FY’23: Net Sales Increased 3.3% to $15.4
billion with Organic Growth1 of 5.0%
FY’23: Diluted Earnings per Share of $0.90;
Adjusted Diluted Earnings per Share1 of $1.29
Q4’23: Net Sales Decreased (2.7)% to $3.7
billion with Organic Growth1 of (2.4)%
Q4’23: Diluted Earnings per Share of $0.17;
Adjusted Diluted Earnings per Share1 of $0.31
Kenvue Inc. (NYSE: KVUE) (“Kenvue”), the world’s largest
pure-play consumer health company by revenue, today announced
financial results for the fiscal full year and fourth quarter ended
December 31, 2023.
“2023 was a transformational year for Kenvue as we began
delivering on our long-term value creation algorithm centered
around profitable growth, durable cash flow generation and
disciplined capital allocation,” said Thibaut Mongon, Chief
Executive Officer. “We enter 2024 with clear strategic priorities
as an independent Kenvue, including strengthened plans in our U.S.
Skin Health and Beauty business. Looking ahead we’re focused on
reaching more consumers, reinventing our ways of working to invest
more in our brands, and fostering a culture that rewards
performance and impact in our organization.”
Full Year and Fourth Quarter 2023
Financial Results
Net Sales & Organic Growth
Full year Net sales increased 3.3% vs a (0.7)% decrease in the
prior year period. Organic growth1 increased 5.0% vs a 3.8%
increase in the prior year. Increases in Net sales and Organic
growth were comprised of 7.7% value realization (defined as price
including mix), and 2.7% volume declines. Volume performance
includes the impacts of non-recurring product discontinuations,
including portfolio rationalization initiatives in 2022 and the
suspension of personal care products in Russia. Excluding these
non-recurring items, volume was down slightly vs the prior
year.
Fourth quarter Net sales decreased 2.7% vs a 0.9% increase in
the prior year period. Organic growth declined 2.4% vs a 6.2%
increase in the prior year. Net sales and Organic growth were
comprised of 5.8% value realization and 8.2% volume declines.
Approximately five points of the volume performance are
attributable to unique dynamics within the fourth quarter 2023
including lapping an early and strong start to the cold, cough, and
flu season last year, 2022 product discontinuations, and customer
inventory reductions. The remaining approximately three points of
volume performance are mainly due to softer than anticipated
performance in the U.S. Skin Health and Beauty business and
continued softness in China.
Gross Profit Margin & Adjusted
Operating Income Margin
Full year Gross profit margin was 56.0% vs 55.4% in the prior
year period, on a reported basis. Adjusted gross profit margin1 was
58.4% vs 58.1% in the prior year period. Margin expansion was
driven by favorable value realization and continued global supply
chain efficiency initiatives partially offset by the impact of
sustained higher cost inflation and approximately 110 basis points
of foreign currency headwinds.
Fourth quarter Gross profit margin was 55.7% vs 54.3% in the
prior year period. Adjusted gross profit margin was 59.5% vs 57.3%
in the prior year period. Margin expansion was driven by favorable
value realization, non-recurring separation-related benefits, and
continued global supply chain efficiency initiatives, partially
offset by approximately 70 basis point of foreign currency
headwinds.
Full year Operating income margin was 16.3% vs 17.9% in the
prior year period and fourth quarter operating income margin was
12.5% vs 14.1% in the prior year period. For both full year and
fourth quarter, Operating income margin decrease vs prior year
period was driven by Separation-related costs.
Full year Adjusted operating income margin1 was 22.4% in the
current and prior year period as strong Adjusted gross profit
margin performance offset incremental ongoing public company costs
not incurred last year and the impact of foreign currency
headwinds.
Fourth quarter Adjusted operating income margin was 21.8% vs
19.9% in the prior year period as strong Adjusted gross profit
margin performance and non-recurring separation-related benefits
was partially offset by the absorption of public company costs and
the impact of foreign currency headwinds.
Interest expense, net &
Taxes
Interest expense, net was $250 million for the year on a
reported basis, and $96 million for fourth quarter 2023. Adjusted
interest expense, net1 was $283 million for the year. The full year
2023 Effective tax rate was 24.0% vs 21.7% in the prior year on a
reported basis. The increase in the reported Effective tax rate is
the result of higher U.S. tax on foreign sourced income and
limitations on the Company’s ability to utilize its foreign tax
credits in the full year period 2023. The Adjusted effective tax
rate1 was 23.4% vs 23.9% in the prior year period. The decrease in
the Adjusted effective tax rate is due primarily to tax reserve
releases due to statute of limitations expiring.
