Lê Thanh Nhàn - SB01267 - Individual Assignment FIN202

8/12/2019 L Thanh Nhn - SB01267 - Individual Assignment FIN202

1/11

Johnson & johnson company

Financial statement

analysisIndividual Assignment Corporate Finance

L Thanh Nhn

Class: SB0803

Student number: SB01267

FPT University

8/3/2014


2/11

1 Financial statement analysis

I. Introduction- Company name: Johnson & Johnson

- Brand name:

- Slogan: The Family Company

- Main Office:

One Johnson & Johnson Plaza

New Brunswick, New Jersey 08933

(732) 524-0400

- Website: www.jnj.com

- History:

Johnson & Johnson Corporation was founded in 1886 by Robert Wood Johnson, an American

entrepreneur and Industrialist. Inspired by the developing scientific understanding of proper of

sanitation, Johnson aimed to make antiseptic surgical procedures easier. Through numerous targeted

acquisitions and research over the next century, the company steadily diversified its business to

encompass pharmaceutical, medical devices, and consumer packaged goods.

Johnson & Johnson (NYSE:JNJ) is the world's second largest and most broadly based manufacturer of

health care products, with 2013 annual sales of $71,312,000, a increase of 6% from 2012. The companyholds a significant share of the consumer and pharmaceutical

markets, and is the world's largest developer and manufacturer of

medical treatment and diagnostic devices.

Corporate chairmanship

Robert Wood Johnson I 18871910

James Wood Johnson 19101932

Robert Wood Johnson II 19321963

Philip B. Hofmann 19631973

Richard B. Sellars 19731976

James E. Burke 19761989

Ralph S. Larsen 19892002

William C. Weldon 20022012

Alex Gorsky 2012Present

Robert Wood Johnson
http://www.jnj.com/http://www.jnj.com/http://www.jnj.com/


3/11


- Corporate governance

Current members of the board of directors of Johnson & Johnson are:

Mary Sue Coleman, James G. Cullen, Dominic Caruso, Michael M.E. Johns, Ann Dibble Jordan, Arnold G.

Langbo, Susan L. Lindquist, Leo F. Mullin, William Perez, Christine A. Poon, Steven S. Reinemund, David

Satcher, and William C. Weldon.

- Business Description

The Companys operating companies are organized into three business segments: Consumer,

Pharmaceutical and Medical Devices and Diagnostics.

- Major products and services

Consumer

offers a range of products used in the baby care, skin care, oral care, wound care, and women s healthfields, as well as nutritionals, over-the-counter pharmaceutical products, and wellness and prevention

platforms under the JOHNSONS, AVEENO, CLEAN & CLEAR, DABAO, JOHNSONS Adult, LUBRIDERM,

NEUTROGENA, RoC, VENDOME, LISTERINE, BAND-AID, NEOSPORIN, STAYFREE, CAREFREE, o.b. tampon,

SPLENDA, TYLENOL, SUDAFED, ZYRTEC, MOTRIN IB, and PEPCID brand names

Medical Devices & Diagnostics

offers various products to treat cardiovascular disease; orthopaedic and neurological products; blood

glucose monitoring and insulin delivery products; general surgery, biosurgical, and energy products;

professional diagnostic products; infection prevention products; and disposable contact lense

The Pharmaceutical:

provides various products in the areas of anti-infective, antipsychotic, cardiovascular, contraceptive,

gastrointestinal, hematology, immunology, infectious diseases, metabolic, neurology, oncology, pain

management, thrombosis, and vaccines.

- Important projects andcompetitors:

The consumer health market size is increasing as consumers are taking greater responsibility and

interest in their own health. Johnson & Johnson owns highly successful brands such as Tylenol, Band-Aid,

and Neutrogena. The acquisition of Pfizer's Consumer Healthcare division in 2006 and addition of brandssuch as Listerine, Lubriderm, Visine, and Neosporin further solidified Johnson & Johnson dominance in

consumer health care. However the company had been plagued by a series of product-quality problems,

mainly at its McNeil Consumer Healthcare unit, which makes over-the-counter medicines. The company

has recalled Tylenol, Motrin, Benadryl and other products for problems ranging from musty odors that

caused nausea in consumers, to excessive concentrations of active ingredients. The problems with

manufacturing have hurt the company's bottom line. In 2010, the company suffered significant losses in


4/11


this segment with a decrease of 7.7% in revenue over the previous year. However, recently 3-years, JNJ

has changed significantly. Comparing the results to its competitors, Johnson & Johnson reported Total

Revenue increase in the 4 quarter by 4.54 % year on year, while most of its competitors have

experienced contraction in total revenues by -4.73 %, recorded in the same quarter.

