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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 COMMISSION FILE NUMBER 1-3215

JOHNSON & JOHNSON (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

NEW JERSEY 22-1024240 (State of (I.R.S. Employer Incorporation) Identification No.)

ONE JOHNSON & JOHNSON PLAZA NEW BRUNSWICK, NEW JERSEY 08933 (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (732) 524-0400

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------

Common Stock, Par Value $1.00 New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]

The aggregate market value of the voting stock held by non-affiliates of the registrant on February 27, 2001 was approximately $133.8 billion.

On February 27, 2001 there were 1,397,232,658 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Parts I and Portions of registrant's annual report to shareowners for II: fiscal year 2000.

Part III: Portions of registrant's proxy statement for its 2001 annual meeting of shareowners.

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PART I

ITEM PAGE ------

1. Business...... General...... Segments of Business; Geographic Areas...... Consumer...... Pharmaceutical...... Professional...... International...... Raw Materials...... Patents and Trademarks...... Seasonality...... Competition...... Research...... Environment...... Regulation...... 2. Properties...... 3. Legal Proceedings...... 4. Submission of Matters to a Vote of Security Holders...... Executive Officers of the Registrant......

PART II

5. Market for the Registrant's Common Equity and Related Shareowner Matters...... 6. Selected Financial Data...... 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 7A. Quantitative and Qualitative Disclosures About Market Risk...... 8. Financial Statements and Supplementary Data...... 9. Changes in and Disagreements on Accounting and Financial Disclosure......

PART III

10. Directors and Executive Officers of the Registrant...... 11. Executive Compensation...... 12. Security Ownership of Certain Beneficial Owners and Management...... 13. Certain Relationships and Related Transactions......

PART IV

14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...... Signatures...... Report of Independent Accountants...... Exhibit Index......

Form 10-Q Quarterly Reports Available. A copy of Johnson & Johnson's Quarterly Report on Form 10-Q for any of the first three quarters of the current fiscal year, without exhibits, will be provided without charge to any shareowner submitting a written request to the Secretary at the principal executive offices of the Company or by calling 800-328-9033. Each report will be available about 45 days after the end of the quarter to which it relates. 3

PART I

ITEM 1. BUSINESS

GENERAL

Johnson & Johnson, employing approximately 98,500 people worldwide, is engaged in the manufacture and sale of a broad range of products in the health care field. It conducts business in virtually all countries of the world. Johnson & Johnson's primary interest, both historically and currently, has been in products related to human health and well-being. Johnson & Johnson was organized in the State of New Jersey in 1887.

Johnson & Johnson is organized on the principle of decentralized management. The Executive Committee of Johnson & Johnson is the principal management group responsible for the operations and allocation of the resources of the Company. This Committee oversees and coordinates the activities of domestic and international companies related to each of the Consumer, Pharmaceutical and Professional businesses. Each international subsidiary is, with some exceptions, managed by citizens of the country where it is located.

SEGMENTS OF BUSINESS; GEOGRAPHIC AREAS

Johnson & Johnson's worldwide business is divided into three segments: Consumer, Pharmaceutical and Professional. Johnson & Johnson further categorizes its sales and operating profit by major geographic areas of the world. Additional information required by this item is incorporated herein by reference to the narrative and tabular (but not the graphic) descriptions of segments and geographic areas captioned "Management's Discussion and Analysis of Results of Operations and Financial Condition -- Segments of Business, Consumer, Pharmaceutical, Professional and Geographic Areas" on pages 28 through 31 and 49 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000.

CONSUMER

The Consumer segment's principal products are personal care and hygienic products, including nonprescription drugs, adult skin and hair care products, baby care products, oral care products, first aid products and sanitary protection products. Major brands include skin care products; BAND-AID Brand Adhesive Bandages; food products; CAREFREE Panty Shields; CLEAN & CLEAR teen skin care products; IMODIUM A-D, an antidiarrheal; JOHNSON'S Baby line of products; JOHNSON'S pH 5.5 skin and hair care products; LACTAID lactose-intolerance products; MONISTAT, a remedy for vaginal yeast infections; adult and children's MOTRIN IB ibuprofen products; gastrointestinal products and PEPCID AC Acid Controller from the Johnson & Johnson - Merck Consumer Pharmaceuticals Co.; skin and hair care products; o.b. Tampons; PENATEN and NATUSAN baby care products; PIZ BUIN and SUNDOWN sun care products; toothbrushes; RoC skin care products; SHOWER TO SHOWER personal care products; , a non-caloric sugar substitute; STAYFREE sanitary protection products; and the broad family of acetaminophen products. These products are marketed principally to the general public and distributed both to wholesalers and directly to independent and chain retail outlets.

PHARMACEUTICAL

The Pharmaceutical segment's principal worldwide franchises are in the antifungal, anti-infective, cardiovascular, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, psychotropic and women's health fields. These products are distributed both directly and through wholesalers for use by health care professionals and the general public. Prescription drugs in the antifungal field include NIZORAL (), SPORANOX (), TERAZOL () and DAKTARIN (miconazole nitrate) antifungal products. Prescription drugs in the anti-infective field include FLOXIN (ofloxacin) and LEVAQUIN (levofloxacin). Prescription drugs in the cardiovascular field include RETAVASE (reteplase), a recombinant biologic cardiology care product for the treatment of acute myocardial infarction to improve blood flow to the heart, and REOPRO (abciximab) for the treatment of

4 acute cardiac disease. Prescriptions drugs in the dermatology field include RETIN-A MICRO (tretinoin), a dermatological cream for acne. Prescription drugs in the gastrointestinal field include ACIPHEX (rabeprazole sodium), a proton pump inhibitor for treating erosive gastroesophageal reflux disease (GERD) and duodenal ulcers; IMODIUM ( HCl), an antidiarrheal; MOTILIUM (), a gastrointestinal mobilizer; and REMICADE (infliximab), a novel monoclonal antibody for treatment of certain Crohn's disease patients. REMICADE is also indicated for the treatment of rheumatoid arthritis.

Prescription drugs in the hematology field include PROCRIT (epoetin alfa, sold outside the U.S. as EPREX), a biotechnology derived version of the human hormone erythropoietin that stimulates red blood cell production. Prescription drugs in the immunology field include ORTHOCLONE OKT-3 (muromonab-CD3), for reversing the rejection of kidney, heart and liver transplants. Prescription drugs in the neurology field include REMINYL (galantamine), TOPAMAX () and STUGERON (cinnarizine). Prescription drugs in the oncology field include ERGAMISOL (levamisole hydrochloride), a colon cancer drug, and LEUSTATIN (cladribine), for hairy cell leukemia. Prescription drugs in the pain management field include DURAGESIC ( transdermal system, sold abroad as DUROGESIC), a transdermal patch for chronic pain; and ULTRAM ( hydrochloride), an analgesic for moderate to moderately severe pain. Prescription drugs in the psychotropics field include RISPERDAL (), an antipsychotic drug, and HALDOL (). Prescription drugs in the women's health field include ORTHO-NOVUM (norethindrone/ethinyl estradiol) and TRICILEST (norgestimate/ethinyl estradiol, sold in the U.S. as ORTHO TRI-CYCLEN) group of oral contraceptives and ORTHO-PREFEST (17 (beta)-estradiol/norgestimate) for hormone replacement therapy.

PROFESSIONAL

The Professional segment includes a broad range of products used by or under the direction of health care professionals, including, suture and mechanical wound closure products, surgical equipment and devices, wound management and infection prevention products, interventional and diagnostic cardiology products, diagnostic equipment and supplies, joint replacements and disposable contact lenses. These products are used principally in the professional fields by physicians, nurses, therapists, hospitals, diagnostic laboratories and clinics. Distribution to these markets is done both directly and through surgical supply and other dealers.

INTERNATIONAL

The international business of Johnson & Johnson is conducted by subsidiaries located in 50 countries outside the United States, which are selling products in more than 175 countries throughout the world. The products made and sold in the international business include many of those described above under "Business -- Consumer, Pharmaceutical and Professional." However, the principal markets, products and methods of distribution in the international business vary with the country and the culture. The products sold in the international business include not only those which were developed in the United States but also those which were developed by subsidiaries abroad.

Investments and activities in some countries outside the United States are subject to higher risks than comparable domestic activities because the investment and commercial climate is influenced by restrictive economic policies and political uncertainties.

RAW MATERIALS

Raw materials essential to Johnson & Johnson's business are generally readily available from multiple sources.

PATENTS AND TRADEMARKS

Johnson & Johnson has made a practice of obtaining patent protection on its products and processes where possible. Johnson & Johnson owns or is licensed under a number of patents relating to its products and manufacturing processes, which in the aggregate are believed to be of material importance in the operation of its business. However, it is believed that no single patent or related group of patents is material in relation to Johnson & Johnson as a whole.

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Johnson & Johnson has made a practice of selling its products under trademarks and of obtaining protection for these trademarks by all available means. Johnson & Johnson's trademarks are protected by registration in the United States and other countries where its products are marketed. Johnson & Johnson considers these trademarks in the aggregate to be of material importance in the operation of its business.

SEASONALITY

Worldwide sales do not reflect any significant degree of seasonality; however spending has been heavier in the fourth quarter of each year than in other quarters. This reflects increased spending decisions, principally for advertising and research grants.

COMPETITION

In all its product lines, Johnson & Johnson companies compete with companies both large and small, located in the United States and abroad. Competition is strong in all lines without regard to the number and size of the competing companies involved. Competition in research, involving the development of new products and processes and the improvement of existing products and processes, is particularly significant and results from time to time in product and process obsolescence. The development of new and improved products is important to Johnson & Johnson's success in all areas of its business. This competitive environment requires substantial investments in continuing research and in multiple sales forces. In addition, the winning and retention of customer acceptance of Johnson & Johnson's consumer products involve heavy expenditures for advertising, promotion and selling.

RESEARCH

Research activities are important to all segments of Johnson & Johnson's business. Major research facilities are located not only in the United States but also in Australia, Belgium, Brazil, Canada, Germany, Switzerland and the United Kingdom. The costs of Johnson & Johnson's worldwide research activities relating to the development of new products, the improvement of existing products, technical support of products and compliance with governmental regulations for the protection of the consumer amounted to $2,926, $2,600, and $2,336 million for fiscal years 2000, 1999 and 1998, respectively. These costs are charged directly to income in the year in which incurred. All research was sponsored by Johnson & Johnson.

ENVIRONMENT

During the past year Johnson & Johnson was subject to a variety of federal, state and local environmental protection measures. Johnson & Johnson believes that its operations comply in all material respects with applicable environmental laws and regulations. Johnson & Johnson's compliance with these requirements did not and is not expected to have a material effect upon its capital expenditures, earnings or competitive position.

REGULATION

Most of Johnson & Johnson's business is subject to varying degrees of governmental regulation in the countries in which operations are conducted, and the general trend is toward regulation of increasing stringency. In the United States, the drug, device, diagnostics and cosmetic industries have long been subject to regulation by various federal, state and local agencies, primarily as to product safety, efficacy, advertising and labeling. The exercise of broad regulatory powers by the Food and Drug Administration (the "FDA") continues to result in increases in the amounts of testing and documentation required for FDA clearance of new drugs and devices and a corresponding increase in the expense of product introduction. Similar trends toward product and process regulation are also evident in a number of major countries outside of the United States, especially in the European Economic Community where efforts are continuing to harmonize the internal regulatory systems.

The costs of human health care have been and continue to be a subject of study, investigation and regulation by governmental agencies and legislative bodies in the United States and other countries. In the 3

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United States, attention has been focused on drug prices and profits and programs that encourage doctors to write prescriptions for particular drugs or recommend particular medical devices. Even in the absence of new government regulation, managed care has become a more potent force in the market place and it is likely that increased attention will be paid to drug and medical device pricing, appropriate drug and medical device utilization and the quality of health care.

The regulatory agencies under whose purview Johnson & Johnson operates have administrative powers that may subject Johnson & Johnson to such actions as product recalls, seizure of products and other civil and criminal sanctions. In some cases Johnson & Johnson may deem it advisable to initiate product recalls voluntarily.

ITEM 2. PROPERTIES

Johnson & Johnson and its worldwide subsidiaries operate 140 manufacturing facilities occupying approximately 16.4 million square feet of floor space.

The manufacturing facilities are used by the industry segments of Johnson & Johnson's business approximately as follows:

SQUARE FEET SEGMENT (IN THOUSANDS) ------

Consumer...... 5,196 Pharmaceutical...... 4,577 Professional...... 6,612 ------Worldwide total...... 16,385 ======

Within the United States, 10 facilities are used by the Consumer segment, 8 by the Pharmaceutical segment and 44 by the Professional segment. Johnson & Johnson's manufacturing operations outside the United States are often conducted in facilities which serve more than one segment of the business.

The locations of the manufacturing facilities by major geographic areas of the world are as follows:

NUMBER OF SQUARE FEET GEOGRAPHIC AREA FACILITIES (IN THOUSANDS) ------

United States...... 62 7,388 Europe...... 34 4,730 Western Hemisphere excluding U.S.A...... 17 2,442 Africa, Asia and Pacific...... 27 1,825 ------Worldwide total...... 140 16,385 ======

In addition to the manufacturing facilities discussed above, Johnson & Johnson maintains numerous office and warehouse facilities throughout the world. Research facilities are also discussed in Item 1 under "Business -- Research."

Johnson & Johnson generally seeks to own its manufacturing facilities, although some, principally in locations abroad, are leased. Office and warehouse facilities are often leased.

Johnson & Johnson's properties are maintained in good operating condition and repair and are well utilized.

For information regarding lease obligations see Note 4 "Rental Expense and Lease Commitments" under "Notes to Consolidated Financial Statements" on page 38 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000. Segment information on additions to Johnson & Johnson's property, plant and equipment is contained on page 49 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000. For information regarding plans to close certain manufacturing facilities, see Note 14 "Restructuring and In-Process Research and Development Charges" under "Notes to Consolidated Financial Statements" on page 44 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000.

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ITEM 3. LEGAL PROCEEDINGS

The information set forth in Note 18 "Legal Proceedings" under "Notes to Consolidated Financial Statements" on page 46 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000 is incorporated herein by reference.

The Company or its subsidiaries are parties to a number of proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund, and comparable state laws, in which the primary relief sought is the cost of past and future remediation. While it is not feasible to predict or determine the outcome of these proceedings, in the opinion of the Company, such proceedings would not have a material adverse effect on the results of operations, cash flows or financial position of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Listed below are the executive officers of Johnson & Johnson as of March 23, 2001, each of whom, unless otherwise indicated below, has been an employee of the Company or its affiliates and held the position indicated during the past five years. There are no family relationships between any of the executive officers, and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected. At the annual meeting of the Board of Directors which follows the Annual Meeting of Shareowners executive officers are elected by the Board to hold office for one year and until their respective successors are elected and qualified, or until earlier resignation or removal.

Information with regard to the directors of the Company, including those of the following executive officers who are directors, is incorporated herein by reference to pages 4 through 8 of Johnson & Johnson's Proxy Statement dated March 14, 2001.

NAME AGE POSITION ------

Robert J. Darretta...... 54 Member, Executive Committee; Vice President, Finance(a) Russell C. Deyo...... 51 Member, Executive Committee; Vice President, Administration(b) Michael J. Dormer...... 49 Member, Executive Committee; Franchise Group Chairman for Medical Devices(c) Roger S. Fine...... 58 Member, Executive Committee; Vice President, General Counsel(d) JoAnn Heffernan Heisen...... 51 Member, Executive Committee; Vice President, Chief Information Officer(e) Christian A. Koffmann...... 60 Member, Executive Committee; Worldwide Chairman, Consumer & Personal Care Group(f) Ralph S. Larsen...... 62 Chairman, Board of Directors and Chief Executive Officer; Chairman, Executive Committee James T. Lenehan...... 52 Vice Chairman, Board of Directors; Member, Executive Committee; Worldwide Chairman, Medical Devices & Diagnostics Group Brian D. Perkins...... 47 Member, Executive Committee; Worldwide Chairman, Consumer Pharmaceuticals & Nutritionals Group(g) Robert G. Savage...... 47 Member, Executive Committee; Worldwide Chairman, Pharmaceuticals Group(h) William C. Weldon...... 52 Vice Chairman, Board of Directors; Member, Executive Committee Robert N. Wilson...... 60 Senior Vice Chairman, Board of Directors; Vice Chairman Executive Committee

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(a) Mr. R. J. Darretta joined the Company in 1968 and held various positions before becoming President of Iolab Corporation in 1988 and Treasurer of the Company in 1995. He became a Member of the Executive Committee and Vice President, Finance in 1997.

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(b) Mr. R. C. Deyo joined the Company in 1985 and became Associate General Counsel in 1991. He became a Member of the Executive Committee and Vice President, Administration in 1996. (c) Mr. M. J. Dormer joined the Company in 1998 as Company Group Chairman, Worldwide Franchise Chairman for DePuy and Codman, when the Company acquired DePuy, Inc. At the time of that acquisition, he had been Chief Operating Officer of DePuy, Inc. since 1996. Mr. Dormer served as President of DePuy International Ltd. from 1992 to 1996. Mr. Dormer became a Member of the Executive Committee and Franchise Group Chairman for Medical Devices in February 2001. (d) Mr. R. S. Fine joined the Company in 1974 and became a Member of the Executive Committee and Vice President, Administration in 1991 and Vice President, General Counsel in 1996. (e) Ms. J. H. Heisen joined the Company in 1989 and became Treasurer in 1991 and Controller in 1995. She became a Member of the Executive Committee and Vice President, Chief Information Officer in 1997. (f) Mr. C. A. Koffmann joined the Company in 1989 as a Company Group Chairman. He became a Member of the Executive Committee and Worldwide Chairman, Consumer & Personal Care Group in 1995. (g) Mr. B. D. Perkins joined the Company in 1980 and held various positions before becoming President of McNeil Consumer Products Company in 1994 and Company Group Chairman for OTC Pharmaceuticals in 1999. He became a Member of the Executive Committee and Worldwide Chairman, Consumer Pharmaceuticals & Nutritionals Group in 1999. (h) Mr. Savage joined the Company in 1996 as Vice President, Marketing & Sales, Ortho-McNeil Pharmaceutical. He was named President of Ortho-McNeil Pharmaceutical in 1998 and Company Group Chairman -- North America, Pharmaceuticals Group in 2000. Mr. Savage became a member of the Executive Committee and Worldwide Chairman, Pharmaceuticals Group in February 2001. Prior to joining the Company, he served in various management positions at Hoffmann-La Roche

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREOWNER MATTERS

The information called for by this item is incorporated herein by reference to the material captioned "Management's Discussion and Analysis of Results of Operations and Financial Condition -- Common Stock Market Prices and Cash Dividends Paid" on page 32 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000.

ITEM 6. SELECTED FINANCIAL DATA

The information called for by this item is incorporated herein by reference to the material captioned "Summary of Operations and Statistical Data 1990-2000" on page 50 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information called for by this item is incorporated herein by reference to the narrative and tabular (but not the graphic) material included in the material captioned "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 26 through 32 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000.

On March 27, 2001, the Company announced that it had entered into a definitive merger agreement with Corporation, a research-based pharmaceutical company and a leader in drug delivery technologies. ALZA shareholders will receive a fixed exchange ratio of .49 shares of Johnson & Johnson common stock for each share of ALZA in a tax-free transaction. On a fully diluted basis, Alza has approximately 295 million shares outstanding. Johnson & Johnson intends to account for the transaction as a pooling of interests. The boards of directors of the Company and ALZA have given approvals to the merger. While the transaction is expected to close by the early part of the third quarter of 2001, the merger is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and the European Union merger control regulation, and other customary closing conditions. The agreement will also require the approval of ALZA's shareholders.

