SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
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[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
Commission File Number 1-3215
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JOHNSON & JOHNSON
RETIREMENT 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
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 RETIREMENT SAVINGS PLAN
By: /s/ R. J. Darretta
---------------------------
R. J. Darretta
Chairman, Pension Committee
June 22, 2004
JOHNSON & JOHNSON RETIREMENT SAVINGS PLAN
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FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002
AND FOR THE YEAR ENDED
DECEMBER 31, 2003
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEAR ENDED DECEMBER 31, 2003
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PAGE(S)
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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 - 11
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 Johnson & Johnson Retirement 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 Retirement 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.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
June 16, 2004
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2003 AND 2002
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2003 2002
------------ ------------
ASSETS
Interest in Master Trusts, at fair value
Interest in Johnson & Johnson Pension
and Savings Plans Master Trust ........... $106,376,720 $ --
Investments in Johnson & Johnson Savings
Plan Trust ............................... -- 100,449,688
------------ ------------
Total investments ...................... 106,376,720 100,449,688
Receivables
Employee contributions ..................... 282,555 --
Employer contributions ..................... 104,265 --
------------ ------------
Total receivables ...................... 386,820 --
------------ ------------
Total assets ........................... 106,763,540 100,449,688
============ ============
LIABILITIES
Accrued expenses ............................. -- 180,668
------------ ------------
Total liabilities .......................... -- 180,668
============ ============
Net assets available for benefits ........ $106,763,540 $100,269,020
============ ============
See Notes to Financial Statements.
-2-
JOHNSON & JOHNSON
RETIREMENT 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 depreciation in fair value of investments........... $ (1,064,952)
Investment income
Interest.............................................. 258,134
Dividends............................................. 1,638,002
Contributions
Employee contributions.................................. 10,947,109
Employer contributions.................................. 4,101,967
------------
Total Additions....................................... 15,880,260
------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO
Benefits paid to participants............................. 9,092,842
Administrative expenses................................... 292,898
------------
Total deductions........................................ 9,385,740
------------
Net increase.......................................... 6,494,520
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year......................................... 100,269,020
------------
End of year............................................... $106,763,540
============
See Notes to Financial Statements.
-3-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF PLAN
GENERAL
The Johnson & Johnson Retirement Savings Plan (the "Plan") is a defined
contribution plan which was established on March 1, 1990 for eligible
employees of certain participating subsidiaries of Johnson & Johnson
("J&J" or the "Company") located in Puerto Rico which have adopted the
Plan. The Plan was designed to provide eligible employees with an
opportunity to strengthen their financial security at retirement by
providing an incentive to save and invest regularly. The funding of the
Plan is made through employee and Company contributions. Beginning
January 1, 2003, assets of the Plan are maintained in 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.
As of January 1, 2003, State Street Bank and Trust Company ("State
Street") serves as agent and custodian of the Plan for purposes of
investment of the assets of the Trust, maintained by Banco Popular de
Puerto Rico. As such, State Street performs certain services for the
Plan, including the execution of certain participant directed
investments, which are commingled for investment purposes only with
assets of other tax-qualified plans maintained by Johnson & Johnson.
Prior to January 1, 2003, the assets of the Plan were maintained and
transactions therein were executed by Banco Popular de Puerto Rico.
This brief description of the Plan is provided for general information
purposes only. Participants should refer to the Plan document for
complete information.
CONTRIBUTIONS
In general, salaried and hourly employees of participating Johnson &
Johnson companies who are Puerto Rico residents can contribute to the
Plan immediately.
Contributions are made to the Plan by participants through payroll
deductions and by the Company on behalf of participants. Participating
employees may contribute a minimum of 3% up to a maximum of 10% pre-tax
and/or a minimum of 1% to 10% post-tax of their base salary. Annual
pre-tax contributions may not individually exceed $8,000 in 2003 or
2002 under Puerto Rico law.
All employee contributions are invested in any of the investment funds
offered by the Plan at the direction of the participating employees.
During 2003, the number of investment funds offered by the Plan
increased to nine compared to three in 2002.
After one year of service, the Company contributes to the Plan an
amount equal to 75% of the participant's pre-tax contributions up to 6%
of their base salary. Prior to 2003, the Company's matching
contributions were made to the J&J Stock Fund, except for participants
over the age of 50, who had the option to have their matching
contribution follow their designated investments. Beginning in 2003,
all participants have the option to elect that the Company matching
contribution be invested in the current investment fund mix chosen by
the participant.
INVESTMENTS
Participants may invest in one or more of the funds offered by the
Plan. The investment mix chosen by the participant will apply to
employee contributions, the Company matching contribution, and earnings
thereon, if elected by participants. All dividend and interest income
is reinvested.
-4-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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VESTING
A participant's account in the Plan, including participant
contributions, company contributions and earnings thereon, is always
fully vested. As a result, there are no forfeitures under the Plan.
PAYMENT OF BENEFITS
Benefits are paid to participants upon termination of employment or
retirement. Participants can elect to defer payment 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 or in installments upon the participant's death.
Participants are allowed to withdraw their post-tax contributions and
earnings thereon one time per calendar year. Participants may withdraw
pre-tax contributions only upon meeting certain hardship conditions.
The benefits to which participants are entitled is the amount provided
by contributions and investment earnings thereon, including realized
and unrealized gains and losses which have been allocated to the
participant's account balance. Participants have the option of
receiving 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.
TERMINATION
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,
all Plan funds must be used exclusively for the benefit of the Plan
participants.
