item 14 exhibits financial statement schedules reports form 8k 1 financial statements financial statements included report incorporated part ii item 8 hereof reference johnson johnsons annual report stockholders fiscal year 1993 2 financial statement schedules v property plant equipment vi accumulated depreciation property plant equipment viii reserves ix short term borrowings x supplementary income statement information schedules listed omitted required applicable 3 exhibits required filed item 601 regulation sk information called paragraph incorporated herein reference exhibit index report b reports form 8k reports form 8k filed last quarter period covered report johnson subsidiaries schedule vproperty plant equipment fiscal years ended january 2 1994 january 3 1993 december 29 1991 dollars millions note includes writeoff fully depreciated assets note b represents assets companies acquired period note c represents transfers account classifications note represents cumulative currency translation adjustment johnson subsidiaries schedule viaccumulated depreciation property plant equipment fiscal years ended january 2 1994 january 3 1993 december 29 1991 dollars millions note includes writeoff fully depreciated assets note b represents transfers account classifications note c represents cumulative currency translation adjustment following estimated useful lives used basis calculation depreciation significant portions respective classes assets cost improvements leased properties written terms respective leases useful lives whichever shorter cost maintenance repairs renewals charged income year incurred cost betterments replacements capitalized charges respective asset accounts upon retirement disposal fixed assets cost related amount accumulated depreciation amortization eliminated asset reserve accounts respectively difference net asset value proceeds adjusted income cost assets still use fully depreciated eliminated asset related reserve accounts johnson subsidiaries schedule viii reserves fiscal years ended january 2 1994 january 3 1993 december 29 1991 dollars millions 1 charges related customer rebates cash discounts reflected reductions sales customers q johnson subsidiaries schedule ix short term borrowings fiscal years ended january 2 1994 january 3 1993 december 29 1991 dollars millions note consists primarily international notes payable banks note b reflects five quarter average balance note c reflects five quarter average balance related interest expense year johnson subsidiaries schedule x supplementary income statement information fiscal years ended january 2 1994 january 3 1993 december 29 1991 dollars millions signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 28 1994 johnson registrant r larsen r larsen chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report duly signed following persons behalf registrant capacities dates indicated report independent auditors stockholders board directors johnson report consolidated financial statements johnson subsidiaries incorporated reference form 10k johnson 1993 annual report stockholders appears page 40 therein connection audits financial statements also audited related financial statement schedules listed index item 14 form 10k opinion financial statement schedules referred considered relation basic financial statements taken whole present fairly material respects information required included therein coopers lybrand new york new york january 31 1994 consent independent auditors hereby consent incorporation reference registration statements 3352260 3340294 3340295 3332875 267443 277153 278905 337634 form s8 3347424 3337040 form s3 related prospectuses report dated january 31 1994 audits consolidated financial statements financial statement schedules johnson subsidiaries january 2 1994 january 3 1993 three years period ended january 2 1994 reports included incorporated reference annual report form 10k coopers lybrand new york new york january 31 1994 exhibit index reg sk exhibit table description item exhibit 3a certificate amendment restated certificate incorporation company restated certificate incorporation dated may 20 1992 incorporated herein reference exhibit 3a registrants form 10k annual report year ended january 3 1993 3b bylaws company amended april 26 1990 incorporated herein reference exhibit 3b registrants form 10k annual report year ended january 3 1993 10a 1991 stock option plan incorporated reference registration statement 3340294 exhibit 4a 10b 1986 stock option plan amended incorporated herein reference exhibit 10b registrants form 10k annual report year ended january 3 1993 10c 1981 incentive stock option plan amended incorporated herein reference exhibit 10c registrants form 10k annual report year ended january 3 1993 10d 1980 stock option plan amended incorporated herein reference exhibit 10d registrants form 10k annual report year ended january 3 1993 10e 1991 stock compensation plan incorporated herein reference exhibit 10e registrants form 10k annual report year ended january 3 1993 10f 1986 stock compensation plan incorporated herein reference exhibit 10f registrants form 10k annual report year ended january 3 1993 10g domestic deferred compensation plan incorporated herein reference exhibit 10g registrants form 10k annual report year ended january 3 1993 10h supplemental retirement plan incorporated herein reference exhibit 10h registrants form 10k annual report year ended january 3 1993 10i executive life insurance plan incorporated herein reference exhibit 10i registrants form 10k annual report year ended january 3 1993 11 calculation earnings per share filed document 12 statement computation ratio earnings fixed charges filed document 13 annual report stockholders fiscal year 1993 portions incorporated reference document deemed filed document 21 subsidiaries filed document 28 form 11k johnson savings plan filed june 30 1994 management contracts compensatory plans arrangements required filed exhibits form pursuant item 14c report copy exhibits listed provided without charge stockholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 14 exhibits financial statement schedules reports form 8k 1 financial statements financial statements included report incorporated part ii item 8 hereof reference johnson johnsons annual report stockholders fiscal year 1994 2 financial statement schedules ii reserves schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called paragraph incorporated herein reference exhibit index report b reports form 8k following reports form 8k filed last quarter period covered report 1 report form 8k filed october 5 1994 included following pro forma financial information prepared reflect two acquisitions company referred note 18 johnson subsidiaries notes consolidated financial statements page 38 johnson johnsons annual report stockholders fiscal year 1994 unaudited pro forma condensed consolidated statements income six months ended july 3 1994 year ended january 2 1994 ii unaudited pro forma condensed consolidated balance sheet july 3 1994 iii notes thereto 2 report form 8k filed december 2 1994 included following pro forma financial information prepared reflect two acquisitions company referred 1 unaudited pro forma condensed consolidated statements income nine months ended october 2 1994 year ended january 2 1994 ii unaudited pro forma condensed consolidated balance sheet october 2 1994 iii notes thereto johnson subsidiaries schedule ii reserves fiscal years ended january 1 1995 january 2 1994 january 3 1993 dollars millions 1 charges related customer rebates cash discounts reflected reductions sales customers signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 31 1995 johnson registrant r larsen r larsen chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report duly signed following persons behalf registrant capacities dates indicated report independent auditors stockholders board directors johnson report consolidated financial statements johnson subsidiaries incorporated reference form 10k johnson 1994 annual report stockholders appears page 40 therein connection audits financial statements also audited related financial statement schedule listed index item 14 form 10k opinion financial statement schedule referred considered relation basic financial statements taken whole present fairly material respects information required included therein coopers lybrand llp coopers lybrand llp new york new york january 23 1995 consent independent auditors hereby consent incorporation reference registration statements 3352252 3340294 3340295 3332875 267443 337634 form s8 3355977 3347424 form s3 3357583 form s4 related prospectuses report dated january 23 1995 audits consolidated financial statements financial statement schedule johnson subsidiaries january 1 1995 january 2 1994 three years period ended january 1 1995 reports included incorporated reference annual report form 10k coopers lybrand llp coopers lybrand llp new york new york january 23 1995 exhibit index management contracts compensatory plans arrangements required filed exhibits form pursuant item 14c report copy exhibits listed provided without charge stockholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 14 exhibits financial statement schedules reports form 8k 1 financial statements financial statements included report incorporated part ii item 8 hereof reference johnson johnsons annual report shareowners fiscal year 1996 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called paragraph incorporated herein reference exhibit index report b reports form 8k reports form 8k filed last quarter 1996 johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended december 29 1996 december 31 1995 january 1 1995 dollars millions charges related customer rebates cash discounts reflected reductions sales customers signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 25 1997 johnson registrant r larsen r larsen chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report duly signed following persons behalf registrant capacities dates indicated report independent auditors shareowners board directors johnson report consolidated financial statements johnson subsidiaries incorporated reference form 10k johnson 1996 annual report shareowners appears page 40 therein connection audits financial statements also audited related financial statement schedule listed index item 14 form 10k opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information required included therein coopers lybrand llp coopers lybrand llp new york new york january 20 1997 consent independent auditors consent incorporation reference registration statements 3352252 3340294 3340295 3332875 337634 03359009 form s8 3355977 3347424 form s3 3357583 33300391 form s4 related prospectuses reports dated january 20 1997 audits consolidated financial statements financial statement schedule johnson subsidiaries december 29 1996 december 31 1995 three years period ended december 29 1996 reports included incorporated reference annual report form 10k coopers lybrand llp coopers lybrand llp new york new york march 28 1997 exhibit index management contracts compensatory plans arrangements required filed exhibits form pursuant item 14c report copy exhibits listed provided without charge shareowner submitting written request specifying desired exhibits secretary principal executive offices companyitem 14 exhibits financial statement schedules reports form 8k 1 financial statements financial statements included report incorporated part ii item 8 hereof reference johnson johnsons annual report shareowners fiscal year 1997 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called paragraph incorporated herein reference exhibit index report b reports form 8k reports form 8k filed last quarter 1997 johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended december 28 1997 december 29 1996 december 31 1995 dollars millions charges related customer rebates cash discounts reflected reductions sales customers signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 20 1998 johnson registrant r larsen r larsen chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report duly signed following persons behalf registrant capacities dates indicated report independent auditors shareowners board directors johnson report consolidated financial statements johnson subsidiaries incorporated reference form 10k johnson 1997 annual report shareowners appears page 43 therein connection audits financial statements also audited related financial statement schedule listed index item 14 form 10k opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information required included therein coopers lybrand llp coopers lybrand llp new york new york january 19 1998 consent independent auditors consent incorporation reference registration statements 3352252 3340294 3340295 3332875 337634 03359009 33338055 33340681 33326979 form s8 3355977 3347424 form s3 3357583 33300391 33338097 33330081 form s4 related prospectuses reports dated january 19 1998 audits consolidated financial statements financial statement schedule johnson subsidiaries december 28 1997 december 29 1996 three years period ended december 28 1997 reports included incorporated reference annual report form 10k coopers lybrand llp coopers lybrand llp new york new york march 27 1998 exhibit index management contracts compensatory plans arrangements required filed exhibits form pursuant item 14c report copy exhibits listed provided without charge shareowner submitting written request specifying desired exhibits secretary principal executive offices companyitem 14 exhibits financial statement schedules reports form 8k following documents filed part report 1 financial statements following consolidated financial statements notes thereto independent auditors report pages 31 44 johnson johnsons annual report shareowners fiscal year 1998 incorporated herein reference consolidated balance sheet end fiscal years 1998 1997 consolidated statement earnings fiscal years 1998 1997 1996 consolidated statement equity fiscal years 1998 1997 1996 consolidated statement cash flows fiscal years 1998 1997 notes consolidated financial statements independent auditors report 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report b reports form 8k reports form 8k filed last quarter 1998 johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended january 3 1999 december 28 1997 december 29 1996 dollars millions charges related customer rebates cash discounts reflected reductions sales customers signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 22 1999 johnson registrant r larsen r larsen chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent auditors shareowners board directors johnson report consolidated financial statements johnson subsidiaries incorporated reference form 10k johnson 1998 annual report shareowners appears page 44 therein connection audits financial statements also audited related financial statement schedule listed index item 14 form 10k opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information required included therein pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york january 25 1999 exhibit index management contracts compensatory plans arrangements required filed exhibits form pursuant item 14c report copy exhibits listed provided without charge shareowner submitting written request specifying desired exhibits secretary principal executive offices companyitem 14 exhibits financial statement schedules reports form 8k following documents filed part report 1 financial statements following consolidated financial statements notes thereto independent auditors report pages 33 48 johnson johnsons annual report shareowners fiscal year 2000 incorporated herein reference consolidated balance sheets end fiscal years 2000 1999 consolidated statements earnings fiscal years 2000 1999 1998 consolidated statements equity fiscal years 2000 1999 1998 consolidated statements cash flows fiscal years 2000 1999 notes consolidated financial statements independent auditors report 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report b reports form 8k reports form 8k filed fourth quarter fiscal year 2000 johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended december 31 2000 january 2 2000 january 3 1999 dollars millions charges related customer rebates cash discounts reflected reductions sales customers signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 26 2001 johnson registrant r larsen r larsen chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent accountants financial statement schedule shareowners board directors johnson audits consolidated financial statements johnson referred report dated january 22 2001 appearing johnson 2000 annual report shareowners report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 14 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york january 22 2001 exhibit index management contracts compensatory plans arrangements required filed exhibits form pursuant item 14c report copy exhibits listed provided without charge shareowner submitting written request specifying desired exhibits secretary principal executive offices companyitem 14 exhibits financial statement schedules reports form 8k following documents filed part report 1 financial statements following consolidated financial statements notes thereto independent auditors report pages 32 48 johnson johnsons annual report shareowners fiscal year 2001 incorporated herein reference consolidated balance sheets end fiscal years 2001 2000 consolidated statements earnings fiscal years 2001 2000 1999 consolidated statements equity fiscal years 2001 2000 1999 consolidated statements cash flows fiscal years 2001 2000 notes consolidated financial statements independent auditors report 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report b reports form 8k report form 8k filed october 22 2001 included press release announcing companys sales earnings fiscal quarter ended september 30 2001 report form 8k filed november 27 2001 included press release announcing completion companys acquisition inverness medical technology incs diabetes care products business report form 8ka filed november 30 2001 amending form 8k filed november 27 johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended december 30 2001 december 31 2000 january 2 2000a dollars millions schedule prepared give retroactive effect merger johnson alza june 22 2001 b charges related customer rebates cash discounts reflected reductions sales customers signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 19 2002 johnson registrant r larsen r larsen chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent accountants financial statement schedule shareowners board directors johnson audits consolidated financial statements referred report dated january 21 2002 appearing johnson annual report shareowners fiscal year ended december 30 2001 report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 14 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york january 21 2002 exhibit index management contracts compensatory plans arrangements required filed exhibits form pursuant item 14c report copy exhibits listed provided without charge shareowner submitting written request specifying desired exhibits secretary principal executive offices companyitem 14 controls procedures disclosure controls within 90 days filing report company evaluated effectiveness design operation disclosure controls procedures companys disclosure controls procedures controls procedures company designed ensure records processes summarizes reports timely manner information company must disclose reports filed securities exchange act william c weldon chairman chief executive officer robert j darretta executive vice president chief financial officer reviewed participated evaluation based evaluation messrs weldon darretta concluded date evaluation companys disclosure controls procedures effective internal controls since date evaluation described significant changes companys internal controls factors could significantly affect controls including corrective actions regard significant deficiencies material weaknesses part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material headings appointment independent auditors preapproval audit nonaudit services pages 25 27 proxy statement part iv item 15item 14 principal accounting fees services information called item incorporated herein reference material caption “ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accounting fees services information called item incorporated herein reference material caption “ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material caption “ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material caption “ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material caption “ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material caption “ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material caption “ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material caption “ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material caption “item 5 ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material caption “item 3 ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material caption “item 3 ratification appointment independent registered public accounting firm” proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material headings appointment independent auditors preapproval audit nonaudit services pages 34 36 proxy statement part iv item 15item 14 principal accountant fees services information called item incorporated herein reference material caption “ratification appointment independent registered public accounting firm” proxy statement part iv item 15 item 7 managements discussion analysis financial condition results operations information called item incorporated herein reference material captioned managements discussion analysis results operations financial conditionoverview sales earnings costs expenses liquidity capital resources changing prices inflation pages 23 25 johnson johnsons annual report stockholders fiscal year 1993 item 8item 7 managements discussion analysis financial condition results operations information called item incorporated herein reference material captioned managements discussion analysis results operations financial conditionoverview sales earnings costs expenses liquidity capital resources changing prices inflation pages 23 26 johnson johnsons annual report stockholders fiscal year 1994 item 8item 7 managements discussion analysis financial condition results operations information called item incorporated herein reference material captioned managements discussion analysis results operations financial conditionoverview sales earnings costs expenses liquidity capital resources changing prices inflation pages 23 26 johnson johnsons annual report shareowners fiscal year 1996 item 8item 7 managements discussion analysis financial condition results operations information called item incorporated herein reference material captioned managements discussion analysis results operations financial conditionoverview sales earnings costs expenses liquidity capital resources changing prices inflation pages 26 28 johnson johnsons annual report shareowners fiscal year 1997 item 8item 7 managements discussion analysis financial condition results operations information called item incorporated herein reference narrative tabular graphic material included material captioned managements discussion analysis results operations financial condition pages 24 30 johnson johnsons annual report shareowners fiscal year 1998 item 7aitem 7 managements discussion analysis financial condition results operations information called item incorporated herein reference narrative tabular graphic material included material captioned managements discussion analysis results operations financial condition pages 26 32 johnson johnsons annual report shareowners fiscal year 2000 march 27 2001 company announced entered definitive merger agreement alza corporation researchbased pharmaceutical company leader drug delivery technologies alza shareholders receive fixed exchange ratio 49 shares johnson common stock share alza taxfree transaction fully diluted basis alza approximately 295 million shares outstanding johnson intends account transaction pooling interests boards directors company alza given approvals merger transaction expected close early part third quarter 2001 merger subject clearance hartscottrodino antitrust improvements act european union merger control regulation customary closing conditions agreement also require approval alzas shareholders january 26 2001 company announced entered definitive agreement acquire heartport inc manufacturer less invasive cardiac surgery products transaction valued approximately 81 million heartport inc develops manufactures sells less invasive cardiac surgery products enable surgeons perform wide range less invasive openchest minimally invasive heart operations companies expect transaction completed second quarter 2001 subject customary conditions including approval majority shareowners heartport hartscottrodino clearance item 7aitem 7 managements discussion analysis financial condition results operations information called item incorporated herein reference narrative tabular graphic material included material captioned managements discussion analysis results operations financial condition pages 25 31 johnson johnsons annual report shareowners fiscal year 2001 february 2002 board directors approved stock repurchase program authorizing company buy back 5 billion common stock open market march 15 2002 13387800 shares repurchased pursuant program average per share price 6083 repurchase program time limit may suspended periods discontinued item 7aitem 7 managements discussion analysis financial condition results operations information called item incorporated herein reference narrative tabular graphic material included material captioned managements discussion analysis results operations financial condition pages 28 37 johnson johnsons annual report shareholders fiscal year 2002 item 7aitem 7 managements discussion analysis results operations financial condition information called item incorporated herein reference narrative tabular graphic material included material captioned managements discussion analysis results operations financial condition pages 28 37 annual report filed exhibit 13 report form 10k subsequent event february 24 2004 companys cordis operating company announced entered strategic alliance guidant corporation copromotion drugeluting stents advancement new technology coronary stent delivery systems sales marketing resources companies join forces focus promoting cypher sirolimuseluting coronary stent united states option pursue similar arrangement japan future companies collaborate marketing sales strategies associated cypher stent bear marketing sales costs separately cordis continue report cypher stent sales revenue cordis also obtain access guidants current next generation technologies delivery coronary stents guidant cordis immediately initiate development regulatory plans cypher stent utilizes guidant stent delivery system addition outstanding patent disputes companies settled described note 18 legal proceedings notes consolidated financial statements filed exhibit 13 report form 10k item 7aitem 7 management’s discussion analysis financial condition results operation information called item incorporated herein reference narrative tabular graphic material captioned “management’s discussion analysis results operations financial condition” pages 38 49 annual report filed exhibit 13 report form 10k item 7aitem 7 management’s discussion analysis financial condition results operation information called item incorporated herein reference narrative tabular graphic material caption “management’s discussion analysis results operations financial condition” pages 36 47 annual report filed exhibit 13 report form 10k item 7aitem 7 management’s discussion analysis financial condition results operation information called item incorporated herein reference narrative tabular graphic material caption “management’s discussion analysis results operations financial condition” pages 34 43 annual report filed exhibit 13 report form 10k item 7aitem 7 management’s discussion analysis financial condition results operation information called item incorporated herein reference narrative tabular graphic material caption “management’s discussion analysis results operations financial condition” pages 26 35 annual report filed exhibit 13 report form 10k item 7aitem 7 management’s discussion analysis financial condition results operation information called item incorporated herein reference narrative tabular graphic material caption “management’s discussion analysis results operations financial condition” pages 30 40 annual report filed exhibit 13 report form 10k item 7aitem 7 management’s discussion analysis financial condition results operations information called item incorporated herein reference narrative tabular material caption “management’s discussion analysis results operations financial condition” annual report filed exhibit 13 report form 10k item 7aitem 7 management’s discussion analysis financial condition results operations information called item incorporated herein reference narrative tabular material caption “management’s discussion analysis results operations financial condition” annual report filed exhibit 13 report form 10k item 7aitem 7 management’s discussion analysis results operations financial condition organization business segments description company business segments johnson subsidiaries company approximately 127100 employees worldwide engaged research development manufacture sale broad range products health care field company conducts business virtually countries world primary focus products related human health wellbeing company organized three business segments consumer pharmaceutical medical devices consumer segment includes broad range products used baby care oral care skin care overthecounter pharmaceutical women’s health wound care markets products marketed general public sold retail outlets distributors throughout world pharmaceutical segment focused five therapeutic areas including immunology infectious diseases neuroscience oncology cardiovascular metabolic diseases products segment distributed directly retailers wholesalers hospitals health care professionals prescription use medical devices segment includes broad range products used orthopaedic surgery cardiovascular diabetes care vision care fields distributed wholesalers hospitals retailers used principally professional fields physicians nurses hospitals eye care professionals clinics executive committee johnson principal management group responsible strategic operations allocation resources company committee oversees coordinates activities consumer pharmaceutical medical devices business segments product lines company competes companies locally globally throughout world competition exists product lines without regard number size competing companies involved competition research involving development improvement new existing products processes particularly significant development new innovative products well protecting underlying intellectual property companys product portfolio important company’s success areas business competitive environment requires substantial investments continuing research addition development maintenance customer demand company’s consumer products involves significant expenditures advertising promotion management’s objectives company manages within strategic framework credo foundation company believes strategic operating principles broadly based human health care managing business long term decentralized management approach committed people values crucial successfully meeting demands rapidly evolving markets compete end management focused longterm strategic growth drivers creating value innovation expanding global reach local focus excellence execution leading purpose company broadly based human health care committed creating value developing accessible high quality innovative products services new products introduced within past five years accounted approximately 25 2015 sales 2015 90 billion 129 sales invested research development reflecting management’s commitment delivering new differentiated products services meet evolving health care needs sustain company’s longterm growth diverse businesses 250 operating companies located 60 countries key drivers company’s success maintaining company’s decentralized management approach time leveraging extensive resources enterprise positions company well innovate execute strategic plans reach markets globally well address needs challenges local markets order remain leader health care company strives maintain purposedriven organization committed developing global business leaders achieve growth objectives businesses managed longterm order sustain market leadership positions enable growth provides enduring source value shareholders credo unifies johnson employees achieving objectives provides common set values serve foundation company’s responsibilities patients consumers health care professionals employees communities shareholders company believes foundational values strategic framework longterm growth drivers along overall mission improving quality life people around world enable johnson continue leader health care industry results operations analysis consolidated sales 2015 worldwide sales decreased 57 701 billion compared increases 42 2014 61 2013 sales changes consisted following 2015 introduction competitive products companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir negative impact 27 worldwide operational sales growth 2015 impact acquisitions divestitures worldwide operational sales growth negative 20 2014 sales companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir positive impact 28 divestiture orthoclinical diagnostics business negative impact 14 worldwide operational growth 2013 acquisition synthes inc net related divestiture increased worldwide operational growth 25 sales us companies 357 billion 2015 348 billion 2014 319 billion 2013 represents increases 26 2015 90 2014 70 2013 sales international companies 344 billion 2015 395 billion 2014 394 billion 2013 represents decrease 131 2015 increases 04 2014 54 2013 fiveyear compound annual growth rates worldwide us international sales 26 39 14 respectively tenyear compound annual growth rates worldwide us international sales 33 23 45 respectively sales companies europe experienced decline 156 compared prior year including operational growth 11 offset negative currency impact 167 sales companies western hemisphere excluding us experienced decline 156 compared prior year including operational growth 26 offset negative currency impact 182 sales companies asiapacific africa region experienced decline 81 compared prior year including operational growth 03 negative currency impact 84 2015 results benefited inclusion 53rd week see note 1 consolidated financial statements annual closing date details company estimated fiscal year 2015 growth rate enhanced approximately 10 additional week added days sales also added full weeks worth operating costs therefore net earnings impact negligible 2015 2014 company one wholesaler distributing products three segments represented approximately 125 110 respectively total consolidated revenues 2013 company customer represented 10 total consolidated revenues us health care reform july 28 2014 internal revenue service issued final regulations branded prescription drug fee annual nontax deductible fee imposed entities engaged business manufacturing importing branded prescription drugs covered entities enacted section 9008 patient protection affordable care act final regulations accelerated expense recognition criteria fee obligation one year fee paid year sales used calculate fee occur change impacted covered entities resulted need entities record additional expense 2014 fee would otherwise expensed paid 2015 company accrued additional 220 million fiscal third quarter 2014 due change fee associated accelerated expense paid scheduled 2015 cash impact 2014 analysis sales business segments consumer segment consumer segment sales 2015 135 billion decrease 68 2014 included 27 operational growth offset negative currency impact 95 us consumer segment sales 52 billion increase 25 international sales 83 billion decrease 119 included 27 operational growth offset negative currency impact 146 2015 divestitures negative impact 14 worldwide consumer segment operational growth major consumer franchise sales overthecounter otc franchise sales 40 billion decreased 32 compared prior year included 81 operational growth negative currency impact 113 operational growth primarily driven analgesics upper respiratory including zyrtec® digestive health products mcneilppc inc johnson consumer inc mcneilppc continues operate consent decree signed 2011 us food drug administration fda governs certain mcneil consumer healthcare manufacturing operations requires mcneilppc remediate facilities operates lancaster pennsylvania fort washington pennsylvania las piedras puerto rico consent decree february 2015 thirdparty expert submitted written certification fda three manufacturing sites following fda inspections 2015 mcneilppc received notifications fda three manufacturing facilities conformity applicable laws regulations consent decree receiving notice fda compliance applicable laws regulations three facilities subject fiveyear audit period thirdparty cgmp expert thus thirdparty expert continue reassess sites various times least five years skin care franchise sales 35 billion decreased 60 compared prior year included 13 operational growth negative currency impact 73 operational growth primarily due sales growth neutrogena® aveeno® products partially offset lower sales china baby care franchise sales 20 billion 2015 decrease 87 compared prior year included 12 operational growth negative currency impact 99 operational growth primarily due new product launches partially offset competition china oral care franchise sales 16 billion 2015 decrease 41 compared prior year included 52 operational growth negative currency impact 93 operational growth driven increased sales listerine® products attributable geographical expansion new products successful marketing campaigns women’s health franchise sales 12 billion 2015 decrease 78 compared prior year included 76 operational growth negative currency impact 154 operational growth outside us driven new product launches successful marketing campaigns wound careother franchise sales 12 billion 2015 decrease 185 2014 primarily due splenda® benecol® divestitures consumer segment sales 2014 145 billion decrease 14 2013 included 10 operational growth offset negative currency impact 24 us consumer segment sales 51 billion decrease 13 international sales 94 billion decrease 14 included 23 operational growth offset negative currency impact 37 pharmaceutical segment pharmaceutical segment sales 2015 314 billion decrease 27 2014 included operational growth 42 offset negative currency impact 69 us sales 183 billion increase 52 international sales 131 billion decrease 120 included 30 operational growth offset negative currency impact 150 pharmaceutical segment operational growth negatively impacted 65 due introduction competitive products companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir positively impacted 14 due adjustment previous reserve estimates including managed medicaid rebates primarily cardiovascularmetabolismother therapeutic area 2015 divestitures negative impact 03 worldwide pharmaceutical segment operational growth major pharmaceutical therapeutic area sales prior year amounts reclassified conform current year presentation percentage greater 100 previously referred immunology products achieved sales 104 billion 2015 representing increase 21 compared prior year immunology products growth 21 included operational growth 69 negative currency impact 48 increased sales stelara® ustekinumab simponi®simponi aria® golimumab due market growth increased penetration simponi aria® growth partially offset lower remicade® infliximab sales companys distributor primarily due weakening euro biosimilar competition europe patents remicade® certain countries europe expired february 2015 biosimilar versions remicade® introduced certain markets outside united states resulting reduction sales remicade® markets additional biosimilar competition likely result reduction remicade® sales markets outside united states timing possible introduction biosimilar version remicade® united states subject enforcement patent rights approval fda compliance 180day notice provisions biologics price competition innovation act bpcia february 9 2016 arthritis advisory committee fda recommended vote 213 approve first investigational biosimilar infliximab across eligible indications united states risk competitor could launch biosimilar version remicade® following fda approval subject compliance 180day notice provisions bpcia even though one valid patents place introduction us market biosimilar version remicade® result reduction us sales remicade® 2015 us sales remicade® 45 billion launch biosimilar version remicade® us expected material adverse effect company’s results operations cash flows 2016 see note 21 consolidated financial statements legal matters regarding remicade® patents infectious disease products sales 37 billion decline 347 2014 included operational decrease 276 negative currency impact 71 competitive products companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir significant negative impact us sales continue negative impact future sales decline hepatitis c sales partially offset sales growth edurant®rilpivirine sales prezista® prezcobix®rezolsta® darunavircobicistat neuroscience products sales 63 billion decrease 35 2014 included operational growth 50 negative currency impact 85 us sales growth concerta®methylphenidate primarily due therapeutic equivalence reclassification generic competitors fda november 2014 strong sales invega sustenna®xeplion®invega trinza® paliperidone palmitate primarily due increased market share launch invega trinza® neuroscience products sales negatively impacted us divestiture nucynta® tapentadol lower sales risperdal® consta® risperidone oncology products achieved sales 47 billion 2015 representing increase 53 compared prior year oncology products growth 53 included operational growth 177 negative currency impact 124 contributors growth strong sales imbruvica® ibrutinib due approval new indications additional country launches strong patient uptake additionally sales zytiga® abiraterone acetate grew us due market growth partially offset share decline strong growth asia latin america partially offset lower sales europe due competition cardiovascularmetabolismother products achieved sales 64 billion 2015 representing increase 151 compared prior year due strong sales xarelto®rivaroxaban invokana®invokamet® canagliflozin procrit®eprex® epoetin alfa sales impacted competition 2015 company advanced pipeline several regulatory submissions approvals new drugs additional indications existing drugs follows pharmaceutical segment achieved sales 323 billion 2014 representing increase 149 prior year strong operational growth 165 negative currency impact 16 us sales 174 billion increase 250 international sales 149 billion increase 50 included 83 operational growth negative currency impact 33 2013 pharmaceutical segment sales included positive adjustment previous estimates managed medicaid rebates negatively impacted 2014 pharmaceutical operational sales growth 08 compared prior year 2014 sales companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir positive impact 69 operational growth pharmaceutical segment medical devices segment medical devices segment sales 2015 251 billion decrease 87 2014 included operational decline 14 negative currency impact 73 us sales 121 billion decrease 10 compared prior year international sales 130 billion decrease 148 compared prior year operational decrease 17 negative currency impact 131 divestitures orthoclinical diagnostics cordis businesses negative impact 32 06 respectively worldwide operational growth medical devices segment compared 2014 major medical devices franchise sales prior year amounts reclassified conform current year presentation orthopaedics franchise sales 93 billion 2015 decrease 43 2014 included operational growth 17 negative currency impact 60 operational growth us europe regions primarily driven sales hip primary stem platform attune® knee system trauma tfna nailing system sports medicine orthovisc®monovisc® products growth negatively impacted softer demand reduction customer inventory levels primarily china continued pricing pressures surgery franchise sales 92 billion 2015 decrease 51 2014 included operational growth 27 negative currency impact 78 operational growth advanced surgery driven endocutter biosurgical energy products primarily attributable market growth increased penetration certain markets new product launches operational growth specialty surgery primarily driven mentor products growth partially offset lower sales womens health urology products general surgery vision care franchise sales 26 billion 2015 decrease 75 2014 included operational growth 17 negative currency impact 92 operational growth major regions primarily driven new product launches partially offset lower price cardiovascular franchise sales 20 billion decrease 78 2014 represented operational decline 01 negative currency impact 77 strong operational growth electrophysiology business driven market growth success thermocool® smarttouch® catheter offset impact divesting cordis business company completed divestiture cordis business cardinal health october 4 2015 cordis business generated annual net revenues approximately 535 million 780 million 2015 2014 respectively additional details see note 20 consolidated financial statements diabetes care franchise sales 19 billion decrease 100 2014 represented operational decline 07 negative currency impact 93 operational decline primarily due lower price partially offset success animas® vibe® products june 30 2014 company divested orthoclinical diagnostics business diagnostics franchise carlyle group additional details see note 20 consolidated financial statements medical devices segment sales 2014 275 billion decrease 34 2013 included operational decline 16 negative currency impact 18 us sales 123 billion decrease 43 compared prior year international sales 153 billion decline 27 compared prior year operational growth 05 offset negative currency impact 32 2014 divestiture orthoclinical diagnostics business negative impact 32 operational growth medical devices segment analysis consolidated earnings provision taxes income consolidated earnings provision taxes income decreased 192 billion compared 206 billion 2014 decrease 66 decrease primarily attributable significantly lower sales olysio®sovriad® simeprevir negative currency impacts restructuring charge 06 billion higher intangible asset writedowns 01 billion 2015 compared 2014 decrease partially offset lower net litigation expense 11 billion lower synthes integration costs 06 billion positive adjustment 04 billion previous reserve estimates including managed medicaid rebates higher gains 03 billion divestitures compared prior year fiscal year 2015 included higher gains 03 billion primarily divestitures cordis business splenda® brand us divestiture nucynta® versus gains recorded 2014 divestitures orthoclinical diagnostics business ky® brand additionally 2014 included additional year branded prescription drug fee 02 billion consolidated earnings provision taxes income increased 206 billion 2014 compared 155 billion 2013 increase 329 earnings provision taxes income favorable due strong sales volume growth particularly sales olysio®sovriad® simeprevir positive mix higher sales higher margin products pharmaceutical business divestitures lower margin businesses cost reduction efforts across many businesses additionally 2014 included higher net gains divestitures 23 billion primarily divestiture orthoclinical diagnostics business lower litigation expense 10 billion lower inprocess research development costs 04 billion lower expenses 01 billion related depuy asr™ hip program compared fiscal year 2013 partially offset inclusion additional year branded prescription drug fee 02 billion 01 billion higher synthes integrationtransaction costs 2014 fiscal year 2013 included net gain 04 billion equity investment transactions primarily sale elan american depositary shares percent sales consolidated earnings provision taxes income 2015 274 versus 277 2014 cost products sold selling marketing administrative expenses cost products sold selling marketing administrative expenses percent sales follows 2015 cost products sold percent sales increased slightly compared prior year favorable mix segments offset 81 million associated restructuring activity medical devices segment negative transactional currency lower sales olysio®sovriad® simeprevir 2015 intangible asset amortization expense included cost products sold 2015 2014 12 billion 14 billion respectively increase percent sales selling marketing administrative expenses 2015 compared prior year primarily due incremental investment spending segments impact lower sales olysio®sovriad® simeprevir partially offset favorable mix inclusion additional year branded prescription drug fee 02 billion 2014 cost products sold percent sales decreased compared prior year primarily result positive mix higher sales higher margin products pharmaceutical business divestitures lower margin businesses cost improvements across many businesses partially offset pricing impact negative transactional currency addition 2013 included inventory stepup charge 01 billion related synthes acquisition intangible asset amortization expense included cost products sold 2014 2013 14 billion decrease percent sales selling marketing administrative expenses 2014 compared prior year primarily due leveraged costs resulting growth pharmaceutical business particularly sales olysio®sovriad® simeprevir cost containment initiatives across many businesses partially offset inclusion additional year branded prescription drug fee 220 million fiscal third quarter 2014 research development expense research development expense segment business follows percent segment sales research development activities represent significant part companys business expenditures relate processes discovering testing developing new products upfront payments milestones improving existing products well ensuring product efficacy regulatory compliance prior launch company remains committed investing research development aim delivering high quality innovative products 2015 worldwide costs research development activities increased 65 compared 2014 increase percent sales attributable increased investment spending primarily pharmaceutical segment lower overall sales business mix 2014 worldwide costs research development activities increased 38 compared 2013 reduction percent sales primarily due strong sales growth pharmaceutical business research spending pharmaceutical segment increased absolute dollars 62 billion compared 58 billion primarily due higher levels spending advance companys pharmaceutical pipeline inprocess research development iprd 2015 company recorded iprd charge 02 billion primarily discontinuation certain development projects related covagen 2014 company recorded iprd charge 02 billion impairment various iprd projects related respivert crucell mentor synthes delay discontinuation certain development projects 2013 company recorded iprd charge 06 billion primarily impairment various iprd projects related crucell corimmun acclarent delay discontinuation certain development projects income expense net income expense net account company records gains losses related sale writedown certain investments equity securities held johnson innovation jjdc inc formerly johnson development corporation gains losses divestitures transactional currency gains losses acquisitionrelated costs litigation accruals settlements well royalty income change income expense net fiscal year 2015 favorable change 20 billion compared prior year primarily due lower litigation expense 11 billion lower synthes integration costs 06 billion higher jjdc portfolio gains 02 billion compared prior year additionally fiscal year 2015 included higher gains 03 billion primarily divestitures cordis business splenda® brand us divestiture nucynta® versus gains recorded 2014 divestitures orthoclinical diagnostics business ky® brand partially offset higher intangible asset writedowns 01 billion 2015 change income expense net fiscal year 2014 favorable change 26 billion compared prior year fiscal year 2014 included higher net gains divestitures 23 billion primarily divestiture orthoclinical diagnostics business lower litigation expense 10 billion lower costs 01 billion related depuy asr™ hip program compared 2013 partially offset higher synthes integrationtransaction costs 02 billion higher intangible asset writedowns 01 billion primarily related incivo® telaprevir 2014 additionally fiscal year 2013 included higher net gain 05 billion compared 2014 equity investment transactions primarily sale elan american depositary shares interest income expense interest income 2015 increased 61 million compared 2014 due higher average balance cash equivalents marketable securities higher interest rates cash equivalents marketable securities totaled 384 billion end 2015 averaged 357 billion compared 311 billion average cash balance 2014 increase yearend cash balance primarily due cash generated operating activities interest expense 2015 increased slightly compared 2014 average debt balance 193 billion 2015 versus 185 billion 2014 total debt balance end 2015 199 billion compared 188 billion end 2014 higher debt balance approximately 11 billion increase commercial paper general corporate purposes primarily stock repurchase program interest income 2014 comparable prior year higher balance cash equivalents marketable securities offset lower interest rates cash equivalents marketable securities totaled 331 billion end 2014 averaged 311 billion compared 252 billion average cash balance 2013 increase yearend cash balance primarily due cash generated operating activities interest expense 2014 increased 51 million compared 2013 due higher average debt balance average debt balance 185 billion 2014 versus 172 billion 2013 total debt balance end 2014 188 billion compared 182 billion end 2013 higher debt balance approximately 06 billion due increased borrowings november 2014 company increased borrowings capitalizing favorable terms capital markets proceeds borrowings used general corporate purposes income tax segment income tax segment business follows 1 see note 18 consolidated financial statements details 2 amounts allocated segments include interest income expense noncontrolling interests general corporate income expense consumer segment 2015 consumer segment income tax percent sales 132 versus 134 2014 primarily due lower divestiture gains 2015 versus 2014 2015 consumer segment tax included gain 03 billion divestitures primarily divestiture splenda® brand 2014 consumer segment included gain 05 billion divestitures primarily divestiture ky® brand 2014 consumer segment income tax percent sales 134 flat prior year pharmaceutical segment 2015 pharmaceutical segment income tax percent sales 373 versus 362 2014 favorable income tax primarily due higher gains recognized 2015 partially offset sales decline olysio®sovriad®simeprevir increased investment spending negative currency impacts compared 2014 included 2015 gain 10 billion us divestiture nucynta® well receipt contingent payment positive adjustment previous reserve estimates including managed medicaid rebates additionally pharmaceutical segment income tax 2014 negatively impacted 02 billion additional year branded prescription drug fee higher intangible asset amortization expense 03 billion primarily related writedown incivo® telaprevir 2014 pharmaceutical segment income tax percent sales 362 versus 326 2013 favorable income tax attributable strong sales volume growth particularly sales olysio®sovriad® simeprevir positive sales mix higher margin products cost containment initiatives realized selling marketing administrative expenses partially offset 02 billion additional year branded prescription drug fee 01 billion intangible asset writedown related incivo® telaprevir additionally 2013 included net gain 04 billion equity investment transactions primarily sale elan american depositary shares positive adjustment 02 billion previous estimates managed medicaid rebates partially offset higher writedowns 04 billion impairment iprd compared 2014 medical devices segment 2015 medical devices segment income tax percent sales 272 versus 289 2014 primarily due restructuring charge 06 billion intangible asset writedown 03 billion related acclarent lower gains 05 billion divestitures compared 2014 2015 medical devices segment included gains 14 billion primarily divestiture cordis business versus gain 19 billion recorded 2014 divestiture orthoclinical diagnostics business 2015 income tax favorably impacted lower net litigation expense 09 billion included gain litigation settlement agreement 06 billion guidant lower synthes integration costs 06 billion 2015 compared 2014 medical devices segment income tax percent sales 289 versus 185 2013 favorable income tax attributable net gain 19 billion divestiture orthoclinical diagnostics business 2014 lower litigation expense 11 billion compared 2013 restructuring company announced restructuring actions medical devices segment expected result annualized pretax cost savings 800 million 10 billion majority expected realized end 2018 including approximately 200 million savings 2016 savings provide company added flexibility resources fund investment new growth opportunities innovative solutions customers patients company estimates connection plans record pretax restructuring charges approximately 20 billion 24 billion expected incurred 2017 fiscal fourth quarter 2015 company recorded pretax charge 06 billion 81 million included cost products sold see note 22 consolidated financial statements additional details related restructuring provision taxes income worldwide effective income tax rate 197 2015 206 2014 106 2013 2015 effective tax rate decrease 09 compared 2014 primarily attributable increases taxable income lower tax jurisdictions relative higher tax jurisdictions tax benefit resulting restructuring international affiliates additionally 2014 effective tax rate affected items mentioned increase 2014 effective tax rate compared 2013 attributable following divestiture orthoclinical diagnostics business approximate 44 effective tax rate litigation accruals low tax rates mix earnings higher tax jurisdictions primarily us accrual additional year branded prescription drug fee tax deductible additional us tax expense related planned increase dividends current year foreign earnings compared prior year increases 2014 effective tax rate partially offset tax benefit 04 billion associated conor medsystems divestiture 2014 effective tax rate also reduced company adjusted unrecognized tax benefits result federal appeals court’s decision omj pharmaceuticals inc’s litigation regarding credits former section 936 internal revenue code see note 21 consolidated financial statements additional information ii settlement substantially issues related company’s us internal revenue service audit tax years 2006 2009 2013 effective tax rate reduced tax benefit associated writeoff assets tax purposes associated scios inc inclusion 2013 2012 benefit research development tax credit controlled foreign corporation lookthrough provisions enacted law january 2013 retroactive january 1 2012 liquidity capital resources liquidity cash flows cash equivalents 137 billion end 2015 compared 145 billion end 2014 primary sources uses cash contributed 08 billion decrease approximately 193 billion cash generated operating activities offset 77 billion net cash used investing activities 108 billion net cash used financing activities 15 billion due effect exchange rate changes cash equivalents addition company 246 billion marketable securities end 2015 186 billion end 2014 see note 1 consolidated financial statements additional details cash equivalents marketable securities cash flow operations 193 billion result 154 billion net earnings 54 billion noncash charges adjustments depreciation amortization stockbased compensation assets writedowns primarily related acclarent venezuela writedowns reduced 26 billion net gains sale assetsbusinesses 12 billion related deferred taxes accounts receivable inventories additional sources operating cash flow 22 billion resulted decrease current noncurrent assets increase current noncurrent liabilities investing activities use 77 billion primarily net purchases investments marketable securities 67 billion additions property plant equipment 35 billion acquisitions net cash acquired 10 billion partially offset 35 billion proceeds disposal assetsbusinesses financing activities use 108 billion primarily dividends shareholders 82 billion 53 billion repurchase common stock financing activities also included source 14 billion net proceeds short longterm debt 13 billion net proceeds stock options exercised associated tax benefits october 13 2015 company announced board directors approved share repurchase program authorizing company purchase 100 billion companys shares common stock january 3 2016 10 billion repurchased program repurchase program time limit may suspended periods discontinued time shares acquired available general corporate purposes company intends finance share repurchase program available cash access capital markets previous share repurchase program approved july 21 2014 authorizing company purchase 50 billion companys shares common stock completed april 28 2015 company continued access liquidity commercial paper market company shelf registration us securities exchange commission enables company issue debt securities warrants purchase debt securities timely basis additional details borrowings see note 7 consolidated financial statements company anticipates operating cash flows existing credit facilities access capital markets provide sufficient resources fund operating needs 2016 concentration credit risk global concentration credit risk respect trade accounts receivables continues limited due large number customers globally adherence internal credit policies credit limits economic challenges italy spain greece portugal southern european region impacted certain payment patterns historically longer experienced us international markets total net trade accounts receivable balance southern european region approximately 13 billion january 3 2016 18 billion december 28 2014 approximately 08 billion january 3 2016 approximately 11 billion december 28 2014 southern european region net trade accounts receivable balance related companys consumer vision care diabetes care businesses well certain pharmaceutical medical devices customers line historical collection patterns remaining balance net trade accounts receivable southern european region negatively impacted timing payments certain government owned supported health care customers well certain distributors pharmaceutical medical devices local affiliates total net trade accounts receivable balance customers approximately 05 billion january 3 2016 07 billion december 28 2014 company continues receive payments customers cases late payments interest customers payment expected periods time longer one year revenue trade receivables discounted estimated period time collection allowances doubtful accounts increased customers immaterial date company continue work closely customers payment plans monitor economic situation take appropriate actions necessary financing market risk company uses financial instruments manage impact foreign exchange rate changes cash flows accordingly company enters forward foreign exchange contracts protect value certain foreign currency assets liabilities hedge future foreign currency transactions primarily related product costs gains losses contracts offset gains losses underlying transactions 10 appreciation us dollar january 3 2016 market rates would increase unrealized value company’s forward contracts 15 million conversely 10 depreciation us dollar january 3 2016 market rates would decrease unrealized value company’s forward contracts 18 million either scenario gain loss forward contract would offset gain loss underlying transaction therefore would impact future anticipated earnings cash flows company hedges exposure fluctuations currency exchange rates effect certain assets liabilities foreign currency entering currency swap contracts 1 change spread us foreign interest rates company’s interest rate sensitive financial instruments would either increase decrease unrealized value company’s swap contracts approximately 115 million either scenario maturity gain loss swap contract would offset gain loss underlying transaction therefore would impact future anticipated cash flows company enter financial instruments trading speculative purposes company policy entering contracts parties least investment grade credit rating counterparties contracts major financial institutions significant concentration exposure one counterparty management believes risk loss remote company invests fixed rate floating rate interest earning securities carry degree interest rate risk fair market value fixed rate securities may adversely impacted due rise interest rates floating rate securities may produce less income predicted interest rates fall 1 100 basis points change spread company’s interest rate sensitive investments would either increase decrease unrealized value cash equivalents current marketable securities approximately 314 million company access substantial sources funds numerous banks worldwide september 2015 company secured new 364day credit facility total credit available company approximates 10 billion expires september 15 2016 interest charged borrowings credit line agreement based either bids provided banks prime rate london interbank offered rates libor plus applicable margins commitment fees agreement material total borrowings end 2015 2014 199 billion 188 billion respectively increase borrowings 2015 2014 result financing companys share repurchase program 2015 net cash current marketable securities net debt 185 billion compared net cash 143 billion 2014 total debt represented 218 total capital shareholders’ equity total debt 2015 212 total capital 2014 shareholders’ equity per share end 2015 2582 compared 2506 yearend 2014 increase 30 summary borrowings found note 7 consolidated financial statements contractual obligations commitments company’s contractual obligations primarily leases debt unfunded retirement plans significant obligations satisfy obligations company use cash operations following table summarizes company’s contractual obligations aggregate maturities january 3 2016 see notes 7 10 16 consolidated financial statements details tax matters see note 8 consolidated financial statements dividends company increased dividend 2015 53rd consecutive year cash dividends paid 295 per share 2015 compared dividends 276 per share 2014 259 per share 2013 dividends distributed follows january 4 2016 board directors declared regular quarterly cash dividend 075 per share payable march 8 2016 shareholders record february 23 2016 company expects continue practice paying regular cash dividends information critical accounting policies estimates management’s discussion analysis results operations financial condition based company’s consolidated financial statements prepared accordance accounting principles generally accepted us gaap preparation financial statements requires management make estimates assumptions affect amounts reported revenues expenses assets liabilities related disclosures actual results may differ estimates company believes understanding certain key accounting policies estimates essential achieving insight company’s operating results financial condition key accounting policies include revenue recognition income taxes legal selfinsurance contingencies valuation longlived assets assumptions used determine amounts recorded pensions employee benefit plans accounting stock based awards revenue recognition company recognizes revenue product sales goods shipped delivered title risk loss pass customer provisions certain rebates sales incentives trade promotions coupons product returns discounts customers accounted reductions sales period related sales recorded product discounts granted based terms arrangements direct indirect market participants well market conditions including prices charged competitors rebates include medicaid rebate provision estimated based contractual terms historical experience patient outcomes trend analysis projected market conditions various markets served company evaluates market conditions products groups products primarily analysis wholesaler thirdparty sellthrough market research data well internally generated information sales returns estimated recorded based historical sales returns information products exhibit unusual sales return patterns due dating competition marketing matters specifically investigated analyzed part accounting sales return accruals sales returns allowances represent reserve products may returned due expiration destruction field specific areas product recall returns reserve based historical return trends product market percent gross sales accordance company’s accounting policies company generally issues credit customers returned goods company’s sales returns reserves accounted accordance us gaap guidance revenue recognition right return exists sales returns reserves recorded full sales value sales returns consumer pharmaceutical segments almost exclusively resalable sales returns certain franchises medical devices segment typically resalable material company infrequently exchanges products inventory returned products sales returns reserve total company approximately 10 annual net trade sales fiscal reporting years 2015 2014 2013 promotional programs product listing allowances cooperative advertising arrangements recorded year incurred continuing promotional programs include coupons volumebased sales incentive programs redemption cost consumer coupons based historical redemption experience product value volumebased incentive programs based estimated sales volumes incentive period recorded products sold company also earns service revenue copromotion certain products years presented service revenues less 1 total revenues included sales customers arrangements evaluated determine appropriate amounts deferred recorded reduction revenue addition company enters collaboration arrangements contain multiple revenue generating activities amounts due collaborative partners arrangements recognized activity performed delivered based relative fair value upfront fees received part arrangements deferred recognized performance period see note 1 consolidated financial statements additional disclosures collaborations reasonably likely changes assumptions used calculate accruals rebates returns promotions anticipated material effect financial statements company currently discloses impact changes assumptions quarterly annual filing material financial statement impact tables show progression accrued rebates returns promotions reserve doubtful accounts reserve cash discounts segment business fiscal years ended january 3 2016 december 28 2014 consumer segment 1 includes reserve customer rebates 31 million january 3 2016 37 million december 28 2014 recorded contra asset pharmaceutical segment 1 includes reserve customer rebates 64 million january 3 2016 70 million december 28 2014 recorded contra asset prior year amount reclassified conform current year presentation medical devices segment 1 includes reserve customer rebates 411 million january 3 2016 354 million december 28 2014 recorded contra asset income taxes income taxes recorded based amounts refundable payable current year include results difference us gaap accounting tax reporting recorded deferred tax assets liabilities company estimates deferred tax assets liabilities based enacted tax regulations rates future changes tax laws rates may affect recorded deferred tax assets liabilities company unrecognized tax benefits uncertain tax positions company follows us gaap prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return management believes changes estimates would material effect companys results operations cash flows financial position january 3 2016 december 28 2014 cumulative amounts undistributed international earnings approximately 580 billion 534 billion respectively january 3 2016 december 28 2014 companys foreign subsidiaries held balances cash equivalents marketable securities amounts 382 billion 329 billion respectively company provided deferred taxes undistributed earnings certain international subsidiaries earnings considered permanently reinvested company intends continue reinvest earnings international operations company decided later date repatriate earnings us company would required provide net tax effects amounts company determine deferred tax liability associated undistributed earnings determination practical see note 8 consolidated financial statements information regarding income taxes legal self insurance contingencies company records accruals various contingencies including legal proceedings product liability claims arise normal course business accruals based management’s judgment probability losses applicable actuarially determined estimates company self insurance whollyowned captive insurance company addition accruals self insurance program claims exceed insurance coverage accrued losses probable amounts reasonably estimated additionally company records insurance receivable amounts thirdparty insurers recovery probable appropriate reserves receivables recorded estimated amounts may collected thirdparty insurers company follows provisions us gaap recording litigation related contingencies liability recorded loss probable reasonably estimated best estimate loss within range accrued however estimate range better minimum amount accrued see notes 1 21 consolidated financial statements information regarding product liability legal proceedings longlived intangible assets company assesses changes economic conditions makes assumptions regarding estimated future cash flows evaluating value company’s property plant equipment goodwill intangible assets assumptions estimates may change time may necessary company record impairment charges employee benefit plans company sponsors various retirement pension plans including defined benefit defined contribution termination indemnity plans cover employees worldwide plans based assumptions discount rate expected return plan assets mortality rates expected salary increases health care cost trend rates attrition rates see note 10 consolidated financial statements details rates effect rate change health care cost trend would company’s results operations stock based compensation company recognizes compensation expense associated issuance equity instruments employees services based type equity instrument fair value estimated date grant using either blackscholes option valuation model combination blackscholes option valuation model monte carlo valuation model expensed financial statements service period input assumptions used determining fair value expected life expected volatility riskfree rate expected dividend yield performance share units fair market value calculated three component goals date grant fair values sales earnings per share goals performance share unit estimated date grant using fair market value shares time award discounted dividends paid performance share units vesting period fair value relative total shareholder return goal performance share unit estimated date grant using monte carlo valuation model see note 17 consolidated financial statements additional information new accounting pronouncements refer note 1 consolidated financial statements recently adopted accounting pronouncements recently issued accounting pronouncements yet adopted january 3 2016 economic market factors company aware products used environment decade policymakers consumers businesses expressed concerns rising cost health care response concerns company longstanding policy pricing products responsibly period 2005 2015 united states weighted average compound annual growth rate company’s net price increases health care products prescription overthecounter drugs hospital professional products us consumer price index cpi company operates certain countries economic conditions continue present significant challenges company continues monitor situations take appropriate actions inflation rates continue effect worldwide economies consequently way companies operate company accounted operations venezuela highly inflationary prior threeyear cumulative inflation rate surpassed 100 face increasing costs company strives maintain profit margins cost reduction programs productivity improvements periodic price increases venezuelan government established alternative systems offerings various foreign currency exchanges 2015 company primarily utilized official government rate 63 bolivares fuertes one us dollar preparing consolidated financial statements 2014 company applied settle outstanding dividend payable one alternative foreign exchange rates result company applied alternative exchange rate translate certain transactions appropriate fourth quarter 2015 number company’s transactions conducted official rate declined prior quarters result company determined longer likely outstanding net monetary assets would settled official government rate 63 bolivares fuertes one us dollar therefore company recorded charge 161 million revalue net monetary assets venezuela one government’s alternative exchange rates simadi impair nonmonetary assets revaluation january 3 2016 company’s venezuelan subsidiaries represented less 01 companys consolidated assets liabilities due continuing uncertain economic conditions venezuela possible additional charges may recorded future additional charges expected material adverse effect company’s 2016 full year results company continues business greece company closely monitors economic situation january 3 2016 company’s greek subsidiaries represented 03 04 companys consolidated assets revenues respectively company exposed fluctuations currency exchange rates 1 change value us dollar compared foreign currencies company sales income expense 2015 would increased decreased translation foreign sales approximately 340 million income 90 million company faces various worldwide health care changes may continue result pricing pressures include health care cost containment government legislation relating sales promotions reimbursement health care products changes behavior spending patterns purchasers health care products services including delaying medical procedures rationing prescription medications reducing frequency physician visits foregoing health care insurance coverage result current global economic downturn may continue impact company’s businesses company also operates environment increasingly hostile intellectual property rights firms filed abbreviated new drug applications biosimilar biological product applications fda otherwise challenged coverage andor validity companys patents seeking market generic biosimilar forms many company’s key pharmaceutical products prior expiration applicable patents covering products event company successful defending patent claims challenged resulting lawsuits generic biosimilar versions products issue introduced market resulting potential substantial market share revenue losses products may result noncash impairment charge associated intangible asset also risk one competitors could launch generic biosimilar version product issue following regulatory approval even though one valid patents place information see discussion “remicade® related cases” “litigation filers abbreviated new drug applications” note 21 consolidated financial statements legal proceedings johnson certain subsidiaries involved various lawsuits claims regarding product liability intellectual property commercial matters governmental investigations legal proceedings arise time ordinary course business company records accruals loss contingencies associated legal matters probable liability incurred amount loss reasonably estimated company accrued certain litigation matters continues monitor related legal issue adjust accruals new information developments accordance accounting standards codification asc 4502025 litigation regulatory matters currently disclosed loss probable reasonably possible company unable estimate possible loss range loss beyond amounts already accrued amounts accrued legal contingencies often result complex series judgments future events uncertainties rely heavily estimates assumptions ability make estimates judgments affected various factors including whether damages sought proceedings unsubstantiated indeterminate scientific legal discovery commenced complete proceedings early stages matters present legal uncertainties significant facts dispute numerous parties involved companys opinion based examination matters experience date discussions counsel ultimate outcome legal proceedings net liabilities accrued companys balance sheet expected material adverse effect companys financial position however resolution increase accruals one matters reporting period may material adverse effect companys results operations cash flows period see note 21 consolidated financial statements information regarding legal proceedings common stock market prices company’s common stock listed new york stock exchange symbol jnj february 19 2016 158749 record holders common stock company composite market price ranges johnson common stock 2015 2014 cautionary factors may affect future results annual report contains forwardlooking statements forwardlooking statements relate strictly historical current facts anticipate results based management’s plans subject uncertainty forwardlooking statements may identified use words “plans” “expects” “will” “anticipates” “estimates” words similar meaning conjunction among things discussions future operations financial performance company’s strategy growth product development regulatory approval market position expenditures forwardlooking statements based current expectations future events company cannot guarantee forwardlooking statement accurate although company believes reasonable expectations assumptions investors realize underlying assumptions prove inaccurate known unknown risks uncertainties materialize actual results could vary materially company’s expectations projections investors therefore cautioned place undue reliance forwardlooking statements company undertake update forwardlooking statements result new information future events developments risks uncertainties include limited economic factors interest rate currency exchange rate fluctuations competition including technological advances new products patents attained competitors challenges uncertainties inherent new product development including uncertainty clinical success obtaining regulatory approvals uncertainty commercial success new existing products challenges patents impact patent expirations ability company successfully execute strategic plans including restructuring plans potential expected benefits opportunities related restructuring may realized may take longer realize expected significant adverse litigation government action including related product liability claims impact business combinations divestitures market conditions possibility ongoing share repurchase program may suspended discontinued significant changes customer relationships changes behavior spending patterns financial distress purchasers health care products services changes applicable laws regulations including global health care reforms trends toward health care cost containment increased scrutiny health care industry government agencies financial instability international economies legal systems sovereign risk manufacturing difficulties delays internally within supply chain complex global supply chains increasing regulatory requirements product efficacy safety concerns resulting product recalls regulatory action disruptions due natural disasters potential failure meet obligations compliance agreements government bodies discussion factors could cause actual results differ materially expectations found report fiscal year ended january 3 2016 including exhibit 99 company notes factors permitted private securities litigation reform act 1995 item 7aitem 7 management’s discussion analysis results operations financial condition organization business segments description company business segments johnson subsidiaries company approximately 126400 employees worldwide engaged research development manufacture sale broad range products health care field company conducts business virtually countries world primary focus products related human health wellbeing company organized three business segments consumer pharmaceutical medical devices consumer segment includes broad range products used baby care oral care beauty previously referred skin care overthecounter pharmaceutical women’s health wound care markets products marketed general public sold retail outlets distributors throughout world pharmaceutical segment focused five therapeutic areas including immunology infectious diseases neuroscience oncology cardiovascular metabolic diseases products segment distributed directly retailers wholesalers hospitals health care professionals prescription use medical devices segment includes broad range products used orthopaedic surgery cardiovascular diabetes care vision care fields distributed wholesalers hospitals retailers used principally professional fields physicians nurses hospitals eye care professionals clinics executive committee johnson principal management group responsible strategic operations allocation resources company committee oversees coordinates activities consumer pharmaceutical medical devices business segments product lines company competes companies locally globally throughout world competition exists product lines without regard number size competing companies involved competition research involving development improvement new existing products processes particularly significant development new innovative products well protecting underlying intellectual property companys product portfolio important company’s success areas business competitive environment requires substantial investments continuing research addition development maintenance customer demand company’s consumer products involves significant expenditures advertising promotion management’s objectives company manages within strategic framework credo foundation company believes strategic operating principles broadly based human health care managing business long term decentralized management approach committed people values crucial successfully meeting demands rapidly evolving markets compete end management focused longterm strategic growth drivers creating value innovation expanding global reach local focus excellence execution leading purpose company broadly based human health care committed creating value developing accessible high quality innovative products services new products introduced within past five years accounted approximately 22 2016 sales 2016 91 billion 127 sales invested research development reflecting management’s commitment delivering new differentiated products services meet evolving health care needs sustain company’s longterm growth diverse businesses 230 operating companies located 60 countries key drivers company’s success maintaining company’s decentralized management approach time leveraging extensive resources enterprise positions company well innovate execute strategic plans reach markets globally well address needs challenges local markets order remain leader health care company strives maintain purposedriven organization committed developing global business leaders achieve growth objectives businesses managed longterm order sustain market leadership positions enable growth provides enduring source value shareholders credo unifies johnson employees achieving objectives provides common set values serve foundation company’s responsibilities patients consumers health care professionals employees communities shareholders company believes foundational values strategic framework longterm growth drivers along overall mission improving quality life people around world enable johnson continue leader health care industry results operations analysis consolidated sales 2016 worldwide sales increased 26 719 billion compared decrease 57 2015 increase 42 2014 sales changes consisted following 2016 acquisitions divestitures negative impact 11 worldwide operational sales growth competitive products companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir negative impact 08 worldwide operational sales growth operations venezuela negatively impacted worldwide operational sales growth 03 2015 introduction competitive products companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir negative impact 27 worldwide operational sales growth 2015 impact acquisitions divestitures worldwide operational sales growth negative 20 2014 sales companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir positive impact 28 divestiture orthoclinical diagnostics business negative impact 14 worldwide operational growth sales us companies 378 billion 2016 357 billion 2015 348 billion 2014 represents increases 60 2016 26 2015 90 2014 sales international companies 341 billion 2016 344 billion 2015 395 billion 2014 represents decreases 09 2016 131 2015 increase 04 2014 fiveyear compound annual growth rates worldwide us international sales 20 55 12 respectively tenyear compound annual growth rates worldwide us international sales 30 24 38 respectively sales companies europe experienced decline 14 compared prior year including operational growth 14 offset negative currency impact 28 sales companies western hemisphere excluding us experienced decline 51 compared prior year including operational growth 40 offset negative currency impact 91 sales companies asiapacific africa region achieved growth 18 compared prior year including operational growth 14 positive currency impact 04 2016 sales growth percentage compared prior year negatively impacted approximately 13 additional shipping days 2015 see note 1 consolidated financial statements annual closing date details additional week 2015 added days sales also added full weeks worth operating costs therefore net earnings impact negligible 2016 company two wholesalers distributing products three segments represented approximately 135 107 total consolidated revenues 2015 2014 company one wholesaler distributing products three segments represented approximately 125 110 respectively total consolidated revenues analysis sales business segments consumer segment consumer segment sales 2016 133 billion decrease 15 2015 included 15 operational growth offset negative currency impact 30 us consumer segment sales 54 billion increase 38 international sales 79 billion decrease 48 included 01 operational growth offset negative currency impact 49 2016 impact acquisitions divestitures consumer segment operational sales growth negative 05 2016 consumer segment operational sales growth negatively impacted 12 operations venezuela negatively impacted 11 due additional shipping days 2015 major consumer franchise sales prior year amounts reclassified conform current year product disclosure formerly skin care overthecounter otc franchise sales 40 billion increased 21 compared prior year included 48 operational growth negative currency impact 27 operational growth primarily driven analgesics antismoking aids digestive health products beauty franchise sales 39 billion increased 73 compared prior year included 94 operational growth negative currency impact 21 operational growth primarily due sales recent acquisitions vogue international llc contributed approximately 46 neostrata company inc well sales growth neutrogena® aveeno® adult products dabao® products baby care franchise sales 20 billion 2016 decrease 72 compared prior year primarily due competitive pressure partially offset sales growth aveeno® baby products oral care franchise sales 16 billion 2016 decrease 08 compared prior year included 20 operational growth negative currency impact 28 operational growth driven increased sales listerine® products attributable new product launches successful marketing campaigns women’s health franchise sales 11 billion 2016 decrease 111 compared prior year primarily due operations venezuela us divestiture tucks® wound careother franchise sales 08 billion 2016 decrease 235 2015 primarily due splenda® divestiture consumer segment sales 2015 135 billion decrease 68 2014 included 27 operational growth offset negative currency impact 95 us consumer segment sales 52 billion increase 25 international sales 83 billion decrease 119 included 27 operational growth offset negative currency impact 146 2015 divestitures negative impact 14 worldwide consumer segment operational growth pharmaceutical segment pharmaceutical segment sales 2016 335 billion increase 65 2015 included operational growth 74 partially offset negative currency impact 09 us sales 201 billion increase 98 international sales 133 billion increase 18 included 40 operational growth partially offset negative currency impact 22 2016 acquisitions divestitures competitive products companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir negative impact 25 operational growth pharmaceutical segment 2016 pharmaceutical segment operational growth negatively impacted 15 due additional shipping days 2015 pharmaceutical segment operational growth 2016 compared prior year impacted adjustments previous reserve estimates periods included approximately 05 billion adjustments major pharmaceutical therapeutic area sales prior year amounts reclassified conform current year presentation percentage greater 100 immunology products achieved sales 120 billion 2016 representing increase 151 compared prior year immunology products growth 151 included operational growth 159 negative currency impact 08 strong growth remicade®infliximab stelara® ustekinumab simponi®simponi aria® golimumabwas primarily driven immunology market growth increased penetration stelara® ustekinumab simponi®simponi aria® golimumab patents remicade®infliximab certain countries europe expired february 2015 biosimilar versions remicade® introduced certain markets outside united states resulting reduction sales remicade® markets additional biosimilar competition likely result reduction remicade® sales markets outside united states introduction biosimilar version remicade® united states subject enforcement patent rights approval us food drug administration fda compliance 180day notice provisions biologics price competition innovation act bpcia april 2016 fda approved sale united states infliximab biosimilar marketed subsidiary pfizer inc october 2016 period notice launch bpcia passed pfizer inc began shipment infliximab biosimilar wholesalers united states late november 2016 sales infliximab biosimilar us market result reduction us sales remicade® company continues assert remicade® related patent rights see note 21 consolidated financial statements description legal matters regarding remicade® patents infectious disease products sales 32 billion decline 123 2015 included operational decrease 112 negative currency impact 11 competitive products companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir significant negative impact sales decline hepatitis c sales partially offset sales growth edurant®rilpivirine prezcobix®darunavircobicistat neuroscience products sales 61 billion decrease 28 2015 included operational decrease 23 negative currency impact 05 strong sales invega sustenna®xeplion® trinza®paliperidone palmitate offset lower sales invega® paliperidone due generic competition risperdal consta® risperidone impact divestitures sales growth concerta®methylphenidate primarily due therapeutic equivalence reclassification generic competitors oncology products achieved sales 58 billion 2016 representing increase 237 compared prior year oncology products growth 237 included operational growth 252 negative currency impact 15 contributors growth oncology products strong sales imbruvica® ibrutinib darzalex® daratumumab due patient uptake additional country launches additional indications imbruvica® generic competition negatively impacted sales growth velcade®bortezomib sales growth zytiga® abiraterone acetate asia pacific region primarily due launch china earlier year partially offset lower sales europe due competition cardiovascularmetabolismother products sales 64 billion decline 03 2015 included operational increase 08 negative currency impact 11 contributors growth strong sales xarelto®rivaroxaban due market share growth invokana®invokamet® canagliflozin due market growth continued uptake european union canada sales hormonal contraceptives negatively impacted generic competition higher adjustment previous reserve estimates 2015 compared 2016 negatively impacted cardiovascularmetabolismother approximately 23 2016 company advanced pipeline several regulatory submissions approvals new drugs additional indications existing drugs follows pharmaceutical segment sales 2015 314 billion decrease 27 2014 included operational growth 42 offset negative currency impact 69 us sales 183 billion increase 52 international sales 131 billion decrease 120 included 30 operational growth offset negative currency impact 150 pharmaceutical segment operational growth negatively impacted 65 due introduction competitive products companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir positively impacted 14 due adjustment previous reserve estimates including managed medicaid rebates primarily cardiovascularmetabolismother therapeutic area 2015 divestitures negative impact 03 worldwide pharmaceutical segment operational growth medical devices segment medical devices segment sales 2016 251 billion decrease 01 2015 included operational increase 09 negative currency impact 10 us sales 123 billion increase 11 compared prior year international sales 129 billion decrease 12 compared prior year operational increase 07 negative currency impact 19 2016 acquisitions divestitures negative impact 18 worldwide operational growth medical devices segment compared 2015 2016 medical devices segment operational growth negatively impacted 09 due additional shipping days 2015 major medical devices franchise sales june 30 2014 company divested orthoclinical diagnostics business diagnostics franchise orthopaedics franchise sales 93 billion 2016 increase 08 2015 included operational growth 18 negative currency impact 10 sales growth primarily driven market growth us sales trauma tfna nailing system worldwide sales hip primary stem platform attune® knee system growth negatively impacted continued pricing pressures surgery franchise sales 93 billion 2016 increase 09 2015 included operational growth 23 negative currency impact 14 operational growth advanced surgery driven endocutter energy biosurgery products primarily attributable market growth increased penetration certain markets new product launches acquisition neuwave medical inc also contributed growth operational decline general surgery due lower sales womens health urology products pricing pressures partially offset growth sutures operational decline specialty surgery primarily due lower sales acclarent products advanced sterilization products outside us divestitures competitive pressures sterilmed partially offset growth mentor products outside us vision care franchise achieved sales 28 billion 2016 increase 68 2015 included operational growth 64 positive currency impact 04 growth major regions primarily driven new product launches cardiovascular franchise sales 18 billion decrease 92 2015 represented operational decline 92 strong operational growth electrophysiology business driven market growth share growth new product launches offset impact divesting cordis business company completed divestiture cordis business cardinal health october 4 2015 additional details see note 20 consolidated financial statements diabetes care franchise sales 18 billion decrease 72 2015 represented operational decline 59 negative currency impact 13 operational decline primarily due price declines competitive pressures january 26 2017 subsequent yearend company announced engaging process evaluate potential strategic options diabetes care franchise medical devices segment sales 2015 251 billion decrease 87 2014 included operational decline 14 negative currency impact 73 us sales 121 billion decrease 10 compared prior year international sales 130 billion decrease 148 compared prior year operational decrease 17 negative currency impact 131 divestitures orthoclinical diagnostics cordis businesses negative impact 32 06 respectively worldwide operational growth medical devices segment compared 2014 analysis consolidated earnings provision taxes income consolidated earnings provision taxes income increased 198 billion 2016 compared 192 billion 2015 increase 32 increase primarily attributable higher sales volume favorable mix business lower selling marketing administrative costs partially offset higher net litigation expense 07 billion higher restructuring charge 01 billion compared 2015 additionally fiscal year 2015 included higher gains sale assetsbusinesses compared 2016 fiscal year 2016 included gains 06 billion divestitures controlled substance raw material api business certain anesthetic products europe certain nonstrategic consumer brands versus gains 26 billion recorded 2015 primarily divestiture cordis business us divestiture nucynta® splenda® brand partially offset 03 billion intangible asset writedown related acclarent included 2015 consolidated earnings provision taxes income decreased 192 billion 2015 compared 206 billion 2014 decrease 66 decrease primarily attributable significantly lower sales olysio®sovriad® simeprevir negative currency impacts restructuring charge 06 billion higher intangible asset writedowns 01 billion 2015 compared 2014 decrease partially offset lower net litigation expense 11 billion lower synthes integration costs 06 billion positive adjustment 04 billion previous reserve estimates including managed medicaid rebates higher gains 03 billion divestitures compared prior year fiscal year 2015 included higher gains 03 billion primarily divestitures cordis business splenda® brand us divestiture nucynta® versus gains recorded 2014 divestitures orthoclinical diagnostics business ky® brand additionally 2014 included additional year branded prescription drug fee 02 billion percent sales consolidated earnings provision taxes income 2016 275 versus 274 2015 cost products sold selling marketing administrative expenses cost products sold selling marketing administrative expenses percent sales follows 2016 cost products sold percent sales decreased 302 307 compared period year ago favorable mix business cost improvement programs partially offset unfavorable impact transactional currency intangible asset amortization expense 12 billion included cost products sold 2016 2015 decrease percent sales selling marketing administrative expenses 2016 compared prior year primarily due cost management segments favorable mix 2015 cost products sold percent sales increased slightly compared prior year favorable mix segments offset 81 million associated restructuring activity medical devices segment negative transactional currency lower sales olysio®sovriad® simeprevir 2015 intangible asset amortization expense included cost