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 ~~October 1, 2023~~March 31, 2024


☐						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 ~~October 27, 2023, 1,914,995,085~~May 3, 2024, 1,914,810,796 shares of Common Stock, $0.01 par value, were outstanding.

TABLE OF CONTENTS

Page

No.

~~CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS~~Cautionary Note Regarding Forward Looking Statements

ii3

Part ~~I — FINANCIAL INFORMATION~~I—Financial Information

Item 1.

Financial Statements (unaudited)

~~Condensed Consolidated Balance~~C onde nsed C onsolidated Bal ance Sheets

Condensed Consolidated Statements of Operations

Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~

~~Condensed~~C ondensed Consolidated Statements of Equity

~~Condensed~~C ondensed Consolidated Statements of Cash Flows

~~Notes~~N otes to Condensed ~~Consolidated~~Consolidat ed Financial Statements

710

I tem 2.

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

3540

I tem 3.

~~Item 3.~~ Quantitative and Qualitative Disclosures About Market Risk

I tem 4.

Controls and Procedures

Part II—Other Information

U nregis tered Sales of Equity Securities and Use of Proceeds

~~Item 4. Controls and Procedures~~

~~Part II — OTHER INFORMATION~~

~~Item 1. Legal Proceedings~~

~~Item 1A. Risk Factors~~

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

~~Item 5. Other Information~~

~~Item 6. Exhibits~~

Signatures

5552

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and Kenvue Inc.’s (“Kenvue,” the “Company” or “we”) 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”,~~“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;~~growth and cost savings; 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~~the 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, costs and cost-saving initiatives, 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;

•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, the shutdown of manufacturing facilities, product relabeling or withdrawal of product from the market), private claims and lawsuits, significant remediation and related costs, safety alerts, product shortages, product recalls, declining sales, reputational damage, and share price impact;

•The potential that the expected benefits and opportunities from the Company’s multi-year restructuring initiative or any other planned or completed restructuring initiative, 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;

•The impact of negative publicity and failed marketing efforts;

•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, breakdowns, invasions, corruptions, destruction, 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;

•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 our former

parent Johnson & Johnson’s (“J&J”) 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,~~14, “Commitments and Contingencies,” to ~~our~~the 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;

•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,~~and global tension, including armed conflict such as the ongoing military conflict between Russia and Ukraine, the recent military conflicts in the Middle East, or other event;

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

•Our ability to access credit markets and maintain satisfactory credit ratings;

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

•~~The possibility that Johnson & Johnson’s interests or those of certain of our~~Certain J&J executive officers ~~and~~continuing to serve as our directors, which may ~~conflict with our interests and~~create conflicts of interest or the ~~interests of our other shareholders;~~appearance thereof;

•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~~J&J branding, including the ~~“Johnson’s”~~“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 ~~Statement Concerning~~Note Regarding Forward-Looking Statements” and “Risk Factors” in our ~~final prospectus~~Annual Report on Form 10-K for the fiscal twelve months ended December 31, 2023 filed on ~~August 14, 2023~~March 1, 2024 with the U.S. Securities and Exchange Commission ~~pursuant to Rule 424(b)(3) under~~(“SEC”) and in our other filings with the ~~Securities Act of 1933, as amended, relating to our Registration Statement on Form S-4.~~SEC. 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~~4

Part ~~I —~~ I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

KENVUE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; InDollars in Millions, Shares in Thousands, Except Per Share Data)

October 1, 2023 January 1, 2023
Assets
Current assets
Cash and cash equivalents $ 1,062 $ 1,231
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 1,885 2,226
Prepaid expenses and other receivables 619 175
Other current assets 219 123
Total current assets 5,894 5,877
Property, plant, and equipment, net 1,872 1,820
Intangible assets, net 9,487 9,853
Goodwill 8,974 9,185
Deferred taxes on income 156 147
Other assets 694 434
Total Assets $ 27,077 $ 27,316
Liabilities and Equity
Current liabilities
Loans and notes payable 513 —
Accounts payable 2,281 1,829
Accrued liabilities 1,288 906
Accrued rebates, returns, and promotions 696 862
Accrued taxes on income 383 329
Total current liabilities 5,161 3,926
Employee related obligations 254 214
Long-term debt 7,685 —
Deferred taxes on income 2,515 2,479
Other liabilities 569 727
Total liabilities 16,184 7,346
Commitments and contingencies (Note 13)
Equity
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 19 —
Additional paid-in capital 16,131 —
Retained earnings 485 —
Net investment from Johnson & Johnson — 25,425
Accumulated other comprehensive loss (5,742) (5,455)
Total equity 10,893 19,970
Total Liabilities and Equity $ 27,077 $ 27,316


	March 31, 2024		December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	1,155	$	1,382
Trade receivables, less allowances for credit losses ($26 and $25 as of March 31, 2024 and December 31, 2023, respectively)	2,160		2,073
Inventories	1,884		1,851
Prepaid expenses and other receivables	645		567
Other current assets	253		265
Total current assets	6,097		6,138
Property, plant, and equipment, net	2,005		2,042
Intangible assets, net	9,378		9,619
Goodwill	9,032		9,271
Deferred taxes on income	171		158
Other assets	600		623
Total Assets	27,283		27,851
Liabilities and Equity
Current liabilities
Loans and notes payable	1,522		599
Accounts payable	2,602		2,489
Accrued liabilities	1,083		1,456
Accrued rebates, returns, and promotions	795		795
Accrued taxes on income	164		142
Total current liabilities	6,166		5,481
Employee related obligations	354		360
Long-term debt	7,033		7,687
Deferred taxes on income	2,568		2,621
Other liabilities	541		491
Total liabilities	16,662		16,640
Commitments and contingencies (Note 14)
Equity
Preferred stock, $0.01 par value, 750,000 shares authorized; no shares issued and outstanding as of March 31, 2024 and December 31, 2023	—		—
Common stock, $0.01 par value, 12,500,000 shares authorized; 1,919,648 and 1,914,698 shares issued and outstanding as of March 31, 2024; 1,915,407 and 1,915,057 shares issued and outstanding as of December 31, 2023	19		19
Additional paid-in capital	16,033		16,147
Treasury stock, 4,950 and 350 shares at cost as of March 31, 2024 and December 31, 2023, respectively	(98)		(7)
Retained earnings	342		429

Accumulated other comprehensive loss	(5,675)		(5,377)
Total equity	10,621		11,211
Total Liabilities and Equity	$	27,283	$	27,851

See accompanying 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 Nine Months Ended
October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022
Net sales $ 3,915 $ 3,789 $ 11,778 $ 11,183
Cost of sales 1,665 1,664 5,178 4,944
Gross profit 2,250 2,125 6,600 6,239
Selling, general, and administrative expenses 1,531 1,376 4,555 4,101
Other operating expense (income), net 9 (14) (7) (6)
Operating income 710 763 2,052 2,144
Other expense, net 25 25 65 19
Interest expense, net 100 — 154 —
Income before taxes 585 738 1,833 2,125
Provision for taxes 147 152 496 422
Net income $ 438 $ 586 $ 1,337 $ 1,703
Net income per share
Basic $ 0.23 $ 0.34 $ 0.73 $ 0.99
Diluted $ 0.23 $ 0.34 $ 0.73 $ 0.99
Weighted average common stock
Basic 1,916 1,716 1,823 1,716
Diluted 1,920 1,716 1,827 1,716


	Fiscal Three Months Ended
	March 31, 2024		April 2, 2023
Net sales	$	3,894	$	3,852
Cost of sales	1,652		1,727
Gross profit	2,242		2,125
Selling, general, and administrative expenses	1,573		1,502
Restructuring expenses	41		—
Other operating expense (income), net	78		(17)
Operating income	550		640
Other expense, net	28		30
Interest expense, net	95		1
Income before taxes	427		609
Provision for taxes	131		140
Net income	$	296	$	469

Net income per share
Basic	$	0.15	$	0.27
Diluted	$	0.15	$	0.27
Weighted average number of shares outstanding
Basic	1,915		1,716
Diluted	1,920		1,716

See accompanying Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~

(Unaudited; Dollars in Millions)

Fiscal Three Months Ended Fiscal Nine Months Ended
October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022
Net income $ 438 $ 586 $ 1,337 $ 1,703
Other comprehensive loss
Foreign currency translation, net of taxes (249) (642) (260) (1,734)
Employee benefit plans, net of taxes 13 1 19 5
Derivatives and hedges, net of taxes (4) 11 27 8
Other comprehensive loss (240) (630) (214) (1,721)
Comprehensive income (loss) $ 198 $ (44) $ 1,123 $ (18)


	Fiscal Three Months Ended
		March 31, 2024		April 2, 2023
Net income		$	296	$	469
Other comprehensive (loss) income, net of taxes
Foreign currency translation		(280)		163
Employee benefit plans		3		14
Derivatives and hedges		(21)		39
Other comprehensive (loss) income		(298)		216
Comprehensive (loss) income		$	(2)	$	685

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

Statements.

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited; Dollars in ~~Millions)~~Millions, Shares in Thousands)


	Fiscal Three Months Ended March 31, 2024
	Common Stock			Additional Paid-In Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
	Shares	Amount				Shares	Amount
Balance, December 31, 2023	1,915,057	$	19	$	16,147	350	$	(7)	$	429	$	(5,377)	$	11,211
Net income	—	—		—		—	—		296		—		296
Other comprehensive loss	—	—		—		—	—		—		(298)		(298)
Cash dividends on common stock	—	—		—		—	—		(383)		—		(383)
Stock-based compensation	—	—		81		—	—		—		—		81
Issuance of common stock under the Kenvue 2023 Plan, net	4,241	—		(12)		—	—		—		—		(12)
Purchase of treasury stock	(4,600)	—		—		4,600	(91)		—		—		(91)
Separation-related adjustments	—	—		(183)		—	—		—		—		(183)
Balance, March 31, 2024	1,914,698	$	19	$	16,033	4,950	$	(98)	$	342	$	(5,675)	$	10,621

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 April 2, 2023(1)
	Net Investment from J&J		Accumulated Other Comprehensive Loss		Total Equity
Balance, January 1, 2023(2)	$	25,425	$	(5,455)	$	19,970
Net income	469		—		469
Other comprehensive income	—		216		216
Stock-based compensation	35		—		35
Net transfers to J&J	(318)		—		(318)
Balance, April 2, 2023	$	25,611	$	(5,239)	$	20,372

(1)

Fiscal Three Months Ended October 2, 2022
Net Investment from Johnson & Johnson Accumulated Other Comprehensive Loss Total Equity
Balance, July 3, 2022 $ 25,143 $ (5,574) $ 19,569
Net income 586 — 586
Other comprehensive loss — (630) (630)
Net transfers to Johnson & Johnson (620) — (620)
Balance, October 2, 2022 $ 25,109 $ (6,204) $ 18,905

Prior to April 4, 2023, the Company operated as a segment of 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 J&J’s historical consolidated financial statements and accounting records as if the Company had been operated on a standalone basis. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Basis of Presentation,” for more information.

(2)

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 Nine Months Ended October 2, 2022
Net Investment from Johnson & Johnson Accumulated Other Comprehensive Loss Total Equity
Balance, January 2, 2022 $ 24,974 $ (4,483) $ 20,491
Net income 1,703 — 1,703
Other comprehensive loss — (1,721) (1,721)
Net transfers to Johnson & Johnson (1,568) — (1,568)
Balance, October 2, 2022 $ 25,109 $ (6,204) $ 18,905

Includes cumulative effect of change in accounting principle related to Global Intangible Low-Taxed Income. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Change in Accounting Principle,” for more information.

See accompanying Notes to Condensed Consolidated Financial Statements.

KENVUE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; Dollars in Millions)

Fiscal Nine Months Ended
October 1, 2023 October 2, 2022
Cash flows from operating activities
Net income $ 1,337 $ 1,703
Adjustments to reconcile net income to cash flows from operating activities
Depreciation and amortization 453 478
Stock-based compensation 75 106
Deferred income taxes (128) 128
Other (11) 8
Net changes in assets and liabilities
Trade receivables (97) (210)
Inventories 275 (535)
Other current and non-current assets (418) 87
Accounts payable 231 19
Accrued liabilities 724 68
Other liabilities (223) 29
Net cash flows from operating activities 2,218 1,881
Cash flows used in investing activities
Purchases of property, plant, and equipment (246) (216)
Transfer of funds to J&J pursuant to the Facility Agreement (8,941) —
Proceeds from J&J upon repayment of the Facility Agreement 8,941 —
Proceeds from sale of assets 14 8
Other investing activities 9 (15)
Net cash flows used in investing activities (223) (223)
Cash flows used in financing activities
(Proceeds from) payments of loans and notes payable (14) 22
Proceeds from Commercial Paper Program, net of issuance cost 497 —
Proceeds from issuance of Senior Notes, net of issuance cost 7,686 —
Proceeds from Kenvue IPO, net 4,241 —
Distribution to J&J in connection with the Separation (13,788) —
Dividends paid (383) —
Net transfer to J&J (274) (1,542)
Other financing activities (109) —
Net cash flows used in financing activities (2,144) (1,520)
Effect of exchange rate changes on cash and cash equivalents (20) (81)
Cash and cash equivalents, beginning of period 1,231 740
Net increase (decrease) in cash and cash equivalents (169) 57
Cash and cash equivalents, end of period $ 1,062 $ 797


	Fiscal Three Months Ended
	March 31, 2024		April 2, 2023
Cash flows from operating activities
Net income	$	296	$	469
Adjustments to reconcile net income to cash flows from operating activities
Depreciation and amortization	149		152
Stock-based compensation	81		35
Deferred income taxes	(4)		28
Impairments	99		—
Other	5		—
Net changes in assets and liabilities
Trade receivables	(124)		23
Inventories	(63)		17
Other current and non-current assets	(55)		(13)
Accounts payable and accrued liabilities	(181)		(2)
Employee related obligations	5		10
Accrued taxes on income	27		272
Other liabilities	52		(189)
Net cash flows from operating activities	287		802
Cash flows used in investing activities
Purchases of property, plant, and equipment	(153)		(55)
Proceeds from sale of assets	—		14
Other investing activities	1		—
Net cash flows used in investing activities	(152)		(41)
Cash flows (used in) from financing activities
Payments of loans and notes payables	—		(12)
Proceeds from Commercial Paper Program, net of issuance cost	160		—
Proceeds from issuance of Senior Notes, net of issuance cost	—		7,686
Dividends paid	(383)		—
Net transfers from (to) J&J	—		(286)
Purchases of treasury shares	(91)		—
Other financing activities	(12)		—
Net cash flows (used in) from financing activities	(326)		7,388
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(36)		6
Cash and cash equivalents and restricted cash, beginning of period	1,382		1,231
Net (decrease) increase in cash and cash equivalents and restricted cash	(227)		8,155
Cash and cash equivalents and restricted cash, end of period	$	1,155	$	9,386

See accompanying 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~~is a ~~wholly owned subsidiary of Johnson & Johnson (“J&J” or the “Former Parent”)~~pure play consumer health company with iconic brands including Aveeno®, BAND-AID® Brand, Johnson’s®, Listerine®, Neutrogena®, Tylenol®, 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.

Zyrtec
®

. 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 pain care, cough, cold, and allergy, ~~pain care,~~ as well as digestive health, smoking cessation, eye care, 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.

Kenvue was initially formed as a wholly owned subsidiary of Johnson & Johnson (“J&J”). In November 2021, 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”), other than the transfer of certain Deferred Local ~~Business~~Businesses (as defined below in “—Variable Interest Entities and Net Economic Benefit Arrangements”).

On May 3, 2023, the registration statement related to the initial public offering of Kenvue’s common stock was declared effective, and on May 4, 2023, Kenvue’s common stock began trading on the New York Stock Exchange under the ticker symbol “KVUE” (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)~~1) net proceeds received from the sale of the common stock in the Kenvue IPO, ~~and (2)~~2) net proceeds received from the Debt Financing Transactions as defined in Note 4, ~~“Borrowings”,~~“Borrowings—Commercial Paper Program,” and ~~(3)~~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~~announced an exchange offer (the “Exchange Offer”) under which its shareholders 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~~completed 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 as of the completion of the Exchange Offer, J&J ~~now owns~~owned 9.5% of the outstanding shares of Kenvue common ~~stock following the completion of the Exchange Offer.~~stock.

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”.~~ Statements.”

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, 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. These financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures for

the fiscal twelve months ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed on March 1, 2024 with the SEC.

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

During the fiscal three months ended March 31, 2024, the Company recorded out-of-period adjustments primarily related to the Separation. As of December 31, 2023, Additional paid-in capital was overstated by $183 million, Accumulated other comprehensive loss was understated by approximately $87 million, and liabilities were understated by approximately $96 million. These amounts were corrected in the fiscal three months ended March 31, 2024 and do not have an impact on the operating results for the fiscal three months ended March 31, 2024. The Company concluded that these adjustments were not material to the Condensed Consolidated Financial Statements for either the current period or prior periods.

Periods prior to the Consumer Health Business Transfer

Prior to April 4, 2023, the Company operated as a segment of 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 J&J’s historical consolidated financial statements ~~for interim financial reporting, which do not conform in all respects to~~and accounting records as if 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 “Split-Off Prospectus”) filedCompany had been operated on August 14, 2023 with the U.S. Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b)(3) under the Securities Act of 1933, as amended (the “Securities Act”), relating to the Company’s Registration Statement on Form 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.~~standalone basis.

Prior to the Kenvue IPO, the Company relied on 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 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~~Cash generated from the Company’s operations prior to ~~establish actual quarterly closing dates using a predetermined fiscal calendar, which allows~~April 4, 2023 was generally managed by J&J’s centralized treasury function and was swept into J&J and its affiliates’ bank accounts. Cash and cash equivalents on the ~~business~~Condensed Consolidated Balance Sheet represent balances in accounts specifically identifiable to ~~close~~the Company that were not swept into J&J and its ~~books on Sunday at the end~~affiliates’ bank accounts. J&J’s third-party interest expense was not allocated for any of the ~~period.~~periods prior to April 4, 2023 as the Company was not the legal obligor of the debt and the borrowings were not directly attributable to the Company’s operations.