On January 26, 2001, the Company announced that it had entered into a definitive agreement to acquire Heartport, Inc., a manufacturer of less invasive cardiac surgery products. The transaction is valued at

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9 approximately $81 million. Heartport, Inc. develops, manufactures and sells less invasive cardiac surgery products that enable surgeons to perform a wide range of less invasive open-chest and minimally invasive heart operations. The companies expect the transaction to be completed during the second quarter of 2001, subject to customary conditions, including approval by a majority of the shareowners of Heartport and Hart-Scott-Rodino clearance.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this item is incorporated herein by reference to the material captioned "Management's Discussion and Analysis of Results of Operations and Financial Condition -- Financial Instruments" on page 31 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by this item is incorporated herein by reference to the Consolidated Financial Statements and the Notes thereto and the material captioned "Independent Auditor's Report" on pages 33 through 48 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information called for by this item is incorporated herein by reference to (a) the material under the caption "Election of Directors -- Nominees" on pages 3 through 8 of Johnson & Johnson's Proxy Statement dated March 14, 2001, (b) the material in Part I hereof under the caption "Executive Officers of the Registrant" and (c) the material under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" on page 11 of Johnson & Johnson's Proxy Statement dated March 14, 2001.

ITEM 11. EXECUTIVE COMPENSATION

The information called for by this item is incorporated herein by reference to the following sections of Johnson & Johnson's Proxy Statement dated March 14, 2001: "Election of Directors -- Directors' Fees, Committees and Meetings" on pages 9 through 10; "Compensation Committee Report on Executive Compensation" on pages 12 through 15; "Shareowner Return Performance Graphs" on pages 16 through 17; and "Executive Compensation" on pages 18 through 21.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by this item is incorporated herein by reference to the material captioned "Election of Directors--Stock Ownership/Control" on pages 8 through 9 of Johnson & Johnson's Proxy Statement dated March 14, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report

1. Financial Statements

The following Consolidated Financial Statements and the Notes thereto and the Independent Auditor's Report on pages 33 through 48 of Johnson & Johnson's Annual Report to Shareowners for fiscal year 2000 are incorporated herein by reference:

Consolidated Balance Sheets at end of Fiscal Years 2000 and 1999

Consolidated Statements of Earnings for Fiscal Years 2000, 1999 and 1998

Consolidated Statements of Equity for Fiscal Years 2000, 1999 and 1998

Consolidated Statements of Cash Flows for Fiscal Years 2000, 1999 and 1998

Notes to Consolidated Financial Statements

Independent Auditor's Report

2. Financial Statement Schedules

Schedule II -- Valuation and Qualifying Accounts

Schedules other than those listed above are omitted because they are not required or are not applicable.

3. Exhibits Required to be Filed by Item 60l of Regulation S-K

The information called for by this item is incorporated herein by reference to the Exhibit Index in this report.

(b) Reports on Form 8-K

No Reports on Form 8-K were filed during the fourth quarter of fiscal year 2000.

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JOHNSON & JOHNSON AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

FISCAL YEARS ENDED DECEMBER 31, 2000, JANUARY 2, 2000 AND JANUARY 3, 1999 (DOLLARS IN MILLIONS)

DEDUCTIONS FROM RESERVES ADDITIONS ------BALANCE AT CHARGED BALANCE BEGINNING TO COSTS AND AT END OF PERIOD EXPENSES(A) DESCRIPTION AMOUNT OF PERIOD ------

2000 Reserves deducted from accounts receivable, trade Reserve for doubtful accounts...... $193 34 Write-offs less recoveries..... 55 Currency adjustments...... 7 165 Reserve for customer rebates...... 135 1,215 Customer rebates allowed...... 1,170 Currency adjustments...... 2 178

Cash discounts allowed...... 484 Reserve for cash discounts...... 61 493 Currency adjustments...... 2 68 ------$389 1,742 1,720 411 ======

1999 Reserves deducted from accounts receivable, trade Reserve for doubtful accounts...... $184 53 Write-offs less recoveries..... 63 Currency adjustments...... (19) 193 Reserve for customer rebates...... 157 1,028 Customer rebates allowed...... 1,056 Currency adjustments...... (6) 135

Reserve for cash discounts...... 47 520 Cash discounts allowed...... 506 61 ------$388 1,601 1,600 389 ======

1998 Reserves deducted from accounts receivable, trade Reserve for doubtful accounts...... $152 42 Write-offs less recoveries..... 15 Currency adjustments...... (5) 184 Reserve for customer rebates...... 164 978 Customer rebates allowed...... 993 Currency adjustments...... (8) 157

Cash discounts allowed...... 429 Reserve for cash discounts...... 42 431 Currency adjustments...... (3) 47 ------$358 1,451 1,421 388 ======

------(A) Charges related to customer rebates and cash discounts are reflected as reductions of sales to customers.

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SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 26, 2001 JOHNSON & JOHNSON ------(Registrant)

By /s/ R. S. LARSEN ------

R. S. Larsen, Chairman, Board of Directors and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE TITLE DATE ------

/s/ R. S. LARSEN Chairman, Board of Directors and March 26, 2001 ------Chief Executive Officer, and R. S. Larsen Director (Principal Executive Officer)

/s/ R. J. DARRETTA Vice President -- Finance March 21, 2001 ------(Principal Financial Officer) R. J. Darretta

/s/ C. E. LOCKETT Controller March 22, 2001 ------C. E. Lockett

/s/ G. N. BURROW Director March 20, 2001 ------G. N. Burrow

/s/ J. G. COONEY Director March 19, 2001 ------J. G. Cooney

/s/ J. G. CULLEN Director March 24, 2001 ------J. G. Cullen

/s/ M. J. FOLKMAN Director March 20, 2001 ------M. J. Folkman

/s/ A. D. JORDAN Director March 20, 2001 ------A. D. Jordan

/s/ A. G. LANGBO Director March 20, 2001 ------A. G. Langbo

Vice Chairman, Board of Directors March , 2001 ------and Director J.T. Lenehan

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SIGNATURE TITLE DATE ------

/s/ J. S. MAYO Director March 20, 2001 ------J. S. Mayo

/s/ L.F. MULLIN Director March 21, 2001 ------L.F. Mullin

/s/ H. B. SCHACHT Director March 20, 2001 ------H. B. Schacht

/s/ M. F. SINGER Director March 20, 2001 ------M. F. Singer

/s/ J. W. SNOW Director March 21, 2001 ------J. W. Snow

/s/ W.C. WELDON Vice Chairman, Board of Directors March 23, 2001 ------and Director W.C. Weldon

/s/ R. N. WILSON Senior Vice Chairman, Board of March 23, 2001 ------Directors and Director R. N. Wilson

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REPORT OF INDEPENDENT ACCOUNTANTS ON

FINANCIAL STATEMENT SCHEDULE

To the Shareowners and Board of Directors of Johnson & Johnson:

Our audits of the consolidated financial statements of Johnson & Johnson referred to in our report dated January 22, 2001 appearing in the Johnson & Johnson 2000 Annual Report to Shareowners (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14 of this Form 10-K.

In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP PRICEWATERHOUSECOOPERS LLP

New York, New York January 22, 2001

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EXHIBIT INDEX

REG. S-K EXHIBIT TABLE DESCRIPTION ITEM NO. OF EXHIBIT ------

3(a)(i) Restated Certificate of Incorporation dated April 26, 1990 -- Incorporated herein by reference to Exhibit 3(a) of the Registrant's Form 10-K Annual Report for the year ended December 30, 1990. 3(a)(ii) Certificate of Amendment to the Restated Certificate of Incorporation of the Company dated May 20, 1992 -- Incorporated herein by reference to Exhibit 3(a) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1993. 3(a)(iii) Certificate of Amendment to the Restated Certificate of Incorporation of the Company dated May 21, 1996 -- Incorporated herein by reference to Exhibit 3(a)(iii) of the Registrant's Form 10-K Annual Report for the year ended December 29, 1996. 3(b) By-Laws of the Company, as amended effective April 23, 1999 -- Incorporated herein by reference to Exhibit 3 of the Registrant's Form 10-Q Quarterly Report for the quarter ended July 4, 1999. 4(a) Upon the request of the Securities and Exchange Commission, the Registrant will furnish a copy of all instruments defining the rights of holders of long term debt of the Registrant. 10(a) Stock Option Plan for Non-Employee Directors -- Incorporated herein by reference to Exhibit 10(a) of the Registrant's Form 10-K Annual Report for the year ended December 29, 1996.* 10(b) 2000 Stock Option Plan -- Filed with this document.* 10(c) 1995 Stock Option Plan (as amended) -- Incorporated herein by reference to Exhibit 10(b) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1999.* 10(d) 1991 Stock Option Plan (as amended) -- Incorporated herein by reference to Exhibit 10(c) of the Registrant's Form 10-K Annual Report for the year ended December 28, 1997.* 10(e) 2000 Stock Compensation Plan -- Filed with this document.* 10(f) Executive Incentive Plan (as amended) -- Filed with this document.* 10(g) Domestic Deferred Compensation Plan (as amended) -- Incorporated herein by reference to Exhibit 10(g) of the Registrant's Form 10-K Annual Report for the year ended December 29, 1996.* 10(h) Deferred Fee Plan for Directors (as amended) -- Incorporated herein by reference to Exhibit 10(h) of the Registrant's Form 10-K Annual Report for the year ended December 29, 1996.* 10(i) Executive Income Deferral Plan (as amended) -- Incorporated herein by reference to Exhibit 10(i) of the Registrant's Form 10-K Annual Report for the year ended January 2, 2000.* 10(j) Excess Savings Plan -- Incorporated herein by reference to Exhibit 10(j) of the Registrant's Form 10-K Annual Report for the year ended December 29, 1996.* 10(k) Supplemental Retirement Plan -- Incorporated herein by reference to Exhibit 10(h) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1993.* 10(l) Executive Life Insurance Plan -- Incorporated herein by reference to Exhibit 10(i) of the Registrant's Form 10-K Annual Report for the year ended January 3, 1993.* 10(m) Stock Option Gain Deferral Plan -- Incorporated herein by reference to Exhibit 10(m) of the Registrant's Form 10-K Annual Report for the year ended January 2, 2000.* 10(n) Estate Preservation Plan -- Incorporated herein by reference to Exhibit 10(n) of the Registrant's Form 10-K Annual Report for the year ended January 2, 2000.*

13

16

REG. S-K EXHIBIT TABLE DESCRIPTION ITEM NO. OF EXHIBIT ------

12 -- Statement of Computation of Ratio of Earnings to Fixed Charges -- Filed with this document. 13 -- Pages 26 through 50 of the Company's Annual Report to Shareowners for fiscal year 2000 (only those portions of the Annual Report incorporated by reference in this report are deemed "filed") -- Filed with this document. 21 -- Subsidiaries -- Filed with this document. 23 -- Consent of Independent Accountants -- Filed with this document. 99(a) -- Annual Reports on Form 11-K for the Johnson & Johnson Savings Plans, to be filed on or before June 30, 2001. 99(b) -- Cautionary Statement pursuant to Private Securities Litigation Reform Act of 1995: "Safe Harbor" for Forward-Looking Statements -- Filed with this document.

------

* Management contracts and compensatory plans and arrangements required to be filed as Exhibits to this form pursuant to Item 14(c) of the report.

A copy of any of the Exhibits listed above will be provided without charge to any shareowner submitting a written request specifying the desired exhibit(s) to the Secretary at the principal executive offices of the Company.

14 1 JOHNSON & JOHNSON

2000 STOCK OPTION PLAN

1. PURPOSE

The purpose of the Johnson & Johnson 2000 Stock Option Plan (the "Plan") is to promote the interests of Johnson & Johnson (the "Company") by ensuring continuity of management and increased incentive on the part of officers and executive employees responsible for major contributions to effective management, through facilitating their acquisition of an equity interest in the Company on reasonable terms.

2. ADMINISTRATION

The Plan shall be administered by the Compensation Committee of the Board of Directors (the "Committee"). The Committee shall consist of not less than three directors. No person shall be eligible to continue to serve as a member of such Committee unless such person is a "Non-Employee Director" within the meaning of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, and an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). Committee members shall not be eligible to participate in the Plan while members of the Committee. The Committee shall have the power to select optionees, to establish the number of shares and other terms applicable to each such option, to construe the provisions of the Plan, and to adopt rules and regulations governing the administration of the Plan.

The Board of Directors, within its discretion, shall have authority to amend the Plan and the terms of any option issued hereunder without the necessity of obtaining further approval of the shareowners, unless such approval is required by law. Notwithstanding the foregoing, except for any stock split, adjustment or other change in the corporate structure or shares of the Company as contemplated under Section 6(A)(v) hereof, the Company shall neither lower the exercise price of any option granted under the Plan nor grant any option hereunder in replacement of an option which had previously been granted at a higher exercise price, without the approval of the shareowners.

3. ELIGIBILITY

Those eligible to participate in the Plan will be selected by the Committee from the following:

(1) Directors who are employees of the Company or its domestic subsidiaries (excluding members from time to time of the Committee).

(2) Officers and other key employees of the Company and its domestic subsidiaries.

(3) Key employees of subsidiaries outside the United States.

(4) Key employees of a joint venture operation of the Company or its subsidiaries and key employees of joint venture partners who are assigned to such a joint venture.

In all cases, optionees shall be selected on the basis of demonstrated ability to contribute substantially to the effective management or financial performance of the Company or its subsidiaries.

2 In no event shall an option be granted to any individual who, immediately after such option is granted, is considered to own stock possessing more than 10% of the combined voting power of all classes of stock of Johnson & Johnson or any of its subsidiaries within the meaning of Section 422 of the Internal Revenue Code.

4. ALLOTMENT OF SHARES

The amount of Common Stock of the Company (par value $1.00 per share) that may be made subject to grants of options under the Plan in any calendar year shall not exceed an amount equal to 1.6 percent of the issued shares of the Company's Common Stock (including Treasury Shares) on January 1 of such year, plus (i) the number of shares that were available for grants in the previous year under the Plan but were not made subject to a grant in such previous year and (ii) the number of shares that were covered by options granted under the Plan which options lapsed, expired or terminated in the previous year without being exercised. Notwithstanding the foregoing, no more than 75 million shares in the aggregate shall be available for issuance as incentive stock options under the Plan.

The total number of shares which may be awarded under the Plan to any optionee in any one year shall not exceed the lesser of (x) 5% of the total shares allotted to the Plan for such year and (y) 2 million shares. The Committee may, in its discretion, issue upon exercise of any option Treasury Shares or authorized but unissued shares.

5. EFFECTIVE DATE AND TERM OF PLAN

The Plan, if approved by the shareowners of the Company, shall become effective on April 19, 2000. No option shall be granted pursuant to this Plan later than April 18, 2005, but the rights of optionees under options theretofore granted to them will not be affected, and all unexpired options will continue in force and operation thereafter, except as such options may lapse or be terminated in accordance with their terms and conditions.

6. TERMS AND CONDITIONS

A. ALL OPTIONS

The following shall apply to all options granted under the Plan:

(i) Option Price

The option price per share for each stock option shall be determined by the Committee and shall not be less than the fair market value on the date the option is granted. The fair market value shall be determined as prescribed by the Internal Revenue Code and Regulations.

(ii) Time of Exercise of Option

The Committee shall establish the time or times within the option period when the stock option may be exercised in whole or in such parts as may be specified from time to time by the Committee. With respect to an optionee whose employment has terminated by reason of death, disability or retirement, the Committee may in its discretion accelerate the time or times when any particular stock option held by said optionee may be so exercised so that such time or times are earlier than those originally provided in said option. In all cases exercise of a

3 stock option shall be subject to the provisions of Section 6B(ii) or 6C(iii), as the case may be. The Committee shall determine, either at the time of grant or later, whether and to what extent and under what circumstances, the delivery of shares issuable in connection with the exercise of a non-qualified option may be deferred at the election of the optionee.

(iii) Payment

The entire option price may be paid at the time the option is exercised. When an option is exercised prior to termination of employment, the Committee shall have the discretion to arrange for the payment of such price, in whole or in part, in installments. In such cases, the Committee shall obtain such evidence of the optionee's obligation, establish such interest rate and require such security as it may deem appropriate for the adequate protection of the Company.

(iv) Non-Transferability of Option

Unless otherwise specified by the Committee to the contrary, an option by its terms shall not be transferable by the optionee otherwise than by will or by the laws of descent and distribution and shall be exercisable during the optionee's lifetime only by the optionee. The Committee may, in the manner established by the Committee, provide for the transfer, without payment of consideration, of a non-qualified option by an optionee to a member of the optionee's immediate family or to a trust or partnership whose beneficiaries are members of the optionee's immediate family. In such case, the option shall be exercisable only by such transferee. For purposes of this provision, an optionee's "immediate family" shall mean the holder's spouse, children and grandchildren.

(v) Adjustment in Event of Recapitalization of the Company

In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or shares of the Company, the Board of Directors shall make such adjustment as it may deem equitably required in the number and kind of shares authorized by and for the Plan, the number and kind of shares covered by the options granted, the number of shares which may be awarded to an optionee in any one year, and the option price.

(vi) Rights after Termination of Employment

(1) In the event of termination of employment due to any cause other than death, disability or retirement, rights to exercise the stock option shall cease, except for those which have accrued to and including the "date of termination" (as defined below), unless the Committee shall otherwise specify. These rights shall remain exercisable for a period of three (3) months after the date of termination, or such longer period (not to exceed three (3) years) as the Committee shall provide.

(2) In the event of termination of employment due to death or disability, rights to exercise the stock option shall cease, except for those which have accrued to and including the date of termination, unless the Committee shall otherwise specify. These rights shall remain exercisable for a period of three (3) years or such longer period (not to exceed the term of the option) as the Committee shall provide.

4 Notwithstanding the above, in the event such termination of employment due to death or disability occurs with optionee having at least ten (10) years of service, any unexercised or unexercisable portion of the stock option may be exercised in whole or in part during the remaining term of the option at such times and to the extent the optionee could have exercised such stock option had the optionee's employment not terminated.

(3) In the event of retirement (unrelated to termination for cause, as defined below, which shall be governed by the provisions of (1) above) rights to exercise the stock option shall cease, except for those which have accrued to and including the date of termination, unless the Committee shall otherwise specify. These rights shall remain exercisable for a period of three (3) years, or such longer period (not to exceed the term of the option) as the Committee shall provide, provided, however, that in the event the optionee is "employed by a competitor" (as defined below) within two (2) years from the date of such retirement, no rights may be exercisable beyond a date which is three (3) months after the commencement of such employment with a competitor.

Notwithstanding the above, in the event such retirement (unrelated to termination for cause which shall be governed by the provisions of (1) above) occurs with optionee having at least ten (10) years of service, any unexercised or unexercisable portions of the stock option may be exercised in whole or in part during the remaining term of the stock option at such times and to the extent the optionee could have exercised such stock option had the optionee's employment not terminated, provided, however, that in the event the optionee is employed by a competitor within two (2) years from the date of such retirement, (i) any unexercisable portion of the stock option shall terminate immediately and (ii) no rights may be exercisable beyond a date which is three (3) months after the commencement of such employment with a competitor.

(4) No stock option shall, in any event, be exercised after the expiration of 10 years from the date such option is granted, or such earlier date as may be specified in the option. In addition, any stock option granted within six (6) months of termination of employment due to any cause whatsoever shall be void unless the Committee shall otherwise provide.

(5) As used in the Plan:

(i) The term "termination for cause" shall mean optionee's termination by the Company or any of its subsidiaries in connection with the violation of any federal or state law, dishonesty, the willful and deliberate failure on the part of an optionee to perform his/her employment duties in any material respect or such other events, including the existence of a conflict of interest, as the Management Compensation Committee may determine. Such committee shall have the sole discretion to determine whether a "termination for cause" exists, and its determination shall be final.

(ii) The term "employed by a competitor" shall mean the optionee's engaging in any activity or providing services, whether as director, employee, advisor, consultant or otherwise, for any corporation or

5 other entity which is a competitor of the Company or any of its subsidiaries. The Management Compensation Committee shall have the sole discretion to determine if an optionee is "employed by a competitor", and its determination shall be final.

(iii) The term "date of termination" shall mean the last date on which the optionee was in an active employment status. Specifically, in the event an optionee is covered by a severance agreement or arrangement, the "date of termination" shall be the last day date of active employment, not the date corresponding to the end of the severance period.

