Johnson and Johnson 2005 Annual Report Download - page 66

PAGE 64 JOHNSON & JOHNSON 2005 ANNUAL REPORT
21. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data for the years 2005 and 2004 are summarized below:
2005 2004
First Second Third Fourth First Second Third Fourth
(Dollars in Millions Except Per Share Data) Quarter Quarter(1) Quarter Quarter(2) Quarter Quarter Quarter(3) Quarter(4)
Segment sales to customers
Consumer $ 2,280 2,278 2,231 2,307 2,047 2,000 2,024 2,262
Pharmaceutical 5,755 5,628 5,457 5,482 5,376 5,427 5,485 5,840
Med Devices & Diagnostics 4,797 4,856 4,622 4,821 4,136 4,057 4,044 4,650
Total sales $12,832 12,762 12,310 12,610 11,559 11,484 11,553 12,752
Gross profit 9,350 9,254 8,970 8,986 8,192 8,322 8,366 9,046
Earnings before provision
for taxes on income 4,062 3,402 3,554 2,638 3,504 3,435 3,274 2,625
Net earnings 2,927 2,676 2,625 2,183 2,493 2,458 2,341 1,217
Basic net earnings per share $ 0.98 0.90 0.88 0.74 0.84 0.83 0.79 0.41
Diluted net earnings per share $ 0.97 0.89 0.87 0.73 0.83 0.82 0.78 0.41
(1) The second quarter of 2005 includes an after-tax charge of $353 million for In-Process Research and Development (IPR&D) and a $225 million tax benefit, due to the
reversal of a tax liability related to a technical correction associated with the American Jobs Creation Act of 2004.
(2) The fourth quarter of 2005 includes an after-tax charge of $6 million for IPR&D. Shifts in sales to lower tax jurisdictions and expenditures to higher tax jurisdictions
had a more significant impact on the fiscal fourth quarter’s tax rate.
(3) The third quarter of 2004 includes an after-tax charge of $12 million for IPR&D.
(4) The fourth quarter of 2004 includes $789 million for taxes on the repatriation of unremitted foreign earnings associated with the American Jobs Creation Act of 2004.
22. SUBSEQUENT EVENTS
On January 25, 2006, the definitive agreement to acquire Guidant Corporation (Guidant) was terminated by Guidant in accordance
with its terms. Pursuant to the terms of the agreement, Guidant paid the Company a fee of $705 million on January 26, 2006.
During the fiscal fourth quarter of 2005, the Company announced its acquisition of Animas Corporation, a leading maker of insulin
infusion pumps and related products. The purchase price, net of cash acquired, of the transaction is approximately $518 million and
closed in the fiscal first quarter of 2006.
During the fiscal first quarter of 2006, the Company completed the acquisition of Hand Innovations LLC, a privately held
manufacturer of widely used fracture fixation products for the upper extremities.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Under Section 404 of The Sarbanes-Oxley Act of 2002,
management is required to assess the effectiveness of the
Company’s internal control over financial reporting as of
the end of each fiscal year and report, based on that assess-
ment, whether the Company’s internal control over financial
reporting is effective.
Management of the Company is responsible for establishing
and maintaining adequate internal control over financial
reporting. The Company’s internal control over financial
reporting is designed to provide reasonable assurance as to the
reliability of the Company’s financial reporting and the prepa-
ration of financial statements in accordance with generally
accepted accounting principles.
Internal controls over financial reporting, no matter how
well designed, have inherent limitations. Therefore, internal
control over financial reporting determined to be effective can
provide only reasonable assurance with respect to financial
statement preparation and may not prevent or detect all mis-
statements. Moreover, projections of any evaluation of effective-
ness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may
deteriorate.
The Company’s management has assessed the effectiveness
of the Company’s internal control over financial reporting as
of January 1, 2006. In making this assessment, the Company
used the criteria established by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in “Internal
Control-Integrated Framework.” These criteria are in the areas
of control environment, risk assessment, control activities,
information and communication, and monitoring. The Com-
pany’s assessment included extensive documenting, evaluating
and testing the design and operating effectiveness of its internal
controls over financial reporting.
Based on the Company’s processes and assessment, as
described above, management has concluded that, as of
January 1, 2006, the Company’s internal control over financial
reporting was effective.
Management’s assessment of the effectiveness of the Com-
pany’s internal control over financial reporting as of January 1,
2006 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in
their report which appears herein.