Johnson and Johnson 2009 Annual Report Download

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Table of contents

  • Page 1
    aNNual REPORT 2009

  • Page 2
    ...any we have ever achieved. We are stronger today than a year ago, with outstanding new products, robust pipelines and talented people-people who remain inspired and united by a common purpose ...caring for others. ON THE COVER The people of Johnson & Johnson remain true to who we are, motivated by...

  • Page 3
    ... & Johnson continued to outperform most for the health and well-being of people is not only an outstanding stock indices in total shareholder returns. business but a mission that truly touches lives. 2009 HigHligHTS While managing short-term challenges, we took important steps for sustainable growth...

  • Page 4
    ... diagnostics and biomarkers- many of which you will read about in the following pages. robust product pipelines in our history. The multitude of opportunities necessitate that we target, invest in and manage its development. A mix of internal and external sources will sustain a flow of new products...

  • Page 5
    ... in emerging markets, with research and development centers, professional training centers and manufacturing facilities. MEdiCal dEViCES aNd diagNOSTiCS PHaRMaCEuTiCalS Our Pharmaceuticals segment, with sales of $22.5 billion, represents the world's seventh largest pharmaceutical business and fourth...

  • Page 6
    ... ORTHO-CLINICAL DIAGNOSTICS® $2.0 6.6% DIABETES CARE (3.7%) $2.4 VISION CARE $2.5 0.2% DEPUY® CORDIS® $5.4 4.6% (10.3%) $2.7 Pharmaceutical Segment Sales Sales by Major Product (in billions of dollars) 2009 Sales: $22.5 billion Sales Change Total: (8.3%) Operational*: (6.1%) OTHER...

  • Page 7
    ... United States and other will lead in health care, drive important innovations for customers markets, Johnson & Johnson supports reform that expands access and patients, and achieve long-term, superior rates of return for to care, improves the long-term sustainability of the U.S. health care system...

  • Page 8
    ..., Institute Director. "In short, it will improve the standard of care for Latin Americans." Beyond Latin America, global orthopaedic and neurological care are advancing thanks to the DePuy Institute, LLC, an education, training and research center that opened in Raynham, Mass., in August 2009. It...

  • Page 9

  • Page 10
    ...of medical products for the large and fastgrowing aesthetic market, in January 2009. Mentor was a natural fit for Ethicon, a leading provider of suture, mesh and other products for a wide range of surgical procedures. In combining forces, Ethicon and Mentor aspire to be the trusted global leader in...

  • Page 11
    ...prosper unless I'm there," she says. "Elyssa chose an advance in breast reconstruction that's fantastic for a woman who needs to run her business and keep her strong self-esteem," says Dr. Downey. "It helped her restore her body and return to her life quickly." JOHNSON & JOHNSON 2009 ANNUAL REPORT

  • Page 12
    ... important academic collaborations, such as with Royal Marsden Hospital in London and Memorial SloanKettering Cancer Center in New York. The two are clinical study sites for abiraterone acetate, a late-stage, first-in-class compound for the treatment of prostate JOHNSON & JOHNSON 2009 ANNUAL REPORT...

  • Page 13
    ...acquisition of Cougar Biotechnology, Inc. by Johnson & Johnson in July 2009. "In our pivotal trials with abiraterone acetate, we've used CELLsEARCh® as an indicator of drug effectiveness," says Bill Hait, M.D., Ph.D., Global Therapeutic Head of Oncology & Hematology, Centocor Research & Development...

  • Page 14
    ... are shared with professionals at medical meetings, such as the American Academy of Dermatology Meeting held each March, play a role in forming important relationships. Products that use technologies developed by skin care R&D researchers from Johnson & Johnson JOHNSON & JOHNSON 2009 ANNUAL REPORT

  • Page 15
    ... individual's skin. India, well-developed professional relationships play an important role in connecting with consumers. Such relationships have been integral from the start for some of the most successful products from the skin care franchise. AVEENO® was founded in 1945 at the Mayo Clinic with...

