Cover
Cover | 6 Months Ended |
Jul. 02, 2023 | |
Cover [Abstract] | |
Document Type | S-4 |
Entity Registrant Name | Kenvue Inc. |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Amendment Flag | false |
Entity Central Index Key | 0001944048 |
Combined Balance Sheets
Combined Balance Sheets - USD ($) $ in Millions | Jan. 01, 2023 | Jan. 02, 2022 |
Current assets | ||
Cash and cash equivalents (Note 1) | $ 1,231 | $ 740 |
Trade receivables, less allowances for credit losses | 2,122 | 2,074 |
Inventories (Notes 1 and 2) | 2,226 | 1,702 |
Prepaid expenses and other receivables | 175 | 257 |
Other current assets | 123 | 154 |
Total current assets | 5,877 | 4,927 |
Property, plant and equipment, net (Notes 1 and 3) | 1,820 | 1,827 |
Intangible assets, net (Notes 1 and 4) | 9,853 | 10,701 |
Goodwill (Notes 1 and 4) | 9,185 | 9,810 |
Deferred taxes on income (Notes 1 and 11) | 147 | 189 |
Other assets | 434 | 475 |
Total assets | 27,316 | 27,929 |
Current liabilities | ||
Accounts payable | 1,829 | 1,827 |
Accrued liabilities | 906 | 1,024 |
Accrued rebates, returns and promotions (Note 1) | 862 | 834 |
Accrued taxes on income | 329 | 357 |
Total current liabilities | 3,926 | 4,042 |
Employee related obligations | 214 | 302 |
Deferred taxes on income | 2,428 | 2,430 |
Other liabilities (Note 17) | 727 | 756 |
Total liabilities | 7,295 | 7,530 |
Commitments and contingencies (Note 13) | ||
Equity | ||
Net investment from Parent (Note 1 and 9) | 25,474 | 24,872 |
Accumulated other comprehensive loss (Note 7) | (5,453) | (4,473) |
Total equity | 20,021 | 20,399 |
Total Liabilities and Equity | $ 27,316 | $ 27,929 |
Combined Balance Sheets (Parent
Combined Balance Sheets (Parenthetical) - USD ($) | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Current assets | |||
Allowance for credit loss | $ (29,000,000) | $ (35,000,000) | $ (32,000,000) |
Combined Statements of Operatio
Combined Statements of Operations - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Income Statement [Abstract] | |||||||
Net sales | $ 4,011 | $ 3,804 | $ 7,863 | $ 7,394 | $ 14,950 | $ 15,054 | $ 14,467 |
Cost of sales | 1,786 | 1,646 | 3,513 | 3,280 | 6,665 | 6,635 | 6,619 |
Gross profit | 2,225 | 2,158 | 4,350 | 4,114 | 8,285 | 8,419 | 7,848 |
Selling, general, and administrative expenses | 1,522 | 1,375 | 3,024 | 2,725 | 5,633 | 5,484 | 4,956 |
Other (income) expense, net, operating (Note 10) | 1 | 13 | (16) | 8 | (23) | 15 | 3,871 |
Operating income (loss) | 702 | 770 | 1,342 | 1,381 | 2,675 | 2,920 | (979) |
Other expense (income), net | 10 | (5) | 40 | (6) | 38 | (5) | 37 |
Income (Loss) before taxes | 639 | 775 | 1,248 | 1,387 | 2,637 | 2,925 | (1,016) |
Provision (benefit) for taxes on income | 209 | 171 | 488 | 255 | 550 | 894 | (137) |
Net income (loss) | $ 430 | $ 604 | $ 760 | $ 1,132 | $ 2,087 | $ 2,031 | $ (879) |
Combined Statements of Comprehe
Combined Statements of Comprehensive Income (Loss) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Statement of Comprehensive Income [Abstract] | |||
Net income (loss) | $ 2,087 | $ 2,031 | $ (879) |
Other comprehensive (loss) income | |||
Foreign currency translation, net of (benefit) provision for taxes of $(99), $(94), $120 | (1,053) | (926) | 855 |
Employee benefit plans: | |||
Prior service cost, net of amortization | (1) | 0 | (1) |
Gain (loss), net of amortization | 58 | 18 | (2) |
Effect of exchange rates | 6 | 7 | (8) |
Net change, net of income tax provision (benefit) of $29, $8, $(2) | 63 | 25 | (11) |
Derivatives and hedges: | |||
Unrealized gain (loss) arising during period | 12 | (3) | (5) |
Reclassifications to net income (loss) | (2) | 3 | 6 |
Net change, net of income tax provision of $3, $0, $0 | 10 | 0 | 1 |
Other comprehensive income (loss) | (980) | (901) | 845 |
Comprehensive income (loss) | $ 1,107 | $ 1,130 | $ (34) |
Combined Statements of Compre_2
Combined Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Statement of Comprehensive Income [Abstract] | |||||||
Foreign currency translation adjustment, taxes | $ (30) | $ (65) | $ 9 | $ 77 | $ (99) | $ (94) | $ 120 |
Employee benefit plans, taxes | (18) | 17 | $ 1 | 29 | 8 | (2) | |
Gain (loss) on derivatives and hedges, taxes | $ (4) | $ 9 | $ 3 | $ 0 | $ 0 |
Combined Statements of Equity
Combined Statements of Equity - USD ($) $ in Millions | Total | Net Investment from Parent | Accumulated Other Comprehensive Loss |
Beginning balance at Dec. 29, 2019 | $ 21,721 | $ 26,138 | $ (4,417) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Net income | (879) | (879) | |
Other comprehensive loss | 845 | 845 | |
Net transfers to (from) the parent | (3,331) | (3,331) | |
Ending balance at Jan. 03, 2021 | 18,356 | 21,928 | (3,572) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Net income | 2,031 | 2,031 | |
Other comprehensive loss | (901) | (901) | |
Net transfers to (from) the parent | 913 | 913 | |
Ending balance at Jan. 02, 2022 | 20,399 | 24,872 | (4,473) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Net income | 1,132 | 1,132 | |
Other comprehensive loss | (1,114) | (1,114) | |
Ending balance at Jul. 03, 2022 | 19,601 | 25,188 | (5,587) |
Beginning balance at Jan. 02, 2022 | 20,399 | 24,872 | (4,473) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Net income | 2,087 | 2,087 | |
Other comprehensive loss | (980) | (980) | |
Net transfers to (from) the parent | (1,485) | (1,485) | |
Ending balance at Jan. 01, 2023 | 20,021 | 25,474 | (5,453) |
Beginning balance at Apr. 03, 2022 | 20,465 | 25,219 | (4,754) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Net income | 604 | 604 | |
Other comprehensive loss | (833) | (833) | |
Ending balance at Jul. 03, 2022 | 19,601 | 25,188 | (5,587) |
Beginning balance at Jan. 01, 2023 | 20,021 | 25,474 | (5,453) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Net income | 760 | 330 | |
Other comprehensive loss | 19 | 19 | |
Ending balance at Jul. 02, 2023 | 11,040 | 0 | (5,507) |
Beginning balance at Apr. 02, 2023 | 20,282 | 25,521 | (5,239) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||
Net income | 430 | ||
Other comprehensive loss | (195) | (195) | |
Ending balance at Jul. 02, 2023 | $ 11,040 | $ 0 | $ (5,507) |
Combined Statements of Cash Flo
Combined Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Cash flows from operating activities | |||
Net income | $ 2,087 | $ 2,031 | $ (879) |
Adjustments to reconcile net income to cash flows from operating activities | |||
Depreciation and amortization | 644 | 731 | 746 |
Stock-based compensation | 137 | 141 | 115 |
Credit losses and trade receivable allowances | 9 | 4 | 9 |
Net loss (gain) on write-downs/disposal of assets/businesses | 4 | (9) | (35) |
Deferred income taxes | 157 | 568 | (801) |
Net changes in assets and liabilities, net of effects from acquisitions and divestitures | |||
Trade receivables | (142) | (303) | 265 |
Inventories | (582) | (77) | 109 |
Other current and non-current assets | 131 | (68) | 32 |
Accounts payable | 52 | 330 | 154 |
Accrued liabilities (Note 17) | (17) | (2,977) | 3,542 |
Employee related obligations | 2 | 14 | 0 |
Accrued taxes on income (Note 11) | (5) | (19) | (96) |
Other liabilities | 48 | (32) | 236 |
Net cash flows from operating activities | 2,525 | 334 | 3,397 |
Cash flows used in investing activities | |||
Purchases of property, plant, and equipment | (375) | (295) | (229) |
Net (purchases) proceeds of assets/businesses | (18) | ||
Net proceeds of assets/businesses | 59 | 176 | |
Proceeds from the sale of investments | 8 | 77 | 0 |
Investment in equity securities | 5 | 12 | 30 |
Net cash used in investing activities | (390) | (171) | (83) |
Cash flows used in financing activities | |||
Proceeds from loans and notes payable | 14 | 0 | 0 |
Repayments of debt | (7) | (11) | |
Net transfer (to) from the Parent | (1,597) | (3,446) | |
Net transfer from the Parent | 7 | ||
Net cash used in financing activities | (1,583) | 0 | (3,457) |
Effect of exchange rate changes on cash and cash equivalents | (61) | (41) | 9 |
Cash and cash equivalents, beginning of year | 740 | 618 | 752 |
Net increase (decrease) in cash and cash equivalents | 491 | 122 | (134) |
Cash and cash equivalents, end of year | 1,231 | 740 | 618 |
Supplemental cash flow data | |||
Cash paid for income taxes | $ (316) | $ (363) | $ (448) |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 |
Current assets | ||
Cash and cash equivalents (Note 1) | $ 1,231 | $ 1,231 |
Trade receivables, less allowances for credit losses ($29 and $35 as of July 2, 2023 and January 1, 2023, respectively) | 2,096 | 2,122 |
Inventories (Notes 1 and 2) | 2,026 | 2,226 |
Prepaid expenses and other receivables | 643 | 175 |
Other current assets | 223 | 123 |
Total current assets | 6,219 | 5,877 |
Property, plant and equipment, net (Notes 1 and 3) | 1,832 | 1,820 |
Intangible assets, net (Notes 1 and 4) | 9,678 | 9,853 |
Goodwill (Notes 1 and 4) | 9,081 | 9,185 |
Deferred taxes on income (Notes 1 and 11) | 143 | 147 |
Other assets | 589 | 434 |
Total assets | 27,542 | 27,316 |
Current liabilities | ||
Loans and notes payable | 752 | 0 |
Accounts payable | 2,354 | 1,829 |
Accrued liabilities | 1,201 | 906 |
Accrued rebates, returns, and promotions | 753 | 862 |
Accrued taxes on income | 239 | 329 |
Total current liabilities | 5,299 | 3,926 |
Employee related obligations | 244 | 214 |
Long-term debt | 7,684 | 0 |
Deferred taxes on income | 2,682 | 2,428 |
Other liabilities | 593 | 727 |
Total liabilities | 16,502 | 7,295 |
Commitments and contingencies (Note 13) | ||
Equity | ||
Preferred stock, $0.01 par value, 750 shares authorized, no shares issued and outstanding | 0 | 0 |
Common stock, $0.01 par value, 12,500 shares authorized, 1,915 shares issued and outstanding | 19 | 0 |
Additional paid-in capital | 16,098 | 0 |
Retained earnings | 430 | 0 |
Net investment from Parent (Note 1 and 9) | 0 | 25,474 |
Accumulated other comprehensive loss (Note 7) | (5,507) | (5,453) |
Total equity | 11,040 | 20,021 |
Total Liabilities and Equity | $ 27,542 | $ 27,316 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jul. 02, 2023 | Jan. 01, 2023 |
Current assets | ||
Allowance for credit loss | $ 29,000,000 | $ 35,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 750,000,000 | 750,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 12,500,000,000 | 12,500,000,000 |
Common stock issued (in shares) | 1,914,894,444 | |
Common stock, shares outstanding (in shares) | 1,914,894,444 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Income Statement [Abstract] | |||||||
Net sales | $ 4,011 | $ 3,804 | $ 7,863 | $ 7,394 | $ 14,950 | $ 15,054 | $ 14,467 |
Cost of sales | 1,786 | 1,646 | 3,513 | 3,280 | 6,665 | 6,635 | 6,619 |
Gross profit | 2,225 | 2,158 | 4,350 | 4,114 | 8,285 | 8,419 | 7,848 |
Selling, general, and administrative expenses | 1,522 | 1,375 | 3,024 | 2,725 | 5,633 | 5,484 | 4,956 |
Other (income) expense, net, operating (Note 10) | 1 | 13 | (16) | 8 | (23) | 15 | 3,871 |
Operating income (loss) | 702 | 770 | 1,342 | 1,381 | 2,675 | 2,920 | (979) |
Other expense (income), net | 10 | (5) | 40 | (6) | 38 | (5) | 37 |
Interest expense, net | 53 | 0 | 54 | 0 | |||
Income (Loss) before taxes | 639 | 775 | 1,248 | 1,387 | 2,637 | 2,925 | (1,016) |
Provision for taxes | 209 | 171 | 488 | 255 | 550 | 894 | (137) |
Net income | $ 430 | $ 604 | $ 760 | $ 1,132 | $ 2,087 | $ 2,031 | $ (879) |
Basic and diluted net income per share | |||||||
Basic (per share) | $ 0.23 | $ 0.35 | $ 0.43 | $ 0.66 | |||
Diluted (per share) | $ 0.23 | $ 0.35 | $ 0.43 | $ 0.66 | |||
Basic and diluted weighted-average common stock | |||||||
Basic (shares) | 1,838 | 1,716 | 1,777 | 1,716 | |||
Diluted (in shares) | 1,838 | 1,716 | 1,777 | 1,716 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Statement of Comprehensive Income [Abstract] | |||||||
Net income (loss) | $ 430 | $ 604 | $ 760 | $ 1,132 | $ 2,087 | $ 2,031 | $ (879) |
Other comprehensive income (loss) | |||||||
Foreign currency translation, net of taxes | (177) | (835) | (16) | (1,115) | (1,053) | (926) | 855 |
Employee benefit plans, net of taxes | (10) | 1 | 4 | 4 | 63 | 25 | (11) |
Derivatives and hedges, net of taxes | (8) | 1 | 31 | (3) | |||
Other comprehensive income (loss) | (195) | (833) | 19 | (1,114) | (980) | (901) | 845 |
Comprehensive income (loss) | $ 235 | $ (229) | $ 779 | $ 18 | $ 1,107 | $ 1,130 | $ (34) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Equity - USD ($) $ in Millions | Total | Common Stock | Additional Paid-In Capital | Retained Earnings | Net Investment from Parent | Accumulated Other Comprehensive Loss |
Beginning balance at Dec. 29, 2019 | $ 21,721 | $ 26,138 | $ (4,417) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | (879) | (879) | ||||
Other comprehensive loss | 845 | 845 | ||||
Ending balance at Jan. 03, 2021 | 18,356 | 21,928 | (3,572) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 2,031 | 2,031 | ||||
Other comprehensive loss | (901) | (901) | ||||
Ending balance at Jan. 02, 2022 | 20,399 | 24,872 | (4,473) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 1,132 | 1,132 | ||||
Other comprehensive loss | (1,114) | (1,114) | ||||
Net transfers from (to) the Parent | (816) | (816) | ||||
Ending balance at Jul. 03, 2022 | 19,601 | 25,188 | (5,587) | |||
Beginning balance at Jan. 02, 2022 | 20,399 | 24,872 | (4,473) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 2,087 | 2,087 | ||||
Other comprehensive loss | (980) | (980) | ||||
Ending balance (in shares) at Jan. 01, 2023 | 0 | |||||
Ending balance at Jan. 01, 2023 | 20,021 | $ 0 | $ 0 | $ 0 | 25,474 | (5,453) |
Beginning balance at Apr. 03, 2022 | 20,465 | 25,219 | (4,754) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 604 | 604 | ||||
Other comprehensive loss | (833) | (833) | ||||
Net transfers from (to) the Parent | (635) | (635) | ||||
Ending balance at Jul. 03, 2022 | 19,601 | 25,188 | (5,587) | |||
Beginning balance at Jan. 01, 2023 | 20,021 | $ 0 | 0 | 0 | 25,474 | (5,453) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 760 | 430 | 330 | |||
Other comprehensive loss | 19 | 19 | ||||
Net transfers from (to) the Parent | (308) | (308) | ||||
Stock-based compensation | 73 | 38 | 35 | |||
Distribution to J&J in connection with the Separation | (13,788) | (13,788) | ||||
Issuance of common stock in connection with the Kenvue IPO (in shares) | 1,915,000,000 | |||||
Issuance of common stock in connection with the Kenvue IPO | 4,241 | $ 19 | 4,222 | |||
Separation adjustments | $ 22 | 95 | (73) | |||
Reclassification of Net Investment from Parent | 25,626 | (25,626) | ||||
Ending balance (in shares) at Jul. 02, 2023 | 1,914,894,444 | 1,915,000,000 | ||||
Ending balance at Jul. 02, 2023 | $ 11,040 | $ 19 | 16,098 | 430 | 0 | (5,507) |
Beginning balance (in shares) at Apr. 02, 2023 | 0 | |||||
Beginning balance at Apr. 02, 2023 | 20,282 | $ 0 | 0 | 0 | 25,521 | (5,239) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 430 | 430 | ||||
Other comprehensive loss | (195) | (195) | ||||
Net transfers from (to) the Parent | 10 | 10 | ||||
Stock-based compensation | 38 | 38 | ||||
Distribution to J&J in connection with the Separation | (13,788) | (13,788) | ||||
Issuance of common stock in connection with the Kenvue IPO (in shares) | 1,915,000,000 | |||||
Issuance of common stock in connection with the Kenvue IPO | 4,241 | $ 19 | 4,222 | |||
Separation adjustments | $ 22 | 95 | ||||
Reclassification of Net Investment from Parent | 25,626 | (25,626) | ||||
Ending balance (in shares) at Jul. 02, 2023 | 1,914,894,444 | 1,915,000,000 | ||||
Ending balance at Jul. 02, 2023 | $ 11,040 | $ 19 | $ 16,098 | $ 430 | $ 0 | $ (5,507) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 6 Months Ended | |
Jul. 02, 2023 | Jul. 03, 2022 | |
Cash flows from operating activities | ||
Net income | $ 760 | $ 1,132 |
Adjustments to reconcile net income to cash flows from operating activities | ||
Depreciation and amortization | 300 | 326 |
Stock-based compensation | 73 | 76 |
Deferred income taxes | 155 | 62 |
Other Noncash Income (Expense) | 12 | 0 |
Net changes in assets and liabilities | ||
Trade receivables | (55) | (144) |
Inventories | 143 | (366) |
Other current and non-current assets | (495) | 68 |
Accounts payable | 329 | (42) |
Accrued liabilities (Note 17) | 776 | (63) |
Employee related obligations | 4 | 11 |
Accrued taxes on income (Note 11) | (207) | 63 |
Other liabilities | (251) | 22 |
Net cash flows from operating activities | 1,544 | 1,145 |
Cash flows used in investing activities | ||
Purchases of property, plant, and equipment | (132) | (113) |
Transfer of funds to J&J pursuant to the Facility Agreement | (8,941) | 0 |
Proceeds from J&J upon repayment of the Facility Agreement | 8,941 | 0 |
Net (purchases) proceeds of assets/businesses | 14 | 2 |
Other investing | 0 | (4) |
Net cash used in investing activities | (118) | (115) |
Cash flows used in financing activities | ||
Proceeds from loans and notes payable | (14) | 7 |
Proceeds from Commercial Paper Program, net of issuance cost | 742 | 0 |
Proceeds from issuance of Senior Notes, net of issuance cost | 7,686 | 0 |
Proceeds from Kenvue IPO, net | 4,241 | 0 |
Distribution to J&J in connection with the Separation | (13,788) | 0 |
Net transfer (to) from the Parent | (274) | (892) |
Other financing | (11) | 0 |
Net cash used in financing activities | (1,418) | (885) |
Effect of exchange rate changes on cash and cash equivalents | (8) | (47) |
Cash and cash equivalents, beginning of year | 1,231 | 740 |
Net increase (decrease) in cash and cash equivalents | 0 | 98 |
Cash and cash equivalents, end of year | $ 1,231 | $ 838 |
Description of the Company and
Description of the Company and Summary of Significant Accounting Policies | 3 Months Ended | 6 Months Ended |
Apr. 02, 2023 | Jul. 02, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Description of the Company and Summary of Significant Accounting Policies | Intangible Assets Intangible assets are reported at cost, less accumulated amortization and impairments. The Company amortizes intangible assets with a finite life over their respective useful lives on a straight-line basis. The estimated useful lives of patents, trademarks and customer relationships range from 3 years to 40 years and for other intangibles ranges from 20 years to 40 years. The useful lives for customer relationships are estimated based on various customer attributes including customer type, size, geography, length of relationships and nature of relationships. Intangible assets deemed to have indefinite lives are not amortized but are subjected to annual tests of impairment. See Note 4 for further details on Intangible Assets. Goodwill Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. The Combined Balance Sheets reflect goodwill established based on past transactions of the Consumer Health segment allocated to the Company’s operations by the Parent. Goodwill is not amortized but is tested for impairment at least annually in the fourth quarter at the reporting unit level, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If the Company concludes it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed. If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). See Note 4 for further details on Goodwill. Impairment of Long-Lived Assets Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the asset group is tested for recoverability by comparing the carrying value of the asset group to the related estimated undiscounted future cash flows expected to be derived from the asset group, which include the amount and timing of the projected future cash flows. If the expected undiscounted cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value. If quoted market prices are not available, the Company will estimate fair value using a discounted value of estimated future cash flows. No indicators of impairment were present for fiscal years 2021 and 2020. See Note 4 for impairment recorded in fiscal year 2022. Indefinite-lived intangible assets are tested for impairment annually or more frequently if events or changes in circumstances between annual tests indicate that the asset may be impaired. Impairment losses on indefinite-lived intangible assets are recognized based on a comparison of the fair value of the asset to its carrying value. Foreign Currency Translation For translation of its international operations, the Company has determined that the local currencies are the functional currencies except those in highly inflationary economies, which are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years, or where a substantial portion of its cash flows are not in the local currency. For the majority of the Company’s international operations the local currency is the functional currency. | Description of the Company and Summary of Significant Accounting Policies Description of the Company and Business Segments Consumer Health Business (a business of Johnson & Johnson) (the “Company”) sells a broad range of products used in the baby care, oral care, skin health and beauty, over-the-counter pharmaceutical, sanitary protection and wound care markets. These products are marketed to the general public through e-commerce, direct-to-consumer channels and to retail outlets and distributors throughout the world. The Company has a global team of more than 22,000 employees engaged in the research and development, manufacture, and sale of a broad range of these products. The Company is organized into three business segments: Self Care, Skin Health and Beauty, and Essential Health. The Self Care segment includes a broad product range such as cough, cold and allergy, pain care, and other Self Care (digestive health, smoking cessation, and other) products. The Skin Health and Beauty segment is focused on face and body care and hair, sun, and other products. The Essential Health segment includes oral care, baby care, and other Essential Health (women’s health and wound care) products. The Company is wholly-owned by Johnson & Johnson (“J&J” or the “Parent”) and primarily represents the Consumer Health segment of J&J. The Company also includes certain other product lines previously reported in another segment of J&J. In November 2021, the Parent announced its intention to separate the Company into a new, publicly traded company (the “Separation”). Basis of Presentation The Company has historically operated as part of the Parent and not as a separate entity. These Combined Financial Statements of the Company have been derived from the consolidated financial statements of the Parent to present the Combined Balance Sheets as of January 1, 2023 and January 2, 2022 and the related Combined Statements of Operations, Comprehensive Income (Loss), Equity and Cash Flows for fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021 as if the Company had been operated on a standalone basis for the periods presented. The Combined Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the Parent’s historical accounting policies, by aggregating financial information from the components of the Company and the Parent’s accounting records directly attributable to the Company. All intercompany transactions and balances within the Company have been eliminated. All transactions between the Company and the Parent are considered to be effectively settled for cash in the Combined Financial Statements at the time the transaction is recorded. The effects of the settlement of these transactions between the Company and the Parent are reflected in the Combined Statements of Cash Flows as “Net transfers from (to) the Parent” within the financing activities, and in the Combined Balance Sheets and Combined Statements of Equity as “Net Investment from Parent”. The Combined Financial Statements of the Company include the assets, liabilities, revenues and expenses that management has determined are specifically or primarily identifiable to the Company, as well as direct and indirect costs that are attributable to the operations of the Company. Indirect costs are the costs of support functions that are provided on a centralized or geographic basis by the Parent and its affiliates, which include, but are 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 have been allocated to the Company for the purposes of preparing the Combined Financial Statements based on a specific identification basis or, when specific identification is not practicable, a proportional cost allocation method, primarily net sales, headcount, or other allocation methodologies that are 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 have been 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. The Company is incurring certain non-recurring Separation-related costs in its establishment as a standalone public company and those costs determined to be for the benefit of the Company are included in the Combined Financial Statements. These non-recurring Separation-related costs were $213 million for fiscal year 2022 and are included within Selling, general, and administrative expenses. The Company did not incur Separation-related costs in fiscal year 2021 or 2020. A significant number of personal injury claims alleging that talc causes cancer have been made against Johnson & Johnson Consumer Inc. (“Old JJCI”) and the Parent arising out of the use of body powders containing talc, primarily Johnson’s Baby Powder. Upon the 2021 Corporate Restructuring (as defined below), the Company no longer reflects the impact of the Talc-Related Liabilities (as defined below). See Note 13. Cash generated from the Company’s operations is generally managed by the Parent’s centralized treasury function and is swept into the Parent’s and its affiliates’ bank accounts. Cash and cash equivalents on the Combined Balance Sheets represent balances in accounts specifically identifiable to the Company that are not swept into the Parent’s and its affiliates’ bank accounts. The Parent’s third-party interest expense has not been allocated for any of the periods presented 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’s equity balance in these financial statements represents the excess of total assets over total liabilities. Equity is impacted by changes in comprehensive income, contributions from or to the Parent which are the result of treasury activities and net funding provided by or distributed to the Parent. The Parent calculates foreign currency translation on its consolidated assets and liabilities, which include assets and liabilities of the Company. Foreign currency translation recorded during the fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021 is based on currency movements specific to the Company’s Combined Financial Statements. The income tax amounts in the Combined Financial Statements have been calculated based on a separate return methodology and presented as if the Company’s operations were reported by separate taxpayers in the jurisdictions in which the Company operates. Following the Separation, the Company’s operating footprint as well as tax return elections and assertions are expected to be different and therefore, the Company’s hypothetical