UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑						Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
						For the quarterly period ended ~~July 2,~~October 1, 2023


☐						Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
						For the transition period from to

Commission File Number: 001-41697

Kenvue Inc.

(Exact name of registrant as specified in its charter)


Delaware						88-1032011
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

199 Grandview Road

Skillman, New Jersey 08558

(Address of principal executive offices)

Registrant’s telephone number, including area code: (908) 874-1200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name on each exchange on which registered

Common Stock, Par Value $0.01

KVUE

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☑

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

On ~~July 26,~~October 27, 2023, ~~1,914,894,444~~1,914,995,085 shares of Common Stock, $0.01 par value, were outstanding.

TABLE OF CONTENTS


						Page
						No.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS						ii

Part I — FINANCIAL INFORMATION						1

Item 1. Financial Statements (unaudited)						1

Condensed Consolidated Balance Sheets						1

Condensed Consolidated Statements of Operations						2

Condensed Consolidated Statements of Comprehensive Income (Loss)						3

Condensed Consolidated Statements of Equity						4

Condensed Consolidated Statements of Cash Flows						6

Notes to Condensed Consolidated Financial Statements						7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						3135

Item 3. Quantitative and Qualitative Disclosures About Market Risk						4651

Item 4. Controls and Procedures						4852

Part II — OTHER INFORMATION						4852

Item 1. Legal Proceedings						4852

Item 1A. Risk Factors						4852

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds						4852

Item 5. Other Information						4953

Item 6. Exhibits						5054

Signatures						5255

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and Kenvue Inc.’s other publicly available documents contain forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and reflect management’s assumptions, views, plans, objectives, and projections about the future. Forward-looking statements may be identified by the use of words such as “plans,” “expects,” “will,” “anticipates,” “estimates”, and other words of similar meaning in conjunction with, among other things: discussions of future operations; expected operating results and financial performance; impact of planned acquisitions and dispositions; our strategy for growth; product development activities; regulatory approvals; market position; expenditures; and the effects of the Separation (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to our Condensed Consolidated Financial Statements included herein), if pursued, on our business.

Because forward-looking statements are based on current beliefs, expectations, and assumptions regarding future events, they are subject to risks, uncertainties, and changes that are difficult to predict and many of which are outside of our control. You should realize that if underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, our actual results and financial condition could vary materially from expectations and projections expressed or implied in our forward-looking statements. Risks and uncertainties include but are not limited to:

•Our ability to expand globally, implement our digital-first approach and respond appropriately to competitive pressure, including pressure from private-label brands and generic non-branded products, market trends, and customer and consumer preferences;

•The impact of negative publicity and failed marketing efforts;

•The rapidly changing retail landscape, including our dependence on key retailers, policies of our retail trade customers, the emergence of e-commerce and other alternative retail channels, and challenges with innovation and research and development;

•~~Our ability~~Product reliability, safety, and/or efficacy concerns, whether or not based on scientific or factual evidence, potentially resulting in governmental investigations, regulatory action (including, but not limited to, ~~achieve~~ the ~~expected benefits~~shutdown of manufacturing facilities, product relabeling or withdrawal of product from the market), private claims and ~~successfully execute the Separation~~lawsuits, significant remediation and related ~~transactions, including the distribution of Johnson & Johnson’s interest in us to its shareholders through an exchange offer or otherwise;~~

•~~Our status as a controlled company,~~costs, safety alerts, product shortages, product recalls, declining sales, reputational damage, and ~~the possibility that Johnson & Johnson’s interests or those of certain of our executive officers and directors may conflict with our interests and the interests of our other shareholders;~~

•~~Restrictions on our business, potential tax and indemnification liabilities and substantial charges in connection with the Separation and related transactions;~~share price impact;

•The potential that the expected benefits and opportunities from any planned or completed acquisition or divestiture may not be realized or may take longer to realize than expected;

•Our ability to establish, maintain, protect, and enforce intellectual property rights, as well as address the threats of counterfeit products, infringement of our intellectual property, and other unauthorized versions of our products;

•Allegations that our products infringe the intellectual property rights of third parties;

•Difficulties and delays in manufacturing, internally or within the supply chain, that may lead to business interruptions, product shortages, withdrawals or suspensions of products from the market, and potential regulatory action;

•Our reliance on third-party relationships, global supply chains, and production and distribution processes, which may adversely affect supply, sourcing, and pricing of materials used in our products, and impact our ability to forecast product demand;

•Interruptions and breaches of our information technology systems or those of a third party;

•The potential for labor disputes, strikes, work stoppages, and similar labor relations matters, and the impact of minimum wage increases;

•Our ability to attract and retain talented, highly skilled employees and a diverse workforce, and to implement succession plans for our senior management;

•Climate change, extreme weather, and natural disasters, or legal, regulatory or market measures to address climate change;

•The impact of increasing scrutiny and rapidly evolving expectations from stakeholders regarding environmental, social, and governance matters;

•The potential for insurance to be unavailable or insufficient to cover losses we may incur;

•
Product reliability, safety, and efficacy concerns, whether or not based on scientific or factual evidence, potentially resulting in governmental investigations, regulatory action (including the shutdown of manufacturing facilities), private claims and lawsuits, significant remediation and related costs, safety alerts, product shortages, declining sales, reputational damage, and share price impact;

•Legal proceedings related to talc or talc-containing products, such as Johnson’s Baby Powder, sold outside the United States and Canada and other risks and uncertainties related to talc or talc-containing products, including Johnson & Johnson’s ability to fully satisfy its obligation to indemnify us in the United States and Canada for the Talc-Related Liabilities (as defined in Note 13, “Commitments and Contingencies,” to our Condensed Consolidated Financial Statements included herein);

•The impact of legal proceedings and the uncertainty of their outcome, whether or not we believe they have merit;

•Changes to applicable laws, regulations, policies, and related ~~interpretations;~~interpretations;

•Changes in tax laws and regulations, increased audit scrutiny by tax authorities and exposures to additional tax liabilities potentially in excess of existing reserves;

•The impact of inflation and fluctuations in interest rates and currency exchange rates;

•Potential changes in export/import and trade laws, regulations, and policies;

•The impact of a natural disaster, catastrophe, epidemic, pandemic, including COVID-19, global tension, including armed conflict such as the ongoing military conflict between Russia and Ukraine, or other event;

•The impact of impairment of our goodwill and other intangible assets;

•Our ability to maintain satisfactory credit ratings;

•Our ability to achieve the expected benefits of the Separation and related transactions;

•The possibility that Johnson & Johnson’s interests or those of certain of our executive officers and directors may conflict with our interests and the interests of our other shareholders;

•Restrictions on our business, potential tax and indemnification liabilities and substantial charges in connection with the Separation and related transactions;

•Failure of our rebranding efforts in connection with the Separation to achieve market acceptance, and the impact of our continued use of legacy Johnson & Johnson branding, including the “Johnson’s” brand; and

•Our substantial indebtedness, including the restrictions and covenants in our debt agreements.

Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found under the sections entitled “Cautionary ~~Note Regarding~~Statement Concerning Forward-Looking Statements” and “Risk Factors” in our final prospectus filed on ~~May 4,~~August 14, 2023 with the U.S. Securities and Exchange Commission pursuant to Rule 424(b)~~(4)~~(3) under the Securities Act of 1933, as amended, relating to our Registration Statement on Form ~~S-1.~~S-4. You should understand that it is not possible to predict or identify all such factors and you should not consider the risks described above to be a complete statement of all potential risks and uncertainties. We do not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments, except as required by law.

iii

Part I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

KENVUE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; In Millions Except Per Share Data)


		July 2, 2023		January 1, 2023			October 1, 2023		January 1, 2023
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	1,231	$	1,231	Cash and cash equivalents	$	1,062	$	1,231
Trade receivables, less allowances for credit losses ($29 and $35 as of July 2, 2023 and January 1, 2023, respectively)		2,096		2,122
Trade receivables, less allowances for credit losses ($27 and $35 as of October 1, 2023 and January 1, 2023, respectively)						Trade receivables, less allowances for credit losses ($27 and $35 as of October 1, 2023 and January 1, 2023, respectively)	2,109		2,122
Inventories	Inventories	2,026		2,226		Inventories	1,885		2,226
Prepaid expenses and other receivables	Prepaid expenses and other receivables	643		175		Prepaid expenses and other receivables	619		175
Other current assets	Other current assets	223		123		Other current assets	219		123
Total current assets	Total current assets	6,219		5,877		Total current assets	5,894		5,877
Property, plant, and equipment, net	Property, plant, and equipment, net	1,832		1,820		Property, plant, and equipment, net	1,872		1,820
Intangible assets, net	Intangible assets, net	9,678		9,853		Intangible assets, net	9,487		9,853
Goodwill	Goodwill	9,081		9,185		Goodwill	8,974		9,185
Deferred taxes on income	Deferred taxes on income	143		147		Deferred taxes on income	156		147

Other assets	Other assets	589		434		Other assets	694		434
Total Assets	Total Assets	$	27,542	$	27,316	Total Assets	$	27,077	$	27,316
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current liabilities	Current liabilities					Current liabilities
Loans and notes payable	Loans and notes payable	752		—		Loans and notes payable	513		—
Accounts payable	Accounts payable	2,354		1,829		Accounts payable	2,281		1,829
Accrued liabilities	Accrued liabilities	1,201		906		Accrued liabilities	1,288		906
Accrued rebates, returns, and promotions	Accrued rebates, returns, and promotions	753		862		Accrued rebates, returns, and promotions	696		862
Accrued taxes on income	Accrued taxes on income	239		329		Accrued taxes on income	383		329
Total current liabilities	Total current liabilities	5,299		3,926		Total current liabilities	5,161		3,926
Employee related obligations	Employee related obligations	244		214		Employee related obligations	254		214
Long-term debt	Long-term debt	7,684		—		Long-term debt	7,685		—
Deferred taxes on income	Deferred taxes on income	2,682		2,428		Deferred taxes on income	2,515		2,479
Other liabilities	Other liabilities	593		727		Other liabilities	569		727
Total liabilities	Total liabilities	16,502		7,295		Total liabilities	16,184		7,346
Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)					Commitments and contingencies (Note 13)
Equity	Equity					Equity
Preferred stock, $0.01 par value, 750 shares authorized, no shares issued and outstanding	Preferred stock, $0.01 par value, 750 shares authorized, no shares issued and outstanding	—		—		Preferred stock, $0.01 par value, 750 shares authorized, no shares issued and outstanding	—		—
Common stock, $0.01 par value, 12,500 shares authorized, 1,915 shares issued and outstanding	Common stock, $0.01 par value, 12,500 shares authorized, 1,915 shares issued and outstanding	19		—		Common stock, $0.01 par value, 12,500 shares authorized, 1,915 shares issued and outstanding	19		—
Additional paid-in capital	Additional paid-in capital	16,098		—		Additional paid-in capital	16,131		—
Retained earnings	Retained earnings	430		—		Retained earnings	485		—
Net investment from Parent		—		25,474
Net investment from Johnson & Johnson						Net investment from Johnson & Johnson	—		25,425
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(5,507)		(5,453)		Accumulated other comprehensive loss	(5,742)		(5,455)
Total equity	Total equity	11,040		20,021		Total equity	10,893		19,970
Total Liabilities and Equity	Total Liabilities and Equity	$	27,542	$	27,316	Total Liabilities and Equity	$	27,077	$	27,316

See Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; In Millions Except Per Share Data)


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
		July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022			October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Net sales	Net sales	$	4,011	$	3,804	$	7,863	$	7,394	Net sales	$	3,915	$	3,789	$	11,778	$	11,183
Cost of sales	Cost of sales	1,786		1,646		3,513		3,280		Cost of sales	1,665		1,664		5,178		4,944
Gross profit	Gross profit	2,225		2,158		4,350		4,114		Gross profit	2,250		2,125		6,600		6,239
Selling, general, and administrative expenses	Selling, general, and administrative expenses	1,522		1,375		3,024		2,725		Selling, general, and administrative expenses	1,531		1,376		4,555		4,101
Other operating expense (income), net	Other operating expense (income), net	1		13		(16)		8		Other operating expense (income), net	9		(14)		(7)		(6)
Operating income	Operating income	702		770		1,342		1,381		Operating income	710		763		2,052		2,144
Other expense (income), net		10		(5)		40		(6)
Other expense, net										Other expense, net	25		25		65		19
Interest expense, net	Interest expense, net	53		—		54		—		Interest expense, net	100		—		154		—
Income before taxes	Income before taxes	639		775		1,248		1,387		Income before taxes	585		738		1,833		2,125
Provision for taxes	Provision for taxes	209		171		488		255		Provision for taxes	147		152		496		422
Net income	Net income	$	430	$	604	$	760	$	1,132	Net income	$	438	$	586	$	1,337	$	1,703

Basic and diluted net income per share		$	0.23	$	0.35	$	0.43	$	0.66
Basic and diluted weighted-average common stock		1,838		1,716		1,777		1,716
Net income per share										Net income per share
Basic										Basic	$	0.23	$	0.34	$	0.73	$	0.99
Diluted										Diluted	$	0.23	$	0.34	$	0.73	$	0.99
Weighted average common stock										Weighted average common stock
Basic										Basic	1,916		1,716		1,823		1,716
Diluted										Diluted	1,920		1,716		1,827		1,716

See Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; in Millions)


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
		July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022			October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Net income	Net income	$	430	$	604	760		1,132		Net income	$	438	$	586	$	1,337	$	1,703
Other comprehensive income (loss)
Other comprehensive loss										Other comprehensive loss
Foreign currency translation, net of taxes	Foreign currency translation, net of taxes	(177)		(835)		(16)		(1,115)		Foreign currency translation, net of taxes	(249)		(642)		(260)		(1,734)
Employee benefit plans, net of taxes	Employee benefit plans, net of taxes	(10)		1		4		4		Employee benefit plans, net of taxes	13		1		19		5
Derivatives and hedges, net of taxes	Derivatives and hedges, net of taxes	(8)		1		31		(3)		Derivatives and hedges, net of taxes	(4)		11		27		8
Other comprehensive income (loss)		(195)		(833)		19		(1,114)
Other comprehensive loss										Other comprehensive loss	(240)		(630)		(214)		(1,721)
Comprehensive income (loss)	Comprehensive income (loss)	$	235	$	(229)	$	779	$	18	Comprehensive income (loss)	$	198	$	(44)	$	1,123	$	(18)

See Notes to Condensed Consolidated Financial ~~Statements.~~Statements

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited; in Millions)

Fiscal Three Months Ended July 2, 2023
Common Stock Additional Paid-In Capital Retained Earnings Net Investment from Parent Accumulated Other Comprehensive Loss Total Equity
Shares Amount
Balance, April 2, 2023 — $ — $ — $ — $ 25,521 $ (5,239) $ 20,282
Net income — — — 430 — — 430
Other comprehensive loss — — — — — (195) (195)
Net transfers from the Parent — — — — 10 — 10
Stock-based compensation — — 38 — — — 38
Distribution to J&J in connection with the Separation — — (13,788) — — — (13,788)
Issuance of common stock in connection with the Kenvue IPO 1,915 19 4,222 — — — 4,241
Separation adjustments — — — — 95 (73) 22
Reclassification of Net Investment from Parent — — 25,626 — (25,626) — —
Balance, July 2, 2023 1,915 $ 19 $ 16,098 $ 430 $ — $ (5,507) $ 11,040


	Fiscal Three Months Ended October 1, 2023
	Common Stock			Additional Paid-In Capital		Retained Earnings		Net Investment from Johnson & Johnson		Accumulated Other Comprehensive Loss		Total Equity
	Shares	Amount
Balance, July 2, 2023	1,915	$	19	$	16,184	$	430	$	—	$	(5,502)	$	11,131
Net income	—	—		—		438		—		—		438
Other comprehensive loss	—	—		—		—		—		(240)		(240)
Cash dividends on common stock	—	—		—		(383)		—		—		(383)

Stock-based compensation	—	—		2		—		—		—		2



Separation-related adjustments	—	—		(55)		—		—		—		(55)

Balance, October 1, 2023	1,915	$	19	$	16,131	$	485	$	—	$	(5,742)	$	10,893


		Fiscal Three Months Ended July 3, 2022							Fiscal Three Months Ended October 2, 2022
		Net Investment from Parent		Accumulated Other Comprehensive Loss		Total Equity			Net Investment from Johnson & Johnson		Accumulated Other Comprehensive Loss		Total Equity
Balance, April 3, 2022		$	25,219	$	(4,754)	$	20,465
Balance, July 3, 2022								Balance, July 3, 2022	$	25,143	$	(5,574)	$	19,569
Net income	Net income	604		—		604		Net income	586		—		586
Other comprehensive loss	Other comprehensive loss	—		(833)		(833)		Other comprehensive loss	—		(630)		(630)
Net transfers to the Parent		(635)		—		(635)
Balance, July 3, 2022		$	25,188	$	(5,587)	$	19,601
Net transfers to Johnson & Johnson								Net transfers to Johnson & Johnson	(620)		—		(620)
Balance, October 2, 2022								Balance, October 2, 2022	$	25,109	$	(6,204)	$	18,905

Fiscal Six Months Ended July 2, 2023
Common Stock Additional Paid-In Capital Retained Earnings Net Investment from Parent Accumulated Other Comprehensive Loss Total Equity
Shares Amount
Balance, January 1, 2023 — $ — $ — $ — $ 25,474 $ (5,453) $ 20,021
Net income — — — 430 330 — 760
Other comprehensive income — — — — — 19 19
Net transfers to the Parent — — — — (308) — (308)
Stock-based compensation — — 38 — 35 — 73
Distribution to J&J in connection with the Separation — — (13,788) — — — (13,788)
Issuance of common stock in connection with the Kenvue IPO 1,915 19 4,222 — — — 4,241
Separation adjustments — — — — 95 (73) 22
Reclassification of Net Investment from Parent — — 25,626 — (25,626) — —
Balance, July 2, 2023 1,915 $ 19 $ 16,098 $ 430 $ — $ (5,507) $ 11,040


	Fiscal Nine Months Ended October 1, 2023
	Common Stock			Additional Paid-In Capital		Retained Earnings		Net Investment from Johnson & Johnson		Accumulated Other Comprehensive Loss		Total Equity
	Shares	Amount
Balance, January 1, 2023	—	$	—	$	—	$	—	$	25,425	$	(5,455)	$	19,970
Net income	—	—		—		868		469		—		1,337
Other comprehensive loss	—	—		—		—		—		(214)		(214)
Cash dividends on common stock	—	—		—		(383)		—				(383)
Net transfers to Johnson & Johnson	—	—		—		—		(308)		—		(308)
Stock-based compensation	—	—		40		—		35		—		75
Distribution to Johnson & Johnson in connection with the Separation	—	—		(13,788)		—		—		—		(13,788)
Issuance of common stock in connection with the Kenvue IPO	1,915	19		4,222		—		—		—		4,241
Reclassification of Net Investment from Johnson & Johnson	—	—		25,712		—		(25,712)		—		—
Separation-related adjustments	—	—		(55)		—		—		—		(55)
Separation from Johnson & Johnson	—	—		—		—		91		(73)		18
Balance, October 1, 2023	1,915	$	19	$	16,131	$	485	$	—	$	(5,742)	$	10,893


		Fiscal Six Months Ended July 3, 2022							Fiscal Nine Months Ended October 2, 2022
		Net Investment from Parent		Accumulated Other Comprehensive Loss		Total Equity			Net Investment from Johnson & Johnson		Accumulated Other Comprehensive Loss		Total Equity
Balance, January 2, 2022	Balance, January 2, 2022	$	24,872	$	(4,473)	$	20,399	Balance, January 2, 2022	$	24,974	$	(4,483)	$	20,491
Net income	Net income	1,132		—		1,132		Net income	1,703		—		1,703
Other comprehensive loss	Other comprehensive loss	—		(1,114)		(1,114)		Other comprehensive loss	—		(1,721)		(1,721)
Net transfers to the Parent		(816)		—		(816)
Balance, July 3, 2022		$	25,188	$	(5,587)	$	19,601
Net transfers to Johnson & Johnson								Net transfers to Johnson & Johnson	(1,568)		—		(1,568)
Balance, October 2, 2022								Balance, October 2, 2022	$	25,109	$	(6,204)	$	18,905

See Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in Millions)


		Fiscal Six Months Ended					Fiscal Nine Months Ended
		July 2, 2023		July 3, 2022			October 1, 2023		October 2, 2022
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income	Net income	$	760	$	1,132	Net income	$	1,337	$	1,703
Adjustments to reconcile net income to cash flows from operating activities	Adjustments to reconcile net income to cash flows from operating activities					Adjustments to reconcile net income to cash flows from operating activities
Depreciation and amortization	Depreciation and amortization	300		326		Depreciation and amortization	453		478
Stock-based compensation	Stock-based compensation	73		76		Stock-based compensation	75		106

Deferred income taxes	Deferred income taxes	155		62		Deferred income taxes	(128)		128
Other	Other	12		—		Other	(11)		8
Net changes in assets and liabilities	Net changes in assets and liabilities					Net changes in assets and liabilities
Trade receivables	Trade receivables	(55)		(144)		Trade receivables	(97)		(210)
Inventories	Inventories	143		(366)		Inventories	275		(535)
Other current and non-current assets	Other current and non-current assets	(495)		68		Other current and non-current assets	(418)		87
Accounts payable	Accounts payable	329		(42)		Accounts payable	231		19
Accrued liabilities	Accrued liabilities	776		(63)		Accrued liabilities	724		68
Employee related obligations		4		11
Accrued taxes on income		(207)		63

Other liabilities	Other liabilities	(251)		22		Other liabilities	(223)		29
Net cash flows from operating activities	Net cash flows from operating activities	1,544		1,145		Net cash flows from operating activities	2,218		1,881
Cash flows used in investing activities	Cash flows used in investing activities					Cash flows used in investing activities
Purchases of property, plant, and equipment	Purchases of property, plant, and equipment	(132)		(113)		Purchases of property, plant, and equipment	(246)		(216)
Transfer of funds to J&J pursuant to the Facility Agreement	Transfer of funds to J&J pursuant to the Facility Agreement	(8,941)		—		Transfer of funds to J&J pursuant to the Facility Agreement	(8,941)		—
Proceeds from J&J upon repayment of the Facility Agreement	Proceeds from J&J upon repayment of the Facility Agreement	8,941		—		Proceeds from J&J upon repayment of the Facility Agreement	8,941		—
Proceeds from sale of assets	Proceeds from sale of assets	14		2		Proceeds from sale of assets	14		8
Other investing		—		(4)
Other investing activities						Other investing activities	9		(15)

Net cash flows used in investing activities	Net cash flows used in investing activities	(118)		(115)		Net cash flows used in investing activities	(223)		(223)
Cash flows used in financing activities	Cash flows used in financing activities					Cash flows used in financing activities
(Payments of) proceeds from loans and notes payable		(14)		7
(Proceeds from) payments of loans and notes payable						(Proceeds from) payments of loans and notes payable	(14)		22
Proceeds from Commercial Paper Program, net of issuance cost	Proceeds from Commercial Paper Program, net of issuance cost	742		—		Proceeds from Commercial Paper Program, net of issuance cost	497		—
Proceeds from issuance of Senior Notes, net of issuance cost	Proceeds from issuance of Senior Notes, net of issuance cost	7,686		—		Proceeds from issuance of Senior Notes, net of issuance cost	7,686		—
Proceeds from Kenvue IPO, net	Proceeds from Kenvue IPO, net	4,241		—		Proceeds from Kenvue IPO, net	4,241		—
Distribution to J&J in connection with the Separation	Distribution to J&J in connection with the Separation	(13,788)		—		Distribution to J&J in connection with the Separation	(13,788)		—
Net transfer to the Parent		(274)		(892)
Other financing		(11)		—

Dividends paid						Dividends paid	(383)		—
Net transfer to J&J						Net transfer to J&J	(274)		(1,542)
Other financing activities						Other financing activities	(109)		—
Net cash flows used in financing activities	Net cash flows used in financing activities	(1,418)		(885)		Net cash flows used in financing activities	(2,144)		(1,520)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(8)		(47)		Effect of exchange rate changes on cash and cash equivalents	(20)		(81)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	1,231		740		Cash and cash equivalents, beginning of period	1,231		740
Net increase in cash and cash equivalents		—		98
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	(169)		57
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	1,231	$	838	Cash and cash equivalents, end of period	$	1,062	$	797

See Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of the Company and Summary of Significant Accounting Policies

Description of the Company and Business Segments

Kenvue Inc. (“Kenvue” or the “Company”) was formed as a wholly owned subsidiary of Johnson & Johnson (“J&J” or the ~~“Parent”~~“Former Parent”) and sells a broad range of products used in the baby care, oral care, skin health and beauty, over-the-counter pharmaceutical, sanitary protection, and wound care markets. These products are marketed to the general public through e-commerce, direct-to-consumer channels, and to retail outlets and distributors throughout the world.

The Company is organized into three business segments: Self Care, Skin Health and Beauty, and Essential Health. The Self Care segment includes a broad product range such as cough, cold and allergy, pain care, as well as digestive health, smoking cessation, and other products. The Skin Health and Beauty segment is focused on face and body care, and hair, sun, and other products. The Essential Health segment includes oral care, baby care, as well as women’s health, wound care, and other products.

In November 2021, ~~the Parent~~J&J announced its intention to separate its Consumer Health segment (the “Consumer Health Business”) into a new, publicly traded company (the “Separation”). Prior to the Kenvue IPO (as defined below), the Company was wholly owned by J&J and primarily represented J&J’s Consumer Health Business. The Company also included certain other product lines previously reported in another segment of J&J. On April 4, 2023, in connection with the Separation, J&J completed in all material respects the transfer of the assets and liabilities of the Consumer Health Business to the Company and its subsidiaries (such transfer, the “Consumer Health Business ~~Transfer)~~Transfer”), other than the transfer of certain Deferred Local Business (as defined below in “—Variable Interest Entities and Net Economic Benefit Arrangements”).

~~The~~On May 3, 2023, the registration statement related to the initial public offering of Kenvue’s common stock was declared effective, and on May 3,4, 2023, ~~and~~ Kenvue’s common stock began trading on the New York Stock Exchange under the ticker symbol “KVUE” ~~on May 4, 2023~~ (the “Kenvue IPO”).

On May 8, 2023, the Kenvue IPO was completed through the sale of 198,734,444 shares of common stock, par value $0.01 per share, including the underwriters’ full exercise of their option to purchase 25,921,884 shares to cover over-allotments, at an initial public offering price of $22 per share for net proceeds of $4.2 billion after deducting underwriting discounts and commissions of $131 million. On May 8, 2023, in conjunction with the Consumer Health Business Transfer, the Company distributed $13.8 billion to J&J from the (1) net proceeds received from the sale of the common stock in the Kenvue IPO and (2) net proceeds received from the Debt Financing Transactions as defined in Note 4, “Borrowings”, and (3) any cash and cash equivalents in excess of the $1.17 billion in cash and cash equivalents retained by the Company immediately following the Kenvue IPO. As of the closing of the Kenvue IPO, J&J owned 1,716,160,000 shares of Kenvue common stock, or approximately 89.6% of the total outstanding shares of Kenvue common stock.

