by Kwanza S. Caffie ACG2021 080 (3:30 – 4:45 M,T,W,TH) October 5, 2005
Johnson & Johnson Information Location of Home Office: One Johnson & Johnson Plaza New Brunswick, NJ 08933 Ending date of Last Fiscal Year : January 2, 2005 Chief Executive Officer: William C. Weldon Main Geographic Area of Activity: Johnson & Johnson is a global company, although most of the company’s activity takes place in the United States of America
Johnson & Johnson Information Cont. Principal Products or Services: Consumer : This segment of Johnson & Johnson manufactures and markets a range of products used in the baby and child care, skin care, oral and wound care, woman’s health care fields, as well as over the counter pharmaceutical and nutritional products. Pharmaceutical : This segment of Johnson & Johnson franchises various products in the anti-fungal, anti-infective, cardiovascular, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, psychotropic, and urology fields. Medical Devices & Diagnostics : This segment of Johnson and Johnson also offers range of products, including wound care, women’s health products, minimally invasive surgical products, circulatory disease management products, blood glucose monitoring products, professional diagnostics products, orthopedic joint reconstruction, spinal & sports medicine products, and disposable contact lenses.
Industry Situation and Company Plans As shown in the table below, the pharmaceutical industry is doing fairly well, despite some major lawsuits that have fallen on one of its major companies, this being Merck & Co. Inc. (MRK). The industry has 1.38K employees, it also has a quarterly revenue growth of 13.10% and a revenue of $464.97 million. Net income for the industry is at $80.43 million and P/E ratio of 20.55. The pharmaceutical industry is a much needed industry in the world today, which enables it to have a great outlook towards the future. JNJMRKNVSPGIndustry Employees109,90063,00081,392110,0001.38K Qtrly Rev. Growth11.10%-9.20%12.90%10.00%13.10% Revenue49.90B22.12B29.86B56.74B464.97M P/E Ratio20.7013.3323.9821.8220.55
Industry Situation and Company Plans Cont. Johnson & Johnson plans to continue with the strong performance that they had in 2004. In the letter to the shareholders, they discuss many of their achievements in 2004 and their plans for 2005. One of the biggest plans for 2005 is to acquire Guidant Corporation for $25.4 billion, this acquisition will be the largest in the company’s history and should’ve been completed in the third quarter of 2005. They are also focused on continuing to give back to the community, by furthering their involvement in The Partnership for Prescription Assistance. This collaboration of ten pharmaceutical companies, including Johnson & Johnson has brought forth the Together Rx Access™ Card. This card will provide people with 25 to 40 percent and more worth of savings on prescription drugs and other prescription products to more than 45 million citizens who do not have prescription drug coverage. Other plans for the company is to continue with success in there research and development in its three major segments.letter to the shareholders
Stock Market Information Information Gathered on: October 4, 2005 Most recent price for Johnson & Johnson Stock: $63.05 Twelve month Trading Range for Johnson & Johnson Stock: Low : $54.81 High: $69.99 Dividend per share: $3.05 eps Johnson & Johnson is a great company for investing. MSN Money gives Johnson & Johnson a stock rate of six (highest being ten). They state that the company is expected to match the market over the next six months, with very low risk. I wound definitely recommend Buying Johnson & Johnson stock, or if already have stock I would recommend Holding.