The ~~Company~~Company’s equity balance in these financial statements prior to April 4, 2023 represents the excess of total assets over total liabilities. Equity is impacted by changes in comprehensive income and contributions from or to J&J ~~incurred certain non-recurring Separation-related costs in~~prior to the ~~establishment~~Kenvue IPO, which was the result of ~~Kenvue as a standalone public company. Costs incurred~~treasury activities and net funding provided by ~~the Company~~or distributed to J&J.

J&J calculated foreign currency translation on its consolidated assets and ~~those costs incurred by J&J determined to be for the benefit~~liabilities, which included assets and liabilities of the Company ~~are included~~prior to April 4, 2023. Foreign currency translation recorded during the fiscal three months ended March 31, 2024 and April 2, 2023 was based on currency movements specific to the Condensed Consolidated Financial Statements.

The income tax amounts in the Condensed Consolidated Financial ~~Statements. These non-recurring Separation-related costs~~Statements prior to the Kenvue IPO have been calculated based on a separate return methodology and presented as if the Company’s operations were ~~$133 million and $50 million~~reported by separate taxpayers in the jurisdictions in which the Company operates. See Note 11, “Income Taxes,” for the fiscal three months ended October 1, 2023 and October 2, 2022, respectively, and $333 million and $109 million for the fiscal nine months ended October 1, 2023 and October 2, 2022, respectively. The non-recurring Separation-related costs are included within Selling, general, and administrative expenses.further discussion.

~~The~~Prior to the Kenvue IPO, all transactions between the Company and J&J were considered to be effectively settled for cash in the Condensed Consolidated Financial Statements ~~include~~at the ~~accounts~~time the transaction was recorded. The effects of the settlement of these transactions between the Company and ~~entities consolidated under~~J&J are reflected in the ~~variable interest~~Condensed Consolidated Statements of Cash Flows as “Net transfers from (to) J&J” within financing activities, and ~~voting models. Intercompany balances and transactions have been eliminated.~~in the Condensed Consolidated Statements of Equity as “Net transfers to J&J.”

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 reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. Estimates are used when accounting for, among other things, sales discounts, trade promotions, rebates, allowances and incentives, product liabilities, income taxes and related valuation allowance, withholding taxes pension, postretirement benefits, fair value of financial instruments, stock-based compensation assumptions, depreciation, amortization, employee benefits, contingencies, allocations of cost and expenses from J&J and its affiliates, and goodwill and intangible asset and liability valuations. Actual results may or may not differ from those estimates.

~~Debt Discounts~~

Trade Receivable and ~~Premiums, Issuance Costs,~~Allowance for Credit Losses

A summary of the change in the allowance for credit losses during the fiscal three months ended March 31, 2024 and ~~Deferred Financing~~April 2, 2023 is presented below:


	Fiscal Three Months Ended
(Dollars in Millions)	March 31, 2024		April 2, 2023
Allowance for credit losses, beginning of period	$	(25)	$	(35)
Provision	(1)		(3)


Allowance for credit losses, end of period	$	(26)	$	(38)

Separation-Related Costs

~~Debt issuance~~The Company and J&J incurred certain non-recurring separation-related costs ~~and discounts are presented~~in the establishment of Kenvue as a ~~reduction~~standalone public company (“Separation-related costs”). Costs incurred by the Company and those costs that were incurred by J&J determined to be for the benefit of ~~Long-term debt~~the Company are included in the Condensed Consolidated Financial Statements. These Separation-related costs were $67 million and $98 million for the fiscal three months ended March 31, 2024 and April 2, 2023, respectively. The Separation-related costs are ~~amortized as a component~~included within ~~Interest expense, net on~~Cost of sales and Selling, general, and administrative expenses in the ~~Company’s~~ Condensed Consolidated Statements of ~~Operations over the term on the related debt using the effective interest method.~~Operations.

Research and Development

Research and development expenses are expensed as incurred and included within Selling, general, and administrative expenses. Research and development costs were ~~$78~~$100 million and ~~$90~~$89 million for the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022, respectively, and $266 million and $272 million for the fiscal nine months ended October 1, 2023 and October 2, 2022,~~ respectively.

Leases

The Company has operating leases for space, vehicles, manufacturing equipment, and data processing equipment. In connection with the Separation, J&J and Kenvue also entered into various lease agreements, in which the Company subleased properties from J&J. The Company has finance leases which primarily includes the Company’s new global corporate headquarters in Summit, New Jersey (as described in the “—Global Corporate Headquarters Lease” section below). Lease terms may include options to extend or terminate the lease. These options are included in the lease term when it is reasonably certain that the Company will exercise that option. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants.

Operating Lease Assets and Liabilities

~~Leases~~Right of Use (“ROU”) assets and lease liabilities associated with the Company’s operating leases are included on the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 as follows:


	Operating Leases
(Dollars in Millions)	March 31, 2024(1)		December 31, 2023(2)
ROU assets included in:

Other assets	$	140	$	139
Total ROU assets	140		139
Lease liabilities included in:
Accrued liabilities	44		44

Other liabilities	98		97
Total lease liabilities	$	142	$	141

(1) Includes leases with J&J of $47 million of ROU assets, $12 million of current lease liabilities, and $35 million of non-current lease liabilities.

(2) Includes leases with J&J of $52 million of ROU assets, $13 million of current lease liabilities, and $39 million of non-current lease liabilities.

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~~(the “Global Corporate Headquarters Lease”). When completed, it will encompass a total of approximately 290,000 square feet and serve as the Company’s new global corporate ~~headquarters.~~ headquarters and research and development center.

The lease associated with the corporate office building, accounted for as a finance lease, commenced in January 2024 and includes an initial term of 15 years as well as renewal options, which the Company is reasonably certain to exercise, that will extend the term of the lease through 2060. As a result of this lease commencement, the Company recorded an initial ROU asset and corresponding finance lease liability each totaling $93 million. The finance lease liability was calculated utilizing an incremental borrowing rate of 4.75% to discount lease payments over the expected term. For the fiscal three months ended March 31, 2024, the ROU assets obtained in exchange for finance lease liabilities totaled $93 million.

ROU assets and lease liabilities associated with the Company’s finance lease in connection with the corporate office building are included on the Condensed Consolidated Balance Sheet as of March 31, 2024 as follows:



(Dollars in Millions)	March 31, 2024
ROU assets included in:
Property, plant, and equipment, net	$	92


Lease liabilities included in:

Long-term debt	$	94

In addition to the corporate office building, the campus also includes a laboratory building to principally support research and development and land to be used for amenities. The lease associated with the land where the research and development building will be constructed commenced in May 2024, and the lease associated with the land to be used for amenities 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.2026. The relocation to this campus is expected to ~~commence~~occur 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~~Held for Sale

~~Right~~The Company classifies assets as held for sale when: 1) management has committed to a plan to sell the assets, 2) the assets are available for immediate sale, 3) there is an active program to locate a buyer, and 4) the sale and transfer of ~~Use assets (“ROU assets”) and lease liabilities associated with~~ the ~~Company's~~asset is probable within one year. On February 21, 2024, the Company listed its interim corporate headquarters in Skillman, New Jersey for sale,

which met the criteria to be classified as held for sale at that date. The held for sale asset is measured at the lower of the carrying amount or the fair value less costs to sell.

The results of the impairment test performed indicated that the carrying value of the Skillman, New Jersey facility exceeded its estimated fair value less costs to sell by $68 million. As a result, the Company recorded an impairment charge equivalent to that amount within Other operating ~~leases are included~~expense (income), net in the Condensed Consolidated ~~Balance Sheets~~Statement of Operations for the fiscal three months ended March 31, 2024. The fair value of the held for sale asset was determined utilizing third-party sales pricing as ~~of October 1, 2023 and January 1, 2023~~an input. The inputs utilized in the analysis are classified as ~~follows:~~Level 3 inputs within the fair value hierarchy.

(Dollars in Millions)
October 1, 2023(1)
January 1, 2023
ROU assets included in:
Other non-current assets $ 149 $ 110
Lease liabilities included in:
Accrued and other current liabilities 46 35
Other non-current liabilities 106 81
Total lease liabilities $ 152 $ 116
The Company recorded the remaining asset held for sale balance related to the Skillman, New Jersey facility within Other current assets on the Condensed Consolidated Balance Sheet as of March 31, 2024.

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

The Company has facilitated a voluntary supply chain finance 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. As of March 31, 2024 and December 31, 2023, the Company’s accounts payable balances included $267 million and $227 million, respectively, related to invoices from suppliers participating in the supplier finance program.

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)~~1) it has the power to direct the activities that most significantly impact the economic performance of the VIE; and ~~(2)~~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,~~Separation, 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 the Kenvue IPO and until the Deferred Local Business transfers to the Company, J&J ~~(1)~~1) holds and operates the Deferred Local Businesses on behalf of and for the benefit of the Company, and ~~(2)~~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~~Sheets 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, on 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)	March 31, 2024
Assets
Current assets
Cash and cash equivalents	$	116
Trade receivables, less allowances for credit losses	56
Inventories	18
Prepaid expenses and other receivables	1
Other current assets	3
Total current assets	194
Property, plant, and equipment, net	2


Deferred taxes on income	1
Other assets	1

Total assets	$	198
Liabilities
Current liabilities
Accounts payable	$	7
Accrued liabilities	9
Accrued rebates, returns, and promotions	14
Accrued taxes on income	5
Total current liabilities	35


Total liabilities	$	35

The Company recognized Net income of $2 million and $0 million related to the Deferred Legal Entities for the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~J&J transferred the equity interests~~respectively, 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.~~Statements of Operations.

Net Economic Benefit Arrangements

With respect to certain Deferred ~~Local Businesses that are legal entities, as described above,~~Legal Entities and the Deferred Local Businesses that are not legal entities (“Deferred Markets”), 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 ~~$23~~$32 million in relation to the net economic benefit arrangements as of ~~October 1, 2023 in~~March 31, 2024 on the ~~Company’s~~ Condensed Consolidated Balance Sheet. The Company recognized ~~$15~~$14 million and ~~$31~~$0 million of ~~net~~Net income in relation to the net economic benefit arrangements for the fiscal three ~~and nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023, respectively, in the ~~Company’s~~ Condensed Consolidated Statements of Operations.

Reclassifications

Certain prior period amounts have been reclassified to conform to current fiscal 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~~in the fiscal 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 (“FASB”) 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,~~J&J 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
	April 2, 2023
(Dollars in Millions, Except Per Share Data)		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statement of Operations:
Income before taxes		$	609	$	—	$	609
Provision for taxes		279		(139)		140
Net income		$	330	$	139	$	469

Basic net income per share		$	0.19	$	0.08	$	0.27
Diluted net income per share		$	0.19	$	0.08	$	0.27

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 Three Months Ended
	April 2, 2023
(Dollars in Millions, Except Per Share Data)		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statement of Comprehensive (Loss) Income:
Foreign currency translation, net of taxes		$	161	$	2	$	163
Other comprehensive income		$	214	$	2	$	216

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
	April 2, 2023
(Dollars in Millions)		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statement of Equity:
Net investment from J&J		$	25,474	$	(49)	$	25,425
Accumulated other comprehensive loss		(5,453)		(2)		(5,455)
Cumulative effect adjustment to beginning balance		$	20,021	$	(51)	$	19,970
Net income		$	330	$	139	$	469
Other comprehensive income		$	214	$	2	$	216

Stock-based compensation		$	35	$	—	$	35
Net transfers to J&J		$	(318)	$	—	$	(318)






Ending balance		$	20,282	$	90	$	20,372


		Fiscal Three Months Ended
	April 2, 2023
(Dollars in Millions)		Prior to Change		Effect of Change		As Adjusted
Condensed Consolidated Statement of Cash Flows:
Net income		$	330	$	139	$	469
Deferred income taxes		$	167	$	(139)	$	28

1116

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)
SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors

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

~~Recently Adopted Accounting Standards~~In March 2024, the SEC adopted final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors (“SEC Release No. 33-11275”) is intended to enhance and standardize climate-related disclosures. SEC Release No. 33-11275 requires disclosure of governance, risk management, and strategy related to material climate-related risks as well as disclosure of material greenhouse gas emissions in registration statements and annual reports. In addition, certain disclosures as it relates to severe weather events and other natural conditions and carbon offsets and renewable energy credits would also be required. The SEC voluntarily stayed the final rules pending completion of judicial review following legal challenges. The rules are effective for large accelerated filers for annual periods ending December 31, 2025, pending resolution of the stay. The Company is currently assessing the impact of these rules on the Condensed Consolidated Financial Statements.

Accounting Standards Update ~~2022-04: Liabilities-Supplier Finance Programs (Topic 405-50) – Disclosure of Supplier Finance Program Obligations~~(“ASU”) 2023-09: Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 enhances the transparency of income tax disclosures, primarily by requiring public business entities to disclose 1) consistent categories and greater disaggregation of information in the rate reconciliations and 2) the disclosure of income taxes paid disaggregated by jurisdiction, among other requirements. This guidance is effective for public entities for the fiscal years beginning after December 15, 2024, and early adoption is permitted. The amendments are applicable on a prospective basis, although retrospective basis is also permitted. The Company ~~adopted~~is currently evaluating this guidance and 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.~~impact on its income tax disclosures.

~~The Company has facilitated~~ASU 2023-07: Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 scopes in entities with a ~~voluntary supply chain financing program~~single reportable segment and requires those entities to provide ~~some~~all disclosures required in Topic 280. Among other various new disclosures, ASU 2023-07 additionally requires that current annual disclosures about a reportable segment’s profit or loss and assets also be provided in interim periods. Enhanced reporting requirements for all entities includes disclosure of ~~its suppliers with~~1) significant segment expenses, 2) the ~~opportunity~~title and position of the chief operating decision maker (the “CODM”), and 3) how the CODM uses disclosed measure(s) of a segment’s profit or loss in assessing segment performance and allocating resources. This guidance is effective for public entities for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. Companies are required to ~~sell receivables due from~~apply the ~~Company (the Company’s accounts payables)~~amendments retrospectively to ~~participating financial institutions at the sole discretion of both the suppliers and~~all prior periods presented in the financial ~~institutions.~~statements and early adoption is permitted. The Company is ~~not a party to the arrangements between the suppliers~~currently evaluating this guidance and ~~the third-party financial institutions. The Company’s obligations to its suppliers,~~expects that adoption will result in new disclosures, 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 J&J’s supplier financing program. The terms of the Company’s supplier financing program are substantially the same as J&J’s program.significant segment expenses.

As of October 1, 2023 and January 1, 2023, the Company’s accounts payable balances included $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~~No other new accounting standards that were issued or became effective during the fiscal ~~nine~~three months ended ~~October 1, 2023 that~~March 31, 2024 had, or are expected to have, a ~~material~~significant impact on the ~~Company’s~~ Condensed Consolidated Financial Statements.

2. Inventories

As of ~~October 1, 2023~~March 31, 2024 and ~~January 1,~~December 31, 2023, inventories were comprised of:


(Dollars in Millions)	(Dollars in Millions)	October 1, 2023		January 1, 2023		(Dollars in Millions)	March 31, 2024	December 31, 2023
Raw materials and supplies	Raw materials and supplies	$	325	$	351
Goods in process	Goods in process	103		123
Finished goods	Finished goods	1,457		1,752
Total inventories	Total inventories	$	1,885	$	2,226

3. Intangible Assets and Goodwill

As of ~~October 1, 2023~~March 31, 2024 and ~~January 1,~~December 31, 2023, the gross and net amounts of intangible assets were:


			October 1, 2023						January 1, 2023
		March 31, 2024																	March 31, 2024			December 31, 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:
Patents and trademarks
Patents and trademarks
Patents and trademarks	Patents and trademarks		$	4,258	$	(1,588)	$	2,670	$	4,400	$	(1,485)	$	2,915
Customer relationships	Customer relationships		2,072		(1,093)		979		2,127		(1,063)		1,064		Customer relationships	2,071	(1,132)	939		2,125	(1,151)		974
Other intangibles	Other intangibles		1,359		(683)		676		1,343		(650)		693		Other intangibles	1,309	(673)	636		1,320	(669)		651
Total definite-lived intangible assets	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:
Trademarks	Trademarks		$	5,102	$	—	$	5,102	$	5,122	$	—	$	5,122
Trademarks
Trademarks
Other	Other		60		—		60		59		—		59		Other	55	—	55		61	—		61
Total intangible assets, net	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 19 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 acquisition of Pfizer Consumer Health in 2006. CarryingGross carrying amount changes for the fiscal three ~~and nine~~ months ended ~~October 1,~~March 31, 2024 and December 31, 2023 ~~and October 2, 2022~~ were driven by currency translations. ~~The Company~~No intangible asset impairments were 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 both the fiscal three ~~and nine~~ months ended ~~October~~March 31, 2024 and April 2, ~~2022, respectively.~~2023.

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

Fiscal Three Months Ended Fiscal Nine Months Ended
(Dollars in Millions) October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022
Trademarks $ 48 $ 44 $ 142 $ 142
Customer relationships and Other intangibles 34 39 100 123
Total Amortization expense $ 82 $ 83 $ 242 $ 265

~~The estimated amortization expense before tax~~ for the ~~remainder~~fiscal three months ended March 31, 2024 and April 2, 2023, which is included in Cost of ~~2023~~ sales, was $74 millionand ~~the five succeeding years is approximately:~~

$81 million, respectively.