income taxes, as presented in the Combined Financial Statements, are not expected to be indicative of the Company’s future income taxes, which will also be impacted by the Tax Matters Agreement with the Parent. Certain current income tax liabilities related to the Company’s activities included in the Parent’s income tax returns were assumed to be immediately settled with Parent through Net Investment from Parent on the Combined Balance Sheets and reflected in the Combined Statements of Cash Flows as a financing activity. Use of Estimates The preparation of Combined Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, trade promotions, rebates, allowances and incentives, product liabilities, income taxes, withholding taxes, depreciation, amortization, employee benefits, contingencies, allocations of cost and expenses from the Parent and its affiliates, and intangible asset and liability valuations. Actual results may or may not differ from those estimates. Economic Uncertainty Macroeconomic factors affect consumer spending patterns and thereby the Company’s operations. These factors include general economic conditions, inflation, consumer confidence, employment rates, business conditions, the availability of credit, interest rates, tax rates and fuel and energy costs. Annual Closing Date The Company follows the concept of a fiscal year, which ends on the Sunday nearest to the end of the month of December. Normally each fiscal year consists of 52 weeks, but every five or six years the fiscal year consists of 53 weeks, and therefore includes additional shipping days, as was the case in fiscal year 2020, and will be the case again in fiscal year 2026. Fiscal year 2022 refers to the fiscal year ended January 1, 2023. Fiscal year 2021 refers to the fiscal year ended January 2, 2022. Fiscal year 2020 refers to the fiscal year ended January 3, 2021. Reportable Segments Commencing in fiscal year 2022, the Company began operating in the following reportable segments: (i) Self Care, (ii) Skin Health and Beauty and (iii) Essential Health. Prior to 2022, the Company operated as one reportable segment. All periods have been presented to conform to the current segment reporting structure. Trade Receivable and Allowance for Credit Losses Trade receivables, net are stated net of certain sales provisions and the allowance for credit losses. The Company estimates the current expected credit loss on its receivables based on various factors, including historical credit loss experience, customer credit worthiness, value of collaterals (if any), and any relevant current and reasonably supportable future economic factors. Trade receivable balances are written off against the allowance when it is deemed probable that the trade receivable will not be collected. (Dollars in Millions) 2022 2021 2020 Allowance for credit losses, beginning of period $ (32) $ (37) $ (35) Provision (9) (4) (9) Utilization 5 8 6 Currency translation adjustment 1 1 1 Allowance for credit losses, end of period $ (35) $ (32) $ (37) Inventories Inventories are stated at the lower of cost or net realizable value and are accounted for using the first-in, first-out method. Property, Plant and Equipment and Depreciation Property, plant and equipment are stated at cost less accumulated depreciation. The Company utilizes the straight-line method of depreciation over the estimated useful lives. Building and building equipment 20 - 30 years Land and leasehold improvements 10 - 20 years Machinery and equipment 2 - 13 years Software 3 - 8 years The Company capitalizes certain computer software and development costs when incurred in connection with developing or obtaining computer software for internal use. Upon retirement or other disposal of property, plant and equipment, the costs and related amounts of accumulated depreciation or amortization are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds are recorded in Other (income) expense, net, operating. Intangible Assets Intangible assets are reported at cost, less accumulated amortization and impairments. The Company amortizes intangible assets with a finite life over their respective useful lives on a straight-line basis. The estimated useful lives of patents, trademarks and customer relationships range from 3 years to 40 years and for other intangibles ranges from 20 years to 40 years. The useful lives for customer relationships are estimated based on various customer attributes including customer type, size, geography, length of relationships and nature of relationships. Intangible assets deemed to have indefinite lives are not amortized but are subjected to annual tests of impairment. See Note 4 for further details on Intangible Assets. Goodwill Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. The Combined Balance Sheets reflect goodwill established based on past transactions of the Consumer Health segment allocated to the Company’s operations by the Parent. Goodwill is not amortized but is tested for impairment at least annually in the fourth quarter at the reporting unit level, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If the Company concludes it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed. If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). See Note 4 for further details on Goodwill. Impairment of Long-Lived Assets Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the asset group is tested for recoverability by comparing the carrying value of the asset group to the related estimated undiscounted future cash flows expected to be derived from the asset group, which include the amount and timing of the projected future cash flows. If the expected undiscounted cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value. If quoted market prices are not available, the Company will estimate fair value using a discounted value of estimated future cash flows. No indicators of impairment were present for fiscal years 2021 and 2020. See Note 4 for impairment recorded in fiscal year 2022. Financial Instruments The Parent and Company use derivative financial instruments to manage exposure to foreign currency fluctuations. The Company participates in the Parent’s centralized hedging and offsetting programs. The effects of foreign currency derivatives are allocated to the Company based on the portion that is deemed to be associated with the Company’s operations. Additionally, in certain jurisdictions, the Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of future intercompany product sales and third-party purchases of materials denominated in a foreign currency. The Company uses interest rate swaps as an instrument to manage interest rate risk related to forecasted fixed rate borrowings. As required by U.S. GAAP, all derivative instruments held by the Company are recorded on the balance sheet at fair value. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value, with Level 1 having the highest priority and Level 3 having the lowest. Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction. Any changes in the fair value of derivatives designated as fair value hedges are recorded in net income. The Parent and Company document all relationships between hedged items and derivatives. The overall risk management strategy includes reasons for undertaking hedge transactions and entering into derivatives. The objectives of this strategy are: (1) minimize foreign currency exposure’s impact on the Company’s financial performance; (2) protect the Company’s cash flow from adverse movements in foreign exchange rates; (3) ensure the appropriateness of financial instruments; (4) manage the enterprise risk associated with financial institutions; and (5) reduce exposure to fluctuation in variable interest rates. See Note 12 to the Combined Financial Statements for further information on fair value instruments. Revenue Recognition The Company’s revenue contracts represent a single performance obligation to sell its products to customers. Revenue from the sale of products to customers is recognized at a single point in time when control transfers, which can be on the date of shipment or the date of receipt by the customer depending on the terms of the contract. Net sales exclude taxes collected by the Company on behalf of governmental authorities. In addition, the Company has elected to account for shipping and handling activities as fulfillment costs and includes the shipping and handling fees charged to the customers as a part of the transaction price to be recognized when control of the product transfers. The Company’s global payment terms are typically between 30 to 90 days. Trade promotions, comprised of coupons, product listing allowances, cooperative advertising arrangements, volume-based incentive programs, as well as discounts to customers, rebates, sales incentives, and product returns, are accounted for as variable consideration and recorded as a reduction in sales in the same period as the related sale. To estimate variable consideration, the Company may apply both the “expected value” method and the “most likely amount” method based on the form of variable consideration, after considering which method would provide the best prediction of consideration to be received from the Company’s customers. The redemption cost of consumer coupons is based on historical redemption experience by product and value. Volume-based incentive programs are based on the estimated sales volumes for the incentive period. The related liability is recognized within Accrued rebates, returns and promotions on the Combined Balance Sheets. Sales returns are almost exclusively not resalable, the related reserves are recorded at full sales value and estimated based on historical sales and returns information. See Note 15 to the Combined Financial Statements for further disaggregation of net sales. Leases The Company determines whether an arrangement is a lease at contract inception by establishing if the contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Right of Use (“ROU”) assets and lease liabilities for operating leases are included in Other assets, Accrued liabilities, and Other liabilities on the Combined Balance Sheets. The ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of all minimum lease payments over the lease term. The Company uses the Parent’s incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments, when the implicit rate is not readily determinable. 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. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has elected the following policy elections on adoption: use of portfolio approach on leases of assets under master service agreements, exclusion of short-term leases on the balance sheet, and not separating lease and non-lease components. The Company primarily has operating leases for space, vehicles, manufacturing equipment and data processing equipment. The ROU asset pertaining to operating leases was $110 million and $126 million, in 2022 and 2021, respectively. The current and non-current lease liability was $116 million and $129 million, in 2022 and 2021, respectively. The operating lease costs were $42 million, $54 million and $63 million, in 2022, 2021 and 2020, respectively. Cash paid for amounts included in the measurement of lease liabilities was $43 million, $55 million and $63 million in 2022, 2021 and 2020 respectively. Weighted-average remaining lease term for operating leases was 7 years for 2022 and 6 years for 2021. The weighted-average discount rate for operating leases was 2.3% and 3.0% for 2022 and 2021, respectively. The estimated operating lease future payments before tax for the five succeeding years and thereafter is approximately: (Dollars in Millions) 2023 $ 31 2024 25 2025 14 2026 12 2027 9 Thereafter 63 Total 154 Less: Imputed Interest (38) Total current and non-current lease liability $ 116 Advertising Costs associated with advertising are expensed in the year incurred and are included in Selling, general, and administrative expenses. Advertising expenses worldwide, which comprised television, radio, print media and digital advertising, were $1,356 million, $1,461 million and $1,230 million in fiscal years 2022, 2021 and 2020, respectively. Shipping and Handling Shipping and handling costs incurred were $322 million, $305 million and $295 million in fiscal years 2022, 2021 and 2020, respectively, and are included in Selling, general, and administrative expenses. Product Liability Accruals for product liability claims are recorded, on an undiscounted basis, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing information and actuarially determined estimates where applicable. The accruals are adjusted periodically as additional information becomes available. The Company accrues an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated. To the extent adverse verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated. Research and Development Research and development expenses are expensed as incurred and included within Selling, general, and administrative expenses. Research and development costs were $375 million, $355 million and $320 million for fiscal year 2022, 2021 and 2020, respectively. Income Taxes Income taxes are recorded based on amounts refundable or payable for the current fiscal year and include the results of any differences between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. The Company estimates deferred tax assets and liabilities based on enacted tax regulations and rates. Future changes in tax laws and rates may affect recorded deferred tax assets and liabilities. U.S. federal, state and foreign income tax payables and receivables are recognized in the Combined Balance Sheets for entities that file separate income tax returns and make direct payments to taxing authorities. U.S. federal, state and foreign income tax payables and receivables for entities that file a combined, consolidated or group income tax return with the Parent are deemed settled with the Parent and are included in the “Net Investment from Parent.” Management establishes valuation allowances on deferred tax assets when it is determined “more likely than not” that some portion or all of the deferred tax assets may not be realized. Management considers positive and negative evidence in evaluating the Company’s ability to realize its deferred tax assets, including its historical results and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. The Company has unrecognized tax benefits for uncertain tax positions. The Company follows U.S. GAAP which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The estimates for these positions are regularly assessed based upon all available information. These estimates may be revised in the future and such changes may have a material additional expense or benefit to the Company’s financial results or its effective tax rate. In the United States, the Tax Cuts and Jobs Act of 2017 (the “TCJA”) enacted in 2017 includes provisions for a tax on global intangible low-taxed income (“GILTI”). GILTI is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets, as provided by the TCJA. In January 2018, the FASB issued guidance that allowed companies to elect as an accounting policy whether to record the tax effects of GILTI in the period the tax liability is generated (i.e., “period cost”) or to provide for deferred tax assets and liabilities related to basis differences that exist at the balance sheet date and are expected to affect the amount of GILTI inclusion in future years upon reversal (i.e., “deferred method”). The Company has elected to account for GILTI under the deferred method. The deferred tax amounts recorded are based on the evaluation of temporary differences that are expected to reverse as GILTI is incurred in future periods. See Note 11 to the Combined Financial Statements for further information regarding income taxes. Stock-Based Compensation Certain employees of the Company participate in the Parent’s stock-based compensation plans. Stock-based compensation expense related to these plans is recognized based on specific identification of cost related to the Company’s employees. The Company also receives allocated stock-based compensation expense relating to employees of central support functions provided by the Parent. Foreign Currency Translation For translation of its international operations, the Company has determined that the local currencies are the functional currencies except those in highly inflationary economies, which are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years, or where a substantial portion of its cash flows are not in the local currency. For the majority of the Company’s international operations the local currency is the functional currency. The net assets of international operations where the local currencies have been determined to be the functional currencies are translated into U.S. dollars, the reporting currency, using period-end exchange rates and at the average exchange rates for the reporting period for revenue and expense accounts. The cumulative foreign currency translation adjustment is recorded as a component of Accumulated other comprehensive loss in equity. Foreign currency translation recorded in these Combined Financial Statements is based on currency movements specific to the Company’s assets and liabilities included on the Combined Balance Sheets during the periods presented. Foreign currency exchange gains and losses on transactions occurring in a currency other than an operation’s functional currency are recognized as a component of Other expense (income), net in the Combined Statements of Operations. Net currency transaction losses (gains) were $105 million, $(16) million and $16 million in fiscal years 2022, 2021 and 2020, respectively. Recently Issued Accounting Standards, Not Adopted as of January 1, 2023 ASU 2022-04: Liabilities-Supplier Finance Programs (Topic 405-50) – Disclosure of Supplier Finance Program Obligations This update requires that a buyer in a supplier finance program disclose additional information about the program to allow financial statement users to better understand the effect of the programs on an entity’s working capital, liquidity, and cash flows. This update will be effective for the Company for fiscal years beginning after December 15, 2022, except for the amendment on roll forward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company is currently assessing the impact of this update on its disclosures and will adopt this standard in the fiscal first quarter of 2023. Reclassifications Certain prior period amounts have been reclassified to conform to current year presentation. Description of the Company and Business Segments Kenvue Inc. (“Kenvue” or the “Company”) was formed as a wholly owned subsidiary of Johnson & Johnson (“J&J” or the “Parent”) and sells a broad range of products used in the baby care, oral care, skin health and beauty, over-the-counter pharmaceutical, sanitary protection, and wound care markets. These products are marketed to the general public through e-commerce, direct-to-consumer channels, and to retail outlets and distributors throughout the world. The Company is organized into three business segments: Self Care, Skin Health and Beauty, and Essential Health. The Self Care segment includes a broad product range such as cough, cold and allergy, pain care, as well as digestive health, smoking cessation, and other products. The Skin Health and Beauty segment is focused on face and body care and hair, sun, and other products. The Essential Health segment includes oral care, baby care, as well as women’s health, wound care, and other products. In November 2021, the Parent 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 (as defined below in “—Variable Interest Entities and Net Economic Benefit Arrangements”). The registration statement related to the initial public offering of Kenvue’s common stock was declared effective on May 3, 2023, and Kenvue’s common stock began trading on the New York Stock Exchange under the ticker symbol “KVUE” on May 4, 2023 (the “Kenvue IPO”). On May 8, 2023, the Kenvue IPO was completed through the sale of 198,734,444 shares of common stock, par value $0.01 per share, including the underwriters’ full exercise of their option to purchase 25,921,884 shares to cover over-allotments, at an initial public offering price of $22 per share for net proceeds of $4.2 billion after deducting underwriting discounts and commissions of $131 million. On May 8, 2023, in conjunction with the Consumer Health Business Transfer, the Company distributed $13.8 billion to J&J from the (1) net proceeds received from the sale of the common stock in the Kenvue IPO and (2) net proceeds received from the Debt Financing Transactions as defined in Note 4, “Borrowings”, and (3) any cash and cash equivalents in excess of the $1.17 billion in cash and cash equivalents retained by the Company immediately following the Kenvue IPO. As of the closing of the Kenvue IPO, J&J owned 1,716,160,000 shares of Kenvue common stock, or approximately 89.6% of the total outstanding shares of Kenvue common stock. On July 24, 2023, J&J initiated an exchange offer under which its shareholders can exchange shares of J&J common stock for shares of Kenvue Inc. common stock owned by J&J. Basis of Presentation Effective April 4, 2023, the Company’s financial statements are presented on a consolidated basis, as J&J completed the Consumer Health Business Transfer on such date. The unaudited financial statements for all periods presented, including the historical results of the Company prior to April 4, 2023, are now referred to as the “Condensed Consolidated Financial Statements”. Prior to April 4, 2023, the Company operated as a segment of the Parent and not as a separate entity. The Company’s financial statements prior to April 4, 2023 were prepared on a combined basis and were derived from the Parent’s historical consolidated financial statements for interim financial reporting, which do not conform in all respects to the requirements of accounting principles generally accepted in the United States of America (“U.S. GAAP” |
Inventories
Inventories | 6 Months Ended |
Jul. 02, 2023 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories At the end of fiscal years 2022 and 2021, inventories were comprised of: (Dollars in Millions) 2022 2021 Raw materials and supplies $ 351 $ 264 Goods in process 123 99 Finished goods 1,752 1,339 Total inventories $ 2,226 $ 1,702 As of July 2, 2023 and January 1, 2023, inventories were comprised of: (Dollars in Millions) July 2, 2023 January 1, 2023 Raw materials and supplies $ 299 $ 351 Goods in process 134 123 Finished goods 1,593 1,752 Total inventories $ 2,026 $ 2,226 |
Property, Plant and Equipment
Property, Plant and Equipment | 6 Months Ended |
Jul. 02, 2023 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, Plant and Equipment At the end of fiscal years 2022 and 2021, property, plant and equipment at cost and accumulated depreciation were: (Dollars in Millions) 2022 2021 Machinery and equipment $ 2,280 $ 2,416 Buildings and building equipment 1,709 1,744 Software 1,329 1,303 Construction in progress 307 228 Land and land improvements 75 79 Total property, plant and equipment, gross $ 5,700 $ 5,770 Less: accumulated depreciation (3,880) (3,943) Total property, plant and equipment, net $ 1,820 $ 1,827 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 6 Months Ended |