B. NON-QUALIFIED STOCK OPTIONS

The Committee may, in its discretion, grant options under the Plan which, in whole or in part, do not qualify as incentive stock options under Section 422 of the Internal Revenue Code. In addition to the terms and conditions set forth in Section 6A above, the following terms and conditions shall govern any option (or portion thereof) to the extent that it does not so qualify.

(i) Form of Payment

Payment of the option price of any option (or portion thereof) not qualifying as an incentive stock option shall be made in cash or, in the discretion of the Committee, in the Common Stock of the Company valued at its fair market value (as the same shall be determined by the Committee), or a combination of such Common Stock and cash. Where payment of the option price is to be made with Common Stock acquired under a Company compensation plan (within the meaning of Opinion No. 25 of the Accounting Principles Board), such Common Stock will not be accepted as payment unless the optionee has beneficially owned such Common Stock for at least six months (increased to one year if such Common Stock was acquired under an incentive stock option) prior to such payment.

(ii) Period of Option

The exercise period of each non-qualified stock option by its terms shall not be more than 10 years from the date the option is granted as specified by the Committee.

C. INCENTIVE STOCK OPTIONS

The Committee may, in its discretion, grant options under the Plan which qualify in whole or in part as incentive stock options under Section 422 of the Internal Revenue Code. In addition to the terms and conditions set forth in Section 6A above, the following terms and conditions shall govern any option (or portion thereof) to the extent that it so qualifies:

(i) Maximum Fair Market Value of Incentive Stock Options The aggregate fair market value (determined as of the time such option is granted) of the Common Stock for which any optionee may have stock options

6 which first become vested in any calendar year (under all incentive stock option plans of the Company and its subsidiaries) shall not exceed $100,000.

(ii) Form of Payment

Payment of the option price for incentive stock options shall be made in cash or in the Common Stock of the Company valued at its fair market value (as the same shall be determined by the Committee), or a combination of such Common Stock and cash. Where payment of the option price is to be made with Common Stock acquired under a Company compensation plan (within the meaning of Opinion No. 25 of the Accounting Principles Board), such Common Stock will not be accepted as payment unless the optionee has beneficially owned such Common Stock for at least six months (increased to one year if such Common Stock was acquired under an incentive stock option) prior to such payment.

(iii) Period of Option

The exercise period of each incentive stock option by its terms shall not be more than 10 years from the date the option is granted as specified by the Committee.

02.16.00 1 JOHNSON & JOHNSON 2000 STOCK COMPENSATION PLAN

Johnson & Johnson's 2000 Stock Compensation Plan (the "Plan") provides, in general, for the awarding of shares of Common Stock of Johnson & Johnson (the "Company") to employees of the Company (including executive officers and officers), its subsidiaries and affiliates, both in the United States and internationally. The Plan continues a practice of the Company which began in 1922. An award is by way of a bonus to the employee and is not regarded as part of the employee's regular compensation. The Plan, in the judgment of the Board of Directors, promotes the interests of the Company by insuring continuity of management and increased incentive on the part of the participants by ensuring their acquisition of an equity interest in the Company and by providing an adequate overall compensation level.

The Common Stock to be distributed in the operation of the Plan will not exceed 5,000,000 shares of the Company's authorized but unissued shares (to be reduced in all events by the number of Treasury shares used for the Plan). Shareowners have no preemptive rights with respect to these shares.

Participants are to be selected by the Board of Directors of the Company, or a committee appointed thereby, from the group of key management personnel, generally at the supervisor level and above, and sales personnel of the Company and its domestic and international subsidiaries and affiliates. Under certain conditions, and with the approval of the Management Compensation Committee of the Company, or its delegate, awards may be granted to employees not meeting the above criteria. Participants are to be selected on the basis of demonstrated ability and potential to contribute substantially to the Company's success.

Subject to the approval of shareowners of the Company, the Plan shall become effective April 19, 2000. The term of the Plan expires on April 18, 2005. The Plan does not provide any maximum on the number of shares which can be awarded to an employee.

The Board of Directors, or a committee appointed thereby, shall have full power and authority to administer the Plan, including the authority to select participants, determine the number of shares to be awarded to each participant and designate how the Plan will be administered, if necessary, in any individual country or countries. In the event of a reorganization, recapitalization, stock split, stock dividend or any other change in the corporate structure or shares of the Company, the Board of Directors, or a committee appointed thereby, shall make such adjustment as it may deem equitably required in the number and kind of shares authorized by and for the Plan. 1 JOHNSON & JOHNSON EXECUTIVE INCENTIVE PLAN

~ Plan Document ~

(Amended as of December 31, 2000)

I. PURPOSE

The purpose of the Johnson & Johnson Executive Incentive Plan (the "Plan") is to attract and retain highly qualified individuals as executive officers; to obtain from each the best possible performance; to underscore the importance to them of achieving particular business objectives established for Johnson & Johnson; and to include in their compensation package a bonus component which is intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), which compensation would be deductible by Johnson & Johnson under the Internal Revenue Code.

II. DEFINITIONS

For the purposes of the Plan, the following terms shall have the following meanings: a) AWARDS. The cash and/or stock bonus awards made pursuant to the Plan. b) BOARD OF DIRECTORS. The Board of Directors of Johnson & Johnson. c) COMMITTEE. The Compensation Committee of the Board of Directors or any successor thereto. d) COMMON STOCK. The common stock of the Corporation, par value $1.00 per share. e) CONSOLIDATED EARNINGS. Consolidated net income for the year for which an Award is made, adjusted to omit the effects of extraordinary items, discontinued operations and the cumulative effects of changes in accounting principles, all as shown on the audited consolidated statement of income of the Corporation and its subsidiaries and as determined in accordance with generally accepted accounting principles. f) CORPORATION. Johnson & Johnson. g) ELIGIBLE EMPLOYEE. An Employee who is an Executive Officer of the Corporation. h) EMPLOYEE. An individual who is on the active payroll of the Corporation or a subsidiary of the Corporation at any time during the period for which an Award is made. i) EXECUTIVE OFFICER. The Chairman and any Vice Chairman of the Board of Directors and any other officer of the Corporation who has been designated a part of the Office of the Chairman or elected a Member of the Executive Committee of the Corporation. j) FAIR MARKET VALUE. The average between the highest and lowest quoted selling price per share of Common Stock on the New York Stock Exchange Composite Transactions Tape on the grant date, provided that if there shall be no sales of shares of Common Stock on such date, the Fair Market Value shall be deemed equal to the average between the highest and lowest sales price of a share of Common Stock on such Composite Tape for the last preceding date on which sales of shares of Common Stock were reported.

III. EFFECTIVE DATE; TERM

The Plan is effective as of January 1, 1996, was approved by the Corporation's stockholders at the Corporation's 1996 Annual Meeting of Stockholders, and shall remain in effect until such time as it shall be terminated by the Board of Directors. IV. AMOUNTS AVAILABLE FOR AWARDS; SHARES SUBJECT TO THE PLAN a) Awards with respect to any taxable year of the Corporation shall not exceed the limitations specified in Section VI of the Plan.

2 b) Awards that are granted under the Plan in the form of stock, in whole or in part, may be made from the aggregate number of shares of Common Stock authorized to be issued under and otherwise in accordance with the terms of the 2000 Stock Compensation Plan of the Corporation (or any successor stock compensation plan approved by the stockholders of the Corporation), subject in each case, to adjustment as hereinafter provided. These shares may, in the discretion of the Committee, consist either in whole or in part of authorized but unissued shares of Common Stock or shares of Common Stock held in the treasury of the Corporation. c) In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, any separation (including a spinoff or other distribution of stock or property), any partial or complete liquidation or any other change in the corporate structure or shares of the Corporation, the committee shall make such adjustment as is equitably required in the number and kind of shares authorized by and for the Plan or in the number of shares of Common Stock covered by any outstanding deferred Award.

V. ELIGIBILITY FOR AWARDS a) Awards for any period may be granted to those Eligible Employees who are selected by the Committee. Such selections, except in the case of the Corporation's Chairman, shall be made after considering the recommendations of the Chairman. The Committee shall also give consideration to the contribution made by the Eligible Employee to achievement of the Corporation's established objectives and such other matters as it shall deem relevant. b) In the discretion of the Committee, Awards may be made to Eligible Employees who have retired or whose employment has terminated after the beginning of the year for which an Award is made, or to the designee or estate of an Eligible Employee who died during such period.

VI. DETERMINATION OF AMOUNTS OF AWARDS a) The maximum Award payable with respect to any taxable year of the Corporation to any Eligible Employee who is the Chairman or a Vice Chairman of the Board of Directors or any other officer who has been designated a part of the Corporation's Office of the Chairman during all or any portion of such taxable year shall not exceed .08% of Consolidated Earnings for such year. The maximum Award payable with respect to any taxable year of the Corporation to any other Eligible Employee shall not exceed .04% of Consolidated Earnings for such year. The amounts of Awards to Eligible Employees shall be determined by the Committee acting in its discretion subject to the maximum amounts set forth above. Such determinations, except in the case of the Award for the Chairman, shall be made after considering the recommendations of the Chairman and such other matters as the Committee shall deem relevant. The Committee, acting in its discretion, may determine to pay a lesser award than the maximum specified herein. b) Awards may be made at any time following the end of the taxable year; provided, however, that no Awards shall be made until the Committee receives assurances from both the Corporation's Chief Financial Officer and its independent accountants that the amount of such Award does not exceed the applicable limitation under this Section VI and the Committee certifies in writing that such limitation has not been exceeded. For purposes of making these determinations, the value of the Common Stock component of any Award shall be its Fair Market Value.

VII. FORM OF AWARDS

Awards under the Plan shall be made in cash or Common Stock, as the Committee shall determine, subject to the limitations set forth in Section IV.

VIII. PAYMENT OF AWARDS a) Awards under the Plan shall be paid currently, unless the Committee shall determine that any Award in cash or Common Stock or any portion thereof shall be deferred. Deferred Awards may be made in one lump sum or in installments and may bear interest in the case of any deferred cash Award or dividend equivalents in the case of any deferred Common Stock Award, all as the Committee shall determine.

3 b) When an Award is made, the Corporation shall cause the cash or Common Stock to be paid or issued to the Eligible Employee at the time or times specified by the Committee or, if no time or times is specified, as soon as practicable after the Award is made.

IX. SPECIAL AWARDS AND OTHER PLANS a) Nothing contained in the Plan shall prohibit the Corporation or any of its subsidiaries from establishing other special awards or incentive compensation plans providing for the payment of incentive compensation to Employees (including Eligible Employees). b) Payments or benefits provided to an Eligible Employee under any stock, deferred compensation, savings, retirement or other employee benefit plan are governed solely by the terms of such plan.

X. ADMINISTRATION, AMENDMENT AND INTERPRETATION OF THE PLAN a) Except as otherwise provided in the Plan, the Committee shall administer the Plan. The Committee shall consist of not less than three members of the Board of Directors. No director shall be eligible to serve as a member of such Committee unless such person is a "disinterested person" within the meaning of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, and an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code. Committee members shall not be eligible to participate in the Plan while members of the Committee. The Committee shall have full power to construe and interpret the Plan, establish and amend rules and regulations for its administration, and perform all other acts relating to the Plan, including the delegation of administrative responsibilities, that it believes reasonable and proper and in conformity with the purposes of the Plan. b) The Committee shall have the right to amend the Plan from time to time or to repeal it entirely or to direct the discontinuance of Awards either temporarily or permanently; provided, however, that (i) no amendment of the Plan shall operate to annul, without the consent of the Eligible Employee, an Award already made hereunder, and (ii) no amendment of the Plan that (x) changes the maximum Award payable to any Eligible Employee, as set forth in Section V1, (y) materially amends the definition of Consolidated Earnings or (z) increases the amount of shares available for awards under the Plan (except as contemplated by Section IV.C.) shall be effective before approval by the affirmative vote of a majority of shares voting at a meeting of the stockholders of the Corporation. c) Any decision made, or action taken, by the Committee arising out of or in connection with the interpretation and/or administration of the Plan shall be final, conclusive and binding on all persons affected thereby.

XI. RIGHTS OF ELIGIBLE EMPLOYEES a) Neither the Plan, nor the adoption or operation of the Plan, nor any documents describing or referring to the Plan (or any part hereof) shall confer upon any Employee any right to continue in the employ of the Corporation or a subsidiary of the Corporation. b) No individual to whom an Award has been made or any other party shall have any interest in the cash or Common Stock, or any other asset of the Corporation until such amount has been paid or issued. To the extent that any party acquires a right to receive payments of cash and/or share certificates under the Plan, such party shall have the status of unsecured creditor of the Corporation with respect to such right. c) No right or interest of any Eligible Employee in the Plan shall be assignable or transferable, or subject to any claims of any creditor or subject to any lien. XII. MISCELLANEOUS a) All expenses and costs incurred in connection with the operation of the Plan shall be borne by the Corporation, and no part therefor (other than the amounts of Awards under the Plan) shall be charged against the maximum limitation of Section VI.

4 b) All Awards under the Plan are subject to withholding, where applicable, for federal, state and local taxes. c) Any provision of the Plan that is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the Plan. d) The Plan and the rights and obligations of the parties to the Plan shall be governed by, and construed and interpreted in accordance with, the law of the State of New Jersey (without regard to principles of conflicts of law). 1

EXHIBIT 12

JOHNSON & JOHNSON AND SUBSIDIARIES

STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1) (DOLLARS IN MILLIONS)

FISCAL YEAR ENDED ------DECEMBER 31, JANUARY 2, JANUARY 3, DECEMBER 28, DECEMBER 29, 2000 2000 1999(2) 1997 1996 ------

Determination of Earnings: Earnings Before Provision for Taxes on Income...... $6,622 5,753 4,182 4,587 4,020 Fixed Charges...... 230 275 210 203 213 ------Total Earnings as Defined.... $6,852 6,028 4,392 4,790 4,233 ======Fixed Charges and Other: Rents...... 84 78 81 79 80 Interests...... 146 197 129 124 133 ------Fixed Charges...... 230 275 210 203 213 Capitalized Interest...... 96 81 72 40 55 ------Total Fixed Charges...... $ 326 356 282 243 268 ======Ratio of Earnings to Fixed Charges..... 21.02 16.93 15.57 19.71 15.79 ======

------(1) The ratio of earnings to fixed charges represents the historical ratio of the Company and is calculated on a total enterprise basis. The ratio is computed by dividing the sum of earnings before provision for taxes and fixed charges (excluding capitalized interest) by fixed charges. Fixed charges represent interest (including capitalized interest) and amortization of debt discount and expense and the interest factor of all rentals, consisting of an appropriate interest factor on operating leases.

(2) Earnings for the year ended January 3, 1999 include charges related to restructuring of $613 million and in-process research and development charges of $298 million. Excluding the effect of these charges, the ratio of earnings to fixed charges would have been 18.80.

1 EXHIBIT 13

Management's Discussion and Analysis of Results of Operations and Financial Condition Overview

In 2000, the Company achieved solid financial results highlighted by a number of significant events. The Pharmaceutical segment continued its rapid growth while successfully integrating Centocor into the Johnson & Johnson Family of Companies, the Professional segment experienced the resurgence of its cardiology franchise, and the Company completed the restructuring of its worldwide manufacturing operations that was announced at year-end 1998. Also during 2000, it became necessary to restrict access to PROPULSID (cisapride) in a number of markets around the world. Despite the loss of over $660 million of PROPULSID sales, the Company was able to achieve strong financial results reflecting the strength of the Company's diverse portfolio of products and services.

The balance sheet remains strong with cash generated from worldwide operations at a record $6.6 billion in 2000. Cash dividends per share paid to shareowners in 2000 increased by 13.8% over 1999 and represented the 38th consecutive year of dividend increases. The Company continues to be one of a few companies with a Triple A credit rating.

The Company's objective is to achieve superior levels of capital efficient profitable growth. To accomplish this, the Company's management operates the business consistent with certain strategic principles that have proven successful over time. To this end, the Company participates in growth areas in human health care and is committed to attain leadership positions in these growth segments through the development of innovative products and services. In 2000, $2.9 billion or 10% of sales was invested in research and development, recognizing the importance of rapid and accurate identification of new and differentiated products and services.

The Company's system of management operates on a decentralized basis. With 194 operating companies located in 51 countries, the Company views this management philosophy as an asset and fundamental to the success of a broadly based business. It also fosters an entrepreneurial spirit, combining the extensive resources of a large organization with the ability to react quickly to local market changes and challenges. Businesses are managed for the long term in order to sustain leadership positions and growth while continuing to be a source of enduring value to shareowners.

Unifying the management team and the Company's dedicated employees in achieving these objectives is the Johnson & Johnson Credo. The Credo provides a common set of values and serves as a constant reminder of the Company's responsibilities to its customers, employees, communities and shareowners. The Company believes that these basic principles, along with its overall mission of improving the quality of life for people everywhere, will enable Johnson & Johnson to continue to be among the leaders in the health care industry.

Description of Business

The Company has 98,500 employees worldwide and is engaged in the manufacture and sale of a broad range of products in the health care field. It conducts business in virtually all countries of the world. The Company's primary interest, both historically and currently, has been in products related to human health and well-being.

The Company is organized on the principle of decentralized management. The Executive Committee of Johnson & Johnson is the principal management group responsible for the operations and allocation of the resources of the Company. This Committee oversees and coordinates the activities of domestic and international companies related to each of the Consumer, Pharmaceutical and Professional businesses. Each international subsidiary is, with some exceptions, managed by citizens of the country where it is located.

In all its product lines, the Company competes with companies both large and small, located in the United States and abroad. Competition is strong in all lines without regard to the number and size of the competing companies involved. Competition in research, involving the development and the improvement of new and 2 existing products and processes, is particularly significant and results from time to time in product and process obsolescence. The development of new and improved products is important to the Company's success in all areas of its business. This competitive environment requires substantial investments in continuing research and in multiple sales forces. In addition, the winning and retention of customer acceptance of the Company's consumer products involves heavy expenditures for advertising, promotion and selling.

Sales and Earnings

In 2000, worldwide sales increased 6.1% to $29.1 billion, compared to increases of 14.5% in 1999 and 5.1% in 1998. Excluding the impact of foreign currencies, worldwide sales increased 9.4% in 2000, 16.4% in 1999 and 7.6% in 1998. The continued strength of our pharmaceutical business and growth in several professional business franchises such as DePuy, Cordis and Endo-Surgery were the primary reasons for the sales increase in 2000.

Worldwide net earnings for 2000 were $4.8 billion, reflecting a 15.2% increase over 1999. Worldwide net earnings per share for 2000 equaled $3.40 per share, an increase of 15.6% from the $2.94 net earnings per share in 1999. Excluding the impact of special charges, worldwide net earnings and net earnings per share increased 14.8% and 15.2%, respectively, over 1999. The special charge taken in 2000 includes in-process research and development (IPR&D) costs associated with the acquisition of Atrionix, Inc., net of a favorable adjustment to the costs associated with the 1998 global manufacturing restructuring charge. Other income and expense includes gains related to the sale of certain equity securities.

Worldwide net earnings for 1999, including the impact of special charges, were $4.2 billion, reflecting a 38.8% increase over 1998. Worldwide net earnings per share for 1999 equaled $2.94 per share, an increase of 38.7% from the $2.12 net earnings per share in 1998. Excluding the impact of special charges, both worldwide net earnings and net earnings per share increased 13.8% over 1998. The special charges included costs associated with the Centocor merger in 1999 and the reconfiguration of the worldwide manufacturing network and IPR&D charges in 1998.

Worldwide net earnings for 1998, including the impact of the Restructuring and IPR&D charges, were $3.0 billion, reflecting a 9.3% decrease from 1997. Worldwide net earnings per share for 1998 equaled $2.12 per share, a decrease of 9.4% from the $2.34 net earnings per share in 1997. Excluding the impact of Restructuring and IPR&D charges, worldwide net earnings for 1998 were $3.7 billion, reflecting an 11.7% increase over 1997. Excluding the impact of these charges, worldwide net earnings per share for 1998 equaled $2.61 per share, an increase of 11.5% over the $2.34 net earnings per share in 1997.

