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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996 COMMISSION FILE NUMBER 1-3215
JOHNSON & JOHNSON
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Registrant's telephone number, including area code (908) 524-0400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant on February 25, 1997 was approximately $75.1 billion.
On February 25, 1997 there were 1,333,553,480 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
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PART I
Form 10-Q Quarterly Reports Available. A copy of Johnson & Johnson's
Quarterly Report on Form 10-Q for any of the first three quarters of the current
fiscal year, without exhibits, will be provided without charge to any shareowner
submitting a written request to the Secretary at the principal executive offices
of the Company or by calling 800-328-9033. Each report will be available about
45 days after the end of the quarter to which it relates.
PART I
ITEM 1. BUSINESS
GENERAL
Johnson & Johnson, employing approximately 89,300 people worldwide, is
engaged in the manufacture and sale of a broad range of products in the health
care field in many countries of the world. Johnson & Johnson's primary interest,
both historically and currently, has been in products related to health and
well-being. Johnson & Johnson was organized in the State of New Jersey in 1887.
Johnson & Johnson is organized on the principles of decentralized
management. The Executive Committee of Johnson & Johnson is the principal
management group responsible for the operations of Johnson & Johnson. In
addition, three Executive Committee members are Chairmen of Group Operating
Committees, which are comprised of managers who represent key operations within
the group, as well as management expertise in other specialized functions. These
Committees oversee and coordinate the activities of domestic and international
companies related to each of the Consumer, Pharmaceutical and Professional
businesses. Operating management of each company is headed by a Chairman,
President, General Manager or Managing Director who reports directly to or
through a Company Group Chairman. In line with this policy of decentralization,
each international subsidiary is, with some exceptions, managed by citizens of
the country where it is located.
SEGMENTS OF BUSINESS; GEOGRAPHIC AREAS
Johnson & Johnson's worldwide business is divided into three segments:
Consumer, Pharmaceutical and Professional. Johnson & Johnson further categorizes
its sales and operating profit by major geographic areas of the world. The
narrative and tabular (but not the graphic) descriptions of segments and
geographic categories captioned "Management's Discussion and Analysis of Results
of Operations and Financial Condition -- Segments of Business, Consumer,
Pharmaceutical, Professional and Geographic Areas" on pages 26 through 28 and 41
of Johnson & Johnson's Annual Report to Shareowners for fiscal year 1996 are
incorporated herein by reference thereto.
CONSUMER
The Consumer segment's principal products are personal care and hygienic
products, including oral and baby care products, first aid products,
nonprescription drugs, sanitary protection products and adult skin and hair
products. Major brands include ACT Fluoride Rinse; BAND-AID Brand Adhesive
Bandages; CAREFREE Panty Shields; JOHNSON'S CLEAN & CLEAR Skin Care Products;
IMODIUM A-D Antidiarrheal; JOHNSON'S Baby line of products; MONISTAT, a remedy
for vaginal yeast infections; MYLANTA gastrointestinal products and PEPCID AC
Acid Controller from Johnson & Johnson - Merck Consumer Pharmaceuticals Co.;
NEUTROGENA skin and hair products; NICOTROL smoking cessation products; 'o.b.'
Tampons; PEDIACARE children's cold and allergy medications; PENATEN and NATUSAN
baby care products; PIZ BUIN and SUNDOWN sun care products; REACH toothbrushes;
RoC skin care products; SHOWER TO SHOWER personal care products; STAYFREE and
SURE & NATURAL sanitary protection products; and the broad family of TYLENOL
acetaminophen products. These products are marketed principally to the general
public and distributed both to wholesalers and directly to independent and chain
retail outlets.
PHARMACEUTICAL
The Pharmaceutical segment's principal worldwide franchises are in the
allergy, antibacterial, antifungal, biotech, central nervous system,
contraceptive, dermatology, gastrointestinal and immunobiology fields. These
products are distributed both directly and through wholesalers for use by health
care professionals and the general public. Prescription drugs include DURAGESIC,
a transdermal patch for chronic pain; EPREX (sold in the U.S. under the
trademark PROCRIT), a biotechnology derived version of the human hormone
erythropoietin, which stimulates red blood cell production; ERGAMISOL, a colon
cancer drug; FLOXIN, an
antibacterial; HISMANAL, the once-a-day less sedating antihistamine; IMODIUM, an
antidiarrheal; LEUSTATIN, for hairy cell leukemia; MOTILIUM, a gastrointestinal
mobilizer; NIZORAL, SPORANOX and TERAZOL, antifungals; ORTHOCLONE OKT-3, for
reversing the rejection of kidney, heart and liver transplants; ORTHO-NOVUM
group of oral contraceptives; PREPULSID (sold in the U.S. under the trademark
PROPULSID), a gastrointestinal prokinetic; RETIN-A, a dermatological cream for
acne; RISPERDAL, an antipsychotic drug; and ULTRAM, a centrally acting
prescription analgesic for moderate to moderately severe pain.
