EX-99.A.I 2 ex99-a_i.txt FORM 11-K 1 Exhibit 99(a)(i) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 11-K ------------------------------ [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended January 2, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission File Number 1-3215 ------------------------------ JOHNSON & JOHNSON SAVINGS PLAN (Full title of the Plan) JOHNSON & JOHNSON ONE JOHNSON & JOHNSON PLAZA NEW BRUNSWICK, NEW JERSEY 08933 (Name of issuer of the securities held pursuant to the Plan and the address of its principal executive office) 2 Item 4. Financial Statements and Exhibits Report of Independent Accountants Financial Statements: Balance Sheets as of December 31, 1999 and 1998 Statement of Operations and Changes in Plan Equity for the years ended December 31, 1999 and 1998 Notes to Financial Statements Supplemental Schedules: Schedule of Investments at December 31, 1999 Schedule of 5% Reportable Transactions for the year ended December 31, 1999 Consent of PricewaterhouseCoopers LLP, dated June 23, 2000 The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. JOHNSON & JOHNSON SAVINGS PLAN By: /s/ R. J. Darretta --------------------------------- R. J. Darretta Chairman, Pension Committee June 26, 2000 3 JOHNSON & JOHNSON SAVINGS PLAN ------------------ FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 4 JOHNSON & JOHNSON SAVINGS PLAN INDEX Report of Independent Accountants 2 Financial Statements: Statements of Net Assets Available for Benefits with Fund Information as of December 31, 1999 and 1998 3-4 Statements of Changes in Net Assets Available for Benefits with Fund Information for the Years Ended December 31, 1999 and 1998 5-6 Notes to Financial Statements 7-18 Supplemental Schedules: Item 27a - Schedule of Assets Held For Investment Purposes at December 31, 1999 19-20 Item 27d - Schedule of Reportable Transactions for the Year Ended December 31, 1999 21
1 5 REPORT OF INDEPENDENT ACCOUNTANTS To the Pension and Benefits Committees of Johnson & Johnson In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Johnson & Johnson Savings Plan (the "Plan") as of December 31, 1999 and 1998, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes and schedule of reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The fund information in the statements of net assets available for benefits and the statements of changes in net assets available for benefits is presented for the purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. PricewaterhouseCoopers LLP Florham Park, New Jersey June 12, 2000 2 6 JOHNSON & JOHNSON SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS with FUND INFORMATION As of December 31, 1999
------------------------------------------------------------------------------- PARTICIPANT DIRECTED ------------------------------------------------------------------------------- Fixed Intermediate USGS Fund Interest Fund Bond Fund Balanced Fund J&J Stock Fund --------- ------------- --------- ------------- -------------- ASSETS: ------- Deposits in Group Annuity Contracts (Note 2) $ 619,495,943 Investments at Fair Value (Notes 2 and 6) $1,274,441,036 Investments in Master Trust (Notes 2 and 6) $ 28,246,092 $29,024,706 $ 242,641,025 Accrued Dividends and Interest Receivable 137,293 3,351,875 20,684 Due From Johnson & Johnson Assets Designated For Transfer (Note 2) Hardship Loans to Participants ------------- -------------- ------------ ------------- -------------- Total Assets $ 28,383,385 $ 622,847,818 $29,024,706 $ 242,641,025 $1,274,461,720 ============= ============== ============ ============= ============== LIABILITIES: ------------ Accrued Expenses $ 7,875 $ 13,551 $ 560 $ 4,674 $ 24,742 Accrued Interest Current Portion of Long Term Note Long-Term Note Payable to J&J ------------- ------------- ------------ ------------- -------------- Total Liabilities 7,875 13,551 560 4,674 24,742 ------------- -------------- ------------ ------------- -------------- Net Assets Available for Benefits $ 28,375,510 $ 622,834,267 $29,024,146 $242,636,351 $1,274,436,978 ============= ============== ============ ============= ==============
------------------------------------------------ -------------------------------- Diversified International Equity Fund Equity Fund Loan Fund ----------- ----------- --------- ASSETS: ------- Deposits in Group Annuity Contracts (Note 2) Investments at Fair Value (Notes 2 and 6) Investments in Master Trust (Notes 2 and 6) $ 986,602,365 $37,668,554 Accrued Dividends and Interest Receivable 754,221 $ 684,389 Due From Johnson & Johnson Assets Designated For Transfer (Note 2) Hardship Loans to Participants 6,657,875 ------------- ------------ ------------ Total Assets $ 987,356,586 $37,668,554 $ 7,342,264 ============= ============ ============ LIABILITIES: ------------ Accrued Expenses $ 433,361 $ 794 Accrued Interest Current Portion of Long Term Note Long-Term Note Payable to J&J --------------- ------------ ------------ Total Liabilities 433,361 794 ------------- ------------ ------------ Net Assets Available for Benefits $ 986,923,225 $37,667,760 $ 7,342,264 ============= ============ ============