Average diluted shares of common stock outstanding were 1.42 billion in 2000, 1999 and 1998.

Sales by domestic companies were $17.0 billion in 2000, $15.4 billion in 1999 and $12.9 billion in 1998. This represents an increase of 10.5% in 2000, 19.7% in 1999 and 8.0% in 1998.

Sales by international companies were $12.1 billion in 2000, $12.1 billion in 1999 and $11.1 billion in 1998. This represents an increase of 0.4% in 2000, 8.4% in 1999 and 1.9% in 1998. Excluding the impact of the foreign currency fluctuations over the past three years, international company sales increased 7.9% in 2000, 12.4% in 1999 and 7.1% in 1998.

All geographic areas throughout the world posted operational gains during 2000. Excluding the effect of exchange rate fluctuations between the U.S. dollar and foreign currencies, sales increased 7.4% in Europe, 4.3% in the Western Hemisphere (excluding the U.S.) and 10.9% in the Asia-Pacific, Africa regions.

The Company achieved an annual compound growth rate of 9.9% for worldwide sales for the 10-year period since 1990 with domestic sales growing at a rate of 12.0% and international sales growing at a rate of 7.6%. Worldwide net earnings achieved a 10-year annual growth rate of 16.4%, while earnings per share grew at a rate of 16.0%. For the last five years, the annual compound growth rate for sales was 9.0%. The annual compound growth rate for net earnings was 15.2%, and the annual compound growth rate for earnings per share was 14.2%. 3 Cost and Expenses

Research activities represent a significant part of the Company's business. These expenditures relate to the development of new products, improvement of existing products, technical support of products and compliance with governmental regulations for the protection of the consumer. Worldwide costs of research activities, excluding the special charges of IPR&D, were as follows:

(Millions of Dollars) 2000 1999 1998

Research expense $2,926 2,600 2,336 Percent increase over prior year 12.5% 11.3% 5.7% Percent of sales 10.0 9.5 9.7

Research expense as a percent of sales for the Pharmaceutical segment was 15.9% for 2000, 15.0% for 1999 and 15.9% for 1998 while averaging 6.0%, 6.0% and 6.1% in the other two segments.

Advertising expenses, which are comprised of television, radio and print media, as well as Internet advertising, were $1.32 billion in 2000, $1.39 billion in 1999 and $1.19 billion in 1998. Additionally, expenditures were incurred for promotional activities such as couponing and performance allowances.

The Company believes that its operations comply in all material respects with applicable environmental laws and regulations. The Company or its subsidiaries are parties to a number of proceedings brought under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, and comparable state laws, in which primary relief sought is the cost of past and future remediation. While it is not feasible to predict or determine the outcome of these proceedings, in the opinion of the Company, such proceedings would not have a material adverse effect on the results of operations, cash flows or financial position of the Company.

Worldwide sales do not reflect any significant degree of seasonality; however, spending has been heavier in the fourth quarter of each year than in other quarters. This reflects increased spending decisions, principally for advertising and research grants.

The worldwide effective income tax rate was 27.5% in 2000, 27.6% in 1999 and 28.2% in 1998. Refer to Note 8 for additional information.

Distribution of Sales Revenues The distribution of sales revenues for 2000, 1999 and 1998 were:

2000 1999 1998

Employment costs 23.6% 23.1% 24.0% Costs of materials and services 47.9 50.1 48.9 Depreciation and amortization of property and intangibles 5.2 5.3 5.4 Taxes other than payroll 6.7 6.3 6.3 Earnings reinvested in business 10.6 9.8 7.1 Cash dividends paid 5.9 5.4 5.4 Restructuring/IPR&D 0.1 -- 2.9

4 Segments of Business Financial information for the Company's three worldwide business segments is summarized below. See Note 12 for additional information on segments of business.

Sales Increase (Millions of Dollars) 2000 1999 Amount Percent

Consumer $ 6,904 6,864 40 0.6% Pharmaceutical 11,954 10,694 1,260 11.8 Professional 10,281 9,913 368 3.7 Worldwide total $29,139 27,471 1,668 6.1%

Operating Profit Percent of Sales (Millions of Dollars) 2000(1) 1999(2) 2000 1999

Consumer $ 867 683 12.6% 10.0% Pharmaceutical 4,175 3,595 34.9 33.6 Professional 1,696 1,632 16.5 16.5 Segments total 6,738 5,910 23.1 21.5 Expenses not allocated to segments (116) (157) Earnings before taxes on income $6,622 5,753 22.7% 20.9%

(1) 2000 results include special charges related to In-Process Research and Development and a gain related to restructuring. Excluding these charges, operating profit as a percentage of sales was: Consumer segment 12.2%, Pharmaceutical segment 34.9%, Professional segment 17.0%.

(2) 1999 results include special charges related to the Centocor merger. Excluding these charges, operating profit as a percentage of sales for the Pharmaceutical segment was 34.1%.

(3) 1998 results including Restructuring and In-Process Research and Development charges. Excluding these charges, operating profits by segment of business were: Consumer 12.7%, Pharmaceutical 60.2%, and Professional 27.1%.

Consumer

The Consumer segment's principal products are personal care and hygienic products, including nonprescription drugs, adult skin and hair care products, baby care products, oral care products, first aid products and sanitary protection products. Major brands include AVEENO skin care products; BAND-AID Brand Adhesive Bandages; BENECOL food products; CAREFREE Panty Shields; CLEAN & CLEAR teen skin care products; IMODIUM A-D, an antidiarrheal; JOHNSON'S Baby line of products; JOHNSON'S pH5.5 skin and hair care products; MONISTAT, a remedy for vaginal yeast infections; adult and children's MOTRIN IB analgesic products; MYLANTA gastrointestinal products and PEPCID AC Acid Controller from the Johnson & Johnson o Merck Consumer Pharmaceuticals Co.; NEUTROGENA skin and hair care products; o.b. Tampons; PENATEN and NATUSAN baby care products; PIZ BUIN and SUNDOWN sun care products; REACH toothbrushes; RoC skin care products; SHOWER TO SHOWER personal care products; SPLENDA, a non-caloric sugar substitute; STAYFREE sanitary protection products; and the broad family of TYLENOL acetaminophen products. These products are marketed principally to the general public and distributed both to wholesalers and directly to independent and chain retail outlets.

Consumer segment sales in 2000 were $6.9 billion, an increase of .6% over 1999. Domestic sales increased by 2.5% while international sales gains in local currency of 5.0% were offset by a negative currency impact of 6.6%. Consumer sales were led by continued strength in the skin care franchise, which includes the

5 NEUTROGENA, RoC, AVEENO and CLEAN & CLEAR product lines, as well as strong performances from the JOHNSON'S line of baby skin care products. During the fourth quarter, the Company acquired the ST. JOSEPH aspirin business. The acquisition is the first entry into the cardio-protective aspirin market by McNeil Consumer Healthcare, the world leader in over-the-counter analgesics.

Consumer segment sales in 1999 were $6.86 billion, an increase of 5.2% over 1998. Domestic sales increased by 10.4% while international sales declined by .2%. International sales gains in local currency of 7.0% were offset by a negative currency impact of 7.2%. During 1999, the Company launched various products that included BENECOL, the dietary ingredient stanol ester that aids in the reduction of cholesterol and also completed the acquisition of the AVEENO brand products.

Consumer segment sales in 1998 were $6.53 billion, an increase of .4% over 1997. Domestic sales increased by 2.6% while international declined by 1.7%. International sales gains in local currency of 5.2% were offset by a negative currency impact of 6.9%. The 1998 special pre-tax charge for the Consumer segment was $244 million. See Note 14 for detailed discussion on the Restructuring charges.

Pharmaceutical

The Pharmaceutical segment's principal worldwide franchises are in the antifungal, anti-infective, cardiovascular, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management and psychotropic fields. These products are distributed both directly and through wholesalers for use by health care professionals and the general public. Prescription drugs in the antifungal field include NIZORAL (ketoconazole), SPORANOX (itraconazole), TERAZOL (terconazole) and DAKTARIN (miconazole nitrate) antifungal products. Prescription drugs in the anti-infective field include FLOXIN (ofloxacin) and LEVAQUIN (levofloxacin). Prescription drugs in the cardiovascular field include RETAVASE (reteplase), a recombinant biologic cardiology care product for the treatment of acute myocardial infarction to improve blood flow to the heart and REOPRO (abciximab) for the treatment of acute cardiac disease. Prescription drugs in the contraceptive field include ORTHO-NOVUM (norethindrone/ethinyl estradiol) and TRICILEST (norgestimate/ethinyl estradiol, sold in the U.S. as ORTHO TRI-CYCLEN) group of oral contraceptives. Prescription drugs in the dermatology field include RETIN-A MICRO (tretinoin), a dermatological cream for acne. Prescription drugs in the gastrointestinal field include ACIPHEX (rabeprazole sodium), a proton pump inhibitor for treating erosive gastroesophageal reflux disease (GERD) and duodenal ulcers; IMODIUM (loperamide HCl), an antidiarrheal; MOTILIUM (domperidone), a gastrointestinal mobilizer; and REMICADE (infliximab), a novel monoclonal antibody for treatment of certain Crohn's disease patients. REMICADE is also indicated for the treatment of rheumatoid arthritis.

Prescription drugs in the hematology field include EPREX (Epoetin alfa, sold in the U.S. as PROCRIT), a biotechnology derived version of the human hormone erythropoietin that stimulates red blood cell production. Prescription drugs in the immunology field include ORTHOCLONE OKT-3 (muromonab-CD3), for reversing the rejection of kidney, heart and liver transplants. Prescription drugs in the neurology field include TOPAMAX (topiramate) and STUGERON (cinnarizine). Prescription drugs in the oncology field include ERGAMISOL (levamisole hydrochloride), a colon cancer drug and LEUSTATIN (cladribine), for hairy cell leukemia. Prescription drugs in the psychotropics field include RISPERDAL (risperidone), an antipsychotic drug and HALDOL (haloperidol). Prescription drugs in the pain management field include DURAGESIC (fentanyl transdermal system, sold abroad as DUROGESIC), a transdermal patch for chronic pain; and ULTRAM (tramadol hydrochloride), an analgesic for moderate to moderately severe pain.

Johnson & Johnson markets over 100 prescription drugs around the world, with 35.3% of the sales generated outside the United States. Thirty-one drugs sold by the Company had 2000 sales in excess of $50 million, with 20 of them in excess of $100 million.

Pharmaceutical segment sales in 2000 were $12.0 billion, an increase of 11.8% over 1999 including 20.5% growth in domestic sales. Operationally, international sales increased 7.6% but were more than offset by a negative currency impact of

6 8.9%. Worldwide sales gains in local currency of 15.2% were partially offset by a negative currency impact of 3.4%.

Sales growth reflects the strong performance of PROCRIT/EPREX, RISPERDAL, DURAGESIC, LEVAQUIN, REMICADE, ULTRAM, TOPAMAX, ACIPHEX/PARIET and the oral contraceptive line of products. Sales growth was partially offset by the restricted access of PROPULSID in a number of markets around the world. During the fourth quarter, the Company received expanded labeling from the FDA for REMICADE (infliximab) for the treatment of rheumatoid arthritis. REMICADE is the first drug to be granted a label indicating that, in combination with methotrexate, it inhibits the progression of structural damage in patients with moderately to severely active rheumatoid arthritis who have had an inadequate response to methotrexate. The Company also filed a new drug application with the U.S. Food and Drug Administration for the ORTHO EVRA transdermal seven-day contraceptive patch.

During the fourth quarter, the Company announced a co-marketing agreement with its McNeil Consumer Healthcare unit and 3M Pharmaceuticals for 3M's new asthma drug, QVAR Inhalation Aerosol (beclomethasone diproprionate HFA.) QVAR is approved for the maintenance treatment of asthma, a chronic inflammatory disease of the large and small airways affecting an estimated 15 percent of the U.S. population.

Pharmaceutical segment sales in 1999 were $10.69 billion, an increase of 20.2% over 1998, including 28.6% growth in domestic sales. International sales increased 9.4% as sales gains in local currency of 13.5% were offset by a negative currency impact of 4.1%. Worldwide growth reflected the strong performance of PROCRIT, RISPERDAL, DURAGESIC, LEVAQUIN, and the oral contraceptive line of products. During the fourth quarter, the Company received approval from the FDA for ORTHO-PREFEST (17(beta)-estradiol/norgestimate) for hormone replacement therapy and an additional indication for REMICADE for the treatment of rheumatoid arthritis.

Pharmaceutical segment sales in 1998 were $8.90 billion, an increase of 12.7% over 1997 including 24.3% growth in domestic sales. International sales increased .6% as sales gains in local currency of 5.4% were offset by a negative currency impact of 4.8%. Worldwide growth reflected the strong performance of PROCRIT, RISPERDAL, DURAGESIC, LEVAQUIN, and the oral contraceptive line of products. At year-end 1998, the Company received approval from the FDA for LEVAQUIN (levofloxacin) for the indication of uncomplicated urinary tract infection. Additionally, the Company completed the acquisition of the U.S. and Canadian product rights for RETAVASE (reteplase), an acute-care cardiovascular drug, from Roche Healthcare.

The 1998 special pre-tax charge for the Pharmaceutical segment was $65 million. See Note 14 for detailed discussion on the Restructuring and IPR&D charges.

Significant research activities continued in the Pharmaceutical segment, increasing to $1.9 billion in 2000, or an 18.6% increase over 1999. This represents 15.9% of 2000 Pharmaceutical sales and a compound annual growth rate of approximately 13.1% for the five-year period since 1995. Worldwide Pharmaceutical research organizations include Janssen Research Foundation, headquartered in Belgium, and the R.W. Johnson Pharmaceutical Research Institute, located in La Jolla, California and Raritan, New Jersey. Additional research is conducted by Centocor and through a collaboration with the James Black Foundation in London, England.

Professional

The Professional segment includes a broad range of products used by or under the direction of health care professionals. These would include suture and mechanical wound closure products, surgical equipment and devices, wound management and infection prevention products, interventional and diagnostic cardiology products, diagnostic equipment and supplies, joint replacements and disposable contact lenses. These products are used principally in the professional fields by physicians, nurses, therapists, hospitals, diagnostic laboratories and clinics. Acquisitions and divestitures in the Professional segment during recent years are part of an ongoing process to transform this segment from a medical supply business to one serving a range of higher technology medical specialties.

7 Worldwide sales in 2000 of $10.3 billion in the Professional segment represented an increase of 3.7% over 1999. Domestic sales were up 4.0%, while international sales increased 3.4% as sales gains in local currency of 10.3% were offset by a negative currency impact of 6.9%. Worldwide sales gains in local currency of 6.9% were reduced by 3.2% due to the strength of the U.S. dollar. Strong sales growth from Cordis' coronary and endovascular stents, DePuy's spinal products, Ethicon's MITEK suture anchors and Gynecare's women's health products, Ethicon Endo-Surgery's MAMMOTOME breast biopsy system and ULTRACISION Harmonic scalpel and Vistakon's disposable contact lens products were the primary contributors to the Professional segment growth. In the fourth quarter, Cordis announced the U.S. market introduction of its new Bx VELOCITY Coronary Stent with Hepacoat -- the first drug-coated stent utilizing a proprietary heparin coating to receive regulatory approval in the U.S. and Europe. The proprietary heparin coating retains its properties for periods lasting several months when implanted into blood vessels. Cordis also received favorable jury verdicts in its stent patent infringement cases against Boston Scientific Corporation and Medtronic AVE, Inc. For additional information, see Note 18.

In addition, Cordis completed the acquisition of Atrionix, Inc., valued at $62.8 million. Atrionix is developing a proprietary, catheter-based system for the treatment of atrial fibrillation, a disruption in the heart's normal sinus rhythm.

Worldwide sales in 1999 of $9.91 billion in the Professional segment represented an increase of 15.7% over 1998. Domestic sales increased 16.9%, while international sales gains in local currency of 15.7% were partially offset by the strength of the U.S. dollar. In the fourth quarter, Cordis launched the new Bx VELOCITY coronary stent in Europe, where it has been well received by the medical community. Ethicon's new products included: PRONOVA Poly (hexafluoropropylene-VDF) Suture, a synthetic nonabsorbable monofilament for cardiovascular and vascular surgery and SURGIFOAM Absorbable Gelatin Sponge USP, which is proven in surgery for over 50 years in Europe and has given Ethicon a full line of hemostasis products. Ethicon also received a fourth quarter approval for Gynecare's THERMACHOICE II Uterine Balloon Therapy System, the latex-free next generation ablation technology system used for excessive uterine bleeding.

1998 worldwide sales of $8.57 billion in the Professional segment represented an increase of 1.6% over 1997. Domestic sales decreased 2.4%, while international sales gains in local currency of 10.7% were partially offset by the strength of the U.S. dollar. During the fourth quarter of 1998, the Company completed the acquisition of DePuy, one of the world's leading orthopaedic products companies with products in reconstructive, spinal, trauma and sports medicine. The Company also completed the acquisition of FemRx, a leader in the development of proprietary surgical systems that enable surgeons to perform less invasive alternatives to hysterectomy. The 1998 special pre-tax charge for the Professional segment for restructuring was $304 million. See Note 14 and Note 17 for detailed discussion on Restructuring and IPR&D charges and Acquisitions.

Geographic Areas The Company further categorizes its sales by major geographic area as presented below:

Sales Increase (Millions of Dollars) 2000 1999 Amount Percent

United States $17,000 15,385 1,615 10.5% Europe 6,365 6,711 (346) (5.2) Western Hemisphere excluding U.S. 2,084 2,023 61 3.0 Asia-Pacific, Africa 3,690 3,352 338 10.1 Worldwide total $29,139 27,471 1,668 6.1%

International sales were negatively impacted by the translation of local currency operating results into U.S dollars in all regions. Average exchange rates

8 to the dollar have declined each year since 1995. See Note 12 for additional information on geographic areas.

Liquidity and Capital Resources

Cash generated from operations and selected borrowings provide the major sources of funds for the growth of the business, including working capital, additions to property, plant and equipment and acquisitions. Cash and current marketable securities totaled $5.74 billion at the end of 2000 as compared with $3.88 billion at the end of 1999. Total unused credit available to the Company approximates $3.0 billion, including $1.5 billion of credit commitments with various banks worldwide that expire on October 4, 2001.

The Company's shelf registration filed with the Securities and Exchange Commission enables the Company to issue up to $2.59 billion of unsecured debt securities and warrants to purchase debt securities under its medium term note (MTN) program. No MTN's were issued in 2000. At December 31, 2000, the Company had $1.79 billion remaining on its shelf registration. A summary of borrowings can be found in Note 6.

Total borrowings at the end of 2000 and 1999 were $3.52 billion and $4.26 billion, respectively. In 2000 net cash (cash and current marketable securities net of debt) was $2.23 billion. In 1999, net debt (debt net of cash and current marketable securities) was 2.3% of net capital (shareowners' equity and net debt). Total debt represented 15.7% of total capital (shareowners' equity and total debt) in 2000 and 20.8% of total capital in 1999. Shareowners' equity per share at the end of 2000 was $13.52 compared with $11.67 at year-end 1999, an increase of 15.9%. For the period ended December 31, 2000, there were no material cash commitments.

Financial Instruments

The Company uses financial instruments to manage the impact of foreign exchange rate changes on cash flows. Accordingly, the Company enters into forward foreign exchange contracts to protect the value of existing foreign currency assets and liabilities and to hedge future foreign currency product costs. Gains or losses on these contracts are offset by the gains or losses on the underlying transactions. A 10% appreciation of the U.S. Dollar from December 31, 2000 market rates would increase the unrealized value of the Company's forward contracts by $266 million. Conversely, a 10% depreciation of the U.S. Dollar from December 31, 2000 market rates would decrease the unrealized value of the Company's forward contracts by $206 million. In either scenario, the gain or loss on the forward contract would be offset by the gain or loss on the underlying transaction and therefore would have no impact on future earnings and cash flows.

