmonary ablation catheter for the treatment of atrial fibrillation, Medtrex, a
company that develops and manufactures electrosurgical generators and disposable
products, and the St. Joseph aspirin business.
The excess of purchase price over the estimated fair value of
acquisitions amounted to $95 million and has been allocated to identifiable
intangibles and goodwill. Approximately $54 million has been identified as the
value of IPR&D associated with the Atrionix, Inc. acquisition. This IPR&D charge
related to a project for the design of a catheter system to be used in a
procedure which blocks electrical impulses originating in pulmonary veins, which
can cause atrial fibrillation. The value of the IPR&D was calculated with the
assistance of a third party appraiser using a cash flow projection discounted
for the risk inherent in such a project. The discount rate used was 26%. Pro
forma information is not provided since the impact of the acquisitions does not
have a material effect on the Company's results of operations, cash flows or
financial position.
On October 6, 1999, Johnson & Johnson and Centocor, Inc. completed the
merger between the two companies. This transaction was accounted for by the
pooling-of-interests method of accounting. Centocor had approximately 71 million
shares outstanding (83 million shares on a fully diluted basis) which were
exchanged for approximately 45 million shares of Johnson & Johnson common stock.
On a diluted basis, when adjusted for stock options outstanding and convertible
debt, Johnson & Johnson issued approximately 53 million shares. Holders of
Centocor common stock received 0.6390 of a share of Johnson & Johnson common
stock for each share of Centocor common stock, valued at $95.47 per share.
Centocor is a leading biopharmaceutical company that creates, acquires
and markets cost-effective therapies that yield long term benefits for patients
and the health care community. Its products, developed primarily through
monoclonal
<PAGE> 30
antibody technology, help physicians deliver innovative treatments to improve
human health and restore patients' quality of life.
During 1999, certain businesses were acquired for $271 million. 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 1999 acquisitions included AVEENO, the dermatological skin care
business from S.C. Johnson, Angioguard, Inc., a developer of an embolic
containment device used during interventional procedures, certain assets of
Cygnus' drug delivery business, certain assets of Medscand related to the TVT
incontinence product and the stock of Horizon Health Services, Inc., a company
specializing in the management of ambulatory surgery centers.
The excess of purchase price over the estimated fair market value of
1999 acquisitions amounted to $266 million. This amount has been allocated to
identifiable intangibles and goodwill. Pro forma information is not provided for
1999, as the impact of the acquisitions does not have a material effect on the
Company's results of operations, cash flows or financial position.
During 1999, the plan to integrate the DePuy business acquired in 1998 into the
Company's operations was completed and resulted in additional liabilities of $81
million to address costs relating to distributor terminations, employee
separations and plant consolidations.
Divestitures in 2000 and 1999 did not have a material effect on the
Company's results of operations, cash flows or financial position.
18 Legal Proceedings
The Company is involved in numerous product liability cases in the United
States, many of which concern adverse reactions to drugs and medical devices.
The damages claimed are substantial, and while the Company is confident of the
adequacy of the warnings and instructions for use which accompany such products,
it is not feasible to predict the ultimate outcome of litigation. However, the
Company believes that if any liability results from such cases, it will be
substantially covered by reserves established under its self-insurance program
and by commercially available excess liability insurance.
The Company, along with numerous other pharmaceutical manufacturers and
distributors, was a defendant in a federal and a number of state antitrust class
actions brought by retail pharmacies alleging an industry-wide agreement to deny
them price discounts on sales of brand name prescription drugs. The Company
defeated the federal class action and has settled all but two of the state class
actions. The cases of a number of pharmacies that opted out of the federal class
action also remain. The Company believes these remaining actions are without
merit and is defending them vigorously.
The Company's subsidiary, Johnson & Johnson Vision Care Inc. (Vision
Care), together with a trade association and various individual defendants, is a
defendant in several consumer class actions and an action brought by multiple
State Attorneys General on behalf of consumers alleging violations of federal
and state antitrust laws. These cases, which were filed between July 1994 and
December 1996 and are consolidated before the United States District Court for
the Middle District of Florida, assert that enforcement of Vision Care's
long-standing policy of selling contact lenses only to licensed eye care
professionals is a result of an unlawful conspiracy to eliminate alternative
distribution channels from the disposable contact lens market. Trial in the
consolidated Florida actions is scheduled to begin in late March of this year.
The Company believes that these actions are without merit and is defending them
vigorously.
