Johnson and Johnson 2014 Annual Report Download - page 22

billion has been repurchased under the program. Share repurchases will take place on the open market from time to time
based on market conditions. The repurchase program has no time limit and may be suspended for periods or discontinued
at any time. Any shares acquired will be available for general corporate purposes. The Company intends to finance the
share repurchase program through available cash.
In 2014, the Company continued to have access to liquidity through the commercial paper market. For additional details
on borrowings, see Note 7 to the Consolidated Financial Statements.
The Company anticipates that operating cash flows, existing credit facilities and access to the commercial paper markets
will provide sufficient resources to fund operating needs in 2015.
Concentration of Credit Risk
Global concentration of credit risk with respect to trade accounts receivables continues to be limited due to the large
number of customers globally and adherence to internal credit policies and credit limits. Economic challenges in Italy,
Spain, Greece and Portugal (the Southern European Region) have impacted certain payment patterns, which have
historically been longer than those experienced in the U.S. and other international markets. The total net trade accounts
receivable balance in the Southern European Region was approximately $1.8 billion as of December 28, 2014 and $2.3
billion as of December 29, 2013. Approximately $1.1 billion as of December 28, 2014 and approximately $1.3 billion as of
December 29, 2013 of the Southern European Region net trade accounts receivable balance related to the Company’s
Consumer, Vision Care and Diabetes Care businesses as well as certain Pharmaceutical and Medical Devices customers
which are in line with historical collection patterns.
The remaining balance of net trade accounts receivable in the Southern European Region has been negatively impacted
by the timing of payments from certain government owned or supported health care customers as well as certain
distributors of the Pharmaceutical and Medical Devices local affiliates. The total net trade accounts receivable balance for
these customers were approximately $0.7 billion at December 28, 2014 and $1.0 billion at December 29, 2013. The
Company continues to receive payments from these customers and in some cases late payment premiums. For customers
where payment is expected over periods of time longer than one year, revenue and trade receivables have been
discounted over the estimated period of time for collection. Allowances for doubtful accounts have been increased for
these customers, but have been immaterial to date. The Company will continue to work closely with these customers on
payment plans, monitor the economic situation and take appropriate actions as necessary.
Financing and Market Risk
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 certain foreign currency
assets and liabilities and to hedge future foreign currency transactions primarily related to 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 the December 28, 2014 market rates would increase the unrealized value of the Company’s forward contracts by
$31 million. Conversely, a 10% depreciation of the U.S. Dollar from the December 28, 2014 market rates would decrease
the unrealized value of the Company’s forward contracts by $38 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
anticipated earnings and cash flows.
The Company hedges the exposure to fluctuations in currency exchange rates, and the effect on certain assets and
liabilities in foreign currency, by entering into currency swap contracts. A 1% change in the spread between U.S. and
foreign interest rates on the Company’s interest rate sensitive financial instruments would either increase or decrease the
unrealized value of the Company’s swap contracts by approximately $145 million. In either scenario, at maturity, the gain or
loss on the swap contract would be offset by the gain or loss on the underlying transaction, and therefore, would have no
impact on future anticipated cash flows.
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 counter-parties
to these contracts are major financial institutions and there is no significant concentration of exposure with any one
counter-party. Management believes the risk of loss is remote.
The Company has access to substantial sources of funds at numerous banks worldwide. In September 2014, the
Company secured a new 364-day Credit Facility. Total credit available to the Company approximates $10 billion, which
expires on September 17, 2015. Interest charged on borrowings under the credit line agreement is based on either bids
provided by banks, the prime rate or London Interbank Offered Rates (LIBOR), plus applicable margins. Commitment fees
under the agreement are not material.
12 •Johnson & Johnson 2014 Annual Report