On July 24, 2023, J&J initiated an exchange offer (the “Exchange Offer”) under which its shareholders ~~can~~could exchange shares of J&J common stock for shares of Kenvue Inc. common stock owned by J&J. On August 23, 2023, J&J announced the results of the Exchange Offer through which J&J accepted an aggregate of 190,955,435 shares of J&J common stock in exchange for 1,533,830,450 shares of Kenvue common stock, representing approximately 80.1% of Kenvue’s outstanding common stock as of August 23, 2023. As a result, Kenvue became a fully independent company and J&J now owns 9.5% of the outstanding shares of Kenvue common stock following the completion of the Exchange Offer.

Basis of Presentation

Effective April 4, 2023, the Company’s financial statements are presented on a consolidated basis, as J&J completed the Consumer Health Business Transfer on such date. The unaudited financial statements for all periods presented, including the historical results of the Company prior to April 4, 2023, are now referred to as the “Condensed Consolidated Financial Statements”. Prior to April 4, 2023, the Company operated as a segment of ~~the Parent~~J&J and not as a separate entity. The Company’s financial statements prior to April 4, 2023 were prepared on a combined basis and were derived from ~~the Parent’s~~J&J’s historical consolidated financial statements for interim financial reporting, which do not conform in all respects to the requirements of accounting principles generally accepted in the United States of America (“U.S. GAAP”) for annual financial statements. The

Condensed Consolidated Balance Sheet as of January 1, 2023 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Accordingly, the accompanying Condensed Consolidated Financial Statements and related notes should be read in conjunction with the audited combined financial statements and related notes as contained in the Company’s final prospectus (the ~~“IPO~~“Split-Off Prospectus”) filed on ~~May 4,~~August 14, 2023 with the U.S. Securities and

Exchange Commission (“SEC”) pursuant to Rule 424(b)~~(4)~~(3) under the Securities Act of 1933, as amended (the ~~“Act,”~~“Securities Act”), relating to the Company’s Registration Statement on Form ~~S-1.~~S-4. The Condensed Consolidated Financial Statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.

Prior to the Kenvue IPO, the Company relied on ~~the Parent’s~~J&J’s corporate and other support functions. Therefore, certain corporate and shared costs were allocated to the Company including the assets, liabilities, revenues, and expenses that J&J’s management determined were specifically or primarily identifiable to the Company, as well as direct and indirect costs that were attributable to the operations of the Company. Indirect costs are the costs of support functions that were provided on a centralized or geographic basis by ~~the Parent~~J&J and its affiliates, which included, but were not limited to, facilities, insurance, logistics, quality, compliance, finance, human resources, benefits administration, procurement support, information technology, legal, corporate strategy, corporate governance, other professional services, and general commercial support functions.

Indirect costs were allocated to the Company for the purposes of preparing condensed combined financial statements prior to the Kenvue IPO, based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method, primarily net sales, headcount, or other allocation methodologies that were considered to be a reasonable reflection of the utilization of services provided or benefit received by the Company during the periods presented, depending on the nature of the services received. Management considers that such allocations were made on a reasonable basis consistent with benefits received but may not necessarily be indicative of the costs that would have been incurred if the Company had been operated on a standalone basis for the periods presented.

Kenvue’s practice is to establish actual quarterly closing dates using a predetermined fiscal calendar, which allows the business to close its books on Sunday at the end of the period.

The Company and ~~the Parent~~J&J incurred certain non-recurring Separation-related costs in the establishment of Kenvue as a standalone public company. Costs incurred by the Company and those costs incurred by ~~the Parent~~J&J determined to be for the benefit of the Company are included in the Condensed Consolidated Financial Statements. These non-recurring Separation-related costs were ~~$102~~$133 million and ~~$49~~$50 million for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, and ~~$200~~$333 million and ~~$59~~$109 million for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively. The non-recurring Separation-related costs are included within Selling, general, and administrative expenses.

The Condensed Consolidated Financial Statements include the accounts of the Company and entities consolidated under the variable interest and voting models. Intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, trade promotions, rebates, allowances and incentives, product liabilities, income taxes and related valuation allowance, withholding taxes, depreciation, amortization, employee benefits, contingencies, allocations of cost and expenses from ~~the Parent~~J&J and its affiliates, and intangible asset and liability valuations. Actual results may or may not differ from those estimates.

Debt Discounts and Premiums, Issuance Costs, and Deferred Financing Costs

Debt issuance costs and discounts are presented as a reduction of Long-term debt and are amortized as a component within Interest expense, net on the Company’s Condensed Consolidated Statements of Operations over the term on the related debt using the effective interest method.

Research and Development

Research and development expenses are expensed as incurred and included within Selling, general, and administrative expenses. Research and development costs were ~~$99~~$78 million and ~~$94~~$90 million for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, and ~~$188~~$266 million and ~~$182~~$272 million for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively.

Leases

Global Corporate Headquarters Lease

On April 20, 2023, the Company entered into a long-term lease for a newly renovated office building and a newly constructed research and development building in Summit, New Jersey that, when completed, will encompass a total of approximately 290,000 square feet and serve as the Company’s new global corporate headquarters. The lease is expected to commence in January 2024. The expected lease expense is approximately $10 million per year with an initial term of 15 years. In addition to corporate office space, this campus will house laboratory space to principally support research and development. The relocation to this campus is expected to commence in 2025 for the office building and continue through 2026 for the new research and development building. The Company will continue to operate from its interim corporate headquarters in Skillman, New Jersey until that time.

Lease Assets and Liabilities

Right of Use assets (“ROU assets”) and lease liabilities associated with the Company's operating leases are included in the Condensed Consolidated Balance Sheets as of ~~July 2,~~October 1, 2023 and January 1, 2023 as follows:


(Dollars in Millions)	(Dollars in Millions)	July 2, 2023(1)		January 1, 2023		(Dollars in Millions)	October 1, 2023(1)		January 1, 2023
ROU assets included in:	ROU assets included in:					ROU assets included in:
Other non-current assets	Other non-current assets	$	164	$	110	Other non-current assets	$	149	$	110
Lease liabilities included in:	Lease liabilities included in:					Lease liabilities included in:
Accrued and other current liabilities	Accrued and other current liabilities	47		35		Accrued and other current liabilities	46		35
Other non-current liabilities	Other non-current liabilities	120		81		Other non-current liabilities	106		81
Total lease liabilities	Total lease liabilities	$	167	$	116	Total lease liabilities	$	152	$	116

(1) Includes related party leases of ~~$73~~$52 million of ROU assets, ~~$13~~$11 million of current lease liabilities, and ~~$56~~$41 million of non-current lease liabilities.

Variable Interest Entities and Net Economic Benefit Arrangements

When the Company makes an initial investment in or establishes other variable interests in an entity, the entity is first evaluated to determine if it is a Variable Interest Entity (“VIE”) and if the Company is the primary beneficiary of the VIE, and therefore subject to consolidation regardless of percentage ownership. The primary beneficiary of a VIE is a party that meets both of the following criteria: (1) it has the power to direct the activities that most significantly impact the economic performance of the VIE; and (2) it has the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. Periodically, the Company assesses whether any change in its interest in or relationship with the entity affects the determination as to whether the entity is a VIE, and, if so, whether the Company is the primary beneficiary.

In connection with the Kenvue IPO, ~~the Parent~~J&J and Kenvue entered into a separation agreement (the “Separation Agreement”) on May 3, 2023. Under the Separation Agreement, transfer of certain assets and liabilities of the Consumer Health Business in certain jurisdictions (each, a “Deferred Local Business”) was not completed prior to the Kenvue IPO and was deferred due to certain precedent conditions, which include ensuring compliance with applicable law and obtaining necessary governmental approvals and other consents, and for other business reasons. At Kenvue IPO and until the Deferred Local Business transfers to the Company, J&J (1) holds and operates the Deferred Local Businesses on behalf of and for the benefit of the Company, and (2) will use reasonable best efforts to treat and operate, insofar as reasonably practicable and to the extent permitted by applicable law, each such Deferred Local Business in the ordinary course of business in all material respects consistent with past practice. The benefits and costs related to these Deferred Local Businesses will be assumed by the Company (see below “—Net Economic Benefit Arrangements”). In addition, the Company and J&J will use reasonable best efforts to take all actions to transfer each Deferred Local Business as promptly as reasonably practicable. When the precedent conditions are met, the Deferred Local Businesses will be transferred to the Company as per the terms of the arrangement with J&J.

The Company determined that certain Deferred Local Businesses that are legal entities (“Deferred Legal Entities”), are VIEs for which Kenvue is the primary beneficiary, since Kenvue has the power to direct the activities that most significantly impact such Deferred Legal Entities’ economic performance as well as to obtain all of the economic benefits and losses of such entities.

These significant activities include, but are not limited to, product pricing, marketing and sales strategy, supply chain strategy,

material supply and vendor management, budget planning, and labor and overhead management. Accordingly, the assets and liabilities of these entities are recognized on the Company’s Condensed Consolidated Balance Sheet at their historical carrying amounts as of the date when the Company entered into the arrangement, since the primary beneficiary of the VIEs and the VIEs themselves were under common control. Additionally, the results of the operations and cash flows are included within the Company’s Condensed Consolidated Financial Statements.

All Deferred Legal Entities are exposed to similar operational risks and are therefore monitored and evaluated on a similar basis by management. Accordingly, the financial information for Deferred Legal Entities has been aggregated and the following table summarizes the consolidated assets and liabilities of these entities, within the Condensed Consolidated Balance Sheets. The amounts represented in this table are only those assets of the VIEs that can be used to settle only the VIE’s obligations and the VIE’s creditors (or beneficial interest holders) have no recourse against the general credit of the primary beneficiary.

~~(Dollars in Millions)~~

~~July 2, 2023~~

~~Assets~~

~~Current assets~~

~~Cash and cash equivalents~~

~~228~~

~~Trade receivables, less allowances for credit losses~~

~~Inventories~~

~~Prepaid expenses and other receivables~~

~~Total current assets~~

~~408~~

~~Property, plant, and equipment, net~~

~~126~~

~~Intangible assets, net~~

~~Goodwill~~

~~249~~

~~Deferred taxes on income~~

~~Other assets~~

~~Total assets~~

~~874~~

~~Liabilities~~

~~Current liabilities~~

~~Accounts payable~~

~~Accrued liabilities~~

~~Accrued rebates, returns, and promotions~~

~~Accrued taxes on income~~

~~Total current liabilities~~

~~282~~

~~Deferred taxes on income~~

~~Other liabilities~~

~~Total liabilities~~

~~304~~

~~The Company recognized net income of $32 million related to the Deferred Legal Entities for~~In the fiscal three months ended ~~July 2,~~October 1, 2023, J&J transferred the equity interests in the majority of the Deferred Legal Entities to the Company that previously had been consolidated as VIEs in the Company’s Condensed Consolidated ~~Statements of Operations.~~Financial Statements.

Net Economic Benefit Arrangements

With respect to certain Deferred Local Businesses that are legal entities, as described above, and the Deferred Local Businesses that are not legal entities (“Deferred Markets”) ~~as described above,~~, the Company and J&J entered into net economic benefit arrangements effective on April 4, 2023, pursuant to which, among other things, J&J will transfer to the Company the net profits from the operations of each of the Deferred Markets (or, in the event the operations of any such Deferred Markets result in net losses to J&J, the Company will reimburse J&J for the amount of such net losses).

The Company recognized a net payable to J&J of ~~$43~~$23 million in relation to the net economic benefit arrangements as of ~~July 2,~~October 1, 2023 in the Company’s Condensed Consolidated Balance Sheet. The Company recognized ~~$16~~$15 million and $31 million of net income in relation to the net economic benefit arrangements for the fiscal three and nine months ended ~~July 2,~~October 1, 2023, respectively, in the Company’s Condensed Consolidated Statements of Operations.

Reclassifications

Certain prior period amounts have been reclassified to conform to current year presentation. For additional information on the realignment of certain allocations in segment financial results, see Note 14, “Segments of Business”.

Change in Accounting Principle

Global Intangible Low-Taxed Income (“GILTI”) Accounting Method Change

Effective as of the three and nine months ended October 1, 2023, the Company changed the accounting principle for GILTI from the deferred approach to the period cost approach. In 2018, the Financial Accounting Standards Board provided companies with an accounting policy choice in determining whether to measure the deferred tax effects of GILTI or to treat GILTI as a period cost. The Company’s Former Parent, Johnson & Johnson, elected to account for the deferred effects of GILTI in 2018. However, as a standalone company that operates in a different industry with different peers than J&J, treating GILTI as a period cost is the prevailing accounting policy that the Company’s peers have elected. Therefore, management believes that the change in accounting is preferable as it does not believe that the impact of deferred taxes on GILTI provides a meaningful measure of future GILTI tax costs.

The effects of the change in accounting principle to the Company's Condensed Consolidated Financial Statements were as follows:


	October 1, 2023						January 1, 2023
	Prior to Change		Effect of Change		As Reported		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Balance Sheets:
Assets
Deferred taxes on income	$	156	$	—	$	156	$	147	$	—	$	147
Liabilities
Accrued taxes on income	$	383	$	—	$	383	$	329	$	—	$	329
Deferred taxes on income	$	2,589	$	(74)	$	2,515	$	2,428	$	51	$	2,479
Equity
Additional paid-in capital	$	16,052	$	79	$	16,131	$	—	$	—	$	—
Retained Earnings	$	497	$	(12)	$	485	$	—	$	—	$	—
Net investment from Johnson & Johnson	$	—	$	—	$	—	$	25,474	$	(49)	$	25,425
Accumulated other comprehensive loss	$	(5,749)	$	7	$	(5,742)	$	(5,453)	$	(2)	$	(5,455)


	Fiscal Three Months Ended
	October 1, 2023						October 2, 2022
	Prior to Change		Effect of Change		As Reported		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statements of Operations:
Income before taxes	$	585	$	—	$	585	$	738	$	—	$	738
Provision for income taxes	135		12		147		153		(1)		152
Net income	$	450	$	(12)	$	438	$	585	$	1	$	586

Basic net income per share	$	0.23	$	—	$	0.23	$	0.34	$	—	$	0.34
Diluted net income per share	$	0.23	$	—	$	0.23	$	0.34	$	—	$	0.34


	Fiscal Nine Months Ended
	October 1, 2023						October 2, 2022
	Prior to Change		Effect of Change		As Reported		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statements of Operations:
Income before taxes	$	1,833	$	—	$	1,833	$	2,125	$	—	$	2,125
Provision for income taxes	623		(127)		496		408		14		422
Net income	$	1,210	$	127	$	1,337	$	1,717	$	(14)	$	1,703

Basic net income per share	$	0.66	$	0.07	$	0.73	$	1.00	$	(0.01)	$	0.99
Diluted net income per share	$	0.66	$	0.07	$	0.73	$	1.00	$	(0.01)	$	0.99


	Fiscal Three Months Ended
	October 1, 2023						October 2, 2022
	Prior to Change		Effect of Change		As Reported		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statements of Comprehensive Income (Loss):
Other comprehensive income (loss)	$	(242)	$	2	$	(240)	$	(639)	$	9	$	(630)


	Fiscal Nine Months Ended
	October 1, 2023						October 2, 2022
	Prior to Change		Effect of Change		As Reported		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statements of Comprehensive Income (Loss):
Other comprehensive income (loss)	$	(224)	$	10	$	(214)	$	(1,753)	$	32	$	(1,721)


	Fiscal Three Months Ended
	October 1, 2023						October 2, 2022
	Prior to Change		Effect of Change		As Reported		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statements of Equity:
Cumulative effect adjustment to beginning balance	$	11,040	$	91	$	11,131	$	19,601	$	(32)	$	19,569
Net income	$	450	$	(12)	$	438	$	585	$	1	$	586
Other comprehensive loss	$	(242)	$	2	$	(240)	$	(639)	$	9	$	(630)



Separation-related adjustments	$	(48)	$	(7)	$	(55)	$	—	$	—	$	—
Ending balance	$	10,819	$	74	$	10,893	$	18,927	$	(22)	$	18,905


	Fiscal Nine Months Ended
	October 1, 2023						October 2, 2022
	Prior to Change		Effect of Change		As Reported		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statements of Equity:
Cumulative effect adjustment to beginning balance	$	20,021	$	(51)	$	19,970	$	20,399	$	92	$	20,491
Net income	$	1,210	$	127	$	1,337	$	1,717	$	(14)	$	1,703
Other comprehensive loss	$	(224)	$	10	$	(214)	$	(1,753)	$	32	$	(1,721)

Net transfers to Johnson & Johnson	$	(308)	$	—	$	(308)	$	(1,436)	$	(132)	$	(1,568)



Reclassification of Net Investment from Johnson & Johnson (Additional paid-in capital)	$	25,626	$	86	$	25,712	$	—	$	—	$	—
Reclassification of Net Investment from Johnson & Johnson (Net Investment from Parent)	$	(25,626)	$	(86)	$	(25,712)	$	—	$	—	$	—
Separation-related adjustments	$	(48)	$	(7)	$	(55)	$	—	$	—	$	—
Separation from Johnson & Johnson	$	23	$	(5)	$	18	$	—	$	—	$	—
Ending balance	$	10,819	$	74	$	10,893	$	18,927	$	(22)	$	18,905


	Fiscal Nine Months Ended
	October 1, 2023						October 2, 2022
	Prior to Change		Effect of Change		As Reported		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statements of Cash Flows:
Net income	$	1,210	$	127	$	1,337	$	1,717	$	(14)	$	1,703
Deferred income taxes	$	(1)	$	(127)	$	(128)	$	114	$	14	$	128

Recently Adopted Accounting Standards

Accounting Standards Update 2022-04: Liabilities-Supplier Finance Programs (Topic 405-50) – Disclosure of Supplier Finance Program Obligations

The Company adopted the standard as of the beginning of fiscal year 2023, which requires that a buyer in a supplier finance program disclose additional information about the program for financial statement users.

The Company has facilitated a voluntary supply chain financing program to provide some of its suppliers with the opportunity to sell receivables due from the Company (the Company’s accounts payables) to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. The Company is not a party to the arrangements between the suppliers and the third-party financial institutions. The Company’s obligations to its suppliers, including amounts due, and scheduled payment dates (which have general payment terms of 90 days), are not affected by a participating supplier’s decision to participate in the program. Prior to the establishment of the Company’s supplier financing program in the second quarter of 2023, the Company participated in ~~the Parent’s~~J&J’s supplier financing program. The terms of the Company’s supplier financing program are substantially the same as ~~the Parent’s~~J&J’s program.

As of ~~July 2,~~October 1, 2023 and January 1, 2023, the Company’s accounts payable balances included ~~$265~~$194 million and $293 million, respectively, related to invoices from suppliers participating in the supplier finance program.

Recently Issued Accounting Standards Not Yet Adopted

There were no new accounting standards issued during the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 that are expected to have ~~had~~ a material impact on the Company’s Condensed Consolidated Financial Statements.

2. Inventories

As of ~~July 2,~~October 1, 2023 and January 1, 2023, inventories were comprised of:


(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		January 1, 2023		(Dollars in Millions)	October 1, 2023		January 1, 2023
Raw materials and supplies	Raw materials and supplies	$	299	$	351	Raw materials and supplies	$	325	$	351
Goods in process	Goods in process	134		123		Goods in process	103		123
Finished goods	Finished goods	1,593		1,752		Finished goods	1,457		1,752
Total inventories	Total inventories	$	2,026	$	2,226	Total inventories	$	1,885	$	2,226

3. Intangible Assets and Goodwill

As of ~~July 2,~~October 1, 2023 and January 1, 2023, the gross and net amounts of intangible assets were:


		July 2, 2023						January 1, 2023							October 1, 2023						January 1, 2023
(Dollars in Millions)	(Dollars in Millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		(Dollars in Millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Definite-lived intangible assets:	Definite-lived intangible assets:													Definite-lived intangible assets:
Patents and trademarks	Patents and trademarks	$	4,383	$	(1,583)	$	2,800	$	4,400	$	(1,485)	$	2,915	Patents and trademarks	$	4,258	$	(1,588)	$	2,670	$	4,400	$	(1,485)	$	2,915
Customer relationships	Customer relationships	2,099		(1,087)		1,012		2,127		(1,063)		1,064		Customer relationships	2,072		(1,093)		979		2,127		(1,063)		1,064
Other intangibles	Other intangibles	1,348		(671)		677		1,343		(650)		693		Other intangibles	1,359		(683)		676		1,343		(650)		693
Total definite-lived intangible assets	Total definite-lived intangible assets	$	7,830	$	(3,341)	$	4,489	$	7,870	$	(3,198)	$	4,672	Total definite-lived intangible assets	$	7,689	$	(3,364)	$	4,325	$	7,870	$	(3,198)	$	4,672
Indefinite-lived intangible assets:	Indefinite-lived intangible assets:													Indefinite-lived intangible assets:
Trademarks	Trademarks	5,128		—		5,128		5,122		—		5,122		Trademarks	$	5,102	$	—	$	5,102	$	5,122	$	—	$	5,122
Other	Other	61		—		61		59		—		59		Other	60		—		60		59		—		59
Total intangible assets, net	Total intangible assets, net	$	13,019	$	(3,341)	$	9,678	$	13,051	$	(3,198)	$	9,853	Total intangible assets, net	$	12,851	$	(3,364)	$	9,487	$	13,051	$	(3,198)	$	9,853

The weighted average amortization period for patents and trademarks is 2019 years. The weighted average amortization period for customer relationships is 31 years and is driven by large established distributors in various regional markets. These customers have been operating in these markets for many years and are expected to continue to operate in these markets for the foreseeable future. The weighted average amortization period for other intangible assets is 34 years. A majority of the other intangible assets relates to the ~~Parent’s~~ acquisition of Pfizer Consumer Health in 2006. Carrying amount changes for the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were ~~primarily~~ driven by currency translations. The Company recognized an intangible impairment of $0 million and $12 million related to certain definite-lived trademarks deemed as irrecoverable in Other operating expense (income), net for the fiscal three and ~~six~~nine months ended ~~July 3, 2022.~~October 2, 2022, respectively.

Amortization expense, which was included in Cost of Sales, for the Company’s amortizable assets was as follows:


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(Dollars in Millions)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Trademarks	Trademarks	$	53	$	48	$	94	$	98	Trademarks	$	48	$	44	$	142	$	142
Other intangible assets		26		41		66		84
Customer relationships and Other intangibles										Customer relationships and Other intangibles	34		39		100		123
Total Amortization expense	Total Amortization expense	$	79	$	89	$	160	$	182	Total Amortization expense	$	82	$	83	$	242	$	265

The estimated amortization expense before tax for the remainder of 2023 and the five succeeding years is approximately:


(Dollars in Millions)	(Dollars in Millions)											(Dollars in Millions)
Remainder of 2023	Remainder of 2023	2024		2025		2026		2027		2028		Remainder of 2023	2024		2025		2026		2027		2028
$	157	$	306	$	282	$	273	$	274	$	270	79	$	306	$	279	$	273	$	274	$	270

Goodwill by reportable segment was as follows:


(Dollars in Millions)	(Dollars in Millions)	Self Care		Skin Health and Beauty		Essential Health		Total		(Dollars in Millions)	Self Care		Skin Health and Beauty		Essential Health		Total
Goodwill at January 1, 2023	Goodwill at January 1, 2023	$	5,194	$	2,365	$	1,626	$	9,185	Goodwill at January 1, 2023	$	5,194	$	2,365	$	1,626	$	9,185
Currency translation/other	Currency translation/other	(39)		(76)		11		(104)		Currency translation/other	(86)		(119)		(6)		(211)
Goodwill at July 2, 2023		$	5,155	$	2,289	$	1,637	$	9,081
Goodwill at October 1, 2023										Goodwill at October 1, 2023	$	5,108	$	2,246	$	1,620	$	8,974

The majority of the Goodwill balance relates to the ~~Parent’s~~ acquisition of Pfizer Consumer Health in 2006.

4. Borrowings

The components of the Company’s debt as of ~~July 2,~~October 1, 2023 and January 1, 2023 were as follows:


(Dollars in Millions)	~~July 2,~~October 1, 2023		January 1, 2023
Senior Notes
5.50% Senior Notes due 2025	$	750	$	—
5.35% Senior Notes due 2026	750		—
5.05% Senior Notes due 2028	1,000		—
5.00% Senior Notes due 2030	1,000		—
4.90% Senior Notes due 2033	1,250		—
5.10% Senior Notes due 2043	750		—
5.05% Senior Notes due 2053	1,500		—
5.20% Senior Notes due 2063	750		—
Other	68		—
Discounts and debt issuance costs	~~(72)~~(73)		—
Total long-term debt	$	~~7,684~~7,685	$	—


Commercial paper	~~754~~515		—

Discounts and debt issuance costs	(2)		—
Total loans and notes payable	~~752~~513		—

Total debt	$	~~8,436~~8,198	$	—

Senior Notes

On March 22, 2023, the Company issued eight series of senior unsecured notes (the “Senior Notes”) in an aggregate principal amount of $7.75 billion in a private placement. The net proceeds to the Company from the Senior Notes were approximately $7.7 billion after deductions of discounts and issuance costs of ~~$75~~$77 million. Upon release from escrow, these funds were loaned to J&J through a facility agreement (the “Facility Agreement”) dated April 5, 2023. See “—Facility Agreement” below for additional details.

The unamortized debt issuance costs related to the Senior Notes at July 2, 2023 were approximately $72 million. Amortization of debt issuance costs related to the Senior Notes for both of the fiscal three and six months ended July 2, 2023 was $3 million. The weighted average effective interest rate of the Company’s long-term debt as of July 2, 2023 was 5.1%.

~~The interest payments are due on March 22 and September 22 of each year, commencing on September 22, 2023.~~

The Senior Notes were initially fully and unconditionally guaranteed on a senior unsecured basis by the Parent. Such guarantees of the Senior Notes were automatically and unconditionally terminated upon the completion of the Consumer Health Business Transfer and the occurrence of the initial registration of the Company’s equity securities. In connection with the issuance of the Senior Notes, the Company entered into a registration rights agreement with the initial purchasers, pursuant to which the Company iswas obligated to use commercially reasonable efforts to file with the SEC and cause to become effective a registration statement with respect to an offer to exchange each series of Senior Notes for registered notes with terms that are substantially identical in all material respects to the notes of such series. On October 19, 2023 the Company completed an exchange offer of its outstanding unregistered Senior Notes (“the Original Senior Notes”) for new notes registered pursuant to the Securities Act (the “Exchange Senior Notes”). The terms of each series of the Exchange Senior Notes are substantially identical to the terms of the applicable series of Original Senior Notes, except the Exchange Senior Notes are registered under the Securities Act, and certain transfer restrictions, registration rights and provisions relating to additional interest relating to the Company’s registrations do not apply to the Exchange Senior Notes. As a result of this exchange we incurred immaterial filing and legal fees during the fiscal three months ended October 1, 2023, which we have capitalized as debt issuance costs.

The unamortized debt issuance costs related to the Senior Notes at October 1, 2023 were approximately $73 million. Amortization of debt issuance costs related to the Senior Notes for the fiscal three and nine months ended October 1, 2023 were $1 million and $4 million, respectively. The weighted average effective interest rate of the Company’s long-term debt as of October 1, 2023 was 5.1%.

The interest payments are due on March 22 and September 22 of each year and commenced on September 22, 2023.

