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The Company holds equity investments with readily determinable fair values and equity investments without readily determinable fair values. The Company measures equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.


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The following table is a summary of the activity related to equity investments for the fiscal years ended December 31, 2023 and January 1, 2023: ##January 1, 2023########December 31, 2023## (Dollars in Millions)##Carrying Value##Changes in Fair Value Reflected in Net Income(1)##Sales/ Purchases/Other(2)##Carrying Value####Non Current Other Assets Equity Investments with readily determinable value *##$576##(368)##4,265##4,473####4,473 Equity Investments without readily determinable value##$613##1##82##696####696


JNJ 2023 Annual Report 61 (1)Recorded in Other Income/Expense (2)Other includes impact of currency

##January 2, 2022########January 1, 2023## (Dollars in Millions)##Carrying Value##Changes in Fair Value Reflected in Net Income(1)##Sales/ Purchases/Other(2)##Carrying Value####Non Current Other Assets Equity Investments with readily determinable value##$1,884##(538)##(770)##576####576 Equity Investments without readily determinable value##$413##93##107##613####613


* Includes the 9.5% remaining stake in Kenvue and the $0.4 billion unfavorable change in fair value of the investment between separation date and the end of the fiscal year.


For the fiscal years ended December 31, 2023 and January 1, 2023 for equity investments without readily determinable market values, $1 million and $51 million, respectively, of the changes in fair value reflected in net income were the result of impairments. There were offsetting impacts of $27 million and $142 million, respectively, of changes in the fair value reflected in net income due to changes in observable prices and gains on the disposal of investments.


Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. In accordance with ASC 820, a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described below with Level 1 having the highest priority and Level 3 having the lowest.


The fair value of a derivative financial instrument (i.e., forward foreign exchange contracts, interest rate contracts) is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. Dollar at the current spot foreign exchange rate. The Company does not believe that fair values of these derivative instruments materially differ from the amounts that could be realized upon settlement or maturity, or that the changes in fair value will have a material effect on the Company’s results of operations, cash flows or financial position. The Company also holds equity investments which are classified as Level 1 and debt securities which are classified as Level 2. The Company holds acquisition related contingent liabilities based upon certain regulatory and commercial events, which are classified as Level 3, whose values are determined using discounted cash flow methodologies or similar techniques for which the determination of fair value requires significant judgment or estimations.


The following three levels of inputs are used to measure fair value:


Level 1 — Quoted prices in active markets for identical assets and liabilities.


Level 2 — Significant other observable inputs.


Level 3 — Significant unobservable inputs.


The Company’s significant financial assets and liabilities measured at fair value as of the fiscal year ended December 31, 2023 and January 1, 2023 were as follows: ######2023######2022 (Dollars in Millions)##Level 1##Level 2####Level 3##Total##Total(1) Derivatives designated as hedging instruments:############ Assets:############ Forward foreign exchange contracts##$—##539####—##539##629 Interest rate contracts (2)##—##988####—##988##1,534 Total##$—##1,527####—##1,527##2,163 Liabilities:############ Forward foreign exchange contracts##—##624####—##624##511 Interest rate contracts (2)##—##5,338####—##5,338##2,778 Total##$—##5,962####—##5,962##3,289 Derivatives not designated as hedging instruments:############ Assets:############ Forward foreign exchange contracts##$—##64####—##64##38 Liabilities:############ Forward foreign exchange contracts##—##75####—##75##68 Available For Sale Other Investments:############ Equity investments(3)##4,473##—####—##4,473##576 Debt securities(4)##—##8,874####—##8,874##10,487 Other Liabilities############ Contingent Consideration(5)##$######1,092##1,092##1,120 Gross to Net Derivative Reconciliation##2023##2022 (Dollars in Millions)#### Total Gross Assets##$1,591##2,201 Credit Support Agreements (CSA)##(1,575)##(2,176) Total Net Asset##16##25 Total Gross Liabilities##6,037##3,357 Credit Support Agreements (CSA)##(5,604)##(3,023) Total Net Liabilities##$433##334


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Summarized information about changes in liabilities for contingent consideration is as follows: ##2023##2022##2021 (Dollars in Millions)###### Beginning Balance##$1,120##533##633 Changes in estimated fair value##29##(194)##(52) Additions (6)##—##792##— Payments/Other##(57)##(11)##(48) Ending Balance (5)##$1,092##1,120##533


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(1)2022 assets and liabilities are all classified as Level 2 with the exception of equity investments of $576 million, which are classified as Level 1 and contingent consideration of $1,120 million, classified as Level 3.


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(2)Includes cross currency interest rate swaps and interest rate swaps.


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(3)Classified as non-current other assets.


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(4)Classified as cash equivalents and current marketable securities.


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(5)Includes $1,092 million, $1,116 million and $520 million, classified as non-current other liabilities as of December 31, 2023, January 1, 2023 and January 2, 2022, respectively. Includes $4 million and $13 million classified as current liabilities as of January 1, 2023 and January 2, 2022, respectively.


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(6)In fiscal year 2022, the Company recorded $704 million of contingent consideration related to Abiomed.


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See Notes 2 and 7 for financial assets and liabilities held at carrying amount on the Consolidated Balance Sheet.


JNJ 7. Borrowings

The components of long-term debt are as follows: (Dollars in Millions)##2023####Effective Rate %######2022####Effective Rate %#### 6.73% Debentures due 2023##$—####—##%####$250####6.73##%## 3.375% Notes due 2023##—####—######801####3.17#### 2.05% Notes due 2023##—####—######500####2.09#### 0.650% Notes due 2024  (750MM Euro 1.1090)(2)/(750MM Euro 1.0651)(3)##831##(2)##0.68######792##(3)##0.68#### 5.50% Notes due 2024  (500MM 1.2756 GBP )(2)/(500MM GBP 1.2037)(3)##637##(2)##6.75######600##(3)##6.75#### 2.625% Notes due 2025##750####2.63######749####2.63#### 0.55% Notes due 2025##950####0.57######918####0.57#### 2.46% Notes due 2026##1,997####2.47######1,996####2.47#### 2.95% Notes due 2027##900####2.96######877####2.96#### 0.95% Notes due 2027##1,419####0.96######1,394####0.96#### 1.150% Notes due 2028 (750MM Euro 1.1090)(2)/(750MM Euro 1.0651)(3)##828##(2)##1.21######794##(3)##1.21#### 2.90% Notes due 2028##1,497####2.91######1,496####2.91#### 6.95% Notes due 2029##298####7.14######298####7.14#### 1.30% Notes due 2030##1,630####1.30######1,607####1.30#### 4.95% Debentures due 2033##499####4.95######498####4.95#### 4.375% Notes due 2033##854####4.24######854####4.24#### 1.650% Notes due 2035 (1.5B Euro 1.1090)(2)/(1.5B Euro 1.0651)(3)##1,652##(2)##1.68######1,591##(3)##1.68#### 3.587% Notes due 2036##864####3.59######842####3.59#### 5.95% Notes due 2037##994####5.99######993####5.99#### 3.625% Notes due 2037##1,357####3.64######1,336####3.64#### 5.85% Debentures due 2038##697####5.85######697####5.85#### 3.400% Notes due 2038##993####3.42######992####3.42#### 4.50% Debentures due 2040##541####4.63######540####4.63#### 2.10% Notes due 2040##849####2.14######828####2.14#### 4.85% Notes due 2041##297####4.89######297####4.89#### 4.50% Notes due 2043##496####4.52######496####4.52#### 3.73% Notes due 2046##1,977####3.74######1,976####3.74#### 3.75% Notes due 2047##832####3.76######812####3.76#### 3.500% Notes due 2048##743####3.52######743####3.52#### 2.250% Notes due 2050##826####2.29######808####2.29#### 2.450% Notes due 2060##1,073####2.49######1,055####2.49#### Other##69####—######7####—#### Subtotal##27,350##(4)##2.98##%##(1)##28,437##(4)##3.04##%##(1) Less current portion##1,469##########1,551######## Total long-term debt##$25,881##########$26,886########


JNJ 7. Borrowings

(1)Weighted average effective rate.


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(2)Translation rate at December 31, 2023.


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(3)Translation rate at January 1, 2023.


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(4)The excess of the carrying value over the fair value of debt was $1.0 billion and $1.6 billion at the end of fiscal year 2023 and fiscal year 2022, respectively.


JNJ 2023 Annual Report 65

Fair value of the long-term debt was estimated using market prices, which were corroborated by quoted broker prices and significant other observable inputs.


JNJ 2023 Annual Report 65

The Company has access to substantial sources of funds at numerous banks worldwide. In September 2023, the Company secured a new 364-day Credit Facility of $10 billion, which expires on September 5, 2024. The Company early terminated the additional 364-day revolving Credit Facility of $10 billion, which had an expiration of November 21, 2023. Interest charged on borrowings under the credit line agreement is based on either the Term SOFR Reference Rate or other applicable market rates as allowed under the terms of the agreement, plus applicable margins. Commitment fees under the agreements are not material.


JNJ 2023 Annual Report 65

Throughout fiscal years 2023 and 2022, the Company continued to have access to liquidity through the commercial paper market. Short-term borrowings and the current portion of long-term debt amounted to approximately $3.5 billion and $12.8 billion at the end of fiscal years 2023 and 2022, respectively. The current portion of the long term debt was $1.5 billion and $1.6 billion in 2023 and 2022, respectively, and the remainder is commercial paper and local borrowing by international subsidiaries.


JNJ 2023 Annual Report 65

The current debt balance as of December 31, 2023 includes $2.0 billion of commercial paper which has a weighted average interest rate of 5.37% and a weighted average maturity of approximately two months. The current debt balance as of January 1, 2023 includes $11.2 billion of commercial paper which has a weighted average interest rate of 4.23% and a weighted average maturity of approximately two months.


JNJ 2023 Annual Report 65

Aggregate maturities of long-term debt obligations commencing in 2024 are: ##(Dollars in Millions)########## 2024####2025##2026##2027##2028##After 2028 $1,469####1,700##1,997##2,320##2,325##17,539


JNJ 8. Income taxes

The provision for taxes on income consists of: (Dollars in Millions)##2023##2022##2021 Currently payable:###### U.S. taxes##$2,705##2,274##1,338 International taxes##3,090##2,295##2,069 Total currently payable##5,795##4,569##3,407 Deferred:###### U.S. taxes##(3,440)##(1,990)##565 International taxes##(619)##410##(2,595) Total deferred##(4,059)##(1,580)##(2,030) Provision for taxes on income##$1,736##2,989##1,377


JNJ 8. Income taxes

A comparison of income tax expense at the U.S. statutory rate of 21% in fiscal years 2023, 2022 and 2021, to the Company’s effective tax rate is as follows: (Dollars in Millions)##2023####2022##2021 U.S.##$(2,033)####4,606##4,275 International##17,095####14,753##14,903 Earnings before taxes on income:##$15,062####19,359##19,178 Tax rates:######## U.S. statutory rate##21.0##%##21.0##21.0 International operations(1)##(8.1)####(5.0)##(19.1) U.S. Tax Settlements##(3.0)####—##— U.S. taxes on international income(2)##(0.3)####(1.1)##8.9 Tax benefits from loss on capital assets##—####—##(1.6) Tax benefits on share-based compensation##(0.8)####(1.4)##(1.2) All other##2.7####1.9##(0.8) Effective Rate##11.5##%##15.4##7.2


JNJ 8. Income taxes

(1)International operations reflect the impacts of operations in jurisdictions with statutory tax rates different than the U.S., particularly Ireland, Switzerland, Belgium and Puerto Rico, which is a favorable impact on the effective tax rate as compared with the U.S. statutory rate.


