-
Net Sales of$4.0 Billion decreased 0.3%; Organic Growth1 was +1.5%
-
Diluted EPS was
$0.03 ; Adjusted Diluted EPS1 was$0.32
- Productivity gains fuel accelerated investment in brands for future growth
- Reaffirms Outlook for FY24 Net Sales Growth and Adjusted Diluted EPS
“We are on track to deliver the financial targets we set for 2024, and while we are in the early days, our work to transform Kenvue into a bolder, more agile organization focused on profitable growth is producing results,” said
Second Quarter 2024 Financial Results
Second quarter Net sales decreased 0.3% following a 5.4% increase in the prior year period. Organic growth1 was 1.5% over 7.7% Organic growth in the prior year period. Organic growth was comprised of 2.1% value realization (price and mix) and (0.6)% volume.
Value realization was driven by a combination of both carry-over pricing and new price actions. The slight volume declines were driven primarily by
Gross Profit Margin and Operating Income Margin
Second quarter Gross profit margin expanded 360 basis points to 59.1% from 55.5% in the prior year period. Adjusted gross profit margin1 expanded 410 basis points to 61.6% from 57.5% in the prior year period. The year-over-year improvement primarily reflects productivity gains attributable to our global supply chain efficiency initiatives, including commodity pricing, and to value realization.
Second quarter Operating income margin was 3.9% vs 17.5% in the prior year period. Charges related to
Second quarter Adjusted operating income margin1 was 22.8% vs 23.1% in the prior year period as significant year-over-year margin expansion was more than offset by increased brand investment.
Interest expense, net and Taxes
Second quarter Interest expense, net was
The second quarter Effective tax rate was 10.8% vs 32.7% in the prior year period, driven by the reversal of a deferred tax liability related to the
Net income per share (“Earnings per share”)
Second quarter Diluted earnings per share was
Long-Lived Asset Impairment Charge
In the second quarter, the Company took a non-cash charge of
2024 Outlook
Based on current spot rates, the Company reaffirms its outlook for 2024, including Net sales growth of 1.0%-3.0% (2.0%-4.0% Organic growth), and Adjusted diluted earnings per share in the range of
Kenvue is not able to provide the most directly comparable GAAP measures or reconcile Adjusted diluted earnings per share or Organic growth 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 foreign exchange, acquisitions, or divestitures.
Webcast Information
As previously announced, Kenvue will host a conference call with investors to discuss its second quarter results on
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, 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.
1 Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to supplement the financial measures prepared in accordance with
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
Adjusted effective tax rate: We define Adjusted effective tax rate as
Adjusted gross profit margin: We define Adjusted gross profit margin as
Adjusted net income: We define Adjusted net income as
Adjusted operating income: We define Adjusted operating income as
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