Johnson & Johnson Vision Care is also a defendant in a nationwide
consumer class action brought on behalf of purchasers of its ACUVUE brand
contact lenses. The plaintiffs in that action, which was filed in 1996 in New
Jersey State Court, allege that Vision Care sold its 1-DAY ACUVUE lens at a
substantially cheaper price than ACUVUE and misled consumers into believing
these were different lenses when, in fact, they were allegedly "the same
lenses." Plaintiffs are seeking substantial
<PAGE> 31
damages and an injunction against supposed improper conduct. The Company
believes these claims are without merit and is defending the action vigorously.
The Company's Ortho Biotech subsidiary is party to an arbitration proceeding
filed against it in 1995 by Amgen, Ortho Biotech's licensor of U.S. non-dialysis
rights to EPO, in which Amgen seeks to terminate Ortho Biotech's U.S. license
rights and collect substantial damages based on alleged deliberate EPO sales by
Ortho Biotech during the early 1990's into Amgen's reserved dialysis market. The
Company believes no basis exists for terminating Ortho Biotech's U.S. license
rights or for obtaining damages and is vigorously contesting Amgen's claims.
However, Ortho Biotech's U.S. license rights to EPO are material to the Company;
thus, an unfavorable outcome could have a material adverse effect on the
Company's consolidated financial position, liquidity and results of operations.
The arbitration is scheduled to begin in September of this year.
In patent infringement actions tried in Delaware Federal Court late
last year, Cordis, a Johnson & Johnson company, obtained verdicts of
infringement and patent validity, and damage awards, against Boston Scientific
Corporation and Medtronic AVE, Inc., based on a number of Cordis coronary stent
patents. On December 15, 2000, the jury in the damage action against Boston
Scientific returned a verdict of $324 million and on December 21, 2000 the jury
in the Medtronic AVE action returned a verdict of $271 million. These sums
represent lost profit and reasonable royalty damages to compensate Cordis for
infringement but do not include pre or post judgment interest. In February 2001
a hearing was held on the claims of Boston Scientific and Medtronic AVE that the
patents at issue are unenforceable owing to alleged inequitable conduct before
the patent office. Post trial motions and appeals to the Federal Circuit Court
of Appeals will follow and no judgments are likely to be paid, if at all, until
those proceedings have run their course. Furthermore, since the amount of
damages, if any, which the Company may receive cannot be quantified until the
legal process is complete, no gain has been recorded in the financial statements
for either of these awards.
The Company is also involved in a number of patent, trademark and other
lawsuits incidental to its business.
The Company believes that the above proceedings, except as noted above,
would not have a material adverse effect on its results of operations, cash
flows or financial position.
19 Earnings Per Share
The following is a reconciliation of basic net earnings per share to diluted net
earnings per share for the years ended December 31, 2000, January 2, 2000 and
January 3, 1999.
(Shares in Millions) 2000(1) 1999(2) 1998(3)
Basic earnings per share $ 3.45 3.00 2.16
Average shares
outstanding - basic 1,390.3 1,390.1 1,389.8
Potential shares
exercisable under
stock option plans 57.0 68.7 68.8
Less: shares repurchased
under treasury stock method (35.9) (40.6) (41.4)
Adjusted average shares
outstanding - diluted 1,417.4 1,418.2 1,417.2
Diluted earnings per share $ 3.40 2.94 2.12
2000 diluted earnings per share calculation includes the dilution effect of
convertible debt: a decrease in interest expense of $13 million and 6 million
additional shares outstanding. 1999 diluted earnings per share calculation does
not include approximately 6 million shares related to convertible debt and 11
million shares of options whose exercise price is greater than average market
value as the effect would be anti-dilutive.
<PAGE> 32
(1) 2000 results excluding special charges related to In-Process Research and
Development charge and restructuring gain: Basic EPS at $3.48 and Diluted EPS at
$3.42 (unaudited).
(2) 1999 results excluding special charges related to the Centocor merger are:
Basic EPS at $3.03 and Diluted EPS at $2.97 (unaudited).
(3) 1998 results excluding Restructuring and In-Process Research and Development
charges are: Basic EPS at $2.66 and Diluted EPS at $2.61 (unaudited).