products sold 2015 2014 12 billion 14 billion respectively increase percent sales selling marketing administrative expenses 2015 compared prior year primarily due incremental investment spending segments impact lower sales olysio®sovriad® simeprevir partially offset favorable mix inclusion additional year branded prescription drug fee 02 billion 2014 research development expense research development expense segment business follows percent segment sales research development activities represent significant part companys business expenditures relate processes discovering testing developing new products upfront payments milestones improving existing products well ensuring product efficacy regulatory compliance prior launch company remains committed investing research development aim delivering high quality innovative products 2016 worldwide costs research development activities increased 05 compared 2015 decreased percent sales decrease percent sales attributable higher overall sales pharmaceutical segment increased dollar spend pharmaceutical segment investment spending advance pipeline 2015 worldwide costs research development activities increased 65 compared 2014 increase percent sales attributable increased investment spending primarily pharmaceutical segment lower overall sales business mix inprocess research development iprd 2016 company recorded iprd charge 29 million discontinuation development program related crucell 2015 company recorded iprd charge 02 billion primarily discontinuation certain development projects related covagen 2014 company recorded iprd charge 02 billion impairment various iprd projects related respivert crucell mentor synthes delay discontinuation certain development projects income expense net income expense net account company records gains losses related sale writedown certain investments equity securities held johnson innovation jjdc inc jjdc gains losses divestitures transactional currency gains losses acquisitionrelated costs litigation accruals settlements well royalty income change income expense net fiscal year 2016 unfavorable change 25 billion compared prior year primarily due higher gains sale assetsbusinesses fiscal year 2015 compared 2016 fiscal year 2016 included gains 06 billion divestitures controlled substance raw material api business certain anesthetic products europe certain nonstrategic consumer brands versus gains 26 billion recorded 2015 primarily divestiture cordis business us divestiture nucynta® splenda® brand additionally fiscal year 2016 included higher litigation expense 07 billion compared 2015 partially offset 03 billion intangible asset writedown related acclarent included fiscal year 2015 change income expense net fiscal year 2015 favorable change 20 billion compared prior year primarily due lower litigation expense 11 billion lower synthes integration costs 06 billion higher jjdc portfolio gains 02 billion compared prior year additionally fiscal year 2015 included higher gains 03 billion primarily divestitures cordis business splenda® brand us divestiture nucynta® versus gains recorded 2014 divestitures orthoclinical diagnostics business ky® brand partially offset higher intangible asset writedowns 01 billion 2015 interest income expense interest income 2016 increased 240 million compared 2015 due higher average balance cash equivalents marketable securities higher interest rates cash equivalents marketable securities totaled 419 billion end 2016 averaged 401 billion compared 357 billion average cash balance 2015 interest expense 2016 higher compared 2015 average debt balance 235 billion 2016 versus 193 billion 2015 total debt balance end 2016 271 billion compared 199 billion end 2015 higher debt balance approximately 72 billion primarily due increased borrowings february may 2016 company increased borrowings capitalizing favorable terms capital markets proceeds borrowings used general corporate purposes primarily stock repurchase program interest income 2015 increased 61 million compared 2014 due higher average balance cash equivalents marketable securities higher interest rates cash equivalents marketable securities totaled 384 billion end 2015 averaged 357 billion compared 311 billion average cash balance 2014 increase yearend cash balance primarily due cash generated operating activities interest expense 2015 increased slightly compared 2014 average debt balance 193 billion 2015 versus 185 billion 2014 total debt balance end 2015 199 billion compared 188 billion end 2014 higher debt balance approximately 11 billion increase commercial paper general corporate purposes primarily stock repurchase program income tax segment income tax segment business follows 1 see note 18 consolidated financial statements details 2 amounts allocated segments include interest income expense general corporate income expense consumer segment 2016 consumer segment income tax percent sales 183 versus 132 2015 primarily driven favorable selling marketing administrative expenses due cost management higher gross profit margins cost improvement projects favorable mix partially offset higher gains 2015 related divestitures primarily divestiture splenda® brand additionally operations venezuela negatively impacted consumer segment income tax 2016 compared 2015 consumer segment income tax percent sales 132 versus 134 2014 primarily due lower divestiture gains 2015 versus 2014 2015 consumer segment tax included gain 03 billion divestitures primarily divestiture splenda® brand 2014 consumer segment included gain 05 billion divestitures primarily divestiture ky® brand pharmaceutical segment 2016 pharmaceutical segment income tax percent sales 383 versus 373 2015 increase income tax primarily due strong sales volume growth favorable selling marketing administrative expenses due cost management additionally fiscal year 2015 higher gains 07 billion related divestitures partially offset higher iprd charge 02 billion compared 2016 fiscal year 2016 included gains divestitures controlled substance raw material api business certain anesthetic products europe versus gains recorded 2015 us divestiture nucynta® 2015 pharmaceutical segment income tax percent sales 373 versus 362 2014 favorable income tax primarily due higher gains recognized 2015 partially offset sales decline olysio®sovriad®simeprevir increased investment spending negative currency impacts compared 2014 included 2015 gain 10 billion us divestiture nucynta® well receipt contingent payment positive adjustment previous reserve estimates including managed medicaid rebates additionally pharmaceutical segment income tax 2014 negatively impacted 02 billion additional year branded prescription drug fee higher intangible asset amortization expense 03 billion primarily related writedown incivo® telaprevir medical devices segment 2016 medical devices segment income tax percent sales 222 versus 272 2015 decrease income tax percent sales primarily due lower gains 14 billion related divestitures higher litigation expense 08 billion higher restructuring charge 01 billion compared 2015 partially offset intangible asset writedown 03 billion related acclarent 2015 favorable selling marketing administrative expenses 2016 2015 medical devices segment income tax percent sales 272 versus 289 2014 primarily due restructuring charge 06 billion intangible asset writedown 03 billion related acclarent lower gains 05 billion divestitures compared 2014 2015 medical devices segment included gains 14 billion primarily divestiture cordis business versus gain 19 billion recorded 2014 divestiture orthoclinical diagnostics business 2015 income tax favorably impacted lower net litigation expense 09 billion included gain litigation settlement agreement 06 billion guidant lower synthes integration costs 06 billion 2015 compared 2014 restructuring company announced restructuring actions medical devices segment expected result annualized pretax cost savings 800 million 10 billion majority expected realized end 2018 approximately 250 million savings realized 2016 savings provide company added flexibility resources fund investment new growth opportunities innovative solutions customers patients company estimates connection plans record pretax restructuring related charges approximately 20 billion 24 billion expected incurred end 2017 2016 company recorded pretax charge 685 million 45 million included cost products sold 149 million included income expense 2015 company recorded pretax charge 590 million 81 million included cost products sold restructuring charges 1275 billion recorded since restructuring announced see note 22 consolidated financial statements additional details related restructuring provision taxes income worldwide effective income tax rate 165 2016 197 2015 206 2014 2016 effective tax rate decreased 32 compared 2015 described note 1 consolidated financial statements company adopted new accounting standard reporting additional tax benefits sharebased compensation vested exercised fiscal year adoption new standard reduced effective tax rate fiscal 2016 18 versus 2015 remainder change effective tax rate primarily related lower earnings taxes united states settlement several uncertain tax positions 2016 versus 2015 decrease 2015 effective tax rate compared 2014 primarily attributable increases taxable income lower tax jurisdictions relative higher tax jurisdictions tax benefit resulting restructuring international affiliates additionally 2014 effective tax rate affected items mentioned increase 2014 effective tax rate compared 2013 attributable following divestiture orthoclinical diagnostics business approximate 44 effective tax rate litigation accruals low tax rates mix earnings higher tax jurisdictions primarily us accrual additional year branded prescription drug fee tax deductible additional us tax expense related planned increase dividends current year foreign earnings compared prior year increases 2014 effective tax rate partially offset tax benefit 04 billion associated conor medsystems divestiture 2014 effective tax rate also reduced company adjusted unrecognized tax benefits result federal appeals court’s decision omj pharmaceuticals inc’s litigation regarding credits former section 936 internal revenue code ii settlement substantially issues related company’s us internal revenue service audit tax years 2006 2009 liquidity capital resources liquidity cash flows cash equivalents 190 billion end 2016 compared 137 billion end 2015 primary sources uses cash contributed 53 billion increase approximately 188 billion cash generated operating activities offset 48 billion net cash used investing activities 86 billion net cash used financing activities 02 billion due effect exchange rate changes cash equivalents addition company 229 billion marketable securities end 2016 246 billion end 2015 see note 1 consolidated financial statements additional details cash equivalents marketable securities cash flow operations 188 billion result 165 billion net earnings 49 billion noncash expenses adjustments depreciation amortization stockbased compensation assets writedowns reduced 06 billion net gains sale assetsbusinesses 03 billion related deferred taxes 24 billion related accounts receivable inventories current noncurrent liabilities additional sources operating cash flow 07 billion resulted increase accounts payable accrued liabilities decrease current noncurrent assets investing activities use 48 billion primarily acquisitions net cash acquired 45 billion additions property plant equipment 32 billion partially offset proceeds net sale investments primarily marketable securities 18 billion 13 billion proceeds disposal assetsbusinesses financing activities use 86 billion primarily dividends shareholders 86 billion 90 billion repurchase common stock financing activities also included source 79 billion net proceeds short longterm debt 12 billion proceeds stock options exercisedemployee withholding tax stock awards net 2016 company announced definitive agreement acquire abbott medical optics inc approximately 43 billion january 26 2017 subsequent year end company announced definitive transaction agreement acquire actelion ltd approximately 300 billion abbott medical optics closed february 27 2017 company use cash held companys foreign subsidiaries pay acquisitions october 13 2015 company announced board directors approved share repurchase program authorizing company purchase 100 billion companys shares common stock january 1 2017 73 billion repurchased program repurchase program time limit may delayed suspended periods discontinued time shares acquired available general corporate purposes company intends finance share repurchase program available cash access capital markets previous share repurchase program approved july 21 2014 authorizing company purchase 50 billion companys shares common stock completed april 28 2015 2016 company continued access liquidity commercial paper market company shelf registration us securities exchange commission expired february 26 2017 company plans file new shelf registration february 27 2017 enable issue debt securities timely basis additional details borrowings see note 7 consolidated financial statements company anticipates operating cash flows existing credit facilities access capital markets provide sufficient resources fund operating needs 2017 concentration credit risk global concentration credit risk respect trade accounts receivables continues limited due large number customers globally adherence internal credit policies credit limits economic challenges italy spain greece portugal southern european region impacted certain payment patterns historically longer experienced us international markets total net trade accounts receivable balance southern european region approximately 11 billion january 1 2017 13 billion january 3 2016 approximately 07 billion january 1 2017 approximately 08 billion january 3 2016 southern european region net trade accounts receivable balance related companys consumer vision care diabetes care businesses well certain pharmaceutical medical devices customers line historical collection patterns remaining balance net trade accounts receivable southern european region negatively impacted timing payments certain government owned supported health care customers well certain distributors pharmaceutical medical devices local affiliates total net trade accounts receivable balance customers approximately 04 billion january 1 2017 05 billion january 3 2016 company continues receive payments customers cases late payments interest customers payment expected periods time longer one year revenue trade receivables discounted estimated period time collection allowances doubtful accounts increased customers immaterial date company continue work closely customers payment plans monitor economic situation take appropriate actions necessary financing market risk company uses financial instruments manage impact foreign exchange rate changes cash flows accordingly company enters forward foreign exchange contracts protect value certain foreign currency assets liabilities hedge future foreign currency transactions primarily related product costs gains losses contracts offset gains losses underlying transactions 10 appreciation us dollar january 1 2017 market rates would increase unrealized value company’s forward contracts 23 million conversely 10 depreciation us dollar january 1 2017 market rates would decrease unrealized value company’s forward contracts 28 million either scenario gain loss forward contract would offset gain loss underlying transaction therefore would impact future anticipated earnings cash flows company hedges exposure fluctuations currency exchange rates effect certain assets liabilities foreign currency entering currency swap contracts 1 change spread us foreign interest rates company’s interest rate sensitive financial instruments would either increase decrease unrealized value company’s swap contracts approximately 82 million either scenario maturity gain loss swap contract would offset gain loss underlying transaction therefore would impact future anticipated cash flows company enter financial instruments trading speculative purposes company policy entering contracts parties least investment grade credit rating counterparties contracts major financial institutions significant concentration exposure one counterparty management believes risk loss remote company invests fixed rate floating rate interest earning securities carry degree interest rate risk fair market value fixed rate securities may adversely impacted due rise interest rates floating rate securities may produce less income predicted interest rates fall 1 100 basis points change spread company’s interest rate sensitive investments would either increase decrease unrealized value cash equivalents current marketable securities approximately 336 million company access substantial sources funds numerous banks worldwide september 2016 company secured new 364day credit facility total credit available company approximates 10 billion expires september 14 2017 interest charged borrowings credit line agreement based either bids provided banks prime rate london interbank offered rates libor plus applicable margins commitment fees agreement material total borrowings end 2016 2015 271 billion 199 billion respectively increase borrowings 2016 2015 result financing companys share repurchase program general corporate purposes 2016 net cash current marketable securities net debt 148 billion compared net cash 185 billion 2015 total debt represented 278 total capital shareholders’ equity total debt 2016 218 total capital 2015 shareholders’ equity per share end 2016 2602 compared 2582 yearend 2015 increase 08 summary borrowings found note 7 consolidated financial statements contractual obligations commitments company’s contractual obligations primarily leases debt unfunded retirement plans significant obligations satisfy obligations company use cash operations following table summarizes company’s contractual obligations aggregate maturities january 1 2017 see notes 7 10 16 consolidated financial statements details tax matters see note 8 consolidated financial statements retirement plan postemployment medical benefit information see note 10 consolidated financial statements table include activity related business combinations dividends company increased dividend 2016 54th consecutive year cash dividends paid 315 per share 2016 compared dividends 295 per share 2015 276 per share 2014 dividends distributed follows january 3 2017 board directors declared regular quarterly cash dividend 080 per share payable march 14 2017 shareholders record february 28 2017 company expects continue practice paying regular cash dividends information critical accounting policies estimates management’s discussion analysis results operations financial condition based company’s consolidated financial statements prepared accordance accounting principles generally accepted us gaap preparation financial statements requires management make estimates assumptions affect amounts reported revenues expenses assets liabilities related disclosures actual results may differ estimates company believes understanding certain key accounting policies estimates essential achieving insight company’s operating results financial condition key accounting policies include revenue recognition income taxes legal selfinsurance contingencies valuation longlived assets assumptions used determine amounts recorded pensions employee benefit plans accounting stock based awards revenue recognition company recognizes revenue product sales goods shipped delivered title risk loss pass customer provisions certain rebates sales incentives trade promotions coupons product returns discounts customers accounted reductions sales period related sales recorded product discounts granted based terms arrangements direct indirect market participants well market conditions including prices charged competitors rebates include medicaid rebate provision estimated based contractual terms historical experience patient outcomes trend analysis projected market conditions various markets served company evaluates market conditions products groups products primarily analysis wholesaler thirdparty sellthrough market research data well internally generated information sales returns estimated recorded based historical sales returns information products exhibit unusual sales return patterns due dating competition marketing matters specifically investigated analyzed part accounting sales return accruals sales returns allowances represent reserve products may returned due expiration destruction field specific areas product recall returns reserve based historical return trends product market percent gross sales accordance company’s accounting policies company generally issues credit customers returned goods company’s sales returns reserves accounted accordance us gaap guidance revenue recognition right return exists sales returns reserves recorded full sales value sales returns consumer pharmaceutical segments almost exclusively resalable sales returns certain franchises medical devices segment typically resalable material company infrequently exchanges products inventory returned products sales returns reserve total company approximately 10 annual net trade sales fiscal reporting years 2016 2015 2014 promotional programs product listing allowances cooperative advertising arrangements recorded year incurred continuing promotional programs include coupons volumebased sales incentive programs redemption cost consumer coupons based historical redemption experience product value volumebased incentive programs based estimated sales volumes incentive period recorded products sold company also earns service revenue copromotion certain products years presented service revenues 1 less total revenues included sales customers arrangements evaluated determine appropriate amounts deferred recorded reduction revenue addition company enters collaboration arrangements contain multiple revenue generating activities amounts due collaborative partners arrangements recognized activity performed delivered based relative selling price upfront fees received part arrangements deferred recognized performance period see note 1 consolidated financial statements additional disclosures collaborations reasonably likely changes assumptions used calculate accruals rebates returns promotions anticipated material effect financial statements company currently discloses impact changes assumptions quarterly annual filing material financial statement impact tables show progression accrued rebates returns promotions reserve doubtful accounts reserve cash discounts segment business fiscal years ended january 1 2017 january 3 2016 consumer segment 1 includes reserve customer rebates 37 million january 1 2017 31 million january 3 2016 recorded contra asset pharmaceutical segment 1 includes reserve customer rebates 102 million january 1 2017 64 million january 3 2016 recorded contra asset 2 includes adjustments medical devices segment 1 includes reserve customer rebates 430 million january 1 2017 411 million january 3 2016 recorded contra asset income taxes income taxes recorded based amounts refundable payable current year include results difference us gaap accounting tax reporting recorded deferred tax assets liabilities company estimates deferred tax assets liabilities based enacted tax regulations rates future changes tax laws rates may affect recorded deferred tax assets liabilities company unrecognized tax benefits uncertain tax positions company follows us gaap prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return management believes changes estimates would material effect companys results operations cash flows financial position january 1 2017 january 3 2016 cumulative amounts undistributed international earnings approximately 662 billion 580 billion respectively january 1 2017 january 3 2016 companys foreign subsidiaries held balances cash equivalents marketable securities amounts 413 billion 382 billion respectively company provided deferred taxes undistributed earnings certain international subsidiaries earnings considered indefinitely reinvested company intends continue reinvest earnings international operations company decided later date repatriate earnings us company would required provide net tax effects amounts company determine deferred tax liability associated undistributed earnings determination practical see note 8 consolidated financial statements information regarding income taxes legal self insurance contingencies company records accruals various contingencies including legal proceedings product liability claims arise normal course business accruals based management’s judgment probability losses applicable actuarially determined estimates company self insurance whollyowned captive insurance company addition accruals self insurance program claims exceed insurance coverage accrued losses probable amounts reasonably estimated additionally company records insurance receivable amounts thirdparty insurers recovery probable appropriate reserves receivables recorded estimated amounts may collected thirdparty insurers company follows provisions us gaap recording litigation related contingencies liability recorded loss probable reasonably estimated best estimate loss within range accrued however estimate range better minimum amount accrued see notes 1 21 consolidated financial statements information regarding product liability legal proceedings longlived intangible assets company assesses changes economic conditions makes assumptions regarding estimated future cash flows evaluating value company’s property plant equipment goodwill intangible assets assumptions estimates may change time may necessary company record impairment charges employee benefit plans company sponsors various retirement pension plans including defined benefit defined contribution termination indemnity plans cover employees worldwide plans based assumptions discount rate expected return plan assets mortality rates expected salary increases health care cost trend rates attrition rates see note 10 consolidated financial statements details rates effect rate change health care cost trend would company’s results operations stock based compensation company recognizes compensation expense associated issuance equity instruments employees services based type equity instrument fair value estimated date grant using either blackscholes option valuation model combination blackscholes option valuation model monte carlo valuation model expensed financial statements service period input assumptions used determining fair value expected life expected volatility riskfree rate expected dividend yield performance share units fair market value calculated three component goals date grant fair values sales earnings per share goals performance share unit estimated date grant using fair market value shares time award discounted dividends paid performance share units vesting period fair value relative total shareholder return goal performance share unit estimated date grant using monte carlo valuation model see note 17 consolidated financial statements additional information new accounting pronouncements refer note 1 consolidated financial statements recently adopted accounting pronouncements recently issued accounting pronouncements yet adopted january 1 2017 economic market factors company aware products used environment decade policymakers consumers businesses expressed concerns rising cost health care response concerns company longstanding policy pricing products responsibly period 2006 2016 united states weighted average compound annual growth rate company’s net price increases health care products prescription overthecounter drugs hospital professional products us consumer price index cpi company operates certain countries economic conditions continue present significant challenges company continues monitor situations take appropriate actions inflation rates continue effect worldwide economies consequently way companies operate company accounted operations venezuela highly inflationary prior threeyear cumulative inflation rate surpassed 100 face increasing costs company strives maintain profit margins cost reduction programs productivity improvements periodic price increases venezuelan government established alternative systems offerings various foreign currency exchanges fourth quarter 2015 number company’s transactions conducted official rate declined prior quarters result company determined longer likely outstanding net monetary assets would settled official government rate 63 bolivares fuertes one us dollar therefore 2015 company recorded charge 161 million revalue net monetary assets venezuela one government’s alternative exchange rates simadi impair nonmonetary assets revaluation january 3 2016 company’s venezuelan subsidiaries represented less 01 companys consolidated assets liabilities company continues business greece company closely monitors economic situation january 1 2017 company’s greek subsidiaries represented 03 04 companys consolidated assets revenues respectively june 23 2016 united kingdom uk held referendum voters approved exit european union eu commonly referred “brexit” given lack comparable precedent unclear financial trade regulatory legal implications withdrawal uk eu brexit creates global political economic uncertainty may cause among consequences volatility exchange rates interest rates additional cost containment thirdparty payors changes regulations however company currently believe related effects material impact company’s consolidated financial position operating results january 1 2017 business company’s uk subsidiaries represented less 3 company’s consolidated assets fiscal twelve months revenues company exposed fluctuations currency exchange rates 1 change value us dollar compared foreign currencies company sales income expense 2016 would increased decreased translation foreign sales approximately 330 million income 105 million governments around world including united states consider various proposals make changes tax laws may include increasing decreasing existing statutory tax rates change statutory tax rate country would result revaluation company’s deferred tax assets liabilities related particular jurisdiction period new tax law enacted change would result expense benefit recorded company’s consolidated statement earnings company closely monitors proposals arise countries operates changes statutory tax rate may occur time related expense benefit recorded may material fiscal quarter year law change enacted belgian government currently considering proposed change corporate tax code including proposal lower statutory tax rate enacted proposed change would result revaluation companys deferred tax assets corresponding charge tax expense may material effect company’s results operations period based deferred tax asset balances january 1 2017 company estimates every 1 statutory tax lowered additional onetime tax expense approximately 6075 million significant portion deferred tax asset described “international rd capitalized tax” note 8 consolidated financial statements related company’s operations belgium us government currently considering various proposals changes corporate tax code proposals include limited lowering statutory tax rate rules international income earned company taxed us impact proposals may material effect company’s results operations period future periods belgian us governments still considering proposals certain enacted company faces various worldwide health care changes may continue result pricing pressures include health care cost containment government legislation relating sales promotions reimbursement health care products changes behavior spending patterns purchasers health care products services including delaying medical procedures rationing prescription medications reducing frequency physician visits foregoing health care insurance coverage result current global economic downturn may continue impact company’s businesses company also operates environment increasingly hostile intellectual property rights firms filed abbreviated new drug applications biosimilar biological product applications fda otherwise challenged coverage andor validity companys patents seeking market generic biosimilar forms many company’s key pharmaceutical products prior expiration applicable patents covering products event company successful defending patent claims challenged resulting lawsuits generic biosimilar versions products issue introduced market resulting potential substantial market share revenue losses products may result noncash impairment charge associated intangible asset also risk one competitors could launch generic biosimilar version product issue following regulatory approval even though one valid patents place information see discussion “remicade® related cases” “litigation filers abbreviated new drug applications” note 21 consolidated financial statements legal proceedings johnson certain subsidiaries involved various lawsuits claims regarding product liability intellectual property commercial matters governmental investigations legal proceedings arise time ordinary course business company records accruals loss contingencies associated legal matters probable liability incurred amount loss reasonably estimated company accrued certain litigation matters continues monitor related legal issue adjust accruals new information developments accordance accounting standards codification asc 4502025 litigation regulatory matters currently disclosed loss probable reasonably possible company unable estimate possible loss range loss beyond amounts already accrued amounts accrued legal contingencies often result complex series judgments future events uncertainties rely heavily estimates assumptions ability make estimates judgments affected various factors including whether damages sought proceedings unsubstantiated indeterminate scientific legal discovery commenced complete proceedings early stages matters present legal uncertainties significant facts dispute numerous parties involved companys opinion based examination matters experience date discussions counsel ultimate outcome legal proceedings net liabilities accrued companys balance sheet expected material adverse effect companys financial position however resolution increase accruals one matters reporting period may material adverse effect companys results operations cash flows period see note 21 consolidated financial statements information regarding legal proceedings common stock market prices company’s common stock listed new york stock exchange symbol jnj february 17 2017 156073 record holders common stock company composite market price ranges johnson common stock 2016 2015 item 7aitem 7 management’s discussion analysis results operations financial condition organization business segments description company business segments johnson subsidiaries company approximately 135100 employees worldwide engaged research development manufacture sale broad range products health care field company conducts business virtually countries world primary focus products related human health wellbeing company organized three business segments consumer pharmaceutical medical devices consumer segment includes broad range products used baby care oral care beauty overthecounter pharmaceutical women’s health wound care markets products marketed general public sold retail outlets distributors throughout world pharmaceutical segment focused six therapeutic areas including immunology infectious diseases neuroscience oncology pulmonary hypertension cardiovascular metabolic diseases products segment distributed directly retailers wholesalers hospitals health care professionals prescription use medical devices segment includes broad range products used orthopaedic surgery interventional solutions cardiovascular neurovascular diabetes care divested fiscal fourth quarter 2018 vision fields distributed wholesalers hospitals retailers used principally professional fields physicians nurses hospitals eye care professionals clinics executive committee johnson principal management group responsible strategic operations allocation resources company committee oversees coordinates activities consumer pharmaceutical medical devices business segments product lines company competes companies locally globally throughout world competition exists product lines without regard number size competing companies involved competition research involving development improvement new existing products processes particularly significant development new innovative products well protecting underlying intellectual property companys product portfolio important company’s success areas business competitive environment requires substantial investments continuing research addition development maintenance customer demand company’s consumer products involves significant expenditures advertising promotion management’s objectives “our credo” foundation company’s purpose blend heart science ingenuity profoundly change trajectory health humanity company committed bringing full breadth depth ensure health people today future generations united around common ambition company poised fulfill purpose successfully meet demands rapidly evolving markets competes company broadly based human healthcare committed creating value developing accessible high quality innovative products services new products introduced within past five years accounted approximately 25 2018 sales 2018 108 billion invested research development 09 billion spent acquisitions reflecting management’s commitment create lifeenhancing innovations create value partnerships profoundly change trajectory health humanity critical driver company’s success 135100 diverse employees work across 260 operating companies located 60 countries employees empowered inspired lead company’s credo purpose guides allows every employee use company’s reach size advance companys purpose also lead agility urgency leveraging extensive resources across enterprise enables company innovate execute excellence ensures company remain focused addressing unmet needs society every day invest enduring impact ultimately delivering value patients consumers healthcare professionals employees communities shareholders results operations analysis consolidated sales 2018 worldwide sales increased 67 816 billion compared increases 63 26 2017 2016 respectively sales changes consisted following 2018 net impact acquisitions divestitures worldwide sales growth positive impact 08 2017 acquisitions divestitures positive impact 36 worldwide sales growth 2016 acquisitions divestitures negative impact 11 worldwide sales growth competitive products companys hepatitis c products olysio®sovriad® simeprevir incivo® telaprevir negative impact 08 worldwide sales growth operations venezuela negatively impacted worldwide sales growth 03 sales us companies 419 billion 2018 399 billion 2017 378 billion 2016 represents increases 51 2018 54 2017 60 2016 sales international companies 397 billion 2018 366 billion 2017 341 billion 2016 represents increase 85 2018 74 2017 decrease 09 2016 fiveyear compound annual growth rates worldwide us international sales 27 56 01 respectively tenyear compound annual growth rates worldwide us international sales 25 26 24 respectively 2018 sales companies europe achieved growth 95 compared prior year including operational growth 62 positive currency impact 33 sales companies western hemisphere excluding us achieved growth 12 compared prior year including operational growth 82 negative currency impact 70 sales companies asiapacific africa region achieved growth 105 compared prior year including operational growth 94 positive currency impact 11 2018 company three wholesalers distributing products three segments represented approximately 140 110 total consolidated revenues 2017 company two wholesalers distributing products three segments represented approximately 140 100 total consolidated revenues 2016 company two wholesalers distributing products three segments represented approximately 135 107 total consolidated revenues analysis sales business segments consumer segment consumer segment sales 2018 139 billion increase 18 2017 included 22 operational growth negative currency impact 04 us consumer segment sales 58 billion increase 35 international sales 81 billion increase 07 included 14 operational growth negative currency impact 07 2018 acquisitions divestitures net negative impact 10 operational sales growth worldwide consumer segment major consumer franchise sales beauty franchise sales 44 billion increased 43 compared prior year growth primarily driven neutrogena® ogx® aveeno® products well strength dr ci labo dabao® products outside us growth partially offset divestiture nizoral® overthecounter otc franchise sales 43 billion increased 50 compared prior year growth primarily driven share consumption market growth across multiple brands including zyrtec® tylenol® childrens motrin® well digestive health products antismoking aids additionally sales recent us acquisition zarbees inc contributed approximately 09 growth baby care franchise sales 19 billion 2018 decrease 30 compared prior year primarily due johnsons® share decline increased trade promotions due johnsons® baby relaunch negative impact currency partially offset strong growth aveeno® baby driven geographic expansion oral care franchise sales 16 billion increased 16 compared prior year primarily driven strong marketing campaigns new product launches women’s health franchise sales 10 billion 2018 decrease 01 compared prior year growth latin america offset negative impact currency wound careother franchise sales 07 billion 2018 decrease 134 compared prior year primarily due divestiture compeed® consumer segment sales 2017 136 billion increase 22 2016 included 13 operational growth positive currency impact 09 us consumer segment sales 56 billion increase 27 international sales 80 billion increase 19 included 04 operational growth positive currency impact 15 2017 acquisitions divestitures net positive impact 18 operational sales growth worldwide consumer segment pharmaceutical segment pharmaceutical segment sales 2018 407 billion increase 124 2017 included operational growth 118 positive currency impact 06 us sales 233 billion increase 84 international sales 174 billion increase 180 included 165 operational growth positive currency impact 15 2018 acquisitions divestitures net positive impact 34 operational sales growth worldwide pharmaceutical segment major pharmaceutical therapeutic area sales prior year amounts reclassified conform current year presentation percentage greater 100 meaningful products acquired actelion june 16 2017 immunology products sales 131 billion 2018 representing increase 72 compared prior year growth driven strong uptake stelara® ustekinumab crohns disease strong launch uptake tremfya® guselkumab expanded indications simponi®simponi aria® golimumab us immunology market growth immunology negatively impacted lower sales remicade® infliximab due increased discountsrebates biosimilar competition patents remicade® infliximab certain countries europe expired february 2015 biosimilar versions remicade® introduced certain markets outside us resulting reduction sales remicade® markets additional biosimilar competition likely result reduction remicade® sales markets outside united states us biosimilar version remicade® introduced 2016 additional competitors continue enter market continued infliximab biosimilar competition us market result reduction us sales remicade® see note 21 consolidated financial statements description legal matters regarding remicade® patents infectious disease products sales 33 billion 2018 representing increase 48 compared prior year sales growth prezcobix®rezolsta® darunavircobicistat edurant®rilpivirine launch symtuza® juluca® dolutegravirrilpivirine partially offset lower sales prezista®darunavir neuroscience products sales 61 billion representing increase 15 compared prior year strong sales longacting injectables invega trinza®trevicta®paliperidone palmitate invega sustenna®xeplion® partially offset cannibalization risperdal consta® risperidone generic competition concerta®methylphenidate oncology products achieved sales 98 billion 2018 representing increase 356 compared prior year contributors growth strong sales darzalex® daratumumab continued market growth share gain imbruvica® ibrutinib due increased patient uptake globally sales zytiga® abiraterone acetate driven latitude data market growth additionally sales launch erleada™ apalutamide contributed growth number companies marketing generic pharmaceuticals filed abbreviated new drug applications andas fda undertaken similar regulatory processes outside us seeking market generic forms zytiga® prior expiration applicable patents andas include allegations noninfringement invalidity applicable patents october 2018 court issued ruling invalidating asserted claims applicable patent janssen appealed court’s decision november 2018 us court appeals federal circuit denied janssen’s request injunction pending appeal result several generic versions zytiga® entered market resulting decline sales zytiga® united states 2018 company reported us sales 18 billion zytiga® see note 21 consolidated financial statements description legal matters regarding zytiga® pulmonary hypertension therapeutic area established acquisition actelion ltd june 16 2017 sales 2018 represented full year compared half year 2017 sales opsumit® macitentan uptravi® selexipag positively impacted market growth share gains sales tracleer® bosetan negatively impacted increased use opsumit® generics cardiovascularmetabolismother products sales 58 billion decline 75 compared prior year lower sales invokana®invokamet® canagliflozin us primarily due increase price discounts higher rebates market share decline driven competitive pressure lower sales xarelto® rivaroxaban driven increase discounts rebates partially offset increase market share 2018 company advanced pipeline several regulatory submissions approvals new drugs additional indications existing drugs follows pharmaceutical segment sales 2017 363 billion increase 83 2016 included operational growth 80 positive currency impact 03 us sales 215 billion increase 67 international sales 148 billion increase 108 included 101 operational growth positive currency impact 07 2017 acquisitions divestitures net positive impact 38 operational sales growth worldwide pharmaceutical segment adjustments previous reserve estimates compared prior year negatively impacted reported pharmaceutical segment operational growth approximately 18 primarily immunology cardiovascularmetabolismother therapeutic areas medical devices segment medical devices segment sales 2018 270 billion increase 15 2017 included operational increase 11 positive currency impact 04 us sales 128 billion increase 01 compared prior year international sales 142 billion increase 28 compared prior year operational increase 19 positive currency impact 09 2018 acquisitions divestitures net negative impact 15 worldwide operational sales growth medical devices segment compared 2017 major medical devices franchise sales 1previously referred cardiovascular 2on june 30 2014 company divested orthoclinical diagnostics business diagnostics franchise amounts represent transitional service agreement concluded 2017 prior year amounts reclassified conform current year presentation products acquired abbott medical optics amo february 27 2017 percentage greater 100 meaningful surgery franchise sales 99 billion 2018 increase 36 2017 growth advanced surgery primarily driven endocutter biosurgery energy products growth general surgery primarily driven wound care products growth specialty surgery primarily driven advanced sterilization products orthopaedics franchise sales 89 billion 2018 decrease 19 2017 decline spine primarily due codman neurosurgery divestiture share loss spine partially offset new product launches decline knees primarily due competitive pressure us partially offset growth asia pacific growth hips trauma due continued uptake new products vision franchise achieved sales 46 billion 2018 increase 121 2017 growth primarily driven strength astigmatism daily disposable lenses oasys® contact lenses category surgical growth driven cataract performance primarily outside us interventional solutions franchise includes cerenovus business previously included spine orthopaedics sales 26 billion increase 152 2017 strong growth electrophysiology business driven atrial fibrillation procedure growth continued uptake thermocool smarttouch® contact force sensing catheter diabetes care franchise sales 10 billion decrease 375 2017 decline primarily due divestiture lifescan business fiscal fourth quarter 2018 companys decision exit animas insulin pump business fiscal fourth quarter 2017 medical devices segment sales 2017 266 billion increase 59 2016 included operational increase 57 positive currency impact 02 us sales 128 billion increase 45 compared prior year international sales 138 billion increase 71 compared prior year operational increase 67 positive currency impact 04 2017 acquisitions divestitures net positive impact 42 worldwide operational sales growth medical devices segment compared 2016 analysis consolidated earnings provision taxes income consolidated earnings provision taxes income 180 billion 177 billion 198 billion fiscal years ended 2018 2017 2016 respectively percent sales consolidated earnings provision taxes income 221 231 275 2018 2017 2016 respectively cost products sold selling marketing administrative expenses cost products sold selling marketing administrative expenses percent sales follows prior years amounts reclassified conform current year presentation adoption asu 201707 2018 cost products sold percent sales decreased 332 333 compared period year ago primarily due lower inventory stepup costs related actelion acquisition favorable product segment mix driven higher percentage sales pharmaceutical segment mostly offset higher amortization expense primarily related actelion acquisition june 16 2017 intangible asset amortization expense 44 billion included cost products sold 2018 compared 30 billion 2017 decrease percent sales selling marketing administrative expenses 2018 compared prior year primarily due lower costs relative sales growth pharmaceutical business favorable segment mix 2017 cost products sold percent sales increased 333 303 compared period year ago unfavorable increase primarily driven 23 billion higher amortization expense charges inventory stepup related recent acquisitions primarily actelion intangible asset amortization expense 30 billion included cost products sold 2017 compared 12 billion 2016 increase percent sales selling marketing administrative expenses 2017 compared prior year primarily due investments new product launches partially offset favorable mix research development expense research development expense segment business follows research development activities represent significant part companys business expenditures relate processes discovering testing developing new products upfront payments milestones improving existing products well ensuring product efficacy regulatory compliance prior launch company remains committed investing research development aim delivering high quality innovative products 2018 worldwide costs research development activities increased 17 compared 2017 decreased percent sales decrease percent sales pharmaceutical segment attributable lower costs relative sales growth increased dollar spend medical devices pharmaceutical segments investment spending advance pipeline 2017 worldwide costs research development activities increased 159 compared 2016 increase percent sales primarily pharmaceutical segment due general portfolio progression well collaborative agreements entered idorsia ltd legend biotech research facilities located us belgium brazil china france germany india israel netherlands poland singapore sweden switzerland united kingdom additional rd support 30 countries inprocess research development iprd 2018 company recorded iprd charge 11 billion 11 billion partial impairment charge 08 billion related development program al8176 investigational drug treatment respiratory syncytial virus rsv human metapneumovirus hmpv acquired 2014 acquisition alios biopharma inc impairment charge calculated based updated cash flow projections discounted inherent risk asset development reflects impact phase 2b clinical trial suspension decrease probability success factors ongoing analysis asset development activities company continues evaluate information respect development program monitor remaining 09 billion intangible asset impairment addition impairment charge 03 billion recorded discontinuation development project antithrombin antibody associated 2015 acquisition xo1 limited 2017 company recorded iprd charge 04 billion primarily discontinuation certain development projects related novira acquired 2015 product development canceled due safety concerns 2016 company recorded iprd charge 29 million discontinuation development program related crucell income expense net income expense net account company records gains losses related sale writedown certain investments equity securities held johnson innovation jjdc inc jjdc unrealized gains losses investments gains losses divestitures certain transactional currency gains losses acquisitionrelated costs litigation accruals settlements well royalty income change income expense net fiscal year 2018 unfavorable change 14 billion primarily due litigation expense 20 billion 2018 compared 13 billion 2017 additionally 2018 included unrealized losses securities 02 billion lower realized gains 04 billion related investments equity securities compared prior year partially offset reversal contingent liability 02 billion lower costs 01 billion related actelion amo acquisitions 2018 compared 2017 fiscal year 2017 included gain 02 billion related monetization future royalty receivables offset asset impairment charge 02 billion primarily related insulin pump business divestiture gains approximately 12 billion 2018 included lifescan business nizoral® roc® certain nonstrategic pharmaceutical products divestiture gains approximately 13 billion 2017 primarily included codman neurosurgery compeed® divestitures additionally restructuring related expense 2018 03 billion compared 04 billion 2017 change income expense net fiscal year 2017 favorable change 03 billion due higher gains 07 billion sale assetsbusinesses primarily codman neurosurgery compeed® divestitures gain 02 billion related monetization future royalty receivables higher gain 03 billion related sale certain investments equity securities compared prior year partially offset higher litigation expense 04 billion 03 billion acquisition costs related actelion amo asset impairment charge 02 billion primarily related insulin pump business higher restructuring related charge 02 billion compared fiscal year 2016 interest income expense interest income higher 2018 compared 2017 due higher average interest rate benefit net investment hedging partially offset lower average cash equivalents marketable securities balance period cash equivalents marketable securities totaled 197 billion end 2018 averaged 190 billion compared cash equivalents marketable securities total 183 billion 301 billion average cash balance 2017 decrease average balance cash equivalents marketable securities due use cash general corporate purposes primarily actelion acquisition 296 billion net cash acquired late fiscal second quarter 2017 interest expense 2018 higher compared 2017 due higher average debt balance average debt balance 325 billion 2018 versus 309 billion 2017 total debt balance end 2018 305 billion compared 346 billion end 2017 interest income 2017 increased slightly compared 2016 due higher average interest rates partially offset lower cash equivalents marketable securities balances period cash equivalents marketable securities totaled 183 billion end 2017 averaged 301 billion compared 401 billion average cash balance 2016 decrease balance cash equivalents marketable securities due use cash general corporate purposes including acquisitions primarily actelion acquisition 296 billion net cash acquired interest expense 2017 higher compared 2016 average debt balance 309 billion 2017 versus 235 billion 2016 total debt balance end 2017 346 billion compared 271 billion end 2016 higher debt balance approximately 75 billion primarily due increased borrowings company increased borrowings february november 2017 capitalizing favorable terms capital markets proceeds borrowings used general corporate purposes including completion stock repurchase program income tax segment income tax segment business follows 1 see note 18 consolidated financial statements details 2 amounts allocated segments include interest income expense general corporate income expense consumer segment 2018 consumer segment income tax percent sales 167 versus 186 2017 decrease income tax percent sales 2018 compared 2017 primarily attributable higher litigation expense 03 billion 2018 partially offset slower increases expenses relative increase sales divestiture gains fiscal year 2018 included divestitures nizoral® roc® comparable fiscal year 2017 gain 03 billion recognized divestiture nizoral® 2017 consumer segment income tax percent sales 186 versus 183 2016 increase income tax percent sales 2017 compared 2016 attributable higher gains divestitures primarily divestiture compeed® 2017 partially offset higher selling marketing administrative expenses compared prior year due increased advertising promotional spending slightly higher amortization expense 2017 related acquisitions additionally fiscal year 2016 negatively impacted operations venezuela pharmaceutical segment 2018 pharmaceutical segment income tax percent sales 309 versus 306 2017 increase income tax percent sales primarily due lower inventory stepup costs related actelion 06 billion favorable product mix slower increases expenses relative increase sales contingent liability reversal 02 billion higher divestiture gains 02 billion divestitures certain nonstrategic pharmaceutical products partially offset higher amortization expense 13 billion primarily related actelion acquisition higher iprd charge 07 billion unrealized loss securities 02 billion compared prior year additionally 2017 included gain 02 billion related monetization future royalty receivables higher gain 03 billion related sale certain investments equity securities 2017 pharmaceutical segment income tax percent sales 306 versus 383 2016 decrease income tax percent sales primarily due 23 billion higher amortization expense costs related actelion acquisition higher research development expense higher iprd charge 04 billion related novira lower gains divestitures compared prior year additionally fiscal year 2016 included positive adjustment 05 billion previous reserve estimates partially offset gain 02 billion related monetization future royalty receivables higher gain 02 billion related sale certain investments equity securities favorable product mix 2017 medical devices segment 2018 medical devices segment income tax percent sales 163 versus 203 2017 decrease income tax percent sales primarily due higher litigation expense 17 billion 2018 compared 11 billion 2017 higher investments business 2018 additionally 2018 lower divestiture gains approximately 03 billion compared divestiture gains 2017 2018 company recorded gain 05 billion related lifescan divestiture partially offset lower restructuring expense 02 billion 2018 compared 2017 additionally 2017 included asset impairment charge 02 billion primarily related insulin pump business 2017 medical devices segment income tax percent sales 203 versus 222 2016 decrease income tax percent sales primarily due 03 billion higher amortization expense acquisition costs related amo 03 billion higher litigation asset impairment charge 02 billion primarily related insulin pump business 01 billion higher restructuring investments new product launches compared fiscal year 2016 partially offset 08 billion higher gains 2017 related divestitures primarily divestiture codman neurosurgery restructuring first quarter 2016 company announced restructuring actions medical devices segment company achieved approximately 07 billion annualized pretax cost saving 2018 track achieve annualized pretax cost savings 08 billion 10 billion outlined restructuring actions savings provide company added flexibility resources fund investment new growth opportunities innovative solutions customers patients 2018 company recorded pretax charge 462 million 46 million included cost products sold 227 million included income expense total project costs approximately 25 billion recorded since restructuring announced restructuring program completed fiscal fourth quarter 2018 second quarter 2018 company announced plans implement actions across global supply chain intended enable company focus resources increase investments critical capabilities technologies solutions necessary manufacture supply product portfolio future enhance agility drive growth company expects supply chain actions include expanding use strategic collaborations bolstering initiatives reduce complexity improving costcompetitiveness enhancing capabilities optimizing network discussions regarding specific future actions ongoing subject relevant consultation requirements finalized total company expects actions generate approximately 06 08 billion annual pretax cost savings substantially delivered 2022 company expects record pretax restructuring charges approximately 19 23 billion company estimates approximately 70 cumulative pretax costs result cash outlays 2018 company recorded pretax charge 238 million 59 million included cost products sold 117 million included income expense see note 22 consolidated financial statements additional details related restructuring programs provision taxes income worldwide effective income tax rate 150 2018 926 2017 165 2016 2018 effective tax rate decreased 776 compared 2017 effective tax rate primarily driven provisional tax charge approximately 130 billion result tax cuts jobs act tcja recorded fourth quarter 2017 impact belgian statutory tax rate change increased 2017 effective rate 34 company also received benefit 2018 lower us statutory tax rate vs 2017 well favorable adjustments 2017 provisional tcja tax charge partially offset unfavorable income tax mix us tax global intangible lowtaxed income gilti 2017 effective tax rate increased 761 compared 2016 primarily driven enactment tax cuts jobs act tcja united states december 2017 enactment tcja resulted provisional tax charge fourth quarter 2017 approximately 130 billion approximately 733 percentage point increase effective tax rate see note 8 consolidated financial statements additional details related tcja remainder increase tax rate 2017 related remeasurement company’s deferred tax assets belgium result changes belgian statutory corporate tax rate enacted december 2017 offset tax benefit closure company’s animas insulin pump business government switzerland currently considering tax reform legislation could material impact company’s effective tax rate enacted law see note 8 consolidated financial statements additional details related tcja income taxes liquidity capital resources liquidity cash flows cash equivalents 181 billion end 2018 compared 178 billion end 2017 primary sources uses cash contributed 03 billion increase approximately 222 billion cash generated operating activities partially offset 32 billion net cash used investing activities 185 billion net cash used financing activities 02 billion due effect exchange rate changes cash equivalents addition company 16 billion marketable securities end 2018 05 billion end 2017 see note 1 consolidated financial statements additional details cash equivalents marketable securities cash flow operations 222 billion result 153 billion net earnings 92 billion noncash expenses adjustments depreciation amortization stockbased compensation assets writedowns offset 23 billion net gains sale assetsbusinesses deferred tax provision accounts receivable allowances 39 billion related increase accounts receivable inventories current noncurrent assets decrease current noncurrent liabilities additional sources operating cash flow 40 billion resulted increase accounts payable accrued liabilities decrease current noncurrent liabilities primarily due 2018 tax payment related tcja investing activities use 32 billion additions property plant equipment 37 billion net purchase investments primarily marketable securities 13 billion acquisitions net cash acquired 09 billion primarily acquisitions zarbees uses 05 billion partially offset 32 billion proceeds disposal assetsbusinesses primarily divestiture lifescan financing activities use 185 billion primarily dividends shareholders 95 billion 59 billion repurchase common stock 39 billion net retirement short longterm debt 02 billion financing activities also included sources 10 billion proceeds stock options exercisedemployee withholding tax stock awards net december 17 2018 company announced board directors approved share repurchase program authorizing company purchase 50 billion companys shares common stock repurchase program time limit may suspended periods discontinued time shares acquired available general corporate purposes company intends finance share repurchase program available cash december 30 2018 09 billion repurchased program december 30 2018 companys notes payable longterm debt excess cash equivalents marketable securities december 30 2018 net debt position 108 billion compared prior year 163 billion decrease net debt position due retirement debt balance end 2018 305 billion compared 346 billion 2017 additionally higher cash equivalents marketable securities balance end 2018 company continued access liquidity commercial paper market additionally result tcja company access cash outside us significantly reduced cost company anticipates operating cash flows ability raise funds external sources borrowing capacity existing committed credit facilities access commercial paper markets continue provide sufficient resources fund operating needs next twelve months company monitors global capital markets ongoing basis time may raise capital market conditions favorable company filed new shelf registration february 27 2017 enable issue debt securities timely basis additional details borrowings see note 7 consolidated financial statements financing market risk company uses financial instruments manage impact foreign exchange rate changes cash flows accordingly company enters forward foreign exchange contracts protect value certain foreign currency assets liabilities hedge future foreign currency transactions primarily related product costs gains losses contracts offset gains losses underlying transactions 10 appreciation us dollar december 30 2018 market rates would increase unrealized value company’s forward contracts 57 million conversely 10 depreciation us dollar december 30 2018 market rates would decrease unrealized value company’s forward contracts 69 million either scenario gain loss forward contract would offset gain loss underlying transaction therefore would impact future anticipated earnings cash flows company hedges exposure fluctuations currency exchange rates effect certain assets liabilities foreign currency entering currency swap contracts 1 change spread us foreign interest rates company’s interest rate sensitive financial instruments would either increase decrease unrealized value company’s swap contracts approximately 226 million either scenario maturity gain loss swap contract would offset gain loss underlying transaction therefore would impact future anticipated cash flows company enter financial instruments trading speculative purposes company policy entering contracts parties least investment grade credit rating counterparties contracts major financial institutions significant concentration exposure one counterparty management believes risk loss remote fiscal second quarter 2017 company entered credit support agreements csa certain derivative counterparties establishing collateral thresholds based respective credit ratings netting agreements company invests fixed rate floating rate interest earning securities carry degree interest rate risk fair market value fixed rate securities may adversely impacted due rise interest rates floating rate securities may produce less income predicted interest rates fall 1 100 basis points change spread company’s interest rate sensitive investments would either increase decrease unrealized value cash equivalents current marketable securities approximately 8 million company access substantial sources funds numerous banks worldwide september 2018 company secured new 364day credit facility total credit available company approximates 10 billion expires september 12 2019 interest charged borrowings credit line agreement based either bids provided banks prime rate london interbank offered rates libor plus applicable margins commitment fees agreement material total borrowings end 2018 2017 305 billion 346 billion respectively decrease borrowings due retirement debt 2018 net debt cash current marketable securities net debt 108 billion compared net debt 163 billion 2017 total debt represented 338 total capital shareholders’ equity total debt 2018 365 total capital 2017 shareholders’ equity per share end 2018 2244 compared 2243 yearend 2017 summary borrowings found note 7 consolidated financial statements contractual obligations commitments company’s contractual obligations primarily recently enacted tax legislation leases debt unfunded retirement plans significant obligations satisfy obligations company use cash operations following table summarizes company’s contractual obligations aggregate maturities december 30 2018 see notes 7 8 10 16 consolidated financial statements details tax matters see note 8 consolidated financial statements retirement plan postemployment medical benefit information see note 10 consolidated financial statements table include activity related business combinations dividends company increased dividend 2018 56th consecutive year cash dividends paid 354 per share 2018 compared dividends 332 per share 2017 315 per share 2016 information critical accounting policies estimates management’s discussion analysis results operations financial condition based company’s consolidated financial statements prepared accordance accounting principles generally accepted us gaap preparation financial statements requires management make estimates assumptions affect amounts reported revenues expenses assets liabilities related disclosures actual results may differ estimates company believes understanding certain key accounting policies estimates essential achieving insight company’s operating results financial condition key accounting policies include revenue recognition income taxes legal selfinsurance contingencies valuation longlived assets assumptions used determine amounts recorded pensions employee benefit plans accounting stock based awards revenue recognition company recognizes revenue product sales obligations terms contract customer satisfied generally occurs transfer control goods customers companys global payment terms typically 30 90 days provisions certain rebates sales incentives trade promotions coupons product returns discounts customers accounted variable consideration recorded reduction sales see note 1 consolidated financial statements accounting standards update related revenue adopted 2018 product discounts granted based terms arrangements direct indirect market participants well market conditions including consideration competitor pricing rebates estimated based contractual terms historical experience patient outcomes trend analysis projected market conditions various markets served company evaluates market conditions products groups products primarily analysis wholesaler thirdparty sellthrough market research data well internally generated information sales returns estimated recorded based historical sales returns information products exhibit unusual sales return patterns due dating competition marketing matters specifically investigated analyzed part accounting sales return accruals sales returns allowances represent reserve products may returned due expiration destruction field specific areas product recall sales returns reserve based historical return trends product market percent gross sales accordance company’s accounting policies company generally issues credit customers returned goods company’s sales returns reserves accounted accordance us gaap guidance revenue recognition right return exists sales returns reserves recorded full sales value sales returns consumer pharmaceutical segments almost exclusively resalable sales returns certain franchises medical devices segment typically resalable material company infrequently exchanges products inventory returned products sales returns reserve total company approximately 10 annual net trade sales fiscal reporting years 2018 2017 2016 promotional programs product listing allowances cooperative advertising arrangements recorded period related sales continuing promotional programs include coupons volumebased sales incentive programs redemption cost consumer coupons based historical redemption experience product value volumebased incentive programs based estimated sales volumes incentive period recorded products sold arrangements evaluated determine appropriate amounts deferred recorded reduction revenue company also earns profitshare payments collaborative arrangements certain products included sales customers years presented profitshare payments less 20 total revenues included sales customers addition company enters collaboration arrangements contain multiple revenue generating activities amounts due collaborative partners arrangements recognized activity performed delivered based relative selling price upfront fees received part arrangements deferred recognized performance period see note 1 consolidated financial statements additional disclosures collaborations reasonably likely changes assumptions used calculate accruals rebates returns promotions anticipated material effect financial statements company currently discloses impact changes assumptions quarterly annual filing material financial statement impact tables show progression accrued rebates returns promotions reserve doubtful accounts reserve cash discounts segment business fiscal years ended december 30 2018 december 31 2017 consumer segment 1 includes reserve customer rebates 57 million december 30 2018 48 million december 31 2017 recorded contra asset pharmaceutical segment 1 includes reserve customer rebates 89 million december 30 2018 90 million december 31 2017 recorded contra asset 2 includes adjustments medical devices segment 1 includes reserve customer rebates 632 million december 30 2018 501 million december 31 2017 recorded contra asset income taxes income taxes recorded based amounts refundable payable current year include results difference us gaap accounting tax reporting recorded deferred tax assets liabilities company estimates deferred tax assets liabilities based enacted tax regulations rates future changes tax laws rates may affect recorded deferred tax assets liabilities company unrecognized tax benefits uncertain tax positions company follows us gaap prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return management believes changes estimates would material effect companys results operations cash flows financial position company recorded deferred tax liabilities undistributed earnings prior december 31 2017 international subsidiaries company provided deferred taxes undistributed earnings subsequent january 1 2018 certain international subsidiaries earnings considered indefinitely reinvested company intends continue reinvest earnings international operations company decides later date repatriate earnings us company would required provide net tax effects amounts company estimates total tax effect repatriation would approximately 07 billion current enacted tax laws regulations current currency exchange rates see note 8 consolidated financial statements information regarding income taxes legal self insurance contingencies company records accruals various contingencies including legal proceedings product liability claims arise normal course business accruals based management’s judgment probability losses applicable actuarially determined estimates company self insurance whollyowned captive insurance company addition accruals self insurance program claims exceed insurance coverage accrued losses probable amounts reasonably estimated company follows provisions us gaap recording litigation related contingencies liability recorded loss probable reasonably estimated best estimate loss within range accrued however estimate range better minimum amount accrued see notes 1 21 consolidated financial statements information regarding product liability legal proceedings longlived intangible assets company assesses changes economic conditions makes assumptions regarding estimated future cash flows evaluating value company’s property plant equipment goodwill intangible assets assumptions estimates may change time may necessary company record impairment charges employee benefit plans company sponsors various retirement pension plans including defined benefit defined contribution termination indemnity plans cover employees worldwide plans based assumptions discount rate expected return plan assets mortality rates expected salary increases health care cost trend rates attrition rates see note 10 consolidated financial statements details rates effect rate change health care cost trend would company’s results operations stock based compensation company recognizes compensation expense associated issuance equity instruments employees services based type equity instrument fair value estimated date grant using either blackscholes option valuation model combination blackscholes option valuation model monte carlo valuation model expensed financial statements service period input assumptions used determining fair value expected life expected volatility riskfree rate expected dividend yield performance share units fair market value calculated three component goals date grant fair values sales earnings per share goals performance share unit estimated date grant using fair market value shares time award discounted dividends paid performance share units vesting period fair value relative total shareholder return goal performance share unit estimated date grant using monte carlo valuation model see note 17 consolidated financial statements additional information new accounting pronouncements refer note 1 consolidated financial statements recently adopted accounting pronouncements recently issued accounting pronouncements yet adopted december 30 2018 economic market factors company aware products used environment decade policymakers consumers businesses expressed concerns rising cost health care response concerns company longstanding policy pricing products responsibly period 2008 2018 us weighted average compound annual growth rate company’s net price increases health care products prescription overthecounter drugs hospital professional products us consumer price index cpi company operates certain countries economic conditions continue present significant challenges company continues monitor situations take appropriate actions inflation rates continue effect worldwide economies consequently way companies operate company accounted operations argentina beginning fiscal third quarter 2018 venezuela highly inflationary prior threeyear cumulative inflation rate surpassed 100 material impact companys results period face increasing costs company strives maintain profit margins cost reduction programs productivity improvements periodic price increases june 2016 united kingdom uk held referendum voters approved exit european union eu commonly referred “brexit” march 2017 uk formally started process uk leave eu given lack comparable precedent unclear financial trade regulatory legal implications withdrawal uk eu brexit creates global political economic uncertainty may cause among consequences volatility exchange rates interest rates additional cost containment thirdparty payors changes regulations however company currently believe related effects material impact company’s consolidated financial position operating results december 30 2018 business company’s uk subsidiaries represented less 3 company’s consolidated assets fiscal twelve months revenues respectively company exposed fluctuations currency exchange rates 1 change value us dollar compared foreign currencies company sales income expense 2018 would increased decreased translation foreign sales approximately 390 million net income approximately 100 million governments around world consider various proposals make changes tax laws may include increasing decreasing existing statutory tax rates change statutory tax rate country would result revaluation company’s deferred tax assets liabilities related particular jurisdiction period new tax law enacted change would result expense benefit recorded company’s consolidated statement earnings company closely monitors proposals arise countries operates changes statutory tax rate may occur time related expense benefit recorded may material fiscal quarter year law change enacted september 28 2018 swiss parliament approved federal act tax reform ahv financing swiss tax reform however referendum called result public vote swiss tax reform take place may 19th 2019 swiss tax reform passes measures expected come force either january 2020 january 2021 prior approval referendum subsequent cantonal implementation proposed swiss tax reform enacted therefore company reflected potential impacts fiscal results company currently assessing impact proposed swiss tax reform enacted law may material impact company’s operating results company faces various worldwide health care changes may continue result pricing pressures include health care cost containment government legislation relating sales promotions reimbursement health care products changes behavior spending patterns purchasers health care products services including delaying medical procedures rationing prescription medications reducing frequency physician visits foregoing health care insurance coverage result current global economic downturn may continue impact company’s businesses company also operates environment increasingly hostile intellectual property rights firms filed abbreviated new drug applications biosimilar biological product applications fda otherwise challenged coverage andor validity companys patents seeking market generic biosimilar forms many company’s key pharmaceutical products prior expiration applicable patents covering products event company successful defending patent claims challenged resulting lawsuits generic biosimilar versions products issue introduced market resulting potential substantial market share revenue losses products may result noncash impairment charge associated intangible asset also risk one competitors could launch generic biosimilar version product issue following regulatory approval even though one valid patents place information see discussion “remicade® related cases” “litigation filers abbreviated new drug applications” note 21 consolidated financial statements legal proceedings johnson certain subsidiaries involved various lawsuits claims regarding product liability intellectual property commercial matters governmental investigations legal proceedings arise time ordinary course business company records accruals loss contingencies associated legal matters probable liability incurred amount loss reasonably estimated company accrued certain litigation matters continues monitor related legal issue adjust accruals new information developments accordance accounting standards codification asc 4502025 litigation regulatory matters currently disclosed loss probable reasonably possible company unable estimate possible loss range loss beyond amounts already accrued amounts accrued legal contingencies often result complex series judgments future events uncertainties rely heavily estimates assumptions ability make estimates judgments affected various factors including whether damages sought proceedings unsubstantiated indeterminate scientific legal discovery commenced complete proceedings early stages matters present legal uncertainties significant facts dispute numerous parties involved companys opinion based examination matters experience date discussions counsel ultimate outcome legal proceedings net liabilities accrued companys balance sheet expected material adverse effect companys financial position however resolution increase accruals one matters reporting period may material adverse effect companys results operations cash flows period see note 21 consolidated financial statements information regarding legal proceedings common stock company’s common stock listed new york stock exchange symbol jnj february 15 2019 142029 record holders common stock company item 7aitem 7 management’s discussion analysis results operations financial condition organization business segments description company business segments johnson subsidiaries company approximately 132200 employees worldwide engaged research development manufacture sale broad range products health care field company conducts business virtually countries world primary focus products related human health wellbeing company organized three business segments consumer pharmaceutical medical devices consumer segment includes broad range products used baby care oral care beauty overthecounter pharmaceutical women’s health wound care markets products marketed general public sold retail outlets distributors throughout world pharmaceutical segment focused six therapeutic areas including immunology infectious diseases neuroscience oncology pulmonary hypertension cardiovascular metabolic diseases products segment distributed directly retailers wholesalers hospitals health care professionals prescription use medical devices segment includes broad range products used orthopaedic surgery interventional solutions cardiovascular neurovascular eye health fields products distributed wholesalers hospitals retailers used principally professional fields physicians nurses hospitals eye care professionals clinics executive committee johnson principal management group responsible strategic operations allocation resources company committee oversees coordinates activities consumer pharmaceutical medical devices business segments product lines company competes companies locally globally throughout world competition exists product lines without regard number size competing companies involved competition research involving development improvement new existing products processes particularly significant development new innovative products well protecting underlying intellectual property companys product portfolio important company’s success areas business competitive environment requires substantial investments continuing research addition development maintenance customer demand company’s consumer products involves significant expenditures advertising promotion management’s objectives “our credo” foundation company’s purpose blend heart science ingenuity profoundly change trajectory health humanity company committed bringing full breadth depth ensure health people today future generations united around common ambition company poised fulfill purpose successfully meet demands rapidly evolving markets competes company broadly based human healthcare committed creating value developing accessible high quality innovative products services new products introduced within past five years accounted approximately 25 2019 sales 2019 114 billion invested research development 58 billion spent acquisitions reflecting management’s commitment create lifeenhancing innovations create value partnerships profoundly change trajectory health humanity critical driver company’s success 132200 diverse employees worldwide employees empowered inspired lead company’s credo purpose guides allows every employee use company’s reach size advance companys purpose also lead agility urgency leveraging extensive resources across enterprise enables company innovate execute excellence ensures company remain focused addressing unmet needs society every day invest enduring impact ultimately delivering value patients consumers healthcare professionals employees communities shareholders results operations analysis consolidated sales discussion results operations financial condition pertaining fiscal years 2018 2017 see company’s annual report form 10k fiscal year ended december 30 2018 item 7 managements discussion analysis results operations financial condition 2019 worldwide sales increased 06 821 billion compared increase 67 2018 sales changes consisted following net impact acquisitions divestitures worldwide sales growth negative impact 17 2019 positive impact 08 2018 sales us companies 421 billion 2019 419 billion 2018 represents increases 05 2019 51 2018 sales international companies 400 billion 2019 397 billion 2018 represents increase 07 2019 85 2018 fiveyear compound annual growth rates worldwide us international sales 20 39 02 respectively tenyear compound annual growth rates worldwide us international sales 29 31 26 respectively 2019 sales companies europe experienced sales decline 15 compared prior year included operational growth 38 offset negative currency impact 53 sales companies western hemisphere excluding us experienced sales decline 28 compared prior year included operational growth 57 offset negative currency impact 85 sales companies asiapacific africa region achieved growth 49 compared prior year including operational growth 69 partially offset negative currency impact 20 2019 company utilized three wholesalers distributing products three segments represented approximately 150 120 110 total consolidated revenues 2018 company three wholesalers distributing products three segments represented approximately 140 110 total consolidated revenues analysis sales business segments consumer segment consumer segment sales 2019 139 billion increase 03 2018 included 30 operational growth negative currency impact 27 us consumer segment sales 58 billion increase 14 international sales 81 billion decrease 04 included 42 operational growth negative currency impact 46 2019 acquisitions divestitures net positive impact 16 operational sales growth worldwide consumer segment major consumer franchise sales beauty franchise sales 46 billion increased 48 compared prior year growth primarily driven incremental sales acquisition ciz holdings co ltd drcilabo japan well market growth share gains neutrogena® aveeno® products growth partially offset divestitures roc® nizoral® fiscal year 2018 overthecounter otc franchise sales 44 billion increased 25 compared prior year growth primarily driven incremental sales acquisition zarbees® additional contributors growth tylenol® childrens motrin® digestive health products antismoking aids baby care franchise sales 17 billion 2019 decrease 99 compared prior year primarily due johnson’s® competitive pressures coupled comparisons prior year relaunch activities baby center divestiture oral care franchise sales 15 billion decreased 17 compared prior year growth listerine® mouthwash ready tabs outside us offset share declines retailer destocking us negative impact currency women’s health franchise sales 10 billion 2019 decrease 60 compared prior year decline primarily driven negative impact currency weakness liners partially offset strength napkins asia pacific latin america wound careother franchise sales 07 billion 2019 decrease 06 compared prior year decline primarily driven divestiture compeed® outside us negative impact currency pharmaceutical segment pharmaceutical segment sales 2019 422 billion increase 36 2018 included operational growth 58 negative currency impact 22 us sales 239 billion increase 25 international sales 183 billion increase 50 included 101 operational growth negative currency impact 51 2019 net impact acquisitions divestitures pharmaceutical segment operational sales growth negligible adjustments previous reserve estimates compared prior year positively impacted pharmaceutical segment operational growth approximately 13 primarily immunology cardiovascularmetabolismother therapeutic areas major pharmaceutical therapeutic area sales immunology products sales 140 billion 2019 representing increase 63 compared prior year growth driven strong uptake stelara® ustekinumab crohns disease tremfya® guselkumab psoriasis expanded indications simponi®simponi aria® golimumab us immunology market growth immunology negatively impacted lower sales remicade® infliximab due increased discountsrebates biosimilar competition patents remicade® infliximab certain countries europe expired february 2015 biosimilar versions remicade® introduced certain markets outside us resulting reduction sales remicade® markets additional biosimilar competition likely result reduction remicade® sales markets outside united states us biosimilar version remicade® introduced 2016 additional competitors continue enter market continued infliximab biosimilar competition us market result reduction us sales remicade® see note 21 consolidated financial statements description legal matters regarding remicade® patents infectious disease products sales 34 billion 2019 representing increase 33 compared prior year strong sales symtuza® launch juluca® dolutegravirrilpivirine partially offset lower sales prezista® prezcobix®rezolsta® darunavircobicistat due increased competition loss exclusivity prezista® certain countries outside us neuroscience products sales 63 billion representing increase 41 compared prior year strong sales longacting injectables invega trinza®trevicta®paliperidone palmitate invega sustenna®xeplion® partially offset cannibalization risperdal consta® risperidone oncology products achieved sales 107 billion 2019 representing increase 86 compared prior year contributors growth strong sales darzalex® daratumumab continued market growth share gain imbruvica® ibrutinib due increased patient uptake globally additionally sales launch erleada™ apalutamide contributed growth negatively impacted decline us sales zytiga® abiraterone acetate driven generic competition partially offset increased sales outside us lower sales velcade® bortezomib also due generic competition pulmonary hypertension products achieved sales 26 billion representing increase 19 compared prior year sales opsumit® macitentan uptravi® selexipag due continued market growth increased share gains sales tracleer® bosentan negatively impacted generics cannibalization opsumit® cardiovascularmetabolismother products sales 52 billion decline 107 compared prior year xarelto® rivaroxaban sales volume growth offset higher discounts rebates lower sales invokana®invokamet® canagliflozin due share loss competitive pressure safety label update us lower sales procrit® eprex® epoetin alfa due biosimilar competition 2019 company advanced pipeline several regulatory submissions approvals new drugs additional indications existing drugs follows medical devices segment medical devices segment sales 2019 260 billion decrease 38 2018 included operational decrease 17 negative currency impact 21 us sales 124 billion decrease 35 compared prior year international sales 136 billion decrease 41 compared prior year operational decrease 01 negative currency impact 40 2019 net impact acquisitions divestitures medical devices segment worldwide operational sales growth negative 56 divestitures lifescan advanced sterilization products asp impact approximately 38 16 respectively major medical devices franchise sales 1lifescan divested fiscal fourth quarter 2018 percentage greater 100 meaningful surgery franchise sales 95 billion 2019 decrease 40 2018 growth advanced surgery primarily driven endocutter biosurgery energy products decline general surgery primarily driven negative impact currency partially offset growth wound closure products decline specialty surgery primarily driven divestiture sterilization business asp partially offset growth aesthetic products orthopaedics franchise sales 88 billion 2019 decrease 05 including operational growth 12 offset negative currency impact 17 compared prior year growth hips driven leadership position anterior approach strong market demand actis® stem kincise™ surgical automated system knees grew outside us new products coupled continued global uptake attune® revision offset negative currency impact growth trauma due strong market growth coupled continued uptake new products decline spine primarily driven base business declines spine partially offset growth sports led new products monovisc® us growth asia pacific vision franchise achieved sales 46 billion 2019 increase 16 2018 growth primarily driven strength daily disposable lenses acuvue® oasys contact lenses category surgical operational growth primarily driven strength cataracts outside us partially offset competitive pressures us interventional solutions franchise achieved sales 30 billion 2019 increase 133 2018 strong growth electrophysiology business driven atrial fibrillation procedure growth strong thermocool smarttouch® sf contact force sensing catheter diagnostic catheter sales analysis consolidated earnings provision taxes income consolidated earnings provision taxes income 173 billion 180 billion fiscal years ended 2019 2018 respectively percent sales consolidated earnings provision taxes income 211 221 2019 2018 respectively cost products sold selling marketing administrative expenses cost products sold selling marketing administrative expenses percent sales follows 2019 cost products sold percent sales increased 336 332 compared period year ago primarily driven negative impact currency pharmaceutical business well increased intangible asset amortization expense intangible asset amortization expense 45 billion included cost products sold 2019 compared 44 billion 2018 decrease percent sales selling marketing administrative expenses 2019 compared prior year primarily due favorable segment mix higher percentage sales coming pharmaceutical business planned prioritization reduced brand marketing expense consumer business partially offset increased selling marketing investments medical devices business research development expense research development expense segment business follows percent segment sales research development activities represent significant part companys business expenditures relate processes discovering testing developing new products upfront payments developmental milestones improving existing products well ensuring product efficacy regulatory compliance prior launch company remains committed investing research development aim delivering high quality innovative products 2019 worldwide costs research development activities increased 54 compared 2018 primarily driven increased investment medical devices business related robotics digital surgery platforms along higher upfront developmental milestone payments primarily argenx collaboration pharmaceutical business research facilities located us belgium brazil china france germany india israel netherlands poland singapore sweden switzerland united kingdom additional rd support 30 countries inprocess research development iprd fiscal first quarter 2019 company recorded iprd charge 09 billion remaining intangible asset value related development program al8176 investigational drug treatment respiratory syncytial virus rsv human metapneumovirus hmpv acquired 2014 acquisition alios biopharma inc impairment charge based additional information including clinical data became available led companys decision abandon development al8176 fiscal third quarter 2018 company recorded impairment charge 11 billion included partial impairment charge 08 billion related development program al8176 impairment charge 03 billion discontinuation development project antithrombin antibody associated 2015 acquisition xo1 limited income expense net income expense net account company records gains losses related sale writedown certain investments equity securities held johnson innovation jjdc inc jjdc unrealized gains losses investments gains losses divestitures certain transactional currency gains losses acquisitionrelated costs litigation accruals settlements well royalty income change income expense net fiscal year 2019 additional net expense 11 billion primarily attributable litigation expense 51 billion 2019 primarily related agreement principle settle opioid litigation 40 billion compared litigation expense 20 billion 2018 partially offset divestiture gains 2019 22 billion 20 billion related divestiture asp business addition fiscal year 2019 included higher unrealized gains securities 07 billion equity stepup gain 03 billion related companys previously held equity investment dr cilabo lower restructuring related expense 02 billion compared period year ago divestiture gains approximately 12 billion 2018 included lifescan business nizoral® roc® certain nonstrategic pharmaceutical products additionally 2018 included reversal contingent liability 02 billion interest income expense fiscal year 2019 included net interest income compared expense fiscal year 2018 primarily due positive effect net investment hedging arrangements certain cross currency swaps lower average debt balance cash equivalents marketable securities totaled 193 billion end 2019 averaged 195 billion compared cash equivalents marketable securities total 197 billion 190 billion average cash balance 2018 total debt balance end 2019 277 billion average debt balance 291 billion compared 305 billion end 2018 average debt balance 325 billion decrease debt due retirement longterm debt income tax segment income tax segment business follows 1 see note 18 consolidated financial statements details 2 amounts allocated segments include interest income expense general corporate income expense consumer segment 2019 consumer segment income tax percent sales 148 versus 167 2018 decrease income tax percent sales 2019 compared 2018 primarily attributable higher expenses litigation 01 billion intangible asset amortization 01 billion restructuring 01 billion fiscal year 2019 compared fiscal year 2018 partially offset planned prioritization brand marketing expense reductions fiscal year 2019 included gain 03 billion related companys previously held equity investment dr cilabo divestiture gains fiscal year 2018 included gain 03 billion divestiture nizoral® pharmaceutical segment 2019 pharmaceutical segment income tax percent sales 209 versus 309 2018 decrease income tax percent sales primarily due higher litigation expense 43 billion primarily due agreement principle settle opioid litigation 40 billion increased spending research development including 03 billion upfront payment argenx partially offset 08 billion higher unrealized gains securities lower inprocess research development charge 02 billion lower actelion acquisition integration related costs compared fiscal year 2018 addition fiscal year 2018 included contingent liability reversal 02 billion higher divestiture gains 02 billion medical devices segment 2019 medical devices segment income tax percent sales 281 versus 163 2018 increase income tax percent sales primarily attributable higher divestiture gains 2019 divestiture gains fiscal 2019 included gain 20 billion related asp business divestiture gains fiscal year 2018 included gain 05 billion related lifescan additionally fiscal year 2019 included lower litigation expense 13 billion lower restructuring charges 02 billion lower intangible asset amortization expense 01 billion compared fiscal year 2018 partially offset increased investment robotics digital solutions restructuring fiscal second quarter 2018 company announced plans implement actions across global supply chain intended enable company focus resources increase investments critical capabilities technologies solutions necessary manufacture supply product portfolio