JNJ 8. Income taxes

(2)Includes the impact of the GILTI tax, the Foreign-Derived Intangible Income deduction and other foreign income that is taxable under the U.S. tax code. The 2023 and 2022 amount includes the impact of certain provisions of the 2017 TCJA that became effective in fiscal 2022. The 2023 amount includes the impact of certain foreign subsidiaries deferred tax remeasurements for legislative elections and the 2021 amounts include the reorganization of international subsidiaries further described below.


JNJ 8. Income taxes

The fiscal year 2023 effective tax rate decreased 3.9% as compared to the fiscal year 2022 effective tax rate as the Company recorded certain non-recurring favorable tax items in fiscal year 2023 when compared to the prior fiscal year.


JNJ 8. Income taxes

In the fiscal fourth quarter of 2023, the Company settled the U.S. Internal Revenue Service audit for tax years 2013 through 2016 which resulted in a favorable impact to the rate of 3.0%. This settlement was partially offset by the Company recording a $0.4 billion decrease in expected U.S. foreign tax credits, an unfavorable effective rate impact of 2.6%, which has been reflected as a current tax expense in U.S. taxes on international income on the Company’s effective tax rate reconciliation.


JNJ 8. Income taxes

In the fiscal year 2023, the Company had certain non-recurring impacts as a result of legislative tax elections made in certain international subsidiaries which resulted in a change in the Company’s tax basis in certain assets resulting in deferred tax re-measurements. The net impact of these non-recurring items is a net benefit of 3.4% to the Company’s annual effective tax rate, comprised of the following items: •approximately $0.3 billion of tax benefit on local deferred tax assets to record the remeasurement of the increased tax basis, this benefit has been reflected as International operations on the Company’s effective tax rate reconciliation. This benefit was offset by approximately $0.1 billion of U.S. deferred tax expense on the GILTI deferred tax liability resulting from the remeasurement of these deferred tax assets. This has been reflected in the “U.S. tax on international income” on the Company’s effective tax rate reconciliation. •approximately $0.3 billion of U.S. deferred tax benefit on the GILTI deferred tax as a result of an international subsidiary making an election to change the treatment of a local deferred tax asset to a refundable tax credit. This has been reflected in the U.S. taxes on international income on the Company’s effective tax rate reconciliation.


JNJ 8. Income taxes

The Company’s 2023 and 2022 tax rates benefited from certain provisions of the Tax Cuts and Jobs Act of 2017 that became effective in fiscal 2022. The Company also had lower income in higher tax jurisdictions vs. fiscal year 2022, primarily in the U.S. where the Company recorded an approximately $7.0 billion charge related to talc matters in the United States at an effective tax rate of 21.1% (for further information see Note 19 to the Consolidated Financial Statements).


JNJ 8. Income taxes

The fiscal year 2022 effective tax rate increased 8.2% as compared to the fiscal year 2021 effective tax rate as the Company recorded certain non-recurring favorable tax items in fiscal year 2021 which resulted in an unfavorable impact to the Company’s fiscal 2022 effective tax rate when compared to the prior fiscal year. These items are described below. The Company’s 2022 tax rate also benefited from the impairment of bermekimab for AD IPR&D and changes in the fair value of securities in the Company’s investment portfolio, both recorded at the U.S. statutory rate.


JNJ 2023 Annual Report 67

In the fiscal year 2021, the Company reorganized the ownership structure of certain wholly-owned international subsidiaries. As part of this reorganization, the Company increased the tax basis of certain assets to fair value in accordance with applicable local regulations. The net impact of this restructuring was approximately $0.6 billion net benefit or 3.2% benefit to the Company’s annual effective tax rate, comprised of the following items: •approximately $2.3 billion of local deferred tax assets to record the remeasurement of the tax basis of these assets to fair value, this benefit has been reflected as International operations on the Company’s effective tax rate reconciliation. •approximately $1.7 billion of U.S. deferred tax expense relating to the GILTI deferred tax liability resulting from the remeasurement of these deferred tax assets. This expense has been reflected as U.S. taxes on international income on the Company’s effective tax rate reconciliation.


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Also, in the fiscal fourth quarter of 2021, the Company recognized a loss on certain U.S. affiliates related to the previously impaired book value of certain intangibles, which reduced the 2021 effective tax rate by approximately 1.6% which is reflected as a Tax benefits from loss on capital assets on the effective tax rate reconciliation. Additionally other fiscal 2021 impacts to the rate were primarily driven by litigation and acquisition related items as follows: •the Company accrued additional legal expenses, of approximately $1.6 billion for talc at an effective tax rate of 23.5% and $0.8 billion for Risperdal Gynecomastia settlements at an effective tax rate of 16.4% (See Note 19 to the Consolidated Financial Statements for more details). •the Company recorded a partial IPR&D charge of $0.9 billion for the Ottava intangible asset (acquired with the Auris Health acquisition in 2019) at an effective rate of 22.4%.


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Temporary differences and carryforwards at the end of fiscal years 2023 and 2022 were as follows: ####2023 Deferred Tax######2022 Deferred Tax## (Dollars in Millions)##Asset####Liability##Asset####Liability Employee related obligations##$586######685#### Stock based compensation##686######632#### Depreciation of property, plant and equipment######(902)######(845) Goodwill and intangibles######(1,252)######(1,737) R&D capitalized for tax##3,595######2,611#### Reserves & liabilities##3,816######2,733#### Income reported for tax purposes(1)##359######2,026#### Net realizable operating loss carryforwards(2)##996######1,319#### Undistributed foreign earnings##1,801####(1,695)##1,517####(1,604) Global intangible low-taxed income######(2,731)######(3,628) Miscellaneous international##831######861####(66) Miscellaneous U.S.######(4)##452#### Total deferred income taxes##$12,670####(6,584)##12,836####(7,880)


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(1)In fiscal 2023, the Company changed the presentation of income taxes accrued on intercompany profits on inventory still owned by the Company as part of “Prepaid expenses and other” on the Consolidated Balance Sheet.


JNJ 2023 Annual Report 67

(2)Net of valuation allowances of $1.1 billion and $0.8 billion in 2023 and 2022. The change in the valuation allowance from 2022 to 2023 was driven by approximately $0.1 billion from acquisition related activity and the remainder was due to normal operations during the fiscal year.


JNJ 2023 Annual Report 67

The Company has wholly-owned international subsidiaries that have cumulative net losses. The Company believes that it is more likely than not that these subsidiaries will generate future taxable income sufficient to utilize these deferred tax assets. However, in certain jurisdictions, valuation allowances have been recorded against deferred tax assets for loss carryforwards that are not more likely than not to be realized.


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The following table summarizes the activity related to unrecognized tax benefits for continuing operations: (Dollars in Millions)##2023##2022##2021 Beginning of year##$3,716##3,210##3,260 Increases related to current year tax positions##239##523##242 Increases related to prior period tax positions##244##143##23 Decreases related to prior period tax positions##(781)##(148)##(128) Settlements##(880)##(1)##(187) Lapse of statute of limitations##(53)##(11)##— End of year##$2,485##3,716##3,210


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As of December 31, 2023 the Company had approximately $2.5 billion of unrecognized tax benefits. The Company conducts business and files tax returns in numerous countries and currently has tax audits in progress with a number of tax authorities. With respect to the United States the Internal Revenue Service has completed its audit for all tax years through 2016.


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In other major jurisdictions where the Company conducts business, the years that remain open to tax audits go back to the year 2008. The Company believes it is possible that some tax audits may be completed over the next twelve months by taxing authorities in some jurisdictions, including in the United States. However, the Company is not able to provide a reasonably reliable estimate of the timing of any other future tax payments or change in uncertain tax positions, if any.


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The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities. Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense. The Company recognized after tax interest expense of $99 million, $136 million and $42 million in fiscal years 2023, 2022 and 2021, respectively. The total amount of accrued interest was $264 million and $637 million in fiscal years 2023 and 2022, respectively.


JNJ 9. Employee related obligations

At the end of fiscal 2023 and fiscal 2022, employee related obligations recorded on the Consolidated Balance Sheets were: (Dollars in Millions)##2023##2022 Pension benefits##$3,129##2,475 Postretirement benefits##1,963##1,728 Postemployment benefits##2,527##2,832 Deferred compensation##68##100 Total employee obligations##7,687##7,135 Less current benefits payable##538##593 Employee related obligations — non-current##$7,149##6,542


JNJ 9. Employee related obligations

Prepaid employee related obligations of $4,992 million and $4,581 million for 2023 and 2022, respectively, are included in Other assets on the Consolidated Balance Sheets.


JNJ 10. Pensions and other benefit plans

The Company sponsors various retirement and pension plans, including defined benefit, defined contribution and termination indemnity plans, which cover most employees worldwide. The Company also provides post-retirement benefits, primarily healthcare, to all eligible U.S. retired employees and their dependents.


Many international employees are covered by government-sponsored programs and the cost to the Company is not significant.


In the U.S, non-union pension benefits for employees hired before January 1, 2015 are primarily based on the employee’s compensation during the last five years before retirement and the number of years of service (the Final Average Pay formula). U.S. pension benefits for employees hired after 2014, are calculated using a different formula based on employee compensation over total years of service (the Retirement Value formula).


In January 2021, the Company announced that, effective on January 1, 2026, all eligible U.S. non-union employees, regardless of hire date, will earn benefits under the Retirement Value formula. This amendment does not affect the benefits accrued under the Final Average Pay formula for service before January 1, 2026.


International subsidiaries have plans under which funds are deposited with trustees, annuities are purchased under group contracts, or reserves are provided.


The Company does not fund retiree healthcare benefits in advance and has the right to modify these plans in the future.


In 2023 and 2022 the Company used December 31, 2023 and December 31, 2022, respectively, as the measurement date for all U.S. and international retirement and other benefit plans.


Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans for 2023, 2022 and 2021 include the following components: ####Retirement Plans######Other Benefit Plans## (Dollars in Millions)##2023##2022##2021##2023##2022##2021 Service cost##$893##1,319##1,412##264##320##309 Interest cost##1,437##908##768##214##104##80 Expected return on plan assets##(2,716)##(2,756)##(2,644)##(7)##(8)##(7) Amortization of prior service cost##(184)##(184)##(181)##(2)##(5)##(31) Recognized actuarial losses (gains)##(199)##650##1,251##23##122##151 Curtailments and settlements##93##1##1##(5)##—##— Net periodic benefit cost (credit)##$(676)##(62)##607##487##533##502


The service cost component of net periodic benefit cost is presented in the same line items on the Consolidated Statement of Earnings where other employee compensation costs are reported, including Cost of products sold, Research and development expense, Selling, marketing and administrative expenses, and Net earnings from discontinued operations, net of taxes if related to the separation of Kenvue. All other components of net periodic benefit cost are presented as part of Other (income) expense, net on the Consolidated Statement of Earnings, with the exception of certain amounts for curtailments and settlements, which are reported in Net earnings from discontinued operations, net of taxes if related to the separation of Kenvue (as noted above).


Unrecognized gains and losses for the U.S. pension plans are amortized over the average remaining future service for each plan. For plans with no active employees, they are amortized over the average life expectancy. The amortization of gains and losses for the other U.S. benefit plans is determined by using a 10% corridor of the greater of the market value of assets or the accumulated postretirement benefit obligation. Total unamortized gains and losses in excess of the corridor are amortized over the average remaining future service.


Prior service costs/benefits for the U.S. pension plans are amortized over the average remaining future service of plan participants at the time of the plan amendment. Prior service cost/benefit for the other U.S. benefit plans is amortized over the average remaining service to full eligibility age of plan participants at the time of the plan amendment.


The following table represents the weighted-average actuarial assumptions: ######Retirement Plans######Other Benefit Plans## Worldwide Benefit Plans##2023####2022##2021##2023##2022##2021 Net Periodic Benefit Cost############## Service cost discount rate##4.85##%##2.46##2.14##5.40##2.59##2.09 Interest cost discount rate##5.25##%##2.80##2.34##5.43##2.64##2.33 Rate of increase in compensation levels##3.71##%##4.02##4.01##4.22##4.21##4.25 Expected long-term rate of return on plan assets##7.21##%##7.25##7.71###### Benefit Obligation############## Discount rate##4.58##%##5.01##2.49##5.11##5.42##2.68 Rate of increase in compensation levels##3.69##%##4.00##4.01##4.22##4.21##4.21


The Company’s discount rates are determined by considering current yield curves representing high quality, long-term fixed income instruments. The resulting discount rates are consistent with the duration of plan liabilities. The Company's methodology in determining service and interest cost uses duration specific spot rates along that yield curve to the plans' liability cash flows.


The expected rates of return on plan asset assumptions represent the Company's assessment of long-term returns on diversified investment portfolios globally. The assessment is determined using projections from external financial sources, long-term historical averages, actual returns by asset class and the various asset class allocations by market.


The following table displays the assumed healthcare cost trend rates, for all individuals: Healthcare Plans##2023######2022## Healthcare cost trend rate assumed for next year##13.90##%##*##5.96##% Rate to which the cost trend rate is assumed to decline (ultimate trend)##4.00##%####3.99##% Year the rate reaches the ultimate trend rate##2048######2047##


JNJ *excludes ongoing negotiations regarding healthcare cost with service providers

The following table sets forth information related to the benefit obligation and the fair value of plan assets at fiscal year-end 2023 and 2022 for the Company’s defined benefit retirement plans and other post-retirement plans: ####Retirement Plans######Other Benefit Plans## (Dollars in Millions)##2023####2022##2023####2022 Change in Benefit Obligation############ Projected benefit obligation — beginning of year##$29,390####41,272##4,192####4,874 Service cost##893####1,319##264####320 Interest cost##1,437####908##214####104 Plan participant contributions##73####67##—####— Amendments##(6)####7##—####— Actuarial (gains) losses(1)##2,068####(12,159)##469####(704) Divestitures & acquisitions(2)##(352)####—##1####— Curtailments, settlements & restructuring##(238)####(7)##(332)####— Benefits paid from plan(3)##(2,122)####(1,220)##(702)####(393) Effect of exchange rates##601####(797)##2####(9) Projected benefit obligation — end of year##$31,744####29,390##4,108####4,192


JNJ 2023 Annual Report 71

Change in Plan Assets############ Plan assets at fair value — beginning of year##$31,496####41,909##78####102 Actual return (loss) on plan assets##3,951####(8,663)##16####(17) Company contributions##268####261##694####386 Plan participant contributions##73####67##—####— Settlements##(176)####(5)##—####— Divestitures & acquisitions(2)##(509)####—##—####— Benefits paid from plan assets(3)##(2,122)####(1,220)##(702)####(393) Effect of exchange rates##626####(853)##—####— Plan assets at fair value — end of year##$33,607####31,496##86####78 Funded status — end of year##$1,863####2,106##(4,022)####(4,114) Amounts Recognized in the Company’s Balance Sheet consist of the following:############ Non-current assets##$4,992####4,581##—####— Current liabilities##(119)####(127)##(416)####(461) Non-current liabilities##(3,010)####(2,348)##(3,606)####(3,653) Total recognized in the consolidated balance sheet — end of year##$1,863####2,106##(4,022)####(4,114) Amounts Recognized in Accumulated Other Comprehensive Income consist of the following:############ Net actuarial loss##$4,962####3,948##354####239 Prior service cost (credit)##(1,236)####(1,417)##(6)####(7) Unrecognized net transition obligation##—####—##—#### Total before tax effects##$3,726####2,531##348####232 Accumulated Benefit Obligations — end of year##$30,139####27,797###### ######(1)The actuarial (gains)/losses for retirement plans in 2023 and 2022 were primarily driven by changes in the discount rates.  (2)Primarily driven by the Kenvue separation. (3)Includes approximately $800 million transferred to a group annuity contract issued by a third-party insurer for the U.S. Salaried Pension Plan.###### ####Retirement Plans######Other Benefit Plans## (Dollars in Millions)##2023####2022##2023####2022 Amounts Recognized in Net Periodic Benefit Cost and Other Comprehensive Income############ Net periodic benefit cost (credit)##$(676)####(62)##487####533 Net actuarial (gain) loss##711####(793)##136####(751) Amortization of net actuarial loss##199####(655)##(22)####(121) Prior service cost (credit)##(2)####7##—####— Amortization of prior service (cost) credit##185####183##2####5 Effect of exchange rates##103####(140)##—####(1) Total loss/(income) recognized in other comprehensive income, before tax##$1,195####(1,398)##116####(868) Total recognized in net periodic benefit cost and other comprehensive income##$519####(1,460)##603####(335)


JNJ 2023 Annual Report 71

The Company plans to continue to fund its U.S. Qualified Plans to comply with the Pension Protection Act of 2006. International Plans are funded in accordance with local regulations. Additional discretionary contributions are made when deemed appropriate to meet the long-term obligations of the plans. For certain plans, funding is not a common practice, as funding provides no economic benefit. Consequently, the Company has several pension plans that are not funded.


JNJ 2023 Annual Report 71

In 2023, the Company contributed $135 million and $133 million to its U.S. and international pension plans, respectively.


JNJ 2023 Annual Report 71

The following table displays the funded status of the Company's U.S. Qualified & Non-Qualified pension plans and international funded and unfunded pension plans at December 31, 2023 and December 31, 2022, respectively: ########U.S. Plans##############International Plans###### ####Qualified Plans########Non-Qualified Plans######Funded Plans########Unfunded Plans## (Dollars in Millions)##2023####2022####2023####2022##2023####2022####2023####2022 Plan Assets##$22,298####20,937####—####—##11,309####10,559####—####— Projected Benefit Obligation##19,152####18,394####2,037####1,937##10,431####8,982####124####77 Accumulated Benefit Obligation##18,557####17,696####1,982####1,872##9,498####8,166####102####63 Over (Under) Funded Status############################ Projected Benefit Obligation##$3,146####2,543####(2,037)####(1,937)##878####1,577####(124)####(77) Accumulated Benefit Obligation##3,741####3,241####(1,982)####(1,872)##1,811####2,393####(102)####(63)


JNJ 2023 Annual Report 71

Plans with accumulated benefit obligations in excess of plan assets have an accumulated benefit obligation, projected benefit obligation and plan assets of $5.8 billion, $6.1 billion and $3.1 billion, respectively, at the end of 2023, and $2.7 billion, $2.7 billion and $0.3 billion, respectively, at the end of 2022.


JNJ 2023 Annual Report 71

The following table displays the projected future benefit payments from the Company’s retirement and other benefit plans: (Dollars in Millions)##2024##2025##2026##2027##2028##2029-2033 Projected future benefit payments############ Retirement plans##$1,481##1,473##1,549##1,647##1,745##10,133 Other benefit plans##$427##438##396##411##428##2,360


JNJ 2023 Annual Report 71

The following table displays the projected future minimum contributions to the unfunded retirement plans. These amounts do not include any discretionary contributions that the Company may elect to make in the future. (Dollars in Millions)##2024##2025##2026##2027##2028##2029-2033 Projected future contributions##$122##126##133##139##145##787


JNJ 2023 Annual Report 71

Each pension plan is overseen by a local committee or board that is responsible for the overall administration and investment of the pension plans. In determining investment policies, strategies and goals, each committee or board considers factors including, local pension rules and regulations; local tax regulations; availability of investment vehicles (separate accounts, commingled accounts, insurance funds, etc.); funded status of the plans; ratio of actives to retirees; duration of liabilities; and other relevant factors including: diversification, liquidity of local markets and liquidity of base currency. A majority of the Company’s pension funds are open to new entrants and are expected to be on-going plans. Permitted investments are primarily liquid and/or listed, with little reliance on illiquid and non-traditional investments such as hedge funds.


JNJ 2023 Annual Report 71

The Company’s retirement plan asset allocation at the end of 2023 and 2022 and target allocations for 2024 are as follows: 2023 Annual Report 73 ######Percent of Plan Assets######Target Allocation## ##2023######2022####2024## Worldwide Retirement Plans############## Equity securities##58##%####62##%##58##% Debt securities##42######38####42## Total plan assets##100##%####100##%##100##%


JNJ Determination of fair value of plan assets

The Plan has an established and well-documented process for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon models that primarily use, as inputs, market-based or independently sourced market parameters, including yield curves, interest rates, volatilities, equity or debt prices, foreign exchange rates and credit curves.


While the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.


JNJ Valuation hierarchy

The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described in the table below with Level 1 having the highest priority and Level 3 having the lowest.


JNJ Valuation hierarchy

The Net Asset Value (NAV) is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding.


JNJ Valuation hierarchy

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.


