Johnson & Johnson

(JNJ)

July 2, 2010

Figures in Millions except per share values

Company OverviewValuation

Current Price

59.07$

Margin of Safety

NCAV(2.61)$Total Net Reprod. Cost32.19$Earnings Power Value (EPV)60.00$Discounted Cash Flow (DCF)62.04$Ben Graham Formula$88.26

Key StatisticsValuation Ratios

Market Cap (millions)162,920.00$P/E (TTM)12.4 52-Week High66.20$P/S (TTM)2.6 52-Week Low55.71$P/Tang.B (MRQ)7.7 % off 52-Week Low6%P/Tang. BV (MRQ)7.7 FCF/EV (TTM)7.2%

Cash Flows

P/FCF (TTM)16.8Free Cash FlowEarnings Yld (TTM)12.8%5 yr FCF Growth9.1%Piotroski (TTM)7 10 yr FCF Growth11.5%Altman (MRQ)4.13 Beneish (TTM)-2.62

Balance SheetEffectiveness

Cash and Equiv18,010.00$CROIC

Margins & Profitability

Short-Term Investments-$Avg34.7%GrossAccts Rec10,018.00$ FCF/SGross MarginInventory5,308.00$Avg19.5%OperatingTotal Current Assets41,093.00$ ROAOperating MarginNet PP&E14,277.00$Avg15.5%Net ProfitIntangibles31,776.00$ ROENet MarginTotal Assets95,673.00$Avg27.5%

Financial Strength (MRQ)

Total Current Liabilities18,499.00$

Efficiency

Quick Ratio1.8Long-Term Debt8,059.00$ Receivable Turnover (TTM)6.3Current Ratio2.1Total Liabilities40,527.00$ Inventory Turnover (TTM)3.5LT Debt to Equity15.2 Asset Turnover (TTM)0.7Total Debt to Equity22.9 Johnson & Johnson is engaged in the research and development, manufacture andsale of a range of products in the health care field. The Company operates in threebusiness segments: Consumer, Pharmaceutical, and Medical Devices andDiagnostics. In July 2009, Johnson & Johnson completed the acquisition of CougarBiotechnology, Inc. with approximately 95.9% interest in Cougar Biotechnology'soutstanding common stock. In September 2009, Elan Corporation, plc and Johnson& Johnson announced that JANSSEN Alzheimer Immunotherapy, a newly formedsubsidiary of Johnson & Johnson, has completed the acquisition of substantially allof the assets and rights of Elan related to its Alzheimer`s Immunotherapy Program(AIP). In March 2010, Hypermarcas SA acquired 99.99% of Versoix ParticipacoesLtda from the Company.

0102030405060708010/20/2003 10/20/2005 10/20/2007 10/20/2009

5 Year Historical Price vs DCF Intrinsic Value

Historical Price Intrinsic Value Buy Price

012345

Low RiskHigh GrowthUnder ValuedWell ManagedGood FinancialHealthStrong Moat

Johnson & Johnson

(JNJ)

Figures in Millions except per share values

7/2/2010

JNJ

2000200120022003200420052006200720082009TTM

Income Statement 9876543210

Revenue29,139.0$ 33,004.0$ 36,298.0$ 41,862.0$ 47,348.0$ 50,514.0$ 53,324.0$ 61,095.0$ 63,747.0$ 61,897.0$ 62,502.0$

% change from prev year

13.3%10.0%15.3%13.1%6.7%5.6%14.6%4.3%-2.9%1.0%

COGS7,346.0$ 9,536.0$ 10,447.0$ 12,176.0$ 13,422.0$ 13,954.0$ 15,057.0$ 17,751.0$ 18,511.0$ 18,447.0$ 18,724.0$

COGS (%)25.2%28.9%28.8%29.1%28.3%27.6%28.2%29.1%29.0%29.8%30.0%

Gross Profit21,793.0$ 23,468.0$ 25,851.0$ 29,686.0$ 33,926.0$ 36,560.0$ 38,267.0$ 43,344.0$ 45,236.0$ 43,450.0$ 43,778.0$

