UNITED STATES
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 January 3, 2010 | Commission file number 1-3215 |
JOHNSON &
JOHNSON
(Exact name of registrant as specified in its charter)
New Jersey | 22-1024240 | |
| (State of incorporation) | (I.R.S. Employer Identification
No.) | |
| One Johnson & Johnson Plaza New Brunswick, New Jersey | 08933 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (732) 524-0400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Title of each class | Name of each exchange on which registered | |
| Common Stock, Par Value $1.00 | New York Stock Exchange |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 ☑ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No o
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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer ☑ Accelerated filer o Non-accelerated filer o Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ☑
The aggregate market value of the Common Stock held by non-affiliates computed by reference to the price at which the Common Stock was last sold as of the last business day of the registrant's most recently completed second fiscal quarter was approximately $156 billion.
On February 8, 2010 there were 2,751,927,062 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and III: | Portions of registrant's annual report to shareholders for fiscal year 2009 (the "Annual Report"). | |
Parts I and III: | Portions of registrant's proxy statement for its 2010 annual meeting of shareholders filed within 120 days after the close of the registrant's fiscal year (the "Proxy Statement"). |
Item | Page | |||||||
PART I | ||||||||
1. | Business | 1 | ||||||
| General | 1 | |||||||
| Segments of Business | 1 | |||||||
| Geographic Areas | 2 | |||||||
| Raw Materials | 2 | |||||||
| Patents and Trademarks | 2 | |||||||
| Seasonality | 2 | |||||||
| Competition | 3 | |||||||
| Research and Development | 3 | |||||||
| Environment | 3 | |||||||
| Regulation | 3 | |||||||
| Available Information | 4 | |||||||
1A. | Risk Factors | 4 | ||||||
1B. | Unresolved Staff Comments | 4 | ||||||
2. | Properties | 4 | ||||||
3. | Legal Proceedings | 5 | ||||||
4. | Submission of Matters to a Vote of Security Holders | 5 | ||||||
| Executive Officers of the Registrant | 5 | |||||||
PART II | ||||||||
5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 6 | ||||||
6. | Selected Financial Data | 7 | ||||||
7. | Management's Discussion and Analysis of Financial Condition and Results of Operation | 7 | ||||||
7A. | Quantitative and Qualitative Disclosures About Market Risk | 7 | ||||||
8. | Financial Statements and Supplementary Data | 7 | ||||||
9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 8 | ||||||
9A. | Controls and Procedures | 8 | ||||||
9B. | Other Information | 8 | ||||||
PART III | ||||||||
10. | Directors, Executive Officers and Corporate Governance | 9 | ||||||
11. | Executive Compensation | 9 | ||||||
12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 9 | ||||||
13. | Certain Relationships and Related Transactions, and Director Independence | 10 | ||||||
14. | Principal Accountant Fees and Services | 10 | ||||||
PART IV | ||||||||
15. | Exhibits and Financial Statement Schedules | 11 | ||||||
| Schedule II - Valuation and Qualifying Accounts | 12 | |||||||
| Signatures | 13 | |||||||
| Report of Independent Registered Public Accounting Firm on Financial Statement Schedule | 15 | |||||||
| Exhibit Index | 16 | |||||||
| EX-10.W | ||||||||
| EX-12 | ||||||||
| EX-13 | ||||||||
| EX-21 | ||||||||
| EX-23 | ||||||||
| EX-31.A | ||||||||
| EX-31.B | ||||||||
| EX-32.A | ||||||||
| EX-32.B | ||||||||
| EX-99 | ||||||||
| EX-101 INSTANCE DOCUMENT | ||||||||
| EX-101 SCHEMA DOCUMENT | ||||||||
| EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
| EX-101 LABELS LINKBASE DOCUMENT | ||||||||
| EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
| EX-101 DEFINITION LINKBASE DOCUMENT | ||||||||
PART I
Item 1. BUSINESS
General
Johnson & Johnson and its subsidiaries have approximately 115,500 employees worldwide engaged in the research and development, manufacture and sale of a broad range of products in the health care field. Johnson & Johnson is a holding company, which has more than 250 operating companies conducting business in virtually all countries of the world. Johnson & Johnson's primary focus has been on products related to human health and well-being. Johnson & Johnson was incorporated in the State of New Jersey in 1887.