The fourth quarter Effective tax rate was 8.4% vs 29.5% in the
prior year period. The Adjusted effective tax rate was 15.8% vs
31.4% in the prior year period. The decrease in reported Effective
tax rate and Adjusted effective tax rate is primarily the result of
lapping tax law changes negatively impacting the prior year, tax
reserve releases due to statute of limitations expiring, and the
benefits from effective tax planning.
Net income per share (“Earnings per
share”)
Full year Diluted earnings per share was $0.90 on a reported
basis. Adjusted diluted earnings per share1 was $1.29.
Fourth quarter Diluted earnings per share was $0.17. Adjusted
diluted earnings per share was $0.31.
2024 Outlook
Based on current spot rates, Kenvue introduced its outlook for
2024 as follows:
Net sales & Organic growth
Kenvue expects full year 2024 reported Net sales growth to be in
the range of 1.0% to 3.0%. Foreign exchange is expected to be a
headwind of approximately one percentage point to reported Net
sales growth. The Company expects full year 2024 Organic growth in
the range of 2.0% to 4.0% with Organic growth sequentially
improving as the year progresses as prior year comparisons ease and
the impact of 2024 strategic priorities take hold.
“Our 2024 priorities are clear,” said Paul Ruh, Chief Financial
Officer. “As we accelerate investment behind our brands,
particularly focused on in-store presence and prominence, enhancing
consumer engagement, and amplify innovation, we expect our
operating model optimization initiatives to generate impact in the
second half of the year. While we are confident in our plans, our
guidance prudently reflects the potential for a continued
challenging macro-back drop and the possibility for unknowns in our
seasonal businesses.”
Adjusted operating income margin and
Earnings per share
Kenvue expects full year 2024 Adjusted operating income margin
to be slightly below 2023 as strong gross margin progression is
offset by the impact of absorbing a full year of public company
costs and 50 basis points of foreign currency headwinds.
Kenvue expects full year 2024 Adjusted diluted earnings per
share to be in the range of $1.10 - $1.20.
This range assumes a full year 2024 diluted weighted average
share count of 1.92 billion.
Reported Interest expense, net
For full year 2024, Kenvue expects reported Interest expense,
net to be approximately $400 million.
Reported and Adjusted effective tax
rate
For full year 2024, Kenvue expects an Effective tax rate between
26.5% to 27.5%, and an Adjusted effective tax rate between 25.5% to
26.5%.
Kenvue is not able to provide the most directly comparable GAAP
measures or reconcile Adjusted operating income margin or Adjusted
diluted earnings per share to comparable GAAP measures on a
forward-looking basis without unreasonable efforts given the
unpredictability of the timing and amounts of discrete items such
as acquisitions or divestitures.
Webcast Information
As previously announced, Kenvue will host a conference call with
investors to discuss its fourth quarter results at 8:30 a.m.
Eastern Time. The conference call can be accessed by dialing
888-660-5501 from the United States or 646-960-0416 from
international locations. The conference ID for all callers is
1558006. A simultaneous webcast of the call for investors and other
interested parties may be accessed by visiting the Investors
section of the Company’s website. A replay will be available
approximately two hours after the live event.
About Kenvue
Kenvue is the world’s largest pure-play consumer health company
by revenue. Built on more than a century of heritage, our iconic
brands, including Aveeno®, BAND-AID® Brand Adhesive Bandages,
Johnson’s®, Listerine®, Neutrogena®, and Tylenol®, are
science-backed and recommended by healthcare professionals around
the world. At Kenvue, we believe in the extraordinary power of
everyday care and our teams work every day to put that power in
consumers’ hands and earn a place in their hearts and homes. Learn
more at www.kenvue.com.
1Non-GAAP
Financial Measures
The Company uses certain non-GAAP financial measures to
supplement the financial measures prepared in accordance with U.S.
GAAP. There are limitations to the use of the non-GAAP financial
measures presented herein. These non-GAAP financial measures are
not prepared in accordance with U.S. GAAP nor do they have any
standardized meaning under U.S. GAAP. In addition, other companies
may use similarly titled non-GAAP financial measures that are
calculated differently from the way the Company calculates such
measures. Accordingly, the non-GAAP financial measures may not be
comparable to such similarly titled non-GAAP financial measures
used by other companies. The Company cautions you not to place
undue reliance on these non-GAAP financial measures, but instead to
consider them with the most directly comparable U.S. GAAP measure.