20 Capital and Treasury Stock
Changes in treasury stock were:
(Dollars in Millions Except Treasury Stock
Number of Shares in Thousands) Shares Amount
Balance at December 28, 1997 144,864 $995
Employee compensation and
stock option plans (11,906) (862)
Repurchase of common stock 12,602 930
Business combinations - (3)
Balance at January 3, 1999 145,560 1,060
Employee compensation and
stock option plans (9,255) (821)
Repurchase of common stock 8,928 840
Business combinations - (2)
Balance at January 2, 2000 145,233 1,077
Employee compensation and stock
option plans (11,062) (1,007)
Repurchase of common stock 10,701 973
Business combinations (888) (9)
Balance at December 31, 2000 143,984 $1,034
Shares of common stock authorized and issued were 1,534,921,000 shares at the
end of 2000, 1,534,916,000 shares at the end of 1999 and 1,534,824,000 shares at
the end of 1998 and 1997.
21 Selected Quarterly Financial Data (Unaudited)
Selected unaudited quarterly financial data for the years 2000 and 1999 are
summarized below:
<TABLE>
<CAPTION>
2000 1999
(Dollars in Millions First Second Third Fourth First Second Third Fourth
Except Per Share Amounts) Qtr Qtr Qtr Qtr(1) Qtr Qtr Qtr Qtr(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Segment sales to customers
Consumer $1,752 1,707 1,722 1,723 1,728 1,687 1,704 1,744
Pharmaceutical 3,042 3,221 2,934 2,757 2,577 2,829 2,735 2,552
Professional 2,525 2,580 2,548 2,628 2,434 2,455 2,445 2,581
-------------------------------------------------------------------
Total sales 7,319 7,508 7,204 7,108 6,739 6,971 6,884 6,877
===================================================================
Gross Profit 5,078 5,252 5,025 4,923 4,669 4,848 4,816 4,696
Earnings before provision
for taxes on income 1,892 1,866 1,746 1,118 1,622 1,629 1,531 971
Net earnings 1,314 1,331 1,264 891 1,138 1,164 1,111 754
-------------------------------------------------------------------
Basic net EPS $ 0.95 0.95 0.91 0.64 0.82 0.84 0.80 0.54
-------------------------------------------------------------------
Diluted net EPS $ 0.93 0.94 0.89 0.63 0.80 0.82 0.78 0.53
===================================================================
</TABLE>
(1) 2000 results excluding special charges related to In-Process Research and
Development charge and restructuring gain: Earnings before taxes $1,139; Net
earnings $924; Basic EPS $.66 and Diluted EPS $.65. The fourth quarter also
<PAGE> 33
includes an after tax charge of $42 million relating to a federal government
investigation of LifeScan's SURESTEP Blood Glucose Meter.
(2) 1999 results excluding special charges related to the Centocor merger;
Earnings before taxes $1,020; Net earnings $796; Basic EPS $.57 and Diluted EPS
$.56.
<PAGE> 34
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 accounting principles
generally accepted in the United States, and include amounts that are based on
our best judgments 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 principle 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 that are distributed throughout
the Company. Management maintains a systematic program to ensure compliance with
these policies.
PricewaterhouseCoopers LLP, the Company's independent auditor, is engaged to
audit our financial statements. PricewaterhouseCoopers LLP maintains an
understanding of our internal controls and conducts such tests and other
auditing procedures considered necessary in the circumstances to express their
opinion in the report that follows.
The Audit Committee of the Board of
Directors, composed solely of outside directors, meets periodically with the
independent auditor, management and internal auditors to review their work and
confirm that they are properly discharging their responsibilities. In addition,
the independent auditor, 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.
- ---------------------------- ---------------------------
Ralph S. Larsen Robert J. Darretta
Chairman, Board of Directors Vice President, Finance
and Chief Executive Officer and Chief Financial Officer
<PAGE> 35
To the Shareowners and Board of Directors of
Johnson & Johnson:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, consolidated statements of equity and
consolidated statements of cash flows present fairly, in all material respects,
the financial position of Johnson & Johnson and its subsidiaries at December 31,
2000 and January 2, 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.
