Johnson and Johnson 2005 Annual Report Download - page 3

Johnson & Johnson achieved record financial results
in 2005 and made further progress in preparing
for future growth. Worldwide sales grew to a record
$50.5 billion, a growth rate of nearly 7 percent,
with operational growth of 6 percent and a positive
currency impact of 1 percent.
Adjusted net earnings for the year were also at
record levels, with net income growing at 13.3 percent
to $10.5 billion and diluted net earnings per share
increasing 12.9 percent to $3.50(1)
.
An improvement in mix toward higher margin prod-
ucts, productivity increases driven by cost containment
efforts, and positive interest and other income all helped
drive impressive earnings growth.
Our cash flow from operations in 2005 continued to
be strong at $11.9 billion. In light of this, we increased
our quarterly dividend to shareholders for the 43rd
consecutive year, this year by nearly 16 percent to $.33.
Even with this significant increase, we ended the year
with a very strong net cash position of $13.5 billion,
providing us the resources to continue important business
building investments.
A year ago I reported to you our excitement about the
prospect of broadening our presence in cardiovascular
devices through the acquisition of Guidant Corporation.
We extended considerable effort throughout the year to
conclude this transaction. Unfortunately, a combination
of adverse developments in Guidant’s business and
competition for the asset forced the price to a point where
we concluded it was no longer in the best interest of
our shareholders to pursue this business opportunity.
Nonetheless, we remain committed to strengthening our
business in this important therapeutic category.
Elsewhere, aggressive investment in the future con-
tinued unabated. We were successful in advancing our
future growth through a series of smaller but nonetheless
important acquisitions described later in this letter. And,
across the business we invested $6.3 billion in research
and development, a $1.1 billion increase, or more than
21 percent, above our 2004 investment.
The men and women of Johnson & Johnson are to be
recognized for their strong performance this past year.
They remain the engine that drives our business forward.
They make it possible for Johnson & Johnson to continue
to touch people’s lives in a more meaningful way, as the
stories in this year’s annual report relate. Each of our
businesses plays an important role in this regard. Let me
provide a few examples.
The Medical Devices and Diagnostics segment per-
formed exceptionally well this past year, with strong
growth in both revenue and profitability. The segment’s
strength was broadly based, with five of the seven
Medical Devices and Diagnostics franchises growing
sales at double-digit rates. The businesses in the segment
aspire to a compelling vision: Restoring the joys of life
for patients by establishing standards of care.
As we have pursued this vision over the last decade,
our Medical Devices and Diagnostics businesses have
harnessed the power of science and technology to enhance
the diagnosis and treatment of disease across a broad
range of medical and surgical specialties.
TO OUR SHAREHOLDERS
TO OUR SHAREHOLDERS PAGE 1
William C. Weldon Chairman, Board of Directors, and Chief Executive Officer