These non-GAAP financial measures have limitations as analytical
tools and should not be considered in isolation. These non-GAAP
financial measures should be considered supplements to, not
substitutes for, or superior to, the corresponding financial
measures calculated in accordance with U.S. GAAP.
The Company believes the presentation of these measures is
relevant and useful for investors because it allows investors to
view performance in a manner similar to the method used by
management. The Company believes these measures help improve
investors’ ability to understand the Company’s operating
performance and makes it easier to compare the Company’s results
with other companies. In addition, the Company believes these
measures are also among the primary measures used externally by the
Company’s investors, analysts, and peers in its industry for
purposes of valuation and comparing the operating performance of
the Company to other companies in our industry.
Below are definitions and the reconciliation to the most closely
related GAAP measures for the non-GAAP measures used in this press
release and the related prepared materials and webcast.
Adjusted diluted earnings per
share: We define Adjusted diluted earnings per share as
Adjusted net income divided by the weighted average number of
diluted shares outstanding. Management views this non-GAAP measure
as useful to investors as it provides a supplemental measure of the
Company’s performance over time.
Adjusted EBITDA margin: We define
the non-GAAP measure EBITDA as U.S. GAAP Net income adjusted for
interest, provision for taxes, and depreciation and amortization.
We define Adjusted EBITDA, another non-GAAP financial measure, as
EBITDA adjusted for costs incurred in connection with our
establishment as a standalone public company (“Separation-related
costs”), operating model optimization initiatives and restructuring
expense, conversion of stock-based awards, stock-based awards
granted to individuals employed by Kenvue as of October 2, 2023
(“Founders stock-based awards”), litigation expense, the impact of
the deferred transfer of certain assets and liabilities from
Johnson & Johnson in certain jurisdictions (the “Deferred
Markets”), impairment of intangible assets, and unrealized gain on
securities. We define Adjusted EBITDA margin as Adjusted EBITDA as
a percentage of Net sales. Management believes this non-GAAP
measure is useful to investors as it provides a supplemental
perspective to the Company’s operating efficiency over time.
Adjusted effective tax rate: We
define Adjusted effective tax rate as U.S. GAAP Effective tax rate
adjusted for tax effects of Separation-related costs, operating
model optimization initiatives and restructuring expense,
amortization and impairment of intangible assets, conversion of
stock-based awards, litigation expense, interest income earned on
the related party note receivable from Johnson & Johnson (i.e.,
special items) and taxes related to the Deferred Markets. We also
exclude certain one-time tax only adjustments which include the
removal of tax effects from the carve-out methodology, the impact
of the interest expense from the debt issuance, which reduced the
Company’s capacity to utilize foreign tax credits against U.S.
foreign source income and other one-time items. Management believes
this non-GAAP measure is useful to investors as it provides a
supplemental measure of the Company’s performance over time.
Adjusted gross profit margin: We
define Adjusted gross profit margin as U.S. GAAP Gross profit
margin adjusted for amortization of intangible assets, operating
model optimization initiatives and restructuring expense,
conversion of stock-based awards, and Founders stock-based awards.
Management believes this non-GAAP measure is useful to investors as
it provides a supplemental perspective to the Company’s operating
efficiency over time.
Adjusted interest expense, net: We
define Adjusted interest expense, net as U.S. GAAP interest
expense, net, adjusted to exclude the interest income earned on the
related party note receivable from Johnson & Johnson.
Management believes this non-GAAP measure is useful to investors in
providing period-to-period comparisons of the results of the
Company’s ongoing operational performance.
Adjusted net income: We define
Adjusted net income as U.S. GAAP Net income adjusted for
amortization and impairment of intangible assets,
Separation-related costs, operating model optimization initiatives
and restructuring expense, conversion of stock-based awards,
Founders stock-based awards, unrealized gain on securities,
litigation expense, the impact of the Deferred Markets, interest
income earned on the related party note receivable from Johnson
& Johnson, and their related tax impacts (i.e. special items).
Adjusted net income excludes the impact of items that may obscure
trends in our underlying performance. Management believes this
non-GAAP measure is useful to investors as the Company uses
Adjusted net income for strategic decision making, forecasting
future results, and evaluating current performance.
Adjusted operating income: We
define Adjusted operating income as U.S. GAAP Operating income
adjusted for amortization and impairment of intangible assets,
Separation-related costs, operating model optimization initiatives
and restructuring expenses, conversion of stock-based awards,
Founders stock-based awards, litigation expense, and the impact of
the Deferred Markets. Management believes this non-GAAP measure is
useful to investors as management uses Adjusted operating income to
assess the Company’s financial performance. In the third quarter of
2023, the Company adjusted its definition of Adjusted operating
income in order to align more closely with the financial measures
used to evaluate performance by the Company’s peers.