The Senior Notes were initially fully and unconditionally guaranteed on a senior unsecured basis by J&J. Such guarantees of the Senior Notes were automatically and unconditionally terminated upon the completion of the Consumer Health Business Transfer and the Kenvue IPO. The Company may redeem ~~the notes~~any series of ~~a series of~~the Senior Notes at its option, in whole or in part, at any time and from time to time by paying a “make whole” premium, plus accrued and unpaid interest to, but excluding, the applicable redemption date. On and after the applicable par call date (between zero and six months prior to maturity, based on

the series), the Company may redeem ~~the notes~~any series of ~~a series of~~the Senior Notes in whole or in part, at a redemption price equal to 100% of the principal amount of the notes of such series being redeemed plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date.

The Company’s Senior Notes are governed by an indenture and supplemental indenture between the Company and a trustee (collectively, the “indenture”). The indenture contains certain covenants, including limitations on the Company and certain of its subsidiaries’ ability to incur liens or engage in certain sale leaseback transactions. The indenture also contains restrictions on the

Company’s ability to consolidate, merge, or sell substantially all of its assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which, the Senior Notes may be declared immediately due and payable.

Facility Agreement

On April 5, 2023, the Company and J&J entered into the Facility Agreement, allowing the Company to lend the proceeds from the issuance of debt (including commercial paper) in an aggregate amount of $8.9 billion to J&J. Interest on loans made from the Facility Agreement was charged at an interest rate equal to the Secured Overnight Financing Rate (“SOFR”) less an adjusted margin of 15 basis points, with a floor of 0% (a weighted average interest rate of 4.7%) to be paid monthly in arrears. The Company recognized interest income of $33 million for ~~both of~~ the fiscal ~~three and six~~nine months ended ~~July 2,~~October 1, 2023 in relation to the Facility Agreement.

Upon completion of the Kenvue IPO on May 8, 2023, the Facility Agreement was terminated and the balance of the loans, and all accrued interest, were repaid by J&J, for a total cash inflow of $9.0 billion. The Company remitted this cash back to J&J as a distribution back to J&J in connection with the Separation. The cash flows for the lending, and repayment, of the principal balance of the Facility Agreement are presented within cash flows from investing activities within the Statement of Cash Flows. Cash inflows from the interest earned on the Facility Agreement are presented within Interest expense, net on the Company’s Condensed Consolidated Statements of Operations and are presented as cash inflows from operations within the Statement of Cash Flows.

Revolving Credit Facility

On March 6, 2023, the Company entered into a credit agreement providing for a five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $4.0 billion to be made available in U.S. dollars and Euros. Interest is payable on the loans under the Revolving Credit Facility at (1) in the case of borrowings denominated in U.S. dollars, adjusted Term Secured Overnight Financing Rate (“Term SOFR”) (or, at the Company’s option, the adjusted base rate), (2) in the case of borrowings denominated in Euros, adjusted Euro Interbank Offered Rate (“EURIBOR”) and (3) in the case of swingline borrowings, the daily simple Euro Short-Term Rate, ~~(“ESTR”),~~ plus, in each case, a margin determined pursuant to a pricing grid based on the Company’s credit ratings. The Revolving Credit Facility fees and letter of credit fees are determined based upon the same grid. Interest payments are due (1) in the case of Term SOFR or EURIBOR borrowings, on the last day of each interest period applicable to the borrowing (or, in the case of any borrowing with an interest period of more than three months’ duration, every three months), (2) in the case of an adjusted base rate borrowing, on the last day of each March, June, September, and December and (3) in the case of swingline borrowings, on the fifth business day after the borrowing. In connection with entering the Revolving Credit Facility, the Company paid an immaterial amount of debt issuance costs. These costs related to securing the Revolving Credit Facility are presented within Prepaid expenses and other receivables on the Condensed Consolidated Balance Sheets.

The Revolving Credit Facility contains representations and warranties, covenants and events of default that are customary for this type of financing, including covenants restricting the incurrence of liens and the entry into certain merger transactions.

~~The Parent~~J&J initially unconditionally guaranteed all of the obligations of the borrowers under the Revolving Credit Facility on an unsecured basis. Such guarantees of the Revolving Credit Facility were automatically terminated upon the completion of the Consumer Health Business Transfer and the ~~occurrence of the initial registration of the Company’s equity securities.~~ Kenvue ~~will~~IPO. Kenvue unconditionally ~~guarantee~~guarantees all of the obligations of the borrowers (other than itself) under the Revolving Credit Facility on an unsecured basis.

As of ~~July 2,~~October 1, 2023, the Company had no outstanding balances under its Revolving Credit Facility.

Commercial Paper Program

On March 3, 2023, the Company entered into a commercial paper program (the “Commercial Paper Program”). The Company’s Board of Directors has authorized the issuance of up to $4.0 billion in an aggregate principal amount of commercial paper

under the Commercial Paper Program. Any such issuance will mature within 364 days from date of issue. The Commercial Paper Program contains representations and warranties, covenants and default that are customary for this type of financing. The commercial paper notes issued under the Commercial Paper Program are unsecured notes ranking at least pari passu with all of the Company’s other senior unsecured indebtedness.

Prior to the Kenvue IPO, the Company issued $1.25 billion under its Commercial Paper Program which, collectively with the Senior Notes, are referred to as the “Debt Financing Transactions”. ~~In aggregate, inclusive~~Inclusive of amounts issued as a part of the Debt Financing Transactions, the Company issued ~~$2.3~~$3.8 billion of commercial paper notes and repaid ~~$1.6~~$3.3 billion in ~~line~~connection with its stated maturities during the fiscal ~~three~~nine months ended ~~July 2,~~October 1, 2023. As of ~~July 2,~~October 1, 2023, the Company had ~~$754~~$513 million of outstanding balances under its Commercial Paper Program, net of a related discount of $2 million.

Interest expense incurred as a result of the Commercial Paper Program for both of the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 ~~totaled $9 million.~~were $7 million and $16 million, respectively. The weighted average effective interest rate of the Company’s commercial paper as of ~~July 2,~~October 1, 2023 was 5.2% and the weighted average maturities as of ~~July 2,~~October 1, 2023 were less than 90 days.

Interest Expense, Net

The amount included in Interest expense, net on the Company’s Condensed Consolidated Statements of Operations consists of the following:


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(Dollars in Millions)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Interest expense	Interest expense	$	118	$	—	$	129	$	—	Interest expense	$	115	$	—	$	244	$	—
Interest income(1)	Interest income(1)	(65)		—		(75)		—		Interest income(1)	(15)		—		(90)		—
Interest expense, net	Interest expense, net	$	53	$	—	$	54	$	—	Interest expense, net	$	100	$	—	$	154	$	—

(1) Includes interest income of $33 million for ~~both of~~ the fiscal ~~three and six~~nine months ended ~~July 2,~~October 1, 2023 recognized in relation to the Facility Agreement.

Scheduled Maturities of Long-Term Debt

The schedule of principal payments required on the Company’s long-term debt for the next five years, including 2023 and thereafter, is as follows:


(Dollars in Millions)
Remainder of 2023		2024		2025		2026		2027		Thereafter
$	—	$	—	$	750	$	750	$	—	$	6,250

Fair Value of Debt

The Company’s debt was recorded at the carrying amount. The estimated fair value of the Company’s Senior Notes was $~~7.8~~7.4 billion as of ~~July 2,~~October 1, 2023. Fair value was estimated using market prices ~~which were corroborated by~~using quoted ~~broker~~ prices ~~and significant other observable inputs and~~in active markets which would be considered Level 2 in the fair value hierarchy. The carrying value of the commercial paper notes approximated the fair value as of ~~July 2,~~October 1, 2023 due to the nature and short term duration of the instrument.

Compliance with Covenants

As of ~~July 2,~~October 1, 2023, the Company was in compliance with all financial and non-financial covenants and no default or event of default has occurred.

5. Pensions

Single Employer Plans

Net periodic benefit costs for the Company’s defined benefit retirement plans sponsored by the Company for the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, included the following components:


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(Dollars in Millions)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Service cost	Service cost	$	5	$	2	$	10	$	4	Service cost	$	6	$	—	$	16	$	4
Interest cost	Interest cost	7		1		10		2		Interest cost	8		—		18		2
Recognized actuarial gain		—		1		—		2
Amortization of (gain) loss										Amortization of (gain) loss	(1)		1		(1)		3
Special events										Special events	8		—		8		—
Expected return on plan assets	Expected return on plan assets	(7)		—		(10)		—		Expected return on plan assets	(8)		—		(18)		—
Net periodic benefit cost	Net periodic benefit cost	$	5	$	4	$	10	$	8	Net periodic benefit cost	$	13	$	1	$	23	$	9

The service cost component of net periodic benefit cost is presented in the same line items on the Company’s Condensed Consolidated Statements of Operations where other employee compensation costs are reported, including Cost of sales and Selling, general, and administrative expenses. All other components of net periodic benefit costs are presented as part of Other expense, ~~(income),~~ net on the Company’s Condensed Consolidated Statements of Operations. During the fiscal three months ended October 1, 2023, the Company converted a defined benefit plan to a defined contribution plan, which resulted in a settlement loss of $10 million, partially offset by a curtailment gain of $2 million. The net balance is disclosed in “Special events” within Net periodic benefit cost.

~~Multiemployer~~Separated Plans

~~The Parent~~J&J has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. ~~The Parent~~J&J also provides medical benefits, principally to its U.S. retirees and their dependents through its other postretirement benefit plans. ~~The participation of~~Prior to the Separation, the Company’s employees ~~and retirees in these plans is reflected as though the Company~~ participated in aJ&J’s defined benefit pension plans, which were accounted for as multiemployer ~~plan with the Parent. Assets~~plans, and assets and liabilities associated with these plans ~~are~~were not reflected in the ~~Company’s~~Company's Condensed Consolidated Balance Sheets. As of October 1, 2023, the Company no longer has any multiemployer plans as they have all converted to a multiple employer pension plan or a single-employer plan. The Condensed Consolidated Statements of Operations include expense allocations for these benefits, which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company amounted to $1$0 million and ~~$15~~$11 million for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, and $17 million and ~~$27~~$38 million for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively.

In connection with the completion of the Separation, ~~the Parent~~J&J transferred certain pension plans to the Company during the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023, resulting in the transfer of net pension assets of ~~$86~~$162 million and net pension liabilities of $21 ~~million. The Company has certain additional~~million inclusive of transfers to multiple employer pension ~~plans that will be transferred from the Parent.~~plans.

6. Accumulated Other Comprehensive Loss

Components of other comprehensive loss consisted of the following:


(Dollars in Millions)	(Dollars in Millions)	Foreign Currency Translation(1)		Employee Benefit Plans(2)		Gain On Cash Flow Hedges(3)		Total Accumulated Other Comprehensive Loss		(Dollars in Millions)	Foreign Currency Translation(1)		Employee Benefit Plans(2)		Gain (Loss) On Cash Flow Hedges(3)		Total Accumulated Other Comprehensive Loss
April 2, 2023		$	(5,313)	$	26	$	48	$	(5,239)
July 2, 2023										July 2, 2023	$	(5,487)	$	(55)	$	40	$	(5,502)
Net change	Net change	(177)		(83)		(8)		(268)		Net change	(249)		13		(4)		(240)
July 2, 2023		$	(5,490)	$	(57)	$	40	$	(5,507)
October 1, 2023										October 1, 2023	$	(5,736)	$	(42)	$	36	$	(5,742)

April 3, 2022		$	(4,701)	$	(48)	$	(5)	$	(4,754)
July 3, 2022										July 3, 2022	$	(5,523)	$	(47)	$	(4)	$	(5,574)
Net change	Net change	(835)		1		1		(833)		Net change	(642)		1		11		(630)
July 3, 2022		$	(5,536)	$	(47)	$	(4)	$	(5,587)
October 2, 2022										October 2, 2022	$	(6,165)	$	(46)	$	7	$	(6,204)

(1) Foreign currency translation adjustments for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were net of benefit from taxes of ~~$30~~$9 million and ~~$65~~$88 million, respectively. Income taxes on foreign currency translation relate to tax impact on prior earnings that are not permanently reinvested and will be repatriated in the future.

(2) Employee benefit plans for the fiscal three months ended ~~July~~October 1, 2023 and October 2, ~~2023~~2022 were net of ~~benefit~~provision (benefit) from taxes of ~~$18 million. Net change for the fiscal three months ended July 2, 2023 includes Separation adjustments of $73~~$1 million ~~in connection with transfers of certain pensions plans by the Parent to the Company.~~and $2 million, respectively.

(3) Gain on derivatives and hedges for the fiscal three months ended ~~July~~October 1, 2023 and October 2, ~~2023~~2022 were net of benefit from taxes of ~~$4 million.~~$2 million and $0 million, respectively.


(Dollars in Millions)	(Dollars in Millions)	Foreign Currency Translation(1)		Employee Benefit Plans(2)		Gain On Cash Flow Hedges(3)		Total Accumulated Other Comprehensive Loss		(Dollars in Millions)	Foreign Currency Translation(1)		Employee Benefit Plans(2)		Gain (Loss) On Cash Flow Hedges(3)		Total Accumulated Other Comprehensive Loss
January 1, 2023	January 1, 2023	$	(5,474)	$	12	$	9	$	(5,453)	January 1, 2023	$	(5,476)	$	12	$	9	$	(5,455)
Net change	Net change	(16)		(69)		31		(54)		Net change	(260)		(54)		27		(287)
July 2, 2023		$	(5,490)	$	(57)	$	40	$	(5,507)
October 1, 2023										October 1, 2023	$	(5,736)	$	(42)	$	36	$	(5,742)

January 2, 2022	January 2, 2022	$	(4,421)	$	(51)	$	(1)	$	(4,473)	January 2, 2022	$	(4,431)	$	(51)	$	(1)	$	(4,483)
Net change	Net change	(1,115)		4		(3)		(1,114)		Net change	(1,734)		5		8		(1,721)
July 3, 2022		$	(5,536)	$	(47)	$	(4)	$	(5,587)
October 2, 2022										October 2, 2022	$	(6,165)	$	(46)	$	7	$	(6,204)

(1) Foreign currency translation adjustments for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were net of benefit from taxes of $9$24 million and ~~$77~~$188 million, respectively. Income taxes on foreign currency translation relate to tax impact on prior earnings that are not permanently reinvested and will be repatriated in the future.

(2) Employee benefit plans for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were net of benefit from taxes of ~~$17~~$16 million and $1$3 million, respectively. Net change for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pensions plans by ~~the Parent~~J&J to the Company.

(3) Gain on derivatives and hedges for the fiscal ~~six~~nine months ended ~~July~~October 1, 2023 and October 2, ~~2023~~2022 were net of provision for taxes of ~~$9 million.~~$7 million and $0 million, respectively.

Amounts in Accumulated other comprehensive loss are presented net of the related tax impact. Foreign currency translation is not adjusted for income taxes where it relates to permanent investments in international operations. For additional details on comprehensive income, see the Condensed Consolidated Statements of Comprehensive Income (Loss).

7. Stock-Based Compensation

~~The Parent’s~~J&J’s 2012 Long-Term Incentive Plan (the “J&J 2012 Plan”) expired on April 26, 2022. Prior to that expiration, on March 7, 2022, ~~the Parent’s~~J&J’s Board of Directors approved the 2022 Long-Term Incentive Plan (the “J&J 2022 Plan”, together with the J&J 2012 Plan, the “J&J Plans”). The J&J Plans provide the grant of non-qualified stock options, incentive stock options, stock appreciation rights, Restricted Stock Units (“RSUs”), performance shares, Performance Stock Units (“PSUs”), other stock-based awards, and cash awards to employees and directors including the Company’s personnel. Stock-based compensation

granted pursuant to the J&J Plans ~~are~~were based on ~~the Parent’s~~J&J’s common stock. The J&J 2022 Plan became effective in April 2022. ~~All~~As such, all options and restricted shares granted subsequent to that date ~~were under this plan. As of July 2, 2023, there~~ ~~are shares outstanding for contracts under each~~and prior to the completion of the Exchange Offer were issued under the J&J ~~Plans.~~2022 Plan.

In March 2023, the Company’s Board of Directors approved the 2023 Long-Term Incentive Plan (the “Kenvue 2023 Plan”) providing for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, RSUs, performance shares, PSUs, other stock-based awards, and cash awards to eligible employees, non-employee directors, independent contractors, and consultants of the Company and its subsidiaries and affiliated entities. Stock-based compensation granted pursuant to the Kenvue 2023 Plan is based on ~~our~~the Company’s common stock. The Kenvue 2023 Plan was approved by ~~the Parent,~~J&J, as sole stockholder of the Company, prior to the Kenvue IPO and became effective in May ~~2023 and no awards have been granted under this plan.~~2023. The maximum aggregate number of shares of Common Stock that may be issued under the Plan is 188,897,256.

During the fiscal three months ended October 1, 2023, awards were first issued pursuant to the Kenvue 2023 Plan related to the conversion of J&J awards.

On August 25, 2023, the Company’s Compensation & Human Capital Committee approved equity grants to individuals employed by Kenvue as of October 2, 2023 (the “Founder Grants”). On October 2, 2023, the Founder Grants were awarded to Kenvue employees in the form of stock options and PSUs to executive officers and either stock options and PSUs or PSUs to non-executive individuals. The Company expects to recognize approximately $81 million in stock-based compensation expense related to the Founder Grants, which will be amortized over the requisite service period of the awards, which ranges from one to three years.

Conversion of J&J Awards

On August 23, 2023, J&J equity awards held by Kenvue employees were accounted for as if they were forfeited by J&J and generally replaced by Kenvue equity awards under the Kenvue 2023 Plan with terms consistent with the those applicable to the J&J awards, subject to adjustments to the number of awards and option exercise prices to preserve the award’s value, except for certain performance-based awards that were replaced with Kenvue RSU awards. The awards were converted using the conversion ratio that was determined in accordance with the Employee Matters Agreement (as defined within Note 8, “Related Parties”). This change in the awards was considered to be a modification for accounting purposes. As part of the deemed forfeiture of the J&J awards, the J&J performance criteria applicable to any outstanding performance-based awards was deemed satisfied at the target level, unless two years have been completed in the performance period, in which case performance was deemed satisfied at the level of actual performance for such years. All other vesting terms and conditions were not affected by the conversion. The terms of the Kenvue awards are as follows:

RSUs

On August 23, 2023, the Company was deemed to have issued 12.5 million RSUs with a modification incremental cost of $268 million. These awards have vesting dates extending through August 2026. These RSUs provide for accelerated vesting in certain change in control scenarios.

The incremental cost of each RSU replaced is estimated based on the fair value of the Company’s shares at the deemed modification date, adjusted to reflect that the RSUs do not participate in dividends through the vesting date (using a dividend rate assumption consistent with the assumption disclosed within the table below). Compensation costs related to these awards are recognized within the Condensed Consolidated Statements of Operations over the vesting period, and are non-cash activities within the Condensed Consolidated Statements of Cash Flows.

Stock Options

On August 23, 2023, the Company was deemed to have issued 57 million of non-qualified stock options and incentive stock options with a modification date incremental cost of $191 million. These stock option awards were deemed granted with an exercise price equal to the original exercise price provided within the original J&J awards, as modified by the conversion ratio described above and will all be vested by January 2027. These stock options provide for accelerated vesting in certain change in control scenarios. Compensation costs related to these awards are recognized within the Condensed Consolidated Statements of Operations over the vesting period, and are non-cash activities within the Condensed Consolidated Statements of Cash Flows.

The fair value of each stock option award is estimated using the Black-Scholes option valuation model that uses the assumptions noted in the following table, and carry a weighted average exercise price of approximately $20.62.


Assumption						August 2023 Converted Stock Options
Expected Volatility						16.2% - 21.4%
Expected Dividends						3.2%
Risk-Free Rate						4.2% - 5.4%
Expected Term						0.5 years - 6.5 years

Expected volatilities are based on the historical volatility of a selected group of the Company’s peers, and other factors. Kenvue uses historical data to estimate stock option exercises and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of stock options granted is consistent with the historical experiences of J&J for similar awards to the Kenvue population. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

As noted above, the conversion of J&J awards to Kenvue awards was accounted for as a modification. As a result, the J&J awards were deemed to be canceled and replaced by Kenvue awards, resulting in incremental stock-based compensation expense of $25 million recognized in the fiscal three months ended October 1, 2023 in relation to J&J denominated stock options which had vested. With respect to the deemed cancellation of J&J stock options, PSUs, and RSUs that had not yet vested, the Company reversed $148 million of previously recognized stock-based compensation costs. From August 23, 2023 through the end of the fiscal three months ended October 1, 2023, the Company recognized $110 million of compensation costs attributable to the RSUs and stock options described above. In total, the Company recognized incremental stock-based compensation expense of $135 million in the fiscal three months ended October 1, 2023, of which, $123 million related to employee services provided prior to the Separation.

In total, the Company recognized $2 million of stock-based compensation expense in the fiscal three months ended October 1, 2023, as compared to $30 million in the fiscal three months ended October 2, 2022. For the fiscal nine months ended October 1, 2023, the Company recognized $75 million of stock-based compensation, as compared with $106 million fiscal nine months ended October 2, 2022.

The components and classification of stock-based compensation expense ~~related to stock options, RSUs, and PSUs~~ directly attributable to those employees specifically identified as employees of the Company and allocations from ~~the Parent~~J&J for the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, were as follows:


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(Dollars in Millions)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022

Cost of sales	Cost of sales	$	12	$	10	$	16	$	18	Cost of sales	$	2	$	6	$	18	$	24
Selling, general, and administrative expenses	Selling, general, and administrative expenses	26		31		57		58		Selling, general, and administrative expenses	—		24		57		82
Stock-based compensation expense	Stock-based compensation expense	$	38	$	41	$	73	$	76	Stock-based compensation expense	$	2	$	30	$	75	$	106

Stock-based compensation expense includes ~~$0 million and $8~~$6 million for the fiscal three months ended ~~July~~October 2, ~~2023~~ ~~and~~ ~~July 3,~~ 2022 ~~respectively,~~ and $2 million and ~~$18~~$24 million for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, of allocated charges from ~~the Parent,~~J&J, based on percentage attribution related to ~~Parent~~J&J employees providing services to the Company. As a result of the Company’s Separation from J&J, the Company will no longer have allocation charges of this nature.

With respect to the RSUs described above, as of October 1, 2023, the Company had unrecognized compensation cost of $199 million, expected to be recognized over a weighted average period of 1.1 years. With respect to the stock options described above, as of October 1, 2023, the Company had unrecognized compensation cost of $124 million, expected to be recognized over a weighted average period of 1.1 years.

8. Related Parties

On August 23, 2023, Kenvue became a fully independent company (see Note 1, “Description of the Company and Summary of Significant Accounting Policies). The Company continues to have material agreements with J&J and considers J&J to be a

related party – see “Related Party Transactions, including Separation Agreement, with J&J” section within this footnote for additional details of these material agreements that govern the Company’s relationship with J&J.

Cost Allocations from ~~Parent~~J&J Prior to Kenvue IPO

Prior to the Kenvue IPO, ~~the Parent~~J&J provided significant support functions to the Company. The Condensed Consolidated Financial Statements reflect an allocation of these costs. Similarly, certain of the Company’s operations provided support to ~~the Parent’s~~J&J’s affiliates and related costs for support are charged to ~~the Parent’s~~J&J’s affiliates. Allocated costs included in Cost of sales on the Company’s Condensed Consolidated Statements of Operations relate to enterprise-wide support primarily consisting of facilities, insurance, logistics, quality, and compliance which are predominantly allocated based on Net sales. Allocated costs included in Selling, general, and administrative expenses primarily relate to finance, human resources, benefits administration, procurement support, information technology, legal, corporate strategy, corporate governance, other professional services, and general commercial support functions and are predominantly allocated based on Net sales or headcount. See Note 1, “Description of the Company and Summary of Significant Accounting ~~Policies,” for a discussion of these costs and the methodology used to allocate them.~~Policies”.

~~These~~Prior to Kenvue becoming a fully independent company, the allocations (excluding stock-based compensation expense), net of costs charged to ~~the Parent’s~~J&J’s affiliates reflected on the Company’s Condensed Consolidated Statements of Operations for the fiscal nine months ended October 1, 2023 and three and ~~six~~nine months ended ~~July~~October 2, ~~2023 and July 3,~~ 2022 were as follows:


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended		Fiscal Nine Months Ended
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(Dollars in Millions)	October 2, 2022		October 1, 2023		October 2, 2022
Cost of sales	Cost of sales	$	16	$	40	$	25	$	76	Cost of sales	$	66	$	25	$	142
Selling, general, and administrative expenses	Selling, general, and administrative expenses	33		173		120		330		Selling, general, and administrative expenses	174		120		504
Total	Total	$	49	$	213	$	145	$	406	Total	$	240	$	145	$	646

Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented. The allocations may not, however, be indicative of the actual expenses that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone public company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company’s employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology, and infrastructure. ~~As of January 2, 2023, the Company began operating independently and received a lower degree of support functions from the Parent~~No allocations were made during the ~~current period and therefore the allocations decreased significantly from the comparable period.~~fiscal three months ended October 1, 2023 as Kenvue became a fully independent company.

Net Transfers ~~(to) from the Parent~~to Johnson & Johnson

Net transfers ~~(to) from the Parent~~to Johnson & Johnson are included within Net investment from ~~Parent~~Johnson & Johnson on the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Equity and within financing activities on the Condensed Consolidated Statements of Cash Flows and represent the net effect of transactions between the Company and ~~Parent.~~J&J. No transactions were recorded in the Net transfers to Johnson & Johnson account during the fiscal three months ended October 1, 2023.

The components of Net transfers ~~(to) from the Parent~~to Johnson & Johnson for the fiscal nine months ended October 1, 2023 and three and ~~six~~nine months ended ~~July~~October 2, ~~2023 and July 3,~~ 2022 were as follows:


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended		Fiscal Nine Months Ended
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(Dollars in Millions)	October 2, 2022		October 1, 2023		October 2, 2022
Cash pooling and general financing activities	Cash pooling and general financing activities	$	(37)	$	(916)	$	(446)	$	(1,324)	Cash pooling and general financing activities	$	(929)	$	(446)	$	(2,253)
Corporate cost allocations	Corporate cost allocations	49		213		145		406		Corporate cost allocations	240		145		646
Taxes deemed settled with the Parent		—		1		27		1
Taxes deemed settled with J&J										Taxes deemed settled with J&J	24		27		25
Allocated derivative and hedging gains	Allocated derivative and hedging gains	—		26		—		25		Allocated derivative and hedging gains	15		—		40
Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Cash Flows		$	12	$	(676)	$	(274)	$	(892)
Net transfers to Johnson & Johnson as reflected in the Condensed Consolidated Statements of Cash Flows										Net transfers to Johnson & Johnson as reflected in the Condensed Consolidated Statements of Cash Flows	$	(650)	$	(274)	$	(1,542)
Stock-based compensation expense(1)	Stock-based compensation expense(1)	—		41		—		76		Stock-based compensation expense(1)	30		—		106
Other(2)	Other(2)	(2)		—		(34)		—		Other(2)	—		(34)		(132)
Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Equity		$	10	$	(635)	$	(308)	$	(816)
Net transfers to Johnson & Johnson as reflected in the Condensed Consolidated Statements of Equity										Net transfers to Johnson & Johnson as reflected in the Condensed Consolidated Statements of Equity	$	(620)	$	(308)	$	(1,568)

(1) Stock-based compensation expense is separately shown within the Condensed Consolidated ~~Statement~~Statements of Equity in fiscal year 2023, and therefore no longer a reconciling item between the Condensed Consolidated ~~Statement~~Statements of Equity and the Condensed Consolidated ~~Statement~~Statements of Cash Flows.

