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View Annual Report OUR PASSION TRANSFORMS IF THERE’S ONE THING ALL 122,200 OF OUR EMPLOYEES SHARE, IT’S PASSION. For 120 years, the passion in our people has powered every invention, every product, every breakthrough we’ve brought to human health. This year was an extraordinary testament to this fact. Passion is part of who we are: the people of the Johnson & Johnson Family of Companies. It’s in our DNA. It’s what compels us to work for a corporation devoted to improving the health and well-being of people the world over. Our passion is further inspired by the values embodied in Our Credo, which the employees of the Johnson & Johnson Family of Companies have practiced, treasured and handed down for generations. Our Credo underscores our personal responsibility to put the needs and well-being of the people we serve first. It liberates our passion and deepens our commitment to delivering meaningful health innovations. At Johnson & Johnson we take pride in knowing that our daily work makes a difference in the world. Now and for years to come, our passion continues to transform human health. ON THE COVER For Olga Vasukova, like so many of her colleagues at Johnson & Johnson, LLC in Moscow, supporting her government’s initiative to modernize health care is a personal call to action. It’s reinforced by the smile on her father’s face and the obvious joy in her daughter Sasha’s heart each time “Papa” pays a visit. For more on their story, see page 10. CHAIRMAN’S LETTER To Our Shareholders Improving the health and well-being of people around the world is a vital and important business. It is perhaps the world’s most meaningful business and, for that reason, attracts exceptional people who are capable, skilled, and possess a genuine passion for making a difference in people’s lives. As the world’s most “Thanks to the dedication of our people in advancing human comprehensive and broadly based health health and well-being, Johnson & Johnson delivered solid 2006 financial results while taking aggressive steps to position the care company, Johnson & Johnson is corporation for future growth.” privileged to play a role in helping millions WILLIAM C. WELDON Chairman, Board of Directors, and Chief Executive Officer of people be well . and stay well. considered too young for hip replacement to preserve In 2006, thanks to the passion, hard work and ingenuity of our bone and return to active lives . and a new medicine from people, we introduced hundreds of significant new products Tibotec Therapeutics Division of Ortho Biotech Products, LP and line extensions across the enterprise. Many advances that offers hope to many treatment-experienced HIV patients were discovered or invented by Johnson & Johnson scientists who thought they were running out of options. and further developed by our R&D organizations. Among And this is just a small sampling of the new products them: new NEUTROGENA® and AVEENO® skin care products introduced in 2006. featuring a patented breakthrough in long-lasting protection At the same time, our focus on growing our broad base in against the sun’s harmful UVA rays . a new diagnostic test human health care led to significant acquisitions across the from Veridex, LLC that allows doctors to know, during enterprise, including Pfizer Consumer Healthcare, which breast cancer surgery, whether a woman’s cancer has spread solidified our position as the world’s premier consumer health to her lymph nodes . new implant technology from care company. Six key acquisitions in medical technology DePuy Orthopaedics, Inc. that enables adults previously further strengthened our position as the world’s largest and NET SALES DILUTED EARNINGS PER SHARE DIVIDENDS PAID PER SHARE (in billions of dollars) (in dollars) (in dollars) $3.73 $53.3 $1.455 $50.5 $3.35 $47.3 $1.275 $41.9 $2.74 $1.095 $36.3 $2.29 $0.925 $2.06 $0.795 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 CHAIRMAN’S LETTER 1 most broadly based medical also advancing at an unprec- devices and diagnostics Opportunity for edented pace. This means company, where we hold the that opportunity for scientific No. 1 or No. 2 position in most scientific innovation innovation—including of our major franchises. innovation through technology In pharmaceuticals, we —including innovation convergence—has never been strengthened our virology more promising, especially business with the U.S. launch through technology for broadly based companies of PREZISTA™ (darunavir) convergence—has never with the capacity to adopt for patients diagnosed with and commercialize new treatment-resistant HIV and been more promising, technologies quickly. continue to build a pipeline of Of course, systemic products targeting some of the especially for broadly increases in demand create world’s most difficult-to-treat