Johnson & Johnson - Index

Johnson & Johnson - report - Index

CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The Company has contractual obligations, primarily lease, debt
obligations and unfunded retirement plans, with no other significant
obligations. To satisfy these obligations, the Company will
use cash from operations. The following table summarizes the
Company’s contractual obligations and their aggregate maturities
as of December 30, 2007 (see Notes 4, 6 and 13 to the
Audited Consolidated Financial Statements for further details):
Unfunded
Operating Debt Retirement
(Dollars in Millions) Leases Obligations (1) Plans Total
2008 $183 2,463 51 2,697
2009 151 247 55 453
2010 119 5 61 185
2011 94 23 64 181
2012 77 628 69 774
After 2012 113 6,171 416 6,700
Total $737 9,537 716 10,990
(1) Amounts do not include interest expense.
For tax matters, see Note 8.
SHARE REPURCHASE AND DIVIDENDS
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 $10.0 billion of the Company’s Common
Stock. 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 corporate purposes. The
Company intends to fund the share repurchase program through
a combination of available cash and debt. During 2007, the
Company repurchased an aggregate of 55.8 million shares of
Johnson & Johnson common stock under the current repurchase
program at a cost of $3.6 billion. In addition the Company has an
annual program to repurchase shares for use in employee stock
and incentive plans.
The Company increased its dividend in 2007 for the 45th
consecutive year. Cash dividends paid were $1.620 per share
in 2007, compared with dividends of $1.455 per share in 2006
and $1.275 per share in 2005. The dividends were distributed
as follows:
2007 2006 2005
First quarter $0.375 0.330 0.285
Second quarter 0.415 0.375 0.330
Third quarter 0.415 0.375 0.330
Fourth quarter 0.415 0.375 0.330
Total $1.620 1.455 1.275
On January 2, 2008, the Board of Directors declared a regular cash
dividend of $0.415 per share, payable on March 11, 2008, to shareholders
of record as of February 26, 2008. The Company expects to
continue the practice of paying regular cash dividends.
Other Information
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s discussion and analysis of results of operations
and financial condition are based on the Company’s consolidated
financial statements that have been prepared in accordance
with accounting principles generally accepted in the U.S. The
preparation of these financial statements requires that management
make estimates and assumptions that affect the amounts
reported for revenues, expenses, assets, liabilities and other
related disclosures. Actual results may or may not differ from
these estimates. The Company believes that the understanding
of certain key accounting policies and estimates are essential in
achieving more insight into the Company’s operating results and
financial condition. These key accounting policies include revenue
recognition, income taxes, legal and self-insurance contingencies,
valuation of long-lived assets, assumptions used to
determine the amounts recorded for pensions and other
employee benefit plans and accounting for stock options.
Revenue Recognition: The Company recognizes revenue from
product sales when goods are shipped or delivered and title and
risk of loss pass to the customer. Provisions for certain rebates,
sales incentives, trade promotions, coupons, product returns and
discounts to customers are accounted for as reductions in sales
in the same period the related sales are recorded.
Product discounts granted are based on the terms of
arrangements with direct, indirect and other market participants,
as well as market conditions, including prices charged
by competitors. Rebates, the largest being the Medicaid rebate
provision, are estimated based on sales terms, historical experience,
trend analysis and projected market conditions in the various
markets served. The Company evaluates market conditions
for products or groups of products primarily through the analysis
of wholesaler and other third party sell-through and market
research data, as well as internally generated information.
Sales returns are generally estimated and recorded based on historical
sales and returns information. Products that exhibit unusual
sales or return patterns due to dating, competition or other marketing
matters are specifically investigated and analyzed as part of the
accounting for sales return accruals.
Sales returns allowances represent a reserve for products
that may be returned due to expiration, destruction in the field,
or in specific areas, product recall. The returns reserve is based
on historical return trends by product and by market as a percent
to gross sales.
Promotional programs, such as product listing allowances
and cooperative advertising arrangements, are recorded in the
year incurred. Continuing promotional programs include coupons
and volume-based sales incentive programs. The redemption cost
of consumer coupons is based on historical redemption experience
by product and value. Volume-based incentive programs are
derived by estimating sales volumes for the incentive period and
are recorded as products are sold. Promotional arrangements containing
customer acceptance criteria are evaluated to determine
the appropriate amounts to be deferred.
In addition, the Company enters into collaboration arrangements,
which contain multiple revenue generating activities. The
revenue for these arrangements is recognized as each activity is
performed or delivered, based on the relative fair value. Upfront
fees received as part of these arrangements, for which no further
performance obligations exist, are recognized as revenue on the
earlier of receipt of payment or collection is assured. If performance
obligations exist, the Company will defer the upfront fees
and recognize as earned over the obligation period.
44 JOHNSON & JOHNSON 2007 ANNUAL REPORT