II. Analysis financial Statement

1. Finance statement

1.1Income statement

View: Annual Data All numbers in thousands

Period Ending Dec 31, 2013 Dec 31, 2012 Dec 1, 2011

Total Revenue 71,312,000 67,224,000 65,030,000

Cost of Revenue 22,342,000 21,658,000 20,360,000

Gross Profit 48,970,000 45,566,000 44,670,000

Operating Expenses

Research Development 8,183,000 7,665,000 7,548,000

Selling General and Administrative 21,830,000 20,869,000 20,969,000

Non Recurring 580,000 1,163,000 569,000

Others - - -

Total Operating Expenses - - -

Operating Income or Loss 18,377,000 15,869,000 15,584,000

Income from Continuing Operations

Total Other Income/Expenses Net (2,424,000) (1,562,000) (2,652,000)

Earnings Before Interest And Taxes 15,953,000 14,307,000 12,932,000

Interest Expense 482,000 532,000 571,000

Income Before Tax 15,471,000 13,775,000 12,361,000

Income Tax Expense 1,640,000 3,261,000 2,689,000


5/11


Minority Interest - 339,000 -

Net Income From Continuing Ops 13,831,000 10,853,000 9,672,000

Non-recurring Events

Discontinued Operations - - -

Extraordinary Items - - -

Effect Of Accounting Changes - - -

Other Items - - -

Net Income 13,831,000 10,853,000 9,672,000

Preferred Stock And Other Adjustments - - -

Net Income Applicable To Common Shares 13,831,000 10,853,000 9,672,000

1.2 Balance sheet

View: Annual Data All numbers in thousands

Period Ending Dec 31, 2013 Dec 31, 2012 Dec 31, 2011

Assets

Current Assets

Cash And Cash Equivalents 20,927,000 14,911,000 24,542,000

Short Term Investments 8,279,000 6,178,000 7,719,000

Net Receivables 15,320,000 14,448,000 13,137,000

Inventory 7,878,000 7,495,000 6,285,000

Other Current Assets 4,003,000 3,084,000 2,633,000

Total Current Assets 56,407,000 46,116,000 54,316,000

Long Term Investments - - -

Property Plant and Equipment 16,710,000 16,097,000 14,739,000

Goodwill 22,798,000 22,424,000 16,138,000


6/11


Intangible Assets 27,947,000 28,752,000 18,138,000

Accumulated Amortization - - -

Other Assets 4,949,000 3,417,000 3,773,000

Deferred Long Term Asset Charges 3,872,000 4,541,000 6,540,000

Total Assets 132,683,000 121,347,000 113,644,000

Liabilities

Current Liabilities

Accounts Payable 20,823,000 19,586,000 16,153,000

Short/Current Long Term Debt 4,852,000 4,676,000 6,658,000

Other Current Liabilities - - -

Total Current Liabilities 25,675,000 24,262,000 22,811,000

Long Term Debt13,328

,00011,489,000 12,969,000

Other Liabilities 15,638,000 17,634,000 18,984,000

Deferred Long Term Liability Charges 3,989,000 3,136,000 1,800,000

Minority Interest - - -

Negative Goodwill - - -

Total Liabilities 58,630,000 56,521,000 56,564,000

Stockholders' Equity

Misc Stocks Options Warrants - - -

Redeemable Preferred Stock - - -

Preferred Stock - - -

Common Stock 3,120,000 3,120,000 3,120,000

Retained Earnings 89,493,000 85,992,000 81,251,000

Treasury Stock (15,700,000) (18,476,000) (21,659,000)

Capital Surplus - - -

Other Stockholder Equity (2,860,000) (5,810,000) (5,632,000)


7/11


Total Stockholder Equity 74,053,000 64,826,000 57,080,000

Net Tangible Assets 23,308,000 13,650,000 22,804,000

2.Analysic

2.1Common-size:

Johnson & Johnson, Common-Size Consolidated Income Statement

12 months ended Dec 31, 2013 Dec 31, 2012 Dec 31, 2011

Sales to customers 100.00% 100.00% 100.00%

Cost of products sold -31.33% -32.22% -31.31%

Gross profit 68.67% 67.78% 68.69%Operating earnings 25.77% 23.61% 23.96%

Earnings before provision for taxes on income 21.69% 20.49% 19.01%

Net earnings 19.40% 15.64% 14.87%

Net earnings attributable to J&J 19.40% 16.14% 14.87%

The common-size of income statement provides information about JNJs efficiency and profitability.

- Compare with 3 years, we can see that proportion of all factor almost not change.

- Net earnings increased 4.53% from 2011 to 2013.

- Gross Profit decreased slightly during three years.

Johnson & Johnson, Common-Size Consolidated Statement of Financial Position, Asset

Dec 31, 2013 Dec 31, 2012 Dec 31, 2011

Current assets 42.51% 38.00% 47.79%

Non-current assets 57.49% 62.00% 52.21%

Total assets 100.00% 100.00% 100.00%

Johnson & Johnson, Common-Size Consolidated Statement of Financial Position, Liabilitiesand Stockholders' Equity

Dec 29, 2013 Dec 30, 2012 Dec 31, 2011

Current liabilities 19.35% 19.99% 20.07%

Non-current liabilities 24.84% 26.58% 29.70%


8/11


Total liabilities 44.19% 46.58% 49.77%

Shareholders equity 55.81% 53.42% 50.23%

Total liabilities and shareholders equity 100.00% 100.00% 100.00%

- Common- size balance sheet provides information of firms asset, liabilities and equity. Below iscompetition of three years with percentage change.

- First, JNJ have steady growth and stability. Compare with 2011, total asset rise 6.8% (2012) and

continue increase 16.7% in 2013 compare with 2011. We can see that total asset increased

steadily during three years.

Unit: All numbers in thousands

Total asset 2013 2012 2011

132,683,000 121,347,000 113,644,000

% change 116.7% 106.8%

- Second, total liability decreased moderately from 2011 to 2013 by 5.58%. In contrast,

Shareholder equity increased gradually from 2011 to 2013 by 5.58%.

- Compare with peer group and Health care industry:

We can see that, JNJ Co. had a large portion of Health care industry in all market Capital, Revenue and net

income. Compare with peer group and Industry, JNJ Company have highest EBITDA with 23.06B, higher than

industry 12.1B.


9/11


2.2Financial ratio

Liquidity ratios Dec 31, 2013 Dec 31, 2012 Dec 31, 2011

Current ratio 2.20 1.90 2.38

Quick ratio 1.89 1.59 2.10

Cash ratio 0.81 0.61 1.08

Efficiency ratioDays Sales Outstanding 58.92 59.43 57.12

Days Inventory 125.57 116.12 104.54

Payables Period 98.81 97.38 101.72

Account receivables turnover 6.2 6.14 6.39

Inventory Turnover 2.91 3.14 3.49

Asset Turnover 0.56 0.57 0.60

Leverage ratio

Debt to Equity 0.18 0.18 0.23Interest coverage 33.1 26.89 22.65

Profit ratio

Net profit margin 19.4% 16.14% 14.87%

ROA 10.86% 9.20% 8.92%

ROE 19.92% 17.81% 17.02%

Market value ratio

Earnings Per Share USD 4.81 3.86 3.49

Book Value Per Share USD 26.25 23.33 20.9

- Liquidity ratios:

The current ratio: JNJs current ratios were high though it decrease year by year from 0.48 in 2012 and

0.18 in 2013 compare with 2011, that is not a negative sign. It shows that the company has high liquidity,

and it will be easier for JNJ to pay short-term liabilities, increased current ratio from 2012 to 2013 is a

good sign, it mean JNJ have adjust timely to make their company have safe development.

The quick ratio: this ratio also high and decrease like current ratio.

Cash ratio quite high (1.08 in 2011, 0.81 in 2013) may be JNJ will invest a new range and open their

market share.

- Efficiency ratios:

The inventory turnover was high, but decrease year by year from 3.49 in 2011 to 2.91 in 2013. It may be

a good thing because it means that JNJ expanded warehouse, import more goods into 1 time, reduced

transportation costs.


