Analysis of Debt
Total Debt (Carrying Amount)
Johnson & Johnson, balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Loans and notes payable
- The value exhibits significant fluctuation over the five-year period. Initially, it increased from 2,631 million USD at the end of 2020 to a peak of 12,771 million USD by the end of 2022. This was followed by a sharp decline to 3,451 million USD in 2023, and then a moderate rise to 5,983 million USD in 2024. The data indicates volatility, with a notable spike in 2022 that was not sustained in subsequent years.
- Long-term debt, excluding current portion
- There is a general downward trend from 32,635 million USD in 2020 to a low of 25,881 million USD in 2023, indicating an effort to reduce long-term debt during this period. However, in 2024, the long-term debt increased again to 30,651 million USD, suggesting a possible shift in debt management strategy or financing needs.
- Total borrowings (carrying amount)
- Total borrowings show variability with an initial slight decline from 35,266 million USD in 2020 to 33,751 million USD in 2021, followed by a substantial rise to 39,659 million USD in 2022. This peak was succeeded by a decrease to 29,332 million USD in 2023, and subsequently a rise again to 36,634 million USD in 2024. This pattern reflects the changes seen in loans and long-term debt, indicating overall borrowing levels have fluctuated considerably over the period.
Total Debt (Fair Value)
| Dec 29, 2024 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Short-term borrowings | 4,234) |
| Long-term debt, including current portion | 30,400) |
| Total borrowings (fair value) | 34,634) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 0.95 |
Based on: 10-K (reporting date: 2024-12-29).
Weighted-average Interest Rate on Debt
Weighted average effective rate on borrowings: 3.48%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 4.46% | 4,100) | 183) | |
| 3.36% | 32,400) | 1,089) | |
| Total | 36,500) | 1,272) | |
| 3.48% | |||
Based on: 10-K (reporting date: 2024-12-29).
1 US$ in millions
2 Weighted-average interest rate = 100 × 1,272 ÷ 36,500 = 3.48%
Interest Costs Incurred
Johnson & Johnson, interest costs incurred
US$ in millions
Based on: 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The data reveals a notable upward trend in the annual interest costs incurred over the five-year period, highlighting significant changes in both the net interest expense and the capitalized portion of interest.
- Interest expense, net of portion capitalized
- This component exhibited a fluctuating pattern initially, decreasing from 201 million USD in 2020 to 183 million USD in 2021. Following this decline, a sharp increase occurred, reaching 276 million USD in 2022, and then surging dramatically to 772 million USD in 2023. The 2024 figure shows a slight decrease to 755 million USD, which remains substantially higher than the earlier years, indicating a significant increase in net interest expense in the most recent periods.
- Interest expense capitalized
- Capitalized interest experienced a downward movement from 63 million USD in 2020 to 49 million USD in 2021, remaining stable at 49 million USD in 2022. This was followed by a rise to 70 million USD in 2023 and further to 79 million USD in 2024. The gradual increase suggests an expanding portion of interest being capitalized in the later years, potentially reflecting increased investment in capital projects or shifts in accounting treatment.
- Interest costs incurred (total interest)
- The total interest costs incurred mirror the sum of the prior two components, starting at 264 million USD in 2020 and declining to 232 million USD in 2021. This low point was followed by a sharp increase to 325 million USD in 2022 and more than doubled in 2023 to 842 million USD. A slight decline to 834 million USD occurred in 2024 but remained at a markedly high level compared to the early years. This substantial rise in total interest costs indicates increased borrowing or higher interest rates affecting the company's overall interest burden.
Overall, the interest expense and total costs incurred reflect a period of heightened borrowing costs, particularly notable from 2022 onwards. The net expense increase is especially pronounced, suggesting changes in either debt levels, interest rates, or a combination of both. Meanwhile, the capitalized interest component shows a more modest yet consistent rise in recent years, pointing to an increased allocation of interest costs to capital expenditures.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2024-12-29), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
2024 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense, net of portion capitalized
= 17,442 ÷ 755 = 23.10
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 17,442 ÷ 834 = 20.91
- Interest Coverage Ratio (without capitalized interest)
- The interest coverage ratio without capitalized interest demonstrated significant fluctuations over the five-year period. Starting from a high level of 83.07 in 2020, it increased notably to 125.46 in 2021, indicating a stronger ability to cover interest expenses during that year. However, a decline followed in subsequent years, dropping to 79.71 in 2022 and experiencing a sharp decrease to 20.51 in 2023. A slight recovery is observed in 2024, with the ratio rising to 23.1, yet it remains considerably lower than the earlier years. This suggests a weakening in the company's capacity to cover interest obligations, particularly after 2021.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted interest coverage ratio, which accounts for capitalized interest, follows a trend similar to the unadjusted ratio. It starts at 63.25 in 2020 and peaks significantly at 98.96 in 2021, reflecting improved financial flexibility that year. Subsequently, there is a decline to 67.7 in 2022, followed by a more pronounced drop to 18.81 in 2023. As with the unadjusted ratio, a modest increase occurs in 2024, reaching 20.91, but the ratio remains markedly below previous levels. The pattern reveals a decreasing ability to cover interest expenses when considering capitalized interest, especially in the last two years.
- Overall Trends and Insights
- Both ratios exhibit a common pattern of peaking in 2021, followed by a downward trend through 2023, with a slight improvement in 2024. The pronounced decline in interest coverage ratios after 2021 may indicate increased interest expenses, reduced earnings before interest and taxes, or a combination of both. Although there is a marginal recovery in the most recent year, the ratios suggest a weakened position in meeting interest obligations compared to the earlier part of the observed period. This could warrant closer monitoring of earnings stability and debt servicing capacity moving forward.