PROFESSIONAL
The Professional segment includes suture and mechanical wound closure
products, minimally-invasive surgical instruments, diagnostic products, medical
equipment and devices, disposable contact lenses, surgical instruments, joint
replacements and products for wound management and infection prevention. These
products are used principally in the professional fields by physicians,
dentists, nurses, therapists, hospitals, diagnostic laboratories and clinics.
Distribution to these markets is done both directly and through surgical supply
and other dealers. In February 1996, Johnson & Johnson acquired Cordis
Corporation which provides devices and systems for markets that include
cardiology, electrophysiology, radiology and interventional neuroradiology.
INTERNATIONAL
The international business of Johnson & Johnson is conducted by
subsidiaries manufacturing in 39 countries outside the United States and selling
in over 175 countries throughout the world. The products made and sold in the
international business include many of those described above under
"Business -- Consumer, Pharmaceutical and Professional." However, the principal
markets, products and methods of distribution in the international business vary
with the country and the culture. The products sold in the international
business include not only those which were developed in the United States but
also those which were developed by subsidiaries abroad.
Investments and activities in some countries outside the United States are
subject to higher risks than comparable domestic activities because the
investment and commercial climate is influenced by restrictive economic policies
and political uncertainties.
RAW MATERIALS
Raw materials essential to Johnson & Johnson's business are generally
readily available from multiple sources.
PATENTS AND TRADEMARKS
Johnson & Johnson has made a practice of obtaining patent protection on its
products and processes where possible. Johnson & Johnson owns or is licensed
under a number of patents relating to its products and manufacturing processes,
which in the aggregate are believed to be of material importance in the
operation of its business. However, it is believed that no single patent or
related group of patents is material in relation to Johnson & Johnson as a
whole.
Johnson & Johnson has made a practice of selling its products under
trademarks and of obtaining protection for these trademarks by all available
means. Johnson & Johnson's trademarks are protected by registration in the
United States and other countries where its products are marketed. Johnson &
Johnson considers these trademarks in the aggregate to be of material importance
in the operation of its business.
SEASONALITY
Worldwide sales do not reflect any significant degree of seasonality;
however spending has been heavier in the fourth quarter of each year than in
other quarters. This reflects increased spending decisions, principally for
advertising and research grants.
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COMPETITION
In all its product lines, Johnson & Johnson companies compete with
companies both large and small, located in the United States and abroad.
Competition is strong in all lines without regard to the number and size of the
competing companies involved. Competition in research, involving the development
of new products and processes and the improvement of existing products and
processes, is particularly significant and results from time to time in product
and process obsolescence. The development of new and improved products is
important to Johnson & Johnson's success in all areas of its business. This
competitive environment requires substantial investments in continuing research
and in multiple sales forces. In addition, the winning and retention of customer
acceptance of Johnson & Johnson's consumer products involve heavy expenditures
for advertising, promotion and selling.
RESEARCH
Research activities are important to all segments of Johnson & Johnson's
business. Major research facilities are located not only in the United States
but also in Australia, Belgium, Brazil, Canada, Germany, Switzerland and the
United Kingdom. The costs of Johnson & Johnson's worldwide research activities
relating to the development of new products, the improvement of existing
products, technical support of products and compliance with governmental
regulations for the protection of the consumer amounted to $1,905, $1,634 and
$1,278 million for fiscal years 1996, 1995 and 1994, respectively. These costs
are charged directly to income in the year in which incurred. All research was
sponsored by Johnson & Johnson.
ENVIRONMENT
During the past year Johnson & Johnson was subject to a variety of federal,
state and local environmental protection measures. Johnson & Johnson believes
that its operations comply in all material respects with applicable
environmental laws and regulations. Johnson & Johnson's compliance with these
requirements did not and is not expected to have a material effect upon its
capital expenditures, earnings or competitive position.
REGULATION
Most of Johnson & Johnson's business is subject to varying degrees of
governmental regulation in the countries in which operations are conducted, and
the general trend is toward regulation of increasing stringency. In the United
States, the drug, device, diagnostics and cosmetic industries have long been
subject to regulation by various federal, state and local agencies, primarily as
to product safety, efficacy, advertising and labeling. The exercise of broad
regulatory powers by the Food and Drug Administration (the "FDA") continues to
result in increases in the amounts of testing and documentation required for FDA
clearance of new drugs and devices and a corresponding increase in the expense
of product introduction. Similar trends toward product and process regulation
are also evident in a number of major countries outside of the United States,
especially in the European Economic Community where efforts are continuing to
harmonize the internal regulatory systems.
The costs of human health care have been and continue to be a subject of
study and investigation by governmental agencies and legislative bodies in the
United States and other countries. In the United States, attention has been
focused on drug prices and profits and programs that encourage doctors to write
prescriptions for particular drugs. Even in the absence of new government
regulation, managed care has become a more potent force in the market place and
it is likely that increased attention will be paid to drug pricing, appropriate
drug utilization and the quality of health care.
The regulatory agencies under whose purview Johnson & Johnson operates have
administrative powers that may subject Johnson & Johnson to such actions as
product recalls, seizure of products and other civil and criminal sanctions. In
some cases Johnson & Johnson may deem it advisable to initiate product recalls
voluntarily.
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ITEM 2. PROPERTIES
Johnson & Johnson and its worldwide subsidiaries operate 173 manufacturing
facilities occupying approximately 16.5 million square feet of floor space.
The manufacturing facilities are used by the industry segments of Johnson &
Johnson's business approximately as follows:
Within the United States, 12 facilities are used by the Consumer segment, 9
by the Pharmaceutical segment and 41 by the Professional segment. Johnson &
Johnson's manufacturing operations outside the United States are often conducted
in facilities which serve more than one segment of the business.
The locations of the manufacturing facilities by major geographic areas of
the world are as follows:
In addition to the manufacturing facilities discussed above, Johnson &
Johnson maintains numerous office and warehouse facilities throughout the world.
Research facilities are also discussed under "Business -- Research."
Johnson & Johnson generally seeks to own its manufacturing facilities,
although some, principally in locations abroad, are leased. Office and warehouse
facilities are often leased.
Johnson & Johnson's properties are maintained in good operating condition
and repair and are well utilized.
For information regarding lease obligations see Note 9 "Rental Expense and
Lease Commitments" under "Johnson & Johnson and Subsidiaries -- Notes to
Consolidated Financial Statements" on page 34 of Johnson & Johnson's Annual
Report to Shareowners for fiscal year 1996. Segment information on additions to
Johnson & Johnson's property, plant and equipment is contained on page 41 of
Johnson & Johnson's Annual Report to Shareowners for fiscal year 1996.
ITEM 3. LEGAL PROCEEDINGS
The information set forth in Note 18 "Pending Legal Proceedings" under
"Johnson & Johnson and Subsidiaries -- Notes to Consolidated Financial
Statements" on page 39 of Johnson & Johnson's Annual Report to Shareowners for
fiscal year 1996 is incorporated herein by reference.
The Company or its subsidiaries are parties to a number of proceedings
brought under the Comprehensive Environmental Response, Compensation, and
Liability Act, commonly known as Superfund, and comparable state laws in which
the primary relief sought is the cost of past and future remediation. While it
is not feasible to predict or determine the outcome of these proceedings, in the
opinion of the Company, such proceedings would not have a material adverse
effect on the results of operations, cash flows or financial position of the
Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the executive officers of Johnson & Johnson as of March
25, 1997, each of whom, unless otherwise indicated below, has been an employee
of the Company or its affiliates and held the position indicated during the past
five years. There are no family relationships between any of the executive
officers, and there is no arrangement or understanding between any executive
officer and any other person pursuant to which the executive officer was
selected. At the annual meeting of the Board of Directors which follows the
Annual Meeting of Shareowners executive officers are elected by the Board to
hold office for one year and until their respective successors are elected and
qualified, or until earlier resignation or removal.
Information with regard to the directors of the Company, including those of
the following executive officers who are directors, is incorporated herein by
reference to pages 3 through 7 of Johnson & Johnson's Proxy Statement dated
March 12, 1997. Mr. Clark H. Johnson, a director referred to in such Proxy
Statement, passed away on March 13, 1997.
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(a) Mr. R. J. Darretta joined the Company in 1968 and held various positions
before becoming President of Iolab Corporation in 1988. He became Treasurer
of the Company in 1995 and on March 24, 1997, became Vice President, Finance
and a Member of the Executive Committee.
(b) Mr. R. C. Deyo joined the Company in 1985 and became Associate General
Counsel in 1991. He became a Member of the Executive Committee and Vice
President, Administration in October 1996.
(c) Mr. R. S. Fine joined the Company in 1974 and became Assistant General
Counsel in 1978 and Associate General Counsel in 1984. He became a Member of
the Executive Committee and Vice President, Administration in 1991 and
became Vice President, General Counsel in October 1996.
(d) Mr. R. G. Gelbman joined the Company in 1972 and became a Company Group
Chairman in 1987. He became a Member of the Executive Committee and
Worldwide Chairman, Pharmaceutical and Diagnostics Group in 1994.