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 Johnson & Johnson Pension and Savings Plans
Master Trust is stated at fair value. Generally, it represents
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 State Street, 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.
-5-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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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.
In 2002, equity investments in the Johnson & Johnson Stock Fund,
administered by Banco Popular de Puerto Rico, were valued at the
closing market price on the last business day of the year. Equity
investments in the Equity Fund, managed by American Funds, represented
shares of a registered investment company and were valued at the quoted
market price, which represented the net asset value of shares held by
the Plan at year-end.
The cost of equity investments in the Johnson & Johnson Stock Fund was
recorded at the average market price of the stock transactions for the
month during which the contribution was made. Units in the Equity Fund
were purchased throughout the month at the prevailing quoted market
price on those dates.
Deposits in short-term investments in the Short-Term Investment Fund
were principally purchases of shares of the Prime Portfolio of Vanguard
Money Market Reserves, Inc. The Portfolio invested in securities which
matured in less than one year. The value of this portfolio was the
market value on the last business day of the year.
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.
RISK AND UNCERTAINTIES
The Plan provides for various investment options in funds, which can
invest in equity and fixed income securities. 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.
-6-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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3. INVESTMENTS
The following investments are those in the Master Trust which represent
5% or more of the Plan's net assets.
DECEMBER 31,
2003 2002
------ ------
Johnson & Johnson Stock Fund* ................... $ 86,270,471 $ 91,043,231
Diversified Equity Fund ......................... 9,462,549 4,754,953
* 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:
FOR THE
YEAR ENDED
DECEMBER 31,
2003
-------------
Equities .................................................... $ 2,501,719
Bonds ....................................................... 1,642
J&J common stock ............................................ (3,637,736)
Other ....................................................... 69,423
------------
Net depreciation .......................................... $ (1,064,952)
============
-7-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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4. NON-PARTICIPANT DIRECTED INVESTMENTS
During 2002, the J&J Stock Fund included participant and
non-participant directed investments. Beginning in 2003, the fund is
fully participant directed. Information about the net assets and the
significant components of the changes in net assets relating to the
fund is as follows:
December 31,
2003 2002
Net assets
J&J Stock Fund $86,270,471 $91,043,231
------------- -------------
For the Year Ended
December 31, 2003
Changes in net assets
Contributions........................... $ 12,412,527
Investment income....................... 1,570,090
Net depreciation in fair value.......... (3,637,735)
Benefits paid to participants........... (7,481,446)
Administrative expenses................. (427,496)
Assets transferred...................... (7,208,700)
---------------
$ (4,772,760)
===============
-8-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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5. INVESTMENTS IN PLAN MASTER TRUST
Beginning January 1, 2003, the assets of the Plan are maintained in the
Johnson & Johnson Pension and Savings Plans Master Trust. The Plan
holds approximately 1.17% of the Trust's net assets as of December 31,
2003.
Nets assets, income, and expenses are allocated to the Plan based on
the total of each participant's share in the trust.
As of
December 31,
2003
Pension & Savings
Plans
Master Trust
-----------------
Investments at fair value
Short term investment funds................................... $ 251,872,480
U.S. Government and Agency securities......................... 688,955,151
Corporate debt................................................ 305,698,696
Preferred stocks.............................................. 10,536,822
J&J common stock.............................................. 4,890,705,529
Other equities................................................ 2,074,484,099
Investments at contract value
Deposits in group annuity contracts and synthetics............ 924,152,802
--------------
Total Master Trust investments............................... 9,146,405,579
Receivables.................................................... 179,120,628
Liabilities.................................................... (230,499,957)
--------------
Net assets held in Master Trust, at fair value............... $9,095,026,250
==============
-9-
JOHNSON & JOHNSON
RETIREMENT 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%
for 2003. The crediting interest rate was approximately 4.96% for 2003.
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 is $924,152,802.
7. TAX STATUS
The Associated Free State of Puerto Rico, Property Department, has
determined and informed the Company by a letter dated March 1, 1990,
that the Plan constitutes as a qualified plan under Section 165(a) of
the Puerto Rico Income Tax Act of 1954 as amended (the "ITA"), and the
Plan and the related trust accounts are exempt from Puerto Rico income
taxes under Section 165(a) and 165(e) of the ITA.
-10-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
The Plan has been amended since receiving the determination letter.
However, the Plan administrator believes that the Plan is currently
designed and operated in compliance with the applicable requirements of
the Puerto Rico tax code. Therefore, no provision for income taxes has
been included in the Plan's financial statements.
8. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by State
Street Global Advisors ("State Street"). State Street is the agent
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.
9. 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 ........ $106,763,540 100,269,020
Amounts allocated to withdrawing
participants ........................ (17,016) --
------------ ------------
Net assets available for benefits per
the Form 5500 ....................... $106,746,524 $100,269,020
============ ============
FOR THE YEAR
ENDED
DECEMBER 31, 2003
-----------------
Benefits paid to participants per the
financial statements ........................... $9,092,842
Add: Amounts allocated to withdrawing
participants at December 31, 2003 .............. 17,016
Less: Amounts allocated to withdrawing
participants at December 31, 2002 .............. --
----------
Benefits paid to participants per the Form 5500 .. $9,109,858
==========
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 but not yet paid as of that
date.
-11-
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-32875) of Johnson & Johnson of our report dated
June 16, 2004 relating to the financial statements of the Johnson & Johnson
Retirement Savings Plan, which appears in this Form 11-K.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Florham Park, New Jersey
June 18, 2004