The Company enters into currency swap contracts to manage the Company's exposure to changes in currency exchange rates and hedge foreign currency denominated assets and liabilities. The impact of a 1% change in interest rates on the Company's interest rate sensitive financial instruments would be immaterial.

The Company does not enter into financial instruments for trading or speculative purposes. Further, the Company has a policy of only entering into contracts with parties that have at least an "A" (or equivalent) credit rating. The counterparties to these contracts are major financial institutions and the Company does not have significant exposure to any one counterparty. Management believes the risk of loss is remote.

Changing Prices and Inflation

Johnson & Johnson is aware that its products are used in a setting where, for more than a decade, policymakers, consumers and businesses have expressed concern about the rising cost of health care. In response to these concerns, Johnson & Johnson has a long-standing policy of pricing products responsibly. For the period 1990 - 2000, in the United States, the weighted average compound annual growth rate of Johnson & Johnson price increases for health care products (prescription and over-the-counter drugs, hospital and professional products) was below the U.S. Consumer Price Index (CPI) for the period.

9 Inflation rates, even though moderate in many parts of the world during 2000, continue to have an effect on worldwide economies and, consequently, on the way companies operate. In the face of increasing costs, the Company strives to maintain its profit margins through cost reduction programs, productivity improvements and periodic price increases.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). The standard was most recently amended in June 2000 by Statement of Financial Accounting Standards No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities -- an amendment of FASB Statement No. 133." The standards are collectively referred to as SFAS 133. The Company adopted SFAS 133 effective January 1, 2001.

SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their respective fair values. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction and, if it is, depending on the type of hedge transaction. For fair value hedge transactions in which the Company is hedging changes in the fair value of assets, liabilities or firm commitments, changes in the fair value of the derivative instrument will generally be offset in earnings by changes in the hedged item's fair value. For cash flow hedge transactions in which the Company is hedging the variability of cash flows related to a variable rate asset, liability or forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be recognized in earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item.

The Company uses forward exchange contracts to manage its exposure to the variability of cash flows primarily related to the foreign exchange rate changes of future foreign currency product costs. The Company also uses currency swaps to manage currency risk primarily related to borrowings. Effective with the adoption of SFAS 133, the Company designated both of these types of derivatives as cash flow hedges.

On January 1, 2001 the Company recorded a $17 million net-of-tax cumulative effect adjustment gain in accumulated other comprehensive income to recognize at fair value all derivative instruments designated as cash flow hedges. The Company also determined that the adjustment to net earnings was immaterial.

In May 2000, the Emerging Issues Task Force (EITF) reached a consensus on Issue 00-14, Accounting for Certain Sales Incentives, addressing both the recognition and income statement classification of certain sales incentives. The Company currently recognizes the expense related to coupons and certain sales incentives upon issuance and classifies these expenses as selling, marketing and administrative expense. The amount of such sales incentives for fiscal years 2000, 1999 and 1998 is estimated to be $112 million, $112 million, and $107 million, respectively. EITF 00-14 is expected to take effect in the second quarter of fiscal 2001 and the impact on the Company will be the reclassification of the above-mentioned amounts from expense to a reduction of sales.

The Company has adopted EITF Issue 00-10, Accounting for Shipping and Handling Fees and Costs. The amount of revenue received for shipping and handling is immaterial for all periods presented. Additional disclosure related to the costs of shipping and handling is provided in Note 1 of the financial statements.

10 Common Stock Market Prices

The Company's common stock is listed on the New York Stock Exchange under the symbol JNJ. The approximate number of shareowners of record at year-end 2000 was 164,158. The composite market price ranges for Johnson & Johnson common stock during 2000 and 1999 were:

2000 1999 High Low High Low

First quarter $ 96.94 66.13 94 77 Second quarter 101.88 70 103 87.81 Third quarter 101.44 90.25 105.88 90 Fourth quarter 105.94 89.19 106.88 90.13 Year-end close 105.06 93.25

Cash Dividends Paid

The Company increased its dividends in 2000 for the 38th consecutive year. Cash dividends paid were $1.24 per share in 2000 compared with dividends of $1.09 per share in 1999 and $.97 per share in 1998. The dividends were distributed as follows:

2000 1999 1998 First quarter $ .28 .25 .22 Second quarter .32 .28 .25 Third quarter .32 .28 .25 Fourth quarter .32 .28 .25 Total $ 1.24 1.09 .97

On January 2, 2001, the Board of Directors declared a regular cash dividend of $.32 per share, paid on March 13, 2001 to shareowners of record on February 20, 2001.

The Company expects to continue the practice of paying regular cash dividends. Cautionary Factors That May Affect Future Results

This Annual Report contains forward-looking statements. Forward-looking statements do not relate strictly to historical or current facts and anticipate results based on management's plans that are subject to uncertainty. Forward-looking statements may be identified by the use of words like "plans," "expects," "will," "anticipates," "estimates" and other words of similar meaning in conjunction with, among other things, discussions of future operations, financial performance, the Company's strategy for growth, product development, regulatory approval, market position and expenditures. Forward-looking statements are based on current expectations of future events. The Company cannot guarantee that any forward-looking statement will be accurate, although the Company believes that it has been reasonable in its expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that unknown risks or uncertainties materialize, actual results could vary materially from the Company's expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. Furthermore, the Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments. The Company's report on Form 10-K for the year ended December 31, 2000 that will be filed in March 2001, will contain, as an Exhibit, a discussion of various factors that could cause actual results to differ from expectations. Prior to that filing, investors should reference the Company's report on Form 10-K for the fiscal year ended January 2, 2000. The Company notes these factors as permitted by the Private Securities Litigation Reform Act of 1995.

11

Consolidated Balance Sheets At December 31, 2000 and January 2, 2000 (Dollars in Millions) (Note 1) 2000 1999

Assets

Current assets

Cash and cash equivalents (Notes 1 and 16) $ 3,411 2,363 Marketable securities (Notes 1 and 16) 2,333 1,516 Accounts receivable trade, less allowances $411 (1999, $389) 4,464 4,233 Inventories (Notes 1 and 2) 2,842 3,095 Deferred taxes on income (Note 8) 1,151 1,105 Prepaid expenses and other receivables 1,249 888 Total current assets 15,450 13,200

Marketable securities, non-current (Notes 1 and 16) 269 441 Property, plant and equipment, net (Notes 1, 3 and 14) 6,971 6,719 Intangible assets, net (Notes 1, 7 and 14) 7,256 7,571 Deferred taxes on income (Note 8) 54 104 Other assets 1,321 1,128 Total assets $ 31,321 29,163

Liabilities and Shareowners' Equity

Current liabilities Loans and notes payable (Note 6) $ 1,479 1,806 Accounts payable 2,083 2,003 Accrued liabilities 2,776 2,972 Accrued salaries, wages and commissions 488 467 Taxes on income 314 206 Total current liabilities 7,140 7,454

Long-term debt (Note 6) 2,037 2,450 Deferred tax liability (Note 8) 255 287 Employee related obligations (Note 5) 1,753 1,749 Other liabilities 1,328 1,010 Shareowners' equity Preferred stock -- without par value (authorized and unissued 2,000,000 shares) -- -- Common stock -- par value $1.00 per share (Note 20) (authorized 2,160,000,000 shares; issued 1,534,921,000 and 1,534,916,000 shares) 1,535 1,535 Note receivable from employee stock ownership plan (Note 15) (35) (41) Accumulated other comprehensive income (Note 11) (470) (396) Retained earnings 18,812 16,192 19,842 17,290 Less: common stock held in treasury, at cost (Note 20) (143,984,000 and 145,233,000) 1,034 1,077 Total shareowners' equity 18,808 16,213 Total liabilities and shareowners' equity $ 31,321 29,163

See Notes to Consolidated Financial Statements

12

Consolidated Statement of Earnings (Dollars in Millions Except Per Share Figures) (Note 1) 2000 1999 1998

Sales to customers $ 29,139 27,471 23,995 Cost of products sold (1998 includes $60 of inventory write-offs for restructuring) 8,861 8,442 7,604 Gross profit 20,278 19,029 16,391 Selling, marketing and administrative expenses 10,875 10,503 9,027 Research expense 2,926 2,600 2,336 Purchased in-process research and development (Notes 14 and 17) 54 - 298 Interest income (379) (246) (277) Interest expense, net of portion capitalized (Note 3) 146 197 129 Other expense, net 67 222 143 Restructuring charge (Note 14) (33) - 553 13,656 13,276 12,209

Earnings before provision for taxes on income 6,622 5,753 4,182 Provision for taxes on income (Note 8) 1,822 1,586 1,179 Net earnings $ 4,800 4,167 3,003

Basic net earnings per share (Notes 1 and 19) $ 3.45 3.00 2.16 Diluted net earnings per share (Notes 1 and 19) $ 3.40 2.94 2.12

See Notes to Consolidated Financial Statements

13

Consolidated Statements of Equity Note (Dollars in Millions) (Note 1) Receiv Accum Common EE Other Stk Treas Comp Retained Stk Comp Issued Stk Total Income Earnings (ESOP) Inc Amt Amt

Balance, December 28, 1997 $ 12,866 12,747 (51) (370) 1,535 (995) Net earnings 3,003 3,003 3,003 Cash dividends paid (1,305) (1,305) Employee compensation and stock option plans 378 (484) 862 Repurchase of common stock (930) (930) Business combinations 10 7 3 Other comprehensive income, net of tax: Currency translation adj 89 89 89 Unrealized gains (losses) on securities (41) (41) (41) Reclassification adjustment 33 Total comprehensive income 3,084 Note receivable from ESOP 7 7 Balance, January 3, 1999 $ 14,077 13,968 (44) (322) 1,535 (1,060) Net earnings 4,167 4,167 4,167 Cash dividends paid (1,479) (1,479) Employee compensation and stock option plans 357 (464) 821 Repurchase of common stock (840) (840) Business combinations 2 2 Other comprehensive income, net of tax: Currency translation adj (155) (155) (155) Unrealized gains (losses) on securities 81 81 81 Reclassification adjustment 17 Total comprehensive income 4,110 Note receivable from ESOP 3 3 Balance, January 2, 2000 $ 16,213 16,192 (41) (396) 1,535 (1,077) Net earnings 4,800 4,800 4,800 Cash dividends paid (1,724) (1,724) Employee compensation and stock option plans 483 (524) 1,007 Repurchase of common stock (973) (973) Business combinations 77 68 9 Other comprehensive income, net of tax: Currency translation adj (45) (45) (45) Unrealized gains (losses) on securities (14) (14) (14) EMinimum pension liability (15) (15) (15) Reclassification adjustment (46) Total comprehensive income 4,680 Note receivable from ESOP 6 6

Balance, December 31, 2000 $ 18,808 18,812 (35) (470) 1,535 (1,034)

See Notes to Consolidated Financial Statements

14 Consolidated Statements of Cash Flows

(Dollars in Millions) (Note 1) 2000 1999 1998

Cash flows from operating activities Net earnings $ 4,800 4,167 3,003 Adjustments to reconcile net earnings to cash flows: Depreciation and amortization of property and intangibles 1,515 1,444 1,285 Purchased in-process research and development 54 -- 298 Increase in deferred taxes (167) (7) (297) Accounts receivable reserves 33 11 24 Changes in assets and liabilities, net of effects from acquisition of businesses: Increase in accounts receivable (451) (671) (163) Decrease (increase) in inventories 125 (333) (100) Increase in accounts payable and accrued liabilities 57 242 646 Decrease in other current and non-current assets 143 457 142 Increase in other current and non-current liabilities 454 450 153 Net cash flows from operating activities 6,563 5,760 4,991 Cash flows from investing activities Additions to property, plant and equipment (1,646) (1,728) (1,545) Proceeds from the disposal of assets 161 35 108 Acquisition of businesses, net of cash acquired (Note 17) (68) (271) (3,818) Purchases of investments (5,383) (3,538) (1,005) Sales of investments 4,670 2,817 400 Other (102) (257) (205) Net cash used by investing activities (2,368) (2,942) (6,065) Cash flows from financing activities Dividends to shareowners (1,724) (1,479) (1,305) Repurchase of common stock (973) (840) (930) Proceeds from short-term debt 814 3,208 2,424 Retirement of short-term debt (1,485) (4,063) (226) Proceeds from long-term debt 4 793 535 Retirement of long-term debt (28) (176) (471) Proceeds from the exercise of stock options 292 180 178 Net cash (used by) provided by financing activities (3,100) (2,377) 205 Effect of exchange rate changes on cash and cash equivalents (47) (72) 24 Increase (decrease) in cash and cash equivalents 1,048 369 (845) Cash and cash equivalents, beginning of year (Note 1) 2,363 1,994 2,839 Cash and cash equivalents, end of year (Note 1) $ 3,411 2,363 1,994

15 Consolidated Statements of Cash Flows (continued) (Dollars in Millions) (Note 1) 2000 1999 1998

Supplemental cash flow data Cash paid during the year for: Interest $ 191 207 174 Income taxes 1,627 1,406 1,310

Supplemental schedule of noncash investing and financing activities Treasury stock issued for employee compensation and stock option plans, net of cash proceeds $ 754 675 717 Acquisitions of businesses Fair value of assets acquired $ 158 271 4,659 Fair value of liabilities assumed (including $296 of assumed debt in 1998) (5) -- (545) 153 271 4,114 Treasury stock issued at fair value (85) -- -- Net purchase price $ 68 271 4,114

See Notes to Consolidated Financial Statements

16 1 Summary of Significant Accounting Principles

Principles of Consolidation

The financial statements include the accounts of Johnson & Johnson and subsidiaries. Intercompany accounts and transactions are eliminated.

Cash Equivalents

The Company considers securities with maturities of three months or less, when purchased, to be cash equivalents.

Investments

Short-term marketable securities are carried at cost, which approximates fair value. Long-term debt securities that the Company has the ability and intent to hold until maturity are carried at amortized cost which also approximates fair value. Gross unrealized holding gains and losses are not material. Management determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determination at each balance sheet date.

Property, Plant and Equipment and Depreciation

Property, plant and equipment are stated at cost. The Company utilizes the straight-line method of depreciation over the estimated useful lives of the assets:

Building and building equipment 20-40 years Land and land improvements 10-20 years Machinery and equipment 2-13 years

Revenue Recognition

The Company recognizes revenue from product sales when the goods are shipped and title passes to the customer. In instances where title does not pass to the customer upon shipment, the Company recognizes revenue upon delivery. The Company has adopted Staff Accounting Bulletin (SAB) 101, Revenue Recognition in Financial Statements, the effects of which are immaterial for all periods presented.

Sales Incentives The Company currently recognizes the expense related to coupons and certain sales incentives upon issuance and classifies these expenses as selling, marketing and administrative expense. The amount of such sales incentives for 2000, 1999 and 1998 is estimated to be $112 million, $112 million, and $107 million, respectively. EITF 00-14 is expected to take effect in the second quarter of 2001 and the impact on the Company will be the reclassification of the above mentioned amounts from expense to a reduction of sales.

Shipping and Handling

Shipping and handling costs incurred were $492 million, $470 million and $401 million in 2000, 1999 and 1998, respectively, and are included in selling, marketing and administrative expense. The amount of revenue received for shipping and handling is immaterial for all periods presented.

Inventories

Inventories are stated at the lower of cost or market determined by the first-in, first-out method.

Intangible Assets

The excess of the cost over the fair value of net assets of purchased businesses is recorded as goodwill and is amortized on a straight-line basis over periods of 40 years or less. The cost of other acquired intangibles is amortized on a straight-line basis over their estimated useful lives. The Company continually evaluates the carrying value of goodwill and other intangible assets. Any impairments would be

17 recognized when the expected future operating cash flows derived from such intangible assets is less than their carrying value.

Financial Instruments

Gains and losses on foreign currency hedges of existing assets or liabilities, or hedges of firm commitments, are deferred and recognized in income as part of the related transaction.

Unrealized gains and losses on currency swaps that hedge third party debt are classified in the balance sheet as other assets or liabilities. Interest expense under these agreements, and on the debt instruments they hedge, are recorded at the net effective interest rate of the hedge transaction. In the event of early termination of a currency swap contract that hedges third party debt, the gain or loss on the swap contract is amortized over the remaining life of the related transaction. If the underlying transaction associated with a swap, or other derivative contract, is accounted for as a hedge and is terminated early, the related derivative contract is terminated simultaneously and any gains or losses would be included in income immediately.

The Company adopted SFAS 133 effective January 1, 2001. The Company uses forward exchange contracts to manage its exposure to the variability of cash flows primarily related to the foreign exchange rate changes of future foreign currency product costs. The Company also uses currency swaps to manage currency risk primarily related to borrowings. Effective with the adoption of SFAS 133, the Company designated both of these types of derivatives as cash flow hedges. On January 1, 2001 the Company recorded a $17 million net-of-tax cumulative effect adjustment gain in accumulated other comprehensive income to recognize at fair value all derivative instruments that will be designated as cash flow hedges. The Company determined that the cumulative effect adjustment to net earnings was immaterial.

Advertising

Costs associated with advertising are expensed in the year incurred. Advertising expenses worldwide, which are comprised of television, radio, print media as well as Internet advertising were $1.32 billion in 2000, $1.39 billion in 1999 and $1.19 billion in 1998.

Income Taxes

The Company intends to continue to reinvest its undistributed international earnings to expand its international operations; therefore no tax has been provided to cover the repatriation of such undistributed earnings. At December 31, 2000, and January 2, 2000 the cumulative amount of undistributed international earnings was approximately $9.5 billion and $8.3 billion, respectively.

Net Earnings Per Share

Basic earnings per share is computed by dividing net income available to common shareowners by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Risks and Uncertainties

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results may or may not differ from those estimates.

Annual Closing Date

The Company follows the concept of a fiscal year which ends on the Sunday nearest to the end of the month of December. Normally each fiscal year consists of 52

18 weeks, but every five or six years, as was the case in 1998, the fiscal year consists of 53 weeks.

Reclassification

Certain prior year amounts have been reclassified to conform with current year presentation.

2 Inventories

At the end of 2000 and 1999, inventories were comprised of: (Dollars in Millions) 2000 1999

Raw materials and supplies $ 702 663 Goods in process 458 416 Finished goods 1,682 2,016 $ 2,842 3,095

3 Property, Plant and Equipment

At the end of 2000 and 1999, property, plant and equipment at cost and accumulated depreciation were: (Dollars in Millions) 2000 1999

Land and land improvements $ 393 375 Buildings and building equipment 3,345 3,164 Machinery and equipment 6,065 6,070 Construction in progress 1,445 1,437 11,248 11,046 Less accumulated depreciation 4,277 4,327 $ 6,971 6,719

The Company capitalizes interest expense as part of the cost of construction of facilities and equipment. Interest expense capitalized in 2000, 1999 and 1998 was $96, $81 and $72 million, respectively.

Upon retirement or disposal of fixed assets, the cost and related amount of accumulated depreciation or amortization are eliminated from the asset and reserve accounts, respectively. The difference, if any, between the net asset value and the proceeds is adjusted to income. For additional discussion on property, plant and equipment, see Note 14.

4 Rental Expense and Lease Commitments

Rentals of space, vehicles, manufacturing equipment and office and data processing equipment under operating leases amounted to approximately $251 million in 2000, $233 million in 1999 and $243 million in 1998. The approximate minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year at December 31, 2000 are:

(Dollars After in Millions) 2001 2002 2003 2004 2005 2005 Total

$ 98 85 66 51 37 87 424

Commitments under capital leases are not significant.