Organic growth: We define Organic growth as the period-over-period change in
The non-GAAP measures as presented herein have been prepared as if our operations had been conducted independently from Johnson & Johnson prior to
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; 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 access capital markets and maintain satisfactory credit ratings, which could adversely affect its liquidity, capital position and borrowing costs; 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 Our
|
|||||||||||||
|
Fiscal Three Months Ended |
|
Fiscal Six Months Ended |
||||||||||
|
|
|
|
|
|
|
|
||||||
Net sales |
$ |
4,000 |
|
|
$ |
4,011 |
|
$ |
7,894 |
|
$ |
7,863 |
|
Cost of sales |
|
1,635 |
|
|
|
1,786 |
|
|
3,287 |
|
|
3,513 |
|
Gross profit |
|
2,365 |
|
|
2,225 |
|
|
4,607 |
|
|
4,350 |
|
|
Selling, general and administrative expenses |
|
1,641 |
|
|
|
1,522 |
|
|
3,214 |
|
|
3,024 |
|
Restructuring expenses |
|
48 |
|
|
|
— |
|
|
89 |
|
|
— |
|
Impairment charges |
|
510 |
|
|
|
— |
|
|
578 |
|
|
— |
|
Other operating expense (income), net |
|
12 |
|
|
|
1 |
|
|
22 |
|
|
(16 |
) |
Operating income |
|
154 |
|
|
|
702 |
|
|
704 |
|
|
1,342 |
|
Other (income) expense, net |
|
(3 |
) |
|
|
10 |
|
|
25 |
|
|
40 |
|
Interest expense, net |
|
92 |
|
|
|
53 |
|
|
187 |
|
|
54 |
|
Income before taxes |
|
65 |
|
|
|
639 |
|
|
492 |
|
|
1,248 |
|
Provision for taxes |
|
7 |
|
|
|
209 |
|
|
138 |
|
|
349 |
|
Net income |
$ |
58 |
|
|
$ |
430 |
|
$ |
354 |
|
$ |
899 |
|
|
|
|
|
|
|
|
|
||||||
Net income per share |
|
|
|
|
|
|
|
||||||
Basic |
$ |
0.03 |
|
|
$ |
0.23 |
|
$ |
0.18 |
|
$ |
0.51 |
|
Diluted |
$ |
0.03 |
|
|
$ |
0.23 |
|
$ |
0.18 |
|
$ |
0.51 |
|
Weighted average number of shares outstanding |
|
|
|
|
|
|
|
||||||
Basic |
|
1,915 |
|
|
|
1,838 |
|
|
1,915 |
|
|
1,777 |
|
Diluted |
|
1,920 |
|
|
|
1,838 |
|
|
1,920 |
|
|
1,777 |
|
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 |
||||||||||||||||
|
Reported Net sales change |
|
Impact of foreign currency |
|
Organic growth(2) |
||||||||||||
(Unaudited; Dollars in Millions) |
Amount |
|
Percent |
|
Amount |
|
Amount |
|
Percent |
||||||||
Self Care |
$ |
(26 |
) |
|
(1.6 |
)% |
|
$ |
(22 |
) |
|
$ |
(4 |
) |
|
(0.2 |
)% |
|
|
(44 |
) |
|
(3.8 |
) |
|
|
(17 |
) |
|
|
(27 |
) |
|
(2.4 |
) |
|
|
59 |
|
|
4.9 |
|
|
|
(33 |
) |
|
|
92 |
|
|
7.6 |
|
Total |
$ |
(11 |
) |
(0.3 |
)% |
$ |
(72 |
) |
|
$ |
61 |
|
|
1.5 |
% |
|
Fiscal Three Months Ended |
||||||||||
(Unaudited) |
Reported Net sales change |
|
Impact of foreign currency |
|
Organic growth(2) |
||||||
|
|
Price/Mix(3) |
|
Volume |
|||||||
Self Care |
(1.6 |
)% |
|
(1.4 |
)% |
|
1.1 |
% |
|
(1.3 |
)% |
|
(3.8 |
) |
|
(1.4 |
) |
|
1.5 |
|
|
(3.9 |
) |
|
4.9 |
|
|
(2.7 |
) |
|
4.1 |
|
|
3.5 |
|
Total |
(0.3 |
)% |
|
(1.8 |
)% |
|
2.1 |
% |
|
(0.6 |
)% |
|
Fiscal Three Months Ended |
||||||||||||||
|
Reported Net sales change |
|
Impact of foreign currency |
|
Organic growth(2) |
||||||||||
(Unaudited; Dollars in Millions) |
Amount |
|
Percent |
|
Amount |
|
Amount |
|
Percent |
||||||
Self Care |
$ |
180 |
|
12.2 |
% |
|
$ |
(30 |
) |
|
$ |
210 |
|
14.2 |
% |
|
|
21 |
|
1.9 |
|
|
|
(17 |
) |
|
|
38 |
|
3.4 |
|
|
|
6 |
|
0.5 |