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 of these statements in accordance with
auditing standards generally accepted in the United States which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
New York, New York
January 22, 2001
<PAGE> 36
<TABLE>
<CAPTION>
(Dollars in Millions Except Per Share Figures)
2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales to customers - Domestic $ 17,000 15,385 12,848 11,895 10,986 9,225 7,871 7,270 7,011 6,293 5,485
Sales to customers - International 12,139 12,086 11,147 10,935 10,769 9,696 7,930 6,944 6,868 6,207 5,812
Total sales 29,139 27,471 23,995 22,830 21,755 18,921 15,801 14,214 13,879 12,500 11,297
Cost of products sold 8,861 8,442 7,604 7,230 7,079 6,264 5,315 4,807 4,700 4,221 3,947
Selling, mkg admin expenses 10,875 10,503 9,027 8,756 8,427 7,491 6,375 5,807 5,758 5,188 4,508
Research expense 2,926 2,600 2,336 2,209 1,962 1,700 1,348 1,248 1,233 1,052 880
Purchased IPR&D 54 - 298 - - - 37 - - 70 115
Interest income (379) (246) (277) (213) (149) (125) (66) (84) (101) (100) (105)
Interest expense, net capitalized 146 197 129 124 133 160 162 146 144 140 203(4)
Other expense, net 67 222 143 137 283 171 76 32 132 87 260(4)
Restructuring charge (33) - 553 - - - - - - - -
22,517 21,718 19,813 18,243 17,735 15,661 13,247 11,956 11,866 10,658 9,808
Earnings bef prov taxes on income 6,622 5,753 4,182 4,587 4,020 3,260 2,554 2,258 2,013 1,842 1,489
Provision for taxes on income 1,822 1,586 1,179 1,276 1,138 893 631 518 514 510 434
Earnings before cumulative effect
of accounting changes 4,800 4,167 3,003 3,311 2,882 2,367 1,923 1,740 1,499 1,332 1,055
Cumulative effect of accounting
changes (net of tax) - - - - - - - - (595) - -
Net earnings $4,800 4,167 3,003 3,311 2,882 2,367 1,923 1,740 904 1,332 1,055
Percent of sales to customers 16.5 15.2 12.5(3) 14.5 13.2 12.5 12.2 12.2 6.5(1) 10.7 9.3(2)
Diluted net earnings per share
of common stock* $3.40 2.94 2.12 2.34 2.05 1.75 1.45 1.30 .66 .97 .77
Percent return on average
shareowners' equity 27.4 27.5 22.3(3) 27.4 28.0 28.5 29.4 31.4 16.1(1) 24.3 22.6(2)
Percent increase (decrease)
over previous year:
Sales to customers 6.1 14.5 5.1 4.9 15.0 19.7 11.2 2.4 11.0 10.6 14.9
Diluted net earnings per share
of common stock 15.6(3) 38.7(3) (9.4)(3) 14.1 17.1 20.7 11.5 97.0(1)(32.0)(1)26.0(2)(2.5)(2)
Supplementary expense data:
Cost of materials and services(5) $ 13,968 13,789 11,736 11,600 11,278 9,903 7,983 7,060 6,875 6,342 5,757
Total employment costs 6,863 6,350 5,755 5,446 5,324 4,750 4,318 4,114 4,109 3,561 3,229
Depreciation and amortization 1,515 1,444 1,285 1,082 1,023 869 738 635 565 497 477
Maintenance and repairs(6) 322 317 296 266 282 254 219 203 211 204 186
Total tax expense(7) 2,508 2,237 1,821 1,850 1,694 1,415 1,101 945 936 904 782
Total tax expense per share(7)* 1.80 1.61 1.31 1.34 1.23 1.06 .84 .71 .70 .67 .58
Supplementary balance sheet data:
Property, plant and equipment, net $ 6,971 6,719 6,395 5,887 5,713 5,264 4,980 4,491 4,233 3,784 3,346
Additions to property, plant
and equipment 1,646 1,728 1,545 1,415 1,378 1,261 942 977 1,121 1,018 878
Total assets 31,321 29,163 27,292 22,108 20,603 18,379 16,203 12,706 12,389 11,073 9,798
Long-term debt 2,037 2,450 1,729 1,181 1,465 2,339 2,431 1,731 1,603 1,560 1,358
Operating cash flow $ 6,563 5,760 4,991 4,396 3,878 3,325 2,910 2,126 2,039 1,538 1,615
Common stock information*
Dividends paid per share $ 1.24 1.09 .97 .85 .735 .64 .565 .505 .445 .385 .33
Shareowners' equity per share $ 13.52 11.67 10.13 9.26 8.23 6.95 5.56 4.36 4.01 4.32 3.77
Market price per share
(year-end close) $ 105.06 93.25 83.88 64.88 50.50 42.75 27.38 22.38 25.25 28.63 17.88
Average shares outstanding
(millions) - basic 1,390.3 1,390.1 1,389.8 1,380.6 1,375.1 1,329.1 1,317.8 1,330.0 1,344.2 1,354.1 1,348.8
- diluted 1,417.4 1,418.2 1,417.2 1,415.4 1,402.7 1,349.8 1,329.0 1,342.1 1,359.5 1,379.9 1,364.3
Shareowners of record (thousands) 164.2 169.4 168.9 160.0 142.0 117.7 109.7 101.7 90.1 74.4 66.2
Employees (thousands) 98.5 97.8 94.3 91.1 89.8 82.8 82.1 82.1 85.8 84.1 83.1
</TABLE>
* Adjusted to reflect the 1996 two-for-one stock split.
