Johnson and Johnson SEC 10-K Report

Posted: August 27th, 2021

Johnson and Johnson SEC 10-K Report

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Johnson and Johnson SEC 10-K Report

Johnson & Johnson is a multinational corporation based in the United States. The company is involved in the development and selling of pharmaceutical and medical devices. The company stocks are listed on the Dow Jones Industrial Average, ranked number 37, according to the 2018 Fortune 500 listings by revenue base. The SEC 10-K report identifies the company as Johnson & Johnson and its subsidiaries (10-k. (n.d.). SEC.gov). The corporation has over 127,100 employees who are engaged in running the company’s activities worldwide for research, development, manufacturing, and selling of a variety of health products to its target customers (10-k. (n.d.). SEC.gov). It is a holding company with over 50 subsidiary companies spread globally. The company was also first incorporated in the State of New Jersey in 1887 (10-k. (n.d.). SEC.gov). Hence, the purpose of this report is to perform an analysis of the company’s financial capacity with a focus on its ability to implement investment programs andacquire creditto finance its activities. The report also assesses the ability of the company to retain its employees.  Therefore, these objectives will be achieved by analyzing the company financial ratios according to the SEC 10-K financial statements for the ten years from 2005 to 2015.

Analysis of Financial Ratios

Ratio Analysis

The investment ratios used in assessing the company investment capability include the working capital ratio, return on investment (ROI), and equity return. Table 1 below presents an assessment report on the three ratios.

Table 1 Analysis of Investment and Credit Worthiness

Return on Investment
Description	2018	2017
Return on Investment (Net Income)	$                   15,297.00	$    1,300.00
Cost of Investment (Total Assets)	$                 152,954.00	$157,303.00
Return on Investment Ratio	10.00%	0.83%
Working Capital
Description	2018	2017
Total Current Assets	$                 152,954.00	$157,303.00
Total Current Liabilities	$                   93,202.00	$  97,143.00
Working Capital Ratio	164.11%	161.93%
Return on Equity
Description	2018	2017
Net Income	$                   15,297.00	$    1,300.00
Shareholder’s Equity	$ 59,752	$ 60,160
Return on Equity Ratio	25.60%	2.16%

Table 1 above is an analysis of the financial statement for two years from 2017 to 2018. The data is obtained from the SEC 10-K report 2018 provided in the excel worksheet and screenshots under Appendix 1. The return on investment ratio was used to measure the return from the company’s resources in its assets. As illustrated in Table 1, its investment performance was tremendous, as demonstrated by an increase from 0.83% in 2017 to 10.0% in 2018 (10-k. (n.d.). SEC.gov). This implies that most of the company investment projects were profitable. Since the company primarily relies on the production, manufacturing, and selling of customer packaged health products, the trend demonstrates that it has improved on its pricing policy and equipment investment. Thus, this strengthens the company’s ability to improve its returns across the period.

Further, the working capital analysis was performed to assess the companies’ current assets’ liquidity against its current liabilities. As illustrated in Table 2, the working capital ratio improved from 161.93% to 164.11%, implying that its assets and liquidity level is sufficient to sustain its operations. Therefore, the increase shows that the company does not require external support to implement its investment products. It is prudent to channel excess liquidity into long-term investments.

Lastly, the equity ratio return was utilized to examine how profitable the company is against its equity investments. The aim was to assess the company’s ability to utilize its equity in generating profits in its business activities. As illustrated in Table 1, the company reported an increase in the returns to equity ratio from 2.16% in 2017 to 25.60% in 2018. Thus, across this period, the ratio shows that the company has improved its ability to utilize shareholder’s equity to generate profits.

Conclusion

An examination of the SEC 10-K reports the recent financial statements for two years from 2017 to 2018 shows that the company is performing well in terms of investment and profitability levels. The company has a steady liquidity flow, efficient management of assets, and proper utilization of shareholder’s equity. Besides, the company has maintained over 127,000 employees and operational activities across its subsidiary companies distributed globally over the period. Therefore, based on its current situation, I would recommend that the company does not require credit support to sustain its liabilities since it has a steady flow of liquidity to meet its obligations. Further, the excess liquidity, especially as realized between 2017 to 2018, should be invested in long-term projects to generate extra resources for the company. Equally, I would recommend any interested party to invest in the company since its efficient management of shareholder’s equity will guarantee any investor a steady return. Finally, the company has a good reputation regarding the employer-employee relationship. Likewise, its stability indicates the potential to assure employment stability for its employees. Hence, it is worth to remain an employee of the company.