The Company's structure is based on the principle of decentralized management. The Executive Committee of Johnson & Johnson is the principal management group responsible for the operations and allocation of the resources of the Company. This Committee oversees and coordinates the activities of the Consumer, Pharmaceutical 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.
Segments of Business
Johnson & Johnson's operating companies are organized into three business segments: Consumer, Pharmaceutical and Medical Devices and Diagnostics. Additional information required by this item is incorporated herein by reference to the narrative and tabular (but not the graphic) descriptions of segments and operating results under the captions "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 26 through 35 and Note 18 "Segments of Business and Geographic Areas" under "Notes to Consolidated Financial Statements" on page 55 of the Annual Report, filed as Exhibit 13 to this Report on Form 10-K.
Consumer
The Consumer segment includes a broad range of products used in the baby care, skin care, oral care, wound care and women's health care fields, as well as nutritional and over-the-counter pharmaceutical products, and wellness and prevention platforms. The Baby Care franchise includes the JOHNSON'S ® Baby line of products. Major brands in the Skin Care franchise include the AVEENO ® ; CLEAN & CLEAR ® ; JOHNSON'S ® Adult; NEUTROGENA ® ; RoC ® ; LUBRIDERM ® ; Dabao; and Vendôme product lines. The Oral Care franchise includes the LISTERINE ® and REACH ® oral care lines of products. The Wound Care franchise includes BAND-AID ® brand adhesive bandages and PURELL ® instant hand sanitizer products. Major brands in the Women's Health franchise are the CAREFREE ® Pantiliners; STAYFREE ® sanitary protection products; and Vania Expansion products. The nutritional and over-the-counter lines include SPLENDA ® , No Calorie Sweetener; the broad family of TYLENOL ® acetaminophen products; SUDAFED ® cold, flu and allergy products; ZYRTEC ® allergy products; MOTRIN ® IB ibuprofen products; and PEPCID ® AC Acid Controller from Johnson & Johnson • Merck Consumer Pharmaceuticals Co. These products are marketed to the general public and sold both to retail outlets and distributors throughout the world.
Pharmaceutical
The Pharmaceutical segment includes products in the following therapeutic areas: anti-infective, antipsychotic, cardiovascular, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, urology and virology. These products are distributed directly to retailers, wholesalers and health care professionals for prescription use. Key products in the Pharmaceutical segment include: REMICADE ® (infliximab), a biologic approved for the treatment of a number of immune mediated inflammatory diseases; PROCRIT ® (Epoetin alfa, sold outside the U.S. as EPREX ® ), a biotechnology-derived product that stimulates red blood cell production; LEVAQUIN ® (levofloxacin) in the anti-infective field; RISPERDAL ® CONSTA ® (risperidone), a long-acting injectable for the treatment of schizophrenia; CONCERTA ® (methylphenidate HCl), a product for the treatment of attention deficit hyperactivity disorder; ACIPHEX ® /PARIET ® , a proton pump inhibitor co-marketed with Eisai Inc.; DURAGESIC ® /Fentanyl Transdermal (fentanyl transdermal system, sold outside the U.S. as DUROGESIC ® ), a treatment for chronic pain that offers a novel delivery system; VELCADE ® (bortezomib), a product for the treatment for multiple myeloma; PREZISTA ® (darunavir) for the treatment of HIV/AIDS patients; and INVEGA ® (paliperidone), a once-daily atypical antipsychotic.
Medical Devices and Diagnostics
The Medical Devices and Diagnostics segment includes a broad range of products distributed to wholesalers, hospitals and retailers, used principally in the professional fields by physicians, nurses, therapists, hospitals, diagnostic laboratories and clinics. These products include Cordis' circulatory disease management products; DePuy's orthopaedic joint reconstruction, spinal care and sports medicine products; Ethicon's surgical care, aesthetics and women's health products; Ethicon Endo-Surgery's minimally invasive surgical products; LifeScan's blood glucose monitoring and insulin delivery products; Ortho-Clinical Diagnostics' professional diagnostic products; and Vistakon's disposable contact lenses. Distribution to these health care professional markets is done both directly and through surgical supply and other dealers.