(1) Excluding the cumulative effect of accounting changes of $595 million.
- -D1992 earnings percent of sales to customers before accounting changes is
10.8%. -D1992 earnings percent return on average shareowners' equity before
accounting changes is 25.4%. -D1993 diluted net earnings per share percent
increase over prior year before accounting changes is 18.2%; 1992 diluted net
earnings per share increase over prior year is 13.4%.
(2) Excluding Latin America non-recurring charges of $125 million. -D1990 net
earnings percent of sales to customers before non-recurring charges is 10.4%.
- -D1990 percent return on average shareowners' equity before non-recurring
charges is 24.9%. -D1991 diluted net earnings per share percent increase over
prior year before non-recurring charges is 12.8%; 1990 diluted net earnings
per share increase over prior year is 8.9%.
(3) Excluding Restructuring and In-Process Research and Development charges of
$697 million. -D1998 earnings percent of sales to customers before special
charges is 15.4%. -D1998 diluted net earnings per share before special charges
is $2.61. -D1998 percent return on average shareowners' equity before special
charges is 26.8%. -D1998 diluted net earnings per share increase over prior year
before special charges is 11.5%; -D1998 cost of products sold includes $60
million of inventory write-offs for restructuring; -D 1999 excluding special
charges diluted net earnings per share percent increase over prior year is 13.8%
- -D 2000 excluding special charges diluted net earnings per share increase over
prior year is 15.2%.
(4) Includes Latin America non-recurring charge of $36 million for the
liquidation of Argentine debt and $104 million write-down in other expenses for
permanent impairment of certain assets and operations in Latin America.
(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.
(8) All periods have been restated to include the effects of the Centocor
merger.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>y46182ex21.txt
<DESCRIPTION>SUBSIDIARIES
<TEXT>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
Johnson & Johnson, a New Jersey corporation, has the domestic and
international subsidiaries shown below. Certain domestic subsidiaries and
international subsidiaries are not named because they are not significant in the
aggregate. Johnson & Johnson has no parent.
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ ---------------
<S> <C>
Domestic Subsidiaries:
AngioGuard, Inc. ......................................... Delaware
Atrionix, Inc. ........................................... California
Biosense, Inc. ........................................... Delaware
Biosense Webster, Inc. ................................... California
Centocor, Inc. ........................................... Pennsylvania
Codman & Shurtleff, Inc. ................................. New Jersey
Cordis Corporation........................................ Florida
Cordis International Corporation.......................... Delaware
DePuy, Inc. .............................................. Delaware
DePuy ACE Medical Co. .................................... California
DePuy AcroMed, Inc. ...................................... Ohio
DePuy AcroMed Sales Limited Partnership................... Massachusetts
DePuy Finance LLC......................................... Delaware
DePuy Orthopaedics, Inc. ................................. Indiana
DePuy Orthopaedic Technology, Inc. ....................... Delaware
Ethicon Endo-Surgery, Inc. ............................... Ohio
Ethicon Endo-Surgery Services, L.P. ...................... Texas
Ethicon, Inc. ............................................ New Jersey
Ethicon LLC............................................... Delaware
Independence Technology, L.L.C. .......................... New Jersey
Innovasive Devices, Inc. ................................. Massachusetts
Janssen Finance Company................................... Florida
Janssen Inc. ............................................. Delaware
Janssen Ortho LLC......................................... Delaware
Janssen Pharmaceutica Inc. ............................... Pennsylvania
Janssen Pharmaceutica Products, L.P. ..................... New Jersey
Janssen Products, Inc. ................................... Delaware
Johnson & Johnson Consumer Companies, 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 - Merck Consumer Pharmaceuticals Co. ... New Jersey
Johnson & Johnson (Middle East) Inc. ..................... New Jersey
Johnson & Johnson Professional Co. (P.R.) Inc. ........... Delaware
Johnson & Johnson Services, Inc. ......................... New Jersey
Johnson & Johnson Vision Care, Inc. ...................... Florida
Joint Medical Products Corporation........................ Delaware
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ ---------------
<S> <C>
JJHC, Inc. ............................................... Delaware
LifeScan, Inc. ........................................... California
LifeScan LLC.............................................. Delaware
McNeil Consumer Brands, Inc............................... New Jersey
McNEIL-PPC, Inc. ......................................... New Jersey
NDC Investment Corporation................................ Delaware
Neutrogena Corporation.................................... Delaware
Nitinol Development Corporation........................... California
Noramco, Inc. ............................................ Georgia
OMJ Pharmaceuticals, Inc. ................................ Delaware
Ortho Biologics LLC....................................... Delaware
Ortho Biotech Holding Corp. .............................. Delaware
