Johnson and Johnson 2007 Annual Report Download

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Table of contents

  • Page 1
    OUR CARING tRANsFORms 2007 Annual report

  • Page 2
    ...one person at a time inspires and unites the people of Johnson & Johnson. â„¢ We embrace research and science-bringing innovative ideas, products and services to advance the health and well-being of people. Employees of the Johnson & Johnson Family of Companies work with partners in health care to...

  • Page 3
    ... C. WEldON Chairman, Board of Directors, and Chief Executive Officer verance of our people and the strength of our operating model. It demonstrates once again how our broad base of businesses enables us to absorb both anticipated as well as unanticipated market challenges. Worldwide sales grew to...

  • Page 4
    ... two new pharmaceutical products in 2007: JOHNSON & JOHNSON 2007 ANNUAL REPORT Across our businesses in 2007, we introduced hundreds of new products that are improving the health and well-being of people around the world ...in everyday ways, and in ways that are truly life changing. You can read...

  • Page 5
    ... ('$PIFNK?I8K< 2007 2006 2005 % CHANGE 2007 % CHANGE 2006 Sales to customers (in millions) Net earnings (in millions) Percent return on average shareholders' equity Diluted net earnings per share Cash dividends paid per share Market price (year-end close) $61,095 $10...

  • Page 6
    ... to tailor products and services accordingly. These solutions will come from a company that has the capability to converge current medical technologies in new ways to prevent illness, enhance health, halt or reverse disease progression, and mitigate the effects of aging. At the end of last year, we...

  • Page 7
    ... in internal R&D to achieve organic growth cycle of their health: from wellness and prevention to disease and build our businesses for the long term. In 2007, we spent management and treatment. This patient-centric business $7.7 billion in R&D across the enterprise. Like our operating model will...

  • Page 8
    ... decentralized management approach encourages our businesses to develop products and marketing strategies tuned to local cultures, enabling them to explore new product categories and even new business models. Our companies in emerging markets also build on the strong international equity of our well...

  • Page 9
    ...-term, superior rates of return for our shareholders. William C. Weldon Chairman, Board of Directors, and Chief Executive Officer March 12, 2008 (1)Excludes in-process research and development and other special items. See Reconciliation of Non-GAAP Financial Measures, page 78. (2)Free cash flow...

  • Page 10
    ... parents, reaching 78 percent of online pregnant women and mothers of young children. After celebrating its 10th anniversary in 2007, the only Johnson & Johnson media company is now in 12 markets and six languages and reaches more than 6 million monthly visitors worldwide. BABycenTer® starts the...

  • Page 11
    ... an online store with products reviewed by moms. PArenTcenTer™ (www.parentcenter.com) continues the experience to age 8. In 2007, BABycenTer® revamped its site to deliver a more personalized and relevant experience for each parent and child and to enhance interactions between parents. New content...

  • Page 12
    ... Adjustable Gastric Band (SAGB). Commercially with other health issues.) available since 1996, SAGB has helped more than 100,000 Today CJ weighs a much healthier 175 pounds and enjoys patients worldwide to manage their weight. PiO NEERiNg SO lu T iO NS JOHNSON & JOHNSON 2007 ANNUAL REPORT n high...

  • Page 13
    ...We're committed to providing bariatric solutions that can help people worldwide realize their health goals and live longer, healthier lives regardless of which surgical option may be right for them," says Kevin Lobo, President, Ethicon EndoSurgery, U.S. "With the right treatment, people with obesity...

  • Page 14
    ... Medical Leader for 1958. hALDoL® defined the state of the art and played a critical Psychiatry at Johnson & Johnson Pharmaceutical Research & role in allowing patients to begin leaving institutional care for Development, LLC. "With every day, our scientists get closer treatment in their home...

  • Page 15
    MINDS AND LIVES 13

  • Page 16
    ... using old-growth trees," Wakimoto says of corporate user of on-site solar power in the United States by the World Resources Institute. Other green power efforts the box, which began to carry the FSC logo in 2008. There are include generating clean energy from plans to add 30 percent post-consumer...

