12
Johnson and Johnson Incorporation
Name: Seun Ubani Brady
Instructor: Carla Kroeze
Course: Principles of accounting ACCT 220
Date: 03/20/2022
Johnson and Johnson Incorporation
Introduction
Johnson and Johnson company is a global leader company in healthcare field. The company is involved in the carrying out research, manufacturing and selling of healthcare products. Johnson and Johnson company was formed in 1887 in the current state of New Jersey where it still has its current headquarters. Since its formation in 1887, Johnson and Johnson company has expanded and currently carries out its business in almost all countries across the globe. Johnson and Johnson company has three business segments which includes pharmaceutical, consumer health and medical devices. Consumer health business segment of Johnson and Johnson company is focused mainly personal healthcare products. The company business segment produces products which enhances personal skin health and beauty. Pharmaceutical business segment of Johnson and Johnson company has immunology, infectious disease, neuroscience, Oncology, cardiovascular and Metabolism and pulmonary hypertension as the main therapeutic areas which the company focuses. Johnson and Johnson company is also involved in the manufacture of medical devices which provides interventional solutions to patients.
Despite Johnson and Johnson company being present in all countries across the world, the company has only physical office in the United States. It operates in other countries virtually in all company’s segments to avoid the negative impact of different political system. The company mainly carries its business with healthcare professionals, hospitals, wholesalers, medical distributors and medical retail shops. Jonson and Johnson company is very competitive in all its business segment both locally in the United States and at global level. Some of the key competitors of Johnson and Johnson company includes the Pfizer, Unilever, Procter and Gamble, Merck among many other companies with produces similar products as those of Johnson and Johnson company. Johnson and Johnson company ensures that company remains competitive through investing much in research and development. Through research and development, Johnson and Johnson company has been able to improve its products to ensure they remain highly demanded in the market. Joaquin Duato is the current chief executive officer of Johnson and Johnson company and has been serving in the position since his appointment in January 2022. Johnson and Johnson company has market capitalization of $464.85 billion which makes the company one of the most valuable companies in terms of market capitalization.
Account Receivable
According to the consolidated balance sheet statement of Johnson and Johnson company, Account receivable of the company was valued at $15.283 billion. This was an improvement from company’s account receivable of $13.576 billion in 2020. This value of account receivable represents the net amount which the company expects to receive from customers. Johnson and Johnson company deals with customers across the world including retailers, hospitals, wholesale, and medical distributors across t the world. Since customers are from different locations, Johnson and Johnson company is exposed to credit risks. Some of the customers that Johnson and Johnson Company deals with are likely to default paying for inventory supplied to them by Johnson and Johnson company on credit.
Allowance for doubtful accounts is important for Johnson and Johnson company to ensure that customer defaulting in making payment for the inventory supplied to them is accounted for. Failure by Customer to make payment for supplied inventory is a loss to Johnson and Johnson company. According Johnson and Johnson company allowance for doubtful debt has decreased to $230 million in 2021 from $293 million which was recorded in 2020.
Inventories
Johnson and Johnson company inventories value is stated at the lower of cost or net realizable value. First in first out inventory valuation method is the method which is used by Johnson and Johnson company. Johnson and Johnson company value of inventory increased from $9.132 billion in 2020 to $10.387 billion in 2021 which represents an increase by $1.248 billion.
Johnson and Johnson company inventory comprises of raw materials and supplies, goods in process and finished goods. At the end of fiscal year 2021, Johnson and Johnson company inventory comprised of mainly finished goods which was valued at $6.508 billion. Goods in process was valued at $2.287 billion while raw materials and supplies of the company was valued at $1.592 billion
Property plant and Equipment
Property, Plant and Equipment is one of the key assets which is owned by Johnson and Johnson company. According to the balance sheet, net book value of Property, Plant and Equipment was valued at $18.692 billion which was an improvement from 2020 value of $18.766 billion. The value of the PPE is stated at cost in balance sheet and it is usually depreciated using the straight-line method. Some of the key PPE which are owned by Johnson and Johnson company includes building and equipment with an estimated useful life of between 20 and 30 years, land and leasehold improvement which is estimated to have life of between 10 and 20 years and machinery and equipment which is estimated to have life of between 2 and 13 years. The accumulated depreciation on property, plant and equipment owned by Johnson and Johnson company is estimated to be $28.717 billion.
Auditor’s Report
Johnson and Johnson company is audited by PricewaterhouseCooper LLP. According to the Auditor, Johnson and Johnson company financial statement represents the true and fair value of the company. PWC company provided a qualified opinion on financial performance of the company. Some of the critical audit matter Affecting Johnson and Johnson company includes U.S pharmaceutical Rebate Reserves, litigation contingencies-Talc and litigation -opioids.