Geographic Areas
The international business of Johnson & Johnson is conducted by subsidiaries located in 59 countries outside the United States, which are selling products in virtually all countries throughout the world. The products made and sold in the international business include many of those described above under "- Segments of Business - Consumer," "- Pharmaceutical" and "- Medical Devices and Diagnostics." However, the principal markets, products and methods of distribution in the international business vary with the country and the culture. The products sold in international business include not only those developed in the United States, but also those developed by subsidiaries abroad.
Investments and activities in some countries outside the United States are subject to higher risks than comparable U.S. 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 operating companies' businesses are generally readily available from multiple sources.
Patents and Trademarks
Johnson & Johnson and its subsidiaries have made a practice of obtaining patent protection on their products and processes where possible. They own or are licensed under a number of patents relating to their products and manufacturing processes, which in the aggregate are believed to be of material importance to Johnson & Johnson in the operation of its businesses. Sales of the Company's largest product, REMICADE ® (infliximab), accounted for approximately 7% of Johnson & Johnson's total revenues for fiscal 2009. Accordingly, the patents related to this product are believed to be material to Johnson & Johnson.
During 2007 through 2009, RISPERDAL ® (risperidone) oral and TOPAMAX ® (topiramate) lost basic patent protection and market exclusivity and became subject to generic competition in the United States and international markets. RISPERDAL ® oral sales declined by 57.7% and 37.8% in 2009 and 2008, respectively. TOPAMAX ® lost market exclusivity in March 2009 and sales declined by 57.9% as compared to 2008. The next significant patent scheduled to expire on December 20, 2010 is for LEVAQUIN ® (levofloxacin), which accounted for 2.5% of the Company's 2009 sales. A pediatric extension for LEVAQUIN ® was granted by the U.S. Food and Drug Administration ("FDA"), which extends market exclusivity in the United States through June 20, 2011.
Johnson & Johnson's operating companies have made a practice of selling their products under trademarks and of obtaining protection for these trademarks by all available means. These trademarks are protected by registration in the United States and other countries where such products are marketed. Johnson & Johnson considers these trademarks in the aggregate to be of material importance in the operation of its businesses.
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 and development activity.
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Competition
In all of their product lines, Johnson & Johnson's operating companies compete with companies both large and small, and both local and global, located throughout the world. Competition exists in all product lines without regard to the number and size of the competing companies involved. Competition in research, involving the development and the improvement of new and existing products and processes, is particularly significant. The development of new and innovative products is important to Johnson & Johnson's success in all areas of its business. This also includes protecting the Company's portfolio of intellectual property. The competitive environment requires substantial investments in continuing research and in maintaining sales forces. In addition, the development and maintenance of customer demand for the Company's consumer products involves significant expenditures for advertising and promotion.
Research and Development
Research activities represent a significant part of Johnson & Johnson's subsidiaries' businesses. Major research facilities are located not only in the United States, but also in Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the Netherlands, Singapore and the United Kingdom. The costs of worldwide Company-sponsored research activities relating 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 (excluding purchased in-process research and development charges for fiscal 2008 and 2007), amounted to $7.0 billion, $7.6 billion and $7.7 billion for fiscal years 2009, 2008 and 2007, respectively. These costs are charged directly to expense, or directly against income, in the year in which incurred.
Environment
Johnson & Johnson's operating companies are subject to a variety of U.S. and international 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 during the past year, and is not expected to, have a material effect upon its capital expenditures, cash flows, earnings or competitive position.
Regulation
Most of Johnson & Johnson's businesses are subject to varying degrees of governmental regulation in the countries in which operations are conducted, and the general trend is toward increasingly stringent regulation. In the United States, the drug, device, diagnostics and cosmetic industries have long been subject to regulation by various federal and state agencies, primarily as to product safety, efficacy, manufacturing, advertising, labeling and safety reporting. The exercise of broad regulatory powers by 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 are also evident in major markets outside of the United States.