Adjusted operating income margin:
We define Adjusted operating income margin as Adjusted operating
income as a percentage of Net sales. Management believes this
non-GAAP measure is useful to investors as it provides a
supplemental perspective to the Company’s operating efficiency over
time.
Free cash flow: We define Free cash
flow as U.S. GAAP Net cash flows from operating activities adjusted
for Purchases of property, plant, and equipment. Management
believes this non-GAAP measure is useful to investors as it
provides a view of the Company’s liquidity after deducting capital
expenditures, which are considered a necessary component of our
ongoing operations.
Organic growth: We define Organic
growth as the period-over-period change in U.S. GAAP Net sales
excluding the impact of changes in foreign currency exchange rates
and the impact of acquisitions and divestitures. Management
believes Organic growth provides investors with additional,
supplemental information that is useful in assessing the Company’s
results of operations by excluding the impact of certain items that
we believe do not directly reflect our underlying operations.
The non-GAAP measures as presented herein have been prepared as
if our operations had been conducted independently from Johnson
& Johnson prior to May 4, 2023, the date Kenvue’s common stock
began trading on the New York Stock Exchange, and therefore they
include certain Johnson & Johnson corporate and shared costs
allocated to us. Management believes the cost allocations are a
reasonable reflection of the utilization of services provided to,
or the benefit derived by, us during the periods presented, though
the allocations may not be indicative of the actual costs that
would have been incurred if we had been operating as a standalone
company.
Cautions Concerning Forward-Looking
Statements
This press release contains “forward-looking statements” as
defined in the Private Securities Litigation Reform Act of 1995
regarding, among other things, statements about management’s
expectations of Kenvue’s future operating and financial
performance, product development, market position and business
strategy. Forward-looking statements may be identified by the use
of words such as “plans,” “expects,” “will,” “anticipates,”
“estimates” and other words of similar meaning. The reader is
cautioned not to rely on these forward-looking statements. These
statements are based on current expectations of future events. If
underlying assumptions prove inaccurate or known or unknown risks
or uncertainties materialize, actual results could vary materially
from the expectations and projections of Kenvue and its affiliates.
Risks and uncertainties include, but are not limited to: the
inability to execute on Kenvue’s business development strategy or
realize the benefits of the separation from Johnson & Johnson;
the risk of disruption or unanticipated costs in connection with
the separation; Kenvue’s ability to succeed as a standalone
publicly traded company; economic factors, such as interest rate
and currency exchange rate fluctuations; the ability to
successfully manage local, regional or global economic volatility,
including reduced market growth rates, and to generate sufficient
income and cash flow to allow Kenvue to effect any expected share
repurchases and dividend payments; Kenvue’s ability to maintain
satisfactory credit ratings, which could adversely affect its
liquidity, capital position, borrowing costs and access to capital
markets; competition, including technological advances, new
products and intellectual property attained by competitors;
challenges inherent in new product research and development;
uncertainty of commercial success for new and existing products and
digital capabilities; challenges to intellectual property
protections including counterfeiting; the ability of Kenvue to
successfully execute strategic plans, including operating model
optimization and restructuring initiatives; the impact of business
combinations and divestitures, including any ongoing or future
transactions; manufacturing difficulties or delays, internally or
within the supply chain; product efficacy or safety concerns
resulting in product recalls or regulatory action; significant
adverse litigation or government action, including related to
product liability claims; changes to applicable laws and
regulations and other requirements imposed by stakeholders;
challenges to intellectual property; changes in behavior and
spending patterns of consumers; natural disasters, acts of war or
terrorism, catastrophes, or epidemics, pandemics, or other disease
outbreaks; and financial instability of international economies and
legal systems and sovereign risk. A further list and descriptions
of these risks, uncertainties and other factors can be found in
Kenvue’s filings with the Securities and Exchange Commission,
including its registration statement on Form S-1 and subsequent
Quarterly Reports on Form 10-Q and other filings, available at
www.kenvue.com or on request from Kenvue. Any forward-looking
statement made in this release speaks only as of the date of this
release. Kenvue undertakes no obligation to update any
forward-looking statements, whether as a result of new information,
future events or developments or otherwise.
Kenvue Inc.
