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## To Our Shareholders 

2010  will be remembered as a year in which our company was severely tested on numerous fronts. Yet our people continued the hallmark work of Johnson & Johnson: finding new ways to care for the health and well-being of people around the world. 

There were challenges we fully expected, particularly those related to the continuing global economic downturn and loss of patent exclusivity on some of our major pharmaceutical products. And there was a challenge we did not expect: the painful and disappointing experience of the McNeil Consumer Healthcare product recalls. 

Despite the trying moments of 2010 , our people introduced new products, advanced our pipelines and expanded businesses in emerging markets. We remain steeped in our tradition of caring for others, driven by values deeply rooted in Our Credo. While we face near-term business pressures, we enter 2011  on a strong foundation to achieve long-term sustainable growth. 

## 2010 RESULTS 

We continued to deliver earnings growth in 2010,  with many of our businesses performing well in light of the macroeconomic conditions. Several factors impacted the health care industry in general and Johnson & Johnson. Medical devices and consumer businesses felt the effects of a continued economic slowdown. In health care, we anticipate continuing to feel those effects in 2011 . There were costs associated with U.S. health care reform, which was implemented early in the year. In addition, we faced lost sales and remediation costs resulting from our consumer over-the-counter product recalls, as well as generic competition in our pharmaceuticals business. 

Despite these headwinds, we continued to grow earnings 

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## CHAIRMAN’S LETTER 

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while maintaining investments for future revenue and earnings growth. With these investments, we are developing a number of exciting new products that have the potential to address significant unmet health care needs. 

Worldwide sales for 2010  were $ 61 . 6  billion, a decrease of 1 . 3  percent operationally (reflecting the challenges noted as well as the 53 rd accounting week included in the 2009  results). Adjusted earnings were $ 13 . 3  billion 1 , an increase of 2 . 9  percent despite a sales decline. Adjusted earnings per share increased 2 . 8  percent 1 . 

In a tough global economy, we maintained our financial discipline. We generated free cash flow of approximately $ 14  billion 2  and held our AAA credit rating. We also executed a $ 1 . 1  billion debt offering at the lowest interest rate for long-term corporate debt in history. 

We had a one-year decline in total shareholder return of about half a percent. Over longer time frames, we continue to compare favorably to most stock indices, beating all major sector performance benchmarks on a three-year and 10 -year basis. 

The one-year decline in shareholder return was disappointing, but reflects both the uncertainty around health care reform that hampered many in our sector and the impact of our consumer product recalls. 

## MCNEIL CONSUMER HEALTHCARE 

Our people dedicate themselves to providing the most trusted brands and high-quality products to help others around the world. 

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