5 Employee Related Obligations

At the end of 2000 and 1999, employee related obligations were: (Dollars in Millions) 2000 1999

Postretirement benefits $ 822 805 Post employment benefits 101 111 Pension liabilities 601 647 Certificates of extra compensation 229 186 Employee related obligations $1,753 1,749

19 6 Borrowings

The components of long-term debt are as follows: Eff. Eff. (Dollars in Millions) 2000 Rate% 1999 Rate%

4.75% Convertible Subordinated Debentures due 2005(2) $ 460 4.75 460 4.75 8.72% Debentures due 2024 300 8.72 300 8.72 6.95% Notes due 2029 293 7.14 293 7.14 6.73% Debentures due 2023 250 6.73 250 6.73 6% Eurodollar due 2001 250 6.02 250 6.02 7.375% Notes due 2002 200 7.49 199 7.49 8.25% Eurodollar Notes due 2004 199 8.37 199 8.37 6.625% Notes due 2009 198 6.80 197 6.80 5% Deutsche Mark Notes due 2001(3) 85 1.98 93 1.98 5.12% Notes due 2003(4) 60 0.82 60 0.82 Industrial Revenue Bonds 44 5.77 47 5.78 Other, principally international 87 -- 128 -- 2,426 6.42(1) 2,476 6.42(1) Less current portion 389 26 $ 2,037 2,450

(1) Weighted average effective rate.

(2) Represents 4.75% convertible subordinated debt issued by Centocor prior to the merger with Johnson & Johnson. Centocor exercised its option to redeem the debentures and set February 21, 2001 as the redemption date, at a price equal to 102.714% of the principal amount plus accrued interest. The debentures are convertible by the holders into approximately 5,987,000 shares of Johnson & Johnson stock at a conversion price of $77.091 per share. The option expired at the close of business of' February 14, 2001.

(3) Represents 5% Deutsche Mark notes due 2001 issued by a Japanese subsidiary and converted to a 1.98% fixed rate yen note via a currency swap.

(4) Represents 5.12% U.S. Dollar notes due 2003 issued by a Japanese subsidiary and converted to a 0.82% fixed rate yen note via a currency swap. The Company has access to substantial sources of funds at numerous banks worldwide. Total unused credit available to the Company approximates $3.0 billion, including $1.5 billion of credit commitments with various banks worldwide that expire on October 4, 2001. Interest charged on borrowings under the credit line agreements is based on either bids provided by the banks, the prime rate or London Interbank Offered Rates (LIBOR), plus applicable margins. Commitment fees under the agreements are not material.

The Company's shelf registration filed with the Securities and Exchange Commission enables the Company to issue up to $2.6 billion of unsecured debt securities and warrants to purchase debt securities under its medium term note (MTN) program. No MTN's were issued in 2000. At December 31, 2000, the Company had $1.8 billion remaining on its shelf registration.

Short-term borrowings and current portion of long-term debt amounted to $1.5 billion at the end of 2000. These borrowings are comprised of $0.8 billion of U.S. commercial paper, at an average interest rate of 6.5%, and $0.7 billion of local borrowings, principally by international subsidiaries.

Aggregate maturities of long-term obligations commencing in 2001 are: After (Dollars in Millions) 2001 2002 2003 2004 2005 2005 $ 389 216 66 214 467 1,074

20 7 Intangible Assets

At the end of 2000 and 1999, the gross and net amounts of intangible assets were: (Dollars in Millions) 2000 1999

Goodwill - gross $ 4,377 4,270 Less accumulated amortization 540 424 Goodwill - net $ 3,837 3,846 Patents and trademarks - gross $ 1,948 2,014 Less accumulated amortization 457 399 Patents & trademarks - net $ 1,491 1,615 Other intangibles - gross $ 2,401 2,471 Less accumulated amortization 473 361 Other intangibles - net $ 1,928 2,110 Total intangible assets - gross $ 8,726 8,755 Less accumulated amortization 1,470 1,184 Total intangible assets - net $ 7,256 7,571

The weighted average amortization periods for goodwill, patents and trademarks and other intangibles are 32 years, 21 years and 18 years, respectively. For additional discussion on intangible assets, see Note 14.

8 Income Taxes

The provision for taxes on income consists of: (Dollars in Millions) 2000 1999 1998

Currently payable: U.S. taxes $ 1,321 994 991 International taxes 668 599 485 1,989 1,593 1,476 Deferred: U.S. taxes (75) 94 (180) International taxes (92) (101) (117) (167) (7) (297) $ 1,822 1,586 1,179

A comparison of income tax expense at the federal statutory rate of 35% in 2000, 1999 and 1998, to the Company's effective tax rate is as follows: (Dollars in Millions) 2000 1999 1998

U.S. $ 3,646 3,241 2,522 International 2,976 2,512 1,660 Earnings before taxes on income: $ 6,622 5,753 4,182 Statutory taxes $ 2,318 2,014 1,464 Tax rates: Statutory 35.0% 35.0% 35.0% Puerto Rico and Ireland operations (5.2) (5.5) (5.5) Research tax credits (0.6) (0.6) (0.3) Domestic state and local 0.7 0.9 1.0 International subsidiaries excluding Ireland (3.0) (2.4) (3.3) IPR&D 0.3 -- 1.3 All other 0.3 0.2 -- Effective tax rate 27.5% 27.6% 28.2%

The reduction in the 2000 worldwide effective tax rate was primarily due to a greater proportion of the Company's taxable income derived from lower tax rate

21 countries offset by the Company's fourth quarter purchased IPR&D charge which is not tax deductible.

During 2000, the Company had subsidiaries operating in Puerto Rico under a tax incentive grant expiring December 31, 2007. In addition, the Company has subsidiaries manufacturing in Ireland under an incentive tax rate effective through the year 2010.

Deferred income taxes are recognized for tax consequences of "temporary differences" by applying enacted statutory tax rates, applicable to future years, to differences between the financial reporting and the tax basis of existing assets and liabilities.

Temporary differences and carryforwards for 2000 are as follows: Deferred Tax (Dollars in Millions) Asset Liability

Employee related obligations $ 597 Depreciation (317) Non-deductible intangibles (734) International R&D capitalized for tax 156 Reserves & liabilities 512 Income reported for tax purposes 270 Miscellaneous international 274 (217) Loss carryforwards 72 Miscellaneous U.S. 275 Total deferred income taxes $ 2,156 (1,268)

The difference between the net deferred tax on income per the balance sheet and the net deferred tax is reflected in Taxes on Income.

9 International Currency Translation

For translation of its non-U.S. dollar currencies, the Company has determined that the local currencies of its international subsidiaries are the functional currencies except those in highly inflationary economies, which are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years.

In consolidating international subsidiaries, balance sheet currency effects are recorded as a separate component of shareowners' equity. This equity account includes the results of translating all balance sheet assets and liabilities at current exchange rates, except for those located in highly inflationary economies which are reflected in operating results.

An analysis of the changes during 2000 and 1999 for foreign currency translation adjustments is included in Note 11.

Net currency transaction and translation gains and losses included in other expense were after-tax losses of $67 million in 2000, after-tax losses of $48 million in 1999 and after-tax losses of $15 million in 1998.

10 Common Stock, Stock Option Plans and Stock Compensation Agreements

At December 31, 2000 the Company had 15 stock-based compensation plans. Under the 2000 Stock Option Plan, the Company may grant options to its employees for up to 1.6% of the issued shares of the Company's Common Stock, plus the number of shares available from the previous year that were not issued, as well as shares issued under the Plan that expired or terminated without being exercised. The shares outstanding are for contracts under the Company's 1986, 1991, 1995 and 2000 Stock Option Plans, the 1997 Non-Employee Director's Plan and the Mitek, Cordis, Biosense, Gynecare, Centocor and Innovasive Stock Option plans. Stock options expire 10 years from the date they are granted and vest over service periods that range from one to six years. All options granted are valued at current market price. Shares available for future grants are based on 1.6% of the issued shares each year. Based on current issued shares, 24.6 million shares could be granted each year during the years 2001 through 2005. Shares available for future

22 grants under the previous plan were 3.0 million, and 15.0 million at the end of 1999 and 1998, respectively.

A summary of the status of the Company's stock option plans as of December 31, 2000, January 2, 2000 and January 3, 1999 and changes during the years ending on those dates, is presented below: Weighted Options Average (Shares in Thousands) Outstanding Exercise Price Balance at December 28, 1997 81,261 $ 34.51 Options granted 10,852 78.20 Options exercised (11,414) 18.65 Options cancelled/forfeited (2,304) 44.92 Balance at January 3, 1999 78,395 42.55 Options granted 13,113 97.87 Options exercised (9,235) 23.84 Options cancelled/forfeited (1,722) 55.53 Balance at January 2, 2000 80,551 53.40 Options granted 20,876 99.87 Options exercised (10,429) 30.99 Options cancelled/forfeited (2,628) 74.81 Balance at December 31, 2000 88,370 $ 66.39

The Company applies the provision of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," that calls for companies to measure employee stock compensation expense based on the fair value method of accounting. However, as allowed by the Statement, the Company elected continued use of Accounting Principle Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," with pro forma disclosure of net income and earnings per share determined as if the fair value method had been applied in measuring compensation cost. Had the fair value method been applied, net income would have been reduced by $168 million or $.12 per share in 2000, $116 million or $.08 per share in 1999 and $77 million or $.05 per share in 1998. These calculations only take into account the options issued since January 1, 1995. The average fair value of options granted was $29.57 in 2000, $30.00 in 1999 and $19.62 in 1998. The fair value was estimated using the Black-Scholes option pricing model based on the weighted average assumptions of: 2000 1999 1998

Risk-free rate 5.45% 6.32% 4.52% Volatility 27.0% 24.0% 22.0% Expected life 5.0 yrs 5.0 yrs 5.0 yrs Dividend yield 1.40% 1.13% 1.30%

The following table summarizes stock options outstanding and exercisable at December 31, 2000: (Shares in Thousands) Outstanding Exercisable Average Average Exercise Average Exercise Exercise Price Range Options Life(a) Price Options Price $8.00-$29.93 20,084 2.8 $ 23.79 20,050 $ 23.79 $30.98-$64.44 17,857 5.3 47.00 12,925 46.34 $64.63-$93.25 19,214 7.5 72.95 8,966 65.10 $93.31-$127.66 31,215 9.5 100.84 66 101.35 $8.00-$127.66 88,370 6.7 $ 66.39 42,007 $ 39.67

(a) Average contractual life remaining in years.

23 11 Accumulated Other Comprehensive Income

Components of other comprehensive income/(loss) consist of the following: Accumulated Foreign Unrealized Pension Other Currency Gains/(Losses) Liab Comprehensive (Dollars in Millions) Translat on Securities Adj Income/(Loss) December 28, 1997 $ (411) 41 (370) 1998 change 89 (41) 48 January 3, 1999 (322) - (322) 1999 change (155) 81 (74) January 2, 2000 (477) 81 (396) 2000 change (45) (14) (15) (74) December 31, 2000 $ (522) 67 (15) (470)

Total other comprehensive income for 2000 includes reclassification adjustment gains of $71 million realized from the sale and write-down of equity securities and the associated tax expense of $25 million. In 1999, total other comprehensive income included reclassification adjustment losses of $27 million and the associated tax benefit of $10 million. The tax effect on these unrealized gains/(losses) on equity securities is an expense of $43 million in 2000 and $50 million in 1999 and a benefit of $19 million in 1998. The currency translation adjustments are not currently adjusted for income taxes as they relate to permanent investments in non-U.S. subsidiaries.

12 Segments of Business and Geographic Areas

Sales to Customers(2) (Dollars in Millions) 2000 1999 1998

Consumer - Domestic $ 3,760 3,670 3,325 International 3,144 3,194 3,201 Total 6,904 6,864 6,526 Pharmaceutical - Domestic 7,734 6,419 4,993 International 4,220 4,275 3,907 Total 11,954 10,694 8,900 Professional - Domestic 5,506 5,296 4,530 International 4,775 4,617 4,039 Total 10,281 9,913 8,569 Worldwide total $29,139 27,471 23,995

Operating Profit(3) Identifiable Assets (Dollars in Millions) 2000(4) 1999(5) 1998(6) 2000 1999 1998

Consumer $ 867 683 414 4,761 4,901 4,904 Pharmaceutical 4,175 3,595 2,933 7,740 7,483 5,918 Professional 1,696 1,632 941 12,745 12,458 13,244 Segments total 6,738 5,910 4,288 25,246 24,842 24,066 Expenses not allocated to segments (3) (116) (157) (106) General corporate(7) 6,075 4,321 3,226 Worldwide total $ 6,622 5,753 4,182 31,321 29,163 27,292

24

Additions to Property, Depreciation and Plant & Equipment Amortization

(Dollars in Millions) 2000 1999 1998 2000 1999 1998

Consumer $ 336 412 268 275 277 273 Pharmaceutical 584 666 600 397 341 352 Professional 665 576 627 801 786 629 Segments total 1,585 1,654 1,495 1,473 1,404 1,254 General corporate 61 74 50 42 40 31 Worldwide total $1,646 1,728 1,545 1,515 1,444 1,285

Geographic Areas(2)

Sales to Customers(2) Long-Lived Assets (Dollars in Millions) 2000 1999 1998 2000 1999 1998

United States $ 17,000 15,385 12,848 9,326 9,314 8,619 Europe 6,365 6,711 6,354 3,551 3,698 4,135 Western Hemisphere excluding U.S. 2,084 2,023 2,105 653 550 429 Asia-Pacific, Africa 3,690 3,352 2,688 427 439 402 Segments total 29,139 27,471 23,995 13,957 14,001 13,585 General corporate 255 282 262 Other non long-lived assets 17,109 14,880 13,445 Worldwide total $ 29,139 27,471 23,995 31,321 29,163 27,292

(1) See Management's Discussion and Analysis for a description of the segments in which the Company does business.

(2) Export sales and intersegment sales are not significant. No single customer or country represents 10% or more of total sales.

(3) Amounts not allocated to segments include interest income/expense, minority interest and general corporate income and expense.

(4) 2000 results excluding Restructuring gain and In-Process Research and Development charges are: Consumer $843, Pharmaceutical $4,171, Professional $1,745.

(5) 1999 Pharmaceutical results excluding special charges related to the Centocor merger equals $3,644.

(6) 1998 results excluding Restructuring and In-Process Research and Development charges: Consumer $658, Pharmaceutical $3,132, and Professional $1,409. See Note 14 for details of Restructuring and IPR&D charges by segment.

(7) General corporate includes cash and marketable securities.

13 Retirement and Pension Plans

The Company sponsors various retirement and pension plans, including defined benefit, defined contribution and termination indemnity plans, which cover most employees worldwide. The Company also provides postretirement benefits, primarily health care to all domestic retired employees and their dependents. Most international employees are covered by government-sponsored programs and the cost to the Company is not significant.

Retirement plan benefits are primarily based on the employee's compensation during the last three to five years before retirement and the number of years of service. The Company's objective in funding its domestic plans is to accumulate funds sufficient to provide for all accrued benefits. International subsidiaries have plans under which funds are deposited with trustees, annuities are purchased under group contracts or reserves are provided.

25 In certain countries other than the United States, the funding of pension plans is not a common practice as funding provides no economic benefit. Consequently, the Company has several pension plans which are not funded. The Company does not fund retiree health care benefits in advance and has the right to modify these plans in the future.

Net periodic benefit costs for the Company's defined benefit retirement plans and other benefit plans for 2000, 1999 and 1998 include the following components:

Retirement Plans Other Benefit Plans (Dollars in Millions) 2000 1999 1998 2000 1999 1998

Service cost $ 201 208 185 20 24 20 Interest cost 295 270 254 51 50 50 Expected return on plan assets (377) (330) (291) (5) (5) (14) Amortization of prior service cost 21 17 17 (1) (1) 2 Amortization of net trans asset (7) (12) (14) - - - Recognized actuarial (gain)/loss (81) (17) (24) (10) (2) 8 Curtailments and settlements - 2 2 - - - Net periodic benefit cost $ 52 138 129 55 66 66

The net periodic (income) cost attributable to domestic retirement plans included above was ($19) million in 2000, $56 million in 1999 and $40 million in 1998. The following tables provide the weighted-average assumptions used to develop net periodic benefit cost and the actuarial present value of projected benefit obligations:

Retirement Plans Other Benefit Plans Domestic Benefit Plans 2000 1999 1998 2000 1999 1998

Weighted average discount rate 7.50% 7.75% 6.75% 7.50% 7.75% 6.75% Expected long-term rate of return on plan assets 9.00 9.00 9.00 9.00 9.00 9.00 Rate of increase in compensation levels 5.00 5.00 5.00 5.00 5.00 5.00

International Benefit Plans Weighted average discount rate 6.00% 5.75% 5.50% 6.75% 6.75% 6.00% Expected long-term rate of return on plan assets 7.50 7.50 7.75 ------Rate of increase in compensation levels 3.50 3.50 3.50 4.25 4.50 4.25

Health care cost trends are projected at annual rates grading from 9% for employees under age 65 and 7% for employees over age 65 down to 5% for both groups by the year 2008 and beyond. The effect of a 1% change in these assumed cost trends on the accumulated postretirement benefit obligation at the end of 2000 would be an $89 million increase or a $78 million decrease and the effect on the service and interest cost components of the net periodic postretirement benefit cost for 2000 would be an $11 million increase or a $9 million decrease.

The following tables set forth the change in benefit obligations and change in plan assets at year-end 2000 and 1999 for the Company's defined benefit retirement plans and other postretirement plans:

26

(Dollars in Millions) Retirement Plans Other Benefit Plans Change in Benefit Obligation 2000 1999 2000 1999

Benefit obligation - begin of year $4,206 4,315 694 726 Service cost 201 208 20 24 Interest cost 295 270 51 50 Plan participant contributions 14 11 - - Amendments 2 81 (16) - Actuarial (gain)/loss 186 (346) 10 (81) Acquisitions 1 51 - 11 Curtailments & settlements (13) (7) - - Total benefits paid (219) (210) (35) (36) Effect of exchange rates (118) (167) (2) - Benefit obligation - end of year $4,555 4,206 722 694

Change in Plan Assets Plan assets at fair value beginning of year $5,254 4,173 62 57 Actual return on plan assets (150) 1,301 (1) 8 Company contributions 62 46 31 32 Plan participant contributions 14 11 - - Acquisitions (5) 41 - - Benefits paid from plan assets (209) (198) (34) (35) Effect of exchange rates (119) (120) - - Plan assets at fair value end of year $4,847 5,254 58 62

Amounts recognized in the Company's balance sheet consist of the following: Retirement Plans Other Benefit Plans (Dollars in Millions) 2000 1999 2000 1999

Plan assets in excess of (less than) projected benefit obligation $ 292 1,048 (664) (632) Unrecognized actuarial gains (984) (1,801) (166) (200) Unrecognized prior service cost 128 156 (23) (9) Unrecognized net transition asset (20) (29) -- -- Total recognized in the consolidated balance sheet $ (584) (626) (853) (841) Book reserves $ (748) (775) (853) (841) Prepaid benefits 138 120 -- -- Other assets 26 29 -- -- Total recognized in Consolidated balance sheet $ (584) (626) (853) (841)

Plans with accumulated benefit obligations in excess of plan assets consist of the following: Retirement Plans Other Benefit Plans (Dollars in Millions) 2000 1999 2000 1999

Accumulated benefit oblig $(451) (411) (692) (696) Projected benefit obligation $(480) (528) - - Plan assets at fair value $49 53 88 62

27 14 Restructuring and In-Process Research and Development Charges

In the fourth quarter of 1998, the Company approved a plan to reconfigure its global network of manufacturing and operating facilities with the objective of enhancing operating efficiencies. This plan was completed at year-end 2000. Among the initiatives involved in this plan were the closure of inefficient manufacturing facilities, exiting certain businesses which were not providing an acceptable return and related employee separations. The closure of these facilities represented approximately 10% of the Company's manufacturing capacity.

The estimated cost of this plan was reflected in cost of sales ($60 million) and restructuring charge ($553 million). The charge consisted of employee separation costs of $161 million, asset impairments of $322 million, impairments of intangibles of $52 million and other exit costs of $78 million. Employee separations occurred primarily in manufacturing and operations facilities affected by the plan. The decision to exit certain facilities and businesses decreased cash flows triggering the asset impairment. The amount of impairment of such assets was calculated using discounted cash flows or appraisals.