The costs of human health care have been and continue to be a subject of study, investigation and regulation by governmental agencies and legislative bodies around the world. In the United States, attention has been focused on drug prices and profits and programs that encourage doctors to write prescriptions for particular drugs or recommend, use or purchase particular medical devices. Payers have become a more potent force in the market place and increased attention is being paid to drug and medical device pricing, appropriate drug and medical device utilization and the quality and costs of health care.
The regulatory agencies under whose purview Johnson & Johnson's operating companies operate have administrative powers that may subject those companies to such actions as product withdrawals, recalls, seizure of products and other civil and criminal sanctions. In some cases, Johnson & Johnson's operating companies may deem it advisable to initiate product recalls.
In addition, business practices in the health care industry have come under increased scrutiny, particularly in the United States, by government agencies and state attorneys general, and resulting investigations and prosecutions carry the risk of significant civil and criminal penalties.
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| Available Information |
The Company's main corporate Web site address is www.jnj.com. Copies of Johnson & Johnson's Quarterly Reports on Form 10-Q, Annual Report on Form 10-K and Current Reports on Form 8-K filed or furnished to the U.S. Securities and Exchange Commission (the "SEC"), and any amendments to the foregoing, will be provided without charge to any shareholder submitting a written request to the Secretary at the principal executive offices of the Company or by calling 1-800-950-5089. All of the Company's SEC filings are also available on the Company's Web site at www.investor.jnj.com/governance/materials.cfm , as soon as reasonably practicable after having been electronically filed or furnished to the SEC. All SEC filings are also available at the SEC's Web site at www.sec.gov . In addition, the written charters of the Audit Committee, the Compensation & Benefits Committee and the Nominating & Corporate Governance Committee of the Board of Directors and the Company's Principles of Corporate Governance, Policy on Business Conduct for employees and Code of Business Conduct & Ethics for Members of the Board of Directors and Executive Officers are available at the www.investor.jnj.com/governance/materials.cfm Web site address and will be provided without charge to any shareholder submitting a written request, as provided above.
Item 1A. RISK FACTORS
Not applicable. Some important factors that could cause the Company's actual results to differ from the Company's expectations in any forward-looking statements in this Report are set forth in Exhibit 99 to this Report on Form 10-K.
Item 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
Item 2. PROPERTIES
Johnson & Johnson and its subsidiaries operate 143 manufacturing facilities occupying approximately 21.4 million square feet of floor space.
The manufacturing facilities are used by the industry segments of Johnson & Johnson's business approximately as follows:
| Square Feet | ||||
| (in | ||||
Segment | thousands) | |||
Consumer | 6,825 | |||
Pharmaceutical | 6,369 | |||
Medical Devices and Diagnostics | 8,251 | |||
Worldwide Total | 21,445 | |||
Within the United States, 7 facilities are used by the Consumer segment, 12 by the Pharmaceutical segment and 37 by the Medical Devices and Diagnostics segment. Johnson & Johnson's manufacturing operations outside the United States are often conducted in facilities that serve more than one business segment.
The locations of the manufacturing facilities by major geographic areas of the world are as follows:
| Square Feet | ||||||||
| Number of | (in | |||||||
Geographic Area | Facilities | thousands) | ||||||
United States | 56 | 7,489 | ||||||
Europe | 38 | 7,336 | ||||||
Western Hemisphere, excluding U.S. | 16 | 3,372 | ||||||
Africa, Asia and Pacific | 33 | 3,248 | ||||||
Worldwide Total | 143 | 21,445 | ||||||
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In addition to the manufacturing facilities discussed above, Johnson & Johnson and its subsidiaries maintain numerous office and warehouse facilities throughout the world. Research facilities are also discussed in Item 1 under "Business - Research and Development."