Jul. 02, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | Intangible Assets and Goodwill At the end of fiscal years 2022 and 2021, the gross and net amounts of intangible assets were: 2022 2021 (Dollars in Millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Patents and trademarks $ 4,400 $ (1,485) $ 2,915 $ 4,705 $ (1,350) $ 3,355 Customer relationships 2,127 (1,063) 1,064 2,265 (1,021) 1,244 Other intangibles 1,343 (650) 693 1,377 (628) 749 Total definite-lived intangible assets 7,870 (3,198) 4,672 8,347 (2,999) 5,348 Indefinite-lived intangible assets: Trademarks 5,122 — 5,122 5,291 — 5,291 Other 59 — 59 62 — 62 Total intangible assets, net $ 13,051 $ (3,198) $ 9,853 $ 13,700 $ (2,999) $ 10,701 The weighted average amortization period for patents and trademarks is 20 years. The weighted average amortization period for customer relationships is 31 years and is driven by large established distributors in various regional markets. These customers have been operating in these markets for many years and are expected to continue to operate in these markets for the foreseeable future. The weighted average amortization period for other intangible assets is 34 years. A majority of the other intangible assets relates to the Parent’s acquisition of Pfizer Consumer Health in 2006. The amortization expense of amortizable assets included in Cost of sales was $348 million, $414 million and $415 million, for the fiscal years 2022, 2021 and 2020 respectively. Amortization of intangible assets is inclusive of amortization on trademarks of $187 million, $213 million, and $197 million for the fiscal years 2022, 2021, and 2020, respectively. Amortization on the remaining intangible assets is $161 million, $201 million, and $218 million for the fiscal years 2022, 2021, and 2020, respectively. Carrying amount changes from fiscal year 2021 to fiscal year 2022 are primarily driven by currency translation. The Company recognized an intangible impairment of $12 million related to certain definite-lived trademarks deemed as irrecoverable in Other (income) expense, net, operating for the fiscal year ended January 1, 2023. The estimated amortization expense before tax for the five succeeding years is approximately: (Dollars in Millions) 2023 2024 2025 2026 2027 $ 314 $ 304 $ 280 $ 276 $ 272 During 2022, the Company realigned and began managing its operations differently, and as a result the Company reallocated its goodwill to align with the new operating segments during 2022. This realignment in segment structure resulted in a change in the Company’s former reporting units, which are now divided between: (i) Self Care, (ii) Skin Health and Beauty and (iii) Essential Health. which are also the Company’s reportable segments. As a result of this realignment, goodwill was reassigned to each of the reporting units using a relative fair value approach. The Company estimates the fair values of a reporting unit using a discounted cash flow model. Goodwill by reportable segment is as follows: (Dollars in Millions) Consumer Health Business Self Care Skin Health and Beauty Essential Health Total Goodwill at January 3, 2021 $ 10,326 $ — $ — $ — $ 10,326 Currency translation/other (516) — — — (516) Goodwill at January 2, 2022 $ 9,810 $ — $ — $ — $ 9,810 Currency translation/other (664) — — — (664) Goodwill at July 3, 2022 $ 9,146 $ — $ — $ — $ 9,146 Realignment of segment goodwill (9,146) 5,193 2,334 1,619 — Currency translation/other — 1 31 7 39 Goodwill at January 1, 2023 $ — $ 5,194 $ 2,365 $ 1,626 $ 9,185 A majority of the goodwill relates to the Parent’s acquisition of Pfizer Consumer Health in 2006. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants. The Company estimates the fair values of a reporting unit using a discounted cash flow model. The discounted cash flow model relies on assumptions regarding revenue and net income growth rates, projected working capital needs, capital expenditures, and discount rates. To estimate fair value, the Company discounts the forecasted cash flows of each reporting unit. The discount rate the Company uses represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return a market participant would expect to earn. The quantitative fair value test is performed utilizing long-term growth rates and discount rates applied to the estimated cash flows in estimation of fair value. To forecast a reporting unit’s cash flows the Company takes into consideration economic conditions and trends, estimated future operating results, management’s projections, and a market participant’s view of growth rates and product lives, and anticipates future economic conditions. Revenue growth rates inherent in these forecasts are based on input from internal and external market research that compare factors such as growth in global economies, recent industry trends and product life-cycles. Macroeconomic factors such as changes in economies, changes in the competitive landscape, changes in government legislation, product life-cycles, industry consolidations and other changes beyond the Company’s control could have a positive or negative impact on achieving its targets. Accordingly, if market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the future. Re-segmentation Goodwill Impairment Test Following the change in reporting units during 2022, the Company performed a quantitative impairment test on each of the reporting units: (i) Self Care, (ii) Skin Health and Beauty and (iii) Essential Health. After completing the testing, the fair value of each of these reporting units exceeded its carrying value, and, therefore, there was no impairment to goodwill. Annual Goodwill Impairment Tests The Company completed its annual goodwill impairment tests for fiscal years 2022, 2021, and 2020 and concluded that no impairment to goodwill was necessary as the fair value of each reporting unit was in excess of its respective carrying value. As of July 2, 2023 and January 1, 2023, the gross and net amounts of intangible assets were: July 2, 2023 January 1, 2023 (Dollars in Millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Patents and trademarks $ 4,383 $ (1,583) $ 2,800 $ 4,400 $ (1,485) $ 2,915 Customer relationships 2,099 (1,087) 1,012 2,127 (1,063) 1,064 Other intangibles 1,348 (671) 677 1,343 (650) 693 Total definite-lived intangible assets $ 7,830 $ (3,341) $ 4,489 $ 7,870 $ (3,198) $ 4,672 Indefinite-lived intangible assets: Trademarks 5,128 — 5,128 5,122 — 5,122 Other 61 — 61 59 — 59 Total intangible assets, net $ 13,019 $ (3,341) $ 9,678 $ 13,051 $ (3,198) $ 9,853 The weighted average amortization period for patents and trademarks is 20 years. The weighted average amortization period for customer relationships is 31 years and is driven by large established distributors in various regional markets. These customers have been operating in these markets for many years and are expected to continue to operate in these markets for the foreseeable future. The weighted average amortization period for other intangible assets is 34 years. A majority of the other intangible assets relates to the Parent’s acquisition of Pfizer Consumer Health in 2006. Carrying amount changes for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were primarily driven by currency translations. The Company recognized an intangible impairment of $12 million related to certain definite-lived trademarks deemed as irrecoverable in Other operating expense (income), net for the fiscal three and six months ended July 3, 2022. Amortization expense, which was included in Cost of Sales, for the Company’s amortizable assets was as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Trademarks $ 53 $ 48 $ 94 $ 98 Other intangible assets 26 41 66 84 Total Amortization expense $ 79 $ 89 $ 160 $ 182 The estimated amortization expense before tax for the remainder of 2023 and the five succeeding years is approximately: (Dollars in Millions) Remainder of 2023 2024 2025 2026 2027 2028 $ 157 $ 306 $ 282 $ 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 (39) (76) 11 (104) Goodwill at July 2, 2023 $ 5,155 $ 2,289 $ 1,637 $ 9,081 |
Employee Related Obligations
Employee Related Obligations | 6 Months Ended |
Jul. 02, 2023 | |
Retirement Benefits [Abstract] | |
Pensions | Employee Related Obligations At the end of fiscal years 2022 and 2021, employee related obligations recorded on the Combined Balance Sheets were: (Dollars in Millions) 2022 2021 Pension benefits $ 216 $ 303 Postretirement benefits 5 5 Total employee obligations 221 308 Less: current benefits in Accrued liabilities (7) (6) Employee related obligations - non-current $ 214 $ 302 Single Employer Plans The Company is the plan sponsor for certain defined benefit retirement plans and other benefit plans and these Combined Financial Statements reflect the periodic benefit costs and funded status of such plans. The Company uses December 31 as the fiscal year-end measurement date for these plans. The Company’s defined benefit retirement plans are located outside the United States. Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans sponsored by the Company for 2022, 2021 and 2020 include the following components: Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2020 2022 2021 2020 Service cost $ 8 $ 7 $ 6 $ — $ — $ — Interest cost 4 2 3 — 1 — Recognized actuarial losses (gain) 4 6 5 — (1) — Curtailments and settlements — — 1 — — — Expected return on plan assets (1) — — — — — Net periodic benefit cost $ 15 $ 15 $ 15 $ — $ — $ — The service cost component of net periodic benefit cost is presented in the same line items on the Combined Statements of Operations where other employee compensation costs are reported, including Cost of sales and Selling, general, and administrative expenses. All other components of net periodic benefit costs are presented as part of Other expense (income), net on the Combined Statements of Operations. The following table represents the weighted-average actuarial assumptions: Retirement Plans Other Benefit Plans Worldwide Benefit Plans 2022 2021 2020 2022 2021 2020 Net Periodic Benefit Cost Service cost discount rate 2.3 % 1.2 % 1.5 % — % — % — % Interest cost discount rate 3.1 % 0.7 % 1.0 % — % — % — % Rate of increase in compensation levels 2.5 % 2.7 % 2.7 % — % — % — % Expected long-term rate of return on plan assets 2.9 % 2.1 % 2.5 % — % — % — % Benefit Obligation Discount rate 4.2 % 1.4 % 1.1 % 12.3 % 11.5 % 13.3 % Rate of increase in compensation levels 2.7 % 2.7 % 2.7 % — % — % — % The Company’s discount rates are determined by considering current yield curves representing high quality, long-term fixed income instruments. The resulting discount rates are consistent with the duration of plan liabilities. The Company’s methodology in determining service and interest cost uses duration specific spot rates along that yield curve to the plans’ liability cash flows. The expected rates of return on plan asset assumptions represent the Company’s assessment of long-term returns on diversified investment portfolios globally. The assessment is determined using projections from external financial sources, long-term historical averages, actual returns by asset class and the various asset class allocations by market. The healthcare cost trend rates have reached the ultimate trend rates of 8.3% and 8.3% for fiscal years 2022 and 2021 respectively. The following table sets forth information related to the benefit obligation and the fair value of plan assets at fiscal year-end 2022 and 2021 for the defined benefit retirement plans and other benefit plans sponsored by the Company: Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2022 2021 Change in Benefit Obligation Projected benefit obligation - beginning of year $ 303 $ 347 $ 5 $ 5 Service cost 8 7 — — Interest cost 4 2 — 1 Actuarial gain (1) (82) (21) — — Curtailments, settlements & restructuring — — — — Benefits paid from plan (8) (9) — — Effect of exchange rates (19) (23) — (1) Other (2) 29 — — — Projected benefit obligation - end of year $ 235 $ 303 $ 5 $ 5 Change in Plan Assets Plan assets at fair value - beginning of year $ — $ — $ — $ — Company contributions 9 9 — — Benefits paid from plan assets (8) (9) — — Actual return on plan assets (1) — — — Effect of exchange rates (2) — — — Transfers 21 — — Plan assets at fair value - end of year 19 — — — Funded status - end of year (216) (303) — — Amounts Recognized in the Company’s Balance Sheet consist of the following: Accrued liabilities (7) (6) — — Employee related obligations - non-current (209) (297) (5) (5) Total recognized in the Combined Balance Sheets - end of year (216) (303) (5) (5) Amounts Recognized in Accumulated Other Comprehensive Income consist of the following: Net actuarial (gain) loss (15) 79 (4) (4) Prior service cost 4 2 — — Total before tax effects (11) 81 (4) (4) Accumulated Benefit Obligations - end of year $ 204 $ 262 $ 3 $ 3 __________________ (1) The actuarial gain for retirement plans in 2022 was primarily related to increases in discount rates (2) This amount includes $25 million related to new unfunded pension plans included in the balance during 2022 from the Parent and other pension plans. See Note 9. Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2022 2021 Amounts Recognized in Net Periodic Benefit Cost and Other Comprehensive Income Net periodic benefit cost $ 15 $ 15 $ — $ — Net actuarial gain (1) (82) (21) — — Amortization of net actuarial loss (4) (6) — — Effect of exchange rates (6) (7) — 1 Total (income)/loss recognized in other comprehensive income, before tax $ (92) $ (34) $ — $ 1 Total recognized in net periodic benefit cost and other comprehensive income $ (77) $ (19) $ — $ 1 _________________ (1) The actuarial gain for retirement plans in 2022 was primarily related to increases in discount rates The Company’s pension plans are funded in accordance with local regulations. Additional discretionary contributions are made when deemed appropriate to meet the long-term obligations of the plans. For certain plans, funding is not a common practice, as funding provides no economic benefit. Consequently, the Company’s pension plans are not funded. The following table displays the projected future benefit payments from the Company’s defined benefit retirement plans and other benefit plans: (Dollars in Millions) 2023 2024 2025 2026 2027 2028- 2032 Projected future benefit payments Retirement plans $ 10 $ 11 $ 12 $ 12 $ 13 $ 80 Other benefit plans $ — $ — $ — $ — $ — $ 2 The Company currently has no projected benefit plan contributions. The Company’s retirement plan assets at the end of 2022 were primarily comprised of debt, equity and insurance contracts. The Company’s retirement plan asset allocation at the end of 2022 and 2021 and target allocations for 2023 are as follows: Percent of Plan Assets Target Allocation Worldwide Retirement Plans 2022 2021 2023 Equity securities 42 % — % 42 % Debt securities 56 % — % 56 % Other assets 2 % 100 % 2 % Total plan assets 100 % 100 % 100 % Determination of Fair Value of Plan Assets The Plan has an established and well-documented process for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon models that primarily use, as inputs, market-based or independently sourced market parameters, including yield curves, interest rates, volatilities, equity or debt prices, foreign exchange rates and credit curves. While the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Valuation Hierarchy The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described in the table below with Level 1 having the highest priority and Level 3 having the lowest. The Net Asset Value (NAV) is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for the investments measured at fair value. • Debt instruments — A limited number of these investments are valued at the closing price reported on the major market on which the individual securities are traded. Where quoted prices are available in an active market, the investments are classified as Level 1. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are classified as Level 2. Level 3 debt instruments are priced based on unobservable inputs. • Equity securities — Equity securities are valued at the closing price reported on the major market on which the individual securities are traded. Substantially all equity securities are classified within Level 1 of the valuation hierarchy. • Other assets — Other assets are primarily related to insurance contracts. The instruments are issued by insurance companies. The fair value is based on negotiated value and the underlying investments held in separate account portfolios as well as considering the credit worthiness of the issuer. The underlying investments are government, asset-backed and fixed income securities. In general, insurance contracts are classified as Level 3 as there are no quoted prices nor other observable inputs for pricing. The following table sets forth the Retirement Plans' investments measured at fair value as of January 1, 2023 and January 2, 2022: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs Significant Unobservable Inputs Total Assets (Dollars in Millions) 2022 2021 2022 2021 2022 2021 2022 2021 Debt instruments $ — $ — $ 9 $ — $ — $ — $ 9 $ — Equity securities 9 — — — — — 9 — Other assets — — — — 1 — 1 — Investments at fair value $ 9 $ — $ 9 $ — $ 1 $ — $ 19 $ — Multiemployer Plans The Parent has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The Parent also provides medical benefits, principally to its U.S. retirees and their dependents through its other postretirement benefit plans. The participation of the Company’s employees and retirees in these plans is reflected as though the Company participated in a multiemployer plan with the Parent. Liabilities associated with these plans are not reflected in the Company’s Combined Balance Sheets. The Combined Statements of Operations includes expense allocations for these benefits which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company amounted to $54 million, $93 million and $94 million for fiscal years 2022, 2021 and 2020, respectively. Savings Plan In the United States, the Parent has voluntary 401(k) savings plans designed to enhance the existing retirement programs covering eligible employees. The Parent matches a percentage of each employee’s contributions consistent with the provisions of the plan for which he/she is eligible. Total Parent matching contributions attributable to the Company’s employees were $14 million, $14 million and $12 million in fiscal years 2022, 2021 and 2020, respectively. Post-Employment Benefit Plans Additionally, the Parent maintains a post-employment benefit plan to provide limited benefits to its former employees, including former employees of the Company, if they are involuntarily terminated. The duration of these benefits are generally based on the employee’s term of service with the Parent, and includes both severance compensation and other benefits, including medical coverage. The post-employment plan is published and is considered a benefit to employees which is earned over the employee’s term of service. As a result, the Parent recognizes the cost of this benefit as it is earned by the employee as required by ASC 712: Compensation - non-retirement post-employment benefits. The cost of this benefit allocated to the Company in fiscal years 2022, 2021 and 2020 was approximately $46 million, $49 million and $53 million, respectively, and is reflected as an expense in the Combined Statements of Comprehensive Income (Loss). Single Employer Plans Net periodic benefit costs for the Company’s defined benefit retirement plans sponsored by the Company for the fiscal three and six months ended July 2, 2023 and July 3, 2022, included the following components: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Service cost $ 5 $ 2 $ 10 $ 4 Interest cost 7 1 10 2 Recognized actuarial gain — 1 — 2 Expected return on plan assets (7) — (10) — Net periodic benefit cost $ 5 $ 4 $ 10 $ 8 The service cost component of net periodic benefit cost is presented in the same line items on the Company’s Condensed Consolidated Statements of Operations where other employee compensation costs are reported, including Cost of sales and Selling, general, and administrative expenses. All other components of net periodic benefit costs are presented as part of Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations. Multiemployer Plans The Parent has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The Parent also provides medical benefits, principally to its U.S. retirees and their dependents through its other postretirement benefit plans. The participation of the Company’s employees and retirees in these plans is reflected as though the Company participated in a multiemployer plan with the Parent. Assets and liabilities associated with these plans are not reflected in the Company’s Condensed Consolidated Balance Sheets. The Condensed Consolidated Statements of Operations include expense allocations for these benefits, which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company amounted to $1 million and $15 million for the fiscal three months ended July 2, 2023 and July 3, 2022, respectively, and $17 million and $27 million for the fiscal six months ended July 2, 2023 and July 3, 2022, respectively. |
Pensions and Other Benefit Plan
Pensions and Other Benefit Plans | 6 Months Ended |
Jul. 02, 2023 | |
Retirement Benefits [Abstract] | |
Pensions and Other Benefit Plans | Employee Related Obligations At the end of fiscal years 2022 and 2021, employee related obligations recorded on the Combined Balance Sheets were: (Dollars in Millions) 2022 2021 Pension benefits $ 216 $ 303 Postretirement benefits 5 5 Total employee obligations 221 308 Less: current benefits in Accrued liabilities (7) (6) Employee related obligations - non-current $ 214 $ 302 Single Employer Plans The Company is the plan sponsor for certain defined benefit retirement plans and other benefit plans and these Combined Financial Statements reflect the periodic benefit costs and funded status of such plans. The Company uses December 31 as the fiscal year-end measurement date for these plans. The Company’s defined benefit retirement plans are located outside the United States. Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans sponsored by the Company for 2022, 2021 and 2020 include the following components: Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2020 2022 2021 2020 Service cost $ 8 $ 7 $ 6 $ — $ — $ — Interest cost 4 2 3 — 1 — Recognized actuarial losses (gain) 4 6 5 — (1) — Curtailments and settlements — — 1 — — — Expected return on plan assets (1) — — — — — Net periodic benefit cost $ 15 $ 15 $ 15 $ — $ — $ — The service cost component of net periodic benefit cost is presented in the same line items on the Combined Statements of Operations where other employee compensation costs are reported, including Cost of sales and Selling, general, and administrative expenses. All other components of net periodic benefit costs are presented as part of Other expense (income), net on the Combined Statements of Operations. The following table represents the weighted-average actuarial assumptions: Retirement Plans Other Benefit Plans Worldwide Benefit Plans 2022 2021 2020 2022 2021 2020 Net Periodic Benefit Cost Service cost discount rate 2.3 % 1.2 % 1.5 % — % — % — % Interest cost discount rate 3.1 % 0.7 % 1.0 % — % — % — % Rate of increase in compensation levels 2.5 % 2.7 % 2.7 % — % — % — % Expected long-term rate of return on plan assets 2.9 % 2.1 % 2.5 % — % — % — % Benefit Obligation Discount rate 4.2 % 1.4 % 1.1 % 12.3 % 11.5 % 13.3 % Rate of increase in compensation levels 2.7 % 2.7 % 2.7 % — % — % — % The Company’s discount rates are determined by considering current yield curves representing high quality, long-term fixed income instruments. The resulting discount rates are consistent with the duration of plan liabilities. The Company’s methodology in determining service and interest cost uses duration specific spot rates along that yield curve to the plans’ liability cash flows. The expected rates of return on plan asset assumptions represent the Company’s assessment of long-term returns on diversified investment portfolios globally. The assessment is determined using projections from external financial sources, long-term historical averages, actual returns by asset class and the various asset class allocations by market. The healthcare cost trend rates have reached the ultimate trend rates of 8.3% and 8.3% for fiscal years 2022 and 2021 respectively. The following table sets forth information related to the benefit obligation and the fair value of plan assets at fiscal year-end 2022 and 2021 for the defined benefit retirement plans and other benefit plans sponsored by the Company: Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2022 2021 Change in Benefit Obligation Projected benefit obligation - beginning of year $ 303 $ 347 $ 5 $ 5 Service cost 8 7 — — Interest cost 4 2 — 1 Actuarial gain (1) (82) (21) — — Curtailments, settlements & restructuring — — — — Benefits paid from plan (8) (9) — — Effect of exchange rates (19) (23) — (1) Other (2) 29 — — — Projected benefit obligation - end of year $ 235 $ 303 $ 5 $ 5 Change in Plan Assets Plan assets at fair value - beginning of year $ — $ — $ — $ — Company contributions 9 9 — — Benefits paid from plan assets (8) (9) — — Actual return on plan assets (1) — — — Effect of exchange rates (2) — — — Transfers 21 — — Plan assets at fair value - end of year 19 — — — Funded status - end of year (216) (303) — — Amounts Recognized in the Company’s Balance Sheet consist of the following: Accrued liabilities (7) (6) — — Employee related obligations - non-current (209) (297) (5) (5) Total recognized in the Combined Balance Sheets - end of year (216) (303) (5) (5) Amounts Recognized in Accumulated Other Comprehensive Income consist of the following: Net actuarial (gain) loss (15) 79 (4) (4) Prior service cost 4 2 — — Total before tax effects (11) 81 (4) (4) Accumulated Benefit Obligations - end of year $ 204 $ 262 $ 3 $ 3 __________________ (1) The actuarial gain for retirement plans in 2022 was primarily related to increases in discount rates (2) This amount includes $25 million related to new unfunded pension plans included in the balance during 2022 from the Parent and other pension plans. See Note 9. Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2022 2021 Amounts Recognized in Net Periodic Benefit Cost and Other Comprehensive Income Net periodic benefit cost $ 15 $ 15 $ — $ — Net actuarial gain (1) (82) (21) — — Amortization of net actuarial loss (4) (6) — — Effect of exchange rates (6) (7) — 1 Total (income)/loss recognized in other comprehensive income, before tax $ (92) $ (34) $ — $ 1 Total recognized in net periodic benefit cost and other comprehensive income $ (77) $ (19) $ — $ 1 _________________ (1) The actuarial gain for retirement plans in 2022 was primarily related to increases in discount rates The Company’s pension plans are funded in accordance with local regulations. Additional discretionary contributions are made when deemed appropriate to meet the long-term obligations of the plans. For certain plans, funding is not a common practice, as funding provides no economic benefit. Consequently, the Company’s pension plans are not funded. The following table displays the projected future benefit payments from the Company’s defined benefit retirement plans and other benefit plans: (Dollars in Millions) 2023 2024 2025 2026 2027 2028- 2032 Projected future benefit payments Retirement plans $ 10 $ 11 $ 12 $ 12 $ 13 $ 80 Other benefit plans $ — $ — $ — $ — $ — $ 2 The Company currently has no projected benefit plan contributions. The Company’s retirement plan assets at the end of 2022 were primarily comprised of debt, equity and insurance contracts. The Company’s retirement plan asset allocation at the end of 2022 and 2021 and target allocations for 2023 are as follows: Percent of Plan Assets Target Allocation Worldwide Retirement Plans 2022 2021 2023 Equity securities 42 % — % 42 % Debt securities 56 % — % 56 % Other assets 2 % 100 % 2 % Total plan assets 100 % 100 % 100 % Determination of Fair Value of Plan Assets The Plan has an established and well-documented process for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon models that primarily use, as inputs, market-based or independently sourced market parameters, including yield curves, interest rates, volatilities, equity or debt prices, foreign exchange rates and credit curves. While the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Valuation Hierarchy The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described in the table below with Level 1 having the highest priority and Level 3 having the lowest. The Net Asset Value (NAV) is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for the investments measured at fair value. • Debt instruments — A limited number of these investments are valued at the closing price reported on the major market on which the individual securities are traded. Where quoted prices are available in an active market, the investments are classified as Level 1. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are classified as Level 2. Level 3 debt instruments are priced based on unobservable inputs. • Equity securities — Equity securities are valued at the closing price reported on the major market on which the individual securities are traded. Substantially all equity securities are classified within Level 1 of the valuation hierarchy. • Other assets — Other assets are primarily related to insurance contracts. The instruments are issued by insurance companies. The fair value is based on negotiated value and the underlying investments held in separate account portfolios as well as considering the credit worthiness of the issuer. The underlying investments are government, asset-backed and fixed income securities. In general, insurance contracts are classified as Level 3 as there are no quoted prices nor other observable inputs for pricing. The following table sets forth the Retirement Plans' investments measured at fair value as of January 1, 2023 and January 2, 2022: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs Significant Unobservable Inputs Total Assets (Dollars in Millions) 2022 2021 2022 2021 2022 2021 2022 2021 Debt instruments $ — $ — $ 9 $ — $ — $ — $ 9 $ — Equity securities 9 — — — — — 9 — Other assets — — — — 1 — 1 — Investments at fair value $ 9 $ — $ 9 $ — $ 1 $ — $ 19 $ — Multiemployer Plans The Parent has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The Parent also provides medical benefits, principally to its U.S. retirees and their dependents through its other postretirement benefit plans. The participation of the Company’s employees and retirees in these plans is reflected as though the Company participated in a multiemployer plan with the Parent. Liabilities associated with these plans are not reflected in the Company’s Combined Balance Sheets. The Combined Statements of Operations includes expense allocations for these benefits which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company amounted to $54 million, $93 million and $94 million for fiscal years 2022, 2021 and 2020, respectively. Savings Plan In the United States, the Parent has voluntary 401(k) savings plans designed to enhance the existing retirement programs covering eligible employees. The Parent matches a percentage of each employee’s contributions consistent with the provisions of the plan for which he/she is eligible. Total Parent matching contributions attributable to the Company’s employees were $14 million, $14 million and $12 million in fiscal years 2022, 2021 and 2020, respectively. Post-Employment Benefit Plans Additionally, the Parent maintains a post-employment benefit plan to provide limited benefits to its former employees, including former employees of the Company, if they are involuntarily terminated. The duration of these benefits are generally based on the employee’s term of service with the Parent, and includes both severance compensation and other benefits, including medical coverage. The post-employment plan is published and is considered a benefit to employees which is earned over the employee’s term of service. As a result, the Parent recognizes the cost of this benefit as it is earned by the employee as required by ASC 712: Compensation - non-retirement post-employment benefits. The cost of this benefit allocated to the Company in fiscal years 2022, 2021 and 2020 was approximately $46 million, $49 million and $53 million, respectively, and is reflected as an expense in the Combined Statements of Comprehensive Income (Loss). Single Employer Plans Net periodic benefit costs for the Company’s defined benefit retirement plans sponsored by the Company for the fiscal three and six months ended July 2, 2023 and July 3, 2022, included the following components: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Service cost $ 5 $ 2 $ 10 $ 4 Interest cost 7 1 10 2 Recognized actuarial gain — 1 — 2 Expected return on plan assets (7) — (10) — Net periodic benefit cost $ 5 $ 4 $ 10 $ 8 The service cost component of net periodic benefit cost is presented in the same line items on the Company’s Condensed Consolidated Statements of Operations where other employee compensation costs are reported, including Cost of sales and Selling, general, and administrative expenses. All other components of net periodic benefit costs are presented as part of Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations. Multiemployer Plans The Parent has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The Parent also provides medical benefits, principally to its U.S. retirees and their dependents through its other postretirement benefit plans. The participation of the Company’s employees and retirees in these plans is reflected as though the Company participated in a multiemployer plan with the Parent. Assets and liabilities associated with these plans are not reflected in the Company’s Condensed Consolidated Balance Sheets. The Condensed Consolidated Statements of Operations include expense allocations for these benefits, which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company amounted to $1 million and $15 million for the fiscal three months ended July 2, 2023 and July 3, 2022, respectively, and $17 million and $27 million for the fiscal six months ended July 2, 2023 and July 3, 2022, respectively. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Jul. 02, 2023 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Components of other comprehensive (loss) income consist of the following: (Dollars in Millions) Foreign Currency Translation Employee Benefit Plans Gain/ (Loss) On Derivatives & Hedge Total Accumulated Other Comprehensive (Loss) Income December 29, 2019 $ (4,350) $ (65) $ (2) $ (4,417) Net 2020 changes 855 (11) 1 845 January 3, 2021 (3,495) (76) (1) (3,572) Net 2021 changes (926) 25 — (901) January 2, 2022 (4,421) (51) (1) (4,473) Net 2022 changes (1,053) 63 10 (980) January 1, 2023 $ (5,474) $ 12 $ 9 $ (5,453) 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 Combined Statements of Comprehensive Income (Loss). Components of other comprehensive loss consisted of the following: (Dollars in Millions) Foreign Currency Translation (1) Employee Benefit Plans (2) Gain On Cash Flow Hedges (3) Total Accumulated Other Comprehensive Loss April 2, 2023 $ (5,313) $ 26 $ 48 $ (5,239) Net change (177) (83) (8) (268) July 2, 2023 $ (5,490) $ (57) $ 40 $ (5,507) April 3, 2022 $ (4,701) $ (48) $ (5) $ (4,754) Net change (835) 1 1 (833) July 3, 2022 $ (5,536) $ (47) $ (4) $ (5,587) _________________ (1) Foreign currency translation adjustments for the fiscal three months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $30 million and $65 million, respectively. Income taxes on foreign currency translation relate to tax impact on prior earnings that are not permanently reinvested and will be repatriated in the future. (2) Employee benefit plans for the fiscal three months ended July 2, 2023 were net of benefit from taxes of $18 million. Net change for the fiscal three months ended July 2, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pensions plans by the Parent to the Company. (3) Gain on derivatives and hedges for the fiscal three months ended July 2, 2023 were net of benefit from taxes of $4 million. (Dollars in Millions) Foreign Currency Translation (1) Employee Benefit Plans (2) Gain On Cash Flow Hedges (3) Total Accumulated Other Comprehensive Loss January 1, 2023 $ (5,474) $ 12 $ 9 $ (5,453) Net change (16) (69) 31 (54) July 2, 2023 $ (5,490) $ (57) $ 40 $ (5,507) January 2, 2022 $ (4,421) $ (51) $ (1) $ (4,473) Net change (1,115) 4 (3) (1,114) July 3, 2022 $ (5,536) $ (47) $ (4) $ (5,587) _________________ (1) Foreign currency translation adjustments for the fiscal six months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $9 million and $77 million, respectively. Income taxes on foreign currency translation relate to tax impact on prior earnings that are not permanently reinvested and will be repatriated in the future. (2) Employee benefit plans for the fiscal six months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $17 million and $1 million, respectively. Net change for the fiscal six months ended July 2, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pensions plans by the Parent to the Company. (3) Gain on derivatives and hedges for the fiscal six months ended July 2, 2023 were net of provision for taxes of $9 million. 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). |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jul. 02, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation At January 1, 2023, the Parent had three stock-based compensation plans. The shares outstanding are for contracts under the Parent's 2005 Long-Term Incentive Plan and the 2012 Long-Term Incentive Plan. The 2005 Long-Term Incentive Plan expired on April 26, 2012. On March 7, 2022, the Parent's Board of Directors approved the 2022 Long-Term Incentive Plan (the “2022 Plan”) providing the grant of non-qualified stock options, incentive stock options, stock appreciation rights, RSUs, performance shares, PSUs, other stock-based awards and cash awards to employees and directors including the Company’s personnel. The 2022 Plan became effective in April 2022. All options and restricted shares granted subsequent to that date were under this plan. The components and classification of stock-based compensation expense related to stock options, Restricted Stock Units (“RSUs”), and Performance Stock Units (“PSUs”) directly attributable to those employees specifically identified as employees of the Company and allocations from the Parent for fiscal years 2022, 2021 and 2020 were as follows: (Dollars in Millions) 2022 2021 2020 Stock options $ 43 $ 41 $ 37 RSUs 74 73 67 PSUs 20 27 11 Stock-based compensation expense 137 141 115 Cost of sales 30 33 29 Selling, general and administrative expenses 107 108 86 Stock-based compensation expense $ 137 $ 141 $ 115 Stock-based compensation expense includes $26 million, $38 million and $28 million for fiscal years 2022, 2021 and 2020 respectively, of allocated charges from the Parent, based on percentage attribution related to Parent employees providing services to the Company. The following quantitative stock option, RSU and PSU information relates to awards to those employees specifically identified as employees of the Company. Stock Options Stock options expire 10 years from the date of grant and vest over service periods that range from 6 months to 4 years. All options were granted at the average of the high and low prices of t he Parent’s common stock on the New York Stock Exchange on the date of grant. The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. For fiscal years 2022, 2021 and 2020 grants, expected volatility represents a blended rate of 10-year weekly historical overall volatility rate, and a 5-week average implied volatility rate based on at-the-money traded Parent options w ith a life of 2 years. For all grants, the Parent’s historical data is used to determine the expected life of the option. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant. The average fair value of options granted was $23.23, $20.86 and $16.42, in fiscal years 2022, 2021 and 2020, respectively. The fair value was estimated based on the weighted average assumptions of: 2022 2021 2020 Risk-free rate 2.0 % 0.8 % 1.5 % Expected volatility 18.0 % 18.6 % 15.3 % Expected life (in years) 7 7 7 Expected dividend yield 2.7 % 2.5 % 2.6 % A summary of option activity under the Plans as of January 1, 2023, and changes during the year is presented below: Aggregate Intrinsic Value (Shares in Thousands) Outstanding Shares Weighted Average Exercise Price (Dollars in Millions) Shares at January 2, 2022 8,657 132.58 $ 333 Options granted 1,783 165.89 Options exercised (1,018) 112.53 Options canceled/forfeited/adjusted (1) (1,201) 114.19 Shares at January 1, 2023 8,221 $ 144.03 $ 268 Options vested and expected to vest at January 1, 2023 8,017 $ 143.55 $ 265 __________________ (1) Includes employee transfers in and out. The total intrinsic value of options exercised was $64 million, $56 million and $50 million in fiscal years 2022, 2021 and 2020, respectively. The weighted-average remaining contractual term of options vested and expected to vest was 6.6 years at January 1, 2023. The following table summarizes stock options outstanding and exercisable at January 1, 2023: (Shares in Thousands) Outstanding Exercisable Exercise Price Range Options Average Life (1) Weighted Average Exercise Price Options Weighted Average Exercise Price $72.54-$100.48 475 1.6 $ 94.95 476 $ 94.95 $101.87-$115.67 1,062 3.7 109.51 1,062 109.51 $129.51-$141.06 1,766 5.7 130.94 1,753 130.93 $151.41-$164.62 3,139 7.6 158.11 — — $164.63-$165.89 1,779 7.6 165.89 — — 8,221 6.7 $ 144.03 3,291 $ 118.83 __________________ (1) Average contractual life remaining in years Stock options outstanding at January 1, 2023 and January 2, 2022 were 8,221 and an average life of 6.7 years, and 8,657 and an average life of 6.4 years, respectively. Stock options exercisable at January 1, 2023 and January 2, 2022 were 3,291 at an average exercise price of $118.83 and 3,693 at an average exercise price of $109.21, respectively. Restricted Share Units and Performance Share Units The Parent granted restricted share units which vest over service periods that range from 6 months to 3 years. The Parent also granted performance share units, which are paid in shares of Parent common stock after the end of a three-year performance period. Whether any performance share units vest, and the amount that does vest, is tied to the completion of service periods that range from 6 months to 3 years and the achievement, over a three-year period, of three equally-weighted goals that directly align with or help the Parent drive long-term total shareholder return: operational sales, adjusted operational earnings per share, and relative total shareholder return. Beginning in fiscal year 2020, performance shares were granted with two equally-weighted goals that directly align with or help drive Parent’s long-term total shareholder return: adjusted operational earnings per share and relative total shareholder return. The number of shares actually earned at the end of the three-year period will vary, based only on actual performance, from 0% to 200% of the target number of performance share units granted. A summary of the unvested restricted share units and performance share units activity under the Plans as of January 1, 2023 is presented below: (Shares in Thousands) Outstanding Restricted Share Units Outstanding Performance Share Units Shares at January 2, 2022 1,206 198 Granted 475 85 Issued (364) (28) Canceled/forfeited/adjusted (1) (87) (34) Shares at January 1, 2023 1,230 221 __________________ (1) Includes employee transfers in and out. The weighted average grant date fair value of the restricted share units granted was $153.69, $152.73 and $139.88 in fiscal years 2022, 2021 and 2020, respectively, using the fair market value at the date of grant. The fair value of restricted share units was discounted for dividends, which are not paid on the restricted share units during the vesting period. The aggregate fair value of restricted share units issued was $44 million, $45 million and $43 million in 2022, 2021 and 2020, respectively. The weighted average per unit grant date fair value of the performance share units granted was $178.45, $187.50 and $177.16 in fiscal years 2022, 2021 and 2020, calculated using the weighted average grant date fair market value for each of the component goals at the date of grant. The fair value for the relative total shareholder return goal of each performance share unit was estimated on the date of grant using a Monte Carlo valuation model. The aggregate fair value of performance share units issued was $4 million, $5 million and $4 million in fiscal years 2022, 2021 and 2020, respectively. For fiscal years 2022, 2021 and 2020, the total remaining unrecognized compensation cost for stock options, RSUs, and PSUs was $105 million, $90 million and $75 million, respectively. The weighted-average remaining requisite service period is approximately 1.79 years, 1.76 years and 1.74 years for fiscal years 2022, 2021 and 2020, respectively. The Parent’s 2012 Long-Term Incentive Plan (the “J&J 2012 Plan”) expired on April 26, 2022. Prior to that expiration, on March 7, 2022, the Parent’s Board of Directors approved the 2022 Long-Term Incentive Plan (the “J&J 2022 Plan”, together with the J&J 2012 Plan, the “J&J Plans”). The J&J Plans provide the grant of non-qualified stock options, incentive stock options, stock appreciation rights, Restricted Stock Units (“RSUs”), performance shares, Performance Stock Units (“PSUs”), other stock-based awards, and cash awards to employees and directors including the Company’s personnel. Stock-based compensation granted pursuant to the J&J Plans are based on the Parent’s common stock. The J&J 2022 Plan became effective in April 2022. All options and restricted shares granted subsequent to that date were under this plan. As of July 2, 2023, there are shares outstanding for contracts under each of the J&J Plans. In March 2023, the Company’s Board of Directors approved the 2023 Long-Term Incentive Plan (the “Kenvue 2023 Plan”) providing for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, RSUs, performance shares, PSUs, other stock-based awards, and cash awards to eligible employees, non-employee directors, independent contractors, and consultants of the Company and its subsidiaries and affiliated entities. Stock-based compensation granted pursuant to the 2023 Plan is based on our common stock. The Kenvue 2023 Plan was approved by the Parent, as sole stockholder of the Company, prior to the Kenvue IPO and became effective in May 2023 and no awards have been granted under this plan. The maximum aggregate number of shares of Common Stock that may be issued under the Plan is 188,897,256. The components and classification of stock-based compensation expense related to stock options, RSUs, and PSUs directly attributable to those employees specifically identified as employees of the Company and allocations from the Parent for the fiscal three and six months ended July 2, 2023 and July 3, 2022, were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cost of sales $ 12 $ 10 $ 16 $ 18 Selling, general, and administrative expenses 26 31 57 58 Stock-based compensation expense $ 38 $ 41 $ 73 $ 76 |
Related Parties
Related Parties | 6 Months Ended |
Jul. 02, 2023 | |
Related Party Transactions [Abstract] | |
Related Parties | Related Parties The Company has not historically operated as a standalone business and the Combined Financial Statements are derived from the consolidated financial statements and accounting records of the Parent. The following disclosure summarizes activity between the Company and Parent. Cost Allocations from Parent Parent provides significant support functions to the Company. The Combined Financial Statements reflect an allocation of these costs. Similarly, certain of the Company’s operations provide support to the Parent’s affiliates and related costs for support are charged to the Parent’s affiliates. Allocated costs included in Cost of sales relate to enterprise-wide support primarily consisting of facilities, insurance, logistics, quality and compliance which are predominantly allocated based on net sales. Allocated costs included in Selling, general, and administrative expenses primarily relate to finance, human resources, benefits administration, procurement support, information technology, legal, corporate strategy, corporate governance, other professional services and general commercial support functions and are predominantly allocated based on net sales or headcount. See Note 1 for a discussion of these costs and the methodology used to allocate them. These allocations (excluding stock-based compensation expense), net of costs charged to the Parent’s affiliates are reflected in the Combined Statements of Operations as follows: (Dollars in Millions) 2022 2021 2020 Cost of sales $ 149 $ 182 $ 166 Selling, general, and administrative expenses 679 649 652 Total $ 828 $ 831 $ 818 Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented. The allocations may not, however, be indicative of the actual expenses that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone public company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company’s employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure. Net Transfers (to) from the Parent Net transfers (to) from the Parent are included within Net Investment from Parent in the Combined Balance Sheets and Combined Statement of Equity and within financing activities in the Combined Statement of Cash Flows and represent the net effect of transactions between the Company and Parent. The components of Net transfers from (to) the Parent are as follows: (Dollars in Millions) 2022 2021 2020 Cash pooling and general financing activities $ (2,568) $ (832) $ (4,414) Corporate cost allocations 828 831 818 Taxes deemed settled with the Parent 78 44 151 Allocated derivative and hedging gain (losses) 65 (36) (1) Net transfers (to) from the Parent as reflected in the Combined Statements of Cash Flows (1,597) 7 (3,446) Stock-based compensation expense 137 141 115 Talc liability transferred to Parent, net of related deferred taxes ($0, $251, $0) — 765 — Pension liabilities transferred from the Parent (25) — — Net transfers (to) from the Parent as reflected in the Combined Statements of Equity $ (1,485) $ 913 $ (3,331) During the fiscal year 2022, transfers between the Company and the Parent were recognized in Net transfers from (to) the Parent in the Combined Statement of Equity at the Parent’s historical cost and consisted primarily of $25 million of pension liabilities related to the Consumer Health Business from the Parent. See Note 6. Cost Allocations from Parent Prior to Kenvue IPO Prior to the Kenvue IPO, the Parent provided significant support functions to the Company. The Condensed Consolidated Financial Statements reflect an allocation of these costs. Similarly, certain of the Company’s operations provided support to the Parent’s affiliates and related costs for support are charged to the Parent’s affiliates. Allocated costs included in Cost of sales on the Company’s Condensed Consolidated Statements of Operations relate to enterprise-wide support primarily consisting of facilities, insurance, logistics, quality, and compliance which are predominantly allocated based on Net sales. Allocated costs included in Selling, general, and administrative expenses primarily relate to finance, human resources, benefits administration, procurement support, information technology, legal, corporate strategy, corporate governance, other professional services, and general commercial support functions and are predominantly allocated based on Net sales or headcount. See Note 1, “Description of the Company and Summary of Significant Accounting Policies,” for a discussion of these costs and the methodology used to allocate them. These allocations (excluding stock-based compensation expense), net of costs charged to the Parent’s affiliates reflected on the Company’s Condensed Consolidated Statements of Operations for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cost of sales $ 16 $ 40 $ 25 $ 76 Selling, general, and administrative expenses 33 173 120 330 Total $ 49 $ 213 $ 145 $ 406 Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented. The allocations may not, however, be indicative of the actual expenses that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone public company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company’s employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology, and infrastructure. As of January 2, 2023, the Company began operating independently and received a lower degree of support functions from the Parent during the current period and therefore the allocations decreased significantly from the comparable period. Net Transfers (to) from the Parent Net transfers (to) from the Parent are included within Net investment from Parent on the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Equity and within financing activities on the Condensed Consolidated Statements of Cash Flows and represent the net effect of transactions between the Company and Parent. The components of Net transfers (to) from the Parent for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cash pooling and general financing activities $ (37) $ (916) $ (446) $ (1,324) Corporate cost allocations 49 213 145 406 Taxes deemed settled with the Parent — 1 27 1 Allocated derivative and hedging gains — 26 — 25 Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Cash Flows $ 12 $ (676) $ (274) $ (892) Stock-based compensation expense (1) — 41 — 76 Other (2) — (34) — Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Equity $ 10 $ (635) $ (308) $ (816) __________________ (1) Stock-based compensation expense is separately shown within the Condensed Consolidated Statement of Equity in fiscal year 2023, and therefore no longer a reconciling item between the Condensed Consolidated Statement of Equity and the Condensed Consolidated Statement of Cash Flows. Separation Agreement and Other Related Party Transactions with J&J In connection with the Separation, Kenvue entered into various agreements with the Parent, including the Separation Agreement. In connection with the terms of the Separation Agreement, certain assets and liabilities included in the pre-Separation balance sheet were retained by the Parent and certain assets and liabilities not included in the pre-Separation balance sheet were transferred to Kenvue. Separation related adjustments have been recognized in Net investment from Parent, net impact of which resulted in an increase in net assets and total equity by $95 million. The impact on net assets primarily represent (i) recognition of balances with J&J including indemnification matters, (ii) changes to income tax assets and liabilities as a result of change in the basis of presentation, (iii) contribution of certain liabilities including pension and employee related obligations from the Parent, (iv) the retention of assets and liabilities by J&J of certain Deferred Local Businesses (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies”), and (v) other assets and liability transfers between Kenvue and J&J in connection with the Separation. The Separation Agreement sets forth certain agreements between the Parent and Kenvue regarding, among other matters: • the principal corporate actions and internal reorganization pursuant to which the Parent transferred the Consumer Health Business to Kenvue; • the allocation of assets and liabilities to the Parent and Kenvue; • the Parent’s and Kenvue’s respective rights and obligations with respect to the Kenvue IPO; • certain matters with respect to any subsequent distribution or other disposition by the Parent of the shares of Kenvue Common Stock owned by the Parent following the Kenvue IPO (the “Distribution”); and • other agreements governing aspects of Kenvue’s relationship with the Parent following the Kenvue IPO. In connection with the Kenvue IPO, the Parent and Kenvue also entered into various other material agreements. These agreements were entered into on May 3, 2023, unless otherwise indicated, and consist of the following: • a tax matters agreement (the “Tax Matters Agreement”), which governs the Parent’s and Kenvue’s respective rights, responsibilities and obligations with respect to all tax matters, including tax liabilities, tax attributes, tax contests, and tax returns (See “Tax Indemnification” below); • an employee matters agreement, which addresses certain employment, compensation, and benefits matters, including the allocation and treatment of certain assets and liabilities relating to Kenvue’s employees and compensation and benefit plans and programs in which Kenvue’s employees participate prior to the date of the Distribution, if pursued; • an intellectual property agreement, which governs the Parent’s and Kenvue’s respective rights, responsibilities and obligations with respect to intellectual property matters, excluding certain intellectual property matters with respect to trademarks; • a trademark phase-out license agreement, dated as of April 3, 2023, and pursuant to which the Parent granted to Kenvue a license to use certain trademarks owned by the Parent on a transitional basis following the completion of the Kenvue IPO; • a transition services agreement (the “Transition Services Agreement”), pursuant to which the Parent will provide to Kenvue certain services for terms of varying duration following the Kenvue IPO; • a transition manufacturing agreement (the “Transition Manufacturing Agreement”), pursuant to which the Parent will provide to Kenvue certain manufacturing services for terms of varying duration following the Kenvue IPO; and • a registration rights agreement, pursuant to which Kenvue granted to the Parent certain registration rights with respect to the shares of Kenvue common stock owned by the Parent following the completion of the Kenvue IPO. In connection with the Kenvue IPO, the Parent and Kenvue also entered into various related party lease agreements, in which the Company subleased properties from the Parent. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Leases” for more information. Related Party Transactions The Company had the following balances and transactions with J&J and its affiliates, primarily in connection with the Tax Matters Agreement, Transition Services Agreement and the Transition Manufacturing Agreement, reported on the Company’s Condensed Consolidated Financial Statements: (Dollars in Millions) July 2, 2023 Accounts payable $ 537 Prepaid expenses and other receivables $ 346 Other assets $ 94 Other liabilities $ 193 Fiscal Three Months Ended (Dollars in Millions) July 2, 2023 Cost of sales $ 39 Selling, general, and administrative expenses $ 47 Tax Indemnification We entered into a Tax Matters Agreement with J&J on May 3, 2023 that governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and other matters regarding taxes. Allocation of Taxes With respect to taxes other than those incurred in connection with the Separation and the Distribution, the Tax Matters Agreement provides that Kenvue will generally indemnify J&J for (1) any taxes of Kenvue for all periods after the Distribution and (2) any taxes of Kenvue or J&J for periods prior to the Distribution to the extent attributable to the Consumer Health Business. J&J will generally indemnify Kenvue for (1) any taxes of J&J for all periods after the Distribution and (2) any taxes of Kenvue or J&J for periods prior to the Distribution to the extent attributable to the business and operations conducted by J&J other than the Consumer Health Business. Furthermore, subject to certain exceptions, the Company is required to reimburse J&J for certain tax refunds it receives with respect to taxes paid prior to the effective date of the Tax Matters Agreement. Preservation of the Intended Tax Treatment of Certain Steps of the Separation and the Distribution With respect to taxes incurred in connection with the Separation and the Distribution, Kenvue will generally be required to indemnify J&J for any taxes resulting from the failure of certain steps of the Separation and the Distribution to qualify for their intended tax treatment, where such taxes are attributable to actions or omissions by Kenvue. In addition, during the time period ending two years after the date of the Distribution, covenants will be in place that will limit or restrict certain actions, including share issuances, business combinations, sales of assets, and similar transactions by Kenvue. The Company does not believe that the above covenants have a material impact to the Company to date. The Company reclassified approximately $246 million of net income tax payables and refunds, unrecognized tax benefits and associated interest as indemnifications reported to Prepaid expenses and other receivables and Accounts payable for current assets and liabilities and Other assets and Other liabilities for noncurrent assets and liabilities within the Company’s Parent on the Condensed Consolidated Balance Sheet as of July 2, 2023. Debt Financing Transactions and IPO Consideration During the fiscal six months ended July 2, 2023, the Company received debt proceeds of $7.7 billion from the issuance of the Senior Notes, earned $13 million of interest on the proceeds of these bonds from investments in money market accounts, and received initial proceeds from its Commercial Paper Program of $1.2 billion. The Company loaned the total proceeds to J&J through the Facility Agreement. Upon the completion of the Kenvue IPO on May 8, 2023, the balance of the loans and all accrued interest were repaid by J&J for a total cash inflow of $9.0 billion. The Company remitted this cash back to J&J as a distribution back to J&J in connection with the Separation. |
Other (income) expense, net, op
Other (income) expense, net, operating and Other expense (income), net | 6 Months Ended |
Jul. 02, 2023 | |
Other Income and Expenses [Abstract] | |
Other Operating Expense (Income), Net and Other Expense (Income), Net | Other (income) expense, net, operating and Other expense (income), net Other (income) expense, net, operating consisted of: (Dollars in Millions) 2022 2021 2020 Litigation (income) expense (1) $ (7) $ 92 $ 3,967 Royalty income (2) (39) (89) (100) Other (3) 23 12 4 Total Other (income) expense, net, operating $ (23) $ 15 $ 3,871 __________________ (1) Litigation expense includes $154 million and 4,029 million of Talc-Related costs for the fiscal year 2021 and 2020, respectively, as well as $74 million of beneficial settlements for Brazil VAT legal resolution for fiscal year 2021. (2) In connection with the Old JJCI corporate restructuring starting in October 2021, rights of Old JJCI and its affiliates to receive four streams of royalties payable from certain third parties were transferred to Royalty A&M LLC, an indirect wholly owned subsidiary of the Parent. (3) Other consists primarily of (gains) losses on asset disposals, certain restructuring expenses (Note 16), intangible impairment (Note 4), and miscellaneous (income) expenses. Other expense (income), net consisted of: (Dollars in Millions) 2022 2021 2020 Currency losses on transactions $ 42 $ 20 $ 40 Other (1) (4) (25) (3) Total Other expense (income), net $ 38 $ (5) $ 37 __________________ (1) Other consists primarily of business disposals, gains and losses on investments, other than service cost components of net periodic benefit costs, and miscellaneous non-operating (income) expenses. Other operating expense (income), net for the fiscal three and six months ended July 2, 2023 and July 3, 2022 consisted of: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Litigation expense $ 21 $ 7 20 $ 7 Royalty income (1) (13) (8) (20) (Gain)/loss on disposal of fixed assets — — (9) 2 Net economic benefits from deferred markets (1) 24 — 24 — Contingent liability reversal (2) (43) — (43) — Other — 19 — 19 Total Other operating expense (income), net $ 1 $ 13 $ (16) $ 8 __________________ (1) Includes income taxes and service fees to be paid to J&J under the net economic benefit arrangements. (2) Includes the reversal of a contingent liability that was no longer considered to be probable. Other expense (income), net for the fiscal three and six months ended July 2, 2023 and July 3, 2022 consisted of: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Currency (gains)/losses on transactions $ 12 $ 5 $ 28 $ (2) Other (1) (2) (10) 12 (4) Total Other expense (income), net $ 10 $ (5) $ 40 $ (6) __________________ (1) Other consists primarily of gains and losses on investments, other than service cost components of net periodic benefit costs, and miscellaneous non-operating (income) expenses. |
Income Taxes
Income Taxes | 6 Months Ended |
Jul. 02, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes During the periods presented in the Combined Financial Statements, the Company operated as part of the Parent and did not file income tax returns on a standalone basis in all jurisdictions in which it operates. However, for the purposes of the Combined Financial Statements, the income taxes and related income tax accounts have been calculated using the separate return method as if the Company filed income tax returns on a standalone basis. In the future, as a standalone company, the income taxes and related income tax accounts of the Company may differ from those presented in the Combined Financial Statements. The provision for taxes on income consists of: (Dollars in Millions) 2022 2021 2020 Currently payable: U.S. taxes $ 75 $ 8 $ 308 International taxes 318 318 356 Total current taxes 393 326 664 Deferred: U.S. taxes 205 627 (741) International taxes (48) (59) (60) Total deferred 157 568 (801) Provision (benefit) for taxes on income $ 550 $ 894 $ (137) A comparison of income tax expense at the U.S. statutory rate of 21% in fiscal years 2022, 2021 and 2020, to the Company’s effective tax rate is as follows: (Dollars in Millions) 2022 2021 2020 U.S. $ 1,238 $ 1,367 $ (2,614) International 1,399 1,558 1,598 Earnings before taxes on income: $ 2,637 $ 2,925 $ (1,016) Tax rates: U.S. statutory rate 21.0 % 21.0 % 21.0 % U.S. taxes on international income (1) (3.8) 9.5 (3.8) International operations (2) (1.6) (2.1) (14.0) State 3.1 1.7 10.2 Change in valuation allowance 2.2 1.4 (2.7) Tax benefits on share-based compensation (0.2) (0.3) 1.0 All other 0.1 (0.6) 1.8 Effective Rate 20.8 % 30.6 % 13.5 % _________________ (1) Includes the impact of the tax on GILTI and other foreign income that is taxable under the U.S. tax code. (2) For all periods presented the Company has subsidiaries operating in Singapore under various tax incentives. International operations reflect the impacts of operations in jurisdictions with statutory tax rates different than the U.S. The Company’s largest international operations are in Canada, Japan, Singapore and Switzerland. The effective tax rate for the fiscal year 2022 is 20.8% and is lower than the U.S. corporate tax rate primarily due to the following: • U.S. incremental taxes on foreign earnings. Talc settlement payments gave rise to an overall domestic loss in the U.S. in fiscal year 2021 preventing the Company from claiming a Section 250 deduction and utilizing U.S. foreign tax credits against the Company’s U.S. tax on foreign earnings. The overall domestic loss is being recaptured in the U.S. in fiscal year 2022 allowing the Company to claim additional U.S. foreign tax credits against the Company’s U.S. tax on foreign earnings. The additional U.S. foreign tax credit benefit is reflected in U.S. taxes on international income within the rate reconciliation. The effective tax rate for the fiscal year 2021 is 30.6% and is higher than the U.S. corporate tax rate primarily due to the following: • U.S. incremental taxes on foreign earnings. As a result of Talc settlement payments, there is a taxable loss in the U.S. preventing the Company from claiming a Section 250 deduction and utilizing U.S. foreign tax credits against the Company’s U.S. tax on foreign earnings. The incremental U.S. tax on foreign earnings is reflected in U.S. taxes on international income within the rate reconciliation. The effective tax rate for the fiscal year 2020 is 13.5% and is lower than the U.S. corporate tax rate applied to the pre-tax loss in 2020 primarily due to the following: • An increase in unrecognized tax benefits of $166 million due to the final settlement of the 2010 – 2012 IRS audit. This reduced the effective tax rate benefit on the pre-tax loss by approximately 16.3% and is included in “International Operations” in the Company’s effective tax rate reconciliation. • An increase in the valuation allowance due to additional U.S. foreign tax credits generated that were not utilized. This reduced the effective tax rate benefit on the pre-tax loss by approximately 4.7%. • These effects are partially offset by the larger benefit of state taxes on the U.S. pre-tax loss as a proportion of the consolidated pre-tax loss. Temporary differences and carryforwards at the end of fiscal years 2022 and 2021 were as follows: 2022 2021 (Dollars in Millions) Asset Liability Asset Liability Employee related obligations $ 20 $ — $ 56 $ — Stock based compensation 75 — 68 — Depreciation of property, plant and equipment — (38) — (41) Goodwill and intangibles — (2,652) — (2,689) Reserves & liabilities 120 — 93 — Net operating loss and tax credit carryforward 261 — 521 — Undistributed foreign earnings 99 (89) 52 (82) Global intangible low-taxed income 51 — — (92) Miscellaneous international 28 — 46 — R&D Capitalized for tax 55 — — — Miscellaneous U.S. 39 — 13 — Subtotal 748 (2,779) 849 (2,904) Valuation allowance (250) — (186) — Total deferred income taxes $ 498 $ (2,779) $ 663 $ (2,904) The Company has wholly-owned international subsidiaries that have cumulative net losses. The Company believes that it is more likely than not that these subsidiaries will generate future taxable income sufficient to utilize these deferred tax assets. However, in certain jurisdictions, valuation allowances have been recorded against deferred tax assets for loss carryforwards that are not more likely than not to be realized. The Company has recognized $110 million and $365 million of deferred tax assets related to U.S. and foreign net operating loss (“NOL”) carryforwards and $151 million and $156 million of deferred tax assets related to foreign, U.S. federal and state credit carryforwards as January 1, 2023 and January 2, 2022 respectively. Federal and foreign NOLs generally do not expire, state NOLs generally expire between 2028 and 2041 and tax credit carryforwards generally expire between 2030 and 2032. The Company assessed net operating losses, credit carryforwards and other deferred tax assets for realizability and, based upon available evidence, recorded valuation allowances against deferred tax assets that are not more likely than not to be realized. As of fiscal years 2022, 2021, and 2020, valuation allowances of $250 million, $186 million, and $144 million have been recorded against certain net operating losses and foreign tax credit carryforwards respectively. The Company recognized a net change in valuation allowance of $64 million, $42 million, and $20 million in fiscal years 2022, 2021 and 2020 respectively. The net change in valuation allowance is primarily attributable to NOLs and tax attributes in Brazil, Puerto Rico, and U.S. Federal, state, and local jurisdictions. The Company has recorded deferred tax liabilities on all undistributed earnings prior to December 31, 2017 and certain undistributed earnings arising after December 31, 2017 from its international subsidiaries. For all other undistributed earnings from our subsidiaries organized outside the United States, the Company has not recorded deferred taxes where the earnings are considered to be indefinitely reinvested. The Company intends to continue to reinvest these earnings in those international operations. If the Company decides at a later date to repatriate these earnings to the United States, the Company would be required to provide for the net tax effects on these amounts. The Company estimates that the tax effect of this repatriation would be approximately $114 million under currently enacted tax laws and regulations and at current currency exchange rates. This amount does not include the possible benefit of U.S. foreign tax credits, which may substantially offset this cost. The following table summarizes the activity related to unrecognized tax benefits: (Dollars in Millions) 2022 2021 2020 Beginning of year $ 469 $ 519 $ 465 Increases related to current year tax positions 32 31 40 (Dollars in Millions) 2022 2021 2020 Increases related to prior period tax positions 7 2 270 Decreases related to prior period tax positions (49) (40) (87) Settlements (5) (15) (136) Lapse of statute of limitations (17) (28) (33) End of year $ 437 $ 469 $ 519 The unrecognized tax benefits of $437 million at January 1, 2023, if recognized, would affect the Company’s annual effective tax rate. The Company conducts business and files tax returns in numerous countries and currently has tax audits in progress with a number of tax authorities. With respect to the United States, the IRS has completed its audit for the tax years through 2012 and is currently auditing tax years 2013 through 2016. In the fiscal year 2020, the Parent made its final tax payments, which included approximately $165 million related to the final settlement of 2010-2012 tax audit liability attributable to the Company. In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go back to the year 2008. The Company believes it is possible that tax audits may be completed over the next twelve months by taxing authorities in some jurisdictions outside of the United States. However, the Company is not able to provide a reasonably reliable estimate of the timing of any future tax payments or the amount of possible changes to the total unrecognized tax benefits associated with any audit closures or other events. The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities which is included in other liabilities on the Combined Balance Sheets. Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense. The Company recognized after tax interest expense of $13 million, $16 million and $46 million in fiscal years 2022, 2021 and 2020, respectively. The total amount of accrued interest was $147 million and $134 million in fiscal years 2022 and 2021, respectively. For interim financial statement purposes, U.S. GAAP income tax expense/benefit related to ordinary income is determined by applying an estimated annual effective income tax rate against a company’s ordinary income, subject to certain limitations on the benefit of losses. Income tax expense/benefit related to items not characterized as ordinary income is recognized as a discrete item when incurred. The estimation of the Company’s income tax provision requires the use of management forecasts and other estimates, application of statutory income tax rates, and an evaluation of valuation allowances. The Company’s estimated annual effective income tax rate may be revised, if necessary, in each interim period. During the periods presented in the Condensed Consolidated Financial Statements, the Company operated as part of the Parent and did not file income tax returns on a standalone basis in all jurisdictions in which it operates. However, for the purposes of the Condensed Consolidated Financial Statements, the income taxes and related income tax accounts have been calculated using the separate return method as if the Company filed income tax returns on a standalone basis. Prior to the Kenvue IPO, the Company’s operations were calculated on a carve-out basis and included certain hypothetical foreign tax credit benefits. Post-Kenvue IPO, these hypothetical foreign tax credit benefits are not available for future utilization by the Company and were removed from the tax provision during the fiscal three months ended July 2, 2023. In the future, as a standalone company, the income taxes and related income tax accounts of the Company may differ from those presented in the Condensed Consolidated Financial Statements. The worldwide effective income tax rates for the fiscal three months ended July 2, 2023 and July 3, 2022 were 32.7% and 22.1%, respectively, and for the fiscal six months ended July 2, 2023 and July 3, 2022 were 39.1% and 18.4%, respectively. The increase for the fiscal three months ended July 2, 2023 as compared to the fiscal three months ended July 3, 2022 was primarily the result of higher U.S. taxes on foreign income and reduced benefits for foreign tax credits. With the issuance of debt in the first quarter of 2023, the resulting increase in annual interest reduced the Company’s capacity to utilize foreign tax credits against U.S. foreign source income. As a result, the Company recorded a $188 million valuation allowance against a deferred tax asset related to future foreign tax credit benefits thus increasing the reported rate for the fiscal six months ended July 2, 2023 as compared to the fiscal six months ended July 3, 2022. This was partially offset by additional discrete tax benefits. The effective income tax rate for the fiscal six months ended July 3, 2022 was lower due to the recognition of discrete foreign tax credit benefits. As of July 2, 2023, the Company had approximately $235 million of liabilities from unrecognized tax benefits. The Company conducts business and will file tax returns in numerous countries. The Parent currently has tax audits in progress in several jurisdictions. With respect to the United States, the IRS is currently conducting the 2013-2016 IRS Audit of the Parent. The Parent currently expects completion of this audit and settlement of the related tax liabilities in the next 12 months. Per the Tax Matters Agreement between the Parent and the Company, the Parent remains liable for all liability related to the final settlement of this audit and any U.S. federal income tax audits in which the Company is part of the Parent’s federal consolidated tax return. During fiscal three months ended July 2, 2023, the Parent made a payment to the U.S. Treasury for the estimated liability related to the 2013-2016 IRS Audit, which included $200 million related to the Consumer Health Business. In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go back to the year 2008. The Company believes it is possible that tax audits may be completed over the next 12 months by taxing authorities in some jurisdictions outside of the United States. However, the Company is not able to provide a reasonably reliable estimate of the timing of any future tax payments or the amount of possible changes to the total unrecognized tax benefits associated with any audit closures or other events. The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities on the Condensed Consolidated Balance Sheets. Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense on the Company’s Condensed Consolidated Statements of Operations. As part of the transition from Condensed Combined Financial Statements to Condensed Consolidated Financial Statements, the Company reclassified $221 million of unrecognized tax benefits related to indemnifications with the Parent to Accounts payable and Other liabilities within the Company’s Condensed Consolidated Financial Statements. On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 (“IRA”), which, among other things, introduces a 15% corporate alternative minimum tax based on adjusted financial statement income of certain large corporations with a three-year average adjusted financial statement income in excess of $1.0 billion, an excise tax on corporate stock buybacks, and several tax incentives to promote clean energy. Based on the Company’s preliminary analysis, the IRA is not expected to have a material impact on the Company’s Condensed Consolidated Financial Statements. The Company will continue to evaluate the impact of this law as additional guidance and clarification becomes available. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jul. 02, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 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 outputs • Level 3 – Significant unobservable outputs If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis: 2022 2021 (Dollars in Millions) Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3 Cash and cash equivalents: Time deposits $ — — — — $ 32 — 32 — Derivatives designated as cash flow hedges: Assets: Forward foreign exchange contracts 39 — 39 — — — — — Interest rate swaps 29 — 29 — — — — — Total $ 68 $ — $ 68 $ — $ — $ — $ — $ — Liabilities: Forward foreign exchange contracts (15) — (15) — — — — — Interest rate swaps (39) — (39) — — — — — Total $ (54) $ — $ (54) $ — $ — $ — $ — $ — Net amount presented in Prepaid expenses and other receivables: $ 14 $ — 14 $ — $ — $ — $ — $ — The carrying amount of Cash and cash equivalents, trade receivable, Prepaid expenses and other receivables, and loans and notes payable approximated fair value as of January 1, 2023 and January 2, 2022. The fair value of forward foreign exchange contracts is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. Dollar at the current spot foreign exchange rate. The interest rate swaps are recorded at fair value that is derived from observable market data, including yield curves. All derivative instruments are classified as level 2 securities. The Company does not believe that fair values of these derivative instruments materially differ from the amounts that could be realized upon settlement or maturity, or that the changes in fair value will have a material effect on the Company’s results of operations, cash flows or financial position. There were no transfers between Level 1, Level 2 or Level 3 during the fiscal years ended January 1, 2023 and January 2, 2022. In certain jurisdictions, the Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows which are designated as cash flow hedges with changes in the fair value recorded in Accumulated other comprehensive loss. To protect gross margins from fluctuations in foreign currency exchange rates, the Parent on behalf of its affiliates enter into forward foreign currency exchange contracts on behalf of the Company to hedge a portion of forecasted foreign currency assets and forecasted liabilities. Changes in the fair value of derivatives are recorded each period in earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction. The contracts that have been designated in hedging relationships are designated as cash flow hedges on the date of contract inception, in accordance with the appropriate accounting guidance. The terms of these contracts are generally 12 months to 18 months. At inception, all designated hedging relationships are expected to be highly effective. Foreign exchange contracts designated as cash flow hedges are accounted for under the forward method and all gains/losses associated with these contracts are recorded in other comprehensive income. The Company recognizes its portion of the net allocated gains and losses when the amounts are reclassified to income, which is at the time the inventory is sold to the customer. The gains and losses relating to these contracts have been allocated to the Company based on the amount of forecasted purchases and included in Net sales or Cost of sales. The Parent on behalf of its affiliates also enters into forward currency exchange contracts to offset the foreign currency exposure related to the settlement of intercompany payables and receivables of the Company. The net allocated gains and losses related to these contracts are recognized within Other expense (income), net. During 2022 and in anticipation of the Company operating as a standalone entity, it has started entering into forward foreign currency exchange contracts to hedge a portion of forecasted foreign currency assets and forecasted liabilities. 