  • Page 17
    ... for more of the BAnD-AiD® Brand boxes he's holding. with the exception of over-the-counter pharmaceutical products where drug safety is an issue. Also in 2007, the Aveeno® PosiTiveLy AgeLess™ and Johnson's® sooThing nATurALs™ lines added 30 percent post-consumer recycled material to their...

  • Page 18
    ... teeth," says Kumar, Ph.D., Vice President, Oral Care Research and Development at Johnson & Johnson Consumer Healthcare & Personal Products Worldwide division of Johnson & Johnson Consumer Companies, Inc. "They feel better about themselves." While 72 percent of adults would like whiter teeth, only...

  • Page 19
    ... and the public that using an ADA-Accepted antimicrobial mouth rinse for 30 seconds twice a day provides oral health benefits beyond daily brushing and flossing. "This is extremely significant," Kumar says. LisTerine® continues to invigorate its storied brand with new offerings, including...

  • Page 20
    ... a public health figHTiNg iNfECTiON Although neither inTeLenceâ„¢ nor problem that is not going to go away," says John Otero, Global PreZisTAâ„¢ was approved in Canada at the time, Tiko's physician Marketing Leader for Anti-Infectives, Pharmaceutical Group was able to start him on the medications as...

  • Page 21
    T H E T H R E AT O F I N F E C T I O N 19

  • Page 22
    ... Mommy should do." In early 2007, doctors told Donna about a new technology that could help open the blockages in her legs and make it possible to place stents. Allen Jeremias, M.D., M.Sc., had joined Stony Brook Medical Center in Stony Brook, N.Y., as director of vascular medicine and peripheral...

  • Page 23

  • Page 24
    ...Company's largest prevention and education programs based on Our Credo, and it directly touches millions of families around the world each year," says David Swearingen, Vice President, Corporate Communications. In addition to financial support from Johnson & Johnson, employees and retired employees...

  • Page 25
    ... countries where the organization is active in promoting health and safety among children under 14. Examples include pedestrian safety in India, health and hygiene instruction in Brazil, and bike helmet protection in the U.S. kEEPiNg CHildREN SafE For 20 years, Safe Kids Worldwide has been working...

  • Page 26
    ... to re-site manufacturing operations, consolidate facilities, transfer information technology systems and relabel products. All this carefully orchestrated activity took place-and in many cases continues-with virtually no disruption to day-to-day business. 24 JOHNSON & JOHNSON 2007 ANNUAL REPORT

  • Page 27
    ... in 2007, are sold through special displays at key retailers in China. This launch represents one of many examples of how consumer brands across the Johnson & Johnson Family of Companies are maximizing the company's worldwide marketing rights as the Official Health Care Products Partner of the 2008...

  • Page 28
    ...the Care of Patients With HIV/AIDS Tibotec Therapeutics and Tibotec Pharmaceuticals, Ltd. continued their commitment to the global response to HIV and AIDS in 2007 by advancing the development of new treatments and seeking innovative ways to expand global access. New Drug and Marketing Authorization...

  • Page 29
    Pharmaceutical Segment Sales sales by major Product 2007 Sales: $24.9 billion Growth Rate: 6.9% (in billions of dollars) Other CONCERtA® Late-Stage Pipeline We made significant progress in advancing our late-stage pipeline in 2007 with a number of achievements, including the approval of DORIBAX™...

  • Page 30
    ... to adjust their insulin based on food intake and activity level. In 2007, the corporation established the Johnson & Johnson Diabetes Institute, LLC to transform care by providing comprehensive training to physicians, nurses and diabetes educators worldwide. 28 JOHNSON & JOHNSON 2007 ANNUAL REPORT

  • Page 31
    ... â„¢ Access System. This technology platform includes a new hand access port and first-to-market finger-mounted instruments that provide surgeons with unique access to hard-to-reach operative spaces. YEAR IN REVIEW Twenty Years of Providing Clearer Vision In 2007, Johnson & Johnson Vision Care, Inc...

  • Page 32
    ...based learning opportunities in an mission is to make life-changing, long-term array of health care careers differences in human throughout their high health. Our work school years. BTE is focuses on saving and expanding into Latin improving lives, America and Africa in 2008. building health care In...

