Johnson and Johnson 2008 Annual Report Download - page 62

14. Cash, Cash Equivalents and Marketable Securities
December 28, 2008 December 30, 2007
____________________________________________ ____________________________________________
Amortized Unrealized Estimated Amortized Unrealized Estimated
(Dollars in Millions) Cost Gains/(Losses) Fair Value Cost Gains/(Losses) Fair Value
Current Investments
Cash $ 3,276 —3,276 2,978 —2,978
Government securities and obligations 7,486 4 7,490 2,722 12,723
Corporate debt securities 627 1 628 1,805 31,808
Money market funds 813 —813 407 —407
Time deposits 607 —607 1,403 —1,403
Total cash, cash equivalents and current marketable securities $12,809 5 12,814 9,315 4 9,319
Non-Current Investments
Marketable securities $4 —42 —2
60 JOHNSON & JOHNSON 2008 ANNUAL REPORT
As of December 28, 2008, current marketable securities consist of
$1,663 million, $342 million and $36 million of government securities
and obligations, corporate debt securities and time deposits,
respectively.
As of December 30, 2007, current marketable securities con-
sist of $251 million and $1,294 million of government securities and
obligations and corporate debt, respectively.
CONCENTRATION OF CREDIT RISK
The Company invests its excess cash in both deposits with major
banks throughout the world and other high-quality money market
instruments. The Company has a policy of making investments
only with commercial institutions that have at least an A (or
equivalent) credit rating.
15. Financial Instruments
All derivative instruments are recorded on the balance sheet at
fair value. See Note 23 for additional details.
As of December 28, 2008, the balanceof deferred net gains
on derivatives included in accumulated other comprehensive
income was $121 million after-tax. For additional information, see
Note 12. The Company expects that substantially all of this amount
will be reclassified into earnings over the next 12 months as a result
of transactions that are expected to occur over that period. The
maximum length of time over which the Company is hedging trans-
action exposure is 18 months. The amount ultimately realized in
earnings will differ as foreign exchangerates change. Realized
gains and losses are ultimately determined by actual exchange
rates at maturity of the derivative. Derivative gains/(losses), initially
reported as a component of other comprehensive income, are
reclassified to earnings in the period when the forecasted
transactions affect earnings.
For the fiscal years ended December 28, 2008, December 30,
2007 and December 31, 2006, the net impact of hedge ineffective-
ness, transactions not qualifying for hedge accounting and dis-
continuanceof hedges, tothe Company’s financial statements,
was insignificant.
Refer to Note 12 for disclosures of movements in Accumulated
Other Comprehensive Income.
16. Savings Plan
The Company has voluntary 401 (k) savings plans designed to
enhance the existing retirement programs covering eligible employ-
ees. The Company matches a percentage of each employee’s contri-
butions consistent with the provisions of the plan for which he/she is
eligible. Total Company matching contributions to the plans were
$166 million in 2008, $169 million in 2007 and $158 million in 2006.
17. Mergers, Acquisitions and Divestitures
Certain businesses were acquired for $1,214 million in cash and
$114 million of liabilities assumed during 2008. These acquisitions
were accounted for by the purchase method and, accordingly,
results of operations have been included in the financial statements
from their respective dates of acquisition.
The 2008 acquisitions included: Amic AB, a privately held
Swedish developer of in vitro diagnostic technologies for use in
point-of-care and near-patient settings; Beijing Dabao Cosmetics
Co., Ltd., a company that sells personal care brands in China;
SurgRx, Inc., a privately held developer of the advanced bipolar
tissue sealing system used in the ENSEAL® family of devices;
HealthMedia, Inc., a privately held companythat creates web-
based behavior change interventions; LGE Performance Systems,
Inc., a privately held company known as Human Performance Insti-
tute™, which develops science-based training programs toimprove
employee engagement and productivity and Omrix Biopharmaceu-
ticals, Inc., a fully integrated biopharmaceutical company that
develops and markets biosurgical and immunotherapy products.
The excess of purchase price over the estimated fair value of
tangible assets acquired amounted to $891 million and has been
assigned to identifiable intangible assets, with any residual recorded
to goodwill. Approximately $181 million has been identified as the
value of IPR&D associated with the acquisitions of Omrix Biophar-
maceuticals, Inc., Amic AB, SurgRx, Inc. and HealthMedia, Inc.
The IPR&D charge related to the acquisition of Omrix Biophar-
maceuticals, Inc. was $127 million and is associated with stand-alone
and combination biosurgical technologies used to achieve hemosta-
sis. The value of the IPR&D was calculated using cash flow projec-
tions discounted for the risk inherent in such projects. Probability of
success factors ranging from 60 –90% were used to reflect inherent
clinical and regulatory risk. The discount rate applied was 14%. As of
the end of the 2008 fiscal year, 97.8% of the outstanding shares of
Common Stock of Omrix Biopharmaceuticals, Inc. had been tendered
by stockholders. Excluding shares that were tendered subject to guar-
anteed delivery procedures, 90.2% of the outstanding shares of Com-
mon Stock had been tendered. On December 30, 2008 the Company
completed the acquisition of Omrix Biopharmaceuticals, Inc.
The IPR&D charge related to the acquisition of Amic AB was
$40 million and is associated with point-of-care device and 4CAST
Chip technologies. The value of the IPR&D was calculated using
cash flowprojections discounted for the risk inherent in such
projects. The discount rate applied was 20%.