Johnson and Johnson 2006 Annual Report Download - page 39

Johnson & Johnson is governed by the values set forth in Our
Credo, created by General Robert Wood Johnson in 1943. These
principles have guided us over the years and continue to set the
tone of integrity for the entire Company. At all levels, the
employees of Johnson & Johnson are committed tothe ethical
principles embodied in Our Credo and these principles have
been woven into the fabric of the Company.
The values articulated in Our Credo extend to our account-
ing and financial responsibilities to Johnson & Johnson share-
holders and investors. We, the management of Johnson &
Johnson, are responsible for the integrity and objectivity of the
accompanying financial statements and related information. We
are also responsible for ensuring that financial data is reported
accurately and in a manner that facilitates the understanding of
this data.
As evidence of our commitment to this responsibility, we
maintain a well-designed system of internal accounting con-
trols, encourage strong and effective corporate governance from
our Board of Directors, continuously review our business results
and strategic choices and focus on financial stewardship.
Our corporate staff of professionally trained internal audi-
tors, who travel worldwide, monitor our system of internal
accounting controls designed to provide reasonable assurance
that assets are safeguarded and that transactions and events are
recorded properly. Our internal controls include self-assessments
and internal reviews of our operating companies.
During 2006, the Company continued to invest significant
time and resources in order to ensure compliance with Section
404 of the Sarbanes-Oxley Act of 2002. Based on the work per-
formed, we have concluded that our internal control over finan-
cial reporting was effective as of December 31, 2006. We refer
you to Management’s Report on Internal Control over Financial
Reporting on page 76.
We require the management teams of our operating
companies to certify their compliance with our Policy on
Business Conduct and we have a systematic program designed
to ensure compliance with these policies. To view our Policy
on Business Conduct, please visit our website at
www.jnj.com/our_company/policies.
PricewaterhouseCoopers LLP, an independent registered
public accounting firm, is engaged to perform an integrated audit
of our consolidated financial statements and internal control
over financial reporting. Their Report of Independent Registered
Public Accounting Firm is on page 77.
The Audit Committee of our Board of Directors is composed
solely of independent directors with the financial knowledge and
experience to provide appropriate oversight. We review internal
control matters and key accounting and financial reporting issues
with the Audit Committee on a regular basis. In addition, the
independent auditors, the General Counsel and the Vice Presi-
dent of Internal Audit regularly meet in private sessions with our
Audit Committee to discuss the results of their work including
observations on the adequacy of internal financial controls, the
quality of financial reporting and confirmation that they are prop-
erly discharging their responsibilities and other relevant matters.
Our Executive Committee is continuously involved in
the review of financial results as well as developing and under-
standing strategies and key initiatives for long-term growth. Our
intent is to ensure that we maintain objectivity in our business
assessments, constructively challenge the approach to business
opportunities and issues and monitor our business results and
the related controls.
Our consolidated financial statements and financial data
that follow have been prepared in conformity with accounting
principles generally accepted in the United States of America
and include amounts that are based upon our best judgments.
We are committed to present and discuss results of operations in
a clear and transparent manner in order to provide timely, com-
prehensive and understandable information to our shareholders.
William C. Weldon Dominic J. Caruso
Chairman, Board of Vice President, Finance,
Directors, and Chief and Chief Financial Officer
Executive Officer
JOHNSON & JOHNSON 2006 ANNUAL REPORT37
Corporate Governance and Management’s Responsibility
MANAGEMENT’S DISCUSSION AND ANALYSIS
38 Organization and Business Segments
38 Results of Operations
39 Analysis of Sales by Business Segments
42 Analysis of Consolidated Earnings Before Provision
for Taxes on Income
44 Liquidity and Capital Resources
46 Other Information
49 Cautionary Factors That May Affect Future Results
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
50 Consolidated Balance Sheets
51 Consolidated Statements of Earnings
52 Consolidated Statements of Equity
53 Consolidated Statements of Cash Flows
54 Notes to Consolidated Financial Statements
76 Management’s Report on Internal Control over
Financial Reporting
77 Report of Independent Registered Public Accounting Firm
78 Summary of Operations and Statistical Data 1996–2006
79 Shareholder Return Performance Graphs
80 Reconciliation of Non-GAAP Financial Measures
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