  • Page 16
    ..., including the waste our consumers generate when they use our products," says Paulette Frank, Vice President, Sustainability and Environmental Health & Safety, Johnson & Johnson Consumer Group of Companies. "Refillable packaging helps us offer a sustainable solution that meets the needs of our...

  • Page 17
    ... as a free food in a diet for diabetes. In 2009, sUN CRYsTALs® was among the first products from the Johnson & Johnson Family of Companies to earn the EARThWARDs™ designation. EARThWARDs™ is a Johnson & Johnson program that encourages teams to find ways to develop earth-friendly products. sUN...

  • Page 18
    ...and diagnostics," says Dr. Manji. "We have Pharmaceutical Research & Development, all those pieces, plus a willingness to LLC. "And we also continue to build strong collaborate with experts inside and programs to treat other disorders with a outside the company." JOHNSON & JOHNSON 2009 ANNUAL REPORT

  • Page 19

  • Page 20
    ...efforts, critical to future growth and to meeting the needs of doctors, nurses and patients. Johnson & Johnson pharmaceutical operating companies launched multiple new products around the world during 2009, including four that address significant unmet medical needs: • sIMpONI ™ (golimumab) was...

  • Page 21
    ...Johnson & Johnson and Tianjin Medical University Cancer Hospital in China are pursuing the best science to identify biomarkers that could help personalize medicine and advance cancer treatment. cancer, a disease that accounts for 10 percent of cancer-related deaths in the United States. (See related...

  • Page 22
    ... traditions have fostered a sincere reverence for water as a source of life, parts of the country are among the most water-scarce areas in the world. Achal is Manager of Environment, Health and Safety (EHS) at the Johnson & Johnson Consumer manufacturing facility in Baddi, Achal at the foothills of...

  • Page 23
    ...actions." program that provides a deworming JOHNSON & JOHNSON 2009 ANNUAL REPORT Keeping Children Free of Infection medication, mebendazole, donated by Johnson & Johnson. Approximately 20 million of the world's most at-risk children are treated, representing the largest health care company donation...

  • Page 24
    ...The Company's legacy of giving is guided by Our Credo responsibility to communities. We work with hundreds of partners worldwide to make life-changing, longterm differences in human health. Learn more at www. jnj.com/ourgiving. JOHNSON & JOHNSON 2009 ANNUAL REPORT ©SIMON DE TREy-WHITE/WWF-UNITED...

  • Page 25
    ..., the Committee oversees the management of the various retirement, pension, long-term incentive, savings, health and welfare plans that cover the Company's employees. Arnold G. Langbo, Chairman Michael M. E. Johns, M.D. William D. Perez Charles Prince JOHNSON & JOHNSON 2009 ANNUAL REPORT 23

  • Page 26
    ... Executive Committee Consumer, Pharmaceuticals ST EP HEN J. COSgROVE and Medical Devices and Corporate Controller Diagnostics business segments. Each subsidiary within the l aVERNE H. CO u NCil business segments is, with Vice President, some exceptions, managed by Chief Information Officer citizens...

  • Page 27
    ... Statements of Cash Flows Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Management's Report on Internal Control over Financial Reporting SUPPORTING SCHEDULES 66 Summary of Operations and Statistical Data 1999-2009 67 Shareholder Return...

  • Page 28
    ...of sales, was invested in research and development. This investment reflects management's commitment to the importance of ongoing development of new and differentiated products and services to sustain long-term growth. With more than 250 operating companies located in 60 countries, the Company views...

  • Page 29
    ... with the acquisition of a joint venture partner in France in the fiscal Major Consumer Franchise Sales: (Dollars in Millions) 2009 2008 2007 % Change _____ '09 vs. '08 '08 vs. '07 OTC Pharmaceuticals & Nutritionals Skin Care Baby Care Women's Health Oral Care Wound Care/Other Total $ 5,630 3,467...