The asset impairments that amounted to $322 million consisted of the following: machinery & equipment of $215 million, inventory of $60 million, buildings of $32 million and leasehold improvements of $15 million. Intangible assets of $52 million included Menlo Care of $26 million, Innotech of $20 million and other intangible assets of $6 million. The Menlo Care intangible asset was related to the Aquavene biomaterial technology that was no longer in use with all other intangible assets related to products that were abandoned by the Company due to insufficient financial return.

Other exit costs consisted of the following: 2000 Beginning 2000 Reversed Remaining (Dollars in Millions) Accrual Cash Outlays to Income Accrual Restructuring charges: Employee separations $100 57 25 18 Other exit costs: Distributor terminations 11 11 -- -- Disposal costs 10 7 3 -- Lease terminations 7 7 -- -- Other costs 12 7 5 -- Total other exit costs 40 32 8 -- $140 89 33 18

At year-end 2000, $33 million of the accrual was reversed to income. This gain by segment of business was applied as follows: $20 million - Consumer, $5 million - Pharmaceutical and $8 million - Professional. The remaining accrual represents on-going payments to severed employees to be paid out over the next six months. The restructuring plan resulted in the reduction of 35 manufacturing facilities around the world. Additionally, the total headcount reduction due to the restructuring plan was approximately 4,100 employees worldwide. In connection with the businesses acquired in 1998, the Company recognized charges for in-process research and development (IPR&D) in the amount of $298 million related primarily to the DePuy and RETAVASE acquisitions. The value of the IPR&D projects was calculated with the assistance of third party appraisers and was based on the estimated percentage completion of the various research and development projects being pursued that ranged from 60% to 85% complete on acquisition date. The calculation reflects cash flow projections discounted for the risk inherent in such projects that ranged from 13% to 20%. The remaining effort to complete these projects is not material.

The 1998 special charges impacted the business segments as follows: the special pre-tax charge for the Consumer segment was $244 million. This charge

28 reflects $85 million for severance costs associated with the termination of approximately 2,550 employees; $133 million for the write-down of impaired assets and $26 million for other exit costs. Acquisitions within the Pharmaceutical business segment resulted in a $134 million write-off of purchased IPR&D. Additionally, the Pharmaceutical business segment recorded $65 million of the special charge representing $18 million for severance costs associated with the termination of approximately 250 employees and $47 million for the write-down of impaired assets. Acquisitions within the Professional business segment resulted in a $164 million write-off of purchased IPR&D. Additionally, the Professional business segment recorded other special charges of $304 million. This charge included $58 million for severance costs associated with the termination of approximately 2,300 employees; $194 million for the write-down of impaired assets and $52 million for other exit costs.

15 Savings Plan

The Company has voluntary 401(k) savings plans designed to enhance the existing retirement programs covering eligible employees. The Company matches a percentage of each employee's contributions consistent with the provisions of the plan for which he/she is eligible.

In the U.S. salaried plan, one-third of the Company match is paid in Company stock under an employee stock ownership plan (ESOP). In 1990, to establish the ESOP, the Company loaned $100 million to the ESOP Trust to purchase shares of the Company stock on the open market. In exchange, the Company received a note, the balance of which is recorded as a reduction of shareowners' equity. Total contributions to the plans were $78 million in 2000, $70 million in 1999, and $65 million in 1998.

16 Financial Instruments

Derivative Financial Instrument Risk The Company uses derivative financial instruments to manage the impact of foreign exchange rate changes on cash flows. The Company does not enter into derivative financial instruments for trading or speculative purposes.

The Company has a policy of only entering into contracts with parties that have at least an "A" (or equivalent) credit rating. The counterparties to these contracts are major financial institutions and the Company does not have significant exposure to any one counterparty. Management believes the risk of loss is remote.

Foreign Exchange Risk Management

The Company uses currency swaps to manage currency risk related to borrowings. Currency swap agreements that hedge third party debt mature with these borrowings and are described in Note 6.

The Company enters into forward foreign exchange and currency swap contracts maturing within five years to hedge future foreign currency product costs and other cash flows, and to protect the value of existing foreign currency assets and liabilities. The Company has forward exchange contracts outstanding at year-end in various currencies, principally in U.S. Dollars, Euros and Swiss Francs. In addition, the Company has currency swaps outstanding, principally in U.S. Dollars and Euros. Unrealized gains and losses, based on market prices, are presented in the following table: 2000 Notional (Dollars in Millions) Amounts Gains Losses Forwards $ 5,548 174 121 Currency swaps 3,223 226 133

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents and current and non-current marketable securities approximates fair value of these instruments. In addition, the carrying amount of long-term investments, long-term debt, interest rate

29 and currency swaps (used to hedge third party debt) approximates fair value of these instruments for 2000 and 1999. The fair value of current and non-current marketable securities, long-term debt and currency swap agreements was estimated based on market prices and quotes obtained from brokers for those or similar instruments. The fair value of long-term investments was estimated based on quoted market prices at year-end.

Concentration of Credit Risk

The Company invests its excess cash in both deposits with major banks throughout the world and other high quality short-term liquid money market instruments (commercial paper, government and government agency notes and bills, etc.). The Company has a policy of making investments only with commercial institutions that have at least an "A" (or equivalent) credit rating. These investments generally mature within six months and the Company has not incurred any related losses.

The Company sells a broad range of products in the health care field in most countries of the world. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base. Ongoing credit evaluations of customers' financial condition are performed and, generally, no collateral is required. The Company maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management's expectations.

17 Mergers & Acquisitions

Certain businesses were acquired for $158 million during 2000 ($73 million in cash and debt assumed and 887,916 shares of the Company's common stock issued from Treasury valued at $77 million). These acquisitions were accounted for by the purchase method and, accordingly, results of operations have been included in the accompanying consolidated financial statements from their respective dates of acquisition.

The 2000 acquisitions included Innovasive Devices, a company that manufactures and sells devices for sport medicine surgery for soft tissue injuries, Atrionix, Inc., a development stage company whose primary product is a pulmonary ablation catheter for the treatment of atrial fibrillation, Medtrex, a company that develops and manufactures electrosurgical generators and disposable products, and the St. Joseph aspirin business.

The excess of purchase price over the estimated fair value of acquisitions amounted to $95 million and has been allocated to identifiable intangibles and goodwill. Approximately $54 million has been identified as the value of IPR&D associated with the Atrionix, Inc. acquisition. This IPR&D charge related to a project for the design of a catheter system to be used in a procedure which blocks electrical impulses originating in pulmonary veins, which can cause atrial fibrillation. The value of the IPR&D was calculated with the assistance of a third party appraiser using a cash flow projection discounted for the risk inherent in such a project. The discount rate used was 26%. Pro forma information is not provided since the impact of the acquisitions does not have a material effect on the Company's results of operations, cash flows or financial position.

On October 6, 1999, Johnson & Johnson and Centocor, Inc. completed the merger between the two companies. This transaction was accounted for by the pooling-of-interests method of accounting. Centocor had approximately 71 million shares outstanding (83 million shares on a fully diluted basis) which were exchanged for approximately 45 million shares of Johnson & Johnson common stock. On a diluted basis, when adjusted for stock options outstanding and convertible debt, Johnson & Johnson issued approximately 53 million shares. Holders of Centocor common stock received 0.6390 of a share of Johnson & Johnson common stock for each share of Centocor common stock, valued at $95.47 per share.

Centocor is a leading biopharmaceutical company that creates, acquires and markets cost-effective therapies that yield long term benefits for patients and the health care community. Its products, developed primarily through monoclonal

30 antibody technology, help physicians deliver innovative treatments to improve human health and restore patients' quality of life.

During 1999, certain businesses were acquired for $271 million. These acquisitions were accounted for by the purchase method and, accordingly, the results of operations of the acquired businesses have been included in the accompanying consolidated financial statements from their respective dates of acquisition.

The 1999 acquisitions included AVEENO, the dermatological skin care business from S.C. Johnson, Angioguard, Inc., a developer of an embolic containment device used during interventional procedures, certain assets of Cygnus' drug delivery business, certain assets of Medscand related to the TVT incontinence product and the stock of Horizon Health Services, Inc., a company specializing in the management of ambulatory surgery centers.

The excess of purchase price over the estimated fair market value of 1999 acquisitions amounted to $266 million. This amount has been allocated to identifiable intangibles and goodwill. Pro forma information is not provided for 1999, as the impact of the acquisitions does not have a material effect on the Company's results of operations, cash flows or financial position. During 1999, the plan to integrate the DePuy business acquired in 1998 into the Company's operations was completed and resulted in additional liabilities of $81 million to address costs relating to distributor terminations, employee separations and plant consolidations.

Divestitures in 2000 and 1999 did not have a material effect on the Company's results of operations, cash flows or financial position.

18 Legal Proceedings

The Company is involved in numerous product liability cases in the United States, many of which concern adverse reactions to drugs and medical devices. The damages claimed are substantial, and while the Company is confident of the adequacy of the warnings and instructions for use which accompany such products, it is not feasible to predict the ultimate outcome of litigation. However, the Company believes that if any liability results from such cases, it will be substantially covered by reserves established under its self-insurance program and by commercially available excess liability insurance.

The Company, along with numerous other pharmaceutical manufacturers and distributors, was a defendant in a federal and a number of state antitrust class actions brought by retail pharmacies alleging an industry-wide agreement to deny them price discounts on sales of brand name prescription drugs. The Company defeated the federal class action and has settled all but two of the state class actions. The cases of a number of pharmacies that opted out of the federal class action also remain. The Company believes these remaining actions are without merit and is defending them vigorously.

The Company's subsidiary, Johnson & Johnson Vision Care Inc. (Vision Care), together with a trade association and various individual defendants, is a defendant in several consumer class actions and an action brought by multiple State Attorneys General on behalf of consumers alleging violations of federal and state antitrust laws. These cases, which were filed between July 1994 and December 1996 and are consolidated before the United States District Court for the Middle District of Florida, assert that enforcement of Vision Care's long-standing policy of selling contact lenses only to licensed eye care professionals is a result of an unlawful conspiracy to eliminate alternative distribution channels from the disposable contact lens market. Trial in the consolidated Florida actions is scheduled to begin in late March of this year. The Company believes that these actions are without merit and is defending them vigorously.

Johnson & Johnson Vision Care is also a defendant in a nationwide consumer class action brought on behalf of purchasers of its brand contact lenses. The plaintiffs in that action, which was filed in 1996 in New Jersey State Court, allege that Vision Care sold its 1-DAY ACUVUE lens at a substantially cheaper price than ACUVUE and misled consumers into believing these were different lenses when, in fact, they were allegedly "the same lenses." Plaintiffs are seeking substantial 31 damages and an injunction against supposed improper conduct. The Company believes these claims are without merit and is defending the action vigorously. The Company's Ortho Biotech subsidiary is party to an arbitration proceeding filed against it in 1995 by Amgen, Ortho Biotech's licensor of U.S. non-dialysis rights to EPO, in which Amgen seeks to terminate Ortho Biotech's U.S. license rights and collect substantial damages based on alleged deliberate EPO sales by Ortho Biotech during the early 1990's into Amgen's reserved dialysis market. The Company believes no basis exists for terminating Ortho Biotech's U.S. license rights or for obtaining damages and is vigorously contesting Amgen's claims. However, Ortho Biotech's U.S. license rights to EPO are material to the Company; thus, an unfavorable outcome could have a material adverse effect on the Company's consolidated financial position, liquidity and results of operations. The arbitration is scheduled to begin in September of this year.

In patent infringement actions tried in Delaware Federal Court late last year, Cordis, a Johnson & Johnson company, obtained verdicts of infringement and patent validity, and damage awards, against Boston Scientific Corporation and Medtronic AVE, Inc., based on a number of Cordis coronary stent patents. On December 15, 2000, the jury in the damage action against Boston Scientific returned a verdict of $324 million and on December 21, 2000 the jury in the Medtronic AVE action returned a verdict of $271 million. These sums represent lost profit and reasonable royalty damages to compensate Cordis for infringement but do not include pre or post judgment interest. In February 2001 a hearing was held on the claims of Boston Scientific and Medtronic AVE that the patents at issue are unenforceable owing to alleged inequitable conduct before the patent office. Post trial motions and appeals to the Federal Circuit Court of Appeals will follow and no judgments are likely to be paid, if at all, until those proceedings have run their course. Furthermore, since the amount of damages, if any, which the Company may receive cannot be quantified until the legal process is complete, no gain has been recorded in the financial statements for either of these awards.

The Company is also involved in a number of patent, trademark and other lawsuits incidental to its business.

The Company believes that the above proceedings, except as noted above, would not have a material adverse effect on its results of operations, cash flows or financial position.

19 Earnings Per Share

The following is a reconciliation of basic net earnings per share to diluted net earnings per share for the years ended December 31, 2000, January 2, 2000 and January 3, 1999. (Shares in Millions) 2000(1) 1999(2) 1998(3)

Basic earnings per share $ 3.45 3.00 2.16 Average shares outstanding - basic 1,390.3 1,390.1 1,389.8 Potential shares exercisable under stock option plans 57.0 68.7 68.8 Less: shares repurchased under treasury stock method (35.9) (40.6) (41.4) Adjusted average shares outstanding - diluted 1,417.4 1,418.2 1,417.2 Diluted earnings per share $ 3.40 2.94 2.12

2000 diluted earnings per share calculation includes the dilution effect of convertible debt: a decrease in interest expense of $13 million and 6 million additional shares outstanding. 1999 diluted earnings per share calculation does not include approximately 6 million shares related to convertible debt and 11 million shares of options whose exercise price is greater than average market value as the effect would be anti-dilutive.

32 (1) 2000 results excluding special charges related to In-Process Research and Development charge and restructuring gain: Basic EPS at $3.48 and Diluted EPS at $3.42 (unaudited).

(2) 1999 results excluding special charges related to the Centocor merger are: Basic EPS at $3.03 and Diluted EPS at $2.97 (unaudited).

(3) 1998 results excluding Restructuring and In-Process Research and Development charges are: Basic EPS at $2.66 and Diluted EPS at $2.61 (unaudited).

20 Capital and Treasury Stock Changes in treasury stock were:

(Dollars in Millions Except Treasury Stock Number of Shares in Thousands) Shares Amount Balance at December 28, 1997 144,864 $995 Employee compensation and stock option plans (11,906) (862) Repurchase of common stock 12,602 930 Business combinations - (3) Balance at January 3, 1999 145,560 1,060 Employee compensation and stock option plans (9,255) (821) Repurchase of common stock 8,928 840 Business combinations - (2) Balance at January 2, 2000 145,233 1,077 Employee compensation and stock option plans (11,062) (1,007) Repurchase of common stock 10,701 973 Business combinations (888) (9) Balance at December 31, 2000 143,984 $1,034

Shares of common stock authorized and issued were 1,534,921,000 shares at the end of 2000, 1,534,916,000 shares at the end of 1999 and 1,534,824,000 shares at the end of 1998 and 1997.

21 Selected Quarterly Financial Data (Unaudited)

Selected unaudited quarterly financial data for the years 2000 and 1999 are summarized below:

2000 1999

(Dollars in Millions First Second Third Fourth First Second Third Fourth Except Per Share Amounts) Qtr Qtr Qtr Qtr(1) Qtr Qtr Qtr Qtr(2)

Segment sales to customers Consumer $1,752 1,707 1,722 1,723 1,728 1,687 1,704 1,744 Pharmaceutical 3,042 3,221 2,934 2,757 2,577 2,829 2,735 2,552 Professional 2,525 2,580 2,548 2,628 2,434 2,455 2,445 2,581 ------Total sales 7,319 7,508 7,204 7,108 6,739 6,971 6,884 6,877 ======

Gross Profit 5,078 5,252 5,025 4,923 4,669 4,848 4,816 4,696 Earnings before provision for taxes on income 1,892 1,866 1,746 1,118 1,622 1,629 1,531 971

Net earnings 1,314 1,331 1,264 891 1,138 1,164 1,111 754 ------Basic net EPS $ 0.95 0.95 0.91 0.64 0.82 0.84 0.80 0.54 ------Diluted net EPS $ 0.93 0.94 0.89 0.63 0.80 0.82 0.78 0.53 ======

(1) 2000 results excluding special charges related to In-Process Research and Development charge and restructuring gain: Earnings before taxes $1,139; Net earnings $924; Basic EPS $.66 and Diluted EPS $.65. The fourth quarter also

33 includes an after tax charge of $42 million relating to a federal government investigation of LifeScan's SURESTEP Blood Glucose Meter.

(2) 1999 results excluding special charges related to the Centocor merger; Earnings before taxes $1,020; Net earnings $796; Basic EPS $.57 and Diluted EPS $.56.

34 Report of Management The management of Johnson & Johnson is responsible for the integrity and objectivity of the accompanying financial statements and related information. The statements have been prepared in conformity with accounting principles generally accepted in the United States, and include amounts that are based on our best judgments with due consideration given to materiality. Management maintains a system of internal accounting controls monitored by a corporate staff of professionally trained internal auditors who travel worldwide. This system is designed to provide reasonable assurance, at reasonable cost, that assets are safeguarded and that transactions and events are recorded properly. While the Company is organized on the principle of decentralized management, appropriate control measures are also evidenced by well-defined organizational responsibilities, management selection, development and evaluation processes, communicative techniques, financial planning and reporting systems and formalized procedures. It has always been the policy and practice of the Company to conduct its affairs ethically and in a socially responsible manner. This responsibility is characterized and reflected in the Company's Credo and Policy on Business Conduct that are distributed throughout the Company. Management maintains a systematic program to ensure compliance with these policies. PricewaterhouseCoopers LLP, the Company's independent auditor, is engaged to audit our financial statements. PricewaterhouseCoopers LLP maintains an understanding of our internal controls and conducts such tests and other auditing procedures considered necessary in the circumstances to express their opinion in the report that follows. The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with the independent auditor, management and internal auditors to review their work and confirm that they are properly discharging their responsibilities. In addition, the independent auditor, the General Counsel and the Vice President, Internal Audit are free to meet with the Audit Committee without the presence of management to discuss the results of their work and observations on the adequacy of internal financial controls, the quality of financial reporting and other relevant matters.