Ortho Biotech Inc. ....................................... New Jersey
Ortho-Clinical Diagnostics, Inc. ......................... New York
Ortho-McNeil Finance Co. ................................. Florida
Ortho-McNeil Pharmaceutical, Inc. ........................ Delaware
Reserve Corporation....................................... Florida
Therakos, Inc. ........................................... Florida
International Subsidiaries:
Abello Farmacia SL........................................ Italy
Apsis..................................................... France
Centra Medicamenta OTC SRL................................ Italy
Cilag AG.................................................. Switzerland
Cilag AG International.................................... Switzerland
Cilag De Mexico, S.A. de C.V. ............................ Mexico
Cilag Farmaceutica Ltda. ................................. Brazil
Cilag Holding AG.......................................... Switzerland
Cordis Europa N.V. ....................................... Netherlands
Cordis Medizinische Apparate GmbH ........................ Germany
Cordis S.A. .............................................. France
Cordis S.a.r.l............................................ Switzerland
DePuy Bioland S.A......................................... France
DePuy France S.A.......................................... France
DePuy International Ltd................................... United Kingdom
DePuy Intl. (Holdings) Ltd................................ United Kingdom
DePuy (Ireland) Limited................................... Ireland
DePuy Japan Inc........................................... Japan
DePuy Orthopedic GmbH..................................... Germany
DePuy Orthopedie S.A...................................... France
Ethicon Beteiligungs Gesellschaft mbH..................... Germany
Ethicon Endo-Surgery (Europe) GmbH ....................... Germany
Ethicon GmbH.............................................. Germany
Ethicon Ireland Limited................................... Ireland
Ethicon Limited........................................... Scotland
Ethicon SAS............................................... France
Ethicon S.p.A. ........................................... Italy
Ethnor (Proprietary) Limited.............................. South Africa
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ ---------------
<S> <C>
Greiter AG................................................ Switzerland
Greiter (International) AG................................ Switzerland
Impulse Dynamics (Ireland) Limited........................ Ireland
Janssen Animal Health BVBA................................ Belgium
Janssen-Cilag A/S......................................... Norway
Janssen-Cilag AB.......................................... Sweden
Janssen-Cilag AG.......................................... Switzerland
Janssen-Cilag A/S......................................... Denmark
Janssen-Cilag B.V. ....................................... Netherlands
Janssen-Cilag Egypt Ltd. ................................. Egypt
Janssen-Cilag, C.A. ...................................... Venezuela
Janssen-Cilag Farmaceutica Ltda. ......................... Brazil
Janssen-Cilag Farmaceutica, Ltda. ........................ Portugal
Janssen-Cilag Ltd. ....................................... United Kingdom
Janssen-Cilag N.V. ....................................... Belgium
Janssen-Cilag OY.......................................... Finland
Janssen-Cilag Pharmaceutical S.A.C.I. .................... Greece
Janssen-Cilag Pharma 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, S.A. de C.V. ....................... Mexico
Janssen-Cilag GmbH........................................ Germany
Janssen-Cilag International N.V. ......................... Belgium
Janssen International C.V. ............................... Belgium
Janssen Korea, Ltd. ...................................... Korea
Janssen-Kyowa Co., Ltd. .................................. Japan
Janssen Ortho Inc. ....................................... Canada
Janssen Pharmaceutica Limited............................. Thailand
Janssen Pharmaceutica N.V. ............................... Belgium
Janssen Pharmaceutica (Pty) Limited....................... South Africa
Janssen Pharmaceutical Limited............................ Ireland
J-C Healthcare Ltd. ...................................... Israel
JHC Nederland B.V. ....................................... Netherlands
J&J/MSD Consumer Pharmaceuticals S.A.S. .................. France
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) Investment Co., Ltd. ........... China
Johnson & Johnson (China) Ltd. ........................... China
Johnson & Johnson Consumer France S.A.S. ................. France
Johnson & Johnson Consumer N.V./S.A. ..................... Belgium
Johnson & Johnson de Colombia S.A. ....................... Colombia
Johnson & Johnson del Ecuador S.A. ....................... Ecuador
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ ---------------
<S> <C>
Johnson & Johnson (Egypt) S.A.E. ......................... Egypt
Johnson & Johnson Finance Limited......................... United Kingdom
Johnson & Johnson Financial Services GmbH................. Germany
Johnson & Johnson GmbH.................................... Germany
Johnson & Johnson Gesellschaft m.b.H...................... Austria
Johnson & Johnson Hellas S.A. ............................ Greece
Johnson & Johnson Holding AB.............................. Sweden
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 International Financial Services Ireland
Company................................................