-------------------------------------------------- Employee Stock Ownership Plan Trust Fund ------------------------------ Total Allocated Unallocated Savings Plan -------------- ----------- -------------- ASSETS: ------- Deposits in Group Annuity Contracts (Note 2) $ 619,495,943 Investments at Fair Value (Notes 2 and 6) $ 313,847,547 $209,286,879 1,797,575,462 Investments in Master Trust (Notes 2 and 6) 1,324,182,742 Accrued Dividends and Interest Receivable 18,961 11,205 4,978,628 Due From Johnson & Johnson 5,272,782 5,272,782 Assets Designated For Transfer (Note 2) 30,948,281 (30,948,281) Hardship Loans to Participants 6,657,875 -------------- ---------------- -------------- Total Assets $ 344,814,789 $ 183,622,585 $3,758,163,432 ============== ============== ============== LIABILITIES: ------------ Accrued Expenses $ 485,557 Accrued Interest $ 3667,289 3,667,289 Current Portion of Long Term Note 7,289,791 7,289,791 Long-Term Note Payable to J&J 39,278,957 39,278,957 -------------- -------------- -------------- Total Liabilities 50,236,037 50,721,594 -------------- -------------- -------------- Net Assets Available for Benefits $ 344,814,789 $ 133,386,548 $3,707,441,838 ============== ============== ==============
See Notes to Financial Statements 3 7 JOHNSON & JOHNSON SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS with FUND INFORMATION As of December 31, 1998
---------------------------------------------------------------------------------- PARTICIPANT DIRECTED ---------------------------------------------------------------------------------- Fixed Intermediate USGS Fund Interest Fund Bond Fund Balanced Fund J&J Stock Fund --------- ------------- ------------ ------------- --------------- ASSETS: ------- Deposits in Group Annuity Contracts (Note 2) $ 632,365,945 Investments at Fair Value (Notes 2 and 6) $1,128,154,493 Investments in Master Trust (Notes 2 and 6) $ 29,463,932 $ 34,191,309 $ 162,347,846 Accrued Dividends and Interest Receivable 129,053 3,277,090 29,633 Due From Johnson & Johnson Assets Designated For Transfer (Note 2) Hardship Loans to Participants -------------- ------------- ------------ ------------- ---------------- Total Assets $ 29,592,985 $ 635,643,035 $34,191,309 $ 162,347,846 $1,128,184,126 -------------- ------------- ------------ ------------- ---------------- LIABILITIES: ------------ Accrued Expenses $ 13,803 $ 91,373 $ 4,664 $ 22,435 $ 157,680 Accrued Interest Current Portion of Long Term Note Long-Term Note Payable to J&J --------------------------------------------------------------------------------- Total Liabilities 13,803 91,373 4,664 22,435 157,680 ------------- ------------- ----------- ------------- ---------------- Net Assets Available for Benefits $ 29,579,182 $ 635,551,662 $34,186,645 $ 162,325,411 $ 1,128,026,446 ============= ============= ============ ============= ================
--------------------------------------------------------------------------------- Employee Stock Ownership ------------- Diversified Plan Trust Fund Total ---------------------------------- Equity Fund Loan Fund Allocated Unallocated Savings Plan ----------- --------- --------- ----------- ------------ ASSETS: ------- Deposits in Group Annuity Contracts (Note 2) $ 632,365,945 Investments at Fair Value (Notes 2 and 6) $ 261,654,218 $ 222,956,246 1,612,764,957 Investments in Master Trust (Notes 2 and 6) $ 760,180,137 986,183,224 Accrued Dividends and Interest Receivable 4,153,061 $ 69,415 13,941 10,864 7,683,057 Due From Johnson & Johnson 6,101,554 6,101,554 Assets Designated For Transfer (Note 2) 25,503,960 (25,503,960) Hardship Loans to Participants 7,082,452 7,082,452 -------------- ----------- -------------- -------------- -------------- Total Assets $ 764,333,198 $ 7,151,867 $ 287,172,119 $ 203,564,704 $3,252,181,189 -------------- ----------- -------------- -------------- --------------- LIABILITIES: ------------ Accrued Expenses $ 390,223 $ 680,178 Accrued Interest $ 4,215,037 4,215,037 Current Portion of Long Term Note 6,955,528 6,955,528 Long-Term Note Payable to J&J 46,568,748 46,568,748 -------------- ------------ -------------- -------------- ----------- Total Liabilities 390,223 57,739,313 58,419,491 -------------- ------------ -------------- -------------- ----------- Net Assets Available for Benefits $ 763,942,975 $ 7,151,867 $ 287,172,119 $ 245,825,391 $3,193,761,698 ============== ============ ============== ============== ==============
See Notes to Financial Statements 4 8 JOHNSON & JOHNSON SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS with FUND INFORMATION For The Year Ended December 31, 1999
--------------------------------------------------------------------- PARTICIPANT DIRECTED --------------------------------------------------------------------- Fixed Intermediate USGS Fund Interest Fund Bond Fund Balanced Fund J&J Stock Fund ----------- ------------- ------------ ------------- -------------- Employee Contributions (Note 3) $1,629,429 $19,653,404 $3,180,896 $16,445,043 $61,171,784 Employer Contributions (Note 3 and 9) 428,788 5,601,257 853,262 4,366,018 18,248,831 Interest 1,463,760 40,127,431 2,101,667 4,011,435 151,835 Dividends 14,777,191 ----------- ------------- ------------ ------------- -------------- Additions to (Deductions from) Plan Equity: 3,521,977 65,382,092 6,135,825 24,822,496 94,349,641 ------------------------------------------- Innotech Transfer-In (10/99) (Note 1) 43,111 13,522 10,422 83,755 117,543 Payments to Participants (Note 4) (2,470,088) (37,803,734) (2,597,174) (8,257,630) (78,184,356) Change in Unrealized Net Appreciation of Investments (1,127,037) 26,601,939 61,581,145 Realized Net Gain on Sale of Investments (877,907) 29,675,778 56,460,832 Interest Expense Administrative Expenses (68,172) (373,775) (88,328) (785,498) (747,072) Assets Transferred (Note 2) (2,230,500) (39,935,980) (6,618,300) 