-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HuiF56+WaCnQL+1snJhEmKSGauTNGX98wsp88ulpRnMRHeHUt3rrjSAlUApwU7jm JQCJNLp0Ujhow1xO4XvLnQ== 0000200406-96-000001.txt : 19960513 0000200406-96-000001.hdr.sgml : 19960513 ACCESSION NUMBER: 0000200406-96-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOHNSON & JOHNSON CENTRAL INDEX KEY: 0000200406 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221024240 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03215 FILM NUMBER: 96559217 BUSINESS ADDRESS: STREET 1: ONE JOHNSON & JOHNSON PLZ CITY: NEW BRUNSWICK STATE: NJ ZIP: 08933 BUSINESS PHONE: 9085240400 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to - ----------------------------------------------------------------- Commission file number 1-3215 JOHNSON & JOHNSON (Exact name of registrant as specified in its charter) NEW JERSEY 22-1024240 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) New Brunswick, New Jersey 08933 (Address of principal executive offices, including zip code) 908-524-0400 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. On April 26, 1996, 666,257,720 shares of Common Stock, $1.00 par value, were outstanding. - 1 - JOHNSON & JOHNSON AND SUBSIDIARIES TABLE OF CONTENTS Part I - Financial Information Page No. Consolidated Balance Sheet - March 31, 1996 and December 31, 1995 3 Consolidated Statement of Earnings for the Three Months Ended March 31, 1996 and April 2, 1995 5 Consolidated Statement of Cash Flows for the Three Months Ended March 31, 1996 and April 2, 1995 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Signatures 14 Part II - Other Information Items 1 through 5 are not applicable Item 6 - Exhibits and Reports on Form 8-K 13 - 2 - Part I - FINANCIAL INFORMATION Item 1 - FINANCIAL STATEMENTS JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Unaudited; Dollars in Millions) ASSETS March 31, December 31, 1996 1995 Current Assets: Cash and cash equivalents $ 1,724 1,201 Marketable securities 139 163 Accounts receivable, trade, less allowances $267 (1995 - $258) 3,223 2,903 Inventories (Note 3) 2,433 2,276 Deferred taxes on income 701 717 Prepaid expenses and other receivables 783 678 Total current assets 9,003 7,938 Marketable securities, non-current 264 338 Property, plant and equipment, at cost 8,437 8,175 Less accumulated depreciation and amortization 3,204 2,979 5,233 5,196 Intangible assets, net (Note 4) 2,944 2,950 Deferred taxes on income 333 307 Other assets 1,163 1,144 Total Assets $ 18,940 17,873 See Notes to Consolidated Financial Statements - 3 - JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Unaudited; Dollars in Millions) LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31, 1996 1995 Current Liabilities: Loans and notes payable $ 267 321 Accounts payable 1,347 1,602 Accrued liabilities 2,049 1,949 Accrued salaries, wages and commissions 395 292 Taxes on income 364 224 Total current liabilities 4,422 4,388 Long-term debt 2,111 2,107 Deferred tax liability 163 156 Certificates of extra compensation 81 86 Other liabilities 2,335 2,091 Stockholders' equity Preferred stock - without par value (authorized and unissued 2,000,000 shares) - - Common stock - par value $1.00 per share (authorized 1,080,000,000 shares; issued 767,412,000 shares) 767 767 Note receivable from employee stock ownership plan (57) (64) Cumulative currency translation adjustments 80 148 Retained earnings 10,551 10,511 11,341 11,362 Less common stock held in treasury, at cost (101,074,000 & 119,732,000 shares) 1,513 2,317 Total stockholders' equity 9,828 9,045 Total liabilities and stockholders' equity $18,940 17,873 See Notes to Consolidated Financial Statements - 4 - JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (Unaudited; dollars & shares in millions except per share figures) Fiscal Quarter Ended March 31, Percent April 2, Percent 1996 to Sales 1995 to Sales Sales to customers (Note 5) $5,334 100.0 4,496 100.0 Cost of products sold 1,719 32.2 1,447 32.2 Selling, marketing and administrative expenses 1,996 37.4 1,720 38.2 Research expense 428 8.0 353 7.9 Interest income (30) (.6) (18) (.4) Interest expense, net of portion capitalized 35 .7 45 1.0 Other expense 62 1.2 28 .6 4,210 78.9 3,575 79.5 Earnings before provision for taxes on income 1,124 21.1 921 20.5 Provision for taxes on income (Note 2) 334 6.3 267 6.0 NET EARNINGS $ 790 14.8 654 14.5 NET EARNINGS PER SHARE $ 1.19 1.02 CASH DIVIDENDS PER SHARE $ .33 .29 AVG. SHARES OUTSTANDING 666.3 643.1 See Notes to Consolidated