Johnson and Johnson company financial statement
The financial statement of the Johnson and Johnson company includes Balance sheet, statement of earnings, statement of cash flows and Statement of changes in Equity. The financial statements are prepared to represent the fair value of both assets and liabilities of the company. Financial statement of Johnson and Johnson company have been attached below.
Conclusion
According to Sec 10K report, Johnson and Johnson company is a profitable company. The company generates major income from the sales to customers. Net earning of Johnson and Johnson company in 2021 was 20.878 billion.
References
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At January 2, 2022 and January 3, 2021
(Dollars in Millions Except Share and Per Share Amounts) (Note 1)
2021 | 2020 | ||||||||||
Assets | |||||||||||
Current assets |
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Cash and cash equivalents (Notes 1 and 2) | $ | 14,487 | 13,985 | ||||||||
Marketable securities (Notes 1 and 2) | 17,121 | 11,200 | |||||||||
Accounts receivable trade, less allowances for doubtful accounts $230 (2020, $293) | 15,283 | 13,576 | |||||||||
Inventories (Notes 1 and 3) | 10,387 | 9,344 | |||||||||
Prepaid expenses and other receivables | 3,701 | 3,132 | |||||||||
Total current assets | 60,979 | 51,237 | |||||||||
Property, plant and equipment, net (Notes 1 and 4) | 18,962 | 18,766 | |||||||||
Intangible assets, net (Notes 1 and 5) | 46,392 | 53,402 | |||||||||
Goodwill (Notes 1 and 5) | 35,246 | 36,393 | |||||||||
Deferred taxes on income (Note 8) | 10,223 | 8,534 | |||||||||
Other assets | 10,216 | 6,562 | |||||||||
Total assets | $ | 182,018 | 174,894 | ||||||||
Liabilities and Shareholders’ Equity |
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Current liabilities |
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Loans and notes payable (Note 7) | $ | 3,766 | 2,631 | ||||||||
Accounts payable | 11,055 | 9,505 | |||||||||
Accrued liabilities | 13,612 | 13,968 | |||||||||
Accrued rebates, returns and promotions | 12,095 | 11,513 | |||||||||
Accrued compensation and employee related obligations | 3,586 | 3,484 | |||||||||
Accrued taxes on income (Note 8) | 1,112 | 1,392 | |||||||||
Total current liabilities | 45,226 | 42,493 | |||||||||
Long-term debt (Note 7) | 29,985 | 32,635 | |||||||||
Deferred taxes on income (Note 8) | 7,487 | 7,214 | |||||||||
Employee related obligations (Notes 9 and 10) | 8,898 | 10,771 | |||||||||
Long-term taxes payable (Note 1) | 5,713 | 6,559 | |||||||||
Other liabilities | 10,686 | 11,944 | |||||||||
Total liabilities | 107,995 | 111,616 | |||||||||
Commitments and Contingencies (Note 19) | |||||||||||
Shareholders’ equity |
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Preferred stock — without par value (authorized and unissued 2,000,000 shares) | — | — | |||||||||
Common stock — par value $1.00 per share (Note 12) (authorized 4,320,000,000 shares; issued 3,119,843,000 shares) | 3,120 | 3,120 | |||||||||
Accumulated other comprehensive income (loss) (Note 13) | (13,058) | (15,242) | |||||||||
Retained earnings | 123,060 | 113,890 | |||||||||
| 113,122 | 101,768 | |||||||||
Less: common stock held in treasury, at cost (Note 12) (490,878,000 shares and 487,331,000 shares) | 39,099 | 38,490 | |||||||||
Total shareholders’ equity | 74,023 | 63,278 | |||||||||
Total liabilities and shareholders’ equity | $ | 182,018 | 174,894 |
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars and Shares in Millions Except Per Share Amounts) (Note 1)
2021 | 2020 | 2019 | |||||||||||||||
Sales to customers | $ | 93,775 | 82,584 | 82,059 | |||||||||||||
Cost of products sold | 29,855 | 28,427 | 27,556 | ||||||||||||||
Gross profit | 63,920 | 54,157 | 54,503 | ||||||||||||||
Selling, marketing and administrative expenses | 24,659 | 22,084 | 22,178 | ||||||||||||||
Research and development expense | 14,714 | 12,159 | 11,355 | ||||||||||||||
In-process research and development (Note 5) | 900 | 181 | 890 | ||||||||||||||
Interest income | (53) | (111) | (357) | ||||||||||||||
Interest expense, net of portion capitalized (Note 4) | 183 | 201 | 318 | ||||||||||||||
Other (income) expense, net | 489 | 2,899 | 2,525 | ||||||||||||||
Restructuring (Note 20) | 252 | 247 | 266 | ||||||||||||||
Earnings before provision for taxes on income | 22,776 | 16,497 | 17,328 | ||||||||||||||