Johnson & Johnson and its subsidiaries generally seek to own their 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 16 "Rental Expense and Lease Commitments" under "Notes to Consolidated Financial Statements" on page 53 of the Annual Report, filed as Exhibit 13 to this Report on Form 10-K. Segment information on additions to property, plant and equipment is contained in Note 18 "Segments of Business and Geographic Areas" under "Notes to Consolidated Financial Statements" on page 55 of the Annual Report, filed as Exhibit 13 to this Report on Form 10-K.
Item 3. LEGAL PROCEEDINGS
The information set forth in Note 21 "Legal Proceedings" under "Notes to Consolidated Financial Statements" on pages 57 through 63 of the Annual Report is incorporated herein by reference and filed as Exhibit 13 to this Report on Form 10-K.
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.
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 February 8, 2010, 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, the 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 the material captioned "Election of Directors" in the Proxy Statement.
Name | Age | Position | ||||
Dominic J. Caruso | 52 | Member, Executive Committee; Vice President, Finance; Chief Financial Officer(a) | ||||
Russell C. Deyo | 60 | Member, Executive Committee; Vice President, Human Resources and General Counsel(b) | ||||
Colleen A. Goggins | 55 | Member, Executive Committee; Worldwide Chairman, Consumer Group(c) | ||||
Alex Gorsky | 49 | Member, Executive Committee; Worldwide Chairman, Medical Devices and Diagnostics Group(d) | ||||
Sherilyn S. McCoy | 51 | Member, Executive Committee; Worldwide Chairman, Pharmaceuticals Group(e) | ||||
William C. Weldon | 61 | Chairman, Board of Directors; Chairman, Executive Committee; Chief Executive Officer | ||||
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| (a) | Mr. D. J. Caruso joined the Company in 1999 when the Company acquired Centocor, Inc. At the time of that acquisition, he had been Senior Vice President, Finance of Centocor. Mr. Caruso was named Vice President, Finance of Ortho-McNeil Pharmaceutical, Inc., a subsidiary of the Company, in 2001 and Vice President, Group Finance of the Company's Medical Devices and Diagnostics Group in 2003. In 2005, Mr. Caruso was named Vice President of the Company's Group Finance organization. Mr. Caruso became a Member of the Executive Committee and Vice President, Finance and Chief Financial Officer in 2007. | |
| (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 1996 and Vice President, General Counsel in 2004. Mr. Deyo was given the additional responsibility for Human Resources in November 2009. | |
| (c) | Ms. C. A. Goggins joined the Company in 1981 and held various positions before becoming President of Personal Products Company, a subsidiary of the Company, in 1994. She was named President of Johnson & Johnson Consumer Companies, Inc. in 1995 and Company Group Chairman, North America, Johnson & Johnson Consumer Products in 1998. Ms. Goggins became a Member of the Executive Committee and Worldwide Chairman, Consumer & Personal Care Group in 2001, now known as the Consumer Group. | |
| (d) | Mr. A. Gorsky joined the Company in 2008 as Company Group Chairman and Worldwide Franchise Chairman for Ethicon, Inc., a subsidiary of the Company. Previously, he was head of the North American pharmaceuticals business at Novartis Pharmaceuticals Corporation from 2004 to 2008. Prior to Novartis, Mr. Gorsky served in various management positions at Johnson & Johnson, including Company Group Chairman for the Company's pharmaceutical business in Europe, Middle East and Africa and President of Janssen Pharmaceutica Inc. (U.S.), a subsidiary of the Company. In January 2009, he became a Member of the Executive Committee and Worldwide Chairman, Surgical Care Group. In September 2009, Mr. Gorsky became Worldwide Chairman, Medical Devices and Diagnostics Group. | |
| (e) | Ms. S. S. McCoy joined the Company in 1982 as an Associate Scientist in Research & Development for Personal Products Company, a subsidiary of the Company. She was named Vice President, Research & Development for the Personal Products Worldwide Division of McNEIL-PPC, Inc., a subsidiary of the Company, in 1995, and Vice President, Marketing for its Skin Care franchise in 2000. In 2002, Ms. McCoy became Global President for its Baby and Wound Care franchise. She was named Company Group Chairman and Worldwide Franchise Chairman of Ethicon, Inc., a subsidiary of the Company, in 2005. In 2008 she became a Member of the Executive Committee and Worldwide Chairman, Surgical Care Group. In 2009, she became Worldwide Chairman, Pharmaceuticals Group. |
PART II
| Item 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
As of February 8, 2010, there were 185,121 record holders of Common Stock of the Company. Additional information called for by this item is incorporated herein by reference to: the material under the captions "Management's Discussion and Analysis of Results of Operations and Financial Condition - Liquidity and Capital Resources - Share Repurchase and Dividends" on page 32; " - Other Information - Common Stock Market Prices" on page 35; Note 17 "Common Stock, Stock Option Plans and Stock Compensation Agreements" under "Notes to Consolidated Financial Statements" on pages 53 and 54; and "Shareholder Return Performance Graphs" on page 67 of the Annual Report, filed as Exhibit 13 to this Report on Form 10-K; and Item 12 "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters - Equity Compensation Plan Information" of this Report on Form 10-K.