JNJ Valuation hierarchy

Following is a description of the valuation methodologies used for the investments measured at fair value. •Short-term investment funds — Cash and quoted short-term instruments are valued at the closing price or the amount held on deposit by the custodian bank. Other investments are through investment vehicles valued using the NAV provided by the administrator of the fund. The NAV is a quoted price in a market that is not active and classified as Level 2. •Government and agency securities — A limited number of these investments are valued at the closing price reported on the major market on which the individual securities are traded. Where quoted prices are available in an active market, the investments are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. When quoted market prices for a security are not available in an active market, they are classified as Level 2. •Debt instruments — A limited number of these investments are valued at the closing price reported on the major market on which the individual securities are traded. Where quoted prices are available in an active market, the investments are classified as Level 1. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are classified as Level 2. Level 3 debt instruments are priced based on unobservable inputs. •Equity securities — Equity securities are valued at the closing price reported on the major market on which the individual securities are traded. Substantially all equity securities are classified within Level 1 of the valuation hierarchy. •Commingled funds — These investment vehicles are valued using the NAV provided by the fund administrator. Assets in the Level 2 category have a quoted market price. •Other assets — Other assets are represented primarily by limited partnerships. These investment vehicles are valued using the NAV provided by the fund administrator. Other assets that are exchange listed and actively traded are classified as Level 1, while inactively traded assets are classified as Level 2.


JNJ Valuation hierarchy

The following table sets forth the Retirement Plans' investments measured at fair value as of December 31, 2023 and December 31, 2022: ####Quoted Prices in Active Markets for Identical Assets######Significant Other Observable Inputs######Significant Unobservable Inputs(1)######Investments Measured at Net Asset Value######## ####(Level 1)######(Level 2)######(Level 3)############Total Assets## (Dollars in Millions)##2023####2022##2023####2022##2023####2022##2023####2022##2023####2022 Short-term investment funds##$12####26##829####13##—####—##—####—##841####39 Government and agency securities##—####—##5,985####5,863##—####—##—####—##5,985####5,863 Debt instruments##—####—##3,899####3,681##—####—##—####—##3,899####3,681 Equity securities##7,764####8,846##—####2##—####—##—####—##7,764####8,848 Commingled funds##—####—##4,967####4,362##43####56##6,672####6,096##11,682####10,514 Other assets##—####—##49####33##92####12##3,295####2,506##3,436####2,551 Investments at fair value##$7,776####8,872##15,729####13,954##135####68##9,967####8,602##33,607####31,496


JNJ Valuation hierarchy

(1) The activity for the Level 3 assets is not significant for all years presented.


JNJ Valuation hierarchy

The Company's Other Benefit Plans are unfunded except for U.S. commingled funds (Level 2) of $86 million and $78 million at December 31, 2023 and December 31, 2022, respectively.


JNJ Valuation hierarchy

The fair value of Johnson & Johnson Common Stock directly held in plan assets was $14 million (0.0% of total plan assets) at December 31, 2023 and $21 million (0.1% of total plan assets) at December 31, 2022.


JNJ 11. Savings plan

The Company has voluntary 401(k) savings plans designed to enhance the existing retirement programs covering eligible employees. The Company matches a percentage of each employee’s contributions consistent with the provisions of the plan for which the employee is eligible. Total Company matching contributions to the plans were $263 million, $257 million and $239 million in fiscal years 2023, 2022 and 2021, respectively.


JNJ 12. Capital and treasury stock

Changes in treasury stock were: ####Treasury Stock## (Amounts in Millions Except Treasury Stock Shares in Thousands)##Shares####Amount Balance at January 3, 2021##487,331####$38,490 Employee compensation and stock option plans##(17,399)####(2,847) Repurchase of common stock##20,946####3,456 Balance at January 2, 2022##490,878####39,099 Employee compensation and stock option plans##(20,007)####(3,440) Repurchase of common stock##35,375####6,035 Balance at January 1, 2023##506,246####41,694 Employee compensation and stock option plans##(15,521)####(2,529) Repurchase of common stock##31,085####5,079 Kenvue share exchange (Note 21)##190,955####31,418 Balance at December 31, 2023##712,765####$75,662


JNJ 12. Capital and treasury stock

Aggregate shares of common stock issued were approximately 3,119,843,000 shares at the end of fiscal years 2023, 2022 and 2021.


JNJ 12. Capital and treasury stock

Cash dividends paid were $4.70 per share in fiscal year 2023, compared with dividends of $4.45 per share in fiscal year 2022, and $4.19 per share in fiscal year 2021.


JNJ 12. Capital and treasury stock

On January 2, 2024, the Board of Directors declared a regular cash dividend of $1.19 per share, payable on March 5, 2024 to shareholders of record as of February 20, 2024.


JNJ 12. Capital and treasury stock

On September 14, 2022, the Company announced that its Board of Directors approved a share repurchase program, authorizing the Company to purchase up to $5.0 billion of the Company's shares of common stock. The repurchase program was completed during the fiscal first quarter of 2023.


JNJ 13. Accumulated other comprehensive income (loss)

Components of other comprehensive income (loss) consist of the following: (Dollars in Millions)##Foreign Currency Translation####Gain/ (Loss) On Securities##Employee Benefit Plans####Gain/ (Loss) On Derivatives & Hedges##Total Accumulated Other Comprehensive Income (Loss) January 3, 2021####$(8,938)##1##(6,957)####652##(15,242) Net 2021 changes####(1,079)##(4)##4,255####(988)##2,184 January 2, 2022####(10,017)##(3)##(2,702)####(336)##(13,058) Net 2022 changes####(1,796)##(24)##1,805####106##91 January 1, 2023####(11,813)##(27)##(897)####(230)##(12,967) Net 2023 changes####(3,221)##26##(1,399)####(147)##(4,741) Kenvue Separation/IPO####4,885####296##*####5,181 December 31, 2023####$(10,149)##(1)##(2,000)####(377)##(12,527)


Amounts in accumulated other comprehensive income are presented net of the related tax impact. Foreign currency translation is not adjusted for income taxes where it relates to permanent investments in international subsidiaries. For additional details on comprehensive income see the Consolidated Statements of Comprehensive Income.


Details on reclassifications out of Accumulated Other Comprehensive Income:


Gain/(Loss) On Securities - reclassifications released to Other (income) expense, net.


Employee Benefit Plans - reclassifications are included in net periodic benefit cost. See Note 10 for additional details.


Gain/(Loss) On Derivatives & Hedges - reclassifications to earnings are recorded in the same account as the hedged transaction. See Note 6 for additional details.


* Includes impact of curtailments and settlements in connection with separation from Kenvue.


JNJ 14. International currency translation

For translation of its subsidiaries operating in non-U.S. Dollar currencies, the Company has determined that the local currencies of its international subsidiaries are the functional currencies except those in highly inflationary economies, which are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years, or where a substantial portion of its cash flows are not in the local currency. For the majority of the Company's subsidiaries the local currency is the functional currency.


In consolidating international subsidiaries, balance sheet currency effects are recorded as a component of accumulated other comprehensive income. The other current and non-current assets line within the Statement of Cash flows includes the impact of foreign currency translation. This equity account includes the results of translating certain balance sheet assets and liabilities at current exchange rates and some accounts at historical rates, except for those located in highly inflationary economies (Argentina and Venezuela). Beginning in the fiscal second quarter of 2022, the Company also accounted for operations in Turkey as highly inflationary. The translation of balance sheet accounts for highly inflationary economies are reflected in the operating results.


A rollforward of the changes during fiscal years 2023, 2022 and 2021 for foreign currency translation adjustments is included in Note 13.


Net currency transaction gains and losses included in Other (income) expense were losses of $366 million, $286 million and $216 million in fiscal years 2023, 2022 and 2021, respectively.


JNJ 15. Earnings per share

The following is a reconciliation of basic net earnings per share to diluted net earnings per share for the fiscal years ended December 31, 2023, January 1, 2023 and January 2, 2022: (In Millions Except Per Share Amounts)##2023##2022##2021 Basic net earnings per share from continuing operations##$5.26##6.23##6.76 Basic net earnings per share from discontinued operations##8.62##0.60##1.17 Total net earnings per share - basic##13.88##6.83##7.93 Average shares outstanding — basic##2,533.5##2,625.2##2,632.1 Potential shares exercisable under stock option plans##94.1##140.1##138.0 Less: shares repurchased under treasury stock method##(67.2)##(101.4)##(96.1) Adjusted average shares outstanding — diluted##2,560.4##2,663.9##2,674.0 Diluted net earnings per share from continuing operations##5.20##6.14##6.66 Diluted net earnings per share from discontinuing operations##8.52##0.59##1.15 Total net earnings per share - diluted##$13.72##6.73##7.81


JNJ 15. Earnings per share

The diluted net earnings per share calculation for fiscal year 2023 excluded 43 million shares related to stock options, as the exercise price of these options was greater than the average market value of the Company's stock.


JNJ 15. Earnings per share

The diluted net earnings per share calculation for the fiscal years 2022 and 2021 included all shares related to stock options, as the exercise price of these options was less than the average market value of the Company's stock.


JNJ 16. Common stock, stock option plans and stock compensation agreements

At December 31, 2023, the Company had one stock-based compensation plan. The shares outstanding are for contracts under the Company's 2012 Long-Term Incentive Plan and the 2022 Long-Term Incentive Plan. The 2012 Long-Term Incentive Plan expired on April 26, 2022. All awards (stock options, restricted shares units and performance share units) granted subsequent to that date were under the 2022 Long-Term Incentive Plan. Under the 2022 Long-Term Incentive Plan, the Company may issue up to 150 million shares of common stock, of which up to 110 million shares of common stock may be issued subject to stock options or stock appreciation rights and up to 40 million shares of common stock may be issued subject to full value awards. Awards will generally be counted on a 1-for-1 basis against the share reserve, provided that if more than 40 million full value awards are granted, each full value award in excess of 40 million will be counted on a 5-for-1 basis against the share reserve. Shares available for future grants under the 2022 Long-Term Incentive Plan were 130 million at the end of fiscal year 2023.


The compensation cost that has been charged against income for these plans was $1,087 million, $1,028 million and $1,038 million for fiscal years 2023, 2022 and 2021, respectively. The total income tax benefit recognized in the income statement for share-based compensation costs was $221 million, $177 million and $199 million for fiscal years 2023, 2022 and 2021, respectively. The Company also recognized additional income tax benefits of $126 million, $267 million and $213 million for fiscal years 2023, 2022 and 2021, respectively, for which options were exercised or restricted shares were vested. The total unrecognized compensation cost was $907 million, $866 million and $775 million for fiscal years 2023, 2022 and 2021, respectively. The weighted average period for this cost to be recognized was 1.80 years, 1.80 years and 1.78 years for fiscal years 2023, 2022, and 2021, respectively. Share-based compensation costs capitalized as part of inventory were insignificant in all periods.