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. In the fourth quarter of 2022, the Company entered into forward starting interest rate swaps in contemplation of securing long-term financing for the Separation or for other long-term financing purposes in the event the Separation does 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 expects to issue in 2023. Changes in the fair value of the forward interest swaps are currently recorded in Accumulated other comprehensive loss and will be reclassified into Other expense (income), net when the hedged interest payments affect earnings. The fair value of the Company’s foreign currency exchange contracts and interest rate swaps as of January 1, 2023, are included in Prepaid expenses and other receivables within the Combined Balance Sheets. As of January 1, 2023, the balance of deferred net gain on derivatives included in accumulated other comprehensive income was $10 million after-tax. The following table sets forth the notional amounts of the Company’s outstanding derivative instruments: January 1, 2023 Forward foreign exchange contracts Interest rate swaps Total Cash Flow Hedges $ 1,768 $ 2,400 $ 4,168 On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. If and when a derivative is no longer expected to be highly effective, hedge accounting is discontinued. Cash flows from derivatives designated in hedging relationships are reflected in the Combined Statement of Cash Flows consistent with the presentation of the hedged item. The following table is a summary of the activity related to derivatives and hedges for fiscal years 2022, 2021 and 2020, net of tax. 2022 2021 2020 Net Sales Cost of sales Other expense (income), net Net Sales Cost of sales Other expense (income), net Net Sales Cost of sales Other expense (income), net Gain (loss) on cash flow hedges $ 21 12 30 11 (23) (21) (2) (3) 10 Gain (loss) on forward currency exchange contracts not designated as hedges $ — — 33 — — (15) — — (34) Credit Risk The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material as it is the Company’s policy to contract with diverse, credit-worthy counterparties based upon both strong credit ratings and other credit considerations. Fair value measurements are estimated based on valuations techniques and inputs categorized as follows: • Level 1 – Quoted prices in active markets for identical assets or liabilities • Level 2 – Significant other observable inputs • Level 3 – Significant unobservable inputs If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis: July 2, 2023 January 1, 2023 (Dollars in Millions) Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3 Assets: Forward foreign exchange contracts $ 66 $ — $ 66 $ — $ 39 $ — $ 39 $ — Interest rate swaps — — — — 29 — 29 — Total 66 — 66 — 68 — 68 — Liabilities: Forward foreign exchange contracts $ (48) — (48) — (15) — (15) — Interest rate swaps — — — — (39) — (39) — Total (48) — (48) — (54) — (54) — Net amount presented in Prepaid expenses and other receivables: $ 18 $ — $ 18 $ — $ 14 $ — $ 14 $ — The carrying amount of Cash and cash equivalents, Trade receivables, Prepaid expenses and other receivables, and Loans and notes payable approximated fair value as of July 2, 2023 and January 1, 2023. The fair value of forward foreign exchange contracts is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. dollar at the current spot foreign exchange rate. The interest rate swaps are recorded at fair value that is derived from observable market data, including yield curves. All derivative instruments are classified as Level 2 securities. There were no transfers between Level 1, Level 2, or Level 3 during the fiscal three and six months ended July 2, 2023 and fiscal year ended January 1, 2023. The following table sets forth the notional amounts of the Company’s outstanding derivative instruments: July 2, 2023 January 1, 2023 (Dollars in Millions) Forward foreign exchange contracts Interest rate swaps Total Forward foreign exchange contracts Interest rate swaps Total Cash flow hedges $ 3,307 $ — $ 3,307 $ 1,768 $ 2,400 $ 4,168 Undesignated forward foreign exchange contracts $ 578 $ — $ 578 $ — $ — $ — Net investment hedges $ 10 $ — $ 10 $ — $ — $ — For the three and six months ended July 2, 2023, the Company recorded after-tax deferred net gain (loss) on derivatives of $(8) million and $31 million, respectively, in Accumulated other comprehensive loss. For the three and six months ended July 3, 2022, the Company recorded after-tax deferred net gain (loss) on derivatives of $1 million and $(3) million, respectively, in Accumulated other comprehensive loss. Forward Foreign Exchange Contracts In certain jurisdictions, the Company uses forward foreign exchange contracts to manage its exposures to the variability of foreign exchange rates. Changes in the fair value of derivatives are recorded each period in earnings or Other comprehensive income (loss), depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction. Since 2022, the Company has entered into forward foreign exchange contracts to hedge a portion of forecasted cash flows denominated in foreign currency. The terms of these contracts are generally 12 months to 18 months. These contracts are designated as cash flow hedging relationships at the date of contract inception, in accordance with the appropriate accounting guidance. At inception, all designated hedging relationships are expected to be highly effective. These contracts are accounted for using the forward method and all gains/losses associated with these contracts are recorded in Other comprehensive income (loss). The Company reclassifies the gains and losses related to these contracts at the time the inventory is sold to the customer into Net sales or Cost of sales and Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations, as applicable. The following table is a summary of gains and losses on forward foreign exchange contracts designated as cash flow hedges within Other comprehensive income (loss) and amount reclassified into earnings: Fiscal Three Months Ended Fiscal Six Months Ended July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Gain (loss) recognized in Other comprehensive income (loss) $ (17) $ 1 $ — $ (2) Gain (loss) reclassified from Other comprehensive income (loss) to earnings $ (6) $ (1) $ 5 $ — The following tables are a summary of the reclassifications to Net Income related to the Company’s forward foreign exchange contracts for the fiscal three and six months ended July 2, 2023 and July 3, 2022: Fiscal Three Months Ended July 2, 2023 July 3, 2022 (Dollars in Millions) Net Sales Cost of Sales Other (income) expense, net Net Sales Cost of Sales Other (income) expense, net Gain (loss) on cash flow hedges $ (1) $ (3) $ (2) $ 8 $ 3 $ 12 Gain (loss) on forward currency exchange contracts not designated as hedges $ — $ — $ (2) $ — $ — $ (1) Fiscal Six Months Ended July 2, 2023 July 3, 2022 (Dollars in Millions) Net Sales Cost of Sales Other (income) expense, net Net Sales Cost of Sales Other (income) expense, net Gain (loss) on cash flow hedges $ — $ 7 $ (2) 11 3 10 Gain on forward currency exchange contracts not designated as hedges $ — $ — $ 4 — — 7 The fair value of the Company’s foreign currency exchange contracts as of July 2, 2023 was included in Prepaid expenses and other receivables, on the Company’s Condensed Consolidated Balance Sheets. Since 2022, the Company has entered into forward currency exchange contracts to offset the foreign currency exposure related to the settlement of payables and receivables of the Company. These contracts are not designated as cash flow hedging relationships, and the net allocated gains and losses related to these contracts were recognized within Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations. As of July 2, 2023 and January 1, 2023, respectively, the Company held forward foreign exchange contracts that were not designated in cash flow hedging relationships of $1 million and $0 million, respectively. Forward Starting Interest Rate Swaps Beginning in the fourth quarter of 2022, the Company entered into forward starting interest rate swaps in contemplation of securing long-term financing for the Separation or for other long-term financing purposes in the event the Separation did not occur. The Company designated these derivatives as cash flow hedges to reduce future interest rate exposure related to changes in the benchmark interest rate on forecasted 5-year, 10-year, and 30-year bonds that the Company issued in 2023. During the fiscal six months ended July 2, 2023, the Company recorded a gain of approximately $48 million in Accumulated other comprehensive loss. Upon the issuance of the forecasted debt, the Company settled its forward starting interest rate swaps and received $38 million in cash. The gain in Accumulated other comprehensive loss will be amortized and recorded in Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations over the life of the 5-year, 10-year, and 30-year bonds. For the fiscal three and six months ended July 2, 2023, we reclassified $1 million and $2 million, respectively, from Other comprehensive income (loss) to the Condensed Consolidated Statements of Operations. Net Investment Hedges The Company designated certain forward currency exchange contracts as net investment hedges to mitigate foreign exchange exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates. During the fiscal three and six months ended July 2, 2023 and July 3, 2022, the Company designated as a net investment hedge a forward currency exchange contract to sell foreign currency (denominated in the local currency of the affiliate) at specified forward rates. These contracts are accounted for using the spot method with changes in the fair value of the contracts attributable to changes in spot rates recorded in Other comprehensive income (loss) (CTA). Changes in the fair value attributable to time value (“excluded components”) are initially recorded to Other comprehensive income (loss) (CTA) and are recognized within Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations ratably over the life of the contract. The fair value of the contracts designated in net investment hedges in liabilities position at July 2, 2023 and January 1, 2023 were $2 million and $0 million, respectively. Effectiveness On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. When a derivative is no longer expected to be highly effective, hedge accounting is discontinued. Statement of Cash Flows Cash flows from derivatives designated in hedging relationships are reflected in the Condensed Consolidated Statements of Cash Flows consistent with the presentation of the hedged item. Cash flows from derivatives that were not accounted for as designated hedging relationships reflect the classification of the cash flows associated with the activities being economically hedged. Credit Risk The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material as it is the Company’s policy to contract with diverse, credit-worthy counterparties based upon both strong credit ratings and other credit considerations. The Company has negotiated International Swaps and Derivatives Association, Inc. master agreements with its counterparties, which contain master netting provisions providing the legal right and ability to offset exposures across trades with each counterparty. Given the rights provided by these contracts, the Company presents derivative balances based on its “net” counterparty exposure. These agreements do not require the posting of collateral. Investments in Equity Securities The Company measures equity investments without readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. As of July 2, 2023 and January 1, 2023, such investments totaled $78 million and $56 million, respectively, and were included in Other assets on the Condensed Consolidated Balance Sheets. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jul. 02, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company, and its Parent, are involved in various lawsuits and claims relating to intellectual property, commercial contracts, product liability, labeling, marketing, advertising, pricing, foreign exchange controls, antitrust and trade regulation, labor and employment, pension, indemnification, data privacy and security, environmental, health and safety and tax matters; governmental investigations; and other legal proceedings that arise from time to time 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 will be incurred, and the amount of the loss can be reasonably estimated. As of January 1, 2023, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has accrued for these matters 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 ASC 450-20-25. 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, among other things, whether damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are significant facts in dispute; procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; ability to achieve comprehensive multi-party settlements; complexity of related cross-claims and counterclaims; and/or there are numerous parties involved. To the extent adverse awards, judgments or verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated. In the Company’s opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued in the Company’s 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 Johnson & Johnson and 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 has established accruals for product liability claims and lawsuits in compliance with ASC 450-20 based on currently available information, which in some cases may be limited. The Company accrues 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 has accrued 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. A significant number of personal injury claims alleging that talc causes cancer were made against Johnson & Johnson Consumer Inc. and Johnson & Johnson arising out of the use of body powders containing talc, primarily JOHNSON’S Baby Powder. The number of these personal injury lawsuits, filed in state and federal courts in the United States as well as outside the United States, continued to increase. In talc cases that previously have gone to trial, the Company and/or its Parent have obtained a number of defense verdicts, but there also have been verdicts against the Company, many of which have been reversed on appeal. In June 2020, the Missouri Court of Appeals reversed in part and affirmed in part a July 2018 verdict of $4,700 million in Ingham v. Johnson & Johnson, et al., No. ED 207476 (Mo. App.), reducing the overall award to $2,100 million. An application for transfer of the case to the Missouri Supreme Court was subsequently denied. As such, the Company accrued approximately $2,500 million (including interest) to Other (income) expense, net, operating in the fourth quarter of 2020 (the “Ingham decision”). In June 2021 a petition for certiorari, seeking a review of the Ingham decision by the United States Supreme Court, was denied. As such, the Company paid the award, which, including interest, totaled approximately $2,500 million. The facts and circumstances, including the terms of the award, were unique to the Ingham decision and not representative of other claims brought against the Company. The Company and its Parent continue to believe that it has strong legal grounds to contest the other talc verdicts that it has appealed. Notwithstanding the Company’s confidence in the safety of its talc products, in certain circumstances the Company has settled cases. In addition to the Ingham decision, the costs associated with certain other settlements, primarily related to mesothelioma cases, and defense costs are reflected in the Company’s accruals noted above. In 2021 and 2020, the Company recorded litigation expense primarily associated with talc-related reserves and certain settlements offset by legal fees and other costs paid. Prior to 2020, the accruals and payments primarily related to defense costs. In October 2021, Johnson & Johnson Consumer Inc. (“Old JJCI”), a former subsidiary of the Parent and the Company, implemented a corporate restructuring (the “2021 Corporate Restructuring”). As a result of that restructuring, Old JJCI ceased to exist and three new entities were created: (a) LTL Management LLC, a North Carolina limited liability company (“LTL” or “Debtor”); (b) Royalty A&M LLC, a North Carolina limited liability company and a direct subsidiary of LTL (“RAM”); and (c) the Debtor’s direct parent, Johnson & Johnson Consumer Inc., a New Jersey company (“New JJCI”). The operations, assets and liabilities of New JJCI will be transferred to the Company as part of the Separation, while LTL and RAM will be retained by the Parent. The Debtor received certain of Old JJCI’s assets and became solely 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 old JJCI’s talc or talc-containing products sold in the United States and Canada (the “Talc-Related Liabilities”). Pursuant to the Separation, Johnson & Johnson will retain the Talc-Related Liabilities and, as a result, will agree to indemnify the Company for the Talc-Related Liabilities and any costs associated with resolving such claims. Such claims represent the vast majority of claims 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. 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. After and in connection with the 2021 Corporate Restructuring, LTL commenced a chapter 11 case (the “LTL Bankruptcy Case”), which is pending before the United States Bankruptcy Court, District of New Jersey (“Bankruptcy Court”). Through its intermediary position between the Parent and LTL, New JJCI has agreed to provide funding to LTL for the payment of amounts the Bankruptcy Court determines are owed by LTL through the establishment of a trust in furtherance of this purpose. In October 2021 and in conjunction with the creation of LTL as part of the 2021 Corporate Restructuring, New JJCI’s liability of $1,016 million was transferred to the Parent and settled through Net Investment from Parent as all legal expenses and liabilities subsequent to October 2021 will be settled by LTL and ultimately the Parent. As such, there are no remaining Talc-Related Liabilities in the Company’s financial statements as of the end of fiscal year 2021 and no activity during 2022. A summary of the talc liabilities from 2020 to 2021 is included below: (Dollars in Millions) 2021 2020 Beginning Balance $ 4,043 $ 462 Accruals 154 4,029 Payments (3,181) (448) Transfer of liability to Parent (1,016) — Ending Balance $ — $ 4,043 In February 2019, Old JJCI’s talc supplier, Imerys Talc America, Inc. and two of its affiliates, Imerys Talc Vermont, Inc. and Imerys Talc Canada, Inc. (collectively, “Imerys”) filed a voluntary petition under chapter 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Imerys Bankruptcy”). The Imerys Bankruptcy relates to Imerys’s potential liability for personal injury from exposure to talcum powder sold by Imerys (“Talc Claims”). In its bankruptcy, Imerys alleges it has claims against the Parent and Old JJCI for indemnification and rights to joint insurance proceeds. In May 2020, Imerys, its parent Imerys S.A., the Tort Claimants’ Committee (“TCC”), and the Future Claimants’ Representative (“FCR”) (collectively, the “Plan Proponents”) filed their Plan of Reorganization (the “Plan”) and the Disclosure Statement related thereto. The Plan Proponents have since filed numerous amendments to the Plan and Disclosure Statement. A hearing on the Plan Proponent’s Disclosure Statement was held in January 2021, and the Court entered an order approving the Disclosure Statement, allowing Imerys to proceed with soliciting votes on the Plan. In March 2021, the Parent voted to reject the Plan and opted out of the consensual releases in the Plan. In April 2021, the Plan Proponents announced the Plan had received the requisite number of accepting votes to confirm the Plan. The Parent challenged certain improprieties with respect to portions of the vote and sought to disqualify those votes. In October 2021, the Bankruptcy Court issued a ruling deeming thousands of votes as withdrawn. In October 2021, Imerys cancelled the confirmation hearing on the Plan. Imerys, the TCC, the FCR, and certain of Imerys’s insurers, and certain parties in the Cyprus Mines chapter 11 case (described below) (collectively the “Mediation Parties”) have since agreed to engage in mediation. The most recent term of the mediation ended on December 31, 2022. In July 2021, Imerys commenced an adversary proceeding against the Parent and Old JJCI in the Imerys Bankruptcy (the “Imerys Adversary Proceeding”). The Imerys Adversary Proceeding sought, among other things, certain declarations with respect to the indemnification obligations allegedly owed by the Parent and Old JJCI to Imerys. The TCC and FCR simultaneously filed a motion for temporary restraining order and preliminary injunction seeking to enjoin the Parent and Old JJCI from undergoing a corporate restructuring that would separate the Parent and Old JJCI’s talc liabilities from its other assets. The Bankruptcy Court denied the motion. The Parent and Old JJCI thereafter filed a motion to dismiss the adversary proceeding. The Bankruptcy Court has not yet decided the motion to dismiss. In October 2021, the Parent and Old JJCI filed a Notice of Bankruptcy Filing and Stay of Proceedings clarifying that the automatic stay arising upon the filing of the LTL Bankruptcy Case should apply to the Imerys Adversary Proceeding. In June 2020, Cyprus Amax Mines Corporation (CAMC) and its parent (together, “Cyprus”), which had owned certain Imerys talc mines, filed an adversary proceeding against the Parent and Old JJCI and Imerys in the Imerys Bankruptcy seeking a declaration of indemnity rights under certain contractual agreements (the “Cyprus Adversary Proceeding”). The Parent and Old JJCI deny such indemnification is owed, and filed a motion to dismiss the adversary complaint. In February 2021, Cyprus filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code and filed its Disclosure Statement and Plan. The Plan contemplates a settlement with Imerys and talc claimants where Cyprus would make a monetary contribution to a trust established under the Imerys Plan in exchange for an injunction against Talc Claims asserted against it. Cyprus has not yet sought approval of its Disclosure Statement and Plan. Cyprus, along with the TCC and FCR appointed in the Cyprus chapter 11 case, have agreed to participate in the mediation with the Mediation Parties. In October 2021, the Parent and Old JJCI filed a Notice of Bankruptcy Filing and Stay of Proceedings clarifying that the automatic stay arising upon the filing of the LTL Bankruptcy Case should apply to the Cyprus Adversary Proceeding. In June 2022, Cyprus commenced an Adversary Proceeding in its chapter 11 case seeking an order enforcing the automatic stay by enjoining parties from commencing or continuing “talc-related claims” against CAMC. In June 2022, the court entered a preliminary injunction order enjoining claimants from pursuing talc-related claims against CAMC through January 2023. In February 2021, several of the Parent’s insurers involved in coverage litigation in New Jersey State Court (the “Coverage Action”) filed a motion in the Imerys Bankruptcy Court proceeding seeking a determination that the automatic stay does not apply to the Coverage Action and, in the alternative, seeking relief from the automatic stay to allow them to continue to litigate their claims in the Coverage Action. In March 2021, the Parent filed a limited response and reservation of rights with respect to the motion. The Court entered an agreed order modifying the stay to allow the litigation in the Coverage Action to continue. In October 2021, LTL filed a Notice of Bankruptcy Filing and Stay of Proceedings clarifying that the automatic stay arising upon the filing of the LTL Bankruptcy Case should apply to the Coverage Action. In March 2022, the Bankruptcy Court for the District of New Jersey ruled that the automatic stay in the LTL Bankruptcy Case applied to the Coverage Action, but, in August and September 2022, the Bankruptcy Court issued two rulings providing that the insurers involved in the Coverage Action could pursue third-party discovery in connection with the Coverage Action. In addition, Johnson & Johnson has received inquiries, subpoenas and requests to produce documents regarding talc matters from various U.S. governmental authorities and is also subject to consumer protection cases and investigations from state attorneys general. The Company has produced documents and responded to inquiries, and will continue to cooperate with government inquiries. Claims for personal injury have been made against Johnson and Johnson Consumer Inc. (JJCI), arising out of the use of TYLENOL, an over-the-counter pain medication, alleging that prenatal exposure to acetaminophen is associated with the development of autism spectrum disorder and/or attention-deficit/hyperactivity disorder. In October 2022, lawsuits filed in federal courts in the United States were organized as a multi-district litigation in the United States District Court for the Southern District of New York. 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, lawsuits have been filed in Canada against our Canadian affiliate. General Litigation In 2006, Johnson & Johnson acquired Pfizer’s 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 after 2006. Johnson & Johnson received indemnification from BI and gave Pfizer indemnification in connection with the transfer of the Zantac business to BI from Pfizer, through Johnson & Johnson. In November 2019, Johnson & Johnson received a demand for indemnification from Pfizer, pursuant to the 2006 Stock and Asset Purchase Agreement between Johnson & Johnson and Pfizer. In January 2020, Johnson & Johnson received a demand for indemnification from BI, pursuant to the 2006 Asset Purchase Agreement among Johnson & Johnson, Pfizer and BI. Pursuant to the agreements, Pfizer and BI have asserted indemnification claims against Johnson & Johnson ostensibly related to Zantac sales by Pfizer. In November 2022, Johnson & Johnson received a demand for indemnification from GlaxoSmithKline LLC (“GSK”), pursuant to the 2006 Stock and Asset Purchase Agreement between Johnson & Johnson and Pfizer, and certain 1993, 1998, and 2002 agreements between Glaxo Wellcome and Warner-Lambert entities. The notices seek indemnification for legal claims related to over-the-counter Zantac (ranitidine) products. Plaintiffs in the underlying actions allege that Zantac and other over-the-counter medications that contain ranitidine may degrade and result in unsafe levels of NDMA (N-nitrosodimethylamine) and can cause or have caused various cancers in patients using the products and seek declaratory and monetary relief. Johnson & Johnson has rejected all the demands for indemnification relating to the underlying actions. No Johnson & Johnson entity sold Zantac in the United States and no Johnson & Johnson entity is a party to the U.S. Zantac litigation. In 2016, Johnson & Johnson Inc. (Canadian affiliate) (“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 related recalls, withdrawals, replacements or related market actions, and JJI is required to indemnify Sanofi for certain other excluded liabilities. In November 2019, JJI received notice reserving rights to claim indemnification from Sanofi pursuant to the 2016 Purchase Agreement. The notice refers to indemnification for legal claims in two class actions with similar allegations to the U.S. litigation related to over-the-counter Zantac (ranitidine) products. Johnson & Johnson and JJI have also been named in putative class actions filed in Canada with similar allegations regarding Zantac or ranitidine use. These actions are pending before the courts of Alberta, British Columbia, Quebec and Ontario. 