(2) Other primarily relates to the impact of the change in accounting principle for GILTI in the fiscal nine months ended October 2, 2022. Please see Note 1, “Description of the Company and Summary of Significant Accounting Policies—Change in Accounting Principle” for more information.

~~Separation Agreement and Other~~ Related Party Transactions, including Separation Agreement, with J&J

In connection with the Separation, Kenvue entered into various agreements with ~~the Parent,~~J&J, including the Separation Agreement. In connection with the terms of the Separation Agreement, certain assets and liabilities included in the pre-Separation balance sheet were retained by ~~the Parent~~J&J and certain assets and liabilities not included in the pre-Separation balance sheet were transferred to Kenvue. Separation related adjustments have been recognized in Net investment from ~~Parent,~~Johnson & Johnson, net impact of which resulted in an increase in net assets and total equity by ~~$95~~$91 million. The impact on net assets primarily represent (i) recognition of balances with J&J including indemnification matters, (ii) changes to income tax assets and liabilities as a result of change in the basis of presentation, (iii) contribution of certain liabilities including pension and employee related obligations from ~~the Parent,~~J&J, (iv) the retention of assets and liabilities by J&J of certain Deferred Local Businesses (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies”), and (v) other assets and liability transfers between Kenvue and J&J in connection with the Separation.

The Separation Agreement sets forth certain agreements between ~~the Parent~~J&J and Kenvue regarding, among other matters:

•the principal corporate actions and internal reorganization pursuant to which ~~the Parent~~J&J transferred the Consumer Health Business to Kenvue;

•the allocation of assets and liabilities to ~~the Parent~~J&J and Kenvue;

•~~the Parent’s~~J&J’s and Kenvue’s respective rights and obligations with respect to the Kenvue IPO;

•certain matters with respect to any subsequent distribution or other disposition by ~~the Parent~~J&J of the shares of Kenvue Common Stock owned by ~~the Parent~~J&J following the Kenvue IPO (the “Distribution”); and

•other agreements governing aspects of Kenvue’s relationship with ~~the Parent~~J&J following the Kenvue IPO.

In connection with the Kenvue IPO, ~~the Parent~~J&J and Kenvue also entered into various other material agreements. These agreements were entered into on May 3, 2023, unless otherwise indicated, and consist of the following:

•a tax matters agreement (the “Tax Matters Agreement”), which governs ~~the Parent’s~~J&J’s and Kenvue’s respective rights, responsibilities and obligations with respect to all tax matters, including tax liabilities, tax attributes, tax contests, and tax returns (See “Tax Indemnification” below);

•an employee matters agreement (the “Employee Matters Agreement”), which addresses certain employment, compensation, and benefits matters, including the allocation and treatment of certain assets and liabilities relating to

Kenvue’s employees and compensation and benefit plans and programs in which Kenvue’s employees participate prior to the date of the Distribution, if pursued;

•an intellectual property agreement, which governs ~~the Parent’s~~J&J’s and Kenvue’s respective rights, responsibilities and obligations with respect to intellectual property matters, excluding certain intellectual property matters with respect to trademarks;

•a trademark phase-out license agreement, dated as of April 3, 2023, and pursuant to which ~~the Parent~~J&J granted to Kenvue a license to use certain trademarks owned by ~~the Parent~~J&J on a transitional basis following the completion of the Kenvue IPO;

•a transition services agreement (the “Transition Services Agreement”), pursuant to which ~~the Parent~~J&J will provide to Kenvue certain services for terms of varying duration following the Kenvue IPO;

•a transition manufacturing agreement (the “Transition Manufacturing Agreement”), pursuant to which ~~the Parent~~J&J will provide to Kenvue certain manufacturing services for terms of varying duration following the Kenvue IPO; and

•a registration rights agreement, pursuant to which Kenvue granted to ~~the Parent~~J&J certain registration rights with respect to the shares of Kenvue common stock owned by ~~the Parent~~J&J following the completion of the Kenvue IPO.

In connection with the Kenvue IPO, ~~the Parent~~J&J and Kenvue also entered into various related party lease agreements, in which the Company subleased properties from ~~the Parent.~~J&J. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Leases” for more information.

Related Party Transactions

The Company had the following balances and transactions with J&J and its affiliates, primarily in connection with the Tax Matters Agreement, Transition Services Agreement, and the Transition Manufacturing Agreement, reported on the Company’s Condensed Consolidated Financial Statements:


(Dollars in Millions)	~~July 2,~~October 1, 2023
Accounts payable and accrued liabilities	$	~~537~~483
Prepaid expenses and other receivables	$	~~346~~324
Other assets	$	9480
Other liabilities	$	~~193~~190


	~~Fiscal Three Months Ended~~
~~(Dollars in Millions)~~	~~July 2, 2023~~
~~Cost of sales~~	$	39
~~Selling, general, and administrative expenses~~	$	47


	Fiscal Three Months Ended				Fiscal Nine Months Ended
(Dollars in Millions)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Cost of sales	$	56	$	—	$	95	$	—
Selling, general, and administrative expenses	$	47	$	—	$	94	$	—

Tax Indemnification

WeThe Company entered into athe Tax Matters Agreement with J&J on May 3, 2023 that governs the parties’ respective rights, responsibilities, and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and other matters regarding taxes.

Allocation of Taxes

With respect to taxes other than those incurred in connection with the Separation and the Distribution, the Tax Matters Agreement provides that Kenvue will generally indemnify J&J for (1) any taxes of Kenvue for all periods after the Distribution and (2) any taxes of Kenvue or J&J for periods prior to the Distribution to the extent attributable to the Consumer Health Business. J&J will generally indemnify Kenvue for (1) any taxes of J&J for all periods after the Distribution and (2) any taxes of Kenvue or J&J for periods prior to the Distribution to the extent attributable to the business and operations conducted by J&J other than the Consumer Health Business. Furthermore, subject to certain exceptions, the Company is required to reimburse J&J for certain tax refunds it receives with respect to taxes paid prior to the effective date of the Tax Matters Agreement.

Preservation of the Intended Tax Treatment of Certain Steps of the Separation and the Distribution

With respect to taxes incurred in connection with the Separation and the Distribution, Kenvue will generally be required to indemnify J&J for any taxes resulting from the failure of certain steps of the Separation and the Distribution to qualify for their intended tax treatment, where such taxes are attributable to actions or omissions by Kenvue. In addition, during the time period ending two years after the date of the Distribution, covenants will be in place that will limit or restrict certain actions, including share issuances, business combinations, sales of assets, and similar transactions by Kenvue. The Company does not believe that the above covenants have a material impact toon the Company to date.

The Company ~~reclassified~~recorded approximately ~~$246~~$186 million of ~~net~~ income tax payables and refunds, unrecognized tax benefits and associated interest due to the Company’s Former Parent as indemnifications ~~reported~~ to Prepaid expenses and other receivables and Accounts payable for current assets and current liabilities, respectively, and to Other assets and Other liabilities for noncurrent assets and noncurrent liabilities, ~~within the Company’s Parent on~~respectively, in the Condensed Consolidated Balance Sheet as of ~~July 2,~~October 1, 2023.

Debt Financing Transactions and IPO Consideration

During the ~~fiscal six months ended July 2,~~second quarter of 2023, the Company received debt proceeds of $7.7 billion from the issuance of the Senior Notes, earned $13 million of interest on the proceeds of these bonds from investments in money market accounts, and received initial proceeds from its Commercial Paper Program of $1.2 billion. The Company loaned the total proceeds to J&J through the Facility Agreement. Upon the completion of the Kenvue IPO on May 8, 2023, the balance of the loans and all accrued interest were repaid by J&J for a total cash inflow of $9.0 billion. The Company remitted this cash back to J&J as a distribution ~~back to J&J~~ in connection with the Separation.

9. Other Operating Expense (Income), Net and Other Expense, ~~(Income),~~ Net

Other operating expense (income), net for the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 consisted of:


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(Dollars in Millions)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Litigation expense	Litigation expense	$	21	$	7	20		$	7	Litigation expense	$	—	$	(6)	$	20	$	1
Royalty income	Royalty income	(1)		(13)		(8)		(20)		Royalty income	(15)		(7)		(23)		(27)
(Gain)/loss on disposal of fixed assets	(Gain)/loss on disposal of fixed assets	—		—		(9)		2		(Gain)/loss on disposal of fixed assets	—		(1)		(9)		1
Net economic benefits from deferred markets(1)		24		—		24		—
Impact of Deferred Markets(1) (Note 1)										Impact of Deferred Markets(1) (Note 1)	10		—		34		—
Contingent liability reversal(2)	Contingent liability reversal(2)	(43)		—		(43)		—		Contingent liability reversal(2)	(2)		—		(45)		—
Other(3)	Other(3)	—		19		—		19		Other(3)	16		—		16		19
Total Other operating expense (income), net	Total Other operating expense (income), net	$	1	$	13	$	(16)	$	8	Total Other operating expense (income), net	$	9	$	(14)	$	(7)	$	(6)

(1) Includes income taxes and service fees to be paid to J&J under the net economic benefit arrangements.

(2) Includes the reversal of a contingent liability that was no longer considered to be probable.

(3) Includes intangible asset impairment, pension related and other miscellaneous operating (income) expenses.

Other expense, ~~(income),~~ net for the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 consisted of:


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(Dollars in Millions)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Currency (gains)/losses on transactions		$	12	$	5	$	28	$	(2)
Currency losses on transactions										Currency losses on transactions	$	23	$	25	$	51	$	23
Other(1)	Other(1)	(2)		(10)		12		(4)		Other(1)	2		—		14		(4)
Total Other expense (income), net		$	10	$	(5)	$	40	$	(6)
Total Other expense, net										Total Other expense, net	$	25	$	25	$	65	$	19

(1) Other consists primarily of gains and losses on investments, other than service cost components of net periodic benefit costs, and miscellaneous non-operating (income) expenses.

10. Income Taxes

For interim financial statement purposes, U.S. GAAP income tax expense/benefit related to ordinary income is determined by applying an estimated annual effective income tax rate against a company’s ordinary income, subject to certain limitations on the benefit of losses. Income tax expense/benefit related to items not characterized as ordinary income is recognized as a discrete item when incurred. The estimation of the Company’s income tax provision requires the use of management forecasts and other estimates, application of statutory income tax rates, and an evaluation of valuation allowances. The Company’s estimated annual effective income tax rate may be revised, if necessary, in each interim period. Effective as of the fiscal three and nine months ended October 1, 2023, the Company changed the accounting principle forGILTI from the deferred approach to the period cost approach.See Note 1, “Description of the Company and Summary of Significant Accounting Policies.

During the periods presented in the Condensed Consolidated Financial Statements, the Company operated as part of J&J until the ~~Parent~~completion of the Exchange Offer and ~~did not~~therefore will be included in J&J’s U.S. Federal income tax return until that date. The Company will then file a standalone U.S. Federal income tax return for the remainder of 2023. The Company expects to file income tax returns on a standalone basis in ~~all~~most other jurisdictions in which it ~~operates.~~operates for 2023. However, for the purposes of the Condensed Consolidated Financial Statements, the income taxes and related income tax accounts have been calculated using the separate return method as if the Company filed income tax returns on a standalone ~~basis.~~basis for all of 2023. Prior to the Kenvue IPO, the Company’s operations were calculated on a carve-out basis and included certain hypothetical foreign tax credit benefits. Post-Kenvue IPO, these hypothetical foreign tax credit benefits are not available for future utilization by the Company and were removed from the tax ~~provision during the fiscal three months ended July 2, 2023. In the future,~~provision. Now as a standalone independent company, the income taxes and related income tax accounts of the Company may differ from ~~those presented in~~ the Condensed Consolidated Financial ~~Statements.~~Statements which include year-to-date results prior to the Exchange Offer.

The worldwide effective income tax rates for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were ~~32.7%~~25.1% and ~~22.1%~~20.6%, respectively, and for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were ~~39.1%~~27.1% and ~~18.4%~~19.9%, respectively. The increase for the fiscal three months ended ~~July 2,~~October 1, 2023 as compared to the fiscal three months ended ~~July 3,~~October 2, 2022 was primarily the result of higher U.S. taxes on foreign income, reduced benefits for foreign tax credits and higher tax expense related to prior year return to provision adjustments offset by windfall benefit on stock option exercises and tax benefits related to the completion of the Exchange Offer with J&J. The increase for the fiscal nine months ended October 1, 2023 as compared to the fiscal nine months ended October 2, 2022 was primarily the result of higher U.S. taxes on foreign income and ~~reduced benefits for~~less favorable return to provision adjustments offset by discrete foreign tax ~~credits.~~benefits. With the issuance of debt in the first quarter of 2023, the resulting increase in annual interest reduced the Company’s capacity to utilize foreign tax credits against U.S. foreign source income. As a result, the Company recorded a ~~$188~~$51 million valuation allowance against a deferred tax asset related to future foreign tax credit benefits thus increasing the reported rate for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 as compared to the fiscal ~~six~~nine months ended ~~July 3,~~October 2, 2022. This was partially offset by additional discrete tax benefits. The effective income tax rate for the fiscal six months ended July 3, 2022 was lower due to the recognition of discrete foreign tax credit benefits.

As of ~~July 2,~~October 1, 2023, the Company had approximately ~~$235~~$226 million of liabilities from unrecognized tax benefits. The Company conducts business and will file tax returns in numerous countries. The ~~Parent~~Company and J&J currently ~~has~~have tax audits in progress in several jurisdictions. With respect to the United States, the ~~IRS~~Internal Revenue Services is currently ~~conducting~~auditing the 2013-2016 ~~IRS Audit~~fiscal periods of ~~the Parent. The Parent~~J&J. We currently ~~expects completion of~~expect J&J to complete this audit and settlement of the related tax liabilities in the next 12 months. Per the Tax Matters Agreement between ~~the Parent~~J&J and the Company, ~~the Parent~~J&J remains liable for all ~~liability~~liabilities related to the final settlement of this audit and any U.S. federal income tax audits in which the Company is part of ~~the Parent’s~~J&J’s federal consolidated tax return. During the fiscal ~~three~~nine months ended ~~July 2,~~October 1, 2023, ~~the Parent~~J&J made a payment to the U.S. Treasury for the estimated liability related to the 2013-2016 IRS Audit, which included $200 million related to the Consumer Health Business. In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go back to the year 2008. The Company believes it is possible that tax audits may be completed over the next 12 months by taxing authorities in some jurisdictions outside of the United States. However, the Company is not able to provide a reasonably reliable estimate of the timing of any future tax payments or the amount of possible changes to the total unrecognized tax benefits associated with any audit closures or other events. The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities on the Condensed Consolidated Balance Sheets. Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense on the Company’s Condensed Consolidated Statements of Operations. ~~As part of the transition from Condensed Combined Financial Statements to Condensed Consolidated Financial Statements, the~~

Company reclassified $221 million of unrecognized tax benefits related to indemnifications with the Parent to Accounts payable and Other liabilities within the Company’s Condensed Consolidated Financial Statements.

On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 (“IRA”), which, among other things, introduces a 15% corporate alternative minimum tax based on adjusted financial statement income of certain large corporations with a three-year average adjusted financial statement income in excess of $1.0 billion, an excise tax on corporate stock buybacks, and several tax incentives to promote clean energy. Based on the Company’s preliminary analysis, the IRA is not

expected to have a material impact on the Company’s Condensed Consolidated Financial Statements. The Company will continue to evaluate the impact of this law as additional guidance and clarification becomes available.

11. Earnings Per Share

Prior to the completion of the Kenvue IPO, the Company had 1,716,160,000 of common stock ~~authorized,~~outstanding, of which 1,716,159,990 shares were issued to Johnson & Johnson through a subscription agreement in May 2023. On May 8, 2023, the Kenvue IPO was completed through the sale of 198,734,444 shares of common stock including the underwriters’ full exercise of their option to purchase 25,921,884 shares to cover over-allotments. As of ~~July 2,~~October 1, 2023, the Company had ~~1,914,894,444~~1,914,909,765 shares of common stock issued and outstanding. For the purposes of the Company’s earnings per share calculations, the shares issued through the subscription agreement are being treated akin to shares attributable to a stock split and, as a result, are being retrospectively presented for all of the periods. ~~For~~

Diluted earnings per share is computed by giving effect to all ~~periods presented, there were no~~potentially dilutive equity instruments or equity awards that are outstanding during the period. There were no equity awards of the Company ~~outstanding.~~ outstanding prior to the Kenvue IPO and no dilutive equity instruments of the Company outstanding prior to the Exchange Offer. During both the three and nine ended October 1, 2023, 38,386,962 shares were determined to be anti-dilutive under the treasury stock method and therefore were excluded from the diluted earnings per share calculation.

Net income per share for the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 was calculated as follows:


		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
(In Millions, Except Per Share Data)	(In Millions, Except Per Share Data)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(In Millions, Except Per Share Data)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Net income	Net income	$	430	$	604	$	760	$	1,132	Net income	$	438	$	586	$	1,337	$	1,703
Basic and diluted weighted-average common stock		1,838		1,716		1,777		1,716
Basic and diluted net income per share		$	0.23	$	0.35	$	0.43	$	0.66

Basic weighted average number of shares outstanding										Basic weighted average number of shares outstanding	1,916		1,716		1,823		1,716
Diluted effects of stock based awards										Diluted effects of stock based awards	4		—		4		—
Diluted weighted average number of shares outstanding										Diluted weighted average number of shares outstanding	1,920		1,716		1,827		1,716

EPS:										EPS:
Basic										Basic	$	0.23	$	0.34	$	0.73	$	0.99
Diluted										Diluted	$	0.23	$	0.34	$	0.73	$	0.99

Share Repurchase Program

The Company’s Board of Directors has authorized a share repurchase program, under which the Company is authorized to repurchase up to 27 million shares of its outstanding common stock in open market or privately negotiated transactions. The program has no expiration date and may be suspended or discontinued at any time. The intent of this repurchase program is to offset dilution from the vesting or exercise of equity awards under Kenvue’s equity incentive plan.

12. Fair Value Measurements

Fair value measurements are estimated based on valuations techniques and inputs categorized as follows:

•Level 1 – Quoted prices in active markets for identical assets or liabilities

•Level 2 – Significant other observable inputs

•Level 3 – Significant unobservable inputs

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis:


		July 2, 2023								January 1, 2023									October 1, 2023								January 1, 2023
(Dollars in Millions)	(Dollars in Millions)	Carrying Value		Level 1		Level 2		Level 3		Carrying Value		Level 1		Level 2		Level 3		(Dollars in Millions)	Carrying Value		Level 1		Level 2		Level 3		Carrying Value		Level 1		Level 2		Level 3

Assets:	Assets:																	Assets:
Forward foreign exchange contracts	Forward foreign exchange contracts	$	66	$	—	$	66	$	—	$	39	$	—	$	39	$	—	Forward foreign exchange contracts	$	82	$	—	$	82	$	—	$	39	$	—	$	39	$	—

Interest rate swaps	Interest rate swaps	—		—		—		—		29		—		29		—		Interest rate swaps	—		—		—		—		29		—		29		—
Total	Total	66		—		66		—		68		—		68		—		Total	$	82	$	—	$	82	$	—	$	68	$	—	$	68	$	—
Liabilities:	Liabilities:																	Liabilities:
Forward foreign exchange contracts	Forward foreign exchange contracts	$	(48)	—		(48)		—		(15)		—		(15)		—		Forward foreign exchange contracts	$	(73)	$	—	$	(73)	$	—	$	(15)	$	—	$	(15)	$	—

Interest rate swaps	Interest rate swaps	—		—		—		—		(39)		—		(39)		—		Interest rate swaps	—		—		—		—		(39)		—		(39)		—
Total	Total	(48)		—		(48)		—		(54)		—		(54)		—		Total	$	(73)	$	—	$	(73)	$	—	$	(54)	$	—	$	(54)	$	—
Net amount presented in Prepaid expenses and other receivables:	Net amount presented in Prepaid expenses and other receivables:	$	18	$	—	$	18	$	—	$	14	$	—	$	14	$	—	Net amount presented in Prepaid expenses and other receivables:	$	33	$	—	$	33	$	—	$	14	$	—	$	14	$	—
Net amount presented in Accounts payable																		Net amount presented in Accounts payable	$	(23)	$	—	$	(23)	$	—	$	—	$	—	$	—	$	—

The carrying amount of Cash and cash equivalents, Trade receivables, Prepaid expenses and other receivables, and Loans and notes payable approximated fair value as of ~~July 2,~~October 1, 2023 and January 1, 2023. The fair value of forward foreign exchange contracts is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. dollar at the current spot foreign exchange rate. The interest rate swaps are recorded at fair value that is derived from observable market data, including yield curves. All derivative instruments are classified as Level 2 securities.

There were no transfers between Level 1, Level 2, or Level 3 during the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and fiscal year ended January 1, 2023.

The following table sets forth the notional amounts of the Company’s outstanding derivative instruments:


		July 2, 2023						January 1, 2023							October 1, 2023						January 1, 2023
(Dollars in Millions)	(Dollars in Millions)	Forward foreign exchange contracts		Interest rate swaps		Total		Forward foreign exchange contracts		Interest rate swaps		Total		(Dollars in Millions)	Forward foreign exchange contracts		Interest rate swaps		Total		Forward foreign exchange contracts		Interest rate swaps		Total
Cash flow hedges	Cash flow hedges	$	3,307	$	—	$	3,307	$	1,768	$	2,400	$	4,168	Cash flow hedges	$	3,810	$	—	$	3,810	$	1,768	$	2,400	$	4,168
Undesignated forward foreign exchange contracts	Undesignated forward foreign exchange contracts	$	578	$	—	$	578	$	—	$	—	$	—	Undesignated forward foreign exchange contracts	$	586	$	—	$	586	$	—	$	—	$	—
Net investment hedges	Net investment hedges	$	10	$	—	$	10	$	—	$	—	$	—	Net investment hedges	$	—	$	—	$	—	$	—	$	—	$	—

For the three and ~~six~~nine months ended ~~July 2,~~October 1, 2023, the Company recorded a total after-tax ~~deferred net gain (loss) on derivatives of $(8) million and $31 million, respectively,~~change in Accumulated other comprehensive ~~loss.~~loss of $(4) million and $27 million, respectively, related to its cash flow hedge portfolio. For the three and ~~six~~nine months ended ~~July 3,~~October 2, 2022, the Company recorded a total after-tax ~~deferred net gain (loss) on derivatives of $1 million and $(3) million, respectively,~~change in Accumulated other comprehensive ~~loss.~~loss of $11 million and $8 million, respectively, related to its cash flow hedge portfolio.

Forward Foreign Exchange Contracts

In certain jurisdictions, the Company uses forward foreign exchange contracts to manage its exposures to the variability of foreign exchange rates. Changes in the fair value of derivatives are recorded each period in earnings or Other comprehensive ~~income (loss),~~loss, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction.

Since 2022, the Company has entered into forward foreign exchange contracts to hedge a portion of forecasted cash flows denominated in foreign currency. The terms of these contracts are generally 12 months to 18 months. These contracts are

designated as cash flow hedging relationships at the date of contract inception, in accordance with the appropriate accounting guidance. At inception, all designated hedging relationships are expected to be highly effective. These contracts are accounted for using the forward method and all gains/losses associated with these contracts are recorded in Other comprehensive ~~income (loss).~~loss. The Company reclassifies the gains and losses related to these contracts at the time the inventory is sold to the customer into Net sales or Cost of sales and Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations, as applicable.

The following table is a summary of gains and losses on forward foreign exchange contracts designated as cash flow hedges within Other comprehensive ~~income (loss)~~loss and amount reclassified into earnings:

Fiscal Three Months Ended Fiscal Six Months Ended
July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022
Gain (loss) recognized in Other comprehensive income (loss) $ (17) $ 1 $ — $ (2)
Gain (loss) reclassified from Other comprehensive income (loss) to earnings $ (6) $ (1) $ 5 $ —


	Fiscal Three Months Ended				Fiscal Nine Months Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Gain recognized in Other comprehensive loss	$	7	$	11	$	7	$	9
Gain (loss) reclassified from Other comprehensive loss to earnings	$	11	$	(2)	$	16	$	(2)

The following tables are a summary of the reclassifications to Net Income related to the Company’s forward foreign exchange contracts for the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022:


		Fiscal Three Months Ended													Fiscal Three Months Ended
		July 2, 2023						July 3, 2022							October 1, 2023						October 2, 2022
(Dollars in Millions)	(Dollars in Millions)	Net Sales		Cost of Sales		Other (income) expense, net		Net Sales		Cost of Sales		Other (income) expense, net		(Dollars in Millions)	Net Sales		Cost of Sales		Other expense, net		Net Sales		Cost of Sales		Other expense, net
Gain (loss) on cash flow hedges		$	(1)	$	(3)	$	(2)	$	8	$	3	$	12
Gain on cash flow hedges														Gain on cash flow hedges	$	—	$	11	$	—	$	7	$	2	$	4
Gain (loss) on forward currency exchange contracts not designated as hedges	Gain (loss) on forward currency exchange contracts not designated as hedges	$	—	$	—	$	(2)	$	—	$	—	$	(1)	Gain (loss) on forward currency exchange contracts not designated as hedges	$	—	$	—	$	(3)	$	—	$	—	$	7


		Fiscal Six Months Ended										Fiscal Nine Months Ended
		July 2, 2023						July 3, 2022				October 1, 2023						October 2, 2022
(Dollars in Millions)	(Dollars in Millions)	Net Sales		Cost of Sales		Other (income) expense, net		Net Sales	Cost of Sales	Other (income) expense, net	(Dollars in Millions)	Net Sales		Cost of Sales		Other expense, net		Net Sales		Cost of Sales		Other expense, net
Gain (loss) on cash flow hedges	Gain (loss) on cash flow hedges	$	—	$	7	$	(2)	11	3	10	Gain (loss) on cash flow hedges	$	—	$	18	$	(2)	$	18	$	5	$	14
Gain on forward currency exchange contracts not designated as hedges	Gain on forward currency exchange contracts not designated as hedges	$	—	$	—	$	4	—	—	7	Gain on forward currency exchange contracts not designated as hedges	$	—	$	—	$	1	$	—	$	—	$	14

The fair value of the Company’s foreign currency exchange contracts as of ~~July 2,~~October 1, 2023 was included in Prepaid expenses and other receivables on the Company’s Condensed Consolidated Balance Sheets.

Since 2022, the Company has entered into forward currency exchange contracts to offset the foreign currency exposure related to the settlement of payables and receivables of the Company. These contracts are not designated as cash flow hedging relationships, and the net allocated gains and losses related to these contracts were recognized within Other expense, ~~(income),~~ net on the Company’s Condensed Consolidated Statements of Operations. As of ~~July 2,~~October 1, 2023 and January 1, 2023, respectively, the Company held forward foreign exchange contracts that were not designated in cash flow hedging relationships of $1$(2) million and $0 million, respectively.