The Company settles employee benefit equity issuances with treasury shares. Treasury shares are replenished through market purchases throughout the year for the number of shares used to settle employee benefit equity issuances.


JNJ Stock options

Stock options expire 10 years from the date of grant and vest over service periods that range from 6 months to 4 years.


JNJ Stock options

Options granted under the 2012 Long-Term Incentive Plan were granted at the average of the high and low prices of the Company’s Common Stock on the New York Stock Exchange on the date of grant. Options granted under the 2022 Long-Term incentive Plan were granted at the closing price of the Company’s Common Stock on the New York Stock Exchange on the date of grant.


JNJ Stock options

The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. For 2023, 2022, and 2021 grants, expected volatility represents a blended rate of 10-year weekly historical overall volatility rate, and a 5-week average implied volatility rate based on at-the-money traded Johnson & Johnson options with a life of 2 years. For all grants, historical data is used to determine the expected life of the option. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant.


JNJ Stock options

The average fair value of options granted was $27.85, $23.23 and $20.86, in fiscal years 2023, 2022 and 2021, respectively. The fair value was estimated based on the weighted average assumptions of: ##2023####2022####2021## Risk-free rate##3.74##%##1.98##%##0.83##% Expected volatility##17.69##%##18.00##%##18.59##% Expected life (in years)##7.0####7.0####7.0## Expected dividend yield##2.90##%##2.70##%##2.50##%


JNJ Stock options

A summary of option activity under the Plan as of December 31, 2023, is presented below: (Shares in Thousands)##Outstanding Shares##Weighted Average Exercise Price##Aggregate Intrinsic Value (Dollars in Millions) Shares at January 1, 2023##118,672##$134.95##$4,949 Options granted##16,320##162.75## Options exercised##(12,386)##109.48## Options canceled/forfeited*##(10,368)##155.62## Shares at December 31, 2023##112,238##$139.88##$2,239


JNJ Stock options

The total intrinsic value of options exercised was $729 million, $1,228 million and $919 million in fiscal years 2023, 2022 and 2021, respectively.


JNJ Stock options

*includes 7,689 shares of options cancelled as a result of the conversion of Johnson & Johnson stock options held by Kenvue employees into Kenvue stock options


JNJ 2023 Annual Report 79

The following table summarizes stock options outstanding and exercisable at December 31, 2023: (Shares in Thousands)####Outstanding######Exercisable## Exercise Price Range##Options##Average Life(1)##Weighted Average Exercise Price##Options####Weighted Average Exercise Price $90.44 - $101.87##20,774##1.4##$99.21##20,774####$99.21 $115.67 - $129.51##19,368##3.6##122.49##19,368####122.49 $131.94 - $151.41##27,391##5.6##142.84##26,676####142.61 $162.70 - $162.75##13,928##9.1##162.75##6####162.75 $164.62 - $165.89##30,777##7.6##165.29##174####165.12 ##112,238##5.5##$139.88##66,998####$123.39


JNJ 2023 Annual Report 79

(1) Average contractual life remaining in years.


JNJ 2023 Annual Report 79

Stock options outstanding at January 1, 2023 and January 2, 2022 were 118,672 and an average life of 5.8 years and 117,361 and an average life of 5.8 years, respectively. Stock options exercisable at January 1, 2023 and January 2, 2022 were 63,661 at an average price of $113.06 and 62,742 at an average price of $104.42, respectively.


JNJ Restricted share units and performance share units

The Company grants restricted share units which vest over service periods that range from 6 months to 3 years. The Company also grants performance share units, which are paid in shares of Johnson & Johnson Common Stock after the end of a three-year performance period. Performance shares were granted with two equally-weighted goals that directly align with or help drive long-term total shareholder return: adjusted operational earnings per share and relative total shareholder return. The number of shares actually earned at the end of the three-year period will vary, based only on actual performance, from 0% to 200% of the target number of performance share units granted.


A summary of the restricted share units and performance share units activity under the Plans as of December 31, 2023 is presented below: (Shares in Thousands)##Outstanding Restricted Share Units##Outstanding Performance Share Units Shares at January 1, 2023##13,616##2,357 Granted##5,910##828 Issued##(4,329)##(785) Canceled/forfeited/adjusted*##(2,259)##(363) Shares at December 31, 2023##12,938##2,037


*includes 1,421 shares of restricted share units and 264 shares of performance share units cancelled as a result of the conversion of Johnson & Johnson restricted share units and performance share units held by Kenvue employees into Kenvue restricted share units


The average fair value of the restricted share units granted was $152.63, $153.67 and $152.62 in fiscal years 2023, 2022 and 2021, respectively, using the fair market value at the date of grant. The fair value of restricted share units was discounted for dividends, which are not paid on the restricted share units during the vesting period. The fair value of restricted share units issued was $605 million, $591 million and $611 million in 2023, 2022 and 2021, respectively.


The weighted average fair value of the performance share units granted was $145.17, $170.46 and $179.35 in fiscal years 2023, 2022 and 2021, calculated using the weighted average fair market value for each of the component goals at the date of grant.


The fair values for the earnings per share goals of each performance share unit were estimated on the date of grant using the fair market value of the shares at the time of the award discounted for dividends, which are not paid on the performance share units during the vesting period. The fair value for the relative total shareholder return goal of each performance share unit was estimated on the date of grant using the Monte Carlo valuation model. The fair value of performance share units issued was $140 million, $94 million and $83 million in fiscal years 2023, 2022 and 2021, respectively.


JNJ 17. Segments of business and geographic areas

Following the separation of the Consumer Health business in the fiscal third quarter of 2023, the Company is now organized into two business segments: Innovative Medicine (formerly referred to as Pharmaceutical) and MedTech. The segment results have been recast for all periods to reflect the continuing operations of the Company. ####Sales to Customers########% Change## (Dollars in Millions)##2023##2022##2021##’23 vs. ’22######’22 vs. ’21 INNOVATIVE MEDICINE(1)############## Immunology############## U.S.##$11,539##11,036##10,843##4.6##%####1.8 International##6,513##5,899##5,907##10.4######(0.1) Worldwide##18,052##16,935##16,750##6.6######1.1 REMICADE############## U.S.##1,143##1,417##2,019##(19.3)######(29.8) U.S. Exports##147##204##236##(28.0)######(13.6) International##549##722##935##(23.9)######(22.8) Worldwide##1,839##2,343##3,190##(21.5)######(26.6) SIMPONI / SIMPONI ARIA############## U.S.##1,124##1,166##1,127##(3.6)######3.5 International##1,073##1,017##1,148##5.4######(11.4) Worldwide##2,197##2,184##2,276##0.6######(4.0) STELARA############## U.S.##6,966##6,388##5,938##9.0######7.6 International##3,892##3,335##3,196##16.7######4.4 Worldwide##10,858##9,723##9,134##11.7######6.5 TREMFYA############## U.S.##2,147##1,844##1,503##16.5######22.7 International##999##824##624##21.2######32.0 Worldwide##3,147##2,668##2,127##17.9######25.4 OTHER IMMUNOLOGY############## U.S.##11##17##21##(33.8)######(18.4) International##0##0##3##—######* Worldwide##11##17##24##(33.8)######(28.2) Infectious Diseases############## U.S.##1,500##1,680##2,249##(10.7)######(25.3) International##2,918##3,769##3,576##(22.6)######5.4 Worldwide##4,418##5,449##5,825##(18.9)######(6.5) COVID-19 VACCINE############## U.S.##0##120##634##*######(81.1) International##1,117##2,059##1,751##(45.8)######17.6 Worldwide##1,117##2,179##2,385##(48.8)######(8.6)


JNJ 2023 Annual Report 81

####Sales to Customers######% Change## (Dollars in Millions)##2023##2022##2021##’23 vs. ’22####’22 vs. ’21 EDURANT / rilpivirine############ U.S.##35##36##41##(3.7)####(10.8) International##1,115##972##953##14.8####2.0 Worldwide##1,150##1,008##994##14.1####1.5 PREZISTA / PREZCOBIX / REZOLSTA / SYMTUZA############ U.S.##1,446##1,494##1,508##(3.2)####(1.0) International##408##449##575##(9.2)####(21.9) Worldwide##1,854##1,943##2,083##(4.6)####(6.7) OTHER INFECTIOUS DISEASES############ U.S.##19##30##66##(34.5)####(55.5) International##278##289##297##(3.8)####(2.6) Worldwide##297##318##363##(6.7)####(12.3) Neuroscience############ U.S.##4,065##3,570##3,347##13.9####6.7 International##3,076##3,323##3,641##(7.5)####(8.7) Worldwide##7,140##6,893##6,988##3.6####(1.4) CONCERTA / methylphenidate############ U.S.##230##151##172##52.5####(12.5) International##554##493##495##12.2####(0.4) Worldwide##783##644##667##21.6####(3.5) INVEGA SUSTENNA / XEPLION / INVEGA TRINZA / TREVICTA############ U.S.##2,897##2,714##2,550##6.7####6.5 International##1,218##1,426##1,472##(14.6)####(3.1) Worldwide##4,115##4,140##4,022##(0.6)####3.0 SPRAVATO############ U.S.##589##328##198##79.7####65.7 International##100##46##26##*####76.9 Worldwide##689##374##224##84.1####67.0 OTHER NEUROSCIENCE(2)############ U.S.##349##376##427##(7.3)####(11.9) International##1,204##1,358##1,647##(11.3)####(17.5) Worldwide##1,553##1,734##2,074##(10.4)####(16.4) Oncology############ U.S.##8,462##6,930##5,958##22.1####16.3 International##9,199##9,052##8,590##1.6####5.4 Worldwide##17,661##15,983##14,548##10.5####9.9 ####Sales to Customers######% Change## (Dollars in Millions)##2023##2022##2021##’23 vs. ’22####’22 vs. ’21 CARVYKTI############ U.S.##469##133##—##*####* International##30##—##—##*####* Worldwide##500##133##—##*####* DARZALEX############ U.S.##5,277##4,210##3,169##25.4####32.8 International##4,467##3,767##2,854##18.6####32.0 Worldwide##9,744##7,977##6,023##22.2####32.4 ERLEADA############ U.S.##1,065##968##813##10.0####19.2 International##1,322##913##478##44.8####* Worldwide##2,387##1,881##1,291##26.9####45.7 IMBRUVICA############ U.S.##1,051##1,390##1,747##(24.4)####(20.4) International##2,214##2,394##2,622##(7.5)####(8.7) Worldwide##3,264##3,784##4,369##(13.7)####(13.4) ZYTIGA /abiraterone acetate############ U.S.##50##74##119##(32.1)####(37.8) International##837##1,696##2,178##(50.7)####(22.1) Worldwide##887##1,770##2,297##(49.9)####(22.9) OTHER ONCOLOGY############ U.S.##549##156##110##*####41.8 International##330##283##458##16.9####(38.2) Worldwide##879##438##568##*####(22.9) Pulmonary Hypertension############ U.S.##2,697##2,346##2,365##15.0####(0.8) International##1,117##1,071##1,085##4.3####(1.3) Worldwide##3,815##3,417##3,450##11.6####(1.0) OPSUMIT############ U.S.##1,292##1,132##1,147##14.1####(1.3) International##681##651##672##4.6####(3.2) Worldwide##1,973##1,783##1,819##10.6####(2.0) UPTRAVI############ U.S.##1,326##1,104##1,056##20.1####4.5 International##255##218##181##17.3####20.4 Worldwide##1,582##1,322##1,237##19.7####6.9 OTHER PULMONARY HYPERTENSION############ U.S.##79##110##163##(28.6)####(32.3) International##182##202##232##(10.3)####(12.8) Worldwide##260##313##395##(16.7)####(20.8)