Provision for taxes on income (Note 8) | 1,898 | 1,783 | 2,209 | ||||||||||||||
Net earnings | $ | 20,878 | 14,714 | 15,119 | |||||||||||||
Net earnings per share (Notes 1 and 15) | |||||||||||||||||
Basic | $ | 7.93 | 5.59 | 5.72 | |||||||||||||
Diluted | $ | 7.81 | 5.51 | 5.63 | |||||||||||||
Average shares outstanding (Notes 1 and 15) | |||||||||||||||||
Basic | 2,632.1 | 2,632.8 | 2,645.1 | ||||||||||||||
Diluted | 2,674.0 | 2,670.7 | 2,684.3 |
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Millions) (Note 1)
2021 | 2020 | 2019 | |||||||||||||||
Net earnings | $ | 20,878 | 14,714 | 15,119 | |||||||||||||
Other comprehensive income (loss), net of tax | |||||||||||||||||
Foreign currency translation | (1,079) | (233) | 164 | ||||||||||||||
Securities: | |||||||||||||||||
Unrealized holding gain (loss) arising during period | (4) | 1 | — | ||||||||||||||
Reclassifications to earnings | — | — | — | ||||||||||||||
Net change | (4) | 1 | — | ||||||||||||||
Employee benefit plans: | |||||||||||||||||
Prior service credit (cost), net of amortization | (169) | 1,298 | (18) | ||||||||||||||
Gain (loss), net of amortization | 4,318 | (1,135) | (714) | ||||||||||||||
Effect of exchange rates | 106 | (229) | (1) | ||||||||||||||
Net change | 4,255 | (66) | (733) | ||||||||||||||
Derivatives & hedges: | |||||||||||||||||
Unrealized gain (loss) arising during period | (199) | 1,000 | (107) | ||||||||||||||
Reclassifications to earnings | (789) | (53) | 7 | ||||||||||||||
Net change | (988) | 947 | (100) | ||||||||||||||
Other comprehensive income (loss) | 2,184 | 649 | (669) | ||||||||||||||
Comprehensive income | $ | 23,062 | 15,363 | 14,450 |
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in Millions) (Note 1)
Total | RetainedEarnings | AccumulatedOtherComprehensiveIncome (Loss) | Common StockIssued Amount | TreasuryStockAmount | |||||||||||||||||||||||||
Balance, December 30, 2018 | $ | 59,752 | 106,216 | (15,222) | 3,120 | (34,362) | |||||||||||||||||||||||
Net earnings | 15,119 | 15,119 |
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Cash dividends paid ($3.75 per share) | (9,917) | (9,917) |
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Employee compensation and stock option plans | 1,933 | (758) |
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| 2,691 | ||||||||||||||||||||||||
Repurchase of common stock | (6,746) |
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| (6,746) | |||||||||||||||||||||||||
Other | (1) | (1) | |||||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | (669) | (669) |
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Balance, December 29, 2019 | 59,471 | 110,659 | (15,891) | 3,120 | (38,417) | ||||||||||||||||||||||||
Net earnings | 14,714 | 14,714 |
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Cash dividends paid ($3.98 per share) | (10,481) | (10,481) |
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Employee compensation and stock option plans | 2,217 | (931) |
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| 3,148 | ||||||||||||||||||||||||
Repurchase of common stock | (3,221) |
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| (3,221) | |||||||||||||||||||||||||
Other | (71) | (71) | |||||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | 649 |
| 649 |
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Balance, January 3, 2021 | 63,278 | 113,890 | (15,242) | 3,120 | (38,490) | ||||||||||||||||||||||||
Net earnings | 20,878 | 20,878 |
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Cash dividends paid ($4.19 per share) | (11,032) | (11,032) |
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Employee compensation and stock option plans | 2,171 | (676) |
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| 2,847 | ||||||||||||||||||||||||
Repurchase of common stock | (3,456) |
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| (3,456) | |||||||||||||||||||||||||
Other comprehensive income (loss), net of tax | 2,184 |
| 2,184 |
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Balance, January 2, 2022 | $ | 74,023 | 123,060 | (13,058) | 3,120 | (39,099) |
JOHNSON & JOHNSON AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions) (Note 1)
2021 | 2020 | 2019 | |||||||||||||||
Cash flows from operating activities |