Gross Profit (%) 74.8%71.1%71.2%70.9%71.7%72.4%71.8%70.9%71.0%70.2%70.0%

Operating Expenses

SG&A10,875.0$ 11,992.0$ 12,216.0$ 14,131.0$ 15,860.0$ 16,877.0$ 17,433.0$ 20,451.0$ 21,490.0$ 19,801.0$ 19,972.0$

SG&A (%)37.3%36.3%33.7%33.8%33.5%33.4%32.7%33.5%33.7%32.0%32.0%

R&D2,926.0$ 3,591.0$ 3,957.0$ 4,684.0$ 5,203.0$ 6,312.0$ 7,125.0$ 7,680.0$ 7,577.0$ 6,986.0$ 7,025.0$

R&D (%)10.0%10.9%10.9%11.2%11.0%12.5%13.4%12.6%11.9%11.3%11.2%

Restructuring & M&A-$ -$ -$ -$ -$ -$ -$ 745.0$ -$ 1,073.0$ 1,073.0$ Other Operating Expense-$ 105.0$ 189.0$ 918.0$ 18.0$ 362.0$ 559.0$ 807.0$ 181.0$ -$ -$ Other Special Charges21.0$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Operating Income7,971.0$ 7,780.0$ 9,489.0$ 9,953.0$ 12,845.0$ 13,009.0$ 13,150.0$ 13,661.0$ 15,988.0$ 15,590.0$ 15,708.0$

Operating Income (%) 27.4%23.6%26.1%23.8%27.1%25.8%24.7%22.4%25.1%25.2%25.1%

Other Income and Expense

Interest Income379.0$ 456.0$ 256.0$ 177.0$ 195.0$ 487.0$ 829.0$ 452.0$ 361.0$ 90.0$ 92.0$ Other Income (expense)(67.0)$ (185.0)$ (294.0)$ 385.0$ (15.0)$ 214.0$ 671.0$ (534.0)$ 1,015.0$ 526.0$ 2,045.0$ Interest expense146.0$ 153.0$ 160.0$ 207.0$ 187.0$ 54.0$ 63.0$ 296.0$ 435.0$ 451.0$ 453.0$

Income Before Taxes6,622.0$ 7,898.0$ 9,291.0$ 10,308.0$ 12,838.0$ 13,656.0$ 14,587.0$ 13,283.0$ 16,929.0$ 15,755.0$ 17,392.0$

Income Taxes1,822.0$ 2,230.0$ 2,694.0$ 3,111.0$ 4,329.0$ 3,245.0$ 3,534.0$ 2,707.0$ 3,980.0$ 3,489.0$ 4,107.0$

Tax Rate % 27.5%28.2%29.0%30.2%33.7%23.8%24.2%20.4%23.5%22.1%23.6%

Net Income: Cont. Operations

4,800.0$ 5,668.0$ 6,597.0$ 7,197.0$ 8,509.0$ 10,411.0$ 11,053.0$ 10,576.0$ 12,949.0$ 12,266.0$ 13,285.0$

Net Income4,800.0$ 5,668.0$ 6,597.0$ 7,197.0$ 8,509.0$ 10,411.0$ 11,053.0$ 10,576.0$ 12,949.0$ 12,266.0$ 13,285.0$

Net Income (%) 16.5%17.2%18.2%17.2%18.0%20.6%20.7%17.3%20.3%19.8%21.3%

Shares and EPS

EPS: Basic1.73$ 1.87$ 2.20$ 2.42$ 2.87$ 3.50$ 3.76$ 3.67$ 4.62$ 4.45$ 4.82$ EPS: Diluted1.70$ 1.84$ 2.16$ 2.40$ 2.84$ 3.46$ 3.73$ 3.63$ 4.57$ 4.40$ 4.76$ Shares: Basic2,780.63,033.82,998.32,968.12,968.42,973.92,936.42,882.92,802.52,759.52,755.4Shares: Diluted2,834.83,099.33,054.13,008.13,003.53,012.52,961.02,910.72,835.62,789.12,797.3