  • Page 33
    ... or sales resulting from the acquisition of Pfizer Consumer Healthcare. Water Use 2003-2006 12.4 11.0 11.2 11.6 Five Years of Revitalized Nursing The Campaign for Nursing's Futureâ„¢ from Johnson & Johnson marked its fifth year of working to alleviate the nursing shortage in the United States...

  • Page 34
    ... Officer CHRiST iNE a. PO O N Vice Chairman, Board of Directors and Worldwide Chairman, Pharmaceuticals Group MaRY S u E CO l EMaN , PH .d. President, University of Michigan Second Row, Left to Right JaMES g. Cu l l EN Retired President and Chief Operating Officer, Bell Atlantic Corporation...

  • Page 35
    ... of independent Directors and the Company's Vice President, Science and Technology, advises the Board on scientific matters, including major internal projects, interaction with academic and other outside research organizations, and the acquisition of technologies and products. David Satcher...

  • Page 36
    ... Consumer, Pharmaceuticals and Medical Devices and Diagnostics business segments. Each subsidiary within the business segments is, with some exceptions, managed by citizens of the country where it is located. Vice President Chief Information Officer Ru SS El l C . d E YO Vice President, Corporate...

  • Page 37
    ... reporting was effective as of December 30, 2007. We refer you to Management's Report on Internal Control over Financial Reporting on page 74. 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...

  • Page 38
    ...MANAGEMENT'S OBJECTIVES Johnson & Johnson and its subsidiaries (the "Company") have approximately 119,200 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the health care field. The Company conducts business in virtually all countries...

  • Page 39
    ...FDA certain changes in the marketing and 2007 2006 2005 % Change _____ '07 vs. '06 '06 vs. '05 OTC Pharmaceuticals & Nutritionals Skin Care Baby Care Women's Health Oral Care Other Total * Prior year amounts have been reclassified to conform with current presentation. $ 5,142 3,051 1,982 1,806...

  • Page 40
    ... lines, as well as new products related to acquisitions. The positive impact on Skin Care total sales growth due to newly acquired brands from Pfizer Inc. was 5.7% for the fiscal year 2007. The Baby Care franchise sales grew by 13.9% to $2.0 billion in 2007. This strong growth was led by the success...

  • Page 41
    ... concerning product safety. The sales decline was also a result of continued generic competition in oral contraceptives. Major Medical Devices and Diagnostics Franchise Sales: (Dollars in Millions) In 2007, Other Pharmaceutical sales were $5.4 billion, representing a growth of 10.9% over prior year...

  • Page 42
    ... Company's business. These expenditures relate to the development of new products, improvement of existing products, technical support of products and compliance with governmental regulations for the protection of consumers and patients. Worldwide costs of research 40 JOHNSON & JOHNSON 2007 ANNUAL...

  • Page 43
    ...such as human resources, finance and information technology to support growth across the business, while also leveraging its scale more effectively in areas such as procurement to benefit its operating companies. See Note 22 for more details. In-Process Research and Development: In 2007, the Company...

  • Page 44
    ... the acquisition of the Consumer Healthcare business of Pfizer Inc. and the Common Stock repurchase program in 2007. Interest income in 2006 increased by $342 million due primarily to higher rates of interest, as well as a higher average cash balance, despite the $5.0 billion Common Stock repurchase...

  • Page 45
    ...-current assets. Operating Cash Flow and Capital Expenditures (in billions of dollars) Capital Expenditures Operating Cash Flow 16 FINANCING AND MARKET RISK 12 8 4 0 05 06 07 The Company uses financial instruments to manage the impact of foreign exchange rate changes on cash flows. Accordingly...

  • Page 46
    ... shares of Johnson & Johnson common stock under the current repurchase program at a cost of $3.6 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 2007 for the 45th consecutive year. Cash...

  • Page 47
    ... in the quarterly or annual filing in which there is a financial statement impact. Below are tables which show the progression of accrued rebates, returns, promotions, reserve for doubtful accounts and reserve for cash discounts by segment of business for the years ended December 30, 2007 and...

  • Page 48
    ... Company's net price increases for health care products (prescription and over-the-counter drugs, hospital and professional products) was below the U.S. Consumer Price Index (CPI). Inflation rates, even though moderate in many parts of the world during 2007, continue to have an effect on worldwide...