JNJ 2023 Annual Report 83

####Sales to Customers######% Change## (Dollars in Millions)##2023##2022##2021##’23 vs. ’22####’22 vs. ’21 Cardiovascular / Metabolism / Other############ U.S.##2,906##3,042##3,192##(4.5)####(4.7) International##765##845##927##(9.4)####(8.9) Worldwide##3,671##3,887##4,119##(5.5)####(5.6) XARELTO############ U.S.##2,365##2,473##2,438##(4.4)####1.4 International##—##—##—##—####— Worldwide##2,365##2,473##2,438##(4.4)####1.4 OTHER(3)############ U.S.##541##569##754##(5.0)####(24.5) International##765##845##927##(9.4)####(8.8) Worldwide##1,306##1,414##1,682##(7.6)####(15.9) TOTAL INNOVATIVE MEDICINE############ U.S.##31,169##28,604##27,954##9.0####2.3 International##23,590##23,959##23,726##(1.5)####1.0 Worldwide##54,759##52,563##51,680##4.2####1.7 MEDTECH############ Interventional Solutions############ U.S.##3,633##2,169##1,836##67.5####18.2 International##2,717##2,131##2,135##27.5####(0.2) Worldwide##6,350##4,300##3,971##47.7####8.3 ELECTROPHYSIOLOGY############ U.S.##2,458##2,036##1,730##20.7####17.7 International##2,230##1,901##1,893##17.3####0.4 Worldwide##4,688##3,937##3,623##19.1####8.7 ABIOMED(4)############ U.S.##1,066##31##—##*####* International##240##—##—##*####* Worldwide##1,306##31##—##*####* OTHER INTERVENTIONAL SOLUTIONS############ U.S.##109##102##106##6.7####(3.8) International##247##230##242##7.3####(5.0) Worldwide##356##332##348##7.1####(4.6) Orthopaedics############ U.S.##5,525##5,321##5,126##3.8####3.8 International##3,417##3,267##3,462##4.6####(5.6) Worldwide##8,942##8,587##8,588##4.1####0.0 HIPS############ U.S.##996##943##878##5.6####7.3 International##564##571##602##(1.2)####(5.1) Worldwide##1,560##1,514##1,480##3.0####2.3 ####Sales to Customers######% Change## (Dollars in Millions)##2023##2022##2021##’23 vs. ’22####’22 vs. ’21 KNEES############ U.S.##896##851##787##5.3####8.2 International##559##508##538##10.2####(5.7) Worldwide##1,456##1,359##1,325##7.1####2.6 TRAUMA############ U.S.##1,949##1,882##1,819##3.6####3.5 International##1,030##989##1,066##4.1####(7.2) Worldwide##2,979##2,871##2,885##3.8####(0.5) SPINE, SPORTS & OTHER############ U.S.##1,684##1,645##1,642##2.4####0.2 International##1,263##1,198##1,256##5.4####(4.6) Worldwide##2,947##2,843##2,898##3.7####(1.9) Surgery############ U.S.##4,031##3,897##3,867##3.4####0.8 International##6,006##5,793##5,945##3.7####(2.6) Worldwide##10,037##9,690##9,812##3.6####(1.2) ADVANCED############ U.S.##1,833##1,784##1,761##2.8####1.3 International##2,837##2,785##2,861##1.9####(2.6) Worldwide##4,671##4,569##4,622##2.2####(1.1) GENERAL############ U.S.##2,198##2,113##2,105##4.0####0.4 International##3,168##3,008##3,085##5.3####(2.5) Worldwide##5,366##5,121##5,190##4.8####(1.3) Vision############ U.S.##2,086##1,990##1,857##4.8####7.2 International##2,986##2,859##2,831##4.5####1.0 Worldwide##5,072##4,849##4,688##4.6####3.4 CONTACT LENSES / OTHER############ U.S.##1,626##1,522##1,398##6.8####8.9 International##2,076##2,022##2,043##2.7####(1.0) Worldwide##3,702##3,543##3,440##4.5####3.0 SURGICAL############ U.S.##460##468##459##(1.8)####2.0 International##910##837##788##8.6####6.2 Worldwide##1,370##1,306##1,248##4.9####4.6 TOTAL MEDTECH############ U.S.##15,275##13,377##12,686##14.2####5.4 International##15,125##14,050##14,374##7.7####(2.3) Worldwide##30,400##27,427##27,060##10.8####1.4


JNJ 2023 Annual Report 85

####Sales to Customers########% Change## (Dollars in Millions)##2023##2022##2021##’23 vs. ’22######’22 vs. ’21 WORLDWIDE############## U.S.##46,444##41,981##40,640##10.6######3.3 International##38,715##38,009##38,100##1.9######(0.2) Worldwide##$85,159##79,990##78,740##6.5##%####1.6


JNJ *Percentage greater than 100% or not meaningful (1)Previously referred to as Pharmaceutical (2)Inclusive of RISPERDAL CONSTA which was previously disclosed separately (3) Inclusive of INVOKANA which was previously disclosed separately (4)  Acquired on December 22, 2022

####Income Before Tax######Identifiable Assets## (Dollars in Millions)##2023 (3)##2022 (4)##2021 (5)##2023####2022 Innovative Medicine##$18,246##15,647##17,750##$58,324####58,436 MedTech##4,669##4,447##4,208##74,710####70,956 Total##22,915##20,094##21,958##133,034####129,392 Less: Expense not allocated to segments (1)##7,853##735##2,780###### Discontinued operations########—####27,237 General corporate (2)########34,524####30,749 Worldwide total##$15,062##19,359##19,178##$167,558####187,378 ####Additions to Property, Plant & Equipment######Depreciation and Amortization## (Dollars in Millions)##2023##2022##2021##2023##2022##2021 Innovative Medicine##$1,653##1,374##1,198##$3,847##3,687##4,029 MedTech##2,372##2,120##1,933##2,943##2,302##2,286 Segments total##4,025##3,494##3,131##6,790##5,989##6,315 Discontinued operations##162##303##314##383##641##739 General corporate##356##212##207##313##340##336 Worldwide total##$4,543##4,009##3,652##$7,486##6,970##7,390 ####Sales to Customers######Long-Lived Assets (6)## (Dollars in Millions)##2023##2022##2021##2023####2022 United States##$46,444##41,981##40,640##$54,832####58,750 Europe##20,410##20,664##20,595##31,616####29,878 Western Hemisphere excluding U.S.##4,549##4,108##3,927##1,491####1,289 Asia-Pacific, Africa##13,756##13,237##13,578##1,500####1,520 Segments total##85,159##79,990##78,740##89,439####91,437 Discontinued operations########—####27,237 General corporate########1,192####1,081 Other non long-lived assets########76,927####67,623 Worldwide total##$85,159##79,990##78,740##$167,558####187,378


See Note 1 for a description of the segments in which the Company operates.


Export sales are not significant. In fiscal year 2023, the Company utilized three wholesalers distributing products for both segments that represented approximately 18.2%, 15.1% and 14.2% of the total consolidated revenues. In fiscal year 2022, the Company had three wholesalers distributing products for both segments that represented approximately 18.9%, 15.0% and 13.8% of the total consolidated revenues. In fiscal year 2021, the Company had three wholesalers distributing products for all three segments that represented approximately 16.6%, 12.6%, and 12.6% of the total consolidated revenues.


(1)Amounts not allocated to segments include interest (income)/expense and general corporate (income)/expense. Fiscal 2023 includes an approximately $7 billion charge related to talc matters (See Note 19, Legal proceedings, for additional details) and $0.4 billion related to the unfavorable change in the fair value of the retained stake in Kenvue.


(2)General corporate includes cash, cash equivalents and marketable securities.


(3)Innovative Medicine includes: •One-time COVID-19 Vaccine manufacturing exit related costs of $0.7 billion •A restructuring related charge of $0.5 billion •Unfavorable changes in the fair value of securities of $0.4 billion •Favorable litigation related items of $0.1 billion •Loss on divestiture $0.2 billion. •An intangible asset impairment charge of approximately $0.2 billion related to market dynamics associated with a non-strategic asset (M710) acquired as part of the acquisition of Momenta Pharmaceuticals in 2020.


MedTech includes: •Acquired in process research and development asset of $0.4 billion related to the Laminar acquisition in 2023 •A restructuring related charge of $0.3 billion •Acquisition and integration related costs of $0.2 billion primarily related to the acquisition of Abiomed •A Medical Device Regulation charge of $0.3 billion •Income from litigation settlements of $0.1 billion


(4)Innovative Medicine includes: •One-time COVID-19 Vaccine manufacturing exit related costs of $1.5 billion •An intangible asset impairment charge of approximately $0.8 billion related to an in-process research and development asset, bermekimab (JnJ-77474462), an investigational drug for the treatment of Atopic Dermatitis (AD) and Hidradenitis Suppurativa (HS) acquired with the acquisition of XBiotech, Inc. in the fiscal year 2020. Additional information regarding efficacy of the AD and HS indications became available which led the Company to the decision to terminate the development of bermekimab for AD and HS •Litigation expense of $0.1 billion •Unfavorable changes in the fair value of securities of $0.7 billion •A restructuring related charge of $0.1 billion


MedTech includes: •Litigation expense of $0.6 billion primarily for pelvic mesh related costs •A restructuring related charge of $0.3 billion •Acquisition and integration related costs of $0.3 billion primarily related to the acquisition of Abiomed •A Medical Device Regulation charge of $0.3 billion


(5)Innovative Medicine includes: •Litigation expense of $0.6 billion, primarily related to Risperdal Gynecomastia •Divestiture gains of $0.6 billion •Gains of $0.5 billion related to the change in the fair value of securities •A restructuring related charge of $0.1 billion


MedTech includes: •An in-process research and development expense of $0.9 billion related to Ottava •A restructuring related charge of $0.3 billion •A Medical Device Regulation charge of $0.2 billion


JNJ 2023 Annual Report 87

•Litigation expense of $0.1 billion


JNJ 2023 Annual Report 87

(6)Long-lived assets include property, plant and equipment, net for fiscal years 2023, and 2022 of $19,898 and $17,982, respectively, and intangible assets and goodwill, net for fiscal years 2023 and 2022 of $70,733 and $74,536, respectively.