Income Statement The Johnson & Johnson Income Statement is presented in Multi-step Format.Income Statement Johnson & Johnson’s Gross profit has increased over the past two years, due to what seems to be a larger increase of Sales to Customers over Cost of Products Sold. Operations income has increased also which can be attributed to a small increase in Research and Development expense and Selling, Marketing and Administrative expenses. These small increase have lead to a small increase in Net Income. (dollars in millions) Gross Profit Income From Operations Net Income 200329,68619,3787,197 200433,92621,0888,509
Balance Sheet All three components that make up the Balance Sheet have increased, although neither by an extreme amount. In Assets the greatest increase was shown in their Cash and Cash Equivalents. While the company’s largest decrease was in Long-Term Investments. The company's Property, Plant and Equipment account increased, there Intangible assets declined due to the expiration if company owned patents. Liabilities saw the largest increase on Accounts Payable. While Short/ Current Long-Term Debt had the greatest decrease, showing that the company has been able to eliminate much of its debt. Stockholders Equity has an continuing amount in Common Stock, while their Treasury Stock has decreased informing us that they have sold back some of the stock they have purchased. Retained Earning also shows a slight increase. Balance Sheet Assets=Liabilities +Stockholder s Equity $53,317 (2004) $21,504$31,813 $48,263 (2003) $21,394$26,869 (dollars in millions)
Statement of Cash Flows The cash from Johnson & Johnson’s Operations is more than their Net Income for the past two years.Operations I would not say that Johnson & Johnson is growing through their Investing Activities. Over the past two years their sale of Property, Plant, Equipment have decreased, their purchase of Property, Plant, Equipment has decreased even more. Although their sale and purchase of short-term investments have increase significantly. Johnson & Johnson primary source of financing comes from long-term loans. The company’s Net Barrowings had an extremely large increase over the past two years. Overall the change in cash has increased over the past two years.
Accounting Policies Johnson & Johnson significant accounting policies are: 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. Sales returns are generally estimated and recorded based on historical sales and returns information. Cash: The company considers securities with maturities of three months or less, when purchased to be cash equivalents. Short-Term Investments: Short-term marketable securities are carried at cost, with approximates fair value Inventories: Inventories are stated at the lower of cost or market, determined by the First-In-First-Out method (FIFO). Property, Plant and Equipment: Property, plant and Equipment are stated at cost. The company utilizes the straight-line method of depreciation over the estimated useful lives of the assts. Topics of the Notes to the Financial Statement: Shipping and Handling, Goodwill and Intangible Assets, Financial Instruments, Product Liability, Research and Development, Advertising, Income Taxes, Net Earning Per Share, Stock Options, Use of Estimates, Reclassification.
Liquidity Ratios Working Capital: Current Ratio: 1.96 This shows that they able to pay their debt Receivable Turnover: 7.06 times Average Days’ Sales Uncollected: 52.1 days These two ratios show that they have an effectiveness of credit polices Inventory Turnover: 30.66 times This shows that their relative size of inventory is good. Average Days’ Inventory on Hand: 91.25 days This shows that their inventory stays on-self for about three months.
Profitability Ratios Profit Margin: 17.9% This shows that the net income from the company’s sales are doing well. Asset Turnover: 1.0 times This shows that their assets are turning into cash fairly well. Return on Assets 16.7% This shows that the company has good earning power. Return on Equity 29% This shows that the stockholders are profitable in their investment.
Solvency and Market Strength Ratios Debt to Equity: 0.6 times This shows the amount of the company’s assets from stockholders. Price/Earnings per Share: 29.9 times This shows that the investors are confident in the company. Dividend Yield: 2.10% This shows that stockholders are receiving a return form their investments.
Audit Report The audit report states that all the information that has been presented form the company Johnson & Johnson is fair and accurate, and is in accordance with government policies. It also states that the company has been able to maintain internal control of the company over the past fiscal year. Princewaterhouse LLP. Audit Committee: Audit Committee James G. Cullen, Chairman Mary sue Coleman Ph.D Leo F. Mullin Henry B. Schacht
Executive Summary After examining the information provided by the company Johnson & Johnson I believe that it is a strong and successful company. It has continued to grow over the years, and their increase in revenue and net income is proof of that. That fact that it is in an industry that will be forever needed makes it a great choice for an investment. Many would not know that many of the larger skin care companies are sub- companies of Johnson & Johnson. It is great to see a company that wishes to focus not only on one element, but rather many. To me this shows how diverse this company can be, and which must add to its success. This is a company that lives by its credo, for it is mentioned many times in the annual report. It wants to give back to the people, all people, and they have done so, and to me that makes for a profitable company.Johnson & Johnson