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
For the Fiscal Year Ended December 31, 2003
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 1-3215
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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)
Item 4. Financial Statements and Exhibits
Report of Independent Registered Public Accounting Firm
Financial Statements:
Statements of Net Assets Available for Benefits
As of December 31, 2003 and 2002
Statement of Changes in Net Assets Available for
Benefits for the Year Ended December 31, 2003
Notes to Financial Statements
Supplemental Schedule*:
Schedule H, line 4i - Schedule of Assets (Held at End of Year) as
of December 31, 2003
*Other schedules required by Section 2520.103.10 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under ERISA have been omitted
because they are not applicable.
Consent of PricewaterhouseCoopers LLP, dated June 18, 2004
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 22, 2004
JOHNSON & JOHNSON SAVINGS PLAN
------------------
FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULE
AS OF DECEMBER 31, 2003 AND 2002
AND FOR THE YEAR ENDED
DECEMBER 31, 2003
JOHNSON & JOHNSON
SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2003
AND 2002 AND FOR THE YEAR ENDED DECEMBER 31, 2003
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PAGE(S)
-------
Report of Independent Registered Public Accounting Firm ........... 1
Financial Statements:
Statements of Net Assets Available for Benefits
As of December 31, 2003 and 2002 ............................. 2
Statement of Changes in Net Assets Available for
Benefits for the Year Ended December 31, 2003 ................ 3
Notes to Financial Statements .................................. 4 - 13
Supplemental Schedule*:
Schedule H, line 4i - Schedule of Assets (Held at
End of Year) as of December 31, 2003 ......................... 14
* Other schedules required by Section 2520.103.10 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under ERISA have been
omitted because they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants, the Pension Committee
and the Compensation & Benefits Committee of the
Johnson & Johnson Savings Plan:
In our opinion, the accompanying statements of net assets available for benefits
and the related statement 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, 2003 and
2002, and the changes in net assets available for benefits for the year ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America. 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 the standards of the Public
Company Accounting Oversight Board (United States) and auditing standards
generally accepted in the United States of America. Those standards 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 our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule H, line 4i -
Schedule of Assets (Held at End of Year) as of December 31, 2003 is presented
for the purpose of additional analysis and is not a required part of the basic
financial statements but is 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. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
June 16, 2004
JOHNSON & JOHNSON
SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2003 AND 2002
--------------------------------------------------------------------------------
2003 2002
-------------- --------------
ASSETS
Interest in Master Trusts, at fair value
Interest in Johnson & Johnson Pension
and Savings Plans Master Trust ........ $4,795,819,517 $ --
Interest in Johnson & Johnson Savings
Plan Trust ............................ -- 3,785,110,898
Interest in Johnson & Johnson Pension
Trust Fund ............................ -- 377,035,603
Participant loans ......................... 57,570,698 49,655,577
-------------- --------------
Total investments ..................... 4,853,390,215 4,211,802,078
Receivables
Employee contributions .................. 12,019,586 --
Employer contributions .................. 4,280,247 --
Due from Johnson & Johnson .............. 1,743,422 2,806,871
-------------- --------------
Total receivables ................... 18,043,255 2,806,871
-------------- --------------
Total assets ...................... 4,871,433,470 4,214,608,949
============== ==============
LIABILITIES
Accrued interest .......................... 1,179,958 1,853,125
Accrued expenses .......................... 1,181,473 --
Current portion of long-term note payable
to Johnson & Johnson .................... 9,064,538 8,548,156
Long-term note payable to Johnson &
Johnson ................................. 5,919,055 14,983,593
-------------- --------------
Total liabilities ..................... 17,345,024 25,384,874
============== ==============
Net assets available for benefits ... $4,854,088,446 $4,189,224,075
============== ==============
See Notes to Financial Statements.