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

Goodwill by reportable segment was as follows:

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

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


(Dollars in Millions)	Self Care		Skin Health and Beauty		Essential Health		Total




Goodwill as of December 31, 2023	$	5,308	$	2,315	$	1,648	$	9,271
Currency translation	(149)		(72)		(18)		(239)
Goodwill as of March 31, 2024	$	5,159	$	2,243	$	1,630	$	9,032

4. Borrowings

The components of the Company’s debt as of ~~October 1, 2023~~March 31, 2024 and ~~January 1,~~December 31, 2023 were as follows:

~~(Dollars in Millions)~~


(Dollars in Millions)	March 31, 2024		December 31, 2023


Senior Notes
5.50% Senior Notes due 2025	$	750	$	750
5.35% Senior Notes due 2026	750		750
5.05% Senior Notes due 2028	1,000		1,000
5.00% Senior Notes due 2030	1,000		1,000
4.90% Senior Notes due 2033	1,250		1,250
5.10% Senior Notes due 2043	750		750
5.05% Senior Notes due 2053	1,500		1,500
5.20% Senior Notes due 2063	750		750
Other(1)	101		9
Discounts and debt issuance costs	(68)		(72)
Total	$	7,783	$	7,687
Less: Current portion of long-term debt—principal amount	(750)		—
Total long-term debt	$	7,033	$	7,687
Current portion of long-term debt—principal amount	750		$	—
Commercial paper	769		600

Discounts and debt issuance costs	(3)		(1)
Other	6		—
Total loans and notes payable	$	1,522	$	599
Total debt	$	8,555	$	8,286

(1) As of March 31, 2024, Other includes $94 million of finance lease liabilities associated with the Global Corporate Headquarters Lease. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Leases,” for more information.

~~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~~

—

~~Discounts and debt issuance costs~~

~~(73)~~

—

~~Total long-term debt~~

~~7,685~~

—

~~Commercial paper~~

~~515~~

—

~~Discounts and debt issuance costs~~

~~(2)~~

—

~~Total loans and notes payable~~

~~513~~

—

~~Total debt~~

~~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.~~billion. The net proceeds to the Company from the Senior Notes were approximately $7.7 billion after deductions of discounts and issuance costs of $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.

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 was 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 any 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 any 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”~~“Indenture”). The ~~indenture~~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~~Indenture also contains restrictions on the Company’s ability to consolidate, merge, or sell substantially all of its assets. In addition, the ~~indenture~~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 the fiscal nine months ended 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, 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.

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 Kenvue IPO. Kenvue unconditionally guarantees all of the obligations of the borrowers (other than itself) under the Revolving Credit Facility on an unsecured basis.

~~As of 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”. Inclusive of amounts issued as a part of the Debt Financing Transactions, the Company issued $3.8 billion of commercial paper notes and repaid $3.3 billion in connection with its stated maturities during the fiscal nine months ended October 1, 2023.Transactions.” As of ~~October 1, 2023,~~March 31, 2024, the Company had ~~$513~~$767 million of outstanding balances under its Commercial Paper Program, net of a related discount of $2 million.

~~Interest expense incurred~~Revolving Credit Facility

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 ~~result of~~distribution back to J&J in connection with the Commercial Paper Program for both of the fiscal three and nine months ended October 1, 2023 were $7 million and $16 million, respectively. The weighted average effective interest rate of the Company’s commercial paper as of October 1, 2023 was 5.2% and the weighted average maturities as of October 1, 2023 were less than 90 days.Separation.

Interest Expense, Net

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

Fiscal Three Months Ended Fiscal Nine Months Ended
(Dollars in Millions) October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022
Interest expense $ 115 $ — $ 244 $ —
Interest income(1)
(15) — (90) —
Interest expense, net $ 100 $ — $ 154 $ —

~~(1)~~ ~~Includes interest income of $33 million for the fiscal nine months ended 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


	Fiscal Three Months Ended
(Dollars in Millions)		March 31, 2024		April 2, 2023
Interest expense		$	109	$	11
Interest income		(14)		(10)
Total interest expense, net		$	95	$	1

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 $~~7.4~~7.7 billion as of ~~October 1, 2023.~~March 31, 2024. Fair value was estimated using market prices using quoted prices 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 ~~October 1, 2023~~March 31, 2024 due to the nature and ~~short term~~short-term duration of the instrument.

Compliance with Covenants

As of ~~October 1, 2023,~~March 31, 2024, the Company was in compliance with all ~~financial and non-financial~~debt 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 nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023 ~~and October 2, 2022,~~ included the following components:


		Fiscal Three Months Ended				Fiscal Nine Months Ended
				Fiscal Three Months Ended
				Fiscal Three Months Ended
				Fiscal Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Service cost	Service cost	$	6	$	—	$	16	$	4
Service cost
Service cost
Interest cost	Interest cost	8		—		18		2
Amortization of (gain) loss		(1)		1		(1)		3
Special events		8		—		8		—
Interest cost
Interest cost
Amortization of loss
Amortization of loss
Amortization of loss

Expected return on plan assets	Expected return on plan assets	(8)		—		(18)		—
Net periodic benefit cost		$	13	$	1	$	23	$	9

Expected return on plan assets

Expected return on plan assets
Total net periodic benefit cost
Total net periodic benefit cost
Total net periodic benefit cost

The service cost component of net periodic benefit cost is presented in the same line items onin 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, net onin 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.

~~Separated~~Participation in J&J Plans

J&J has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. J&J also provides medical benefits, principally to its U.S. retirees and their dependents through its other postretirement benefit plans. Prior to the Separation, the Company’s employees participated in J&J’s defined benefit pension plans, which were accounted for as multiemployer plans, and assets and liabilities associated with these plans were not reflected inon the ~~Company's~~ Condensed Consolidated Balance Sheets. ~~As of October 1, 2023,~~After the Separation, the Company no longer ~~has~~had any multiemployer plans, as they ~~have~~were all converted to a multiple employer pension plan or a single-employer pension plan. The Condensed Consolidated ~~Statements~~Statement of Operations ~~include~~for the fiscal three months ended April 2, 2023 includes expense allocations for these benefits, which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company amounted to ~~$0 million and $11~~$16 million for the fiscal three months ended ~~October 1, 2023 and October~~April 2, ~~2022, respectively, and $17 million and $38 million for the fiscal nine months ended October 1, 2023 and October 2, 2022, respectively.~~

2023.

In connection with the completion of the Separation, J&J transferred certain pension plans to the Company during the fiscal nine months ended October 1, 2023, resulting in the transfer of net pension assets of $162 million and net pension liabilities of $21 million inclusive of transfers to multiple employer pension plans.

6. Accrued and Other Liabilities

Accrued liabilities consisted of:


(Dollars in Millions)	March 31, 2024		December 31, 2023
Accrued expenses	$	429	$	465
Accrued compensation and benefits	171		406
Operating lease liabilities	44		44
Tax indemnification liability(1)	170		113
Other accrued liabilities	269		428
Total accrued liabilities	$	1,083	$	1,456

Other liabilities, non-current, consisted of:


(Dollars in Millions)	March 31, 2024		December 31, 2023
Accrued income taxes	$	173	$	188
Operating lease liabilities	98		97
Tax indemnification liability(1)	143		141
Other accrued liabilities	127		65
Total other liabilities	$	541	$	491

(1) The balances primarily relate to the Tax Matters Agreement entered into 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. See Note 9, “Relationship with J&J—Tax Indemnification,” for more information.

6.7. Accumulated Other Comprehensive Loss

Components of Accumulated other comprehensive loss consisted of the following:

(Dollars in Millions)
Foreign Currency Translation(1)
Employee Benefit Plans(2)
Gain (Loss) On Cash Flow Hedges(3)
Total Accumulated Other Comprehensive Loss
July 2, 2023 $ (5,487) $ (55) $ 40 $ (5,502)
Net change (249) 13 (4) (240)
October 1, 2023 $ (5,736) $ (42) $ 36 $ (5,742)
July 3, 2022 $ (5,523) $ (47) $ (4) $ (5,574)
Net change (642) 1 11 (630)
October 2, 2022 $ (6,165) $ (46) $ 7 $ (6,204)


(Dollars in Millions)	Foreign Currency Translation		Employee Benefit Plans		Gain On Cash Flow Hedges		Total Accumulated Other Comprehensive Loss
December 31, 2023	$	(5,257)	$	(167)	$	47	$	(5,377)
Comprehensive (loss) income before reclassifications	(280)		2		(21)		(299)
Amounts reclassified to the Condensed Consolidated Statements of Operations	—		1		—		1
Net current period Comprehensive (loss) income	(280)		3		(21)		(298)
March 31, 2024	$	(5,537)	$	(164)	$	26	$	(5,675)

~~(1)~~ Foreign currency translation adjustments for the fiscal three months ended October 1, 2023 and October 2, 2022 were net of benefit from taxes of $9 million and $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 October 1, 2023 and October 2, 2022 were net of provision (benefit) from taxes of $1 million and $2 million, respectively.~~

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

(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 $ (5,476) $ 12 $ 9 $ (5,455)
Net change (260) (54) 27 (287)
October 1, 2023 $ (5,736) $ (42) $ 36 $ (5,742)
January 2, 2022 $ (4,431) $ (51) $ (1) $ (4,483)
Net change (1,734) 5 8 (1,721)
October 2, 2022 $ (6,165) $ (46) $ 7 $ (6,204)

~~(1)~~ Foreign currency translation adjustments for the fiscal nine months ended October 1, 2023 and October 2, 2022 were net of benefit from taxes of $24 million and $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 nine months ended October 1, 2023 and October 2, 2022 were net of benefit from taxes of $16 million and $3 million, respectively. Net change for the fiscal nine months ended October 1, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pensions plans by J&J to the Company.

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


(Dollars in Millions)	Foreign Currency Translation		Employee Benefit Plans		Gain On Cash Flow Hedges		Total Accumulated Other Comprehensive Loss
January 1, 2023	$	(5,476)	$	12	$	9	$	(5,455)
Comprehensive (loss) income before reclassifications	163		14		51		228
Amounts reclassified to the Condensed Consolidated Statements of Operations	—		—		(12)		(12)
Net current period Comprehensive (loss) income	163		14		39		216
April 2, 2023	$	(5,313)	$	26	$	48	$	(5,239)

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).

Income.

7.The provision (benefit) for taxes allocated to the components of Accumulated other comprehensive loss before reclassification are as follows:


	Fiscal Three Months Ended
(Dollars in Millions)	March 31, 2024		April 2, 2023
Foreign currency translation	$	(2)	$	19
Employee benefit plans	—		1
Gain on cash flow hedges	10		13

Total provision for taxes recognized in Accumulated other comprehensive loss	$	8	$	33

The provision (benefit) for taxes allocated to the reclassifications from Accumulated other comprehensive loss to the Condensed Consolidated Statements of Operations was not significant for both the fiscal three months ended March 31, 2024 and April 2, 2023.

8. Stock-Based Compensation

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, 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 were based on J&J’s common stock. The J&J 2022 Plan became effective in April 2022. As such, all options and restricted shares granted subsequent to that date and prior to the completion of the Exchange Offer were issued under the J&J 2022 Plan.

~~In March 2023, the Company’s Board of Directors approved the~~ 2023 Long-Term Incentive Plan (the “Kenvue 2023 Plan”) ~~providing~~provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, ~~RSUs,~~restricted stock units (“RSUs”), performance ~~shares, PSUs,~~stock units (“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 the Company’s common stock. The Kenvue 2023 Plan was approved by J&J, as sole stockholder of the Company, prior to the Kenvue IPO and became effective in May 2023. The maximum aggregate number of shares of Common Stock that may be issued under the Plan is 188,897,256.

~~During~~For the fiscal three months ended ~~October 1, 2023,~~March 31, 2024, stock-based compensation expense was recognized resulting from the grant of stock-based awards ~~were first issued pursuant to~~under the Kenvue 2023 Plan, ~~related to the conversion~~which were denominated in shares 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~~common stock.

On August 23, 2023 (the “Conversion Date”), J&J ~~equity~~equity-based awards held by Kenvue employees were accounted for as if they were forfeited by J&J and generally replaced by Kenvue ~~equity~~equity-based awards under the Kenvue 2023 Plan with terms consistent ~~with the~~to those applicable to the J&J awards, subject to adjustments to the number of underlying 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~~

For the fiscal three months ended April 2, 2023, stock-based compensation expense was driven by stock-based awards granted under J&J’s long-term incentive plans, which were ~~converted using the conversion ratio that was determined~~denominated 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~~shares of ~~the deemed forfeiture of the~~ J&J ~~awards,~~common stock.

The classification of stock-based compensation expense for the ~~J&J performance criteria applicable to any outstanding performance-based awards~~fiscal three months ended March 31, 2024 and April 2, 2023 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.


	Fiscal Three Months Ended
(Dollars in Millions)		March 31, 2024			April 2, 2023




Cost of sales			$	36		$	4
Selling, general, and administrative expenses			45			31
Total stock-based compensation expense			$	81		$	35

The ~~incremental cost of each RSU replaced is estimated based on the~~increase in stock-based compensation expense was primarily driven by a higher grant date fair value and shorter expense attribution period of the ~~Company’s shares at~~converted Kenvue stock-based awards outstanding in the ~~deemed modification date, adjusted~~current period as compared to ~~reflect that~~stock-based awards outstanding in the ~~RSUs do not participate~~prior period, which were granted under the J&J plans prior to the Conversion Date, as well as the grant of the Founder Shares (as defined 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 StatementsNote 15, “Segments of ~~Operations over the vesting period,~~Business—Segment Net Sales and ~~are non-cash activities within the Condensed Consolidated Statements of Cash Flows.~~Segment Adjusted Operating Income”) on October 2, 2023.

Stock Options

~~On August 23, 2023,~~During the fiscal three months ended March 31, 2024, the Company ~~was deemed to have issued 57 million of non-qualified~~granted 13,496,000 stock options. The stock options expire 10 years from the grant date 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~~vest over service periods that range from one year 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.four years.

2023

The weighted average grant date fair value of stock options granted during the fiscal three months ended March 31, 2024 was $3.17. The grant date 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~~model. The weighted average ~~exercise price~~assumptions used in calculating the grant date fair value of ~~approximately $20.62.~~stock options granted during the fiscal three months ended March 31, 2024 were as follows:

~~Assumption~~

~~August 2023 Converted Stock Options~~

~~Expected Volatility~~

~~16.2% - 21.4%~~

~~Expected Dividends~~

~~3.2%~~Fiscal Three Months Ended

~~Risk-Free Rate~~March 31, 2024

~~4.2% - 5.4%~~

Expected ~~Term~~volatility(1)

21.3

Expected dividend yield(2)

~~0.5 years - 6.5 years~~

3.9

Risk-free rate(3)

4.1

Expected term(4)

(1)

Expected ~~volatilities are~~volatility is based on the historical volatility of a selected group of the Company’s peers and other factors.

(2) Expected dividend yield is calculated using the assumed dividend payout per common share as a percentage of the average Kenvue ~~uses historical data to estimate stock option exercises and employee termination within~~common share price for 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~~prior three-month period, which is ~~consistent with the historical experiences of J&J for similar awards to the Kenvue population. The risk-free~~then annualized.

(3) Risk-free rate is based on the U.S. Treasury yield curve in effect atas of the grant date for options granted.

(4) Given the lack of trading history of Kenvue common stock as of the time of ~~grant.~~valuation, the expected term is calculated as the average of the vesting periods and the contractual terms of the stock options.

~~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~~Restricted Stock Units and ~~replaced by Kenvue awards, resulting in incremental stock-based compensation expense of $25 million recognized in~~Performance Stock Units

During 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,~~March 31, 2024, the Company ~~reversed $148 million~~granted 6,963,000 RSUs which vest over service periods that range from one year to three years. The weighted average grant date fair value of ~~previously recognized stock-based compensation costs. From August 23, 2023 through the end of~~RSUs granted during the fiscal three months ended ~~October 1, 2023, the Company recognized $110 million~~March 31, 2024 was $19.02. The grant date fair value of ~~compensation costs attributable~~RSUs granted is equivalent to the close price of Kenvue common stock on the New York Stock Exchange on the grant date. All RSUs ~~and stock options described above. In total,~~granted have dividend participation rights during the ~~Company recognized incremental stock-based compensation expense of $135 million in~~vesting period.

During the fiscal three months ended ~~October 1, 2023,~~March 31, 2024, the Company granted 1,180,000 PSUs which are paid in shares of ~~which, $123 million related to employee services provided prior~~Kenvue’s common stock after the end of a three-yearperformance period. The vesting of PSUs is tied to the ~~Separation.~~

Incompletion of a three-year service period and the achievement, over a three-year period, of specified performance metrics as well as the relative total shareholder return for Kenvue common stock. The number of shares earned at the ~~Company~~end of the three-year performance period will vary, based on actual performance, from 0% to 200% of the target number of PSUs granted. The grant date fair value of each PSU, inclusive of the fair value associated with the achievement of the specified performance metrics and the relative total shareholder return goal, was estimated on the grant date using a Monte Carlo valuation model. The weighted average grant date fair value of PSUs granted during the fiscal three months ended March 31, 2024 was $18.60. During the three-year performance period, stock-based compensation expense for the PSUs will be adjusted based on the Company’s best estimate of achievement of the specified performance metrics. The cumulative effect on current and prior periods of a change in the estimated number of PSUs that are expected to be earned will be recognized ~~$2 million of~~as an adjustment to stock-based compensation expense in the ~~fiscal three months ended October 1, 2023, as compared to $30 million in~~period of 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.adjustment.