Financial Statements - 5 - JOHNSON & JOHNSON AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited; Dollars in Millions) Fiscal Quarter Ended March 31, April 2, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 790 654 Adjustments to reconcile net earnings to cash flows: Depreciation and amortization of property and intangibles 244 204 Increase in accounts receivable, trade, less allowances (234) (163) Increase in inventories (125) (54) Changes in other assets and liabilities 238 71 NET CASH FLOWS FROM OPERATING ACTIVITIES 913 712 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (219) (218) Proceeds from the disposal of assets 8 395 Other, principally marketable securities 166 (476) NET CASH USED BY INVESTING ACTIVITIES (45) (299) CASH FLOWS FROM FINANCING ACTIVITIES Dividends to stockholders (214) (187) Repurchase of common stock (102) (77) Proceeds from short-term debt 58 72 Retirement of short-term debt (41) (447) Proceeds from long-term debt - 3 Retirement of long-term debt (79) (2) Proceeds from the exercise of stock options 39 29 NET CASH USED BY FINANCING ACTIVITIES (339) (609) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (6) 20 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 523 (176) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD1,201 636 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,724 460 See Notes to Consolidated Financial Statements - 6 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - The accompanying interim financial statements and related notes should be read in conjunction with the Consolidated Financial Statements of Johnson & Johnson and Subsidiaries (the "Company") and related notes as contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 1995. The interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of such statements. Earnings per share were calculated on the basis of the weighted average number of shares of common stock outstanding during the applicable period. NOTE 2 - INCOME TAXES The effective income tax rates for the first three months of 1996 and 1995 are 29.7% and 29.0%, respectively, as compared to the U.S. federal statutory rate of 35%. The difference from the statutory rate is the result of domestic subsidiaries operating in Puerto Rico under a grant for tax relief expiring on December 31, 2007 and the result of subsidiaries manufacturing in Ireland under an incentive tax rate expiring on December 31, 2010. The increase in the 1996 worldwide effective tax rate was primarily due to an increase in income subject to tax in the U.S. The Omnibus Budget Reconciliation Act of 1993 includes a change in the tax code which will reduce the benefit the Company receives from its operations in Puerto Rico by 60% gradually over a five year period. NOTE 3 - INVENTORIES (Dollars in Millions) March 31, 1996 Dec. 31, 1995 Raw materials and supplies $ 655 625 Goods in process 530 519 Finished goods 1,248 1,132 $ 2,433 2,276 - 7 - NOTE 4 - INTANGIBLE ASSETS (Dollars in Millions) March 31, 1996 Dec. 31, 1995 Intangible assets $ 3,370 3,345 Less accumulated amortization 426 395 $ 2,944 2,950 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. NOTE 5 - SALES TO CUSTOMERS BY SEGMENT OF BUSINESS AND GEOGRAPHIC AREAS (Dollars in Millions) SALES BY SEGMENT OF BUSINESS First Quarter Percent 1996 1995 Increase Consumer Domestic $ 825 729 13.2 International 794 707 12.3 1,619 1,436 12.7% Pharmaceutical Domestic $ 792 607 30.5 International 970 876 10.7 1,762 1,483 18.8% Professional Domestic $ 1,035 840 23.2 International 918 737 24.6 1,953 1,577 23.8% Domestic $ 2,652 2,176 21.9 International 2,682 2,320 15.6 Worldwide $ 5,334 4,496 18.6% - 8 - NOTE 5 - SALES TO CUSTOMERS BY SEGMENT OF BUSINESS AND GEOGRAPHIC AREAS SALES BY GEOGRAPHIC AREA First Quarter Percent 1996 1995 Increase U.S. $ 2,652 2,176 21.9 Europe 1,587 1,356 17.0 Western Hemisphere excluding U.S. 464 406 14.3 Asia-Pacific, Africa 631 558 13.1 Total $ 5,334 4,496 18.6% NOTE 6 - MERGER On February 23, 1996, Johnson & Johnson and Cordis Corporation completed the previously announced merger between the two companies. The number of Johnson & Johnson shares issued in the merger for each Cordis share is the result of dividing $109 by the average of the closing prices per Johnson & Johnson share for the 10 trading days prior to the closing of the merger. This resulted in an exchange ratio of 1.1292 shares of Johnson & Johnson stock for each share of Cordis stock. The merger has a total value, net of cash, of approximately $1.8 billion. Cordis had approximately 17.6 million shares outstanding on a fully diluted basis. The merger has been accounted for as a pooling of interests. However, prior period financial statements have not been restated as the effect of reflecting data relating to this merger would not materially affect previously issued financial statements. Cordis is a leader in angiography and angioplasty (balloon catheters). The combination of Cordis and Johnson & Johnson's interventional cardiology business is an important strategic step for both companies to meet the challenge of providing for customer needs in the fast changing healthcare industry. - 9 - NOTE 7 - SUBSEQUENT EVENT On April 25, 1996, the Board of Directors approved an increase in the authorized common stock from 1.08 billion to 2.16 billion shares enabling the Company to complete a two-for-one split of its common stock. Par value will remain at $1.00 per common share. One new share of common stock will be distributed on June 11, 1996 with respect to each existing share of common stock held of record on May 21, 1996. Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SALES AND EARNINGS Consolidated sales for the first quarter of 1996 were $5,334 million, an increase of 18.6% over 1995 first quarter sales of $4,496 million. The effect of the stronger dollar relative to foreign currencies decreased first quarter's sales by .2%. The sales increase of 18.8% due to operations included a positive price change effect of .7%. Consolidated net earnings for the first quarter of 1996 were $790 million, compared with $654 million for the same period a year ago, an increase of 20.8%. Earnings per share for the period were $1.19, compared with $1.02 for the same period in 1995, an increase of 16.7%. Domestic sales for the first three months of 1996 were $2,652 million, an increase of 21.9% over 1995 domestic sales of $2,176 million for the same period. Sales by international subsidiaries were $2,682 million for the first quarter of 1996 compared with $2,320 million for the same period a year ago, an increase of 15.6%. Excluding the impact of the higher value of the dollar, international sales increased by 16.0% for the quarter. - 10 - Domestic consumer sales increased 13.2% for the first quarter. Growth was led by PEPCID AC Acid Controller, a product of Johnson Johnson o Merck Consumer Pharmaceuticals Co.; Neutrogena, a line of adult skin and hair care products; the TYLENOL line of acetaminophen-based analgesic and cold products; and Children's Motrin, the first new nonprescription children's fever and pain reliever in 35 years. International consumer sales increased 12.3% for the first quarter due to equally strong performance in Europe, Latin America, and Asia-Pacific & Africa. Worldwide pharmaceutical sales of $1.8 billion for the quarter increased 18.8%, with domestic sales growing 30.5%. Leading the increase in pharmaceutical sales were RISPERDAL, a new antipsychotic medication; PROPULSID, a gastrointestinal product; PROCRIT, for the treatment of anemia; ULTRAM, a centrally acting prescription analgesic for moderate to moderately severe pain; SPORANOX, a broad spectrum antifungal agent; and RENOVA. The Food and Drug Administration approved a new indication, onychomycosis, for SPORANOX last fall. One in every 25 Americans suffers from nail infection and SPORANOX is the first therapy to offer significant improvement to patients. Positive feedback is being received from dermatologists, primary care physicians and podiatrists concerning the efficacy of SPORANOX. RENOVA is the first prescription skin cream proven to reduce fine wrinkles, brown spots and surface roughness associated with chronic sun exposure and the natural aging process, when used in addition to a comprehensive skin care and sun avoidance program. RENOVA was launched in the U.S. in February 1996. Worldwide sales of $2.0 billion in the Professional segment represented an increase of 23.8% over the first quarter in 1995. - 11 - Included in the consolidated figure are sales from Cordis for the first three months of this year. Strong sales growth continued to be fueled by the rapid market adoption of the Johnson & Johnson Interventional's PALMAZ-SCHATZ Coronary Stent due to its efficacy in reducing the incidence of recurring blockage of coronary arteries following balloon angioplasty. LifeScan's blood glucose monitoring systems, Vistakon's ACUVUE disposable contact lenses, Johnson & Johnson Professional's orthopaedic