Johnson & Johnson - Index

Johnson & Johnson - report - Index

14. Cash, Cash Equivalents and Marketable Securities
December 30, 2007 December 31, 2006
____________________________________________ ____________________________________________
Amortized Unrealized Estimated Amortized Unrealized Estimated
(Dollars in Millions) Cost Gains/(Losses) Fair Value Cost Gains/(Losses) Fair Value
Current Investments
Cash $2,978 — 2,978 1,909 — 1,909
Government securities
and obligations 2,722 1 2,723 — — —
Corporate debt securities 1,805 3 1,808 — — —
Money market funds 407 — 407 1,116 — 1,116
Time deposits 1,403 — 1,403 1,059 — 1,059
Total cash, cash equivalents and current marketable securities $9,315 4 9,319 4,084 — 4,084
Non-Current Investments
Marketable securities $ 2 — 2 16 — 16
15. Financial Instruments
The Company follows the provisions of SFAS No. 133 requiring
that all derivative instruments be recorded on the balance sheet
at fair value.
As of December 30, 2007, the balance of deferred net losses
on derivatives included in accumulated other comprehensive
income was $45 million after-tax. For additional information, see
Note 12. The Company expects that substantially all of this amount
will be reclassified into earnings over the next 12 months as a result
of transactions that are expected to occur over that period. The maximum
length of time over which the Company is hedging transaction
exposure is 18 months. The amount ultimately realized in earnings
will differ as foreign exchange rates change. Realized gains and
losses are ultimately determined by actual exchange rates at maturity
of the derivative. Derivative gains/(losses), initially reported as a
component of other comprehensive income, are reclassified to earnings
in the period when the forecasted transactions affect earnings.
For the years ended December 30, 2007, December 31, 2006
and January 1, 2006, the net impact of hedge ineffectiveness, transactions
not qualifying for hedge accounting and discontinuance of
hedges, to the Company’s financial statements was insignificant.
Refer to Note 12 for disclosures of movements in Accumulated
Other Comprehensive Income.
CONCENTRATION OF CREDIT RISK
The Company invests its excess cash in both deposits with major
banks throughout the world and other high-quality money market
instruments. The Company has a policy of making investments
only with commercial institutions that have at least an A
(or equivalent) credit rating. On average these investments
mature within six months, and the Company has not incurred
any related losses.
16. Savings Plan
The Company has voluntary 401(k) savings plans designed to
enhance the existing retirement programs covering eligible
employees. The Company matches a percentage of each
employee’s contributions consistent with the provisions of the
plan for which he/she is eligible. Total Company matching contributions
to the plans were $169 million in 2007, $158 million in
2006 and $148 million in 2005.
17. Mergers, Acquisitions and Divestitures
Certain businesses were acquired for $1,388 million in cash and
$232 million of liabilities assumed during 2007. These acquisitions
were accounted for by the purchase method and, accordingly,
results of operations have been included in the financial
statements from their respective dates of acquisition.
The 2007 acquisitions included: Conor Medsystems, Inc., a
cardiovascular device company, with new drug delivery technology;
Robert Reid, Inc., a Japanese orthopedic product distributor
and Maya’s Mom, Inc., a social media company.
The excess of purchase price over the estimated fair value
of tangible assets acquired amounted to $636 million and has
been assigned to identifiable intangible assets, with any residual
recorded to goodwill. Approximately $807 million has been
identified as the value of IPR&D associated with the acquisition
of Conor Medsystems, Inc.
The IPR&D charge related to the acquisition of Conor
Medsystems, Inc. was $807 million and is associated with
research related to the discovery and application of the stent
technology. The value of the IPR&D was calculated using cash
flow projections discounted for the risk inherent in such projects.
The discount rate applied was 19%.
Certain businesses were acquired for $18.0 billion in cash
and $1.3 billion of liabilities assumed during 2006. These acquisitions
were accounted for by the purchase method and, accordingly,
results of operations have been included in the financial
statements from their respective dates of acquisition except as
noted below.
On December 20, 2006, the Company completed the
acquisition of the Consumer Healthcare business of Pfizer Inc. for
a purchase price of $16.6 billion in cash. The operating results of
the Consumer Healthcare business of Pfizer Inc. were reported in
the Company’s financial statements beginning in 2007, as 2006
results subsequent to the acquisition date were not significant.
In order to obtain regulatory approval of the transaction, the
Company agreed to divest certain overlapping businesses. The
Company completed the divestiture of the ZANTAC® product
on December 20, 2006 and the divestitures of KAOPECTATE®,
UNISOM®, CORTIZONE®, BALMEX® and ACT® products on
January 2, 2007.
The following table provides pro forma results of operations
for the fiscal year ended January 1, 2006 and the fiscal year
ended December 31, 2006, as if the Consumer Healthcare business
of Pfizer Inc. had been acquired as of the beginning of each
64 JOHNSON & JOHNSON 2007 ANNUAL REPORT