countervailing social forces, diseases. We also signed several based companies with including pressure on health important licensing agreements care budgets, political pressure that position us for growth the capacity to adopt for access to and affordability in therapeutic areas—such of health care services and as oncology, diabetes and and commercialize new products, demand for low-cost hepatitis C—where serious technologies quickly. alternatives, increasing unmet needs exist and where competition and challenges the science is rapidly evolving. to intellectual property. Thanks to the dedication These forces impact virtually of our people in advancing human health and well-being, all participants in the health care marketplace. Johnson & Johnson delivered solid 2006 financial results Our approach to addressing these underlying challenges is while taking aggressive steps to position the corporation to find the right path with all of our stakeholders to sustainable for future growth. Worldwide sales grew to a record long-term growth. At Johnson & Johnson, for over 60 years Our $53.3 billion, a growth rate of 5.6 percent with operational Credo has focused our people on our responsibilities to a wide growth of 5.3 percent. range of stakeholders: customers, patients, family members, Net earnings as adjusted of $11.1 billion grew by employees, communities and shareholders. We have been long 9.2(1) percent, once again outpacing sales growth. We achieved acquainted with the need to find win-win propositions with solid earnings growth in a year of slower sales growth by stakeholders all around the world. We also understand that continued focus on productivity and cost management. solid financial returns will come from doing this well. Adjusted earnings per share of $3.76 grew by 10.9(1) percent, a higher rate than earnings due to completion of our $5 billion A WINNING FORMULA FOR GROWTH Johnson & Johnson is a unique share repurchase program announced in March 2006. company. And in a world in which change is the only constant, Johnson & Johnson is an enduring company. STRONG GROWTH OPPORTUNITIES There has never been a more Our uniqueness goes well beyond the exceptional exciting time to be the world’s most comprehensive and long-term financial results we have delivered for many broadly based health care company. Our products and services decades. It derives from management philosophies that bring high value; they are in increasing demand; and the define our unique business model and have guided us through progress of science is opening new horizons for improving extraordinary changes in the science and economics of human human health and well-being. health over much of the past century. We are: Demographic and geographic trends will drive even · Founded on shared values embodied in Our Credo. stronger demand for all categories of health care products in · Broadly based in human health care. the years ahead. Much of the developed world’s population · Decentralized in the way we operate the business. is aging, with an expectation of maintaining a full and active · Managed for the long term. life. Furthermore, the rapid growth in demand for health Followed over time, these strategic principles are the products and services in developing nations is creating a global source of our enduring strength and our ability to adapt and expansion opportunity, especially for companies like ours flourish in a dynamic, ever-evolving industry. They encourage that have the capacity to execute in many markets. Our successful operation of our businesses for both the near products are sold in over 175 countries, making us ideally and the long term. suited to capitalize on this trend. The chart on the next page shows the exceptionally Equally important, the science of health and well-being consistent sales growth we have attained over the longer term. is evolving rapidly, thanks in part to the wealth of information In 2006, we logged our 74th consecutive year of sales increases, flowing from sequencing of the human genome. Moreover, our 23rd consecutive year of earnings increases adjusted for scientific breakthroughs outside of biology—in materials special charges and our 44th consecutive year of dividend science, electronics, computer science and other technologies increases. This is a record matched by very few, if any, that underpin science-based health care solutions—are companies in history. 2 JOHNSON & JOHNSON 2006 ANNUAL REPORT FINANCIAL HIGHLIGHTS $60 JOHNSON & JOHNSON AND SUBSIDIARIES $50 Sales 1946–2006 (Dollars in Billions) $40 � $30 $20 $10 1946 1956 1966 1976 1986 1996 2006 2006 2005 2004 % CHANGE 2006 % CHANGE 2005 Sales to customers (in millions) $53,324 $50,514 $47,348 5.6% 6.7%] Net earnings (in millions) $11,053 $10,060 $8,180 9.9% 23.0%]
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