  • Page 30
    ... The Wound Care/Other franchise sales grew by 9.4% to $1.1 billion primarily due to the recent acquisitions in the Wellness and Prevention platform and strong sales of PURELL® hand sanitizer. Consumer segment sales in 2008 were $16.0 billion, an increase of 10.8% over 2007 with 8.3% of this change...

  • Page 31
    ... billion recorded in 2007. As a percent to sales, consolidated earnings before provision for taxes on income in 2009 was 25.4% versus 26.5% in 2008. 2009 2008 2007 % Change _____ '09 vs. '08 '08 vs. '07 DEPUY® ETHICON ENDO-SURGERY® ETHICON® CORDIS® Vision Care Diabetes Care ORTHO-CLINICAL...

  • Page 32
    ... by segment of business was as follows: (Dollars in Millions) 2009 _____ Amount % of Sales* 2008 _____ Amount % of Sales* 2007 _____ Amount % of Sales* Consumer Pharmaceutical Medical Devices and Diagnostics Total research and development expense Percent (decrease)/increase over the prior year * As...

  • Page 33
    ... related to funding acquisitions and investments and the purchase of the Company's Common Stock under the ongoing Common Stock repurchase program announced on July 9, 2007. Interest income in 2008 decreased by $91 million due to lower rates of interest earned despite higher average cash balances...

  • Page 34
    ... 16 to the Consolidated Financial Statements for further details): FINANCING AND MARKET RISK Long-term Debt Obligations Interest on Debt Obligations Unfunded Retirement Plans Operating Leases The Company uses financial instruments to manage the impact of foreign exchange rate changes on cash flows...

  • Page 35
    ... shares of Johnson & Johnson Common Stock under the current repurchase program at a cost of $8.9 billion. In addition, the Company has an annual program to repurchase shares for use in employee stock and incentive plans. The Company increased its dividend in 2009 for the 47th consecutive year. Cash...

  • Page 36
    ...response to these concerns, the Company has a long-standing policy of pricing products responsibly. For the period 1999-2009, in the United States, the weighted average compound annual growth rate of the Company's net price increases for health care products 34 JOHNSON & JOHNSON 2009 ANNUAL REPORT

  • Page 37
    ...and revenue losses for that product. For further information see the discussion on "Litigation Against Filers of Abbreviated New Drug Applications" in Note 21 to the Consolidated Financial Statements. LEGAL PROCEEDINGS COMMON STOCK MARKET PRICES The Company's common stock is listed on the New York...

  • Page 38
    Consolidated Balance Sheets At January 3, 2010 and December 28, 2008 (Dollars in Millions Except Share and Per Share Data) (Note 1) Johnson & Johnson and Subsidiaries 2009 2008 Assets Current assets Cash and cash equivalents (Notes 1 and 2) Marketable securities (Notes 1 and 2) Accounts ...

  • Page 39
    ...,283 2,707 10,576 3.67 3.63 1.620 2,882.9 2,910.7 Sales to customers Cost of products sold Gross profit Selling, marketing and administrative expenses Research expense Purchased in-process research and development (Note 20) Interest income Interest expense, net of portion capitalized (Note 4) Other...

  • Page 40
    ... on securities Employee benefit plans Losses on derivatives & hedges Reclassification adjustment Total comprehensive income Balance, December 30, 2007 Net earnings Cash dividends paid Employee compensation and stock option plans Conversion of subordinated debentures Repurchase of common stock Other...

  • Page 41
    ... of assets Acquisitions, net of cash acquired (Note 20) Purchases of investments Sales of investments Other (primarily intangibles) Net cash used by investing activities Cash flows from financing activities Dividends to shareholders Repurchase of common stock Proceeds from short-term debt Retirement...

  • Page 42
    ...on products related to human health and well-being. The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices and Diagnostics. The Consumer segment manufactures and markets a broad range of products used in the baby care, skin care, oral care, wound care and...