future enhance agility drive growth company expects supply chain actions include expanding use strategic collaborations bolstering initiatives reduce complexity improving costcompetitiveness enhancing capabilities optimizing network discussions regarding specific future actions ongoing subject relevant consultation requirements finalized total company expects actions generate approximately 06 08 billion annual pretax cost savings substantially delivered 2022 company expects record pretax restructuring charges approximately 19 23 billion company estimates approximately 70 cumulative pretax costs result cash outlays 2019 company recorded pretax charge 06 billion included following lines consolidated statement earnings 03 billion restructuring 02 billion income expense 01 billion cost products sold total project costs approximately 08 billion recorded since restructuring announced see note 22 consolidated financial statements additional details related restructuring programs provision taxes income worldwide effective income tax rate 127 2019 150 2018 discussion related fiscal 2019 provision taxes refer note 8 consolidated financial statements september 28 2018 swiss parliament approved federal act tax reform ahv financing traf may 19 2019 public referendum held switzerland approved federal reform proposals fiscal third quarter 2019 swiss federal council enacted traf became effective january 1 2020 february 9 2020 public referendum legislative change held last remaining canton company significant operations legislation approved voters formal enactment expected fiscal first half 2020 company yet elected transitional provision canton however net financial benefit estimated 02 billion 05 billion fiscal first half 2020 company believe traf material impact company’s ongoing consolidated effective tax rate beginning fiscal year 2020 liquidity capital resources liquidity cash flows cash equivalents 173 billion end 2019 compared 181 billion end 2018 primary sources uses cash contributed 08 billion decrease approximately 234 billion cash generated operating activities offset 62 billion net cash used investing activities 180 billion net cash used financing activities addition company 20 billion marketable securities end 2019 16 billion end 2018 see note 1 consolidated financial statements additional details cash equivalents marketable securities cash flow operations 234 billion result 151 billion net earnings 91 billion noncash expenses adjustments depreciation amortization stockbased compensation assets writedowns primarily related alios iprd asset favorable increases accounts payable accrued liabilities 55 billion reduced 16 billion related increase accounts receivable inventories current noncurrent assets well noncash expenses adjustments 25 billion increase deferred tax provision net gain sale assetsbusinesses 22 billion primarily related asp divestiture investing activities use 62 billion cash primarily used acquisitions 58 billion primarily related acquisitions auris health inc dr cilabo additions property plant equipment 35 billion 05 billion net purchases investments investing activities also included source 33 billion proceeds disposal assetsbusinesses primarily asp divestiture proceeds credit support agreements 03 billion financing activities use 180 billion cash primarily used dividends shareholders 99 billion repurchase common stock 67 billion net retirement short long term debt 29 billion financing activities also included sources 15 billion proceeds stock options exercisedemployee withholding tax stock awards financing activities december 17 2018 company announced board directors approved share repurchase program authorizing company purchase 50 billion companys shares common stock shares acquired available general corporate purposes company financed share repurchase program available cash september 29 2019 50 billion repurchased program completed december 29 2019 companys notes payable longterm debt excess cash equivalents marketable securities december 29 2019 net debt position 84 billion compared prior year 108 billion decrease net debt position due retirement debt balance end 2019 277 billion compared 305 billion 2018 2019 company continued access liquidity commercial paper market additionally result tcja company access cash outside us significantly reduced cost company anticipates operating cash flows ability raise funds external sources borrowing capacity existing committed credit facilities access commercial paper markets continue provide sufficient resources fund operating needs including agreement principle settle opioid litigation potentially paid next two three years discussed note 8 consolidated financial statements internal revenue service irs completed audit tax years 2009 currently auditing tax years 20102012 company currently expects completion audit settlement related tax liabilities fiscal year 2020 december 29 2019 company classified unrecognized tax benefits related interest approximately 09 billion current liability “accrued taxes income” line consolidated balance sheet amount expected paid next 12 months respect irs audit subsequent december 29 2019 company made payment approximately 06 billion us treasury related estimated 20102012 tax audit liability anticipation final settlement later fiscal 2020 completion tax audit may result additional adjustments company’s unrecognized tax benefit liability may material impact company’s future operating results cash flows period audit substantially completed company monitors global capital markets ongoing basis time may raise capital market conditions favorable company filed shelf registration february 27 2017 enable issue debt securities timely basis updated required additional details borrowings see note 7 consolidated financial statements financing market risk company uses financial instruments manage impact foreign exchange rate changes cash flows accordingly company enters forward foreign exchange contracts protect value certain foreign currency assets liabilities hedge future foreign currency transactions primarily related product costs gains losses contracts offset gains losses underlying transactions 10 appreciation us dollar december 29 2019 market rates would increase unrealized value company’s forward contracts 271 million conversely 10 depreciation us dollar december 29 2019 market rates would decrease unrealized value company’s forward contracts 331 million either scenario gain loss forward contract would offset gain loss underlying transaction therefore would impact future anticipated earnings cash flows company hedges exposure fluctuations currency exchange rates effect certain assets liabilities foreign currency entering currency swap contracts 1 change spread us foreign interest rates company’s interest rate sensitive financial instruments would either increase decrease unrealized value company’s swap contracts approximately 1043 million either scenario maturity gain loss swap contract would offset gain loss underlying transaction therefore would impact future anticipated cash flows company enter financial instruments trading speculative purposes company policy entering contracts parties least investment grade credit rating counterparties contracts major financial institutions significant concentration exposure one counterparty management believes risk loss remote fiscal second quarter 2017 company entered credit support agreements csa certain derivative counterparties establishing collateral thresholds based respective credit ratings netting agreements see note 6 consolidated financial statements additional details credit support agreements company invests fixed rate floating rate interest earning securities carry degree interest rate risk fair market value fixed rate securities may adversely impacted due rise interest rates floating rate securities may produce less income predicted interest rates fall 1 100 basis points change spread company’s interest rate sensitive investments would either increase decrease unrealized value cash equivalents current marketable securities approximately 7 million company access substantial sources funds numerous banks worldwide september 2019 company secured new 364day credit facility total credit available company approximates 10 billion expires september 10 2020 interest charged borrowings credit line agreement based either bids provided banks prime rate london interbank offered rates libor applicable market rate allowed terms agreement plus applicable margins commitment fees agreement material total borrowings end 2019 2018 277 billion 305 billion respectively decrease borrowings due retirement debt 2019 net debt cash current marketable securities net debt 84 billion compared net debt 108 billion 2018 total debt represented 318 total capital shareholders’ equity total debt 2019 338 total capital 2018 shareholders’ equity per share end 2019 2259 compared 2244 yearend 2018 summary borrowings found note 7 consolidated financial statements contractual obligations commitments company’s contractual obligations primarily recently enacted tax legislation leases debt unfunded retirement plans significant obligations satisfy obligations company use cash operations following table summarizes company’s contractual obligations aggregate maturities december 29 2019 see notes 7 8 10 16 consolidated financial statements details tax matters see note 8 consolidated financial statements retirement plan postemployment medical benefit information see note 10 consolidated financial statements table include activity related business combinations dividends company increased dividend 2019 57th consecutive year cash dividends paid 375 per share 2019 354 per share 2018 information critical accounting policies estimates management’s discussion analysis results operations financial condition based company’s consolidated financial statements prepared accordance accounting principles generally accepted us gaap preparation financial statements requires management make estimates assumptions affect amounts reported revenues expenses assets liabilities related disclosures actual results may differ estimates company believes understanding certain key accounting policies estimates essential achieving insight company’s operating results financial condition key accounting policies include revenue recognition income taxes legal selfinsurance contingencies valuation longlived assets assumptions used determine amounts recorded pensions employee benefit plans accounting stock based awards revenue recognition company recognizes revenue product sales obligations terms contract customer satisfied generally occurs transfer control goods customers companys global payment terms typically 30 90 days provisions certain rebates sales incentives trade promotions coupons product returns discounts customers accounted variable consideration recorded reduction sales see note 1 consolidated financial statements accounting standards update related revenue adopted 2018 product discounts granted based terms arrangements direct indirect market participants well market conditions including consideration competitor pricing rebates estimated based contractual terms historical experience patient outcomes trend analysis projected market conditions various markets served company evaluates market conditions products groups products primarily analysis wholesaler thirdparty sellthrough market research data well internally generated information sales returns estimated recorded based historical sales returns information products exhibit unusual sales return patterns due dating competition marketing matters specifically investigated analyzed part accounting sales return accruals sales returns allowances represent reserve products may returned due expiration destruction field specific areas product recall sales returns reserve based historical return trends product market percent gross sales accordance company’s accounting policies company generally issues credit customers returned goods company’s sales returns reserves accounted accordance us gaap guidance revenue recognition right return exists sales returns reserves recorded full sales value sales returns consumer pharmaceutical segments almost exclusively resalable sales returns certain franchises medical devices segment typically resalable material company infrequently exchanges products inventory returned products sales returns reserve total company approximately 10 annual net trade sales fiscal reporting years 2019 2018 promotional programs product listing allowances cooperative advertising arrangements recorded period related sales continuing promotional programs include coupons volumebased sales incentive programs redemption cost consumer coupons based historical redemption experience product value volumebased incentive programs based estimated sales volumes incentive period recorded products sold arrangements evaluated determine appropriate amounts deferred recorded reduction revenue company also earns profitshare payments collaborative arrangements certain products included sales customers years presented profitshare payments approximately 20 total revenues included sales customers addition company enters collaboration arrangements contain multiple revenue generating activities amounts due collaborative partners arrangements recognized activity performed delivered based relative selling price upfront fees received part arrangements deferred recognized performance period see note 1 consolidated financial statements additional disclosures collaborations reasonably likely changes assumptions used calculate accruals rebates returns promotions anticipated material effect financial statements company currently discloses impact changes assumptions quarterly annual filing material financial statement impact tables show progression accrued rebates returns promotions reserve doubtful accounts reserve cash discounts segment business fiscal years ended december 29 2019 december 30 2018 consumer segment 1 includes reserve customer rebates 54 million december 29 2019 57 million december 30 2018 recorded contra asset pharmaceutical segment 1 includes reserve customer rebates 93 million december 29 2019 89 million december 30 2018 recorded contra asset 2 includes adjustments medical devices segment 1 includes reserve customer rebates 499 million december 29 2019 632 million december 30 2018 recorded contra asset 2 certain prior period amounts reclassified conform current year presentation income taxes income taxes recorded based amounts refundable payable current year include results difference us gaap accounting tax reporting recorded deferred tax assets liabilities company estimates deferred tax assets liabilities based enacted tax regulations rates future changes tax laws rates may affect recorded deferred tax assets liabilities company unrecognized tax benefits uncertain tax positions company follows us gaap prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return management believes changes estimates would material effect companys results operations cash flows financial position company recorded deferred tax liabilities undistributed earnings prior december 31 2017 international subsidiaries company provided deferred taxes undistributed earnings subsequent january 1 2018 certain international subsidiaries earnings considered indefinitely reinvested company intends continue reinvest earnings international operations company decides later date repatriate earnings us company would required provide net tax effects amounts company estimates total tax effect repatriation would approximately 08 billion current enacted tax laws regulations current currency exchange rates see note 8 consolidated financial statements information regarding income taxes legal self insurance contingencies company records accruals various contingencies including legal proceedings product liability claims arise normal course business accruals based management’s judgment probability losses applicable actuarially determined estimates company self insurance whollyowned captive insurance company addition accruals self insurance program claims exceed insurance coverage accrued losses probable amounts reasonably estimated company follows provisions us gaap recording litigation related contingencies liability recorded loss probable reasonably estimated best estimate loss within range accrued however estimate range better minimum amount accrued see notes 1 21 consolidated financial statements information regarding product liability legal proceedings longlived intangible assets company assesses changes economic conditions makes assumptions regarding estimated future cash flows evaluating value company’s property plant equipment goodwill intangible assets assumptions estimates may change time may necessary company record impairment charges employee benefit plans company sponsors various retirement pension plans including defined benefit defined contribution termination indemnity plans cover employees worldwide plans based assumptions discount rate expected return plan assets mortality rates expected salary increases health care cost trend rates attrition rates see note 10 consolidated financial statements details rates effect rate change health care cost trend would company’s results operations stock based compensation company recognizes compensation expense associated issuance equity instruments employees services based type equity instrument fair value estimated date grant using either blackscholes option valuation model combination blackscholes option valuation model monte carlo valuation model expensed financial statements service period input assumptions used determining fair value expected life expected volatility riskfree rate expected dividend yield performance share units fair market value calculated three component goals date grant fair values sales earnings per share goals performance share unit estimated date grant using fair market value shares time award discounted dividends paid performance share units vesting period fair value relative total shareholder return goal performance share unit estimated date grant using monte carlo valuation model see note 17 consolidated financial statements additional information new accounting pronouncements refer note 1 consolidated financial statements recently adopted accounting pronouncements recently issued accounting pronouncements yet adopted december 29 2019 economic market factors company aware products used environment decade policymakers consumers businesses expressed concerns rising cost health care response concerns company longstanding policy pricing products responsibly period 2009 2019 us weighted average compound annual growth rate company’s net price increases health care products prescription overthecounter drugs hospital professional products us consumer price index cpi company operates certain countries economic conditions continue present significant challenges company continues monitor situations take appropriate actions inflation rates continue effect worldwide economies consequently way companies operate company accounted operations argentina beginning fiscal third quarter 2018 venezuela highly inflationary prior threeyear cumulative inflation rate surpassed 100 material impact companys results period face increasing costs company strives maintain profit margins cost reduction programs productivity improvements periodic price increases june 2016 united kingdom uk held referendum voters approved exit european union eu commonly referred “brexit” january 31 2020 uk formally exited eu given lack comparable precedent unclear ultimate financial trade regulatory legal implications withdrawal uk eu brexit creates global political economic uncertainty may cause among consequences volatility exchange rates interest rates additional cost containment thirdparty payors changes regulations however company currently believe related effects material impact company’s consolidated financial position operating results december 29 2019 business company’s uk subsidiaries represented less 3 company’s consolidated assets fiscal twelve months revenues respectively company exposed fluctuations currency exchange rates 1 change value us dollar compared foreign currencies company sales income expense 2019 would increased decreased translation foreign sales approximately 390 million net income approximately 120 million governments around world consider various proposals make changes tax laws may include increasing decreasing existing statutory tax rates change statutory tax rate country would result revaluation company’s deferred tax assets liabilities related particular jurisdiction period new tax law enacted change would result expense benefit recorded company’s consolidated statement earnings company closely monitors proposals arise countries operates changes statutory tax rate may occur time related expense benefit recorded may material fiscal quarter year law change enacted discussion federal act tax reform ahv financing swiss tax reform see provision taxes income managements discussion analysis financial condition results operations company faces various worldwide health care changes may continue result pricing pressures include health care cost containment government legislation relating sales promotions reimbursement health care products changes behavior spending patterns purchasers health care products services including delaying medical procedures rationing prescription medications reducing frequency physician visits foregoing health care insurance coverage result current global economic downturn may continue impact company’s businesses company also operates environment increasingly hostile intellectual property rights firms filed abbreviated new drug applications biosimilar biological product applications fda otherwise challenged coverage andor validity companys patents seeking market generic biosimilar forms many company’s key pharmaceutical products prior expiration applicable patents covering products event company successful defending patent claims challenged resulting lawsuits generic biosimilar versions products issue introduced market resulting potential substantial market share revenue losses products may result noncash impairment charge associated intangible asset also risk one competitors could launch generic biosimilar version product issue following regulatory approval even though one valid patents place information see discussion “remicade® related cases” “litigation filers abbreviated new drug applications” note 21 consolidated financial statements legal proceedings johnson certain subsidiaries involved various lawsuits claims regarding product liability intellectual property commercial matters governmental investigations legal proceedings arise time ordinary course business company records accruals loss contingencies associated legal matters probable liability incurred amount loss reasonably estimated december 29 2019 company determined liabilities associated certain litigation matters probable reasonably estimated company accrued matters continue monitor related legal issue adjust accruals might warranted based new information developments accordance asc 4502025 litigation regulatory matters discussed loss probable reasonably possible company unable estimate possible loss range loss beyond amounts already accrued amounts accrued legal contingencies often result complex series judgments future events uncertainties rely heavily estimates assumptions including timing related payments ability make estimates judgments affected various factors including among things whether damages sought proceedings unsubstantiated indeterminate scientific legal discovery commenced complete proceedings early stages matters present legal uncertainties significant facts dispute procedural jurisdictional issues uncertainty unpredictability number potential claims numerous parties involved extent adverse verdicts rendered company record accrual loss determined probable reasonably estimated companys opinion based examination matters experience date discussions counsel ultimate outcome legal proceedings net liabilities accrued companys balance sheet expected material adverse effect companys financial position however resolution increase accruals one matters reporting period may material adverse effect companys results operations cash flows period see note 21 consolidated financial statements information regarding legal proceedings common stock company’s common stock listed new york stock exchange symbol jnj february 12 2020 135953 record holders common stock company item 7aitem 7 managements discussion analysis results operations financial condition information called item incorporated herein reference narrative tabular graphic material included material captioned managements discussion analysis results operations financial condition pages 28 38 annual report filed exhibit 13 report form 10k item 7aitem 7 management’s discussion analysis financial condition results operation information called item incorporated herein reference narrative tabular graphic material caption “management’s discussion analysis results operations financial condition” pages 26 36 annual report filed exhibit 13 report form 10k item 7a nannannannanitem 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material captioned managements discussion analysis results operations financial condition financial instruments page 26 johnson johnsons annual report shareowners fiscal year 1998 item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material captioned managements discussion analysis results operations financial condition financial instruments page 31 johnson johnsons annual report shareowners fiscal year 2000 item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material captioned managements discussion analysis results operations financial condition financial instruments page 30 johnson johnsons annual report shareowners fiscal year 2001 item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material captioned managements discussion analysis results operations financial condition financial position capital resources page 34 35 johnson johnsons annual report shareholders fiscal year 2002 item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material captioned managements discussion analysis results operations financial condition liquidity capital resources pages 34 35 annual report filed exhibit 13 report form 10k item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference narrative graphic material captioned “management’s discussion analysis results operations financial condition liquidity capital resources” pages 44 45 annual report filed exhibit 13 report form 10k item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material caption “management’s discussion analysis results operations financial condition liquidity capital resources financing market risk” page 43 note 1 “summary significant accounting policies financial instruments” “notes consolidated financial statements” pages 53 54 annual report filed exhibit 13 report form 10k item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material caption “management’s discussion analysis results operations financial condition liquidity capital resources financing market risk” page 40 note 1 “summary significant accounting policies financial instruments” “notes consolidated financial statements” pages 49 50 annual report filed exhibit 13 report form 10k item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material caption “management’s discussion analysis results operations financial condition liquidity capital resources financing market risk” page 32 note 1 “summary significant accounting policies financial instruments” “notes consolidated financial statements” page 42 annual report filed exhibit 13 report form 10k item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material caption “management’s discussion analysis results operations financial condition liquidity capital resources financing market risk” pages 36 37 note 1 “summary significant accounting policies financial instruments” “notes consolidated financial statements” pages 46 47 annual report filed exhibit 13 report form 10k item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material caption “management’s discussion analysis results operations financial condition liquidity capital resources financing market risk” note 1 “summary significant accounting policies financial instruments” “notes consolidated financial statements” annual report filed exhibit 13 report form 10k item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material caption “management’s discussion analysis results operations financial condition liquidity capital resources financing market risk” note 1 “summary significant accounting policies financial instruments” “notes consolidated financial statements” annual report filed exhibit 13 report form 10k item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference item 7 “management’s discussion analysis results operations financial condition liquidity capital resources financing market risk” report note 1 “summary significant accounting policies financial instruments” notes consolidated financial statements included item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference “item 7 management’s discussion analysis results operations financial condition liquidity capital resources financing market risk” report note 1 “summary significant accounting policies financial instruments” notes consolidated financial statements included item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference “item 7 management’s discussion analysis results operations financial condition liquidity capital resources financing market risk” report note 1 “summary significant accounting policies financial instruments” notes consolidated financial statements included item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference “item 7 management’s discussion analysis results operations financial condition liquidity capital resources financing market risk” report note 1 “summary significant accounting policies financial instruments” notes consolidated financial statements included item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material captioned managements discussion analysis results operations financial condition liquidity capital resources pages 34 35 annual report filed exhibit 13 report form 10k item 8item 7a quantitative qualitative disclosures market risk information called item incorporated herein reference material caption “management’s discussion analysis results operations financial conditionliquidity capital resourcesfinancing market risk” pages 32 33 note 1 “summary significant accounting policiesfinancial instruments” “notes consolidated financial statements” page 42 annual report filed exhibit 13 report form 10k item 8 item 8 financial statements supplementary data information called item incorporated herein reference consolidated financial statements notes thereto material captioned independent auditors report pages 29 40 johnson johnsons annual report stockholders fiscal year 1993 item 9item 8 financial statements supplementary data information called item incorporated herein reference consolidated financial statements notes thereto material captioned independent auditors report pages 29 40 johnson johnsons annual report stockholders fiscal year 1994 item 9item 8 financial statements supplementary data information called item incorporated herein reference consolidated financial statements notes thereto material captioned independent auditors report pages 29 40 johnson johnsons annual report shareowners fiscal year 1996 item 9item 8 financial statements supplementary data information called item incorporated herein reference consolidated financial statements notes thereto material captioned independent auditors report pages 32 43 johnson johnsons annual report shareowners fiscal year 1997 item 9item 8 financial statements supplementary data information called item incorporated herein reference consolidated financial statements notes thereto material captioned independent auditors report pages 31 44 johnson johnsons annual report shareowners fiscal year 1998 item 9item 8 financial statements supplementary data information called item incorporated herein reference consolidated financial statements notes thereto material captioned independent auditors report pages 33 48 johnson johnsons annual report shareowners fiscal year 2000 item 9item 8 financial statements supplementary data information called item incorporated herein reference consolidated financial statements notes thereto material captioned independent auditors report pages 32 48 johnson johnsons annual report shareowners fiscal year 2001 item 9item 8 financial statements supplementary data information called item incorporated herein reference consolidated financial statements notes thereto material captioned independent auditors report pages 38 56 johnson johnsons annual report shareholders fiscal year 2002 item 9item 8 financial statements supplementary data see consolidated financial statements notes thereto material captioned report independent auditors incorporated reference pages 38 60 annual report filed exhibit 13 report form 10k item 9item 8 financial statements supplementary data information called item incorporated herein reference audited consolidated financial statements notes thereto material captioned “report independent registered public accounting firm” pages 50 77 annual report filed exhibit 13 report form 10k item 9item 8 financial statements supplementary data information called item incorporated herein reference audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” pages 48 75 annual report filed exhibit 13 report form 10k item 9item 8 financial statements supplementary data information called item incorporated herein reference audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” pages 44 69 annual report filed exhibit 13 report form 10k item 9item 8 financial statements supplementary data information called item incorporated herein reference audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” pages 36 65 annual report filed exhibit 13 report form 10k item 9item 8 financial statements supplementary data information called item incorporated herein reference audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” pages 41 72 annual report filed exhibit 13 report form 10k item 9item 8 financial statements supplementary data information called item incorporated herein reference audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” annual report filed exhibit 13 report form 10k item 9item 8 financial statements supplementary data information called item incorporated herein reference audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” annual report filed exhibit 13 report form 10k item 9item 8 financial statements supplementary data index audited consolidated financial statements consolidated balance sheets consolidated statements earnings consolidated statements comprehensive income consolidated statements equity consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm management’s report internal control financial reporting johnson subsidiaries consolidated balance sheets january 3 2016 december 28 2014 dollars millions except share per share amounts note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements earnings dollars shares millions except per share amounts note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements comprehensive income dollars millions note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements equity dollars millions note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements cash flows dollars millions note 1 see notes consolidated financial statements notes consolidated financial statements 1 summary significant accounting policies principles consolidation consolidated financial statements include accounts johnson subsidiaries company intercompany accounts transactions eliminated description company business segments company approximately 127100 employees worldwide engaged research development manufacture sale broad range products health care field company conducts business virtually countries world primary focus products related human health wellbeing company organized three business segments consumer pharmaceutical medical devices consumer segment includes broad range products used baby care oral care skin care overthecounter pharmaceutical women’s health wound care markets products marketed general public sold retail outlets distributors throughout world pharmaceutical segment focused five therapeutic areas including immunology infectious diseases neuroscience oncology cardiovascular metabolic diseases products segment distributed directly retailers wholesalers hospitals health care professionals prescription use medical devices segment includes broad range products used orthopaedic surgery cardiovascular diabetes care vision care fields distributed wholesalers hospitals retailers used principally professional fields physicians nurses hospitals eye care professionals clinics new accounting pronouncements recently adopted accounting pronouncements fiscal second quarter 2015 financial accounting standards board fasb issued accounting standard update 201504 practical expedient measurement date employer’s defined benefit obligation plan assets update provides practical expedient option entities defined benefit plans fiscal yearend coincide calendar monthend option allows entity elect measure defined benefit plan assets obligations using calendar monthend closest fiscal yearend update effective company annual interim periods beginning december 15 2015 practical expedient elected entity required adopted prospective basis early adoption permitted company elected adopt practical expedient measure defined benefit plans election material impact company’s consolidated financial statements fiscal fourth quarter 2015 fasb issued accounting standard update 201517 income taxes balance sheet classification deferred taxes simplify presentation deferred income taxes amendments update require deferred tax liabilities assets classified noncurrent classified statement financial position update required effective public companies annual periods beginning december 15 2016 interim periods within annual periods earlier application permitted company elected early adopt standard retrospective basis 2014 consolidated balance sheet reclassification reduced current assets 36 billion increased noncurrent assets 28 billion reduced liabilities 08 billion recently issued accounting standards adopted january 3 2016 fiscal first quarter 2016 fasb issued accounting standard update 201601 recognition measurement financial assets financial liabilities amendments update supersede guidance classify equity securities readily determinable fair values different categories trading availableforsale require equity securities measured fair value changes fair value recognized net income standard amends financial reporting providing relevant information entity’s equity investments reducing number items recognized comprehensive income update effective company annual periods beginning december 15 2017 interim periods within annual periods company currently assessing impact future adoption standard financial statements fiscal second quarter 2015 fasb issued accounting standard update 201503 simplifying presentation debt issuance costs update requires capitalized debt issuance costs presented reduction carrying value debt instead classified deferred charge currently required update effective company annual interim periods beginning december 15 2015 required applied retroactively periods presented update material impact presentation company’s financial position fiscal second quarter 2015 fasb issued accounting standard update 201511 simplifying measurement inventory update requires inventory measured lower cost net realizable value net realizable value estimated selling prices ordinary course business less reasonably predictable costs completion disposal transportation update effective company annual interim periods beginning december 15 2016 amendments update applied prospectively earlier application permitted beginning interim annual reporting period update material impact presentation company’s financial position fiscal third quarter 2015 fasb issued accounting standard update 201516 business combinations simplifying accounting measurementperiod adjustments amendments update require acquirer recognize adjustments provisional amounts identified measurement period reporting period adjustment amounts determined update effective company annual interim periods beginning december 15 2015 amendments update applied prospectively adjustments provisional amounts occur effective date update earlier application permitted financial statements issued update expected material impact company’s consolidated financial statements fiscal second quarter 2014 fasb issued accounting standards update 201409 revenue contracts customers standard replaces substantially current revenue recognition accounting guidance fiscal third quarter 2015 fasb approved one year deferral effective date adopted public companies annual periods interim reporting periods beginning december 15 2017 early adoption standard permitted original effective date annual periods interim reporting periods beginning december 15 2016 company currently assessing impact future adoption standard financial statements fiscal second quarter 2014 fasb issued amended guidance accounting standards update 201410 development stage entities elimination certain financial reporting requirements including amendment variable interest entity guidance topic 810 consolidation change current guidance require company determine consolidate one entities based change consolidation analysis update consolidation analysis become effective annual periods interim reporting periods beginning december 15 2015 adoption standard expected material impact presentation companys consolidated financial statements fiscal third quarter 2014 fasb issued accounting standards update 201415 disclosure uncertainties entity’s ability continue going concern standard requires management evaluate annual interim reporting period whether conditions events considered aggregate raise substantial doubt entity’s ability continue going concern within one year date financial statements issued available issued substantial doubt raised additional disclosures around management’s plan alleviate doubts required update become effective annual periods interim reporting periods ending december 15 2016 standard expected impact current disclosures financial statements cash equivalents company classifies highly liquid investments stated maturities three months less date purchase cash equivalents highly liquid investments stated maturities greater three months date purchase current marketable securities company policy making investments commercial institutions least investment grade credit rating company invests cash primarily reverse repurchase agreements rras government securities obligations corporate debt securities money market funds rras collateralized deposits form ‘government securities obligations’ amount less 102 value company record asset liability company permitted sell repledge associated collateral company policy collateral least equivalent credit rating company utilizes third party custodian manage exchange funds ensure collateral received maintained 102 value rras daily basis rras stated maturities greater three months date purchase classified marketable securities investments classified held maturity investments reported amortized cost realized gains losses reported earnings investments classified availableforsale carried estimated fair value unrealized gains losses recorded component accumulated comprehensive income availableforsale securities available current operations classified current assets management determines appropriate classification investment debt equity securities time purchase reevaluates determination balance sheet date company periodically reviews investments equity securities impairment adjusts investments fair value decline market value deemed temporary losses securities considered temporary loss recognized earnings property plant equipment depreciation property plant equipment stated cost company utilizes straightline method depreciation estimated useful lives assets company capitalizes certain computer software development costs included machinery equipment incurred connection developing obtaining computer software internal use capitalized software costs amortized estimated useful lives software generally range 3 8 years company reviews longlived assets assess recoverability using undiscounted cash flows certain events changes operating economic conditions occur impairment assessment may performed recoverability carrying value assets asset determined impaired loss measured based difference asset’s fair value carrying value quoted market prices available company estimate fair value using discounted value estimated future cash flows revenue recognition company recognizes revenue product sales goods shipped delivered title risk loss pass customer provisions certain rebates sales incentives trade promotions coupons product returns discounts customers accounted reductions sales period related sales recorded product discounts granted based terms arrangements direct indirect market participants well market conditions including prices charged competitors rebates include medicaid estimated based contractual terms historical experience patient outcomes trend analysis projected market conditions various markets served company evaluates market conditions products groups products primarily analysis wholesaler thirdparty sellthrough market research data well internally generated information sales returns generally estimated recorded based historical sales returns information products exhibit unusual sales return patterns due dating competition marketing matters specifically investigated analyzed part accounting sales returns accruals sales returns allowances represent reserve products may returned due expiration destruction field specific areas product recall returns reserve based historical return trends product market percent gross sales accordance company’s accounting policies company generally issues credit customers returned goods company’s sales returns reserves accounted accordance us gaap guidance revenue recognition right return exists sales returns reserves recorded full sales value sales returns consumer pharmaceutical segments almost exclusively resalable sales returns certain franchises medical devices segment typically resalable material company infrequently exchanges products inventory returned products sales returns reserve total company approximately 10 annual sales customers fiscal reporting years 2015 2014 2013 promotional programs product listing allowances cooperative advertising arrangements recorded year incurred continuing promotional programs include coupons volumebased sales incentive programs redemption cost consumer coupons based historical redemption experience product value volumebased incentive programs based estimated sales volumes incentive period recorded products sold company also earns service revenue copromotion certain products includes sales customers arrangements evaluated determine appropriate amounts deferred recorded reduction revenue shipping handling shipping handling costs incurred 996 million 1068 million 1128 million 2015 2014 2013 respectively included selling marketing administrative expense amount revenue received shipping handling less 05 sales customers periods presented inventories stated lower cost market determined firstin firstout method intangible assets goodwill authoritative literature us gaap requires goodwill intangible assets indefinite lives assessed annually impairment company completed annual impairment test 2015 fiscal fourth quarter future impairment tests performed annually fiscal fourth quarter sooner warranted purchased inprocess research development accounted indefinite lived intangible asset underlying project completed point intangible asset accounted definite lived intangible asset abandoned point intangible asset written partially impaired intangible assets finite useful lives continue amortized useful lives reviewed impairment warranted economic conditions see note 5 details intangible assets goodwill financial instruments required us gaap derivative instruments recorded balance sheet fair value fair value exit price would received sell asset paid transfer liability fair value marketbased measurement determined using assumptions market participants would use pricing asset liability authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value level 1 highest priority level 3 lowest changes fair value derivatives recorded period current earnings comprehensive income depending whether derivative designated part hedge transaction type hedge transaction company documents relationships hedged items derivatives overall risk management strategy includes reasons undertaking hedge transactions entering derivatives objectives strategy 1 minimize foreign currency exposure’s impact company’s financial performance 2 protect company’s cash flow adverse movements foreign exchange rates 3 ensure appropriateness financial instruments 4 manage enterprise risk associated financial institutions see note 6 additional information financial instruments product liability accruals product liability claims recorded undiscounted basis probable liability incurred amount liability reasonably estimated based existing information actuarially determined estimates applicable accruals adjusted periodically additional information becomes available company accrues estimate legal defense costs needed defend matter costs probable reasonably estimated result cost availability factors effective november 1 2005 company ceased purchasing thirdparty product liability insurance company self insurance whollyowned captive insurance company addition accruals self insurance program claims exceed insurance coverage accrued losses probable amounts reasonably estimated based availability prior coverage receivables insurance recoveries related product liability claims recorded undiscounted basis probable recovery realized appropriate reserves receivables recorded estimated amounts may collected thirdparty insurers concentration credit risk global concentration credit risk respect trade accounts receivables continues limited due large number customers globally adherence internal credit policies credit limits economic challenges italy spain greece portugal southern european region impacted certain payment patterns historically longer experienced us international markets total net trade accounts receivable balance southern european region approximately 13 billion january 3 2016 approximately 18 billion december 28 2014 approximately 08 billion january 3 2016 approximately 11 billion december 28 2014 southern european region net trade accounts receivable balance related companys consumer vision care diabetes care businesses well certain pharmaceutical medical devices customers line historical collection patterns remaining balance net trade accounts receivable southern european region negatively impacted timing payments certain government owned supported health care customers well certain distributors pharmaceutical medical devices local affiliates total net trade accounts receivable balance customers approximately 05 billion january 3 2016 07 billion december 28 2014 company continues receive payments customers cases late payments interest customers payment expected periods time longer one year revenue trade receivables discounted estimated period time collection allowances doubtful accounts increased customers immaterial date company continue work closely customers payment plans monitor economic situation take appropriate actions necessary research development research development expenses expensed incurred upfront milestone payments made third parties connection research development collaborations expensed incurred point regulatory approval payments made third parties subsequent regulatory approval capitalized amortized remaining useful life related product amounts capitalized payments included intangibles net accumulated amortization company enters collaborative arrangements typically pharmaceutical biotechnology companies develop commercialize drug candidates intellectual property arrangements typically involve two parties active participants collaboration exposed significant risks rewards dependent commercial success activities collaborations usually involve various activities one parties including research development marketing selling distribution often collaborations require upfront milestone royalty profit share payments contingent upon occurrence certain future events linked success asset development amounts due collaborative partners related development activities generally reflected reduction research development expense performance contract development services central company’s operations general income statement presentation collaborations follows milestones capitalized intangible assets amortized cost goods sold useful life years presented individual project represented greater 5 total annual consolidated research development expense company number products compounds developed collaboration strategic partners including xarelto® codeveloped bayer healthcare ag imbruvica® developed collaboration comarketed pharmacyclics llc abbvie company advertising costs associated advertising expensed year incurred included selling marketing administrative expenses advertising expenses worldwide comprised television radio print media internet advertising 25 billion 26 billion 25 billion 2015 2014 2013 respectively income taxes income taxes recorded based amounts refundable payable current year include results difference us gaap accounting tax reporting recorded deferred tax assets liabilities company estimates deferred tax assets liabilities based enacted tax regulations rates future changes tax laws rates may affect recorded deferred tax assets liabilities future company unrecognized tax benefits uncertain tax positions company follows us gaap prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return management believes changes estimates would material effect companys results operations cash flows financial position january 3 2016 december 28 2014 cumulative amounts undistributed international earnings approximately 580 billion 534 billion respectively january 3 2016 december 28 2014 companys foreign subsidiaries held balances cash equivalents marketable securities amounts 382 billion 329 billion respectively company provided deferred taxes undistributed earnings certain international subsidiaries earnings considered permanently reinvested company intends continue reinvest earnings international operations company decided later date repatriate earnings us company would required provide net tax effects amounts company determine deferred tax liability associated undistributed earnings determination practical see note 8 consolidated financial statements information regarding income taxes net earnings per share basic earnings per share computed dividing net earnings available common shareholders weighted average number common shares outstanding period diluted earnings per share reflects potential dilution could occur securities exercised converted common stock using treasury stock method use estimates preparation consolidated financial statements conformity accounting principles generally accepted us requires management make estimates assumptions affect amounts reported estimates used accounting sales discounts rebates allowances incentives product liabilities income taxes depreciation amortization employee benefits contingencies intangible asset liability valuations actual results may differ estimates company follows provisions us gaap recording litigation related contingencies liability recorded loss probable reasonably estimated best estimate loss within range accrued however estimate range better minimum amount accrued annual closing date company follows concept fiscal year ends sunday nearest end month december normally fiscal year consists 52 weeks every five six years fiscal year consists 53 weeks case 2015 case 2020 reclassification certain prior period amounts reclassified conform current year presentation 2 cash equivalents current marketable securities end 2015 2014 cash equivalents current marketable securities comprised 1 held maturity investments reported amortized cost realized gains losses reported earnings 2 available sale securities reported fair value unrealized gains losses reported net taxes comprehensive income fair value government securities obligations corporate debt securities estimated using quoted broker prices significant observable inputs contractual maturities substantially available sale securities one five years january 3 2016 company invests excess cash deposits major banks throughout world highquality money market instruments company policy making investments commercial institutions least investment grade credit rating 3 inventories end 2015 2014 inventories comprised 4 property plant equipment end 2015 2014 property plant equipment cost accumulated depreciation company capitalizes interest expense part cost construction facilities equipment interest expense capitalized 2015 2014 2013 102 million 115 million 105 million respectively depreciation expense including amortization capitalized interest 2015 2014 2013 25 billion 25 billion 27 billion respectively upon retirement disposal property plant equipment costs related amounts accumulated depreciation amortization eliminated asset accumulated depreciation accounts respectively difference net asset value proceeds recorded earnings 5 intangible assets goodwill end 2015 2014 gross net amounts intangible assets goodwill january 3 2016 december 28 2014 allocated segment business follows weighted average amortization periods patents trademarks customer relationships intangible assets 18 years 24 years respectively amortization expense amortizable assets included cost products sold 12 billion 14 billion 14 billion tax fiscal years ended january 3 2016 december 28 2014 december 29 2013 respectively estimated amortization expense five succeeding years approximates 12 billion tax per year intangible asset writedowns included income expense net see note 20 consolidated financial statements additional details related acquisitions divestitures 6 fair value measurements company uses forward foreign exchange contracts manage exposure variability cash flows primarily related foreign exchange rate changes future intercompany products thirdparty purchases materials denominated foreign currency company uses cross currency interest rate swaps manage currency risk primarily related borrowings types derivatives designated cash flow hedges additionally company uses interest rate swaps instrument manage interest rate risk related fixed rate borrowings derivatives treated fair value hedges company may use forward foreign exchange contracts designated net investment hedges additionally company uses forward foreign exchange contracts offset exposure certain foreign currency assets liabilities forward foreign exchange contracts designated hedges therefore changes fair values derivatives recognized earnings thereby offsetting current earnings effect related foreign currency assets liabilities company enter derivative financial instruments trading speculative purposes contain credit risk related contingent features requirements post collateral either company counterparty ongoing basis company monitors counterparty credit ratings company considers credit nonperformance risk low company primarily enters agreements commercial institutions least investment grade credit rating refer table significant financial assets liabilities measured fair value contained footnote receivables payables commercial institutions january 3 2016 company notional amounts outstanding forward foreign exchange contracts cross currency interest rate swaps interest rate swaps 312 billion 23 billion 22 billion respectively derivative instruments recorded balance sheet fair value changes fair value derivatives recorded period current earnings comprehensive income depending whether derivative designated part hedge transaction type hedge transaction designation cash flow hedge made entrance date derivative contract inception derivatives expected highly effective changes fair value derivative designated cash flow hedge highly effective recorded accumulated comprehensive income underlying transaction affects earnings reclassified earnings account hedged transaction gains losses associated interest rate swaps changes fair value hedged debt attributable changes interest rates recorded interest expense period occur gains losses net investment hedges accounted currency translation account insignificant ongoing basis company assesses whether derivative continues highly effective offsetting changes hedged items derivative longer expected highly effective hedge accounting discontinued hedge ineffectiveness included current period earnings income expense net forward foreign exchange contracts cross currency interest rate swaps interest rate swaps designated fair value hedges hedge ineffectiveness included current period earnings within interest expense current reporting period hedge ineffectiveness associated interest rate swaps material january 3 2016 balance deferred net losses derivatives included accumulated comprehensive income 36 million aftertax additional information see consolidated statements comprehensive income note 13 company expects substantially amounts related forward foreign exchange contracts reclassified earnings next 12 months result transactions expected occur period maximum length time company hedging transaction exposure 18 months excluding interest rate contracts amount ultimately realized earnings may differ foreign exchange rates change realized gains losses ultimately determined actual exchange rates maturity derivative following table summary activity related derivatives designated cash flow hedges fiscal years ended january 3 2016 december 28 2014 amounts shown table net tax 1 effective portion 2 ineffective portion 3 forward foreign exchange contracts 4 cross currency interest rate swaps fiscal years ended january 3 2016 december 28 2014 loss 34 million gain 5 million respectively recognized income expense net relating forward foreign exchange contracts designated hedging instruments fair value exit price would received sell asset paid transfer liability fair value marketbased measurement determined using assumptions market participants would use pricing asset liability authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value levels within hierarchy described level 1 highest priority level 3 lowest fair value derivative financial instrument ie forward foreign exchange contracts interest rate contracts aggregation currency future cash flows discounted present value prevailing market interest rates subsequently converted us dollar current spot foreign exchange rate company believe fair values derivative instruments materially differ amounts could realized upon settlement maturity changes fair value material effect company’s results operations cash flows financial position company also holds equity investments classified level 1 debt securities classified level 2 company significant financial assets liabilities would require revised valuations standard recognized fair value following three levels inputs used measure fair value level 1 quoted prices active markets identical assets liabilities level 2 significant observable inputs level 3 significant unobservable inputs company’s significant financial assets liabilities measured fair value january 3 2016 december 28 2014 follows 1 2014 assets liabilities classified level 2 exception equity investments 679 million classified level 1 2 includes 20 million 29 million noncurrent assets fiscal years ending january 3 2016 december 28 2014 respectively 3 includes 239 million 8 million noncurrent liabilities fiscal years ending january 3 2016 december 28 2014 respectively 4 includes cross currency interest rate swaps interest rate swaps 5 classified noncurrent assets carrying amount equity investments 528 million 284 million january 3 2016 december 28 2014 respectively unrealized gains 979 million 406 million january 3 2016 december 28 2014 respectively unrealized losses 13 million 11 million january 3 2016 december 28 2014 respectively 6 classified current marketable securities 7 classified current assets 8 classified accounts payable see notes 2 7 financial assets liabilities held carrying amount consolidated balance sheet 7 borrowings components longterm debt follows 1 weighted average effective rate 2 translation rate january 3 2016 3 translation rate december 28 2014 4 excess fair value carrying value debt 17 billion 2015 22 billion 2014 fair value noncurrent debt estimated using market prices corroborated quoted broker prices significant observable inputs company access substantial sources funds numerous banks worldwide september 2015 company secured new 364day credit facility total credit available company approximates 10 billion expires september 15 2016 interest charged borrowings credit line agreements based either bids provided banks prime rate london interbank offered rates libor plus applicable margins commitment fees agreements material throughout 2015 company continued access liquidity commercial paper market shortterm borrowings current portion longterm debt amounted approximately 70 billion end 2015 46 billion borrowed commercial paper program remainder principally represents local borrowing international subsidiaries aggregate maturities longterm obligations commencing 2016 8 income taxes provision taxes income consists comparison income tax expense us statutory rate 35 2015 2014 2013 company’s effective tax rate follows 1the company subsidiaries operating puerto rico various tax incentives 2015 effective tax rate decrease compared 2014 primarily attributable increases taxable income lower tax jurisdictions relative higher tax jurisdictions tax benefit resulting restructuring international affiliates additionally 2014 effective tax rate affected items mentioned increase 2014 effective tax rate compared 2013 attributable following divestiture orthoclinical diagnostics business approximate 44 effective tax rate litigation accruals low tax rates mix earnings higher tax jurisdictions primarily us accrual additional year branded prescription drug fee tax deductible additional us tax expense related planned increase dividends current year foreign earnings compared prior year increases 2014 effective tax rate partially offset tax benefit 04 billion associated conor medsystems divestiture 2013 effective tax rate reduced tax benefit associated writeoff assets tax purposes associated scios inc inclusion 2013 2012 benefit research development tax credit controlled foreign corporation lookthrough provisions enacted law january 2013 retroactive january 1 2012 2014 effective tax rate also reduced company adjusted unrecognized tax benefits result federal appeals court’s decision omj pharmaceuticals inc’s litigation regarding credits former section 936 internal revenue code see note 21 consolidated financial statements additional information ii settlement substantially issues related company’s us internal revenue service audit tax years 2006 2009 impact settlement reflected us tax international income line items within reconciliation items noted reflect key drivers rate reconciliation temporary differences carryforwards 2015 2014 follows 1 922 million 2015 net valuation allowance related belgium 196 million 1128 million 2014 net valuation allowance related belgium 172 million company whollyowned international subsidiaries cumulative net losses company believes likely subsidiaries realize future taxable income sufficient utilize deferred tax assets following table summarizes activity related unrecognized tax benefits unrecognized tax benefits 31 billion january 3 2016 recognized would affect company’s annual effective tax rate company conducts business files tax returns numerous countries currently tax audits progress number tax authorities irs completed audit tax years 2009 currently auditing tax years 20102012 major jurisdictions company conducts business years remain open generally back year 2004 company believes possible audits may completed tax authorities jurisdictions next twelve months however company able provide reasonably reliable estimate timing future tax payments relating uncertain tax positions company classifies liabilities unrecognized tax benefits related interest penalties longterm liabilities interest expense penalties related unrecognized tax benefits classified income tax expense company recognized tax interest expense 44 million 12 million 40 million 2015 2014 2013 respectively total amount accrued interest 366 million 298 million 2015 2014 respectively 9 employee related obligations end 2015 2014 employee related obligations recorded consolidated balance sheets prepaid employee related obligations 256 million 233 million 2015 2014 respectively included assets consolidated balance sheets 10 pensions benefit plans company sponsors various retirement pension plans including defined benefit defined contribution termination indemnity plans cover employees worldwide company also provides postretirement benefits primarily health care eligible us retired employees dependents many international employees covered governmentsponsored programs cost company significant retirement plan benefits employees hired january 1 2015 primarily based employee’s compensation last three five years retirement number years service 2014 company announced us defined benefit plan amended adopt new benefit formula effective employees hired january 1 2015 benefits calculated using new formula based employee compensation total years service international subsidiaries plans funds deposited trustees annuities purchased group contracts reserves provided company fund retiree health care benefits advance right modify plans future described note 1 consolidated financial statements company elected early adopt practical expedient beginning fiscal year end 2015 measure defined benefit plans using calendar month end closest fiscal year end 2015 2014 company used december 31 2015 december 28 2014 respectively measurement date us international retirement benefit plans net periodic benefit costs company’s defined benefit retirement plans benefit plans 2015 2014 2013 include following components amounts expected recognized net periodic benefit cost coming year company’s defined benefit retirement plans postretirement plans unrecognized gains losses us pension plans amortized average remaining future service plan plans active employees amortized average life expectancy amortization gains losses us benefit plans determined using 10 corridor greater market value assets accumulated postretirement benefit obligation total unamortized gains losses excess corridor amortized average remaining future service prior service costsbenefits us pension plans amortized average remaining future service plan participants time plan amendment prior service costbenefit us benefit plans amortized average remaining service full eligibility age plan participants time plan amendment following table represents weightedaverage actuarial assumptions company’s discount rates determined considering current yield curves representing high quality longterm fixed income instruments resulting discount rates consistent duration plan liabilities fiscal year 2016 company change methodology determining service interest cost single weighted average discount rate approach duration specific spot rates along yield curve plans’ liability cash flows management concluded precise estimate prior change methodology company measured service interest costs utilizing single weightedaverage discount rate derived yield curve used measure plan obligations company accounted change accounting estimate accordingly accounted prospective basis change impact benefit obligation material impact 2016 full year results expected rates return plan asset assumptions represent companys assessment longterm returns diversified investment portfolios globally assessment determined using projections external financial sources longterm historical averages actual returns asset class various asset class allocations market 2014 measurement us retirement benefit obligations mortality assumption updated newly established 2014 mortality table resulting increase projected benefit obligation following table displays assumed health care cost trend rates individuals onepercentagepoint change assumed health care cost trend rates would following effect following table sets forth information related benefit obligation fair value plan assets yearend 2015 2014 company’s defined benefit retirement plans postretirement plans company plans continue fund us qualified plans comply pension protection act 2006 international plans funded accordance local regulations additional discretionary contributions made deemed appropriate meet longterm obligations plans certain plans funding common practice funding provides economic benefit consequently company several pension plans funded 2015 company contributed 435 million 317 million us international pension plans respectively following table displays funded status companys us qualified nonqualified pension plans international funded unfunded pension plans december 31 2015 december 28 2014 respectively plans accumulated benefit obligations excess plan assets accumulated benefit obligation projected benefit obligation plan assets 45 billion 53 billion 19 billion respectively end 2015 82 billion 94 billion 53 billion respectively end 2014 following table displays projected future benefit payments company’s retirement benefit plans following table displays projected future minimum contributions unfunded retirement plans amounts include discretionary contributions company may elect make future pension plan overseen local committee board responsible overall administration investment pension plans determining investment policies strategies goals committee board considers factors including local pension rules regulations local tax regulations availability investment vehicles separate accounts commingled accounts insurance funds etc funded status plans ratio actives retirees duration liabilities relevant factors including diversification liquidity local markets liquidity base currency majority company’s pension funds open new entrants expected ongoing plans permitted investments primarily liquid andor listed little reliance illiquid nontraditional investments hedge funds company’s retirement plan asset allocation end 2015 2014 target allocations 2016 follows determination fair value plan assets plan established welldocumented process determining fair values fair value based upon quoted market prices available listed prices quotes available fair value based upon models primarily use inputs marketbased independently sourced market parameters including yield curves interest rates volatilities equity debt prices foreign exchange rates credit curves plan believes valuation methods appropriate consistent market participants use different methodologies assumptions determine fair value certain financial instruments could result different estimate fair value reporting date valuation hierarchy authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value levels within hierarchy described table level 1 highest priority level 3 lowest financial instrument’s categorization within valuation hierarchy based upon lowest level input significant fair value measurement following description valuation methodologies used investments measured fair value • shortterm investments cash quoted shortterm instruments valued closing price amount held deposit custodian bank investments investment vehicles valued using net asset value nav provided administrator fund nav based value underlying assets owned fund minus liabilities divided number shares outstanding nav quoted price market active classified level 2 • government agency securities limited number investments valued closing price reported major market individual securities traded quoted prices available active market investments classified within level 1 valuation hierarchy quoted market prices available specific security fair values estimated using pricing models quoted prices securities similar characteristics discounted cash flows quoted market prices security available active market classified level 2 • debt instruments limited number investments valued closing price reported major market individual securities traded quoted prices available active market investments classified level 1 quoted market prices available specific security fair values estimated using pricing models quoted prices securities similar characteristics discounted cash flows classified level 2 level 3 debt instruments priced based unobservable inputs • equity securities common stocks valued closing price reported major market individual securities traded substantially common stock classified within level 1 valuation hierarchy • commingled funds investment vehicles valued using nav provided fund administrator nav based value underlying assets owned fund minus liabilities divided number shares outstanding assets level 2 category quoted market price market active • insurance contracts instruments issued insurance companies fair value based negotiated value underlying investments held separate account portfolios well considering credit worthiness issuer underlying investments government assetbacked fixed income securities general insurance contracts classified level 3 quoted prices observable inputs pricing • assets represented primarily limited partnerships real estate investments well commercial loans commercial mortgages classified corporate debt assets exchange listed actively traded classified level 1 inactively traded assets classified level 2 limited partnerships represent investments private equity similar funds valued general partners certain limited partnerships well assets valued using unobservable inputs classified level 3 following table sets forth retirement plans investments measured fair value december 31 2015 december 28 2014 companys benefit plans unfunded except us commingled funds level 2 74 million 79 million december 31 2015 december 28 2014 respectively fair value johnson common stock directly held plan assets 751 million 34 total plan assets december 31 2015 778 million 34 total plan assets december 28 2014 level 3 gains losses table sets forth summary changes fair value plan’s level 3 assets years ended december 31 2015 december 28 2014 11 savings plan company voluntary 401k savings plans designed enhance existing retirement programs covering eligible employees company matches percentage employee’s contributions consistent provisions plan heshe eligible total company matching contributions plans 187 million 172 million 164 million 2015 2014 2013 respectively 12 capital treasury stock changes treasury stock aggregate shares common stock issued approximately 3119843000 shares end 2015 2014 2013 cash dividends paid 295 per share 2015 compared dividends 276 per share 2014 259 per share 2013 october 13 2015 company announced board directors approved share repurchase program authorizing company purchase 100 billion companys shares common stock repurchase program time limit may suspended periods discontinued time shares acquired available general corporate purposes company intends finance share repurchase program available cash access capital markets january 3 2016 10 billion repurchased program july 21 2014 company announced board directors approved share repurchase program authorizing company purchase 50 billion companys shares common stock share repurchase program completed april 28 2015 13 accumulated comprehensive income components comprehensive income loss consist following amounts accumulated comprehensive income presented net related tax impact foreign currency translation adjusted income taxes relates permanent investments international subsidiaries additional details comprehensive income see consolidated statements comprehensive income details reclassifications accumulated comprehensive income gainloss securities reclassifications released income expense net employee benefit plans reclassifications included net periodic benefit cost see note 10 additional details gainloss derivatives hedges reclassifications earnings recorded account hedged transaction see note 6 additional details 14 international currency translation subsidiaries operating nonus dollar currencies company determined local currencies international subsidiaries functional currencies except highly inflationary economies defined compound cumulative rates inflation 100 past three years substantial portion cash flows local currency consolidating international subsidiaries balance sheet currency effects recorded component accumulated comprehensive income equity account includes results translating certain balance sheet assets liabilities current exchange rates accounts historical rates except located highly inflationary economies translation balance sheet accounts highly inflationary economies reflected operating results rollforward changes 2015 2014 2013 foreign currency translation adjustments included note 13 net currency transaction gains losses included income expense losses 104 million 156 million 186 million 2015 2014 2013 respectively 15 earnings per share following reconciliation basic net earnings per share diluted net earnings per share fiscal years ended january 3 2016 december 28 2014 december 29 2013 diluted net earnings per share calculation included dilutive effect convertible debt offset related reduction interest expense 3 million aftertax years 2015 2014 4 million year 2013 diluted net earnings per share calculation 2015 2014 2013 included shares related stock options exercise price options less average market value companys stock diluted net earnings per share calculation fiscal year ended december 29 2013 included dilutive effect 196 million shares related accelerated share repurchase program associated acquisition synthes inc fiscal year 2012 16 rental expense lease commitments rentals space vehicles manufacturing equipment office data processing equipment operating leases approximately 316 million 341 million 363 million 2015 2014 2013 respectively approximate minimum rental payments required operating leases initial remaining noncancelable lease terms excess one year january 3 2016 dollars millions commitments capital leases significant 17 common stock option plans stock compensation agreements january 3 2016 company 2 stockbased compensation plans shares outstanding contracts companys 2005 longterm incentive plan 2012 longterm incentive plan 2005 longterm incentive plan expired april 26 2012 options restricted shares granted subsequent date 2012 longterm incentive plan 2012 longterm incentive plan company may issue 650 million shares common stock plus shares canceled expired forfeited issued 2005 longterm incentive plan subsequent april 26 2012 shares available future grants 2012 longterm incentive plan 486 million end 2015 compensation cost charged income plans 874 million 792 million 728 million 2015 2014 2013 respectively total income tax benefit recognized income statement sharebased compensation costs 253 million 259 million 243 million 2015 2014 2013 respectively total unrecognized compensation cost 744 million 722 million 636 million 2015 2014 2013 respectively weighted average period cost recognized 098 years 118 years 126 years 2015 2014 2013 respectively sharebased compensation costs capitalized part inventory insignificant periods company settles employee benefit equity issuances treasury shares treasury shares replenished throughout year number shares used settle employee benefit equity issuances stock options stock options expire 10 years date grant vest service periods range 6 months 4 years options granted average high low prices company’s common stock new york stock exchange date grant fair value option award estimated date grant using blackscholes option valuation model uses assumptions noted following table 2014 2013 grants expected volatility represents blended rate 4year daily historical average volatility rate 5week average implied volatility rate based atthemoney traded johnson options life 2 years 2015 grants expected volatility represents blended rate 10year weekly historical overall volatility rate 5week average implied volatility rate based atthemoney traded johnson options life 2 years grants historical data used determine expected life option riskfree rate based us treasury yield curve effect time grant average fair value options granted 1068 842 488 2015 2014 2013 respectively fair value estimated based weighted average assumptions summary option activity plan january 3 2016 december 28 2014 december 29 2013 changes years ending dates presented total intrinsic value options exercised 644 million 954 million 941 million 2015 2014 2013 respectively following table summarizes stock options outstanding exercisable january 3 2016 1 average contractual life remaining years stock options outstanding december 28 2014 december 29 2013 115712 average life 57 years 119556 average life 51 years respectively stock options exercisable december 28 2014 december 29 2013 57846 average price 6194 75210 average price 6201 respectively restricted share units performance share units company grants restricted share units vest service periods range 6 months 3 years company also grants performance share units paid shares johnson common stock end threeyear performance period whether performance share units vest amount vest tied completion service periods range 6 months 3 years achievement threeyear period three equallyweighted goals directly align help drive longterm total shareholder return operational sales adjusted operational earnings per share relative total shareholder return number shares actually earned end threeyear period vary based actual performance 0 200 target number performance share units granted summary restricted share units performance share units activity plans january 3 2016 presented average fair value restricted share units granted 9165 8301 6590 2015 2014 2013 respectively using fair market value date grant fair value restricted share units discounted dividends paid restricted share units vesting period fair value restricted share units issued 5976 million 5410 million 5692 million 2015 2014 2013 respectively weighted average fair value performance share units granted 9354 8594 7342 2015 2014 2013 calculated using weighted average fair market value three component goals date grant fair values sales earnings per share goals performance share unit estimated date grant using fair market value shares time award discounted dividends paid performance share units vesting period fair value relative total shareholder return goal performance share unit estimated date grant using monte carlo valuation model fair value performance share units issued 167 million 14 million 2015 2014 respectively performance share units vested 2013 18 segments business geographic areas ­ see note 1 description segments company operates export sales significant 2015 2014 company one wholesaler distributing products three segments represented approximately 125 110 respectively total consolidated revenues 2013 company customer represented 100 total revenues 1 amounts allocated segments include interest income expense noncontrolling interests general corporate income expense 2 general corporate includes cash equivalents marketable securities 3 medical devices segment includes restructuring charge 590 million intangible asset writedown 346 million related acclarent synthes integration costs 196 million 148 million expense cost associated depuy asrtm hip program includes 224 million inprocess research development expense comprised 214 million 10 million pharmaceutical medical devices segments respectively includes net litigation expense 141 million comprised 136 million pharmaceutical segment 5 million medical devices segment included gain litigation settlement agreement guidant 600 million medical devices segment includes gain 13 billion divestiture cordis business pharmaceutical segment includes gain 981 million us divestiture nucynta® positive adjustment 05 billion previous reserve estimates including managed medicaid rebates consumer segment includes gain 229 million divestiture splenda® brand 4 includes net litigation expense 1253 million comprised 907 million 259 million 87 million medical devices pharmaceutical consumer segments respectively includes 178 million inprocess research development expense comprised 147 million 31 million pharmaceutical medical devices segments respectively medical devices segment includes net gain 1899 million divestiture orthoclinical diagnostics business synthes integration costs 754 million 126 million expense cost associated depuy asrtm hip program pharmaceutical segment includes additional year branded prescription drug fee 220 million positive adjustment 01 billion previous reserve estimates 5 includes 2276 million net litigation expense comprised 1975 million 301 million medical devices pharmaceutical segments respectively includes 683 million synthes integrationtransaction costs medical devices segment includes 580 million inprocess research development expense comprised 514 million 66 million pharmaceutical medical devices segments respectively medical devices segment also includes 251 million expense cost associated depuy asrtm hip program includes 98 million income related adjustments comprised 55 million 43 million consumer pharmaceutical segments respectively 6 longlived assets include property plant equipment net 2015 2014 15905 16126 respectively intangible assets goodwill net 2015 2014 47393 49054 respectively 19 selected quarterly financial data unaudited selected unaudited quarterly financial data years 2015 2014 summarized 1 first quarter 2015 includes net litigation gain 253 million aftertax 402 million beforetax 122 million aftertax 139 million beforetax costs associated depuy asrtm hip program 2 second quarter 2015 includes net litigation expense 23 million aftertax 134 million beforetax 3 third quarter 2015 includes net litigation expense 348 million aftertax 409 million beforetax 4 fourth quarter 2015 includes restructuring charge 415 million aftertax 590 million beforetax 156 million aftertax 214 million beforetax impairment inprocess research development synthes integration costs 59 million aftertax 83 million beforetax additionally fourth quarter 2015 includes gain cordis divestiture 5 first quarter 2014 includes synthes integration costs 84 million aftertax 118 million beforetax 398 million tax benefit associated conor medsystems 6 second quarter 2014 includes litigation expense 342 million aftertax 276 million beforetax synthes integration costs 104 million aftertax 144 million beforetax 7 third quarter 2014 includes additional year branded prescription drug fee 220 million tax litigation expense 231 million aftertax 285 million beforetax synthes integration costs 130 million aftertax 167 million beforetax 111 million aftertax 126 million beforetax costs associated depuy asrtm hip program additionally fiscal third quarter 2014 includes net gain 11 billion aftertax 19 billion beforetax divestiture orthoclinical diagnostics business 8 fourth quarter 2014 includes litigation expense primarily related product liability patent litigation 652 million aftertax 692 million beforetax synthes integration costs 237 million aftertax 325 million beforetax 115 million aftertax 156 million beforetax impairment inprocess research development 20 business combinations divestitures certain businesses acquired 954 million cash 220 million liabilities assumed 2015 assumed liabilities primarily represent fair value contingent consideration 210 million acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2015 acquisitions primarily included xo1 limited privatelyheld biopharmaceutical company developing antithrombin antibody novira therapeutics inc privately held clinicalstage biopharmaceutical company developing innovative therapies curative treatment chronic hepatitis b virus infection excess purchase price estimated fair value tangible assets acquired amounted 1173 million assigned identifiable intangible assets residual recorded goodwill amount approximately 839 million identified value iprd primarily associated acquisitions xo1 limited novira therapeutics inc value iprd calculated using cash flow projections discounted inherent risk projects iprd related acquisition xo1 limited 360 million associated recombinant human antibody developed mimic activity human antibody appears produce anticoagulated state without predisposition bleeding probability success factor 360 used reflect inherent clinical regulatory risk discount rate applied 1175 iprd related acquisition novira therapeutics inc 396 million associated lead candidate nvr 3778 investigational small molecule directacting antiviral oral administration patients hbv inhibits hbv core capsid protein probability success factor 510 used reflect inherent clinical regulatory risk discount rate applied 160 certain businesses acquired 2129 million cash 38 million liabilities assumed 2014 acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2014 acquisitions included covagen ag privatelyheld biopharmaceutical company specializing development multispecific protein therapeutics fynomab® technology platform alios biopharma inc privatelyheld clinical stage biopharmaceutical company focused developing therapies viral diseases orsltm electrolyte readytodrink brand jagdale industries ltd excess purchase price estimated fair value tangible assets acquired amounted 2069 million assigned identifiable intangible assets residual recorded goodwill amount approximately 1913 million identified value iprd associated acquisitions covagen ag alios biopharma inc value iprd calculated using cash flow projections discounted inherent risk projects iprd related acquisition alios biopharma inc alios 1688 million associated alios’ lead compound al8176 orally administered antiviral therapy treatment infants respiratory syncytial virus rsv probability success factor 600 used reflect inherent clinical regulatory risk discount rate applied 114 iprd related acquisition covagen ag 225 million associated covagen’s lead compound cova322 currently phase 1b study psoriasis holding potential treatment broad range inflammatory diseases including rheumatoid arthritis probability success factor 260 used reflect inherent clinical regulatory risk discount rate applied 125 2015 company recorded charge impairment iprd related acquisition covagen ag certain businesses acquired 835 million cash 193 million liabilities assumed 2013 acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition assumed liabilities primarily represent fair value contingent consideration may payable related acquisition aragon pharmaceuticals inc privatelyheld pharmaceutical discovery development company focused drugs treat hormonallydriven cancers per terms agreement additional payments 350 million may paid future based reaching predetermined milestones 2013 acquisitions included flexible stenting solutions inc leading developer innovative flexible peripheral arterial venous biliary stents shanghai elsker mother baby co ltd baby care company china aragon pharmaceuticals inc excess purchase price estimated fair value tangible assets acquired amounted 941 million assigned identifiable intangible assets residual recorded goodwill amount approximately 831 million identified value iprd primarily associated acquisitions aragon pharmaceuticals inc iprd related acquisition aragon pharmaceuticals inc 810 million associated aragon’s androgen receptor antagonist program treatment hormonallydriven cancers value iprd calculated using cash flow projections discounted inherent risk projects probability success factors ranging 37 520 used reflect inherent clinical regulatory risk discount rate applied 155 2012 company completed acquisition synthes inc purchase price 202 billion cash stock connection acquisition synthes inc company entered two accelerated share repurchase asr agreements 2013 company settled remaining liabilities asr agreements company believes transactions asr agreement series related internal transactions consummated tax efficient manner accordance applicable law possible internal revenue service could assert one contrary positions challenge transactions tax perspective challenged amount total purchase price synthes shares could treated subject applicable us tax approximately statutory rate company plus interest supplemental pro forma information 2015 2014 2013 accordance us gaap standards related business combinations goodwill intangible assets provided impact aforementioned acquisitions material effect company’s results operations cash flows financial position 2015 company divestitures included cordis business cardinal health splenda® brand heartland food products group us license rights nucynta® tapentadol nucynta ® er tapentadol extendedrelease tablets nucynta® tapentadol oral solution 2015 pretax gains divestitures businesses approximately 26 billion january 3 2016 assets held sale material 2014 company divestitures included orthoclinical diagnostics business carlyle group ky® brand reckitt benckiser group plc us certain markets benecol® brand raisio plc 2014 pretax gains divestitures businesses approximately 24 billion company completed divestiture orthoclinical diagnostics business carlyle group approximately 40 billion company recorded pretax gain approximately 19 billion orthoclinical diagnostics results included companys medical devices segment 2013 company divestitures included womens sanitary protection products us canada caribbean energizer holdings inc rolaids® chattem inc doribax® rights shionogi sale certain consumer brands certain pharmaceutical products 2013 pretax gains divestitures businesses 01 billion 21 legal proceedings johnson certain subsidiaries involved various lawsuits claims regarding product liability intellectual property commercial matters governmental investigations legal proceedings arise time ordinary course business company records accruals loss contingencies associated legal matters probable liability incurred amount loss reasonably estimated january 3 2016 company determined liabilities associated certain litigation matters probable reasonably estimated company accrued matters continue monitor related legal issue adjust accruals might warranted based new information developments accordance asc 4502025 litigation regulatory matters discussed loss probable reasonably possible company unable estimate possible loss range loss beyond amounts already accrued amounts accrued legal contingencies often result complex series judgments future events uncertainties rely heavily estimates assumptions ability make estimates judgments affected various factors including whether damages sought proceedings unsubstantiated indeterminate scientific legal discovery commenced complete proceedings early stages matters present legal uncertainties significant facts dispute numerous parties involved companys opinion based examination matters experience date discussions counsel ultimate outcome legal proceedings net liabilities accrued companys balance sheet expected material adverse effect companys financial position however resolution increase accruals one matters reporting period may material adverse effect companys results operations cash flows period product liability certain subsidiaries johnson involved numerous product liability claims lawsuits involving multiple products claimants cases seek substantial compensatory available punitive damages subsidiaries believe substantial defenses feasible predict ultimate outcome litigation company established accruals product liability claims lawsuits compliance asc 45020 based currently available information cases may limited company accrues estimate legal defense costs needed defend matter certain matters company accrued additional amounts estimated costs associated settlements damage losses product liability accruals represent projected product liability thousands claims around world different litigation environments different fact patterns changes accruals may required future additional information becomes available significant cases include depuy asr™ xl acetabular system depuy asr™ hip resurfacing system pinnacle® acetabular cup system pelvic meshes risperdal® xarelto® january 3 2016 united states approximately 5300 plaintiffs direct claims pending lawsuits regarding injuries allegedly due depuy asr™ xl acetabular system depuy asr™ hip resurfacing system 8700 respect pinnacle® acetabular cup system 46700 respect pelvic meshes 10700 respect risperdal® 5000 respect xarelto® august 2010 depuy orthopaedics inc depuy announced worldwide voluntary recall asr™ xl acetabular system depuy asr™ hip resurfacing system used hip replacement surgery claims personal injury made depuy johnson number pending lawsuits expected fluctuate certain lawsuits settled dismissed additional lawsuits filed cases filed federal courts united states organized multidistrict litigation united states district court northern district ohio litigation also filed countries outside united states primarily united kingdom canada australia november 2013 depuy reached agreement courtappointed committee lawyers representing asr™ hip system plaintiffs establish program settle claims eligible asr hip patients united states surgery replace asr hips known revision surgery august 31 2013 settlement covered approximately 8000 patients february 2015 depuy reached additional agreement would effectively extend existing settlement program asr hip patients revision surgeries august 31 2013 prior february 1 2015 second agreement estimated cover approximately 1800 additional patients estimated cost agreements covered existing accruals settlement program expected bring close significant asr hip litigation activity united states however many lawsuits united states remain settlement program address litigation outside united states company continues receive information respect potential costs associated recall worldwide basis company established accruals costs associated depuy asr™ hip program related product liability litigation changes accruals may required future additional information becomes available claims personal injury also made depuy johnson relating depuys pinnacle® acetabular cup system used hip replacement surgery number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases filed federal courts united states organized multidistrict litigation united states district court northern district texas litigation also filed countries outside united states primarily united kingdom company established accrual cover defense costs connection product liability litigation associated depuys pinnacle® acetabular cup system changes accrual may required future additional information becomes available claims personal injury made ethicon inc ethicon johnson arising ethicons pelvic mesh devices used treat stress urinary incontinence pelvic organ prolapse number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases filed federal courts united states organized multidistrict litigation united states district court southern district west virginia addition class actions individual personal injury cases claims commenced australia belgium canada england israel italy netherlands scotland venezuela seeking damages alleged injury resulting ethicons pelvic mesh devices company established accrual respect product liability litigation associated ethicons pelvic mesh products changes accrual may required future additional