JNJ 18. Acquisitions and divestitures

In the fiscal first quarter of 2024, the Company announced it has entered into a definitive agreement to acquire Ambrx Biopharma, Inc., or Ambrx (Nasdaq: AMAM), a clinical-stage biopharmaceutical company with a proprietary synthetic biology technology platform to design and develop next-generation antibody drug conjugates (ADCs), in an all-cash merger transaction for a total equity value of approximately $2.0 billion, or $1.9 billion net of estimated cash acquired. The Company will acquire all of the outstanding shares of Ambrx’s common stock for $28.00 per share through a merger of Ambrx with a subsidiary of the Company. The closing of the transaction is expected to occur in the first half of 2024, subject to receipt of Ambrx shareholder approval, as well as clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. The Company expects that the transaction will be accounted for as a business combination and the results of operations will be included in the Innovative Medicine segment as of the acquisition date.


JNJ 18. Acquisitions and divestitures

During the fiscal year 2023, the Company did not make any acquisitions that qualified as a business combination.


JNJ 18. Acquisitions and divestitures

During the fiscal year 2023, there were asset acquisitions of in-process research and development of approximately $0.5 billion in cash, primarily consisting of the acquisition of Laminar Inc. for $0.4 billion which was closed on November 30, 2023. Laminar Inc. is a privately-held medical device company focused on eliminating the left atrial appendage (LAA) in patients with non-valvular atrial fibrillation (AFib).


JNJ 18. Acquisitions and divestitures

During the fiscal year 2022, certain businesses were acquired for $17.7 billion in cash and $1.1 billion of liabilities assumed. These acquisitions were accounted for using the acquisition method and, accordingly, results of operations have been included in the financial statements from their respective dates of acquisition.


JNJ 18. Acquisitions and divestitures

The excess of purchase price over the estimated fair value of tangible assets acquired amounted to $17.3 billion and has been assigned to identifiable intangible assets, with any residual recorded to goodwill.


JNJ 18. Acquisitions and divestitures

The fiscal year 2022 acquisitions primarily included Abiomed, Inc. (Abiomed). The remaining acquisitions were not material.


JNJ 18. Acquisitions and divestitures

On December 22, 2022, the Company completed the acquisition of Abiomed, a leading, first-to-market provider of cardiovascular medical technology with a first-in-kind portfolio for the treatment of coronary artery disease and heart failure which also has an extensive innovation pipeline of life-saving technologies. The transaction broadens the Company’s position as a growing cardiovascular innovator, advancing the standard of care in heart failure and recovery, one of healthcare’s largest areas of unmet need. The transaction was accounted for as a business combination and the results of operations were included in the MedTech segment as of the date of the acquisition. The acquisition was completed through a tender offer for all outstanding shares. The consideration paid in the acquisition consisted of an upfront payment of $380.00 per share in cash, amounting to $17.1 billion, net of cash acquired, as well as a non-tradeable contingent value right (“CVR”) entitling the holder to receive up to $35.00 per share in cash (which with respect to the CVRs total approximately $1.6 billion in the aggregate) if certain commercial and clinical milestones are achieved. The corresponding enterprise value (without taking into account the CVRs) of approximately $16.5 billion includes cash, cash equivalents and marketable securities acquired.


JNJ 18. Acquisitions and divestitures

The milestones of the CVR consist of:


JNJ 18. Acquisitions and divestitures

a.$17.50 per share, payable if net sales for Abiomed products exceeds $3.7 billion during Johnson & Johnson’s fiscal second quarter of 2027 through fiscal first quarter of 2028, or if this threshold is not met during this period and is subsequently met during any rolling four quarter period up to the end of Johnson & Johnson’s fiscal first quarter of 2029, $8.75 per share;


JNJ 18. Acquisitions and divestitures

b.$7.50 per share payable upon FDA premarket application approval of the use of Impella® products in ST-elevated myocardial infarction (STEMI) patients without cardiogenic shock by January 1, 2028; and


JNJ 18. Acquisitions and divestitures

c.$10.00 per share payable upon the first publication of a Class I recommendation for the use of Impella® products in high risk PCI or STEMI with or without cardiogenic shock within four years from their respective clinical endpoint publication dates, but in all cases no later than December 31, 2029.


JNJ 18. Acquisitions and divestitures

During the fiscal fourth quarter of 2023, the Company finalized the purchase price allocation. In the fiscal 2023, there were purchase price allocation adjustments netting to approximately $0.2 billion with an offsetting increase to goodwill. The fair value of the acquisition was allocated to assets acquired of $20.1 billion (net of $0.3 billion cash acquired), primarily to goodwill for $11.1 billion, amortizable intangible assets for $6.6 billion, IPR&D for $1.1 billion, marketable securities of $0.6 billion and


JNJ 18. Acquisitions and divestitures

liabilities assumed of $3.0 billion, which includes the fair value of the contingent consideration mentioned above for $0.7 billion and deferred taxes of $2.0 billion. The goodwill is primarily attributable to the commercial acceleration and expansion of the portfolio and is not expected to be deductible for tax purposes. The contingent consideration was recorded in Other Liabilities and adjusted to fair value through the fiscal year end 2023 on the Consolidated Balance Sheet.


JNJ 18. Acquisitions and divestitures

The amortizable intangible assets were primarily comprised of already in-market products of the Impella® platform with an average weighted life of 14 years. The IPR&D assets were valued for technology programs for unapproved products. The value of the IPR&D was calculated using probability-adjusted cash flow projections discounted for the risk inherent in such projects. The probability of success factor ranged from 52% to 70%. The discount rate applied was 9.5%.


JNJ 18. Acquisitions and divestitures

In 2023, the Company recorded acquisition related costs before tax of approximately $0.2 billion, which was primarily recorded in Other (income)/expense. In 2022, the Company recorded acquisition related costs before tax of approximately $0.3 billion, which was recorded in Other (income)/expense.


JNJ 18. Acquisitions and divestitures

During fiscal year 2021, the Company did not make any material acquisitions that qualified as a business combination.


JNJ 18. Acquisitions and divestitures

In accordance with U.S. GAAP standards related to business combinations, and goodwill and other intangible assets, supplemental pro forma information for fiscal years 2023, 2022 and 2021 is not provided, as the impact of the aforementioned acquisitions did not have a material effect on the Company’s results of operations.


JNJ Divestitures

During the fiscal year 2023, the Company executed divestitures resulting in approximately $0.2 billion in proceeds resulting in gains or losses that were not material. At fiscal year end 2023, the Company held assets, primarily intangibles, on its Consolidated Balance Sheet that it expects to divest of approximately $0.3 billion primarily related to Acclarent and Ponvory.


JNJ Divestitures

During fiscal year 2022, the Company did not make any material divestitures.


JNJ Divestitures

During fiscal year 2021, in separate transactions, the Company divested two brands outside the U.S. within the Innovative Medicine segment. The Company recognized a pre-tax gain recorded in Other (income) expense, net, of approximately $0.6 billion.


JNJ 19. Legal proceedings

Johnson & Johnson and certain of its subsidiaries are involved in various lawsuits and claims regarding product liability; intellectual property; commercial; indemnification and other matters; governmental investigations; and other legal proceedings that arise from time to time in the ordinary course of their business.


JNJ 19. Legal proceedings

The Company records accruals for loss contingencies associated with these legal matters when it is probable that a liability


JNJ 19. Legal proceedings

will be incurred, and the amount of the loss can be reasonably estimated. As of December 31, 2023, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments in accordance with ASC 450-20-25, Contingencies. For these and other litigation and regulatory matters discussed below for which a loss is probable or reasonably possible, the Company is unable to estimate the possible loss or range of loss beyond the amounts accrued. Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. The ability to make such estimates and judgments can be affected by various factors including, among other things, whether damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are significant facts in dispute; procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; ability to achieve comprehensive multi-party settlements; complexity of related cross-claims and counterclaims; and/or there are numerous parties involved. To the extent adverse awards, judgments or verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated.


JNJ 19. Legal proceedings

In the Company’s opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued in the Company’s balance sheet, is not expected to have a material adverse effect on the Company’s financial position. However, the resolution of, or increase in accruals for, one or more of these matters in any reporting period may have a material adverse effect on the Company’s results of operations and cash flows for that period.


JNJ Matters concerning talc

A significant number of personal injury claims alleging that talc causes cancer have been asserted against Johnson & Johnson Consumer Inc., its successor LTL Management LLC (now known as LLT Management LLC) and the Company arising out of the use of body powders containing talc, primarily JOHNSON’S Baby Powder.


JNJ Matters concerning talc

In talc cases that previously have gone to trial, the Company has obtained a number of defense verdicts, but there also have been verdicts against the Company, many of which have been reversed on appeal. In June 2020, the Missouri Court of Appeals reversed in part and affirmed in part a July 2018 verdict of $4.7 billion in Ingham v. Johnson & Johnson, et al., No. ED 207476 (Mo. App.), reducing the overall award to $2.1 billion. An application for transfer of the case to the Missouri Supreme Court was subsequently denied and in June 2021, a petition for certiorari, seeking a review of the Ingham decision by the United States Supreme Court, was denied. In June 2021, the Company paid the award, which, including interest, totaled approximately $2.5 billion. The facts and circumstances, including the terms of the award, were unique to the Ingham decision and not representative of other claims brought against the Company. The Company continues to believe that it has strong legal grounds to contest the other talc verdicts that it has appealed. Notwithstanding the Company’s confidence in the safety of its talc products, in certain circumstances the Company has settled cases.


JNJ Matters concerning talc

In October 2021, Johnson & Johnson Consumer Inc. (Old JJCI) implemented a corporate restructuring (the 2021 Corporate Restructuring). As a result of that restructuring, Old JJCI ceased to exist and three new entities were created: (a) LTL Management LLC, a North Carolina limited liability company (LTL or Debtor); (b) Royalty A&M LLC, a North Carolina limited liability company and a direct subsidiary of LTL (RAM); and (c) the Debtor’s direct parent, Johnson & Johnson Consumer Inc., a New Jersey company (New JJCI). The Debtor received certain of Old JJCI’s assets and became solely responsible for the talc-related liabilities of Old JJCI, including all liabilities related in any way to injury or damage, or alleged injury or damage, sustained or incurred in the purchase or use of, or exposure to, talc, including talc contained in any product, or to the risk of, or responsibility for, any such damage or injury, except for any liabilities for which the exclusive remedy is provided under a workers’ compensation statute or act (the Talc-Related Liabilities).