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Net earnings | $ | 20,878 | 14,714 | 15,119 | |||||||||||||
Adjustments to reconcile net earnings to cash flows from operating activities: |
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Depreciation and amortization of property and intangibles | 7,390 | 7,231 | 7,009 | ||||||||||||||
Stock based compensation | 1,135 | 1,005 | 977 | ||||||||||||||
Asset write-downs | 989 | 233 | 1,096 | ||||||||||||||
Contingent consideration reversal | — | (1,148) | — | ||||||||||||||
Net gain on sale of assets/businesses | (617) | (111) | (2,154) | ||||||||||||||
Deferred tax provision | (2,079) | (1,141) | (2,476) | ||||||||||||||
Credit losses and accounts receivable allowances | (48) | 63 | (20) | ||||||||||||||
Changes in assets and liabilities, net of effects from acquisitions and divestitures: |
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(Increase)/Decrease in accounts receivable | (2,402) | 774 | (289) | ||||||||||||||
Increase in inventories | (1,248) | (265) | (277) | ||||||||||||||
Increase in accounts payable and accrued liabilities | 2,437 | 5,141 | 4,060 | ||||||||||||||
Increase in other current and non-current assets | (1,964) | (3,704) | (1,054) | ||||||||||||||
(Decrease)/Increase in other current and non-current liabilities | (1,061) | 744 | 1,425 | ||||||||||||||
Net cash flows from operating activities | 23,410 | 23,536 | 23,416 | ||||||||||||||
Cash flows from investing activities |
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Additions to property, plant and equipment | (3,652) | (3,347) | (3,498) | ||||||||||||||
Proceeds from the disposal of assets/businesses, net | 711 | 305 | 3,265 | ||||||||||||||
Acquisitions, net of cash acquired (Note 18) | (60) | (7,323) | (5,810) | ||||||||||||||
Purchases of investments | (30,394) | (21,089) | (3,920) | ||||||||||||||
Sales of investments | 25,006 | 12,137 | 3,387 | ||||||||||||||
Credit support agreements activity, net | 214 | (987) | 338 | ||||||||||||||
Other (primarily licenses and milestones) | (508) | (521) | 44 | ||||||||||||||
Net cash used by investing activities | (8,683) | (20,825) | (6,194) | ||||||||||||||
Cash flows from financing activities |
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Dividends to shareholders | (11,032) | (10,481) | (9,917) | ||||||||||||||
Repurchase of common stock | (3,456) | (3,221) | (6,746) | ||||||||||||||
Proceeds from short-term debt | 1,997 | 3,391 | 39 | ||||||||||||||
Repayment of short-term debt | (1,190) | (2,663) | (100) | ||||||||||||||
Proceeds from long-term debt, net of issuance costs | 5 | 7,431 | 3 | ||||||||||||||
Repayment of long-term debt | (1,802) | (1,064) | (2,823) | ||||||||||||||
Proceeds from the exercise of stock options/employee withholding tax on stock awards, net | 1,036 | 1,114 | 954 | ||||||||||||||
Credit support agreements activity, net | 281 | (333) | 100 | ||||||||||||||
Other | 114 | (294) | 475 | ||||||||||||||
Net cash used by financing activities | (14,047) | (6,120) | (18,015) | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (178) | 89 | (9) | ||||||||||||||
Increase/(Decrease) in cash and cash equivalents | 502 | (3,320) | (802) | ||||||||||||||
Cash and cash equivalents, beginning of year (Note 1) | 13,985 | 17,305 | 18,107 | ||||||||||||||
Cash and cash equivalents, end of year (Note 1) | $ | 14,487 | 13,985 | 17,305 | |||||||||||||
Supplemental cash flow data |
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Cash paid during the year for: |
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Interest | $ | 990 | 904 | 995 | |||||||||||||
Interest, net of amount capitalized | 941 | 841 | 925 | ||||||||||||||
Income taxes | 4,768 | 4,619 | 4,191 |
Supplemental schedule of non-cash investing and financing activities |
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Treasury stock issued for employee compensation and stock option plans, net of cash proceeds/ employee withholding tax on stock awards | $ | 1,811 | 1,937 | 1,736 | |||||
Conversion of debt | — | 27 | 1 | ||||||
Acquisitions |
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Fair value of assets acquired | $ | 61 | 7,755 | 7,228 | |||||
Fair value of liabilities assumed and noncontrolling interests | (1) | (432) | (1,418) | ||||||
Net cash paid for acquisitions (Note 18) | $ | 60 | 7,323 | 5,810 |