Question

Financial Statement Analysis – Johnson & Johnson Use the Johnson & Johnson 2017 annual report to answer the following questions. You can locate the annual report on Johnson & Johnson’s web site or on the SEC’s website. a. Who signed the letter to the shareholders (include both name and title)? b. From looking at Part 1 (Segments of Business) section of the 2017 annual report, how many segments do they have and what are they? c. How many Board of Directors members are there for Johnson & Johnson? Who is their Chief Financial Officer? d. What are the six major topics that are covered in the Management Discussion and Analysis (MD&A)? e. Based upon information in the MD&A, in 2017, what percentage of earnings before provision for income taxes is attributable to each of the segments? Does this add up to 100%? If not, why not? (Note: You will need to calculate the percentages. Please do not use the percentages given.) f. Based on the financial statements, what asset has the largest balance and what is the balance? What was Johnson & Johnson’s basic earnings per share (EPS) for 2017? What was its comprehensive income attributable to Johnson & Johnson in 2017? What was its operating cash flow for 2017? g. How many notes are in the Johnson & Johnson 2017 annual report? h. Please use the Footnotes to answer the following questions: Johnson & Johnson reported cash and cash equivalents on the balance sheet of $17,824 million. How much of that was cash (as opposed to cash equivalents)? Johnson & Johnson reported inventory on the balance sheet of $8,765 million. How much of that was finished goods? Johnson & Johnson reported a $16,373 million provision for income taxes on the statement of earnings. How much of that relates to US taxes? i. Who audited Johnson & Johnson’s 2017 financial statements?

Answer 1

(a): The letter to the shareholder was signed by Mr. Alex Gorsky, Chairman and CEO of J&J.

(b): The company has 3 segments they are – the consumer segment (range of products in baby care, oral care etc.), the pharmaceutical segment (focused on immunology, neuroscience etc.) and medical devices segment (medical devices for surgery, diabetes care etc.)

(c): For J&J there were 8 board of directors (as mentioned in its 2017 annual report). The company’s CFO is Mr. Dominic J. Carsuso.

(d): The six major topics that are covered in the Management Discussion and Analysis (MD&A) are – description of company and its business segments, objectives of the management team, analysis of results of operations, analysis of sales and profitability, analysis of financial and market risk, and critical accounting policies and estimates.

(e):

	Earnings before tax (in $ millions)	%
Consumer	2,524.00	14.28
Pharmaceuticals	11,083.00	62.71
Medical Devices	5,392.00	30.51
Total earnings before tax as reported by J&J	17,673.00

Total of the percentages do not add to 100% as there are expenses to the tune of $1,326 million that is not allocated to any of the segments.

(f): Intangible assets had the largest balance and its amount was $53,228 million.

Basic EPS of 2017 was $0.48

Comprehensive income was $3,002 million and operating cash flow was $21,056 million

(g): There are a total of 22 notes

(h): Cash amount was $2,929. Balance consists of items like money market funds, government securities etc.

Finished goods were $5,308 million

The amount related to US taxes = currently payable - deferred amount

= 11969-1956

= $10,013 million

(i) Pricewaterhouse Coopers LLP had audited J&J's 2017 financial statements.