8,170,100 12,832,799 ----------- ------------- ------------ ------------- -------------- Net Increase (Decrease) (1,203,672) (12,717,875) (5,162,499) 80,310,940 146,410,532 Net Assets Available for Benefits, Beginning of Year 29,579,182 635,551,662 34,186,645 162,325,411 1,128,026,446 ----------- ------------- ------------ ------------- -------------- Net Assets Available for Benefits, End of Year $28,375,510 $622,833,787 $29,024,146 $242,636,351 $1,274,436,978 =========== ============= ============ ============= ============== ---------------------------------------- -------------------------- Diversified International Equity Fund Equity Fund Loan Fund ------------ ------------- ----------- Employee Contributions (Note 3) $51,881,825 $1,724,853 Employer Contributions (Note 3 and 9) 13,936,300 434,923 Interest 155,320 $615,080 Dividends 10,645,313 ------------ ------------- ----------- Additions to (Deductions from) Plan Equity: 76,463,438 2,315,096 615,080 ------------------------------------------- Innotech Transfer-In (10/99) (Note 1) 191,059 6,149 Payments to Participants (Note 4) (41,789,341) (181,611) (424,683) Change in Unrealized Net Appreciation of Investments 74,704,075 7,674,513 Realized Net Gain on Sale of Investments 113,737,242 1,860,524 Interest Expense Administrative Expenses (2,815,223) (53,312) Assets Transferred (Note 2) 2,489,000 26,046,401 ------------ ------------- ----------- Net Increase (Decrease) 222,980,250 37,667,760 190,397 Net Assets Available for Benefits, Beginning of Year 763,942,975 7,151,867 ------------ ------------- ----------- Net Assets Available for Benefits, End of Year $986,923,225 $37,667,760 $7,342,264 ============ ============= =========== ------------------------------------------------- Employee Stock Ownership Plan Trust Fund ------------------------- Total Allocated Unallocated Savings Plan ------------ ------------- -------------- Employee Contributions (Note 3) $ 155,687,234 Employer Contributions (Note 3 and 9) $ 5,272,782 49,142,161 Interest $ 117,993 72,360 48,816,881 Dividends 688,982 5,445,531 31,557,017 ------------ ------------- -------------- Additions to (Deductions from) Plan Equity: 806,975 10,790,673 285,203,293 ------------------------------------------- Innotech Transfer-In (10/99) (Note 1) 465,561 Payments to Participants (Note 4) (12,333,034) (184,041,651) Change in Unrealized Net Appreciation of Investments 52,114,532 (9,352,227) 212,196,940 Realized Net Gain on Sale of Investments 8,199,865 209,056,334 Interest Expense (4,269,437) (4,269,437) Administrative Expenses (4,931,380) Assets Transferred (Note 2) 8,854,332 (9,607,852) ------------ ------------- -------------- Net Increase (Decrease) 57,642,670 (12,438,843) 513,679,660 Net Assets Available for Benefits, Beginning of Year 287,172,119 145,825,391 3,193,761,698 ------------ ------------- -------------- Net Assets Available for Benefits, End of Year $344,814,789 $133,386,548 $3,707,441,358 ============ ============= ==============
See Notes to Financial Statements 5 9 JOHNSON & JOHNSON SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS with FUND INFORMATION For The Year Ended December 31, 1998
--------------------------------------------------------------------- PARTICIPANT DIRECTED --------------------------------------------------------------------- Fixed Intermediate USGS Fund Interest Fund Bond Fund Balanced Fund J&J Stock Fund ----------- ------------- ------------ ------------- -------------- Employee Contributions (Note 3) $ 1,429,359 $ 22,174,292 $ 3,208,058 $ 15,233,773 $ 57,631,178 Employer Contributions (Note 3 and 9) 432,990 6,675,429 862,892 4,085,683 15,930,284 Interest 1,319,347 40,422,516 1,697,138 3,091,407 123,759 Dividends 12,716,300 ----------- ------------- ------------ ------------- -------------- Additions to (Deductions from) Net Assets: 3,181,696 69,272,237 5,768,088 22,410,863 86,401,521 ------------------------------------------ UltraCision Transfer-In (7/98) (Note 1) 187,001 51,375 17,018 161,539 Clinical Diagnostics Transfer-In (10/98) (Note 1) 6,900,030 8,383,866 2,006,692 6,486,945 7,352,413 Payments to Participants (Note 4) (2,835,340) (33,642,754) (928,359) (6,299,485) (49,520,871) Change in Unrealized Net Appreciation of Investments (360,448) 11,684,861 176,370,772 Realized Net Gain on Sale of Investments 292,358 9,638,810 50,950,685 Interest Expense Administrative Expenses (49,351) (438,965) (70,957) (514,817) (704,201) Assets Transferred (Note 2) (705,695) (29,780,065) 6,241,449 5,189,088 (6,330,091) ----------- ------------- ------------ ------------- -------------- Net Increase (Decrease) 6,678,341 13,845,694 12,948,823 48,613,283 264,681,767 Net Assets Available for Benefits, Beginning of Year 22,900,841 621,705,968 21,237,822 113,712,128 863,344,679 ----------- ------------- ------------ ------------- -------------- Net Assets Available for Benefits, End of Year $29,579,182 $ 635,551,662 $ 34,186,645 $ 162,325,411 $1,128,026,446 =========== ============= ============ ============= ============== -------------------------------------------------------------------------- Employee Stock Ownership ------------ Plan Trust Fund Diversified ------------------------- Total Equity Fund Loan Fund Allocated Unallocated Savings Plan ------------ ----------- ------------ ------------- -------------- Employee Contributions (Note 3) $ 44,725,916 $ 144,402,576 Employer Contributions (Note 3 and 9) 12,299,744 $ 6,101,554 46,388,576 Interest $ 528,053 $ 101,758 79,368 47,363,346 Dividends 8,829,920 653,065 4,940,274 27,139,559 ------------ ----------- ------------ ------------- -------------- Additions to (Deductions from) Net Assets: 65,855,580 528,053 754,823 11,121,196 265,294,057 ------------------------------------------ UltraCision Transfer-In (7/98) (Note 1) 227,676 644,609 Clinical Diagnostics Transfer-In (10/98) (Note 1) 12,457,112 59,601 43,646,659 Payments to Participants (Note 4) (23,679,257) (760,745) (7,848,364) (125,515,175) Change in Unrealized Net Appreciation of Investments 68,650,503 70,761,168 24,853,465 351,960,321 Realized Net Gain on Sale of Investments 64,047,658 6,421,322 131,350,833 Interest Expense (4,892,068) (4,892,068) Administrative Expenses (1,523,643) (3,301,934) Assets Transferred (Note 2) 25,844,569 9,331,121 (9,790,376) ------------ ----------- ------------ ------------- -------------- Net Increase (Decrease) 211,880,198 (173,091) 79,420,070 21,292,217 659,187,302 Net Assets Available for Benefits, Beginning of Year 552,062,777 7,324,958 207,752,049 124,533,174 2,534,574,396 ------------ ----------- ------------ ------------- -------------- Net Assets Available for Benefits, End of Year $763,942,975 $ 7,151,867 $287,172,119 $ 145,825,391 $3,193,761,698 ============ =========== ============ ============= ==============
See Notes to Financial Statements 6 10 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS 1. Organization: The Johnson & Johnson Savings Plan (the "Plan") is a defined contribution plan which was established on June 1, 1982 for eligible salaried and non-union hourly employees of Johnson & Johnson ("J&J" or the "Company") and certain domestic subsidiaries. The Plan was designed to enhance the existing retirement program of eligible employees. The funding of the Plan is made through employee and Company contributions. The assets of the Plan are maintained in two Master Trust accounts ("Johnson & Johnson Savings Plan Trust" and "Johnson & Johnson Pension Trust Fund") and transactions therein are executed by the trustee, Bankers Trust Company. The Johnson & Johnson Savings Plan Trust and the Johnson & Johnson Pension Trust Fund are allocated based upon the total of each individual participant's share of the Johnson & Johnson Savings Plan Trust and the Johnson & Johnson Pension Trust Fund. Effective January 1, 1991, the Company implemented a Leveraged Employee Stock Ownership Plan ("ESOP") to supplement its existing 401(k) plan. The ESOP is a leveraged employee stock ownership plan and is designed to comply with Section 4975(e)(7) and the regulations thereunder of the Internal Revenue Code of 1986, as amended, and is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended. The ESOP is used to fund an additional 25% match of employee contributions ("ESOP contribution"). Additionally, the Company may elect to fund the employer 50% match of employee directed contributions with ESOP leveraged shares. Initial funding for the ESOP was made through an advance from Johnson & Johnson of $100 million, which was used to purchase 1,554,800 shares of J&J common stock on the open market (which equates to 6,219,200 shares when adjusted for subsequent stock splits). Of these shares, 2,206,210 (adjusted for stock splits) remain unallocated as of December 31, 1999. These shares are allocated to Plan participants under a formula set forth in the note agreement relating to the advance from J&J. Accordingly, the financial statements of the Plan for the years 1999 and 1998 present separately the assets and liabilities and changes therein pertaining to: (a) the accounts of employees with vested rights in allocated stock (Allocated) and (b) stock not yet allocated to employees (Unallocated). Each participant is entitled to exercise voting rights attributable to the shares allocated to their account. The Company is entitled to exercise voting rights attributable to unallocated shares. 7 11 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 1. Organization (Continued): In the third quarter of 1998, Johnson & Johnson incorporated a "dividend pass-through" feature into the Plan. This feature allows a participant to receive cash for dividends paid on certain shares owned through the plan. To receive a dividend pass-through, it is contingent on the ownership of shares in the Johnson & Johnson Stock Fund and it does not apply to any share owned in Employee Stock Ownership Plan Trust Fund. In order to receive dividend pass-through amounts, participant eligibility is based on the lesser of (a) 20% of the eligible compensation (annual base pay rate for the year plus 50% of prior calendar year commissions) and (b) IRS Pre-tax compensation limit ($10,000 in 1999) reduced by the estimated pre-tax contribution for the year (current pre-tax percentage multiplied by the eligible compensation for the year). For the 1999 and 1998 plan years, the dividend pass-through amounts recorded in the Plan statement of changes in net assets available for benefits as dividend income and payments to participants were $8,407,284 and $4,259,619 respectively. On October 1, 1999, the assets of the Innotech 401(k) Retirement Plan were transferred into the Plan. On October 1, 1998 and December 1, 1998, the assets of the Clinical Diagnostics 401(k) Retirement Plan were transferred into the Plan; and on July 1, 1998, the assets of the UltraCision 401(k) Retirement Plan were transferred into the Plan. 2. Summary of Significant Accounting Policies: Valuation of Investments: Equity investments in the Johnson & Johnson Stock Fund and the ESOP, administered by Bankers Trust Company, are valued at the average of the high and low market price on the last business day of the year. The cost of equity investments in the Johnson & Johnson Stock Fund are recorded at the average market price of the stock transactions for the month during which the contribution is made. The investments in the US Government Securities (the "USGS Fund"), Fixed Interest, and Diversified Equity funds represent the Plan's share of assets in the Johnson & Johnson Savings Plan Trust ("Savings Plan Trust"). The USGS Fund consists of short-term obligations that are issued or guaranteed by the US Government. Investments are valued at cost which approximates market value. Deposits in group annuity contracts in the Fixed Interest Fund are recorded at their contract values which approximates fair value because these investments have fully benefit-responsive features. Contract value represents contributions and reinvested income, less any withdrawals plus accrued interest. Participants may direct the withdrawal or transfer of all or a portion of their investment at contract value. However, withdrawals influenced by employer initiated events such as in connection with the sale of a business, may result in a distribution at other than contract value. There are no reserves against contract values for credit risk of contract issuers or otherwise. 8 12 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 2. Summary of Significant Accounting Policies (Continued): The average yield of the Fixed Interest Fund was approximately 6.56% for 1999 and 6.71% for 1998. The crediting interest rate of the Fixed Interest Fund was approximately 6.63% for 1999 and 6.77% for 1998. The difference between the average yield and crediting interest rate is due to administrative charges paid by the Plan. The crediting interest rate for the investment contracts is either agreed-to in advance with the issuer or varies based on an agreed-to formula, but cannot be less than zero. Equity investments and corporate obligations in the Diversified Equity Fund, managed by Capital Guardian Trust Company and J.P. Morgan Investment Management, Inc., are traded on a national securities exchange and are valued at the last reported market sales price on the last business day of the year. Investments in the Diversified Equity Fund are purchased periodically by Capital Guardian Trust Company and J.P. Morgan Investment Management, Inc. based on the prevailing market values of the underlying investments. The Intermediate Bond Fund invests in various kinds of bonds, primarily corporate and U.S. government bonds. The Balanced Fund is invested in a mix of stocks, bonds, and real estate. The investment in these funds represents the Plan's share of the assets in the Johnson & Johnson Pension Trust Fund ("Pension Trust Fund"). These investments are stated at fair value. Generally, they represent securities traded on a national securities exchange which are valued at the last reported sales price on the last business day of the year. In the first quarter of 1999, the Company incorporated an additional fund to the Plan, the International Equity Fund. The International Equity Fund, managed by American Express Management and Capital Guardian Trust Company, invests primarily in equities sold on foreign exchange markets. These investments are valued at the last reported market sales price on the last business day of the year. The investment in the fund represents the Plan's share of the assets in the Pension Trust Fund. Participant loans are valued at cost, which approximates fair value. Temporary cash investments are stated at redemption value which approximates fair value. Transfers: Transfers among funds, which are made at the participant's election, have been presented as assets transferred in the Statement of Changes in Net Assets Available for Benefits. With respect to the ESOP, transfers represent shares allocated to the participants. 9 13 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 2. Summary of Significant Accounting Policies (Continued): Use of Estimates: The preparation of the Plan's financial statements in conformity with accounting principles generally accepted in the United States requires the plan administrator to make estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and the changes in net assets available for benefits during the reporting period and, when applicable, disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Risks and Uncertainties: The Plan provides for various participant investment options in funds which can invest in any combination of stocks, bonds, fixed income securities, mutual funds, and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participants' account balances and the amounts reported in the statements of net assets available for benefits and the statements of changes in net assets available for benefits. Other: Interest and dividend income is recorded as earned on the accrual basis. Purchases and sales of investment securities are reflected on a trade-date basis. Gains and losses on sales of investment securities are determined on the average cost method. Administrative charges are allocated monthly bases on the quarterly percentage of assets in each of the six investment funds. All third party administrative expenses are paid by the Plan, except cost of entering new investment vehicles which are paid primarily by Johnson & Johnson. 