Johnson and Johnson 2009 Annual Report Download - page 48

7. Borrowings
The components of long-term debt are as follows:
Effective Effective
(Dollars in Millions) 2009 Rate % 2008 Rate %
6.625% Notes due 2009 —— 199 6.80
5.15% Debentures due 2012 $ 599 5.18% 599 5.18
3.80% Debentures due 2013 500 3.82 500 3.82
5.55% Debentures due 2017 1,000 5.55 1,000 5.55
5.15% Debentures due 2018 898 5.15 898 5.15
4.75% Notes due 2019
(1B Euro 1.4382)(2)/(1B Euro 1.4000)(3) 1,429(2) 5.35 1,390(3) 5.35
3% Zero Coupon Convertible
Subordinated Debentures due 2020 188 3.00 183 3.00
6.73% Debentures due 2023 250 6.73 250 6.73
5.50% Notes due 2024
(500MM GBP 1.6189)(2)/
(500MM GBP 1.4759)(3) 803(2) 5.71 731(3) 5.71
6.95% Notes due 2029 294 7.14 294 7.14
4.95% Debenture due 2033 500 4.95 500 4.95
5.95% Notes due 2037 995 5.99 995 5.99
5.86% Debentures due 2038 700 5.86 700 5.86
Other (Includes Industrial
Revenue Bonds) 101 102
8,257(4) 5.42(1) 8,341(4) 5.46(1)
Less current portion 34 221
$8,223 8,120
(1) Weighted average effective rate.
(2) Translation rate at January 3, 2010.
(3) Translation rate at December 28, 2008.
(4) The excess of the fair value over the carrying value of debt was $0.8 billion in 2009 and
$1.4 billion in 2008.
Fair value of the non-current debt was estimated using market
prices, which were corroborated by quoted broker prices in
active markets.
The Company has access to substantial sources of funds at
numerous banks worldwide. In September 2009, the Company
secured a new 364-day Credit Facility. Total credit available to the
Company approximates $10 billion which expires September 23,
2010. Interest charged on borrowings under the credit line agree-
ments is based on either bids provided by banks, the prime rate or
London Interbank Offered Rates (LIBOR), plus applicable margins.
Commitment fees under the agreements are not material.
On July 28, 2000, ALZA Corporation, a subsidiary of the
Company, completed a private offering of the 3% Zero Coupon
Convertible Subordinated Debentures, which were issued at a
price of $551.26 per $1,000 principal amount at maturity. Under
the terms of the 3% Debentures, holders are entitled to convert
their debentures into approximately 15.0 million shares of
Johnson & Johnson stock at a price of $40.102 per share. Approxi-
mately 11.4 million shares have been issued as of January 3,
2010, due to voluntary conversions by note holders. At the option
of the holder, the 3% Debentures may be repurchased by the
Company on July 28, 2013, at a purchase price equal to the issue
price plus accreted original issue discount to such purchase date.
The Company, at its option, may also redeem any or all of the 3%
Debentures after July 28, 2003 at the issue price plus accreted
original issue discount.
Throughout 2009 the Company continued to have access to
liquidity through the commercial paper market. Short-term borrow-
ings and the current portion of long-term debt amounted to approxi-
mately $6.3 billion at the end of 2009, of which $5.8 billion was
borrowed under the Commercial Paper Program. The remainder
represents principally local borrowing by international subsidiaries.
The Company filed a shelf registration with the Securities and
Exchange Commission that became effective March 11, 2008 which
enables the Company to issue an unlimited aggregate principal
amount in debt securities and warrants to purchase debt securities.
Aggregate maturities of long-term obligations commencing in
2009 are:
(Dollars in Millions) After
2010 2011 2012 2013 2014 2014
$34 35 615 507 9 7,057
8. Income Taxes
The provision for taxes on income consists of:
(Dollars in Millions) 2009 2008 2007
Currently payable:
U.S. taxes $2,410 2,334 2,990
International taxes 1,515 1,624 1,479
3,925 3,958 4,469
Deferred:
U.S. taxes 187 126 (722)
International taxes (623) (104) (1,040)
(436) 22 (1,762)
$3,489 3,980 2,707
A comparison of income tax expense at the U.S. statutory rate of
35% in 2009, 2008 and 2007, to the Company’s effective tax rate
is as follows:
(Dollars in Millions) 2009 2008 2007
U.S. $ 7,141 6,579 5,237
International 8,614 10,350 8,046
Earnings before taxes on income: $15,755 16,929 13,283
Tax rates:
U.S. statutory rate 35.0% 35.0 35.0
Ireland and Puerto Rico operations (5.1) (6.8) (8.8)
Research and orphan drug tax credits (0.6) (0.6) (0.8)
U.S. state and local 1.8 1.6 2.1
International subsidiaries excluding Ireland (6.7) (5.6) (7.3)
U.S. manufacturing deduction (0.4) (0.4) (0.3)
In-process research and
development (IPR&D) 0.0 0.4 2.1
U.S. Tax international income (1.6) (0.5) (1.9)
All other (0.3) 0.4 0.3
Effective tax rate 22.1% 23.5 20.4
The Company has subsidiaries manufacturing in Ireland under an
incentive tax rate. In addition, the Company has subsidiaries operat-
ing in Puerto Rico under various tax incentive grants. The decrease
in the 2009 tax rate was primarily due to increases in taxable
income in lower tax jurisdictions relative to taxable income in higher
tax jurisdictions. The increase in the 2008 tax rate was mainly
attributed to increases in taxable income in higher tax jurisdictions
relative to taxable income in lower jurisdictions, as well as a busi-
ness restructuring of certain international subsidiaries in 2007,
resulting in a one-time benefit of $267 million, which reduced the
2007 effective tax rate by 2%.
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