  • Page 49
    ... and cash flows for that period. See Note 18 for further information regarding legal proceedings. COMMON STOCK MARKET PRICES The Company's common stock is listed on the New York Stock Exchange under the symbol JNJ. The composite market price ranges for Johnson & Johnson common stock during 2007 and...

  • Page 50
    Consolidated Balance Sheets At December 30, 2007 and December 31, 2006 (Dollars in Millions Except Share and Per Share Data) (Note 1) Johnson & Johnson and Subsidiaries 2007 2006 Assets Current assets Cash and cash equivalents (Notes 1 and 14) Marketable securities (Notes 1 and 14) Accounts ...

  • Page 51
    ... to customers Cost of products sold Gross profit Selling, marketing and administrative expenses Research expense Purchased in-process research and development (Note 17) Restructuring (Note 22) Interest income Interest expense, net of portion capitalized (Note 3) Other (income) expense, net Earnings...

  • Page 52
    ...Balance, January 2, 2005 Net earnings Cash dividends paid Employee stock compensation and stock option plans Conversion of subordinated debentures Repurchase of common stock Other comprehensive income, net of tax: Currency translation adjustment Unrealized losses on securities Employee benefit plans...

  • Page 53
    ... and Subsidiaries 2007 2006 2005 Cash flows from operating activities Net earnings Adjustments to reconcile net earnings to cash flows: Depreciation and amortization of property and intangibles Stock based compensation Purchased in-process research and development Intangible asset write-down...

  • Page 54
    ... worldwide engaged in the research and development, manufacture and sale of a broad range of products in the health care field. The Company conducts business in virtually all countries of the world and its primary focus is on products related to human health and well-being. The Company is organized...

  • Page 55
    ... projected market conditions in the various markets served. The Company evaluates market conditions for products or groups of products primarily through the analysis of wholesaler and other third party sell-through and market research data, as well as internally generated information. Sales returns...

  • Page 56
    ... requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, rebates, allowances and incentives, product liabilities, income taxes, depreciation, amortization, employee benefits, contingencies and intangible asset...

  • Page 57
    ...may be repurchased by the Company on July 28, 2008 or 2013, at a purchase price equal to the issue price plus accreted original issue discount to such purchase date. The Company, at its option, may elect to deliver either Johnson & Johnson common stock or cash, or a combination of stock and cash, in...

  • Page 58
    ...® intangible asset. The remaining unamortized intangible value associated with NATRECOR® was $200 million at the end of 2007. This U.S. International Earnings before taxes on income: Tax rates: U.S. statutory rate Puerto Rico and Ireland operations Research and orphan drug tax credits U.S. state...

  • Page 59
    ... Company's annual effective tax rate. The Company conducts business and files tax At December 30, 2007, the Company had 15 stock-based compensation plans. The shares outstanding are for contracts under the Company's 1995 and 2000 Stock Option Plans, the 2005 Long-Term Incentive Plan, the 2000 Stock...

  • Page 60
    ... Stock Exchange on the date of grant. Under the 2005 Long-Term Incentive Plan, the Company may issue up to 260 million shares of Common Stock. Shares available for future grants under the 2005 Long-Term Incentive Plan were 194.5 million at the end of 2007. The Company settles employee stock option...

  • Page 61
    ... Segments of Business(1) and Geographic Areas (Dollars in Millions) Sales to Customers(2) _____ 2007 2006 2005 Consumer - United States International Total Pharmaceutical - United States International Total Medical Devices and Diagnostics - United States International Total Worldwide total $ 6,408...

  • Page 62
    ... health care, to all U.S. retired employees and their dependents. Many international employees are covered by governmentsponsored programs and the cost to the Company is not significant. Retirement plan benefits are primarily based on the employee's compensation during the last three to five years...

  • Page 63
    ... year. Retirement Plans _____ 2007 2006 2005 Other Benefit Plans _____ 2007 2006 2005 (Dollars in Millions) U.S. Benefit Plans Discount rate Expected long-term rate of return on plan assets Rate of increase in compensation levels International Benefit Plans Discount rate Expected long-term rate...

