Annual Report Johnson&Johnson

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Annual ReportJohnsonJohnson

• Emily Cecil
• ACG2021 004

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Executive Summary

• Johnson Johnson has become a worldwide leader
  in the field of health care. By year end 2005 the
  company reached a new sales record of 50.5
  billion, a 7 percent increase form the year
  before. Johnson Johnson has growing
  pharmaceutical and medical diagnostics braches
  that are continuing to expand. The Johnson
  Johnson arms reach far beyond the consumer brands
  such as Johnsons Baby, Tylenol, and Neutrogena
  that the public has come to know and respect. The
  company has plans to dive deeper in virology, in
  developing resistant strains against the HIV
  virus. The company is also developing new
  advances in cardiovascular health, and
  anti-psychotics.
• After an intensive review of the financial
  statements for 2005, it is clear that the company
  is also moving ahead financially. The cash flow
  increased to 11.9 billion, and thus Johnson
  Johnson was able to increase its dividends to its
  share holders. Total assets and total
  stockholders equity increased while total
  liabilities decreased. Research and development
  expenses also increased. Johnson Johnson has a
  commitment to new improvements in the health care
  field that will help to improve lives around the
  world.
• Investor Relations - Annual Reports Proxy

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Introduction

• Chief Executive Officer William C. Weldon
  Chairman, and Board of Directors
• Location of home office 1 Johnson Johnson
  Plaza, New Brunswick, NJ 08933
• Johnson Johnson is a worldwide leader in the
  manufacture of pharmaceuticals and health care
  products. The Johnson Johnson family of
  corporations includes Neutrogena, Johnsons Baby,
  Splenda, Tylenol, and countless others. The
  Medical and Diagnostics businesses are becoming
  an ever growing part of Johnson Johnson and are
  committed to the prevention of disease as well as
  new medical and surgical improvements.

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Audit Report

• Johnson Johnson have a corporate staff of
  internal auditors who travel around the world
  monitoring the accounting system. Other
  independent auditors include the Pricewaterhouse
  Coopers LLP, who are an independent public
  accounting firm who perform an audit of the
  financial statements.
• After reviewing the consolidated financial
  statements of Johnson Johnson in accordance
  with the standards of the Public Company
  Accounting Oversight Board the auditors found
  that the financial statements accurately show the
  financial position of the company. The auditors
  also came to the conclusion that the companies
  internal control over financial reporting was
  also accurate and fair.
• Report of Independent Registered Public
  Accounting available at http//www.jnj.com/2005Ann
  ualReport/financials/independent/index.htm

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Stock Market Information

• Security JNJ
• Exchange New York Stock Exchange
• Currency US Dollars
• Most Recent Price of Stock 64.75
• Dividend per share .38 as of 8/25/06
• Date of the above information Oct. 10, 2006

• As an investor, I would highly recommend buying
  and holding Johnson Johnson stock as an
  investment. In 2005 Johnson Johnson increased
  their quarterly dividend to shareholders for
  the 43rd consecutive year ,..by nearly 16 percent
  to .33 (Johnson Johnson Annual Report p1).

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Industry Situation and Company Plans

• Johnson Johnson was founded in 1886 and has
  become a worldwide leader in the manufacturing of
  pharmaceutical, medical devices, and consumer
  goods. The corporation is made of 230 subsidiary
  companies and operates in almost every company in
  the world. Some of the most well know consumer
  products include Band-Aid, Tylenol, Johnsons
  Baby, Aveeno, Clean and Clear, Stayfree, and
  more. The pharmaceutical branch includes
  anti-infective, cardiovascular, neurology,
  psychotropic, hematology, as well as others. The
  primary focus and outlook of the industry has
  been to improve the future of health care around
  the world. In 2005 Johnson Johnson invested
  6.3 billion in research and development, a 1.1
  billion increase, or more than 21 percent above
  the 2004 investment (Johnson Johnson Annual
  Report 2005). Expansions and business building
  acquisitions are also a large part of the future
  of the industry (Johnson Johnson Annual Report
  2005). In 2005 Johnson Johnson acquired Animas,
  an insulin delivery corporation, as well as Hand
  Innovations LLC. A leader in the extremities
  market. The health care industry is growing and
  expanding everyday, and so is Johnson Johnson.
  Their dedication to research and development and
  their promise to continue to improve health care
  for people around the world solidifies Johnson
  Johnson as a successful and long standing
  industry.
• Sources www.marketwatch.com http//en.wikipedia.o
  rg/wiki/Johnson__Johnson JohnsonJohnson 2005
  Annual Report

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Income Statement

• The income statement from the 2005 Annual Report
  is in multi step format.
• Gross Profit , Income from Operation, and Net
  Income all increased from 2004 to 2005. These
  increases were achieved through efforts in cost
  management and greater productivity.