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. It is not possible, at this stage, to assess reliably the outcome of these lawsuits or the potential financial impact on the Company. Beginning in May 2021, multiple putative class actions were filed in state and federal courts (California, Florida, New York, and New Jersey) against various Johnson & Johnson 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 a strict liability manufacturing defect and failure to warn claims, asserting that the named plaintiffs suffered unspecified injuries as a result of alleged exposure to benzene. The Judicial Panel on Multi-District Litigation has consolidated all pending actions, except one case pending in New Jersey state court, in the United States District Court for the Southern District of Florida, Fort Lauderdale Division. In October 2021, 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. The settlement was preliminarily approved by the court in March 2022. On February 28, 2023, an order granting final approval of the settlement, certifying the settlement class and awarding attorney’s fees was entered. Johnson & Johnson (subsequently substituted by 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 United States District Court for the District of New Jersey, related to the clean-up of a section of the Lower Passaic River in New Jersey. The Company and/or certain of its subsidiaries are involved from time to time in various lawsuits and claims relating to intellectual property, commercial contracts, product liability, labeling, marketing, advertising, pricing, antitrust and trade regulation, labor and employment, indemnification, data privacy and security, environmental, health and safety, and tax matters, governmental investigations, and other legal proceedings that arise in the ordinary course of their business. The Company records accruals for loss contingencies associated with these legal matters when it is probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. As of July 2, 2023, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has accordingly accrued for those contingent liabilities that are material and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments in accordance with Accounting Standards Codification (“ASC”) 450-20-25. Accrued liabilities related to litigation matters are included in Accrued liabilities and Other liabilities on the Condensed Consolidated Balance Sheets. For these and other litigation and regulatory matters discussed below for which a loss is probable or reasonably possible, the Company is unable to estimate the possible loss or range of loss beyond the amounts accrued. Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. The ability to make such estimates and judgments can be affected by various factors including whether, among other things, damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has commenced or is complete; proceedings are in early stages; matters present legal uncertainties; significant facts are in dispute; procedural or jurisdictional issues exist; the number of potential claims is certain or predictable; comprehensive multi-party settlements are achievable; there are complex related cross-claims and counterclaims; and/or there are numerous parties involved. In the Company’s opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued in the Company’s Condensed Consolidated Balance Sheets, is not expected to have a material adverse effect on the Company’s financial position. However, the resolution of, or increase in accruals for, one or more of these matters in any reporting period may have a material adverse effect on the Company’s results of operations and cash flows for that period. Product Liability The Company and/or certain of its subsidiaries are involved in numerous product liability claims and lawsuits involving multiple products. Claimants in these cases seek substantial compensatory and, where available, punitive damages. While the Company believes it has substantial defenses, it is not feasible to predict the ultimate outcome of litigation. From time to time, even if it has substantial defenses, the Company considers isolated settlements based on a variety of circumstances. The Company may accrue an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated. For certain of these matters, the Company may accrue additional amounts such as estimated costs associated with settlements, damages, and other losses. Product liability accruals can represent projected product liability for thousands of claims around the world, each in different litigation environments and with different fact patterns. Changes to the accruals may be required in the future as additional information becomes available. Claims for personal injury have been made against our subsidiary Johnson & Johnson Consumer Inc. (“JJCI”) in federal court arising out of the use of Tylenol, an over-the-counter pain medication, alleging that in utero exposure to acetaminophen (the active ingredient in Tylenol) is associated with the development of autism spectrum disorder and/or attention-deficit/hyperactivity disorder in children. In October 2022, lawsuits filed in federal courts in the United States were organized as a multi-district litigation in the U.S. District Court for the Southern District of New York. No trial dates have been set in these actions. Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and the anticipated number of cases. In addition, a lawsuit has been filed in state court against JJCI, the Company and J&J, and lawsuits have been filed in Canada against our subsidiary Johnson & Johnson Inc. (Canadian affiliate) (“JJI”) and J&J. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out these claims and lawsuits. General Litigation In 2006, J&J acquired Pfizer’s over-the-counter (“OTC”) business including the U.S. rights to OTC Zantac, which were on-sold to Boehringer Ingelheim (“BI”) as a condition to merger control approval such that BI assumed product liability risk for U.S. sales after 2006. J&J received indemnification from BI and gave Pfizer indemnification in connection with the transfer of the Zantac business to BI from Pfizer, through J&J. In November 2019, J&J received a demand for indemnification from Pfizer, pursuant to the 2006 Stock and Asset Purchase Agreement between J&J and Pfizer. In January 2020, J&J received a demand for indemnification from BI, pursuant to the 2006 Asset Purchase Agreement among J&J, Pfizer and BI. Pursuant to the agreements, Pfizer and BI have asserted indemnification claims against J&J ostensibly related to Zantac sales by Pfizer. In November 2022, J&J received a demand for indemnification from GlaxoSmithKline LLC (“GSK”), pursuant to the 2006 Stock and Asset Purchase Agreement between J&J and Pfizer, and certain 1993, 1998, and 2002 agreements between Glaxo Wellcome and Warner-Lambert entities. The notices seek indemnification for legal claims related to over-the-counter Zantac (ranitidine) products. Plaintiffs in the underlying actions allege that Zantac and other over-the-counter medications that contain ranitidine may degrade and result in unsafe levels of NDMA (N-nitrosodimethylamine) and can cause or have caused various cancers in patients using the products and seek declaratory and monetary relief. J&J has rejected all the demands for indemnification relating to the underlying actions. No J&J entity sold Zantac in the United States. In 2016, JJI sold the Canadian Zantac business to Sanofi Consumer Health, Inc. (“Sanofi”). Under the 2016 Asset Purchase Agreement between JJI and Sanofi (the “2016 Purchase Agreement”), Sanofi assumed certain liabilities including those pertaining to Zantac (ranitidine) product sold by Sanofi after closing and losses arising from or relating to recalls, withdrawals, replacements or related market actions or post-sale warning in respect of products sold by Sanofi after the closing, and JJI is required to indemnify Sanofi for certain other excluded liabilities. In November 2019, JJI received a notice reserving rights to claim indemnification from Sanofi pursuant to the 2016 Purchase Agreement. The notice refers to indemnification for legal claims in class actions and various individual personal injury actions with similar allegations to the U.S. litigation related to over-the-counter Zantac (ranitidine) products. J&J and/or JJI have also been named in four of the seven putative class actions filed in Canada with similar allegations regarding Zantac or ranitidine use. Of the four putative class actions naming J&J and/or JJI, the British Columbia action has been stayed, the Alberta action has been discontinued, and the Quebec action has been stayed. The Ontario action is pending, but not currently active. JJI was also named as a defendant, along with other manufacturers, in various personal injury actions in Canada related to Zantac products. JJI has provided Sanofi notice reserving rights to claim indemnification pursuant to the 2016 Purchase Agreement related to the class actions and personal injury actions. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out these claims and lawsuits. Beginning in May 2021, multiple putative class actions were filed in state and federal courts (California, Florida, New York, and New Jersey) against various J&J entities alleging violations of state consumer fraud statutes based on nondisclosure of alleged benzene contamination of certain Neutrogena and Aveeno sunscreen products and the affirmative promotion of those products as “safe”; and, in at least one case, alleging strict liability manufacturing defect and failure to warn claims, asserting that the named plaintiffs suffered unspecified injuries as a result of alleged exposure to benzene. The Judicial Panel on Multi-District Litigation has consolidated all pending actions, except one case pending in New Jersey state court, in the U.S. District Court for the Southern District of Florida, Fort Lauderdale Division. In October 2021, an affiliate of the Company reached an agreement in principle for the settlement of a nationwide class, encompassing the claims of the consolidated actions, subject to approval by the Florida federal Court. In December 2021, plaintiffs in the consolidated actions filed a motion for preliminary approval of a nationwide class settlement. In February 2023, an order granting final approval of the settlement, certifying the settlement class and awarding attorney’s fees was entered. A Notice of Appeal was filed in April 2023. J&J (subsequently substituted by JJCI) 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 law |
Accrued and Other Liabilities
Accrued and Other Liabilities | 6 Months Ended |
Jul. 02, 2023 | |
Other Liabilities Disclosure [Abstract] | |
Accrued and Other Liabilities | Accrued and Other Liabilities Accrued liabilities consisted of: (Dollars in Millions) 2022 2021 Accrued expenses $ 447 $ 535 Accrued compensation and benefits 272 266 Lease liability 35 47 Other accrued liabilities 152 176 Accrued liabilities $ 906 $ 1,024 Other liabilities consisted of: (Dollars in Millions) 2022 2021 Accrued income taxes - noncurrent (Note 11) $ 584 $ 603 Noncurrent lease liability 81 82 Other noncurrent accrued liabilities 62 71 Other liabilities $ 727 $ 756 Accrued liabilities consisted of: (Dollars in Millions) July 2, 2023 January 1, 2023 Accrued expenses $ 470 $ 447 Accrued compensation and benefits 275 272 Lease liability 47 35 Other accrued liabilities (1) 409 152 Accrued liabilities $ 1,201 $ 906 Other liabilities consisted of: (Dollars in Millions) July 2, 2023 January 1, 2023 Accrued income taxes - noncurrent $ 234 $ 584 Noncurrent lease liability 120 81 Other noncurrent accrued liabilities (1) 239 62 Other liabilities $ 593 $ 727 __________________ |
Acquisitions and Divestitures
Acquisitions and Divestitures | 6 Months Ended |
Jul. 02, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Acquisitions and Divestitures | Acquisitions and Divestitures During fiscal years 2022, 2021 and 2020, the Company did not make any material acquisitions. During fiscal years 2021 and 2020, in separate transactions, the Company divested several brands and facilities and recognized a pre-tax gain of $25 million and $50 million, respectively, within Other expense (income), net. During fiscal year 2022, the Company did not have any material divestitures. |
Segments of Business and Geogra
Segments of Business and Geographic Areas | 6 Months Ended |
Jul. 02, 2023 | |
Segment Reporting [Abstract] | |
Segments of Business and Geographic Areas | Segments of Business and Geographic Areas The Company has historically operated as part of the Parent, reported under the Parent’s segment structure and historically the Chief Operating Decision Maker (“CODM”) was the Consumer Health Segment Operating Committee. As the Company is transitioning into an independent, publicly traded company, the Company’s CODM was determined to be the Company’s Executive Committee as they will be 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 realigned its historical segment structure and determined it is organized as three operating segments, which are also its reportable segments: (i) Self Care, (ii) Skin Health and Beauty, and (iii) Essential Health. Prior period presentations conform to the current segment reporting structure. Segment profit is based on Operating income (loss) excluding depreciation and amortization, restructuring, Separation-related costs, Other (income) expense, net, operating, and unallocated general corporate administrative expenses (referred to herein as “Adjusted Operating Income”) as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which includes treasury and legal operations and certain expenses, gains and losses related to the overall management of the Company, are not allocated to the segments. In assessing segment performance and managing operations, management does not review segment assets. The Company operates the business through the following three reportable business segments: Reportable Segments Product Categories Self Care Cough, Cold and Allergy Pain Care Other Self Care (Digestive Health, Smoking Cessation and Other) Skin Health and Beauty Face and Body Care Hair, Sun and Other Essential Health Oral Care Baby Care Other Essential Health (Women’s Health and Wound Care) The Company’s product categories as a percentage of Net sales for the fiscal years 2022, 2021 and 2020 were as follows: 2022 2021 2020 Cough, Cold and Allergy 13 % 12 % 12 % Pain Care 13 % 11 % 10 % Other Self Care 14 % 15 % 14 % Face and Body Care 20 % 22 % 22 % Hair, Sun and Other 9 % 8 % 9 % Oral Care 10 % 11 % 11 % Baby Care 10 % 10 % 11 % Other Essential Health 11 % 11 % 11 % Total 100 % 100 % 100 % Segment Net Sales and Adjusted Operating Income Segment net sales and adjusted operating income for the fiscal years 2022, 2021 and 2020 were as follows: Net Sales (Dollars in Millions) 2022 2021 2020 Self Care $ 6,030 $ 5,643 $ 5,235 Skin Health and Beauty 4,350 4,541 4,450 Essential Health 4,570 4,870 4,782 Total $ 14,950 $ 15,054 $ 14,467 Adjusted Operating Income (Dollars in Millions) 2022 (4) 2021 (1)(4) 2020 (1)(4) Self Care $ 2,088 $ 1,952 $ 1,858 Skin Health and Beauty 708 878 889 Essential Health 1,111 1,224 1,250 Total adjusted operating income 3,907 4,054 3,997 Reconciliation to income (loss) before taxes: General corporate/unallocated expenses (298) (272) (277) Other (income) expense, net, operating (Note 10) 23 (15) (3,871) Restructuring (2) (100) (116) (82) Depreciation and amortization (644) (731) (746) Separation-related costs (3) (213) — — Total operating income (loss) 2,675 2,920 (979) Other expense (income), net (Note 10) 38 (5) 37 Income (loss) before taxes $ 2,637 $ 2,925 $ (1,016) __________________ (1) For the fourth quarter of 2022, the Company updated the methodology of allocation for certain selling expenses to align with segment financial results as measured by the Company, including the Chief Operating Decision Maker. All prior periods have been recast to conform to current presentation. Total adjusted operating income did not change as a result of this change. (2) Exclusive of the restructuring expense included in other (income) expense, net, operating. See Note 16. (3) For the fourth quarter of 2022, the Company updated methodology to no longer allocate non-recurring Separation-related costs to align with segment financial results as measured by the Company, including the Chief Operating Decision Maker. This change only impacted fiscal year 2022 given there were no non-recurring Separation-related costs in any other period presented. (4) 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 Chief Operating Decision Maker. Accordingly, the Company has updated its segment disclosures in all prior periods. Total adjusted operating income did not change as a result of this update. Depreciation & Amortization Depreciation and amortization by segment for the fiscal years 2022, 2021 and 2020 were as follows: Depreciation and Amortization (Dollars in Millions) 2022 (1) 2021 2020 Self Care $ 202 $ 212 $ 205 Skin Health and Beauty 247 305 325 Essential Health 195 214 216 Total $ 644 $ 731 $ 746 __________________ (1) 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 Chief Operating Decision Maker. Accordingly, the Company has updated its depreciation and amortization disclosures in the impacted period. Total depreciation and amortization did not change as a result of this update. Geographic Information Net sales are attributed to a geographic region based on the location of the customer and for the fiscal years 2022, 2021 and 2020 were as follows: Net Sales (Dollars in Millions) 2022 2021 2020 North America (1) $ 7,418 $ 7,284 $ 7,095 Europe, Middle East, and Africa 3,188 3,436 3,332 Asia-Pacific 3,146 3,276 3,013 Latin America 1,198 1,058 1,027 Total $ 14,950 $ 15,054 $ 14,467 __________________ (1) Includes U.S. net sales in fiscal years 2022, 2021 and 2020 of $6,599 million, $6,516 million and $6,357 million, respectively. Long-lived assets consisting of property, plant and equipment, net of accumulated depreciation, intangible assets, net and goodwill are attributed to geographic locations as of January 1, 2023 and January 2, 2022 as follows: Long Lived Assets (2) (Dollars in Millions) 2022 2021 North America (1) $ 9,582 $ 9,687 Europe, Middle East, and Africa 8,244 9,169 Asia-Pacific 2,736 3,204 Latin America 296 278 Total $ 20,858 $ 22,338 __________________ (1) Includes U.S. long lived assets in fiscal years 2022, 2021 and 2020 of $7,469 million, $7,527 million and $7,631 million, respectively. (2) Long-lived assets include property, plant and equipment, net for fiscal years 2022, and 2021 of $1,820 million and $1,827 million, respectively, and intangible assets and goodwill, net for fiscal years 2022 and 2021 of $19,038 million and $20,511 million, respectively. Major Customers One customer accounted for approximately 13%, 14% and 14% of total net sales in fiscal years 2022, 2021 and 2020, respectively. The Company has historically operated as part of the Parent, reported under the Parent’s segment structure and historically the Chief Operating Decision Maker (“CODM”) was the Consumer Health Segment Operating Committee. As the Company transitioned into an independent, publicly traded company, the Company’s CODM was determined to be the Kenvue Leadership Team as they are responsible for allocating resources and assessing performance. Based on how the CODM assesses operating performance on a regular basis, makes resource allocation decisions, and designates responsibilities of their direct reports, the Company is organized as three operating segments, which are also its reportable segments: (i) Self Care, (ii) Skin Health and Beauty, and (iii) Essential Health. Prior period presentations conform to the current segment reporting structure. Segment profit is based on Operating income, excluding depreciation and amortization, non-recurring Separation-related costs, restructuring expense, Other operating expense (income), net, and unallocated general corporate administrative expenses (referred to herein as “Adjusted operating income”), as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which include treasury and legal operations and certain expenses, gains and losses related to the overall management of the Company, are not allocated to the segments. In assessing segment performance and managing operations, management does not review segment assets. The Company operates the business through the following three reportable business segments: Reportable Segments Product Categories Self Care Cough, Cold and Allergy Pain Care Other Self Care (Digestive Health, Smoking Cessation, and Other) Skin Health and Beauty Face and Body Care Hair, Sun and Other Essential Health Oral Care Baby Care Other Essential Health (Women’s Health and Wound Care) The Company’s product categories as a percentage of Net sales for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cough, Cold and Allergy 13 % 13 % 14 % 12 % Pain Care 12 11 13 13 Other Self Care 16 15 15 15 Face and Body Care 19 20 19 20 Hair, Sun and Other 10 10 10 9 Oral Care 10 10 10 10 Baby Care 9 10 9 10 Other Essential Health 11 11 10 11 Total 100 % 100 % 100 % 100 % Segment Net Sales and Adjusted Operating Income Segment Net sales and Adjusted operating income for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Net Sales Net Sales Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Self Care $ 1,661 $ 1,481 $ 3,301 $ 2,946 Skin Health and Beauty 1,147 1,126 2,258 2,138 Essential Health 1,203 1,197 2,304 2,310 Total $ 4,011 $ 3,804 $ 7,863 $ 7,394 Adjusted Operating Income Adjusted Operating Income Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Self Care $ 576 $ 524 $ 1,158 $ 998 Skin Health and Beauty 201 243 350 370 Essential Health 250 314 461 560 Total Adjusted operating income (1)(2) $ 1,027 $ 1,081 $ 1,969 $ 1,928 Reconciliation to Income before taxes: Depreciation and amortization 148 161 300 326 Separation-related costs 102 49 200 59 Restructuring (3) — 24 — 38 Other operating expense (income), net 1 13 (16) 8 General corporate/unallocated expenses 74 64 143 116 Total operating income $ 702 $ 770 $ 1,342 $ 1,381 Other expense (income), net 10 (5) 40 (6) Interest expense, net 53 — 54 — Income before taxes $ 639 $ 775 $ 1,248 $ 1,387 __________________ (1) For the first quarter of 2023, the Company adjusted the allocation for certain intangible asset amortization costs within Cost of Sales to align with segment financial results as measured by the Company, including the CODM. Accordingly, the Company has updated its segment disclosures to reflect the updated presentation in all prior periods. Total Adjusted operating income did not change as a result of this update. (2) We define Adjusted operating income as U.S. GAAP Operating income excluding depreciation and amortization, Separation-related costs, restructuring expense, Other operating expense (income), net, and general corporate unallocated expenses that are not part of our measurement of segment performance. Management uses 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. |
Restructuring
Restructuring | 6 Months Ended |
Jul. 02, 2023 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | Restructuring During 2018, the Parent announced plans to implement actions across its global supply chain that are intended to enable the Company to focus resources and increase investments in critical capabilities, technologies and solutions necessary to manufacture and supply its product portfolio of the future, enhance agility and drive growth. These supply chain actions have included expanding its use of strategic collaborations, and bolstering its initiatives to reduce complexity, improving cost-competitiveness, enhancing capabilities, and optimizing its network. The restructuring charges associated with the program, and directly attributed to the Company, were primarily related to contractors/outside services, asset write-downs, and accelerated depreciation. The program was completed in the fiscal fourth quarter of 2022. These costs have been recognized in the Combined Statement of Operations as follows: (Dollars in Millions) 2022 2021 2020 Cost of sales $ 55 $ 48 $ 34 Selling, general, and administrative expenses 45 68 48 Other (income) expense, net, operating — 1 (16) Total $ 100 $ 117 $ 66 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jul. 02, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Combined Financial Statements of the Company are derived from the consolidated financial statements of the Parent, which issued its financial statements for the year ended January 1, 2023 on February 16, 2023. Accordingly, the Company has evaluated transactions or other events for consideration as recognized subsequent events in the annual financial statements through February 16, 2023. Additionally, the Company has evaluated transactions and other events that occurred through March 3, 2023, the date these Combined Financial Statements were issued, for purposes of disclosure of unrecognized subsequent events. Events Subsequent to Original Issuance of Financial Statements (Unaudited) In connection with the reissuance of the financial statements, the Company has evaluated subsequent events through April 24, 2023, the date the financial statements were reissued. On April 20, 2023, the Company entered into a long-term lease for a newly renovated office building and a newly constructed R&D building in Summit, New Jersey that, when completed, will encompass a total of approximately 290,000 square feet and serve as the Company’s new global corporate headquarters. The 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 R&D. The relocation to this campus is expected to commence in 2025 for the office building and continue through 2026 for occupancy into the new R&D building. The Company will continue to operate from our interim corporate headquarters in Skillman, New Jersey until that time. On March 22, 2023, the Company issued eight series of senior unsecured notes (the “Notes”) in an aggregate principal amount of $7.75 billion in a private placement. The net proceeds to the Company from the Notes offering was $7.69 billion after deductions of discounts and commissions payable of $65 million. The Notes will initially be fully and unconditionally guaranteed on a senior unsecured basis by the Parent. Such guarantees will terminate upon (1) the completion in all material respects of the transfer of the assets and liabilities of Johnson & Johnson’s Consumer Health Business to the Company, other than the transfer of the assets and liabilities of the Company’s businesses in certain jurisdictions where the Company and the Parent will defer the transfer of such assets and liabilities (such transfer, the “Consumer Health Business Transfer”) and (2) the occurrence of the initial registration of the Company’s equity securities. The Company intends to use the proceeds from the offering of the Notes as partial consideration to the Parent for the Consumer Health Business that the Parent will transfer to the Company. The net proceeds of the Notes offering were placed in segregated escrow accounts pending the occurrence of the Consumer Health Business Transfer. On April 4, 2023, the net proceeds of the Notes offering were released from escrow upon the completion of the Consumer Health Business Transfer. After completion of the Notes offering on March 22, 2023, the Long-term debt outstanding was $7.69 billion. 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 billion to be made available in U.S. dollars and Euros. The Revolving Credit Facility contains representations and warranties, covenants and events of default that are customary for this type of financing, including covenants restricting the incurrence of liens and the entry into certain merger transactions. The company does not expect the Revolving Credit Facility to be drawn from or used in connection with the Separation. Following the original issuance of the financial statements, 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 billion in aggregate principal amount of commercial paper under the Commercial Paper Program. The Commercial Paper Program contains representations and warranties, covenants and default that are customary for this type of financing. Dividend Declaration 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 will be payable on September 7, 2023 to shareholders of record as of the close of business on August 28, 2023. Proposed Exchange Offer |