systems, and Ethicon Endo-Surgery's minimally invasive surgical instruments continued to deliver solid growth. The joining of the Johnson & Johnson Interventional Systems and Cordis businesses in February 1996, represents an important strategic step which provides the combined businesses a greater breadth of technically superior products. These include balloon/stent systems, as well as the technological expertise and resources to continue to lead new and innovative cardiology developments. Average shares of common stock outstanding in the first three months of 1996 were 666.3 million, compared with 643.1 million for the same period a year ago. The increase of 23.2 million shares include 18.6 million shares for the Cordis merger in 1996 and the balance for various acquisitions using common stock during 1995. LIQUIDITY AND CAPITAL RESOURCES Net debt (borrowings net of cash and current marketable securities) as of March 31, 1996 was 5.0% of net capital (stockholders' equity and net debt) compared with 10.5% at the end of 1995. Net debt decreased by $549 million during the first three months of 1996 to $515 million at March 31, 1996. Total debt represented 19.5% of total capital (stockholders' equity and total borrowings) at quarter end, compared with 21.2% at the end of 1995. - 12 - Additions to property, plant and equipment were $219 million for the first three months of 1996, compared with $218 million for the same period in 1995. On April 25, 1996, the Board of Directors approved an increase in the authorized common stock from 1.08 billion to 2.16 billion shares enabling the Company to complete a two-for-one split of its common stock. Par value will remain at $1.00 per common share. One new share of common stock will be distributed on June 11, 1996 with respect to each existing share of common stock held of record on May 21, 1996. In addition, the Board of Directors raised the quarterly dividend from 33 cents to 38 cents per share on a pre- split basis, an increase of 15.2%. The dividend is payable on June 11, 1996 to shareholders of record as of May 21, 1996. Part II - Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibit Numbers (1) Exhibit 11 - Calculation of Earnings Per Share (2) Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: A report on Form 8-K was filed on March 8, 1996, which included pro forma financial information prepared to reflect the merger of Johnson & Johnson and Cordis as referred to under Note 7 - Merger: (a) Unaudited Pro Forma Condensed Consolidated Statements of Income for the nine months ended October 1, 1995 and the years ended January 1, 1995, January 2, 1994 and January 3, 1993, (b) Unaudited Pro Forma Condensed Consolidated Balance Sheet as of October 1, 1995 and (c) the notes thereto. - 13 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JOHNSON & JOHNSON (Registrant) Date: May 10, 1996 By C. H. Johnson C. H. Johnson (Vice President, Finance) Date: May 10, 1996 By J. H. Heisen J. H. Heisen (Corporate Controller) - 14 - Exhibit 11 JOHNSON & JOHNSON AND SUBSIDIARIES CALCULATION OF EARNINGS PER SHARE (Dollars and shares in millions except per share figures) First Quarter Ended March 31, April 2, 1996 1995 1. Net Earnings ................ $ 790 654 2. Average number of shares outstanding during the period............ 666.3 643.1 3. Earnings per share based upon average outstanding shares (1 / 2) $ 1.19 1.02 4. Fully diluted earnings per share: a. Average number of shares out- standing during the period. 666.3 643.1 b. Shares issuable under stock compensation agreements at quarter-end .............. - .1 c. Shares reserved under the stock option plan for which the market price at end of quarter exceeds the option price.. 39.2 34.6 d. Aggregate proceeds to the Company from the exercise of options in 4c ............ 2,286 1,503 e. Market price of the Company's common stock at fiscal quarter-end............... 92.25 59.50 f. Shares which could be repurchased under the treasury stock method (4d / 4e) ................ 24.8 25.3 g. Addition to average outstanding shares (4b + 4c - 4f)..... 14.4 9.4 h. Shares for fully diluted earnings per share calculation (4a + 4g) ................ 680.7 652.5 i. Fully diluted earnings per share (1 / 4h) ................. $ 1.16 1.00 - 15 - EX-27 2
5 3-MOS DEC-29-1996 MAR-31-1996 1,724 139 3,490 267 2,433 9,003 8,437 3,204 18,940 4,422 0 767 0 0 9,061 18,940 5,334 0 1,719 1,719 428 0 35 1,124 334 0 0 0 0 790 1.19 1.16
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