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Microsoft Excel LibreOffice Calc

Johnson & Johnson (JNJ)

Economic Value Added (EVA)

Advanced level

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit

Johnson & Johnson, economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 30, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 28, 2014
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2018 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Johnson & Johnson’s economic profit decreased from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Net Operating Profit after Taxes (NOPAT)

Johnson & Johnson, NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 30, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 28, 2014
Net earnings
Deferred income tax expense (benefit)1
Increase (decrease) in allowances for doubtful accounts2
Increase (decrease) in restructuring reserve3
Increase (decrease) in equity equivalents4
Interest expense, net of portion capitalized
Interest expense, operating lease liability5
Adjusted interest expense, net of portion capitalized
Tax benefit of interest expense, net of portion capitalized6
Adjusted interest expense, net of portion capitalized, after taxes7
(Gain) loss on marketable securities
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income8
Investment income, after taxes9
Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowances for doubtful accounts.

3 Addition of increase (decrease) in restructuring reserve.

4 Addition of increase (decrease) in equity equivalents to net earnings.

5 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

6 2018 Calculation
Tax benefit of interest expense, net of portion capitalized = Adjusted interest expense, net of portion capitalized × Statutory income tax rate
= × 21.00% =

7 Addition of after taxes interest expense to net earnings.

8 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

9 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Johnson & Johnson’s NOPAT decreased from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Cash Operating Taxes

Johnson & Johnson, cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 30, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 28, 2014
Provision for taxes on income
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense, net of portion capitalized
Less: Tax imposed on investment income
Cash operating taxes

Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Johnson & Johnson’s cash operating taxes increased from 2016 to 2017 but then slightly decreased from 2017 to 2018 not reaching 2016 level.

Invested Capital

Johnson & Johnson, invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 30, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 28, 2014
Loans and notes payable
Long-term debt, excluding current portion
Operating lease liability1
Total reported debt & leases
Shareholders’ equity
Net deferred tax (assets) liabilities2
Allowances for doubtful accounts3
Restructuring reserve4
Equity equivalents5
Accumulated other comprehensive (income) loss, net of tax6
Adjusted shareholders’ equity
Construction in progress7
Current marketable securities8
Invested capital

Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of restructuring reserve.

5 Addition of equity equivalents to shareholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction in progress.

8 Subtraction of current marketable securities.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Johnson & Johnson’s invested capital increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.

Cost of Capital

Johnson & Johnson, cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (filing date: 2019-02-20).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2018-02-21).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2017-02-27).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2016-02-24).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2015-02-24).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Economic Spread Ratio

Johnson & Johnson, economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Dec 30, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 28, 2014
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3

Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).

1 Economic profit. See details »

2 Invested capital. See details »

3 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Johnson & Johnson’s economic spread ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.

Economic Profit Margin

Johnson & Johnson, economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 30, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 28, 2014
Selected Financial Data (US$ in millions)
Economic profit1
Sales to customers
Performance Ratio
Economic profit margin2

Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).

1 Economic profit. See details »

2 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales to customers
= 100 × ÷ =

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Johnson & Johnson’s economic profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level.