10 14 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 3. Contributions: Participating employees may contribute a minimum of 3% up to a maximum of 20% of their base salary plus 50 percent of eligible commissions in combinations of pre- and post-tax contributions. Pre-tax contributions may not exceed the smaller of 20% of their base salary including 50 percent of eligible commissions or $10,000 in 1999 and 16% of their base salary including 50 percent of eligible commissions or $10,000 in 1998. The Company contributes to the Plan an amount equal to 75% of the employee directed contributions of the participants up to a maximum of 6% of the employee's base salary and 50 percent of eligible commissions. Contributions are made to the Plan by participants through payroll deductions and by the Company on behalf of participants. Such contributions, with the exception of the ESOP contribution, are invested in any of the seven investment funds at the direction of the participating employees. The 25% ESOP contribution is invested in J&J stock, except for employees over 55 years of age who may choose the alternative investments. ESOP shares are released from the unallocated portion of the ESOP each February following the payment of the loan (see Note 9), in accordance with the ESOP Trust Agreement. Shares released, in accordance with the ESOP note agreement, may be more or less than shares earned by participants. In the accompanying statements of net assets available for benefits, shares earned by participants in excess of those allocated have been reflected in the accompanying financial statements as assets designated for transfer. The number of participants invested in each fund at December 31, 1999 and 1998 was:
1999 1998 --------- --------- U.S. Government Securities Fund 3,066 3,063 Fixed Interest Fund 16,310 17,580 Intermediate Bond Fund 4,070 4,091 Balanced Fund 11,695 10,327 Johnson & Johnson Stock Fund 29,507 27,360 Employee Stock Ownership Plan 35,341 33,713 Diversified Equity Fund 24,152 22,180 International Equity Fund 2,697 N/A
Participants may elect to invest in more than one fund and can change investment direction once every three months. A total of 38,162 and 36,704 active and former employees had investments in the Plan for 1999 and 1998, respectively. 11 15 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 4. Participant Accounts and Benefits: All participants are fully vested in their contributions and the Company match. The benefit to which a Plan participant is entitled is the amount provided by contributions (Company and participant) and investment earnings thereon (including net realized and unrealized investment gains and losses) which have been allocated to such participant's account balance. Allocations are based on participant earnings on account balance, as defined. Participants are allowed to withdraw their after-tax contributions and earnings thereon, at any time. Participants may withdraw before-tax contributions only upon meeting certain hardship conditions. 5. Loans to Participants: Participants may borrow up to a maximum of 50% of their account balance or $50,000, whichever is less. Loans bear a market rate of interest plus 1% and are repayable within five years. Loans are secured by the balance in the participant accounts. 12 16 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 6. Investments: Investments held by the Plan as of December 31, 1999 are summarized as follows:
Johnson & Johnson Employee Stock Ownership Stock Fund Plan Trust Fund Combined ------------------------------------------------------------------- --------- Fair Value Cost Fair Value Cost Fair Value Cost ------------------------------- ------------------------------ --------------------------------- Johnson & Johnson Common Stock $1,271,834,329 $556,635,747 $516,545,250 $86,999,081 $1,788,379,579 $662,469,734 Temporary Cash Investments 2,606,707 2,606,707 6,589,176 6,589,176 9,195,883 9,195,884 -------------- -------------- --------------- ----------- -------------- ----------- $1,274,441,036 $559,242,454 $523,134,426 $93,588,257 $1,797,575,462 $671,665,618 ============== ============== =============== =========== ============== ============
The investments in the USGS, Fixed Interest, and the Diversified Equity Funds reflected in the accompanying Statement of Net Assets Available for Benefits represent the Plan's share of investments (approximately 99.4% of fair value) held by the Johnson & Johnson Savings Plan Trust. Total investments held by the Savings Plan Trust on behalf of the Plan and the Johnson & Johnson Savings Plan for Union Represented Employees are summarized as follows:
Description Fair Value Cost ----------- -------------- -------------- USGS Fund: U.S. Government Securities - Short Term $ 29,313,150 $ 29,313,150 Other* 142,201 142,201 Fixed Interest Fund: Deposits in Group Annuity Contracts 621,653,591 621,653,591 Other* 3,363,553 3,363,553 Diversified Equity Fund: Common Stocks 992,698,523 700,989,649 Other* 758,881 758,881 -------------- -------------- $1,647,929,899 $1,356,221,025 ============== ==============
* Other consists of interest and/or dividends receivable. 13 17 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 6. Investments, (continued): As of December 31, 1999, the investments in the Intermediate Bond, Balanced and International Equity Funds reflected in the accompanying Statement of Net Assets Available for Benefits represent the Plan's share of investments (approximately 7.9% of fair value) held by the Johnson & Johnson Pension Trust Fund. Total investments held by the Pension Trust Fund on behalf of the Plan and the various Johnson & Johnson Pension Plans are summarized as follows:
Description Fair Value Cost ----------- ------------- ------------- U.S. Government Securities - Short Term $ 19,517,115 $ 19,433,889 U.S. Government Securities - Long Term 310,817,373 317,925,206 Corporate Bonds & Notes - Long Term 202,228,167 215,804,216 Common Stocks: Johnson & Johnson 421,228,900 23,727,279 Other 2,582,214,040 1,799,521,532 Preferred Stocks 21,154,649 13,841,946 Commingled Investment Funds 234,314,860 195,153,996 Temporary Investments 99,507,974 100,313,591 Other 24,206,592 24,231,052 -------------- -------------- $3,915,189,670 $2,709,952,707 ============== ==============
Investments held by the Plan as of December 31, 1998 are summarized as follows:
Johnson & Johnson Employee Stock Ownership Stock Fund Plan Trust Fund Combined --------------------------------- ------------------------------ ------------------------------ Fair Value Cost Fair Value Cost Fair Value Cost ----------------- -------------- ---------------- ------------ ---------------- ------------ Johnson & Johnson Common Stock $1,123,468,342 $469,850,905 $478,730,076 $91,946,210 $1,602,198,418 $561,797,115 Temporary Cash Investments 4,686,151 4,686,151 5,880,388 5,880,388 10,566,539 10,566,539 ------------------------------ -------------------------- ----------------------------- $1,128,154,493 $474,537,056 $484,610,464 $97,826,598 $1,612,764,957 $572,363,654 ============== ============ ============ =========== ============== ============
14 18 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 6. Investments, (continued): As of December 31, 1998, the investments in the USGS, Fixed Interest, and the Diversified Equity Funds reflected in the accompanying Statement of Net Assets Available for Benefits represent the Plan's share of investments (approximately 99.5% of fair value) held by the Johnson & Johnson Savings Plan Trust. Total investments held by the Savings Plan Trust on behalf of the Plan and the Johnson & Johnson Savings Plan for Union Represented Employees are summarized as follows:
Description Fair Value Cost ----------- -------------- -------------- USGS Fund: U.S. Government Securities - Short Term $ 30,466,695 $ 30,466,695 Other* 138,992 138,992 Fixed Interest Fund: Deposits in Group Annuity Contracts 634,215,282 634,215,282 Other* 3,286,951 3,286,951 Diversified Equity Fund: Common Stocks 764,674,566 548,124,829 Other* 4,178,130 4,178,130 -------------- -------------- $1,436,960,616 $1,220,410,879 ============== ==============
* Other consists of interest and/or dividends receivable. As of December 31, 1998, the investments in the Intermediate Bond and Balanced Funds reflected in the accompanying Statement of Net Assets Available for Benefits represent the Plan's share of investments (approximately 6.5% of fair value) held by the Johnson & Johnson Pension Trust Fund. Total investments held by the Pension Trust Fund on behalf of the Plan and the various Johnson & Johnson Pension Plans are summarized as follows:
Description Fair Value Cost ----------- -------------- -------------- U.S. Government Securities - Short Term $ 88,842,142 $ 86,445,403 Corporate Bonds & Notes - Short Term 120,087,554 120,447,976 U.S. Government Securities - Long Term 109,212,710 108,202,456 Corporate Bonds & Notes - Long Term 118,451,198 124,404,110 Common Stocks: Johnson & Johnson 420,817,650 26,353,605 Other 1,792,008,039 1,423,899,173 Preferred Stocks 30,757,224 26,973,063 Commingled Investment Funds 204,839,027 195,837,097 Temporary Investments 82,892,180 83,127,335 Other 42,063,434 41,991,873 -------------- -------------- $3,009,971,158 $2,237,682,091
15 19 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 6. Investments, (continued): Realized gains on investments sold and distributed during the years ended December 31, 1999 and 1998 are summarized as follows:
J&J Stock Fund Diversified Equity Fund Employee Stock Ownership Plan Fund --------------------------------------- ---------------------------------------- -------------------------------------- Book Value Proceeds Gain Book Value Proceeds Gain Book Value Proceeds Gain ---------- ------------ ------------- ------------ ---------- ------------ ------------ ---------- ---------- 1999 $86,129,736 $142,590,568 $56,460,832 $633,256,161 $746,993,403 $113,737,242 $9,126,789 $17,326,654 $8,199,865 1998 54,377,538 105,328,223 50,950,658 537,294,947 601,342,605 64,047,658 5,461,721 11,883,043 6,421,322
Intermediate Bond Fund Balanced Fund International Equity Fund ------------------------------------- ---------------------------------------- -------------------------------------- Book Value Proceeds Gain/(Loss) Book Value Proceeds Gain Book Value Proceeds Gain ---------- ------------ ------------- ---------- ---------- ------------ ------------ ---------- ---------- 1999 $60,324,026 $59,446,119 $(877,907) $270,641,548 $300,317,326 $29,675,778 $17,823,861 $19,684,385 $1,860,524 1998 45,282,372 45,574,730 292,358 174,560,399 184,199,209 9,638,810 N/A N/A N/A