|
|
|
(40 |
) |
|
|
46 |
|
3.8 |
|
Total |
$ |
207 |
|
5.4 |
% |
|
$ |
(87 |
) |
|
$ |
294 |
|
7.7 |
% |
|
Fiscal Three Months Ended |
||||||||||
(Unaudited) |
Reported Net sales change |
|
Impact of foreign currency |
|
Organic growth(2) |
||||||
|
|
Price/Mix(3) |
|
Volume |
|||||||
Self Care |
12.2 |
% |
|
(2.0 |
)% |
|
10.6 |
% |
|
3.6 |
% |
|
1.9 |
|
|
(1.5 |
) |
|
6.6 |
|
|
(3.2 |
) |
|
0.5 |
|
|
(3.3 |
) |
|
10.7 |
|
|
(6.9 |
) |
Total |
5.4 |
% |
|
(2.3 |
)% |
9.4 |
% |
(1.7 |
)% |
|
Fiscal Six Months Ended |
||||||||||||||||
|
Reported Net sales change |
|
Impact of foreign currency |
|
Organic growth(2) |
||||||||||||
(Unaudited; Dollars in Millions) |
Amount |
|
Percent |
|
Amount |
|
Amount |
|
Percent |
||||||||
Self Care |
$ |
32 |
|
|
1.0 |
% |
|
$ |
(33 |
) |
|
$ |
65 |
|
|
2.0 |
% |
|
|
(101 |
) |
|
(4.5 |
) |
|
|
(24 |
) |
|
|
(77 |
) |
|
(3.4 |
) |
|
|
100 |
|
|
4.3 |
|
|
|
(46 |
) |
|
|
146 |
|
|
6.3 |
|
Total |
$ |
31 |
|
0.4 |
% |
$ |
(103 |
) |
|
$ |
134 |
|
|
1.7 |
% |
|
Fiscal Six Months Ended |
||||||||||
(Unaudited) |
Reported Net sales change |
|
Impact of foreign currency |
|
Organic growth(2) |
||||||
|
|
Price/Mix(3) |
|
Volume |
|||||||
Self Care |
1.0 |
% |
|
(1.0 |
)% |
|
3.4 |
% |
|
(1.4 |
)% |
|
(4.5 |
) |
|
(1.1 |
) |
|
1.9 |
|
|
(5.3 |
) |
|
4.3 |
|
|
(2.0 |
) |
|
5.4 |
|
|
0.9 |
|
Total |
0.4 |
% |
|
(1.3 |
)% |
|
3.5 |
% |
|
(1.8 |
)% |
|
Fiscal Six Months Ended |
|||||||||||||||
|
Reported Net sales change |
|
Impact of foreign currency |
|
Organic growth(2) |
|||||||||||
(Unaudited; Dollars in Millions) |
Amount |
|
Percent |
|
Amount |
|
Amount |
|
Percent |
|||||||
Self Care |
$ |
355 |
|
|
12.1 |
% |
|
$ |
(80 |
) |
|
$ |
435 |
|
14.8 |
% |
|
|
120 |
|
|
5.6 |
|
|
|
(52 |
) |
|
|
172 |
|
8.0 |
|
|
|
(6 |
) |
|
(0.3 |
) |
|
|
(97 |
) |
|
|
91 |
|
3.9 |
|
Total |
$ |
469 |
|
|
6.3 |
% |
|
$ |
(229 |
) |
|
$ |
698 |
|
9.4 |
% |
|
Fiscal Six Months Ended |
||||||||||
(Unaudited) |
Reported Net sales change |
|
Impact of foreign currency |
|
Organic growth(2) |
||||||
|
|
Price/Mix(3) |
|
Volume |
|||||||
Self Care |
12.1 |
% |
|
(2.7 |
)% |
|
9.4 |
% |
|
5.3 |
% |
|
5.6 |
|
|
(2.4 |
) |
|
7.6 |
|
|
0.4 |
|
|
(0.3 |
) |
|
(4.2 |
) |
|
10.1 |
|
|
(6.1 |
) |
Total |
6.3 |
% |
|
(3.1 |
)% |
9.1 |
% |
0.3 |
% |
(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. |
Total Segment
Segment Net sales and Adjusted operating income for the periods presented were as follows:
|
|
|
||||||||||||||
|
|
Fiscal Three Months Ended |
|
Fiscal Six Months Ended |
||||||||||||
(Unaudited; Dollars in Millions) |
|
|
|
|
|
|
|
|
||||||||
Self Care |
|
$ |
1,635 |
|
|
$ |
1,661 |
|
|
$ |
3,333 |
|
|
$ |
3,301 |
|
|
|
|
1,103 |
|
|
|
1,147 |
|
|
|
2,157 |
|
|
|
2,258 |
|
|
|
|
1,262 |
|
|
|
1,203 |
|
|
|
2,404 |
|
|
|
2,304 |
|
Total segment net sales |
|
$ |
4,000 |
|
|
$ |
4,011 |
|
|
$ |
7,894 |
|
|
$ |
7,863 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Adjusted Operating Income |
||||||||||||||
|
|
Fiscal Three Months Ended |
|
Fiscal Six Months Ended |
||||||||||||
(Unaudited; Dollars in Millions) |
|
|
|
|
|
|
|
|
||||||||
Self Care Adjusted operating income |
|
$ |
534 |
|
|
$ |
576 |
|
|
$ |
1,135 |
|
|
$ |
1,158 |
|
|
|
|
165 |
|
|
|
201 |
|
|
|
311 |
|
|
|
350 |
