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Common stock, stock option plans and stock compensation agreements | 12 Months Ended
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Dec. 29, 2024
Share-Based Payment Arrangement [Abstract] |
Common stock, stock option plans and stock compensation agreements | Common stock, stock option plans and stock compensation agreements At December 29, 2024, the Company had one active stock-based compensation plan, the 2022 Long-Term Incentive Plan. The shares outstanding are for contracts under the Company's 2012 Long-Term Incentive Plan and 2022 Long-Term Incentive Plan. The 2012 Long-Term Incentive Plan expired on April 26, 2022. All awards (stock options, restricted shares units and performance share units) granted subsequent to that date were under the 2022 Long-Term Incentive Plan. Under the 2022 Long-Term Incentive Plan, the Company may issue up to 150 million shares of common stock, of which up to 110 million shares of common stock may be issued subject to stock options or stock appreciation rights and up to 40 million shares of common stock may be issued subject to full value awards. Awards will generally be counted on a 1-for-1 basis against the share reserve, provided that if more than 40 million full value awards are granted, each full value award in excess of 40 million will be counted on a 5-for-1 basis against the share reserve. Shares available for future grants under the 2022 Long-Term Incentive Plan were 111 million at the end of fiscal year 2024. The compensation cost that has been charged against income for these plans was $1,176 million, $1,087 million and $1,028 million for fiscal years 2024, 2023 and 2022, respectively. The total income tax benefit recognized in the income statement for share-based compensation costs was $251 million, $221 million and $177 million for fiscal years 2024, 2023 and 2022, respectively. The Company also recognized additional income tax benefits of $94 million, $126 million and $267 million for fiscal years 2024, 2023 and 2022, respectively, for which options were exercised or restricted shares were vested. The total unrecognized compensation cost was $1,002 million, $907 million and $866 million for fiscal years 2024, 2023 and 2022, respectively. The weighted average period for this cost to be recognized was 1.81 years, 1.80 years and 1.80 years for fiscal years 2024, 2023, and 2022, respectively. Share-based compensation costs capitalized as part of inventory were insignificant in all periods. The Company settles employee benefit equity issuances with treasury shares. Treasury shares are replenished through market purchases throughout the year for the number of shares used to settle employee benefit equity issuances. Stock options Stock options expire 10 years from the date of grant and vest over service periods that range from 6 months to 4 years. Options granted under the 2012 Long-Term Incentive Plan were granted at the average of the high and low prices of the Company’s Common Stock on the New York Stock Exchange on the date of grant. Options granted under the 2022 Long-Term incentive Plan were granted at the closing price of the Company’s Common Stock on the New York Stock Exchange on the date of grant. The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. For 2024, 2023, and 2022 grants, expected volatility represents a blended rate of 10-year weekly historical overall volatility rate, and a 5-week average implied volatility rate based on at-the-money traded Johnson & Johnson options with a life of 2 years. For all grants, historical data is used to determine the expected life of the option. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant. The average fair value of options granted was $27.67, $27.85 and $23.23, in fiscal years 2024, 2023 and 2022, respectively. The fair value was estimated based on the weighted average assumptions of:
| 2024 |  | 2023 |  | 2022
Risk-free rate | 4.15 | % |  | 3.74 | % |  | 1.98 | %
Expected volatility | 17.85 | % |  | 17.69 | % |  | 18.00 | %
Expected life (in years) | 7.0 |  | 7.0 |  | 7.0
Expected dividend yield | 3.10 | % |  | 2.90 | % |  | 2.70 | %
A summary of option activity under the Plan as of December 29, 2024, is presented below:
(Shares in Thousands) |  | Outstanding Shares |  | Weighted Average Exercise Price |  | Aggregate Intrinsic Value (Dollars in Millions)
Shares at December 31, 2023 |  | 112,238 |  | $139.88 |  | $2,239
Options granted |  | 13,917 |  | 157.92 |  |
Options exercised |  | (10,771) |  | 107.06 |  |
Options canceled/forfeited |  | (2,755) |  | 162.45 |  |
Shares at December 29, 2024 |  | 112,629 |  | $144.69 |  | $1,129
The total intrinsic value of options exercised was $560 million, $729 million and $1,228 million in fiscal years 2024, 2023 and 2022, respectively. The following table summarizes stock options outstanding and exercisable at December 29, 2024:
(Shares in Thousands) |  | Outstanding |  | Exercisable
Exercise Price Range |  | Options |  | Average Life(1) |  | Weighted Average Exercise Price |  | Options |  | Weighted Average Exercise Price
$100.06 - $101.87 |  | 13,016 |  | 0.8 |  | $101.29 |  | 13,016 |  | $101.29
$115.67 - $129.51 |  | 18,252 |  | 2.6 |  | 122.49 |  | 18,252 |  | 122.49
$131.94 - $151.41 |  | 25,624 |  | 4.6 |  | 142.87 |  | 25,624 |  | 142.87
$157.92 - $162.75 |  | 26,391 |  | 8.6 |  | 160.33 |  | 4,269 |  | 162.75
$164.62 - $165.89 |  | 29,346 |  | 6.6 |  | 165.29 |  | 13,522 |  | 164.64
|  | 112,629 |  | 5.3 |  | $144.69 |  | 74,683 |  | $135.72
(1)Average contractual life remaining in years. Stock options outstanding at December 31, 2023 and January 1, 2023 were 112,238 and an average life of 5.5 years and 118,672 and an average life of 5.8 years, respectively. Stock options exercisable at December 31, 2023 and January 1, 2023 were 66,998 at an average price of $123.39 and 63,661 at an average price of $113.06, respectively. Restricted share units and performance share units The Company grants restricted share units which vest over service periods that range from 6 months to 3 years. The Company also grants performance share units, which are paid in shares of Johnson & Johnson Common Stock after the end of a three-year performance period. Performance shares were granted with two equally-weighted goals that directly align with or help drive long-term total shareholder return: adjusted operational earnings per share and relative total shareholder return. The number of shares actually earned at the end of the three-year period will vary, based only on actual performance, from 0% to 200% of the target number of performance share units granted. A summary of the restricted share units and performance share units activity under the Plans as of December 29, 2024 is presented below:
(Shares in Thousands) |  | Outstanding Restricted Share Units |  | Outstanding Performance Share Units
Shares at December 31, 2023 |  | 12,938 |  | 2,037
Granted |  | 6,331 |  | 906
Issued |  | (5,454) |  | (808)
Canceled/forfeited/adjusted |  | (774) |  | (122)
Shares at December 29, 2024 |  | 13,041 |  | 2,013
The average fair value of the restricted share units granted was $147.51, $152.63 and $153.67 in fiscal years 2024, 2023 and 2022, respectively, using the fair market value at the date of grant. The fair value of restricted share units was discounted for dividends, which are not paid on the restricted share units during the vesting period. The fair value of restricted share units issued was $833 million, $605 million and $591 million in 2024, 2023 and 2022, respectively. The weighted average fair value of the performance share units granted was $133.76, $145.17 and $170.46 in fiscal years 2024, 2023 and 2022, calculated using the weighted average fair market value for each of the component goals at the date of grant. The fair values for the earnings per share goals of each performance share unit were estimated on the date of grant using the fair market value of the shares at the time of the award discounted for dividends, which are not paid on the performance share units during the vesting period. The fair value for the relative total shareholder return goal of each performance share unit was estimated on the date of grant using the Monte Carlo valuation model. The fair value of performance share units issued was $146 million, $140 million and $94 million in fiscal years 2024, 2023 and 2022, respectively.

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