information becomes available claims personal injury made janssen pharmaceuticals inc johnson arising use risperdal® indicated treatment schizophrenia acute manic mixed episodes associated bipolar disorder irritability associated autism related compounds number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases company established accrual respect product liability litigation associated risperdal® changes accrual may required future additional information becomes available claims personal injury made janssen pharmaceuticals inc johnson arising use xarelto® oral anticoagulant number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases filed federal courts united states organized multidistrict litigation united states district court eastern district louisiana addition cases filed state courts across united states many cases consolidated state mass tort litigation philadelphia pennsylvania class action lawsuits also filed canada company established accrual respect product liability litigation associated xarelto® changes accrual may required future additional information becomes available intellectual property certain subsidiaries johnson subject time legal proceedings claims related patent trademark intellectual property matters arising businesses many matters involve challenges coverage andor validity patents various products allegations certain company’s products infringe patents third parties although subsidiaries believe substantial defenses challenges allegations respect significant patents assurance outcome matters loss cases could adversely affect ability subsidiaries sell products result loss sales due loss market exclusivity require payment past damages future royalties may result noncash impairment charge associated intangible asset significant matters described medical devices january 2010 tyco healthcare group lp tyco us surgical corporation covidien plc filed lawsuit ethicon endosurgery inc ees united states district court district connecticut alleging eess harmonic® shears infringed three tyco patents case tried july 2012 march 2013 court ruled eess harmonic® shears infringed tycos patents ordered ees pay damages approximately 176 million declined order injunctive relief ees appealed december 2014 united states court appeals federal circuit reversed district courts ruling found asserted claims invalid july 2015 tyco filed motion review united states supreme court july 2014 covidien filed another patent infringement lawsuit ees united states district court district connecticut seeking damages preliminary injunction alleging eess newest version harmonic scalpels harmonic ace® 7 shears harmonic ace® shears infringed three tyco patents asserted previous case claims asserted covidien case claims declared invalid december 2014 court appeals tyco case discussed november 2015 united states supreme court denied tycos petition review therefore cases dismissed november 2007 roche diagnostics operations inc et al roche filed patent infringement lawsuit lifescan inc lifescan united states district court district delaware alleging lifescans onetouch® line blood glucose monitoring systems infringe two patents related use microelectrode sensors roche seeking monetary damages injunctive relief september 2009 lifescan obtained favorable ruling claim construction precluded finding infringement roche appealed court appeals reversed district courts ruling claim construction remanded case district court new findings issue december 2014 district court ruled lifescans favor reinstated original claim construction february 2015 roche appealed ruling february 2016 oral argument took place court appeals parties awaiting decision june 2009 rembrandt vision technologies lp rembrandt filed patent infringement lawsuit johnson vision care inc jjvc united states district court eastern district texas alleging jjvcs manufacture sale acuvue®advance® acuvue® oasys® hydrogel contact lenses infringe us patent 5712327 327 patent rembrandt seeking monetary relief case transferred united states district court middle district florida may 2012 jury returned verdict holding neither accused lenses infringes 327 patent rembrandt appealed august 2013 united states court appeals federal circuit affirmed district courts judgment rembrandt asked district court grant new trial based alleged new evidence july 2014 district court denied rembrandt’s motion rembrandt appealed district courts denial motion new trial december 2009 state israel filed lawsuit district court tel aviv jaffa omrix biopharmaceuticals inc various affiliates omrix lawsuit state claims employee governmentowned hospital inventor several patents related fibrin glue technology employee developed government employee state claims right transfer intellectual property omrix belongs state seeking damages plus royalties quixil™ evicel® products alternatively transfer patents state case remains active trial date set september 2011 lifescan inc lifescan filed lawsuit shasta technologies llc shasta instacare corp pharmatech solutions inc pharmatech conductive technologies inc conductive united states district court northern district california patent infringement false advertising making marketing strip use lifescans onetouch® blood glucose meters defendants alleged three lifescan patentsinsuit invalid challenged validity asserted patents united states patent trademark office uspto april 2013 defendants brought counterclaims alleged antitrust violations false advertising claims stayed pending resolution patent infringement case validity two patents confirmed uspto determined third patent us patent 7250105 105 patent invalid lifescan lost appeal decision seeking rehearing lifescan entered settlement agreement shasta conductive motion brought pharmatech summary judgment patent invalidity argued february 2016 parties awaiting decision lifescans patent infringement false advertising claims scheduled tried august 2016 lifescan filed patent infringement lawsuit unistrip technologies llc unistrip united states district court district north carolina may 2014 alleging making marketing unistrip’s strips infringe patents asserted shasta case stayed pending outcome appeal usptos decision validity 105 patent july 2014 unistrip brought lawsuit lifescan united states district court eastern district pennsylvania alleging antitrust violations relating marketing practices lifescan strips march 2013 medinol ltd medinol filed patent infringement lawsuit cordis corporation cordis johnson united states district court southern district new york alleging cordiss sales cypher® cypher select™ stents made united states since 2005 willfully infringed four medinols patents directed geometry articulated stents medinol seeking damages attorneys fees trial january 2014 district court dismissed case finding medinol unreasonably delayed bringing claims medinol appeal decision september 2014 district court denied motion medinol vacate judgment grant new trial medinols appeal decision dismissed medinol filed petition review united states supreme court following divestiture cordis company retains liability may result case december 2014 bonutti skeletal innovations llc bonutti sued depuy synthes sales inc depuy synthes products inc united states district court district massachusetts alleging depuy synthess product line spine implants infringes six patents owned bonutti generally covering wedge implants methods implantation bonutti seeking monetary damages injunctive relief pharmaceutical 2012 2013 noramco inc noramco moved intervene several patent infringement lawsuits filed united states district court southern district new york purdue pharma lp others purdue noramco oxycodone customers impax laboratories inc impax teva pharmaceuticals usa inc teva amneal pharmaceuticals llc amneal watson laboratories inc florida watson andrx labs llc andrx lawsuits response defendants respective abbreviated new drug applications seeking approval market generic extended release oxycodone products expiration certain purdue patents three asserted patents relate oxycodone processes making oxycodone noramco agreed defend lawsuits behalf impax teva amneal watson andrx april 2013 watson andrx entered settlement purdue trial impax teva others took place september 2013 noramco defended teva impax november 2013 impax entered settlement purdue december 2014 teva entered settlement purdue district court issued decision january 2014 invalidating relevant purdue patents based decision subsequently dismissed lawsuit amneal parties defended noramco purdue appealed courts decision february 2016 federal circuit affirmed district court decision invalidating purdue patents purdue ultimately prevails appeal invalidity decision reinstitute action amneal december 2015 purdue filed another patent infringement action amneal district delaware asserting among others three abovereferenced patents newly issued patent relating oxycodone processes making oxycodone johnson acquired prostate cancer business aragon pharmaceuticals inc aragon including arn509 compound tested treatment prostate cancer september 2013 prior acquisition may 2011 medivation inc medivation sued aragon university california seeking rights arn509 december 2012 state court granted summary judgment aragon medivations claims awarding rights arn509 compound aragon january 2013 court dismissed case aragon medivation appealed remicade® related cases september 2013 jbi nyu langone medical center nyu medical center received office action united states patent trademark office uspto rejecting claims us patent 6284471 relating remicade® 471 patent reexamination proceeding instituted third party 471 patent coowned jbi nyu medical center nyu medical center granted jbi exclusive license nyu medical centers rights patent currently 471 patent united states expires september 2018 jbi responded rejection december 2013 august 2014 jbi nyu medical center received rejection jbi responded rejection filing amendment november 2014 jbis petition enter amendment granted application returned examiner issuance new office action occurred february 2015 rejecting patent jbi responded rejection april 2015 uspto issued action maintaining rejection 471 patent may 2015 jbi filed notice appeal usptos patent trial appeal board appeal currently pending 471 patent remains valid enforceable patent undergoes reexamination uspto jbi continue defend patent necessary pursue available appeals august 2014 celltrion filed fda approval make sell biosimilar version remicade® march 2015 jbi filed lawsuit united states district court district massachusetts celltrion hospira seeking declaratory judgment biosimilar product seeking fda approval new biologics price competition innovation act bpcia infringes potentially infringes six jbi patents jbi also seeking declaratory judgment defendants failed comply certain procedural requirements bpcia addition jbi moved preliminary permanent injunction prohibit celltrion hospira launching biosimilar product 180 days given jbi notice commercial marketing notice given fda approval celltrions product also march 2015 jbi moved stay proceedings district court respect ‘471 patent pending uspto reexamination proceeding august 2015 jbi also filed motion seeking district courts permission file patent infringement lawsuit asserting us patent 7598083 083 patent celltrion manufacturer cell culture media celltrion uses make biosimilar product although 083 patent already asserted existing lawsuit would expand claims include use cell media made united states manufacture celltrions biosimilar february 2016 celltrion hospira agreed launch biosimilar product june 30 2016 471 083 patents two remaining patents lawsuit light representation federal circuit court appeals expected decide issue unrelated similar case june 29th court denied jbis motion preliminary injunction noted jbi may renew motion following court appeals decision necessary court appeals fails decide issue june 29th addition february 2016 celltrion hospira filed motion summary judgment invalidity ‘471 patent march 2013 hospira healthcare corporation hospira filed impeachment proceeding kennedy institute rheumatology kennedy challenging validity canadian patent related remicade® feldman patent exclusively licensed janssen biotech inc jbi october 2013 kennedy along jbi janssen inc cilag gmbh international affiliates jbi filed counterclaim infringement celltrion healthcare co ltd celltrion inc together celltrion hospira counterclaim alleges products described celltrion’s hospira’s marketing applications health canada subsequent entry biologics seb remicade® would infringe feldman patents owned kennedy discovery patent action ongoing trial scheduled september 2016 january 2014 health canada approved celltrion’s seb remicade® allowing celltrion market biosimilar version remicade® canada regardless pending patent action june 2014 hospira received approval seb remicade® july 2014 janssen inc janssen filed lawsuit compel canadian minister health withdraw notice compliance hospira’s seb hospira serve notice allegation janssen address patent listed janssen patent register march 2015 parties entered settlement agreement whereby health canada agreed consent judgment setting aside hospira’s notice compliance subject health canadas right appeal filed june 2015 nevertheless hospira began marketing biosimilar version remicade® distributor celltrions notice compliance remicade® related patents discussed found invalid patent could relied upon prevent introduction biosimilar versions remicade® biosimilar versions remicade® introduced certain markets outside united states resulting reduction sales remicade® markets timing possible introduction biosimilar version remicade® united states subject enforcement patent rights approval fda compliance 180day notice provisions bpcia february 2016 arthritis advisory committee fda recommended approval celltrion’s investigational biosimilar version remicade® vote 213 across eligible indications united states risk competitor could launch biosimilar version remicade® following fda approval subject compliance 180day notice provisions bpcia even though one valid patents place introduction us market biosimilar version remicade® result reduction us sales remicade® litigation filers abbreviated new drug applications andas following summarizes lawsuits pending generic companies filed abbreviated new drug applications andas fda undertaken similar regulatory processes outside united states seeking market generic forms products sold various subsidiaries johnson prior expiration applicable patents covering products andas typically include allegations noninfringement invalidity unenforceability applicable patents event subsidiaries successful actions statutory 30month stays andas expire united states district court rulings obtained thirdparty companies involved ability upon approval fda introduce generic versions products issue market resulting potential substantial market share revenue losses products may result noncash impairment charge associated intangible asset addition time subsidiaries may settle actions settlements involve introduction generic versions products issue market prior expiration relevant patents prezista® number generic companies filed andas seeking approval market generic versions prezista® november 2010 tibotec inc tibotec llc tibotec pharmaceuticals janssen rd ireland collectively tibotec filed patent infringement lawsuit lupin ltd lupin pharmaceuticals inc collectively lupin mylan inc mylan pharmaceuticals inc collectively mylan united states district court district new jersey response lupins mylans respective andas seeking approval market generic versions tibotecs prezista® product expiration tibotecs patent relating prezista® lupin mylan filed counterclaims alleging noninfringement invalidity july 2011 tibotec filed another patent infringement lawsuit lupin united states district court district new jersey response lupins supplement anda add new dosage strengths proposed product august 2011 tibotec gd searle company gd searle filed patent infringement lawsuit lupin mylan response notice letters advising andas seeking approval market generic versions tibotecs prezista® product expiration two additional patents relating prezista® tibotec exclusively licenses gd searle september 2011 court consolidated lawsuits referred first consolidated action approved new drug application prezista® transferred tibotec inc janssen products lp december 2011 2012 2013 janssen products lp janssen rd ireland collectively janssen added several patents exclusively license gd searle first consolidated action mylan lupin june 2013 janssen gd searle dismissed claims relating patents owned gd searle lupin mylan based parties’ agreement seek fda approval respective andas november 2017 expiration gd searle patents trial regarding remaining patents first consolidated action court issued decision august 2014 favor janssen holding asserted patents valid would infringed lupins mylans marketing proposed products mylan lupin filed appeal july 2014 janssen filed patent infringement lawsuit mylan united states district court district new jersey alleging infringement united states patent 8153829 november 2015 janssen mylan entered confidential settlement pursuant settlement agreement parties process seeking dismissal action addition appeal august 2014 decision relates mylan dismissed remanded district court parties seeking modification court’s 2014 order accordance settlement agreement may 2013 lupin notified janssen filed anda seeking approval market new dosage strength generic version prezista® response janssen filed patent infringement lawsuit united states district court district new jersey alleging lupins new dosage strength would infringe patents janssen asserting lupin original action march 2014 janssen filed patent infringement lawsuit lupin united states district court district new jersey alleging infringement united states patent 8518987 ‘987 patent january 2015 court consolidated lawsuits referred second consolidated action stayed pending lupins appeal courts decision first consolidated action april 2015 lupin filed inter partes review uspto seeking invalidate ‘987 patent october 2015 uspto denied lupins petition january 2016 janssen received patent notice lupin advising lupin amended anda reflect new formulation darunavir lupin alleges infringe relevant janssen patents february 2016 janssen filed lawsuit asserting patents lupin united states district court district new jersey addition january 2016 lupin filed motion stay deactivate appeal abovereferenced august 2014 decision remand matter district court lupin intends modify 2014 district court order injunction allow lupin market new formulation darunavir expiration relevant patents janssen filed patent infringement lawsuit hetero drugs ltd unit iii hetero usa inc march 2013 united states district court district new jersey alleging infringement united states patent nos 7126015 7595408 october 2015 parties stipulated consent judgment wherein hetero defendants admitted patentsinsuit valid would infringed manufacture importation use sale hetero’s anda product agreed injunction respect product life patentsinsuit hetero reserved right develop noninfringing darunavir products processes august 2014 janssen filed patent infringement lawsuits cipla ltd cipla usa inc collectively cipla united states district courts districts new jersey delaware response cipla’s anda seeking approval market generic version janssen’s prezista® product expiration certain janssen’s patents relating prezista® cipla filed counterclaims seeking declarations noninfringement invalidity patentsinsuit may 2015 janssen cipla entered settlement agreement response notice allegation seeking approval market generic version prezista® canada expiration canadian patent 2485834 janssen inc janssen rd ireland filed notice application mylan pharmaceuticals ulc july 2014 december 2014 janssen rd ireland transferred prezista® patents janssen sciences ireland uc janssen sciences ireland uc substituted janssen rd ireland plaintiff abovereferenced actions february 2016 parties entered confidential settlement notice application dismissed january 2015 janssen inc janssen sciences ireland uc filed notice application teva canada limited response notice allegation seeking approval market generic version prezista® expiration canadian patent 2485834 october 2015 parties entered settlement wherein teva canada limited agreed withdraw notice allegation without prejudice file new one future janssen inc janssen sciences ireland uc agreed dismiss notice application lawsuits janssen sought seeking order enjoining defendants marketing generic versions prezista® expiration relevant patents concerta® may 2014 alza corporation alza janssen pharmaceuticals inc jpi filed patent infringement lawsuit united states district court district west virginia mylan inc mylan pharmaceuticals inc mylan response anda seeking approval market generic version concerta® expiration united states patent 8163798 798 patent mylan filed counterclaims seeking declarations invalidity noninfringement patentsinsuit may 2015 mylan sought leave add counterclaim invalidity noninfringement us patent 8629179 179 patent court denied mylans motion july 2015 mylan filed declaratory judgment action eastern district pennsylvania seeking declaration invalidity noninfringement 179 patent october 2015 parties entered confidential settlement west virginia pennsylvania actions december 2014 janssen inc alza filed notice application actavis pharma company actavis response notice allegation seeking approval market generic version concerta® expiration canadian patent 2264852 ‘852 patent hearing scheduled september 2016 february 2015 janssen inc alza filed notice application apotex inc apotex response notice allegation seeking approval market generic version concerta® expiration 852 patent august 2015 janssen inc alza voluntarily dismissed notice application lawsuits alza andor jpi sought seeking order enjoining defendants marketing generic versions concerta® expiration relevant patents zytiga® june july 2015 janssen biotech inc jbi received notices paragraph iv certification several companies advising respective andas seeking approval generic version zytiga® expiration one patents relating zytiga® july 2015 jbi janssen oncology inc janssen research development llc collectively janssen btg international ltd btg filed patent infringement lawsuit united states district court district new jersey several generic anda applicants certain affiliates andor suppliers response respective andas seeking approval market generic version zytiga® expiration united states patent nos 5604213 213 patent expiring december 2016 andor 8822438 438 patent expiring august 2027 generic companies include actavis laboratories fl inc actavis amneal pharmaceuticals llc amneal pharmaceuticals new york llc collectively amneal apotex inc apotex corp collectively apotex citron pharma llc citron dr reddy’s laboratories ltd dr reddy’s laboratories inc collectively dr reddys mylan pharmaceuticals inc mylan inc collectively mylan par pharmaceuticals inc par pharmaceutical companies inc collectively par sun pharmaceutical industries ltd sun pharmaceuticals industries inc collectively sun teva pharmaceuticals usa inc teva wockhardt bio ag wockhardt usa llc wockhardt ltd collectively wockhardt westward pharmaceutical corp westward hikma pharmaceuticals llc hikma court entered stay new jersey lawsuit par citron agreed bound decision defendants new jersey action february 2016 new jersey court set trial date october 2017 august 2015 janssen btg filed additional jurisdictional protective lawsuit mylan defendants united states district court northern district west virginia october 2015 mylan filed motion dismiss new jersey lawsuit lack personal jurisdiction improper venue february 2016 west virginia court stayed west virginia case pending decision mylans motion dismiss new jersey lawsuit set conditional trial date february 2018 court dismiss west virginia lawsuit mylans motion dismiss new jersey denied august 2015 jbi received notice paragraph iv certification hetero usa inc us regulatory agent hetero labs limited unitv division hetero labs limited collectively hetero advising hetero’s anda seeking approval generic version zytiga® expiration 438 patent september 2015 janssen btg filed amended complaint new jersey lawsuit allege infringement 438 patent hetero filing abovereferenced lawsuits triggered stay october 2018 fda grant final approval generics andas unless earlier district court decision finding patentsinsuit invalid infringed december 2015 amerigen pharmaceuticals limited filed petition inter partes review uspto seeking invalidate 438 patent lawsuits janssen seeking order enjoining defendants marketing generic versions zytiga® expiration relevant patents complera® august september 2015 janssen pharmaceutica nv janssen sciences ireland uc collectively janssen gilead sciences inc gilead sciences ireland uc collectively gilead filed patent infringement lawsuits united states district court district delaware west virginia mylan inc mylan pharmaceuticals inc collectively mylan response anda seeking approval market generic version complera® expiration united states patent nos 8841310 7125879 8101629 september 2015 mylan filed answer west virginia action included counterclaims seeking declarations invalidity noninfringement patentsinsuit well united states patent 8080551 september 2015 mylan filed motion dismiss delaware lawsuit lack personal jurisdiction january 2016 janssen gilead filed first amended complaint new jersey action adding claims patent infringement respect united states patent nos 7399856 7563922 addition new jersey action court dismissed mylan’s motion dismiss set trial date february 2018 west virginia action court set trial date december 2017 february 2016 mylan renewed motion dismiss lack jurisdiction lawsuits janssen seeking order enjoining defendants marketing generic versions complera® expiration relevant patents xarelto® number generic companies filed andas seeking approval market generic versions xarelto® october 2015 janssen pharmaceuticals inc jpi bayer pharma ag bayer intellectual property gmbh collectively bayer filed patent infringement lawsuit aurobindo pharma limited aurobindo pharma usa inc breckenridge pharmaceutical inc micro labs usa inc micro labs ltd mylan pharmaceuticals inc mylan inc prinston pharmaceutical inc sigmapharm laboratories llc torrent pharmaceuticals limited torrent pharma inc united states district court district delaware response parties’ respective andas seeking approval market generic versions xarelto® expiration bayer’s united states patent nos 7157456 7585860 7592339 relating xarelto® jpi exclusive licensee asserted patents jpi seeking order enjoining defendants marketing generic versions xarelto® expiration relevant patents november 2015 mylan moved dismiss action december 2015 jpi bayer mylan stipulated agreed dismiss claims mylan inc suspend briefing argument mylans motion dismiss pending appeals relating personal jurisdiction mylan pharmaceuticals inc district delaware january 2016 jpi bayer received paragraph iv notice invagen pharmaceuticals inc invagen advising seeking fda approval generic xarelto® product expiration relevant patents february 2016 jpi bayer filed patent infringement action invagen asserting xarelto® patents asserted original case invagen case consolidated original case court set trial date march 2018 government proceedings like companies pharmaceutical medical devices industries johnson certain subsidiaries subject extensive regulation national state local government agencies united states countries operate result interaction government agencies ongoing significant litigation brought investigations conducted government agencies listed possible criminal charges substantial fines andor civil penalties damages could result government investigations litigation average wholesale price awp litigation johnson several pharmaceutical subsidiaries jj awp defendants along numerous pharmaceutical companies defendants series lawsuits state federal courts involving allegations pricing marketing certain pharmaceutical products amounted fraudulent otherwise actionable conduct among things companies allegedly reported inflated average wholesale price awp drugs issue payors alleged used awps calculating provider reimbursement levels many cases federal actions state actions removed federal court consolidated pretrial purposes multidistrict litigation mdl united states district court district massachusetts plaintiffs cases included three classes private persons entities paid portion purchase drugs issue based awp state government entities made medicaid payments drugs issue based awp june 2007 trial merits mdl court dismissed claims two plaintiff classes jj awp defendants march 2011 court dismissed claims third class jj awp defendants without prejudice awp cases brought various attorneys general proceeded trial manufacturers several state cases certain subsidiaries johnson settled including case alaska settled april 2014 cases still pending illinois new jersey wisconsin utah cases illinois new jersey wisconsin yet proceeded trial utah claims brought attorney general dismissed court 2013 state may appeal dismissal conclusion similar pending matters defendants awp case jj awp defendants brought attorney general commonwealth pennsylvania tried commonwealth court 2010 court found commonwealths favor regard certain claims pennsylvania unfair trade practices consumer protection law “utpl” entered injunction awarded 45 million restitution 65 million civil penalties court found jj awp defendants favor commonwealths claims unjust enrichment misrepresentationfraud civil conspiracy certain commonwealths claims utpl jj awp defendants appealed commonwealth courts utpl ruling june 2014 pennsylvania supreme court vacated judgment entered commonwealth court remanded case proceedings remand january 2015 commonwealth court dismissed monetary awards jj awp defendants march 2015 ruling appealed back pennsylvania supreme court december 2015 pennsylvania supreme court affirmed order commonwealth court dismissing monetary awards jj awp defendants risperdal® november 2013 johnson subsidiary janssen pharmaceuticals inc jpi finalized previously disclosed settlement agreements united states department justice fortyfive states resolving federal investigations state medicaid claims related past promotional practices risperdal® 1999 2005 matters jpi also settled alleged consumer fraud claims connection sale marketing risperdal® thirtysix states district columbia september 2012 addition actions attorneys general several states brought actions jpi related sale marketing risperdal® seeking one following remedies reimbursement medicaid public funds risperdal® prescriptions written offlabel use compensation treating citizens alleged adverse reactions risperdal® civil fines penalties violations state false claims acts consumer fraud statutes punitive damages relief relating alleged unfair business practices certain actions also sought injunctive relief relating promotion risperdal® many actions claims brought state attorneys general settled either individually part settlements described cases brought attorneys general mississippi kentucky settled december 2015 without admission wrongdoing part jpi state cases went judgment trial discussed 2004 attorney general west virginia commenced lawsuit janssen pharmaceutica inc jpi based claims alleged consumer fraud duragesic® well risperdal® jpi found liable damages assessed 45 million jpi filed appeal november 2010 west virginia supreme court appeals reversed trial courts decision december 2010 attorney general west virginia dismissed case related risperdal® without payment thereafter jpi settled case insofar related duragesic® 2004 attorney general louisiana filed multicount complaint janssen pharmaceutica inc jpi johnson later added defendant case tried october 2010 issue tried jury whether johnson jpi violated states medical assistance program integrity law act misrepresentations allegedly made mailing november 2003 dear health care professional letter regarding risperdal® jury returned verdict jpi johnson violated act awarded 2577 million damages trial judge subsequently awarded attorney general counsel fees expenses amount 73 million january 2014 louisiana supreme court reversed district court’s judgment favor attorney general rendered judgment favor johnson jpi april 2014 louisiana supreme court denied attorney generals petition seeking rehearing appellate arguments resulting final dismissal case 2007 office general counsel commonwealth pennsylvania filed lawsuit janssen pharmaceutica inc jpi multicount complaint related janssen pharmaceuticas sale risperdal® commonwealths medicaid program trial occurred june 2010 trial judge dismissed case close plaintiffs evidence commonwealth filed appeal july 2012 pennsylvania appeals court upheld dismissal commonwealths case 2007 attorney general south carolina filed lawsuit johnson janssen pharmaceutica inc jpi several counts march 2011 matter tried jury liability time lawsuit limited claims violation south carolina unfair trade practices act including among others questions whether johnson jpi engaged unfair deceptive acts practices conduct trade commerce distributing november 2003 dear health care professional letter regarding risperdal® use products fdaapproved label jury found favor johnson jpi june 2011 court awarded civil penalties approximately 3271 million jpi appealed judgment february 2015 south carolina supreme court affirmed trial court’s decision part reversed part remanded case back trial court net effect decision reduce judgment approximately 136 million plus interest first fiscal quarter 2015 company accrued 136 million march 2015 jpi filed petition rehearing july 2015 south carolina supreme court granted petition filed substituted opinion new opinion reduced judgment approximately 136 million approximately 124 million january 2016 united states supreme court denied jpis request review putting end case april 2012 lawsuit brought attorney general arkansas jury found jpi johnson court imposed penalties amount approximately 12 billion january 2013 trial court awarded attorney fees approximately 181 million jpi johnson appealed awards arkansas supreme court march 2014 arkansas supreme court dismissed state’s claim arkansas medicaid fraud false claims act well approximately 12 billion penalties reversed remanded claim arkansas deceptive trade practices act april 2014 arkansas supreme court rejected petition state rehearing case may 2015 matter settled 775 million mcneil consumer healthcare starting june 2010 mcneil consumer healthcare division mcneilppc inc johnson consumer inc mcneil consumer healthcare division mcneil consumer healthcare certain affiliates including johnson companies received grand jury subpoenas united states attorneys office eastern district pennsylvania requesting documents broadly relating recalls various products mcneil consumer healthcare fda inspections fort washington pennsylvania lancaster pennsylvania manufacturing facilities well certain documents relating recalls small number products subsidiaries addition february 2011 government served mcneilppc inc mcneilppc civil investigative demand seeking records relevant investigation determine violation federal false claims act march 2015 mcneilppc entered guilty plea united states district court eastern district pennsylvania misdemeanor violation us food drug cosmetic act mcneil ppc agreed pay 20 million fine 5 million forfeiture resolve matter companies also received civil investigative demands multiple state attorneys general offices broadly relating mcneil recall issues companies continue cooperate inquiries coordinated multistate coalition resolution cannot reached multistate coalition possible individual state attorneys general offices may file civil monetary claims companies january 2011 oregon attorney general filed civil complaint johnson mcneilppc mcneil healthcare llc state court alleging civil violations oregon unlawful trade practices act relating earlier recall mcneil otc product november 2012 state court granted motion companies dismiss oregons complaint entirety prejudice oregon appealed decision november 2015 court appeals state oregon reversed trial court reinstated oregons consumer protection claims december 2015 companies filed petition review oregon supreme court opioids litigation along pharmaceutical companies johnson jj janssen pharmaceuticals inc jpi named two lawsuits alleging claims related marketing opioids including duragesic® nucynta® nucynta® er may 2014 santa clara orange counties california counties filed complaint state court orange county california numerous pharmaceutical manufacturers including jj jpi alleging claims related opioid marketing practices including false advertising unfair competition public nuisance counties seek injunctive monetary relief february 2015 defendants filed motions challenging sufficiency complaint august 2015 court stayed case fda concludes ongoing inquiry safety effectiveness longterm opioid treatment june 2014 city chicago filed complaint cook county circuit court group pharmaceutical manufacturers including jj jpi alleging number claims related opioid marketing practices including consumer fraud violations false claims seeking injunctive monetary relief case later removed united states district court northern district illinois december 2014 jj jpi filed motion dismiss city chicagos first amended complaint failure state claim november 2015 jj jpi filed motion dismiss city chicagos second amended complaint failure state claim september 2014 tennessee attorney general division consumer affairs issued request information jpi pharmaceutical companies related opioids marketing practices august 2015 new hampshire attorney general consumer protection antitrust bureau issued subpoena jpi pharmaceutical companies related opioids marketing practices jpi objected private contingent fee counsel’s participation investigation state’s behalf october 2015 state moved enforce subpoena december 2015 state mississippi filed complaint chancery court first judicial district hinds county group pharmaceutical manufacturers including jj jpi alleging number claims related opioid marketing practices state mississippi seeking penalties injunctive monetary relief september 2011 synthes inc synthes received civil investigative demand issued pursuant false claims act united states attorneys office eastern district pennsylvania demand sought information regarding allegations fellowships offered hospitals exchange agreements purchase products synthes produced documents information response demand cooperating inquiry may 2012 acclarent inc acclarent received subpoena united states attorneys office district massachusetts requesting documents broadly relating sales marketing alleged offlabel promotion acclarent relieva stratus® microflow spacer product stratus® spacer april 2015 indictment filed united states district court district massachusetts charging former presidentceo vice president sales acclarent former acclarent officers indictment charges former acclarent officers various violations related offlabel promotion stratus® spacer allegations former acclarent officers relate development sale marketing stratus® spacer well actions allegedly taken former acclarent officers connection acquisition acclarent ethicon inc 2010 charges acclarent ethicon inc johnson august 2012 depuy orthopaedics inc depuy inc depuy synthes inc johnson services inc companies received informal request united states attorneys office district massachusetts civil division united states department justice united states production materials relating asr™ xl hip device july 2014 united states notified united states district court district massachusetts declined intervene qui tam case filed pursuant false claims act companies district court issued order august 2014 publicly unsealed united states declination notice however complaint matter remains seal addition october 2013 group state attorneys general issued civil investigative demands relating development sales marketing several depuy orthopaedics inc’s hip products july 2014 oregon department justice investigating matters independently states announced settlement asr™ xl hip device investigation total payment 4 million state oregon october 2012 johnson contacted california attorney generals office regarding multistate attorney general investigation marketing surgical mesh products hernia urogynecological purposes johnson johnsons subsidiary ethicon inc ethicon johnson ethicon since entered series tolling agreements 47 states district columbia participating multistate investigation responded civil investigative demands served certain participating states seeking monetary injunctive relief december 2012 therakos inc therakos formerly subsidiary johnson part orthoclinical diagnostics inc ocd franchise received letter civil division united states attorneys office eastern district pennsylvania informing therakos united states attorneys office investigating sales marketing uvadex® methoxsalen uvar xts® system period 2000 present united states attorneys office requested ocd johnson preserve documents could relate investigation therakos subsequently acquired affiliate gores capital partners iii lp january 2013 ocd johnson retain certain liabilities may result investigation activity occurred prior sale therakos march 2014 united states attorney’s office requested johnson produce certain documents johnson cooperating request following divestiture ocd johnson retains ocd’s portion liability may result investigation activity occurred prior sale therakos recent years johnson received numerous requests variety united states congressional committees produce information relevant ongoing congressional inquiries policy johnson cooperate inquiries producing requested information general litigation september 2006 johnson filed lawsuit guidant corporation guidant united states district court southern district new york alleging guidant breached provisions merger agreement johnson guidant june 2011 guidant filed motion summary judgment july 2014 judge denied guidant’s motion trial concluded january 2015 february 2015 decision issued court johnson guidant entered settlement agreement pursuant guidant agreed pay johnson 600 million agreed sue johnson affiliates patent infringement regarding certain stent products johnson dismissed action guidant prejudice company recorded gain associated transaction fiscal first quarter 2015 june 2009 following public announcement orthoclinical diagnostics inc ocd received grand jury subpoena united states department justice antitrust division connection investigation since closed multiple class action complaints filed ocd direct purchasers seeking damages alleged price fixing cases consolidated pretrial purposes united states district court eastern district pennsylvania blood reagent antitrust litigation following divestiture ocd johnson retains liability may result cases august 2012 district court granted motion filed plaintiffs class certification april 2015 united states court appeals third circuit reversed class certification ruling remanded case district court proceedings october 2015 district court granted motion plaintiffs class certification september 2011 johnson inc mcneil consumer healthcare division johnson inc received notice civil claim filed nick field supreme court british columbia canada bc civil claim bc civil claim putative class action brought behalf persons reside british columbia purchased period september 20 2001 december 2010 one various mcneil infants childrens overthecounter medicines manufactured fort washington facility bc civil claim alleges defendants violated bc business practices consumer protection act canadian statutes common laws selling medicines allegedly safe andor effective comply canadian good manufacturing practices class certification hearing scheduled october 2015 adjourned currently date set hearing august 2014 united states customs border protection us cbp issued penalty notice janssen ortho llc janssen ortho assessing penalties alleged improper classification darunavir ethanolate prezista® connection importation united states october 2014 janssen ortho submitted petition relief response penalty notice may 2015 us cbp issued amended penalty notice assessing substantial penalties janssen ortho filed petition relief july 2015 march 2015 costco wholesale corporation costco filed complaint johnson vision care inc jjvci united states district court northern district california alleging antitrust claims unlawful vertical price fixing agreement jjvci costco unnamed distributors retailers costco alleges alleged agreements harmed competition causing increases price costco customers pay jjvci contact lenses costco seeking injunction monetary damages june 2015 case transferred united states district court middle district florida along related class action cases described november 2015 court denied jjvci motion dismiss march april 2015 30 putative class action complaints filed contact lens patients number courts around united states johnson vision care inc jjvci contact lens manufacturers distributors retailers alleging vertical horizontal conspiracies fix retail prices contact lenses complaints alleged manufacturers reached agreements certain distributors retailers concerning prices contact lenses could sold consumers plaintiffs seeking damages class action cases transferred united states district court middle district florida june 2015 along related case filed costco wholesale corporation described plaintiffs filed consolidated class action complaint november 2015 december 2015 jjvci defendants filed motions dismiss april 2015 johnson vision care inc jjvci filed complaint united states district court district utah state utah seeking declaratory judgment law passed state ban unilateral pricing policies solely contact lens market violates commerce clause united states constitution court denied jjvcis motion preliminary injunction jjvci appealed argument appeal held august 2015 april 2015 adimmune corporation ltd adimmune commenced arbitration international court arbitration international chamber commerce crucell switzerland ag janssen vaccines ag crucell holland bv collectively crucell adimmune claims crucell breached certain agreements relating supply flu antigen crucell ceased purchasing flu antigen adimmune december 2015 adimmune filed statement claim seeking monetary damages august 2015 two thirdparty payors filed purported class action united states district court eastern district louisiana janssen research development llc janssen ortho llc janssen pharmaceuticals inc orthomcneiljanssen pharmaceuticals johnson well certain bayer entities alleging defendants improperly marketed promoted xarelto® safer effective less expensive alternative medications failing fully disclose risks complaint seeks damages unspecified amount johnson subsidiaries also parties number proceedings brought comprehensive environmental response compensation liability act commonly known superfund comparable state local foreign laws primary relief sought cost past andor future remediation 22 restructuring company announced restructuring actions medical devices segment better serve needs patients customers today’s evolving healthcare marketplace company undertaking actions strengthen gotomarket model accelerate pace innovation prioritize key platforms geographies streamline operations maintaining high quality standards company estimates connection plans record pretax restructuring charges approximately 20 billion 24 billion expected incurred 2017 fiscal fourth quarter 2015 company recorded pretax charge 590 million 81 million included cost products sold 590 million restructuring charge consists severance costs 484 million asset writeoffs 86 million 20 million costs primarily related supply contracts additionally part plan company expects restructuring actions result position eliminations approximately 4 6 percent medical devices segment’s global workforce next two years subject consultation procedures countries required company estimates approximately one half cumulative pretax costs result cash outlays including approximately 500 million employee severance approximately one half cumulative pretax costs noncash relating primarily facility rationalization inventory writeoffs intangible asset writeoffs following table summarizes severance charges associated spending fiscal year ended 2015 cash outlays severance expected substantially paid next 24 months accordance companys plans local laws report independent registered public accounting firm shareholders board directors johnson opinion accompanying consolidated balance sheets related consolidated statements earnings statements comprehensive income statements equity statements cash flows present fairly material respects financial position johnson subsidiaries january 3 2016 december 28 2014 results operations cash flows three years period ended january 3 2016 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting january 3 2016 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso companys management responsible financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinions financial statements companys internal control financial reporting based integrated audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions discussed note 1 consolidated financial statements company changed manner classifies deferred tax assets liabilities 2015 companys internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp pricewaterhousecoopers llp florham park new jersey february 24 2016 management’s report internal control financial reporting section 404 sarbanesoxley act 2002 management required assess effectiveness company’s internal control financial reporting end fiscal year report based assessment whether company’s internal control financial reporting effective management company responsible establishing maintaining adequate internal control financial reporting company’s internal control financial reporting designed provide reasonable assurance reliability company’s financial reporting preparation external financial statements accordance generally accepted accounting principles internal controls financial reporting matter well designed inherent limitations therefore internal control financial reporting determined effective provide reasonable assurance respect financial statement preparation may prevent detect misstatements moreover projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate company’s management assessed effectiveness company’s internal control financial reporting january 3 2016 making assessment company used criteria established committee sponsoring organizations treadway commission coso “internal controlintegrated framework 2013” criteria areas control environment risk assessment control activities information communication monitoring company’s assessment included extensive documenting evaluating testing design operating effectiveness internal controls financial reporting based company’s processes assessment described management concluded january 3 2016 company’s internal control financial reporting effective effectiveness company’s internal control financial reporting january 3 2016 audited pricewaterhousecoopers llp independent registered public accounting firm stated report appears herein alex gorsky dominic j caruso alex gorsky dominic j caruso chairman board directors vice president finance chief executive officer chief financial officer shareholder return performance graphs set forth line graphs comparing cumulative total shareholder return company’s common stock periods five years ten years ending december 31 2015 cumulative total return standard poor’s 500 stock index standard poor’s pharmaceutical index standard poor’s health care equipment index graphs tables assume 100 invested december 31 2010 december 31 2005 company’s common stock standard poor’s 500 stock index standard poor’s pharmaceutical index standard poor’s health care equipment index dividends reinvested 5 year shareholder return performance jj vs indices 10 year shareholder return performance jj vs indices item 9item 8 financial statements supplementary data index audited consolidated financial statements consolidated balance sheets consolidated statements earnings consolidated statements comprehensive income consolidated statements equity consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm management’s report internal control financial reporting johnson subsidiaries consolidated balance sheets january 1 2017 january 3 2016 dollars millions except share per share amounts note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements earnings dollars shares millions except per share amounts note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements comprehensive income dollars millions note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements equity dollars millions note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements cash flows dollars millions note 1 see notes consolidated financial statements notes consolidated financial statements 1 summary significant accounting policies principles consolidation consolidated financial statements include accounts johnson subsidiaries company intercompany accounts transactions eliminated description company business segments company approximately 126400 employees worldwide engaged research development manufacture sale broad range products health care field company conducts business virtually countries world primary focus products related human health wellbeing company organized three business segments consumer pharmaceutical medical devices consumer segment includes broad range products used baby care oral care beauty previously referred skin care overthecounter pharmaceutical women’s health wound care markets products marketed general public sold retail outlets distributors throughout world pharmaceutical segment focused five therapeutic areas including immunology infectious diseases neuroscience oncology cardiovascular metabolic diseases products segment distributed directly retailers wholesalers hospitals health care professionals prescription use medical devices segment includes broad range products used orthopaedic surgery cardiovascular diabetes care vision care fields distributed wholesalers hospitals retailers used principally professional fields physicians nurses hospitals eye care professionals clinics new accounting pronouncements recently adopted accounting pronouncements fiscal first quarter 2016 financial accounting standards board fasb issued accounting standards update 201609 compensation stock compensation improvements employee share based payment accounting amendments update effective annual periods beginning december 15 2016 interim periods within annual periods early adoption permitted entity interim annual period fiscal second quarter 2016 company elected early adopt standard update requires following changes presentation financial statements • excess tax benefits deficiencies recognized reduction increase provision taxes income previously company recorded benefits directly retained earnings tax benefit company 353 million fiscal year 2016 standard permit retroactive presentation benefit prior fiscal years consolidated statement earnings • tax benefit deficiency required classified presented cash flow tofrom operating activities previously required presented cash flow tofrom financing activities consolidated statement cash flows permitted standard company elected adopt reclassification prospective basis therefore prior fiscal years consolidated statement cash flows recast provision • clarifies cash payments made taxing authorities employees’ sharebased compensation classified cash outflow financing activities reclassification required recast retrospectively result fiscal year 2016 269 million classified cash outflow financing activities 290 million 239 million cash outflow reclassified operating activity financing activity proceeds exercise stock optionsemployee withholding tax stock awards net fiscal years 2015 2014 respectively • diluted net earnings per share calculation applying treasury stock method shares could repurchased assumed proceeds longer include amount excess tax benefit material impact companys diluted net earnings per share calculation fiscal second quarter 2015 fasb issued accounting standards update 201503 simplifying presentation debt issuance costs update requires capitalized debt issuance costs presented reduction carrying value debt instead classified deferred charge update effective company annual interim periods beginning december 15 2015 required applied retroactively periods presented update material impact presentation company’s financial position fiscal third quarter 2015 fasb issued accounting standards update 201516 business combinations simplifying accounting measurementperiod adjustments amendments update require acquirer recognize adjustments provisional amounts identified measurement period reporting period adjustment amounts determined update effective company annual interim periods beginning december 15 2015 amendments update applied prospectively adjustments provisional amounts occur effective date update earlier application permitted financial statements issued update material impact company’s consolidated financial statements fiscal third quarter 2014 fasb issued accounting standards update 201415 disclosure uncertainties entity’s ability continue going concern standard requires management evaluate annual interim reporting period whether conditions events considered aggregate raise substantial doubt entity’s ability continue going concern within one year date financial statements issued available issued substantial doubt raised additional disclosures around management’s plan alleviate doubts required update becomes effective annual periods interim reporting periods ending december 15 2016 adoption standard impact company’s current disclosures financial statements recently issued accounting pronouncements adopted january 1 2017 fiscal first quarter 2017 fasb issued accounting standard update 201701 clarifying definition business update narrows definition business providing screen determine integrated set assets activities business screen specifies integrated set assets activities business substantially fair value gross assets acquired disposed concentrated single group similar identifiable assets update effective company annual periods beginning december 15 2017 including interim periods within annual periods early adoption permitted update applied prospectively company currently assessing impact future adoption standard financial statements fiscal first quarter 2017 fasb issued accounting standard update 201704 simplifying test goodwill impairment update simplifies entity required test goodwill impairment goodwill impairment measured amount reporting unit’s carrying value exceeds fair value exceed carrying amount goodwill update effective company annual interim goodwill impairment tests fiscal years beginning december 15 2019 early adoption permitted update applied prospectively company currently assessing impact future adoption standard financial statements fiscal first quarter 2017 fasb issued accounting standard update 201705 incomegains losses derecognition nonfinancial assets update clarifies scope asset derecognition guidance adds guidance partial sales nonfinancial assets clarifies recognizing gains losses transfer nonfinancial assets contracts noncustomers update effective company annual interim reporting periods beginning december 15 2017 time amendments update 201409 revenue contracts customers update allows company choose either full retrospective method modified retrospective method upon adoption company currently assessing impact future adoption standard financial statements fiscal first quarter 2016 fasb issued accounting standards update 201601 financial instruments recognition measurement financial assets financial liabilities amendments update supersede guidance classify equity securities readily determinable fair values different categories trading availableforsale require equity securities measured fair value changes fair value recognized net income standard amends financial reporting providing relevant information entity’s equity investments reducing number items recognized comprehensive income update effective company annual periods beginning december 15 2017 interim periods within annual periods company unable estimate impact future adoption standard financial statements depend equity investments adoption date fiscal first quarter 2016 fasb issued accounting standards update 201602 leases topic 842 update requires recognition lease assets lease liabilities balance sheet lease obligations disclosing key information leasing arrangements update requires recognition lease assets lease liabilities lessees leases classified operating leases current generally accepted accounting principles update effective company annual interim periods beginning december 15 2018 including interim periods within fiscal years early application permitted update required adopted using modified retrospective approach company anticipates operating leases result recognition additional assets corresponding liabilities consolidated balance sheets however expect material impact financial position actual impact depend companys lease portfolio time adoption company continues assess implications standard related financial disclosures fiscal first quarter 2016 fasb issued accounting standards update 201607 investments equity method joint ventures topic 323 simplifying transition equity method accounting amendments update eliminate requirement investment qualifies use equity method result increase level ownership interest degree influence investor must adjust investment results operations retained earnings retroactively step basis equity method effect previous periods investment held amendments update effective entities fiscal years interim periods within fiscal years beginning december 15 2016 amendments applied prospectively upon effective date increases level ownership interest degree influence result application equity method earlier adoption permitted entity interim annual period adoption standard expected material impact presentation companys consolidated financial statements fiscal third quarter 2016 fasb issued accounting standards update 201615 statement cash flows topic 230 classification certain cash receipts cash payments update addresses whether present certain specific cash flow items operating investing financing activities amendments update effective public entities fiscal years interim periods within fiscal years beginning december 15 2017 early adoption permitted including adoption interim period company currently assessing impact future adoption standard consolidated statements cash flows fiscal fourth quarter 2016 fasb issued accounting standards update 201616 income taxes topic 740 intraentity transfers assets inventory update removes current exception us gaap prohibiting entities recognizing current deferred income tax expenses benefits related transfer assets inventory within consolidated entity current exception defer recognition tax impact transfer inventory within consolidated entity sold third party remains unaffected amendments update effective public entities annual reporting periods beginning december 15 2017 early adoption permitted first interim period entity issues interim financial statements company currently assessing impact future adoption standard consolidated financial statements fiscal second quarter 2015 fasb issued accounting standards update 201511 simplifying measurement inventory update requires inventory measured lower cost net realizable value net realizable value estimated selling prices ordinary course business less reasonably predictable costs completion disposal transportation update effective company annual interim periods beginning december 15 2016 amendments update applied prospectively earlier application permitted beginning interim annual reporting period update material impact presentation company’s financial position fiscal second quarter 2014 fasb issued accounting standards update 201409 revenue contracts customers along amendments issued 2015 2016 replace substantially current us gaap guidance topic eliminate industryspecific guidance early adoption standard permitted original effective date annual periods interim reporting periods beginning december 15 2017 guidance permits two methods adoption full retrospective method retrospective application prior reporting period presented modified retrospective method retrospective application cumulative effect initially applying guidance recognized date initial application providing certain additional disclosures company continues evaluate effect standard preliminarily anticipate material impact financial statements complete assessment impact standard financial statements company continues assess implications standard method adoption related financial disclosures additionally company continues monitor modifications clarifications interpretations issued fasb may affect current conclusions cash equivalents company classifies highly liquid investments stated maturities three months less date purchase cash equivalents highly liquid investments stated maturities greater three months date purchase current marketable securities company policy making investments commercial institutions least investment grade credit rating company invests cash primarily government securities obligations corporate debt securities money market funds reverse repurchase agreements rras collateralized deposits form government securities obligations amount less 102 value company record asset liability company permitted sell repledge associated collateral company policy collateral least equivalent credit rating company utilizes third party custodian manage exchange funds ensure collateral received maintained 102 value rras daily basis rras stated maturities greater three months date purchase classified marketable securities investments classified held maturity investments reported amortized cost realized gains losses reported earnings investments classified availableforsale carried estimated fair value unrealized gains losses recorded component accumulated comprehensive income availableforsale securities available current operations classified current assets otherwise classified long term management determines appropriate classification investment debt equity securities time purchase reevaluates determination balance sheet date company periodically reviews investments equity securities impairment adjusts investments fair value decline market value deemed temporary losses securities considered temporary loss recognized earnings property plant equipment depreciation property plant equipment stated cost company utilizes straightline method depreciation estimated useful lives assets company capitalizes certain computer software development costs included machinery equipment incurred connection developing obtaining computer software internal use capitalized software costs amortized estimated useful lives software generally range 3 8 years company reviews longlived assets assess recoverability using undiscounted cash flows certain events changes operating economic conditions occur impairment assessment may performed recoverability carrying value assets asset determined impaired loss measured based difference asset’s fair value carrying value quoted market prices available company estimate fair value using discounted value estimated future cash flows revenue recognition company recognizes revenue product sales goods shipped delivered title risk loss pass customer provisions certain rebates sales incentives trade promotions coupons product returns discounts customers accounted reductions sales period related sales recorded product discounts granted based terms arrangements direct indirect market participants well market conditions including prices charged competitors rebates include medicaid estimated based contractual terms historical experience patient outcomes trend analysis projected market conditions various markets served company evaluates market conditions products groups products primarily analysis wholesaler thirdparty sellthrough market research data well internally generated information sales returns generally estimated recorded based historical sales returns information products exhibit unusual sales return patterns due dating competition marketing matters specifically investigated analyzed part accounting sales returns accruals sales returns allowances represent reserve products may returned due expiration destruction field specific areas product recall returns reserve based historical return trends product market percent gross sales accordance company’s accounting policies company generally issues credit customers returned goods company’s sales returns reserves accounted accordance us gaap guidance revenue recognition right return exists sales returns reserves recorded full sales value sales returns consumer pharmaceutical segments almost exclusively resalable sales returns certain franchises medical devices segment typically resalable material company infrequently exchanges products inventory returned products sales returns reserve total company approximately 10 annual sales customers fiscal reporting years 2016 2015 2014 promotional programs product listing allowances cooperative advertising arrangements recorded year incurred continuing promotional programs include coupons volumebased sales incentive programs redemption cost consumer coupons based historical redemption experience product value volumebased incentive programs based estimated sales volumes incentive period recorded products sold company also earns service revenue copromotion certain products includes sales customers arrangements evaluated determine appropriate amounts deferred recorded reduction revenue shipping handling shipping handling costs incurred 974 million 996 million 1068 million 2016 2015 2014 respectively included selling marketing administrative expense amount revenue received shipping handling less 05 sales customers periods presented inventories stated lower cost market determined firstin firstout method intangible assets goodwill authoritative literature us gaap requires goodwill intangible assets indefinite lives assessed annually impairment company completed annual impairment test 2016 fiscal fourth quarter future impairment tests performed annually fiscal fourth quarter sooner warranted purchased inprocess research development accounted indefinite lived intangible asset underlying project completed point intangible asset accounted definite lived intangible asset abandoned point intangible asset written partially impaired intangible assets finite useful lives continue amortized useful lives reviewed impairment warranted economic conditions see note 5 details intangible assets goodwill financial instruments required us gaap derivative instruments recorded balance sheet fair value fair value exit price would received sell asset paid transfer liability fair value marketbased measurement determined using assumptions market participants would use pricing asset liability authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value level 1 highest priority level 3 lowest changes fair value derivatives recorded period current earnings comprehensive income depending whether derivative designated part hedge transaction type hedge transaction company documents relationships hedged items derivatives overall risk management strategy includes reasons undertaking hedge transactions entering derivatives objectives strategy 1 minimize foreign currency exposure’s impact company’s financial performance 2 protect company’s cash flow adverse movements foreign exchange rates 3 ensure appropriateness financial instruments 4 manage enterprise risk associated financial institutions see note 6 additional information financial instruments product liability accruals product liability claims recorded undiscounted basis probable liability incurred amount liability reasonably estimated based existing information actuarially determined estimates applicable accruals adjusted periodically additional information becomes available company accrues estimate legal defense costs needed defend matter costs probable reasonably estimated result cost availability factors effective november 1 2005 company ceased purchasing thirdparty product liability insurance company self insurance whollyowned captive insurance company addition accruals self insurance program claims exceed insurance coverage accrued losses probable amounts reasonably estimated based availability prior coverage receivables insurance recoveries related product liability claims recorded undiscounted basis probable recovery realized appropriate reserves receivables recorded estimated amounts may collected thirdparty insurers concentration credit risk global concentration credit risk respect trade accounts receivables continues limited due large number customers globally adherence internal credit policies credit limits economic challenges italy spain greece portugal southern european region impacted certain payment patterns historically longer experienced us international markets total net trade accounts receivable balance southern european region approximately 11 billion january 1 2017 approximately 13 billion january 3 2016 approximately 07 billion january 1 2017 approximately 08 billion january 3 2016 southern european region net trade accounts receivable balance related companys consumer vision care diabetes care businesses well certain pharmaceutical medical devices customers line historical collection patterns remaining balance net trade accounts receivable southern european region negatively impacted timing payments certain government owned supported health care customers well certain distributors pharmaceutical medical devices local affiliates total net trade accounts receivable balance customers approximately 04 billion january 1 2017 05 billion january 3 2016 company continues receive payments customers cases late payments interest customers payment expected periods time longer one year revenue trade receivables discounted estimated period time collection allowances doubtful accounts increased customers immaterial date company continue work closely customers payment plans monitor economic situation take appropriate actions necessary research development research development expenses expensed incurred upfront milestone payments made third parties connection research development collaborations expensed incurred point regulatory approval payments made third parties subsequent regulatory approval capitalized amortized remaining useful life related product amounts capitalized payments included intangibles net accumulated amortization company enters collaborative arrangements typically pharmaceutical biotechnology companies develop commercialize drug candidates intellectual property arrangements typically involve two parties active participants collaboration exposed significant risks rewards dependent commercial success activities collaborations usually involve various activities one parties including research development marketing selling distribution often collaborations require upfront milestone royalty profit share payments contingent upon occurrence certain future events linked success asset development amounts due collaborative partners related development activities generally reflected reduction research development expense performance contract development services central company’s operations general income statement presentation collaborations follows milestones capitalized intangible assets amortized cost goods sold useful life years presented individual project represented greater 5 total annual consolidated research development expense company number products compounds developed collaboration strategic partners including xarelto® codeveloped bayer healthcare ag imbruvica® developed collaboration comarketed pharmacyclics llc abbvie company advertising costs associated advertising expensed year incurred included selling marketing administrative expenses advertising expenses worldwide comprised television radio print media internet advertising 24 billion 25 billion 26 billion 2016 2015 2014 respectively income taxes income taxes recorded based amounts refundable payable current year include results difference us gaap accounting tax reporting recorded deferred tax assets liabilities company estimates deferred tax assets liabilities based enacted tax regulations rates future changes tax laws rates may affect recorded deferred tax assets liabilities future company unrecognized tax benefits uncertain tax positions company follows us gaap prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return management believes changes estimates would material effect companys results operations cash flows financial position january 1 2017 january 3 2016 cumulative amounts undistributed international earnings approximately 662 billion 580 billion respectively january 1 2017 january 3 2016 companys foreign subsidiaries held balances cash equivalents marketable securities amounts 413 billion 382 billion respectively company provided deferred taxes undistributed earnings certain international subsidiaries earnings considered indefinitely reinvested company intends continue reinvest earnings international operations company decided later date repatriate earnings us company would required provide net tax effects amounts company determine deferred tax liability associated undistributed earnings determination practical see note 8 consolidated financial statements information regarding income taxes net earnings per share basic earnings per share computed dividing net earnings available common shareholders weighted average number common shares outstanding period diluted earnings per share reflects potential dilution could occur securities exercised converted common stock using treasury stock method use estimates preparation consolidated financial statements conformity accounting principles generally accepted us requires management make estimates assumptions affect amounts reported estimates used accounting sales discounts rebates allowances incentives product liabilities income taxes depreciation amortization employee benefits contingencies intangible asset liability valuations actual results may differ estimates company follows provisions us gaap recording litigation related contingencies liability recorded loss probable reasonably estimated best estimate loss within range accrued however estimate range better minimum amount accrued annual closing date company follows concept fiscal year ends sunday nearest end month december normally fiscal year consists 52 weeks every five six years fiscal year consists 53 weeks therefore includes additional shipping days case 2015 case 2020 reclassification certain prior period amounts reclassified conform current year presentation 2 cash equivalents current marketable securities end 2016 2015 cash equivalents current marketable securities comprised 1 held maturity investments reported amortized cost realized gains losses reported earnings 2 available sale securities reported fair value unrealized gains losses reported net taxes comprehensive income fair value government securities obligations corporate debt securities estimated using quoted broker prices significant observable inputs contractual maturities available sale debt securities january 1 2017 follows company invests excess cash deposits major banks throughout world highquality money market instruments company policy making investments commercial institutions least investment grade credit rating 3 inventories end 2016 2015 inventories comprised 4 property plant equipment end 2016 2015 property plant equipment cost accumulated depreciation company capitalizes interest expense part cost construction facilities equipment interest expense capitalized 2016 2015 2014 102 million 102 million 115 million respectively depreciation expense including amortization capitalized interest 25 billion 2016 2015 2014 upon retirement disposal property plant equipment costs related amounts accumulated depreciation amortization eliminated asset accumulated depreciation accounts respectively difference net asset value proceeds recorded earnings 5 intangible assets goodwill end 2016 2015 gross net amounts intangible assets goodwill january 1 2017 january 3 2016 allocated segment business follows weighted average amortization periods patents trademarks customer relationships intangible assets 19 years 24 years respectively amortization expense amortizable assets included cost products sold 12 billion 12 billion 14 billion tax fiscal years ended january 1 2017 january 3 2016 december 28 2014 respectively estimated amortization expense including abbott medical optics amo five succeeding years approximates 15 billion tax per year intangible asset writedowns included income expense net see note 20 consolidated financial statements additional details related acquisitions divestitures 6 fair value measurements company uses forward foreign exchange contracts manage exposure variability cash flows primarily related foreign exchange rate changes future intercompany products thirdparty purchases materials denominated foreign currency company uses cross currency interest rate swaps manage currency risk primarily related borrowings company also uses equity collar contracts manage exposure market risk associated certain equity investments three types derivatives designated cash flow hedges additionally company uses interest rate swaps instrument manage interest rate risk related fixed rate borrowings derivatives treated fair value hedges company uses forward foreign exchange contracts designated net investment hedges additionally company uses forward foreign exchange contracts offset exposure certain foreign currency assets liabilities forward foreign exchange contracts designated hedges therefore changes fair values derivatives recognized earnings thereby offsetting current earnings effect related foreign currency assets liabilities company enter derivative financial instruments trading speculative purposes contain credit risk related contingent features requirements post collateral excluding equity collar contract either company counterparty equity collar contracts company pledged underlying hedged marketable equity securities counterparty collateral ongoing basis company monitors counterparty credit ratings company considers credit nonperformance risk low company primarily enters agreements commercial institutions least investment grade credit rating refer table significant financial assets liabilities measured fair value contained footnote receivables payables commercial institutions january 1 2017 company notional amounts outstanding forward foreign exchange contracts cross currency interest rate swaps interest rate swaps equity collar contracts 360 billion 23 billion 18 billion 03 billion respectively derivative instruments recorded balance sheet fair value changes fair value derivatives recorded period current earnings comprehensive income depending whether derivative designated part hedge transaction type hedge transaction designation cash flow hedge made entrance date derivative contract inception derivatives expected highly effective changes fair value derivative designated cash flow hedge highly effective recorded accumulated comprehensive income underlying transaction affects earnings reclassified earnings account hedged transaction gains losses associated interest rate swaps changes fair value hedged debt attributable changes interest rates recorded interest expense period occur gains losses net investment hedges accounted currency translation account ongoing basis company assesses whether derivative continues highly effective offsetting changes hedged items derivative longer expected highly effective hedge accounting discontinued hedge ineffectiveness included current period earnings income expense net forward foreign exchange contracts cross currency interest rate swaps net investment hedges equity collar contracts interest rate swaps designated fair value hedges hedge ineffectiveness included current period earnings within interest expense current reporting period hedge ineffectiveness associated interest rate swaps material fiscal second quarter 2016 company designated euro denominated notes issued may 2016 due dates ranging 2022 2035 net investment hedge companys investments certain international subsidiaries use euro functional currency order reduce volatility caused changes exchange rates 2016 change carrying value due remeasurement euro notes resulted 375 million pretax gain reflected foreign currency translation adjustment within consolidated statements comprehensive income january 1 2017 balance deferred net losses derivatives included accumulated comprehensive income 285 million aftertax additional information see consolidated statements comprehensive income note 13 company expects substantially amounts related forward foreign exchange contracts reclassified earnings next 12 months result transactions expected occur period maximum length time company hedging transaction exposure 18 months excluding interest rate contracts net investment hedges equity collar contracts amount ultimately realized earnings may differ foreign exchange rates change realized gains losses ultimately determined actual exchange rates maturity derivative following table summary activity related derivatives designated cash flow hedges fiscal years ended january 1 2017 january 3 2016 amounts shown table net tax 1 effective portion 2 ineffective portion 3 forward foreign exchange contracts 4 cross currency interest rate swaps 5 includes equity collar contracts fiscal years ended january 1 2017 january 3 2016 loss 56 million loss 34 million respectively recognized income expense net relating forward foreign exchange contracts designated hedging instruments fair value exit price would received sell asset paid transfer liability fair value marketbased measurement determined using assumptions market participants would use pricing asset liability authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value levels within hierarchy described level 1 highest priority level 3 lowest fair value derivative financial instrument ie forward foreign exchange contracts interest rate contracts aggregation currency future cash flows discounted present value prevailing market interest rates subsequently converted us dollar current spot foreign exchange rate company believe fair values derivative instruments materially differ amounts could realized upon settlement maturity changes fair value material effect company’s results operations cash flows financial position company also holds equity investments classified level 1 debt securities classified level 2 company significant financial assets liabilities would require revised valuations standard recognized fair value following three levels inputs used measure fair value level 1 quoted prices active markets identical assets liabilities level 2 significant observable inputs level 3 significant unobservable inputs company’s significant financial assets liabilities measured fair value january 1 2017 january 3 2016 follows 1 2015 assets liabilities classified level 2 exception equity investments 1494 million classified level 1 2 includes 23 million 20 million noncurrent assets fiscal years ending january 1 2017 january 3 2016 respectively 3 includes 382 million 239 million noncurrent liabilities fiscal years ending january 1 2017 january 3 2016 respectively 4 includes cross currency interest rate swaps interest rate swaps 5 classified noncurrent assets exception 332 million current assets january 1 2017 carrying amount equity investments 520 million 528 million january 1 2017 january 3 2016 respectively unrealized gains 757 million 979 million january 1 2017 january 3 2016 respectively unrealized losses 68 million 13 million january 1 2017 january 3 2016 respectively 6 classified current marketable securities 7 classified current assets 8 classified accounts payable see notes 2 7 financial assets liabilities held carrying amount consolidated balance sheet 7 borrowings components longterm debt follows 1 weighted average effective rate 2 translation rate january 1 2017 3 translation rate january 3 2016 4 excess fair value carrying value debt 16 billion 2016 17 billion 2015 fair value longterm debt estimated using market prices corroborated quoted broker prices significant observable inputs company access substantial sources funds numerous banks worldwide september 2016 company secured new 364day credit facility total credit available company approximates 10 billion expires september 14 2017 interest charged borrowings credit line agreements based either bids provided banks prime rate london interbank offered rates libor plus applicable margins commitment fees agreements material throughout 2016 company continued access liquidity commercial paper market shortterm borrowings current portion longterm debt amounted approximately 47 billion end 2016 27 billion borrowed commercial paper program remainder principally represents local borrowing international subsidiaries throughout 2015 company continued access liquidity commercial paper market shortterm borrowings current portion longterm debt amounted approximately 70 billion end 2015 46 billion borrowed commercial paper program remainder principally represents local borrowing international subsidiaries aggregate maturities longterm obligations commencing 2017 8 income taxes provision taxes income consists comparison income tax expense us statutory rate 35 2016 2015 2014 company’s effective tax rate follows 1the company subsidiaries operating puerto rico various tax incentives 2016 effective tax rate decreased 32 compared 2015 described note 1 company adopted new accounting standard reporting additional tax benefits sharebased compensation vested exercised fiscal year adoption new standard reduced effective tax rate fiscal 2016 18 versus 2015 remainder change effective tax rate primarily related lower earnings taxes united states settlement several uncertain tax positions 2016 versus 2015 decrease 2015 effective tax rate compared 2014 primarily attributable increases taxable income lower tax jurisdictions relative higher tax jurisdictions tax benefit resulting restructuring international affiliates additionally 2014 effective tax rate affected items mentioned increase 2014 effective tax rate compared 2013 attributable following divestiture orthoclinical diagnostics business approximate 44 effective tax rate litigation accruals low tax rates mix earnings higher tax jurisdictions primarily us accrual additional year branded prescription drug fee tax deductible additional us tax expense related planned increase dividends current year foreign earnings compared prior year increases 2014 effective tax rate partially offset tax benefit 04 billion associated conor medsystems divestiture 2014 effective tax rate also reduced company adjusted unrecognized tax benefits result federal appeals court’s decision omj pharmaceuticals inc’s litigation regarding credits former section 936 internal revenue code ii settlement substantially issues related company’s us internal revenue service audit tax years 2006 2009 impact settlement reflected us tax international income line items within reconciliation items noted reflect key drivers rate reconciliation temporary differences carryforwards 2016 2015 follows 1 net valuation allowance related belgium 196 million 2016 allowance reversed related deferred tax asset utilized reduce current tax expense company whollyowned international subsidiaries cumulative net losses company believes likely subsidiaries realize future taxable income sufficient utilize deferred tax assets following table summarizes activity related unrecognized tax benefits unrecognized tax benefits 30 billion january 1 2017 recognized would affect company’s annual effective tax rate company conducts business files tax returns numerous countries currently tax audits progress number tax authorities irs completed audit tax years 2009 currently auditing tax years 20102012 major jurisdictions company conducts business years remain open generally back year 2004 company believes possible audits may completed tax authorities jurisdictions next twelve months however company able provide reasonably reliable estimate timing future tax payments relating uncertain tax positions company classifies liabilities unrecognized tax benefits related interest penalties longterm liabilities interest expense penalties related unrecognized tax benefits classified income tax expense company recognized tax interest expense 7 million 44 million 12 million 2016 2015 2014 respectively total amount accrued interest 344 million 366 million 2016 2015 respectively 9 employee related obligations end 2016 2015 employee related obligations recorded consolidated balance sheets prepaid employee related obligations 227 million 256 million 2016 2015 respectively included assets consolidated balance sheets 10 pensions benefit plans company sponsors various retirement pension plans including defined benefit defined contribution termination indemnity plans cover employees worldwide company also provides postretirement benefits primarily health care eligible us retired employees dependents many international employees covered governmentsponsored programs cost company significant retirement plan benefits employees hired january 1 2015 primarily based employee’s compensation last three five years retirement number years service 2014 company announced us defined benefit plan amended adopt new benefit formula effective employees hired january 1 2015 benefits calculated using new formula based employee compensation total years service international subsidiaries plans funds deposited trustees annuities purchased group contracts reserves provided company fund retiree health care benefits advance right modify plans future 2016 2015 company used december 31 2016 december 31 2015 respectively measurement date us international retirement benefit plans net periodic benefit costs company’s defined benefit retirement plans benefit plans 2016 2015 2014 include following components amounts expected recognized net periodic benefit cost coming year company’s defined benefit retirement plans postretirement plans unrecognized gains losses us pension plans amortized average remaining future service plan plans active employees amortized average life expectancy amortization gains losses us benefit plans determined using 10 corridor greater market value assets accumulated postretirement benefit obligation total unamortized gains losses excess corridor amortized average remaining future service prior service costsbenefits us pension plans amortized average remaining future service plan participants time plan amendment prior service costbenefit us benefit plans amortized average remaining service full eligibility age plan participants time plan amendment following table represents weightedaverage actuarial assumptions company’s discount rates determined considering current yield curves representing high quality longterm fixed income instruments resulting discount rates consistent duration plan liabilities fiscal year 2016 company changed methodology determining service interest cost single weighted average discount rate approach duration specific spot rates along yield curve plans’ liability cash flows management concluded precise estimate prior change methodology company measured service interest costs utilizing single weightedaverage discount rate derived yield curve used measure plan obligations company accounted change accounting estimate accordingly accounted prospective basis change impact benefit obligation material impact 2016 full year results expected rates return plan asset assumptions represent companys assessment longterm returns diversified investment portfolios globally assessment determined using projections external financial sources longterm historical averages actual returns asset class various asset class allocations market following table displays assumed health care cost trend rates individuals onepercentagepoint change assumed health care cost trend rates would following effect following table sets forth information related benefit obligation fair value plan assets yearend 2016 2015 company’s defined benefit retirement plans postretirement plans company plans continue fund us qualified plans comply pension protection act 2006 international plans funded accordance local regulations additional discretionary contributions made deemed appropriate meet longterm obligations plans certain plans funding common practice funding provides economic benefit consequently company several pension plans funded 2016 company contributed 501 million 337 million us international pension plans respectively following table displays funded status companys us qualified nonqualified pension plans international funded unfunded pension plans december 31 2016 december 31 2015 respectively plans accumulated benefit obligations excess plan assets accumulated benefit obligation projected benefit obligation plan assets 88 billion 99 billion 56 billion respectively end 2016 45 billion 53 billion 19 billion respectively end 2015 following table displays projected future benefit payments company’s retirement benefit plans following table displays projected future minimum contributions unfunded retirement plans amounts include discretionary contributions company may elect make future pension plan overseen local committee board responsible overall administration investment pension plans determining investment policies strategies goals committee board considers factors including local pension rules regulations local tax regulations availability investment vehicles separate accounts commingled accounts insurance funds etc funded status plans ratio actives retirees duration liabilities relevant factors including diversification liquidity local markets liquidity base currency majority company’s pension funds open new entrants expected ongoing plans permitted investments primarily liquid andor listed little reliance illiquid nontraditional investments hedge funds company’s retirement plan asset allocation end 2016 2015 target allocations 2017 follows determination fair value plan assets plan established welldocumented process determining fair values fair value based upon quoted market prices available listed prices quotes available fair value based upon models primarily use inputs marketbased independently sourced market parameters including yield curves interest rates volatilities equity debt prices foreign exchange rates credit curves plan believes valuation methods appropriate consistent market participants use different methodologies assumptions determine fair value certain financial instruments could result different estimate fair value reporting date valuation hierarchy authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value levels within hierarchy described table level 1 highest priority level 3 lowest financial instrument’s categorization within valuation hierarchy based upon lowest level input significant fair value measurement following description valuation methodologies used investments measured fair value • shortterm investments cash quoted shortterm instruments valued closing price amount held deposit custodian bank investments investment vehicles valued using net asset value nav provided administrator fund nav based value underlying assets owned fund minus liabilities divided number shares outstanding nav quoted price market active classified level 2 • government agency securities limited number investments valued closing price reported major market individual securities traded quoted prices available active market investments classified within level 1 valuation hierarchy quoted market prices available specific security fair values estimated using pricing models quoted prices securities similar characteristics discounted cash flows quoted market prices security available active market classified level 2 • debt instruments limited number investments valued closing price reported major market individual securities traded quoted prices available active market investments classified level 1 quoted market prices available specific security fair values estimated using pricing models quoted prices securities similar characteristics discounted cash flows classified level 2 level 3 debt instruments priced based unobservable inputs • equity securities common stocks valued closing price reported major market individual securities traded substantially common stock classified within level 1 valuation hierarchy • commingled funds investment vehicles valued using nav provided fund administrator nav based value underlying assets owned fund minus liabilities divided number shares outstanding assets level 2 category quoted market price • insurance contracts instruments issued insurance companies fair value based negotiated value underlying investments held separate account portfolios well considering credit worthiness issuer underlying investments government assetbacked fixed income securities general insurance contracts classified level 3 quoted prices observable inputs pricing • assets represented primarily limited partnerships real estate investments well commercial loans commercial mortgages classified corporate debt assets exchange listed actively traded classified level 1 inactively traded assets classified level 2 following table sets forth retirement plans investments measured fair value december 31 2016 december 31 2015 activity level 3 assets significant years presented b per adoption asu 201507 certain investments measured fair value using net asset value per share equivalent practical expedient classified fair value hierarchy per asu 20157 prior year amounts reclassified conform current year presentation fair value amounts presented table intended permit reconciliation fair value hierarchy total retirement plan assets companys benefit plans unfunded except us commingled funds level 2 75 million 74 million december 31 2016 december 31 2015 respectively fair value johnson common stock directly held plan assets 847 million 36 total plan assets december 31 2016 751 million 34 total plan assets december 31 2015 11 savings plan company voluntary 401k savings plans designed enhance existing retirement programs covering eligible employees company matches percentage employee’s contributions consistent provisions plan heshe eligible total company matching contributions plans 191 million 187 million 172 million 2016 2015 2014 respectively 12 capital treasury stock changes treasury stock aggregate shares common stock issued approximately 3119843000 shares end 2016 2015 2014 cash dividends paid 315 per share 2016 compared dividends 295 per share 2015 276 per share 2014 october 13 2015 company announced board directors approved share repurchase program authorizing company purchase 100 billion companys shares common stock repurchase program time limit may suspended periods discontinued time shares acquired available general corporate purposes company intends finance share repurchase program available cash access capital markets january 1 2017 73 billion repurchased program july 21 2014 company announced board directors approved share repurchase program authorizing company purchase 50 billion companys shares common stock share repurchase program completed april 28 2015 13 accumulated comprehensive income components comprehensive income loss consist following amounts accumulated comprehensive income presented net related tax impact foreign currency translation adjusted income taxes relates permanent investments international subsidiaries additional details comprehensive income see consolidated statements comprehensive income details reclassifications accumulated