Johnson and Johnson 2015 Annual Report Download - page 76

In 2012, the Company completed the acquisition of Synthes, Inc. for a purchase price of $20.2 billion in cash and stock.
In connection with the acquisition of Synthes, Inc. the Company entered into two accelerated share repurchase (ASR)
agreements. In 2013, the Company settled the remaining liabilities under the ASR agreements. While the Company
believes that the transactions under each ASR agreement and a series of related internal transactions were consummated
in a tax efficient manner in accordance with applicable law, it is possible that the Internal Revenue Service could assert
one or more contrary positions to challenge the transactions from a tax perspective. If challenged, an amount up to the
total purchase price for the Synthes shares could be treated as subject to applicable U.S. tax at approximately the
statutory rate to the Company, plus interest.
Supplemental pro forma information for 2015, 2014 and 2013 in accordance with U.S. GAAP standards related to
business combinations, and goodwill and other intangible assets, is not provided, as the impact of the aforementioned
acquisitions did not have a material effect on the Company’s results of operations, cash flows or financial position.
During 2015, the Company divestitures included: The Cordis business to Cardinal Health; the SPLENDA®brand to
Heartland Food Products Group and the U.S. license rights to NUCYNTA®(tapentadol), NUCYNTA®ER (tapentadol
extended-release tablets), and NUCYNTA®(tapentadol) oral solution. In 2015, the pre-tax gains on the divestitures of
businesses were approximately $2.6 billion. As of January 3, 2016, assets held for sale were not material.
During 2014, the Company divestitures included: The Ortho-Clinical Diagnostics business to The Carlyle Group; the K-Y®
brand to Reckitt Benckiser Group PLC in the U.S. and certain other markets; and the BENECOL®brand to Raisio plc. In
2014, the pre-tax gains on the divestitures of businesses were approximately $2.4 billion. The Company completed the
divestiture of its Ortho-Clinical Diagnostics business to The Carlyle Group for approximately $4.0 billion and the Company
recorded a pre-tax gain of approximately $1.9 billion. Ortho-Clinical Diagnostics’ results are included in the Company’s
Medical Devices segment.
During 2013, the Company divestitures included: women’s sanitary protection products in the U.S., Canada and the
Caribbean to Energizer Holdings, Inc.; Rolaids®to Chattem, Inc.; DORIBAX®rights to Shionogi; and the sale of certain
consumer brands and certain pharmaceutical products. In 2013, the pre-tax gains on the divestitures of businesses were
$0.1 billion.
21. Legal Proceedings
Johnson & Johnson and certain of its subsidiaries are involved in various lawsuits and claims regarding product liability,
intellectual property, commercial and other matters; governmental investigations; and other legal proceedings that arise
from time to time in the ordinary course of their business.
The Company records accruals for loss contingencies associated with these legal matters when it is probable that a
liability will be incurred and the amount of the loss can be reasonably estimated. As of January 3, 2016, the Company has
determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The
Company has accrued for these matters and will continue to monitor each related legal issue and adjust accruals as might
be warranted based on new information and further developments in accordance with ASC 450-20-25. For these and
other litigation and regulatory matters discussed below for which a loss is probable or reasonably possible, the Company
is unable to estimate the possible loss or range of loss beyond the amounts already accrued. Amounts accrued for legal
contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on
estimates and assumptions. The ability to make such estimates and judgments can be affected by various factors,
including whether damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery
has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are
significant facts in dispute; or there are numerous parties involved.
In the Company’s opinion, based on its examination of these matters, its experience to date and discussions with counsel,
the ultimate outcome of legal proceedings, net of liabilities accrued in the Company’s balance sheet, is not expected to
have a material adverse effect on the Company’s financial position. However, the resolution of, or increase in accruals for,
one or more of these matters in any reporting period may have a material adverse effect on the Company’s results of
operations and cash flows for that period.
Product Liability
Certain subsidiaries of Johnson & Johnson are involved in numerous product liability claims and lawsuits involving multiple
products. Claimants in these cases seek substantial compensatory and, where available, punitive damages. While these
subsidiaries believe they have substantial defenses, it is not feasible to predict the ultimate outcome of litigation. The
64 •Johnson & Johnson 2015 Annual Report