The Pharmacy Health Care Provision Business Results - Assignment Example

Annual Report Project Introduction The company that has been chosen for analysis in this exercise is the Johnson & Johnson Family of Companies. The current CEO of the company is known as Alex Gorsky and the company’s headquarters are in New Brunswick, New Jersey. The company was founded in 1886 by James Wood Johnson, Edward Mead Johnson and Robert Wood Johnson. This company is perceived as among the largest health care provider in the US through its perceived caring for the world by the embracing of research and science. This has helped the company to bring to the market various innovative products, services and ideas aimed at the advancement of the well-being and health of its consumers and the general population. The employees at the organization work with partners at the enhancement of the lives of citizens everyday globally. The latest financial annual report for the company is for the year 2013 and it has an ending date for the fiscal year as 29th December, 2013. The company’s core business is in the pharmacy health care provision business and currently it has an integrated offerings spectrum across the pharmacy care spectrum. Thus, it seeks at the effective management of pharmaceutical costs and improving the outcomes of the health care through a pharmacy benefit management (PBM) program. This is centered on the fact that most people are overwhelmed by the ever rising costs in health care; thus, becoming confused. For instance, in 2013 alone, the company’s business delivered an outstanding performance in the pharmaceutical segment through its key strengths such as in the sale of key brands like over-the-counter (OTC) medicine and a continual progress in the integration of the Synthes, Inc. into its Medical Devices and Diagnostics business. Largely, the company has three main business segments: Pharmaceutical, Consumer and Medical Devices Diagnostics. Johnson & Johnson Family of Companies has a wide geographical coverage that spans mainly in the US, but, it also has a global coverage centered on the achievement of global health standards. It has more than 275 companies that operate in more than 60 countries, in the world. In achieving this, the company has set itself as the largest and diverse company in the offering of medical devices and diagnostics, the sixth largest consumer health company and the fifth largest company globally in biologics. The name of the company’s accountant or auditor is known as PricewaterhouseCoopers LLP as was appointed in the latest annual general meeting. PricewaterhouseCoopers LLP, as an independent auditor noted through their evaluation and informed opinion that the annual report presented a fair representation of the company’s consolidated financial statements. The conducting of the auditing was based on the company’s Internal Control-Integrated Framework. The achievement of this entailed the piloting of assessment so as to acquire judicious assurance about the efficiency of the internal control over fiscal reporting and whether it was maintained in all material respects. As such, in their opinion, the Corporation sustained, in all substantial respects, operational internal control over the fiscal reporting as at December 29, 2013, according to the COSO criteria. However, the auditing firm also believes that the limitations of the company in relation to the internal controls over financial reporting, it may be difficult to detect or even prevent the misstatements in the financial reports. Therefore, the auditor projects any future evaluations for effectiveness to be subject to the risk that the controls may not be adequate due to the changes in the conditions and the deterioration of the degree of compliance to the procedures. The most recent share price for the company is at $4.92. Industry situation and company plans The pharmaceutical industry that the company operates in has a positive outlook given that most consumers are concerned about the provision of solutions to their medical needs. The company has promised to make this realizable through the making of a difference in the things that they do. For instance, the company has opted at the reinvention of their pharmacies so as to help people to meet their medical needs on their paths to better health. The company has several plans that it plans to roll out in combating the situation as they are currently in the pharmaceutical market. As quantified in its fiscal report, the company plans, among its commitments and contingencies to build on lease guarantees. In this, the company plans at disposing of any guaranteed stores that it had and hope that the same will have no material effects on its consolidated financial position as most of the guaranteed stores had collapsed. Subsequently, the company plans at effectively managing its pharmaceutical costs and improving on its health care outcomes through the adoption of its new program, the Pharmacy Benefit Management (PBM). Through its integrated program, the company seeks at modeling its packages to enable the enhancement of offering members and consumers with an expanded choice, personalized services and greater access to help in the attainment of better health. Financial Statements a. Income statement: The format that has been used in the consolidated statements of comprehensive income is a multistep format. This is because it uses multiple subtractions and additions to arrive at the net income. Subsequently, it provides more information than a single step format as is the case of the income statement for Johnson & Johnson Co. Table 1: Comparison between gross profit, income from operations and net income Gross Profit ($ in millions) Income from Operations ($ in millions) Net Income ($ in millions) 2013 48,970 17,414 16,781 2012 45,566 15,396 10,675 2011 44,670 14,298 7,571 In 2012 and 2011, in comparison to 2013, there was an increase in the net income for the company. This increase can be attributed to the new techniques and business models adopted by the company. Subsequently, the trend is the same for the gross profit and income from operations. b. Balance sheet: The table below shows that the assets equal the addition of liabilities and shareholder’s equity for the years, 2012 and 2013. Table 2: Equating liabilities and shareholder’s equity to assets Liabilities (L) ($ in millions) Shareholder’s Equity (SE) ($ in millions) L + SE ($ in millions) Assets ($ in millions) 2013 58,630 74,053 132,683 132,683 2012 56,521 64,826 121,347 121,347 c. Statement of Cash Flow: Cash Flows from operations in contrast to the net income for the period beginning 2011-2013 are as presented below. Table 3: Comparison between net income and cash flow from operations Net Income ($ in millions) Cash Flows from operations ($ in millions) 2013 16,781 17,414 2012 10,675 15,396 2011 7,571 14,298 From the table above, the cash flows from operations for the past two years were higher than the net income for the company. As such, it would be noted that the company is increasing through its investing activities. The significant financing source for the fiscal year 2013 is proceeds long-term debt. Accounting policies a. Amendments related to testing indefinite-lived intangible assets for impairment This is the most current policy to be adopted by the company as guidance from the Financial Accounting Standards Board (FASB). In this, the company has the option to first assess the qualitative factors in determining whether the actuality of procedures or conditions designates that it is more prospective than not that the indeterminate lived intangible asset is impaired. b. Revenue recognition: revenue is recognized from the product sales at the delivery or shipment of the goods and the designation and threat of loss passed to the customer. Under this, the company also accounts for provisions such as sales incentives, rebates, coupons, trade promotions, discounts and product returns as reductions in the sales in the equivalent period that the associated products are recorded. c. Sales returns are projected and documented centered on the historical sales and returns information. d. Inventories are quantified at the inferior of cost or market resolute by the first-in, first-out (FIFO) method. e. Property, plant and equipment: In this, the company benefits from the interest expense as part of the construction cost for facilities and equipment. Upon the disposal or retirement of the property, plant and equipment (PPE), the related amounts and costs of accumulated depreciation or amortization are eliminated from the asset and accumulated depreciation accounts, respectively. Topics of notes to the financial statements a. Summary of Significant Accounting Policies b. Cash, Cash Equivalents and Current Marketable Securities c. Inventories d. Property, Plant and Equipment e. Intangible Assets and Goodwill f. Fair Value Measurements g. Borrowings h. Income Taxes i. Employee Related Obligations j. Pensions and Other Benefit Plans k. Savings Plan l. Capital and Treasury Stock m. International Currency Translation n. Earnings Per Share o. Rental Expense and Lease Commitments p. Common Stock, Stock Option Plans and Stock Compensation Agreements q. Segments of Business and Geographic Areas r. Selected Quarterly Financial Data (unaudited) s. Business Combinations and Divestitures t. Legal Proceedings u. Restructuring Financial Analysis Work Cited http://www.investor.jnj.com/investor-relations.cfm Read More