Condensed Consolidated
Statement of Operations
(Unaudited; Millions Except
Per Share Data)
Fiscal Three Months
Ended
Fiscal Twelve Months
Ended
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Net sales
$
3,666
$
3,767
$
15,444
$
14,950
Cost of sales
1,623
1,721
6,801
6,665
Gross profit
2,043
2,046
8,643
8,285
Selling, general and administrative
expenses
1,586
1,532
6,141
5,633
Other operating income, net
(3
)
(17
)
(10
)
(23
)
Operating income
460
531
2,512
2,675
Other expense, net
7
19
72
38
Interest expense, net
96
—
250
—
Income before taxes
357
512
2,190
2,637
Provision for taxes
30
151
526
573
Net income
$
327
$
361
$
1,664
$
2,064
Net income per share
Basic
$
0.17
$
0.21
$
0.90
$
1.20
Diluted
$
0.17
$
0.21
0.90
$
1.20
Weighted average common stock
Basic
1,915
1,716
1,846
1,716
Diluted
1,919
1,716
1,850
1,716
Non-GAAP Financial Information
Organic Growth
The following tables present a reconciliation of the change in
Net sales, as reported, to Organic growth for the periods
presented:
Fiscal Three Months Ended
December 31, 2023 vs January 1, 2023(1)
Reported Net Sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
(31
)
(2.0
)%
$
—
$
(31
)
(2.0
)%
Skin Health and Beauty
(87
)
(8.0
)
—
(87
)
(8.0
)
Essential Health
17
1.5
(11
)
28
2.5
Total
$
(101
)
(2.7
)%
$
(11
)
$
(90
)
(2.4
)%
Fiscal Three Months Ended
December 31, 2023 vs January 1, 2023(1)
(Unaudited)
Reported Net Sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
(2.0
)%
—
%
4.3
%
(6.3
)%
Skin Health and Beauty
(8.0
)
—
4.8
(12.8
)
Essential Health
1.5
(1.0
)
8.8
(6.3
)
Total
(2.7
)%
(0.3
)%
5.8
%
(8.2
)%
Fiscal Three Months Ended
January 1, 2023 vs January 2, 2022(1)
Reported Net Sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
120
8.3
%
$
(73
)
$
193
13.3
%
Skin Health and Beauty
4
0.4
(54
)
58
5.4
Essential Health
(90
)
(7.5
)
(71
)
(19
)
(1.6
)
Total
$
34
0.9
%
$
(198
)
$
232
6.2
%
Fiscal Three Months Ended
January 1, 2023 vs January 2, 2022(1)
(Unaudited)
Reported Net Sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
8.3
%
(5.0
)%
8.3
%
5.0
%
Skin Health and Beauty
0.4
(5.0
)
3.7
1.7
Essential Health
(7.5
)
(5.9
)
7.2
(8.8
)
Total
0.9
%
(5.3
)%
6.6
%
(0.4
)%
Fiscal Twelve Months Ended
December 31, 2023 vs January 1, 2023(1)
Reported Net Sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
421
7.0
%
$
(84
)
$
505
8.4
%
Skin Health and Beauty
28
0.6
(52
)
80
1.8
Essential Health
45
1.0
(117
)
162
3.6
Total
$
494
3.3
%
$
(253
)
$
747
5.0
%
Fiscal Twelve Months Ended
December 31, 2023 vs January 1, 2023(1)
(Unaudited)
Reported Net Sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
7.0
%
(1.4
)%
7.1
%
1.3
%
Skin Health and Beauty
0.6
(1.2
)
6.6
(4.8
)
Essential Health
1.0
(2.6
)
9.6
(6.0
)
Total
3.3
%
(1.7
)%
7.7
%
(2.7
)%
Fiscal Twelve Months Ended
January 1, 2023 vs January 2, 2022
Reported Net Sales
change
Impact of foreign
currency
Acquisitions and
divestitures
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Amount
Percent
Self Care
$
387
6.9
%
$
(226
)
$
—
$
613
10.9
%
Skin Health and Beauty
(191
)
(4.2
)
(173
)
(39
)
21
0.5
Essential Health
(300
)
(6.2
)
(218
)
(14
)
(68
)
(1.4
)
Total
$
(104
)
(0.7
)%
$
(617
)
$
(53
)
$
566
3.8
%
Fiscal Twelve Months Ended
January 1, 2023 vs January 2, 2022
(Unaudited)
Reported Net Sales
change
Impact of foreign
currency
Acquisitions and
divestitures
Organic growth(2)
Price/Mix(3)
Volume
Self Care
6.9
%
(4.0
)%
—
%
4.2
%
6.7
%
Skin Health and Beauty
(4.2
)
(3.8
)
(0.9
)
2.8
(2.3
)
Essential Health
(6.2
)
(4.5
)
(0.3
)
4.8
(6.2
)
Total
(0.7
)%
(4.1
)%
(0.4
)%
4.0
%
(0.2
)%
(1) Acquisitions and divestitures did not materially impact the
reported Net sales change. (2) Non-GAAP financial measure. Excludes
the impact of foreign currency exchange and the impact of
Acquisitions and divestitures. (3) Price/Mix reflects value
realization.