-2-
JOHNSON & JOHNSON
SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2003
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INVESTMENT INCOME (LOSS)
Investment income from interest in Master Trust
Net appreciation in fair value of investments ........... $ 307,926,456
Investment income
Interest .............................................. 53,604,340
Dividends ............................................. 47,975,105
Contributions
Employee contributions .................................. 359,978,556
Employer contributions .................................. 90,169,784
Asset transfers due to acquisitions ....................... 3,158,627
--------------
Total Additions ....................................... 862,812,868
--------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO
Benefits paid to participants ............................. 187,817,557
Interest expense .......................................... 1,444,690
Administrative expenses ................................... 6,941,224
Employee Stock Ownership Plan transfers ................... 1,745,026
--------------
Total deductions ........................................ 197,948,497
--------------
Net increase .......................................... 664,864,371
--------------
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year ......................................... 4,189,224,075
--------------
End of year ............................................... $4,854,088,446
==============
See Notes to Financial Statements.
-3-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN
GENERAL
The Johnson & Johnson Savings Plan (the "Plan") is a participant
directed 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 were maintained in
the Johnson & Johnson Savings Plan Trust and the Johnson & Johnson
Pension Trust Fund, and transactions therein were executed by the
trustee, State Street Trust Company ("State Street" or "Trustee"). The
Plan's interests in the Savings Plan Trust and the Pension Trust Fund
were allocated to the Plan based upon the total of each participant's
share in the Master Trust accounts. As of January 1, 2003, the Johnson
& Johnson Savings Plan Trust and Johnson & Johnson Pension Trust Fund
merged to form a single Master Trust, the Johnson & Johnson Pension and
Savings Plans Master Trust (the "Trust"). The Plan's interest in the
Johnson & Johnson Pension and Savings Plans Master Trust is allocated
to the Plan based upon the total of each participant's share in the
Trust.
This brief description of the Plan is provided for general information
purposes only. Participants should refer to the Plan document for
complete information.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective January 1, 1991, the Company implemented a Leveraged Employee
Stock Ownership Plan ("ESOP") to enhance 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% company
match of employee contributions (referred to herein as the "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 J&J of
$100 million, which was used to purchase 1,554,800 shares of J&J common
stock on the open market (which equates to 12,438,400 shares when
adjusted for subsequent stock splits) (See Note 8). Of these shares,
465,624 and 1,217,133 (adjusted for stock splits) remain unallocated as
of December 31, 2003 and 2002, respectively. As of December 31, 2003
and 2002, the net assets of the unallocated portion are $8,414,076 and
$51,194,395, respectively, while the net assets of the allocated
portion are $449,559,196 and $446,341,354, respectively. Shares are
allocated to Plan participants under a formula set forth in the ESOP
note agreement relating to the advance from J&J.
Each participant is entitled to exercise voting rights attributable to
the shares allocated to his or her account. The Company is entitled to
exercise voting rights attributable to unallocated shares.
CONTRIBUTIONS
In general, full-time salaried employees and certain non-union hourly,
part-time and temporary employees can contribute to the Plan, as there
is no service requirement for employee contributions.
-4-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Contributions are made to the Plan by participants through payroll
deductions and by the Company on behalf of the participants.
Participating employees may contribute a minimum of 3% up to a maximum
of 35% of eligible pay, as defined by the Plan. Contributions can be
pre-tax, post-tax or a combination of both. Pre-tax contributions may
not exceed the smaller of (i) 35% of a participant's base salary or
(ii) $12,000 for 2003 or $11,000 for 2002. The maximum contributions to
a participant's account, including participant pre-tax and post-tax
contributions and the employer match is $40,000 for 2003 and 2002.
Effective July 1, 2002, participants age 50 and over are eligible to
contribute extra pre-tax contributions above the annual IRS limitations
up to $2,000 in 2003 and $1,000 in 2002. Participants can elect an
amount to be contributed from each paycheck as their catch-up
contribution. This amount will be in addition to the pre-tax and
post-tax contribution percentages that participants have elected.