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Balance Sheet

• Important and impressive increases on the
  balance sheet include current assets,
  inventories, total current assets, property,
  plant, and equipment, accounts receivable, and
  total stockholders equity. Some of the note
  worthy decreases include total current
  liabilities, total liabilities, accounts payable,
  and long term debt. All of these movements helped
  Johnson Johnson reach record high financial
  status in 2005 with a 7 percent growth rate of
  50.5 billion.

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Statement of Cash Flows

• Cash flows for the past two years have been more
  than net income.
• Cash Flows 2005-11,877
• 2004- 11,131
• Net Income 2005- 10, 411
• 2004- 8,509
• The company has been growing through
  acquisitions, investments and the purchasing of
  property, plant, and equipment. In 2005 Johnson
  Johnson paid 2,632 billion in additions to
  property, plant, and equipment, 5,660 billion in
  investments, and 987 million in acquisitions.
• Johnson Johnsons primary source of financing
  are short term loans.
• Johnson Johnson has seen an overall increase in
  cash from 2004 to 2005. The end of the year cash
  for 2004 was 9,203 billion followed by a
  substantial increase to 16,055 billion in 2005.
  

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Accounting Policies

• Inventories Inventories are stated at the at the
  lower of cost or market determined by the first
  in, first out method.
• Revenue Recognition The company recognizes
  revenue from product sales when the goods are
  shipped or delivered and title and risk of loss
  pass to the customer.
• Property, Plant, and Equipment are stated at
  cost.
• Short term marketable securities are carried at
  cost, which approximates fair value.
• 1. Summary of Significant Accounting Policies 2.
  Inventories 3. Property, plant, and Equipment 4.
  Rental Expense and Lease Commitments 5. Employee
  Related Obligations 6. Borrowings 7. Intangible
  Assets and Goodwill 8. Income Taxes 9.
  International Currency Translation 10. Common
  Stock, Stock Option Plans, and Stock Compensation
  Agreements 11. Segments of Business and
  Geographic Areas 12. Accumulated other
  Comprehensive Income 13. Pensions and other
  Benefit Plans 14. Cash Equivalents and Marketable
  Securities 15. Financial Instruments 16. Savings
  Plan 17. Mergers, Acquisitions and Divestitures
  18. Legal Proceedings 19. Earnings per share 20.
  Capital and Treasury Stock 21. Selected Quarterly
  Financial Data (unaudited) 22. Subsequent Events

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Financial Analysis Liquidity Ratios

• Working Capital 2005- 31,392-12,635 18,759
• 2004- 27,320-
  13,927 13,393
• Current Ratio 2005- 31,394/12,635 2.5
• 2004- 27,320/13927
  1.9
• Receivable Turnover 2005- 50,514/6920.5 7.29
• 2004-
  47348/6702.57.06
• Average days sales uncollected
• 2005-
  365/7.29 50.07
• 2004-
  365/7.06 51.7
• Inventory Turnover 2005- 13,954/3851.50 3.62
• 2004-
  13422/3666 3.7
• Average days inventory on hand 2005- 365/3.62
  100
• 
  2004- 365/3.7 99.7

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Financial Analysis Profitability Ratios

• Profit Margin 2005- 10411/50514 20.61
• 2004- 8509/47348 18
• Asset Turnover 2005- 50514/55671 .91
• 2004- 47348/50790
  .93
• Return on Assets 2005- 10411/55671 18.7
• 2004-
  8509/50790 16.8
• Return on Equity 2005- 10411/34842 29.88
• 2004- 8509/29341 29

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Financial Analysis Solvency Ratio

• Debt to Equity
• 2005- 20154/ 37871 .5
• 2004- 21504/ 31813 .68
• The debt to equity for 2005 was .5 meaning that
  the stockholders, rather than the creditors own
  the majority of the company.

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Financial Analysis Market Strength Ratios

• Price/Earnings per share
• 2005- 10411/2973.9 3.50
• 2004- 8509/2968.4 2.87
• Dividend Yield
• 2005- 1.275/62.17 2.05
• 2004- 1.095/55.98 1.96