Balance Sheet

Assets

Cash and Equiv3,411.0$ 3,758.0$ 2,894.0$ 5,377.0$ 9,203.0$ 16,055.0$ 4,083.0$ 7,770.0$ 10,768.0$ 15,810.0$ 13,743.0$ Short-Term Investments2,333.0$ 4,214.0$ 4,581.0$ 4,146.0$ 3,681.0$ 83.0$ 1.0$ 1,545.0$ 2,041.0$ 3,615.0$ 4,267.0$ Accts Rec4,464.0$ 4,630.0$ 5,399.0$ 6,574.0$ 6,831.0$ 7,010.0$ 8,712.0$ 9,444.0$ 9,719.0$ 9,646.0$ 10,018.0$

% change from prev year

3.6%14.2%17.9%3.8%2.6%19.5%7.8%2.8%-0.8%3.7%

Inventory2,842.0$ 2,992.0$ 3,303.0$ 3,588.0$ 3,744.0$ 3,959.0$ 4,889.0$ 5,110.0$ 5,052.0$ 5,180.0$ 5,308.0$

% change from prev year

5.0%9.4%7.9%4.2%5.4%19.0%4.3%-1.1%2.5%2.4%

Other Current Assets2,400.0$ 2,879.0$ 3,089.0$ 3,310.0$ 3,861.0$ 4,287.0$ 5,290.0$ 6,076.0$ 6,797.0$ 5,290.0$ 5,525.0$

Total Current Assets15,450.0$ 18,473.0$ 19,266.0$ 22,995.0$ 27,320.0$ 31,394.0$ 22,975.0$ 29,945.0$ 34,377.0$ 39,541.0$ 38,861.0$

Net PP&E6,971.0$ 7,719.0$ 8,710.0$ 9,846.0$ 10,436.0$ 10,830.0$ 13,044.0$ 14,185.0$ 14,365.0$ 14,759.0$ 14,277.0$ Intangibles7,256.0$ 9,077.0$ 9,246.0$ 11,539.0$ 11,842.0$ 12,175.0$ 28,688.0$ 28,763.0$ 27,695.0$ 31,185.0$ 31,776.0$ Other Long-Term Assets1,644.0$ 3,219.0$ 3,334.0$ 3,883.0$ 3,719.0$ 3,626.0$ 5,849.0$ 8,061.0$ 8,475.0$ 9,197.0$ 8,527.0$

Total Assets31,321.0$ 38,488.0$ 40,556.0$ 48,263.0$ 53,317.0$ 58,025.0$ 70,556.0$ 80,954.0$ 84,912.0$ 94,682.0$ 93,441.0$

Liabilities & Stockholders' Equity

Accts Payable2,083.0$ 2,838.0$ 3,621.0$ 4,966.0$ 5,227.0$ 4,315.0$ 5,691.0$ 6,909.0$ 7,503.0$ 5,541.0$ 5,126.0$ Short-Term Debt1,479.0$ 565.0$ 2,117.0$ 1,139.0$ 280.0$ 668.0$ 4,579.0$ 2,463.0$ 3,732.0$ 6,318.0$ 4,044.0$ Taxes Payable-$ -$ -$ -$ -$ -$ -$ -$ 417.0$ 442.0$ 1,373.0$ Accrued Liabilities-$ 4,104.0$ 5,001.0$ 7,343.0$ 8,420.0$ 7,652.0$ 8,891.0$ 10,465.0$ 9,200.0$ 9,430.0$ 7,956.0$ Other Short-Term Liabilities3,578.0$ 537.0$ 710.0$ -$ -$ -$ -$ -$ -$ -$ -$

Total Current Liabilities7,140.0$ 8,044.0$ 11,449.0$ 13,448.0$ 13,927.0$ 12,635.0$ 19,161.0$ 19,837.0$ 20,852.0$ 21,731.0$ 18,499.0$