Issuer Purchases of Equity Securities
On July 9, 2007, the Company announced that its Board of Directors approved a stock repurchase program, authorizing the Company to buy back up to $10 billion of the Company's Common Stock. Share repurchases take place on the open market from time to time based on market conditions. The repurchase program has no time limit and may be suspended for periods or discontinued at any time. Any shares acquired will be available for general
6
corporate purposes. The Company funds the share repurchase program through a combination of available cash and debt. The Company does not expect its triple-A credit rating to be affected by the share repurchase program. As of January 3, 2010, an aggregate of 140,377,700 shares were purchased for a total of $8.9 billion since the inception of the repurchase program announced on July 9, 2007.
In addition, Common Stock purchases on the open market are made as part of a systematic plan related to the Company's compensation programs.
The following table provides information with respect to Common Stock purchases by the Company during the fiscal fourth quarter of 2009.
| Total Number | ||||||||||||||||
| of Shares | Remaining | |||||||||||||||
| Purchased as | Maximum Number | |||||||||||||||
| Part of | of Shares that | |||||||||||||||
| Total Number | Avg. Price | Publicly Announced | May Yet Be Purchased | |||||||||||||
| of Shares | Paid Per | Plans or | Under the Plans | |||||||||||||
Period | Purchased (1) | Share | Programs | or Programs (2) | ||||||||||||
September 28, 2009 through October 25, 2010 | 984,600 | $ | 60.53 | - | ||||||||||||
October 26, 2009 through November 22, 2009 | 3,963,000 | $ | 59.74 | - | ||||||||||||
November 23, 2009 through January 3, 2010 | 10,343,500 | $ | 64.00 | - | ||||||||||||
Total | 15,291,100 | - | 16,766,460 | |||||||||||||
| (1) | During the fiscal fourth quarter of 2009, the Company did not repurchase any shares of the Company's Common Stock pursuant to the repurchase program that was publicly announced on July 9, 2007. The Company did repurchase an aggregate of 15,291,100 shares in open-market transactions outside of the program. |
| (2) | As of January 3, 2010, based on the closing price of the Company's Common Stock on the New York Stock Exchange on December 31, 2009 of $64.41 per share. |
Item 6. SELECTED FINANCIAL DATA
The information called for by this item is incorporated herein by reference to the material under the caption "Summary of Operations and Statistical Data 1999-2009" on page 66 of the Annual Report, filed as Exhibit 13 to this Report on Form 10-K.
| Item 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION |
The information called for by this item is incorporated herein by reference to the narrative and tabular (but not the graphic) material under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 26 through 35 of the Annual Report, filed as Exhibit 13 to this Report on Form 10-K.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by this item is incorporated herein by reference to the material under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition - Liquidity and Capital Resources - Financing and Market Risk" on page 32 and Note 1 "Summary of Significant Accounting Policies - Financial Instruments" under "Notes to Consolidated Financial Statements" on page 42 of the Annual Report, filed as Exhibit 13 to this Report on Form 10-K.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is incorporated herein by reference to the Audited Consolidated Financial Statements and Notes thereto and the material under the caption "Report of Independent Registered Public Accounting Firm" on pages 36 through 65 of the Annual Report, filed as Exhibit 13 to this Report on Form 10-K.