comprehensive income gainloss securities reclassifications released income expense net employee benefit plans reclassifications included net periodic benefit cost see note 10 additional details gainloss derivatives hedges reclassifications earnings recorded account hedged transaction see note 6 additional details 14 international currency translation subsidiaries operating nonus dollar currencies company determined local currencies international subsidiaries functional currencies except highly inflationary economies defined compound cumulative rates inflation 100 past three years substantial portion cash flows local currency consolidating international subsidiaries balance sheet currency effects recorded component accumulated comprehensive income equity account includes results translating certain balance sheet assets liabilities current exchange rates accounts historical rates except located highly inflationary economies translation balance sheet accounts highly inflationary economies reflected operating results rollforward changes 2016 2015 2014 foreign currency translation adjustments included note 13 net currency transaction gains losses included income expense losses 289 million 104 million 156 million 2016 2015 2014 respectively 15 earnings per share following reconciliation basic net earnings per share diluted net earnings per share fiscal years ended january 1 2017 january 3 2016 december 28 2014 diluted net earnings per share calculation included dilutive effect convertible debt offset related reduction interest expense 2 million aftertax year 2016 3 million years 2015 2014 diluted net earnings per share calculation 2016 2015 2014 included shares related stock options exercise price options less average market value companys stock 16 rental expense lease commitments rentals space vehicles manufacturing equipment office data processing equipment operating leases approximately 330 million 316 million 341 million 2016 2015 2014 respectively approximate minimum rental payments required operating leases initial remaining noncancelable lease terms excess one year january 1 2017 dollars millions commitments capital leases significant 17 common stock option plans stock compensation agreements january 1 2017 company 2 stockbased compensation plans shares outstanding contracts companys 2005 longterm incentive plan 2012 longterm incentive plan 2005 longterm incentive plan expired april 26 2012 options restricted shares granted subsequent date 2012 longterm incentive plan 2012 longterm incentive plan company may issue 650 million shares common stock plus shares canceled expired forfeited issued 2005 longterm incentive plan subsequent april 26 2012 shares available future grants 2012 longterm incentive plan 439 million end 2016 compensation cost charged income plans 878 million 874 million 792 million 2016 2015 2014 respectively total income tax benefit recognized income statement sharebased compensation costs 256 million 253 million 259 million 2016 2015 2014 respectively additional tax benefit 353 million recognized 2016 due adoption new accounting standard reporting additional tax benefits sharebased compensation described note 1 total unrecognized compensation cost 749 million 744 million 722 million 2016 2015 2014 respectively weighted average period cost recognized 109 years 098 years 118 years 2016 2015 2014 respectively sharebased compensation costs capitalized part inventory insignificant periods company settles employee benefit equity issuances treasury shares treasury shares replenished throughout year number shares used settle employee benefit equity issuances stock options stock options expire 10 years date grant vest service periods range 6 months 4 years options granted average high low prices company’s common stock new york stock exchange date grant fair value option award estimated date grant using blackscholes option valuation model uses assumptions noted following table 2014 grants expected volatility represents blended rate 4year daily historical average volatility rate 5week average implied volatility rate based atthemoney traded johnson options life 2 years 2016 2015 grants expected volatility represents blended rate 10year weekly historical overall volatility rate 5week average implied volatility rate based atthemoney traded johnson options life 2 years grants historical data used determine expected life option riskfree rate based us treasury yield curve effect time grant average fair value options granted 1001 1068 842 2016 2015 2014 respectively fair value estimated based weighted average assumptions summary option activity plan january 1 2017 january 3 2016 december 28 2014 changes years ending dates presented total intrinsic value options exercised 980 million 644 million 954 million 2016 2015 2014 respectively following table summarizes stock options outstanding exercisable january 1 2017 1 average contractual life remaining years stock options outstanding january 3 2016 december 28 2014 116517 average life 59 years 115712 average life 57 years respectively stock options exercisable january 3 2016 december 28 2014 48345 average price 6226 57846 average price 6194 respectively restricted share units performance share units company grants restricted share units vest service periods range 6 months 3 years company also grants performance share units paid shares johnson common stock end threeyear performance period whether performance share units vest amount vest tied completion service periods range 6 months 3 years achievement threeyear period three equallyweighted goals directly align help drive longterm total shareholder return operational sales adjusted operational earnings per share relative total shareholder return number shares actually earned end threeyear period vary based actual performance 0 200 target number performance share units granted summary restricted share units performance share units activity plans january 1 2017 presented average fair value restricted share units granted 9245 9165 8301 2016 2015 2014 respectively using fair market value date grant fair value restricted share units discounted dividends paid restricted share units vesting period fair value restricted share units issued 5877 million 5976 million 5410 million 2016 2015 2014 respectively weighted average fair value performance share units granted 10530 9354 8594 2016 2015 2014 calculated using weighted average fair market value three component goals date grant fair values sales earnings per share goals performance share unit estimated date grant using fair market value shares time award discounted dividends paid performance share units vesting period fair value relative total shareholder return goal performance share unit estimated date grant using monte carlo valuation model fair value performance share units issued 1277 million 167 million 14 million 2016 2015 2014 respectively 18 segments business geographic areas ­ see note 1 description segments company operates export sales significant 2016 company two wholesalers distributing products three segments represented approximately 135 107 total consolidated revenues 2015 2014 company one wholesaler distributing products three segments represented approximately 125 110 respectively total consolidated revenues 1 amounts allocated segments include interest income expense general corporate income expense 2 general corporate includes cash equivalents marketable securities 3 includes net litigation expense 806 million restructuring related charge 685 million medical devices segment pharmaceutical segment includes positive adjustment 05 billion previous reserve estimates inprocess research development expense 29 million gains divestitures controlled substance raw material active pharmaceutical ingredient api business certain anesthetic products europe 4 medical devices segment includes restructuring related charge 590 million intangible asset writedown 346 million related acclarent synthes integration costs 196 million 148 million expense cost associated depuy asrtm hip program includes 224 million inprocess research development expense comprised 214 million 10 million pharmaceutical medical devices segments respectively includes net litigation expense 141 million comprised 136 million pharmaceutical segment 5 million medical devices segment included gain litigation settlement agreement guidant 600 million medical devices segment includes gain 13 billion divestiture cordis business pharmaceutical segment includes gain 981 million us divestiture nucynta® positive adjustment 05 billion previous reserve estimates including managed medicaid rebates consumer segment includes gain 229 million divestiture splenda® brand 5 includes net litigation expense 1253 million comprised 907 million 259 million 87 million medical devices pharmaceutical consumer segments respectively includes 178 million inprocess research development expense comprised 147 million 31 million pharmaceutical medical devices segments respectively medical devices segment includes net gain 1899 million divestiture orthoclinical diagnostics business synthes integration costs 754 million 126 million expense cost associated depuy asrtm hip program pharmaceutical segment includes additional year branded prescription drug fee 220 million positive adjustment 01 billion previous reserve estimates 6 longlived assets include property plant equipment net 2016 2015 15912 15905 respectively intangible assets goodwill net 2016 2015 49681 47393 respectively 19 selected quarterly financial data unaudited selected unaudited quarterly financial data years 2016 2015 summarized 1 first quarter recast reflect adoption asu 201609 see note 1 consolidated financial statements details first quarter 2016 includes restructuring charge 120 million aftertax 137 million beforetax net litigation expense 56 million aftertax 66 million beforetax 2 second quarter 2016 includes restructuring charge 97 million aftertax 141 million beforetax net litigation expense 493 million aftertax 600 million beforetax 3 third quarter 2016 includes restructuring charge 76 million aftertax 109 million beforetax net litigation expense 46 million aftertax 55 million beforetax 4 fourth quarter 2016 includes restructuring charge 251 million aftertax 298 million beforetax net litigation expense 80 million aftertax 96 million beforetax 5 first quarter 2015 includes net litigation gain 253 million aftertax 402 million beforetax 122 million aftertax 139 million beforetax costs associated depuy asrtm hip program 6 second quarter 2015 includes net litigation expense 23 million aftertax 134 million beforetax 7 third quarter 2015 includes net litigation expense 348 million aftertax 409 million beforetax 8 fourth quarter 2015 includes restructuring charge 415 million aftertax 590 million beforetax 156 million aftertax 214 million beforetax impairment inprocess research development synthes integration costs 59 million aftertax 83 million beforetax additionally fourth quarter 2015 includes gain cordis divestiture 20 business combinations divestitures certain businesses acquired 4509 million cash 77 million liabilities assumed 2016 acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2016 acquisitions primarily included vogue international llc privatelyheld company focused marketing development distribution saloninfluenced nature inspired hair care personal products neuwave medical inc privatelyheld medical device company manufactures markets minimally invasive soft tissue microwave ablation systems neostrata company inc global leader dermocosmetics global rights commercialization rhinocort® allergy spray outside united states excess purchase price estimated fair value tangible assets acquired amounted 4077 million assigned identifiable intangible assets residual recorded goodwill net purchase price vogue international llc 33 billion primarily recorded amortizable intangible assets 23 billion goodwill 11 billion weighted average life 23 billion total amortizable intangibles approximately 22 years trademark asset values determined definite lives ranging 10 22 years majority 22 years goodwill primarily attributable synergies expected arise business acquisition expected deductible tax purposes assets acquired recorded consumer segment fiscal third quarter 2016 company announced definitive agreement acquire abbott medical optics amo whollyowned subsidiary abbott laboratories 4325 billion cash acquisition include ophthalmic products related cataract surgery laser refractive surgery consumer eye health transaction closed february 27 2017 purchase price allocation progress expected result allocation significant value amortizable intangible assets residual recorded goodwill january 26 2017 subsequent year end company announced definitive transaction agreement company launch allcash tender offer switzerland acquire outstanding shares actelion ltd 280 per share payable us dollars approximately 300 billion part transaction immediately prior completion acquisition actelion spin drug discovery operations earlystage clinical development assets newly created swiss biopharmaceutical company rd newco shares rd newco listed six swiss exchange six distributed actelions shareholders stock dividend upon closing tender company initially hold 16 shares rd newco rights additional 16 rd newco equity convertible note actelion established leading franchise differentiated innovative products pulmonary arterial hypertension pah highly complementary existing portfolio company addition actelion’s specialty inmarket medicines latestage products consistent companys efforts grow attractive complementary therapeutic areas serve patients serious illnesses significant unmet medical need closing subject demerger antitrust clearance customary closing conditions february 15 2017 subsequent year end company received binding offer integra lifesciences holdings corporation purchase codman neurosurgery business approximately 10 billion subsequent year end company announced engaging process evaluate potential strategic options johnson diabetes care companies specifically lifescan inc animas corporation calibra medical inc strategic options may include formation operating partnerships joint ventures strategic alliances sale businesses alternatives either separately together options evaluated determine best opportunity drive future growth maximize shareholder value assurance process result transaction strategic alternative kind therefore assets held sale january 1 2017 related announcement certain businesses acquired 954 million cash 220 million liabilities assumed 2015 assumed liabilities primarily represent fair value contingent consideration 210 million acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2015 acquisitions primarily included xo1 limited privatelyheld biopharmaceutical company developing antithrombin antibody novira therapeutics inc privately held clinicalstage biopharmaceutical company developing innovative therapies curative treatment chronic hepatitis b virus infection excess purchase price estimated fair value tangible assets acquired amounted 1173 million assigned identifiable intangible assets residual recorded goodwill amount approximately 839 million identified value iprd primarily associated acquisitions xo1 limited novira therapeutics inc value iprd calculated using cash flow projections discounted inherent risk projects iprd related acquisition xo1 limited 360 million associated recombinant human antibody developed mimic activity human antibody appears produce anticoagulated state without predisposition bleeding probability success factor 360 used reflect inherent clinical regulatory risk discount rate applied 1175 iprd related acquisition novira therapeutics inc 396 million associated lead candidate nvr 3778 investigational small molecule directacting antiviral oral administration patients hbv inhibits hbv core capsid protein probability success factor 510 used reflect inherent clinical regulatory risk discount rate applied 160 certain businesses acquired 2129 million cash 38 million liabilities assumed 2014 acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2014 acquisitions included covagen ag privatelyheld biopharmaceutical company specializing development multispecific protein therapeutics fynomab® technology platform alios biopharma inc privatelyheld clinical stage biopharmaceutical company focused developing therapies viral diseases orsltm electrolyte readytodrink brand jagdale industries ltd excess purchase price estimated fair value tangible assets acquired amounted 2069 million assigned identifiable intangible assets residual recorded goodwill amount approximately 1913 million identified value iprd associated acquisitions covagen ag alios biopharma inc value iprd calculated using cash flow projections discounted inherent risk projects iprd related acquisition alios biopharma inc 1688 million associated alios’ lead compound al8176 orally administered antiviral therapy treatment infants respiratory syncytial virus rsv probability success factor 600 used reflect inherent clinical regulatory risk discount rate applied 114 iprd related acquisition covagen ag 225 million associated covagen’s lead compound cova322 currently phase 1b study psoriasis holding potential treatment broad range inflammatory diseases including rheumatoid arthritis probability success factor 260 used reflect inherent clinical regulatory risk discount rate applied 125 2015 company recorded charge impairment iprd related acquisition covagen ag 2012 company completed acquisition synthes inc purchase price 202 billion cash stock connection acquisition synthes inc company entered two accelerated share repurchase asr agreements 2013 company settled remaining liabilities asr agreements company believes transactions asr agreement series related internal transactions consummated tax efficient manner accordance applicable law possible internal revenue service could assert one contrary positions challenge transactions tax perspective challenged amount total purchase price synthes shares could treated subject applicable us tax approximately statutory rate company plus interest supplemental pro forma information 2016 2015 2014 accordance us gaap standards related business combinations goodwill intangible assets provided impact aforementioned acquisitions material effect company’s results operations cash flows financial position 2016 company divestitures included controlled substance raw material active pharmaceutical ingredient api business certain anesthetic products europe certain nonstrategic consumer brands 2016 pretax gains divestitures approximately 06 billion 2015 company divestitures included cordis business cardinal health splenda® brand heartland food products group us license rights nucynta® tapentadol nucynta®er tapentadol extendedrelease tablets nucynta® tapentadol oral solution 2015 pretax gains divestitures approximately 26 billion 2014 company divestitures included orthoclinical diagnostics business carlyle group ky® brand reckitt benckiser group plc us certain markets benecol® brand raisio plc 2014 pretax gains divestitures approximately 24 billion company completed divestiture orthoclinical diagnostics business carlyle group approximately 40 billion company recorded pretax gain approximately 19 billion orthoclinical diagnostics results included companys medical devices segment 21 legal proceedings johnson certain subsidiaries involved various lawsuits claims regarding product liability intellectual property commercial matters governmental investigations legal proceedings arise time ordinary course business company records accruals loss contingencies associated legal matters probable liability incurred amount loss reasonably estimated january 1 2017 company determined liabilities associated certain litigation matters probable reasonably estimated company accrued matters continue monitor related legal issue adjust accruals might warranted based new information developments accordance asc 4502025 litigation regulatory matters discussed loss probable reasonably possible company unable estimate possible loss range loss beyond amounts already accrued amounts accrued legal contingencies often result complex series judgments future events uncertainties rely heavily estimates assumptions ability make estimates judgments affected various factors including whether damages sought proceedings unsubstantiated indeterminate scientific legal discovery commenced complete proceedings early stages matters present legal uncertainties significant facts dispute numerous parties involved companys opinion based examination matters experience date discussions counsel ultimate outcome legal proceedings net liabilities accrued companys balance sheet expected material adverse effect companys financial position however resolution increase accruals one matters reporting period may material adverse effect companys results operations cash flows period product liability johnson certain subsidiaries involved numerous product liability claims lawsuits involving multiple products claimants cases seek substantial compensatory available punitive damages company believes substantial defenses feasible predict ultimate outcome litigation company established accruals product liability claims lawsuits compliance asc 45020 based currently available information cases may limited company accrues estimate legal defense costs needed defend matter costs probable reasonably estimated certain matters company accrued additional amounts estimated costs associated settlements damages losses extent adverse verdicts rendered company record accrual loss determined probable reasonably estimated product liability accruals represent projected product liability thousands claims around world different litigation environments different fact patterns changes accruals may required future additional information becomes available significant cases include depuy asr™ xl acetabular system depuy asr™ hip resurfacing system pinnacle® acetabular cup system pelvic meshes risperdal® xarelto® johnsons® baby powder january 1 2017 us approximately 2000 plaintiffs direct claims pending lawsuits regarding injuries allegedly due depuy asr™ xl acetabular system depuy asr™ hip resurfacing system 9400 respect pinnacle® acetabular cup system 54800 respect pelvic meshes 18500 respect risperdal® 16900 respect xarelto® 3100 respect johnsons® baby powder august 2010 depuy orthopaedics inc depuy announced worldwide voluntary recall asr™ xl acetabular system depuy asr™ hip resurfacing system used hip replacement surgery claims personal injury made depuy johnson number pending lawsuits expected fluctuate certain lawsuits settled dismissed additional lawsuits filed cases filed federal courts united states organized multidistrict litigation united states district court northern district ohio litigation also filed countries outside united states primarily united kingdom canada australia ireland germany italy november 2013 depuy reached agreement courtappointed committee lawyers representing asr hip system plaintiffs establish program settle claims eligible asr hip patients united states surgery replace asr hips known revision surgery august 31 2013 settlement covered approximately 8000 patients february 2015 depuy reached additional agreement effectively extends existing settlement program asr hip patients revision surgeries august 31 2013 prior february 1 2015 second agreement estimated cover approximately 1800 additional patients estimated cost agreements covered existing accruals settlement program expected bring close significant asr hip litigation activity united states however many lawsuits united states remain settlement program address litigation outside united states australia settlement reached representatives class action lawsuit pending federal court new south wales resolves claims majority asr hip patients country company continues receive information respect potential costs associated recall worldwide basis company established accruals costs associated depuy asr™ hip program related product liability litigation changes accruals may required future additional information becomes available claims personal injury also made depuy johnson relating pinnacle® acetabular cup system used hip replacement surgery number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases filed federal courts united states organized multidistrict litigation united states district court northern district texas litigation also filed countries outside united states primarily united kingdom company established accrual defense costs connection product liability litigation associated pinnacle® acetabular cup system changes accrual may required future additional information becomes available claims personal injury made ethicon inc ethicon johnson arising ethicons pelvic mesh devices used treat stress urinary incontinence pelvic organ prolapse number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases filed federal courts united states organized multidistrict litigation united states district court southern district west virginia addition class actions individual personal injury cases claims commenced various countries outside united states including claims cases united kingdom netherlands belgium italy venezuela class actions israel australia canada seeking damages alleged injury resulting ethicons pelvic mesh devices company established accrual respect product liability litigation associated ethicons pelvic mesh products changes accrual may required future additional information becomes available claims personal injury made janssen pharmaceuticals inc johnson arising use risperdal® indicated treatment schizophrenia acute manic mixed episodes associated bipolar disorder irritability associated autism related compounds lawsuits primarily filed state courts pennsylvania california missouri actions pending various courts united states canada number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases company established accrual respect product liability litigation associated risperdal® changes accrual may required future additional information becomes available claims personal injury made janssen pharmaceuticals inc johnson arising use xarelto® oral anticoagulant number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases filed federal courts united states organized multidistrict litigation united states district court eastern district louisiana addition cases filed state courts across united states many cases consolidated state mass tort litigation philadelphia pennsylvania coordinated proceedings delaware california missouri class action lawsuits also filed canada company established accrual defense costs connection product liability litigation associated xarelto® changes accrual may required future additional information becomes available claims personal injury made johnson consumer inc johnson arising use johnsons® baby powder number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases lawsuits primarily filed state courts missouri new jersey california addition federal multidistrict litigation proceeding created litigation district court new jersey company established accrual defense costs connection product liability litigation associated johnsons® baby powder changes accrual may required future additional information becomes available intellectual property certain subsidiaries johnson subject time legal proceedings claims related patent trademark intellectual property matters arising businesses many matters involve challenges coverage andor validity patents various products allegations certain company’s products infringe patents third parties although subsidiaries believe substantial defenses challenges allegations respect significant patents assurance outcome matters loss cases could adversely affect ability subsidiaries sell products result loss sales due loss market exclusivity require payment past damages future royalties may result noncash impairment charge associated intangible asset significant matters described medical devices june 2009 rembrandt vision technologies lp rembrandt filed patent infringement lawsuit johnson vision care inc jjvci united states district court eastern district texas alleging jjvcis manufacture sale acuvue® advance acuvue oasys® hydrogel contact lenses infringe us patent 5712327 327 patent rembrandt seeking monetary relief case transferred united states district court middle district florida may 2012 jury returned verdict holding neither accused lenses infringes 327 patent rembrandt appealed august 2013 united states court appeals federal circuit affirmed district courts judgment rembrandt asked district court grant new trial based alleged new evidence july 2014 district court denied rembrandt’s motion rembrandt appealed court appeals overturned ruling april 2016 remanded case district court new trial jjvcis motion reconsider petition review united states supreme court denied new trial scheduled august 2017 december 2009 state israel filed lawsuit district court tel aviv jaffa omrix biopharmaceuticals inc various affiliates omrix lawsuit state claimed employee governmentowned hospital inventor several patents related fibrin glue technology employee developed government employee state claimed right transfer intellectual property omrix belongs state sought damages plus royalties quixil™ evicel® products alternatively transfer patents state case settled december 2016 lifescan filed patent infringement lawsuit unistrip technologies llc unistrip united states district court district north carolina may 2014 alleging making marketing unistrip’s strips use lifescan’s blood glucose monitors infringe us patent nos 6241862 862 patent 7250105 105 patent august 2014 united states patent trademark office uspto determined 105 patent invalid january 2016 invalidity decision upheld appeal lifescan filed motion rehearing denied july 2014 unistrip brought lawsuit lifescan united states district court eastern district pennsylvania alleging antitrust violations relating marketing practices lifescan strips march 2013 medinol ltd medinol filed patent infringement lawsuit cordis corporation cordis johnson united states district court southern district new york alleging cordiss sales cypher™ cypher select™ stents made united states since 2005 willfully infringed four medinols patents directed geometry articulated stents medinol seeking damages attorneys fees trial january 2014 district court dismissed case finding medinol unreasonably delayed bringing claims medinol appeal decision september 2014 district court denied motion medinol vacate judgment grant new trial medinols appeal decision dismissed medinol filed petition review united states supreme court cordis divested 2015 company retained liability may result case november 2016 medidea llc medidea filed patent infringement lawsuit depuy orthopaedics inc united states district court northern district illinois alleging infringement attune® knee system two patents relating posterior stabilized knee systems specifically medidea alleges sofcamtm contact feature attune® posterior stabilized knee products infringes patentsinsuit medidea seeking monetary damages injunctive relief december 2016 ethicon endosurgery inc ethicon endosurgery llc known ethicon llc sued covidien inc us district court district massachusetts seeking declaration covidien’s us patent nos 6585735 7118587 7473253 8070748 8241284 either invalid infringed ethicon’s enseal® x1 large jaw tissue sealer product enseal x1 enseal x1 product scheduled launch united states europe first quarter 2017 pharmaceutical april 2016 morphosys ag german biotech company filed patent infringement lawsuit janssen biotech inc jbi genmab us inc genmab collectively genmab united states district court district delaware alleging jbi’s manufacture sale darzalex® daratumumab willfully infringes morphosys us patent 8263746 morphosys seeking money damages jbi licenses patents commercial rights darzalex® genmab june 2016 jbi filed motion dismiss lawsuit november 2016 morphosys sought leave add another patent case us patent 9200061 february 2017 court granted request trial case currently scheduled commence august 2018 august 2016 sandoz ltd hexal ag collectively sandoz filed lawsuit english high court gd searle llc pfizer company janssen sciences ireland uc jsi alleging searle’s supplementary protection certificate spcgb07038 spc exclusively licensed jsi invalid revoked janssencilag limited sells prezista® darunavir uk pursuant license october 2016 searle jsi counterclaimed sandoz threatened infringement spc based statements plans launch generic darunavir uk trial case scheduled begin late aprilearly may 2017 remicade® related cases us proceedings september 2013 janssen biotech inc jbi nyu langone medical center nyu received office action united states patent trademark office uspto rejecting claims us patent 6284471 relating remicade® infliximab 471 patent reexamination proceeding instituted third party 471 patent coowned jbi nyu granted jbi exclusive license nyu’s rights patent 471 patent expires september 2018 following several office actions patent examiner including two rejections responses jbi uspto issued action maintaining rejection 471 patent jbi filed notice appeal usptos patent trial appeal board november 2016 patent trial appeal board issued decision upholding examiners rejection jbi filed appeal us court appeals federal circuit august 2014 celltrion healthcare co ltd celltrion inc together celltrion filed application us food drug administration fda approval make sell infliximab biosimilar march 2015 jbi filed lawsuit united states district court district massachusetts celltrion hospira healthcare corporation hospira exclusive us marketing rights celltrions infliximab biosimilar seeking among things declaratory judgment biosimilar product infringes potentially infringes several jbi patents including 471 patent us patent 7598083 083 patent august 2016 district court granted celltrions hospiras motions summary judgment invalidity 471 patent jbi appealed decisions us court appeals federal circuit case appeal reexamination 471 patent designated companion cases heard panel judges federal circuit june 2016 jbi filed two additional patent infringement lawsuits asserting 083 patent one celltrion united states district court district massachusetts hyclone laboratories inc manufacturer cell culture media celltrion uses make biosimilar product united states district court district utah although 083 patent already asserted existing lawsuit celltrion additional lawsuit expands claims include use cell culture media made united states manufacture celltrions biosimilar additional lawsuit celltrion consolidated existing lawsuit discussed hospira moved dismiss counts lawsuit related 083 patent celltrion moved dismiss counts lawsuit related 083 patent without prejudice failure join coowners ‘083 patent plaintiffs trial postponed pending resolution motions fda approved celltrion’s infliximab biosimilar sale united states april 2016 180day period notice launch biosimilar product biologics price competition innovation act passed hospiras parent company pfizer inc began shipment celltrions infliximab biosimilar wholesalers united states late november 2016 introduction us market biosimilar result reduction us sales remicade® canadian proceedings march 2013 hospira filed impeachment proceeding kennedy institute rheumatology kennedy challenging validity canadian patent related remicade® feldman patent exclusively licensed jbi october 2013 kennedy along jbi janssen inc janssen cilag gmbh international affiliates jbi filed counterclaim infringement celltrion hospira counterclaim alleges products described celltrion’s hospira’s marketing applications health canada subsequent entry biologics seb remicade® would infringe feldman patents owned kennedy trial patent action concluded october 2016 closing arguments took place january 2017 parties awaiting decision january 2014 health canada approved celltrion’s seb remicade® allowing celltrion market infliximab biosimilar canada regardless pending patent action june 2014 health canada approved hospira’s seb remicade® july 2014 janssen filed lawsuit compel canadian minister health withdraw notice compliance hospira’s seb hospira serve notice allegation janssen address patent listed janssen patent register march 2015 parties entered settlement agreement whereby health canada agreed consent judgment setting aside hospira’s notice compliance subject health canadas appeal filed june 2015 nevertheless hospira began marketing infliximab biosimilar distributor celltrions notice compliance october 2016 appeals court reversed consent judgment janssen filed application leave appeal supreme court canada hospira continues market sell celltrions infliximab biosimilar canada remicade® patent discussed found invalid following appeals could relied upon prevent introduction infliximab biosimilars prior august 1 2017 expiry date patent litigation filers abbreviated new drug applications andas following summarizes lawsuits pending generic companies filed abbreviated new drug applications andas fda undertaken similar regulatory processes outside united states seeking market generic forms products sold various subsidiaries johnson prior expiration applicable patents covering products andas typically include allegations noninfringement invalidity unenforceability applicable patents event subsidiaries successful actions statutory 30month stays andas expire united states district court rulings obtained thirdparty companies involved ability upon approval fda introduce generic versions products issue market resulting potential substantial market share revenue losses products may result noncash impairment charge associated intangible asset addition time subsidiaries may settle actions settlements involve introduction generic versions products issue market prior expiration relevant patents inter partes review ipr process united states patent trademark office uspto created 2011 america invents act also used generic companies conjunction andas lawsuits challenge patents held company’s subsidiaries concerta® december 2014 janssen inc alza corporation filed notice application actavis pharma company actavis response actavis’ notice allegation seeking approval market generic version concerta® expiration canadian patent 2264852 852 patent december 2016 canadian federal court allowed application issued order preventing actavis obtaining marketing approval notice compliance generic version concerta® expiration 852 patent actavis commence appeal prior deadline thus prevented obtaining notice compliance generic version concerta® expiration 852 patent october 2016 alza corporation janssen pharmaceuticals inc filed patent infringement lawsuit us district court district delaware amneal pharmaceuticals new york llc amneal pharmaceuticals llc response amneal’s anda seeking approval market generic version concerta® expiration united states patent nos 8163798 9144549 november 2016 amneal filed motion judgment pleadings arguing certain claims patents invalid others infringed janssen opposed motion zytiga® june july 2015 janssen biotech inc jbi received notices paragraph iv certification several companies advising respective andas seeking approval generic version zytiga® expiration one patents relating zytiga® july 2015 jbi janssen oncology inc janssen oncology janssen research development llc collectively janssen btg international ltd btg filed patent infringement lawsuit united states district court district new jersey several generic anda applicants certain affiliates andor suppliers response respective andas seeking approval market generic version zytiga® expiration united states patent nos 5604213 213 patent andor 8822438 438 patent generic companies include actavis laboratories fl inc actavis amneal pharmaceuticals llc amneal pharmaceuticals new york llc collectively amneal apotex inc apotex corp collectively apotex citron pharma llc citron dr reddy’s laboratories ltd dr reddy’s laboratories inc collectively dr reddys mylan pharmaceuticals inc mylan inc collectively mylan par pharmaceuticals inc par pharmaceutical companies inc collectively par sun pharmaceutical industries ltd sun pharmaceuticals industries inc collectively sun teva pharmaceuticals usa inc teva wockhardt bio ag wockhardt usa llc wockhardt ltd collectively wockhardt westward pharmaceutical corp westward hikma pharmaceuticals llc hikma court entered stay lawsuit par citron agreed bound decision defendants action 213 patent expired december 2016 thus infringement actions concern 438 patent february 2016 court set trial date october 2017 august 2015 janssen btg filed additional jurisdictional protective lawsuit mylan defendants united states district court northern district west virginia stayed august 2015 janssen received notice paragraph iv certification hetero usa inc us regulatory agent hetero labs limited unitv division hetero labs limited collectively hetero advising hetero’s anda seeking approval generic version zytiga® expiration 438 patent september 2015 janssen btg filed amended complaint new jersey lawsuit add alleged infringement 438 patent hetero march 2016 janssen filed motion new jersey lawsuit correct inventorship 438 patent add inventor granted leave amend complaint accordingly january 2017 court granted janssens motion janssen filed second amended complaint adding btg coowner 438 patent coplaintiff regarding 438 patent infringement claims march 2016 janssen received notice amerigen pharmaceuticals limited amerigen advising amerigen’s anda seeking approval generic version zytiga® expiration 438 patent response janssen btg filed separate patent infringement lawsuit united states district court district new jersey amerigen may 2016 may 2016 janssen received notice paragraph iv certification glenmark pharmaceuticals inc behalf glenmark pharmaceuticals sa wholly owned subsidiary glenmark pharmaceuticals ltd collectively glenmark advising glenmark’s anda seeking approval generic version zytiga® expiration 438 patent response june 2016 janssen btg filed patent infringement lawsuit united states district court district new jersey glenmark parties stipulated dismissal glenmark pharmaceuticals ltd filing abovereferenced lawsuits triggered stay october 2018 time fda grant final approval generics andas unless earlier district court decision finding patentsinsuit invalid infringed lawsuits janssen seeking order enjoining defendants marketing generic versions zytiga® expiration relevant patents december 2015 amerigen filed petition inter partes review uspto seeking invalidate 438 patent may 2016 uspto granted inter partes review decision validity ‘438 patent expected may 2017 june 2016 argentum pharmaceuticals llc mylan pharmaceuticals inc filed petitions inter partes review uspto seeking invalidate 438 patent moved join inter partes review filed amerigen uspto instituted argentums petition granted argentums motion joinder january 2017 granted mylans petition inter partes review denied mylans motion joinder august 2016 wockhardt bio ag filed petition inter partes review uspto seeking invalidate 438 patent uspto granted january 2017 february 2017 actavis amneal dr reddys sun teva westward hikma filed joint petition inter partes review uspto seeking invalidate 438 patent moved join inter partes review filed mylan complera® august september 2015 janssen pharmaceutica nv janssen sciences ireland uc collectively janssen gilead sciences inc gilead sciences ireland uc collectively gilead filed patent infringement lawsuits united states district courts district delaware district west virginia respectively mylan inc mylan pharmaceuticals inc collectively mylan response mylan’s anda seeking approval market generic version complera® expiration united states patent nos 8841310 310 patent 7125879 879 patent 8101629 629 patent west virginia action september 2015 mylan filed answer counterclaims asserting invalidity noninfringement 310 patent 879 patent 629 patent well united states patent 8080551 ‘551 patent march 2016 district west virginia court stayed lawsuit scheduled conditional trial date february 2018 accordance schedule firstfiled delaware lawsuit described delaware action january march 2016 janssen gilead amended complaint add claims patent infringement respect ‘551 patent united states patent nos 7399856 856 patent 7563922 922 patent 8101752 752 patent 8618291 291 patent mylan filed motion dismiss suit lack personal jurisdiction motion dismiss strike sever infringement claims regarding ‘752 ‘291 patents september 2016 delaware district court denied mylan’s motions trial delaware action scheduled february 2018 lawsuits janssen seeking order enjoining defendants marketing generic versions complera® expiration relevant patents xarelto® number generic companies filed andas seeking approval market generic versions xarelto® october 2015 janssen pharmaceuticals inc jpi bayer pharma ag bayer intellectual property gmbh collectively bayer filed patent infringement lawsuits united states district court district delaware aurobindo pharma limited aurobindo pharma usa inc breckenridge pharmaceutical inc micro labs usa inc micro labs ltd collectively micro mylan pharmaceuticals inc mylan inc mylan prinston pharmaceutical inc sigmapharm laboratories llc torrent pharmaceuticals limited torrent pharma inc response parties’ respective andas seeking approval market generic versions xarelto® expiration bayer’s united states patent nos 7157456 ‘456 patent 7585860 ‘860 patent 7592339 ‘339 patent relating xarelto® jpi exclusive licensee asserted patents november 2015 mylan moved dismiss action december 2015 jpi bayer mylan stipulated agreed dismiss claims mylan suspend briefing argument mylans motion dismiss pending appeals relating personal jurisdiction mylan pharmaceuticals inc district delaware february 2016 similar patent infringement action jpi bayer invagen pharmaceuticals inc invagen response invagen’s notice paragraph iv certification advising anda seeking fda approval generic xarelto® product expiration relevant patents consolidated original case district court set trial date march 2018 april 2016 jpi bayer filed separate patent infringement action district delaware micro response notice paragraph iv certification advising anda seeking fda approval generic xarelto® product expiration ‘860 ‘339 patents may 2016 action consolidated original action july 2016 jpi bayer filed separate patent infringement action district delaware breckenridge pharmaceutical inc response notice paragraph iv certification advising anda seeking fda approval generic xarelto® product expiration ‘456 ‘339 patents action consolidated original action lawsuits jpi seeking order enjoining defendants marketing generic versions xarelto® expiration relevant patents october 2016 mylan filed petitions inter partes review uspto seeking invalidate ‘339 ‘456 ‘860 patents government proceedings like companies pharmaceutical medical devices industries johnson certain subsidiaries subject extensive regulation national state local government agencies united states countries operate result interaction government agencies ongoing significant litigation brought investigations conducted government agencies listed possible criminal charges substantial fines andor civil penalties damages could result government investigations litigation average wholesale price awp litigation johnson several pharmaceutical subsidiaries jj awp defendants along numerous pharmaceutical companies defendants series lawsuits state federal courts involving allegations pricing marketing certain pharmaceutical products amounted fraudulent otherwise actionable conduct among things companies allegedly reported inflated average wholesale price awp drugs issue payors alleged used awps calculating provider reimbursement levels many cases federal actions state actions removed federal court consolidated pretrial purposes multidistrict litigation mdl united states district court district massachusetts plaintiffs cases included three classes private persons entities paid portion purchase drugs issue based awp state government entities made medicaid payments drugs issue based awp june 2007 trial merits mdl court dismissed claims two plaintiff classes jj awp defendants march 2011 court dismissed claims third class jj awp defendants without prejudice awp cases brought various attorneys general proceeded trial manufacturers several state cases certain johnson subsidiaries settled including case wisconsin settled february 2016 cases still pending illinois new jersey utah cases illinois new jersey yet proceeded trial utah claims brought attorney general dismissed court 2013 state may appeal dismissal conclusion similar pending matters defendants awp case jj awp defendants brought commonwealth pennsylvania following trial 2010 pennsylvania commonwealth court found favor commonwealth regard certain claims pennsylvania unfair trade practices consumer protection law favor jj awp defendants commonwealth’s remaining claims following appeal pennsylvania supreme court vacated judgment commonwealth court entered subsequent judgment favor jj awp defendants claims subsequent judgment upheld pennsylvania supreme court successive appeal mcneil consumer healthcare starting june 2010 mcneil consumer healthcare division mcneilppc inc johnson consumer inc mcneil consumer healthcare division mcneil consumer healthcare certain affiliates including johnson companies received grand jury subpoenas united states attorneys office eastern district pennsylvania requesting documents broadly relating recalls various products mcneil consumer healthcare fda inspections fort washington pennsylvania lancaster pennsylvania manufacturing facilities well certain documents relating recalls small number products subsidiaries addition february 2011 government served mcneilppc inc johnson consumer inc jjci civil investigative demand seeking records relevant investigation determine violation federal false claims act march 2015 mcneilppc inc jjci entered guilty plea united states district court eastern district pennsylvania misdemeanor violation us food drug cosmetic act mcneilppc inc jjci agreed pay 20 million fine 5 million forfeiture resolve matter companies also received civil investigative demands multiple state attorneys general offices broadly relating mcneil recall issues companies continue cooperate inquiries coordinated multistate coalition resolution cannot reached multistate coalition possible individual state attorneys general offices may file civil monetary claims companies january 2011 oregon attorney general filed civil complaint johnson mcneilppc inc jjci mcneil healthcare llc state court alleging civil violations oregon unlawful trade practices act relating earlier recall mcneil otc product november 2012 state court granted motion companies dismiss oregons complaint entirety prejudice november 2015 state court appeals reversed trial court reinstated oregons consumer protection claims february 2016 oregon supreme court denied companies petition review case sent back trial court opioids litigation described johnson jj janssen pharmaceuticals inc jpi along pharmaceutical companies named four lawsuits alleging claims related marketing opioids including duragesic® nucynta® nucynta® er subpoenaed two states information related opioid marketing practices may 2014 santa clara orange counties california filed complaint state court orange county california numerous pharmaceutical manufacturers including jj jpi alleging claims related opioid marketing practices including false advertising unfair competition public nuisance counties seek injunctive monetary relief february 2015 defendants filed motions challenging sufficiency complaint august 2015 court stayed case fda concludes ongoing inquiry safety effectiveness longterm opioid treatment following motion counties lift stay october 2016 court kept stay place part requested parties confer adjourned matter later date june 2014 city chicago filed complaint cook county circuit court group pharmaceutical manufacturers including jj jpi alleging number claims related opioid marketing practices including consumer fraud violations false claims seeking injunctive monetary relief case later removed united states district court northern district illinois december 2014 jj jpi filed motion dismiss city chicagos first amended complaint granted leave file amended complaint city filed second amended complaint november 2015 jj jpi filed motion dismiss second amended complaint september 2016 court dismissed eight city’s ten causes action granted city one final opportunity replead dismissed claims city filed third amended complaint october 2016 december 2016 jj jpi filed answer two causes action motion dismiss remaining causes action september 2014 tennessee attorney general division consumer affairs issued request information jpi pharmaceutical companies related opioids marketing practices august 2015 new hampshire attorney general consumer protection antitrust bureau issued subpoena jpi pharmaceutical companies related opioids marketing practices october 2015 state filed motion state new hampshire superior court enforce subpoena jpi pharmaceutical companies subsequently filed joint motion injunctive relief protective order preclude state engaging private contingent fee counsel participate state’s investigation subsequent enforcement action march 2016 court granted protective order grounds state obtained requisite executive legislative approvals retain private counsel rejected contention contingency fee agreement otherwise unlawful parties appealed march 2016 ruling new hampshire supreme court august 2016 court denied pharmaceutical companies’ joint motion enforce protective order ground underlying deficiency legislative approval cured september 2016 state stipulated stay enforcement subpoenas pending new hampshire supreme court’s consideration companies’ appeal march 2016 ruling december 2015 state mississippi filed complaint chancery court first judicial district hinds county substantially group pharmaceutical manufacturers suits brought california counties city chicago including jj jpi alleging number claims related opioid marketing practices seeking penalties injunctive monetary relief march 2016 defendants filed motion transfer venue motions dismiss complaint august 2016 county suffolk new york filed complaint several pharmaceutical manufacturers new york supreme court including jj jpi alleging claims related opioid marketing including claims based deceptive acts practices false advertising fraud unjust enrichment complaint seeks penalties injunctive monetary relief february 2017 county erie county broome new york filed complaint new york supreme court several pharmaceutical manufacturers including jpi complaints allege claims related opioid marketing practices including statutory claims deceptive acts practices false advertising violation new york’s social services law common law causes action public nuisance fraud unjust enrichment county seeking compensatory punitive damages costs september 2011 synthes inc synthes received civil investigative demand issued pursuant false claims act united states attorneys office eastern district pennsylvania demand sought information regarding allegations fellowships offered hospitals exchange agreements purchase products synthes produced documents information response demand cooperating inquiry may 2012 acclarent inc acclarent received subpoena united states attorneys office district massachusetts requesting documents broadly relating sales marketing alleged offlabel promotion acclarent relieva stratus® microflow spacer product relieva stratus® spacer march 2016 acclarent executed civil settlement united states justice department agencies resolve investigation johnson party settlement admission liability separate matter july 2016 former presidentceo vice president sales acclarent former acclarent officers convicted misdemeanor violations connection sale marketing relieva stratus® spacer charges acclarent ethicon inc johnson matter august 2012 depuy orthopaedics inc depuy inc depuy synthes inc johnson services inc received informal request united states attorneys office district massachusetts civil division united states department justice united states production materials relating depuy asr™ xl hip device july 2014 united states notified united states district court district massachusetts declined intervene qui tam case filed pursuant false claims act companies february 2016 district court granted companies’ motion dismiss prejudice unsealed qui tam complaint denied qui tam relators’ request leave file amended complaint qui tam relators appealed case united states court appeals first circuit first circuits decision case pending since october 2013 group state attorneys general issued civil investigative demands relating development sales marketing several depuy orthopaedics incs hip products states seeking monetary injunctive relief july 2014 oregon department justice investigating matters independently states announced settlement asr xl hip device investigation total payment 4 million state oregon october 2012 johnson contacted california attorney generals office regarding multistate attorney general investigation marketing surgical mesh products hernia urogynecological purposes johnson johnsons subsidiary ethicon inc ethicon johnson ethicon since entered series tolling agreements 47 states district columbia participating multistate investigation responded civil investigative demands served certain participating states seeking monetary injunctive relief may 2016 california washington filed civil complaints johnson ethicon alleging violations consumer protection statutes august 2016 kentucky filed similar complaint companies johnson ethicon entered new tolling agreement remaining 44 states district columbia december 2012 therakos inc therakos formerly subsidiary johnson part orthoclinical diagnostics inc ocd franchise received letter civil division united states attorneys office eastern district pennsylvania informing therakos united states attorneys office investigating sales marketing uvadex® methoxsalen uvar xts® system period 2000 present united states attorneys office requested ocd johnson preserve documents could relate investigation therakos subsequently acquired affiliate gores capital partners iii lp january 2013 ocd divested june 2014 following divestiture ocd johnson retains ocd’s portion liability may result investigation activity occurred prior sale therakos march 2014 march 2016 united states attorney’s office requested johnson produce certain documents johnson cooperating requests june 2014 mississippi attorney general filed complaint chancery court first judicial district hinds county mississippi johnson consumer companies inc johnson consumer inc jjci complaint alleges defendants failed disclose alleged health risks associated female consumers use talc contained johnsons® baby powder johnsons® shower product longer sold jjci seeks injunctive monetary relief matter currently scheduled trial september 2017 march 2016 janssen pharmaceuticals inc jpi received civil investigative demand united states attorney’s office southern district new york related jpi’s contractual relationships pharmacy benefit managers period january 1 2006 present regard certain jpis pharmaceutical products demand issued connection investigation false claims act january 2017 janssen pharmaceuticals inc jpi received civil investigative demand cid united states department justice doj relating allegations concerning sales marketing practices olysiotm jpi cooperating doj appropriately responding cid february 2017 johnson received subpoena united states attorneys office district massachusetts seeking production records pertaining payments 501c3 charitable organization provides financial assistance medicare patients multiple pharmaceutical companies publicly reported receipt similar subpoenas ongoing inquiries recent years johnson received numerous requests variety united states congressional committees produce information relevant ongoing congressional inquiries policy johnson cooperate inquiries producing requested information general litigation june 2009 following public announcement orthoclinical diagnostics inc ocd received grand jury subpoena united states department justice antitrust division connection investigation since closed multiple class action complaints filed ocd direct purchasers seeking damages alleged price fixing cases consolidated pretrial purposes united states district court eastern district pennsylvania blood reagent antitrust litigation august 2012 district court granted motion filed plaintiffs class certification april 2015 united states court appeals third circuit reversed class certification ruling remanded case district court proceedings october 2015 district court granted motion plaintiffs class certification july 2016 ocd filed motion summary judgment ocd divested 2014 johnson retained liability may result cases september 2011 johnson inc mcneil consumer healthcare division johnson inc received notice civil claim filed nick field supreme court british columbia canada bc civil claim bc civil claim putative class action brought behalf persons reside british columbia purchased period september 20 2001 december 2010 one various mcneil infants childrens overthecounter medicines manufactured fort washington pennsylvania facility bc civil claim alleges defendants violated bc business practices consumer protection act canadian statutes common laws selling medicines allegedly safe andor effective comply canadian good manufacturing practices class certification hearing scheduled october 2015 adjourned currently date set hearing may 2014 two purported class actions filed federal court one united states district court central district california one united states district court southern district illinois johnson jj johnson consumer companies inc johnson consumer inc jjci alleging violations state consumer fraud statutes based nondisclosure alleged health risks associated talc contained johnsons® baby powder johnsons® shower product longer sold jjci cases seek injunctive relief monetary damages neither includes claim personal injuries october 2016 cases transferred united states district court district court new jersey part newly created federal multidistrict litigation december 2016 jj jjci filed motion dismiss one cases august 2014 united states customs border protection us cbp issued penalty notice janssen ortho llc janssen ortho assessing penalties alleged improper classification darunavir ethanolate active pharmaceutical ingredient prezista® connection importation united states october 2014 janssen ortho submitted petition relief response penalty notice may 2015 us cbp issued amended penalty notice assessing substantial penalties janssen ortho filed petition relief july 2015 march april 2015 30 putative class action complaints filed contact lens patients number courts around united states johnson vision care inc jjvci contact lens manufacturers distributors retailers alleging vertical horizontal conspiracies fix retail prices contact lenses complaints allege manufacturers reached agreements certain distributors retailers concerning prices contact lenses could sold consumers plaintiffs seeking damages injunctive relief class action cases transferred united states district court middle district florida june 2015 plaintiffs filed consolidated class action complaint november 2015 december 2015 jjvci defendants filed motions dismiss june 2016 court denied motions dismiss discovery ongoing april 2015 johnson vision care inc jjvci filed complaint united states district court district utah state utah seeking declaratory judgment law passed state ban unilateral pricing policies solely contact lens market violates commerce clause united states constitution court denied jjvcis motion preliminary injunction jjvci appealed argument appeal held august 2015 december 2016 appellate court denied jjvcis appeal april 2015 adimmune corporation ltd adimmune commenced arbitration international court arbitration international chamber commerce crucell switzerland ag janssen vaccines ag crucell holland bv janssen vaccines prevention bv collectively crucell adimmune claims crucell breached certain agreements relating supply flu antigen crucell ceased purchasing flu antigen adimmune december 2015 adimmune filed statement claim seeking monetary damages arbitration hearing took place november 2016 parties awaiting ruling august 2015 two thirdparty payors filed purported class action united states district court eastern district louisiana janssen research development llc janssen ortho llc janssen pharmaceuticals inc orthomcneiljanssen pharmaceuticals inc johnson well certain bayer entities alleging defendants improperly marketed promoted xarelto® safer effective less expensive alternative medications failing fully disclose risks complaint seeks damages unspecified amount johnson subsidiaries also parties number proceedings brought comprehensive environmental response compensation liability act commonly known superfund comparable state local foreign laws primary relief sought cost past andor future remediation 22 restructuring company announced restructuring actions medical devices segment better serve needs patients customers today’s evolving healthcare marketplace company undertaking actions strengthen gotomarket model accelerate pace innovation prioritize key platforms geographies streamline operations maintaining high quality standards company estimates connection plans record pretax restructuring related charges approximately 20 billion 24 billion 2016 company recorded pretax charge 685 million 45 million included cost products sold 149 million included income expense see table additional details total project costs 1275 billion recorded since restructuring announced additionally part plan company expects restructuring actions result position eliminations approximately 4 6 percent medical devices segment’s global workforce next two years subject consultation procedures countries required approximately 1500 positions eliminated since restructuring announced company estimates approximately onehalf cumulative pretax costs result cash outlays including approximately 500 million employee severance approximately one half cumulative pretax costs noncash relating primarily facility rationalization inventory writeoffs intangible asset writeoffs following table summarizes severance charges associated spending initiative fiscal year ended 2016 cash outlays severance expected substantially paid next 18 months accordance companys plans local laws includes project expense salaries employees supporting initiative consulting expenses report independent registered public accounting firm shareholders board directors johnson opinion accompanying consolidated balance sheets related consolidated statements earnings comprehensive income equity cash flows present fairly material respects financial position johnson subsidiaries january 1 2017 january 3 2016 results operations cash flows three years period ended january 1 2017 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting january 1 2017 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso companys management responsible financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinions financial statements companys internal control financial reporting based integrated audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions discussed note 1 consolidated financial statements company changed manner accounts presents certain elements share based payments 2016 company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp florham park new jersey february 27 2017 management’s report internal control financial reporting section 404 sarbanesoxley act 2002 management required assess effectiveness company’s internal control financial reporting end fiscal year report based assessment whether company’s internal control financial reporting effective management company responsible establishing maintaining adequate internal control financial reporting company’s internal control financial reporting designed provide reasonable assurance reliability company’s financial reporting preparation external financial statements accordance generally accepted accounting principles internal controls financial reporting matter well designed inherent limitations therefore internal control financial reporting determined effective provide reasonable assurance respect financial statement preparation may prevent detect misstatements moreover projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate company’s management assessed effectiveness company’s internal control financial reporting january 1 2017 making assessment company used criteria established committee sponsoring organizations treadway commission coso “internal controlintegrated framework 2013” criteria areas control environment risk assessment control activities information communication monitoring company’s assessment included extensive documenting evaluating testing design operating effectiveness internal controls financial reporting based company’s processes assessment described management concluded january 1 2017 company’s internal control financial reporting effective effectiveness company’s internal control financial reporting january 1 2017 audited pricewaterhousecoopers llp independent registered public accounting firm stated report appears herein alex gorsky dominic j caruso alex gorsky dominic j caruso chairman board directors executive vice president chief financial officer chief executive officer shareholder return performance graphs set forth line graphs comparing cumulative total shareholder return company’s common stock periods five years ten years ending december 31 2016 cumulative total return standard poor’s 500 stock index standard poor’s pharmaceutical index standard poor’s health care equipment index graphs tables assume 100 invested december 31 2011 december 31 2006 company’s common stock standard poor’s 500 stock index standard poor’s pharmaceutical index standard poor’s health care equipment index dividends reinvested 5 year shareholder return performance jj vs indices 10 year shareholder return performance jj vs indices item 9item 8 financial statements supplementary data index audited consolidated financial statements consolidated balance sheets consolidated statements earnings consolidated statements comprehensive income consolidated statements equity consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm management’s report internal control financial reporting johnson subsidiaries consolidated balance sheets december 30 2018 december 31 2017 dollars millions except share per share amounts note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements earnings dollars shares millions except per share amounts note 1 prior years amounts reclassified conform current year presentation adoption asu 201707 see notes consolidated financial statements johnson subsidiaries consolidated statements comprehensive income dollars millions note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements equity dollars millions note 1 see note 1 consolidated financial statements additional details effect cumulative adjustments retained earnings see notes consolidated financial statements johnson subsidiaries consolidated statements cash flows dollars millions note 1 see notes consolidated financial statements notes consolidated financial statements 1 summary significant accounting policies principles consolidation consolidated financial statements include accounts johnson subsidiaries company intercompany accounts transactions eliminated description company business segments company approximately 135100 employees worldwide engaged research development manufacture sale broad range products health care field company conducts business virtually countries world primary focus products related human health wellbeing company organized three business segments consumer pharmaceutical medical devices consumer segment includes broad range products used baby care oral care beauty overthecounter pharmaceutical women’s health wound care markets products marketed general public sold retail outlets distributors throughout world pharmaceutical segment focused six therapeutic areas including immunology infectious diseases neuroscience oncology pulmonary hypertension cardiovascular metabolic diseases products segment distributed directly retailers wholesalers hospitals health care professionals prescription use medical devices segment includes broad range products used orthopaedic surgery interventional solutions cardiovascular neurovascular diabetes care divested fiscal fourth quarter 2018 vision fields distributed wholesalers hospitals retailers used principally professional fields physicians nurses hospitals eye care professionals clinics new accounting standards recently adopted accounting standards asu 201409 revenue contracts customers january 1 2018 company adopted new accounting standard asc 606 revenue contracts customers related amendments new revenue standard contracts using modified retrospective method cumulative effect initially applying new revenue standard recognized adjustment opening balance retained earnings comparative information restated continues reported accounting standards effect periods adoption new revenue standard material impact either reported sales customers net earnings additionally company continue recognize revenue product sales goods shipped delivered customer control goods transfers time accordance new revenue standard requirements disclosure impact adoption companys consolidated statement earnings balance sheet follows company made cumulative effect adjustment 2018 opening balance retained earnings upon adoption asu 201409 decreased beginning retained earnings 47 million part adoption asc 606 see note 18 consolidated financial statements disaggregation revenue asu 201601 financial instruments recognition measurement financial assets financial liabilities company adopted standard beginning fiscal year 2018 modified retrospective basis amendments update supersede guidance classify equity securities readily determinable fair values different categories trading availableforsale require equity securities measured fair value changes fair value recognized net earnings standard amends financial reporting providing relevant information entity’s equity investments reducing number items recognized comprehensive income company made cumulative effect adjustment opening balance retained earnings upon adoption asu 201601 increased retained earnings 232 million net tax decreased accumulated comprehensive income previously unrealized gains equity investments additional details see note 6 consolidated financial statements asu 201616 income taxes intraentity transfers assets inventory company adopted standard beginning fiscal year 2018 update removes current exception us gaap prohibiting entities recognizing current deferred income tax expenses benefits related transfer assets inventory within consolidated entity current exception defer recognition tax impact transfer inventory within consolidated entity sold third party remains unaffected discussed note 8 consolidated financial statements fourth fiscal quarter 2018 company elected accounting policy treat tax global intangible lowtaxed income gilti deferred tax accounting model result company required record additional deferred tax liability related basis difference intraentity asset transfers company recorded net adjustments including increase deferred tax assets approximately 20 billion increase deferred tax liabilities approximately 17 billion related gilti accounting policy election fourth fiscal quarter 2018 decrease assets approximately 07 billion decrease retained earnings approximately 04 billion adoption standard material impact companys consolidated financial statements asu 201701 clarifying definition business company adopted standard beginning fiscal year 2018 update narrows definition business providing screen determine integrated set assets activities business screen specifies integrated set assets activities business substantially fair value gross assets acquired disposed concentrated single group similar identifiable assets update applied prospectively adoption standard material impact companys consolidated financial statements asu 201707 improving presentation net periodic pension cost net periodic postretirement benefit cost company adopted standard beginning fiscal year 2018 update requires employer disaggregate service cost component components net periodic benefit cost npbc addition service cost component eligible capitalization amendments update required applied retrospectively presentation service cost component components npbc consolidated statement earnings prospectively adoption date capitalization service cost component npbc assets required transition provisions update following table shows impact adoption respective line items consolidated statement earnings 2018 reclassifications 2017 2016 fiscal year consolidated statement earnings retroactively apply classification service cost component components npbc following table summarizes cumulative effect adjustments made 2018 opening balance retained earnings upon adoption new accounting standards mentioned asu 201712 targeted improvements accounting hedging activities company elected early adopt standard beginning fiscal second quarter 2018 update makes financial nonfinancial hedging strategies eligible hedge accounting also amends presentation disclosure requirements changes companies assess effectiveness adoption standard material impact companys consolidated financial statements additional required disclosures see note 6 consolidated financial statements recently issued accounting standards adopted december 30 2018 asu 201818 collaborative arrangements update clarifies interaction asc 808 collaborative arrangements asc 606 revenue contracts customers update clarifies certain transactions participants collaborative arrangement accounted asc 606 counterparty customer addition update precludes entity presenting consideration transaction collaborative arrangement revenue counterparty customer transaction update effective company fiscal years beginning december 15 2019 interim periods within fiscal years asu 201818 applied retrospectively date initial application asc 606 early adoption permitted company currently assessing impact update company’s consolidated financial statements related disclosures asu 201816 derivatives hedging topic asc 815 update adds overnight index swap ois rate based secured overnight financing rate sofr eligible benchmark interest rate permitted application hedge accounting update effective company fiscal years beginning december 15 2018 interim periods within fiscal years early adoption permitted entity adopted asu 201712 company currently assessing impact update company’s consolidated financial statements related disclosures asu 201802 reclassification certain tax effects accumulated comprehensive income update allows reclassification accumulated comprehensive income retained earnings stranded tax effects resulting tax cuts job act enacted december 2017 update effective company fiscal years beginning december 15 2018 interim periods within fiscal years company expect standard material impact companys consolidated financial statements asu 201613 financial instruments credit losses update introduces current expected credit loss cecl model require entity measure credit losses certain financial instruments financial assets including trade receivables update initial recognition reporting period entity required recognize allowance reflects entity’s current estimate credit losses expected incurred life financial instrument update effective company fiscal years beginning december 15 2019 interim periods within fiscal years early adoption permitted company currently assessing impact update company’s consolidated financial statements related disclosures asu 201602 leases update requires recognition lease assets lease liabilities balance sheet lease obligations disclosing key information leasing arrangements update requires recognition lease assets lease liabilities lessees leases classified operating leases current generally accepted accounting principles update effective company annual periods beginning december 15 2018 including interim periods within fiscal years company apply new standard adoption date rather earliest comparative period presented financial statements company’s operating leases result recognition additional assets corresponding liabilities consolidated balance sheets adoption standard material impact companys consolidated financial statements cash equivalents company classifies highly liquid investments stated maturities three months less date purchase cash equivalents highly liquid investments stated maturities greater three months date purchase current marketable securities company policy making investments commercial institutions least investment grade credit rating company invests cash primarily government securities obligations corporate debt securities money market funds reverse repurchase agreements rras collateralized deposits form government securities obligations amount less 102 value company record asset liability company permitted sell repledge associated collateral company policy collateral least equivalent credit rating company utilizes third party custodian manage exchange funds ensure collateral received maintained 102 value rras daily basis rras stated maturities greater three months date purchase classified marketable securities investments classified held maturity investments reported amortized cost realized gains losses reported earnings investments classified availableforsale carried estimated fair value unrealized gains losses recorded component accumulated comprehensive income availableforsale securities available current operations classified current assets otherwise classified long term management determines appropriate classification investment debt equity securities time purchase reevaluates determination balance sheet date company reviews investments equity securities impairment adjusts investments fair value earnings required property plant equipment depreciation property plant equipment stated cost company utilizes straightline method depreciation estimated useful lives assets company capitalizes certain computer software development costs included machinery equipment incurred connection developing obtaining computer software internal use capitalized software costs amortized estimated useful lives software generally range 3 8 years company reviews longlived assets assess recoverability using undiscounted cash flows certain events changes operating economic conditions occur impairment assessment may performed recoverability carrying value assets asset determined impaired loss measured based difference asset’s fair value carrying value quoted market prices available company estimate fair value using discounted value estimated future cash flows revenue recognition company recognizes revenue product sales obligations terms contract customer satisfied generally occurs transfer control goods customers companys global payment terms typically 30 90 days provisions certain rebates sales incentives trade promotions coupons product returns discounts customers accounted variable consideration recorded reduction sales product discounts granted based terms arrangements direct indirect market participants well market conditions including consideration competitor pricing rebates estimated based contractual terms historical experience patient outcomes trend analysis projected market conditions various markets served company evaluates market conditions products groups products primarily analysis wholesaler thirdparty sellthrough market research data well internally generated information sales returns estimated recorded based historical sales returns information products exhibit unusual sales return patterns due dating competition marketing matters specifically investigated analyzed part accounting sales return accruals sales returns allowances represent reserve products may returned due expiration destruction field specific areas product recall sales returns reserve based historical return trends product market percent gross sales accordance company’s accounting policies company generally issues credit customers returned goods company’s sales returns reserves accounted accordance us gaap guidance revenue recognition right return exists sales returns reserves recorded full sales value sales returns consumer pharmaceutical segments almost exclusively resalable sales returns certain franchises medical devices segment typically resalable material company infrequently exchanges products inventory returned products sales returns reserve total company approximately 10 annual net trade sales fiscal reporting years 2018 2017 2016 promotional programs product listing allowances cooperative advertising arrangements recorded period related sales continuing promotional programs include coupons volumebased sales incentive programs redemption cost consumer coupons based historical redemption experience product value volumebased incentive programs based estimated sales volumes incentive period recorded products sold arrangements evaluated determine appropriate amounts deferred recorded reduction revenue company also earns profitshare payments collaborative arrangements certain products included sales customers years presented profitshare payments less 20 total revenues included sales customers shipping handling shipping handling costs incurred 1090 million 1042 million 974 million 2018 2017 2016 respectively included selling marketing administrative expense amount revenue received shipping handling less 05 sales customers periods presented inventories stated lower cost net realizable value determined firstin firstout method intangible assets goodwill authoritative literature us gaap requires goodwill intangible assets indefinite lives assessed annually impairment company completed annual impairment test 2018 fiscal fourth quarter future impairment tests performed annually fiscal fourth quarter sooner warranted purchased inprocess research development accounted indefinite lived intangible asset underlying project completed point intangible asset accounted definite lived intangible asset abandoned point intangible asset written partially impaired intangible assets finite useful lives continue amortized useful lives reviewed impairment warranted economic conditions see note 5 details intangible assets goodwill financial instruments required us gaap derivative instruments recorded balance sheet fair value fair value exit price would received sell asset paid transfer liability fair value marketbased measurement determined using assumptions market participants would use pricing asset liability authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value level 1 highest priority level 3 lowest changes fair value derivatives recorded period current earnings comprehensive income depending whether derivative designated part hedge transaction type hedge transaction company documents relationships hedged items derivatives overall risk management strategy includes reasons undertaking hedge transactions entering derivatives objectives strategy 1 minimize foreign currency exposure’s impact company’s financial performance 2 protect company’s cash flow adverse movements foreign exchange rates 3 ensure appropriateness financial instruments 4 manage enterprise risk associated financial institutions see note 6 additional information financial instruments product liability accruals product liability claims recorded undiscounted basis probable liability incurred amount liability reasonably estimated based existing information actuarially determined estimates applicable accruals adjusted periodically additional information becomes available company accrues estimate legal defense costs needed defend matter costs probable reasonably estimated extent adverse verdicts rendered company record accrual loss determined probable reasonably estimated result cost availability factors effective november 1 2005 company ceased purchasing thirdparty product liability insurance company self insurance whollyowned captive insurance company addition accruals self insurance program claims exceed insurance coverage accrued losses probable amounts reasonably estimated research development research development expenses expensed incurred accordance asc 730 research development upfront milestone payments made third parties connection research development collaborations expensed incurred point regulatory approval payments made third parties subsequent regulatory approval capitalized amortized remaining useful life related product amounts capitalized payments included intangibles net accumulated amortization company enters collaborative arrangements typically pharmaceutical biotechnology companies develop commercialize drug candidates intellectual property arrangements typically involve two parties active participants collaboration exposed significant risks rewards dependent commercial success activities collaborations usually involve various activities one parties including research development marketing selling distribution often collaborations require upfront milestone royalty profit share payments contingent upon occurrence certain future events linked success asset development amounts due collaborative partners related development activities generally reflected reduction research development expense performance contract development services central company’s operations general income statement presentation collaborations follows milestones capitalized intangible assets amortized cost products sold useful life years presented individual project represented greater 5 total annual consolidated research development expense company number products compounds developed collaboration strategic partners including xarelto® codeveloped bayer healthcare ag imbruvica® developed collaboration comarketed pharmacyclics llc abbvie company number licensing arrangements products compounds including darzalex® licensed genmab advertising costs associated advertising expensed year incurred included selling marketing administrative expenses advertising expenses worldwide comprised television radio print media internet advertising 26 billion 25 billion 24 billion 2018 2017 2016 respectively income taxes income taxes recorded based amounts refundable payable current year include results difference us gaap accounting tax reporting recorded deferred tax assets liabilities company estimates deferred tax assets liabilities based enacted tax regulations rates future changes tax laws rates may affect recorded deferred tax assets liabilities future company unrecognized tax benefits uncertain tax positions company follows us gaap prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return management believes changes estimates would material effect companys results operations cash flows financial position fourth fiscal quarter 2018 company elected account gilti tax deferred method deferred tax amounts recorded based evaluation temporary differences expected reverse gilti incurred company recorded deferred tax liabilities undistributed earnings prior december 31 2017 international subsidiaries company provided deferred taxes undistributed earnings subsequent january 1 2018 certain international subsidiaries earnings considered indefinitely reinvested company intends continue reinvest earnings international operations company decides later date repatriate earnings us company would required provide net tax effects amounts company estimates total tax effect repatriation would approximately 07 billion current enacted tax laws regulations current currency exchange rates see note 8 information regarding income taxes net earnings per share basic earnings per share computed dividing net earnings available common shareholders weighted average number common shares outstanding period diluted earnings per share reflects potential dilution could occur securities exercised converted common stock using treasury stock method use estimates preparation consolidated financial statements conformity accounting principles generally accepted us requires management make estimates assumptions affect amounts reported estimates used accounting sales discounts rebates allowances incentives product liabilities income taxes withholding taxes depreciation amortization employee benefits contingencies intangible asset liability valuations actual results may differ estimates company follows provisions us gaap recording litigation related contingencies liability recorded loss probable reasonably estimated best estimate loss within range accrued however estimate range better minimum amount accrued annual closing date company follows concept fiscal year ends sunday nearest end month december normally fiscal year consists 52 weeks every five six years fiscal year consists 53 weeks therefore includes additional shipping days case 2015 case 2020 reclassification certain prior period amounts reclassified conform current year presentation 2 cash equivalents current marketable securities end 2018 2017 cash equivalents current marketable securities comprised 2018 carrying amount estimated fair value 2017 carrying amount estimated fair value 1 held maturity investments reported amortized cost realized gains losses reported earnings 2 available sale debt securities reported fair value unrealized gains losses reported net taxes comprehensive income fair value government securities obligations corporate debt securities estimated using quoted broker prices significant observable inputs contractual maturities available sale debt securities december 30 2018 follows company invests excess cash deposits major banks throughout world highquality money market instruments company policy making investments commercial institutions least investment grade credit rating 3 inventories end 2018 2017 inventories comprised 1 net assets held sale consolidated balance sheet approximately 02 billion related divestiture advanced sterilization products business 03 billion related strategic collaboration jabil inc pending december 30 2018 4 property plant equipment end 2018 2017 property plant equipment cost accumulated depreciation 1 net assets held sale consolidated balance sheet approximately 01 billion related divestiture advanced sterilization products business 01 billion related strategic collaboration jabil inc pending december 30 2018 company capitalizes interest expense part cost construction facilities equipment interest expense capitalized 2018 2017 2016 86 million 94 million 102 million respectively depreciation expense including amortization capitalized interest 2018 2017 2016 26 billion 26 billion 25 billion respectively upon retirement disposal property plant equipment costs related amounts accumulated depreciation amortization eliminated asset accumulated depreciation accounts respectively difference net asset value proceeds recorded earnings 5 intangible assets goodwill end 2018 2017 gross net amounts intangible assets 1 decrease primarily attributable writedown 11 billion related assets acquired acquisitions alios biopharma inc alios xo1 limited xo1 11 billion company recorded partial impairment charge 08 billion related development program al8176 investigational drug treatment respiratory syncytial virus rsv human metapneumovirus hmpv acquired 2014 acquisition alios impairment charge calculated based updated cash flow projections discounted inherent risk asset development reflects impact phase 2b clinical trial suspension decrease probability success factors ongoing analysis asset development activities addition impairment charge 03 billion recorded discontinuation development project antithrombin antibody associated 2015 acquisition xo1 additionally 08 billion iprd related erleada™ reclassified definite lived intangible assets upon commercialization goodwill december 30 2018 december 31 2017 allocated segment business follows 1 goodwill 62 billion related actelion acquisition acquired fiscal second quarter 2017 within pharmaceutical segment 17 billion related amo acquisition acquired fiscal first quarter 2017 within medical devices segment 2 goodwill 10 billion related divestiture lifescan business goodwill 03 billion related divestiture advanced sterilization products business pending classified assets held sale consolidated balance sheet december 30 2018 weighted average amortization periods patents trademarks customer relationships intangible assets 11 years 22 years respectively amortization expense amortizable assets included cost products sold 44 billion 30 billion 12 billion tax fiscal years ended december 30 2018 december 31 2017 january 1 2017 respectively estimated amortization expense five succeeding years approximates 43 billion tax per year intangible asset writedowns included income expense net see note 20 consolidated financial statements additional details related acquisitions divestitures 6 fair value measurements company uses forward foreign exchange contracts manage exposure variability cash flows primarily related foreign exchange rate changes future intercompany products thirdparty purchases materials denominated foreign currency company uses cross currency interest rate swaps manage currency risk primarily related borrowings types derivatives designated cash flow hedges additionally company uses interest rate swaps instrument manage interest rate risk related fixed rate borrowings derivatives designated fair value hedges company uses cross currency interest rate swaps forward foreign exchange contracts designated net investment hedges additionally company uses forward foreign exchange contracts offset exposure certain foreign currency assets liabilities forward foreign exchange contracts designated hedges therefore changes fair values derivatives recognized earnings thereby offsetting current earnings effect related foreign currency assets liabilities company early adopted asu 201712 targeted improvements accounting hedge activities effective beginning fiscal second quarter 2018 company enter derivative financial instruments trading speculative purposes contain credit risk related contingent features fiscal second quarter 2017 company entered credit support agreements csa certain derivative counterparties establishing collateral thresholds based respective credit ratings netting agreements december 30 2018 total amount collateral paid credit support agreements csa amounted 182 million net ongoing basis company monitors counterparty credit ratings company considers credit nonperformance risk low company primarily enters agreements commercial institutions least investment grade credit rating refer table significant financial assets liabilities measured fair value contained footnote receivables payables commercial institutions december 30 2018 company notional amounts outstanding forward foreign exchange contracts cross currency interest rate swaps interest rate swaps 411 billion 73 billion 05 billion respectively december 31 2017 company notional amounts outstanding forward foreign exchange contracts cross currency interest rate swaps interest rate swaps 345 billion 23 billion 11 billion respectively derivative instruments recorded balance sheet fair value changes fair value derivatives recorded period current earnings comprehensive income depending whether derivative designated part hedge transaction type hedge transaction designation cash flow hedge made entrance date derivative contract inception derivatives expected highly effective foreign exchange contracts designated cash flow hedges accounted forward method gainslosses associated contracts recognized income statement hedged item impacts earnings changes fair value derivatives recorded accumulated comprehensive income underlying transaction affects earnings reclassified earnings account hedged transaction gains losses associated interest rate swaps changes fair value hedged debt attributable changes interest rates recorded interest expense period occur gains losses net investment hedge accounted currency translation account within accumulated comprehensive income portion excluded effectiveness testing recorded interest income expense using spot method ongoing basis company assesses whether derivative continues highly effective offsetting changes hedged items derivative longer expected highly effective hedge accounting discontinued fiscal second quarter 2016 company designated euro denominated notes issued may 2016 due dates ranging 2022 2035 net investment hedge companys investments certain international subsidiaries use euro functional currency order reduce volatility caused changes exchange rates december 30 2018 balance deferred net loss derivatives included accumulated comprehensive income 195 million aftertax additional information see consolidated statements comprehensive income note 13 company expects substantially amounts related forward foreign exchange contracts reclassified earnings next 12 months result transactions expected occur period maximum length time company hedging transaction exposure 18 months excluding interest rate contracts net investment hedges equity collar contracts amount ultimately realized earnings may differ foreign exchange rates change realized gains losses ultimately determined actual exchange rates maturity derivative following table summary activity related derivatives hedges fiscal years ended december 30 2018 december 31 2017 1 includes equity collar contracts equity collar contracts expired december 2017 fiscal years ended december 30 2018 december 31 2017 following amounts recorded consolidated balance sheet company adopted asu 201601 financial instruments recognition measurement financial assets financial liabilities beginning fiscal year 2018 asu amends prior guidance classify equity investments readily determinable market values different categories trading availableforsale require equity investments measured fair value changes fair value recognized net earnings company made cumulative effect adjustment opening balance retained earnings upon adoption asu 201601 increased retained earnings 232 million net tax decreased accumulated comprehensive income previously net unrealized gains equity investments company holds equity investments readily determinable fair values equity investments without readily determinable fair values company elected measure equity investments readily determinable fair values cost minus impairment plus minus changes resulting observable price changes orderly transactions identical similar investment issuer following table summary activity related equity investments december 30 2018 1 recorded incomeexpense 2 includes impact currency equity investments without readily determinable market values 54 million changes fair value reflected net income result impairments 67 million changes fair value reflected net income due changes observable prices fiscal years ended december 31 2017 changes fair value reflected within comprehensive income due previously unrealized gains equity investments readily determinable fair values net tax net gain 232 million fair value exit price would received sell asset paid transfer liability fair value marketbased measurement determined using assumptions market participants would use pricing asset liability authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value levels within hierarchy described level 1 highest priority level 3 lowest fair value derivative financial instrument ie forward foreign exchange contracts interest rate contracts aggregation currency future cash flows discounted present value prevailing market interest rates subsequently converted us dollar current spot foreign exchange rate company believe fair values derivative instruments materially differ amounts could realized upon settlement maturity changes fair value material effect company’s results operations cash flows financial position company also holds equity investments classified level 1 debt securities classified level 2 company significant financial assets liabilities