Long-Term Debt2,037.0$ 2,217.0$ 2,022.0$ 2,955.0$ 2,565.0$ 2,017.0$ 2,014.0$ 7,074.0$ 8,120.0$ 8,223.0$ 8,059.0$ Other Long-Term Liabilities3,336.0$ 3,994.0$ 4,388.0$ 4,991.0$ 5,012.0$ 5,502.0$ 10,063.0$ 10,724.0$ 13,429.0$ 14,140.0$ 13,969.0$

Total Liabilities12,513.0$ 14,255.0$ 17,859.0$ 21,394.0$ 21,504.0$ 20,154.0$ 31,238.0$ 37,635.0$ 42,401.0$ 44,094.0$ 40,527.0$ Total Equity18,808.0$ 24,233.0$ 22,697.0$ 26,869.0$ 31,813.0$ 37,871.0$ 39,318.0$ 43,319.0$ 42,511.0$ 50,588.0$ 52,914.0$ Total Liabilities & Equity31,321.0$ 38,488.0$ 40,556.0$ 48,263.0$ 53,317.0$ 58,025.0$ 70,556.0$ 80,954.0$ 84,912.0$ 94,682.0$ 93,441.0$

Cash Flows Statement

Cash Flows From Operating Activities

Net Income4,800.0$ 5,668.0$ 6,597.0$ 7,197.0$ 8,509.0$ 10,411.0$ 11,053.0$ 10,576.0$ 12,949.0$ 12,266.0$ 13,285.0$ Depr & Amort1,515.0$ 1,605.0$ 1,662.0$ 1,869.0$ 2,124.0$ 2,093.0$ 2,177.0$ 2,777.0$ 2,832.0$ 2,774.0$ 2,832.0$ Deferred Taxes(167.0)$ (106.0)$ (74.0)$ (720.0)$ (498.0)$ (46.0)$ (1,168.0)$ (1,762.0)$ 22.0$ (436.0)$ (688.0)$ Other415.0$ 1,697.0$ (9.0)$ 2,249.0$ 996.0$ (581.0)$ 2,186.0$ 3,658.0$ (831.0)$ 1,967.0$ 2,005.0$

Cash from Operations6,563.0$ 8,864.0$ 8,176.0$ 10,595.0$ 11,131.0$ 11,877.0$ 14,248.0$ 15,249.0$ 14,972.0$ 16,571.0$ 17,434.0$

Cash Flows From Investing Activities

Cap Ex(1,646.0)$ (1,731.0)$ (2,099.0)$ (2,262.0)$ (2,175.0)$ (2,632.0)$ (2,738.0)$ (3,310.0)$ (3,066.0)$ (2,365.0)$ (2,327.0)$ Purchase of Business-$ -$ -$ -$ -$ -$ -$ -$ (1,214.0)$ (2,470.0)$ (1,951.0)$ Other(722.0)$ (2,362.0)$ (98.0)$ (2,264.0)$ (172.0)$ 2,353.0$ (17,553.0)$ (2,829.0)$ 93.0$ (2,763.0)$ (4,126.0)$

Cash from Investing(2,368.0)$ (4,093.0)$ (2,197.0)$ (4,526.0)$ (2,347.0)$ (279.0)$ (20,291.0)$ (6,139.0)$ (4,187.0)$ (7,598.0)$ (8,404.0)$

Cash Flows From Financing Activities

Net Issuance of Stock(681.0)$ (2,056.0)$ (6,148.0)$ (872.0)$ (742.0)$ (1,021.0)$ (5,587.0)$ (4,045.0)$ (6,651.0)$ (2,130.0)$ (1,679.0)$ Net Issuance of Debt-$ -$ -$ -$ -$ -$ -$ -$ 10,044.0$ 9,274.0$ 6,712.0$ Dividends1,724.0$ 2,047.0$ 2,381.0$ 2,746.0$ 3,251.0$ 3,793.0$ 4,267.0$ 4,670.0$ 5,024.0$ 5,327.0$ 5,404.0$ Other(695.0)$ (1,148.0)$ 1,576.0$ (245.0)$ (1,155.0)$ 293.0$ 3,745.0$ 3,017.0$ (5,833.0)$ (5,909.0)$ (7,675.0)$