Full Year Organic Growth by Segment
Self Care:
- Organic growth of 8.4% was comprised of 7.1% value realization
and 1.3% volume growth. Self Care had another strong year of
performance with all product categories growing mid-single digits
to low double digits, and healthy growth across all regions.
Innovation, supply recovery and brand activation across product
categories and brands such as Motrin®, Tylenol®, Nicorette®, and
Imodium® fueled growth for the segment and created expanded
opportunities for our consumers to take care of their health.
Skin Health and Beauty:
- Organic growth increased 1.8%, comprised of 6.6% value
realization, partially offset by 4.8% volume declines. Sun Care had
robust growth across key markets in full year 2023, growing share
from successful innovation launches and strong in store presence.
This was offset by underperformance in commercial U.S. in-store
execution, particularly in the fourth quarter.
Essential Health:
- Organic growth of 3.6% was comprised of 9.6% value realization,
partially offset by 6.0% volume decrease. Value realization and
strong performance in Oral Care driven by product innovation such
as Listerine® Gum Therapy and clinical claims resulting in
increased healthcare professional endorsements. Women’s Health
growth in the year was led by value realization and brand
activation.
Total Segment Net Sales and Adjusted Operating Income
Segment Net sales and Adjusted operating income for the periods
presented were as follows:
Net Sales
Net Sales
Fiscal Three Months
Ended
Fiscal Twelve Months
Ended
(Unaudited; Dollars in
Millions)
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Self Care
$
1,537
$
1,568
$
6,451
$
6,030
Skin Health and Beauty
1,001
1,088
4,378
4,350
Essential Health
1,128
1,111
4,615
4,570
Total segment net sales
$
3,666
$
3,767
$
15,444
$
14,950
Adjusted Operating
Income
Adjusted Operating
Income
Fiscal Three Months
Ended
Fiscal Twelve Months
Ended
(Unaudited; Dollars in
Millions)
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Self Care Adjusted operating income
$
558
$
534
$
2,299
$
2,088
Skin Health and Beauty Adjusted operating
income
162
92
679
708
Essential Health Adjusted operating
income
241
290
1,011
1,111
Total
$
961
$
916
$
3,989
$
3,907
Depreciation
(94
)
(83
)
(305
)
(296
)
General corporate/unallocated expenses
(77
)
(101
)
(296
)
(298
)
Other operating income, net
3
17
10
23
Other - impact of deferred markets(1)
1
—
34
—
Litigation expense
5
—
25
—
Impairment of intangible assets
—
—
—
12
Adjusted operating income
(non-GAAP)
$
799
$
749
$
3,457
$
3,348
Reconciliation to Income before taxes:
Amortization
80
83
322
348
Separation-related costs(2)
135
104
468
213
Operating model optimization initiatives
and restructuring expense
29
31
32
100
Conversion of stock-based awards
80
—
55
—
Other - impact of deferred markets(1)
1
—
34
—
Litigation expense
5
—
25
—
Founders stock-based awards
9
—
9
—
Impairment of intangible assets
—
—
—
12
Operating income
$
460
$
531
$
2,512
$
2,675
Other expense, net
7
19
72
38
Interest expense, net
96
—
250
—
Income before taxes
$
357
$
512
$
2,190
$
2,637
(1) Includes tax expense and minority
interest expense related to Deferred Markets recognized within
Other operating income, net, which are payable to Johnson &
Johnson through interim related-party agreements until these
Deferred Markets can be transferred to the Company. Deferred
Markets are local businesses in certain non-U.S. jurisdictions in
which the transfer from Johnson & Johnson of certain assets and
liabilities were deferred in order to ensure compliance with
applicable law, to obtain necessary governmental approvals and
other consents and for other business reasons.
(2) Costs incurred in connection with our
establishment as a standalone public company are defined as
“Separation-related costs.”