7
| Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
Not applicable.
| Item 9A. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures. At the end of the period covered by this report, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. William C. Weldon, Chairman and Chief Executive Officer, and Dominic J. Caruso, Chief Financial Officer, reviewed and participated in this evaluation. Based on this evaluation, Messrs. Weldon and Caruso concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective.
Management's Report on Internal Control Over Financial Reporting. Under Section 404 of the Sarbanes-Oxley Act of 2002, management is required to assess the effectiveness of the Company's internal control over financial reporting as of the end of each fiscal year and report, based on that assessment, whether the Company's internal control over financial reporting is effective.
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is designed to provide reasonable assurance as to the reliability of the Company's financial reporting and the preparation of external financial statements in accordance with generally accepted accounting principles.
Internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company's management has assessed the effectiveness of the Company's internal control over financial reporting as of January 3, 2010. In making this assessment, the Company used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control-Integrated Framework." These criteria are in the areas of control environment, risk assessment, control activities, information and communication, and monitoring. The Company's assessment included extensive documenting, evaluating and testing the design and operating effectiveness of its internal control over financial reporting.
Based on the Company's processes and assessment, as described above, management has concluded that, as of January 3, 2010, the Company's internal control over financial reporting was effective.
The effectiveness of the Company's internal control over financial reporting as of January 3, 2010 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears in the "Report of Independent Registered Public Accounting Firm" on page 64 of the Annual Report, which is incorporated herein by reference and filed as Exhibit 13 to this Report on Form 10-K.
Changes in Internal Control Over Financial Reporting. During the fiscal quarter ended January 3, 2010, there were no changes in the Company's internal control over financial reporting identified in connection with the evaluation of such referred to above in this Item 9A that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
| Item 9B. | OTHER INFORMATION |
Not applicable.
8
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information called for by this item is incorporated herein by reference to the material under the captions "Election of Directors" and "Stock Ownership and Section 16 Compliance - Section 16(a) Beneficial Ownership Reporting Compliance" and the discussion of the Audit Committee under the caption "Corporate Governance - Board Committees" in the Proxy Statement; and the material under the caption "Executive Officers of the Registrant" in Part I of this Report on Form 10-K.
The Company's Policy on Business Conduct, which covers all employees (including the Chief Executive Officer, Chief Financial Officer and Controller), meets the requirements of the SEC rules promulgated under Section 406 of the Sarbanes-Oxley Act of 2002. The Policy on Business Conduct is available on the Company's Web site at www.investor.jnj.com/governance/policies.cfm , and copies are available to shareholders without charge upon written request to the Secretary at the Company's principal executive offices. Any substantive amendment to the Policy on Business Conduct or any waiver of the Policy granted to the Chief Executive Officer, the Chief Financial Officer or the Controller will be posted on the Company's Web site at www.investor.jnj.com/governance.cfm within five business days (and retained on the Web site for at least one year).
In addition, the Company has adopted a Code of Business Conduct & Ethics for Members of the Board of Directors and Executive Officers. The Code of Business Conduct & Ethics for Members of the Board of Directors and Executive Officers is available on the Company's Web site at www.investor.jnj.com/governance/policies.cfm , and copies are available to shareholders without charge upon written request to the Secretary at the Company's principal executive offices. Any substantive amendment to the Code or any waiver of the Code granted to any member of the Board of Directors or any executive officer will be posted on the Company's Web site at www.investor.jnj.com/governance.cfm within five business days (and retained on the Web site for at least one year).
Item 11. EXECUTIVE COMPENSATION
The information called for by this item is incorporated herein by reference to the material under the captions "Compensation Discussion and Analysis," "Executive and Director Compensation" and "Compensation Committee Report" in the Proxy Statement.