Forward Starting Interest Rate Swaps

Beginning in the fourth quarter of 2022, the Company entered into forward starting interest rate swaps in contemplation of securing long-term financing for the Separation or for other long-term financing purposes in the event the Separation did not

occur. The Company designated these derivatives as cash flow hedges to reduce future interest rate exposure related to changes in the benchmark interest rate on forecasted 5-year, 10-year, and 30-year bonds that the Company issued in 2023. During the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023, the Company recorded a gain of approximately $48 million in Accumulated other comprehensive loss. Upon the issuance of the forecasted debt, the Company settled its forward starting interest rate swaps and received $38 million in cash. The gain in Accumulated other comprehensive loss will be amortized and recorded in Other expense, ~~(income),~~ net on the Company’s Condensed Consolidated Statements of Operations over the life of the 5-year, 10-year, and 30-year bonds. For the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023, we reclassified $1 million and $2$3 million, respectively, from Other comprehensive ~~income (loss)~~loss to the Condensed Consolidated Statements of Operations.

Net Investment Hedges

The Company designated certain forward currency exchange contracts as net investment hedges to mitigate foreign exchange exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates. During the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, the Company designated as a net investment hedge a forward currency exchange contract to sell foreign currency (denominated in the local currency of the affiliate) at specified forward rates. These contracts ~~are~~were accounted for using the spot method with changes in the fair value of the contracts attributable to changes in spot rates recorded in Other comprehensive ~~income (loss)~~loss (CTA). Changes in the fair value attributable to time value (“excluded components”) ~~are~~were initially recorded to Other comprehensive ~~income (loss)~~loss (CTA) and ~~are~~were recognized within Other expense, ~~(income),~~ net on the Company’s Condensed Consolidated Statements of Operations ratably over the life of the contract. The ~~fair value of the~~forward currency exchange contracts designated inas net investment hedges ~~in liabilities position at July 2, 2023 and January~~were settled during the fiscal three months ended October 1, ~~2023 were $2 million and $0 million, respectively.~~2023.

Effectiveness

On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. When a derivative is no longer expected to be highly effective, hedge accounting is discontinued.

Statement of Cash Flows

Cash flows from derivatives designated in hedging relationships are reflected in the Condensed Consolidated Statements of Cash Flows consistent with the presentation of the hedged item. Cash flows from derivatives that were not accounted for as designated hedging relationships reflect the classification of the cash flows associated with the activities being economically hedged.

Credit Risk

The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material as it is the Company’s policy to contract with diverse, ~~credit-worthy~~creditworthy counterparties based upon both strong credit ratings and other credit considerations. The Company has negotiated International Swaps and Derivatives Association, Inc. master agreements with its counterparties, which contain master netting provisions providing the legal right and ability to offset exposures across trades with each counterparty. Given the rights provided by these contracts, the Company presents derivative balances based on its “net” counterparty exposure. These agreements do not require the posting of collateral.

Investments in Equity Securities

The Company measures equity investments without readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. As of ~~July 2,~~October 1, 2023 and January 1, 2023, such investments totaled ~~$78~~$76 million and $56 million, respectively, and were included in Other assets on the Condensed Consolidated Balance Sheets.

13. Commitments and Contingencies

The Company and/or certain of its subsidiaries are involved from time to time in various lawsuits and claims relating to intellectual property, commercial contracts, product liability, labeling, marketing, advertising, pricing, antitrust and trade

regulation, labor and employment, indemnification, data privacy and security, environmental, health and safety, and tax matters, governmental investigations, and other legal proceedings that arise 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 has been incurred, and the amount of the loss can be reasonably estimated. As of ~~July 2,~~October 1, 2023, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has accordingly accrued for those contingent liabilities that are material 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 Accounting Standards Codification ~~(“ASC”)~~ 450-20-25. Accrued liabilities related to litigation matters are included in Accrued liabilities and Other liabilities on the Condensed Consolidated Balance Sheets. 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 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 including timing of related payments. The ability to make such estimates and judgments can be affected by various factors including whether, among other things, damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has commenced or is complete; proceedings are in early stages; matters present legal uncertainties; significant facts are in dispute; procedural or jurisdictional issues exist; the number of potential claims is certain or predictable; comprehensive multi-party settlements are achievable; there are complex related cross-claims and counterclaims; and/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 Condensed Consolidated Balance Sheets, 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

The Company and/or certain of its subsidiaries 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 the Company believes it has substantial defenses, it is not feasible to predict the ultimate outcome of litigation. From time to time, even if it has substantial defenses, the Company considers isolated settlements based on a variety of circumstances. The Company may accrue an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated. For certain of these matters, the Company may accrue additional amounts such as estimated costs associated with settlements, damages, and other losses. Product liability accruals can represent projected product liability for thousands of claims around the world, each in different litigation environments and with different fact patterns. Changes to the accruals may be required in the future as additional information becomes available.

Claims for personal injury have been made against our subsidiary Johnson & Johnson Consumer Inc. (“JJCI”), along with other sellers of acetaminophen-containing products, in federal court ~~arising out of the use of Tylenol, an over-the-counter pain medication,~~ alleging that in utero exposure to acetaminophen (the active ingredient in ~~Tylenol)~~Tylenol, an over-the-counter pain medication) is associated with the development of autism spectrum disorder and/or attention-deficit/hyperactivity disorder in children. In October 2022, lawsuits filed in federal courts in the United States were organized as a multi-district litigation in the U.S. District Court for the Southern District of New York. No trial dates have been set in these actions. Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and the anticipated number of cases. In addition, a lawsuit has been filed in state court against JJCI, the Company and J&J, and lawsuits have been filed in Canada against our subsidiary Johnson & Johnson Inc. (Canadian affiliate) (“JJI”) and J&J. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out these claims and lawsuits.

General Litigation

In 2006, J&J acquired Pfizer’s over-the-counter (“OTC”) business including the U.S. rights to OTC Zantac, which were on-sold to Boehringer Ingelheim (“BI”) as a condition to merger control approval such that BI assumed product liability risk for U.S. sales from and after December 2006. J&J received indemnification from BI and gave Pfizer indemnification in connection with the transfer of the Zantac business to BI from Pfizer, through J&J. In November 2019, J&J received a demand for indemnification from Pfizer, pursuant to the 2006 Stock and Asset Purchase Agreement between J&J and Pfizer. In January 2020, J&J received a demand for indemnification from BI, pursuant to the 2006 Asset Purchase Agreement among J&J, Pfizer and BI. Pursuant to the agreements, Pfizer and BI have asserted indemnification claims against J&J ostensibly related to Zantac sales by Pfizer. In November 2022, J&J received a demand for indemnification from GlaxoSmithKline LLC (“GSK”), pursuant to the 2006 Stock and Asset Purchase Agreement between J&J and Pfizer, and certain 1993, 1998, and 2002 agreements

between Glaxo Wellcome and Warner-Lambert entities. The notices seek indemnification for legal claims related to over-the-counter Zantac (ranitidine) products. Plaintiffs in the underlying actions allege that Zantac and other over-the-counter medications that contain ranitidine may degrade and result in unsafe levels of NDMA (N-nitrosodimethylamine) and can cause or have caused various

cancers in patients using the products and seek declaratory and monetary relief. J&J has rejected all the demands for indemnification relating to the underlying actions. No J&J entity sold Zantac in the United States.

In 2016, JJI sold the Canadian Zantac business to Sanofi Consumer Health, Inc. (“Sanofi”). Under the 2016 Asset Purchase Agreement between JJI and Sanofi (the “2016 Purchase Agreement”), Sanofi assumed certain liabilities including those pertaining to Zantac (ranitidine) product sold by Sanofi after closing and losses arising from or relating to recalls, withdrawals, replacements or related market actions or post-sale warning in respect of products sold by Sanofi after the closing, and JJI is required to indemnify Sanofi for certain other excluded liabilities. In November 2019, JJI received a notice reserving rights to claim indemnification from Sanofi pursuant to the 2016 Purchase Agreement. The notice refers to indemnification for legal claims in class actions and various individual personal injury actions with similar allegations to the U.S. litigation related to over-the-counter Zantac (ranitidine) products.

J&J and/or JJI have also been named in four of the seven putative class actions filed in Canada with similar allegations regarding Zantac or ranitidine use. Of the four putative class actions naming J&J and/or JJI, the British Columbia action has been stayed, the Alberta action has been discontinued, and the Quebec action has been stayed. The Ontario action is pending, but not currently active. JJI was also named as a defendant, along with other manufacturers, in various personal injury actions in Canada related to Zantac products. JJI has provided Sanofi notice reserving rights to claim indemnification pursuant to the 2016 Purchase Agreement related to the class actions and personal injury actions. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out these claims and lawsuits.

Beginning in May 2021, multiple putative class actions were filed in state and federal courts (California, Florida, New York, and New Jersey) against various J&J entities alleging violations of state consumer fraud statutes based on nondisclosure of alleged benzene contamination of certain Neutrogena and Aveeno sunscreen products and the affirmative promotion of those products as “safe”; and, in at least one case, alleging strict liability manufacturing defect and failure to warn claims, asserting that the named plaintiffs suffered unspecified injuries as a result of alleged exposure to benzene. The Judicial Panel on Multi-District Litigation ~~has~~ consolidated all pending actions, except one case pending in New Jersey state court, in the U.S. District Court for the Southern District of Florida, Fort Lauderdale Division. In October 2021, an affiliate of the Company reached an agreement in principle for the settlement of a nationwide class, encompassing the claims of the consolidated actions, subject to approval by the Florida federal Court. In December 2021, plaintiffs in the consolidated actions filed a motion for preliminary approval of a nationwide class settlement. In February 2023, an order granting final approval of the settlement, certifying the settlement class and awarding attorney’s fees was entered. A Notice of Appeal was filed in April 2023.

~~J&J (subsequently substituted by JJCI)~~In September 2023, the Nonprescription Drugs Advisory Committee (the “NDAC”) of the U.S. Food and Drug Administration (“FDA”) met to discuss new data on the effectiveness of orally administered phenylephrine (“PE”) and concluded that the current scientific data do not support that the recommended dosage of orally administered PE is effective as a nasal decongestant. Neither FDA nor the NDAC raised concerns about safety issues with use of oral PE at the recommended dose. FDA has stated it will consider the input of the NDAC, and the evidence, before taking any action on the status of oral PE. Beginning in September 2023, following the NDAC vote, putative class actions were filed against the Company and its affiliates, along with other sellers and manufacturers of PE-containing products, asserting various causes of action including violation of consumer protection statutes, negligence and unjust enrichment. The complaints seek damages and injunctive relief. A petition for a multi-district litigation has been filed. Separately, putative Canadian class actions were filed in September 2023 against the Company’s affiliates, along with other sellers and manufacturers of PE-containing products, alleging false, misleading representations, and seeking damages and declaratory relief based on similar causes of action. Additionally, in October 2023, a putative securities class action was filed in the U.S. District Court for the District of New Jersey against the Company and certain of its officers, among other defendants. The complaint alleges that the Company made false or misleading statements, and omitted material facts, about PE and the efficacy of certain PE-containing products, and seeks damages for all shareholders who acquired shares pursuant to the registration statement and the IPO Prospectus for the Kenvue IPO. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out these claims and lawsuits.

JJCI along with more than 120 other companies, is a defendant in a cost recovery and action brought by Occidental Chemical Corporation in June 2018 in the U.S. District Court for the District of New Jersey, related to the clean-up of a section of the Lower Passaic River in New Jersey. Certain defendants (not including JJCI) have executed a settlement with the U.S. Environmental Protection Agency and U.S. Department of Justice, which is subject to public comment. The settlement, if

judicially approved, will be confirmed through a judicial Consent Decree. The case has been administratively closed but can be re-opened upon request, following a decision on the Consent Decree.

The Company or its subsidiaries are also parties to various proceedings brought under the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund, and comparable state, local or foreign laws in which the primary relief sought is the Company’s agreement to implement remediation activities at designated hazardous waste sites or to reimburse the government or third parties for the costs they have incurred in performing remediation at such sites.

Other

A significant number of personal injury claims alleging that talc causes cancer were made against J&J and certain of its affiliates arising out of the use of body powders containing talc, primarily Johnson’s Baby Powder. These personal injury suits were filed primarily in state and federal courts in the United States and in Canada.

Pursuant to the Separation Agreement, J&J has retained all liabilities on account of or relating to harm arising out of, based upon or resulting from, directly or indirectly, the presence of or exposure to talc or talc-containing products sold by J&J or its affiliates in the United States and Canada (the “Talc-Related Liabilities”) and, as a result, has agreed to indemnify the Company for the Talc-Related Liabilities and any costs associated with resolving such claims. The Company will, however, remain responsible for all liabilities on account of or relating to harm arising out of, based upon or resulting from, directly or indirectly, the presence of or exposure to talc or talc-containing products sold outside the United States or Canada.

14. Segments of Business

The Company ~~has~~ historically operated as part of ~~the Parent,~~J&J, reported under ~~the Parent’s~~J&J’s segment structure and historically the Chief Operating Decision Maker (“CODM”) was ~~the~~J&J’s Consumer Health Segment Operating Committee. As the Company transitioned into an independent, publicly traded company, the Company’s CODM was determined to be the Kenvue Leadership Team as they are responsible for allocating resources and assessing performance. Based on how the CODM assesses operating performance on a regular basis, makes resource allocation decisions, and designates responsibilities of their direct reports, the Company is organized as three operating segments, which are also its reportable segments: (i) Self Care, (ii) Skin Health and Beauty, and (iii) Essential Health. Prior period presentations conform to the current segment reporting structure.

Segment profit is based on Operating income, excluding depreciation and amortization, non-recurring Separation-related costs, restructuring expense, the impact of the conversion of share-based awards, Other operating expense (income), net, and unallocated general corporate administrative expenses (referred to herein as ~~“Adjusted~~“Segment adjusted operating income”), as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which include treasury and legal operations and certain expenses, gains and losses related to the overall management of the Company, are not allocated to the segments. In assessing segment performance and managing operations, management does not review segment assets.

The Company operates the business through the following three reportable business segments:


Reportable Segments			Product Categories
Self Care			Cough, Cold, and Allergy
			Pain Care
			Other Self Care (Digestive Health, Smoking Cessation, and Other)
Skin Health and Beauty			Face and Body Care
			Hair, Sun, and Other
Essential Health			Oral Care
			Baby Care
			Other Essential Health (Women’s Health and Wound Care)

The Company’s product categories as a percentage of Net sales for the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were as follows:

Fiscal Three Months Ended Fiscal Six Months Ended
July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022
Cough, Cold and Allergy 13 % 13 % 14 % 12 %
Pain Care 12 11 13 13
Other Self Care 16 15 15 15
Face and Body Care 19 20 19 20
Hair, Sun and Other 10 10 10 9
Oral Care 10 10 10 10
Baby Care 9 10 9 10
Other Essential Health 11 11 10 11
Total 100 % 100 % 100 % 100 %


	Fiscal Three Months Ended				Fiscal Nine Months Ended
Product Categories	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Cough, Cold and Allergy	13	%	13	%	14	%	13	%
Pain Care	14		14		13		12
Other Self Care	14		14		15		15
Face and Body Care	21		21		20		21
Hair, Sun and Other	8		8		9		8
Oral Care	10		10		10		10
Baby Care	9		10		9		10
Other Essential Health	11		10		10		11
Total	100	%	100	%	100	%	100	%

Segment Net Sales and Segment Adjusted Operating Income

Segment ~~Net~~net sales and ~~Adjusted~~Segment adjusted operating income for the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were as follows:


		Net Sales				Net Sales					Segment Net Sales
		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(Dollars in Millions)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Self Care	Self Care	$	1,661	$	1,481	$	3,301	$	2,946	Self Care	$	1,613	$	1,516	$	4,914	$	4,462
Skin Health and Beauty	Skin Health and Beauty	1,147		1,126		2,258		2,138		Skin Health and Beauty	1,119		1,124		3,377		3,262
Essential Health	Essential Health	1,203		1,197		2,304		2,310		Essential Health	1,183		1,149		3,487		3,459
Total		$	4,011	$	3,804	$	7,863	$	7,394
Total segment net sales										Total segment net sales	$	3,915	$	3,789	$	11,778	$	11,183


		Adjusted Operating Income				Adjusted Operating Income					Segment Adjusted Operating Income
		Fiscal Three Months Ended				Fiscal Six Months Ended					Fiscal Three Months Ended				Fiscal Nine Months Ended
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022		(Dollars in Millions)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Self Care	Self Care	$	576	$	524	$	1,158	$	998	Self Care	$	583	$	556	$	1,741	$	1,554
Skin Health and Beauty	Skin Health and Beauty	201		243		350		370		Skin Health and Beauty	167		246		517		616
Essential Health	Essential Health	250		314		461		560		Essential Health	309		261		770		821
Total Adjusted operating income(1)(2)		$	1,027	$	1,081	$	1,969	$	1,928
Total segment adjusted operating income(1)(2)										Total segment adjusted operating income(1)(2)	$	1,059	$	1,063	$	3,028	$	2,991
Reconciliation to Income before taxes:	Reconciliation to Income before taxes:									Reconciliation to Income before taxes:
Depreciation and amortization		148		161		300		326
Depreciation										Depreciation	72		69		211		213
Amortization										Amortization	81		83		242		265
Separation-related costs	Separation-related costs	102		49		200		59		Separation-related costs	133		50		333		109
Restructuring(3)		—		24		—		38
Restructuring expense(3)										Restructuring expense(3)	3		31		3		69
Conversion of share-based awards(4)										Conversion of share-based awards(4)	(25)		—		(25)		—
Other operating expense (income), net	Other operating expense (income), net	1		13		(16)		8		Other operating expense (income), net	9		(14)		(7)		(6)
General corporate/unallocated expenses	General corporate/unallocated expenses	74		64		143		116		General corporate/unallocated expenses	76		81		219		197
Total operating income	Total operating income	$	702	$	770	$	1,342	$	1,381	Total operating income	$	710	$	763	$	2,052	$	2,144
Other expense (income), net		10		(5)		40		(6)
Other expense, net										Other expense, net	25		25		65		19
Interest expense, net	Interest expense, net	53		—		54		—		Interest expense, net	100		—		154		—
Income before taxes	Income before taxes	$	639	$	775	$	1,248	$	1,387	Income before taxes	$	585	$	738	$	1,833	$	2,125

(1) ~~For~~In the first quarter of 2023, the Company adjusted the allocation for certain intangible asset amortization costs within Cost of Sales to align with segment financial results as measured by the Company, including the CODM. Accordingly, the Company has updated its segment

disclosures to reflect the updated presentation in all prior periods. ~~Total Adjusted~~Segment adjusted operating income did not change as a result of this update.

(2)~~We define Adjusted~~ The Company defines Segment adjusted operating income as U.S. GAAP Operating income excluding depreciation and amortization, Separation-related costs, restructuring expense, the impact of the conversion of share-based awards, Other operating expense (income), net, and general corporate unallocated expenses that are not part of our measurement of segment performance. Management uses ~~Adjusted~~Segment adjusted operating income to assess segment financial performance.

(3) Exclusive of the restructuring expense included in Other operating expense (income), net on the Company’s Condensed Consolidated Statements of Operations.

(4) As noted above, Segment adjusted operating income excludes the impact of the conversion of share-based awards (see Note 7, Stock-Based Compensation). This adjustment primarily represents the add-back of the net impact of the gain on reversal of previously recognized stock-based compensation expense of $148 million, offset by stock-based compensation expense recognized in the fiscal three months ended October 1, 2023 relating to employee services provided prior to the Separation of $123 million.

15. Accrued and Other Liabilities

Accrued liabilities consisted of:


(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		January 1, 2023		(Dollars in Millions)	October 1, 2023		January 1, 2023
Accrued expenses	Accrued expenses	$	470	$	447	Accrued expenses	$	545	$	447
Accrued compensation and benefits	Accrued compensation and benefits	275		272		Accrued compensation and benefits	326		272
Lease liability	Lease liability	47		35		Lease liability	46		35
Other accrued liabilities(1)	Other accrued liabilities(1)	409		152		Other accrued liabilities(1)	371		152
Accrued liabilities	Accrued liabilities	$	1,201	$	906	Accrued liabilities	$	1,288	$	906

Other liabilities consisted of:


(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		January 1, 2023		(Dollars in Millions)	October 1, 2023		January 1, 2023
Accrued income taxes - noncurrent	Accrued income taxes - noncurrent	$	234	$	584	Accrued income taxes - noncurrent	$	226	$	584
Noncurrent lease liability	Noncurrent lease liability	120		81		Noncurrent lease liability	106		81
Other noncurrent accrued liabilities(1)	Other noncurrent accrued liabilities(1)	239		62		Other noncurrent accrued liabilities(1)	237		62
Other liabilities	Other liabilities	$	593	$	727	Other liabilities	$	569	$	727

(1) The increase in Other current and noncurrent accrued liabilities relates primarily to the agreements entered into with ~~the Parent~~J&J in connection with the Separation Agreement, which went into effect in the second quarter of 2023. See Note 8, “Related Parties” for more information.

16. Subsequent Events

Dividend Declaration

On ~~July 20,~~October 26, 2023, the ~~Company’s~~Company announced that its Board of Directors declared a $0.20 cash dividend for the ~~third~~fourth quarter of 2023 to shareholders. The ~~third~~fourth quarter dividend of $0.20 per share on the outstanding common stock ~~of the Company~~ will be payable on ~~September 7,~~November 22, 2023 to shareholders of record as of the close of business on ~~August 28,~~November 8, 2023.

~~Proposed Exchange Offer~~

On July 24, 2023, the Company filed a Registration Statement on Form S-4 with the SEC in connection with J&J’s proposed exchange offer, whereby J&J shareholders can exchange shares of J&J common stock for shares of the Company’s common stock owned by J&J.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions, and projections about our industry, business, and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in the section of our final prospectus (the “IPO Prospectus”) filed on May 4, 2023 with the U.S. Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Act”) relating to our Registration Statement on Form S-1Split-Off Prospectus entitled “Risk Factors” and the section entitled “Cautionary Note Regarding Forward-Looking Statements” included herein.

Our accompanying Condensed Consolidated Financial Statements as of ~~July 2,~~October 1, 2023 and for the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC for interim financial statements, and should be read in conjunction with our audited combined financial

statements for the year ended January 1, 2023, which are included in the ~~IPO~~Split-Off Prospectus, and in conjunction with our unaudited Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. In our opinion, the Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair statement of the financial condition, results of operations and cash flows for the periods indicated. All currency amounts are expressed in U.S. dollars unless otherwise noted.

Overview

Company Overview

At Kenvue, our purpose is to realize the extraordinary power of everyday care. As a global leader at the intersection of healthcare and consumer goods, we are the world’s largest pure-play consumer health company by revenue with $15.0 billion in Net sales in 2022. By combining the power of science with meaningful human insights and digital-first approach, we empower consumers to live healthier lives every day. Trusted by generations, our differentiated portfolio of iconic brands—including Tylenol®, Neutrogena®, Listerine®, Johnson’s®, BAND-AID®, Aveeno®, Zyrtec®, and Nicorette®—is backed by science and recommended by healthcare professionals, which further reinforces our consumers’ connections to our brands.

Our portfolio includes Self Care, Skin Health and Beauty, and Essential Health products, allowing us to connect with consumers globally—in their daily rituals and the moments that matter most.

Our well-known portfolio represents a combination of global and regional brands, many of which hold leading positions in their respective categories. In 2022, we held seven #1 brand positions across major categories globally, in addition to many #1 brand positions locally across our four regions. Our global footprint is also well balanced geographically with approximately half of our Net sales generated outside North America in 2022.

Our global scale and the breadth of our brand portfolio are complemented by our well-developed capabilities and accelerated through our digital-first approach, allowing us to dynamically capitalize on and respond to current trends impacting our categories and geographic markets.

With a sole focus on consumer health, our marketing organization operates efficiently by leveraging our precision marketing, e-commerce, and broader digital capabilities to develop unique consumer insights and further enhance the relevance of our brands. Similarly, our research and development organization combines these consumer insights with deep, multi-disciplinary scientific expertise, and engagement with healthcare professionals, to drive innovative new products, solutions, and experiences centered around consumer health.

Our Business Segments

We operate our business through the following three reportable business segments:

•Self Care. Our Self Care product categories include: Cough, Cold and Allergy; Pain Care; and Other Self Care (Digestive Health, Smoking Cessation, and Other). Major brands in the segment include Tylenol®, Nicorette®, and Zyrtec®.

•Skin Health and Beauty. Our Skin Health and Beauty product categories include: Face and Body Care and Hair, Sun and Other. Major brands in the segment include Neutrogena®, Aveeno®, and OGX®.

•Essential Health. Our Essential Health product categories include: Oral Care, Baby Care, and Other Essential Health (Women’s Health and Wound Care). Major brands in the segment include Listerine®, Johnson’s®, BAND-AID®, and Stayfree®.

For additional information about our three reportable business segments, see “—Key Factors Affecting Our Results—Our Brands and Product Portfolio” and Note 14, “Segments of Business,” to our Condensed Consolidated Financial Statements included herein.

Separation from Johnson & Johnson

In November 2021, Johnson & Johnson (“J&J” ~~or the “Parent”~~), our former parent company, announced its intention to separate its Consumer Health segment (the “Consumer Health Business”) into a new, publicly traded company (the “Separation”). We were incorporated in Delaware on February 23, 2022 in connection with the Separation and were formed to ultimately hold, directly

or indirectly, and conducted certain operational activities in anticipation of the planned separation of, the Consumer Health Business. Prior to the Kenvue IPO (as defined below), we were wholly owned by J&J and primarily represented the Consumer Health Business. We also included certain other product lines previously reported in another segment of J&J. On April 4, 2023, in connection with the Separation, J&J completed in all material respects the transfer of the assets and liabilities of the Consumer Health Business to us and our subsidiaries, other than the transfer of assets and liabilities in certain jurisdictions where we and J&J will defer the transfer of such assets and assumption of liabilities and other immaterial assets (such transfer, the “Consumer Health Business Transfer”).

The registration statement related to the initial public offering of Kenvue’s common stock was declared effective on May 3, 2023, and our common stock began trading on the New York Stock Exchange under the ticker symbol “KVUE” on May 4, 2023 (the “Kenvue IPO”).

proceeds received from the Debt Financing Transactions as defined in Note 4, “Borrowings” to our Condensed Consolidated Financial Statements included herein, and (3) any cash and cash equivalents in excess of the $1.17 billion in cash and cash equivalents retained by the Company immediately following the Kenvue IPO. As of the closing of the Kenvue IPO, J&J owned 1,716,160,000 shares of Kenvue common stock, or approximately 89.6% of the total outstanding shares of Kenvue common ~~stock and, as such, will continue to consolidate the financial results of Kenvue until the Separation is complete.~~stock.

On July 24, 2023, ~~we filed a Registration Statement on Form S-4 with the SEC in connection with~~ J~~&J’s proposed~~&J initiated an exchange offer ~~whereby J&J~~(the “Exchange Offer”) under which its shareholders ~~can~~could exchange shares of J&J common stock for shares of ~~our~~Kenvue Inc. common stock owned by J&J. On August 23, 2023, J&J announced the results of the Exchange Offer through which J&J accepted an aggregate of 190,955,435 shares of J&J common stock in exchange for 1,533,830,450 shares of Kenvue common stock, representing approximately 80.1% of Kenvue’s outstanding common stock as of August 23, 2023. As a result, Kenvue became a fully independent company and J&J now owns 9.5% of the outstanding shares of Kenvue common stock following the completion of the Exchange Offer.

We are incurring certain costs in connection with our establishment as a standalone public company (the “Separation-related costs”). We expect the non-recurring Separation-related costs will continue through at least fiscal year 2024. For additional information about the Separation, see ~~“The Separation~~“Agreements between Johnson & Johnson and ~~Distribution Transactions—The Separation”~~Kenvue and ~~“Certain Relationships and~~Other Related Person Transactions—Relationship between Johnson & Johnson and Kenvue” and “Agreements between Johnson & Johnson and Kenvue and Other Related Person Transactions—Agreements ~~to be~~ Entered into in Connection with the Separation” in the ~~IPO~~Split-Off Prospectus.

