The purpose of this report is to provide analysis of SEC 10K for Johnson & Johnson (JNJ). JNJ was incorporated in the State of New Jersey in 1887. JNJ and its subsidiaries have approximately 117,900 employees worldwide engaged in the research and development, manufacture and sale of a broad range of 250 operating companies conduction business in all countries of the world. JNJ’s primary focus has been on products related to human health and well-being. Most of Johnson and Johnson’s success can be attributed to its emphasis on decentralized management, which allows for greater focus as the company blankets 250 countries across the world (Johnson and Johnson – Strategic Planning). For the last 120 years, Johnson and Johnson have been on the forefront of innovation for each of its three divisions, but it must continue to develop and grow in order to maintain its position for the future. This report will investigate, assess, and put forth recommendations to ensure continued success for Johnson and Johnson. Income
Income statement presents information on the financial results of a company’s business activities over a period of time. The income statement communicates how much revenue the company generated during a period and what cost it incurred in connection with generating that revenue. Net Sales for 2013 was $68,894 compared to 2012 at $68,974. Not much of sales production for 2013. Net earnings has been increasing since 2011, with earnings at $10,513 in 2012 to $13,831 in 2013. Cost of Goods Sold was $22, 342 and Gross Profit came in at $48,970. Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. Johnson & Johnson’s gross profit margin deteriorated from 2011 to 2012 but then improved from 67.7% in 2012 to 67.6% in 2013 not reaching in 2011 level of 68.69%. Net profit margin improved from 2012 at 20.1%. Year over year, Johnson & Johnson has been able to grow revenues from $67.2B to $71.3B. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold, SGA expenses and income tax expenses. All of these improvements led to a bottom line growth from $10.9B to $13.8B stated by Bloomberg Businessweek (2014). Balance Sheet
This company’s debt to total capital ratio, at 19.71%, is in-line with the Pharmaceuticals industry’s norm. Additionally, there are enough liquid assets to satisfy current obligations. Cash collection is average with Accounts Receivable are typical for the industry, although improving, with 58.76 days’ worth of sales outstanding. Stock Market
Compared to its closing price of one year ago, JNJ’s share price has jumped by 30.39%, exceeding the performance of the broader market during that same time frame. Regarding the stock’s future course, although almost any stock can fall in a broad market decline, JNJ should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year. Net operating cash flow has increased to $5,947.00 million or 32.24% when compared to the same quarter last year. In addition, JOHNSON & JOHNSON has also modestly surpassed the industry average cash flow growth rate of 31.10%.
Statement of Stockholder’s Equity
The statement of financial position provides creditors, investors, and analysts with information on company’s resources (assets) and its sources of capital (its equity and liabilities). It normally also provides information about the future earnings capacity of a company’s assets as well as an indication of cash flows that may come from receivables and inventories. Liabilities represents obligations of a company arising from past events, the settlement of which is expected to result in an outflow of economic benefits from the entity.
JNJ’s contributed capital stock is as follows:
Preferred stock – without par value (authorized and unissued 2,000,000 shares) $0 Common Stock – par value $1.00 per share; authorized 4,320,000,000 shares; issued 3,119,843,000 shares) $3,120
Other accounts reported in the Stockholder’s Equity section is as follows: Accumulated other comprehensive income $2,860
Retained earning $89,493
Less: common stock held in treasury, at cost (299,215,000 shares and 341,354,000 shares)
Retained earnings, beginning balance $89,493
+ Net Income 3,519 – Dividends (7,286) = Retained earnings, ending balance $85,726
Return on stockholder’s equity
Net Income/Total Stockholder’s Equity =
$13,831/$75,053 = 18.42%
Earnings per share
Net Income/Outstanding Shares =
$13,831/64.70 = $0.12
Statement of Cash Flows
The cash flow statement provides information about a company’s cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on the company’s statement of financial position. The cash flow statement consists of three parts: cash flows provided by operating activities of $13,831, cash flows provided by investing activities, and cash flows provided by financing activities effect of exchange rate changes on cash and cash equivalents of ($204) According to many investors, free cash flow is the best indication of a company’s ability to generate cash.
Stock Analysis on Net. (2014). Statement of Cash Flows. Retrieved from http://www.stock-analysis-on.net/NYSE/Company/Johnson-Johnson/Financial-Statement/Statement-of-Cash-Flows Meola, A. (2014). Why Johnson & Johnson (JNJ) Is Down Today. The Street. Retrieved 21 January 2014, from http://www.thestreet.com/story/12254179/1/why- johnson-johnson-jnj-is-down-today.
Csimarket.com. (2014). Johnson & Johnson (JNJ) Gross Margin starting from second quarter 2014 to second quarter 2013, Profitability Trends and Ranking, Fundamental Ratios – CSIMarket. Retrieved 10 October 2014, from http://csimarket.com/stocks/singleProfitabilityRatios.php?code=JNJ&gro Stock Analysis on Net. (2014). Johnson & Johnson (JNJ) | Profitability. Retrieved 10 October 2014, from http://www.stock-analysis-on.net/NYSE/Company/Johnson-Johnson/Ratios/Profitability Businessweek.com. (2014). JOHNSON & JOHNSON (JNJ:New York): Financial Statements – Businessweek. Retrieved 10 October 2014, from http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=JNJ&dataset=balanceSheet&period=A¤cy=native Sec.gov. (2014). Ex 13 – Form 10-K 2013 1229. Retrieved 10 October 2014, from http://www.sec.gov/Archives/edgar/data/200406/000020040614000033/ex13-form10xk20131229.htm#sE10B2FDDDC572964E7857481EA681571