The following tables present reconciliations of GAAP to Non-GAAP
for the periods presented:
Fiscal Three Months Ended
December 31, 2023
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
3,666
$
—
$
3,666
Gross profit
$
2,043
$
139
(a),(b),(c),(d)
$
2,182
Gross profit margin
55.7
%
59.5
%
Operating income
$
460
$
339
(a)-(j)
$
799
Operating income margin
12.5
%
21.8
%
Net Income
$
327
$
259
(a)-(h),(j-k)
$
586
Net income margin
8.9
%
16.0
%
Interest expense, net
$
96
Provision for taxes
$
30
Depreciation and amortization
$
174
EBITDA (non-GAAP)
$
627
$
259
(b)-(j)
$
886
EBITDA margin
17.1
%
24.2
%
Detail of
Adjustments
(a)
Amortization (COGS)
$
80
(b)
Operating model optimization initiatives
and restructuring expense (COGS)
$
20
(c)
Conversion of stock-based awards
(COGS)
$
35
(d)
Founders stock-based awards (COGS)
$
4
(e)
Separation-related costs (SG&A)
$
135
(f)
Operating model optimization initiatives
and restructuring expense (SG&A)
$
9
(g)
Conversion of stock-based awards
(SG&A)
$
45
(h)
Founders stock-based awards (SG&A)
$
5
(i)
Other - Impact of deferred markets (tax
expense) (OOI&E)
$
1
(j)
Litigation expense (OOI&E)
$
5
(k)
Tax impact on special item adjustments
$
(79
)
Fiscal Three Months Ended
January 1, 2023
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
3,767
$
—
$
3,767
Gross profit
$
2,046
$
111
(a),(b)
$
2,157
Gross profit margin
54.3
%
57.3
%
Operating income
$
531
$
218
(a)-(d)
$
749
Operating income margin
14.1
%
19.9
%
Net Income
$
361
$
140
(a)-(e)
$
501
Net income margin
9.6
%
13.3
%
Provision for taxes
$
151
Depreciation and amortization
$
166
EBITDA (non-GAAP)
$
678
$
135
(b)-(d)
$
813
EBITDA margin
18.0
%
21.6
%
Detail of
Adjustments
(a)
Amortization (COGS)
$
83
(b)
Operating model optimization initiatives
and restructuring expense (COGS)
$
28
(c)
Separation-related costs (SG&A)
$
104
(d)
Operating model optimization initiatives
and restructuring expense (SG&A)
$
3
(e)
Tax impact on special item adjustments
$
(78
)
Fiscal Twelve Months Ended
December 31, 2023
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
15,444
$
—
$
15,444
Gross profit
$
8,643
$
375
(a),(b),(c),(d)
$
9,018
Gross profit margin
56.0
%
58.4
%
Operating income
$
2,512
$
945
(a)-(k)
$
3,457
Operating income margin
16.3
%
22.4
%
Net Income
$
1,664
$
719
(a)-(i),(k)-(n)
$
2,383
Net income margin
10.8
%
15.4
%
Interest expense, net
$
250
Provision for taxes
$
526
Depreciation and amortization
$
627
EBITDA (non-GAAP)
$
3,067
$
630
(b)-(l)
$
3,697
EBITDA margin
19.9
%
23.9
%
Detail of
Adjustments
(a)
Amortization (COGS)
$
322
(b)
Operating model optimization initiatives
and restructuring expense (COGS)
$
21
(c)
Conversion of stock-based awards
(COGS)
$
28
(d)
Founders stock-based awards (COGS)
$
4
(e)
Separation-related costs (SG&A)
$
468
(f)
Operating model optimization initiatives
and restructuring expense (SG&A)
$
11
(g)
Conversion of stock-based awards
(SG&A)
$
27
(h)
Founders stock-based awards (SG&A)
$
5
(i)
Other - Impact of deferred markets
(minority interest expense) (OOI&E)
$
10
(j)
Other - Impact of deferred markets (tax
expense) (OOI&E)
$
24
(k)
Litigation expense (OOI&E)
$
25
(l)
Unrealized gain on securities
(OI&E)
$
7
(m)
Interest income from related party note
(Interest expense, net)
$
(33
)
(n)
Tax impact on special item adjustments
$
(176
)
Fiscal Twelve Months Ended
January 1, 2023
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
14,950
$
—
$
14,950
Gross profit
$
8,285
$
403
(a),(b)
$
8,688
Gross profit margin
55.4
%
58.1
%
Operating income
$
2,675
$
673
(a)-(e)
$
3,348
Operating income margin
17.9
%
22.4
%
Net Income
$
2,064
$
456
(a)-(f)
$
2,520
Net income margin
13.8
%
16.9
%
Provision for taxes
$
573
Depreciation and amortization
$
644
EBITDA (non-GAAP)
$
3,281
$
325
(b)-(e)
$
3,606
EBITDA margin
21.9
%
24.1
%
Detail of
Adjustments