Relationship with J&J

In connection with the Separation, we have entered into the Separation Agreement and various other agreements with J&J for the purpose of effecting the Separation. These agreements provide a framework for our relationship with J&J and govern various interim and ongoing relationships between us and J&J that follows the completion of the Kenvue IPO. These agreements with J&J are described in Note 8, “Related Parties,” to our Condensed Consolidated Financial Statements included herein.

Key Factors Affecting Our Results

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of our ~~IPO~~Split-Off Prospectus entitled “Risk Factors”.

Our Brands and Product Portfolio

We have a world class, global portfolio of iconic and modern brands that has been built over the last 135 years and is trusted by generations of consumers. Our business is balanced and resilient with leading brands across categories and geographic markets. Our brands are widely recognized and represents a combination of global powerhouses and regional brands, many of which hold leading positions in their respective categories. Our brands are built for moments that uniquely matter; these moments of care create an emotional connection to our products that creates deep bonds between consumers and our brands.

Our ability to compete successfully depends on the strength of these brands. The vast majority of our Net sales are derived from products bearing proprietary trademarks and trade names, and these trademarks and trade names convey that the products we sell are “brand name” products. Developing and maintaining the reputation of our brands is a critical component of our relationship with consumers, customers, manufacturers, suppliers, distributors, and other third-party partners, including healthcare professionals, influencers, and other individuals with whom we have relationships. We recognize that our reputation and our brands could be damaged by negative publicity, whether or not valid, related to our company, our brands, our products, our supply chain, our ingredients, our packaging, our environmental, social, and governance practices, our employees, or any other aspect of our business.

Consumers, customers, and third-party partners value and trust the reputation, reliability, and status of our brands and the quality, performance, and functionality of our products, and we believe there are significant opportunities to further increase our category and brand penetration by continuing to deepen our brand relevance and salience across our portfolio, continually earning a place for our products in consumers’ hearts and homes.

Shifting Consumer Preferences

Everyday care has never been a more essential part of the consumer health journey. Globally, people’s preferences and expectations for consumer health products continue to evolve, with a heightened focus on preventative care and science-backed solutions. While the focus on consumer health was already on the rise before the COVID-19 pandemic, this focus has further accelerated since the start of the pandemic. Consumers are also shifting the paradigm of beauty towards health. Other recent trends that have affected consumer preferences include an aging population, premiumization (where consumers switch their purchases to premium alternatives), a growing middle class in emerging markets and the rise of digital ecosystems that create

new opportunities for personalized health solutions. We expect these trends to continue and that consumers will continue to seek solutions that meet their health goals, creating growth opportunities across our product portfolio.

Consumer preferences and purchasing patterns are difficult to predict and may fluctuate rapidly. Our success is dependent on our ability to anticipate, understand, and respond appropriately to market trends and changing consumer preferences more quickly than our competitors. Accordingly, we increasingly leverage our digital capabilities and data analytics to gain new commercial insights and develop targeted marketing and advertising initiatives to reach consumers. Moreover, market trends and consumer preferences and purchasing patterns may vary by geographic region, and we seek to complement our portfolio of iconic global brands with strong regional brands that are uniquely tailored to local preferences and trends.

Innovation

We rely on science. We have always prioritized science as the core of how we provide care, and we remain committed to this approach. Our ability to quickly develop new products and technologies and to adapt and market our products on an ongoing basis to meet evolving consumer preferences is an essential component of our business strategy. Several of our products have a long history of life-enhancing, first-to-market innovations. In many situations, we have driven the innovation and clinical compendium of entire categories. By leveraging world-class research and development capabilities and a team of research and development professionals, we have a multi-disciplinary and differentiated approach to innovation.

We have a successful track record of driving innovation across our categories with a science-based approach centered around human empathy and leveraging our long-standing relationships with healthcare professionals and academic institutions. Nonetheless, developing new products and technologies is a complex, time-consuming and costly process, and a new product may not achieve a successful launch or may not generate sufficient consumer interest and sales to become a profitable product. In order to remain competitive within the product markets we currently service, enter new product markets, and expand into adjacent categories, channels of distribution or geographies, we must continue to invest in innovation and develop, promote, and bring to market new high-quality products.

Expansion of e-Commerce and Digital Capabilities

Our digital-first mindset cuts across all we do. Over the last several years, our digital acceleration has transformed our ability to deliver better consumer health experiences. Today, we apply a digital-first mindset to all aspects of our operations, including research and development, supply chain, go-to-market, and marketing, by prioritizing digital investments, and we intend to continue to accelerate our implementation of this strategy in the future. Effective implementation of our digital-first approach, including effective integration of our digital and physical channels, is integral to the continued growth of our business but involves significant operational changes. We have gradually increased our investment focus into enhancing our digital capabilities, including data science, data analytics, artificial intelligence, machine learning, and natural language processing.

Our pursuit of this strategy has led us in recent years to promote new services, including e-commerce and direct-to-consumer (“DTC”) services, and introduce innovative new products and connected health offerings beyond the traditional services and products we have historically provided to our consumers and customers. Our investments in our digital capabilities are improving data quality and access, fostering innovation, driving e-commerce success, and enabling us to manage our supply chain more effectively while enhancing our marketing and commercial capabilities. However, expanding our service and product offerings through digital initiatives will also create additional risks and uncertainties associated with conducting business digitally, including the speed with which technology changes, technical failures, information security or cybersecurity incidents, consumer privacy and data protection concerns, ethical concerns, changes in state tax regimes, and government regulation of internet activities.

Geographic Expansion

We have a global footprint through which we sold and distributed our broad product portfolio in more than 165 countries across our four regions in 2022. In recent years, we have grown, and we intend to continue to grow, our business by expanding our global operations. Given our global scale, including in the United States and China, we are well positioned to work with our retail partners to meet increasing consumer health demands and develop new product adjacencies for evolving consumer needs globally. In addition to prioritizing expansion in our existing markets where we have identified the most attractive opportunities, we also intend to invest in other sizable, growing, and underpenetrated geographic markets throughout the world.

We expect competition to intensify in the geographic markets where we plan to expand our operations. Local companies based in markets outside the United States may have substantial competitive advantages because of their greater understanding of, and focus on, those local markets. Meanwhile, some of our multinational competitors may develop and grow in certain geographic

markets more quickly than we will. Our ability to successfully expand our business globally will depend on a number of factors, including our marketing efforts and consumer acceptance of our products.

Increased Competition

Our products are sold in a highly competitive global marketplace, which, in recent years, has experienced increased retail trade concentration, the emergence of retail buying alliances, the rapid growth of e-commerce and the integration of traditional and digital operations at key retail trade customers. One of our customers accounted for approximately 12% and 13% of our total Net sales for the fiscal three and nine months ended October 1, 2023, respectively, and 13% and 14% of our total Net sales f~~or both of~~for the fiscal three and ~~six~~nine months ended ~~July~~October 2, ~~2023 and July 3,~~ 2022, ~~and our~~respectively. Our top 10 customers represented approximately ~~41%~~40% and ~~43%~~42% of our total Net sales for ~~both of~~ the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023, respectively, and 42% and 44% of our total Net sales for the fiscal three and ~~six~~nine months ended ~~July 3,~~October 2, 2022, respectively. Nonetheless, as a result of these trends, we are increasingly dependent on certain large-format retail trade customers in each of our business segments and some of these retail trade customers have significant bargaining strength.

We face substantial competition in each of our business segments and product lines and across all geographic markets in which we operate. We compete with companies of all sizes on the basis of cost-effectiveness, product performance, real or perceived product advantages, intellectual property rights, advertising, and promotional activities, brand recognition and loyalty, consumer convenience, pricing, and geographic reach. Our competitors include multinational corporations, smaller companies that often operate on a regional basis, retailers’ private-label brands, and generic non-branded products. Many of these competitors have benefited from the substantial growth in e-commerce and focus extensively on DTC or other non-traditional, digital business models. Competitive factors impacting our business also include market dynamics and evolving consumer preferences, brand image, a broad product portfolio, new product innovations and product development, pricing that is attractive to consumers, cost inputs, and the ability to attract and retain talented employees. We expect that the continued attractiveness of the categories and geographic markets in which we operate will encourage the entry of new competitors of all sizes, which could increase these and other competitive pressures in the future.

Sourcing, Manufacturing, and Supply Chain Management

Our ability to meet the needs of our consumers and customers depends on the proper functioning of our manufacturing and supplier operations. Our manufacturing operations require the timely delivery of sufficient amounts of complex, high-quality components and materials. We have built our supply chain network to deploy resources across the globe where they are most needed. Our extensive distribution network and sales organization enable us to establish strategic partnerships with key suppliers and retailers across multiple markets and channels, where we further leverage our scale to drive flexible manufacturing capacity and supply chain optimization. We believe this approach builds and supports our resilience across economic cycles and allows us to prioritize or expand our geographic focus based on our strategic priorities. Nonetheless, we have in the past faced, and may in the future face, unanticipated interruptions and delays in manufacturing through our internal

and external supply chain. For example, since 2021 we have experienced, and we continue to experience, higher than expected inflation, including escalating transportation, commodity and other supply-chain costs and disruptions that have adversely affected, and continue to adversely affect, our results of operations. Although certain costs have moderated to an extent, we continue to experience higher energy and labor costs. Manufacturing or supplier disruptions could result in product shortages, declining sales, reputational damage or significant costs.

Supply Chain Optimization Initiatives

Since 2019, we have taken significant steps to meet consumer demand and mitigate supply chain constraints. We have redesigned our manufacturing and distribution network, optimizing both in-house and external manufacturing and distribution footprints to improve lead time and reliability across the globe. We selectively invested in specific technologies and expanded our capacity in different geographic markets with the intent to increase competitiveness by improving cost, speed, compliance, and customer service. A series of different initiatives were deployed including (1) improving inter-region agility through end-to-end collaboration and shipping optimization, (2) distribution network redesign to manage the surge of e-commerce volume and mitigate constraints, (3) product offering optimization that eliminated a significant number of small external manufacturers and discontinued unprofitable SKUs, and (4) investments in technology, automation, and digital capabilities that modernized our supply chain operations and enabled inventory optimization, which improved profitability, quality control, and shipping container loading and utilization while reducing consumer complaints. As a result, our historical results of operations reflect savings delivered through these end-to-end supply chain optimization initiatives.

Macroeconomic Trends

Macroeconomic factors affect consumer spending patterns and thereby our results of operations. These factors include general economic conditions, inflation, consumer confidence, employment rates, business conditions, the availability of credit, interest

rates, tax rates, and fuel and energy costs. Factors that impact consumer discretionary spending, which remains volatile globally, continue to create a complex and challenging retail environment for us and our third-party partners. We intend to continue to evaluate and adjust our operating strategies and cost management opportunities to help mitigate any impacts on our results of operations resulting from broader macroeconomic conditions and policy changes, while remaining focused on the long-term growth of our business.

Foreign Currency Exposure

We report our consolidated financial results in U.S. dollars but have significant non-U.S. operations. A large portion of our business is conducted in currencies other than U.S. dollars, and generally the applicable local currency is our functional currency in that locality. As a result, we face foreign currency exposure on the translation into U.S. dollars of our results of operations in numerous jurisdictions primarily in the European Union, the United Kingdom, Japan, China, Canada, Brazil, and India. In addition, as we continue to expand our global operations, our exposure to foreign currency risk could become more significant, particularly if the U.S. dollar strengthens in the future.

Where possible, we manage foreign currency exposure through a variety of methods. We may adopt natural hedging strategies whereby favorable and unfavorable foreign currency impacts to our foreign currency-denominated operating expenses are mitigated to a certain extent by the natural, opposite impact on our foreign currency-denominated Net sales. During 2022, in anticipation of operating as a standalone entity, we started to use derivative financial instruments to mitigate our foreign currency exposure and not for trading or speculative purposes. For example, we hedged a portion of forecasted foreign currency revenue and forecasted inventory purchases. Nonetheless, it is not practical for us to mitigate all of our foreign currency exposure, nor are we able to accurately predict the possible impact of future foreign currency exchange rate fluctuations on our results of operations, due to our constantly changing exposure to various foreign currencies, difficulty in predicting fluctuations in foreign currency exchange rates relative to the U.S. dollar, and the significant number of foreign currencies involved.

Acquisitions and Divestitures

We actively refine our portfolio through acquisitions towards high growth, high margin businesses as well as divestitures of assets that we do not believe are well integrated into our product portfolio and strategic direction. We have demonstrated an ability to successfully integrate and scale acquired businesses to further build upon our market leadership across our product portfolio. We did not complete any significant acquisitions or divestitures during the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022.

We intend to continue to pursue a disciplined and prudent approach to acquisitions and partnership opportunities that accelerate growth within our business. We believe our strong balance sheet will allow us to strategically make acquisitions and

divestitures while maintaining our disciplined approach to capital allocation. However, the pursuit of acquisitions and divestitures of businesses, brands, assets, and technologies involves numerous potential risks.

Impacts of the COVID-19 Pandemic

~~In March 2020,~~The COVID-19 pandemic and government steps to reduce the ~~World Health Organization (the “WHO”) declared~~spread and address the ~~outbreak~~impact of COVID-19 ~~a global~~have had and may continue to have an impact on the way people live, work, interact, travel and shop. During the COVID-19 pandemic, and recommended containment and mitigation measures worldwide. On May 5, 2023, the WHO declared that COVID-19 was no longer a global health emergency. We have assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impactsmany of the ~~COVID-19~~communities in which we manufacture, market and sell our products experienced and may in the future experience “stay at home” orders, travel or movement restrictions and other government actions to address the pandemic.

Our Net sales in our Self Care segment and within certain product categories in our Essential Health segment were accelerated by changes in consumer behavior during the COVID-19 pandemic, which helped to offset the adverse impact on our Net sales from the remainder of the business, primarily Skin Health and Beauty products and the Baby Care and Women’s Health products within our Essential Health segment, due to lockdown-driven lost usage occasions, including the inability of consumers to purchase our products due to financial hardship, government actions imposing travel or movement restrictions, shifts in demand and consumption away from more discretionary or higher-priced products to lower-priced products and consumer pantry-loading activity. However, as governments began lifting restrictions, this negative trend began to level off and stabilize in the fourth quarter of 2021 while momentum in Self Care and Essential Health products continued due to a rising focus on consumer health. ~~The~~Although the impact of the COVID-19 pandemic on our business has largely subsided, the extent to which the COVID-19 pandemic will continue to impact our business and financial results will depend on many factors that cannot be predicted with certainty, including the duration of the outbreak and the impact of new variants. Any resurgence in the spread of COVID-19 or its variants could result in the imposition of new governmental directives and the implementation of prolonged restrictive measures that could further disrupt our operations.

We have considered various internal and external factors in assessing the potential impact of the COVID-19 pandemic on our business and financial results based upon information available at this time, as follows:

•~~Operating Model.~~ ~~We have an agile business model across the consumer health industry with flexibility designed into our manufacturing, research and development, and commercial capabilities.~~

•~~Supply Chain.~~ We continue to leverage our global manufacturing footprint while closely monitoring and maintaining critical inventory at major distribution centers away from high-risk areas to ensure adequate and effective distribution.

•~~Business Continuity.~~ The robust, active business continuity plans across our network were instrumental in preparing us for the COVID-19 pandemic and enabling us to continue to meet the majority of consumer needs without significant interruption.

•~~Workforce.~~ We put procedures in place to protect our essential workforce in manufacturing, distribution, commercial, and research operations while ensuring appropriate remote working protocols were established for other employees.

•~~Liquidity.~~ ~~We expect to have an investment grade credit rating as we seek access to the financial capital markets in the foreseeable future.~~

•~~Legislation.~~ We will continue to assess and evaluate the ongoing global legislative efforts to combat the impact of the COVID-19 pandemic on the categories and geographic markets in which we participate. Currently, the laws and regulations enacted in response to the COVID-19 pandemic are not expected to have a material impact on our operations.

The impact of the COVID-19 pandemic on our results of operations, including changes in our segment net sales and segment profits, is discussed in further detail below. See “—Results of Operations”.

Legal Proceedings

We and/or certain of our subsidiaries are involved from time to time in various lawsuits and claims relating to intellectual property, commercial contracts, product liability, labeling, marketing, advertising, pricing, antitrust and trade regulation, labor and employment, indemnification, data privacy and security, environmental, health and safety, and tax matters, governmental investigations, and other legal proceedings that arise in the ordinary course of our business. See Note 13, “Commitments and Contingencies,” to our Condensed Consolidated Financial Statements included herein for additional information regarding our current legal proceedings.

Pursuant to the Separation Agreement, J&J has retained all liabilities on account of or relating to harm arising out of, based upon or resulting from, directly or indirectly, the presence of or exposure to talc or talc-containing products sold by J&J or its affiliates in the United States and Canada (the “Talc-Related Liabilities”) and, as a result, has agreed to indemnify us for the Talc-Related Liabilities and any costs associated with resolving such claims. We will, however, remain responsible for all liabilities on account of or relating to harm arising out of, based upon or resulting from, directly or indirectly, the presence of or exposure to talc or talc-containing products sold outside the United States or Canada.

Other Information

Baby Powder Transition

On August 11, 2022, we announced the commercial decision to transition to an all cornstarch-based baby powder portfolio. As a result of this transition, talc-based Johnson’s Baby Powder will be discontinued globally in 2023. Talc-based Johnson’s Baby Powder was previously discontinued during 2020 in certain markets including the United States and Canada. We do not expect the impact of this change to be material.

Russia-Ukraine War

Although the long-term implications of the ongoing military conflict between Russia and Ukraine (the “Russia-Ukraine War”) are difficult to predict at this time, the financial impact of the conflict to us during the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 was not material. For both the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 and 2022, our Ukrainian business represented 0.2% of our Net sales. As of October 1, 2023 and January 1, 2023, our Ukrainian business represented less than 0.1% and 0.1% of our net assets, respectively. For both the fiscal three and nine months ended October 1, 2023, our

~~0.1%~~Russian business represented 1.0% of our Net sales. For the fiscal three and ~~six~~nine months ended ~~July 3, 2022, our Ukrainian business represented 0.2% and 0.1% of our Net sales, respectively. As of July~~October 2, 2023, our Ukrainian business represented less than 0.1% of our net assets and as of January 1, 2023, 0.1% of our net assets. For the fiscal three and six months ended July 2, 2023, our Russian business represented 0.8% and 1.0% of our Net sales, respectively. For the fiscal three and six months ended July 3, 2022, our Russian business represented ~~1.6%~~1.3% and ~~1.5%~~1.4% of our Net sales, respectively.

In the first quarter of 2022, we announced our decision to suspend supply of all of our products into Russia other than our over-the-counter medicines within our Self Care segment, which we continued to supply as patients rely on many of these products for healthcare purposes. Supply of the suspended products terminated during the second quarter of 2022. We also suspended all advertising in Russia, all clinical trials in Russia, and any additional investment in Russia. We will continue to monitor the geopolitical situation in Russia and to evaluate our activities and future operations in Russia.

Deferred Markets

In order to ensure compliance with applicable law, to obtain necessary governmental approvals and other consents and for other business reasons, we deferred the transfer of certain assets and liabilities of businesses in certain non-U.S. jurisdictions, including China, Malaysia, and Russia, until after the completion of the Kenvue IPO. On September 11, 2023, J&J transferred the equity interests in the majority of the Deferred Legal Entities to the Company that previously had been consolidated as VIEs in the Company’s Condensed Consolidated Financial Statements. The Condensed Consolidated Financial Statements included herein include businesses in all jurisdictions in which we will operate following the completion of the Separation, including any Deferred Local Business (as defined in ~~“Certain Relationships~~“Agreements between Johnson & Johnson and Kenvue and Other Related Person Transactions—Agreements ~~to be~~ Entered into in Connection with the Separation—Separation Agreement—Deferred Markets” in the ~~IPO~~Split-Off Prospectus). For more information regarding Deferred Local Businesses, see “Risk Factors—Risks Related to ~~the Separation and the Distribution—~~Kenvue’s Relationship with Johnson & Johnson—The transfer of certain assets and liabilities from Johnson & Johnson to usKenvue contemplated by the Separation will not be ~~complete~~completed prior to the completion of ~~this offering”~~the Exchange Offer.” and ~~“Certain Relationships~~“Agreements between Johnson & Johnson and Kenvue and Other Related Person Transactions—Agreements ~~to be~~ Entered into in Connection with the Separation—Separation Agreement—Deferred Markets” in the ~~IPO~~Split-Off Prospectus.

Provision For Taxes

On December 15, 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation Development (“OECD”) Pillar Two Framework that was supported by over 130 countries worldwide. The EU’s Pillar Two Directive effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. On July 17, 2023, the OECD published Administrative Guidance proposing certain safe harbors that effectively extend certain effective dates to January 1, 2027. EU Member States still need to adopt the OECD Administrative Guidance in their local Pillar Two legislation for such safe harbor rules to apply. A significant number of other countries are also considering implementing similar legislation. We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries, including those within the European Union. The global implementation of the minimum tax could have a material impact on our Condensed Consolidated Financial Statements in future periods.

Results of Operations

Fiscal Three Months Ended ~~July 2,~~October 1, 2023 Compared with Fiscal Three Months Ended ~~July 3,~~October 2, 2022

Our results for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were as follows:


		Fiscal Three Months Ended									Fiscal Three Months Ended
		July 2, 2023		July 3, 2022		Change 2022 to 2023					October 1, 2023		October 2, 2022		Change 2022 to 2023
(Dollars in Millions)	(Dollars in Millions)					Amount		Percent		(Dollars in Millions)					Amount		Percent
Net sales	Net sales	$	4,011	$	3,804	$	207	5.4	%	Net sales	$	3,915	$	3,789	$	126	3.3	%
Cost of sales	Cost of sales	1,786		1,646		140		8.5	%	Cost of sales	1,665		1,664		1		0.1	%
Gross profit	Gross profit	2,225		2,158		67		3.1	%	Gross profit	2,250		2,125		125		5.9	%
Selling, general, and administrative expenses	Selling, general, and administrative expenses	1,522		1,375		147		10.7	%	Selling, general, and administrative expenses	1,531		1,376		155		11.3	%
Other operating expense, net		1		13		(12)		(92.3)	%
Other operating expense (income), net										Other operating expense (income), net	9		(14)		23		*
Operating income	Operating income	702		770		(68)		(8.8)	%	Operating income	710		763		(53)		(6.9)	%
Other expense (income), net		10		(5)		15		*
Other expense, net										Other expense, net	25		25		—		—	%
Interest expense, net	Interest expense, net	53		—		53		*		Interest expense, net	100		—		100		*
Income before taxes	Income before taxes	639		775		(136)		(17.5)	%	Income before taxes	585		738		(153)		(20.7)	%
Provision for taxes	Provision for taxes	209		171		38		22.2	%	Provision for taxes	147		152		(5)		(3.3)	%
Net income	Net income	$	430	$	604	$	(174)	(28.8)	%	Net income	$	438	$	586	$	(148)	(25.3)	%

* Calculation not meaningful.

Net Sales

Net sales were ~~$4.0~~$3.9 billion and $3.8 billion for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase of ~~$207~~$126 million, or ~~5.4%~~3.3%. Net sales growth was primarily driven by value realization (also referred to as Price/Mix)., partially offset by lower volume. Excluding the impact of unfavorable changes in currency rates of ~~$87~~$13 million, Organic growth, a non-GAAP financial measure as defined below, was ~~$294~~$139 million, primarily attributable to Self Care, where successful brand activation and innovation continue to expand usage occasions, driving volume growth and strength across all product categories, despite a slow start to the cold, cough, and flu season. Momentum in Essential Health continued as value realization ~~increased demand across our Pain Care~~ and ~~Cough, Cold, and Flu product categories resulting from higher cold and flu incidences and sequential share gains in sun care fueled by innovation and improved supply.~~premiumization initiatives took hold.

Cost of Sales

Cost of sales were ~~$1.8~~$1.7 billion ~~and $1.6 billion~~ for both the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, ~~respectively,~~ an increase of ~~$140~~$1 million, or ~~8.5%~~0.1% primarily ~~due~~attributable to ~~Organic growth, as noted above in Net sales. In addition, Cost~~the impact of ~~sales was further impacted by~~ higher costs of key ingredients and packaging materials ~~and inbound freight,~~ due to ~~commodity~~the impact of inflation. The increase was partially offset by the realization of benefits associated with our supply chain optimization ~~initiatives and favorable currency impacts of $42 million.~~initiatives. Cost of sales as a percentage of Net sales ~~increased 120~~decreased 140 basis points to ~~44.5%~~42.5% as compared to the prior year, due primarily to ~~inflationary impact on costs,~~Net sales growth, which was primarily driven by value realization and non-recurring separation-related benefits, partially offset by the ~~realization~~impact of ~~benefits associated with our supply chain optimization initiatives.~~inflation on costs and the negative impact of transactional foreign currency fluctuations. Gross profit margin was 57.5% and 56.1% for the fiscal three months ended October 1, 2023 and October 2, 2022, respectively.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG~~&A”~~&A expenses”) were $1.5 billion and $1.4 billion for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase of ~~$147~~$155 million, or ~~10.7%~~11.3%. SG&A as a percentage of Net sales increased ~~180~~280 basis points to ~~37.9%~~39.1%, as compared to the prior year, primarily attributable to higher costs in enterprise functions ~~as we prepared to operate~~from operating on a standalone basis, transition services agreement costs with J&J and an $83 million increase in non-recurring Separation-related ~~costs of $53 million. These cost increases were partially offset by favorable currency impacts of $22 million.~~costs.

Other Operating Expense (Income), Net

Other operating expense (income), net was $1$9 million and ~~$13~~$(14) million for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, ~~a decrease~~resulting in an increase in Other operating expense of ~~$12~~$23 million. The ~~decrease~~increase was primarily

driven ~~by the reversal of a contingent liability that was no longer considered to be probable, partially offset~~ by the impact of net economic benefit arrangements with J&J in connection

with the Deferred Local ~~Business in~~Businesses during the fiscal three months ended ~~July 2,~~October 1, 2023, partially offset by royalty income. For additional information on the Deferred Local Businesses, see Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to our Condensed Consolidated Financial Statements included ~~herein for additional information.~~herein.

Other Expense, ~~(Income),~~ Net

Other expense, net was ~~$10~~$25 million compared to Other ~~income,~~expense, net of $5$25 million for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, which consisted primarily of the ~~change~~impact of changes in ~~expense of $15 million, primarily driven by higher~~ foreign currency ~~losses.~~rates.

Interest Expense, Net

Interest expense, net was ~~$53~~$100 million in the fiscal three months ended ~~July 2,~~October 1, 2023 as compared to $0 million in the fiscal three months ended ~~July 3,~~October 2, 2022. The increase was driven by interest expense recognized on senior unsecured notes (the “Senior Notes”) and notes issued under the commercial paper ~~program, offset by interest income earned on the debt proceeds in escrow and a related party note receivable with J&J (the “Facility Agreement”), resulting in interest income of $33 million.~~program. See Note 4, “Borrowings,” to our Condensed Consolidated Financial Statements included herein for additional information.

Provision For Taxes

Provision for taxes was ~~$209~~$147 million and ~~$171~~$152 million for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, ~~an increase~~a decrease in income tax expense of ~~$38~~$5 million. The ~~increase~~decrease was primarily due to lower quarter to date income in comparison to prior year, windfall benefit on stock option exercises and tax benefits related to the completion of the Exchange Offer with J&J offset by higher U.S. tax on foreign income after foreign tax ~~credits, an increase in the valuation allowance on deferred tax assets for foreign tax credits, and higher tax expense related to prior year return to provision adjustments.~~credits.

Segment Results

Segment profit is based on Operating income, excluding depreciation and amortization, non-recurring Separation-related costs, restructuring expense, the impact of the conversion of share-based awards, Other income, net, operating, and unallocated general corporate administrative expenses (referred to herein as ~~“Adjusted~~“Segment adjusted operating income”) as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which includes treasury and legal operations and certain expenses, gains and losses related to the overall management of our company, are not allocated to the segments. In assessing segment performance and managing operations, management does not review segment assets.

For the first quarter of 2023, we adjusted the allocation for certain intangible asset amortization costs within Cost of sales to align with segment financial results as measured by us, including the CODM. Accordingly, we updated our segment disclosures to reflect the updated presentation in all prior periods. ~~Total Adjusted~~Segment adjusted operating income did not change as a result of this update.

See Note 14, “Segments of Business,” to our Condensed Consolidated Financial Statements included herein for additional information.

Fiscal Three Months Ended ~~July 2,~~October 1, 2023 Compared with Fiscal Three Months Ended ~~July 3,~~October 2, 2022

Condensed Consolidated Financial Statements included herein for further details regarding ~~segment~~Segment net sales and ~~segment Adjusted~~Segment adjusted operating income.

Fiscal Three Months Ended
July 2, 2023 July 3, 2022 Change 2022 to 2023
(Dollars in Millions) Amount Percent Amount Percent Amount Percent
Segment Net Sales
Self Care $ 1,661 41.4 % $ 1,481 38.9 % $ 180 12.2 %
Skin Health and Beauty 1,147 28.6 1,126 29.6 21 1.9
Essential Health 1,203 30.0 1,197 31.5 6 0.5
Total segment net sales $ 4,011 100.0 % $ 3,804 100.0 % $ 207 5.4 %
Income before taxes $ 639 $ 775
Interest expense, net 53 —
Other expense (income), net 10 (5)
Total operating income $ 702 $ 770
Reconciliation to Adjusted operating income:
Depreciation and amortization 148 161
Separation-related costs 102 49
Restructuring(1)
— 24
Other operating expense, net 1 13
General corporate/unallocated expenses 74 64
Total Adjusted operating income $ 1,027 $ 1,081
Segment Adjusted operating income
Self Care $ 576 $ 524 $ 52 9.9 %
Skin Health and Beauty 201 243 (42) (17.3)
Essential Health 250 314 (64) (20.4)
Total Adjusted operating income $ 1,027 $ 1,081 $ (54) (5.0) %


	Fiscal Three Months Ended
	October 1, 2023				October 2, 2022				Change 2022 to 2023
(Dollars in Millions)	Amount		Percent		Amount		Percent		Amount		Percent
Segment Net Sales
Self Care	$	1,613	41.2	%	$	1,516	40.0	%	$	97	6.4	%
Skin Health and Beauty	1,119		28.6		1,124		29.7		(5)		(0.4)
Essential Health	1,183		30.2		1,149		30.3		34		3.0
Total segment net sales	$	3,915	100.0	%	$	3,789	100.0	%	$	126	3.3	%

Self Care	$	583			$	556			$	27	4.9	%
Skin Health and Beauty	167				246				(79)		(32.1)
Essential Health	309				261				48		18.4
Total segment adjusted operating income	$	1,059			$	1,063			$	(4)	(0.4)	%
Reconciliation to Income before taxes:
Depreciation	72				69
Amortization	81				83
Separation-related costs	133				50
Restructuring expense(1)	3				31
Conversion of share-based awards(2)	(25)				—
Other operating expense (income), net	9				(14)
General corporate/unallocated expenses	76				81
Total operating income	$	710			$	763
Other expense, net	25				25
Interest expense, net	100				—
Income before taxes	$	585			$	738

(1) Exclusive of the restructuring expense included in Other operating expense ~~net.~~(income), net on the Company’s Condensed Consolidated Statements of Operations.

(2) As noted above, Segment adjusted operating income excludes the impact of the conversion of share-based awards (see Note 7, Stock-Based Compensation). This adjustment primarily represents the net impact of the gain on reversal of previously recognized stock-based compensation expense of $148 million, offset by stock-based compensation expense recognized in the fiscal third quarter of 2023 relating to employee services provided prior to the Separation of $123 million.

Organic Growth

We assess our Net sales performance by measuring Organic growth, a non-GAAP financial measure, which measures the period-over-period change in 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 they may find useful in assessing our results of operations by excluding the impact of certain items that we believe do not directly reflect our underlying operations.

The following tables present a reconciliation of the change in U.S. GAAP Net sales to Organic growth for the fiscal three months ended ~~July 2,~~October 1, 2023 compared to the fiscal three months ended ~~July 3,~~October 2, 2022:


		Fiscal Three Months Ended July 2, 2023 vs July 3, 2022(1)								Fiscal Three Months Ended October 1, 2023 vs October 2, 2022(1)
		Reported Net sales change				Impact of foreign currency		Organic growth						Reported Net sales change				Impact of foreign currency		Organic growth
(Dollars in Millions)	(Dollars in Millions)	Amount		Percent		Amount		Amount			Percent		(Dollars in Millions)	Amount		Percent		Amount		Amount		Percent
Self Care	Self Care	$	180	12.2	%	$	(30)	$	210		14.2	%	Self Care	$	97	6.4	%	$	(4)	$	101	6.7	%
Skin Health and Beauty	Skin Health and Beauty	21		1.9		(17)		38			3.4		Skin Health and Beauty	(5)		(0.4)		—		(5)		(0.4)
Essential Health	Essential Health	6		0.5		(40)		46			3.8		Essential Health	34		3.0		(9)		43		3.8
Total	Total	$	207	5.4	%	$	(87)	$	294		7.7	%	Total	$	126	3.3	%	$	(13)	$	139	3.6	%


		Fiscal Three Months Ended July 2, 2023 vs July 3, 2022(1)												Fiscal Three Months Ended October 1, 2023 vs October 2, 2022(1)
		Reported Net sales change				Impact of foreign currency					Organic growth							Reported Net sales change			Impact of foreign currency					Organic growth
										Price/Mix(2)	Volume			Reported Net sales change		Impact of foreign currency							Price/Mix(2)		Volume
Self Care	Self Care			12.2	%			(2.0)	%				10.6					%		3.6	6.4	%	(0.3)	%				5.5	%			1.2	%
Skin Health and Beauty	Skin Health and Beauty	1.9				(1.5)					6.6				(3.2)		Skin Health and Beauty	(0.4)			—					6.4				(6.8)
Essential Health	Essential Health	0.5				(3.3)					10.7				(6.9)		Essential Health	3.0			(0.8)					10.0				(6.2)
Total	Total	5.4	%			(2.3)	%				9.4	%			(1.7)	%	Total	3.3	%		(0.3)	%				7.1	%			(3.5)	%

(1) Acquisitions and divestitures did not materially impact Net sales for the fiscal three months ended ~~July 2,~~October 1, 2023 or ~~July 3,~~October 2, 2022.

(2) Also referred to as value realization.

Self Care Segment

Self Care Segment Net Sales

The Self Care ~~segment~~Segment Net sales were ~~$1.7~~$1.6 billion and $1.5 billion for the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase of ~~$180~~$97 million, or ~~12.2%~~6.4%. Excluding the unfavorable impact of foreign currency translation, Organic growth was ~~$210~~$101 million or ~~14.2%~~6.7%, primarily driven by value realization of ~~10.6%~~5.5% and volume related increases of ~~3.6%~~1.2% driven by ~~increased demand for Cough, Cold, and Allergy products due~~innovation-based volume growth, with Organic growth in all Self Care product categories growing mid to ~~greater instances of respiratory illness (including cough, cold and flu), primarily in China.~~high single digits.

Self Care Segment Adjusted Operating Income

The Self Care ~~segment Adjusted~~Segment adjusted operating income increased by ~~$52~~$27 million, or ~~9.9%~~4.9% to ~~$576~~$583 million for the fiscal three months ended ~~July 2,~~October 1, 2023, primarily driven by value realization and ~~favorable product mix, portfolio optimization, and~~the realization of benefits associated with our supply chain ~~efficiencies,~~optimization initiatives, partially offset by the negative impact of transactional foreign currency fluctuation,higher costs of ~~raw materials.~~key ingredients and packaging materials due to the impact of inflation, and increased SG&A expenses.

Skin Health and Beauty Segment

Skin Health and Beauty Segment Net Sales

The Skin Health and Beauty ~~segment~~Segment Net sales were $1.1 billion for both the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, ~~an increase~~a decrease of ~~$21~~$5 million, or ~~1.9%~~0.4%. Excluding the unfavorable impact of foreign currency translation, Organic growth ~~was $38~~decreased $5 million, or ~~3.4%~~0.4%, primarily driven by volume-related declines of 6.8%, offset by value realization of ~~6.6%, offset by volume-related declines of 3.2% driven primarily by Kenvue’s supply suspension of certain personal care products in Russia since March 2022.~~6.4%. The ~~increase~~decrease was driven by ~~strong demand for sun care products and improved supply and strong e-commerce and club channel performance primarily~~the impact of 2022 product discontinuations in the United States ~~as well as new product innovations~~and market softness in ~~Latin America,~~China. The decrease was partially offset by ~~product discontinuation.~~the impact of a strong finish to the sun season in the United States, and strength across Latin America (“LATAM”) and Europe, Middle East, and Africa (“EMEA”) led by pricing and premiumization supported growth as supply recovery continued in the United States.

Skin Health and Beauty Segment Adjusted Operating Income

The Skin Health and Beauty ~~segment Adjusted~~Segment adjusted operating income decreased by ~~$42~~$79 million, or ~~17.3%~~32.1% to ~~$201~~$167 million for the fiscal three months ended October 1, 2023, primarily driven by the phasing and segment mix of marketing expense recognized in the quarter, the negative impact of transactional foreign currency fluctuations, and higher costs of ~~raw~~key ingredients and packaging materials due to the impact of inflation. This decrease was partially offset by value realization ~~as discussed above, favorable product mix,~~ andthe realization of benefits associated with our supply chain ~~efficiencies.~~

optimization initiatives.

Essential Health Segment

Essential Health Segment Net Sales

The Essential Health ~~segment~~Segment Net sales were $1.2 billion and $1.1 billion for ~~both~~ the fiscal three months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, with an increase of $6$34 million, or ~~0.5%~~3.0%. Excluding the unfavorable impact of foreign currency translation, Organic growth was ~~$46~~$43 million, or 3.8%, primarily driven by value realization of ~~10.7%~~10.0%, ~~most notably in Women’s Health,~~ partially offset by volume declines of ~~6.9%~~6.2%. ~~Overall volume declines were driven primarily~~Value realization was led by ~~Kenvue’s supply suspension of certain personal care products in Russia since March 2022.~~product innovation and premiumization throughout product categories.

Essential Health Segment Adjusted Operating Income

The Essential Health ~~segment Adjusted~~Segment adjusted operating income ~~decreased~~increased by ~~$64~~$48 million, or ~~20.4%~~18.4% to ~~$250 million.~~$309 million for the fiscal three months ended October 1, 2023. The ~~decrease~~increase was primarily ~~attributable to impact~~driven by the phasing and segment mix of marketing expense recognized in the quarter, value realization, and the realization of benefits associated with our supply chain optimization initiatives. This increase was partially offset by the higher costs of ~~raw~~key ingredients and packaging materials ~~partially offset by value realization as discussed above, favorable product mix,~~due to the impact of inflation and ~~supply chain efficiencies.~~the negative impact of transactional foreign currency fluctuations.

Results of Operations

Fiscal ~~Six~~Nine Months Ended ~~July 2,~~October 1, 2023 Compared with Fiscal ~~Six~~Nine Months Ended ~~July 3,~~October 2, 2022

Our results for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were as follows:


		Fiscal Six Months Ended									Fiscal Nine Months Ended
		July 2, 2023		July 3, 2022		Change 2022 to 2023					October 1, 2023		October 2, 2022		Change 2022 to 2023
(Dollars in Millions)	(Dollars in Millions)					Amount		Percent		(Dollars in Millions)					Amount		Percent
Net sales	Net sales	$	7,863	$	7,394	$	469	6.3	%	Net sales	$	11,778	$	11,183	$	595	5.3	%
Cost of sales	Cost of sales	3,513		3,280		233		7.1	%	Cost of sales	5,178		4,944		234		4.7	%
Gross profit	Gross profit	4,350		4,114		236		5.7	%	Gross profit	6,600		6,239		361		5.8	%
Selling, general, and administrative expenses	Selling, general, and administrative expenses	3,024		2,725		299		11.0	%	Selling, general, and administrative expenses	4,555		4,101		454		11.1	%
Other operating expense (income), net		(16)		8		(24)		*
Other operating income, net										Other operating income, net	(7)		(6)		(1)		(16.7)	%
Operating income	Operating income	1,342		1,381		(39)		(2.8)	%	Operating income	2,052		2,144		(92)		(4.3)	%
Other expense (income), net		40		(6)		46		*
Other expense, net										Other expense, net	65		19		46		*
Interest expense, net	Interest expense, net	54		—		54		*		Interest expense, net	154		—		154		*
Income before taxes	Income before taxes	1,248		1,387		(139)		(10.0)	%	Income before taxes	1,833		2,125		(292)		(13.7)	%
Provision for taxes	Provision for taxes	488		255		233		91.4	%	Provision for taxes	496		422		74		17.5	%
Net income	Net income	$	760	$	1,132	$	(372)	(32.9)	%	Net income	$	1,337	$	1,703	$	(366)	(21.5)	%

* Calculation not meaningful.

Net Sales

Net sales were ~~$7.9~~$11.8 billion and ~~$7.4~~$11.2 billion for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase of ~~$469~~$595 million, or ~~6.3%~~5.3%. Excluding the impact of unfavorable changes in currency rates of ~~$229~~$242 million, Organic growth was ~~$698~~$837 million, primarily attributable to value realization, increased demand across our Self Care segment, including Pain Care and Cough, Cold and ~~Flu~~Allergy product categories, resulting from higher cold and flu incidences

and successful brand activation and innovation. In Skin Health & Beauty, sequential share gains in sun care were fueled by ~~innovation~~a strong sun season care, strong e-commerce and ~~improved supply.~~club channel performance. Momentum in Essential Health continued as value realization and premiumization initiatives took hold.

Cost of Sales

Cost of sales were ~~$3.5~~$5.2 billion and ~~$3.3~~$4.9 billion for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase of ~~$233~~$234 million, or ~~7.1%~~4.7% primarily ~~due~~attributable to ~~increased variable costs driven by Organic growth, as noted above in Net sales. In addition, Cost~~impact of ~~sales was further impacted by~~ higher costs of key ingredients and packaging materials ~~and inbound freight,~~ due to ~~commodity~~the impact of inflation. The increase was partially offset by the realization of benefits associated with our supply

chain optimization initiatives and $106 million favorable translational currency ~~impacts of $108 million.~~impacts. Cost of sales as a percentage of Net sales ~~increased 30~~decreased 20 basis points to ~~44.7%~~44.0% as compared to the prior year due ~~primarily~~ to ~~higher costs~~Net sales growth, which was primarily driven by ~~commodity inflation.~~value realization, partially offset by negative transactional foreign currency fluctuations. Gross profit margin was 56.0% and 55.8% for the fiscal nine months ended October 1, 2023 and October 2, 2022, respectively.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were ~~$3.0~~$4.6 billion and ~~$2.7~~$4.1 billion for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase of ~~$299~~$454 million, or ~~11.0%~~11.1%. SG&A as a percentage of Net sales increased ~~160~~200 basis points to ~~38.5%~~38.7%, as compared to the prior year, primarily attributable to higher costs in enterprise functions as we prepared to operate on a standalone basis, transition services agreement costs with J&J, and an $224 million increase in non-recurring Separation-related ~~costs of $141 million.~~costs. These cost increases were partially offset by favorable currency impacts of ~~$66~~$65 million.

Other Operating ~~Expense (Income),~~Income, Net

Other operating income, net was ~~$16~~$7 million compared to other operating ~~expense,~~income, net of $8$6 million for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, ~~a change~~an increase of ~~$24~~$1 million. The ~~change~~increase was primarily driven by the reversal of a contingent liability that was no longer considered to be probable and the gain recognized on the sale of a manufacturing facility in Lancaster, Pennsylvania of $9 million, partially offset by litigation expense and the impact of net economic benefit arrangements with J&J in connection with the Deferred Local Business in the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023, see Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to our Condensed Consolidated Financial Statements included herein for additional information.

Other Expense, ~~(Income),~~ Net

Other expense, net was ~~$40~~$65 million compared to other ~~income,~~expense, net of $6$19 million for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase in expense of $46 million, primarily driven by higher foreign currency losses and losses on equity securities.

Interest Expense, Net

Interest expense, net was ~~$54~~$154 million in the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 as compared to $0 million in the fiscal ~~six~~nine months ended ~~July 3,~~October 2, 2022. The increase was driven by interest expense recognized on the Senior Notes and notes issued under the commercial paper program, offset by interest income earned on the debt proceeds in escrow and the Facility Agreement, resulting in interest income of $33 million. See Note 4, “Borrowings,” to our Condensed Consolidated Financial Statements included herein for additional information.

Provision For Taxes

Provision for taxes was ~~$488~~$496 million and ~~$255~~$422 million for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase income tax expense of ~~$233~~$74 million. The issuance of debt in the first quarter of 2023 resulted in an increase in annual interest and reduced our capacity to utilize foreign tax credits against U.S. foreign source income. As a result, we recorded a valuation allowance against a deferred tax asset related to future foreign tax credit benefits thus increasing the reported tax expense in the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 as compared to the fiscal ~~six~~nine months ended ~~July 3,~~October 2, 2022. In addition, the effective tax rate increased as a result of return to provision adjustments, offset by favorable foreign tax benefits.

Segment Results

Fiscal ~~Six~~Nine Months Ended ~~July 2,~~October 1, 2023 Compared with Fiscal ~~Six~~Nine Months Ended ~~July 3,~~October 2, 2022

The following table presents ~~segment Adjusted~~Segment net sales and Segment adjusted operating income and the period-over-period changes in ~~segment Adjusted~~Segment adjusted operating income for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022. See Note 14, “Segments of Business,” to our Condensed Consolidated Financial Statements included herein for further details regarding ~~segment~~Segment net sales and ~~segment Adjusted~~Segment adjusted operating income.

Fiscal Six Months Ended
July 2, 2023 July 3, 2022 Change 2022 to 2023
(Dollars in Millions) Amount Percent Amount Percent Amount Percent
Segment Net Sales
Self Care $ 3,301 42.0 % $ 2,946 39.9 % 355 12.1 %
Skin Health and Beauty 2,258 28.7 2,138 28.9 120 5.6
Essential Health 2,304 29.3 2,310 31.2 (6) (0.3)
Total segment net sales $ 7,863 100.0 % $ 7,394 100.0 % $ 469 6.3 %
Income before taxes $ 1,248 $ 1,387
Interest expense 54 —
Other expense (income), net 40 (6)
Total operating income $ 1,342 $ 1,381
Reconciliation to Adjusted operating income:
Depreciation and amortization 300 326
Separation-related costs 200 59
Restructuring(1)
— 38
Other operating expense (income), net (16) 8
General corporate/unallocated expenses 143 116
Total Adjusted operating income $ 1,969 $ 1,928
Segment Adjusted operating income
Self Care $ 1,158 $ 998 $ 160 16.0 %
Skin Health and Beauty 350 370 (20) (5.4)
Essential Health 461 560 (99) (17.7)
Total Adjusted operating income $ 1,969 $ 1,928 $ 41 2.1 %


	Fiscal Nine Months Ended
	October 1, 2023				October 2, 2022				Change 2022 to 2023
(Dollars in Millions)	Amount		Percent		Amount		Percent		Amount		Percent
Segment Net Sales
Self Care	$	4,914	41.7	%	$	4,462	39.9	%	452		10.1	%
Skin Health and Beauty	3,377		28.7		3,262		29.2		115		3.5
Essential Health	3,487		29.6		3,459		30.9		28		0.8
Total segment net sales	$	11,778	100.0	%	$	11,183	100.0	%	$	595	5.3	%

Self Care	$	1,741			$	1,554			$	187	12.0	%
Skin Health and Beauty	517				616				(99)		(16.1)
Essential Health	770				821				(51)		(6.2)
Total segment adjusted operating income	$	3,028			$	2,991			$	37	1.2	%
Reconciliation to Income before taxes:
Depreciation	211				213
Amortization	242				265
Separation-related costs	333				109
Restructuring expense(1)	3				69
Conversion of share-based awards(2)	(25)				—
Other operating expense, net	(7)				(6)
General corporate/unallocated expenses	219				197
Total operating income	$	2,052			$	2,144
Other expense, net	65				19
Interest expense	154				—
Income before taxes	$	1,833			$	2,125

(1) Exclusive of the restructuring expense included in Other operating expense, ~~(income), net.~~net on the Company’s Condensed Consolidated Statements of Operations.

The following tables present a reconciliation of the change in U.S. GAAP Net sales to Organic growth for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 compared to the fiscal ~~six~~nine months ended ~~July 3,~~October 2, 2022:


		Fiscal Six Months Ended July 2, 2023 vs July 3, 2022(1)								Fiscal Nine Months Ended October 1, 2023 vs October 2, 2022(1)
		Reported Net sales change				Impact of foreign currency		Organic growth						Reported Net sales change				Impact of foreign currency		Organic growth
(Dollars in Millions)	(Dollars in Millions)	Amount		Percent		Amount		Amount			Percent		(Dollars in Millions)	Amount		Percent		Amount		Amount		Percent
Self Care	Self Care	$	355	12.1	%	$	(80)	$	435		14.8	%	Self Care	$	452	10.1	%	$	(84)	$	536	12.0	%
Skin Health and Beauty	Skin Health and Beauty	120		5.6		(52)		172			8.0		Skin Health and Beauty	115		3.5		(52)		167		5.1
Essential Health	Essential Health	(6)		(0.3)		(97)		91			3.9		Essential Health	28		0.8		(106)		134		3.9
Total	Total	$	469	6.3	%	$	(229)	$	698		9.4	%	Total	$	595	5.3	%	$	(242)	$	837	7.5	%


		Fiscal Six Months Ended July 2, 2023 vs July 3, 2022(1)												Fiscal Nine Months Ended October 1, 2023 vs October 2, 2022(1)
		Reported Net sales change				Impact of foreign currency					Organic growth							Reported Net sales change			Impact of foreign currency					Organic growth
										Price/Mix(2)	Volume			Reported Net sales change		Impact of foreign currency							Price/Mix(2)		Volume
Self Care	Self Care			12.1	%			(2.7)	%				9.4					%		5.3	10.1	%	(1.9)	%				8.1	%			3.9	%
Skin Health and Beauty	Skin Health and Beauty	5.6				(2.4)					7.6				0.4		Skin Health and Beauty	3.5			(1.6)					7.2				(2.1)
Essential Health	Essential Health	(0.3)				(4.2)					10.1				(6.1)		Essential Health	0.8			(3.1)					10.0				(6.1)
Total	Total	6.3	%			(3.1)	%				9.1	%			0.3	%	Total	5.3	%		(2.2)	%				8.4	%			(0.9)	%

(1) Acquisitions and divestitures did not materially impact Net sales for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 or ~~July 3,~~October 2, 2022.

(2) Also referred to as value realization.

Self Care Segment

Self Care Segment Net Sales

The Self Care ~~segment~~Segment Net sales were ~~$3.3~~$4.9 billion and ~~$2.9~~$4.5 billion for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase of ~~$355~~$452 million, or ~~12.1%~~10.1%. Excluding the unfavorable impact of foreign currency translation, Organic growth was ~~$435~~$536 million or ~~14.8%~~12.0%, primarily driven by value realization of ~~9.4%~~8.1% and volume-related increases of ~~5.3%~~3.9% driven by increased demand for Cough, Cold, and Allergy products due to greater instances of respiratory illness, primarily in Europe and China, ~~and~~ one-time supply replenishment, primarily in the United States related to low inventory levels at the start of the ~~year.~~year, growth in Digestive Health, and innovation-based volume growth.

Self Care Segment Adjusted Operating Income

The Self Care ~~segment Adjusted~~Segment adjusted operating income increased by ~~$160~~$187 million, or ~~16.0%~~12.0% to ~~$1.2~~$1.7 billion for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023, primarily driven by value realization and ~~favorable product mix,~~volume-related increases, portfolio optimization, and the realization of benefits associated with our supply chain ~~efficiencies,~~optimization initiatives, partially offset by the negative impact of transactional foreign currency fluctuations, higher costs of ~~raw materials.~~key ingredients and packaging materials due to the impact of inflation, and increased SG&A expenses.

Skin Health and Beauty Segment

Skin Health and Beauty Segment Net Sales

The Skin Health and Beauty ~~segment~~Segment Net sales were ~~$2.3~~$3.4 billion and ~~$2.1~~$3.3 billion for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase of ~~$120~~$115 million, or ~~5.6%~~3.5%. Excluding the unfavorable impact of foreign currency translation, Organic growth was ~~$172~~$167 million, or ~~8.0%~~5.1%, primarily driven by value realization of ~~7.6% and~~7.2%, offset by volume-related ~~increases~~decreases of ~~0.4%~~2.1%. The increase was driven by strong e-commerce and club channel performance, ~~primarily in the United States,~~ easing of supply chain constraints, one-time supply replenishment, and the impact of a strong sun season, ~~pipeline fill. The increase was~~ partially offset by ~~product discontinuation.~~portfolio rationalization initiatives in 2022 coupled with market softness in China.

Skin Health and Beauty Segment Adjusted Operating Income

The Skin Health and Beauty ~~segment Adjusted~~Segment adjusted operating income decreased by ~~$20~~$99 million, or ~~5.4%~~16.1% to ~~$350~~$517 million for the fiscal nine months ended October 1, 2023, driven by increased SG&A expenses, higher costs of key ingredients and packaging materials due to the impact of ~~higher costs~~inflation, and the negative impact of ~~raw materials,~~transactional foreign currency fluctuations, partially offset by value realization ~~as discussed above, favorable product mix,~~ and the realization of benefits associated with our supply chain ~~efficiencies.~~optimization initiatives.

Essential Health Segment

Essential Health Segment Net Sales

The Essential Health ~~segment~~Segment Net sales were ~~$2.3~~$3.5 billion and $3.5 billion for ~~both of~~ the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, ~~a decrease~~an increase of $6$28 million, or ~~0.3%~~0.8%. Excluding the unfavorable impact of foreign currency translation, Organic growth was ~~$91~~$134 million, or 3.9%, primarily driven by value realization of ~~10.1%~~10.0%, most notably in Women’s Health and strong momentum in Oral Care globally, partially offset by volume declines of 6.1%. Overall volume declines were driven ~~primarily~~ by category contractions, as well as our supply suspension of certain personal care products in Russia since March 2022.