would require revised valuations standard recognized fair value following three levels inputs used measure fair value level 1 quoted prices active markets identical assets liabilities level 2 significant observable inputs level 3 significant unobservable inputs company’s significant financial assets liabilities measured fair value december 30 2018 december 31 2017 follows 1 2017 assets liabilities classified level 2 exception equity investments 751 million classified level 1 2 includes 6 million 7 million noncurrent assets fiscal years ending december 30 2018 december 31 2017 respectively 3 includes 3 million 9 million noncurrent liabilities fiscal years ending december 30 2018 december 31 2017 respectively 4 includes cross currency interest rate swaps interest rate swaps 5 classified noncurrent assets carrying amount equity investments 511 million 751 million december 30 2018 december 31 2017 respectively 6 classified cash equivalents current marketable securities see notes 2 7 financial assets liabilities held carrying amount consolidated balance sheet 7 borrowings components longterm debt follows 1 weighted average effective rate 2 translation rate december 30 2018 3 translation rate december 31 2017 4 excess fair value carrying value debt 03 billion 2018 20 billion 2017 fair value longterm debt estimated using market prices corroborated quoted broker prices significant observable inputslevel 2 company access substantial sources funds numerous banks worldwide september 2018 company secured new 364day credit facility total credit available company approximates 10 billion expires september 12 2019 interest charged borrowings credit line agreements based either bids provided banks prime rate london interbank offered rates libor plus applicable margins commitment fees agreements material throughout 2018 company continued access liquidity commercial paper market shortterm borrowings current portion longterm debt amounted approximately 28 billion end 2018 26 billion current portion long term debt remainder principally represents local borrowing international subsidiaries throughout 2017 company continued access liquidity commercial paper market shortterm borrowings current portion longterm debt amounted approximately 39 billion end 2017 23 billion borrowed commercial paper program 15 billion current portion longterm debt remainder principally represents local borrowing international subsidiaries aggregate maturities longterm obligations commencing 2019 8 income taxes provision taxes income consists comparison income tax expense us statutory rate 21 2018 35 2017 2016 company’s effective tax rate follows 1 periods presented company subsidiaries operating puerto rico various tax incentives international operations reflects impacts operations jurisdictions statutory tax rates different us particularly ireland switzerland puerto rico favorable impact effective tax rate compared us statutory rate 2017 amount also includes tax cost related revaluation deferred tax balances related change belgian statutory tax rate increasing tax provision approximately 34 2 includes impact gilti tax foreignderived intangible income deduction foreign income taxable us tax code 3 represents impact adjustments 2017 tcja provisional tax charge also includes net tax benefit reduction deferred tax liability related foreign withholding taxes originally accrued part provisional charge benefit reduced company’s effective tax rate approximately 11 description included 4 includes us state local taxes provisionally recorded part tcja provisional charge approximately 06 total effective tax rate december 22 2017 united states enacted law new us tax legislation tax cuts jobs act tcja law included provisions comprehensive overhaul corporate income tax code including reduction statutory corporate tax rate 35 21 effective january 1 2018 legislation also eliminated reduced certain corporate income tax deductions well introduced new provisions taxed certain foreign income previously taxed united states tcja also included provision tax previously undistributed earnings us companies located foreign jurisdictions undistributed earnings form cash equivalents taxed rate 155 earnings taxed rate 80 tax payable 8 years accrue interest payments began 2018 continue 2025 remaining balance end fiscal year 2018 approximately 82 billion december 2017 sec provided regulatory guidance accounting impacts tcja referred sab 118 guidance sab 118 income tax effects accounting asc 740 incomplete reported provisional amount based reasonable estimate reasonable estimate subject adjustment measurement period exceed one year accounting complete estimate also subject finalization management’s analysis related certain matters developing interpretations provision tcja changes certain estimates amounts related earnings profits certain subsidiaries filing tax returns fourth quarter 2017 company recorded provisional tax cost approximately 130 billion consisted primarily following components • 101 billion charge previously undistributed foreign earnings december 31 2017 • 45 billion deferred tax liability foreign local withholding taxes offset 11 billion deferred tax asset us foreign tax credits repatriation substantially earnings • 06 billion tax benefit relating remeasurement us deferred tax assets liabilities impact tcja unrecognized tax benefits • 01 billion charge us state local taxes repatriation foreign earnings fourth quarter 2018 company completed full assessment finalized accounting impact tcja company recorded net adjustments components provisional charge approximately 02 billion revisions based updated estimates additional analysis management well applying interpretative guidance issued us department treasury facts circumstances existed tcja enactment date charge primarily related additional deferred tax liabilities foreign local withholding taxes remaining balance undistributed foreign earnings december 31 2017 provided provisional charge fourth quarter 2017 tcja also includes provisions tax global intangible lowtaxed income gilti described excess us shareholder’s total net foreign income deemed return tangible assets provided tcja january 2018 fasb issued guidance allows companies elect accounting policy whether record tax effects gilti period tax liability generated ie “period cost” provide deferred tax assets liabilities related basis differences exist expected effect amount gilti inclusion future years upon reversal ie “deferred method” third fiscal quarter 2018 company provisionally elected treat gilti period expense upon analysis new tax provision company elected account gilti deferred method deferred tax amounts recorded based evaluation temporary differences expected reverse gilti incurred result election company recorded deferred tax cost related gilti approximately 14 billion fourth fiscal quarter 2018 related facts circumstances existed date tcja enactment result gilti deferred tax charge adjustments provisional amount company recorded total 16 billion adjustments 2017 provisional charge increasing company’s annual effective tax rate approximately 9 2018 company reorganized ownership structure certain foreign subsidiaries resulted reduction certain foreign withholding taxes recognized part provisional tcja tax charge fourth quarter 2017 following completion restructuring fourth quarter 2018 result clarification swiss tax authorities regarding applicability withholding tax repatriation certain earnings company reversed deferred tax liability 28 billion related deferred tax asset 09 billion us foreign tax credits net deferred tax benefit 19 billion restructuring occurred tcja enactment date benefit considered adjustment provisional amount recorded 2017 sab118 benefit sab 118 adjustments reflected “tcja related impacts” company’s effective tax rate reconciliation described note 1 consolidated financial statements 2018 company adopted asu 201616 income taxes intraentity transfers assets inventory standard requires entities recognize deferred tax assets liabilities related transfer assets inventory within consolidated entity beginning fiscal 2018 company recorded net adjustment deferred tax assets approximately 20 billion fourth quarter 2018 result election record gilti deferred method company recorded gilti deferred tax liability 17 billion related adoption provisions asu 201616 adjustment retained earnings 2018 effective tax rate decreased 776 compared 2017 effective tax rate primarily driven approximately 13 billion provisional tax charge recorded fourth quarter 2017 impact belgian statutory tax rate change increased 2017 effective rate 34 additional drivers 2018 annual effective tax • reduction us statutory corporate tax rate including effects tax elections resulted acceleration certain deductions 2017 tax return impact accelerated deductions decreased annual effective tax rate approximately 17 • impact adjustments 2017 provisional tcja charge including sab 118 adjustments internal restructuring decreased effective tax rate approximately 19 • gilti tax increased annual effective tax rate approximately 16 excludes impact sab 118 adjustment adoption deferred method gilti • tax benefits received stockbased compensation fiscal 2018 2017 reduced effective tax rate 15 20 respectively • fourth quarter 2018 company completed divestiture lifescan business note 20 increased company annual effective tax rate approximately 08 • income higher tax jurisdictions relative lower tax jurisdictions compared 2017 effective tax rate increased 761 compared 2016 primarily driven enactment tcja us december 2017 enactment tcja resulted provisional tax charge fourth quarter 2017 approximately 130 billion approximately 733 percentage point increase effective tax rate remainder increase tax rate 2017 related remeasurement company’s deferred tax assets belgium result changes belgian statutory corporate tax rate enacted december 2017 offset tax benefit closure company’s animas insulin pump business temporary differences carryforwards 2018 2017 follows company whollyowned international subsidiaries cumulative net losses company believes likely subsidiaries generate future taxable income sufficient utilize deferred tax assets following table summarizes activity related unrecognized tax benefits 1 2017 347 million decrease related tcja unrecognized tax benefits 33 billion december 30 2018 recognized would affect company’s annual effective tax rate company conducts business files tax returns numerous countries currently tax audits progress number tax authorities irs completed audit tax years 2009 currently auditing tax years 20102012 company currently expects completion audit 2019 final conclusion tax audit may result outcome different company’s estimates may result material impact company’s current future operating results cash flows period audit concluded major jurisdictions company conducts business years remain open tax audit go back year 2006 company believes possible audits may completed tax authorities jurisdictions next twelve months however company able provide reasonably reliable estimate timing future tax payments relating uncertain tax positions company classifies liabilities unrecognized tax benefits related interest penalties longterm liabilities interest expense penalties related unrecognized tax benefits classified income tax expense company recognized tax interest expense 53 million 60 million 7 million 2018 2017 2016 respectively total amount accrued interest 503 million 436 million 2018 2017 respectively 9 employee related obligations end 2018 2017 employee related obligations recorded consolidated balance sheets prepaid employee related obligations 475 million 526 million 2018 2017 respectively included assets consolidated balance sheets 10 pensions benefit plans company sponsors various retirement pension plans including defined benefit defined contribution termination indemnity plans cover employees worldwide company also provides postretirement benefits primarily health care eligible us retired employees dependents many international employees covered governmentsponsored programs cost company significant retirement plan benefits employees hired january 1 2015 primarily based employee’s compensation last three five years retirement number years service 2014 company announced us defined benefit plan amended adopt new benefit formula effective employees hired january 1 2015 benefits calculated using new formula based employee compensation total years service international subsidiaries plans funds deposited trustees annuities purchased group contracts reserves provided company typically fund retiree health care benefits advance may discretion company also right modify plans future 2018 2017 company used december 31 2018 december 31 2017 respectively measurement date us international retirement benefit plans net periodic benefit costs company’s defined benefit retirement plans benefit plans 2018 2017 2016 include following components 2018 per adoption asu 201707 service cost component net periodic benefit cost presented line items consolidated statement earnings employee compensation costs reported components net periodic benefit cost presented part income expense net consolidated statement earnings amounts expected recognized net periodic benefit cost coming year company’s defined benefit retirement plans postretirement plans unrecognized gains losses us pension plans amortized average remaining future service plan plans active employees amortized average life expectancy amortization gains losses us benefit plans determined using 10 corridor greater market value assets accumulated postretirement benefit obligation total unamortized gains losses excess corridor amortized average remaining future service prior service costsbenefits us pension plans amortized average remaining future service plan participants time plan amendment prior service costbenefit us benefit plans amortized average remaining service full eligibility age plan participants time plan amendment following table represents weightedaverage actuarial assumptions company’s discount rates determined considering current yield curves representing high quality longterm fixed income instruments resulting discount rates consistent duration plan liabilities fiscal year 2016 company changed methodology determining service interest cost single weighted average discount rate approach duration specific spot rates along yield curve plans’ liability cash flows management concluded precise estimate prior change methodology company measured service interest costs utilizing single weightedaverage discount rate derived yield curve used measure plan obligations company accounted change accounting estimate accordingly accounted prospective basis change impact benefit obligation material impact 2016 full year results expected rates return plan asset assumptions represent companys assessment longterm returns diversified investment portfolios globally assessment determined using projections external financial sources longterm historical averages actual returns asset class various asset class allocations market following table displays assumed health care cost trend rates individuals onepercentagepoint change assumed health care cost trend rates would following effect following table sets forth information related benefit obligation fair value plan assets yearend 2018 2017 company’s defined benefit retirement plans postretirement plans company plans continue fund us qualified plans comply pension protection act 2006 international plans funded accordance local regulations additional discretionary contributions made deemed appropriate meet longterm obligations plans certain plans funding common practice funding provides economic benefit consequently company several pension plans funded 2018 company contributed 679 million 461 million us international pension plans respectively following table displays funded status companys us qualified nonqualified pension plans international funded unfunded pension plans december 31 2018 december 31 2017 respectively plans accumulated benefit obligations excess plan assets accumulated benefit obligation projected benefit obligation plan assets 75 billion 88 billion 43 billion respectively end 2018 38 billion 46 billion 07 billion respectively end 2017 following table displays projected future benefit payments company’s retirement benefit plans following table displays projected future minimum contributions unfunded retirement plans amounts include discretionary contributions company may elect make future pension plan overseen local committee board responsible overall administration investment pension plans determining investment policies strategies goals committee board considers factors including local pension rules regulations local tax regulations availability investment vehicles separate accounts commingled accounts insurance funds etc funded status plans ratio actives retirees duration liabilities relevant factors including diversification liquidity local markets liquidity base currency majority company’s pension funds open new entrants expected ongoing plans permitted investments primarily liquid andor listed little reliance illiquid nontraditional investments hedge funds company’s retirement plan asset allocation end 2018 2017 target allocations 2019 follows determination fair value plan assets plan established welldocumented process determining fair values fair value based upon quoted market prices available listed prices quotes available fair value based upon models primarily use inputs marketbased independently sourced market parameters including yield curves interest rates volatilities equity debt prices foreign exchange rates credit curves plan believes valuation methods appropriate consistent market participants use different methodologies assumptions determine fair value certain financial instruments could result different estimate fair value reporting date valuation hierarchy authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value levels within hierarchy described table level 1 highest priority level 3 lowest financial instrument’s categorization within valuation hierarchy based upon lowest level input significant fair value measurement following description valuation methodologies used investments measured fair value • shortterm investment funds cash quoted shortterm instruments valued closing price amount held deposit custodian bank investments investment vehicles valued using net asset value nav provided administrator fund nav based value underlying assets owned fund minus liabilities divided number shares outstanding nav quoted price market active classified level 2 • government agency securities limited number investments valued closing price reported major market individual securities traded quoted prices available active market investments classified within level 1 valuation hierarchy quoted market prices available specific security fair values estimated using pricing models quoted prices securities similar characteristics discounted cash flows quoted market prices security available active market classified level 2 • debt instruments limited number investments valued closing price reported major market individual securities traded quoted prices available active market investments classified level 1 quoted market prices available specific security fair values estimated using pricing models quoted prices securities similar characteristics discounted cash flows classified level 2 level 3 debt instruments priced based unobservable inputs • equity securities equity securities valued closing price reported major market individual securities traded substantially common stock classified within level 1 valuation hierarchy • commingled funds investment vehicles valued using nav provided fund administrator nav based value underlying assets owned fund minus liabilities divided number shares outstanding assets level 2 category quoted market price • insurance contracts instruments issued insurance companies fair value based negotiated value underlying investments held separate account portfolios well considering credit worthiness issuer underlying investments government assetbacked fixed income securities general insurance contracts classified level 3 quoted prices observable inputs pricing • assets represented primarily limited partnerships real estate investments well commercial loans commercial mortgages classified corporate debt assets exchange listed actively traded classified level 1 inactively traded assets classified level 2 following table sets forth retirement plans investments measured fair value december 31 2018 december 31 2017 activity level 3 assets significant years presented companys benefit plans unfunded except us commingled funds level 2 72 million 81 million us shortterm investment funds level 2 108 million 200 million december 31 2018 december 31 2017 respectively fair value johnson common stock directly held plan assets 876 million 33 total plan assets december 31 2018 938 million 33 total plan assets december 31 2017 11 savings plan company voluntary 401k savings plans designed enhance existing retirement programs covering eligible employees company matches percentage employee’s contributions consistent provisions plan heshe eligible total company matching contributions plans 242 million 214 million 191 million 2018 2017 2016 respectively 12 capital treasury stock changes treasury stock aggregate shares common stock issued approximately 3119843000 shares end 2018 2017 2016 cash dividends paid 354 per share 2018 compared dividends 332 per share 2017 315 per share 2016 december 17 2018 company announced board directors approved share repurchase program authorizing company purchase 50 billion companys shares common stock repurchase program time limit may suspended periods discontinued time shares acquired available general corporate purposes company intends finance share repurchase program available cash december 30 2018 09 billion repurchased program october 13 2015 company announced board directors approved share repurchase program authorizing company purchase 100 billion companys shares common stock share repurchase program completed july 2 2017 13 accumulated comprehensive income loss components comprehensive income loss consist following 1 see note 1 consolidated financial statements additional details adoption asu 201601 amounts accumulated comprehensive income presented net related tax impact foreign currency translation adjusted income taxes relates permanent investments international subsidiaries additional details comprehensive income see consolidated statements comprehensive income details reclassifications accumulated comprehensive income gainloss securities reclassifications released income expense net employee benefit plans reclassifications included net periodic benefit cost see note 10 additional details gainloss derivatives hedges reclassifications earnings recorded account hedged transaction see note 6 additional details 14 international currency translation subsidiaries operating nonus dollar currencies company determined local currencies international subsidiaries functional currencies except highly inflationary economies defined compound cumulative rates inflation 100 past three years substantial portion cash flows local currency beginning fiscal third quarter 2018 company accounted operations argentina highly inflationary majority companys subsidiaries local currency functional currency consolidating international subsidiaries balance sheet currency effects recorded component accumulated comprehensive income equity account includes results translating certain balance sheet assets liabilities current exchange rates accounts historical rates except located highly inflationary economies translation balance sheet accounts highly inflationary economies reflected operating results rollforward changes 2018 2017 2016 foreign currency translation adjustments included note 13 net currency transaction gains losses included income expense losses 265 million 216 million 289 million 2018 2017 2016 respectively 15 earnings per share following reconciliation basic net earnings per share diluted net earnings per share fiscal years ended december 30 2018 december 31 2017 january 1 2017 diluted net earnings per share calculation included dilutive effect convertible debt offset related reduction interest expense 1 million aftertax 2018 2017 2 million 2016 diluted net earnings per share calculation 2018 2017 2016 included shares related stock options exercise price options less average market value companys stock 16 rental expense lease commitments rentals space vehicles manufacturing equipment office data processing equipment operating leases approximately 332 million 372 million 330 million 2018 2017 2016 respectively approximate minimum rental payments required operating leases initial remaining noncancelable lease terms excess one year december 30 2018 dollars millions commitments capital leases significant 17 common stock option plans stock compensation agreements december 30 2018 company 2 stockbased compensation plans shares outstanding contracts companys 2005 longterm incentive plan 2012 longterm incentive plan 2005 longterm incentive plan expired april 26 2012 options restricted shares granted subsequent date 2012 longterm incentive plan 2012 longterm incentive plan company may issue 650 million shares common stock plus shares canceled expired forfeited issued 2005 longterm incentive plan subsequent april 26 2012 shares available future grants 2012 longterm incentive plan 351 million end 2018 compensation cost charged income plans 978 million 962 million 878 million 2018 2017 2016 respectively total income tax benefit recognized income statement sharebased compensation costs 192 million 275 million 256 million 2018 2017 2016 respectively additional tax benefit 353 million recognized 2016 due adoption new accounting standard reporting additional tax benefits sharebased compensation total unrecognized compensation cost 827 million 798 million 749 million 2018 2017 2016 respectively weighted average period cost recognized 173 years 176 years 109 years 2018 2017 2016 respectively sharebased compensation costs capitalized part inventory insignificant periods company settles employee benefit equity issuances treasury shares treasury shares replenished throughout year number shares used settle employee benefit equity issuances stock options stock options expire 10 years date grant vest service periods range 6 months 4 years options granted average high low prices company’s common stock new york stock exchange date grant fair value option award estimated date grant using blackscholes option valuation model uses assumptions noted following table 2018 2017 2016 grants expected volatility represents blended rate 10year weekly historical overall volatility rate 5week average implied volatility rate based atthemoney traded johnson options life 2 years grants historical data used determine expected life option riskfree rate based us treasury yield curve effect time grant average fair value options granted 1798 1338 1001 2018 2017 2016 respectively fair value estimated based weighted average assumptions summary option activity plan december 30 2018 december 31 2017 january 1 2017 changes years ending dates presented total intrinsic value options exercised 1028 million 1060 million 980 million 2018 2017 2016 respectively following table summarizes stock options outstanding exercisable december 30 2018 1 average contractual life remaining years stock options outstanding december 31 2017 january 1 2017 111306 average life 63 years 113455 average life 62 years respectively stock options exercisable december 31 2017 january 1 2017 52421 average price 7361 50414 average price 6577 respectively restricted share units performance share units company grants restricted share units vest service periods range 6 months 3 years company also grants performance share units paid shares johnson common stock end threeyear performance period whether performance share units vest amount vest tied completion service periods range 6 months 3 years achievement threeyear period three equallyweighted goals directly align help drive longterm total shareholder return operational sales adjusted operational earnings per share relative total shareholder return number shares actually earned end threeyear period vary based actual performance 0 200 target number performance share units granted fourth quarter 2017 company modified restricted share units scheduled vest january 1 2018 march 15 2018 modification guaranteed minimum aggregate value market value total expected payout amount awards expected vest period amount committed material company’s overall financial position summary restricted share units performance share units activity plans december 30 2018 presented average fair value restricted share units granted 11967 10769 9245 2018 2017 2016 respectively using fair market value date grant fair value restricted share units discounted dividends paid restricted share units vesting period fair value restricted share units issued 6137 million 5965 million 5877 million 2018 2017 2016 respectively weighted average fair value performance share units granted 12064 11413 10530 2018 2017 2016 calculated using weighted average fair market value three component goals date grant fair values sales earnings per share goals performance share unit estimated date grant using fair market value shares time award discounted dividends paid performance share units vesting period fair value relative total shareholder return goal performance share unit estimated date grant using monte carlo valuation model fair value performance share units issued 1288 million 1325 million 1277 million 2018 2017 2016 respectively 18 segments business geographic areas percentage greater 100 meaningful ­ see note 1 description segments company operates export sales significant 2018 company three wholesalers distributing products three segments represented approximately 140 110 total consolidated revenues 2017 company two wholesalers distributing products three segments represented approximately 140 100 total consolidated revenues 2016 company two wholesalers distributing products three segments represented approximately 135 107 total consolidated revenues 1 amounts allocated segments include interest income expense general corporate income expense 2 general corporate includes cash equivalents marketable securities 3 consumer segment includes gain 03 billion divestiture nizoral® litigation expense 03 billion pharmaceutical segment includes inprocess research development charge 11 billion related alios xo1 assets corresponding xo1 contingent liability reversal 02 billion actelion acquisition related costs 02 billion unrealized loss securities 02 billion gain 02 billion divestiture certain nonstrategic pharmaceutical products medical devices segment includes net litigation expense 17 billion restructuring related charge 06 billion amo acquisition related costs 01 billion gain 05 billion divestiture lifescan business fiscal fourth quarter 4 pharmaceutical segment includes 08 billion actelion acquisition related costs inprocess research development expense 04 billion litigation expense 01 billion medical devices segment includes litigation expense 11 billion restructuring related charge 08 billion asset impairment 02 billion primarily related insulin pump business 01 billion amo acquisition related costs medical devices segment includes gain 07 billion divestiture codman neurosurgery consumer segment includes gain 05 billion divestiture compeed® 5 includes net litigation expense 08 billion restructuring related charge 07 billion medical devices segment pharmaceutical segment includes positive adjustment 05 billion previous reserve estimates gains divestitures controlled substance raw material active pharmaceutical ingredient api business certain anesthetic products europe 6 longlived assets include property plant equipment net 2018 2017 17035 17005 respectively intangible assets goodwill net 2018 2017 78064 85134 respectively 19 selected quarterly financial data unaudited selected unaudited quarterly financial data years 2018 2017 summarized 1 first quarter 2018 includes actelion acquisition related cost 92 million aftertax 96 million beforetax restructuring related charge 81 million aftertax 107 million beforetax 2 second quarter 2018 includes litigation expense 609 million aftertax 703 million beforetax restructuring related charge 152 million aftertax 176 million beforetax 3 third quarter 2018 includes inprocess research development expense 859 million aftertax 1126 million beforetax related alios xo1 assets corresponding xo1 contingent liability reversal 184 million tax restructuring related charge 162 million aftertax 190 million beforetax 265 million benefit aftertax impact tax legislation 4 fourth quarter 2018 includes litigation expense 1113 million aftertax 1288 million beforetax restructuring related charge 190 million aftertax 227 million beforetax 137 million benefit aftertax impact tax legislation 5 first quarter 2017 includes restructuring charge 121 million aftertax 161 million beforetax amo acquisition related cost 251 million aftertax 38 million beforetax 6 second quarter 2017 includes litigation expense 352 million aftertax 493 million beforetax actelion acquisition related costs 199 million aftertax 213 million beforetax restructuring charge 101 million aftertax 128 million beforetax asset impairment charge 125 million aftertax 182 million beforetax 7 third quarter 2017 includes litigation expense 97 million aftertax 118 million beforetax actelion acquisition related costs 255 million aftertax 367 million beforetax restructuring charge 136 million aftertax 187 million beforetax 8 fourth quarter 2017 includes litigation expense 506 million aftertax 645 million beforetax actelion acquisition related costs 313 million aftertax 217 million beforetax restructuring charge 237 million aftertax 284 million beforetax inprocess research development expense 266 million aftertax 408 million beforetax aftertax benefit 116 million related insulin pump business additionally fourth quarter 2017 includes provisional charge 136 billion recently enacted tax legislation 20 business combinations divestitures certain businesses acquired 09 billion cash 01 billion liabilities assumed 2018 acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2018 acquisitions primarily included zarbee’s inc privately held company leader naturallybased consumer healthcare products medical enterprises distribution llc privately held healthcare technology firm focused surgical procedure innovation benevir biopharm inc benevir privatelyheld biopharmaceutical company specializing development oncolytic immunotherapies orthotaxy privatelyheld developer softwareenabled surgery technologies including differentiated roboticassisted surgery solution excess purchase price estimated fair value tangible assets acquired amounted 10 billion assigned identifiable intangible assets residual recorded goodwill october 23 2018 company entered agreement acquire ciz holdings co ltd japanese company focused marketing development distribution broad range dermocosmetic cosmetic skincare products total purchase price approximately ¥230 billion equates approximately 21 billion using exchange rate 10906 japanese yen us dollar january 16 2019 acquisition completed january 17 2019 series transactions included allcash tender offer acquire publicly held shares already held company ¥5900 per share upon completion tender offer related transactions company acquired 89 outstanding shares company plans acquire remaining shares tendered tender offer share consolidation japanese law first half 2019 take appropriate actions delist tokyo stock exchange acquisition include range brands comprising drcilabo labo genomer line skincare products company expects treat transaction business combination include consumer segment february 13 2019 company entered definitive agreement acquire auris health inc approximately 34 billion cash additional contingent payments to235 billion aggregate may payable upon reaching certain predetermined milestones auris health privately held developer robotic technologies initially focused lung cancer fdacleared platform currently used bronchoscopic diagnostic therapeutic procedures closing subject antitrust clearance customary closing conditions transaction expected close end second quarter 2019 company expects treat transaction business combination include medical devices segment 2017 certain businesses acquired 352 billion cash 18 billion liabilities assumed acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2017 acquisitions primarily included actelion ltd established leading franchise differentiated innovative products pulmonary arterial hypertension pah abbott medical optics amo whollyowned subsidiary abbott laboratories included ophthalmic products related cataract surgery laser refractive surgery consumer eye health neuravi limited privatelyheld medical device company develops markets medical devices neurointerventional therapy tearscience inc manufacturer products dedicated treating meibomian gland dysfunction sightbox inc privatelyheld company developed subscription vision care service connects consumers eye care professionals supply contact lenses torax medical inc privatelyheld medical device company manufactures markets linx™ reflux management system surgical treatment gastroesophageal reflux disease megadyne medical products inc privatelyheld medical device company develops manufactures markets electrosurgical tools excess purchase price estimated fair value tangible assets acquired amounted 344 billion assigned identifiable intangible assets residual recorded goodwill amount approximately 11 billion identified value iprd primarily associated acquisition actelion ltd value iprd calculated using cash flow projections discounted inherent risk projects 2017 company completed acquisition actelion ltd cash tender offer switzerland 280 per share amounting 296 billion net cash acquired part transaction immediately prior completion acquisition actelion spun drug discovery operations earlystage clinical development assets newly created swiss biopharmaceutical company idorsia ltd shares idorsia listed six swiss exchange six 2017 company held 99 shares idorsia rights additional 221 idorsia equity convertible loan principal amount approximately 05 billion result idorsia raising additional capital july 2018 company currently holds 90 shares idorsia rights additional 208 idorsia equity convertible loan principal amount approximately 05 billion convertible loan may converted idorsia shares follows aggregate shareholding 16 idorsia shares result certain shareholders holding 20 issued idorsia shares ii balance remaining amount within 20 business days maturity date convertible loan 10 year term idorsia undergoes change control transaction investment idorsia recorded cost method investment assets companys consolidated balance sheet company also exercised option acquired act132577 product within idorsia developed resistant hypertension currently phase 2 clinical development company also entered agreement provide idorsia swiss franc denominated credit facility approximately 250 million december 30 2018 idorsia made drawdowns credit facility actelion entered transitional services agreement idorsia actelion established leading franchise differentiated innovative products pulmonary arterial hypertension pah highly complementary existing portfolio company addition actelion’s specialty inmarket medicines latestage products consistent companys efforts grow attractive complementary therapeutic areas serve patients serious illnesses significant unmet medical need fiscal second quarter 2018 company finalized purchase price allocation individual assets acquired liabilities assumed using acquisition method following table presents amounts recognized assets acquired liabilities assumed acquisition date adjustments made second quarter 2018 1 includes adjustment 642 million writeup acquired inventory estimated fair value adjustments made since date acquisition 02 billion deferred taxes 04 billion current liabilities offset goodwill assets acquired recorded pharmaceutical segment acquisition actelion resulted approximately 62 billion goodwill primarily attributable synergies expected arise acquisition goodwill expected deductible tax purposes purchase price allocation identifiable intangible assets follows includes 04 billion related valchlor® one acquired products divested fiscal second quarter 2018 patents trademarks acquired comprised developed technology weighted average life 9 years primarily based patent life marketed products intangible assets definite lives assigned asset lives ranging 4 10 years inprocess research development intangible assets valued technology programs unapproved products value iprd calculated using probability adjusted cash flow projections discounted risk inherent projects discount rate applied 9 acquisition accounted using acquisition method accordingly results operations actelion reported companys financial statements beginning june 16 2017 date acquisition year ended december 31 2017 total sales net loss actelion date acquisition 14 billion 14 billion respectively following table provides pro forma results operations fiscal year ended december 31 2017 january 1 2017 actelion acquired january 4 2016 pro forma results include effect certain purchase accounting adjustments estimated changes depreciation amortization expense acquired tangible intangible assets however pro forma results include anticipated cost savings effects planned integration actelion accordingly amounts necessarily indicative results acquisition occurred dates indicated may occur future company recorded actelion acquisition related costs tax approximately 02 billion 08 billion 2018 2017 respectively recorded incomeexpense cost products sold 2017 company acquired abbott medical optics amo whollyowned subsidiary abbott laboratories 43 billion net cash acquired acquisition included ophthalmic products related cataract surgery laser refractive surgery consumer eye health net purchase price primarily recorded amortizable intangible assets 23 billion goodwill 17 billion weighted average life total amortizable intangibles majority customer relationships approximately 144 years goodwill primarily attributable synergies expected arise business acquisition deductible tax purposes intangible assets goodwill amounts based final purchase price allocation assets acquired recorded medical devices segment certain businesses acquired 45 billion cash 01 billion liabilities assumed 2016 acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2016 acquisitions primarily included vogue international llc privatelyheld company focused marketing development distribution saloninfluenced nature inspired hair care personal products neuwave medical inc privatelyheld medical device company manufactures markets minimally invasive soft tissue microwave ablation systems neostrata company inc global leader dermocosmetics global rights commercialization rhinocort® allergy spray outside united states excess purchase price estimated fair value tangible assets acquired amounted 41 billion assigned identifiable intangible assets residual recorded goodwill net purchase price vogue international llc 33 billion primarily recorded amortizable intangible assets 23 billion goodwill 11 billion weighted average life 23 billion total amortizable intangibles approximately 22 years trademark asset values determined definite lives ranging 10 22 years majority 22 years goodwill primarily attributable synergies expected arise business acquisition expected deductible tax purposes assets acquired recorded consumer segment 2012 company completed acquisition synthes inc purchase price 202 billion cash stock connection acquisition synthes inc company entered two accelerated share repurchase asr agreements 2013 company settled remaining liabilities asr agreements company believes transactions asr agreement series related internal transactions consummated tax efficient manner accordance applicable law possible internal revenue service could assert one contrary positions challenge transactions tax perspective challenged amount total purchase price synthes shares could treated subject applicable us tax approximately statutory rate company plus interest exception actelion ltd acquisition supplemental pro forma information 2018 2017 2016 accordance us gaap standards related business combinations goodwill intangible assets provided impact aforementioned acquisitions material effect company’s results operations cash flows financial position 2018 company divested lifescan inc business approximately 21 billion retained certain net liabilities divestitures 2018 included nizoral® roc® certain nonstrategic pharmaceutical products 2018 pretax gains divestitures approximately 12 billion additionally 2018 company accepted binding offer fortive corporation acquire advanced sterilization products asp business approximately 27 billion subject customary adjustments transaction expected close 2019 december 30 2018 assets held sale consolidated balance sheet 02 billion inventory 01 billion property plant equipment 03 billion goodwill company retain certain net receivables approximately 01 billion associated asp business 2018 company accepted binding offer form strategic collaboration jabil inc one world’s leading manufacturing services providers health care products technology products company expanding 12year relationship jabil produce range products within ethicon endosurgery depuy synthes businesses transaction includes transfer employees manufacturing sites december 30 2018 assets held sale consolidated balance sheet 03 billion inventory 01 billion property plant equipment net additional details global supply chain restructuring see note 22 consolidated financial statements 2017 company divestitures primarily included codman neurosurgery business integra lifesciences holdings corporation divestiture compeed® hra pharma 2017 pretax gains divestitures approximately 13 billion 2016 company divestitures included controlled substance raw material active pharmaceutical ingredient api business certain anesthetic products europe certain nonstrategic consumer brands 2016 pretax gains divestitures approximately 06 billion 21 legal proceedings johnson certain subsidiaries involved various lawsuits claims regarding product liability intellectual property commercial supplier indemnification matters governmental investigations legal proceedings arise time ordinary course business company records accruals loss contingencies associated legal matters probable liability incurred amount loss reasonably estimated december 30 2018 company determined liabilities associated certain litigation matters probable reasonably estimated company accrued matters continue monitor related legal issue adjust accruals might warranted based new information developments accordance asc 4502025 litigation regulatory matters discussed loss probable reasonably possible company unable estimate possible loss range loss beyond amounts already accrued amounts accrued legal contingencies often result complex series judgments future events uncertainties rely heavily estimates assumptions ability make estimates judgments affected various factors including whether damages sought proceedings unsubstantiated indeterminate scientific legal discovery commenced complete proceedings early stages matters present legal uncertainties significant facts dispute numerous parties involved companys opinion based examination matters experience date discussions counsel ultimate outcome legal proceedings net liabilities accrued companys balance sheet expected material adverse effect companys financial position however resolution increase accruals one matters reporting period may material adverse effect companys results operations cash flows period product liability johnson certain subsidiaries involved numerous product liability claims lawsuits involving multiple products claimants cases seek substantial compensatory available punitive damages company believes substantial defenses feasible predict ultimate outcome litigation company established accruals product liability claims lawsuits compliance asc 45020 based currently available information cases may limited company accrues estimate legal defense costs needed defend matter costs probable reasonably estimated certain matters company accrued additional amounts estimated costs associated settlements damages losses extent adverse verdicts rendered company record accrual loss determined probable reasonably estimated product liability accruals represent projected product liability thousands claims around world different litigation environments different fact patterns changes accruals may required future additional information becomes available significant cases include depuy asr™ xl acetabular system depuy asr™ hip resurfacing system pinnacle® acetabular cup system pelvic meshes risperdal® xarelto® body powders containing talc primarily johnsons® baby powder invokana® ethicon physiomesh® flexible composite mesh december 30 2018 united states approximately 1800 plaintiffs direct claims pending lawsuits regarding injuries allegedly due depuy asr™ xl acetabular system depuy asr™ hip resurfacing system 10500 respect pinnacle® acetabular cup system 34800 respect pelvic meshes 13400 respect risperdal® 25600 respect xarelto® 13000 respect body powders containing talc 1050 respect invokana® 2100 respect ethicon physiomesh® flexible composite mesh august 2010 depuy orthopaedics inc depuy announced worldwide voluntary recall asr™ xl acetabular system depuy asr™ hip resurfacing system used hip replacement surgery claims personal injury made depuy johnson number pending lawsuits expected fluctuate certain lawsuits settled dismissed additional lawsuits filed cases filed federal courts united states organized multidistrict litigation united states district court northern district ohio litigation also filed countries outside united states primarily united kingdom canada australia ireland germany italy november 2013 depuy reached agreement courtappointed committee lawyers representing asr hip system plaintiffs establish program settle claims eligible asr hip patients united states surgery replace asr hips known revision surgery august 31 2013 depuy reached additional agreements february 2015 march 2017 extended settlement program include asr hip patients revision surgeries august 31 2013 prior february 15 2017 settlement program resolved 10000 claims therefore bringing resolution significant asr hip litigation activity united states however lawsuits united states remain settlement program address litigation outside united states australia class action settlement reached resolved claims majority asr hip patients country canada company reached agreements settle two pending class actions approved québec superior court supreme court british columbia british columbia order currently subject appeal company continues receive information respect potential additional costs associated recall worldwide basis company established accruals costs associated united states settlement program depuy asr™ hiprelated product liability litigation claims personal injury also made depuy orthopaedics inc johnson collectively depuy relating pinnacle® acetabular cup system used hip replacement surgery number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases filed federal courts united states organized multidistrict litigation united states district court northern district texas litigation also filed state courts countries outside united states several adverse verdicts rendered depuy one reversed appeal remanded retrial second remains appeal third pending decision posttrial motions district court company established accrual product liability litigation associated pinnacle® acetabular cup system company negotiating settlements cases related costs reflected company’s accruals claims personal injury made ethicon inc ethicon johnson arising ethicons pelvic mesh devices used treat stress urinary incontinence pelvic organ prolapse company continues receive information respect potential costs additional cases filed federal courts united states organized multidistrict litigation united states district court southern district west virginia company settled otherwise resolved majority united states cases costs associated settlements reflected companys accruals addition class actions individual personal injury cases claims commenced various countries outside united states including claims cases united kingdom netherlands belgium class actions israel australia canada seeking damages alleged injury resulting ethicons pelvic mesh devices australia trial class action issues completed parties awaiting decision company established accruals respect product liability litigation associated ethicons pelvic mesh products following june 2016 worldwide market withdrawal ethicon physiomesh® flexible composite mesh claims personal injury made ethicon inc johnson alleging personal injury arising use hernia mesh device cases filed federal courts united states organized multidistrict litigation mdl united states district court northern district georgia multi county litigation mcl also formed new jersey state court assigned atlantic county cases pending new jersey product liability lawsuits continue filed company continues receive information respect potential costs anticipated number cases company established accruals respect product liability litigation associated ethicon physiomesh® flexible composite mesh claims personal injury made janssen pharmaceuticals inc johnson arising use risperdal® indicated treatment schizophrenia acute manic mixed episodes associated bipolar disorder irritability associated autism related compounds lawsuits primarily filed state courts pennsylvania california missouri actions pending various courts united states canada product liability lawsuits continue filed company continues receive information respect potential costs anticipated number cases company settled otherwise resolved many united states cases costs associated settlements reflected companys accruals claims personal injury arising use xarelto® oral anticoagulant made janssen pharmaceuticals inc jpi johnson jpis collaboration partner xarelto® bayer ag certain affiliates number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases filed federal courts united states organized multidistrict litigation united states district court eastern district louisiana addition cases filed state courts across united states many cases consolidated state mass tort litigation philadelphia pennsylvania coordinated proceedings delaware california missouri class action lawsuits also filed canada company established accrual defense costs connection product liability litigation associated xarelto® personal injury claims alleging talc causes cancer made johnson consumer inc johnson arising use body powders containing talc primarily johnsons® baby powder number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases lawsuits primarily filed state courts missouri new jersey california cases filed federal courts united states organized multidistrict litigation united states district court district new jersey company successfully defended number cases verdicts company including verdict july 2018 47 billion company believes strong grounds appeal overturn verdicts company established accrual defense costs connection product liability litigation associated body powders containing talc february 2018 securities class action lawsuit filed johnson certain named officers united states district court district new jersey alleging johnson violated federal securities laws failing adequately disclose alleged asbestos contamination body powders containing talc primarily johnsons® baby powder purchasers johnson’s shares suffered losses result plaintiffs seeking damages october 2018 shareholder derivative lawsuit filed johnson nominal defendant current directors defendants united states district court district new jersey alleging breach fiduciary duties related alleged asbestos contamination body powders containing talc primarily johnson’s® baby powder johnson suffered damages result alleged breaches plaintiff seeking damages order company reform internal policies procedures january 2019 two erisa class action lawsuits filed participants johnson savings plan johnson pension benefits committee certain named officers united states district court district new jersey alleging defendants breached fiduciary duties offering johnson stock johnson savings plan investment option imprudent failures disclose alleged asbestos contamination body powders containing talc primarily johnson’s® baby powder plaintiffs seeking damages injunctive relief matters adjudicated conjunction multidistrict litigation referenced prior paragraph addition company received preliminary inquiries subpoenas produce documents regarding matters senator murray member senate committee health education labor pensions department justice securities exchange commission company cooperating government inquiries producing documents response claims personal injury made number johnson companies including janssen pharmaceuticals inc johnson arising use invokana® prescription medication indicated improve glycemic control adults type 2 diabetes lawsuits filed federal courts united states organized multidistrict litigation united states district court district new jersey cases also filed state courts pennsylvania california new jersey class action lawsuits filed canada product liability lawsuits continue filed company continues receive information respect potential costs anticipated number cases company settled otherwise resolved many cases claims united states costs associated settlements reflected companys accruals intellectual property certain subsidiaries johnson subject time legal proceedings claims related patent trademark intellectual property matters arising businesses many matters involve challenges coverage andor validity patents various products allegations certain company’s products infringe patents third parties although subsidiaries believe substantial defenses challenges allegations respect significant patents assurance outcome matters loss cases could adversely affect ability subsidiaries sell products result loss sales due loss market exclusivity require payment past damages future royalties may result noncash impairment charge associated intangible asset significant matters described medical devices june 2009 rembrandt vision technologies lp rembrandt filed patent infringement lawsuit johnson vision care inc jjvci united states district court eastern district texas alleging jjvcis manufacture sale acuvue® advance acuvue oasys® hydrogel contact lenses infringed rembrandt’s united states patent 5712327 seeking monetary relief case transferred united states district court middle district florida trial may 2012 resulted verdict noninfringement subsequently upheld appeal july 2014 rembrandt sought new trial based alleged new evidence district court denied april 2016 court appeals overturned ruling remanded case district court new trial new trial held august 2017 jury returned verdict noninfringement favor jjvci rembrandt appealed verdict united states court appeals federal circuit cafc february 2019 cafc affirmed judgment favor jjvci march 2013 medinol ltd medinol filed patent infringement lawsuit cordis corporation cordis johnson united states district court southern district new york alleging cordis’s sales cypher™ cypher select™ stents made united states since 2005 willfully infringed four medinols patents directed geometry articulated stents medinol seeking damages attorneys’ fees although johnson since sold cordis retained liability case trial january 2014 district court dismissed case finding medinol unreasonably delayed bringing claims laches defense september 2014 district court denied motion medinol vacate judgment grant new trial medinol appealed decision united states court appeals federal circuit march 2017 united states supreme court held laches defense available patent cases april 2018 united states court appeals federal circuit remanded case back district court reconsider medinol’s motion new trial briefing district court completed june 2018 november 2016 medidea llc medidea filed patent infringement lawsuit depuy orthopaedics inc united states district court northern district illinois alleging infringement attune® knee system april 2017 medidea filed amended complaint adding depuy synthes products inc depuy synthes sales inc named defendants medidea alleges infringement united states patent nos 6558426 ’426 8273132 ’132 8721730 ’730 9492280 ’280 relating posterior stabilized knee systems specifically medidea alleges sofcamtm contact feature attune® posterior stabilized knee products infringes patentsinsuit medidea seeking monetary damages injunctive relief june 2017 case transferred united states district court district massachusetts claim construction hearing held october 2018 claim construction order issued november 2018 december 2018 medidea stipulated noninfringement ’132 ’730 ’280 patents based district court’s claim construction reserving right appeal construction leaving ’426 patent issue district court january 2019 district court stayed case pending decision inter partes review proceeding ’426 patent see december 2017 depuy synthes products inc filed petition inter partes review united states patent trademark office uspto seeking invalidate two claims ’426 patent asserted district court litigation june 2018 uspto instituted review claims hearing trial scheduled march 2019 decision proceeding due june 2019 december 2016 ethicon endosurgery inc ethicon endosurgery llc known ethicon llc sued covidien inc united states district court district massachusetts seeking declaration united states patent nos 6585735 ’735 patent 7118587 7473253 8070748 8241284 ’284 patent either invalid infringed ethicon’s enseal® x1 large jaw tissue sealer product april 2017 covidien lp covidien sales llc covidien ag collectively covidien answered counterclaimed denying allegations asserting willful infringement ’735 patent ’284 patent united states patent nos 8323310 ’310 patent 9084608 9241759 ’759 patent 9113882 seeking damages injunction covidien filed motion preliminary injunction denied october 2017 parties entered joint stipulations ’735 patent ’310 patent ’759 patent remain dispute trial scheduled begin september 2019 november 2017 board regents university texas system tissuegen inc collectively ut filed lawsuit united states district court western district texas ethicon inc ethicon us llc alleging manufacture sale vicryl® plus antibacterial sutures monocryl® plus antibacterial sutures pds® plus antibacterial sutures stratafix® pos® antibacterial sutures stratafix® monocryl®plus antibacterial sutures infringe plaintiffs’ united states patent nos 6596296 7033603 directed implantable polymer drug releasing biodegradable fibers containing therapeutic agent ut seeking damages injunction december 2018 ethicon filed petitions uspto seeking inter partes review ipr asserted patents petitions stayed uspto pending decision us court appeals federal circuit unrelated case pharmaceutical april 2016 morphosys ag german biotech company filed patent infringement lawsuit janssen biotech inc jbi genmab us inc genmab collectively genmab united states district court district delaware morphosys alleged jbi’s manufacture sale darzalex® daratumumab willfully infringed morphosys’ united states patent nos 8263746 9200061 9785590 morphosys sought money damages jbi licenses patents commercial rights darzalex® genmab january 2019 district court granted summary judgment jbi genmab’s favor invalidating asserted claims patentsinsuit parties filed joint stipulation dismissal action august 2016 sandoz ltd hexal ag collectively sandoz filed lawsuit english high court gd searle llc pfizer company searle janssen sciences ireland uc jsi alleging searle’s supplementary protection certificate spcgb07038 spc exclusively licensed jsi invalid revoked janssencilag limited sells prezista® darunavir united kingdom pursuant license october 2016 searle jsi counterclaimed sandoz threatened infringement spc based statements plans launch generic darunavir united kingdom sandoz admitted generic darunavir product would infringe spc found valid searle jsi seeking order enjoining sandoz marketing generic darunavir expiration spc following trial april 2017 court entered decision holding spc valid granting final injunction sandoz appealed court’s decision injunction stayed pending appeal january 2018 court referred issue appeal court justice european union cjeu stayed proceedings pending cjeu’s ruling issue april 2018 acerta pharma bv astrazeneca uk ltd astrazeneca pharmaceuticals lp filed patent infringement lawsuit united states district court district delaware pharmacylics llc abbvie inc collectively abbvie alleging manufacture sale imbruvica® infringes us patent 7459554 janssen biotech inc commercializes imbruvica® jointly abbvie intervened action november 2018 trial scheduled begin january 2021 remicade® related cases august 2014 celltrion healthcare co ltd celltrion inc collectively celltrion filed application united states food drug administration fda approval make sell infliximab biosimilar march 2015 janssen biotech inc jbi filed lawsuit united states district court district massachusetts celltrion hospira healthcare corporation hospira exclusive marketing rights celltrion’s infliximab biosimilar united states seeking among things declaratory judgment biosimilar product infringes potentially infringes several jbi patents including united states patent 6284471 relating remicade® infliximab ’471 patent united states patent 7598083 ’083 patent directed cell culture media used make celltrion’s biosimilar august 2016 district court granted celltrion’s hospira’s motions summary judgment invalidity ’471 patent jbi appealed decisions united states court appeals federal circuit january 2018 federal circuit dismissed appeal moot based affirmance decision uspto’s patent trial appeal board affirming invalidity ’471 patent june 2016 jbi filed two additional patent infringement lawsuits asserting ’083 patent one celltrion hospira united states district court district massachusetts hyclone laboratories inc manufacturer cell culture media celltrion uses make biosimilar product united states district court district utah july 30 2018 district court granted celltrion’s motion summary judgment noninfringement entered order dismissing ’083 lawsuit celltrion hospira jbi appealed united states court appeals federal circuit litigation hyclone utah stayed pending outcome massachusetts actions fda approved first infliximab biosimilar sale united states 2016 number products launched litigation filers abbreviated new drug applications andas following summarizes lawsuits pending generic companies filed abbreviated new drug applications andas fda undertaken similar regulatory processes outside united states seeking market generic forms products sold various subsidiaries johnson prior expiration applicable patents covering products andas typically include allegations noninfringement invalidity applicable patents event subsidiaries successful action automatic statutory stay andas expires united states district court rulings obtained thirdparty companies involved would ability upon approval fda introduce generic versions products market resulting potential substantial market share revenue losses applicable products may result noncash impairment charge associated intangible asset addition time subsidiaries may settle types actions settlements involve introduction generic versions products issue market prior expiration relevant patents inter partes review ipr process united states patent trademark office uspto created 2011 america invents act also used times generic companies conjunction andas lawsuits challenge applicable patents zytiga® july 2015 janssen biotech inc janssen oncology inc janssen research development llc collectively janssen btg international ltd btg initiated patent infringement lawsuit united states district court district new jersey number generic companies certain affiliates andor suppliers filed andas seeking approval market generic version zytiga® 250mg expiration united states patent 8822438 ’438 patent generic companies include amneal pharmaceuticals llc amneal pharmaceuticals new york llc collectively amneal apotex inc apotex corp collectively apotex citron pharma llc citron dr reddy’s laboratories ltd dr reddy’s laboratories inc collectively dr reddy’s mylan pharmaceuticals inc mylan inc collectively mylan par pharmaceuticals inc par pharmaceutical companies inc collectively par sun pharmaceutical industries ltd sun pharmaceuticals industries inc collectively sun teva pharmaceuticals usa inc teva wockhardt bio ag wockhardt usa llc wockhardt ltd collectively wockhardt westward pharmaceutical corp westward hikma pharmaceuticals llc hikma janssen btg also initiated patent infringement lawsuits united states district court district new jersey amerigen pharmaceuticals limited amerigen may 2016 glenmark pharmaceuticals inc glenmark june 2016 filed anda seeking approval market generic version zytiga® expiration ’438 patent lawsuits consolidated lawsuit filed july 2015 august 2015 janssen btg filed additional jurisdictional protective lawsuit mylan defendants united states district court northern district west virginia stayed august 2017 janssen btg initiated patent infringement lawsuit united states district court district new jersey teva filed anda seeking approval market generic version zytiga® 500mg expiration ’438 patent lawsuit consolidated lawsuit filed july 2015 february 2018 janssen btg filed patent infringement lawsuit msn pharmaceuticals inc msn laboratories private limited collectively msn united states district court district new jersey based anda seeking approval generic version zytiga® prior expiration ’438 patent november 2018 janssen btg initiated patent infringement lawsuit united states district court district new jersey qilu pharmaceutical co ltd qilu pharma inc collectively qilu filed anda seeking approval market generic version zytiga® expiration ’438 patent december 2017 janssen btg entered settlement agreement glenmark january 2018 janssen dismissed lawsuit sun withdrew anda april 2018 janssen btg entered settlement agreement apotex october 2018 united states district court district new jersey issued ruling invalidating asserted claims ’438 patent court held patent claims would infringed patent valid janssen appealed court’s decision november 2018 united states court appeals federal circuit denied janssen’s request injunction pending appeal result several generic versions zytiga® entered market janssen appealed decision united states district court district new jersey oral argument appeal scheduled march 2019 lawsuits msn qilu remain pending district courts lawsuits janssen seeking order enjoining defendants marketing generic versions zytiga® expiration ’438 patent several generic companies including amerigen argentum pharmaceuticals llc argentum mylan wockhardt actavis amneal dr reddy’s sun teva westward hikma filed petitions inter partes review ipr uspto seeking invalidate ’438 patent january 2018 uspto issued decisions finding ’438 patent claims unpatentable janssen requested rehearing december 2018 uspto denied janssen’s request rehearing ipr decisions janssen filed appeal consolidated abovementioned appeal decision united states district court district new jersey october 2017 janssen inc janssen oncology inc collectively janssen initiated two notices application section 6 patented medicines notice compliance regulations teva canada limited teva minister health canada response tevas filing abbreviated new drug submissions ands seeking approval market generic versions zytiga® 250mg zytiga® 500mg expiration canadian patent 2661422 june 2018 parties entered settlement agreement november 2017 janssen initiated notice application section 6 patented medicines notice compliance regulations apotex inc apotex minister health canada response apotex’s filing abbreviated new drug submission ands seeking approval market generic version zytiga® expiration canadian patent 2661422 federal court canada scheduled final hearing april 2019 janssen seeking order prohibiting minister health issuing notice compliance respect apotex’s ands expiration janssen’s patent january 2019 janssen initiated notice application section 6 patented medicines notice compliance regulations apotex minister health canada response apotex’s filing abbreviated new drug submission ands seeking approval market filmcoated generic version zytiga® expiration canadian patent 2661422 janssen seeking order prohibiting minister health issuing notice compliance respect apotex’s ands expiration janssen’s patent xarelto® beginning october 2015 janssen pharmaceuticals inc jpi bayer pharma ag bayer intellectual property gmbh collectively bayer filed patent infringement lawsuits united states district court district delaware number generic companies filed andas seeking approval market generic versions xarelto® expiration bayer’s united states patent nos 7157456 7585860 7592339 relating xarelto® jpi exclusive sublicensee asserted patents following generic companies named defendants aurobindo pharma limited aurobindo pharma usa inc collectively aurobindo breckenridge pharmaceutical inc breckenridge invagen pharmaceuticals inc invagen micro labs usa inc micro labs ltd collectively micro mylan pharmaceuticals inc mylan prinston pharmaceuticals inc sigmapharm laboratories llc sigmapharm torrent pharmaceuticals limited torrent pharma inc collectively torrent trial concluded april 2018 july 2018 district court entered judgment mylan sigmapharm holding asserted compound patent valid infringed september 2018 district court entered judgment remaining defendants none defendants appealed judgment beginning april 2017 jpi bayer intellectual property gmbh bayer ag collectively bayer ag filed patent infringement lawsuits united states district court district delaware number generic companies filed andas seeking approval market generic versions xarelto® expiration bayer ag’s united states patent 9539218 ’218 relating xarelto® jpi exclusive sublicensee asserted patent following generic companies named defendants alembic pharmaceuticals limited alembic global holding sa alembic pharmaceuticals inc alembic aurobindo breckenridge invagen lupin limited lupin pharmaceuticals inc collectively lupin micro mylan sigmapharm taro pharmaceutical industries ltd taro pharmaceuticals usa inc collectively taro torrent lupin counterclaimed declaratory judgment noninfringement invalidity united states patent 9415053 lupin dismissed counterclaims provided covenant sue patent aurobindo taro torrent micro breckenridge invagen sigmapharm lupin alembic agreed cases stayed bound outcome final judgment rendered defendants ’218 cases consolidated discovery trial currently set trial april 2019 december 2018 jpi bayer ag filed patent infringement lawsuit united states district court district delaware teva pharmaceuticals usa inc teva pharmaceutical industries ltd collectively teva filed anda seeking approval market generic version xarelto® expiration bayer ag’s ’218 patent lawsuits jpi seeking order enjoining defendants marketing generic versions xarelto® expiration relevant patents may 2018 mylan filed petition inter partes review uspto seeking invalidate ’218 patent december 2018 uspto issued decision denying institution mylan’s petition inter partes review prezista® may 2018 janssen products lp janssen sciences ireland uc collectively janssen initiated patent infringement lawsuit united states district court district new jersey dr reddys laboratories inc dr reddys laboratories ltd laurus labs ltd pharmaq inc collectively drl filed anda seeking approval market generic versions prezista® expiration united states patent nos 8518987 7126015 7595408 trial scheduled begin may 2020 december 2018 janssen initiated patent infringement lawsuit united states district court district new jersey amneal pharmaceuticals llc amneal pharmaceuticals company gmbh amneal pharmaceuticals new york llc amneal pharmaceuticals pvt ltd raks pharma pvt ltd collectively amneal filed anda seeking approval market generic versions prezista® expiration united states patent nos 8518987 7126015 7595408 lawsuits janssen seeking order enjoining defendants marketing generic versions prezista® expiration relevant patents invokana®invokamet® beginning july 2017 janssen pharmaceuticals inc janssen research development llc cilag gmbh international janssen pharmaceutica nv collectively janssen mitsubishi tanabe pharma corporation mtpc filed patent infringement lawsuits united states district court district new jersey united states district court district colorado united states district court district delaware number generic companies filed andas seeking approval market generic versions invokana® andor invokamet® expiration mtpc’s united states patent nos 7943582 andor 8513202 relating invokana® invokamet® janssen exclusive licensee asserted patents following generic companies named defendants apotex inc apotex corp apotex aurobindo pharma usa inc aurobindo macleods pharmaceuticals ltd macleods pharma usa inc invagen pharmaceuticals inc invagen prinston pharmaceuticals inc dr reddy’s laboratories inc dr reddy’s laboratories ltd hetero usa inc hetero labs limited unitv hetero labs limited msn laboratories private ltd msn pharmaceuticals inc laurus labs ltd indoco remedies ltd zydus pharmaceuticals usa inc zydus sandoz inc sandoz teva pharmaceuticals usa inc lupin ltd lupin pharmaceuticals inc beginning july 2017 janssen mtpc filed patent infringement lawsuits united states district court district new jersey united states district court district colorado sandoz invagen filed andas seeking approval market generic versions invokana® andor invokamet® expiration mtpc’s united states patent 7943788 ’788 patent relating invokana® invokamet® zydus filed andas seeking approval market generic versions invokana® invokamet® expiration ’788 patent mtpcs united states patent 8222219 relating invokana® invokamet® mtpc’s united states patent 8785403 relating invokamet® aurobindo filed anda seeking approval market generic version invokana® expiration ’788 patent ’219 patent relating invokana® janssen exclusive licensee asserted patents october 2017 colorado lawsuits sandoz dismissed december 2017 delaware lawsuits apotex teva dismissed april 2018 janssen mtpc filed patent infringement lawsuit united states district court district new jersey prinston filed anda seeking approval market generic version invokana® expiration ’788 patent relating invokana® lawsuits janssen mtpc seeking order enjoining defendants marketing generic versions invokana® andor invokamet® expiration relevant patents opsumit® january 2018 actelion pharmaceuticals ltd actelion initiated patent infringement lawsuit united states district court district new jersey zydus pharmaceuticals usa inc zydus amneal pharmaceuticals llc amneal filed anda seeking approval market generic version opsumit® expiration united states patent 7094781 lawsuit actelion seeking order enjoining zydus amneal marketing generic versions opsumit® expiration patent december 2018 district court entered order wherein one defendants amneal stipulated infringement trial scheduled commence october 2020 invega sustenna® january 2018 janssen pharmaceutica nv janssen pharmaceuticals inc collectively janssen initiated patent infringement lawsuit united states district court district new jersey teva pharmaceuticals usa inc teva filed anda seeking approval market generic version invega sustenna® expiration united states patent 9439906 lawsuit janssen seeking order enjoining teva marketing generic version invega sustenna® expiration patent february 2018 janssen inc janssen pharmaceutica nv collectively janssen initiated notices application section 6 patented medicines notice compliance regulations teva canada limited teva minister health response tevas filing abbreviated new drug submission ands seeking approval market generic version invega sustenna® expiration canadian patent nos 2309629 2655335 janssen seeking order prohibiting minister health issuing notice compliance respect teva’s ands expiration patents final hearing scheduled begin september 2019 imbruvica® beginning january 2018 pharmacyclics llc pharmacyclics janssen biotech inc jbi filed patent infringement lawsuits united states district court district delaware number generic companies filed andas seeking approval market generic versions imbruvica® expiration pharmacyclics’ united states patent nos 8008309 7514444 8697711 8735403 8957079 9181257 8754091 8497277 8925015 8476284 8754090 8999999 9125889 9801881 9801883 9814721 9795604 9296753 9540382 9713617 andor 9725455 relating imbruvica® jbi exclusive licensee asserted patents following generic companies named defendants cipla limited cipla usa inc cipla fresenius kabi usa llc fresenius kabi usa inc fresenius kabi oncology limited fresenius kabi sandoz inc lek pharmaceuticals dd sandoz shilpa medicare limited shilpa sun pharma global fze sun pharmaceutical industries limited sun teva pharmaceuticals usa inc teva zydus worldwide dmcc cadila healthcare limited zydus trial scheduled begin october 2020 october 2018 pharmacyclics jbi filed patent infringement lawsuit united states district court district delaware sun asserting newly issued united states patent 10004746 lawsuits pharmacyclics jbi seeking order enjoining defendants marketing generic versions imbruvica® expiration relevant patents january 2019 pharmacyclics jbi amended complaints fresenius kabi zydus teva sandoz allege infringement us patent nos 10106548 10125140 january 2019 pharmacyclics jbi filed patent infringement lawsuit united states district court district delaware zydus filed anda seeking approval market generic version imbruvica® 70 mg expiration us patent nos 514444 8003309 8476284 8497277 8697711 8753403 8754090 8754091 8952015 8957079 9181257 9296753 9540382 9713617 9725455 10106548 10125140 government proceedings like companies pharmaceutical medical devices industries johnson certain subsidiaries subject extensive regulation national state local government agencies united states countries operate result interaction government agencies ongoing significant litigation brought investigations conducted government agencies listed possible criminal charges substantial fines andor civil penalties damages could result government investigations litigation average wholesale price awp litigation johnson several pharmaceutical subsidiaries jj awp defendants along numerous pharmaceutical companies named defendants series lawsuits state federal courts involving allegations pricing marketing certain pharmaceutical products amounted fraudulent otherwise actionable conduct among things companies allegedly reported inflated average wholesale price awp drugs issue payors alleged used awps calculating provider reimbursement levels plaintiffs cases included three classes private persons entities paid portion purchase drugs issue based awp state government entities made medicaid payments drugs issue based awp many cases federal actions state actions removed federal court consolidated pretrial purposes multidistrict litigation united states district court district massachusetts claims jj awp defendants ultimately dismissed jj awp defendants also prevailed case brought commonwealth pennsylvania awp cases resolved court order settlement two cases remain pending case brought illinois trial scheduled march 2019 new jersey putative class action based upon awp allegations pending centocor inc ortho biotech inc janssen biotech inc johnson alza corporation opioids litigation beginning 2014 continuing present johnson janssen pharmaceuticals inc jpi along pharmaceutical companies named 1600 lawsuits brought certain state local governments related marketing opioids including duragesic® nucynta® nucynta® er date complaints pharmaceutical companies including johnson jpi filed state court state attorneys general arkansas florida kentucky louisiana mississippi missouri new hampshire new jersey new mexico ohio oklahoma south dakota complaints manufacturers also filed state federal court city county local government agencies following states alabama arkansas california connecticut florida georgia illinois kentucky louisiana maine maryland massachusetts mississippi missouri nevada new hampshire new jersey new mexico new york north carolina ohio oklahoma oregon pennsylvania rhode island south carolina south dakota tennessee texas utah virginia washington west virginia wisconsin government puerto rico filed suit superior court san juan addition province british columbia filed suit canada actions allege variety claims related opioids marketing practices including false advertising unfair competition public nuisance consumer fraud violations deceptive acts practices false claims unjust enrichment suits generally seek penalties andor injunctive monetary relief suits plaintiffs seeking joint several liability among defendants cases early stages litigation october 2017 johnson jpi served motion consolidate 66 pending matters federal multi district litigation southern district ohio december 2017 mdl approved northern district ohio 1400 cases transferred mdl johnson jpi pharmaceutical companies also received subpoenas requests information related opioids marketing practices following state attorneys general alaska indiana montana new hampshire south carolina tennessee texas washington september 2017 johnson jpi contacted texas colorado attorney general’s offices behalf approximately 38 states regarding multistate attorney general investigation multistate coalition served johnson jpi subpoenas part investigation johnson jpi also received requests information ranking minority member united states senate committee homeland security governmental affairs regarding sales marketing educational strategies related promotion opioids use august 2012 depuy orthopaedics inc depuy inc known depuy synthes inc johnson services inc collectively depuy received informal request united states attorneys office district massachusetts civil division united states department justice united states production materials relating depuy asr™ xl hip device july 2014 united states notified united states district court district massachusetts declined intervene qui tam case filed pursuant false claims act companies february 2016 district court granted companies’ motion dismiss prejudice unsealed qui tam complaint denied qui tam relators’ request leave file amended complaint qui tam relators appealed case united states court appeals first circuit july 2017 first circuit affirmed district court’s dismissal part reversed part affirmed decision deny relators’ request file third amended complaint relators’ remaining claims pending district court fact discovery currently scheduled close september 2019 additionally depuy filed petition certiorari united states supreme court seeking review first circuit’s decision supreme court denied petition april 2018 since october 2013 group state attorneys general issued civil investigative demands relating development sales marketing several depuy orthopaedics incs hip products july 2014 oregon department justice investigating matters independently states announced settlement asr™ xl hip device investigation state oregon december 2018 company remaining states district columbia agreed settle investigations january 22 2019 states company filed consent judgments resolving matter october 2012 johnson contacted california attorney generals office regarding multistate attorney general investigation marketing surgical mesh products hernia urogynecological purposes johnson johnsons subsidiary ethicon inc ethicon johnson ethicon since entered series tolling agreements 47 states district columbia participating multistate investigation responded civil investigative demands served certain participating states seeking monetary injunctive relief may 2016 california washington filed civil complaints johnson ethicon us llc alleging violations consumer protection statutes similar complaints filed companies kentucky august 2016 mississippi october 2017 johnson ethicon entered new tolling agreement remaining 43 states district columbia december 2012 therakos inc therakos formerly subsidiary johnson part orthoclinical diagnostics inc ocd franchise received letter civil division united states attorneys office eastern district pennsylvania informing therakos united states attorneys office investigating sales marketing uvadex® methoxsalen uvar xts® cellex® systems period 2000 present united states attorneys office requested ocd johnson preserve documents could relate investigation therakos subsequently acquired affiliate gores capital partners iii lp january 2013 ocd divested june 2014 following divestiture ocd johnson retains ocd’s portion liability may result investigation activity occurred prior sale therakos march 2014 march 2016 united states attorney’s office requested johnson produce certain documents johnson cooperating requests june 2014 mississippi attorney general filed complaint chancery court first judicial district hinds county mississippi johnson consumer companies inc known johnson consumer inc jjci complaint alleges defendants failed disclose alleged health risks associated female consumers use talc contained johnsons® baby powder johnsons® shower product divested 2012 seeks injunctive monetary relief trial stayed pending interlocutory appeal denial jjcis motion summary judgment march 2016 janssen pharmaceuticals inc jpi received civil investigative demand united states attorney’s office southern district new york related jpi’s contractual relationships pharmacy benefit managers period january 1 2006 present regard certain jpis pharmaceutical products demand issued connection investigation false claims act january 2017 janssen pharmaceuticals inc jpi received civil investigative demand united states department justice relating allegations concerning sales marketing practices olysio® december 2017 johnson jpi served whistleblower lawsuit filed united states district court central district california alleging offlabel promotion olysio® additional products including nucynta® xarelto® levaquin® remicade® time federal state governments declined intervene lawsuit related civil investigative demand prosecuted former company employee united states district court central district california dismissed claim april 2018 may 2018 relator filed notice appeal united states court appeals ninth circuit november 2018 second whistleblower lawsuit unsealed united states district court central district california lawsuit substantially similar lawsuit appeal brought name original relator federal state governments declined intervene second suit time february 2017 johnson received subpoena united states attorneys office district massachusetts seeking production records pertaining payments 501c3 charitable organization provides financial assistance medicare patients multiple pharmaceutical companies publicly reported receipt subpoenas ongoing inquiries similar one described government represented pursuing action company matter actelion pharmaceuticals us inc actelion us received subpoena may 2016 followup requests documents united states attorneys office district massachusetts subpoena seeks production records pertaining actelion us’ payments 501c3 charitable organizations provide financial assistance medicare patients december 2018 company united states department justice agreed settlement matter march 2017 janssen biotech inc received civil investigative demand united states department justice regarding false claims act investigation concerning management advisory services provided rheumatology gastroenterology practices purchased remicade® simponi aria® april september 2017 johnson received subpoenas united states attorney district massachusetts seeking documents broadly relating pharmaceutical copayment support programs darzalex® olysio® remicade® simponi® stelara® zytiga® subpoenas also seek documents relating average manufacturer price best price reporting center medicare medicaid services related products well rebate payments state medicaid agencies june 2017 johnson received subpoena united states attorneys office district massachusetts seeking information regarding practices pertaining sterilization depuy synthes inc spinal implants three hospitals boston well interactions employees company subsidiaries physicians hospitals johnson depuy synthes inc produced documents response subpoena fully cooperating government’s investigation july 2018 advanced sterilization products asp received civil investigative demand united states department justice regarding false claims act investigation concerning pricing quality marketing promotion evotech ecr tyvek peel pouches sterrad cyclesure 24 biological indicators july 2018 public prosecution service rio de janeiro representatives brazilian antitrust authority cade inspected offices 30 companies including johnson brasil indústria e comércio de produtos para saúde ltda authorities appear investigating allegations possible anticompetitive behavior possible improper payments medical device industry united states department justice united states securities exchange commission made additional preliminary inquiries inspection brazil johnson brasil indústria e comércio de produtos para saúde ltda cooperating requests time company received requests variety united states congressional committees produce information relevant ongoing congressional inquiries policy johnson cooperate inquiries producing requested information general litigation april 2016 putative class action filed johnson sales logistics company llc mcneil ppc inc known johnson consumer inc new jersey superior court camden county behalf persons reside state new jersey purchased various mcneil overthecounter products december 2008 present complaint alleges violations new jersey consumer fraud act following grant motion dismiss filing amended complaint may 2017 court denied motion dismiss amended complaint december 2018 settlement reached matter dismissed may 2014 two purported class actions filed federal court one united states district court central district california one united states district court southern district illinois johnson consumer companies inc known johnson consumer inc jjci alleging violations state consumer fraud statutes based nondisclosure alleged health risks associated talc contained johnsons® baby powder johnsons® shower product longer sold jjci cases seek injunctive relief monetary damages neither includes claim personal injuries october 2016 cases transferred united states district court district court new jersey part newly created federal multidistrict litigation july 2017 district court granted johnson johnsons jjci’s motion dismiss one cases september 2018 united states court appeals third circuit affirmed dismissal september 2017 plaintiff second case voluntarily dismissed complaint march 2018 plaintiff second case refiled illinois state court august 2014 united states customs border protection us cbp issued penalty notice janssen ortho llc janssen ortho assessing penalties alleged improper classification darunavir ethanolate active pharmaceutical ingredient prezista® connection importation united states october 2014 janssen ortho submitted petition relief response penalty notice may 2015 us cbp issued amended penalty notice assessing substantial penalties janssen ortho filed petition relief july 2015 march april 2015 30 putative class action complaints filed contact lens patients number courts around united states johnson vision care inc jjvci contact lens manufacturers distributors retailers alleging vertical horizontal conspiracies fix retail prices contact lenses complaints allege manufacturers reached agreements certain distributors retailers concerning prices contact lenses could sold consumers plaintiffs seeking damages injunctive relief class action cases transferred united states district court middle district florida june 2015 plaintiffs filed consolidated class action complaint november 2015 june 2016 district court denied motions dismiss filed jjvci defendants discovery ongoing march 2017 plaintiffs filed motion class certification district court held hearing motion class certification august 2018 december 2018 district court granted plaintiffs motion class certification august 2015 two thirdparty payors filed purported class action united states district court eastern district louisiana janssen research development llc janssen ortho llc janssen pharmaceuticals inc orthomcneiljanssen pharmaceuticals inc johnson well certain bayer entities alleging defendants improperly marketed promoted xarelto® safer effective less expensive alternative medications failing fully disclose risks complaint seeks damages may 2017 lonza sales ag lonza filed request arbitration london court international arbitration janssen research development llc janssen rd lonza alleges janssen rd breached 2005 agreement parties sublicensing certain lonza technology used manufacture daratumumab without lonza’s consent lonza seeks monetary damages arbitration hearing held september 2018 post hearing briefing complete parties awaiting decision may 2017 purported class action filed united states district court western district washington lifescan inc johnson diabetes test strip manufacturers certain pharmacy benefit managers pbms complaint alleges consumers paid inflated prices glucose monitor test strips consequence undisclosed rebates incentives paid manufacturers pbms complaint includes rico erisa state consumer protection claims complaint seeks equitable relief damages november 2017 case ordered transferred united states district court district new jersey lifescan business divested october 2018 johnson retained liability may result claims prior closing divestiture september 2017 pfizer inc pfizer filed antitrust complaint johnson janssen biotech inc collectively janssen united states district court eastern district pennsylvania pfizer alleges janssen violated federal antitrust laws contracting strategies remicade® complaint seeks damages injunctive relief beginning september 2017 multiple purported class actions filed johnson janssen biotech inc collectively janssen alleging janssen’s remicade® contracting strategies violated federal state antitrust consumer laws seeking damages injunctive relief november 2017 cases consolidated pretrial purposes united states district court eastern district pennsylvania remicade antitrust litigation june 2018 walgreen co kroger co filed antitrust complaint johnson janssen biotech inc collectively janssen united states district court eastern district pennsylvania complaint alleges janssen violated federal antitrust laws contracting strategies remicade® complaint seeks damages injunctive relief october 2017 certain united states service members families brought complaint number pharmaceutical medical devices companies including johnson certain subsidiaries alleging defendants violated united states antiterrorism act complaint alleges defendants provided funding terrorist organizations sales practices pursuant pharmaceutical medical device contracts iraqi ministry health andover healthcare inc andover filed lanham act case johnson consumer inc april 2017 united states district court district massachusetts andover asserts claim “not made natural rubber latex” coach® sports wrap bandaid® brand secureflex® wrap bandaid® brand hurtfree® wrap false andover seeks actual damages prejudgment interest thereon disgorgement profits treble damages attorney’s fees injunctive relief december 2018 parties entered settlement agreement october 2018 two separate putative class actions filed actelion pharmaceutical ltd actelion pharmaceuticals us inc actelion clinical research inc collectively “actelion” united states district court district maryland united states district court district columbia complaints allege actelion violated state federal antitrust unfair competition laws allegedly refusing supply generic pharmaceutical manufacturers samples tracleer® tracleer® subject risk evaluation mitigation strategy imposes restrictions distribution product january 2019 plaintiffs dismissed district columbia case filed consolidated complaint federal court maryland december 2018 janssen biotech inc janssen oncology inc janssen research development llc johnson collectively janssen served qui tam complaint filed behalf united states 28 states district columbia complaint filed december 2017 united states district court northern district california alleges janssen violated federal false claims act state law providing pricing information zytiga® government connection direct government sales governmentfunded drug reimbursement programs time federal state governments declined intervene johnson subsidiaries also parties number proceedings brought comprehensive environmental response compensation liability act commonly known superfund comparable state local foreign laws primary relief sought cost past andor future remediation 22 restructuring first quarter 2016 company announced restructuring actions medical devices segment better serve needs patients customers today’s evolving healthcare marketplace company undertaken actions strengthen gotomarket model accelerate pace innovation prioritize key platforms geographies streamline operations maintaining high quality standards 2018 company recorded pretax charge 462 million 46 million included cost products sold 227 million included income expense total project costs 25 billion recorded since restructuring announced restructuring program completed fiscal fourth quarter 2018 april 17 2018 company announced plans implement series actions across global supply chain intended focus resources increase investments critical capabilities technologies solutions necessary manufacture supply product portfolio enhance agility drive growth global supply chain actions include expanding use strategic collaborations bolstering initiatives reduce complexity improve costcompetitiveness enhance capabilities optimize supply chain network additional details global supply chain restructuring strategic collaborations see note 20 consolidated financial statements 2018 company recorded pretax charge 238 million 59 million included cost products sold 117 million included income expense see following table additional details restructuring programs total company expects global supply chain actions generate approximately 06 billion 08 billion annual pretax cost savings substantially delivered 2022 company expects record pretax restructuring charges approximately 19 billion 23 billion 4 5 year period activity costs associated network optimizations exit costs accelerated depreciation amortization following table summarizes severance charges associated spending initiatives fiscal year ended 2018 cash outlays severance expected substantially paid next 2 years accordance companys plans local laws includes project expense salaries employees supporting initiative consulting expenses although medical devices restructuring program completed 2018 company expects severance charges continue beyond date company continuously reevaluates severance reserves related restructuring timing payments extended due planned release associates regarding several longerterm projects company believes existing severance reserves sufficient cover global supply chain plans given period actions take place company continue assess make adjustments necessary additional amounts become probable estimable approximately 2375 individuals received separation payments since restructuring announcements report independent registered public accounting firm board directors shareholders johnson opinions financial statements internal control financial reporting audited accompanying consolidated balance sheets johnson subsidiaries “company” december 