|
Essential Health Adjusted operating income |
|
|
359 |
|
|
|
250 |
|
|
|
623 |
|
|
|
461 |
|
Total(1) |
|
$ |
1,058 |
|
|
$ |
1,027 |
|
|
$ |
2,069 |
|
|
$ |
1,969 |
|
Depreciation |
|
|
(69 |
) |
|
|
(68 |
) |
|
|
(144 |
) |
|
|
(139 |
) |
General corporate/unallocated expenses |
|
|
(89 |
) |
|
|
(74 |
) |
|
|
(176 |
) |
|
|
(143 |
) |
Other operating (expense) income, net |
|
|
(12 |
) |
|
|
(1 |
) |
|
|
(22 |
) |
|
|
16 |
|
Other—impact of Deferred Markets(2) |
|
|
23 |
|
|
|
21 |
|
|
|
39 |
|
|
|
21 |
|
Litigation expense |
|
|
— |
|
|
|
20 |
|
|
|
— |
|
|
|
20 |
|
Adjusted operating income (non-GAAP) |
|
$ |
911 |
|
|
$ |
925 |
|
|
$ |
1,766 |
|
|
$ |
1,744 |
|
Reconciliation to Income before taxes: |
|
|
|
|
|
|
|
|
||||||||
Amortization |
|
|
72 |
|
|
|
80 |
|
|
|
146 |
|
|
|
161 |
|
Separation-related costs(3) |
|
|
79 |
|
|
|
102 |
|
|
|
146 |
|
|
|
200 |
|
Restructuring and operating model optimization initiatives |
|
|
58 |
|
|
|
— |
|
|
|
108 |
|
|
|
— |
|
Conversion of stock-based awards |
|
|
6 |
|
|
|
— |
|
|
|
28 |
|
|
|
— |
|
Other—impact of Deferred Markets(2) |
|
|
23 |
|
|
|
21 |
|
|
|
39 |
|
|
|
21 |
|
Founder Shares |
|
|
9 |
|
|
|
— |
|
|
|
17 |
|
|
|
— |
|
Litigation expense |
|
|
— |
|
|
|
20 |
|
|
|
— |
|
|
|
20 |
|
Impairment charges |
|
|
510 |
|
|
|
— |
|
|
|
578 |
|
|
|
— |
|
Operating income |
|
$ |
154 |
|
|
$ |
702 |
|
|
$ |
704 |
|
|
$ |
1,342 |
|
Other (income) expense, net |
|
|
(3 |
) |
|
|
10 |
|
|
|
25 |
|
|
|
40 |
|
Interest expense, net |
|
|
92 |
|
|
|
53 |
|
|
|
187 |
|
|
|
54 |
|
Income before taxes |
|
$ |
65 |
|
|
$ |
639 |
|
|
$ |
492 |
|
|
$ |
1,248 |
|
(1) For the second fiscal quarter of 2024, the Company adjusted the allocation for certain Research & development costs within Selling, general, and administrative expenses to align with segment financial results as measured by the Company, including the chief operating decision maker (the “CODM”). Accordingly, the Company has updated its segment disclosures to reflect the updated presentation in all prior periods. Total Adjusted operating income did not change as a result of this update. |
||||||||||||||||
(2) Includes the provision for taxes and minority interest expense related to Deferred Markets recognized within Other operating expense (income), net, which are payable to Johnson & Johnson through interim agreements until these Deferred Markets can be transferred to the Company. Deferred Markets are local businesses in certain non- |
||||||||||||||||
(3) 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 |
||||||||||||||
(Unaudited; Dollars in Millions) |
|
As Reported |
|
|
|
Adjustments |
|
Reference |
|
|
|
As Adjusted |
||||
Net sales |
|
$ |
4,000 |
|
|
|
|
— |
|
|
|
|
|
$ |
4,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
$ |
2,365 |
|
|
|
|
99 |
|
(a) |
|
|
|
$ |
2,464 |
|
Gross profit margin |
|
|
59.1 |
% |
|
|
|
|
|
|
|
|
|
|
61.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
$ |
154 |
|
|
|
|
757 |
|
(a)-(d) |
|
|
|
$ |
911 |
|
Operating income margin |
|
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
|
22.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income |
|
$ |
58 |
|
|
|
|
553 |
|
(a)-(e) |
|
|
|
$ |
611 |
|
Net income margin |