~~The components and classification of stock-based compensation expense directly attributable to those employees specifically identified as employees of the Company and allocations from~~

9. Relationship with J&J ~~for the fiscal three and nine months ended October 1, 2023 and October 2, 2022, were as follows:~~

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 $ 2 $ 6 $ 18 $ 24
Selling, general, and administrative expenses — 24 57 82
Stock-based compensation expense $ 2 $ 30 $ 75 $ 106

Stock-based compensation expense includes $6 million for the fiscal three months ended October 2, 2022 and $2 million and $24 million for the fiscal nine months ended October 1, 2023 and October 2, 2022, respectively, of allocated charges from J&J, based on percentage attribution related to 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 upon the completion of the Exchange Offer (see Note 1, “Description of the Company and Summary of Significant Accounting ~~Policies).~~Policies—Description of the Company and Business Segments”), and J&J ceased to be a related party on that date. The Company continues to have material agreements with J~~&J and considers~~&J—see “—Transactions with J&J, ~~to be a~~

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

Cost Allocations from J&J Prior to Kenvue IPO

Prior to the Kenvue IPO, 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 J&J’s affiliates and related costs for support ~~are~~were charged to J&J’s affiliates. Allocated costs included in Cost of sales onin the ~~Company’s~~ Condensed Consolidated Statements of Operations ~~relate~~related to enterprise-wide support primarily consisting of facilities, insurance, logistics, quality, and compliance, which ~~are~~were predominantly allocated based on Net sales. Allocated costs included in Selling, general, and administrative expenses primarily ~~relate~~related 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~~were predominantly allocated based on Net sales or headcount. See Note 1, “Description of the Company and Summary of Significant Accounting ~~Policies”.~~Policies—Basis of Presentation.”

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

Fiscal Three Months Ended Fiscal Nine Months Ended
(Dollars in Millions) October 2, 2022 October 1, 2023 October 2, 2022
Cost of sales $ 66 $ 25 $ 142
Selling, general, and administrative expenses 174 120 504
Total $ 240 $ 145 $ 646


	Fiscal Three Months Ended
(Dollars in Millions)	April 2, 2023
Cost of sales	$	9
Selling, general, and administrative expenses	87
Total costs allocated	$	96

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~~period 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 the Company’s employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology, and infrastructure. No allocations were made ~~during the fiscal three months ended October 1, 2023 as~~after Kenvue became a fully independent company.

Net Transfers to ~~Johnson & Johnson~~J&J

Net transfers to ~~Johnson & Johnson~~J&J are included ~~within~~in Net investment from ~~Johnson & Johnson on~~J&J in the ~~Condensed Consolidated Balance Sheets and~~ Condensed Consolidated Statements of Equity and within financing activities onin the Condensed Consolidated Statements of Cash Flows and represent the net effect of transactions between the Company and J&J. No transactions were recorded in ~~the~~ Net transfers to ~~Johnson & Johnson account during~~J&J subsequent to the fiscal three months ended ~~October 1,~~July 2, 2023.

The components of Net transfers to ~~Johnson & Johnson~~J&J for the fiscal ~~nine~~three months ended ~~October 1,~~April 2, 2023 ~~and three and nine months ended October 2, 2022~~ were as follows:

Fiscal Three Months Ended Fiscal Nine Months Ended
(Dollars in Millions) October 2, 2022 October 1, 2023 October 2, 2022
Cash pooling and general financing activities $ (929) $ (446) $ (2,253)
Corporate cost allocations 240 145 646
Taxes deemed settled with J&J 24 27 25
Allocated derivative and hedging gains 15 — 40
Net transfers to Johnson & Johnson as reflected in the Condensed Consolidated Statements of Cash Flows $ (650) $ (274) $ (1,542)
Stock-based compensation expense(1)
30 — 106
Other(2)
— (34) (132)
Net transfers to Johnson & Johnson as reflected in the Condensed Consolidated Statements of Equity $ (620) $ (308) $ (1,568)


	Fiscal Three Months Ended
(Dollars in Millions)	April 2, 2023
Cash pooling and general financing activities	$	(409)
Corporate cost allocations	96
Taxes deemed settled with J&J	27

Net transfers to J&J as reflected in the Condensed Consolidated Statement of Cash Flows	$	(286)
Other	(32)
Net transfers to J&J as reflected in the Condensed Consolidated Statement of Equity	$	(318)

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

~~Related Party~~ Transactions ~~including Separation Agreement,~~ with J&J, including the Separation Agreement

In connection with the Separation, Kenvue entered into various agreements with 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 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 Johnson & Johnson, net impact of which resulted in an increase in net assets and total equity by $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 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 J&J and Kenvue regarding, among other matters:

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

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

•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 J&J of the shares of Kenvue ~~Common Stock~~common stock owned by J&J following the Kenvue IPO (the “Distribution”); and

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

In connection with the Kenvue IPO, J&J and ~~Kenvue~~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~~agreement (the “Tax Matters Agreement”), which governs 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~~“—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;~~Distribution;

•an intellectual property agreement, which governs 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 J&J granted to Kenvue a license to use certain trademarks owned by J&J on a transitional basis following the completion of the Kenvue IPO;

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

•a transition manufacturing agreement (the “Transition Manufacturing Agreement”), pursuant to which J&J ~~will provide~~provides 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 J&J certain registration rights with respect to the shares of Kenvue common stock owned by J&J following the completion of the Kenvue IPO.

In connection with the ~~Kenvue IPO,~~Separation, J&J and Kenvue also entered into various ~~related party~~operating lease agreements, in which the Company subleased properties from J&J. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—~~Leases”~~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 onin the ~~Company’s~~ Condensed Consolidated Financial Statements:


(Dollars in Millions)	March 31, 2024		December 31, 2023
Prepaid expenses and other receivables	$	240	$	213
Accounts payable and accrued liabilities	$	548	$	486
Other assets	$	77	$	87
Other liabilities	$	154	$	153

Fiscal Three Months Ended

(Dollars in Millions)

March 31, 2024

~~October 1,~~April 2, 2023

~~Accounts payable and accrued liabilities~~Cost of sales

~~483~~62

~~Prepaid expenses and other receivables~~

~~324~~—

~~Other assets~~Selling, general, and administrative expenses

8063

~~Other liabilities~~

~~190~~—

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

The Company entered into the 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)~~1) any taxes of Kenvue for all periods after the Distribution

and ~~(2)~~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)~~1) any taxes of J&J for all periods after the Distribution and ~~(2)~~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, August 23, 2025, covenants ~~will be~~are 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 on the Company to date. The Company believes that it has complied with these requirements to date.

The Company recorded a net liability totaling approximately ~~$186~~$231 million offor income and non-income indemnification tax payables and refunds, unrecognized tax benefits and associated interest due to ~~the Company’s Former Parent~~J&J as ~~indemnifications to~~ Prepaid expenses and other receivables and ~~Accounts payable~~Accrued liabilities for current assets and current liabilities, respectively, and to Other assets and Other liabilities for ~~noncurrent~~non-current assets and ~~noncurrent~~non-current liabilities, respectively, inon the Condensed Consolidated Balance Sheet as of ~~October 1, 2023.~~March 31, 2024.

~~Debt Financing Transactions and IPO Consideration~~

During the 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 in connection with the Separation.

9.10. Other Operating Expense (Income), Net and Other Expense, Net

Other operating expense (income), net for the fiscal three ~~and nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023 ~~and October 2, 2022~~ consisted of:

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


	Fiscal Three Months Ended
(Dollars in Millions)		March 31, 2024		April 2, 2023
Litigation expense		$	2	$	—
Royalty income		(9)		(7)
Gain on disposal of fixed assets		—		(9)
Impact of Deferred Markets(1)		15		—

Fixed asset impairment(2)		68		—
Other(3)		2		(1)
Total other operating expense (income), net		$	78	$	(17)

(1) Includes ~~income~~the provision for taxes, minority interest expense, and service fees to be paid to J&J under the net economic benefit arrangements. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Variable Interest Entities and Net Economic Benefit Arrangements,” for more information regarding Deferred Markets.

(2)~~Includes~~ Represents the ~~reversal~~impairment charge recorded on the held for sale asset associated with the Company’s interim corporate headquarters in Skillman, New Jersey. See Note 1, “Description of ~~a contingent liability that was no longer considered to be probable.~~the Company and Summary of Significant Accounting Policies—Assets Held for Sale,” for more information.

(3) Includes ~~intangible asset impairment, pension related~~impact of foreign derivative contracts and other miscellaneous operating (income) expenses.

Other expense, net for the fiscal three ~~and nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023 ~~and October 2, 2022~~ consisted of:

Fiscal Three Months Ended Fiscal Nine Months Ended
(Dollars in Millions) October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022
Currency losses on transactions $ 23 $ 25 $ 51 $ 23
Other(1)
2 — 14 (4)
Total Other expense, net $ 25 $ 25 $ 65 $ 19


	Fiscal Three Months Ended
(Dollars in Millions)		March 31, 2024		April 2, 2023
Currency (gains)/losses on transactions		$	(4)	$	16
Losses on investments		31		7
Other(1)		1		7
Total other expense, net		$	28	$	30

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

~~10.~~11. Income Taxes

For interim financial statement purposes, U.S. GAAP ~~income tax expense/benefit~~provision (benefit) for taxes 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~~Provision (benefit) for taxes 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~~in the fiscal three ~~and nine~~ months ended October 1, 2023, the Company changed ~~the~~its 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.~~Policies—Change in Accounting Principle.”

~~During~~The worldwide effective income tax rates for the ~~periods presented~~fiscal three months ended March 31, 2024 and April 2, 2023 were 30.7% and 23.0%, respectively. The increase for the fiscal three months ended March 31, 2024 as compared to the fiscal three months ended April 2, 2023 was primarily the result of reduced benefits for foreign tax credits, prior year releases of tax reserves due to statute of limitations expiring, and shortfall on stock-based compensation.

As discussed in Note 1, “Description of the ~~Condensed Consolidated Financial Statements,~~Company and Summary of Significant Accounting Policies—Basis of Presentation,” prior to April 4, 2023, the Company operated as ~~part~~a segment of J&J ~~until~~and not as a separate entity. Accordingly, the ~~completion of the Exchange Offer and therefore will be included in J&J’s U.S. Federal~~effective worldwide income tax ~~return until that date. The Company will then file a standalone U.S. Federal income tax return~~rate for the remainder of 2023. The Company expects to file income tax returns on a standalone basis in most other jurisdictions in which it operates for 2023. However, for the purposes of the Condensed Consolidated Financial Statements, the income taxes and related income tax accounts have beenfiscal three months ended April 2, 2023 was calculated using the separate return method as if the Company filed income tax returns on both a standalone basis ~~for all of 2023. Prior to the Kenvue IPO, the Company’s operations were calculated~~and on a carve-out ~~basis and included~~basis. This resulted in the inclusion of certain hypothetical foreign tax credit ~~benefits. Post-Kenvue IPO, these hypothetical foreign tax credit~~ benefits ~~are~~that did not ~~available for future utilization by~~exist following the Company and were removed from the tax provision. Now as a standalone independent company, the income taxes and related income tax accounts of the Company may differ from the Condensed Consolidated Financial Statements which include year-to-date results prior to the Exchange Offer.

The worldwide effective income tax rates for the fiscal three months ended October 1, 2023 and October 2, 2022 were 25.1% and 20.6%, respectively, and for the fiscal nine months ended October 1, 2023 and October 2, 2022 were 27.1% and 19.9%, respectively. The increase for the fiscal three months ended October 1, 2023 as compared to the fiscal three months ended 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 less favorable return to provision adjustments offset by discrete foreign tax 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 $51 million valuation allowance against a deferred tax asset related to future foreign tax credit benefits thus increasing the reported rate for the fiscal nine months ended October 1, 2023 as compared to the fiscal nine months ended October 2, 2022.Kenvue IPO.

As of ~~October 1, 2023,~~March 31, 2024, the Company had approximately ~~$226~~$174 million of liabilities from unrecognized tax benefits. The Company conducts business and ~~will file~~files tax returns in numerous countries. The Company and J&J currently have tax audits in progress in several ~~jurisdictions.~~jurisdictions, which remain open from 2008 and forward. With respect to the United States, the Internal Revenue Services is currently auditing the 2013-2016 fiscal periods of J&J. We currently expect J&J to complete this audit and settlement of the related tax liabilities in the next 12 months. Perper the Tax Matters Agreement between J&J and the Company, J&J remains liable for all liabilities related to the final settlement of ~~this audit and~~ any U.S. federal income tax audits in which the Company is part of J&J’s federal consolidated ~~tax~~ return. During the fiscal nine months ended October 1, 2023, 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.~~audits range from 2015 and forward. The Company believes it is possible that certain tax audits in major jurisdictions where the Company conducts business outside of the United States may be completed over the next 12 months by their respective taxing ~~authorities in some jurisdictions outside of the United States.~~authorities. 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~~provision for taxes in the ~~Company’s~~ Condensed Consolidated Statements of Operations.

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~~$1 billion, an excise tax on corporate stock buybacks, and several tax incentives to promote clean energy. Based on the Company’s ~~preliminary~~current analysis, as well as recently published guidance by the IRS, the IRA isdid not

~~expected to~~ have a ~~material~~significant 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.

The Company has included the estimated impact of enacted legislation related to the Organization for Economic Co-operation Development’s (“OECD”) Pillar Two Inclusive Framework in its provision for taxes beginning in the fiscal three months ended March 31, 2024. While the estimated impact is not material, it is possible that further OECD implementation guidance, or legislation in countries in which the Company operates, could have a material effect on the Company’s provision for taxes in the future.

~~11. Earnings~~

12. Net Income Per Share

The Company had 1,919,648,483 shares of common stock issued and 1,914,698,483 shares of common stock outstanding as of March 31, 2024. Prior to the completion of the Kenvue IPO, the Company had 1,716,160,000 shares of common stock outstanding, of which 1,716,159,990 shares were issued to ~~Johnson & Johnson~~J&J 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 October 1, 2023,~~For all periods prior to the ~~Company had 1,914,909,765 shares of common stock issued and outstanding. For~~Kenvue IPO, 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.

Diluted ~~earnings~~net income per share is computed by giving effect to all potentially dilutive equity instruments or equity awards that are outstanding during the period. During the fiscal three months ended March 31, 2024, 57,601,000 shares were determined to be anti-dilutive under the treasury stock method and therefore were excluded from the diluted net income per share calculation. There were no equity awards of the Company 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 nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023 ~~and October 2, 2022~~ was calculated as follows:


		Fiscal Three Months Ended				Fiscal Nine Months Ended
				Fiscal Three Months Ended
				Fiscal Three Months Ended
				Fiscal Three Months Ended
(In Millions, Except Per Share Data)	(In Millions, Except Per Share Data)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Net income
Net income
Net income	Net income	$	438	$	586	$	1,337	$	1,703

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		4		—		4		—

Basic weighted average number of shares outstanding

Basic weighted average number of shares outstanding
Diluted effects of stock-based awards
Diluted effects of stock-based awards
Diluted effects of stock-based awards
Diluted weighted average number of shares outstanding
Diluted weighted average number of shares outstanding
Diluted weighted average number of shares outstanding	Diluted weighted average number of shares outstanding	1,920		1,716		1,827		1,716

EPS:
Net income per share:

Net income per share:

Net income per share:
Basic
Basic
Basic	Basic	$	0.23	$	0.34	$	0.73	$	0.99
Diluted	Diluted	$	0.23	$	0.34	$	0.73	$	0.99
Diluted
Diluted

~~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.~~13. 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.

2729

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:


			October 1, 2023								January 1, 2023
		March 31, 2024																					March 31, 2024				December 31, 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:

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

Interest rate swaps			—		—		—		—		29		—		29		—
Total			$	82	$	—	$	82	$	—	$	68	$	—	$	68	$	—

Cross currency swap contracts

Cross currency swap contracts

Cross currency swap contracts

Total assets
Total assets
Total assets
Liabilities:	Liabilities:
Forward foreign exchange contracts	Forward foreign exchange contracts		$	(73)	$	—	$	(73)	$	—	$	(15)	$	—	$	(15)	$	—
Forward foreign exchange contracts
Forward foreign exchange contracts
Cross currency swap contracts

Interest rate swaps			—		—		—		—		(39)		—		(39)		—
Total			$	(73)	$	—	$	(73)	$	—	$	(54)	$	—	$	(54)	$	—

Total liabilities

Total liabilities

Total liabilities
Net amount presented in Prepaid expenses and other receivables:	Net amount presented in Prepaid expenses and other receivables:		$	33	$	—	$	33	$	—	$	14	$	—	$	14	$	—
Net amount presented in Accounts payable			$	(23)	$	—	$	(23)	$	—	$	—	$	—	$	—	$	—
Net amount presented in Accounts payable:
Net amount presented in Other assets:

As of March 31, 2024 and December 31, 2023, cash equivalents were $364 million and $329 million, respectively, which were primarily comprised of time deposits and money market funds.

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 ~~October 1, 2023~~March 31, 2024 and ~~January 1,~~December 31, 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~~cross currency swaps are recorded at fair value that is derived from observable market data, including foreign exchange rates and yield curves. ~~All~~

The fair value of the Company’s derivative ~~instruments are classified as Level 2 securities.~~assets is included in Prepaid expenses and other receivables and Other Assets on the Condensed Consolidated Balance Sheets. The fair value of the Company’s derivative liabilities is included in Accounts payable on the Condensed Consolidated Balance Sheets.

There were no transfers between Level 1, Level 2, or Level 3 during the fiscal three ~~and nine~~ months ended ~~October 1, 2023~~March 31, 2024 and the fiscal ~~year~~twelve months ended ~~January 1,~~December 31, 2023.

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


		October 1, 2023						January 1, 2023
		March 31, 2024
		March 31, 2024
		March 31, 2024														December 31, 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		Cross currency swap contracts	Total notional amount	Forward foreign exchange contracts	Cross currency swap contracts	Total notional amount
Cash flow hedges	Cash flow hedges	$	3,810	$	—	$	3,810	$	1,768	$	2,400	$	4,168
Undesignated forward foreign exchange contracts		$	586	$	—	$	586	$	—	$	—	$	—
Fair value hedges
Net investment hedges	Net investment hedges	$	—	$	—	$	—	$	—	$	—	$	—
Undesignated hedging instruments

Cash Flow Hedges

For the fiscal three ~~and nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023, the Company recorded a total after-tax change in Accumulated other comprehensive loss of ~~$(4)~~$(21) million and ~~$27~~$39 million, respectively, related to its cash flow hedge portfolio. For the three and nine months ended October 2, 2022, the Company recorded a total after-tax change in Accumulated other comprehensive 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 ~~loss,~~(loss) income, 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 ~~loss.~~(loss) income. 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 onin the ~~Company’s~~ Condensed Consolidated Statements of Operations, as applicable.

The Company expects that substantially all of the amounts related to forward foreign exchange contracts will be reclassified into earnings over the next 12 months as a result of transactions that are expected to occur over that period. The maximum length of time over which the Company is hedging transaction exposure is 18 months. The amount ultimately realized in earnings may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity of the derivative.

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

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)


	Fiscal Three Months Ended
	March 31, 2024	April 2, 2023
(Loss) gain recognized in Other comprehensive (loss) income	(11)	17
Gain reclassified from Other comprehensive (loss) income into earnings	1	$	11

The following ~~tables are~~table is a summary of the ~~reclassifications to Net Income~~gains and losses reclassified from Other comprehensive (loss) income into earnings related to the ~~Company’s~~ forward foreign exchange contracts for the fiscal three ~~and nine~~ months ended ~~October 1, 2023~~March 31, 2024 and ~~October~~April 2, ~~2022:~~2023:

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


	Fiscal Three Months Ended
	March 31, 2024			April 2, 2023
(Dollars in Millions)	Net Sales	Cost of Sales	Other expense, net	Net Sales		Cost of Sales		Other expense, net
Gain (loss) reclassified from Other comprehensive income into earnings	—	(6)	7	$	1	$	10	$	—

Fiscal Nine Months Ended
October 1, 2023 October 2, 2022
(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 $ — $ 18 $ (2) $ 18 $ 5 $ 14
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 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, net on the Company’s Condensed Consolidated Statements of Operations. As of 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 $(2) million and $0 million, respectively.

Forward Starting Interest Rate Swaps

Beginning in the ~~fourth quarter of 2022,~~fiscal three months ended January 1, 2023, 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 ~~nine~~three months ended ~~October 1,~~April 2, 2023, the Company recorded a gain of ~~approximately~~ $48 million in Accumulated other comprehensive ~~loss. Upon~~loss, of which $38 million was related to the ~~issuance~~settlement of ~~the forecasted debt, the Company settled~~ its forward starting interest rate swaps ~~and received~~upon the issuance of the forecasted debt. The $38 million ~~in cash. The~~ gain in Accumulated other comprehensive loss will be amortized and recorded in Other expense, net onin 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 nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023, wethe amounts reclassified ~~$1 million and $3 million, respectively,~~ from Other comprehensive ~~loss~~(loss) income to the Condensed Consolidated Statements of Operations were not significant.

Fair Value Hedges

Forward Foreign Exchange Contracts

During the fiscal three months ended March 31, 2024, the Company entered into forward foreign exchange contracts to hedge against the risk of changes in the fair value of foreign denominated intercompany debt attributable to foreign exchange rate fluctuations. These contracts are designated as fair value hedging relationships at the date of contract inception in accordance with the appropriate accounting guidance. At inception, all designated fair value hedging relationships are expected to be highly effective. The contracts were accounted for using the spot method with changes in the fair value of the contract attributable to the changes in spot rates recorded within Other expense, net in the Condensed Consolidated Statements of Operations. The Company has elected to exclude the changes in the fair value attributable to the difference between the spot price and the forward price, as well as any cross currency basis spread, from the assessment of hedge effectiveness (the “excluded components”). The excluded components were excluded from the assessment of the hedge effectiveness. The initial value of the excluded component was not significant to the Condensed Consolidated Financial Statements as of March 31, 2024. The changes in fair value attributable to the excluded components are recognized in Accumulated other comprehensive loss. The changes in fair value attributable to the excluded components will be recognized in Other expense, net in the Condensed Consolidated Statements of Operations on a systematic and rational basis over the life of the hedging instrument.

Net Investment Hedges

~~The~~Cross Currency Swap Contracts

During the fiscal three months ended December 31, 2023 and the fiscal three months ended March 31, 2024, the Company designated ~~certain forward~~cross currency ~~exchange~~swap contracts as net investment hedges to ~~mitigate foreign exchange~~hedge exposure ~~related to non-U.S. dollar net investments~~ in ~~certain~~ foreign subsidiaries against changes in foreign exchange rates. During the fiscal three and nine months ended October 1, 2023 and October 2, 2022, the Company designated as a net investment hedge a forward currency exchange contract to sell foreign currency (denominated in thewith local ~~currency of the affiliate) at specified forward rates.~~functional currencies. These contracts were accounted for using the spot method with changes in the fair value of the contracts attributable to changes in spot rates recorded inwithin Cumulative Translation Adjustments (“CTA”) as a component of Other comprehensive ~~loss (CTA). Changes~~(loss) income and will remain there until the hedged net investments are sold or substantially liquidated. The Company has elected to exclude the changes in the fair value attributable to time value ~~(“excluded~~and spot-forward rate differences (the “excluded net investment hedge components”) ~~were initially recorded~~from the assessment of the hedge effectiveness. The excluded net investment hedge components associated with the net investment hedge entered into during the fiscal three months ended December 31, 2023 had an initial value of $7 million in the period of inception, and the excluded net investment hedge components associated with the net investment hedge entered into during the fiscal three months ended March 31, 2024 had an initial value of $(7) million in the period of inception. The changes in fair value attributable to the excluded net investment hedge components are recognized into interest expense in the Condensed Consolidated Statements of Operations on a systematic and rational basis through the swap accrual over the life of the hedging instrument.

The following table is a summary of the gains and losses recognized within Other comprehensive ~~loss (CTA)~~(loss) income related to the cross currency swap contracts designated as net investment hedges:


	Fiscal Three Months Ended
(Dollars in Millions)	March 31, 2024		April 2, 2023
Loss recognized in CTA within Other comprehensive (loss) income	$	(47)	$	—

Other than amounts excluded from effectiveness testing, the Company did not reclassify any gains or losses from CTA within Other comprehensive (loss) income to earnings during the fiscal three months ended March 31, 2024 and April 2, 2023 related to the cross currency swap contracts.

Undesignated Hedging Instruments

Undesignated Forward Foreign Exchange Contracts

Since 2022, the Company has entered into forward foreign 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, net onin the ~~Company’s~~

Condensed Consolidated Statements of ~~Operations ratably over~~Operations. As of March 31, 2024 and December 31, 2023, respectively, the ~~life~~Company held forward foreign exchange contracts that were not designated in cash flow hedging relationships with a fair value of $(1) million and $4 million, respectively.

The following table is a summary of the ~~contract. The~~gains and losses recognized within Other expense, net related to the undesignated forward ~~currency~~foreign exchange contracts ~~designated as net investment hedges were settled during~~for the fiscal three months ended ~~October 1, 2023.~~March 31, 2024 and April 2, 2023:


	Fiscal Three Months Ended
	March 31, 2024	April 2, 2023
(Loss) gain recognized in Other expense, net	(3)	$	6

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, 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 ~~October 1, 2023~~March 31, 2024 and ~~January 1,~~December 31, 2023, such investments totaled ~~$76~~$41 millionand ~~$56~~$71 million, respectively, and were included in Other assets on the Condensed Consolidated Balance Sheets.

~~13.~~

14. 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, intellectual property, commercial contracts, foreign exchange controls, 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 ~~October 1, 2023,~~March 31, 2024, 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 450-20-25.~~developments. 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 inon 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~~the Company’s subsidiary Johnson & Johnson Consumer Inc. (“JJCI”), along with other third-party sellers of acetaminophen-containing products, in federal court alleging that in utero exposure to acetaminophen (the active ingredient in Tylenol®, an over-the-counter (“OTC”) 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. In February 2024, the court entered final judgment in favor of JJCI and the other sellers of acetaminophen-containing products and dismissed the majority of cases then pending in the multi-district litigation. A Notice of Appeal was filed in March 2024. No trial dates have been set in ~~these~~the remaining 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~~lawsuits have been filed in state court against JJCI, the Company and J&J, and lawsuits have been filed in Canada against ~~our~~the Company’s 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 of these claims and lawsuits.

General Litigation

In 2006, J&J acquired Pfizer’s ~~over-the-counter (“OTC”)~~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~~OTC Zantac (ranitidine) products. Plaintiffs in the underlying actions allege that Zantac and other ~~over-the-counter~~OTC 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~~individuals 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~~OTC Zantac (ranitidine) products.

J&J and/or JJI have also been named in ~~four~~two of the ~~seven~~five outstanding putative class actions filed in Canada with similar allegations regarding Zantac or ranitidine use. Of the ~~four~~two outstanding putative class actions naming J&J and/or JJI, the ~~British Columbia~~Quebec Superior Court action has been stayed, ~~the Alberta action has been discontinued,~~ and the ~~Quebec action has been stayed. The~~ Ontario Superior Court of Justice 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 of 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 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.~~2023, and an appeal is pending before the U.S. Court of Appeals for the Eleventh Circuit.

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 third-party 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~~In December 2023, lawsuits filed in federal courts in the United States were organized as a multi-district litigation ~~has been filed.~~in the U.S. District Court for the Eastern District of New York. Separately, putative Canadian class actions were filed beginning in September 2023 against the Company’s affiliates, along with other third-party sellers and manufacturers of PE-containing products, alleging false, misleading representations, and seeking damages and declaratory relief based on similar causes of action.

Additionally, beginning in October 2023, atwo putative securities class ~~action was~~actions were filed in the U.S. District Court for the District of New Jersey against the Company and certain of its officers, among other defendants. In December 2023, the two cases were consolidated as In re Kenvue Inc. Securities Litigation and a lead plaintiff was appointed. In March 2024, a consolidated amended complaint was filed that named the Company’s directors as defendants in addition to the defendants named in the initial complaints. The consolidated amended complaint brings claims under the Securities Act of 1933, as amended. It alleges that the ~~Company made false or~~Company’s registration statements and prospectuses filed with the SEC in connection with the Kenvue IPO on Form S-1 and the Exchange Offer on Form S-4 contained misleading statements and ~~omitted material facts,~~omissions about ~~PE and the efficacy of certain PE-containing products, and~~PE. It seeks damages for all shareholders who acquired shares pursuant to the ~~registration statement~~Kenvue IPO and the ~~IPO Prospectus~~Exchange Offer registration statements and prospectuses.

Finally, in January 2024, shareholder derivative complaints were filed in the U.S. District Court for the District of New Jersey against the Company as the nominal defendant and the Company’s directors and certain of its officers as defendants, among other defendants. The derivative complaints allege breaches of fiduciary duties based on disclosures in the Company’s SEC filings regarding PE, and they seek damages and equitable relief. The derivative complaints have been consolidated as In re Kenvue, ~~IPO.~~Inc. Derivative Litigation and have been stayed. 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 of these claims and lawsuits.

In March 2024, following the filing of a Citizen Petition with FDA by Valisure LLC that included testing results purporting to show that benzoyl peroxide (“BPO”) OTC acne products can degrade into benzene at levels well above the alleged limit of two parts per million, putative class actions were filed against the Company and its affiliates, along with other third-party sellers and

manufacturers of BPO-containing acne products, asserting various causes of action including violation of consumer protection statutes, negligence, breach of express and implied warranties, and unjust enrichment. The complaints, pending in the U.S. District Court for the Central District of California, the U.S. District Court for the Northern District of Illinois, and the U.S. District Court for the District of New Jersey seek damages and injunctive relief. 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 of 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.~~

15. Segments of Business

The Company historically operated as part of J&J and reported under J&J’s segment ~~structure and historically~~structure. Prior to the ~~Chief Operating Decision Maker (“CODM”)~~Separation, the Company’s CODM was 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.chief executive officer.

Segment profit is based on Operating income, excluding depreciation and amortization, ~~non-recurring~~ Separation-related costs, restructuring ~~expense,~~and operating model optimization initiatives, the impact of the conversion of ~~share-based~~stock-based awards, issuance of Founder Shares, Other operating expense (income), net, and unallocated general corporate administrative expenses (referred to herein as “Segment adjusted operating income”), as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which include expenses related to treasury, ~~and~~ legal operations and certain other expenses, along with 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, Eye Care, 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, Wound Care, and ~~Wound Care)~~Other)

The Company’s product categories as a percentage of Net sales for the fiscal three ~~and nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023 ~~and October 2, 2022~~ were as follows:

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 %


	Fiscal Three Months Ended
Product Categories		March 31, 2024		April 2, 2023
Cough, Cold, and Allergy		15	%	14	%
Pain Care		13		14
Other Self Care		16		14
Face and Body Care		18		20
Hair, Sun, and Other		9		9
Oral Care		10		9
Baby Care		9		9
Other Essential Health		10		11
Total		100	%	100	%

Segment Net Sales and Segment Adjusted Operating Income

Segment net sales and Segment adjusted operating income for the fiscal three ~~and nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023 ~~and October 2, 2022~~ were as follows:


		Segment Net Sales
		Fiscal Three Months Ended					Fiscal Nine Months Ended
							Segment Net Sales
							Segment Net Sales
							Segment Net Sales
				Fiscal Three Months Ended							Fiscal Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	October 1, 2023			October 2, 2022		October 1, 2023		October 2, 2022
Self Care	Self Care	$	1,613		$	1,516	$	4,914	$	4,462
Self Care
Self Care
Skin Health and Beauty
Skin Health and Beauty
Skin Health and Beauty	Skin Health and Beauty	1,119			1,124		3,377		3,262
Essential Health	Essential Health	1,183			1,149		3,487		3,459
Total segment net sales		$	3,915		$	3,789	$	11,778	$	11,183
Essential Health
Essential Health
Total net sales
Total net sales
Total net sales


		Segment Adjusted Operating Income
		Fiscal Three Months Ended					Fiscal Nine Months Ended
							Segment Adjusted Operating Income
							Segment Adjusted Operating Income
							Segment Adjusted Operating Income
				Fiscal Three Months Ended							Fiscal Three Months Ended
(Dollars in Millions)	(Dollars in Millions)	October 1, 2023			October 2, 2022		October 1, 2023		October 2, 2022
Self Care	Self Care	$	583		$	556	$	1,741	$	1,554
Self Care
Self Care
Skin Health and Beauty
Skin Health and Beauty
Skin Health and Beauty	Skin Health and Beauty	167			246		517		616
Essential Health	Essential Health	309			261		770		821
Total segment adjusted operating income(1)(2)		$	1,059		$	1,063	$	3,028	$	2,991
Reconciliation to Income before taxes:
Essential Health
Essential Health
Segment adjusted operating income
Segment adjusted operating income
Segment adjusted operating income
Reconciliation to Income before taxes
Reconciliation to Income before taxes
Reconciliation to Income before taxes
Less:
Less:
Less:
Depreciation
Depreciation
Depreciation	Depreciation	72			69		211		213
Amortization	Amortization	81			83		242		265
Amortization
Amortization
Separation-related costs	Separation-related costs	133			50		333		109
Restructuring expense(3)		3			31		3		69
Conversion of share-based awards(4)		(25)			—		(25)		—
Separation-related costs
Separation-related costs
Restructuring and operating model optimization initiatives
Restructuring and operating model optimization initiatives
Restructuring and operating model optimization initiatives
Conversion of stock-based awards(1)
Conversion of stock-based awards(1)
Conversion of stock-based awards(1)
Founder Shares(2)
Founder Shares(2)
Founder Shares(2)
Other operating expense (income), net
Other operating expense (income), net
Other operating expense (income), net	Other operating expense (income), net	9			(14)		(7)		(6)
General corporate/unallocated expenses	General corporate/unallocated expenses	76			81		219		197
Total operating income		$	710		$	763	$	2,052	$	2,144
General corporate/unallocated expenses
General corporate/unallocated expenses
Operating income
Operating income
Operating income
Other expense, net
Other expense, net
Other expense, net	Other expense, net	25			25		65		19
Interest expense, net	Interest expense, net	100			—		154		—
Interest expense, net
Interest expense, net
Income before taxes	Income before taxes	$	585		$	738	$	1,833	$	2,125
Income before taxes
Income before taxes

(1) 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. Segment adjusted operating income did not change as a result of this update.~~

~~(2)~~ 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 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~~stock-based awards ~~(see Note 7, Stock-Based Compensation). This~~that occurred on August 23, 2023. The 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~~March 31, 2024 relating to employee services provided prior to the ~~Separation of $123 million.~~Separation.

~~15. Accrued and Other Liabilities~~

~~Accrued liabilities consisted of:~~

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

~~Other liabilities consisted of:~~

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

~~(1)~~ (2)~~The increase in Other current and noncurrent accrued liabilities relates primarily~~ 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 Shares”). On October 2, 2023, the ~~agreements entered into with J&J in connection with the Separation Agreement, which went into effect~~Founder Shares were granted to all Kenvue employees in the ~~second quarter~~form of ~~2023. See Note 8, “Related Parties” for more information.~~stock options and PSUs to executive officers and either stock options and PSUs or RSUs to non-executive individuals.

16. Restructuring

As part of the Company’s continued transformation to a fit-for-purpose consumer company focused on growth, in the fiscal three months ended March 31, 2024, the Company began to take steps intended to enhance organizational efficiencies and better position Kenvue for future growth. These initiatives primarily include global workforce reductions, changes in management structure, and the relocation of business activities to centralized shared-service functions in lower-cost locations.

The one-time termination benefits and employee-related costs incurred in relation to these restructuring activities are accounted for in accordance with Accounting Standards Codification Topic 420, Exit or Disposal Cost Obligations. The Company recognizes a liability and the related expense for these restructuring costs when the liability is incurred and can be measured.

The related expense for these restructuring costs is recorded in the Restructuring expenses line item in the Condensed Consolidated Statements of Operations.

The following table summarizes the restructuring expenses and the associated spending related to these restructuring activities for the fiscal three months ended March 31, 2024:


	Accrued Restructuring Expenses
(Dollars in Millions)	Employee-related Costs		Other		Total
Accrued restructuring expenses as of December 31, 2023	$	—	$	—	$	—
Restructuring charges	24		17		41
Cash payments	(5)		(1)		(6)
Accrued restructuring expenses as of March 31, 2024	$	19	$	16	$	35

17. Subsequent Events

~~Dividend Declaration~~

On ~~October 26, 2023,~~May 6, 2024, the ~~Company announced that its~~Company’s Board of Directors ~~declared~~approved a ~~$0.20 cash dividend for the fourth quarter of 2023~~multi-year initiative to ~~shareholders. The fourth quarter dividend of $0.20 per share~~build on the ~~outstanding common stock will be payable on November 22, 2023~~Company’s strengths and optimize its cost structure by rebalancing resources to ~~shareholders~~better position the Company for future growth. This initiative is expected to result in pre-tax restructuring expenses and other charges totaling approximately $275 million in each of ~~record as~~fiscal year 2024 and fiscal year 2025, for a total of ~~the close~~approximately $550 million, consisting of ~~business on November 8, 2023.~~IT and project-related costs (approximately 50%), employee-related costs (approximately 40%), and other implementation costs (approximately 10%). The Company expects to reinvest all or a portion of these benefits in future growth opportunities, including immediate reinvestment behind advertising, product promotion, and healthcare professional engagement.

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 Split-Off Prospectus~~ entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal twelve months ended December 31, 2023 filed on March 1, 2024 with the SEC (the “Annual Report”) and the section entitled “Cautionary Note Regarding Forward-Looking Statements” included herein.

~~Our~~This discussion should be read in conjunction with our accompanying Condensed Consolidated Financial Statements as of ~~October 1, 2023~~March 31, 2024 and for the fiscal three ~~and nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022~~which 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~~consolidated financial

statements for the ~~year~~fiscal twelve months ended ~~January 1,~~December 31, 2023, which are included in the ~~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.~~Annual Report. 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~~$15.4 billion in Net sales in ~~2022.~~2023. 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®, Brand, 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: Pain Care; Cough, Cold, and Allergy; ~~Pain Care;~~ and Other Self Care (Digestive Health, Smoking Cessation, Eye Care, and Other). Major brands in the segment include Tylenol®, Motrin®, Nicorette®, Benadryl®, Zyrtec®, Zarbee’s®, ORSLTM, Rhinocort®, and ~~Zyrtec~~Calpol®.

•Skin Health and Beauty. Our Skin Health and Beauty product categories include: Face and Body ~~Care~~Care; and Hair, Sun, and Other. Major brands in the segment include Neutrogena®, Aveeno®, Dr.Ci:Labo®, OGX®, Le Petit Marseillais®, Lubriderm®, and ~~OGX~~Rogaine®.

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

For additional information about our three reportable business segments, see “—“—Key Factors Affecting Our Results—Our Brands and Product ~~Portfolio~~”Portfolio” and Note 14, “~~Segments~~15, “Segments of Business,,” to ~~our~~the Condensed Consolidated Financial Statements included herein.

Separation from Johnson & Johnson

In November 2021, Johnson & Johnson (“J&J”), our former parent company, announced its intention to separate its Consumer Health segment (the “Consumer Health Business”) into ~~a new,~~an independent publicly traded company (the “Separation”). ~~We were~~Kenvue was incorporated in Delaware onin February ~~23,~~ 2022, ~~in connection with~~as a wholly owned subsidiary of J&J, to serve as the ~~Separation and were formed to ultimately hold, directly~~

~~or indirectly, and conducted certain operational activities in anticipation~~ultimate parent company of ~~the planned separation of, the~~J&J’s 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. OnIn April 4, 2023, ~~in connection with the Separation,~~ J&J completed ~~in all material respects~~ the transfer of substantially all 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~~subsidiaries. In May 2023, 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~~completed an initial public offering (the “Kenvue IPO”) of ~~Kenvue’s~~approximately 10.4% of our outstanding 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”).~~

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, 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” 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“KVUE.” Following the Kenvue IPO, J&J owned ~~1,716,160,000 shares of Kenvue common stock, or~~ approximately 89.6% of ~~the total~~our outstanding ~~shares of Kenvue~~ common stock.

On In July ~~24,~~ 2023, J&J ~~initiated~~announced an exchange offer (the “Exchange Offer”) under which its shareholders could exchange shares of J&J common stock for shares of ~~Kenvue Inc.~~our common stock owned by J&J. OnIn August ~~23,~~ 2023, J&J ~~announced the results of~~completed the Exchange Offer ~~through which~~and exchanged shares representing 80.1% of our common stock, completing the Separation from 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 becameand transition to being a fully independent ~~company and~~public company. Following the Separation, J&J ~~now owns~~continues to own approximately 9.5% of ~~the~~our outstanding ~~shares of Kenvue~~ common ~~stock following the completion~~stock.

See Note 1, “Description of the ~~Exchange Offer.~~Company and Summary of Significant Accounting Policies—Description of the Company and Business Segments,” to the Condensed Consolidated Financial Statements for additional information.

We are incurring certain non-recurring separation-related 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 the fiscal year 2024. For additional information about the Separation, see ~~“Agreements between Johnson & Johnson~~Note 1, “Description of the Company and ~~Kenvue~~Summary of Significant Accounting Policies,” and Other Related Person Transactions—Relationship between Johnson & Johnson and Kenvue” and “Agreements between Johnson & Johnson and Kenvue and Other Related Person Transactions—Agreements Entered into in ConnectionNote 9, “Relationship with J&J,” to the ~~Separation” in the Split-Off Prospectus.~~Condensed Consolidated Financial Statements included herein.

Relationship with J&J

~~In connection with the Separation, we~~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~~follow the completion of the Kenvue IPO. ~~These agreements~~See Note 9, “Relationship with J&J, ~~are described in Note 8, “Related Parties,~~” to ~~our~~the Condensed Consolidated Financial Statements included ~~herein.~~herein for additional information on these agreements.

Kenvue Global Corporate Headquarters

On April 20, 2023, we entered into a long-term lease for a newly renovated office building and a newly constructed research and development building in Summit, New Jersey (the “Global Corporate Headquarters Lease”). when completed, will encompass a total of approximately 290,000 square feet and serve as our new global corporate headquarters and research and development center. The relocation to this campus is expected to occur in 2025 for the office building and continue through 2026 for the new research and development building. We will continue to operate from our interim corporate headquarters in Skillman, New Jersey, until that time.

On February 21, 2024, we listed our interim corporate headquarters in Skillman New Jersey for sale, which met the criteria to be classified as held for sale at that date. For the fiscal three months ended March 31, 2024, an impairment charge of $68 million was recorded on the held for sale asset associated with the interim corporate headquarters in Skillman. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Assets Held for Sale,” to the Condensed Consolidated Financial Statements included herein for more information.

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 Split-Off Prospectus~~ entitled “Risk Factors”. in our Annual Report.

Our Brands and Product Portfolio

We have a ~~world class,~~world-class, global portfolio of iconic and modern brands, ~~that has~~and we have been ~~built~~making and investing in consumer products for over ~~the last~~ 135 years ~~and is~~that are 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~~represent 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%~~13% and ~~13%~~14% of our total Net sales for the fiscal three ~~and nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~respectively, and 13% and 14% of our total Net sales for the fiscal three and nine months ended October 2, 2022,~~ respectively. Our top 10 customers represented approximately ~~40%~~43% and ~~42% of our total Net sales for the fiscal~~ ~~three and nine~~42% ~~months ended~~ ~~October 1, 2023, respectively, and 42% and 44%~~ of our total Net sales for the fiscal three ~~and nine~~ months ended ~~October~~March 31, 2024 and April 2, ~~2022, respectively~~. ~~Nonetheless, as~~2023, respectively. 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~~strength and represent a significant portion 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.

total Net sales.

~~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~~Global economic challenges, including the impact from acts of war, military actions, terrorist attacks, or civil unrest, such as the ongoing military conflict between Russia and Ukraine (the “Russia-Ukraine War”) or the ongoing conflict in the Middle East, may continue to cause economic uncertainty and volatility. The impact of these issues may adversely affect ~~consumer spending patterns and thereby our results of operations. These factors include general~~prevailing 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~~business, 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~~or 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 nine months ended October 1, 2023 and 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~~

The COVID-19 pandemic and government steps to reduce the spread and address the impact of COVID-19 have had and may continue to have an impact on the way people live, work, interact, travel and shop. During the COVID-19 pandemic, many of the 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. 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.

~~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.

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 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.condition.

Russia-Ukraine War

Although the long-term implications of the ~~ongoing military conflict between Russia and Ukraine (the “Russia-Ukraine War”)~~Russia-Ukraine War are difficult to predict at this time, the financial impact of the conflict to us during the fiscal ~~nine~~three months ended ~~October 1,~~March 31, 2024 and April 2, 2023 ~~and October 2, 2022~~ was not ~~material.~~significant to our results of operations. For ~~both~~ the fiscal three ~~and nine~~ months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and 2022,~~ our Ukrainian business represented 0.2% and 0.1% of our Net ~~sales.~~sales, respectively. As of ~~October 1, 2023~~both March 31, 2024 and ~~January 1,~~December 31, 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~~

~~Russian business represented 1.0% of our Net sales.~~assets. For the fiscal three ~~and nine~~ months ended ~~October~~March 31, 2024 and April 2, ~~2022,~~2023, our Russian business represented ~~1.3%~~1.1% and ~~1.4%~~1.2% of our Net sales, respectively. As of both March 31, 2024 and December 31, 2023, our Russian business represented 0.7% of our net assets.

In the ~~first quarter of~~fiscal three months ended April 3, 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~~fiscal three months ended July 3, 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~~Acquisitions and Divestitures

~~In order~~We did not complete any significant acquisitions or divestitures during the fiscal three months ended March 31, 2024 and April 2, 2023.

Legal Proceedings

See Note 14, “Commitments and Contingencies,” 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 “Agreements between Johnson & Johnson and Kenvue and Other Related Person Transactions—Agreements Entered into in Connection with the Separation—Separation Agreement—Deferred Markets” in the Split-Off Prospectus). For morefor additional information regarding Deferred Local Businesses, see “Risk Factors—Risks Related to Kenvue’s Relationship with Johnson & Johnson—The transfer of certain assets and liabilities from Johnson & Johnson to Kenvue contemplated by the Separation will not be completed prior to the completion of the Exchange Offer.” and “Agreements between Johnson & Johnson and Kenvue and Other Related Person Transactions—Agreements Entered into in Connection with the Separation—Separation Agreement—Deferred Markets” in the Split-Off Prospectus.our current legal proceedings.

~~Provision For Taxes~~

Restructuring

~~On December 15, 2022,~~See Note 16, “Restructuring,” and Note 17, “Subsequent Events,” to the ~~European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which g~~enerally 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.~~included herein for information about our restructuring programs.

Results of Operations

Fiscal Three Months Ended ~~October 1, 2023~~March 31, 2024 Compared with Fiscal Three Months Ended ~~October~~April 2, ~~2022~~2023

Our results for the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023 ~~and October 2, 2022~~ were as follows:

Fiscal Three Months Ended
October 1, 2023 October 2, 2022 Change 2022 to 2023
(Dollars in Millions) Amount Percent
Net sales $ 3,915 $ 3,789 $ 126 3.3 %
Cost of sales 1,665 1,664 1 0.1 %
Gross profit 2,250 2,125 125 5.9 %
Selling, general, and administrative expenses 1,531 1,376 155 11.3 %
Other operating expense (income), net 9 (14) 23 *
Operating income 710 763 (53) (6.9) %
Other expense, net 25 25 — — %
Interest expense, net 100 — 100 *
Income before taxes 585 738 (153) (20.7) %
Provision for taxes 147 152 (5) (3.3) %
Net income $ 438 $ 586 $ (148) (25.3) %


	Fiscal Three Months Ended				Change In Fiscal Period
	March 31, 2024		April 2, 2023		Change 2023 to 2024
(Dollars in Millions)					Amount		Percent
Net sales	$	3,894	$	3,852	$	42	1.1	%
Cost of sales	1,652		1,727		(75)		(4.3)
Gross profit	2,242		2,125		117		5.5
Selling, general, and administrative expenses	1,573		1,502		71		4.7
Restructuring expenses	41		—		41		*
Other operating expense (income), net	78		(17)		95		*
Operating income	550		640		(90)		(14.1)
Other expense, net	28		30		(2)		(6.7)
Interest expense, net	95		1		94		*
Income before taxes	427		609		(182)		(29.9)
Provision for taxes	131		140		(9)		(6.4)
Net income	$	296	$	469	$	(173)	(36.9)	%

* Calculation not meaningful.

Net Sales

Net sales were $3.9 billion ~~and $3.8 billion~~ for both the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022, respectively,~~ an increase of ~~$126~~$42 million, or ~~3.3%~~1.1%. ~~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 ~~$13~~$31 million, Organic growth ~~a non-GAAP financial measure as defined below,~~ was ~~$139~~$73 million, primarily attributable to value realization (defined as price including mix), partially offset by volume-related decreases. In Self Care, ~~where successful brand activation~~there was increased demand across the segment, including the Cough, Cold, and ~~innovation continue to expand usage occasions, driving volume growth~~Allergy and ~~strength across all~~Other Self Care product categories, ~~despite a slow start~~partially offset by declines in Pain Care attributable to trade inventory fluctuations in the ~~cold, cough,~~United States. In Skin Health and ~~flu season.~~Beauty, negative growth was driven by volume declines in the United States due to execution challenges, coupled with market softness in China. Momentum in Essential Health continued, asdriven by value realization and ~~premiumization initiatives took hold.~~strong performance in Oral Care, along with growth in Women’s Health led by value realization and brand activation, partially offset by overall volume-related decreases in Baby Care.

Cost of Sales

Cost of sales were $1.7 billion for both the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022, an increase~~a decrease of $1$75 million, or ~~0.1%~~4.3%, primarily attributable to the ~~impact~~realization of ~~higher~~benefits associated with our supply chain optimization initiatives, lower costs of key ingredients and packaging materials due to the softened impact of ~~inflation. The increase was partially offset~~inflation, and $13 million favorable translational currency impacts. Gross profit margin increased 240 basis points to 57.6% for the fiscal three months ended March 31, 2024 as compared to 55.2% for the fiscal three months ended April 2, 2023, primarily due to growth in Net sales driven by ~~the~~value realization, realization of benefits associated with our supply chain optimization ~~initiatives. Cost~~initiatives, lower costs of ~~sales as a percentage of Net sales decreased 140 basis points to 42.5% as compared~~key ingredients and packaging materials due to the ~~prior year, due primarily to Net sales growth, which was primarily driven by value realization and non-recurring separation-related benefits, partially offset by the~~softened impact of inflation, ~~on costs~~ and ~~the negative impact of~~favorable 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 expenses”)~~ were ~~$1.5~~$1.6 billion and ~~$1.4~~$1.5 billion for the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022,~~ respectively, an increase of ~~$155~~$71 million, or ~~11.3%~~4.7%. ~~SG&A~~Selling, general, and administrative expenses as a

percentage of Net sales increased ~~280~~140 basis points to ~~39.1%,~~40.4% for the fiscal three months ended March 31, 2024, as compared to 39.0% for the ~~prior year,~~fiscal three months ended April 2, 2023, primarily attributable to higher costs in enterprise functions ~~from operating~~as we now operate on a standalone basis, transition services agreement costs with J&J, and ~~an $83~~increased investment in our brands. These cost increases were partially offset by a $31 million ~~increase~~decrease in ~~non-recurring~~ Separation-related ~~costs.~~costs and $9 million favorable translational currency impacts.

Restructuring Expenses

Restructuring expenses were $41 million for the fiscal three months ended March 31, 2024, driven by costs incurred primarily for steps taken to save costs, including global workforce reductions, changes in management structure, and the relocation of business activities to centralized shared-service functions in lower-cost locations, as we began to take steps intended to enhance organizational efficiencies and better position Kenvue for future growth. See Note 16, “Restructuring,” and Note 17, “Subsequent Events,” to the Condensed Consolidated Financial Statements included herein for additional information.

Other Operating Expense (Income), Net

Other operating expense (income), net was $9$78 million and ~~$(14)~~$(17) million for the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022,~~ respectively, ~~resulting in~~ an increase in ~~Other operating~~ expense of ~~$23~~$95 million. The increase was primarily

driven by the impact of a $68 million impairment charge related to our interim corporate headquarters in Skillman, New Jersey, which was classified as held for sale on February 21, 2024. The increase was further driven by the accounting impact of net economic benefit arrangements with J&J in connection with the Deferred Local Businesses ~~during the fiscal three months ended October 1, 2023, partially offset by royalty income. For additional information on the Deferred Local Businesses, see~~(see Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to ~~our~~the Condensed Consolidated Financial Statements included ~~herein.~~herein for additional information), and a $9 million gain recognized on the sale of a manufacturing facility in Lancaster, Pennsylvania in the fiscal three months ended April 2, 2023.

Other Expense, Net

Other expense, net was ~~$25~~$28 million ~~compared to Other expense, net of $25~~and $30 million for the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022, respectively, which consisted~~respectively. The decrease in expense was primarily ~~of the impact of changes in~~driven by lower foreign currency ~~rates.~~losses, offset by an increase in losses on investments.

Interest Expense, Net

Interest expense, net was ~~$100~~$95 million inand $1 million for the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~as compared to $0 million~~respectively. The increase in ~~the fiscal three months ended October 2, 2022. The increase~~expense was driven by interest expense recognized on ~~senior unsecured notes (the “Senior Notes”)~~the Senior Notes and notes issued under the ~~commercial paper program.~~Commercial Paper Program. See Note 4, “Borrowings,” to ~~our~~the Condensed Consolidated Financial Statements included herein for additional information.

Provision For Taxes

Provision for taxes was ~~$147~~$131 million and ~~$152~~$140 million for the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022,~~ respectively, a decrease in ~~income tax expense~~provision for taxes of $5$9 million. The decrease in expense was primarily due to lower ~~quarter to date~~quarter-to-date income in comparison to the prior period as a result of a full quarter of interest expense and the recording of a valuation allowance against a deferred tax asset related to future foreign tax benefits in the fiscal three months ended April 2, 2023. In addition, the worldwide effective income tax rates for the fiscal three months ended March 31, 2024 and April 2, 2023 were 30.7% and 23.0%, respectively. The increase for the fiscal three months ended March 31, 2024 as compared to the fiscal three months ended April 2, 2023 was primarily the result of reduced benefits for foreign tax credits, prior year ~~windfall benefit~~releases of tax reserves due to statute of limitations expiring, and a shortfall on ~~stock option exercises and tax benefits related~~stock-based compensation. See Note 11, “Income Taxes,” to the ~~completion of the Exchange Offer with J&J offset by higher U.S. tax on foreign income after foreign tax credits.~~Condensed Consolidated Financial Statements included herein for additional information.

Segment Results

Segment profit is based on Operating income, excluding depreciation and amortization, ~~non-recurring~~ Separation-related costs, restructuring ~~expense,~~and operating model optimization initiatives, the impact of the conversion of ~~share-based~~stock-based awards, issuance of Founder Shares, Other ~~income,~~operating expense (income), net, ~~operating,~~ and unallocated general corporate administrative expenses (referred to herein as “Segment adjusted operating income”), as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which includes expenses related to treasury, ~~and~~ legal operations, and certain other expenses, along with gains and losses related to the overall management of our ~~company,~~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. Segment adjusted operating income did not change as a result of this update.

See Note ~~14,~~15, “Segments of Business,” to ~~our~~the Condensed Consolidated Financial Statements included herein for additional information.

Fiscal Three Months Ended ~~October 1, 2023~~March 31, 2024 Compared with Fiscal Three Months Ended ~~October~~April 2, ~~2022~~2023

The following table presents Segment net sales and Segment adjusted operating income and the period-over-period changes in Segment net sales and Segment adjusted operating income for the fiscal three months ended ~~October 1, 2023~~March 31, 2024 and ~~October~~April 2, ~~2022.~~2023. See Note ~~14,~~15, “Segments of Business,” to ~~our~~the Condensed Consolidated Financial Statements included herein for further details regarding Segment net sales and Segment adjusted operating income.


		Fiscal Three Months Ended
		October 1, 2023				October 2, 2022				Change 2022 to 2023
	Fiscal Three Months Ended																											Fiscal Three Months Ended														Change In Fiscal Period
	March 31, 2024																					March 31, 2024							April 2, 2023						Change 2023 to 2024
(Dollars in Millions)	(Dollars in Millions)	Amount		Percent		Amount		Percent		Amount		Percent		(Dollars in Millions)		Amount				Percent				Amount						Percent		Amount						Percent
Segment Net Sales	Segment Net Sales
Self Care	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
Self Care	Self Care	$	583			$	556			$	27	4.9	%	$	1,698			43.6	43.6		%		$	1,640		42.6				42.6	%	$	58	3.5					3.5		%
Skin Health and Beauty	Skin Health and Beauty	167				246				(79)		(32.1)
Essential Health	Essential Health	309				261				48		18.4
Total segment adjusted operating income		$	1,059			$	1,063			$	(4)	(0.4)	%
Segment net sales														Segment net sales		$	3,894			100.0		%		$	3,852					100.0	%	$	42					1.1		%

Self Care
Self Care
Self Care																$	606									$	582									$	24						4.1	%
Skin Health and Beauty
Essential Health
Segment adjusted operating income														Segment adjusted operating income		$	1,011									$	942									$	69						7.3	%
Reconciliation to Income before taxes:	Reconciliation to Income before taxes:
Less:
Less:
Less:
Depreciation
Depreciation
Depreciation	Depreciation	72				69
Amortization	Amortization	81				83
Amortization
Amortization
Separation-related costs	Separation-related costs	133				50
Restructuring expense(1)		3				31
Conversion of share-based awards(2)		(25)				—
Separation-related costs
Separation-related costs
Restructuring and operating model optimization initiatives
Restructuring and operating model optimization initiatives
Restructuring and operating model optimization initiatives
Conversion of stock-based awards(1)
Conversion of stock-based awards(1)
Conversion of stock-based awards(1)
Founder Shares(2)
Founder Shares(2)
Founder Shares(2)
Other operating expense (income), net
Other operating expense (income), net
Other operating expense (income), net	Other operating expense (income), net	9				(14)
General corporate/unallocated expenses	General corporate/unallocated expenses	76				81
Total operating income		$	710			$	763
General corporate/unallocated expenses
General corporate/unallocated expenses
Operating income
Operating income
Operating income
Other expense, net	Other expense, net	25				25
Interest expense, net		100				—
Other expense, net
Other expense, net
Interest expense
Interest expense
Interest expense
Income before taxes	Income before taxes	$	585			$	738
Income before taxes
Income before taxes

(1) ~~Exclusive of the restructuring expense included in Other operating expense (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~~stock-based awards ~~(see Note 7, Stock-Based Compensation).~~that occurred on August 23, 2023. 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~~three months ended March 31, 2024 relating to employee services provided prior to the ~~Separation~~Separation.

(2) On August 25, 2023, the Company’s Compensation & Human Capital Committee approved equity grants to individuals employed by Kenvue as of ~~$123 million.~~October 2, 2023 (the “Founder Shares”). On October 2, 2023, the Founder Shares were granted to all Kenvue employees in the form of stock options and PSUs to executive officers and either stock options and PSUs or RSUs to non-executive individuals.

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 ~~October 1, 2023~~March 31, 2024 as compared to the fiscal three months ended ~~October~~April 2, ~~2022:~~2023:


		Fiscal Three Months Ended October 1, 2023 vs October 2, 2022(1)
		Reported Net sales change				Impact of foreign currency		Organic growth
		Fiscal Three Months Ended March 31, 2024 vs April 2, 2023(1)
		Fiscal Three Months Ended March 31, 2024 vs April 2, 2023(1)
		Fiscal Three Months Ended March 31, 2024 vs April 2, 2023(1)
	Reported Net sales change																	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	$	97	6.4	%	$	(4)	$	101	6.7	%	Self Care	$	58	3.5		3.5		%		$	(11)		$		$	69		4.2	4.2	%
Skin Health and Beauty	Skin Health and Beauty	(5)		(0.4)		—		(5)		(0.4)
Essential Health	Essential Health	34		3.0		(9)		43		3.8
Total	Total	$	126	3.3	%	$	(13)	$	139	3.6	%	Total	$	42	1.1		1.1		%		$	(31)		$		$	73		1.9	1.9	%

Fiscal Three Months Ended October 1, 2023 vs October 2, 2022(1)
Reported Net sales change Impact of foreign currency Organic growth
Price/Mix(2)
Volume
Self Care 6.4 % (0.3) % 5.5 % 1.2 %
Skin Health and Beauty (0.4) — 6.4 (6.8)
Essential Health 3.0 (0.8) 10.0 (6.2)
Total 3.3 % (0.3) % 7.1 % (3.5) %


	Fiscal Three Months Ended March 31, 2024 vs April 2, 2023(1)
	Reported Net sales change		Impact of foreign currency			Organic growth
					Price/Mix(2)			Volume
Self Care	3.5	%	(0.7)	%		5.6	%		(1.4)	%
Skin Health and Beauty	(5.1)		(0.6)			2.4			(6.9)
Essential Health	3.7		(1.2)			6.8			(1.9)
Total	1.1	%	(0.8)	%		5.0	%		(3.1)	%

(1) Acquisitions and divestitures did not materially impact Net sales for the fiscal three months ended ~~October 1, 2023~~March 31, 2024 or ~~October~~April 2, ~~2022.~~2023.

(2)Also referred to as value realization.

Self Care Segment

Self Care Segment Net Sales

The Self Care Segment Net sales were ~~$1.6~~$1.7 billion and ~~$1.5~~$1.6 billion for the fiscal three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022,~~ respectively, an increase of ~~$97~~$58 million, or ~~6.4%~~3.5%. Excluding the unfavorable impact of foreign currency translation, Organic growth was ~~$101~~$69 million, or ~~6.7%~~4.2%, primarily driven by value realization of ~~5.5% and volume related increases~~5.6%, partially offset by volume-related decreases of ~~1.2%~~1.4%. The increase was driven by ~~innovation-based volume growth, with Organic growth in all~~increased demand for Cough, Cold, and Allergy and Other Self Care ~~product categories growing mid~~products due to ~~high single digits.~~strong performance in Digestive Health and Smoking Cessation products, effective promotional strategies, and new distribution partnerships. The increase was partially offset by declines in Pain Care attributable to trade inventory fluctuations primarily in the United States.

Self Care Segment Adjusted Operating Income

The Self Care Segment adjusted operating income increased by ~~$27~~$24 million, or ~~4.9%~~4.1%, to ~~$583~~$606 million for the fiscal three months ended ~~October 1, 2023, primarily driven by value realization and~~ ~~the realization of benefits associated with our supply chain optimization initiatives, partially offset by~~ ~~the negative impact of transactional foreign currency fluctuation,~~ ~~higher costs of~~ ~~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 Net sales were $1.1 billion for both the fiscal three months ended October 1, 2023 and October 2, 2022, a decrease of $5 million, or 0.4%. Excluding the unfavorable impact of foreign currency translation, Organic growth decreased $5 million, or 0.4%, primarily driven by volume-related declines of 6.8%, offset by value realization of 6.4%. The decrease was driven by ~~the impact of 2022 product discontinuations in the United States and market softness in China~~. The decrease was partially offset by 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 operating income decreased~~ ~~by $79 million, or 32.1% to $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~~ ~~key ingredients and packaging materials due to the impact of inflation. This decrease was~~ ~~partially offset by value realization and~~ ~~the realization of benefits associated with our supply chain optimization initiatives.~~

~~Essential Health Segment~~

~~Essential Health Segment Net Sales~~

The Essential Health Segment Net sales were $1.2 billion and $1.1 billion for the fiscal three months ended October 1, 2023 and October 2, 2022, respectively, with an increase of $34 million, or 3.0%. Excluding the unfavorable impact of foreign currency translation, Organic growth was $43 million, or 3.8%, primarily driven by value realization of 10.0%, partially offset by volume declines of 6.2%. Value realization was led by product innovation and premiumization throughout product categories.

~~Essential Health Segment Adjusted Operating Income~~

~~The Essential Health Segment adjusted operating income increased by $48 million, or 18.4% to $309 million for the fiscal three months ended October 1, 2023.~~March 31, 2024. The increase ~~was~~ ~~primarily 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~~ ~~key ingredients and packaging materials due to the impact of inflation and~~ ~~the~~ ~~negative impact of transactional foreign currency fluctuations~~.

~~Results of Operations~~

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

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

Fiscal Nine Months Ended
October 1, 2023 October 2, 2022 Change 2022 to 2023
(Dollars in Millions) Amount Percent
Net sales $ 11,778 $ 11,183 $ 595 5.3 %
Cost of sales 5,178 4,944 234 4.7 %
Gross profit 6,600 6,239 361 5.8 %
Selling, general, and administrative expenses 4,555 4,101 454 11.1 %
Other operating income, net (7) (6) (1) (16.7) %
Operating income 2,052 2,144 (92) (4.3) %
Other expense, net 65 19 46 *
Interest expense, net 154 — 154 *
Income before taxes 1,833 2,125 (292) (13.7) %
Provision for taxes 496 422 74 17.5 %
Net income $ 1,337 $ 1,703 $ (366) (21.5) %

* Calculation not meaningful.

~~Net Sales~~

Net sales were $11.8 billion and $11.2 billion for the fiscal nine months ended October 1, 2023 and October 2, 2022, respectively, an increase of $595 million, or 5.3%. Excluding the impact of unfavorable changes in currency rates of $242 million, Organic growth was $837 million, primarily attributable to value realization, increased demand across our Self Care segment, including Pain Care and Cough, Cold and 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 a strong sun season care, strong e-commerce and club channel performance. Momentum in Essential Health continued as value realization and premiumization initiatives took hold.

~~Cost of Sales~~

Cost of sales were $5.2 billion and $4.9 billion for the fiscal nine months ended October 1, 2023 and October 2, 2022, respectively, an increase of $234 million, or 4.7% primarily attributable to impact of higher costs of key ingredients and packaging materials due to 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. Cost of sales as a percentage of Net sales decreased 20 basis points to 44.0% as compared to the prior year due to Net sales growth, which was primarily driven by 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 $4.6 billion and $4.1 billion for the fiscal nine months ended October 1, 2023 and October 2, 2022, respectively, an increase of $454 million, or 11.1%. SG&A as a percentage of Net sales increased 200 basis points to 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. These cost increases were partially offset by favorable currency impacts of $65 million.

~~Other Operating Income, Net~~

Other operating income, net was $7 million compared to other operating income, net of $6 million for the fiscal nine months ended October 1, 2023 and October 2, 2022, respectively, an increase of $1 million. The 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 nine months ended 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, Net~~

Other expense, net was $65 million compared to other expense, net of $19 million for the fiscal nine months ended October 1, 2023 and 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 $154 million in the fiscal nine months ended October 1, 2023 as compared to $0 million in the fiscal nine months ended 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 $496 million and $422 million for the fiscal nine months ended October 1, 2023 and October 2, 2022, respectively, an increase income tax expense of $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 nine months ended October 1, 2023 as compared to the fiscal nine months ended 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 Nine Months Ended October 1, 2023 Compared with Fiscal Nine Months Ended October 2, 2022~~

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

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, 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.

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

Fiscal Nine Months Ended October 1, 2023 vs October 2, 2022(1)
Reported Net sales change Impact of foreign currency Organic growth
(Dollars in Millions) Amount Percent Amount Amount Percent
Self Care $ 452 10.1 % $ (84) $ 536 12.0 %
Skin Health and Beauty 115 3.5 (52) 167 5.1
Essential Health 28 0.8 (106) 134 3.9
Total $ 595 5.3 % $ (242) $ 837 7.5 %

Fiscal Nine Months Ended October 1, 2023 vs October 2, 2022(1)
Reported Net sales change Impact of foreign currency Organic growth
Price/Mix(2)
Volume
Self Care 10.1 % (1.9) % 8.1 % 3.9 %
Skin Health and Beauty 3.5 (1.6) 7.2 (2.1)
Essential Health 0.8 (3.1) 10.0 (6.1)
Total 5.3 % (2.2) % 8.4 % (0.9) %

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

~~(2)~~ ~~Also referred to as value realization.~~

~~Self Care Segment~~

~~Self Care Segment Net Sales~~

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

~~Self Care Segment Adjusted Operating Income~~

The Self Care Segment adjusted operating income increased by $187 million, or 12.0% to $1.7 billion for the fiscal nine months ended October 1, 2023, primarily driven by value realization and volume-related increases, portfolio optimization, and the realization of benefits associated with our supply chain optimization initiatives, partially offset by volume-related decreases, the negative impact of ~~transactional foreign currency fluctuations,~~ ~~higher costs of~~ ~~key ingredients and packaging materials due to the impact of~~cost inflation, and increased ~~SG&A expenses.~~investment in our brands.

Skin Health and Beauty Segment

Skin Health and Beauty Segment Net Sales

The Skin Health and Beauty Segment Net sales were ~~$3.4 billion and $3.3~~$1.1 billion for both the fiscal ~~nine~~three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022, respectively, an increase~~a decrease of ~~$115~~$57 million, or ~~3.5%~~5.1%. Excluding the unfavorable impact of foreign currency translation, Organic growth ~~was $167~~decreased $50 million, or ~~5.1%~~4.5%, primarily driven by volume-related decreases of 6.9%, partially offset by value realization of ~~7.2%, offset by volume-related decreases of 2.1%~~2.4%. The ~~increase~~decrease was driven by ~~strong e-commerce~~volume declines in the United States attributable to execution challenges, distribution losses, and ~~club channel performance, easing of~~ supply chain constraints, ~~one-time supply replenishment, and the impact of a strong sun season, partially offset by portfolio rationalization initiatives in 2022~~ coupled with market softness in China. The decrease was partially offset by positive growth outside the United States and China attributable to product innovation and effective promotional strategies.

Skin Health and Beauty Segment Adjusted Operating Income

The Skin Health and Beauty Segment adjusted operating income ~~decreased by $99 million, or 16.1% to $517 million for~~was consistent with the ~~fiscal nine months ended October 1, 2023,~~prior period which was primarily driven by increased SG&A expenses, higher costs of key ingredients and packaging materials due to the impact of inflation, and the negative impact of transactional foreign currency fluctuations, partially offset by value realization, ~~and~~the positive impact of declining cost inflation, the realization of benefits associated with our supply chain optimization ~~initiatives.~~initiatives, and the positive impact of lower transactional foreign currency fluctuations, offset by volume-related decreases and increased investment in our brands. Segment adjusted operating income margin increased by 0.6% for the fiscal three months ended March 31, 2024 as compared to the fiscal three months ended April 2, 2023.

Essential Health Segment

Essential Health Segment Net Sales

The Essential Health Segment Net sales were ~~$3.5~~$1.1 billion ~~and $3.5 billion~~ for both the fiscal ~~nine~~three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022, respectively,~~ an increase of ~~$28~~$41 million, or ~~0.8%~~3.7%. Excluding the unfavorable impact of foreign currency translation, Organic growth was ~~$134~~$54 million or ~~3.9%~~4.9%, primarily driven by value realization of ~~10.0%~~6.8%, ~~most notably in Women’s Health and~~led by strong ~~momentum~~performance in Oral Care ~~globally,~~and growth in Women’s Health. The increase was partially offset by ~~volume~~volume-related decreases of 1.9%, primarily attributable to declines ~~of 6.1%. Overall volume declines were driven by category contractions, as well as our supply suspension of certain personal care products~~ in ~~Russia since March 2022.~~Baby Care.

Essential Health Segment Adjusted Operating Income

The Essential Health Segment adjusted operating income ~~decreased~~increased by ~~$51~~$46 million, or ~~6.2%~~21.9% to ~~$770~~$256 million for the fiscal ~~nine~~three months ended ~~October 1, 2023.~~March 31, 2024. The ~~decrease~~increase was primarily attributable to higher costs of 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,driven by value realization, partially offset by ~~value realization~~volume-related decreases, and ~~the realization of benefits associated with~~increased investment in our ~~supply chain optimization initiatives.~~brands.

Liquidity and Capital Resources

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

Effective April 4, 2023, upon completion of the Consumer Health Business Transfer (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies—Description of the Company and Business Segments,” to the Condensed Consolidated Financial Statements included herein), we no longer participate in J&J’s corporate-wide cash management and centralized funding programs.

Cash Flows

Summarized cash flow information for the fiscal ~~nine~~three months ended ~~October 1,~~March 31, 2024 and April 2, 2023 ~~and October 2, 2022~~ were as follows:

Fiscal Nine Months Ended Change
(Dollars in Millions) October 1, 2023 October 2, 2022 Amount Percent
Net income $ 1,337 $ 1,703 $ (366) (21.5) %
Net changes in assets and liabilities $ 492 $ (542) $ 1,034 *
Net cash flows from operating activities $ 2,218 $ 1,881 $ 337 17.9 %
Net cash flows used in investing activities $ (223) $ (223) $ — — %
Net cash flows used in financing activities $ (2,144) $ (1,520) $ (624) 41.1 %


					Change In Fiscal Period
	Fiscal Three Months Ended				Change 2023 to 2024
(Dollars in Millions)	March 31, 2024		April 2, 2023		Amount		Percent
Net income	$	296	$	469	$	(173)	(36.9)	%
Net changes in assets and liabilities	$	(339)	$	118	$	(457)	*
Net cash flows from operating activities	$	287	$	802	$	(515)	(64.2)	%
Net cash flows used in investing activities	$	(152)	$	(41)	$	(111)	*
Net cash flows (used in) from financing activities	$	(326)	$	7,388	$	(7,714)	*

*Calculation not meaningful.

Operating Activities

Net cash flows from operating activities were ~~$2.2 billion~~$287 million and ~~$1.9 billion~~$802 million for the fiscal ~~nine~~three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022,~~ respectively, ~~an increase~~a decrease of ~~$337~~$515 million. The ~~increase~~decrease was primarily attributable to changes in working

capital balances driven by ~~increases accounts~~a net decrease in Accounts payable and ~~accrued~~Accrued liabilities due to the timing of payments and ~~a decrease~~an increase in ~~inventory balances compared~~Trade receivables due to the ~~prior year period due to increased demand and the rebuilding~~timing of ~~inventory levels by customers following supply shortages in the prior year.~~

collections.

Investing Activities

Net cash flows used in investing activities were ~~$223~~$152 million and ~~$223~~$41 million for the fiscal ~~nine~~three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022,~~ respectively. ~~Cash~~Net cash flows used in investing activities ~~in both the fiscal nine months ended October 1, 2023 and October 2, 2022 was~~were primarily driven by purchases of property, plant, and equipment in both the fiscal three months ended March 31, 2024 and April 2, 2023, partially offset by ~~the~~ proceeds from the sale of ~~assets.~~assets in the fiscal three months ended April 2, 2023.

Financing Activities

Net cash flows ~~used in~~(used in) from financing activities were ~~$2.1 billion~~$(326) million and ~~$1.5 billion~~$7,388 million for the fiscal ~~nine~~three months ended ~~October 1,~~March 31, 2024 and April 2, 2023, ~~and October 2, 2022,~~ respectively. ~~Cash~~Net cash flows used in financing activities for the fiscal ~~nine~~three months ended ~~October 1, 2023~~March 31, 2024 were primarily ~~reflect $13.8 billion in distribution~~driven by $383 million of dividends paid and $91 million of payments made to ~~J&J in connection with the Separation,~~purchase treasury shares, partially offset by ~~$7.7 billion of net proceeds from Senior Notes (as defined below), $0.5 billion~~$160 million of net proceeds from the issuance of commercial paper under the Commercial Paper Program (as defined below)~~, and $4.2~~. Net cash flows from financing activities for the fiscal three months ended April 2, 2023 were primarily driven by $7.7 billion of net proceeds from ~~the sale of common stock in connection with the Kenvue IPO. In addition, we recognized~~Senior Notes (as defined below), partially offset by Net transfers to J&J of ~~$274 million and $1.5 billion for the fiscal nine months ended October 1, 2023 and October 2, 2022, respectively.~~$286 million. Net transfers to J&J were driven by cash pooling and general financing activities, indirect corporate cost allocations from J&J, and taxes deemed to be settled with J&J. For further details regarding Net ~~transfer to~~transfers from (to) J&J, see Note ~~8, “Related Parties,~~9, “Relationship with J&J—Net Transfers to J&J,” to ~~our~~the Condensed Consolidated Financial Statements included herein.

Sources of Liquidity

~~In connection with the Separation, our capital structure and~~Our primary sources of liquidity ~~have changed~~are cash on hand, which consisted of cash and cash equivalents of $1.2 billion as of March 31, 2024, cash flows from operations, borrowing capacity under our ~~historical capital structure because~~Revolving Credit Facility (as defined below) of ~~our issuances~~$4.0 billionand authorized Commercial Paper Program issuance of ~~shares, the Kenvue IPO, and the Debt Financing Transactions.~~$4.0 billion. As of ~~April 4, 2023,~~March 31, 2024, we had no ~~longer participate in J&J’s corporate-wide cash management~~amounts outstanding under the Revolving Credit Facility and ~~centralized funding programs.~~ $767 million of outstanding balances under our Commercial Paper Program, net of related discount of $2 million.

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.

Cash and cash equivalents decreased by $227 million during the fiscal three months ended March 31, 2024 to $1.2 billion as of March 31, 2024, as compared to $1.4 billion as of December 31, 2023. Cash and cash equivalents held by our foreign subsidiaries was $1.1 billion and $1.3 billion as of March 31, 2024 and December 31, 2023, respectively.

Supplier Finance Program

As a part of our ongoing efforts to maximize working capital and managing liquidity, we work with suppliers to optimize payment terms and conditions on accounts payable through a voluntary supply chain financing program. The program provides some of our suppliers with the opportunity to sell receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. We are not a party to the arrangements between the suppliers and the third-party financial institutions. Our obligations to the suppliers, including amounts due, and scheduled payment dates, are not affected by a participating supplier’s decision to participate in the program. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Supplier Finance Program,” to the Condensed Consolidated Financial Statements included herein.

Senior Notes

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.~~billion. The net proceeds to us from the Senior Notes offering was $7.7 billion after deductions of discounts and issuance costs of $77 million. The net proceeds were reflected as Restricted cash on ~~our~~the Condensed Consolidated Balance ~~Sheets~~Sheet 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,~~4, “Borrowings—Senior Notes,” to ~~our~~the Condensed Consolidated Financial Statements included herein. The unamortized debt issuance costs related to the Senior Notes as of October 1, 2023 were approximately $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 nine months ended 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 October 1, 2023, we had no outstanding balances under its Revolving Credit Facility.Commercial Paper Program

On March 3, 2023, we entered into a commercial paper program (the “Commercial Paper Program”). Our Board of Directors (the “Board”) 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~~defaults 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. For further details on the Commercial Paper Program, see Note 4, “Borrowings—Commercial Paper Program,” to the Condensed Consolidated Financial Statements included herein.

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

Revolving Credit Facility

On ~~May 8,~~March 6, 2023, we entered into a credit agreement providing for a five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) in ~~conjunction with the Consumer Health Business Transfer, we distributed $13.8~~an aggregate principal amount of $4.0 billion to ~~J&J from the (1) net proceeds received from the sale of the common stock~~be made available in ~~the Kenvue IPO~~U.S. dollars 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.Euros.

Interest Expense, Net

We ~~accrued interest expenses~~recognized Interest expense, net of ~~$115~~$95 million ~~and $244 million for~~in the Condensed Consolidated Statement of Operations during the fiscal three ~~and nine~~ months ended ~~October 1, 2023, respectively~~March 31, 2024 which primarily includes interest expense, including amortization of discounts and debt issuance costs, recognized on the Senior Notes and interest ~~income~~expense incurred as a result 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.~~Commercial Paper Program.

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.Compliance with Covenants

As of ~~October 1, 2023,~~March 31, 2024, we were in compliance with all ~~financial~~debt 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.~~Dividends

Quarterly dividends have been paid since the Kenvue IPO. A summary of cash dividends per share on the outstanding Kenvue common stock declared to shareholders by our Board and paid during the fiscal three months ended March 31, 2024 is presented below:

Declaration Date

Record Date

Payment Date

Per Share Amount

January 25, 2024

February 14, 2024

February 28, 2024

$0.20

On April 25, 2024, we announced that our Board declared a dividend of $0.20 per share on our common stock. The dividend is payable on May 22, 2024 to shareholders of record as of the close of business on May 8, 2024.

Future Cash Requirements

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

~~In addition to our working capital requirements, as~~As of ~~October 1, 2023,~~March 31, 2024, we expect our primary cash requirements for ~~2023~~2024 to include capital expenditures. We have made payments of ~~$246~~$153 million for property, plant, and equipment ~~for~~during the fiscal ~~nine~~three months ended ~~October 1, 2023.~~March 31, 2024.

~~Kenvue’s~~Share Repurchase Program

Our Board ~~of Directors~~ has authorized a share repurchase program, under which we are authorized to repurchase up to ~~27 million~~27,000,000 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.~~

the Kenvue 2023 Plan (as defined in Note 8, “Stock-Based Compensation,” to the Condensed Consolidated Financial Statements included herein). We repurchased 4,600,000

shares of our outstanding common stock for $91 millionduring the fiscal three months ended March 31, 2024.

Future Litigation

In the ordinary course of business, we are involved in litigation, claims, government inquiries, investigations, charges, and proceedings. See Note ~~13,~~14, “Commitments and Contingencies,” to ~~our~~the 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.

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 was 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 have a significant impact on our results of operations.

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 (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Condensed Consolidated Financial Statements included herein) to the Company that previously had been consolidated as Variable Interest Entities (“VIEs”) in the 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 Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to the Condensed Consolidated Financial Statements included herein). For more information regarding Deferred Local Businesses, see “Risk Factors—Risks Related to Our Relationship with J&J—The transfer of certain assets and liabilities from J&J to us contemplated by the Separation has not been completed and may be significantly delayed or not occur at all” in our Annual Report and Note 1, “Description of the

Company and Summary of Significant Accounting Policies,” to the Condensed Consolidated Financial Statements included herein.

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 Inclusive Framework that was supported by over 130 countries worldwide. The EU 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. The OECD continues to release additional guidance, including guidance on safe harbors for which we may qualify, and many countries have already implemented legislation consistent with the OECD Pillar Two Framework. Due to these new rules, our provision for taxes could be unfavorably impacted as the legislation becomes effective in countries in which we conduct business. However, based on the Company’s current analysis, currently enacted laws for Pillar Two do not have a significant impact on the Condensed Consolidated Financial Statements. We are continuing to evaluate the Model Global Anti-Base Erosion Rules for Pillar Two and related legislation, and their potential impact on future periods.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

~~We operate on~~Because we manufacture and sell products and finance operations in a ~~global basis and~~number of countries throughout the world, we are exposed to the ~~risk that our business, results~~impact on revenue and expenses of ~~operations or financial condition could be adversely affected by changes~~movements 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 and swap foreign exchange contracts. The financial instruments utilized are viewed as risk management tools and are not used for trading or speculative purposes. Forward and swap foreign exchange contracts are sensitive to changes in foreign currency rates. Gains or losses on these contracts are generally offset by the gains or losses on the underlying ~~transactions.~~transactions, and therefore, would have no impact on future anticipated earnings and cash flows.

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 nine months ended October 1, 2023,~~In recent years, 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,~~Interest rate risk is managed through the maintenance of a ~~hypothetical 1% increase or decrease~~portfolio of variable and fixed-rate debt composed of short and long-term instruments. The objective is to maintain a cost-effective mix that management deems appropriate. From time to time, we also hedge the anticipated issuance of fixed-rate debt, and those contracts are designated as cash flow hedges. As of March 31, 2024, our outstanding long-term debt portfolio was comprised primarily of fixed-rate debt, and therefore, any fluctuation in market interest ~~rates would~~rate is not expected to have ~~had~~ a material impact on ~~the value~~our results of ~~our cash and cash equivalents as of 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.operations. Our interest expense for ~~these borrowings and for~~ any new floating rate 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 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.

5148

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, 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~~and corn derivatives, vegetable oils ~~lubricants, tallow, corn, poultry, soybeans~~ and ~~silicon; packaging components, including corrugate;~~oleochemicals, and other inputs, including energy, labor, transportation (such as trucks, containers, and ocean freight), and logistics services. We use various ~~strategies~~strategic pricing mechanisms to manage cost exposures on certain material purchases with the objective of obtaining ~~more predictable~~appropriate 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. We are also 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 our policy to contract with diverse, credit-worthy counterparties based upon both strong credit ratings and other credit considerations.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~Disclosure controls and procedures.~~ AtAs of March 31, 2024, 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,~~The Company’s Chief Executive Officer, Thibaut Mongon, and ~~Paul Ruh,~~ Chief Financial Officer, Paul Ruh, reviewed and participated in this ~~evaluation.~~evaluation of Kenvue’s disclosure controls and procedures. 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.

Changes in Internal ~~control.~~ Control Over Financial Reporting

During the fiscal three months ended March 31, 2024, 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 —~~ II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The information called for by this item is incorporated herein by reference to Note ~~13,~~14, “Commitments and Contingencies,” ~~included in Part I, Item 1, Financial Statements (unaudited) — Notes~~ to the 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~~There have been no material changes in our risk factors from those disclosed under Item 1A “Risk Factors” included in our ~~Split-Off Prospectus. Any of these factors could result in a significant or material adverse effect~~Annual Report 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 filingsForm 10-K for the fiscal twelve months ended December 31, 2023 filed on March 1, 2024 with the SEC.

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

There were no sales of equity securities by the Company during the fiscal three months ended ~~October 1, 2023.~~March 31, 2024.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

52During the fiscal three months ended October 1, 2023, our Board authorized a share repurchase program, under which we are authorized to repurchase up to 27,000,000 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 the Kenvue 2023 Plan (as defined in Note 8, “Stock-Based Compensation,” to the Condensed Consolidated Financial Statements included herein).

The following table represents our purchase of common stock during the fiscal three months ended March 31, 2024:


(Shares in Thousands)
Period	Total Number of Shares Purchased	Average Price Paid Per Common Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Program	Approximate Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2024 - January 31, 2024	301	$	21.01	301	26,349
February 1, 2024 - February 29, 2024	4,299	$	19.70	4,299	22,050
March 1, 2024 - March 31, 2024	—	$	—	—	22,050
Total number of shares purchased	4,600

Item 5. OTHER INFORMATION

Insider Trading Arrangements and Policies

During the fiscal ~~quarter~~three months ended ~~October 1, 2023,~~March 31, 2024, none of the ~~Company's~~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~~the Company’s 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.

5350

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 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~~						~~Kenvue Inc.~~ ~~Executive~~ ~~Severance~~ ~~Pay Plan, dated as of~~ ~~August 23,~~ ~~2023~~ *†
~~10.2~~						K ~~envue Inc. Amended& RestatedDeferred Fee Plan for Directors, dated~~ ~~as of~~ ~~September 1~~9 ~~, 2023~~ *†
~~10.3~~						~~Form of Founder Global Performance Share Unit Award Agreement~~ *†
~~10.4~~						~~Form of Founder Global Nonqualified Stock Option Award Agreement~~ *†
18						~~Preferability Letter of PricewaterhouseCoopers LLP, dated November~~ 3 ~~, 2023, relating to Change in Accounting Principle~~ *
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~~

5451

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: ~~November 3, 2023~~May 9, 2024			/s/ PAUL RUH
			Paul Ruh
			Chief Financial Officer (Principal Financial Officer)

Date: ~~November 3, 2023~~May 9, 2024			/s/ HEATHER HOWLETT
			Heather Howlett
			Chief Accounting Officer (Principal Accounting Officer)

5552


	Fiscal Three Months Ended October 2, 2022
	Net Investment from Johnson & Johnson		Accumulated Other Comprehensive Loss		Total Equity
Balance, July 3, 2022	$	25,143	$	(5,574)	$	19,569
Net income	586		—		586
Other comprehensive loss	—		(630)		(630)
Net transfers to Johnson & Johnson	(620)		—		(620)
Balance, October 2, 2022	$	25,109	$	(6,204)	$	18,905


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


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


(Dollars in Millions)	Foreign Currency Translation(1)		Employee Benefit Plans(2)		Gain (Loss) On Cash Flow Hedges(3)		Total Accumulated Other Comprehensive Loss
July 2, 2023	$	(5,487)	$	(55)	$	40	$	(5,502)
Net change	(249)		13		(4)		(240)
October 1, 2023	$	(5,736)	$	(42)	$	36	$	(5,742)

July 3, 2022	$	(5,523)	$	(47)	$	(4)	$	(5,574)
Net change	(642)		1		11		(630)
October 2, 2022	$	(6,165)	$	(46)	$	7	$	(6,204)


	Fiscal Nine Months Ended				Change
(Dollars in Millions)	October 1, 2023		October 2, 2022		Amount		Percent
Net income	$	1,337	$	1,703	$	(366)	(21.5)	%
Net changes in assets and liabilities	$	492	$	(542)	$	1,034	*
Net cash flows from operating activities	$	2,218	$	1,881	$	337	17.9	%
Net cash flows used in investing activities	$	(223)	$	(223)	$	—	—	%
Net cash flows used in financing activities	$	(2,144)	$	(1,520)	$	(624)	41.1	%