The material incorporated herein by reference to the material under the caption "Compensation Committee Report" in the Proxy Statement shall be deemed furnished, and not filed, in this Report on Form 10-K and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, as a result of this furnishing, except to the extent that the Registrant specifically incorporates it by reference.
| Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Additional information called for by this item is incorporated herein by reference to the material under the captions "Stock Ownership and Section 16 Compliance" in the Proxy Statement and Note 17 "Common Stock, Stock Option Plans and Stock Compensation Agreements" under "Notes to Consolidated Financial Statements" on pages 53 and 54 of the Annual Report, filed as Exhibit 13 to this Report on Form 10-K.
9
Equity Compensation Plan Information
The following table provides certain information as of January 3, 2010 concerning the shares of the Company's Common Stock that may be issued under existing equity compensation plans.
| Number of Securities to | Weighted Average | Number of Securities | ||||||||||
| be Issued Upon Exercise of | Exercise Price of | Remaining Available for | ||||||||||
| Outstanding Options, | Outstanding Options, | Future Issuance Under | ||||||||||
| Plan Category | Warrants and Rights | Warrants and Rights | Equity Compensation Plans (4) | |||||||||
Equity Compensation Plans Approved by Security Holders (1) | 238,568,739 | $ | 52.22 | 139,725,718 | ||||||||
Equity Compensation Plans Not Approved by Security Holders (2)(3) | 474,474 | 43.06 | - | |||||||||
Total | 239,043,213 | 52.20 | 139,725,718 | |||||||||
| (1) | Included in this category are the following equity compensation plans, which have been approved by the Company's shareholders: 1995 Stock Option Plan, 2000 Stock Option Plan and 2005 Long-Term Incentive Plan. |
| (2) | Included in this category are 383,124 shares of Common Stock of the Company issuable under various equity compensation plans which were assumed by the Company upon acquisition of the following companies: ALZA Corporation, Scios Inc., and Inverness Medical Technology, Inc. 216,770 of the shares listed as issuable in this category were issued under plans that were approved by the shareholders of these companies prior to the acquisition and the assumption of these plans by the Company. At the time of each of these acquisitions, options to acquire equity of the acquired company were replaced by options to acquire the Common Stock of the Company. No stock options or equity awards of any type have been made under any of these plans since the assumption of these plans by the Company, and no further stock options or other equity awards of any type will be made under any of these plans in the future. |
The shares that are included in this column that were issued under plans not approved by shareholders of the applicable acquired company are: 131,183 shares issuable under the 1996 Scios Non-Officer Stock Option Plan; and 35,171 shares issuable under warrants under an Inverness Medical plan.
| (3) | Also included in this category are 91,350 shares of Common Stock of the Company issuable upon the exercise of outstanding stock options under the Company's Stock Option Plan for Non-Employee Directors. All options outstanding under this plan have fully vested with an expiration period of ten years from the date of grant. |
| (4) | This column excludes shares reflected under the column "Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights." |
| Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The information called for by this item is incorporated herein by reference to the material under the captions "Transactions with Related Persons" and "Corporate Governance - Director Independence" in the Proxy Statement.
| Item 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The information called for by this item is incorporated herein by reference to the material under the caption "Ratification of Appointment of Independent Registered Public Accounting Firm" in the Proxy Statement.
10
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
1. Financial Statements
The following Audited Consolidated Financial Statements and Notes thereto and the material under the caption "Report of Independent Registered Public Accounting Firm" on pages 36 through 64 of the Annual Report are incorporated herein by reference and filed as Exhibit 13 to this Report on Form 10-K:
Consolidated Balance Sheets at end of Fiscal Years 2009 and 2008
Consolidated Statements of Earnings for Fiscal Years 2009, 2008 and 2007
Consolidated Statements of Equity for Fiscal Years 2009, 2008 and 2007
Consolidated Statements of Cash Flows for Fiscal Years 2009, 2008 and 2007
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
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 item is incorporated herein by reference to the Exhibit Index in this report.
11
Schedule Of Valuation And Qualifying Accounts Disclosure
JOHNSON & JOHNSON AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS