UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------
*
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended December 31, 2005
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)
REQUIRED INFORMATION
Item 4. Financial Statements and Exhibits
Financial statements prepared in accordance with the financial reporting
requirements of ERISA filed herewith are listed below in lieu of the
requirements of Items 1 to 3.
Report of Independent Registered Public Accounting Firm
Financial Statements:
Statements of Net Assets Available for Benefits
Statement of Changes in Net Assets Available for Benefits
Notes to Financial Statements
Supplemental Schedule*:
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
* Other supplemental 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 required or are not
applicable.
Exhibits:
23. Consent of PricewaterhouseCoopers LLP, dated June 26, 2006
SIGNATURES
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 26, 2006
JOHNSON & JOHNSON RETIREMENT SAVINGS PLAN
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FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2005 AND 2004
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 20034
PAGE(S)
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Report of Independent Registered Public Accounting Firm 1
Financial Statements:
Statements of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4 - 10
Supplemental Schedule*:
Schedule H, line 4i - Schedule of Assets (Held at
End of Year) 11
* Other supplemental 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 required or 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 Retirement Savings Plan:
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 Retirement Savings Plan (the "Plan") as of December 31,
2005 and 2004, and the changes in net assets available for benefits for the year
ended December 31, 2005 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). 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 23, 2006
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005 AND 2004
2005 2004
------------ ------------
ASSETS
Interest in Johnson & Johnson Pension
and Savings Plans Master Trust, at fair value $138,882,917 $135,917,302
------------ ------------
Total investments 138,882,917 135,917,302
Receivables
Employee contributions 365,587 320,808
Employer contributions 129,059 117,904
------------ ------------
Total receivables 494,646 438,712
------------ ------------
Total assets 139,377,563 136,356,014
============ ============
LIABILITIES
Accrued expenses 39,922 51,711
------------ ------------
Total liabilitites 39,922 51,711
============ ============
Net assets available for benefits $139,337,641 $136,304,303
============ ============
The accompanying notes are an integral part of these financial statements.
-2-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2005
ADDITIONS TO NET ASSETS ATTRIBUTED TO
Investment income (loss)
Plan's interest in the Johnson & Johnson Pension and
Savings Plans Master Trust net depreciation $ (2,314,607)
Contributions
Employee contributions 13,819,107
Employer contributions 5,066,172
------------
Total additions 16,570,672
------------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO
Benefits paid to participants 13,192,541
Administrative expenses 344,793
------------
Total deductions 13,537,334
------------
Net increase 3,033,338
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 136,304,303
------------
End of year $139,337,641
============
The accompanying notes are an integral part of these financial statements.
-3-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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, as there is no service requirement for employee contributions.
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% up to a maximum of 10% post-tax of their base
salary. Annual pre-tax contributions may not individually exceed $8,000 in
2005 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.
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 into the Johnson & Johnson Stock Fund. 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.
INVESTMENT
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, if elected. Rollover
contributions are invested at the election of the participant.
All other dividend and interest income is reinvested by the Trustee.
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.
-4-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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 are the amounts 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
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.
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 accounting principles generally accepted
in the United States of America.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's interest in the 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. Securities not traded on a national securities exchange are valued
using external pricing vendors based on the frequency of their valuations.
Benefit responsive guaranteed and synthetic investment contracts are
recorded at contract value, which approximates fair value (Note 4).
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 funds. 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. Each 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.
-5-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
NET APPRECIATION (DEPRECIATION)
The Plan presents in the Statement of Changes in Net Assets Available for
Benefits the Plan's interest in the Trust and includes net appreciation
(depreciation) in the fair value of investments held in the 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.
DERIVATIVES
The Trust will invest in securities from time to time that are denominated
in currencies other than the U.S. dollar. To hedge against adverse changes
in foreign exchange rates relating to non-U.S. dollar denominated
investments, the Trust can enter into forward foreign exchange contracts.
Forward foreign exchange contracts qualify as a derivative under Statement
of Financial Accounting Standard, Accounting for Derivative Instruments and
Hedging Activities ("SFAS No. 133"). The holder is exposed to credit risk
for nonperformance and to market risk for changes in interest and currency
rates. Those instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the Statements of Net Assets
Available For Plan Benefits. The Trust attempts to mitigate this credit
risk by utilizing the same policies in making commitments and conditional
obligations as it does for on-balance sheet instruments, and through
structured trading with reputable parties and continual monitoring
procedures. Accordingly the Trust does not anticipate losses for
nonperformance. The Trust does not require collateral or other security to
support forward foreign exchange contracts. The Trust accounts for forward
foreign exchange contracts at fair value. The Trust has forward exchange
contracts outstanding at December 31, 2005 and 2004 in various currencies.
At December 31, 2005 and 2004, the notional amount outstanding for these
contracts in the Trust was $15,175,043 and $11,869,143, respectively, and
the net currency (loss)/gain recognized during 2005 and 2004 by the Trust
was ($155,355) and ($808,790), respectively. The Trust holds no other
material derivative financial instruments at December 31, 2005 and 2004.
USE OF ESTIMATES
The preparation of the Plan's financial statements in conformity with
generally accepted accounting principles requires management 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 could 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
3. INVESTMENTS IN PLAN TRUST
Effective January 1, 2003, the assets of the Plan are maintained in the
Johnson & Johnson Pension and Savings Plans Master Trust. The Plan holds
approximately 1.16% and 1.27%, respectively of the Trust's net assets as of
December 31, 2005 and 2004.