Cash from Financing(3,100.0)$ (5,251.0)$ (6,953.0)$ (3,863.0)$ (5,148.0)$ (4,521.0)$ (6,109.0)$ (5,698.0)$ (7,464.0)$ (4,092.0)$ (8,046.0)$

Currency Adj(47.0)$ (40.0)$ 110.0$ 277.0$ 190.0$ (225.0)$ 180.0$ 275.0$ (323.0)$ 161.0$ 170.0$ Change in Cash1,048.0$ (520.0)$ (864.0)$ 2,483.0$ 3,826.0$ 6,852.0$ (11,972.0)$ 3,687.0$ 2,998.0$ 5,042.0$ 1,154.0$

Free Cash Flow

Cash from Operations6,563.0$ 8,864.0$ 8,176.0$ 10,595.0$ 11,131.0$ 11,877.0$ 14,248.0$ 15,249.0$ 14,972.0$ 16,571.0$ 17,434.0$ Cap Ex(1,646.0)$ (1,731.0)$ (2,099.0)$ (2,262.0)$ (2,175.0)$ (2,632.0)$ (2,738.0)$ (3,310.0)$ (3,066.0)$ (2,365.0)$ (2,327.0)$

Free Cash Flow4,917.0$ 7,133.0$ 6,077.0$ 8,333.0$ 8,956.0$ 9,245.0$ 11,510.0$ 11,939.0$ 11,906.0$ 14,206.0$ 15,107.0$ Owner Earnings FCF4,669.0$ 5,542.0$ 6,160.0$ 6,804.0$ 8,458.0$ 9,872.0$ 10,492.0$ 10,043.0$ 12,715.0$ 12,675.0$ 13,790.0$

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Johnson & Johnson

Shares Out.M.O.SGrowthDiscount %Terminal %Select FCFAdjust 2009 FCF

(JNJ)

Check Shares2,760.0010.3%

7/2/2010

Select input witheach list or enter

Current PriceIntrinsic $Buy UnderActual M.O.S52 Wk High52 Wk Low

$59.07

$62.04

$31.02

$66.20$55.71

Fiscal YearTrend

2000200120022003200420052006200720082009TTM

Cash Flow Data

Cash from Operations$6,563.0$8,864.0$8,176.0$10,595.0$11,131.0$11,877.0$14,248.0$15,249.0$14,972.0$16,571.0$17,434.0 Capex$1,646.0$1,731.0$2,099.0$2,262.0$2,175.0$2,632.0$2,738.0$3,310.0$3,066.0$2,365.0$2,327.0 Cash Flow$3,501.8$3,264.6$4,201.3$4,705.8$5,676.2$6,591.5$6,663.5$6,673.0$7,856.3$8,136.6$8,057.9 Free Cash Flow$4,917.0$7,133.0$6,077.0$8,333.0$8,956.0$9,245.0$11,510.0$11,939.0$11,906.0

$14,206.0

$15,107.0YOY% Change45.1%-14.8%37.1%7.5%3.2%24.5%3.7%-0.3%19.3%6.3%

Margins

Gross Margin74.8%71.1%71.2%70.9%71.7%72.4%71.8%70.9%71.0%70.2%70.0% Operating Margin27.4%23.6%26.1%23.8%27.1%25.8%24.7%22.4%25.1%25.2%25.1% Net Margin16.5%17.2%18.2%17.2%18.0%20.6%20.7%17.3%20.3%19.8%21.3%

Margins

Diluted EPS$1.70$1.84$2.16$2.40$2.84$3.46$3.73$3.63$4.57$4.40$4.76 Tax Rate27.5%28.2%29.0%30.2%33.7%23.8%24.2%20.4%23.5%22.1%23.6%

Efficiency & Profitability

CROIC29.1%33.4%30.6%35.8%32.5%27.8%50.7%36.9%32.7%34.0%35.0% FCF/Sales16.9%21.6%16.7%19.9%18.9%18.3%21.6%19.5%18.7%23.0%24.2% Inventory Turnover258.5%318.7%316.3%339.4%358.5%352.5%308.0%347.4%366.4%356.1%352.8% Return On Assets (ROA)15.3%14.7%16.3%14.9%16.0%17.9%15.7%13.1%15.2%13.0%14.2% Retun On Equity (ROE)25.5%23.4%29.1%26.8%26.7%27.5%28.1%24.4%30.5%24.2%25.1%