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
15.3 |
% |
Interest expense, net |
|
$ |
92 |
|
|
|
|
|
|
|
|
|
|
|
||
Provision for taxes |
|
$ |
7 |
|
|
|
|
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
$ |
141 |
|
|
|
|
|
|
|
|
|
|
|
||
EBITDA (non-GAAP) |
|
$ |
298 |
|
|
|
|
685 |
|
(b)-(d), (f) |
|
|
|
$ |
983 |
|
EBITDA margin |
|
|
7.5 |
% |
|
|
|
|
|
|
|
|
|
|
24.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Detail of Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Cost of sales |
|
SG&A/Restructuring expenses |
|
Impairment charges |
|
Other operating expense (income), net |
|
Provision for taxes |
|
Total |
||||||||
Amortization |
|
$ |
72 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
$ |
72 |
|
Restructuring expenses |
|
|
— |
|
|
48 |
|
|
— |
|
|
— |
|
|
— |
|
|
|
48 |
|
Operating model optimization initiatives |
|
|
9 |
|
|
1 |
|
|
— |
|
|
— |
|
|
— |
|
|
|
10 |
|
Separation-related costs (including conversion of stock-based awards and Founder Shares) |
|
|
18 |
|
|
76 |
|
|
— |
|
|
— |
|
|
— |
|
|
|
94 |
|
Impairment charges |
|
|
— |
|
|
— |
|
|
510 |
|
|
— |
|
|
(151 |
) |
|
|
359 |
|
Impact of Deferred Markets—minority interest expense |
|
|
— |
|
|
— |
|
|
— |
|
|
9 |
|
|
— |
|
|
|
9 |
|
Impact of Deferred Markets—provision for taxes |
|
|
— |
|
|
— |
|
|
— |
|
|
14 |
|
|
(14 |
) |
|
|
— |
|
Tax impact on special item adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(39 |
) |
|
|
(39 |
) |
Total |
|
$ |
99 |
|
$ |
125 |
|
$ |
510 |
|
$ |
23 |
|
$ |
(204 |
) |
|
$ |
553 |
|
|
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
|
||||||||
Cost of sales less amortization |
|
$ |
27 |
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
(f) |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Three Months Ended |
|
|
||||||||||||
(Unaudited; Dollars in Millions) |
|
As Reported |
|
|
|
Adjustments |
|
Reference |
|
|
|
As Adjusted |
||||
Net sales |
|
$ |
4,011 |
|
|
|
|
— |
|
|
|
|
|
$ |
4,011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
$ |
2,225 |
|
|
|
|
80 |
|
(a) |
|
|
|
$ |
2,305 |
|
Gross profit margin |
|
|
55.5 |
% |
|
|
|
|
|
|
|
|
|
|
57.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
$ |
702 |
|
|
|
|
223 |
|
(a)-(c) |
|
|
|
$ |
925 |
|
Operating income margin |
|
|
17.5 |
% |
|
|
|
|
|
|
|
|
|
|
23.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income |
|
$ |
430 |
|
|
|
|
144 |
|
(a)-(e) |
|
|
|
$ |
574 |
|
Net income margin |
|
|
10.7 |
% |
|
|
|
|
|
|
|
|
|
|
14.3 |
% |
Interest expense, net |
|
$ |
53 |
|
|
|
|
|
|
|
|
|
|
|
||
Provision for taxes |
|
$ |
209 |
|
|
|
|
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
$ |
148 |
|
|
|
|
|
|
|
|
|
|
|
||
EBITDA (non-GAAP) |
|
$ |
840 |
|
|
|
|
143 |
|
(b)-(c) |
|
|
|
$ |
983 |
|
EBITDA margin |
|
|
20.9 |
% |
|
|
|
|
|
|
|
|
|
|
24.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Detail of Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Cost of sales |
|
SG&A/Restructuring expenses |
|
Other operating expense (income), net |
|
Interest expense, net |
|
Provision for taxes |
|
Total |
|||||||||
Amortization |
|
$ |
80 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
80 |
|
Separation-related costs |
|
|
— |
|
|
102 |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