30 2018 december 31 2017 related consolidated statements earnings comprehensive income equity cash flows three years period ended december 30 2018 including related notes collectively referred “consolidated financial statements” also audited companys internal control financial reporting december 30 2018 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion consolidated financial statements referred present fairly material respects financial position company december 30 2018 december 31 2017 results operations cash flows three years period ended december 30 2018 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting december 30 2018 based criteria established internal control integrated framework 2013 issued coso basis opinions companys management responsible consolidated financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying management’s report internal control financial reporting responsibility express opinions company’s consolidated financial statements companys internal control financial reporting based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud whether effective internal control financial reporting maintained material respects audits consolidated financial statements included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate spricewaterhousecoopers llp florham park new jersey february 20 2019 served company’s auditor since least 1920 able determine specific year began serving auditor company management’s report internal control financial reporting section 404 sarbanesoxley act 2002 management required assess effectiveness company’s internal control financial reporting end fiscal year report based assessment whether company’s internal control financial reporting effective management company responsible establishing maintaining adequate internal control financial reporting company’s internal control financial reporting designed provide reasonable assurance reliability company’s financial reporting preparation external financial statements accordance generally accepted accounting principles internal controls financial reporting matter well designed inherent limitations therefore internal control financial reporting determined effective provide reasonable assurance respect financial statement preparation may prevent detect misstatements moreover projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate company’s management assessed effectiveness company’s internal control financial reporting december 30 2018 making assessment company used criteria established committee sponsoring organizations treadway commission coso “internal controlintegrated framework 2013” criteria areas control environment risk assessment control activities information communication monitoring company’s assessment included extensive documenting evaluating testing design operating effectiveness internal controls financial reporting based company’s processes assessment described management concluded december 30 2018 company’s internal control financial reporting effective effectiveness company’s internal control financial reporting december 30 2018 audited pricewaterhousecoopers llp independent registered public accounting firm stated report appears herein alex gorsky joseph j wolk alex gorsky joseph j wolk chairman board directors executive vice president chief financial officer chief executive officer shareholder return performance graphs set forth line graphs comparing cumulative total shareholder return company’s common stock periods five years ten years ending december 31 2018 cumulative total return standard poor’s 500 stock index standard poor’s pharmaceutical index standard poor’s health care equipment index graphs tables assume 100 invested december 31 2013 december 31 2008 company’s common stock standard poor’s 500 stock index standard poor’s pharmaceutical index standard poor’s health care equipment index dividends reinvested 5 year shareholder return performance jj vs indices 10 year shareholder return performance jj vs indices item 9item 8 financial statements supplementary data index audited consolidated financial statements consolidated balance sheets consolidated statements earnings consolidated statements comprehensive income consolidated statements equity consolidated statements cash flows notes consolidated financial statements report independent registered public accounting firm management’s report internal control financial reporting johnson subsidiaries consolidated balance sheets december 29 2019 december 30 2018 dollars millions except share per share amounts note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements earnings dollars shares millions except per share amounts note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements comprehensive income dollars millions note 1 see notes consolidated financial statements johnson subsidiaries consolidated statements equity dollars millions note 1 see note 1 consolidated financial statements additional details effect cumulative adjustments retained earnings see notes consolidated financial statements johnson subsidiaries consolidated statements cash flows dollars millions note 1 see notes consolidated financial statements notes consolidated financial statements 1 summary significant accounting policies principles consolidation consolidated financial statements include accounts johnson subsidiaries company intercompany accounts transactions eliminated columns rows within tables may add due rounding percentages calculated using actual nonrounded figures description company business segments company approximately 132200 employees worldwide engaged research development manufacture sale broad range products health care field company conducts business virtually countries world primary focus products related human health wellbeing company organized three business segments consumer pharmaceutical medical devices consumer segment includes broad range products used baby care oral care beauty overthecounter pharmaceutical women’s health wound care markets products marketed general public sold retail outlets distributors throughout world pharmaceutical segment focused six therapeutic areas including immunology infectious diseases neuroscience oncology pulmonary hypertension cardiovascular metabolic diseases products segment distributed directly retailers wholesalers hospitals health care professionals prescription use medical devices segment includes broad range products used orthopaedic surgery interventional solutions cardiovascular neurovascular eye health fields distributed wholesalers hospitals retailers used principally professional fields physicians nurses hospitals eye care professionals clinics new accounting standards recently adopted accounting standards asu 201602 leases company adopted standard beginning fiscal year 2019 prospective basis update requires recognition lease assets lease liabilities balance sheet lease obligations disclosing key information leasing arrangements update requires recognition lease assets lease liabilities lessees arrangements classified operating leases company’s operating leases resulted recognition additional assets corresponding liabilities consolidated balance sheet however material impact consolidated financial statements company determines whether arrangement lease contract inception establishing contract conveys right control use identified property plant equipment period time exchange consideration right use rou assets lease liabilities operating leases included assets accrued liabilities consolidated balance sheet rou assets represent right use underlying asset lease term lease liabilities represent obligation make lease payments arising lease commitments finance leases significant included property plant equipment loans notes payable longterm debt consolidated balance sheet rou assets lease liabilities recognized lease commencement date based present value minimum lease payments lease term company uses incremental borrowing rate based information available commencement date determining present value lease payments implicit rate readily determinable lease terms may include options extend terminate lease options included lease term reasonably certain company exercise option operating lease expense recognized straightline basis lease term company elected following policy elections adoption use portfolio approach leases assets master service agreements exclusion short term leases balance sheet separating lease nonlease components additional disclosures see note 16 consolidated financial statements asu 201802 reclassification certain tax effects accumulated comprehensive income update allows company elect reclassify stranded tax effects resulting tax cuts job act enacted december 2017 accumulated comprehensive income retained earnings company elected reclassify income tax effects standard therefore standard impact companys consolidated financial statements asu 201816 derivatives hedging topic asc 815 update adds overnight index swap ois rate based secured overnight financing rate sofr eligible benchmark interest rate permitted application hedge accounting guidance effective company fiscal fourth quarter 2018 due previous adoption asu 201712 impact adoption guidance material impact company’s consolidated financial statements related disclosures standard may impact future market sofr derivatives develops time sofr used hedge company’s financial instruments accounting standards adopted fiscal 2018 cumulative effect 2018 opening balance retained earnings following table summarizes cumulative effect adjustments made 2018 opening balance retained earnings upon adoption new accounting standards mentioned recently issued accounting standards adopted december 29 2019 asu 201818 collaborative arrangements update clarifies interaction asc 808 collaborative arrangements asc 606 revenue contracts customers update clarifies certain transactions participants collaborative arrangement accounted asc 606 counterparty customer addition update precludes entity presenting consideration transaction collaborative arrangement revenue counterparty customer transaction update effective company fiscal years beginning december 15 2019 interim periods within fiscal years asu 201818 applied retrospectively date initial application asc 606 early adoption permitted adoption standard material impact company’s consolidated financial statements asu 201613 financial instruments credit losses update introduces current expected credit loss cecl model require entity measure credit losses certain financial instruments financial assets including trade receivables update initial recognition reporting period entity required recognize allowance reflects entity’s current estimate credit losses expected incurred life financial instrument update effective company fiscal years beginning december 15 2019 interim periods within fiscal years early adoption permitted adoption standard material impact company’s consolidated financial statements cash equivalents company classifies highly liquid investments stated maturities three months less date purchase cash equivalents highly liquid investments stated maturities greater three months date purchase current marketable securities company policy making investments commercial institutions least investment grade credit rating company invests cash primarily government securities obligations corporate debt securities money market funds reverse repurchase agreements rras collateralized deposits form government securities obligations amount less 102 value company record asset liability company permitted sell repledge associated collateral company policy collateral least equivalent credit rating company utilizes third party custodian manage exchange funds ensure collateral received maintained 102 value rras daily basis rras stated maturities greater three months date purchase classified marketable securities investments classified held maturity investments reported amortized cost realized gains losses reported earnings investments classified availableforsale debt securities carried estimated fair value unrealized gains losses recorded component accumulated comprehensive income availableforsale securities available current operations classified current assets otherwise classified long term management determines appropriate classification investment debt equity securities time purchase reevaluates determination balance sheet date company reviews investments impairment adjusts investments fair value earnings required property plant equipment depreciation property plant equipment stated cost company utilizes straightline method depreciation estimated useful lives assets company capitalizes certain computer software development costs included machinery equipment incurred connection developing obtaining computer software internal use capitalized software costs amortized estimated useful lives software generally range 3 8 years company reviews longlived assets assess recoverability using undiscounted cash flows certain events changes operating economic conditions occur impairment assessment may performed recoverability carrying value assets asset determined impaired loss measured based difference asset’s fair value carrying value quoted market prices available company estimate fair value using discounted value estimated future cash flows revenue recognition company recognizes revenue product sales obligations terms contract customer satisfied generally occurs transfer control goods customers companys global payment terms typically 30 90 days provisions certain rebates sales incentives trade promotions coupons product returns discounts customers accounted variable consideration recorded reduction sales liability recognized within accrued rebates returns promotions consolidated balance sheet product discounts granted based terms arrangements direct indirect market participants well market conditions including consideration competitor pricing rebates estimated based contractual terms historical experience patient outcomes trend analysis projected market conditions various markets served significant portion liability related rebates sale companys pharmaceutical products within us primarily managed care medicare medicaid programs amounted 70 billion 58 billion december 29 2019 december 30 2018 respectively company evaluates market conditions products groups products primarily analysis wholesaler thirdparty sellthrough market research data well internally generated information sales returns estimated recorded based historical sales returns information products exhibit unusual sales return patterns due dating competition marketing matters specifically investigated analyzed part accounting sales return accruals sales returns allowances represent reserve products may returned due expiration destruction field specific areas product recall sales returns reserve based historical return trends product market percent gross sales accordance company’s accounting policies company generally issues credit customers returned goods company’s sales returns reserves accounted accordance us gaap guidance revenue recognition right return exists sales returns reserves recorded full sales value sales returns consumer pharmaceutical segments almost exclusively resalable sales returns certain franchises medical devices segment typically resalable material company infrequently exchanges products inventory returned products sales returns reserve total company approximately 10 annual net trade sales fiscal reporting years 2019 2018 2017 promotional programs product listing allowances cooperative advertising arrangements recorded period related sales continuing promotional programs include coupons volumebased sales incentive programs redemption cost consumer coupons based historical redemption experience product value volumebased incentive programs based estimated sales volumes incentive period recorded products sold arrangements evaluated determine appropriate amounts deferred recorded reduction revenue company also earns profitshare payments collaborative arrangements certain products included sales customers years presented profitshare payments approximately 20 total revenues included sales customers see note 18 consolidated financial statements disaggregation revenue shipping handling shipping handling costs incurred 10 billion 11 billion 10 billion 2019 2018 2017 respectively included selling marketing administrative expense amount revenue received shipping handling less 05 sales customers periods presented inventories stated lower cost net realizable value determined firstin firstout method intangible assets goodwill authoritative literature us gaap requires goodwill intangible assets indefinite lives assessed annually impairment company completed annual impairment test 2019 fiscal fourth quarter future impairment tests performed annually fiscal fourth quarter sooner warranted purchased inprocess research development accounted indefinite lived intangible asset underlying project completed point intangible asset accounted definite lived intangible asset abandoned point intangible asset written partially impaired intangible assets finite useful lives continue amortized useful lives reviewed impairment warranted economic conditions see note 5 details intangible assets goodwill financial instruments required us gaap derivative instruments recorded balance sheet fair value fair value exit price would received sell asset paid transfer liability fair value marketbased measurement determined using assumptions market participants would use pricing asset liability authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value level 1 highest priority level 3 lowest changes fair value derivatives recorded period current earnings comprehensive income depending whether derivative designated part hedge transaction type hedge transaction company documents relationships hedged items derivatives overall risk management strategy includes reasons undertaking hedge transactions entering derivatives objectives strategy 1 minimize foreign currency exposure’s impact company’s financial performance 2 protect company’s cash flow adverse movements foreign exchange rates 3 ensure appropriateness financial instruments 4 manage enterprise risk associated financial institutions see note 6 additional information financial instruments product liability accruals product liability claims recorded undiscounted basis probable liability incurred amount liability reasonably estimated based existing information actuarially determined estimates applicable accruals adjusted periodically additional information becomes available company accrues estimate legal defense costs needed defend matter costs probable reasonably estimated extent adverse verdicts rendered company record accrual loss determined probable reasonably estimated company self insurance whollyowned captive insurance company addition accruals self insurance program claims exceed insurance coverage accrued losses probable amounts reasonably estimated research development research development expenses expensed incurred accordance asc 730 research development upfront milestone payments made third parties connection research development collaborations expensed incurred point regulatory approval payments made third parties subsequent regulatory approval capitalized amortized remaining useful life related product amounts capitalized payments included intangibles net accumulated amortization company enters collaborative arrangements typically pharmaceutical biotechnology companies develop commercialize drug candidates intellectual property arrangements typically involve two parties active participants collaboration exposed significant risks rewards dependent commercial success activities collaborations usually involve various activities one parties including research development marketing selling distribution often collaborations require upfront milestone royalty profit share payments contingent upon occurrence certain future events linked success asset development amounts due collaborative partners related development activities generally reflected reduction research development expense performance contract development services central company’s operations general income statement presentation collaborations follows milestones capitalized intangible assets amortized cost products sold useful life years presented individual project represented greater 5 total annual consolidated research development expense company number products compounds developed collaboration strategic partners including xarelto® codeveloped bayer healthcare ag imbruvica® developed collaboration comarketed pharmacyclics llc abbvie company separately company number licensing arrangements products compounds including darzalex® licensed genmab advertising costs associated advertising expensed year incurred included selling marketing administrative expenses advertising expenses worldwide comprised television radio print media internet advertising 22 billion 26 billion 25 billion 2019 2018 2017 respectively income taxes income taxes recorded based amounts refundable payable current year include results difference us gaap accounting tax reporting recorded deferred tax assets liabilities company estimates deferred tax assets liabilities based enacted tax regulations rates future changes tax laws rates may affect recorded deferred tax assets liabilities future company unrecognized tax benefits uncertain tax positions company follows us gaap prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return management believes changes estimates would material effect companys results operations cash flows financial position january 2018 fasb issued guidance allows companies elect accounting policy whether record tax effects global intangible lowtaxed income gilti period tax liability generated ie “period cost” provide deferred tax assets liabilities related basis differences exist expected effect amount gilti inclusion future years upon reversal ie “deferred method” fiscal 2018 company elected account gilti deferred method deferred tax amounts recorded based evaluation temporary differences expected reverse gilti incurred future periods company recorded deferred tax liabilities undistributed earnings prior december 31 2017 international subsidiaries company provided deferred taxes undistributed earnings subsequent january 1 2018 certain international subsidiaries earnings considered indefinitely reinvested company intends continue reinvest earnings international operations company decides later date repatriate earnings us company would required provide net tax effects amounts company estimates total tax effect repatriation would approximately 08 billion current enacted tax laws regulations current currency exchange rates see note 8 consolidated financial statements information regarding income taxes net earnings per share basic earnings per share computed dividing net earnings available common shareholders weighted average number common shares outstanding period diluted earnings per share reflects potential dilution could occur securities exercised converted common stock using treasury stock method use estimates preparation consolidated financial statements conformity accounting principles generally accepted us requires management make estimates assumptions affect amounts reported estimates used accounting sales discounts rebates allowances incentives product liabilities income taxes withholding taxes depreciation amortization employee benefits contingencies intangible asset liability valuations actual results may differ estimates company follows provisions us gaap recording litigation related contingencies liability recorded loss probable reasonably estimated best estimate loss within range accrued however estimate range better minimum amount accrued annual closing date company follows concept fiscal year ends sunday nearest end month december normally fiscal year consists 52 weeks every five six years fiscal year consists 53 weeks therefore includes additional shipping days case 2015 case 2020 reclassification certain prior period amounts reclassified conform current year presentation 2 cash equivalents current marketable securities end fiscal year 2019 2018 cash equivalents current marketable securities comprised 1 held maturity investments reported amortized cost realized gains losses reported earnings 2 available sale debt securities reported fair value unrealized gains losses reported net taxes comprehensive income fair value government securities obligations corporate debt securities estimated using quoted broker prices significant observable inputs 2019 2018 carrying amount estimated fair value contractual maturities available sale debt securities december 29 2019 follows company invests excess cash deposits major banks throughout world highquality money market instruments company policy making investments commercial institutions least investment grade credit rating 3 inventories end 2019 2018 inventories comprised 1 see note 20 consolidated financial statements details assets held sale related divestitures 4 property plant equipment end 2019 2018 property plant equipment cost accumulated depreciation 1 see note 20 consolidated financial statements details assets held sale related divestitures company capitalizes interest expense part cost construction facilities equipment interest expense capitalized 2019 2018 2017 70 million 86 million 94 million respectively depreciation expense including amortization capitalized interest 2019 2018 2017 25 billion 26 billion 26 billion respectively upon retirement disposal property plant equipment costs related amounts accumulated depreciation amortization eliminated asset accumulated depreciation accounts respectively difference net asset value proceeds recorded earnings 5 intangible assets goodwill end 2019 2018 gross net amounts intangible assets majority comprised customer relationships 1 fiscal year 2019 company completed acquisition auris health inc recorded inprocess research development intangible asset 29 billion additionally fiscal first quarter 2019 company recorded iprd impairment charge 09 billion remaining intangible asset value related development program al8176 investigational drug treatment respiratory syncytial virus rsv human metapneumovirus hmpv acquired 2014 acquisition alios biopharma inc impairment charge based additional information including clinical data became available led companys decision abandon development al8176 partial impairment charge 08 billion previously recorded fiscal third quarter 2018 related development program al8176 goodwill december 29 2019 december 30 2018 allocated segment business follows 1 goodwill 10 billion related divestiture lifescan business goodwill 03 billion related divestiture advanced sterilization products business closed 2019 pending classified assets held sale consolidated balance sheet december 30 2018 weighted average amortization period patents trademarks 12 years weighted average amortization period customer relationships intangible assets 21 years amortization expense amortizable assets included cost products sold 45 billion 44 billion 30 billion tax fiscal years ended december 29 2019 december 30 2018 december 31 2017 respectively intangible asset writedowns included income expense net estimated amortization expense approved products tax five succeeding years approximately see note 20 consolidated financial statements additional details related acquisitions divestitures 6 fair value measurements company uses forward foreign exchange contracts manage exposure variability cash flows primarily related foreign exchange rate changes future intercompany products thirdparty purchases materials denominated foreign currency company uses cross currency interest rate swaps manage currency risk primarily related borrowings types derivatives designated cash flow hedges additionally company uses interest rate swaps instrument manage interest rate risk related fixed rate borrowings derivatives designated fair value hedges company uses cross currency interest rate swaps forward foreign exchange contracts designated net investment hedges additionally company uses forward foreign exchange contracts offset exposure certain foreign currency assets liabilities forward foreign exchange contracts designated hedges therefore changes fair values derivatives recognized earnings thereby offsetting current earnings effect related foreign currency assets liabilities company enter derivative financial instruments trading speculative purposes contain credit risk related contingent features company maintains credit support agreements csa certain derivative counterparties establishing collateral thresholds based respective credit ratings netting agreements december 29 2019 total amount cash collateral held company credit support agreements csa amounted 255 million net primarily related net investment hedges ongoing basis company monitors counterparty credit ratings company considers credit nonperformance risk low company primarily enters agreements commercial institutions least investment grade credit rating refer table significant financial assets liabilities measured fair value contained footnote receivables payables commercial institutions december 29 2019 company notional amounts outstanding forward foreign exchange contracts cross currency interest rate swaps 453 billion 201 billion respectively december 30 2018 company notional amounts outstanding forward foreign exchange contracts cross currency interest rate swaps interest rate swaps 411 billion 73 billion 05 billion respectively derivative instruments recorded balance sheet fair value changes fair value derivatives recorded period current earnings comprehensive income depending whether derivative designated part hedge transaction type hedge transaction designation cash flow hedge made entrance date derivative contract inception derivatives expected highly effective foreign exchange contracts designated cash flow hedges accounted forward method gainslosses associated contracts recognized income statement hedged item impacts earnings changes fair value derivatives recorded accumulated comprehensive income underlying transaction affects earnings reclassified earnings account hedged transaction gains losses associated interest rate swaps changes fair value hedged debt attributable changes interest rates recorded interest expense period occur effect immaterial fiscal years ended december 29 2019 december 30 2018 gains losses net investment hedge accounted currency translation account within accumulated comprehensive income portion excluded effectiveness testing recorded interest income expense using spot method ongoing basis company assesses whether derivative continues highly effective offsetting changes hedged items derivative longer expected highly effective hedge accounting discontinued company designated euro denominated notes issued may 2016 due dates ranging 2022 2035 net investment hedge companys investments certain international subsidiaries use euro functional currency order reduce volatility caused changes exchange rates december 29 2019 balance deferred net loss derivatives included accumulated comprehensive income 295 million aftertax additional information see consolidated statements comprehensive income note 13 company expects substantially amounts related forward foreign exchange contracts reclassified earnings next 12 months result transactions expected occur period maximum length time company hedging transaction exposure 18 months excluding interest rate contracts net investment hedges amount ultimately realized earnings may differ foreign exchange rates change realized gains losses ultimately determined actual exchange rates maturity derivative following table summary activity related derivatives hedges fiscal years ended december 29 2019 december 30 2018 net tax fiscal years ended december 29 2019 december 30 2018 following amounts recorded consolidated balance sheet company holds equity investments readily determinable fair values equity investments without readily determinable fair values company measures equity investments readily determinable fair values cost minus impairment plus minus changes resulting observable price changes orderly transactions identical similar investment issuer following table summary activity related equity investments fiscal years ended december 29 2019 december 30 2018 1 recorded incomeexpense 2 includes impact currency fiscal years ended december 29 2019 december 30 2018 equity investments without readily determinable market values 57 million 54 million respectively changes fair value reflected net income result impairments 19 million 67 million respectively changes fair value reflected net income due changes observable prices fair value exit price would received sell asset paid transfer liability fair value marketbased measurement determined using assumptions market participants would use pricing asset liability accordance asc 820 threelevel hierarchy prioritize inputs used measuring fair value levels within hierarchy described level 1 highest priority level 3 lowest fair value derivative financial instrument ie forward foreign exchange contracts interest rate contracts aggregation currency future cash flows discounted present value prevailing market interest rates subsequently converted us dollar current spot foreign exchange rate company believe fair values derivative instruments materially differ amounts could realized upon settlement maturity changes fair value material effect company’s results operations cash flows financial position company also holds equity investments classified level 1 debt securities classified level 2 company holds acquisition related contingent liabilities based upon certain regulatory commercial events classified level 3 whose values determined using discounted cash flow methodologies similar techniques determination fair value requires significant judgment estimations following three levels inputs used measure fair value level 1 quoted prices active markets identical assets liabilities level 2 significant observable inputs level 3 significant unobservable inputs company’s significant financial assets liabilities measured fair value fiscal year ended december 29 2019 december 30 2018 follows summarized information changes liabilities contingent consideration follows 1 2018 assets liabilities classified level 2 exception equity investments 511 million classified level 1 contingent consideration 397 million classified level 3 2 includes 1 million 6 million noncurrent assets fiscal years ending december 29 2019 december 30 2018 respectively 3 includes 3 million noncurrent liabilities fiscal years ending december 30 2018 4 includes cross currency interest rate swaps interest rate swaps 5 classified noncurrent assets 6 classified cash equivalents current marketable securities 7 includes 1631 million primarily related auris health 397 million 600 million classified noncurrent liabilities december 29 2019 december 30 2018 december 31 2017 respectively includes 84 million classified current liabilities december 29 2019 8 amounts recorded primarily research development expense see notes 2 7 financial assets liabilities held carrying amount consolidated balance sheet 7 borrowings components longterm debt follows 1 weighted average effective rate 2 translation rate december 29 2019 3 translation rate december 30 2018 4 excess fair value carrying value debt 30 billion 2019 03 billion 2018 fair value longterm debt estimated using market prices corroborated quoted broker prices significant observable inputs company access substantial sources funds numerous banks worldwide september 2019 company secured new 364day credit facility total credit available company approximates 10 billion expires september 10 2020 interest charged borrowings credit line agreements based either bids provided banks prime rate london interbank offered rates libor applicable market rate allowed terms agreement plus applicable margins commitment fees agreements material throughout 2019 company continued access liquidity commercial paper market shortterm borrowings current portion longterm debt amounted approximately 12 billion end 2019 11 billion current portion longterm debt remainder principally represents local borrowing international subsidiaries throughout 2018 company continued access liquidity commercial paper market shortterm borrowings current portion longterm debt amounted approximately 28 billion end 2018 26 billion current portion long term debt remainder principally represents local borrowing international subsidiaries aggregate maturities longterm debt obligations commencing 2020 8 income taxes provision taxes income consists 1 includes 14 billion deferred tax expense adoption deferred method account gilti comparison income tax expense us statutory rate 21 2019 2018 35 2017 company’s effective tax rate follows 1 periods presented company subsidiaries operating puerto rico various tax incentives international operations reflects impacts operations jurisdictions statutory tax rates different us particularly ireland switzerland puerto rico favorable impact effective tax rate compared us statutory rate 2017 amount also includes tax cost related revaluation deferred tax balances related change belgian statutory tax rate increasing tax provision approximately 34 2 includes impact gilti tax foreignderived intangible income deduction foreign income taxable us tax code 3 represents impact adjustments balances originally recorded part 2017 tcja provisional tax charge information provided 4 includes us state local taxes provisionally recorded part tcja provisional charge approximately 06 total effective tax rate 2019 tax rate decreased 23 compared fiscal year 2018 tax rate addition impact swiss tax reform discussed detail primary drivers net decrease follows • company reorganized ownership structure certain whollyowned international subsidiaries fiscal fourth quarter 2019 resulted reduction certain withholding local taxes previously recognized part provisional tax cuts jobs act tcja tax charge fiscal year 2017 finalized fiscal year 2018 following completion restructuring approval applicable local authorities company reversed deferred tax liability 06 billion related deferred tax asset 02 billion us foreign tax credits net deferred tax benefit 04 billion decreasing annual effective tax rate 22 benefit reflected “tcja related impacts” company’s effective tax rate reconciliation • impact agreement principle settle opioid litigation 4 billion see note 21 consolidated financial statements reduced us earnings taxes effective tax rate 235 decreased company’s annual effective tax rate approximately 21 • december fiscal year 2019 us treasury issued final foreign tax credit regulations resulted company revising amount foreign tax credits initially recorded fiscal year 2017 part provisional tcja tax charge result company recorded increased deferred tax asset related foreign tax credits approximately 03 billion 17 annual effective tax rate benefit reflected “tcja related impacts” company’s effective tax rate reconciliation • company reassessed uncertain tax positions related current irs audit increased unrecognized tax benefit 03 billion liability increased annual effective tax rate approximately 15 see section unrecognized tax benefits additional information positions related uncertain tax regarding international transfer pricing expense classified “international operations” company’s effective tax rate reconciliation subsequent december 29 2019 company received agreed notices proposed adjustments nopas irs company believes adequately reserved potential exposures • several onetime tax impacts resulted cumulative net tax benefit 2018 annual effective tax rate 12 items included lifescan divestiture adjustment 2017 provisional tcja tax charge acceleration certain tax deductions part 2017 tax return • income higher tax jurisdictions relative lower tax jurisdictions compared 2018 september 28 2018 swiss parliament approved federal act tax reform ahv financing traf may 19 2019 public referendum held switzerland approved federal reform proposals fiscal third quarter 2019 swiss federal council enacted traf became effective january 1 2020 federal transitional provisions traf allow companies certain conditions adjust tax basis adjustments fair value ie “stepup” used tax depreciation amortization purposes resulting deduction transitional period subsequent adjustment company’s asset tax basis require review approval tax authorities traf also provides parameters enable swiss cantons establish localized tax rates regulations companies new cantonal tax parameters include favorable tax benefits patents additional research development tax deductions cantonal transitional provisions traf also expected allow companies elect either 1 tax basis stepup similar federal transition benefit 2 alternative statutory tax rate period exceed 5 years company currently operations located various swiss cantons enactment may uniform substantive nature legislation timing enactment company recorded net tax expense 01 billion increased effective tax rate fiscal year 2019 approximately 06 net tax expense related federal certain cantonal enactments fiscal year 2019 consisting following provisions • approximately 06 billion tax expense relating remeasurement swiss deferred tax assets liabilities change federal cantonal tax rates enactment occurred december 29 2019 expense reflected “international operations” company’s effective tax rate reconciliation • 09 billion deferred tax asset related estimated value federal tax basis stepup company’s swiss subsidiaries’ assets benefit reflected “international operations” company’s effective tax rate reconciliation • approximately 450 million us deferred tax expense relating gilti deferred tax liability resulting remeasurement swiss deferred tax assets liabilities new deferred tax asset federal stepup benefit reflected “us tax international income” company’s effective tax rate reconciliation fiscal fourth quarter 2019 swiss federal tax administration issued authoritative guidance required company decrease estimated value federal tax basis stepup approximately 03 billion determination made fiscal third quarter 2019 authoritative guidance relevant swiss tax authorities may issued future additional revisions may required fiscal period issued company currently assessing applying approval elective transition provisions several cantons includes discussions local tax authorities application new law company recorded estimated impact transitional provisions based best available information cantons enactment occurred company yet received final tax ruling december 29 2019 one canton company maintains significant operations yet enacted traf legislation amounts recorded fiscal year 2019 include estimates unenacted legislation february 9 2020 public referendum legislative change held canton legislation approved voters formal enactment expected fiscal first half 2020 company yet elected transitional provision canton however net financial benefit estimated 02 billion 05 billion fiscal first half 2020 us tax cuts jobs act tcja 2018 2017 fiscal year 2017 united states enacted law new us tax legislation tcja law included provisions comprehensive overhaul corporate income tax code including reduction statutory corporate tax rate 35 21 effective january 1 2018 legislation also eliminated reduced certain corporate income tax deductions well introduced new provisions taxed certain foreign income previously taxed united states tcja also included provision tax previously undistributed earnings us companies located foreign jurisdictions undistributed earnings form cash equivalents taxed rate 155 earnings taxed rate 80 tax payable 8 years accrue interest payments began 2018 continue 2025 remaining balance end fiscal year 2019 approximately 82 billion 77 billion classified noncurrent reflected “longterm taxes payable” company’s balance sheet balance account related receivables tax authorities expected received next 12 months fourth quarter 2017 company recorded provisional tax cost approximately 130 billion consisted primarily following components • 101 billion charge previously undistributed foreign earnings december 31 2017 • 45 billion deferred tax liability foreign local withholding taxes offset 11 billion deferred tax asset us foreign tax credits repatriation substantially earnings • 06 billion tax benefit relating remeasurement us deferred tax assets liabilities impact tcja unrecognized tax benefits • 01 billion charge us state local taxes repatriation foreign earnings fiscal year 2018 company completed full assessment finalized accounting impact tcja company recorded net adjustments components provisional charge approximately 02 billion revisions based updated estimates additional analysis management well applying interpretative guidance issued us department treasury facts circumstances existed tcja enactment date charge primarily related additional deferred tax liabilities foreign local withholding taxes remaining balance undistributed foreign earnings december 31 2017 provided 2017 provisional charge tcja also includes provisions tax gilti described excess us shareholder’s total net foreign income deemed return tangible assets provided tcja fiscal year 2018 company elected treat gilti period expense deferred method recorded deferred tax cost approximately 14 billion fiscal year 2018 related facts circumstances existed date tcja enactment see note 1 information regarding income taxes accounting policies 2018 company reorganized ownership structure certain foreign subsidiaries resulted reduction certain foreign withholding taxes recognized part provisional tcja tax charge fourth quarter 2017 following completion restructuring result clarification swiss tax authorities regarding applicability withholding tax repatriation certain earnings company reversed deferred tax liability 28 billion related deferred tax asset 09 billion us foreign tax credits net deferred tax benefit 19 billion benefit reflected “tcja related impacts” company’s effective tax rate reconciliation 2018 effective tax rate decreased 776 compared 2017 effective tax rate primarily driven approximately 13 billion provisional tax charge recorded fourth quarter 2017 impact belgian statutory tax rate change increased 2017 effective rate 34 additional drivers 2018 annual effective tax • reduction us statutory corporate tax rate including effects tax elections resulted acceleration certain deductions 2017 tax return impact accelerated deductions decreased annual effective tax rate approximately 17 • impact adjustments 2017 provisional tcja charge including staff accounting bulletin sab 118 adjustments internal restructuring decreased effective tax rate approximately 19 • gilti tax increased annual effective tax rate approximately 16 excludes impact sab 118 adjustment adoption deferred method gilti • tax benefits received stockbased compensation fiscal 2018 2017 reduced effective tax rate 15 20 respectively • fourth quarter 2018 company completed divestiture lifescan business see note 20 consolidated financial statements increased companys annual effective tax rate approximately 08 • income higher tax jurisdictions relative lower tax jurisdictions compared 2017 temporary differences carryforwards 2019 2018 follows company whollyowned international subsidiaries cumulative net losses company believes likely subsidiaries generate future taxable income sufficient utilize deferred tax assets following table summarizes activity related unrecognized tax benefits 1 2017 347 million decrease related tcja unrecognized tax benefits 39 billion december 29 2019 recognized would affect company’s annual effective tax rate company conducts business files tax returns numerous countries currently tax audits progress number tax authorities respect united states internal revenue service irs completed audit tax years 2009 currently auditing tax years 20102012 company currently expects completion audit settlement related tax liabilities fiscal year 2020 december 29 2019 company classified unrecognized tax benefits related interest approximately 09 billion current liability “accrued taxes income” line consolidated balance sheet amount expected paid next 12 months respect irs audit subsequent december 29 2019 company made payment approximately 06 billion us treasury related estimated 20102012 tax audit liability anticipation final settlement later fiscal 2020 completion tax audit may result additional adjustments company’s unrecognized tax benefit liability major jurisdictions company conducts business years remain open tax audit go back year 2006 company believes possible tax audits may completed next twelve months taxing authorities jurisdictions outside united states however company able provide reasonably reliable estimate timing future tax payments relating uncertain tax positions company classifies liabilities unrecognized tax benefits related interest penalties longterm liabilities except previously noted amounts related current united states irs audit interest expense penalties related unrecognized tax benefits classified income tax expense company recognized tax interest expense 50 million 53 million 60 million 2019 2018 2017 respectively total amount accrued interest 559 million 503 million 2019 2018 respectively 9 employee related obligations end 2019 2018 employee related obligations recorded consolidated balance sheets prepaid employee related obligations 551 million 475 million 2019 2018 respectively included assets consolidated balance sheets 10 pensions benefit plans company sponsors various retirement pension plans including defined benefit defined contribution termination indemnity plans cover employees worldwide company also provides postretirement benefits primarily health care eligible us retired employees dependents many international employees covered governmentsponsored programs cost company significant retirement plan benefits employees hired january 1 2015 primarily based employee’s compensation last three five years retirement number years service 2014 company announced us defined benefit plan amended adopt new benefit formula effective employees hired january 1 2015 benefits calculated using new formula based employee compensation total years service international subsidiaries plans funds deposited trustees annuities purchased group contracts reserves provided company typically fund retiree health care benefits advance may discretion company also right modify plans future 2019 2018 company used december 31 2019 december 31 2018 respectively measurement date us international retirement benefit plans net periodic benefit costs company’s defined benefit retirement plans benefit plans 2019 2018 2017 include following components amounts expected recognized net periodic benefit cost coming year company’s defined benefit retirement plans postretirement plans unrecognized gains losses us pension plans amortized average remaining future service plan plans active employees amortized average life expectancy amortization gains losses us benefit plans determined using 10 corridor greater market value assets accumulated postretirement benefit obligation total unamortized gains losses excess corridor amortized average remaining future service prior service costsbenefits us pension plans amortized average remaining future service plan participants time plan amendment prior service costbenefit us benefit plans amortized average remaining service full eligibility age plan participants time plan amendment following table represents weightedaverage actuarial assumptions company’s discount rates determined considering current yield curves representing high quality longterm fixed income instruments resulting discount rates consistent duration plan liabilities companys methodology determining service interest cost uses duration specific spot rates along yield curve plans liability cash flows expected rates return plan asset assumptions represent companys assessment longterm returns diversified investment portfolios globally assessment determined using projections external financial sources longterm historical averages actual returns asset class various asset class allocations market following table displays assumed health care cost trend rates individuals onepercentagepoint change assumed health care cost trend rates would following effect following table sets forth information related benefit obligation fair value plan assets yearend 2019 2018 company’s defined benefit retirement plans postretirement plans company plans continue fund us qualified plans comply pension protection act 2006 international plans funded accordance local regulations additional discretionary contributions made deemed appropriate meet longterm obligations plans certain plans funding common practice funding provides economic benefit consequently company several pension plans funded 2019 company contributed 489 million 419 million us international pension plans respectively following table displays funded status companys us qualified nonqualified pension plans international funded unfunded pension plans december 31 2019 december 31 2018 respectively plans accumulated benefit obligations excess plan assets accumulated benefit obligation projected benefit obligation plan assets 43 billion 52 billion 09 billion respectively end 2019 75 billion 88 billion 43 billion respectively end 2018 following table displays projected future benefit payments company’s retirement benefit plans following table displays projected future minimum contributions unfunded retirement plans amounts include discretionary contributions company may elect make future pension plan overseen local committee board responsible overall administration investment pension plans determining investment policies strategies goals committee board considers factors including local pension rules regulations local tax regulations availability investment vehicles separate accounts commingled accounts insurance funds etc funded status plans ratio actives retirees duration liabilities relevant factors including diversification liquidity local markets liquidity base currency majority company’s pension funds open new entrants expected ongoing plans permitted investments primarily liquid andor listed little reliance illiquid nontraditional investments hedge funds company’s retirement plan asset allocation end 2019 2018 target allocations 2020 follows determination fair value plan assets plan established welldocumented process determining fair values fair value based upon quoted market prices available listed prices quotes available fair value based upon models primarily use inputs marketbased independently sourced market parameters including yield curves interest rates volatilities equity debt prices foreign exchange rates credit curves plan believes valuation methods appropriate consistent market participants use different methodologies assumptions determine fair value certain financial instruments could result different estimate fair value reporting date valuation hierarchy authoritative literature establishes threelevel hierarchy prioritize inputs used measuring fair value levels within hierarchy described table level 1 highest priority level 3 lowest net asset value nav based value underlying assets owned fund minus liabilities divided number shares outstanding financial instrument’s categorization within valuation hierarchy based upon lowest level input significant fair value measurement following description valuation methodologies used investments measured fair value • shortterm investment funds cash quoted shortterm instruments valued closing price amount held deposit custodian bank investments investment vehicles valued using nav provided administrator fund nav quoted price market active classified level 2 • government agency securities limited number investments valued closing price reported major market individual securities traded quoted prices available active market investments classified within level 1 valuation hierarchy quoted market prices available specific security fair values estimated using pricing models quoted prices securities similar characteristics discounted cash flows quoted market prices security available active market classified level 2 • debt instruments limited number investments valued closing price reported major market individual securities traded quoted prices available active market investments classified level 1 quoted market prices available specific security fair values estimated using pricing models quoted prices securities similar characteristics discounted cash flows classified level 2 level 3 debt instruments priced based unobservable inputs • equity securities equity securities valued closing price reported major market individual securities traded substantially equity securities classified within level 1 valuation hierarchy • commingled funds investment vehicles valued using nav provided fund administrator assets level 2 category quoted market price • insurance contracts instruments issued insurance companies fair value based negotiated value underlying investments held separate account portfolios well considering credit worthiness issuer underlying investments government assetbacked fixed income securities general insurance contracts classified level 3 quoted prices observable inputs pricing • assets represented primarily limited partnerships investment vehicles valued using nav provided fund administrator assets exchange listed actively traded classified level 1 inactively traded assets classified level 2 following table sets forth retirement plans investments measured fair value december 31 2019 december 31 2018 activity level 3 assets significant years presented companys benefit plans unfunded except us commingled funds level 2 84 million 72 million us shortterm investment funds level 2 31 million 108 million december 31 2019 december 31 2018 respectively fair value johnson common stock directly held plan assets 984 million 31 total worldwide plan assets december 31 2019 876 million 33 total worldwide plan assets december 31 2018 11 savings plan company voluntary 401k savings plans designed enhance existing retirement programs covering eligible employees company matches percentage employee’s contributions consistent provisions plan heshe eligible total company matching contributions plans 235 million 242 million 214 million 2019 2018 2017 respectively 12 capital treasury stock changes treasury stock aggregate shares common stock issued approximately 3119843000 shares end 2019 2018 2017 cash dividends paid 375 per share 2019 compared dividends 354 per share 2018 332 per share 2017 december 17 2018 company announced board directors approved share repurchase program authorizing company purchase 50 billion companys shares common stock share repurchase program completed september 29 2019 october 13 2015 company announced board directors approved share repurchase program authorizing company purchase 100 billion companys shares common stock share repurchase program completed july 2 2017 13 accumulated comprehensive income loss components comprehensive income loss consist following 1 per adoption asu 201601 financial instruments amounts accumulated comprehensive income presented net related tax impact foreign currency translation adjusted income taxes relates permanent investments international subsidiaries additional details comprehensive income see consolidated statements comprehensive income details reclassifications accumulated comprehensive income gainloss securities reclassifications released income expense net employee benefit plans reclassifications included net periodic benefit cost see note 10 additional details gainloss derivatives hedges reclassifications earnings recorded account hedged transaction see note 6 additional details 14 international currency translation subsidiaries operating nonus dollar currencies company determined local currencies international subsidiaries functional currencies except highly inflationary economies defined compound cumulative rates inflation 100 past three years substantial portion cash flows local currency majority companys subsidiaries local currency functional currency consolidating international subsidiaries balance sheet currency effects recorded component accumulated comprehensive income equity account includes results translating certain balance sheet assets liabilities current exchange rates accounts historical rates except located highly inflationary economies argentina venezuela translation balance sheet accounts highly inflationary economies reflected operating results rollforward changes 2019 2018 2017 foreign currency translation adjustments included note 13 net currency transaction gains losses included income expense losses 267 million 265 million 216 million 2019 2018 2017 respectively 15 earnings per share following reconciliation basic net earnings per share diluted net earnings per share fiscal years ended december 29 2019 december 30 2018 december 31 2017 diluted net earnings per share calculation included dilutive effect convertible debt offset related reduction interest expense 1 million aftertax 2019 2018 2017 diluted net earnings per share calculation 2019 excluded insignificant number shares related stock options exercise price options greater average market value company’s stock diluted net earnings per share calculation 2018 2017 included shares related stock options exercise price options less average market value companys stock 16 lease commitments company primarily operating leases space vehicles manufacturing equipment data processing equipment leases remaining lease terms ranging 1 year 55 years could include options extend leases reasonably certain operating lease costs approximately 307 million 332 million 372 million 2019 2018 2017 respectively cash paid amounts included measurement lease liabilities 2019 308 million commitments finance leases significant supplemental information related leases follows weighted average remaining lease term discount rate operating leases 58 years weighted average discount rate 3 maturity lease liabilities related operating lease approximate minimum rental payments required operating leases initial remaining noncancelable lease terms excess one year december 29 2019 supplemental information comparative periods december 30 2018 prior adoption asu 201602 approximate future minimum rental payments required operating leases initial remaining noncancelable lease terms excess one year dollars millions supplemental balance sheet information related leases december 29 2019 follows 17 common stock option plans stock compensation agreements december 29 2019 company 2 stockbased compensation plans shares outstanding contracts companys 2005 longterm incentive plan 2012 longterm incentive plan 2005 longterm incentive plan expired april 26 2012 options restricted shares granted subsequent date 2012 longterm incentive plan 2012 longterm incentive plan company may issue 650 million shares common stock plus shares canceled expired forfeited issued 2005 longterm incentive plan subsequent april 26 2012 shares available future grants 2012 longterm incentive plan 315 million end 2019 compensation cost charged income plans 977 million 978 million 962 million 2019 2018 2017 respectively total income tax benefit recognized income statement sharebased compensation costs 227 million 192 million 275 million 2019 2018 2017 respectively total unrecognized compensation cost 823 million 827 million 798 million 2019 2018 2017 respectively weighted average period cost recognized 171 years 173 years 176 years 2019 2018 2017 respectively sharebased compensation costs capitalized part inventory insignificant periods company settles employee benefit equity issuances treasury shares treasury shares replenished throughout year number shares used settle employee benefit equity issuances stock options stock options expire 10 years date grant vest service periods range 6 months 4 years options granted average high low prices company’s common stock new york stock exchange date grant fair value option award estimated date grant using blackscholes option valuation model uses assumptions noted following table 2019 2018 2017 grants expected volatility represents blended rate 10year weekly historical overall volatility rate 5week average implied volatility rate based atthemoney traded johnson options life 2 years grants historical data used determine expected life option riskfree rate based us treasury yield curve effect time grant average fair value options granted 1780 1798 1338 2019 2018 2017 respectively fair value estimated based weighted average assumptions summary option activity plan december 29 2019 december 30 2018 december 31 2017 changes years ending dates presented total intrinsic value options exercised 807 million 1028 million 1060 million 2019 2018 2017 respectively following table summarizes stock options outstanding exercisable december 29 2019 1 average contractual life remaining years stock options outstanding december 30 2018 december 31 2017 109652 average life 62 years 111306 average life 63 years respectively stock options exercisable december 30 2018 december 31 2017 54862 average price 8203 52421 average price 7361 respectively restricted share units performance share units company grants restricted share units vest service periods range 6 months 3 years company also grants performance share units paid shares johnson common stock end threeyear performance period whether performance share units vest amount vest tied completion service periods range 6 months 3 years achievement threeyear period three equallyweighted goals directly align help drive longterm total shareholder return operational sales adjusted operational earnings per share relative total shareholder return number shares actually earned end threeyear period vary based actual performance 0 200 target number performance share units granted fourth quarter 2017 company modified restricted share units scheduled vest january 1 2018 march 15 2018 modification guaranteed minimum aggregate value market value total expected payout amount awards expected vest period amount committed material company’s overall financial position summary restricted share units performance share units activity plans december 29 2019 presented average fair value restricted share units granted 12131 11967 10769 2019 2018 2017 respectively using fair market value date grant fair value restricted share units discounted dividends paid restricted share units vesting period fair value restricted share units issued 5859 million 6137 million 5965 million 2019 2018 2017 respectively weighted average fair value performance share units granted 12467 12064 11413 2019 2018 2017 calculated using weighted average fair market value three component goals date grant fair values sales earnings per share goals performance share unit estimated date grant using fair market value shares time award discounted dividends paid performance share units vesting period fair value relative total shareholder return goal performance share unit estimated date grant using monte carlo valuation model fair value performance share units issued 1191 million 1288 million 1325 million 2019 2018 2017 respectively 18 segments business geographic areas percentage greater 100 meaningful ­ see note 1 description segments company operates export sales significant 2019 company utilized three wholesalers distributing products three segments represented approximately 150 120 110 total consolidated revenues 2018 company three wholesalers distributing products three segments represented approximately 140 110 total consolidated revenues 2017 company two wholesalers distributing products three segments represented approximately 140 100 total consolidated revenues 1 amounts allocated segments include interest income expense general corporate income expense 2 general corporate includes cash equivalents marketable securities 3 consumer segment includes gain 03 billion related companys previously held equity investment dr cilabo litigation expense 04 billion restructuring charge 01 billion pharmaceutical segment includes litigation expense 43 billion including 40 billion related agreement principle settle opioid litigation see note 21 consolidated financial statements additional information regarding opioid litigation inprocess research development expense 09 billion related alios asset research development expense 03 billion upfront payment related argenx unrealized gain securities 06 billion actelion acquisition related costs 02 billion restructuring charge 01 billion medical devices segment includes gain 20 billion divestiture asp business restructuring related charge 04 billion litigation expense 04 billion auris health acquisition related costs 01 billion 4 consumer segment includes gain 03 billion divestiture nizoral® litigation expense 03 billion pharmaceutical segment includes inprocess research development charge 11 billion related alios xo1 assets corresponding xo1 contingent liability reversal 02 billion actelion acquisition related costs 02 billion unrealized loss securities 02 billion gain 02 billion divestiture certain nonstrategic pharmaceutical products medical devices segment includes net litigation expense 17 billion restructuring related charge 06 billion amo acquisition related costs 01 billion gain 05 billion divestiture lifescan business 5 pharmaceutical segment includes 08 billion actelion acquisition integration related costs inprocess research development expense 04 billion litigation expense 01 billion medical devices segment includes litigation expense 11 billion restructuring related charge 08 billion asset impairment 02 billion primarily related insulin pump business 01 billion amo acquisition related costs medical devices segment includes gain 07 billion divestiture codman neurosurgery consumer segment includes gain 05 billion divestiture compeed® 6 longlived assets include property plant equipment net 2019 2018 17658 17035 respectively intangible assets goodwill net 2019 2018 81282 78064 respectively 19 selected quarterly financial data unaudited selected unaudited quarterly financial data years 2019 2018 summarized 1 first quarter 2019 includes gain 03 billion aftertax 03 billion beforetax related companys previously held equity investment dr cilabo inprocess research development expense 703 million aftertax 890 million beforetax related alios asset litigation expense 342 million aftertax 423 million beforetax unrealized gain securities 125 million aftertax 158 million beforetax restructuring related charge 75 million aftertax 90 million beforetax acquisition related costs 60 million aftertax 67 million beforetax 2 second quarter 2019 includes gain 15 billion aftertax 20 billion beforetax divestiture asp business litigation expense 342 million aftertax 409 million beforetax unrealized gain securities 117 million aftertax 148 million beforetax restructuring related charge 116 million aftertax 142 million beforetax acquisition related costs 50 million aftertax 55 million beforetax 3 third quarter 2019 includes litigation expense 3080 million aftertax 4000 million beforetax related agreement principle settle opioid litigation restructuring related charge 106 million aftertax 128 million beforetax acquisition related costs 88 million aftertax 107 million beforetax 391 million benefit aftertax impact tax legislation unrealized loss securities 71 million aftertax 89 million beforetax 4 fourth quarter 2019 includes litigation expense 251 million aftertax 264 million beforetax unrealized gain securities 277 million aftertax 350 million beforetax restructuring related charge 214 million aftertax 251 million beforetax 184 million benefit aftertax impact tax legislation acquisition related costs 82 million aftertax 90 million beforetax 5 first quarter 2018 includes actelion acquisition related cost 92 million aftertax 96 million beforetax restructuring related charge 81 million aftertax 107 million beforetax 6 second quarter 2018 includes litigation expense 609 million aftertax 703 million beforetax restructuring related charge 152 million aftertax 176 million beforetax 7 third quarter 2018 includes inprocess research development expense 859 million aftertax 1126 million beforetax related alios xo1 assets corresponding xo1 contingent liability reversal 184 million tax restructuring related charge 162 million aftertax 190 million beforetax 265 million benefit aftertax impact tax legislation 8 fourth quarter 2018 includes litigation expense 1113 million aftertax 1288 million beforetax restructuring related charge 190 million aftertax 227 million beforetax 137 million benefit aftertax impact tax legislation 20 acquisitions divestitures certain businesses acquired 58 billion cash 14 billion liabilities assumed 2019 acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2019 acquisitions primarily included dr cilabo japanese company focused marketing development distribution broad range dermocosmetic cosmetic skincare products auris health inc privately held developer robotic technologies initially focused lung cancer fdacleared platform currently used bronchoscopic diagnostic therapeutic procedures taris biomedical llc company specializing development novel drug delivery technology treatment bladder diseases including cancer company also acquired assets jointpoint inc privately held company navigation software improve surgical outcomes hip replacement excess purchase price estimated fair value tangible assets acquired amounted 68 billion assigned identifiable intangible assets residual recorded goodwill january 17 2019 company acquired dr cilabo japanese company focused marketing development distribution broad range dermocosmetic cosmetic skincare products total purchase price approximately ¥230 billion equates approximately 21 billion using exchange rate 10906 japanese yen us dollar january 16 2019 acquisition completed series transactions included allcash tender offer acquire publicly held shares already held company ¥5900 per share company previously held 20 ownership dr cilabo june 2019 company became legal owner dr cilabo completion tender offer procedure japan acquired company delisted tokyo stock exchange additionally fiscal first quarter 2019 company recognized pretax gain recorded income expense net approximately 03 billion related companys previously held equity investment dr cilabo company treated transaction business combination included consumer segment allocation purchase price included current period balance sheet based best estimate management preliminary subject change december 29 2019 fair value acquisition allocated primarily amortizable intangible assets 15 billion goodwill 12 billion liabilities 04 billion subject subsequent valuation adjustments within measurement period adjustments made since date acquisition 01 billion intangible assets accrued liabilities deferred taxes income property plant equipment offset goodwill amortizable intangible assets comprised brandtrademarks customer relationships weighted average life 153 years goodwill primarily attributable synergies expected arise business acquisition expected deductible tax purposes april 1 2019 company completed acquisition auris health inc approximately 34 billion net cash acquired additional contingent payments 235 billion aggregate may payable upon reaching certain predetermined milestones auris health privately held developer robotic technologies initially focused lung cancer fdacleared platform currently used bronchoscopic diagnostic therapeutic procedures company treated transaction business combination included medical devices segment fair value acquisition allocated primarily amortizable nonamortizable intangible assets primarily iprd 30 billion goodwill 20 billion marketable securities 02 billion liabilities assumed 18 billion includes fair value contingent payments mentioned subject subsequent valuation adjustments within measurement period december 29 2019 valuation adjustments fair value contingent consideration 11 billion probability success factor ranging 55 95 used fair value calculation reflect inherent regulatory commercial risk contingent payments iprd discount rate applied approximately 10 goodwill primarily attributable synergies expected arise business acquisition expected deductible tax purposes december 20 2019 company announced agreement acquire verilys stake verb surgical inc transaction closed fiscal first quarter 2020 verb surgical inc subsidiary johnson december 30 2019 subsequent fiscal year end company completed acquisition rights investigational compound bermekimab multiple dermatological indications along certain employees xbiotech inc purchase price 08 billion xbiotech may eligible receive additional payments upon receipt certain commercialization authorizations transaction accounted business combination included pharmaceutical segment 2018 certain businesses acquired 09 billion cash 01 billion liabilities assumed 2018 acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2018 acquisitions primarily included zarbee’s inc privately held company leader naturallybased consumer healthcare products benevir biopharm inc benevir privatelyheld biopharmaceutical company specializing development oncolytic immunotherapies orthotaxy privatelyheld developer softwareenabled surgery technologies including differentiated roboticassisted surgery solution company also acquired assets medical enterprises distribution llc privately held healthcare technology firm focused surgical procedure innovation excess purchase price estimated fair value tangible assets acquired amounted 10 billion assigned identifiable intangible assets residual recorded goodwill 2017 certain businesses acquired 352 billion cash 18 billion liabilities assumed acquisitions accounted using acquisition method accordingly results operations included financial statements respective dates acquisition 2017 acquisitions primarily included actelion ltd established leading franchise differentiated innovative products pulmonary arterial hypertension pah abbott medical optics amo whollyowned subsidiary abbott laboratories included ophthalmic products related cataract surgery laser refractive surgery consumer eye health neuravi limited privatelyheld medical device company develops markets medical devices neurointerventional therapy tearscience inc manufacturer products dedicated treating meibomian gland dysfunction sightbox inc privatelyheld company developed subscription vision care service connects consumers eye care professionals supply contact lenses torax medical inc privatelyheld medical device company manufactures markets linx™ reflux management system surgical treatment gastroesophageal reflux disease megadyne medical products inc privatelyheld medical device company develops manufactures markets electrosurgical tools excess purchase price estimated fair value tangible assets acquired amounted 344 billion assigned identifiable intangible assets residual recorded goodwill amount approximately 11 billion identified value iprd primarily associated acquisition actelion ltd value iprd calculated using cash flow projections discounted inherent risk projects 2017 company completed acquisition actelion ltd cash tender offer switzerland 280 per share amounting 296 billion net cash acquired part transaction immediately prior completion acquisition actelion spun drug discovery operations earlystage clinical development assets newly created swiss biopharmaceutical company idorsia ltd shares idorsia listed six swiss exchange six 2017 company held 99 shares idorsia rights additional 221 idorsia equity convertible loan principal amount approximately 05 billion result idorsia raising additional capital july 2018 company currently holds 90 shares idorsia rights additional 208 idorsia equity convertible loan carrying value principal amount approximately 05 billion convertible loan may converted 38715114 idorsia shares subject certain restrictions follows aggregate shareholding 16 idorsia shares result certain shareholders holding 20 issued idorsia shares ii balance remaining amount within 20 business days maturity date convertible loan 10 year term idorsia undergoes change control transaction maturity loan remaining amount yet converted idorsia may elect settle remaining amount cash ordinary shares idorsia equity investment idorsia convertible loan recorded assets companys consolidated balance sheet company also exercised option acquired act132577 product within idorsia developed resistant hypertension currently phase 3 clinical development company also entered agreement provide idorsia swiss franc denominated credit facility approximately 250 million december 29 2019 idorsia made drawdowns credit facility actelion established leading franchise differentiated innovative products pulmonary arterial hypertension pah highly complementary existing portfolio company addition actelion’s specialty inmarket medicines latestage products consistent companys efforts grow attractive complementary therapeutic areas serve patients serious illnesses significant unmet medical need fiscal second quarter 2018 company finalized purchase price allocation actelion individual assets acquired liabilities assumed using acquisition method following table presents amounts recognized assets acquired liabilities assumed acquisition date adjustments made second quarter 2018 1 includes adjustment 642 million writeup acquired inventory estimated fair value adjustments made since date acquisition 02 billion deferred taxes 04 billion current liabilities offset goodwill assets acquired recorded pharmaceutical segment acquisition actelion resulted approximately 62 billion goodwill primarily attributable synergies expected arise acquisition goodwill expected deductible tax purposes purchase price allocation identifiable intangible assets follows includes 04 billion related valchlor® one acquired products divested fiscal second quarter 2018 patents trademarks acquired comprised developed technology weighted average life 9 years primarily based patent life marketed products intangible assets definite lives assigned asset lives ranging 4 10 years inprocess research development intangible assets valued technology programs unapproved products value iprd calculated using probability adjusted cash flow projections discounted risk inherent projects discount rate applied 9 acquisition accounted using acquisition method accordingly results operations actelion reported companys financial statements beginning june 16 2017 date acquisition year ended december 31 2017 total sales net loss actelion date acquisition 14 billion 14 billion respectively following table provides pro forma results operations fiscal year ended december 31 2017 actelion acquired january 4 2016 pro forma results include effect certain purchase accounting adjustments estimated changes depreciation amortization expense acquired tangible intangible assets however pro forma results include anticipated cost savings effects planned integration actelion accordingly amounts necessarily indicative results acquisition occurred dates indicated may occur future company recorded actelion acquisition related costs tax approximately 02 billion 02 billion 08 billion 2019 2018 2017 respectively recorded incomeexpense cost products sold 2017 company acquired abbott medical optics amo whollyowned subsidiary abbott laboratories 43 billion net cash acquired acquisition included ophthalmic products related cataract surgery laser refractive surgery consumer eye health net purchase price primarily recorded amortizable intangible assets 23 billion goodwill 17 billion weighted average life total amortizable intangibles majority customer relationships approximately 144 years goodwill primarily attributable synergies expected arise business acquisition deductible tax purposes intangible assets goodwill amounts based final purchase price allocation assets acquired recorded medical devices segment 2012 company completed acquisition synthes inc purchase price 202 billion cash stock connection acquisition synthes inc company entered two accelerated share repurchase asr agreements 2013 company settled remaining liabilities asr agreements company believes transactions asr agreement series related internal transactions consummated tax efficient manner accordance applicable law possible internal revenue service could assert one contrary positions challenge transactions tax perspective challenged amount total purchase price synthes shares could treated subject applicable us tax approximately statutory rate company plus interest exception actelion ltd acquisition supplemental pro forma information 2019 2018 2017 accordance us gaap standards related business combinations goodwill intangible assets provided impact aforementioned acquisitions material effect company’s results operations cash flows financial position divestitures 2019 company divested advanced sterilization products asp business fortive corporation aggregate value approximately 28 billion consisting 27 billion cash proceeds 01 billion retained net receivables december 30 2018 assets held sale consolidated balance sheet 02 billion inventory 01 billion property plant equipment net 03 billion goodwill company recognized pretax gain recorded income expense net approximately 20 billion 2018 company divested lifescan inc business approximately 21 billion retained certain net liabilities divestitures 2018 included nizoral® roc® certain nonstrategic pharmaceutical products 2018 pretax gains divestitures approximately 12 billion 2018 company accepted binding offer form strategic collaboration jabil inc one world’s leading manufacturing services providers health care products technology products company expanding 12year relationship jabil produce range products within ethicon endosurgery depuy synthes businesses transaction includes transfer employees manufacturing sites majority transfers completed 2019 minor amount remaining 2020 december 29 2019 assets held sale consolidated balance sheet 01 billion inventory property plant equipment net december 30 2018 assets held sale consolidated balance sheet 03 billion inventory 01 billion property plant equipment net additional details global supply chain restructuring see note 22 consolidated financial statements 2017 company divestitures primarily included codman neurosurgery business integra lifesciences holdings corporation divestiture compeed® hra pharma 2017 pretax gains divestitures approximately 13 billion 21 legal proceedings johnson certain subsidiaries involved various lawsuits claims regarding product liability intellectual property commercial supplier indemnification matters governmental investigations legal proceedings arise time ordinary course business company records accruals loss contingencies associated legal matters probable liability incurred amount loss reasonably estimated december 29 2019 company determined liabilities associated certain litigation matters probable reasonably estimated company accrued matters continue monitor related legal issue adjust accruals might warranted based new information developments accordance asc 4502025 litigation regulatory matters discussed loss probable reasonably possible company unable estimate possible loss range loss beyond amounts already accrued amounts accrued legal contingencies often result complex series judgments future events uncertainties rely heavily estimates assumptions including timing related payments ability make estimates judgments affected various factors including among things whether damages sought proceedings unsubstantiated indeterminate scientific legal discovery commenced complete proceedings early stages matters present legal uncertainties significant facts dispute procedural jurisdictional issues uncertainty unpredictability number potential claims numerous parties involved extent adverse verdicts rendered company record accrual loss determined probable reasonably estimated companys opinion based examination matters experience date discussions counsel ultimate outcome legal proceedings net liabilities accrued companys balance sheet expected material adverse effect companys financial position however resolution increase accruals one matters reporting period may material adverse effect companys results operations cash flows period product liability johnson certain subsidiaries involved numerous product liability claims lawsuits involving multiple products claimants cases seek substantial compensatory available punitive damages company believes substantial defenses feasible predict ultimate outcome litigation time even substantial defenses company considers isolated settlements based variety circumstances company established accruals product liability claims lawsuits compliance asc 45020 based currently available information cases may limited company accrues estimate legal defense costs needed defend matter costs probable reasonably estimated certain matters company accrued additional amounts estimated costs associated settlements damages losses product liability accruals represent projected product liability thousands claims around world different litigation environments different fact patterns changes accruals may required future additional information becomes available significant cases include depuy asr™ xl acetabular system depuy asr™ hip resurfacing system pinnacle® acetabular cup system pelvic meshes risperdal® xarelto® body powders containing talc primarily johnsons® baby powder invokana® ethicon physiomesh® flexible composite mesh december 29 2019 united states approximately 1100 plaintiffs direct claims pending lawsuits regarding injuries allegedly due depuy asr™ xl acetabular system depuy asr™ hip resurfacing system 10300 respect pinnacle® acetabular cup system 17600 respect pelvic meshes 11900 respect risperdal® 29000 respect xarelto® 17900 respect body powders containing talc 400 respect invokana® 3300 respect ethicon physiomesh® flexible composite mesh august 2010 depuy orthopaedics inc depuy announced worldwide voluntary recall asr™ xl acetabular system depuy asr™ hip resurfacing system used hip replacement surgery claims personal injury made depuy johnson number pending lawsuits expected fluctuate certain lawsuits settled dismissed additional lawsuits filed cases filed federal courts united states organized multidistrict litigation united states district court northern district ohio litigation also filed countries outside united states primarily united kingdom canada australia ireland germany india italy november 2013 depuy reached agreement courtappointed committee lawyers representing asr hip system plaintiffs establish program settle claims eligible asr hip patients united states surgery replace asr hips known revision surgery august 31 2013 depuy reached additional agreements february 2015 march 2017 extended settlement program include asr hip patients revision surgeries august 31 2013 prior february 15 2017 settlement program resolved 10000 claims therefore bringing resolution significant asr hip litigation activity united states however lawsuits united states remain settlement program address litigation outside united states australia class action settlement reached resolved claims majority asr hip patients country canada company reached agreements settle two pending class actions approved québec superior court supreme court british columbia company continues receive information respect potential additional costs associated recall worldwide basis company established accruals costs associated united states settlement program depuy asr™ hiprelated product liability litigation claims personal injury also made depuy orthopaedics inc johnson collectively depuy relating pinnacle® acetabular cup system used hip replacement surgery product liability lawsuits continue filed company continues receive information respect potential costs anticipated number cases filed federal courts united states organized multidistrict litigation united states district court northern district texas litigation also filed state courts countries outside united states several adverse verdicts rendered depuy one reversed appeal remanded retrial first quarter 2019 depuy established united states settlement program resolve cases part settlement program adverse verdicts settled company established accrual product liability litigation associated pinnacle® acetabular cup system related settlement program claims personal injury made ethicon inc ethicon johnson arising ethicons pelvic mesh devices used treat stress urinary incontinence pelvic organ prolapse company continues receive information respect potential costs additional cases filed federal courts united states organized multidistrict litigation mdl united states district court southern district west virginia mdl court remanding cases trial jurisdictions case originally filed additional pelvic mesh lawsuits filed remain outside mdl company settled otherwise resolved majority united states cases estimated costs associated settlements remaining cases reflected companys accruals addition class actions individual personal injury cases claims commenced various countries outside united states including claims cases united kingdom netherlands belgium class actions israel australia canada seeking damages alleged injury resulting ethicons pelvic mesh devices november 2019 federal court australia issued judgment regarding findings respect liability relation three lead applicants generally relation design manufacture pre postmarket assessments testing supply promotion devices australia used treat stress urinary incontinence pelvic organ prolapse orders determining damages amounts awarded three lead applicants expected first quarter 2020 respect group members individual case assessment process require proof use causally related loss class actions canada expected discontinued 2020 result settlement group cases subject court approval discontinuance company established accruals respect product liability litigation associated ethicons pelvic mesh products following june 2016 worldwide market withdrawal ethicon physiomesh® flexible composite mesh claims personal injury made ethicon inc johnson alleging personal injury arising use hernia mesh device cases filed federal courts united states organized multidistrict litigation mdl united states district court northern district georgia multicounty litigation mcl also formed new jersey state court assigned atlantic county cases pending new jersey addition matters mdl mcl additional lawsuits pending united states district court southern district ohio part mdl polypropylene mesh devices manufactured cr bard inc lawsuits pending outside united states along ethicon physiomesh® lawsuits number filings related proceed® mesh proceed® ventral patch products march 2019 new jersey supreme court entered order consolidating proceed® proceed® ventral patch cases mcl atlantic county superior court additional cases filed various federal state courts us jurisdictions outside us company continues receive information respect potential costs anticipated number cases company established accruals respect product liability litigation associated ethicon physiomesh® flexible composite mesh proceed® mesh proceed® ventral patch products september 2019 plaintiffs’ attorney filed application new jersey supreme court seeking centralized management 107 prolene™ polypropylene hernia system cases new jersey supreme court granted plaintiffs application january 2020 transferred mcl atlantic county superior court claims personal injury made janssen pharmaceuticals inc johnson arising use risperdal® indicated treatment schizophrenia acute manic mixed episodes associated bipolar disorder irritability associated autism related compounds lawsuits primarily filed state courts pennsylvania california missouri actions pending various courts united states canada product liability lawsuits continue filed company continues receive information respect potential costs anticipated number cases company successfully defended number cases verdicts company including recent verdict october 2019 8 billion punitive damages related one single plaintiff subsequently reduced january 2020 68 million trial judge company appeal final judgment company settled otherwise resolved many united states cases costs associated settlements reflected companys accruals claims personal injury arising use xarelto® oral anticoagulant made janssen pharmaceuticals inc jpi johnson jj jpis collaboration partner xarelto® bayer ag certain affiliates cases filed federal courts united states organized multidistrict litigation united states district court eastern district louisiana addition cases filed state courts across united states many cases consolidated state mass tort litigation philadelphia pennsylvania coordinated proceeding los angeles california class action lawsuits also filed canada march 2019 jpi jj announced agreement principle settle xarelto® cases united states settlement agreement executed may 2019 settlement became final december 2019 resolve majority cases pending united states company established accruals costs associated united states settlement program xarelto® related product liability litigation personal injury claims alleging talc causes cancer made johnson consumer inc johnson arising use body powders containing talc primarily johnson’s® baby powder number pending product liability lawsuits continues increase company continues receive information respect potential costs anticipated number cases lawsuits primarily filed state courts missouri new jersey california well outside united states cases filed federal courts united states organized multidistrict litigation united states district court district new jersey multidistrict litigation parties moved exclude experts known daubert motions court held daubert hearings midjuly 2019 final round briefing submitted court parties awaiting decision company successfully defended number cases verdicts company including verdict july 2018 47 billion company believes strong grounds appeal overturn verdicts company established accrual primarily defense costs connection product liability litigation associated body powders containing talc february 2019 company’s talc supplier imerys talc america inc two affiliates imerys talc vermont inc imerys talc canada inc collectively imerys filed voluntary chapter 11 petition commencing reorganization united states bankruptcy code united states bankruptcy court district delaware imerys bankruptcy imerys bankruptcy relates imerys’ potential liability personal injury exposure talcum powder sold imerys talc claims bankruptcy filing imerys noted certain claims alleges company indemnification rights joint insurance proceeds based claims well indemnity insurance claims company imerys company petitioned united states district court district delaware establish federal jurisdiction state court talc lawsuits bankruptcy code companys petition denied state court talc lawsuits removed federal court basis remanded company formally proposed resolve imerys company’s obligations arising talc claims agreeing assume defense litigation talc claims involving companys products lifting automatic stay enable talc claims proceed outside bankruptcy forum company agreeing settle pay judgment imerys waiving company’s indemnification claims imerys discussions imerys company issue remain ongoing february 2018 securities class action lawsuit filed johnson certain named officers united states district court district new jersey alleging johnson violated federal securities laws failing adequately disclose alleged asbestos contamination body powders containing talc primarily johnsons® baby powder purchasers johnson’s shares suffered losses result plaintiffs seeking damages april 2019 company moved dismiss complaint briefing motion complete august 2019 december 2019 court denied part motion dismiss october 2018 shareholder derivative lawsuit filed johnson nominal defendant current directors defendants united states district court district new jersey alleging breach fiduciary duties related alleged asbestos contamination body powders containing talc primarily johnson’s® baby powder johnson suffered damages result alleged breaches june 2019 shareholder filed additional complaint initiating summary proceeding new jersey state court books records inspection august 2019 johnson responded books records complaint filed cross motion dismiss september 2019 plaintiff replied court heard oral argument court yet ruled books records action september 2019 united states district court district new jersey granted defendants’ motion dismiss shareholder derivative lawsuit dismissed complaint without prejudice october 2019 shareholder filed notice appeal united states court appeals third circuit january 2020 shareholder voluntarily dismissed appeal prejudice four additional shareholder derivative lawsuits filed new jersey making similar allegations company current directors certain officers january 2019 two erisa class action lawsuits filed participants johnson savings plan johnson pension benefits committee certain named officers united states district court district new jersey alleging defendants breached fiduciary duties offering johnson stock johnson savings plan investment option imprudent failures disclose alleged asbestos contamination body powders containing talc primarily johnson’s® baby powder plaintiffs seeking damages injunctive relief defendants filed motion dismiss lawsuit pending united states district court central district california alleging violations proposition 65 california’s unfair competition law false advertising law concerning johnson’s® baby powder june 2019 plaintiffs filed motion voluntary dismissal proposition 65 action company opposed motion extent would allow plaintiffs’ counsel refile claims new plaintiffs court granted plaintiff’s motion conditioned upon payment attorneys’ fees costs court entered award attorneys’ fees costs october 2019 case dismissed without prejudice another lawsuit alleging violations proposition 65 california’s consumer legal remedies act relating johnson’s® baby powder filed superior court california county san diego july 2019 company filed notice removal united states district court southern district california plaintiffs filed second amended complaint shortly thereafter october 2019 company moved dismiss second amended complaint failure state claim upon relief may granted primarily basis plaintiffs failed comply proposition 65’s mandatory presuit notice requirement applies even plaintiff asserts indirect proposition 65 claim response motions plaintiffs filed third amended complaint december 2019 company moved dismiss third amended complaint failure state claim upon relief may granted addition company received preliminary inquiries subpoenas produce documents regarding matters senator murray member senate committee health education labor pensions department justice securities exchange commission us congressional subcommittee economic consumer policy company cooperating government inquiries continues produce documents response claims personal injury made number johnson companies including janssen pharmaceuticals inc johnson arising use invokana® prescription medication indicated improve glycemic control adults type 2 diabetes lawsuits filed federal courts united states organized multidistrict litigation united states district court district new jersey cases also filed state courts class action lawsuits filed canada product liability lawsuits continue filed company continues receive information respect potential costs anticipated number cases company settled otherwise resolved many cases claims united states costs associated settlements reflected companys accruals intellectual property certain subsidiaries johnson subject time legal proceedings claims related patent trademark intellectual property matters arising businesses many matters involve challenges coverage andor validity patents various products allegations certain company’s products infringe patents third parties although subsidiaries believe substantial defenses challenges allegations respect significant patents assurance outcome matters loss cases could adversely affect ability subsidiaries