References

10-k. (n.d.). SEC.gov. https://www.sec.gov/Archives/edgar/data/200406/000020040616000071/form10-k20160103.htm

2018 JNJ Johnson & Johnson, Excel financial data. (n.d.). Docoh | SEC Filings Search | Analyze & Compare Company Reports. https://docoh.com/filing/200406/0000200406-19-000009/JNJ-10K-2018FY/file/140/data

Appendices

Appendix 1: Consolidated Balance Sheet

Consolidated Balance Sheets – USD ($) $ in Millions	Dec. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents (Notes 1 and 2)	$ 18,107	$ 17,824
Marketable securities (Notes 1 and 2)	1,580	472
Accounts receivable trade, fewer allowances for doubtful accounts $248 (2017, $291)	14,098	13,490
Inventories (Notes 1 and 3)	8,599	8,765
Prepaid expenses and other receivables	2,699	2,537
Assets held for sale (Note 20)	950	0
Total current assets	46,033	43,088
Property, plant, and equipment, net (Notes 1 and 4)	17,035	17,005
Intangible assets, net (Notes 1 and 5)	47,611	53,228
Goodwill (Notes 1 and 5)	30,453	31,906
Deferred taxes on income (Note 8)	7,640	7,105
Other assets	4,182	4,971
Total assets	152,954	157,303
Current liabilities:
Loans and notes payable (Note 7)	2,796	3,906
Accounts payable	7,537	7,310
Accrued liabilities	7,601	7,304
Accrued rebates, returns, and promotions	9,380	7,210
Accrued compensation and employee-related obligations	3,098	2,953
Accrued taxes on income (Note 8)	818	1,854
Total current liabilities	31,230	30,537
Long-term debt (Note 7)	27,684	30,675
Deferred taxes on income (Note 8)	7,506	8,368
Employee related obligations (Notes 9 and 10)	9,951	10,074
Long-term taxes payable (Note 8)	8,242	8,472
Other liabilities	8,589	9,017
Total liabilities	93,202	97,143
Shareholders’ equity:
Preferred stock — without par value (authorized and unissued 2,000,000 shares)	0	0
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)	-15,222	-13,199
Retained earnings	106,216	101,793
Stockholders’ Equity before Treasury Stock	94,114	91,714
Less: common stock held in treasury, at cost (Note 12) (457,519,000 shares and 437,318,000 shares)	34,362	31,554
Total shareholders’ equity	59,752	60,160
Total liabilities and shareholders’ equity	$ 152,954	$ 157,303

Source: 2018 JNJ Johnson & Johnson Excel financial data. https://docoh.com/filing/200406/0000200406-19-000009/JNJ-10K-2018FY/file/140/data

Appendix 2: Consolidated Income Statement

Consolidated Statements of Earnings – USD ($) shares in Millions, $ in Millions	12 Months Ended
Dec. 30, 2018	Dec. 31, 2017	Jan. 01, 2017
Income Statement [Abstract]
Sales to customers	$ 81,581	$ 76,450	$ 71,890
Cost of products sold	27,091	25,439	21,789
Gross profit	54,490	51,011	50,101
Selling, marketing, and administrative expenses	22,540	21,520	20,067
Research and development expense	10,775	10,594	9,143
In-process research and development	1,126	408	29
Interest income	-611	-385	-368
Interest expense, net of portion capitalized (Note 4)	1,005	934	726
Other (income) expense, net	1,405	-42	210
Restructuring (Note 22)	251	309	491
Earnings before provision for taxes on income	17,999	17,673	19,803
Provision for taxes on income (Note 8)	2,702	16,373	3,263
Net earnings	$ 15,297	$ 1,300	$ 16,540
Net earnings per share (Notes 1 and 15)
Basic (in dollars per share)	$ 5.70	$ 0.48	$ 6.04
Diluted (in dollars per share)	$ 5.61	$ 0.47	$ 5.93
Average shares outstanding (Notes 1 and 15)
Basic (in shares)	2,681.5	2,692	2,737.3
Diluted (in shares)	2,728.7	2,745.3	2,788.9

Source: 2018 JNJ Johnson & Johnson, Excel financial data. https://docoh.com/filing/200406/0000200406-19-000009/JNJ-10K-2018FY/file/140/data