102 |
|
Impact of Deferred Markets—minority interest expense |
|
|
— |
|
|
— |
|
|
6 |
|
|
— |
|
|
|
— |
|
|
|
6 |
|
Impact of Deferred Markets—provision for taxes |
|
|
— |
|
|
— |
|
|
15 |
|
|
— |
|
|
|
(15 |
) |
|
|
— |
|
Litigation expense |
|
|
— |
|
|
— |
|
|
20 |
|
|
— |
|
|
|
— |
|
|
|
20 |
|
Interest income from related party note |
|
|
— |
|
|
— |
|
|
— |
|
|
(33 |
) |
|
|
— |
|
|
|
(33 |
) |
Tax impact on special item adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
(31 |
) |
|
|
(31 |
) |
Total |
|
$ |
80 |
|
$ |
102 |
|
$ |
41 |
|
$ |
(33 |
) |
|
$ |
(46 |
) |
|
$ |
144 |
|
|
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
|
|
|
Fiscal Six Months Ended |
||||||||||||||
(Unaudited; Dollars in Millions) |
|
As Reported |
|
|
|
Adjustments |
|
Reference |
|
|
|
As Adjusted |
||||
Net sales |
|
$ |
7,894 |
|
|
|
|
— |
|
|
|
|
|
$ |
7,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
$ |
4,607 |
|
|
|
|
202 |
|
(a) |
|
|
|
$ |
4,809 |
|
Gross profit margin |
|
|
58.4 |
% |
|
|
|
|
|
|
|
|
|
|
60.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
$ |
704 |
|
|
|
|
1,062 |
|
(a)-(d) |
|
|
|
$ |
1,766 |
|
Operating income margin |
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
|
22.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income |
|
$ |
354 |
|
|
|
|
804 |
|
(a)-(f) |
|
|
|
$ |
1,158 |
|
Net income margin |
|
|
4.5 |
% |
|
|
|
|
|
|
|
|
|
|
14.7 |
% |
Interest expense, net |
|
$ |
187 |
|
|
|
|
|
|
|
|
|
|
|
||
Provision for taxes |
|
$ |
138 |
|
|
|
|
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
$ |
290 |
|
|
|
|
|
|
|
|
|
|
|
||
EBITDA (non-GAAP) |
|
$ |
969 |
|
|
|
|
947 |
|
(b)-(e), (g) |
|
|
|
$ |
1,916 |
|
EBITDA margin |
|
|
12.3 |
% |
|
|
|
|
|
|
|
|
|
|
24.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Detail of Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Cost of sales |
|
SG&A/Restructuring expenses |
|
Impairment charges |
|
Other operating expense (income), net |
|
Other (income) expense, net |
|
Provision for taxes |
|
Total |
|||||||||
Amortization |
|
$ |
146 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
$ |
146 |
|
Restructuring expenses |
|
|
— |
|
|
89 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
89 |
|
Operating model optimization initiatives |
|
|
15 |
|
|
4 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
19 |
|
Separation-related costs (including conversion of stock-based awards and Founder Shares) |
|
|
41 |
|
|
150 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
191 |
|
Impairment charges |
|
|
— |
|
|
— |
|
|
578 |
|
|
— |
|
|
— |
|
|
(151 |
) |
|
|
427 |
|
Impact of Deferred Markets—minority interest expense |
|
|
— |
|
|
— |
|
|
— |
|
|
16 |
|
|
— |
|
|
— |
|
|
|
16 |
|
Impact of Deferred Markets—provision for taxes |
|
|
— |
|
|
— |
|
|
— |
|
|
23 |
|
|
— |
|
|
(23 |
) |
|
|
— |
|
Losses on investments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
31 |
|
|
— |
|
|
|
31 |
|
Tax impact on special item adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(115 |
) |
|
|
(115 |
) |
Total |
|
$ |
202 |
|
$ |
243 |
|
$ |
578 |
|
$ |
39 |
|
$ |
31 |
|
$ |
(289 |
) |
|
$ |
804 |
|
|
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
|
|||||||||
Cost of sales less amortization |