------Ralph S. Larsen Robert J. Darretta Chairman, Board of Directors Vice President, Finance and Chief Executive Officer and Chief Financial Officer

35 To the Shareowners and Board of Directors of Johnson & Johnson:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, consolidated statements of equity and consolidated statements of cash flows present fairly, in all material respects, the financial position of Johnson & Johnson and its subsidiaries at December 31, 2000 and January 2, 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

New York, New York January 22, 2001

36 (Dollars in Millions Except Per Share Figures) 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990

Sales to customers - Domestic $ 17,000 15,385 12,848 11,895 10,986 9,225 7,871 7,270 7,011 6,293 5,485 Sales to customers - International 12,139 12,086 11,147 10,935 10,769 9,696 7,930 6,944 6,868 6,207 5,812 Total sales 29,139 27,471 23,995 22,830 21,755 18,921 15,801 14,214 13,879 12,500 11,297 Cost of products sold 8,861 8,442 7,604 7,230 7,079 6,264 5,315 4,807 4,700 4,221 3,947 Selling, mkg admin expenses 10,875 10,503 9,027 8,756 8,427 7,491 6,375 5,807 5,758 5,188 4,508 Research expense 2,926 2,600 2,336 2,209 1,962 1,700 1,348 1,248 1,233 1,052 880 Purchased IPR&D 54 - 298 - - - 37 - - 70 115 Interest income (379) (246) (277) (213) (149) (125) (66) (84) (101) (100) (105) Interest expense, net capitalized 146 197 129 124 133 160 162 146 144 140 203(4) Other expense, net 67 222 143 137 283 171 76 32 132 87 260(4) Restructuring charge (33) - 553 ------22,517 21,718 19,813 18,243 17,735 15,661 13,247 11,956 11,866 10,658 9,808 Earnings bef prov taxes on income 6,622 5,753 4,182 4,587 4,020 3,260 2,554 2,258 2,013 1,842 1,489 Provision for taxes on income 1,822 1,586 1,179 1,276 1,138 893 631 518 514 510 434 Earnings before cumulative effect of accounting changes 4,800 4,167 3,003 3,311 2,882 2,367 1,923 1,740 1,499 1,332 1,055 Cumulative effect of accounting changes (net of tax) ------(595) - - Net earnings $4,800 4,167 3,003 3,311 2,882 2,367 1,923 1,740 904 1,332 1,055 Percent of sales to customers 16.5 15.2 12.5(3) 14.5 13.2 12.5 12.2 12.2 6.5(1) 10.7 9.3(2) Diluted net earnings per share of common stock* $3.40 2.94 2.12 2.34 2.05 1.75 1.45 1.30 .66 .97 .77 Percent return on average shareowners' equity 27.4 27.5 22.3(3) 27.4 28.0 28.5 29.4 31.4 16.1(1) 24.3 22.6(2) Percent increase (decrease) over previous year: Sales to customers 6.1 14.5 5.1 4.9 15.0 19.7 11.2 2.4 11.0 10.6 14.9 Diluted net earnings per share of common stock 15.6(3) 38.7(3) (9.4)(3) 14.1 17.1 20.7 11.5 97.0(1)(32.0)(1)26.0(2)(2.5)(2) Supplementary expense data: Cost of materials and services(5) $ 13,968 13,789 11,736 11,600 11,278 9,903 7,983 7,060 6,875 6,342 5,757 Total employment costs 6,863 6,350 5,755 5,446 5,324 4,750 4,318 4,114 4,109 3,561 3,229 Depreciation and amortization 1,515 1,444 1,285 1,082 1,023 869 738 635 565 497 477 Maintenance and repairs(6) 322 317 296 266 282 254 219 203 211 204 186 Total tax expense(7) 2,508 2,237 1,821 1,850 1,694 1,415 1,101 945 936 904 782 Total tax expense per share(7)* 1.80 1.61 1.31 1.34 1.23 1.06 .84 .71 .70 .67 .58 Supplementary balance sheet data: Property, plant and equipment, net $ 6,971 6,719 6,395 5,887 5,713 5,264 4,980 4,491 4,233 3,784 3,346 Additions to property, plant and equipment 1,646 1,728 1,545 1,415 1,378 1,261 942 977 1,121 1,018 878 Total assets 31,321 29,163 27,292 22,108 20,603 18,379 16,203 12,706 12,389 11,073 9,798 Long-term debt 2,037 2,450 1,729 1,181 1,465 2,339 2,431 1,731 1,603 1,560 1,358 Operating cash flow $ 6,563 5,760 4,991 4,396 3,878 3,325 2,910 2,126 2,039 1,538 1,615 Common stock information* Dividends paid per share $ 1.24 1.09 .97 .85 .735 .64 .565 .505 .445 .385 .33 Shareowners' equity per share $ 13.52 11.67 10.13 9.26 8.23 6.95 5.56 4.36 4.01 4.32 3.77 Market price per share (year-end close) $ 105.06 93.25 83.88 64.88 50.50 42.75 27.38 22.38 25.25 28.63 17.88 Average shares outstanding (millions) - basic 1,390.3 1,390.1 1,389.8 1,380.6 1,375.1 1,329.1 1,317.8 1,330.0 1,344.2 1,354.1 1,348.8 - diluted 1,417.4 1,418.2 1,417.2 1,415.4 1,402.7 1,349.8 1,329.0 1,342.1 1,359.5 1,379.9 1,364.3 Shareowners of record (thousands) 164.2 169.4 168.9 160.0 142.0 117.7 109.7 101.7 90.1 74.4 66.2 Employees (thousands) 98.5 97.8 94.3 91.1 89.8 82.8 82.1 82.1 85.8 84.1 83.1

* Adjusted to reflect the 1996 two-for-one stock split.

(1) Excluding the cumulative effect of accounting changes of $595 million. -D1992 earnings percent of sales to customers before accounting changes is 10.8%. -D1992 earnings percent return on average shareowners' equity before accounting changes is 25.4%. -D1993 diluted net earnings per share percent increase over prior year before accounting changes is 18.2%; 1992 diluted net earnings per share increase over prior year is 13.4%.

(2) Excluding Latin America non-recurring charges of $125 million. -D1990 net earnings percent of sales to customers before non-recurring charges is 10.4%. -D1990 percent return on average shareowners' equity before non-recurring charges is 24.9%. -D1991 diluted net earnings per share percent increase over prior year before non-recurring charges is 12.8%; 1990 diluted net earnings per share increase over prior year is 8.9%.

(3) Excluding Restructuring and In-Process Research and Development charges of $697 million. -D1998 earnings percent of sales to customers before special charges is 15.4%. -D1998 diluted net earnings per share before special charges is $2.61. -D1998 percent return on average shareowners' equity before special charges is 26.8%. -D1998 diluted net earnings per share increase over prior year before special charges is 11.5%; -D1998 cost of products sold includes $60 million of inventory write-offs for restructuring; -D 1999 excluding special charges diluted net earnings per share percent increase over prior year is 13.8% -D 2000 excluding special charges diluted net earnings per share increase over prior year is 15.2%.

(4) Includes Latin America non-recurring charge of $36 million for the liquidation of Argentine debt and $104 million write-down in other expenses for permanent impairment of certain assets and operations in Latin America.

(5) Net of interest and other income.

(6) Also included in cost of materials and services category. (7) Includes taxes on income, payroll, property and other business taxes.

(8) All periods have been restated to include the effects of the Centocor merger. 1

EXHIBIT 21

SUBSIDIARIES

Johnson & Johnson, a New Jersey corporation, has the domestic and international subsidiaries shown below. Certain domestic subsidiaries and international subsidiaries are not named because they are not significant in the aggregate. Johnson & Johnson has no parent.

JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION ------

Domestic Subsidiaries: AngioGuard, Inc...... Delaware Atrionix, Inc...... California Biosense, Inc...... Delaware Biosense Webster, Inc...... California Centocor, Inc...... Pennsylvania Codman & Shurtleff, Inc...... New Jersey Cordis Corporation...... Florida Cordis International Corporation...... Delaware DePuy, Inc...... Delaware DePuy ACE Medical Co...... California DePuy AcroMed, Inc...... Ohio DePuy AcroMed Sales Limited Partnership...... Massachusetts DePuy Finance LLC...... Delaware DePuy Orthopaedics, Inc...... Indiana DePuy Orthopaedic Technology, Inc...... Delaware Ethicon Endo-Surgery, Inc...... Ohio Ethicon Endo-Surgery Services, L.P...... Texas Ethicon, Inc...... New Jersey Ethicon LLC...... Delaware Independence Technology, L.L.C...... New Jersey Innovasive Devices, Inc...... Massachusetts Janssen Finance Company...... Florida Janssen Inc...... Delaware Janssen Ortho LLC...... Delaware Janssen Pharmaceutica Inc...... Pennsylvania Janssen Pharmaceutica

Products, L.P...... New Jersey Janssen Products, Inc...... Delaware Johnson & Johnson Consumer Companies, Inc...... New Jersey Johnson & Johnson Development Corporation...... New Jersey Johnson & Johnson Finance Corporation...... New Jersey Johnson & Johnson Health Care Systems Inc...... New Jersey Johnson & Johnson International...... New Jersey Johnson & Johnson Japan Inc...... New Jersey Johnson & Johnson - Merck Consumer Pharmaceuticals Co. ... New Jersey Johnson & Johnson (Middle East) Inc...... New Jersey Johnson & Johnson Professional Co. (P.R.) Inc...... Delaware Johnson & Johnson Services, Inc...... New Jersey Johnson & Johnson Vision Care, Inc...... Florida Joint Medical Products Corporation...... Delaware

2

JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION ------

JJHC, Inc...... Delaware LifeScan, Inc...... California LifeScan LLC...... Delaware McNeil Consumer Brands, Inc...... New Jersey McNEIL-PPC, Inc...... New Jersey NDC Investment Corporation...... Delaware Neutrogena Corporation...... Delaware Nitinol Development Corporation...... California Noramco, Inc...... Georgia OMJ Pharmaceuticals, Inc...... Delaware Ortho Biologics LLC...... Delaware Ortho Biotech Holding Corp...... Delaware Ortho Biotech Inc...... New Jersey Ortho-Clinical Diagnostics, Inc...... New York Ortho-McNeil Finance Co...... Florida Ortho-McNeil Pharmaceutical, Inc...... Delaware Reserve Corporation...... Florida Therakos, Inc...... Florida International Subsidiaries: Abello Farmacia SL...... Italy Apsis...... France Centra Medicamenta OTC SRL...... Italy AG...... Switzerland Cilag AG International...... Switzerland Cilag De Mexico, S.A. de C.V...... Mexico Cilag Farmaceutica Ltda...... Brazil Cilag Holding AG...... Switzerland Cordis Europa N.V...... Netherlands Cordis Medizinische Apparate GmbH ...... Germany Cordis S.A...... France Cordis S.a.r.l...... Switzerland DePuy Bioland S.A...... France DePuy France S.A...... France DePuy International Ltd...... United Kingdom DePuy Intl. (Holdings) Ltd...... United Kingdom DePuy (Ireland) Limited...... Ireland DePuy Japan Inc...... Japan DePuy Orthopedic GmbH...... Germany DePuy Orthopedie S.A...... France Ethicon Beteiligungs Gesellschaft mbH...... Germany Ethicon Endo-Surgery (Europe) GmbH ...... Germany Ethicon GmbH...... Germany Ethicon Ireland Limited...... Ireland Ethicon Limited...... Scotland Ethicon SAS...... France Ethicon S.p.A...... Italy Ethnor (Proprietary) Limited...... South Africa

3

JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION ------

Greiter AG...... Switzerland Greiter (International) AG...... Switzerland Impulse Dynamics (Ireland) Limited...... Ireland Janssen Animal Health BVBA...... Belgium Janssen-Cilag A/S...... Norway Janssen-Cilag AB...... Sweden Janssen-Cilag AG...... Switzerland Janssen-Cilag A/S...... Denmark Janssen-Cilag B.V...... Netherlands Janssen-Cilag Egypt Ltd...... Egypt Janssen-Cilag, C.A...... Venezuela Janssen-Cilag Farmaceutica Ltda...... Brazil Janssen-Cilag Farmaceutica, Ltda...... Portugal Janssen-Cilag Ltd...... United Kingdom Janssen-Cilag N.V...... Belgium Janssen-Cilag OY...... Finland Janssen-Cilag Pharmaceutical S.A.C.I...... Greece Janssen-Cilag Pharma GmbH...... Austria Janssen-Cilag Pty. Limited...... Australia Janssen-Cilag S.A...... Spain Janssen-Cilag S.A...... France Janssen-Cilag S.p.A...... Italy Janssen Farmaceutica, S.A. de C.V...... Mexico Janssen-Cilag GmbH...... Germany Janssen-Cilag International N.V...... Belgium Janssen International C.V...... Belgium Janssen Korea, Ltd...... Korea Janssen-Kyowa Co., Ltd...... Japan Janssen Ortho Inc...... Canada Janssen Pharmaceutica Limited...... Thailand Janssen Pharmaceutica N.V...... Belgium Janssen Pharmaceutica (Pty) Limited...... South Africa Janssen Pharmaceutical Limited...... Ireland J-C Healthcare Ltd...... Israel JHC Nederland B.V...... Netherlands J&J/MSD Consumer Pharmaceuticals S.A.S...... France Johnson & Johnson AB...... Sweden Johnson & Johnson AG...... Switzerland Johnson & Johnson A/S...... Denmark Johnson & Johnson S.A. de C.V...... Mexico Johnson & Johnson de Argentina, S.A.C.e I...... Argentina Johnson & Johnson (China) Investment Co., Ltd...... China Johnson & Johnson (China) Ltd...... China Johnson & Johnson Consumer France S.A.S...... France Johnson & Johnson Consumer N.V./S.A...... Belgium Johnson & Johnson de Colombia S.A...... Colombia Johnson & Johnson del Ecuador S.A...... Ecuador

4

JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION ------

Johnson & Johnson (Egypt) S.A.E...... Egypt Johnson & Johnson Finance Limited...... United Kingdom Johnson & Johnson Financial Services GmbH...... Germany Johnson & Johnson GmbH...... Germany Johnson & Johnson Gesellschaft m.b.H...... Austria Johnson & Johnson Hellas S.A...... Greece Johnson & Johnson Holding AB...... Sweden Johnson & Johnson Holding GmbH...... Germany Johnson & Johnson (Hong Kong) Limited...... Hong Kong Johnson & Johnson Inc...... Canada Johnson & Johnson Industria e Comercio Ltda...... Brazil Johnson & Johnson International Financial Services Ireland Company...... Johnson & Johnson International S.A...... France Johnson & Johnson Investments Limited...... United Kingdom Johnson & Johnson (Ireland) Limited...... Ireland Johnson & Johnson (Kenya) Limited...... Kenya Johnson & Johnson Kft...... Hungary Johnson & Johnson K.K...... Japan Johnson & Johnson Korea, Ltd...... Korea Johnson & Johnson Lda...... Portugal Johnson & Johnson Ltd...... United Kingdom Johnson & Johnson Limited ...... India Johnson & Johnson MSD Consumer Pharmaceuticals, S.A.S..... France Johnson & Johnson Management Ltd...... United Kingdom Johnson & Johnson Medical B.V...... Netherlands Johnson & Johnson Medical (China) Ltd...... China Johnson & Johnson Medical G.m.b.H...... Austria Johnson & Johnson Medical K.K...... Japan Johnson & Johnson Medical Korea Limited...... Korea Johnson & Johnson Medical Limited...... United Kingdom Johnson & Johnson Medical Mexico, S.A. de C.V...... Mexico Johnson & Johnson Medical NV/SA...... Belgium Johnson & Johnson Medical Pty. Ltd...... Australia Johnson & Johnson Medical S.A...... Argentina Johnson & Johnson Morocco S.A...... Morocco Johnson & Johnson (New Zealand) Limited...... New Zealand Johnson & Johnson Pacific Pty. Ltd...... Australia Johnson & Johnson Pakistan (Private) Limited...... Pakistan Johnson & Johnson (Philippines), Inc...... Philippines Johnson & Johnson Poland Sp. z o.o...... Poland Johnson & Johnson (Private) Limited...... Zimbabwe Johnson & Johnson Products Inc...... Canada Johnson & Johnson Produtos Profissionais Ltda...... Brazil Johnson & Johnson Professional Products (Proprietary) South Africa Ltd...... Johnson & Johnson (Proprietary) Limited...... South Africa Johnson & Johnson Pte. Ltd...... Singapore Johnson & Johnson Pty. Limited...... Australia

5

JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION ------

Johnson & Johnson Research Pty. Limited...... Australia Johnson & Johnson, S.A. de C.V...... Mexico Johnson & Johnson S.A...... Spain Johnson & Johnson SDN. BHD...... Malaysia Johnson & Johnson S.p.A...... Italy Johnson & Johnson, Spol.s.r.o...... Czech Republic Johnson & Johnson Taiwan Ltd...... Taiwan Johnson & Johnson (Thailand) Ltd...... Thailand Johnson & Johnson Vision Products AB...... Sweden Johnson & Johnson Vision Products (Ireland) Ltd...... Ireland Johnson & Johnson (Zambia) Limited...... Zambia Laboratoires Martin Johnson & Johnson -- MSD S.A.S...... France Laboratoires Polive S.N.C...... France Lifescan Canada Ltd...... Canada McNeil Consumer Nutritionals Europe...... Switzerland Medos S.A...... Switzerland Neutrogena Limited...... England Neutrogena Provence S.A.R.L...... France OMJ Ireland Limited...... Ireland OMJ Manufacturing Ltd...... Ireland Ortho-Clinical Diagnostics European Support Center...... France Ortho-Clinical Diagnostics GmbH...... Germany Ortho-Clinical Diagnostics K.K...... Japan Ortho-Clinical Diagnostics...... United Kingdom Ortho-Clinical Diagnostics S.A...... Spain Ortho-Clinical Diagnostics N.V...... Belgium Ortho-Clinical Diagnostics S.A...... France Ortho-Clinical Diagnostics S.p.A...... Italy Pharma Argentina S.A...... Argentina P.T. Johnson & Johnson Indonesia...... Indonesia Shanghai Johnson & Johnson Pharmaceuticals, Ltd...... China Shanghai Johnson & Johnson Ltd...... China Surgikos, S.A. de C.V...... Mexico Tasmanian Alkaloids Pty. Ltd...... Australia The R.W. Johnson Pharmaceutical Research Institute...... Switzerland Vania Expansion, S.N.C...... France Woelm Pharma GmbH & Co...... Germany Xian-Janssen Pharmaceutical Limited...... China

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EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements of Johnson & Johnson on Form S-8 (File No. 33-52252, 33-40294, 33-40295, 33-32875, 033-59009, 333-38055, 333-40681, 333-26979 and 333-39238), Form S-3 (File No. 333-91349, 33-55977 and 33-47424) and Form S-4 (File No. 33-57583, 333-00391, 333-38097, 333-30081, 333-86611, 333-94367 and 333-56034) and related Prospectuses, of our reports dated January 22, 2001, on our audits of the consolidated financial statements and financial statement schedule of Johnson & Johnson and subsidiaries as of December 31, 2000 and January 2, 2000, and for each of the three years in the period ended December 31, 2000, which reports are included or incorporated by reference in this Annual Report on Form 10-K.

[PricewaterhouseCooper LLP]

New York, New York March 29, 2001

1

EXHIBIT 99(b)

CAUTIONARY STATEMENT PURSUANT TO PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 -- "SAFE HARBOR" FOR FORWARD-LOOKING STATEMENTS

The Company may from time to time make certain forward-looking statements in publicly-released materials, both written and oral. Forward-looking statements do not relate strictly to historical or current facts and anticipate results based on management's plans that are subject to uncertainty. Forward-looking statements may be identified by the use of words like "plans," "expects," "will," "anticipates," "estimates" and other words of similar meaning in conjunction with, among other things, discussions of future operations, financial performance, the Company's strategy for growth, product development, regulatory approvals, market position and expenditures.

Forward-looking statements are based on current expectations of future events. The Company cannot guarantee that any forward-looking statement will be accurate, although the Company believes that it has been reasonable in its expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from the Company's expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. Furthermore, the Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments.

Some important factors that could cause the Company's actual results to differ from the Company's expectations in any forward-looking statements are as follows:

Economic factors, including inflation and fluctuations in interest rates and foreign currency exchange rates and the potential effect of such fluctuations on revenues, expenses and resulting margins;

Competitive factors, including technological advances achieved and patents attained by competitors and generic competition as patents on the Company's products expire;

Domestic and foreign health care changes resulting in pricing pressures, including the continued consolidation among health care providers, trends toward managed care and health care cost containment and government laws and regulations relating to sales and promotion, reimbursement and pricing generally;

Government laws and regulations, affecting domestic and foreign operations, including those relating to trade, monetary and fiscal policies, taxes, price controls, regulatory approval of new products and licensing;

Competition in research, involving the development and the improvement of new and existing products and processes, is particularly significant and results from time to time in product and process obsolescence. The development of new and improved products is important to the Company's success in all areas of its business;

Difficulties inherent in product development, including the potential inability to successfully continue technological innovation, complete clinical trials, obtain regulatory approvals in the United States and abroad, gain and maintain market approval of products and the possibility of encountering infringement claims by competitors with respect to patent or other intellectual property rights which can preclude or delay commercialization of a product;

Significant litigation adverse to the Company including product liability claims, patent infringement claims, and antitrust claims, as well as the arbitration proceeding filed by Amgen to terminate U.S. license rights;

Product efficacy or safety concerns resulting in product recalls, regulatory action on the part of the FDA (or foreign counterparts) or declining sales;

2

The impact of business combinations, including acquisitions and divestitures, both internally for the Company and externally in the pharmaceutical and health care industries; and

Issuance of new or revised accounting standards by the American Institute of Certified Public Accountants, the Financial Accounting Standards Board or the Securities and Exchange Commission.

The foregoing list sets forth many, but not all, of the factors that could impact upon the Company's ability to achieve results described in any forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties. The Company notes the factors on this list as permitted by the Private Securities Litigation Reform Act of 1995.