  • Page 43
    .... The Company rarely exchanges products from inventory for returned products. The sales returns reserve for the total Company has ranged between 1.1% and 1.2% of annual net trade sales during the prior three fiscal reporting years 2007-2009. Promotional programs, such as product listing allowances...

  • Page 44
    ...for sales discounts, rebates, allowances and incentives, product liabilities, income taxes, depreciation, amortization, employee benefits, contingencies and intangible asset and liability valuations. For instance, in determining annual pension and post-employment benefit costs, the Company estimates...

  • Page 45
    ... _____ Amortized Unrealized Estimated Cost Gains/(Losses) Fair Value (Dollars in Millions) Current Investments Cash Government securities and obligations Corporate debt securities Money market funds Time deposits Total cash, cash equivalents and current marketable securities $ 2,517 13,370 426...

  • Page 46
    ... exchange rate changes of future intercompany product and third-party purchases of raw materials denominated in foreign currency. The Company also uses cross currency interest rate swaps to manage currency risk primarily related to borrowings. Both types of derivatives are designated as cash flow...

  • Page 47
    ... of the investment based on Crucell's share price in an actively traded market as of the date of the transaction with the excess recorded to research and development expense in 2009. The Company did not have any other significant financial assets or liabilities which would require revised valuations...

  • Page 48
    ... 2009 and $1.4 billion in 2008. Fair value of the non-current debt was estimated using market prices, which were corroborated by quoted broker prices in active markets. The Company has access to substantial sources of funds at numerous banks worldwide. In September 2009, the Company secured a new...

  • Page 49
    ... purchased under group contracts, or reserves are provided. The Company does not fund retiree health care benefits in advance and has the right to modify these plans in the future. The Company uses the date of its consolidated financial statements (January 3, 2010 and December 28, 2008, respectively...

  • Page 50
    ... obligation for the year listed and also the net periodic benefit cost for the following year. (Dollars in Millions) Retirement Plans _____ 2009 2008 2007 Other Benefit Plans _____ 2009 2008 2007 U.S. Benefit Plans Discount rate Expected long-term rate of return on plan assets Rate of increase in...

  • Page 51
    ... sets forth information related to the benefit obligation and the fair value of plan assets at year-end 2009 and 2008 for the Company's defined benefit retirement plans and other postretirement plans: (Dollars in Millions) Retirement Plans _____ 2009 2008 Other Benefit Plans _____ 2009 2008 Change...

  • Page 52
    ... and other Total plan assets The Company's other benefit plans are unfunded except for U.S. life insurance contract assets of $16 million and $17 million at January 3, 2010 and December 28, 2008, respectively. The fair value of Johnson & Johnson common stock directly held in plan assets was $469...

  • Page 53
    ... Plan's Level 3 assets for the year ended January 3, 2010: (Dollars in Millions) Debt Instruments Equity Securities Commingled Funds Insurance Contracts Other Assets Total Level 3 Balance December 28, 2008 Realized gains (losses) Unrealized gains (losses) Purchases, sales, issuances and settlements...

  • Page 54
    ... 30, 2007 Employee compensation and stock option plans Conversion of subordinated debentures Repurchase of common stock Balance at December 28, 2008 Employee compensation and stock option plans Conversion of subordinated debentures Repurchase of common stock Balance at January 3, 2010 226,612...

  • Page 55
    ...2010, December 28, 2008 and December 30, 2007: (Shares in Millions Except Per Share Data) 2009 2008 2007 Basic net earnings per share Average shares outstanding - basic Potential shares exercisable under stock option plans Less: shares repurchased under treasury stock method Convertible debt shares...

  • Page 56
    ... SHARE UNITS Risk-free rate Expected volatility Expected life Dividend yield 2.71% 19.5% 6.0 yrs 3.30% 2.97% 15.0% 6.0 yrs 2.90% 4.78% 14.7% 6.0 yrs 2.50% A summary of option activity under the Plan as of January 3, 2010, December 28, 2008, and December 30, 2007 and changes during the years...