  • Page 64
    ... Divestitures & acquisitions Benefits paid from plan assets Effect of exchange rates Plan assets at fair value - end of year Funded status at - end of year Amounts Recognized in the Company's Balance Sheet consist of the following: Non-current assets Current liabilities Non-current liabilities Total...

  • Page 65
    ...1,080 (94) $986 appropriate to meet the long-term obligations of the plans. In certain countries other than the United States, the funding of pension plans is not a common practice as funding provides no economic benefit. Consequently the Company has several pension plans which are not funded. The...

  • Page 66
    ... 20, 2006, the Company completed the acquisition of the Consumer Healthcare business of Pfizer Inc. for a purchase price of $16.6 billion in cash. The operating results of the Consumer Healthcare business of Pfizer Inc. were reported in the Company's financial statements beginning in 2007, as 2006...

  • Page 67
    ... fluid management systems; Vascular Control Systems, Inc., a privately held company focused on developing medical devices to treat fibroids and to control bleeding in obstetric and gynecologic applications; Groupe Vendôme S.A., a privately held French marketer of adult and baby skin care products...

  • Page 68
    ... the discount rate applied was 22%. Certain businesses were acquired for $987 million in cash and $141 million of liabilities assumed during 2005. These acquisitions were accounted for by the purchase method and, accordingly, results of operations have been included in the financial statements from...

  • Page 69
    ...which seek certification as class actions. Numerous claims and lawsuits in the United States relating to the drug PROPULSID®, withdrawn from general sale by the Company's Janssen subsidiary in 2000, have been resolved or are currently enrolled in settlement programs with an aggregate cap below $100...

  • Page 70
    ...(ANDA) The following chart indicates lawsuits pending against generic firms that filed Abbreviated New Drug Applications (ANDAs) seeking to market generic forms of products sold by various subsidiaries of the Company prior to expiration of the applicable patents covering those products. These ANDAs...

  • Page 71
    ... in state and federal courts involving allegations that the pricing and marketing of certain 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...

  • Page 72
    ...'s Office, District of Massachusetts, seeking documents related to sales and marketing of eight drugs to Omnicare, Inc., a manager of pharmaceutical benefits for longterm care facilities. The Johnson & Johnson subsidiaries involved are responding to the subpoena. Several employees of the Company...

  • Page 73
    ...Ethicon Endo-Surgery, Inc., and Johnson & Johnson Health Care Systems, Inc. These challenge suture and endo-mechanical contracts with Group Purchasing Organizations and hospitals, in which discounts are predicated on a hospital achieving specified market share targets for both categories of products...

  • Page 74
    ... earnings per share for the fiscal years ended December 30, 2007, December 31, 2006 and January 1, 2006: (Shares in Millions Except Per Share Data) 2007 2006 2005 Balance at January 2, 2005 Employee compensation and stock option plans Conversion of subordinated debentures Repurchase of common stock...

  • Page 75
    ... its enterprise-wide functions such as human resources, finance and information technology to support growth across the business, while also leveraging its scale more effectively in areas such as procurement to benefit its operating companies. Additionally, as part of this program the Company plans...

  • Page 76
    ... Company's internal control over financial reporting as of December 30, 2007 has been audited by PricewaterhouseCoopers 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...

  • Page 77
    ... their cash flows for each of the three years in the period ended December 30, 2007 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting...

  • Page 78
    ... 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 79
    ... the Company's Common Stock, the Standard & Poor's 500 Stock Index, the Standard & Poor's Pharmaceutical Index and the Standard & Poor's Health Care Equipment Index and that all dividends were reinvested. 5-Year Cumulative Total Shareholder Return (2002-2007) $200 $180 Johnson & Johnson S&P 500...

  • Page 80
    ... Except Per Share Data) 2007 2006 2005 '07 vs. '06 % Change '06 vs. '05 % Change Earnings before provision for taxes on income - as reported Purchased in-process research & development (IPR&D) Restructuring charges NATRECOR® intangible asset write-down Guidant acquisition agreement termination...

  • Page 81
    ... 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 82
    .... 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 facilities provided and new products launched. Reserves must be created to provide for adverse times...