After one year of service, participants receive an employer matching
contribution equal to 75% of the first 6% of a participant's
contributions. The Company match is composed of cash (50%) and shares
of Johnson & Johnson common stock (25%), defined as the ESOP
contribution.
All contributions, with the exception of the ESOP contribution, are
invested in any of the nine investment funds as selected by the
participating employees. Beginning in April of 2002, participants have
the option to elect that the Company stock matching contribution be
made as a cash contribution thus being diversified from ESOP into any
of the other investment funds chosen by the participant. ESOP shares
are released from the unallocated portion of the ESOP each February
following the payment of the loan (see Note 8), in accordance with the
ESOP Trust Agreement. Shares released, in accordance with the ESOP note
agreement, may be more or less than shares allocated to participants.
INVESTMENTS
Participants may invest in one or more of the nine investment funds
offered by the Plan. The investment mix chosen by the participant will
apply to employee and Company matching contributions. Rollover
contributions are invested at the election of the participant.
Beginning in 2002, participants may transfer all or a portion of their
accumulated Company stock contribution into the Plan's other investment
funds.
In the third quarter of 1998, Johnson & Johnson incorporated a
"dividend pass-through" feature into the Plan. Up through 2001, the
pass-through was distributed to each participant via check. Effective
January 1, 2002, dividends are automatically reinvested in the J&J
Stock Fund unless specific elections are made to receive payment via
check. For participants who had their dividends reinvested in the J&J
Stock Fund, they had an opportunity in early 2002 to receive those 2001
dividends in cash. The eligibility to receive a dividend pass-through
is contingent on the ownership of shares in the Johnson & Johnson Stock
Fund, which does not include shares owned in the Employee Stock
Ownership Plan Fund. The 2003 dividend pass-through amount paid to
participants of $2,149,902 is reflected as benefits paid to
participants in the Statement of Changes in Net Assets Available for
Benefits.
All other dividend and interest income is reinvested by the Trustee.
-5-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
VESTING
A participant's interest in their account, including participant
contributions, Company contributions and earnings thereon, will be at
all times fully vested. As a result, there are no forfeitures under the
Plan.
PAYMENT OF BENEFITS
Benefits are paid to participants upon termination of employment,
long-term disability or retirement. Participants can elect to defer
payment until age 70 1/2 if account balances are greater than $5,000.
Distributions are paid either in a lump sum payment, or installment
payments made on a monthly, quarterly, or annual basis. Installment
payments are made over a period of years selected by the participant.
A participant's account may be distributed to their beneficiaries in
lump sum, in installments or maintained in the Trust upon the
participant's death only if the beneficiary is a spouse. Otherwise, it
is paid to the beneficiary in a lump sum.
Participants are allowed to withdraw an amount equal to their pre-
August 1, 2003 post-tax contributions and earnings thereon, and after
August 1, 2003 unmatched post-tax contributions by the employee and
earnings thereon at any time. Participants may withdraw pre-tax
contributions, post-tax matched contributions, and the employer match
after August 1, 2003, only upon meeting certain hardship conditions.
The benefits to which participants are entitled is the amount provided
by contributions (Company and participant) and investment earnings
thereon, including net realized and unrealized gains and losses which
have been allocated to the participant's account balance. Participants
have the option of receiving all or part of their balance in the
Johnson & Johnson Stock Fund as either cash or in shares of Johnson &
Johnson common stock (plus cash for fractional shares) for
distributions other than a hardship.
ADMINISTRATIVE EXPENSES
All third party administrative expenses are paid by the Plan, unless
otherwise provided for by the Company.
PARTICIPANT LOANS
Participants may borrow up to a maximum of 50% of their account
balance. The minimum loan amount is $1,000 and the maximum amount of
outstanding loans cannot exceed $50,000. Loans bear an interest rate of
prime plus 1%, are repayable within one to five years and are secured
by the balance in the participant's account. Principal and interest is
paid ratably through payroll deductions for active employees. Loans
must be paid within two months following retirement or termination of
employment with the Company. If the loan is not repaid in full, the
unpaid balance, plus accrued interest, will be deducted from the
participant's account balance and reported to the IRS as a
distribution.
TERMINATION
Although it has not expressed an intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and
to terminate the Plan subject to the provisions of ERISA. In the event
of a partial or full Plan termination, all Plan funds must be used
exclusively for the benefit of the Plan participants.
-6-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual
method of accounting in accordance with generally accepted accounting
principles in the United States of America.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's interest in the Trust in 2003 and the Savings Plan Trust and
the Pension Trust Fund in 2002 is 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. Benefit responsive guaranteed and synthetic investment
contracts are recorded at contract value, which approximates fair value
(Note 6).
As the investment funds contain various underlying assets such as stock
and short-term investments, the participant's account balance is
reported in units of participation, which allows for immediate
transfers in and out of the fund. The purchase or redemption price of
the units is determined by the trustee, based on the current market
value of the underlying assets of the funds. The fund's net asset value
is the value of a single unit, which is computed by adding the value of
the fund's investments, cash and other assets, and subtracting
liabilities, then dividing the result by the number of units
outstanding.
Purchases and sales of securities are recorded on a trade-date basis.
Gains and losses on the sale of investment securities are determined on
the average cost method. Dividend income is recorded on the ex-dividend
date. Interest income is recorded as earned on an accrual basis.
NET APPRECIATION (DEPRECIATION)
The Plan presents in the Statement of Changes in Net Assets Available
for Benefits the net appreciation (depreciation) in the fair value of
investments held in the Master Trust, which consists of unrealized
appreciation (depreciation) of the underlying investments and realized
gains and losses on sales of investments.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
USE OF ESTIMATES
The preparation of the Plan's financial statements in conformity with
generally accepted accounting principles 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.
-7-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
RISK AND UNCERTAINTIES
The Plan provides for various investment options in funds, which can
invest in a combination of equity, fixed income securities and other
investments. Investments are exposed to various risks, such as interest
rate, market and credit. Due to the level of risk associated with
certain investments, 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 Statement of Changes in Net Assets
Available for Benefits.
3. INVESTMENTS
The following investments are those in the Master Trust which represent
5% or more of the Plan's net assets.
AS OF DECEMBER 31,
-------------------------------
2003 2002
-------------- --------------
Johnson & Johnson Stock Fund ......... $1,432,335,221 $1,568,857,008
Diversified Equity Fund .............. 1,070,568,713 689,385,756
Fixed Interest Fund .................. 943,616,817 883,842,038
Employee Stock Ownership Plan Trust
Fund* .............................. 457,973,272 497,535,749
Balanced Fund ........................ 341,967,570 226,840,071
*Non-participant directed (See Note 4)
The Plan's investments include gains and losses on investments bought
and sold as well as held during the year which are reflected in its
interest in the Master Trust. These investments
appreciated/(depreciated) in value during 2003 as follows:
Equities ......................................... $330,635,563
Bonds ............................................ 5,262,603
J&J common stock ................................. (80,859,453)
Other ............................................ 52,887,743
------------
Net appreciation ............................... $307,926,456
============
-8-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
4. NON-PARTICIPANT DIRECTED INVESTMENTS
The ESOP includes participant directed and non-participant directed
investments. Information about the ESOP's net assets and the
significant components of the changes in net assets of this fund is as
follows:
AS OF DECEMBER 31,
2003 2002
------------------------- -------------------------
Allocated Unallocated Allocated Unallocated
------------ ----------- ------------ -----------
Net assets
J&J common
stock $449,559,196 $8,414,076 $446,341,354 $51,194,395
============ ========== ============ ===========
FOR THE YEAR ENDED
DECEMBER 31, 2003
-----------------------
ALLOCATED UNALLOCATED
--------- -----------
Changes in net assets
Employer contributions .............. -- $ 1,743,422
Investment income .................. 7,198,120 1,448,469
Net depreciation in fair value ..... 24,988,566 (44,296,250)
Benefits paid to participants ...... (14,670,990) --
Transfers to participant-directed
investments ...................... (14,297,854) (231,270)
Interest expense ................... -- (1,444,690)
------------ ------------
$ 3,217,842 $(42,780,319)
============ ============
5. INVESTMENTS IN PLAN MASTER TRUSTS
Effective January 1, 2003, the Johnson & Johnson Savings Plan Trust
merged with the Johnson & Johnson Pension Trust Fund to form a single
Master Trust, the Johnson & Johnson Pension and Savings Plans Master
Trust. The Plan holds approximately 52.71% of the Trust's net assets as
of December 31, 2003.
As of December 31, 2002 the investments in the U.S. Government
Securities, Fixed Interest, J&J Stock, Diversified Equity, Small Cap,
Russell 3000 and ESOP Funds were included in the Savings Plan Trust.
The Plan held approximately 99.08% of the Savings Plan Trust's net
assets as of December 31, 2002.
As of December 31, 2002, the investments in the Intermediate Bond,
Balanced, and International Equity Funds were included in the Pension
Trust Fund. The Plan held approximately 10.2% of the Fund's net assets
as of December 31, 2002.
-9-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Net assets, income, and expenses are allocated to the Plan based on the
total of each participant's share in the respective trust.
AS OF DECEMBER 31,
------------------------------------------------
2003 2002 2002
PENSION & SAVINGS PENSION
SAVINGS PLANS PLAN TRUST
MASTER TRUST TRUST FUND
-------------- -------------- --------------
Investments at
fair value
Short term
investment
funds ......... $ 251,872,480 $ 46,899,619 $ 538,889,775
U.S. Government
and Agency
securities .... 688,955,151 50,232,862 357,318,806
Corporate debt .. 305,698,696 7,109,175 307,506,360
Preferred
stocks ........ 10,536,822 -- 10,450,249
J&J common
stock ......... 4,890,705,529 2,673,806,548 1,477,495,733
Other equities .. 2,074,484,099 166,832,677 1,128,435,886
Investments at
contract value
Deposits in
group annuity
contracts and
synthetics ... 924,152,802 872,124,535 --
-------------- -------------- --------------
Total Master
Trust
investments .. 9,146,405,579 3,817,005,416 3,820,096,809
Receivables ...... 179,120,628 5,456,869 138,929,799
Liabilities ...... (230,499,957) (2,143,681) (246,197,215)
-------------- -------------- --------------
Net assets
held in Master
Trust, at fair
value ........ $9,095,026,250 $3,820,318,604 $3,712,829,393
============== ============== ==============
-10-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The net investment income/(loss) of the Pension and Savings Plans
Master Trust was composed of the following:
FOR THE
YEAR ENDED
DECEMBER 31,
2003
------------
Net appreciation/(depreciation) in fair value of investments
Short term investment funds............................... $ 356,879
U.S. Government and Agency securities..................... (3,648,217)
Corporate debt............................................ 36,792,741
Preferred Stocks.......................................... 2,107,744
J&J common stock.......................................... 536,529,673
Equities and other........................................ 410,093,798
--------------
982,232,618
--------------
Interest................................................... $ 78,096,556
Dividends.................................................. 101,605,984
--------------
Net Investment Gain..................................... 1,161,935,158
==============
6. GUARANTEED AND SYNTHETIC INVESTMENT CONTRACTS
The Trust holds investments in guaranteed and synthetic investment
contracts as part of the Fixed Interest Fund. These investments are
recorded at their contract values. This represents cost plus accrued
interest of guaranteed investment contracts and fair value of the
collateral plus the benefit responsive wrap value for synthetics, as
the contracts are fully benefit-responsive. Participants may ordinarily
direct the withdrawal or transfer of all or a portion of their
investment at contract value. There are currently no reserves against
contract values for credit risk of the contract issuers or otherwise.