  • Page 57
    ...080 2,585 192 2,777 (Dollars in Millions) Sales to Customers(2) _____ 2009 2008 2007 Long-Lived Assets(8) _____ 2009 2008 2007 United States Europe Western Hemisphere excluding U.S. Asia-Pacific, Africa Segments total General corporate Other non long-lived assets Worldwide total (1) $30,889 15...

  • Page 58
    ... 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, 56 JOHNSON & JOHNSON 2009 ANNUAL REPORT

  • Page 59
    ...in 2008, divestitures in 2009, 2008 and 2007 did not have a material effect on the Company's results of operations, cash flows or financial position. Note 21 - Legal Proceedings PRODUCT LIABILITY The Company's subsidiaries are involved in numerous product liability cases in the United States, many...

  • Page 60
    ... the judgment, net of amounts exchanged in settlement of a number of other litigations between the companies. The net settlement of $472 million was recorded as a credit to other (income) expense, net in the 2008 consolidated statement of earnings. In September 2009, Cordis settled this case with...

  • Page 61
    ... market share and revenue losses for the product of the Company's subsidiary. As noted in the following chart, 30-month stays expired during 2009, and will expire in 2010, 2011 and 2012 with respect to ANDA challenges regarding various products: Brand Name Product Patent/NDA Holder Generic...

  • Page 62
    ... pharmaceutical products amounted to fraudulent and otherwise actionable conduct because, among other things, the companies allegedly reported an inflated Average Wholesale Price (AWP) for the drugs at issue. Many of these cases, both federal actions and state actions JOHNSON & JOHNSON 2009 ANNUAL...

  • Page 63
    ...Attorney's Office, District of Massachusetts, seeking documents related to sales and marketing of eight drugs to Omnicare, Inc., a manager of pharmaceutical benefits for long-term care facilities. The Johnson & Johnson subsidiaries involved responded to the subpoena. Several employees of the Company...

  • Page 64
    ... drugs. The Company responded to these requests. In addition, the U.S. Attorney's Office in Boston has issued subpoenas for grand jury testimony to several employees of Johnson & Johnson. In May 2007, the New York State Attorney General issued a subpoena seeking information relating to the marketing...

  • Page 65
    ... market. The Company's Pharmaceuticals segment has reduced its cost base by consolidating certain operations, while continuing to invest in recently launched products and its late-stage pipeline of new products. The Cordis franchise has moved to a more integrated business model to address the market...

  • Page 66
    ... of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Johnson & Johnson: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, statements of equity, and statements of cash flows present fairly, in...

  • Page 67
    ... LLP, an independent registered public accounting firm, as stated in their report, which appears herein. William C. Weldon Chairman, Board of Directors, and Chief Executive Officer Dominic J. Caruso Vice President, Finance, and Chief Financial Officer MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER...

  • Page 68
    ... balance sheet data: Property, plant and equipment, net Additions to property, plant and equipment Total assets Long-term debt Operating cash flow Common stock information Dividends paid per share Shareholders' equity per share Market price per share (year-end close) Average shares outstanding...

  • Page 69
    Shareholder Return Performance Graphs SHAREHOLODER RETURN PERFORMANCE GRAPHS 67

  • Page 70
    ... to reconcile certain financial disclosures in the Letter to Shareholders, page 1. (Dollars in Millions Except Per Share Data) 2009 2008 2007 '09 vs. '08 % Change '08 vs. '07 % Change Earnings before provision for taxes on income - as reported Purchased in-process research & development (IPR&D) Net...

  • Page 71
    ... for Employees and Code of Business Conduct & Ethics for Members of the Board of Directors and Executive Officers. Copies of these documents are available to shareholders without charge upon written request to the Secretary at the Company's principal address. Listed on New York Stock Exchange Stock...

  • Page 72
    ... to use, protecting the environment and natural resources. Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new...