(a)
Amortization (COGS)
$
348
(b)
Operating model optimization initiatives
and restructuring expense (COGS)
$
55
(c)
Separation-related costs (SG&A)
$
213
(d)
Operating model optimization initiatives
and restructuring expense (SG&A)
$
45
(e)
Impairment of intangible assets
(OOI&E)
$
12
(f)
Tax impact on special item adjustments
$
(217
)
The following table presents a reconciliation of Interest
expense, net, as reported, to Adjusted interest expense, net:
Fiscal Twelve Months
Ended
(Unaudited; Dollars in
Millions)
December 31, 2023
Interest expense, net
$
250
Adjustment:
Interest income from related party
note
(33
)
Adjusted interest expense, net
(non-GAAP)
$
283
The following tables present reconciliations of the Effective
tax rate, as reported, to Adjusted effective tax rate for the
periods presented:
Fiscal Three Months
Ended
Fiscal Twelve Months
Ended
(Unaudited)
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Effective tax rate
8.4
%
29.5
%
24.0
%
21.7
%
Adjustments:
Tax-effect on special item adjustments
7.9
1.3
(1.0
)
1.6
Removal of tax benefits from carve out
methodology
—
—
2.0
—
Taxes related to Deferred Markets
0.5
—
0.5
—
Valuation allowance on foreign tax credits
due to interest expense
(0.6
)
—
(2.4
)
—
Other
(0.4
)
0.6
0.3
0.6
Adjusted Effective tax rate
(non-GAAP)
15.8
%
31.4
%
23.4
%
23.9
%
The following table presents a reconciliation of Effective tax
rate, as forecasted on a U.S. GAAP basis, to forecasted Adjusted
effective tax rate for fiscal year 2024:
Fiscal Year 2024
(Unaudited)
Forecast
Effective tax rate
26.5% - 27.5%
Adjustments:
Tax-effect on special item adjustments
(1.2
)
Taxes related to Deferred Markets
0.5
Other
(0.3
)
Adjusted Effective tax rate
(non-GAAP)
25.5% - 26.5%
The following table presents a reconciliation of Diluted
earnings per share, as reported, to Adjusted diluted earnings per
share:
Fiscal Three Months
Ended
Fiscal Twelve Months
Ended
(Unaudited)
December 31, 2023
December 31, 2023
Diluted earnings per share
$
0.17
$
0.90
Adjustments:
Separation-related costs
0.07
0.25
Operating model optimization initiatives
and restructuring expense
0.02
0.02
Amortization and impairment of intangible
assets
0.04
0.17
Conversion of stock-based awards
0.04
0.03
Interest income from related party
note
—
(0.02
)
Tax impact on special item adjustments
(0.04
)
(0.10
)
Other
0.01
0.04
Adjusted diluted earnings per share
(non-GAAP)
$
0.31
$
1.29
The following table presents a reconciliation of Net cash flows
from operating activities, as reported, and Purchases of property,
plant, and equipment, as reported, to Free cash flow:
Fiscal Twelve Months
Ended
(Unaudited; Dollars in
Billions)
December 31, 2023
Net cash flows from operating
activities
$
3.2
Purchases of property, plant, and
equipment
(0.5
)
Free cash flow (non-GAAP)
$
2.7
Other Supplemental Financial Information
The following table presents the Company’s Net sales by
Geographic Region for the periods presented:
Fiscal Three Months
Ended
Fiscal Twelve Months
Ended
(Unaudited; Dollars in
Millions)
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Net sales by geographic region
North America
$
1,762
$
1,906
$
7,610
$
7,418
Europe, Middle East and Africa
822
796
3,388
3,188
Latin America
332
310
1,339
1,198
Asia Pacific
750
755
3,107
3,146
Total Net sales by geographic
region
$
3,666
$
3,767
$
15,444
$
14,950
The following table presents the Company’s Cash and cash
equivalents, Total debt and Net debt balance as of December 31,
2023:
(Unaudited; Dollars in
Billions)
December 31, 2023
Cash and cash equivalents
$
1.4
Total debt
8.3
Net debt
$
6.9
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240208322209/en/
Investor Relations: Tina Romani Kenvue_IR@kenvue.com
Media Relations: Melissa Witt media@kenvue.com
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