Net assets, income, and expenses are allocated to the Plan based on the
total of each participant's share in the respective funds.
The following table represents the total value of investments in the Trust:
AS OF DECEMBER 31,
---------------------------------
2005 2004
--------------- ---------------
Investments at fair value
Short term investment funds $ 525,961,309 $ 551,013,386
U.S. Government and Agency securities 1,203,887,637 856,971,117
Corporate debt 384,540,272 313,196,278
Preferred stocks 12,642,943 11,061,328
Common stocks 7,248,778,441 6,822,053,563
Equities and other 1,718,940,364 1,348,404,513
Investments at contract value
Deposits in group annuity contracts
and synthetic GICs 1,037,128,055 973,552,848
--------------- ---------------
Total Trust investments 12,131,879,021 10,876,253,033
Receivables 91,846,840 75,006,869
Liabilities (273,456,135) (211,812,708)
--------------- ---------------
Net assets held in Trust, at fair value $11,950,269,726 $10,739,447,194
=============== ===============
-7-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
The net investment income of the Johnson & Johnson Pension and Savings
plans Master Trust was composed of the following:
FOR THE
YEAR ENDED
DECEMBER 31,
2005
------------
Net appreciation in fair value of investments
Short term investment funds $ 311,514
U.S. Government and Agency securities (8,112,371)
Corporate debt (15,656,090)
Preferred stocks 2,051,876
Common stocks 191,591,423
Equities and other 95,164,399
------------
265,350,751
------------
Interest 129,122,943
Dividends 172,796,316
------------
Net investment gain $567,270,010
============
4. GUARANTEED AND SYNTHETIC INVESTMENT CONTRACTS
The Trust holds investments in guaranteed and synthetic investment
contracts. 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 these contracts was approximately 4.21% and 4.12% for
2005 and 2004, respectively. The crediting interest rate was approximately
4.37% and 4.22% for 2005 and 2004, respectively. The crediting interest
rate of the contracts is the annual return of the contracts before plan
expenses, while the average yield includes plan expenses. The crediting
interest rate for the investment contracts is either agreed upon in advance
with the issuer or varies based on an agreed upon formula, but cannot be
less than zero. The fair value of guaranteed and synthetic investment
contracts for the Plan at December 31, 2005 and 2004 was $6,794,992 and
$4,940,892, respectively.
On December 29, 2005, The Financial Accounting Standards Board (FASB)
released FASB Staff Position Nos. AAG INV-1 and SOP 94-4-1, Reporting of
Fully Benefit-Responsive Investment Contracts Held by Certain Investment
Companies Subject to the AICPA Investment Company Guide and
Defined-Contribution Health and Welfare and Pension Plans (FSP). The FSP
clarifies the definition of fully benefit-responsive investment contracts
for contracts held by defined contribution plans. The FSP also establishes
enhanced financial statement presentation and disclosure requirements for
defined contribution plans subject to the FSP effective for financial
statements for issued for periods ending after December 15, 2006.
-8-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Management intends to adopt the FSP in the Plan's financial statements for
the year ended December 31, 2006 and does not believe the adoption will
have a material affect on the plans financial statements.
5. 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. Although the Plan has been amended
since receiving the determination letter, the Plan Administrator and the
Plan's tax counsel believe that the Plan is currently designed and is
currently being 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.
6. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of institutional commingled funds
managed by State Street Global Advisors, a division of State Street. State
Street is the trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest transactions. As of December 31,
2005 the total market value of investments in the institutional commingled
funds managed by State Street was $6,021,973.
The Plan also invests in shares of the Company, which is managed by State
Street Global Advisors. The Company is the plan sponsor and, therefore,
these transactions qualify as party-in-interest transactions. As of
December 31, 2005 the market value of investments in the Johnson & Johnson
Common Stock Fund was $109,013,145.
-9-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
7. 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,
---------------------------
2005 2004
------------ ------------
Net assets available for benefits
per the financial statements $139,337,641 $136,304,303
Amounts allocated to withdrawing participants (31,240) (8,274)
------------ ------------
Net assets available for benefits per the Form 5500 $139,306,401 $136,296,029
============ ============
FOR THE YEAR ENDED
DECEMBER 31, 2005
------------------
Benefits paid to participants per the financial statements $(13,192,541)
Add: Amounts allocated to withdrawing participants at
December 31, 2005 31,240
Less: Amounts allocated to withdrawing participants
at December 31, 2004 (8,274)
------------
Benefits paid to participants per the Form 5500 $(13,169,575)
------------
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, 2005 but not yet paid as of that date.
-10-
JOHNSON & JOHNSON
RETIREMENT SAVINGS PLAN
SCHEDULE H, LINE 4I - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2005
DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE,
IDENTITY OF ISSUE, BORROWER, LESSOR, RATE OF INTEREST, COLLATERAL, CURRENT
OR SIMILAR PARTY PAR OR MATURITY VALUE COST VALUE
------------------------------------ --------------------------------------- ---- -----------
Plan's interest in the Trust Plan's interest in the Johnson & Johnson $138,882,917
Pension and Savings Plans Master Trust
-11-