Johnson & Johnson International S.A. ..................... France
Johnson & Johnson Investments Limited..................... United Kingdom
Johnson & Johnson (Ireland) Limited....................... Ireland
Johnson & Johnson (Kenya) Limited......................... Kenya
Johnson & Johnson Kft. ................................... Hungary
Johnson & Johnson K.K. ................................... Japan
Johnson & Johnson Korea, Ltd. ............................ Korea
Johnson & Johnson Lda..................................... Portugal
Johnson & Johnson Ltd..................................... United Kingdom
Johnson & Johnson Limited ................................ India
Johnson & Johnson MSD Consumer Pharmaceuticals, S.A.S..... France
Johnson & Johnson Management Ltd.......................... 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 K.K. ........................... Japan
Johnson & Johnson Medical Korea Limited................... Korea
Johnson & Johnson Medical Limited......................... United Kingdom
Johnson & Johnson Medical Mexico, S.A. de C.V............. Mexico
Johnson & Johnson Medical NV/SA........................... Belgium
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 (Philippines), Inc. .................... Philippines
Johnson & Johnson Poland Sp. z o.o. ...................... Poland
Johnson & Johnson (Private) Limited....................... Zimbabwe
Johnson & Johnson Products Inc. .......................... Canada
Johnson & Johnson Produtos Profissionais Ltda............. Brazil
Johnson & Johnson Professional Products (Proprietary) South Africa
Ltd. ..................................................
Johnson & Johnson (Proprietary) Limited................... South Africa
Johnson & Johnson Pte. Ltd. .............................. Singapore
Johnson & Johnson Pty. Limited............................ Australia
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
------------------ ---------------
<S> <C>
Johnson & Johnson Research Pty. Limited................... Australia
Johnson & Johnson, S.A. de C.V. .......................... Mexico
Johnson & Johnson S.A. ................................... Spain
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) Ltd.......................... Thailand
Johnson & Johnson Vision Products AB...................... Sweden
Johnson & Johnson Vision Products (Ireland) Ltd........... Ireland
Johnson & Johnson (Zambia) Limited........................ Zambia
Laboratoires Martin Johnson & Johnson -- MSD S.A.S........ France
Laboratoires Polive S.N.C. ............................... France
Lifescan Canada Ltd. ..................................... Canada
McNeil Consumer Nutritionals Europe....................... Switzerland
Medos S.A. ............................................... Switzerland
Neutrogena Limited........................................ England
Neutrogena Provence S.A.R.L............................... France
OMJ Ireland Limited....................................... Ireland
OMJ Manufacturing Ltd..................................... Ireland
Ortho-Clinical Diagnostics European Support Center........ France
Ortho-Clinical Diagnostics GmbH........................... Germany
Ortho-Clinical Diagnostics K.K. .......................... Japan
Ortho-Clinical Diagnostics................................ United Kingdom
Ortho-Clinical Diagnostics S.A. .......................... Spain
Ortho-Clinical Diagnostics N.V. .......................... Belgium
Ortho-Clinical Diagnostics S.A. .......................... France
Ortho-Clinical Diagnostics S.p.A. ........................ Italy
Pharma Argentina S.A. .................................... Argentina
P.T. Johnson & Johnson Indonesia.......................... Indonesia
Shanghai Johnson & Johnson Pharmaceuticals, Ltd........... China
Shanghai Johnson & Johnson Ltd. .......................... China
Surgikos, S.A. de C.V. ................................... Mexico
Tasmanian Alkaloids Pty. Ltd. ............................ Australia
The R.W. Johnson Pharmaceutical Research Institute........ Switzerland
Vania Expansion, S.N.C.................................... France
Woelm Pharma GmbH & Co.................................... Germany
Xian-Janssen Pharmaceutical Limited....................... China
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>y46182ex23.txt
<DESCRIPTION>CONSENT OF INDEPENDENT ACCOUNTANTS
<TEXT>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements of Johnson & Johnson on Form S-8 (File No. 33-52252, 33-40294,
33-40295, 33-32875, 033-59009, 333-38055, 333-40681, 333-26979 and 333-39238),
Form S-3 (File No. 333-91349, 33-55977 and 33-47424) and Form S-4 (File No.
33-57583, 333-00391, 333-38097, 333-30081, 333-86611, 333-94367 and 333-56034)
and related Prospectuses, of our reports dated January 22, 2001, on our audits
of the consolidated financial statements and financial statement schedule of
Johnson & Johnson and subsidiaries as of December 31, 2000 and January 2, 2000,
and for each of the three years in the period ended December 31, 2000, which
reports are included or incorporated by reference in this Annual Report on Form
10-K.
[PricewaterhouseCooper LLP]
New York, New York
March 29, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.B
<SEQUENCE>9
<FILENAME>y46182ex99-b.txt
<DESCRIPTION>CAUTIONARY STATEMENT
<TEXT>
<PAGE> 1
EXHIBIT 99(b)
CAUTIONARY STATEMENT PURSUANT TO PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995 -- "SAFE HARBOR" FOR FORWARD-LOOKING STATEMENTS
The Company may from time to time make certain forward-looking statements
in publicly-released materials, both written and oral. Forward-looking
statements do not relate strictly to historical or current facts and anticipate
results based on management's plans that are subject to uncertainty.
Forward-looking statements may be identified by the use of words like "plans,"
"expects," "will," "anticipates," "estimates" and other words of similar meaning
in conjunction with, among other things, discussions of future operations,
financial performance, the Company's strategy for growth, product development,
regulatory approvals, market position and expenditures.
Forward-looking statements are based on current expectations of future
events. The Company cannot guarantee that any forward-looking statement will be
accurate, although the Company believes that it has been reasonable in its
expectations and assumptions. Investors should realize that if underlying
assumptions prove inaccurate or unknown risks or uncertainties materialize,
actual results could vary materially from the Company's expectations and
projections. Investors are therefore cautioned not to place undue reliance on
any forward-looking statements. Furthermore, the Company assumes no obligation
to update any forward-looking statements as a result of new information or
future events or developments.
Some important factors that could cause the Company's actual results to
differ from the Company's expectations in any forward-looking statements are as
follows:
Economic factors, including inflation and fluctuations in interest
rates and foreign currency exchange rates and the potential effect of such
fluctuations on revenues, expenses and resulting margins;
Competitive factors, including technological advances achieved and
patents attained by competitors and generic competition as patents on the
Company's products expire;
Domestic and foreign health care changes resulting in pricing
pressures, including the continued consolidation among health care
providers, trends toward managed care and health care cost containment and
government laws and regulations relating to sales and promotion,
reimbursement and pricing generally;
Government laws and regulations, affecting domestic and foreign
operations, including those relating to trade, monetary and fiscal
policies, taxes, price controls, regulatory approval of new products and
licensing;
Competition in research, involving the development and the improvement
of new and 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;
Difficulties inherent in product development, including the potential
inability to successfully continue technological innovation, complete
clinical trials, obtain regulatory approvals in the United States and
abroad, gain and maintain market approval of products and the possibility
of encountering infringement claims by competitors with respect to patent
or other intellectual property rights which can preclude or delay
commercialization of a product;
Significant litigation adverse to the Company including product
liability claims, patent infringement claims, and antitrust claims, as well
as the arbitration proceeding filed by Amgen to terminate U.S. license
rights;
Product efficacy or safety concerns resulting in product recalls,
regulatory action on the part of the FDA (or foreign counterparts) or
declining sales;
<PAGE> 2
The impact of business combinations, including acquisitions and
divestitures, both internally for the Company and externally in the
pharmaceutical and health care industries; and
Issuance of new or revised accounting standards by the American
Institute of Certified Public Accountants, the Financial Accounting
Standards Board or the Securities and Exchange Commission.
The foregoing list sets forth many, but not all, of the factors that could
impact upon the Company's ability to achieve results described in any
forward-looking statements. Investors should understand that it is not possible
to predict or identify all such factors and should not consider this list to be
a complete statement of all potential risks and uncertainties. The Company notes
the factors on this list as permitted by the Private Securities Litigation
Reform Act of 1995.
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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