sell products result loss sales due loss market exclusivity require payment past damages future royalties may result noncash impairment charge associated intangible asset significant matters described medical devices march 2013 medinol ltd medinol filed patent infringement lawsuit cordis corporation cordis johnson united states district court southern district new york alleging cordis’s sales cypher™ cypher select™ stents made united states since 2005 willfully infringed four medinols patents directed geometry articulated stents although johnson since sold cordis retained liability case trial january 2014 district court dismissed case finding medinol unreasonably delayed bringing claims laches defense september 2014 district court denied motion medinol vacate judgment grant new trial medinol appealed decision united states court appeals federal circuit march 2017 united states supreme court held laches defense available patent cases april 2018 united states court appeals federal circuit remanded case back district court reconsider medinol’s motion new trial march 2019 district court denied medinol’s motion new trial april 2019 medinol filed notice appeal november 2016 medidea llc medidea filed patent infringement lawsuit depuy orthopaedics inc united states district court northern district illinois alleging infringement attune® knee system april 2017 medidea filed amended complaint adding depuy synthes products inc depuy synthes sales inc named defendants collectively depuy medidea alleges infringement united states patent nos 6558426 ’426 8273132 ’132 8721730 ’730 9492280 ’280 relating posterior stabilized knee systems specifically medidea alleges sofcamtm contact feature attune® posterior stabilized knee products infringes patentsinsuit medidea seeking monetary damages injunctive relief june 2017 case transferred united states district court district massachusetts claim construction hearing held october 2018 claim construction order issued november 2018 december 2018 medidea stipulated noninfringement ’132 ’730 ’280 patents based district court’s claim construction reserving right appeal construction leaving ’426 patent issue district court january 2019 district court stayed case pending decision inter partes review proceeding ’426 patent see december 2017 depuy synthes products inc filed petition inter partes review united states patent trademark office uspto seeking invalidate two claims ’426 patent asserted district court litigation june 2018 uspto instituted review claims hearing held march 2019 april 2019 uspto issued decision upholding validity patent may 2019 depuy filed motion summary judgment noninfringement claims ’426 patent november 2019 judgment entered favor depuy december 2019 medidea filed notice appeal december 2016 ethicon endosurgery inc ethicon endosurgery llc known ethicon llc sued covidien inc united states district court district massachusetts seeking declaration united states patent nos 6585735 ’735 patent 7118587 7473253 8070748 8241284 ’284 patent either invalid infringed ethicon’s enseal® x1 large jaw tissue sealer product april 2017 covidien lp covidien sales llc covidien ag collectively covidien answered counterclaimed denying allegations asserting willful infringement ’735 patent ’284 patent united states patent nos 8323310 ’310 patent 9084608 9241759 ’759 patent 9113882 seeking damages injunction covidien filed motion preliminary injunction denied october 2017 parties entered joint stipulations ’310 patent ’759 patent remain dispute trial began september 2019 closing arguments heard march 2020 december 2016 dr ford albritton sued acclarent inc acclarent united states district court northern district texas alleging acclarent’s relieva® spin relievea spinplus® products infringe us patent 9011412 ’412 patent dr albritton also alleges breach contract fraud true owner acclarent’s us patent 8414473 december 2016 acclarent filed petition inter partes review ipr united states patent trademark office uspto challenging validity ’412 patent uspto instituted ipr july 2017 july 2018 uspto ruled favor albritton ipr finding acclarent met burden proof challenged claims invalid october 2019 court appeals affirmed uspto’s patent trial appeal board june 2019 parties filed cross motions summary judgment district court parties awaiting decision district court trial scheduled april 2020 november 2017 board regents university texas system tissuegen inc collectively ut filed lawsuit united states district court western district texas ethicon inc ethicon us llc alleging manufacture sale vicryl® plus antibacterial sutures monocryl® plus antibacterial sutures pds® plus antibacterial sutures stratafix® pds® antibacterial sutures stratafix® monocryl® plus antibacterial sutures infringe plaintiffs’ united states patent nos 6596296 7033603 ’603 patent directed implantable polymer drug releasing biodegradable fibers containing therapeutic agent ut seeking damages injunction december 2018 ethicon filed petitions uspto seeking inter partes review ipr asserted patents petitions stayed uspto pending decision us supreme court unrelated case ut dismissed ’603 patent suit longer accuses pds® plus antibacterial sutures stratafix® pds® plus antibacterial sutures infringement district court trial scheduled june 2020 august 2018 intuitive surgical inc intuitive surgical operations inc “intuitive” filed patent infringement suit auris health inc “auris” united states district court district delaware suit intuitive alleges willful infringement us patent nos 6246200 ’200 patent 6491701 ’701 patent 6522906 ’906 patent 6800056 ’056 patent 8142447 ’447 patent 8620473 ’473 patent 8801601 ’601 patent 9452276 ’276 patent based auris’ monarch™ platform auris filed petitions inter partes review uspto regarding ’200 ’056 ’601 ’701 ’447 ’276 ’906 patents december 2019 uspto instituted review ’601 patent denied review ’056 patent district court trial scheduled begin january 2021 august 2019 rsb spine llc “rsb spine” filed patent infringement suit depuy synthes inc united states district court district delaware october 2019 rsb spine amended complaint change named defendants depuy synthes sales inc depuy synthes products inc suit rsb spine alleges willful infringement united states patent nos 6984234 9713 537 one following products zeropva™ spacer zerop® spacer zerop natural™ plate synfix® lr spacer synfix® evolution system rsb spine seeks monetary damages injunctive relief november 2019 suit consolidated pretrial purposes patent infringement suits brought rsb spine united states district court district delaware life spine inc medacta usa inc precision spine inc xtant medical holdings inc pharmaceutical august 2016 sandoz ltd hexal ag collectively sandoz filed lawsuit english high court gd searle llc pfizer company searle janssen sciences ireland uc jsi alleging searle’s supplementary protection certificate spcgb07038 spc exclusively licensed jsi invalid revoked janssencilag limited sells prezista® darunavir united kingdom pursuant license october 2016 searle jsi counterclaimed sandoz threatened infringement spc based statements plans launch generic darunavir united kingdom sandoz admitted generic darunavir product would infringe spc found valid searle jsi seeking order enjoining sandoz marketing generic darunavir expiration spc following trial april 2017 court entered decision holding spc valid granting final injunction sandoz appealed court’s decision injunction stayed pending appeal january 2018 court referred issue appeal court justice european union cjeu stayed proceedings pending cjeu’s ruling issue december 2019 parties entered settlement agreement april 2018 acerta pharma bv astrazeneca uk ltd astrazeneca pharmaceuticals lp filed patent infringement lawsuit united states district court district delaware pharmacyclics llc abbvie inc collectively abbvie alleging manufacture sale imbruvica® infringes us patent 7459554 janssen biotech inc commercializes imbruvica® jointly abbvie intervened action november 2018 october 2019 parties entered settlement agreement remicade® related cases august 2014 celltrion healthcare co ltd celltrion inc collectively celltrion filed application united states food drug administration fda approval make sell infliximab biosimilar march 2015 janssen biotech inc jbi filed lawsuit united states district court district massachusetts celltrion hospira healthcare corporation hospira exclusive marketing rights celltrion’s infliximab biosimilar united states seeking among things declaratory judgment biosimilar product infringes potentially infringes several jbi patents including united states patent 6284471 relating remicade® infliximab ’471 patent united states patent 7598083 ’083 patent directed cell culture media used make celltrion’s biosimilar august 2016 district court granted celltrion’s hospira’s motions summary judgment invalidity ’471 patent jbi appealed decisions united states court appeals federal circuit january 2018 federal circuit dismissed appeal moot based affirmance decision uspto’s patent trial appeal board affirming invalidity ’471 patent june 2016 jbi filed two additional patent infringement lawsuits asserting ’083 patent one celltrion hospira united states district court district massachusetts hyclone laboratories inc manufacturer cell culture media celltrion uses make biosimilar product united states district court district utah jbi seeks monetary damages relief october 2017 district court massachusetts action denied celltrion hospira’s motion dismiss lack standing july 2018 district court massachusetts action granted celltrion’s motion summary judgment noninfringement entered order dismissing ’083 lawsuit celltrion hospira jbi appealed united states court appeals federal circuit celltrion hospira crossappealed standing issue hearing appeal crossappeal scheduled march 2020 litigation hyclone utah stayed pending outcome massachusetts actions fda approved first infliximab biosimilar sale united states 2016 number products launched litigation filers abbreviated new drug applications andas following summarizes lawsuits pending generic companies filed abbreviated new drug applications andas fda undertaken similar regulatory processes outside united states seeking market generic forms products sold various subsidiaries johnson prior expiration applicable patents covering products andas typically include allegations noninfringement invalidity applicable patents event subsidiaries successful action automatic statutory stay andas expires united states district court rulings obtained thirdparty companies involved would ability upon approval fda introduce generic versions products market resulting potential substantial market share revenue losses applicable products may result noncash impairment charge associated intangible asset addition time subsidiaries may settle types actions settlements involve introduction generic versions products issue market prior expiration relevant patents inter partes review ipr process united states patent trademark office uspto created 2011 america invents act also used times generic companies conjunction andas lawsuits challenge applicable patents zytiga® july 2015 janssen biotech inc janssen oncology inc janssen research development llc collectively janssen btg international ltd btg initiated patent infringement lawsuit main action united states district court district new jersey number generic companies certain affiliates andor suppliers filed andas seeking approval market generic version zytiga® 250mg expiration united states patent 8822438 ’438 patent generic companies include amneal pharmaceuticals llc amneal pharmaceuticals new york llc collectively amneal apotex inc apotex corp collectively apotex citron pharma llc citron dr reddy’s laboratories ltd dr reddy’s laboratories inc collectively dr reddy’s mylan pharmaceuticals inc mylan inc collectively mylan par pharmaceuticals inc par pharmaceutical companies inc collectively par teva pharmaceuticals usa inc teva wockhardt bio ag wockhardt usa llc wockhardt ltd collectively wockhardt westward pharmaceutical corp westward hikma pharmaceuticals llc hikma janssen btg also initiated patent infringement lawsuits united states district court district new jersey amerigen pharmaceuticals limited amerigen may 2016 glenmark pharmaceuticals inc glenmark june 2016 filed anda seeking approval market generic version zytiga® expiration ’438 patent lawsuits consolidated main action august 2015 janssen btg filed additional jurisdictional protective lawsuit mylan defendants united states district court northern district west virginia stayed august 2017 janssen btg initiated patent infringement lawsuit united states district court district new jersey teva filed anda seeking approval market generic version zytiga® 500mg expiration ’438 patent lawsuit consolidated main action december 2017 janssen btg entered settlement agreement glenmark february 2018 janssen btg filed patent infringement lawsuit msn pharmaceuticals inc msn laboratories private limited collectively msn united states district court district new jersey based anda seeking approval generic version zytiga® prior expiration ’438 patent february 2019 action stayed pending outcome main action april 2018 janssen btg entered settlement agreement apotex october 2018 united states district court district new jersey issued ruling invalidating asserted claims ’438 patent court held patent claims would infringed patent valid janssen appealed court’s decision november 2018 janssen btg initiated patent infringement lawsuit united states district court district new jersey qilu pharmaceutical co ltd qilu pharma inc collectively qilu filed anda seeking approval market generic version zytiga® expiration ’438 patent janssen seeking order enjoining qilu marketing generic version zytiga® expiration ’438 patent november 2018 united states court appeals federal circuit denied janssen’s request injunction pending appeal result several generic versions zytiga® entered market several generic companies including amerigen argentum pharmaceuticals llc argentum mylan wockhardt actavis amneal dr reddy’s sun teva westward hikma filed petitions inter partes review ipr uspto seeking invalidate ’438 patent january 2018 uspto issued decisions finding ’438 patent claims unpatentable janssen requested rehearing december 2018 uspto denied janssen’s request rehearing ipr decisions janssen filed appeal consolidated abovementioned appeal decision united states district court district new jersey may 2019 federal circuit issued decision affirming usptos decision wockhardt ipr ’438 patent claims unpatentable dismissed remaining appeals moot subsequently janssen dismissed lawsuits msn qilu november 2017 janssen initiated notice application section 6 patented medicines notice compliance regulations apotex inc apotex minister health canada response apotex’s filing abbreviated new drug submission ands seeking approval market generic version zytiga® expiration canadian patent 2661422 ’422 patent final hearing concluded may 2019 october 2019 court issued order prohibiting canadian minister health approving apotex’s ands expiration ’422 patent november 2019 apotex filed appeal january 2019 janssen initiated notice application section 6 patented medicines notice compliance regulations apotex minister health canada response apotex’s filing abbreviated new drug submission ands seeking approval market filmcoated generic version zytiga® expiration ’422 patent january 2019 janssen initiated notice application section 6 patented medicines notice compliance regulations pharmascience inc pharmascience minister health canada response pharmascience’s filing abbreviated new drug submission ands seeking approval market generic version zytiga® 250 mg expiration ’422 patent final hearing scheduled begin october 2020 november 2019 janssen initiated notice application section 6 patented medicines notice compliance regulations pharmascience minister health canada response pharmascience’s filing ands seeking approval market generic version zytiga® 500 mg expiration ’422 patent final hearing scheduled begin october 2020 january 2019 janssen initiated notice application section 6 patented medicines notice compliance regulations sandoz canada inc sandoz minister health canada response sandoz’s filing abbreviated new drug submission ands seeking approval market generic version zytiga® expiration canadian patent 2661422 july 2019 parties entered settlement agreement june 2019 janssen initiated notice application section 6 patented medicines notice compliance regulations dr reddys laboratories ltd dr reddys laboratories inc collectively drl minister health canada response apotex’s filing abbreviated new drug submission ands seeking approval market generic version zytiga® expiration canadian patent 2661422 final hearing scheduled begin october 2020 canadian actions janssen seeking order prohibiting minister health issuing notice compliance respect defendants’ andss expiration janssen’s patent xarelto® beginning october 2015 janssen pharmaceuticals inc jpi bayer pharma ag bayer intellectual property gmbh collectively bayer filed patent infringement lawsuits united states district court district delaware number generic companies filed andas seeking approval market generic versions xarelto® expiration bayer’s united states patent nos 7157456 7585860 7592339 relating xarelto® jpi exclusive sublicensee asserted patents following generic companies named defendants aurobindo pharma limited aurobindo pharma usa inc collectively aurobindo breckenridge pharmaceutical inc breckenridge invagen pharmaceuticals inc invagen micro labs usa inc micro labs ltd collectively micro mylan pharmaceuticals inc mylan prinston pharmaceuticals inc sigmapharm laboratories llc sigmapharm torrent pharmaceuticals limited torrent pharma inc collectively torrent trial concluded april 2018 july 2018 district court entered judgment mylan sigmapharm holding asserted compound patent valid infringed september 2018 district court entered judgment remaining defendants none defendants appealed judgment beginning april 2017 jpi bayer intellectual property gmbh bayer ag collectively bayer ag filed patent infringement lawsuits united states district court district delaware number generic companies filed andas seeking approval market generic versions xarelto® expiration bayer ag’s united states patent 9539218 ’218 relating xarelto® jpi exclusive sublicensee asserted patent following generic companies named defendants alembic pharmaceuticals limited alembic global holding sa alembic pharmaceuticals inc alembic aurobindo breckenridge invagen lupin limited lupin pharmaceuticals inc collectively lupin micro mylan sigmapharm taro pharmaceutical industries ltd taro pharmaceuticals usa inc collectively taro torrent lupin counterclaimed declaratory judgment noninfringement invalidity united states patent 9415053 lupin dismissed counterclaims provided covenant sue patent aurobindo taro torrent micro breckenridge invagen sigmapharm lupin alembic agreed cases stayed bound outcome final judgment rendered defendants ’218 cases consolidated discovery trial began april 2019 closing arguments heard june 2019 december 2018 jpi bayer ag filed patent infringement lawsuit united states district court district delaware teva pharmaceuticals usa inc teva pharmaceutical industries ltd collectively teva filed anda seeking approval market generic version xarelto® expiration bayer ag’s ’218 patent case teva consolidated ’218 cases purposes teva agreed case stayed bound outcome final judgment rendered defendants may 2018 mylan filed petition inter partes review uspto seeking invalidate ’218 patent december 2018 uspto issued decision denying institution mylan’s petition inter partes review may 2019 jpi bayer filed suit macleods pharmaceuticals ltd macleods pharma usa inc collectively macleods alleging infringement ’218 patent case macleods consolidated ’218 cases purposes macleods agreed case stayed bound outcome final judgment rendered defendants june 2019 jpi bayer filed suit accord healthcare inc accord healthcare ltd intas pharmaceuticals ltd collectively accord alleging infringement ’218 patent august 2019 jpi bayer filed suit sunshine lake pharma co ltd hec pharm usa inc alleging infringement ’218 patent october 2019 jpi bayer entered settlement agreement mylan november 2019 jpi bayer entered settlement agreement breckenridge december 2019 jpi bayer entered settlement agreements accord micro sigmapharm sunshine torrent january 2020 jpi bayer entered settlement agreement macleods consolidated ’218 cases involving alembic aurobindo invagen lupin taro teva stayed march 2020 lawsuits jpi seeking order enjoining defendants marketing generic versions xarelto® expiration relevant patents prezista® may 2018 janssen products lp janssen sciences ireland uc collectively janssen initiated patent infringement lawsuit united states district court district new jersey dr reddys laboratories inc dr reddys laboratories ltd laurus labs ltd pharmaq inc collectively drl filed anda seeking approval market generic versions prezista® expiration united states patent nos 8518987 7126015 7595408 february 2019 parties entered settlement agreement december 2018 janssen initiated patent infringement lawsuit united states district court district new jersey amneal pharmaceuticals llc amneal pharmaceuticals company gmbh amneal pharmaceuticals new york llc amneal pharmaceuticals pvt ltd raks pharma pvt ltd collectively amneal filed anda seeking approval market generic versions prezista® expiration united states patent nos 8518987 7126015 7595408 april 2019 parties entered settlement agreement january 2020 janssen products lp janssen sciences ireland unlimited company collectively janssen initiated patent infringement lawsuit united states district court district new jersey zydus pharmaceuticals usa inc cadila healthcare ltd collectively zydus filed anda seeking approval market generic version prezista® expiration united states patent nos 7700645 8518987 7126015 7595408 janssen seeking order enjoining zydus marketing generic version prezista® expiration relevant patents invokana®invokamet®invokamet xr® beginning july 2017 janssen pharmaceuticals inc janssen research development llc cilag gmbh international janssen pharmaceutica nv collectively janssen mitsubishi tanabe pharma corporation mtpc filed patent infringement lawsuits united states district court district new jersey united states district court district colorado united states district court district delaware number generic companies filed andas seeking approval market generic versions invokana® andor invokamet® expiration mtpc’s united states patent nos 7943582 ’582 patent andor 8513202 ’202 patent relating invokana® invokamet® janssen exclusive licensee asserted patents following generic companies named defendants apotex inc apotex corp apotex aurobindo pharma usa inc aurobindo macleods pharmaceuticals ltd macleods pharma usa inc invagen pharmaceuticals inc invagen prinston pharmaceuticals inc dr reddy’s laboratories inc dr reddy’s laboratories ltd hetero usa inc hetero labs limited unitv hetero labs limited msn laboratories private ltd msn pharmaceuticals inc laurus labs ltd indoco remedies ltd zydus pharmaceuticals usa inc zydus sandoz inc sandoz teva pharmaceuticals usa inc lupin ltd lupin pharmaceuticals inc lupin beginning july 2017 janssen mtpc filed patent infringement lawsuits united states district court district new jersey united states district court district colorado sandoz invagen filed andas seeking approval market generic versions invokana® andor invokamet® expiration mtpc’s united states patent 7943788 ’788 patent relating invokana® invokamet® zydus filed andas seeking approval market generic versions invokana® invokamet® expiration ’788 patent mtpcs united states patent 8222219 relating invokana® invokamet® mtpc’s united states patent 8785403 relating invokamet® ’403 patent aurobindo filed anda seeking approval market generic version invokana® expiration ’788 patent ’219 patent relating invokana® janssen exclusive licensee asserted patents october 2017 colorado lawsuits sandoz dismissed december 2017 delaware lawsuits apotex teva dismissed april 2018 janssen mtpc filed patent infringement lawsuit united states district court district new jersey prinston filed anda seeking approval market generic version invokana® expiration ’788 patent relating invokana® february 2019 janssen mtpc filed patent infringement lawsuit united states district court district new jersey lupin filed anda seeking approval market generic version invokamet xr® expiration ’582 patent ’202 patent relating invokamet xr® july 2019 janssen mtpc filed patent infringement lawsuit united states district court district new jersey msn filed anda seeking approval market generic version invokamet xr® expiration ’582 patent ’202 patent relating invokamet xr® october 2019 janssen mtpc initiated patent infringement lawsuit united states district court district new jersey msn filed andas seeking approval market generic versions invokana® invokamet xr® expiration ’788 patent october 2019 janssen mtpc initiated patent infringement lawsuit united states district court district new jersey drl filed anda seeking approval market generic version invokamet® expiration ’788 patent janssen mtpc entered settlement agreements prinston invagen june 2019 hetero july 2019 apotex teva august 2019 trial ’582 ’202 patents scheduled begin april 2020 trial ’788 ’219 ’403 patents scheduled begin may 2020 lawsuits janssen mtpc seeking order enjoining defendants marketing generic versions invokana® invokamet® andor invokamet xr® expiration relevant patents opsumit® january 2018 actelion pharmaceuticals ltd actelion initiated patent infringement lawsuit united states district court district new jersey zydus pharmaceuticals usa inc zydus amneal pharmaceuticals llc amneal filed anda seeking approval market generic version opsumit® expiration united states patent 7094781 ’781 patent lawsuit actelion seeking order enjoining zydus amneal marketing generic versions opsumit® expiration patent amneal zydus stipulated infringement february 2019 actelion amneal entered settlement agreement trial zydus scheduled commence october 2020 july 2019 actelion pharmaceuticals ltd filed suit aurobindo pharma usa inc aurobindo pharma limited aurobindo filed anda seeking approval market generic version opsumit® expiration ’781 patent actelion seeking order enjoining defendants marketing generic version opsumit® expiration ’781 patent trial aurobindo scheduled commence july 2021 invega sustenna® january 2018 janssen pharmaceutica nv janssen pharmaceuticals inc collectively janssen initiated patent infringement lawsuit united states district court district new jersey teva pharmaceuticals usa inc teva filed anda seeking approval market generic version invega sustenna® expiration united states patent 9439906 trial scheduled begin june 2020 august 2019 janssen pharmaceutica nv janssen pharmaceuticals inc collectively janssen initiated patent infringement lawsuit united states district court district new jersey mylan laboratories limited mylan filed anda seeking approval market generic version invega sustenna® expiration patent december 2019 janssen pharmaceutica nv janssen pharmaceuticals inc collectively janssen initiated patent infringement lawsuit united states district courts districts new jersey delaware pharmascience inc mallincrodt plc specgx llc collectively pharmascience filed anda seeking approval market generic version invega sustenna® expiration united states patent 9439906 february 2018 janssen inc janssen pharmaceutica nv collectively janssen initiated notices application section 6 patented medicines notice compliance regulations teva canada limited teva minister health response tevas filing abbreviated new drug submission ands seeking approval market generic version invega sustenna® expiration canadian patent nos 2309629 2655335 janssen seeking order prohibiting minister health issuing notice compliance respect teva’s ands expiration patents final hearing scheduled begin february 2020 lawsuits janssen seeking order enjoining defendant marketing generic version invega sustenna® expiration patent imbruvica® beginning january 2018 pharmacyclics llc pharmacyclics janssen biotech inc jbi filed patent infringement lawsuits united states district court district delaware number generic companies filed andas seeking approval market generic versions imbruvica® 140 mg capsules expiration pharmacyclics’ united states patent nos 8008309 7514444 8697711 8735403 8957079 9181257 8754091 8497277 8925015 8476284 8754090 8999999 9125889 9801881 9801883 9814721 9795604 9296753 9540382 9713617 andor 9725455 relating imbruvica® jbi exclusive licensee asserted patents following generic companies named defendants cipla limited cipla usa inc cipla fresenius kabi usa llc fresenius kabi usa inc fresenius kabi oncology limited fresenius kabi sandoz inc lek pharmaceuticals dd sandoz shilpa medicare limited shilpa sun pharma global fze sun pharmaceutical industries limited sun teva pharmaceuticals usa inc teva zydus worldwide dmcc cadila healthcare limited zydus trial scheduled begin october 2020 october 2018 pharmacyclics jbi filed patent infringement lawsuit united states district court district delaware sun asserting united states patent 10004746 november 2018 pharmacyclics jbi filed patent infringement lawsuit united states district court district delaware hetero labs limited hetero labs limited unit1 hetero labs limited unitv hetero usa inc hetero filed anda seeking approval market generic version imbruvica® 140 mg capsules asserting infringement united states patent nos 8754090 9296753 9540382 9713617 9725455 january 2019 pharmacyclics jbi amended complaints fresenius kabi zydus teva sandoz allege infringement us patent nos 10106548 10125140 january 2019 pharmacyclics jbi filed patent infringement lawsuit united states district court district delaware zydus filed anda seeking approval market generic version imbruvica® 70 mg expiration us patent nos 7514444 8003309 8476284 8497277 8697711 8753403 8754090 8754091 8952015 8957079 9181257 9296753 9540382 9713617 9725455 10106548 10125140 january 2019 pharmacyclics jbi filed patent infringement lawsuit united states district court district delaware hetero asserting infringement united states patent 10106548 february 2019 pharmacyclics jbi amended complaints cipla shilpa sun allege infringement united states patent nos 10106548 10125140 february 2019 pharmacyclics jbi entered settlement agreements teva hetero march 2019 pharmacyclics jbi entered settlement agreement shilpa march 2019 pharmacyclics jbi filed patent infringement lawsuit united states district court district delaware alvogen pine brook llc natco pharma ltd alvogen filed anda seeking approval market generic versions imbruvica® tablets asserting infringement united states patent nos 7514444 8003309 8476284 8497277 8697711 8753403 8754090 8754091 8952015 8957079 9181257 9296753 9655857 9725455 10010507 10106548 10125140 may 2019 pharmacyclics jbi amended complaints cipla allege infringement united states patent 10016435 june 2019 pharmacyclics jbi amended complaints alvogen allege infringement united states patent 10213386 august 2019 pharmacyclics jbi amended complaints cipla fresenius sandoz allege infringement us patent nos 10294231 10294232 amended complaint sun allege infringement us patent 10294232 march 2019 sandoz filed inter partes review ipr uspto seeking invalidate united states patent 9795604 lawsuits pharmacyclics jbi seeking order enjoining defendants marketing generic versions imbruvica® expiration relevant patents tracleer® may 2019 actelion pharmaceuticals ltd actelion pharmaceuticals us inc initiated patent infringement lawsuit united states district court district new jersey natco pharma limited syneos health llc collectively natco filed anda seeking approval market generic version tracleer® 32 mg expiration us patent 8309126 ’126 patent lawsuit actelion seeking order enjoining natco marketing generic version tracleer® expiration ’126 patent november 2019 parties entered settlement agreement december 2019 actelion pharmaceuticals ltd actelion pharmaceuticals us inc initiated patent infringement lawsuit united states district court district new jersey zydus pharmaceuticals usa inc cadila healthcare limited collectively zydus filed anda seeking approval market generic version tracleer® 32 mg expiration us patent 8309126 ’126 patent actelion seeking order enjoining zydus marketing generic version tracleer® expiration ’126 patent risperdal consta® july 2019 janssen pharmaceuticals inc alkermes pharma ireland limited alkermes controlled therapeutics inc initiated patent infringement lawsuit united states district court district delaware luye pharma group ltd luye pharma usa ltd nanjing luye pharmaceutical co ltd shandong luye pharmaceutical co ltd collectively luye filed anda seeking approval market generic version risperdal consta® expiration united states patent 6667061 november 2019 parties entered settlement lawsuit janssen seeking order enjoining luye marketing generic version risperdal consta® expiration patent government proceedings like companies pharmaceutical consumer medical devices industries johnson certain subsidiaries subject extensive regulation national state local government agencies united states countries operate result interaction government agencies ongoing significant litigation brought investigations conducted government agencies listed possible criminal charges substantial fines andor civil penalties damages could result government investigations litigation average wholesale price awp litigation johnson several pharmaceutical subsidiaries jj awp defendants along numerous pharmaceutical companies named defendants series lawsuits state federal courts involving allegations pricing marketing certain pharmaceutical products amounted fraudulent otherwise actionable conduct among things companies allegedly reported inflated average wholesale price awp drugs issue payors alleged used awps calculating provider reimbursement levels plaintiffs cases included three classes private persons entities paid portion purchase drugs issue based awp state government entities made medicaid payments drugs issue based awp many cases federal actions state actions removed federal court consolidated pretrial purposes multidistrict litigation united states district court district massachusetts claims jj awp defendants ultimately dismissed jj awp defendants also prevailed case brought commonwealth pennsylvania awp cases resolved court order settlement case brought illinois settled trial new jersey putative class action based upon awp allegations pending centocor inc ortho biotech inc janssen biotech inc johnson alza corporation cases resolved opioid litigation beginning 2014 continuing present johnson janssen pharmaceuticals inc jpi along pharmaceutical companies named 2800 lawsuits brought certain state local governments related marketing opioids including duragesic® nucynta® nucynta® er suits also raise allegations related previously owned active pharmaceutical ingredient supplier subsidiaries tasmanian alkaloids pty ltd noramco inc subsidiaries divested 2016 similar lawsuits also filed following groups plaintiffs individual plaintiffs behalf children suffering neonatal abstinence syndrome hospitals health insurerspayors date complaints pharmaceutical companies including johnson jpi filed state attorneys general arkansas florida idaho illinois kentucky louisiana mississippi missouri new hampshire new jersey new mexico new york ohio oklahoma south dakota texas washington west virginia complaints manufacturers also filed state federal court city county local government agencies following states alabama arkansas california connecticut florida georgia illinois kentucky louisiana maine maryland massachusetts mississippi missouri nevada new hampshire new jersey new mexico new york north carolina ohio oklahoma oregon pennsylvania rhode island south carolina south dakota tennessee texas utah virginia washington west virginia wisconsin government puerto rico filed suit superior court san juan 350 cases pending various state courts 2500 federal cases coordinated federal multidistrict litigation mdl pending us district court northern district ohio mdl 2804 addition province british columbia filed suit canada october 2019 antitrust complaint filed private plaintiffs federal court tennessee pending transfer mdl actions allege variety claims related opioid marketing practices including false advertising unfair competition public nuisance consumer fraud violations deceptive acts practices false claims unjust enrichment suits generally seek penalties andor injunctive monetary relief suits plaintiffs seeking joint several liability among defendants adverse judgment lawsuits could result imposition large monetary penalties significant damages including punitive damages cost abatement substantial fines equitable remedies sanctions trial matter filed oklahoma attorney general resulted judgment johnson jpi amount 572 million subject final order issued court issued final judgment reducing amount 465 million johnson jpi appealed judgment company believes strong grounds overturn judgment october 2019 johnson jpi announced settlement first case set trial mdl two counties ohio johnson jpi pharmaceutical companies also received subpoenas requests information related opioids marketing practices following state attorneys general alaska indiana montana new hampshire south carolina tennessee texas washington september 2017 johnson jpi contacted texas colorado attorney general’s offices behalf approximately 38 states regarding multistate attorney general investigation october 2019 company announced proposed agreement principle would include company paying 4 billion settlement lawsuits subject various conditions agreement finalized agreement principle admission liability wrongdoing would resolve opioid lawsuits filed future claims states cities counties company cannot predict agreement finalized individual cases ongoing including trial new york scheduled commence march 2020 august 2019 johnson received grand jury subpoena united states attorney’s office eastern district new york documents related company’s antidiversion policies procedures distribution opioid medications company understands part broader investigation manufacturers’ distributors’ monitoring programs reporting controlled substances act september 2019 johnson received subpoenas new york state department financial services nydfs part industrywide inquiry effect opioid prescriptions new york health insurance premiums company cooperating producing documents response various subpoenas requests information august 2012 depuy orthopaedics inc depuy inc known depuy synthes inc johnson services inc collectively depuy received informal request united states attorneys office district massachusetts civil division united states department justice united states production materials relating depuy asr™ xl hip device july 2014 united states notified united states district court district massachusetts declined intervene qui tam case filed pursuant false claims act companies february 2016 district court granted companies’ motion dismiss prejudice unsealed qui tam complaint denied qui tam relators’ request leave file amended complaint qui tam relators appealed case united states court appeals first circuit july 2017 first circuit affirmed district court’s dismissal part reversed part affirmed decision deny relators’ request file third amended complaint relators’ remaining claims pending district court fact discovery currently scheduled close march 2020 october 2012 johnson contacted california attorney generals office regarding multistate attorney general investigation marketing surgical mesh products hernia urogynecological purposes johnson johnsons subsidiary ethicon inc ethicon may 2016 california washington filed civil complaints johnson ethicon us llc alleging violations consumer protection statutes april 2019 johnson ethicon settled washington case california case started trial july 2019 concluded september 2019 january 2020 court found favor state awarded state civil penalties approximately 344 million company intends appeal proceedings concluded trial court similar complaints filed companies kentucky august 2016 mississippi october 2017 west virginia september 2019 oregon december 2019 trial date kentucky case scheduled september 2019 adjourned new trial date scheduled october 2019 johnson ethicon settled multistate investigation 41 states district columbia december 2012 therakos inc therakos formerly subsidiary johnson part orthoclinical diagnostics inc ocd franchise received letter civil division united states attorneys office eastern district pennsylvania informing therakos united states attorneys office investigating sales marketing uvadex® methoxsalen uvar xts® cellex® systems period 2000 present united states attorneys office requested ocd johnson preserve documents could relate investigation therakos subsequently acquired affiliate gores capital partners iii lp january 2013 ocd divested june 2014 following divestiture ocd johnson retains ocd’s portion liability may result investigation activity occurred prior sale therakos march 2014 march 2016 united states attorney’s office requested johnson produce certain documents johnson cooperating requests june 2014 mississippi attorney general filed complaint chancery court first judicial district hinds county mississippi johnson consumer companies inc known johnson consumer inc jjci complaint alleges defendants violated mississippi consumer protection act failing disclose alleged health risks associated female consumers use talc contained johnsons® baby powder johnsons® shower product divested 2012 seeks injunctive monetary relief matter stayed pending interlocutory appeal december 2018 denial johnson jjcis motion summary judgment mississippi supreme court granted jj jjcis request file interlocutory appeal denial motion summary judgment late 2019 soon establish briefing schedule company also received inquiries several state attorneys general march 2016 janssen pharmaceuticals inc jpi received civil investigative demand united states attorney’s office southern district new york related jpi’s contractual relationships pharmacy benefit managers period january 1 2006 present regard certain jpis pharmaceutical products demand issued connection investigation false claims act july 2016 johnson janssen products lp served qui tam complaint pursuant false claims act filed united states district court district new jersey alleging offlabel promotion two hiv products prezista® intelence® antikickback violations connection promotion products complaint filed seal december 2012 federal state governments declined intervene lawsuit prosecuted relators january 2017 janssen pharmaceuticals inc jpi received civil investigative demand united states department justice relating allegations concerning sales marketing practices olysio® december 2017 johnson jpi served whistleblower lawsuit filed united states district court central district california alleging offlabel promotion olysio® additional products including nucynta® xarelto® levaquin® remicade® time federal state governments declined intervene lawsuit related civil investigative demand prosecuted former company employee united states district court central district california dismissed claim april 2018 may 2018 relator filed notice appeal united states court appeals ninth circuit january 2020 us court appeals ninth circuit dismissed relators appeal november 2018 second whistleblower lawsuit unsealed united states district court central district california lawsuit substantially similar lawsuit appeal brought name original relator federal state governments declined intervene second suit relator moved dismiss lawsuit without prejudice april 2019 court granted relators motion dismissed complaint without prejudice march 2017 janssen biotech inc received civil investigative demand united states department justice regarding false claims act investigation concerning management advisory services provided rheumatology gastroenterology practices purchased remicade® simponi aria® august 2019 unites states department justice notified janssen biotech inc closing investigation january 2020 janssen biotech inc served newlyunsealed qui tam suit filed us district court district massachusetts april september 2017 johnson received subpoenas united states attorney district massachusetts seeking documents broadly relating pharmaceutical copayment support programs darzalex® olysio® remicade® simponi® stelara® zytiga® subpoenas also seek documents relating average manufacturer price best price reporting center medicare medicaid services related products well rebate payments state medicaid agencies june 2017 johnson received subpoena united states attorneys office district massachusetts seeking information regarding practices pertaining sterilization depuy synthes inc spinal implants three hospitals boston well interactions employees company subsidiaries physicians hospitals johnson depuy synthes inc produced documents response subpoena fully cooperating government’s investigation july 2018 public prosecution service rio de janeiro representatives brazilian antitrust authority cade inspected offices 30 companies including johnson brasil indústria e comércio de produtos para saúde ltda authorities appear investigating allegations possible anticompetitive behavior possible improper payments medical device industry united states department justice united states securities exchange commission made additional inquiries johnson brasil indústria e comércio de produtos para saúde ltda cooperating requests january 2020 new mexico attorney general’s office filed suit johnson consumer companies inc first judicial district court new mexico suit relates safety marketing company’s talc products state included claims violations new mexico unfair practices act medicaid fraud act fraud taxpayers act fraud negligent misrepresentation negligence unjust enrichment state attorneys general informed company conducting inquiry matter time company received requests variety united states congressional committees produce information relevant ongoing congressional inquiries policy johnson cooperate inquiries producing requested information general litigation may 2014 two purported class actions filed federal court one united states district court central district california one united states district court southern district illinois johnson consumer companies inc known johnson consumer inc jjci alleging violations state consumer fraud statutes based nondisclosure alleged health risks associated talc contained johnsons® baby powder johnsons® shower product longer sold jjci cases seek injunctive relief monetary damages neither includes claim personal injuries october 2016 cases transferred united states district court district court new jersey part newly created federal multidistrict litigation july 2017 district court granted johnson johnsons jjci’s motion dismiss one cases september 2018 united states court appeals third circuit affirmed dismissal september 2017 plaintiff second case voluntarily dismissed complaint march 2018 plaintiff second case refiled illinois state court august 2014 united states customs border protection us cbp issued penalty notice janssen ortho llc janssen ortho assessing penalties alleged improper classification darunavir ethanolate active pharmaceutical ingredient prezista® connection importation united states october 2014 janssen ortho submitted petition relief response penalty notice may 2015 us cbp issued amended penalty notice assessing substantial penalties janssen ortho filed petition relief july 2015 may 2019 us cbp issued mitigation decision determined janssen ortho negligently misrepresented darunavir ethanolate entitled duty free treatment june 2019 janssen ortho filed supplemental petition relief penalties proceeding impacted related classification litigation pending united states court international trade classification litigation determine whether darunavir ethanolate properly classified exempt duties upon importation united states trial classification litigation held july 2019 february 2020 court ruled darunavir ethanolate eligible duty free treatment march april 2015 30 putative class action complaints filed contact lens patients number courts around united states johnson vision care inc jjvci contact lens manufacturers distributors retailers alleging vertical horizontal conspiracies fix retail prices contact lenses complaints allege manufacturers reached agreements certain distributors retailers concerning prices contact lenses could sold consumers plaintiffs seeking damages injunctive relief class action cases transferred united states district court middle district florida june 2015 plaintiffs filed consolidated class action complaint november 2015 december 2018 district court granted plaintiffs motion class certification defendants filed two motions interlocutory appeal class certification united states court appeals eleventh circuit motions denied defendants motions summary judgment denied november 2019 trial scheduled june 2020 august 2015 two thirdparty payors filed purported class action united states district court eastern district louisiana janssen research development llc janssen ortho llc janssen pharmaceuticals inc orthomcneiljanssen pharmaceuticals inc johnson well certain bayer entities alleging defendants improperly marketed promoted xarelto® safer effective less expensive alternative medications failing fully disclose risks complaint seeks damages september 2017 pfizer inc pfizer filed antitrust complaint johnson janssen biotech inc collectively janssen united states district court eastern district pennsylvania pfizer alleges janssen violated federal antitrust laws contracting strategies remicade® complaint seeks damages injunctive relief discovery ongoing beginning september 2017 multiple purported class actions direct indirect purchasers filed johnson janssen biotech inc collectively janssen alleging janssen’s remicade® contracting strategies violated federal state antitrust consumer laws seeking damages injunctive relief november 2017 cases consolidated pretrial purposes united states district court eastern district pennsylvania remicade antitrust litigation motions dismiss denied direct indirect purchaser cases motion compel arbitration direct purchaser case denied district court united states court appeals third circuit reversed district courts ruling june 2018 walgreen co kroger co filed antitrust complaint johnson janssen biotech inc collectively janssen united states district court eastern district pennsylvania complaint alleges janssen violated federal antitrust laws contracting strategies remicade® complaint seeks damages injunctive relief march 2019 summary judgment granted favor janssen ruling appeal united states court appeals third circuit june 2019 united states federal trade commission ftc issued civil investigative demand johnson connection investigation whether janssen’s remicade® contracting practices violate federal antitrust laws company produced documents information responsive civil investigative demand october 2017 certain united states service members families brought complaint number pharmaceutical medical devices companies including johnson certain subsidiaries alleging defendants violated united states antiterrorism act complaint alleges defendants provided funding terrorist organizations sales practices pursuant pharmaceutical medical device contracts iraqi ministry health january 2019 plaintiffs motion file second amended complaint adding plaintiffs lawsuit granted april 2019 company moved dismiss second amended complaint october 2018 two separate putative class actions filed actelion pharmaceutical ltd actelion pharmaceuticals us inc actelion clinical research inc collectively actelion united states district court district maryland united states district court district columbia complaints allege actelion violated state federal antitrust unfair competition laws allegedly refusing supply generic pharmaceutical manufacturers samples tracleer® tracleer® subject risk evaluation mitigation strategy imposes restrictions distribution product january 2019 plaintiffs dismissed district columbia case filed consolidated complaint united states district court district maryland october 2019 court granted actelion’s motion dismiss amended complaint plaintiffs appealed decision december 2018 janssen biotech inc janssen oncology inc janssen research development llc johnson collectively janssen served qui tam complaint filed behalf united states 28 states district columbia complaint filed december 2017 united states district court northern district california alleges janssen violated federal false claims act state law providing pricing information zytiga® government connection direct government sales governmentfunded drug reimbursement programs time federal state governments declined intervene case transferred united states district court district new jersey janssen moved dismiss complaint april 2019 blue cross blue shield louisiana hmo louisiana inc filed class action complaint janssen biotech inc janssen oncology inc janssen research development llc btg international limited united states district court eastern district virginia several additional complaints filed thereafter complaints generally allege defendants violated antitrust consumer protections laws several states sherman act pursuing patent litigation relating zytiga® order delay generic entry case transferred united states district court district new jersey consolidated pretrial purposes may 2019 class action antitrust complaint filed janssen rd ireland janssen johnson complaint alleges janssen violated federal state antitrust consumer protection laws agreeing exclusivity provisions agreements gilead concerning development marketing combination antiretroviral therapies cart treat hiv complaint also alleges gilead entered similar agreements bristolmyerssquibb japan tobacco case pending united states district court district northern california defendants filed motions dismiss complaint october 2019 innovative health llc filed complaint biosense webster inc bwi united states district court middle district california complaint alleges certain bwi’s business practices contractual terms violate antitrust laws united states state california restricting competition sale high density mapping catheters ultrasound catheters bwi filed motion dismiss complaint company received notices pfizer inc sanofi consumer health inc november 2019 boehringer ingelheim pharmaceuticals inc january 2020 tendering defense indemnification legal claims related personal injury matters putative class actions us canada related zantac ranitidine products notices based certain indemnification provisions regarding assumed liabilities connection stock asset purchase agreement pfizer inc company 2006 plaintiffs underlying suits allege generally zantac overthecounter ranitidine medications contain unsafe levels ndma nnitrosodimethylamine cause andor caused various cancers patients using products plaintiffs seeking injunctive monetary relief johnson subsidiaries also parties number proceedings brought comprehensive environmental response compensation liability act commonly known superfund comparable state local foreign laws primary relief sought cost past andor future remediation 22 restructuring company announced plans implement series actions across global supply chain intended focus resources increase investments critical capabilities technologies solutions necessary manufacture supply product portfolio enhance agility drive growth global supply chain actions include expanding use strategic collaborations bolstering initiatives reduce complexity improve costcompetitiveness enhance capabilities optimize supply chain network additional details global supply chain restructuring strategic collaborations see note 20 consolidated financial statements 2019 company recorded pretax charge 06 billion included following lines consolidated statement earnings 03 billion restructuring 02 billion income expense 01 billion cost products sold total project costs approximately 08 billion recorded since restructuring announced see following table additional details restructuring program total company expects global supply chain actions generate approximately 06 billion 08 billion annual pretax cost savings substantially delivered 2022 company expects record pretax restructuring charges approximately 19 billion 23 billion 4 5 year period activity costs associated network optimizations exit costs accelerated depreciation amortization following table summarizes severance charges associated spending initiatives fiscal year ended 2019 1 cash outlays severance expected substantially paid next 2 years accordance companys plans local laws 2 includes project expense salaries employees supporting initiatives consulting expenses 3 relates pension related actuarial losses associated transfer employees jabil inc part strategic collaboration company continuously reevaluates severance reserves related restructuring timing payments due planned release associates regarding several longerterm projects company believes existing severance reserves sufficient cover global supply chain plans given period actions take place company continue assess make adjustments necessary additional amounts become probable estimable report independent registered public accounting firm board directors shareholders johnson opinions financial statements internal control financial reporting audited accompanying consolidated balance sheets johnson subsidiaries “company” december 29 2019 december 30 2018 related consolidated statements earnings comprehensive income equity cash flows three fiscal years period ended december 29 2019 including related notes collectively referred “consolidated financial statements” also audited companys internal control financial reporting december 29 2019 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion consolidated financial statements referred present fairly material respects financial position company december 29 2019 december 30 2018 results operations cash flows three fiscal years period ended december 29 2019 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting december 29 2019 based criteria established internal control integrated framework 2013 issued coso basis opinions companys management responsible consolidated financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying managements report internal control financial reporting responsibility express opinions company’s consolidated financial statements companys internal control financial reporting based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud whether effective internal control financial reporting maintained material respects audits consolidated financial statements included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions described management’s report internal control financial reporting management excluded ciz holdings co ltd “dr cilabo” assessment internal control financial reporting december 29 2019 acquired company business combination 2019 also excluded dr cilabo audit internal control financial reporting dr cilabo whollyowned subsidiary whose total assets excluding intangible assets goodwill total sales excluded management’s assessment audit internal control financial reporting represent less 1 related consolidated financial statement amounts fiscal year ended december 29 2019 definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate critical audit matters critical audit matters communicated matters arising current period audit consolidated financial statements communicated required communicated audit committee relate accounts disclosures material consolidated financial statements ii involved especially challenging subjective complex judgments communication critical audit matters alter way opinion consolidated financial statements taken whole communicating critical audit matters providing separate opinions critical audit matters accounts disclosures relate us pharmaceutical rebate reserves managed care medicare medicaid described note 1 consolidated financial statements company recognizes revenue product sales obligations terms contract customer satisfied rebates discounts provided customers accounted variable consideration recorded reduction sales liability rebates discounts recognized within accrued rebates returns promotions consolidated balance sheet significant portion liability related rebates sale pharmaceutical goods within us primarily managed care medicare medicaid programs amounted 70 billion december 29 2019 significant rebate programs include us managed care medicare medicaid rebate programs rebates discounts estimated management based contractual terms historical experience patient outcomes trend analysis projected market conditions us pharmaceutical market principal considerations determination performing procedures relating us pharmaceutical rebate reserves managed care medicare medicaid critical audit matter use significant judgment management due significant measurement uncertainty involved developing reserves turn led high degree auditor judgment subjectivity audit effort applying procedures assumptions related contractual terms customers historical experience patient outcomes trend analysis projected market conditions us addressing matter involved performing procedures evaluating audit evidence connection forming overall opinion consolidated financial statements procedures included testing effectiveness controls relating us pharmaceutical rebate reserves managed care medicare medicaid including controls assumptions used estimate rebates procedures also included among others developing independent estimate rebates utilizing third party information price market conditions us terms specific rebate programs historical trend actual rebate claims paid ii testing rebate claims processed company including evaluating claims consistency contractual mandated terms company’s rebate arrangements iii comparing independent estimate management’s estimates litigation contingencies talc described notes 1 21 consolidated financial statements company records accruals loss contingencies associated legal matters including talc probable liability incurred amount loss reasonably estimated extent adverse verdicts rendered company management record accrual loss determined probable reasonably estimated matters management unable estimate reasonably possible loss range loss ability make estimates judgments affected various factors including among things whether damages sought proceedings unsubstantiated indeterminate scientific legal discovery commenced complete proceedings early stages matters present legal uncertainties significant facts dispute procedural jurisdictional issues uncertainty unpredictability number potential claims numerous parties involved verdicts company matter including verdict july 2018 47 billion described management company believes strong grounds appeal overturn verdicts company established accrual primarily defense costs connection product liability litigation associated body powders containing talc principal considerations determination performing procedures relating talc litigation critical audit matter use significant judgment management assessing likelihood loss incurred management’s determination whether reasonable estimate loss range loss claim made turn led high degree auditor judgment effort evaluating management’s assessment loss contingencies associated litigation addressing matter involved performing procedures evaluating audit evidence connection forming overall opinion consolidated financial statements procedures included testing effectiveness controls relating management’s evaluation talc litigation including controls determining whether loss probable whether amount loss reasonably estimated well financial statement disclosures procedures also included among others gaining understanding company’s process around accounting reporting talc litigation ii discussing status significant known actual potential litigation company’s inhouse legal counsel well external counsel deemed necessary iii obtaining evaluating letters audit inquiry internal external legal counsel significant litigation iv evaluating reasonableness management’s assessment regarding whether unfavorable outcome reasonably possible probable reasonably estimable v evaluating sufficiency company’s litigation contingencies disclosures litigation opioids described notes 18 21 consolidated financial statements company records accruals loss contingencies associated legal matters including opioids probable liability incurred amount loss reasonably estimated extent adverse verdicts rendered company management record accrual loss determined probable reasonably estimated matters management unable estimate reasonably possible loss range loss amounts accrued legal contingencies often result complex series judgments future events uncertainties rely heavily estimates assumptions including timing related payments ability make estimates judgments affected various factors including among things whether damages sought proceedings unsubstantiated indeterminate matters present legal uncertainties significant facts dispute procedural jurisdictional issues uncertainty unpredictability number potential claims numerous parties involved company named numerous lawsuits brought certain state local governments related opioids matters trial matter filed oklahoma attorney general resulted judgment company amount 572 million subsequently reduced 465 million company appealed judgment described management believes strong grounds overturn judgment separately october 2019 company announced proposed agreement principle would include company paying 4 billion settlement lawsuits subject various conditions agreement finalized company cannot predict agreement finalized company recorded pretax charge 4 billion fiscal year ended december 29 2019 matter principal considerations determination performing procedures relating opioids litigation critical audit matter use significant judgment management assessing likelihood loss incurred judgment company oklahoma management’s determination whether reasonable estimate range loss proposed agreement principle settle opioids litigation made turn led high degree auditor judgment effort evaluating management’s assessment loss contingencies associated litigation addressing matter involved performing procedures evaluating audit evidence connection forming overall opinion consolidated financial statements procedures included testing effectiveness controls relating management’s evaluation opioid litigation including controls determining whether loss probable whether amount loss reasonably estimated well financial statement disclosures procedures also included among others gaining understanding company’s process around accounting reporting opioids litigation ii discussing status significant known actual potential litigation ongoing settlement negotiations company’s inhouse legal counsel well external counsel deemed necessary iii obtaining evaluating letters audit inquiry internal external legal counsel significant litigation iv evaluating reasonableness management’s assessment regarding whether unfavorable outcome reasonably possible probable reasonably estimable v evaluating sufficiency company’s litigation contingencies disclosures pricewaterhousecoopers llp florham park new jersey february 18 2020 served company’s auditor since least 1920 able determine specific year began serving auditor company management’s report internal control financial reporting section 404 sarbanesoxley act 2002 management required assess effectiveness company’s internal control financial reporting end fiscal year report based assessment whether company’s internal control financial reporting effective management company responsible establishing maintaining adequate internal control financial reporting company’s internal control financial reporting designed provide reasonable assurance reliability company’s financial reporting preparation external financial statements accordance generally accepted accounting principles internal controls financial reporting matter well designed inherent limitations therefore internal control financial reporting determined effective provide reasonable assurance respect financial statement preparation may prevent detect misstatements moreover projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate company’s management assessed effectiveness company’s internal control financial reporting december 29 2019 making assessment company used criteria established committee sponsoring organizations treadway commission coso “internal controlintegrated framework 2013” criteria areas control environment risk assessment control activities information communication monitoring company’s assessment included extensive documenting evaluating testing design operating effectiveness internal controls financial reporting company acquired ciz holdings co ltd dr cilabo business combination january 2019 dr cilabos total assets excluding intangible assets goodwill total sales represented less 1 related consolidated financial statement amounts fiscal year ended december 29 2019 acquisition occurred fiscal year 2019 scope companys assessment design effectiveness internal control financial reporting fiscal year 2019 excluded mentioned acquisition exclusion accordance secs general guidance assessment recently acquired business may omitted scope year acquisition based company’s processes assessment described management concluded december 29 2019 company’s internal control financial reporting effective effectiveness company’s internal control financial reporting december 29 2019 audited pricewaterhousecoopers llp independent registered public accounting firm stated report appears herein alex gorsky joseph j wolk alex gorsky joseph j wolk chairman board directors executive vice president chief financial officer chief executive officer shareholder return performance graphs set forth line graphs comparing cumulative total shareholder return company’s common stock periods five years ten years ending december 31 2019 cumulative total return standard poor’s 500 stock index standard poor’s pharmaceutical index standard poor’s health care equipment index graphs tables assume 100 invested december 31 2014 december 31 2009 company’s common stock standard poor’s 500 stock index standard poor’s pharmaceutical index standard poor’s health care equipment index dividends reinvested 5 year shareholder return performance jj vs indices 10 year shareholder return performance jj vs indices item 9item 8 financial statements supplementary data information called item incorporated herein reference audited consolidated financial statements notes thereto material captioned report independent registered public accounting firm pages 39 63 annual report filed exhibit 13 report form 10k item 9item 8 financial statements supplementary data information called item incorporated herein reference audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” pages 37 68 annual report filed exhibit 13 report form 10k item 9 nannannannannannannanitem 15 exhibits financial statement schedules reports form 8k following documents filed part report 1 financial statements following consolidated financial statements notes thereto independent auditors report pages 38 56 johnson johnsons annual report shareholders fiscal year 2002 incorporated herein reference consolidated balance sheets end fiscal years 2002 2001 consolidated statements earnings fiscal years 2002 2001 2000 consolidated statements equity fiscal years 2002 2001 2000 consolidated statements cash flows fiscal years 2002 2001 notes consolidated financial statements independent auditors report 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report b reports form 8k report form 8k filed october 23 2002 included press release statement amgen arbitration report form 8k filed december 4 2002 included press release statement change european labeling eprexerypo report form 8k filed december 30 2002 regarding funding companys us pension plan report form 8k filed january 30 2003 included press release statement amgen arbitration also reported resignation john w snow board directors report form 8k filed march 12 2003 included managements discussion analysis financial condition results operations independent auditors report johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended december 29 2002 december 30 2001 december 31 2000 dollars millions charges related customer rebates cash discounts reflected reductions sales customers signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 17 2003 johnson registrant w c weldon w c weldon chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated certification chief executive officer pursuant rule 13a14 securities exchange act 1934 william c weldon certify 1 reviewed annual report form 10k johnson registrant 2 based knowledge annual report contain untrue statement material fact omit state material fact necessary make statements made light circumstances statements made misleading respect period covered annual report 3 based knowledge financial statements financial information included annual report fairly present material respects financial condition results operations cash flows registrant periods presented annual report 4 registrants certifying officers responsible establishing maintaining disclosure controls procedures defined exchange act rules 13a14 15d14 registrant designed disclosure controls procedures ensure material information relating registrant including consolidated subsidiaries made known us others within entities particularly period annual report prepared b evaluated effectiveness registrants disclosure controls procedures date within 90 days prior filing date annual report evaluation date c presented annual report conclusions effectiveness disclosure controls procedures based evaluation date 5 registrants certifying officers disclosed based recent evaluation registrants auditors audit committee registrants board directors persons performing equivalent function significant deficiencies design operation internal controls could adversely affect registrants ability record process summarize report financial data identified registrants auditors material weaknesses internal controls b fraud whether material involves management employees significant role registrants internal controls 6 registrants certifying officers indicated annual report whether significant changes internal controls factors could significantly affect internal controls subsequent date recent evaluation including corrective actions regard significant deficiencies material weaknesses william c weldon william c weldon chief executive officer date march 17 2003 certification chief financial officer pursuant rule 13a14 securities exchange act 1934 robert j darretta certify 1 reviewed annual report form 10k johnson registrant 2 based knowledge annual report contain untrue statement material fact omit state material fact necessary make statements made light circumstances statements made misleading respect period covered annual report 3 based knowledge financial statements financial information included annual report fairly present material respects financial condition results operations cash flows registrant periods presented annual report 4 registrants certifying officers responsible establishing maintaining disclosure controls procedures defined exchange act rules 13a14 15d14 registrant designed disclosure controls procedures ensure material information relating registrant including consolidated subsidiaries made known us others within entities particularly period annual report prepared b evaluated effectiveness registrants disclosure controls procedures date within 90 days prior filing date annual report evaluation date c presented annual report conclusions effectiveness disclosure controls procedures based evaluation date 5 registrants certifying officers disclosed based recent evaluation registrants auditors audit committee registrants board directors persons performing equivalent function significant deficiencies design operation internal controls could adversely affect registrants ability record process summarize report financial data identified registrants auditors material weaknesses internal controls b fraud whether material involves management employees significant role registrants internal controls 6 registrants certifying officers indicated annual report whether significant changes internal controls factors could significantly affect internal controls subsequent date recent evaluation including corrective actions regard significant deficiencies material weaknesses robert j darretta robert j darretta chief financial officer date march 17 2003 certification chief executive officer pursuant 18 usc section 1350 undersigned william c weldon chief executive officer johnson new jersey corporation company pursuant 18 usc 1350 adopted pursuant section 906 sarbanesoxley act 2002 hereby certifies 1 companys annual report form 10k fiscal year ended december 29 2002 report fully complies requirements section 13a securities exchange act 1934 2 information contained report fairly presents material respects financial condition results operations company william c weldon william c weldon chief executive officer dated march 17 2003 certification accompanies report form 10k pursuant section 906 sarbanesoxley act 2002 shall except extent required act deemed filed company purposes section 18 securities exchange act 1934 amended certification chief financial officer pursuant 18 usc section 1350 undersigned robert j darretta chief financial officer johnson new jersey corporation company pursuant 18 usc 1350 adopted pursuant section 906 sarbanesoxley act 2002 hereby certifies 1 companys annual report form 10k fiscal year ended december 29 2002 report fully complies requirements section 13a securities exchange act 1934 2 information contained report fairly presents material respects financial condition results operations company robert j darretta robert j darretta chief financial officer dated march 17 2003 certification accompanies report form 10k pursuant section 906 sarbanesoxley act 2002 shall except extent required act deemed filed company purposes section 18 securities exchange act 1934 amended report independent accountants financial statement schedule shareholders board directors johnson audits consolidated financial statements referred report dated january 20 2003 except note 22 date february 10 2003 appearing 2002 annual report shareholders johnson report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 15a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york january 20 2003 exhibit index management contracts compensatory plans arrangements required filed exhibits form pursuant item 15c report copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules reports form 8k following documents filed part report 1 financial statements following consolidated financial statements notes thereto independent auditors report pages 38 60 annual report shareholders fiscal year 2003 incorporated herein reference filed exhibit 13 report form 10k consolidated balance sheets end fiscal years 2003 2002 consolidated statements earnings fiscal years 2003 2002 2001 consolidated statements equity fiscal years 2003 2002 2001 consolidated statements cash flows fiscal years 2003 2002 notes consolidated financial statements report independent auditors 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report b reports form 8k report form 8k furnished january 16 2004 included press release announcing decision james lenehan retire company june 30 2004 resign vice chairman board directors president effective february 1 2004 report form 8k furnished january 20 2004 included press release dated january 20 2004 announcing companys sales earnings fourth quarter fiscal year ended december 28 2003 including consolidated financial results report form 8k furnished march 1 2004 included press release announcing companys cordis subsidiary entered strategic alliance guidant corporation respect cypher drugeluting stent report form 8k filed march 1 2004 included managements discussion analysis financial condition results operations audited consolidated financial statements notes thereto report independent auditors december 28 2003 johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended december 28 2003 december 29 2002 december 30 2001 dollars millions charges related customer rebates cash discounts reflected reductions sales customers signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 10 2004 johnson registrant w c weldon w c weldon chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent auditors financial statement schedule shareholders board directors johnson audits consolidated financial statements referred report dated january 19 2004 except fifth thirteenth paragraphs note 18 dates february 5 2004 february 24 2004 respectively appearing 2003 annual report shareholders johnson report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 15a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york january 19 2004 exhibit index management contracts compensatory plans arrangements required filed exhibits form pursuant item 15c report form 10k copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements following audited consolidated financial statements notes thereto material captioned “report independent registered public accounting firm” pages 50 77 annual report incorporated herein reference filed exhibit 13 report form 10k consolidated balance sheets end fiscal years 2006 2005 consolidated statements earnings fiscal years 2006 2005 2004 consolidated statements equity fiscal years 2006 2005 2004 consolidated statements cash flows fiscal years 2006 2005 2004 notes consolidated financial statements report independent registered public accounting firm 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended december 31 2006 january 1 2006 january 2 2005 dollars millions 1 includes reserve customer rebates 558 million 471 million 488 million recorded contra asset december 31 2006 january 1 2006 january 2 2005 respectively 2 includes 186 million related previously estimated performancebased rebate allowances managed care contracts 3 includes 170 million related previously estimated performancebased rebate allowances managed care contracts signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 16 2007 johnson registrant w c weldon w c weldon chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent registered public accounting firm financial statement schedule board directors johnson audits consolidated financial statements management’s assessment effectiveness internal control financial reporting effectiveness internal control financial reporting referred report dated february 20 2007 appearing 2006 annual report shareholders johnson report consolidated financial statements assessment incorporated reference annual report form 10k also included audit financial statement schedule listed item 15a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york february 20 2007 exhibit index management contract compensatory plan copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements following audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” pages 48 75 annual report incorporated herein reference filed exhibit 13 report form 10k consolidated balance sheets end fiscal years 2007 2006 consolidated statements earnings fiscal years 2007 2006 2005 consolidated statements equity fiscal years 2007 2006 2005 consolidated statements cash flows fiscal years 2007 2006 2005 notes consolidated financial statements report independent registered public accounting firm 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended december 30 2007 december 31 2006 january 1 2006 dollars millions 1 includes reserve customer rebates 710 million 558 million 471 million december 30 2007 december 31 2006 january 1 2006 respectively 2 includes 186 million related previously estimated performancebased rebate allowances managed care contracts signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 26 2008 johnson registrant w c weldon w c weldon chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent registered public accounting firm financial statement schedule shareholders board directors johnson audits consolidated financial statements effectiveness internal control financial reporting referred report dated february 20 2008 appearing 2007 annual report shareholders johnson report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 15a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york february 20 2008 exhibit index management contract compensatory plan copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements following audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” pages 44 69 annual report incorporated herein reference filed exhibit 13 report form 10k consolidated balance sheets end fiscal years 2008 2007 consolidated statements earnings fiscal years 2008 2007 2006 consolidated statements equity fiscal years 2008 2007 2006 consolidated statements cash flows fiscal years 2008 2007 2006 notes consolidated financial statements report independent registered public accounting firm 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended december 28 2008 december 30 2007 december 31 2006 dollars millions 1 includes reserve customer rebates 721 million 710 million 558 million december 28 2008 december 30 2007 december 31 2006 respectively 2 includes 171 million adjustment related previously estimated accrued sales reserve signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 9 2009 johnson registrant w c weldon w c weldon chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent registered public accounting firm financial statement schedule board directors johnson audits consolidated financial statements effectiveness internal control financial reporting referred report dated february 17 2009 appearing 2008 annual report shareholders johnson report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 15a form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york february 17 2009 exhibit index management contract compensatory plan copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements following audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” pages 36 64 annual report incorporated herein reference filed exhibit 13 report form 10k consolidated balance sheets end fiscal years 2009 2008 consolidated statements earnings fiscal years 2009 2008 2007 consolidated statements equity fiscal years 2009 2008 2007 consolidated statements cash flows fiscal years 2009 2008 2007 notes consolidated financial statements report independent registered public accounting firm 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report schedule valuation qualifying accounts disclosure johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended january 3 2010 december 28 2008 december 30 2007 dollars millions 1 includes reserve customer rebates 729 million 721 million 710 million january 3 2010 december 28 2008 december 30 2007 respectively 2 includes 171 million adjustment related previously estimated accrued sales reserve signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 1 2010 johnson registrant w c weldon w c weldon chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent registered public accounting firm financial statement schedule board directors johnson audits consolidated financial statements effectiveness internal control financial reporting referred report dated march 1 2010 appearing 2009 annual report shareholders johnson report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 15a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york march 1 2010 exhibit index management contract compensatory plan copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements following audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” pages 41 72 annual report incorporated herein reference filed exhibit 13 report form 10k consolidated balance sheets end fiscal years 2010 2009 consolidated statements earnings fiscal years 2010 2009 2008 consolidated statements equity fiscal years 2010 2009 2008 consolidated statements cash flows fiscal years 2010 2009 2008 notes consolidated financial statements report independent registered public accounting firm 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report schedule ii schedule valuation qualifying accounts disclosure johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended january 2 2011 january 3 2010 december 28 2008 dollars millions 1 includes reserve customer rebates 701 million 729 million 721 million january 2 2011 january 3 2010 december 28 2008 respectively 2 includes 171 million adjustment related previously estimated accrued sales reserve signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 15 2011 johnson registrant w c weldon w c weldon chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent registered public accounting firm financial statement schedule board directors johnson audits consolidated financial statements effectiveness internal control financial reporting referred report dated february 24 2011 appearing 2010 annual report shareholders johnson report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 15a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york february 24 2011 exhibit index management contract compensatory plan copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements following audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” annual report incorporated herein reference filed exhibit 13 report form 10k consolidated balance sheets end fiscal years 2013 2012 consolidated statements earnings fiscal years 2013 2012 2011 consolidated statements comprehensive income fiscal years 2013 2012 2011 consolidated statements equity fiscal years 2013 2012 2011 consolidated statements cash flows fiscal years 2013 2012 2011 notes consolidated financial statements report independent registered public accounting firm 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended december 29 2013 december 30 2012 january 1 2012 dollars millions 1 includes reserve customer rebates 730 million 642 million 656 million december 29 2013 december 30 2012 january 1 2012 respectively recorded contra asset signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 21 2014 johnson registrant gorsky chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent registered public accounting firm financial statement schedule board directors johnson audits consolidated financial statements effectiveness internal control financial reporting referred report dated february 21 2014 appearing 2013 annual report shareholders johnson report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 15a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york february 21 2014 exhibit index management contract compensatory plan copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements following audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” annual report incorporated herein reference filed exhibit 13 report form 10k consolidated balance sheets end fiscal years 2014 2013 consolidated statements earnings fiscal years 2014 2013 2012 consolidated statements comprehensive income fiscal years 2014 2013 2012 consolidated statements equity fiscal years 2014 2013 2012 consolidated statements cash flows fiscal years 2014 2013 2012 notes consolidated financial statements report independent registered public accounting firm schedules listed omitted required applicable 2 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 23 2015 johnson registrant gorsky chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index management contract compensatory plan copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements consolidated balance sheets end fiscal years 2015 2014 consolidated statements earnings fiscal years 2015 2014 2013 consolidated statements comprehensive income fiscal years 2015 2014 2013 consolidated statements equity fiscal years 2015 2014 2013 consolidated statements cash flows fiscal years 2015 2014 2013 notes consolidated financial statements report independent registered public accounting firm schedules omitted applicable required information included financial statements notes 2 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 24 2016 johnson registrant gorsky chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index reg sk exhibit table description item exhibit 10u summary employment arrangements sandra e peterson incorporated herein reference exhibit 10t registrants form 10k annual report year ended december 30 2012 10v severance pay plan johnson us affiliated companies amended restated october 1 2014 incorporated herein reference exhibit 101 registrants form 10q quarterly report quarter ended september 28 2014 10w first amendment severance pay plan johnson us affiliated companies amended restated effective october 1 2014 incorporated herein reference exhibit 101 registrants form 10q quarterly report quarter ended june 28 2015 10x second amendment severance pay plan johnson us affiliated companies amended restated effective october 1 2014 filed document statement computation ratio earnings fixed charges filed document subsidiaries filed document consent independent registered public accounting firm filed document 31a certification chief executive officer pursuant section 302 sarbanesoxley act filed document 31b certification chief financial officer pursuant section 302 sarbanesoxley act filed document 32a certification chief executive officer pursuant section 906 sarbanesoxley act furnished document 32b certification chief financial officer pursuant section 906 sarbanesoxley act furnished document cautionary statement pursuant private securities litigation reform act 1995 “safe harbor” forwardlooking statements filed document xbrl extensible business reporting language following materials report fiscal year ended january 3 2016 formatted extensive business reporting language xbrl consolidated balance sheets ii consolidated statements earnings iii consolidated statements comprehensive income iv consolidated statements equity v consolidated statements cash flows vi notes consolidated financial statements management contract compensatory plan copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements consolidated balance sheets end fiscal years 2016 2015 consolidated statements earnings fiscal years 2016 2015 2014 consolidated statements comprehensive income fiscal years 2016 2015 2014 consolidated statements equity fiscal years 2016 2015 2014 consolidated statements cash flows fiscal years 2016 2015 2014 notes consolidated financial statements report independent registered public accounting firm schedules omitted applicable required information included financial statements notes 2 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report item 16 form 10k summary registrants may voluntarily include summary information required form 10k item 16 company elected include summary information signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 27 2017 johnson registrant gorsky chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index reg sk exhibit table description item exhibit 10u severance pay plan johnson us affiliated companies amended restated october 1 2014 incorporated herein reference exhibit 101 registrants form 10q quarterly report quarter ended september 28 2014 10v first amendment severance pay plan johnson us affiliated companies amended restated effective october 1 2014 incorporated herein reference exhibit 101 registrants form 10q quarterly report quarter ended june 28 2015 10w second amendment severance pay plan johnson us affiliated companies amended restated effective october 1 2014 incorporated herein reference exhibit 10x registrants form 10k annual report fiscal year ended january 3 2016 statement computation ratio earnings fixed charges filed document subsidiaries filed document consent independent registered public accounting firm filed document 31a certification chief executive officer pursuant section 302 sarbanesoxley act filed document 31b certification chief financial officer pursuant section 302 sarbanesoxley act filed document 32a certification chief executive officer pursuant section 906 sarbanesoxley act furnished document 32b certification chief financial officer pursuant section 906 sarbanesoxley act furnished document xbrl extensible business reporting language following materials report fiscal year ended january 1 2017 formatted extensive business reporting language xbrl consolidated balance sheets ii consolidated statements earnings iii consolidated statements comprehensive income iv consolidated statements equity v consolidated statements cash flows vi notes consolidated financial statements management contract compensatory plan copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements consolidated balance sheets end fiscal years 2018 2017 consolidated statements earnings fiscal years 2018 2017 2016 consolidated statements comprehensive income fiscal years 2018 2017 2016 consolidated statements equity fiscal years 2018 2017 2016 consolidated statements cash flows fiscal years 2018 2017 2016 notes consolidated financial statements report independent registered public accounting firm schedules omitted applicable required information included financial statements notes 2 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report item 16 form 10k summary registrants may voluntarily include summary information required form 10k item 16 company elected include summary information signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 20 2019 johnson registrant gorsky chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index management contract compensatory plan paper filing copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices company pursuant item 601b4iiia regulation sk company filed exhibits form 10k certain longterm debt instruments including indentures total amount securities authorized exceed 10 total assets company subsidiaries consolidated basis company hereby agrees furnish copy instrument sec upon requestitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements consolidated balance sheets end fiscal years 2019 2018 consolidated statements earnings fiscal years 2019 2018 2017 consolidated statements comprehensive income fiscal years 2019 2018 2017 consolidated statements equity fiscal years 2019 2018 2017 consolidated statements cash flows fiscal years 2019 2018 2017 notes consolidated financial statements report independent registered public accounting firm schedules omitted applicable required information included financial statements notes 2 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report item 16 form 10k summary registrants may voluntarily include summary information required form 10k item 16 company elected include summary information signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 18 2020 johnson registrant gorsky chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated exhibit index management contract compensatory plan paper filing copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices company pursuant item 601b4iiia regulation sk company filed exhibits form 10k certain longterm debt instruments including indentures total amount securities authorized exceed 10 total assets company subsidiaries consolidated basis company hereby agrees furnish copy instrument sec upon requestitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements following audited consolidated financial statements notes thereto report independent registered public accounting firm pages 39 63 annual report incorporated herein reference filed exhibit 13 report form 10k consolidated balance sheets end fiscal years 2004 2003 consolidated statements earnings fiscal years 2004 2003 2002 consolidated statements equity fiscal years 2004 2003 2002 consolidated statements cash flows fiscal years 2004 2003 notes consolidated financial statements report independent registered public accounting firm 2 financial statement schedules schedule ii valuation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report johnson subsidiaries schedule ii valuation qualifying accounts fiscal years ended january 2 2005 december 28 2003 december 29 2002 dollars millions 1 includes reserve customer rebates 488 314 274 january 2 2005 december 28 2003 december 29 2002 respectively 2 includes 170 related reversal previously estimated performancebased rebate allowances managed care contracts certain prior year amounts reclassified conform current year presentation signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date march 9 2005 johnson registrant w c weldon w c weldon chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent registered public accounting firm financial statement schedule shareholders board directors johnson audits consolidated financial statements managements assessment effectiveness internal control financial reporting effectiveness internal control financial reporting referred report dated february 28 2005 appearing 2004 annual report shareholders johnson report consolidated financial statements assessment incorporated reference annual report form 10k also included audit financial statement schedule listed item 15a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york march 11 2005 exhibit index management contracts compensatory plans arrangements required filed exhibits form pursuant item 15a report form 10k copy exhibits listed provided without charge shareholder submitting written request specifying desired exhibits secretary principal executive offices companyitem 15 exhibits financial statement schedules following documents filed part report 1 financial statements following audited consolidated financial statements notes thereto material caption “report independent registered public accounting firm” pages 37 68 annual report incorporated herein reference filed exhibit 13 report form 10k consolidated balance sheets end fiscal years 2011 2010 consolidated statements earnings fiscal years 2011 2010 2009 consolidated statements equity fiscal years 2011 2010 2009 consolidated statements cash flows fiscal years 2011 2010 2009 notes consolidated financial statements report independent registered public accounting firm 2 financial statement schedules schedule iivaluation qualifying accounts schedules listed omitted required applicable 3 exhibits required filed item 60l regulation sk information called item incorporated herein reference exhibit index report johnson subsidiaries schedule valuation qualifying accounts schedule iivaluation qualifying accounts fiscal years ended january 1 2012 january 2 2011 january 3 2010 dollars millions 1 includes reserve customer rebates 656 million 701 million 729 million january 1 2012 january 2 2011 january 3 2010 respectively 2 accruals paymentscredits 2010 revised 908 million 2009 834 million appropriately reflect noncash creditsadjustments consistent current year presentation related ethicon franchise previously reported net accruals column revision considered material previously issued financial statements signatures pursuant requirements section 13 securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized date february 23 2012 johnson registrant w c weldon w c weldon chairman board directors chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent registered public accounting firm financial statement schedule board directors johnson audits consolidated financial statements effectiveness internal control financial reporting referred report dated february 23 2012 appearing 2011 annual report shareholders johnson report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 15a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp new york new york february 23 2012 exhibit index management contract compensatory plan