16 20 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 7. Tax Status: The Internal Revenue Service has determined and informed the Company by a letter dated April 25, 1996, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter. However, the Plan administrator believes that the Plan is designed and is currently being operated in compliance with applicable requirements of the IRC. 8. Termination Priorities: The Company has the right to terminate the Plan at any time, and in the event the Plan is terminated, subject to conditions set forth in ERISA, the amount of each participant's account balance in the Plan is fully vested. 9. Indebtedness In connection with the formation of the Plan's ESOP feature, the Plan borrowed $100 million from Johnson & Johnson for the purpose of purchasing J&J common stock. The note bears interest at 9% and is payable through February 15, 2005. The Company is obligated to make contributions in cash to the ESOP which, when aggregated with the ESOP's dividends and interest earnings, equal the amount necessary to enable the ESOP to make its regularly scheduled payments of principal and interest due on the term loan. Aggregate maturities for the next five years are as follows: 2000 $ 7,289,791 2001 7,664,462 2002 8,082,746 2003 8,548,156 2004 9,064,538 Thereafter 5,919,055 ----------- $46,568,748
In the event of Plan termination or of termination of the ESOP portion of the Plan, any unallocated shares shall be sold to the Company or on the open market. The proceeds of such sale shall be used to satisfy the outstanding principal and interest. The Company has no rights against shares once they are allocated under the ESOP. 10. Concentrations of Credit Risk Financial instruments which potentially subject the Plan to concentrations of credit risk consist principally of the Fixed Interest Fund holdings in fully benefit-responsive group annuity contracts with insurance and other financial institutions. 17 21 JOHNSON & JOHNSON SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS, Continued 10. Concentrations of Credit Risk, (Continued): The Fixed Interest Fund places its fully benefit-responsive group annuity contracts with high-credit quality institutions and, by policy, limits the amount of credit exposure to any one financial institution. If any of the insurance companies that the group annuity contracts are invested with fail to perform according to the contract, the asset value of the Plan could be impaired. 11. Reconciliation of Financial Statements to Form 5500: The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
December 31, December 31, 1999 1998 --------------- --------------- Net Assets Available for Benefits Per the Financial Statements $ 3,707,441,838 $ 3,193,761,698 Amounts Allocated to Withdrawing Participants (6,895,528) (8,151,647) --------------- --------------- Net Assets Available for Benefits Per the Form 5500 $ 3,700,546,310 $ 3,185,610,051 =============== ===============
Year Ended Year Ended December 31, December 31, 1999 1998 ------------- ------------- Benefits Paid to Participants Per the Financial Statements $ 184,041,651 $ 125,515,175 Add: Amounts Allocated to Withdrawing Participants at December 31, 1999 and 1998 6,895,528 8,151,647 Less: Amounts Allocated to Withdrawing Participants at December 31, 1998 and 1997 (8,151,647) (6,758,039) ------------- ------------- Benefits Paid to Participants Per the Form 5500 $ 182,785,532 $ 126,908,783 ============= =============
Amounts allocated to the withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to December 31, 1999 and 1998 but not yet paid as of that date. 18 22 Supplemental Schedule JOHNSON & JOHNSON SAVINGS PLAN ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1999
FACE AMOUNT OR SHARES ISSUES COST FAIR VALUE ----------- ------ ----------------- ---------- J&J STOCK FUND Common Stock 13,807,910 shs. Johnson & Johnson $556,635,747 $1,271,834,329 Temporary Investments $2,606,707 BT Pyramid Directed Account Cash Fund 2,606,707 2,606,707 --------------- ------------------ Total J&J Stock Fund $559,242,454 $1,274,441,036 ============== ============== EMPLOYEE STOCK OWNERSHIP PLAN TRUST FUND Common Stock 5,909,816 shs. Johnson & Johnson $86,999,081 $516,545,250 Temporary Investment $6,589,176 BT Pyramid Directed Account Cash Fund 6,589,176 6,589,176 ------------- ------------- Total ESOP Trust Fund $93,588,257 $523,134,426 ============= ============
19 23 Supplemental Schedule JOHNSON & JOHNSON SAVINGS PLAN ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1999
FACE AMOUNT ISSUES FAIR VALUE ----------- ------ ---------- Loan Fund $6,657,875 Loans to Participants (Fixed Interest rate based on the prime lending rate plus one percentage point. The repayment period is from one to five years.) $6,657,875 684,389 Interest Receivable 684,389 ------------- Total Loan Fund $7,342,264 =============
20 24 Supplemental Schedule JOHNSON & JOHNSON SAVINGS PLAN ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1999
DISPOSED ACQUIRED ------------------------------------------- ---------------------- SECURITY/PARTY GAIN/ DESCRIPTION SALES COSTS PROCEEDS (LOSS) PURCHASES COST ----- -------- -------- ------ --------- ---- (# of Transactions) (# of Transactions) SERIES OF TRANSACTIONS: BT Pyramid Directed Account-Cash Fund (a) $98,648,975 $98,648,975 $ - (a) $95,095,030 Johnson & Johnson Common Stock 158 $72,547,729
(a) Trustee is unable to provide detailed information on the number of transactions. 21 25 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 33-40294) of Johnson & Johnson of our report dated June 12, 2000 relating to the financial statements and financial statement schedules of the Johnson & Johnson Savings Plan, which appears in this Form 11-K. PricewaterhouseCoopers LLP Florham Park, New Jersey June 23, 2000