10/11


The Account receivable turnover was decreased during 3 years but quite high. This meant the company

can collect money faster, extended trading term, accept credit sales to customers in order to sell more

products.

- Leverage ratios :

Debt to equity remain stable between 2012 and 2013. It was low and decreased (from 0.23 in 2011 to

0.18 in 2012 and 2013) so JNJ had adjust leverage financial, issuance of additional shares

Payable period was high so JNJ delayed pay money for supplier, equity multiplier was high so it mean

the company used efficient leverage financial.

The cash coverage increased sharply (from 22.65 in 2011 to 33.1 in 2013 ), so the ability of paying

interest is good over 3 years.

- Profitable ratio :

All of these ratios have trend of rising, it means that the profit that JNJ can get is higher and higher. Thatshowed JNJ Co. have investment efficiently.

- Market value ratio:

Both Earnings per share and Book value per share increase rapidly it mean that JNJ have strong growth.

So investors willing to invest and buy stocks of the JNJs company.

2.3Dupont

ROE = Net profit margin xTotal asset

turnover Equity

Multiplier

Dec 29, 2013 19.92% 0.194 0.56 1.79

Dec 30, 2012 17.81% 0.1614 0.57 1.87

Dec 31, 2011 17.02% 0.1487 0.60 1.99

- We can see in the table:

The ROA increased during 3 years, net profit margin and asset turnover are too.

The ROE increased during 3 years, ROA was too while equity multiplier decreased from 2011 to 2013

(1.99 to 1.79P). So ROA is the main factor to drive ROE.

- ROE of industry = 15.3% -> ROE of JNJ larger than ROE of industry. Because compare with the

competitors, JNJ have large market share and have many strategies make their company have powerful

development.


11/11


2.4 Statement of cash flow

JOHNSON & JOHNSON (JNJ) Statement of CASH FLOW

Fiscal year ends in December. USD in millions except per share data.

2011-12 2012-12 2013-12

Net cash provided by operating activities 14298 15396 17414

Net cash used for investing activities -4612 -4510 -5103

Net cash provided by (used for) financing activities -4452 -20562 -6091

As we can be seen from the table,

- Net cash flow from operating activities increased sharply from 2011 to 2013 ($14298millions to 17414

millions). Its a good point because positive cash flow that results from the company selling off all its

assets, or because it has recently issued new stocks or bonds, results in one-time gains and is not an

indicator of financial health.

- Net cash used for investing activities had growth negatively with $ -4612m in 2011, $ - 4510m in 2012

and $-5130m in 2013. However, the company have generate positive cash flow from its business

operations, the negative overall cash flow may be a result of heavy investment expenditures, which is

not necessarily a bad thing.

- Net cash flow from finance activities had growth negatively with $-4452m in 2011, decreased rapidly $-

20562 in 2012 and $-6091 in 2013. The reason why net cash flow finance activities in 2012 decreased

dramatically because in 2012, JNJ had change their CEO from William Weldon to Alex Gorsky. But in

2011, William had sold more than 1million stock JNJ. So in 2012, JNJ Co. must spend cash to repurchase

previously issued stock, to pay down debt, to pay interest on debt and to pay dividends to shareholders.

With this information from the Statement of cash flow, we can see JNJ Co. have a strength financial

health to activity and development. With a positive net cash flow from operating activities, JNJ will have

enough money to funding for projects in the future

III. ConclusionJohnson and Johnson is in a defensive growth sector for investors. That is to say that the equities market

of its industry, the healthcare, consistently show stable and predictable earnings (therefore reliable

dividend payments) both in good and bad times, although they do not show spectacular growth.

Johnson and Johnson is a high-quality company that has healthy balance sheets and produces robustand consistent cash flows - which means that, unlike many small companies, they don't depend on

access to shaky credit markets for capital. So despite the unfavorable currency exchange rates and the

intensified pressure from both generic drugs and competitors' new products, Johnson and Johnsons

overall performance still keep pace with the previous years and growth in the past 3 years.

Lê Thanh Nhàn - SB01267 - Individual Assignment FIN202

Documents

Transcript of Lê Thanh Nhàn - SB01267 - Individual Assignment FIN202