(e) Ms. J. H. Heisen joined the Company in 1989 as Assistant Treasurer and
became Vice President, Investor Relations in 1990, Treasurer in 1991 and
Controller in 1995. She became a Member of the Executive Committee and Vice
President, Chief Information Officer in January 1997.
(f) Mr. C. A. Koffmann joined the Company in 1989 as a Company Group Chairman.
He became a Member of the Executive Committee and Worldwide Chairman,
Consumer and Personal Care Group in 1995.
(g) Mr. J. T. Lenehan joined the Company in 1976 and became a Company Group
Chairman in 1993. He became a Member of the Executive Committee and
Worldwide Chairman, Consumer, Pharmaceuticals and Professional Group in
1994.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREOWNER MATTERS
The information called for by this item is incorporated herein by reference
to the material captioned "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Common Stock Market Prices"and "Cash
Dividends Paid" on page 24 of Johnson & Johnson's Annual Report to Shareowners
for fiscal year 1996.
ITEM 6. SELECTED FINANCIAL DATA
The information called for by this item is incorporated herein by reference
to the material captioned "Summary of Operations and Statistical Data 1986-1996"
on page 42 of Johnson & Johnson's Annual Report to Shareowners for fiscal year
1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information called for by this item is incorporated herein by reference
to the material captioned "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Overview, Sales and Earnings, Costs and
Expenses, Liquidity and Capital Resources and Changing Prices and Inflation" on
pages 23 through 26 of Johnson & Johnson's Annual Report to Shareowners for
fiscal year 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is incorporated herein by reference
to the consolidated financial statements and the notes thereto and the material
captioned "Independent Auditor's Report" on pages 29 through 40 of Johnson &
Johnson's Annual Report to Shareowners for fiscal year 1996.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to executive officers is presented at the end of
Part I hereof. Information with respect to directors (except as noted in Item 4
above) is incorporated herein by reference to the material captioned "Election
of Directors--Nominees" on pages 2 through 7 of Johnson & Johnson's Proxy
Statement dated March 12, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this item is incorporated herein by reference
to the material captioned "Election of Directors--Directors' Fees, Committees
and Meetings" and "Executive Compensation" on pages 8 and 9, and 14 through 17
of Johnson & Johnson's Proxy Statement dated March 12, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this item is incorporated herein by reference
to the material captioned "General Information--Principal Shareowner" and
"Election of Directors--Stock Ownership/Control" on pages 2 and 8 of Johnson &
Johnson's Proxy Statement dated March 12, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements to be included in this report are incorporated in
Part II, Item 8 hereof by reference to Johnson & Johnson's Annual Report to
Shareowners for fiscal year 1996.
2. Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because they are not
required or are not applicable.
3. Exhibits Required to be Filed by Item 60l of Regulation S-K
The information called for by this paragraph is incorporated herein by
reference to the Exhibit Index of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of 1996.
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JOHNSON & JOHNSON AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS ENDED DECEMBER 29, 1996, DECEMBER 31, 1995 AND JANUARY 1, 1995
(DOLLARS IN MILLIONS)
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(A) Charges related to customer rebates and cash discounts are reflected as
reductions of sales to customers.
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: March 25, 1997 JOHNSON & JOHNSON
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(Registrant)
By /s/ R. S. LARSEN
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R. S. Larsen, Chairman, Board of
Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been duly signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
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REPORT OF INDEPENDENT AUDITORS
To the Shareowners and Board of Directors of
Johnson & Johnson:
Our report on the consolidated financial statements of Johnson & Johnson
and subsidiaries has been incorporated by reference in this Form 10-K from the
Johnson & Johnson 1996 Annual Report to Shareowners and appears on page 40
therein. In connection with our audits of such financial statements, we have
also audited the related financial statement schedule listed in the index in
Item 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
New York, New York
January 20, 1997
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CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements No.
33-52252, 33-40294, 33-40295, 33-32875, 33-7634 and 033-59009 on Form S-8, No.
33-55977 and 33-47424 on Form S-3 and No. 33-57583 and 333-00391 on Form S-4 and
related Prospectuses of our reports dated January 20, 1997, on our audits of the
consolidated financial statements and financial statement schedule of Johnson &
Johnson and subsidiaries as of December 29, 1996 and December 31, 1995, and for
each of the three years in the period ended December 29, 1996, which reports are
included or incorporated by reference in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
New York, New York
March 28, 1997
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EXHIBIT INDEX
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* Management contracts and compensatory plans and arrangements required to be
filed as Exhibits to this form pursuant to Item 14(c) of the report.
A copy of any of the Exhibits listed above will be provided without charge
to any shareowner submitting a written request specifying the desired exhibit(s)
to the Secretary at the principal executive offices of the Company.
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