|
$ |
56 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
(g) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Six Months Ended |
||||||||||||||
(Unaudited; Dollars in Millions) |
|
As Reported |
|
|
|
Adjustments |
|
Reference |
|
|
|
As Adjusted |
||||
Net sales |
|
$ |
7,863 |
|
|
|
|
— |
|
|
|
|
|
$ |
7,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
$ |
4,350 |
|
|
|
|
161 |
|
(a) |
|
|
|
$ |
4,511 |
|
Gross profit margin |
|
|
55.3 |
% |
|
|
|
|
|
|
|
|
|
|
57.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income |
|
$ |
1,342 |
|
|
|
|
402 |
|
(a)-(c) |
|
|
|
$ |
1,744 |
|
Operating income margin |
|
|
17.1 |
% |
|
|
|
|
|
|
|
|
|
|
22.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income |
|
$ |
899 |
|
|
|
|
308 |
|
(a)-(f) |
|
|
|
$ |
1,207 |
|
Net income margin |
|
|
11.4 |
% |
|
|
|
|
|
|
|
|
|
|
15.4 |
% |
Interest expense, net |
|
$ |
54 |
|
|
|
|
|
|
|
|
|
|
|
||
Provision for taxes |
|
$ |
349 |
|
|
|
|
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
$ |
300 |
|
|
|
|
|
|
|
|
|
|
|
||
EBITDA (non-GAAP) |
|
$ |
1,602 |
|
|
|
|
248 |
|
(b)-(d) |
|
|
|
$ |
1,850 |
|
EBITDA margin |
|
|
20.4 |
% |
|
|
|
|
|
|
|
|
|
|
23.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Detail of Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Cost of sales |
|
SG&A/Restructuring expenses |
|
Other operating expense (income), net |
|
Other (income) expense, net |
|
Interest expense, net |
|
Provision for taxes |
|
Total |
||||||||||
Amortization |
|
$ |
161 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
161 |
|
Separation-related costs |
|
|
— |
|
|
200 |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
200 |
|
Impact of Deferred Markets—minority interest expense |
|
|
— |
|
|
— |
|
|
6 |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
6 |
|
Impact of Deferred Markets—provision for taxes |
|
|
— |
|
|
— |
|
|
15 |
|
|
— |
|
|
— |
|
|
|
(15 |
) |
|
|
— |
|
Litigation expense |
|
|
— |
|
|
— |
|
|
20 |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
20 |
|
Losses on investments |
|
|
— |
|
|
— |
|
|
— |
|
|
7 |
|
|
— |
|
|
|
— |
|
|
|
7 |
|
Interest income from related party note |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(33 |
) |
|
|
— |
|
|
|
(33 |
) |
Tax impact on special item adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
(53 |
) |
|
|
(53 |
) |
Total |
|
$ |
161 |
$ |
200 |
$ |
41 |
$ |
7 |
$ |
(33 |
) |
$ |
(68 |
) |
|
$ |
308 |
|
|||||
|
|
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
|
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 Six Months Ended |
||||||||
(Unaudited) |
|
|
|
|
|
|
|
|
||||
Effective tax rate |
|
10.8 |
% |
|
32.7 |
% |
|
28.0 |
% |
|
28.0 |
% |
Adjustments: |
|
|
|
|
|
|
|
|
||||
Tax-effect on special item adjustments |
|
(2.9 |
) |
|
(10.6 |
) |
|
(3.1 |
) |
|
(2.4 |
) |
Dr.Ci:Labo® Impairment |
|
17.3 |
|
|
— |
|
|
1.4 |
|
|
— |
|
Removal of tax benefits from carve out methodology |
|
— |
|
|
6.8 |
|
|
— |
|
|
3.5 |
|
Taxes related to Deferred Markets |
|
0.5 |
|
|
1.8 |
|
|
0.5 |
|
|
0.9 |
|
Valuation allowance on foreign tax credits due to interest expense |
|
— |
|
|
— |
|
|
— |
|
|
(4.3 |
) |
Other |
|
— |
|
|
0.1 |
|
|
0.1 |
|
|
— |
|
Adjusted Effective tax rate (non-GAAP) |