JNJ Matters concerning talc

In October 2021, notwithstanding the Company’s confidence in the safety of its talc products, the Debtor filed a voluntary petition with the United States Bankruptcy Court for the Western District of North Carolina, Charlotte Division, seeking relief under chapter 11 of the Bankruptcy Code (the LTL Bankruptcy Case). All litigation against LTL, Old JJCI, New JJCI, the Company, other of their corporate affiliates, identified retailers, insurance companies, and certain other parties (the Protected Parties) was stayed, although LTL did agree to lift the stay on a small number of appeals where appeal bonds had been filed. The LTL Bankruptcy Case was transferred to the United States Bankruptcy Court for the District of New Jersey. Claimants filed motions to dismiss the LTL Bankruptcy Case and, following a multiple day hearing, the New Jersey Bankruptcy Court denied those motions in March 2022.


JNJ Matters concerning talc

The claimants subsequently filed notices of appeal as to the denial of the motions to dismiss the LTL Bankruptcy Case and the extension of the stay to the Protected Parties. On January 30, 2023, the Third Circuit reversed the Bankruptcy Court’s ruling and remanded to the Bankruptcy Court to dismiss the LTL bankruptcy.


JNJ Matters concerning talc

LTL filed a petition for rehearing of the Third Circuit’s decision, which was denied in March 2023. LTL subsequently filed a motion in the Third Circuit to stay the mandate directing the New Jersey Bankruptcy Court to dismiss the LTL bankruptcy pending filing and disposition of a petition for writ of certiorari to the United States Supreme Court. The Third Circuit denied the motion to stay the mandate and issued the mandate.


JNJ Matters concerning talc

In April 2023, the New Jersey Bankruptcy Court dismissed the LTL Bankruptcy Case, effectively lifting the stay as to all parties and returning the talc litigation to the tort system. LTL re-filed in the United States Bankruptcy Court for the District of New Jersey seeking relief under chapter 11 of the Bankruptcy Code (the LTL 2 Bankruptcy Case). As a result of the new filing, all talc claims against LTL were again automatically stayed pursuant to section 362 of the Bankruptcy Code. Additionally, the New Jersey Bankruptcy Court issued a temporary restraining order staying all litigation as to LTL, Old JJCI, New JJCI, the Company, identified retailers, and certain other parties (the New Protected Parties).


JNJ Matters concerning talc

Also in April 2023, the New Jersey Bankruptcy Court issued a decision that granted limited injunctive relief to the Company and the New Protected Parties (the LTL 2 Preliminary Injunction). The LTL 2 Preliminary Injunction remained in force until late August 2023, following the Bankruptcy Court’s extension of the initial LTL 2 Preliminary Injunction in June 2023. Under the LTL 2 Preliminary Injunction, except for in those cases filed in the federal court ovarian cancer multi-district litigation, discovery in all personal injury and wrongful death matters was permitted to proceed.


JNJ Matters concerning talc

Furthermore, in April 2023, the Talc Claimants' Committee filed a motion to dismiss the LTL 2 Bankruptcy followed by similar motions from other claimants. Hearings on the motions to dismiss occurred in June 2023. On July 28, 2023, the court dismissed the LTL 2 Bankruptcy case and, the same day, the Company stated its intent to appeal the decision and to continue its efforts to obtain a resolution of the talc claims. In September 2023, the Bankruptcy Court entered an order granting LTL leave to seek a direct appeal to the Third Circuit Court of Appeals. In October 2023, the Third Circuit granted LTL’s petition for a direct appeal. Briefing is ongoing.


JNJ Matters concerning talc

Following the dismissal of LTL 2, new lawsuits were filed and cases across the country that had been stayed were reactivated. The majority of the cases are pending in federal court, organized in a multi-district litigation (MDL) in the United States District Court for the District of New Jersey. In the MDL, case-specific discovery is proceeding with an expectation that a trial will occur in early 2025. Separately, discovery and pre-trial activity is underway in various individually filed and set cases around the country, with most activity for such cases centralized in New Jersey and California.


JNJ Matters concerning talc

In the original bankruptcy case, the Company agreed to provide funding to LTL for the payment of amounts the New Jersey Bankruptcy Court determines are owed by LTL and the establishment of a $2 billion trust in furtherance of this purpose. The Company established a reserve for approximately $2 billion in connection with the aforementioned trust. During the bankruptcy proceedings LTL had been de-consolidated by the Company. In the LTL 2 Bankruptcy Case, the Company had agreed to contribute an additional amount which, when added to the prior $2 billion, would be a total reserve of approximately $9 billion payable over 25 years (nominal value approximately $12 billion discounted at a rate of 4.41%), to resolve all the current and future talc claims. The approximate $9 billion reserve encompasses actual and contemplated settlements, of which approximately one-third is recorded as a current liability. The recorded amount remains the Company’s best estimate of probable loss after the dismissal.


JNJ Matters concerning talc

The parties have not yet reached a resolution of all talc matters and the Company is unable to estimate the possible loss or range of loss beyond the amount accrued.


JNJ Matters concerning talc

A class action advancing claims relating to industrial talc was filed against the Company and others in New Jersey state court in May 2022 (the Edley Class Action). The Edley Class Action asserts, among other things, that the Company fraudulently defended past asbestos personal injury lawsuits arising from exposure to industrial talc mined, milled, and manufactured before January 6, 1989 by the Company’s then wholly owned subsidiary, Windsor Minerals, Inc., which is currently a debtor in the Imerys Bankruptcy described hereafter. The Company removed the Edley Class Action to federal court in the District of New Jersey. In October 2022, the Company filed motions to dismiss and to deny certification of a class to pursue the Edley Class Action in the New Jersey District Court. Argument on the motions was heard in November 2023. Thereafter, the Company resolved this matter.


JNJ Matters concerning talc

In February 2019, the Company’s talc supplier, Imerys Talc America, Inc. and two of its affiliates, Imerys Talc Vermont, Inc. and Imerys Talc Canada, Inc. (collectively, Imerys) filed a voluntary petition for relief under chapter 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (Imerys Bankruptcy). The Imerys Bankruptcy relates to Imerys’s potential liability for personal injury from exposure to talcum powder sold by Imerys. In its bankruptcy, Imerys alleges it has claims against the Company for indemnification and rights to joint insurance proceeds. In its bankruptcy, Imerys proposed a chapter 11 plan (the Imerys Plan) that contemplated all talc-related claims against it being channeled to a trust along with its alleged indemnification rights against the Company. Following confirmation and consummation of the plan, the trust would pay talc claims pursuant to proposed trust distribution procedures (the TDP) and then seek indemnification from the Company.


JNJ Matters concerning talc

In February 2021, Cyprus Mines Corporation (Cyprus), which had owned certain Imerys talc mines, filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code and filed its Disclosure Statement and Plan (the Cyprus Plan). The Cyprus Plan contemplates a settlement with Imerys and talc claimants where Cyprus would make a monetary contribution to a trust established under the Imerys Plan in exchange for an injunction against talc claims asserted against it and certain affiliated parties.


JNJ Matters concerning talc

The Imerys Plan proceeded to solicitation in early 2021. However, the Imerys Plan did not receive the requisite number of votes to be confirmed after the Bankruptcy Court ruled certain votes cast in favor of the Imerys Plan should be disregarded. Imerys subsequently canceled its confirmation hearing.


JNJ Matters concerning talc

Imerys, the Imerys Tort Claimants’ Committee, and the Imerys Future Claimants’ Representative, along with Cyprus, the Cyprus Tort Claimants’ Committee, and the Cyprus Future Claimants’ Representative (collectively the Mediation Parties) have been engaged in mediation since shortly after the confirmation hearing was canceled in October 2021. In September 2023, the Bankruptcy Court entered an order extending the term of the mediation among the Mediation Parties through the end of December 2023. The Bankruptcy Court also authorized Imerys and Cyprus to proceed with mediation with certain of their insurers through the end of December 2023.


JNJ Matters concerning talc

In September 2023, Imerys and Cyprus filed amended plans of reorganization. The amended plans contemplate a similar construct as the prior Imerys and Cyprus Plans, including all talc claims against Imerys and Cyprus (and certain other protected parties) being channeled to a trust along with Imerys’s and Cyprus’s alleged indemnification rights against the Company. In January 2024, Imerys and Cyprus filed revised TDP. In February 2024, Imerys and Cyprus filed certain motions related to their Disclosure Statement.


JNJ Matters concerning talc

In February 2018, a securities class action lawsuit was filed against the Company and certain named officers in the United States District Court for the District of New Jersey, alleging that the Company violated the federal securities laws by failing to disclose alleged asbestos contamination in body powders containing talc, primarily JOHNSON’S Baby Powder, and that purchasers of the Company’s shares suffered losses as a result. In April 2019, the Company moved to dismiss the complaint. In


JNJ 2023 Annual Report 91

December 2019, the Court denied, in part, the motion to dismiss. In April 2021, briefing on Plaintiff’s motion for class certification was completed. The case was stayed in May 2022 pursuant to the LTL Bankruptcy Case and was reopened in May 2023. In December 2023, the Court granted Plaintiff’s motion for class certification. In January 2024, Defendants filed a petition with the Third Circuit under Federal Rule of Civil Procedure 23(f) for permission to appeal the Court’s order granting class certification. Fact discovery is proceeding.


JNJ 2023 Annual Report 91

A lawsuit was brought against the Company in the Superior Court of California for the County of San Diego alleging violations of California’s Consumer Legal Remedies Act (CLRA) relating to JOHNSON’S Baby Powder. In that lawsuit, the plaintiffs allege that the Company violated the CLRA by failing to provide required Proposition 65 warnings. In July 2019, the Company filed a notice of removal to the United States District Court for the Southern District of California and plaintiffs filed a second amended complaint shortly thereafter. In October 2019, the Company moved to dismiss the second amended complaint for failure to state a claim upon which relief may be granted. In response to those motions, plaintiffs filed a third amended complaint. In December 2019, the Company moved to dismiss the third amended complaint for failure to state a claim upon which relief may be granted. In April 2020, the Court granted the motion to dismiss but granted leave to amend. In May 2020, plaintiffs filed a Fourth Amended Complaint but indicated that they would be filing a motion for leave to file a fifth amended complaint. Plaintiffs filed a Fifth Amended Complaint in August 2020. The Company moved to dismiss the Fifth Amended Complaint for failure to state a claim upon which relief may be granted. In January 2021, the Court issued an Order and opinion ruling in the Company’s favor and granting the motion to dismiss with prejudice. In February 2021, Plaintiffs filed a Notice of Appeal with the Ninth Circuit. Plaintiffs filed their opening brief in July 2021. The company filed its responsive brief in October 2021. After the Notice of Suggestion of Bankruptcy was filed with the Ninth Circuit, a stay was imposed, and the Court held the reply deadline in abeyance. In September 2023, the stay lifted. With briefing complete, the Court is expected to either schedule oral argument or issue its decision at any time.