Johnson and Johnson 2005 Annual Report Download - page 48

PAGE 46 JOHNSON & JOHNSON 2005 ANNUAL REPORT
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 weeks, but every five
or six years, the fiscal year consists of 53 weeks, as was the
case in 2004.
Reclassification
Certain prior year amounts have been reclassified to conform
with current year presentation.
2. INVENTORIES
At the end of 2005 and 2004, inventories were comprised of:
(Dollars in Millions) 2005 2004
Raw materials and supplies $ 931 964
Goods in process 1,073 1,113
Finished goods 1,955 1,667
$3,959 3,744
3. PROPERTY, PLANT AND EQUIPMENT
At the end of 2005 and 2004, property, plant and equipment at
cost and accumulated depreciation were:
(Dollars in Millions) 2005 2004
Land and land improvements $ 502 515
Buildings and building equipment 5,875 5,907
Machinery and equipment 10,835 10,455
Construction in progress 2,504 1,787
19,716 18,664
Less accumulated depreciation 8,886 8,228
$10,830 10,436
The Company capitalizes interest expense as part of the cost of
construction of facilities and equipment. Interest expense capi-
talized in 2005, 2004 and 2003 was $111 million, $136 million
and $108 million, respectively.
Depreciation expense, including the amortization of capital-
ized interest in 2005, 2004 and 2003 was $1.5 billion, $1.5 bil-
lion and $1.4 billion, respectively.
Upon retirement or other disposal of property, plant and
equipment, the cost and related amount of accumulated depre-
ciation or amortization are eliminated from the asset and accu-
mulated depreciation accounts, respectively. The difference, if
any, between the net asset value and the proceeds is recorded
in earnings.
4. RENTAL EXPENSE AND LEASE COMMITMENTS
Rentals of space, vehicles, manufacturing equipment and
office and data processing equipment under operating leases
were approximately $248 million in 2005, $254 million in
2004 and $279 million in 2003.
The approximate minimum rental payments required under
operating leases that have initial or remaining noncancelable
lease terms in excess of one year at January 1, 2006 are:
(Dollars After
in Millions) 2006 2007 2008 2009 2010 2010 Total
$162 142 119 103 88 151 765
Commitments under capital leases are not significant.
5. EMPLOYEE RELATED OBLIGATIONS
At the end of 2005 and 2004, employee related obligations were:
(Dollars in Millions) 2005 2004
Pension benefits $1,264 1,109
Postretirement benefits 1,157 1,071
Postemployment benefits 322 244
Deferred compensation 511 397
$3,254 2,821
Less current benefits payable 189 190
Employee related obligations $3,065 2,631
Prepaid employee related obligations of $1,218 million and
$1,001 million for 2005 and 2004, respectively, are included in
other assets on the consolidated balance sheet.
6. BORROWINGS
The components of long-term debt are as follows:
Effective Effective
(Dollars in Millions) 2005 Rate% 2004 Rate%
3% Zero Coupon
Convertible Subordinated
Debentures due 2020 $ 202 3.00 560 3.00
4.95% Debentures due 2033 500 4.95 500 4.95
3.80% Debentures due 2013 500 3.82 500 3.82
6.95% Notes due 2029 293 7.14 293 7.14
6.73% Debentures due 2023 250 6.73 250 6.73
6.625% Notes due 2009 199 6.80 198 6.80
5.50% Convertible
Subordinated Notes
due 2009(2) — — 177 2.00
Industrial Revenue Bonds 31 3.90 34 2.76
Other 55 — 71 —
2,030 5.18(1) 2,583 4.63(1)
Less current portion 13 18
$2,017 2,565
(1) Weighted average effective rate.
(2) 5.50% Convertible Subordinated Notes redeemed by Scios Inc.
in August 2005.