|
25.7 |
% |
|
30.8 |
% |
|
26.9 |
% |
|
25.7 |
% |
The following table presents a reconciliation of Effective tax rate, as forecasted on a
|
|
Fiscal Year 2024 |
(Unaudited) |
|
Forecast |
Effective tax rate |
|
26.5% - 27.5% |
Adjustments: |
|
|
Tax-effect on special item adjustments |
|
(1.5) |
Taxes related to Deferred Markets |
|
0.5 |
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 for the periods presented:
|
|
Fiscal Three Months Ended |
|
Fiscal Six Months Ended |
||||||||||||
(Unaudited) |
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per share |
|
$ |
0.03 |
|
|
$ |
0.23 |
|
|
$ |
0.18 |
|
|
$ |
0.51 |
|
Adjustments: |
|
|
|
|
|
|
|
|
||||||||
Separation-related costs |
|
|
0.04 |
|
|
|
0.06 |
|
|
|
0.08 |
|
|
|
0.11 |
|
Restructuring and operating model optimization initiatives |
|
|
0.03 |
|
|
|
— |
|
|
|
0.06 |
|
|
|
— |
|
Impairment charges |
|
|
0.27 |
|
|
|
— |
|
|
|
0.30 |
|
|
|
— |
|
Amortization |
|
|
0.04 |
|
|
|
0.04 |
|
|
|
0.08 |
|
|
|
0.09 |
|
Losses on investments |
|
|
— |
|
|
|
— |
|
|
|
0.02 |
|
|
|
— |
|
Interest income from related party note |
|
|
— |
|
|
|
(0.02 |
) |
|
|
— |
|
|
|
(0.02 |
) |
Tax impact on special item adjustments |
|
|
(0.10 |
) |
|
|
(0.02 |
) |
|
|
(0.14 |
) |
|
|
(0.03 |
) |
Other |
|
|
0.01 |
|
|
|
0.02 |
|
|
|
0.02 |
|
|
|
0.02 |
|
Adjusted diluted earnings per share (non-GAAP) |
|
$ |
0.32 |
|
$ |
0.31 |
|
|
$ |
0.60 |
|
|
$ |
0.68 |
|
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 for the periods presented:
|
|
Fiscal Six Months Ended |
||||||
(Unaudited; Dollars in Billions) |
|
|
|
|
||||
Net cash flows from operating activities |
|
$ |
0.7 |
|
|
$ |
1.5 |
|
Purchases of property, plant, and equipment |
|
|
(0.2 |
) |
|
|
(0.1 |
) |
Free cash flow (non-GAAP) |
|
$ |
0.5 |
|
|
$ |
1.4 |
|
Other Supplemental Financial Information
The following table presents the Company’s Net sales by
|
|
Fiscal Three Months Ended |
|
Fiscal Six Months Ended |
||||||||
(Unaudited; Dollars in Millions) |
|
|
|
|
|
|
|
|
||||
Net sales by geographic region |
|
|
|
|
|
|
|
|
||||
|
|
$ |
2,020 |
|
$ |
2,028 |
|
$ |
3,893 |
|
$ |
3,969 |
|
|
|
878 |
|
|
864 |
|
|
1,783 |
|
|
1,702 |
|
|
|
780 |
|
|
781 |
|
|
1,546 |
|
|
1,549 |
|
|
|
322 |
|
|
338 |
|
|
672 |
|
|
643 |
Total Net sales by geographic region |
|
$ |
4,000 |
|
$ |
4,011 |
|
$ |
7,894 |
|
$ |
7,863 |
The following table presents the Company’s Research and development expenses for the periods presented. Research and development expenses are included within Selling, general, and administrative expenses.
|
|
Fiscal Three Months Ended |
|
Fiscal Six Months Ended |
||||||||
(Unaudited; Dollars in Millions) |
|
|
|
|
|
|
|
|
||||
Research & Development |
|
$ |
105 |
|
$ |
99 |
|
$ |
205 |
|
$ |
188 |
The following table presents the Company’s Cash and cash equivalents, Total debt and Net debt balance as of the periods presented:
(Unaudited; Dollars in Billions) |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
1.0 |
|
|
$ |
1.4 |
|
Total debt |
|
|
(8.5 |
) |
|
|
(8.3 |
) |
Net debt |
|
$ |
(7.5 |
) |
|
$ |
(6.9 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240806423161/en/
Investor Relations:
Kenvue_IR@kenvue.com
Media Relations:
media@kenvue.com
Source: Kenvue