Debt Related

Debt to Equity66.5%58.8%78.7%79.6%67.6%53.2%79.4%86.9%99.7%87.2%76.6% Capitalization Ratio9.8%8.4%8.2%9.9%7.5%5.1%4.9%14.0%16.0%14.0%13.2% FCF to Total Debt39.3%50.0%34.0%39.0%41.6%45.9%36.8%31.7%28.1%32.2%37.3% FCF to Short Term Debt332.5%1262.5%287.1%731.6%3198.6%1384.0%251.4%484.7%319.0%224.8%373.6% FCF to Long Term Debt241.4%321.7%300.5%282.0%349.2%458.4%571.5%168.8%146.6%172.8%187.5%

5 Year Multi-Year Performance

2004-20082005-20092004-20072005-20082006-20092004-20062005-20072006-20082007-2009Median

Tang Shareholder Equity-7.2%-6.8%-10.0%-16.8%22.2%-27.0%-24.7%18.1%15.5%-7.2%Free Cash Flow7.4%11.3%10.1%8.8%7.3%13.4%13.6%1.7%9.1%

9.1%

CROIC32.7%34.0%34.7%34.8%35.5%32.5%36.9%36.9%34.0%34.7%FCF/Sales18.9%19.5%19.2%19.1%20.6%18.9%19.5%19.5%19.5%19.5%ROA15.7%15.2%15.8%15.5%14.2%16.0%15.7%15.2%13.1%15.5%ROE27.5%27.5%27.1%27.8%26.3%27.5%27.5%28.1%24.4%27.5%Gross Margin71.7%71.0%71.7%71.4%71.0%71.8%71.8%71.0%70.9%71.4%Operating Margin25.1%25.1%25.2%24.9%24.9%25.8%24.7%24.7%25.1%25.1%Net Margin20.3%20.3%19.3%20.5%20.1%20.6%20.6%20.3%19.8%20.3%Revenue Growth7.7%5.2%8.9%8.1%5.1%6.1%10.0%9.3%0.7%7.7%Earnings Growth12.6%6.2%8.5%9.7%5.7%14.6%2.4%10.7%10.1%9.7%Cash from Ops Growth7.7%8.7%11.1%8.0%5.2%13.1%13.3%2.5%4.2%8.0%

10 Year Multi-Year Performance

2000-20072001-20082002-20092000-20052001-20062002-20072003-20082004-2009Median

Tang Shareholder Equity3.4%-0.3%5.4%17.3%-6.8%1.6%-0.7%-0.6%0.6%Free Cash Flow13.5%7.6%12.9%13.5%10.0%14.5%7.4%9.7%

11.5%

CROIC32.9%33.1%33.4%31.6%32.9%34.2%34.3%33.4%33.2%FCF/Sales19.2%19.2%19.2%18.6%19.4%19.2%19.2%19.2%19.2%ROA15.5%15.5%15.5%15.6%15.8%15.8%15.5%15.5%15.5%ROE26.8%27.1%27.1%26.8%27.1%27.1%27.1%27.1%27.1%Gross Margin71.4%71.2%71.1%71.4%71.4%71.4%71.3%71.3%71.4%Operating Margin25.2%24.9%25.1%25.9%25.2%25.2%24.9%25.1%25.2%Net Margin17.6%18.1%19.0%17.6%18.1%18.1%19.1%20.1%18.1%Revenue Growth11.2%9.9%7.9%11.6%10.1%11.0%8.8%5.5%10.0%Earnings Growth11.4%13.9%10.7%15.3%15.2%10.9%13.7%9.2%12.6%Cash from Ops Growth12.8%7.8%10.6%12.6%10.0%13.3%7.2%8.3%10.3%

Projection of future Free Cash Flow

Growing at