The average yield of the Fixed Interest Fund was approximately 4.86%
and 5.71% for 2003 and 2002, respectively. The crediting interest rate
was approximately 4.96% for 2003 and 5.80% for 2002. The crediting
interest rate of the Fixed Interest Fund is the annual return of the
fund before plan expenses, while the average yield includes
administrative expenses. 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. The fair
value of guaranteed and synthetic investment contracts at December 31,
2003 and 2002 was $924,152,802 and $872,124,535, respectively, in the
aggregate.
-11-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
7. TAX STATUS
The Internal Revenue Service has determined and informed the Company by
a letter dated December 31, 2002, that the Plan is designed in
accordance with applicable sections of the Internal Revenue Code (IRC).
Although the Plan has been amended since receiving the determination
letter, the Plan administrator believes that the Plan is designed and
is currently being operated in compliance with applicable requirements
of the IRC.
8. INDEBTEDNESS AND RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by State
Street Global Advisors ("State Street"). State Street is the trustee as
defined by the Plan and, therefore, these transactions qualify as
party-in-interest transactions.
The Plan also invests in shares of the Company. The Company is the plan
sponsor and, therefore, these transactions qualify as party-in-interest
transactions.
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 principal maturities for the next two years are as follows:
2004 .................................... $ 9,064,538
2005 .................................... 5,919,055
-----------
$14,983,593
===========
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 on the
allocated ESOP shares.
9. ASSETS TRANSFERS
In July 2003, the assets of the Inverness Medical Technology Plan were
transferred into the Plan. In November 2003, the assets of the TERAMed
Inc. 401(k) Retirement Plan were transferred into the Plan. In December
2003, the assets of the Virco Labs Inc. 401(k) Plan, Micro Typing
Systems, Inc. 401(k) Plan and GynoPharma Inc. 401(k) Plan were
transferred into the Plan.
-12-
JOHNSON & JOHNSON
SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
10. 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,
-------------------------------
2003 2002
-------------- --------------
Net assets available for benefits
per the financial statements ..... $4,854,088,446 $4,189,224,075
Amounts allocated to withdrawing
participants ..................... (1,214,681) (503,822)
-------------- --------------
Net assets available for benefits
per the Form 5500 ................ $4,852,873,765 $4,188,720,253
============== ==============
YEAR ENDED
DECEMBER 31, 2003
-----------------
Benefits paid to participants per the
financial statements ........................... $187,817,557
Add: Amounts allocated to withdrawing
participants at December 31, 2003 .............. 1,214,681
Less: Amounts allocated to withdrawing
participants at December 31, 2002 .............. (503,822)
------------
Benefits paid to participants per the Form 5500 .. $188,528,416
============
Amounts allocated to the withdrawing participants are recorded on the
Form 5500 for benefit payments that have been processed and approved
for payment prior to December 31, 2003 and 2002 but not yet paid as of
that date.
-13-
JOHNSON & JOHNSON
SAVINGS PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2003
--------------------------------------------------------------------------------
DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE,
IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, COLLATERAL CURRENT
LESSOR, OR SIMILAR PARTY PAR OR MATURITY VALUE COST VALUE
---------------------------- ---------------------------- ---- -------
*Participant loans Interest rate is prime rate -- 57,570,698
plus one percent
Maturities ranging from
2004-2008
* Represents parties-in-interest transactions.
-14-
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-40294) of Johnson & Johnson of our report dated
June 16, 2004 relating to the financial statements and financial statement
schedule of the Johnson & Johnson Savings Plan, which appears in this Form 11-K.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Florham Park, New Jersey
June 18, 2004