Essential Health Segment Adjusted Operating Income

The Essential Health ~~segment Adjusted~~Segment adjusted operating income decreased by ~~$99~~$51 million, or ~~17.7%~~6.2% to ~~$461 million.~~$770 million for the fiscal nine months ended October 1, 2023. The decrease was primarily attributable to ~~impact of~~ higher costs of ~~raw~~key ingredients and packaging materials due to the impact of inflation on costs, the negative impact of transactional foreign currency fluctuations, and increased SG&A expenses, partially offset by value realization ~~as discussed above, favorable product mix,~~ and the realization of benefits associated with our supply chain ~~efficiencies.~~optimization initiatives.

Liquidity and Capital Resources

Prior to April 4, 2023, our working capital requirements and capital expenditures were satisfied as part of ~~the Parent’s~~J&J’s corporate-wide cash management and centralized funding programs, and a substantial portion of our cash was transferred to ~~the Parent.~~J&J. Cash and cash equivalents held by ~~the Parent~~J&J at the corporate level were not specifically identifiable to us.

Effective April 4, 2023, upon completion of the Consumer Health Business Transfer, we no longer participate in ~~the Parent’s~~J&J’s corporate-wide cash management and centralized funding programs.

Cash Flows

Summarized cash flow information for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 were as follows:


		Fiscal Six Months Ended				Change					Fiscal Nine Months Ended				Change
(Dollars in Millions)	(Dollars in Millions)	July 2, 2023		July 3, 2022		Amount		Percent		(Dollars in Millions)	October 1, 2023		October 2, 2022		Amount		Percent
Net income	Net income	$	760	$	1,132	$	(372)	(32.9)	%	Net income	$	1,337	$	1,703	$	(366)	(21.5)	%
Net changes in assets and liabilities	Net changes in assets and liabilities	$	244	$	(451)	$	695	*		Net changes in assets and liabilities	$	492	$	(542)	$	1,034	*
Net cash flows from operating activities	Net cash flows from operating activities	$	1,544	$	1,145	$	399	34.8	%	Net cash flows from operating activities	$	2,218	$	1,881	$	337	17.9	%
Net cash flows used in investing activities	Net cash flows used in investing activities	$	(118)	$	(115)	$	(3)	2.6	%	Net cash flows used in investing activities	$	(223)	$	(223)	$	—	—	%
Net cash flows used in financing activities	Net cash flows used in financing activities	$	(1,418)	$	(885)	$	(533)	60.2	%	Net cash flows used in financing activities	$	(2,144)	$	(1,520)	$	(624)	41.1	%

*Calculation not meaningful.

Operating Activities

Net cash flows from operating activities were ~~$1.5~~$2.2 billion and ~~$1.1~~$1.9 billion for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively, an increase of ~~$399~~$337 million. The increase was primarily attributable to changes in working capital balances driven by increases in accounts payable and accrued liabilities due to the timing of payments and a decrease in ~~inventories~~inventory balances compared to the prior year period due to increased demand and the rebuilding of inventory levels by customers following supply shortages in the prior year.

Investing Activities

Net cash flows used in investing activities were ~~$118~~$223 million and ~~$115~~$223 million for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively. Cash used in investing activities in both the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022 was primarily driven by purchases of property, plant, and equipment, partially offset by the proceeds from the sale of assets.

Financing Activities

Net cash flows used in financing activities were ~~$1.4~~$2.1 billion and ~~$885 million~~$1.5 billion for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively. Cash flows ~~from~~used in financing activities for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 primarily reflect $13.8 billion in distribution to J&J in connection with the Separation, partially offset by $7.7 billion of net proceeds from Senior Notes (as defined below), ~~$0.7~~$0.5 billion of net proceeds from the issuance of commercial paper under the Commercial Paper Program (as defined below), and $4.2 billion of proceeds from the sale of common stock in connection with the Kenvue IPO. In addition, we recognized Net transfers to ~~the Parent~~J&J of $274 million and ~~$892 million~~$1.5 billion for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023 and ~~July 3,~~October 2, 2022, respectively. Net transfers to ~~the Parent~~J&J were driven by cash pooling and general financing activities, indirect corporate cost allocations from ~~the Parent,~~J&J, and taxes deemed to be settled with ~~the Parent.~~J&J. For further details regarding Net transfer to ~~the Parent,~~J&J, see Note 8, “Related Parties,” to our Condensed Consolidated Financial Statements included herein.

Sources of Liquidity

In connection with the Separation, our capital structure and sources of liquidity have changed from our historical capital structure because of our issuances of shares, the Kenvue IPO, and the Debt Financing Transactions. As of April 4, 2023, we no longer participate in ~~the Parent’s~~J&J’s corporate-wide cash management and centralized funding programs. Our ability to fund our operating needs will depend on our ability to continue to generate positive cash flow from operations, and on our ability to obtain debt financing on acceptable terms or to issue additional equity or equity-linked securities. Based upon our history of generating positive cash flows, we believe our existing cash and cash generated from operations will be sufficient to service our current obligations for at least the next 12 months. Management believes that our cash balances and funds provided by operating activities, along with expected borrowing capacity and access to capital markets, taken as a whole, provide adequate liquidity to meet all of our current and long-term obligations when due, including third-party debt that we incurred in connection with the Separation, adequate liquidity to fund capital expenditures, and flexibility to meet investment opportunities that may arise. However, we cannot assure you that we will be able to obtain additional debt or equity financing on acceptable terms in the future.

On March 22, 2023, we issued eight series of senior unsecured notes (the “Senior Notes”) in an aggregate principal amount of $7.75 billion in a private placement. The net proceeds to us from the Senior Notes offering was $7.7 billion after deductions of discounts and issuance costs of ~~$75~~$77 million. The net proceeds were reflected as Restricted cash on our Condensed Consolidated Balance Sheets prior to their release from escrow on April 5, 2023. Upon release from escrow, these funds were loaned to J&J through the Facility Agreement dated April 5, 2023. For further details on the Senior Notes and Facility Agreement, see Note 4. “Borrowings,” to our Condensed Consolidated Financial Statements included herein. The unamortized debt issuance costs related to the Senior Notes as of ~~July 2,~~October 1, 2023 were approximately ~~$72~~$73 million. The interest payments are due on March 22 and September 22 of each year, commencing September 22, 2023.

Our Senior Notes are governed by an indenture and supplemental indenture between us and a trustee (collectively, the “indenture”). The indenture contains certain covenants, including limitations on us and certain of our subsidiaries’ ability to incur liens or engage in sale-leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which, the Senior Notes may be declared immediately due and payable.

On April 5, 2023, we entered into the Facility Agreement, allowing us to lend the proceeds from the issuance of debt (including commercial paper) in an aggregate amount of $8.9 billion to J&J. Interest on loans made from the Facility Agreement was charged at an interest rate equal to the Secured Overnight Financing Rate (“SOFR”) less an adjusted margin of 15 basis points, with a floor of 0% (a weighted average interest rate of 4.7%) to be paid monthly in arrears. We recognized interest income of $33 million in the fiscal three and ~~six~~nine months ended ~~July 2,~~October 1, 2023 in relation to the Facility Agreement.

Upon completion of the Kenvue IPO on May 8, 2023, the Facility Agreement was terminated and the balance of the Facility Agreement, and all accrued interest, were repaid by J&J, for a total cash inflow of $9.0 billion. We remitted this cash back to J&J as a part of the distribution to J&J in connection with the Separation.

On March 6, 2023, we entered into a credit agreement providing for a five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $4.0 billion to be made available in U.S. dollars and Euros. As of ~~July 2,~~October 1, 2023, we had no outstanding balances under its Revolving Credit Facility.

On March 3, 2023, we entered into a commercial paper program (the “Commercial Paper Program”). Our Board of Directors has authorized the issuance of up to $4.0 billion in an aggregate principal amount of commercial paper under the Commercial Paper Program. Any such issuance will mature within 364 days from date of issue. The Commercial Paper Program contains

representations and warranties, covenants and default that are customary for this type of financing. The commercial paper notes issued under the Commercial Paper Program are unsecured notes ranking at least pari passu with all of our other senior unsecured indebtedness. Prior to the Kenvue IPO, we issued $1.25 billion under the Commercial Paper Program which, collectively with the Senior Notes, are referred to as the “Debt Financing Transactions”. ~~In aggregate, inclusive~~Inclusive of amounts issued as a part of the Debt Financing Transactions, wethe Company issued ~~$2.3~~$3.8 billion of commercial paper notes and repaid ~~$1.6~~$3.3 billion in ~~line~~connection with its stated maturities during the fiscal ~~three~~nine months ended ~~July 2,~~October 1, 2023. As of ~~July 2,~~October 1, 2023, wethe Company had ~~$754~~$513 million of outstanding balances under ~~the~~its Commercial Paper Program, net of a related discount of $2 million.

We accrued interest expenses of $118 million and $129 million the fiscal three and six months ended July 2, 2023, respectively and interest income of $65 million and $75 million for the fiscal three and six months ended July 2, 2023, respectively. The net amount was included in Interest expense, net on our Condensed Consolidated Statements of Operations.

~~As of July 2, 2023, we were in compliance with all financial covenants and no default or event of default has occurred.~~

On May 8, 2023, in conjunction with the Consumer Health Business Transfer, we distributed $13.8 billion to J&J from the (1) net proceeds received from the sale of the common stock in the Kenvue IPO and (2) net proceeds received from the Debt Financing Transactions as defined in Note 4, “Borrowings” of our Condensed Consolidated Financial Statements included herein, and (3) any cash and cash equivalents in excess of the $1.17 billion in cash and cash equivalents retained by the Company immediately following the Kenvue IPO.

We accrued interest expenses of $115 million and $244 million for the fiscal three and nine months ended October 1, 2023, respectively and interest income of $15 million and $90 million for the fiscal three and nine months ended October 1, 2023, respectively. The net amount was included in Interest expense, net on our Condensed Consolidated Statements of Operations.

On July 20, 2023, the Company’s Board of Directors declared a $0.20 cash dividend for the third quarter of 2023 to shareholders. The third quarter dividend of $0.20 per share on the outstanding common stock of the Company was paid on September 7, 2023 to shareholders of record as of the close of business on August 28, 2023.

As of October 1, 2023, we were in compliance with all financial covenants and no default or event of default has occurred.

We expect to utilize our cash flows to continue to invest in our brands, digital capabilities, talent and growth strategies, to repay our indebtedness over time, and for general corporate purposes.

Future Cash Requirements

We expect our future cash requirements will relate to working capital, capital expenditures, restructuring and integration, benefit obligations, interest expense and debt service obligations, litigation costs, and the return of capital to shareholders, including through the payment of any dividend. On ~~July 20,~~October 26, 2023, the Company announced that its Board of Directors declared a $0.20 cash dividend for the ~~third~~fourth quarter of 2023 to shareholders. The ~~third~~fourth quarter dividend of $0.20 per share on the outstanding common stock will be payable on ~~September 7,~~November 22, 2023 to shareholders of record as of the close of business on ~~August 28,~~November 8, 2023. In addition, we may use cash to enter into business development transactions, such as licensing arrangements or strategic acquisitions.

In addition to our working capital requirements, as of ~~July 2,~~October 1, 2023, we expect our primary cash requirements for 2023 to include capital expenditures. We have made payments of ~~$132~~$246 million for property, plant, and equipment for the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023.

Kenvue’s Board of Directors has authorized a share repurchase program, under which we are authorized to repurchase up to 27 million shares of our outstanding common stock in open market or privately negotiated transactions. The program has no expiration date and may be suspended or discontinued at any time. The intent of this repurchase program is to offset dilution from the vesting or exercise of equity awards under Kenvue’s equity incentive plan.

Future Litigation

In the ordinary course of business, we are involved in litigation, claims, government inquiries, investigations, charges, and proceedings. See Note 13, “Commitments and Contingencies,” to our Condensed Consolidated Financial Statements included herein for further details regarding certain matters that are currently pending. Our ability to successfully resolve pending and future litigation may adversely impact our financial condition, results of operations, or cash flows.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements (as defined under the rules and regulations of the SEC) or any relationships with unconsolidated entities that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, net sales or expenses, results of operations, liquidity, cash requirements, or capital resources.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

We operate on a global basis and are exposed to the risk that our business, results of operations or financial condition could be adversely affected by changes in foreign currency exchange rates, including as a result of the strengthening of the U.S. dollar or fluctuations in foreign currency rates in numerous jurisdictions, particularly the European Union, the United Kingdom, Japan, China, Canada, Brazil, and India. We are primarily exposed to foreign exchange risk with respect to future intercompany products sales and purchases and third-party purchases of materials denominated in a foreign currency. We manage the impact

of foreign exchange rate movements on our earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments such as forward foreign exchange contracts. Gains or losses on these contracts are generally offset by the gains or losses on the underlying transactions.

Inflation Risk

Inflationary pressures have recently increased, and may continue to increase, the costs of raw materials, packaging components, and other inputs for our products. Since 2021 and continuing throughout the fiscal ~~six~~nine months ended ~~July 2,~~October 1, 2023, we have experienced, and we continue to experience, higher than expected inflation, including escalating transportation, commodity, and other supply chain costs and disruptions that have affected, and continue to affect, our results of operations. We have partially offset the impact of inflation largely through price increases, in addition to continued supply chain optimization initiatives.

However, if our costs continue to be subject to significant inflationary pressures, we may not be able to offset such higher costs through price increases, which could adversely affect our business, results of operations, or financial condition.

Interest Rate Risk

Our cash equivalents and marketable securities are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Holding other estimates constant, a hypothetical 1% increase or decrease in interest rates would not have had a material impact on the value of our cash and cash equivalents as of ~~July 2,~~October 1, 2023 and January 1, 2023.

In connection with the Separation, we incurred approximately $9.0 billion of new debt pursuant to the Debt Financing Transactions. This new debt includes $7.75 billion of debt that we incurred in connection with the Senior Notes offering, which we completed on March 22, 2023, and $1.25 billion of commercial paper issued under the Commercial Paper Program. Our interest expense for these borrowings and for any new debt we may incur in the future, including under the Revolving Credit Facility, could be exposed to changes in interest rates. Interest rate risk is highly sensitive due to many factors, including the monetary and tax policies of the United States and other countries, market and economic factors, and other factors beyond our control.

Beginning in October 2022, we entered into forward starting interest rate swap agreements in contemplation of securing long-term financing for the Separation or for other long-term financing purposes in the event the Separation ~~does~~did not occur. In connection with the Senior Notes offering, the interest rate swap contracts were early terminated on a negotiated basis. See Note 12, “Fair Value Measurements,” to our Condensed Consolidated Financial Statements included herein.

During the first quarter of 2023, we settled the forward starting interest rate swaps and received approximately $38 million upon settlement, resulting in a gain in Accumulated other comprehensive loss. The gain in Accumulated other comprehensive loss will be amortized and recorded in Other expense, ~~(income),~~ net on our Condensed Consolidated Statements of Operations over the life of the 5-year, 10-year and 30-year bonds.

Commodity Price Risk

We are exposed to commodity and other price risk, including from essential oils, resins, pulp, tropical oils, lubricants, tallow, corn, poultry, soybeans and silicon; packaging components, including corrugate; and other inputs, including energy, labor, transportation (such as trucks, containers and ocean freight), and logistics services. We use various strategies to manage cost exposures on certain material purchases with the objective of obtaining more predictable costs for these commodities.

Credit Risk

We are exposed to potential credit losses in the event of nonperformance by counterparties to our receivables, including our customers. Concentrations of credit risk arising from receivables from customers are limited due to the diversity of our customers. We perform credit evaluations of our customers’ financial conditions and may also obtain collateral or other security as appropriate. Notwithstanding these efforts, current adverse macroeconomic factors across the global economy may increase the difficulty in collecting receivables.

Item 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures. At the end of the period covered by this report, management of the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Thibaut Mongon, Chief Executive Officer, and Paul Ruh, Chief Financial Officer, reviewed and participated in this evaluation. Based on this evaluation, Messrs. Mongon and Ruh concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

Internal control. During the period covered by this report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The information called for by this item is incorporated herein by reference to Note 13, “Commitments and Contingencies,” included in Part I, Item 1, Financial Statements (unaudited) — Notes to Condensed Consolidated Financial Statements included herein.

Item 1A. RISK FACTORS

The information called for by this item is incorporated herein by reference to the section entitled “Risk Factors” in our final prospectus (the “IPO Prospectus”) as filed with the SEC on May 4, 2023 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, relating to our Registration Statement on Form S-1.Split-Off Prospectus. Any of these factors could result in a significant or material adverse effect on our result of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Recent Sales~~There were no sales of ~~Unregistered Securities~~equity securities by the Company during the fiscal three months ended October 1, 2023.

On February 23, 2022, the date of the Company’s incorporation, the Company issued 10 shares of our common stock to Johnson & Johnson pursuant to the exemption from registration in Section 4(a)(2) of the Securities Act because the offer and issuance of the shares did not involve a public offering.

On May 3, 2023, in connection with the Kenvue IPO and prior to the effectiveness of Kenvue’s registration statement on Form 8-A, Kenvue issued 1,716,159,990 shares of Kenvue common stock to the Parent for aggregate consideration of $17 million paid by the Parent to Kenvue pursuant to a subscription agreement. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act.52

~~Use of Proceeds~~

On May 8, 2023, the Company completed the Kenvue IPO resulting in the issuance of 198,734,444 shares of common stock at a price to the public of $22 per share, including 25,921,884 shares of common stock allocated to the underwriters’ 30-day option to purchase additional shares of common stock. The 198,734,444 shares of common stock sold in the Kenvue IPO represent approximately 10.4% of the Company’s outstanding shares, while Johnson & Johnson continues to own approximately 89.6% of the Company’s outstanding shares. The shares sold in the offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-269115), which was declared effective by the SEC as of May 3, 2023. The aggregate offering price of the common stock registered and sold under the registration statement was approximately $4.4 billion (including the shares issued pursuant to the underwriters’ option to purchase additional shares). Net proceeds from the Kenvue IPO were approximately $4.2 billion, after deducting underwriting discounts and commissions of

$131 million. Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and BofA Securities, Inc. served as joint lead book-running managers and as representatives of the underwriters for the Kenvue IPO. The offering commenced on May 3, 2023 and did not terminate before all of the securities registered under the registration statement were sold.

As contemplated by the IPO Prospectus, on May 8, 2023 the Company distributed to Johnson & Johnson approximately $13.8 billion in connection with the Separation, which includes the net proceeds from the Kenvue IPO.

Item 5. OTHER INFORMATION

During the fiscal quarter ended ~~July 2,~~October 1, 2023, none of the Company's directors or officers (as defined in Rule 16a1(f) under the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities intended to satisfy the conditions of the affirmative defense provided by Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Executive Severance Pay Plan of Kenvue Inc. and U.S. Affiliated Companies

On October 30, 2023, the Compensation and Human Capital Committee of the Board of Directors adopted the Executive Severance Pay Plan of Kenvue Inc. and U.S. Affiliated Companies (the “Severance Plan”) effective August 23, 2023.

The Severance Plan provides for the payment of severance and other benefits to certain eligible employees, including the Company’s executive officers. The Severance Plan provides that in the event of an involuntary termination by the Company without “cause”, or termination by an executive officer for “good reason” (each as defined in the Severance Plan) (each, a “Severance Event”), the Company will provide:

•in the case of the Chief Executive Officer, cash severance equal to two times the sum of the CEO’s annual base salary and target bonus, payable in equal installments over 24 months; and

•in the case of each other executive officer, cash severance equal to one and a half times the sum of his or her annual base salary and target bonus, payable in equal installments over 18 months.

In addition, if an executive officer experiences a Severance Event in the 24-month period following a “change of control” (as defined in the Kenvue Long-Term Incentive Plan), the Company will provide:

•in the case of the CEO, cash severance equal to two and a half times the sum of the CEO’s annual base salary and target bonus, payable in a lump sum; and

•in the case of each other executive officer, cash severance equal to two times the sum of his or her annual base salary and target bonus, payable in a lump sum.

The Severance Plan also provides for the continuation of health insurance coverage for all executive officers (at active employee rates) for 52 weeks and eligibility for outplacement assistance benefits. Additionally, the Severance Plan provides for a “best-net cutback” if any executive officer would be subject to the excise tax imposed by Section 280G of the Internal Revenue Code.

As a condition to receiving the severance compensation and benefits described above, a participant will be required to sign, and not revoke, a customary release of claims in favor of the Company and its affiliates and remain in compliance with any restrictive covenant obligations.

The above description is a summary of the terms of the Severance Plan and is subject to and qualified in its entirety by the terms of the Severance Plan, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

Item 6. EXHIBITS


Exhibit Number						Exhibit Description
3.1						Amended and Restated Certificate of Incorporation of Kenvue Inc., effective as of May 3, 2023, filed as Exhibit 3.1 to the Current Report on Form 8-K filed by Kenvue Inc. with the SE C SEC on May 8, 2023, and incorporated herein by reference
3.2						Amended and Restated Bylaws of Kenvue Inc., effective as of May 3, 2023, filed as Exhibit 3.2 to the Current Report on Form 8-K filed by Kenvue Inc. with the SEC on May 8, 2023, and incorporated herein by reference
10.1						~~Separation Agreement,~~Ken vue Inc. Executive Severance Pay Plan , dated as of ~~May 3, 2023, by and between Johnson & Johnson and Kenvue Inc., filed as Exhibit 10.1 to the Current Report on Form 8-K filed by Kenvue Inc. with the~~ ~~SEC~~August 23, ~~on May 8,~~ 2023 ~~and incorporated herein by reference~~ *†
10.2						~~Tax Matters Agreement,~~K envue Inc. Amended & Restated Deferred Fee Plan for Directors , dated as of ~~May 3,~~September 1 9 , 2023 ~~by and between Johnson & Johnson and Kenvue Inc., filed as Exhibit 10.2 to the Current Report on Form 8-K filed by Kenvue Inc. with the~~ ~~SEC~~ ~~on May 8, 2023, and incorporated herein by reference~~ *†
10.3						~~Employee Matters~~Form of Founder Global Performance Share Unit Award Agreement ~~dated as of May 3, 2023, by and between Johnson & Johnson and Kenvue Inc., filed as Exhibit 10.3 to the Current Report on Form 8-K filed by Kenvue Inc. with the~~ ~~SEC~~ ~~on May 8, 2023, and incorporated herein by reference~~ *†
10.4						~~Intellectual Property~~Form of Founder Global Nonqualified Stock Option Award Agreement ~~dated as of May 3, 2023, by and between Johnson & Johnson and Kenvue Inc., filed as Exhibit 10.4 to the Current Report on Form 8-K filed by Kenvue Inc. with the~~ ~~SEC~~ ~~on May 8, 2023, and incorporated herein by reference~~ *†
~~10.5~~18						~~Trademark Phase-Out License Agreement,~~Preferability Letter of PricewaterhouseCoopers LLP, dated ~~as of April~~ November 3 , 2023, ~~by and between Johnson & Johnson and Johnson & Johnson Consumer Inc., filed as Exhibit 10.5~~relating to ~~the Current Report on Form 8-K filed by Kenvue Inc. with the~~ ~~SEC~~ ~~on May 8, 2023, and incorporated herein by reference~~
~~10.6~~						~~Transition Services Agreement, dated as of May 3, 2023, by and between Johnson & Johnson and Kenvue Inc., filed as Exhibit 10.6 to the Current Report on Form 8-K filed by Kenvue Inc. with the~~ ~~SEC~~ ~~on May 8, 2023, and incorporated herein by reference~~
~~10.7~~						~~Transition Manufacturing Agreement, dated as of May 3, 2023, by and between Johnson & Johnson and Kenvue Inc., filed as Exhibit 10.7 to the Current Report on Form 8-K filed by Kenvue Inc. with the~~ ~~SEC~~ ~~on May 8, 2023, and incorporated herein by reference~~
~~10.8~~						~~Registration Rights Agreement, dated as of May 3, 2023, by and between Johnson & Johnson and Kenvue Inc., filed as Exhibit 10.8 to the Current Report on Form 8-K filed by Kenvue Inc. with the~~ ~~SEC~~ ~~on May 8, 2023, and incorporated herein by reference~~
~~10.9~~						~~Kenvue Inc. Long-Term Incentive Plan, filed as Exhibit 99.1 to Registration Statement on Form S-8 (Registration No. 333-271735) filed by Kenvue Inc. with the~~ ~~SEC~~ ~~on May 8, 2023, and incorporated herein by reference~~Change in Accounting Principle †
~~10.10~~						~~Kenvue Inc. Deferred Fee Plan for Directors, filed as Exhibit 10.11 to the Quarterly Report on Form 10 Q for the quarterly period ended April 2, 2023 filed by Kenvue Inc. with the SEC on June 2, 2023, and incorporated herein by reference~~ †*
31.1						Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2						Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1						Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
32.2						Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **
101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document *
101.SCH						Inline XBRL Taxonomy Extension Schema Document *
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF						Inline XBRL Taxonomy Extension Definition Document *
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document *
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document *
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith


** Furnished herewith
† Indicates management contract or compensatory plan

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Kenvue Inc.





Date: ~~August 2,~~November 3, 2023			/s/ PAUL RUH
			Paul Ruh
			Chief Financial Officer (Principal Financial Officer)

Date: ~~August 2,~~November 3, 2023			/s/ HEATHER HOWLETT
			Heather Howlett
			Chief Accounting Officer (Principal Accounting Officer)


	Fiscal Three Months Ended July 2, 2023
	Common Stock			Additional Paid-In Capital		Retained Earnings		Net Investment from Parent		Accumulated Other Comprehensive Loss		Total Equity
	Shares	Amount
Balance, April 2, 2023	—	$	—	$	—	$	—	$	25,521	$	(5,239)	$	20,282
Net income	—	—		—		430		—		—		430
Other comprehensive loss	—	—		—		—		—		(195)		(195)
Net transfers from the Parent	—	—		—		—		10		—		10
Stock-based compensation	—	—		38		—		—		—		38
Distribution to J&J in connection with the Separation	—	—		(13,788)		—		—		—		(13,788)
Issuance of common stock in connection with the Kenvue IPO	1,915	19		4,222		—		—		—		4,241
Separation adjustments	—	—		—		—		95		(73)		22
Reclassification of Net Investment from Parent	—	—		25,626		—		(25,626)		—		—
Balance, July 2, 2023	1,915	$	19	$	16,098	$	430	$	—	$	(5,507)	$	11,040


	Fiscal Six Months Ended July 2, 2023
	Common Stock			Additional Paid-In Capital		Retained Earnings		Net Investment from Parent		Accumulated Other Comprehensive Loss		Total Equity
	Shares	Amount
Balance, January 1, 2023	—	$	—	$	—	$	—	$	25,474	$	(5,453)	$	20,021
Net income	—	—		—		430		330		—		760
Other comprehensive income	—	—		—		—		—		19		19
Net transfers to the Parent	—	—		—		—		(308)		—		(308)
Stock-based compensation	—	—		38		—		35		—		73
Distribution to J&J in connection with the Separation	—	—		(13,788)		—		—		—		(13,788)
Issuance of common stock in connection with the Kenvue IPO	1,915	19		4,222		—		—		—		4,241
Separation adjustments	—	—		—		—		95		(73)		22
Reclassification of Net Investment from Parent	—	—		25,626		—		(25,626)		—		—
Balance, July 2, 2023	1,915	$	19	$	16,098	$	430	$	—	$	(5,507)	$	11,040