Description of the Company an_2
Description of the Company and Summary of Significant Accounting Policies | 3 Months Ended | 6 Months Ended |
Apr. 02, 2023 | Jul. 02, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Description of the Company and Summary of Significant Accounting Policies | Intangible Assets Intangible assets are reported at cost, less accumulated amortization and impairments. The Company amortizes intangible assets with a finite life over their respective useful lives on a straight-line basis. The estimated useful lives of patents, trademarks and customer relationships range from 3 years to 40 years and for other intangibles ranges from 20 years to 40 years. The useful lives for customer relationships are estimated based on various customer attributes including customer type, size, geography, length of relationships and nature of relationships. Intangible assets deemed to have indefinite lives are not amortized but are subjected to annual tests of impairment. See Note 4 for further details on Intangible Assets. Goodwill Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. The Combined Balance Sheets reflect goodwill established based on past transactions of the Consumer Health segment allocated to the Company’s operations by the Parent. Goodwill is not amortized but is tested for impairment at least annually in the fourth quarter at the reporting unit level, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If the Company concludes it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed. If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). See Note 4 for further details on Goodwill. Impairment of Long-Lived Assets Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the asset group is tested for recoverability by comparing the carrying value of the asset group to the related estimated undiscounted future cash flows expected to be derived from the asset group, which include the amount and timing of the projected future cash flows. If the expected undiscounted cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value. If quoted market prices are not available, the Company will estimate fair value using a discounted value of estimated future cash flows. No indicators of impairment were present for fiscal years 2021 and 2020. See Note 4 for impairment recorded in fiscal year 2022. Indefinite-lived intangible assets are tested for impairment annually or more frequently if events or changes in circumstances between annual tests indicate that the asset may be impaired. Impairment losses on indefinite-lived intangible assets are recognized based on a comparison of the fair value of the asset to its carrying value. Foreign Currency Translation For translation of its international operations, the Company has determined that the local currencies are the functional currencies except those in highly inflationary economies, which are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years, or where a substantial portion of its cash flows are not in the local currency. For the majority of the Company’s international operations the local currency is the functional currency. | Description of the Company and Summary of Significant Accounting Policies Description of the Company and Business Segments Consumer Health Business (a business of Johnson & Johnson) (the “Company”) sells a broad range of products used in the baby care, oral care, skin health and beauty, over-the-counter pharmaceutical, sanitary protection and wound care markets. These products are marketed to the general public through e-commerce, direct-to-consumer channels and to retail outlets and distributors throughout the world. The Company has a global team of more than 22,000 employees engaged in the research and development, manufacture, and sale of a broad range of these products. The Company is organized into three business segments: Self Care, Skin Health and Beauty, and Essential Health. The Self Care segment includes a broad product range such as cough, cold and allergy, pain care, and other Self Care (digestive health, smoking cessation, and other) products. The Skin Health and Beauty segment is focused on face and body care and hair, sun, and other products. The Essential Health segment includes oral care, baby care, and other Essential Health (women’s health and wound care) products. The Company is wholly-owned by Johnson & Johnson (“J&J” or the “Parent”) and primarily represents the Consumer Health segment of J&J. The Company also includes certain other product lines previously reported in another segment of J&J. In November 2021, the Parent announced its intention to separate the Company into a new, publicly traded company (the “Separation”). Basis of Presentation The Company has historically operated as part of the Parent and not as a separate entity. These Combined Financial Statements of the Company have been derived from the consolidated financial statements of the Parent to present the Combined Balance Sheets as of January 1, 2023 and January 2, 2022 and the related Combined Statements of Operations, Comprehensive Income (Loss), Equity and Cash Flows for fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021 as if the Company had been operated on a standalone basis for the periods presented. The Combined Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the Parent’s historical accounting policies, by aggregating financial information from the components of the Company and the Parent’s accounting records directly attributable to the Company. All intercompany transactions and balances within the Company have been eliminated. All transactions between the Company and the Parent are considered to be effectively settled for cash in the Combined Financial Statements at the time the transaction is recorded. The effects of the settlement of these transactions between the Company and the Parent are reflected in the Combined Statements of Cash Flows as “Net transfers from (to) the Parent” within the financing activities, and in the Combined Balance Sheets and Combined Statements of Equity as “Net Investment from Parent”. The Combined Financial Statements of the Company include the assets, liabilities, revenues and expenses that management has determined are specifically or primarily identifiable to the Company, as well as direct and indirect costs that are attributable to the operations of the Company. Indirect costs are the costs of support functions that are provided on a centralized or geographic basis by the Parent and its affiliates, which include, but are 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 have been allocated to the Company for the purposes of preparing the Combined Financial Statements based on a specific identification basis or, when specific identification is not practicable, a proportional cost allocation method, primarily net sales, headcount, or other allocation methodologies that are 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 have been 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. The Company is incurring certain non-recurring Separation-related costs in its establishment as a standalone public company and those costs determined to be for the benefit of the Company are included in the Combined Financial Statements. These non-recurring Separation-related costs were $213 million for fiscal year 2022 and are included within Selling, general, and administrative expenses. The Company did not incur Separation-related costs in fiscal year 2021 or 2020. A significant number of personal injury claims alleging that talc causes cancer have been made against Johnson & Johnson Consumer Inc. (“Old JJCI”) and the Parent arising out of the use of body powders containing talc, primarily Johnson’s Baby Powder. Upon the 2021 Corporate Restructuring (as defined below), the Company no longer reflects the impact of the Talc-Related Liabilities (as defined below). See Note 13. Cash generated from the Company’s operations is generally managed by the Parent’s centralized treasury function and is swept into the Parent’s and its affiliates’ bank accounts. Cash and cash equivalents on the Combined Balance Sheets represent balances in accounts specifically identifiable to the Company that are not swept into the Parent’s and its affiliates’ bank accounts. The Parent’s third-party interest expense has not been allocated for any of the periods presented 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’s equity balance in these financial statements represents the excess of total assets over total liabilities. Equity is impacted by changes in comprehensive income, contributions from or to the Parent which are the result of treasury activities and net funding provided by or distributed to the Parent. The Parent calculates foreign currency translation on its consolidated assets and liabilities, which include assets and liabilities of the Company. Foreign currency translation recorded during the fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021 is based on currency movements specific to the Company’s Combined Financial Statements. The income tax amounts in the Combined Financial Statements have been calculated based on a separate return methodology and presented as if the Company’s operations were reported by separate taxpayers in the jurisdictions in which the Company operates. Following the Separation, the Company’s operating footprint as well as tax return elections and assertions are expected to be different and therefore, the Company’s hypothetical income taxes, as presented in the Combined Financial Statements, are not expected to be indicative of the Company’s future income taxes, which will also be impacted by the Tax Matters Agreement with the Parent. Certain current income tax liabilities related to the Company’s activities included in the Parent’s income tax returns were assumed to be immediately settled with Parent through Net Investment from Parent on the Combined Balance Sheets and reflected in the Combined Statements of Cash Flows as a financing activity. Use of Estimates The preparation of Combined Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, trade promotions, rebates, allowances and incentives, product liabilities, income taxes, withholding taxes, depreciation, amortization, employee benefits, contingencies, allocations of cost and expenses from the Parent and its affiliates, and intangible asset and liability valuations. Actual results may or may not differ from those estimates. Economic Uncertainty Macroeconomic factors affect consumer spending patterns and thereby the Company’s operations. These factors include general economic conditions, inflation, consumer confidence, employment rates, business conditions, the availability of credit, interest rates, tax rates and fuel and energy costs. Annual Closing Date The Company follows the concept of a fiscal year, which ends on the Sunday nearest to the end of the month of December. Normally each fiscal year consists of 52 weeks, but every five or six years the fiscal year consists of 53 weeks, and therefore includes additional shipping days, as was the case in fiscal year 2020, and will be the case again in fiscal year 2026. Fiscal year 2022 refers to the fiscal year ended January 1, 2023. Fiscal year 2021 refers to the fiscal year ended January 2, 2022. Fiscal year 2020 refers to the fiscal year ended January 3, 2021. Reportable Segments Commencing in fiscal year 2022, the Company began operating in the following reportable segments: (i) Self Care, (ii) Skin Health and Beauty and (iii) Essential Health. Prior to 2022, the Company operated as one reportable segment. All periods have been presented to conform to the current segment reporting structure. Trade Receivable and Allowance for Credit Losses Trade receivables, net are stated net of certain sales provisions and the allowance for credit losses. The Company estimates the current expected credit loss on its receivables based on various factors, including historical credit loss experience, customer credit worthiness, value of collaterals (if any), and any relevant current and reasonably supportable future economic factors. Trade receivable balances are written off against the allowance when it is deemed probable that the trade receivable will not be collected. (Dollars in Millions) 2022 2021 2020 Allowance for credit losses, beginning of period $ (32) $ (37) $ (35) Provision (9) (4) (9) Utilization 5 8 6 Currency translation adjustment 1 1 1 Allowance for credit losses, end of period $ (35) $ (32) $ (37) Inventories Inventories are stated at the lower of cost or net realizable value and are accounted for using the first-in, first-out method. Property, Plant and Equipment and Depreciation Property, plant and equipment are stated at cost less accumulated depreciation. The Company utilizes the straight-line method of depreciation over the estimated useful lives. Building and building equipment 20 - 30 years Land and leasehold improvements 10 - 20 years Machinery and equipment 2 - 13 years Software 3 - 8 years The Company capitalizes certain computer software and development costs when incurred in connection with developing or obtaining computer software for internal use. Upon retirement or other disposal of property, plant and equipment, the costs and related amounts of accumulated depreciation or amortization are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds are recorded in Other (income) expense, net, operating. Intangible Assets Intangible assets are reported at cost, less accumulated amortization and impairments. The Company amortizes intangible assets with a finite life over their respective useful lives on a straight-line basis. The estimated useful lives of patents, trademarks and customer relationships range from 3 years to 40 years and for other intangibles ranges from 20 years to 40 years. The useful lives for customer relationships are estimated based on various customer attributes including customer type, size, geography, length of relationships and nature of relationships. Intangible assets deemed to have indefinite lives are not amortized but are subjected to annual tests of impairment. See Note 4 for further details on Intangible Assets. Goodwill Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. The Combined Balance Sheets reflect goodwill established based on past transactions of the Consumer Health segment allocated to the Company’s operations by the Parent. Goodwill is not amortized but is tested for impairment at least annually in the fourth quarter at the reporting unit level, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If the Company concludes it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed. If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). See Note 4 for further details on Goodwill. Impairment of Long-Lived Assets Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the asset group is tested for recoverability by comparing the carrying value of the asset group to the related estimated undiscounted future cash flows expected to be derived from the asset group, which include the amount and timing of the projected future cash flows. If the expected undiscounted cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value. If quoted market prices are not available, the Company will estimate fair value using a discounted value of estimated future cash flows. No indicators of impairment were present for fiscal years 2021 and 2020. See Note 4 for impairment recorded in fiscal year 2022. Financial Instruments The Parent and Company use derivative financial instruments to manage exposure to foreign currency fluctuations. The Company participates in the Parent’s centralized hedging and offsetting programs. The effects of foreign currency derivatives are allocated to the Company based on the portion that is deemed to be associated with the Company’s operations. Additionally, in certain jurisdictions, the Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of future intercompany product sales and third-party purchases of materials denominated in a foreign currency. The Company uses interest rate swaps as an instrument to manage interest rate risk related to forecasted fixed rate borrowings. As required by U.S. GAAP, all derivative instruments held by the Company are recorded on the balance sheet at fair value. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value, with Level 1 having the highest priority and Level 3 having the lowest. Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction. Any changes in the fair value of derivatives designated as fair value hedges are recorded in net income. The Parent and Company document all relationships between hedged items and derivatives. The overall risk management strategy includes reasons for undertaking hedge transactions and entering into derivatives. The objectives of this strategy are: (1) minimize foreign currency exposure’s impact on the Company’s financial performance; (2) protect the Company’s cash flow from adverse movements in foreign exchange rates; (3) ensure the appropriateness of financial instruments; (4) manage the enterprise risk associated with financial institutions; and (5) reduce exposure to fluctuation in variable interest rates. See Note 12 to the Combined Financial Statements for further information on fair value instruments. Revenue Recognition The Company’s revenue contracts represent a single performance obligation to sell its products to customers. Revenue from the sale of products to customers is recognized at a single point in time when control transfers, which can be on the date of shipment or the date of receipt by the customer depending on the terms of the contract. Net sales exclude taxes collected by the Company on behalf of governmental authorities. In addition, the Company has elected to account for shipping and handling activities as fulfillment costs and includes the shipping and handling fees charged to the customers as a part of the transaction price to be recognized when control of the product transfers. The Company’s global payment terms are typically between 30 to 90 days. Trade promotions, comprised of coupons, product listing allowances, cooperative advertising arrangements, volume-based incentive programs, as well as discounts to customers, rebates, sales incentives, and product returns, are accounted for as variable consideration and recorded as a reduction in sales in the same period as the related sale. To estimate variable consideration, the Company may apply both the “expected value” method and the “most likely amount” method based on the form of variable consideration, after considering which method would provide the best prediction of consideration to be received from the Company’s customers. The redemption cost of consumer coupons is based on historical redemption experience by product and value. Volume-based incentive programs are based on the estimated sales volumes for the incentive period. The related liability is recognized within Accrued rebates, returns and promotions on the Combined Balance Sheets. Sales returns are almost exclusively not resalable, the related reserves are recorded at full sales value and estimated based on historical sales and returns information. See Note 15 to the Combined Financial Statements for further disaggregation of net sales. Leases The Company determines whether an arrangement is a lease at contract inception by establishing if the contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Right of Use (“ROU”) assets and lease liabilities for operating leases are included in Other assets, Accrued liabilities, and Other liabilities on the Combined Balance Sheets. The ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of all minimum lease payments over the lease term. The Company uses the Parent’s incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments, when the implicit rate is not readily determinable. 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. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has elected the following policy elections on adoption: use of portfolio approach on leases of assets under master service agreements, exclusion of short-term leases on the balance sheet, and not separating lease and non-lease components. The Company primarily has operating leases for space, vehicles, manufacturing equipment and data processing equipment. The ROU asset pertaining to operating leases was $110 million and $126 million, in 2022 and 2021, respectively. The current and non-current lease liability was $116 million and $129 million, in 2022 and 2021, respectively. The operating lease costs were $42 million, $54 million and $63 million, in 2022, 2021 and 2020, respectively. Cash paid for amounts included in the measurement of lease liabilities was $43 million, $55 million and $63 million in 2022, 2021 and 2020 respectively. Weighted-average remaining lease term for operating leases was 7 years for 2022 and 6 years for 2021. The weighted-average discount rate for operating leases was 2.3% and 3.0% for 2022 and 2021, respectively. The estimated operating lease future payments before tax for the five succeeding years and thereafter is approximately: (Dollars in Millions) 2023 $ 31 2024 25 2025 14 2026 12 2027 9 Thereafter 63 Total 154 Less: Imputed Interest (38) Total current and non-current lease liability $ 116 Advertising Costs associated with advertising are expensed in the year incurred and are included in Selling, general, and administrative expenses. Advertising expenses worldwide, which comprised television, radio, print media and digital advertising, were $1,356 million, $1,461 million and $1,230 million in fiscal years 2022, 2021 and 2020, respectively. Shipping and Handling Shipping and handling costs incurred were $322 million, $305 million and $295 million in fiscal years 2022, 2021 and 2020, respectively, and are included in Selling, general, and administrative expenses. Product Liability Accruals for product liability claims are recorded, on an undiscounted basis, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing information and actuarially determined estimates where applicable. The accruals are adjusted periodically as additional information becomes available. The Company accrues an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated. To the extent adverse verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated. Research and Development Research and development expenses are expensed as incurred and included within Selling, general, and administrative expenses. Research and development costs were $375 million, $355 million and $320 million for fiscal year 2022, 2021 and 2020, respectively. Income Taxes Income taxes are recorded based on amounts refundable or payable for the current fiscal year and include the results of any differences between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. The Company estimates deferred tax assets and liabilities based on enacted tax regulations and rates. Future changes in tax laws and rates may affect recorded deferred tax assets and liabilities. U.S. federal, state and foreign income tax payables and receivables are recognized in the Combined Balance Sheets for entities that file separate income tax returns and make direct payments to taxing authorities. U.S. federal, state and foreign income tax payables and receivables for entities that file a combined, consolidated or group income tax return with the Parent are deemed settled with the Parent and are included in the “Net Investment from Parent.” Management establishes valuation allowances on deferred tax assets when it is determined “more likely than not” that some portion or all of the deferred tax assets may not be realized. Management considers positive and negative evidence in evaluating the Company’s ability to realize its deferred tax assets, including its historical results and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. The Company has unrecognized tax benefits for uncertain tax positions. The Company follows U.S. GAAP which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The estimates for these positions are regularly assessed based upon all available information. These estimates may be revised in the future and such changes may have a material additional expense or benefit to the Company’s financial results or its effective tax rate. In the United States, the Tax Cuts and Jobs Act of 2017 (the “TCJA”) enacted in 2017 includes provisions for a tax on global intangible low-taxed income (“GILTI”). GILTI is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets, as provided by the TCJA. In January 2018, the FASB issued guidance that allowed companies to elect as an accounting policy whether to record the tax effects of GILTI in the period the tax liability is generated (i.e., “period cost”) or to provide for deferred tax assets and liabilities related to basis differences that exist at the balance sheet date and are expected to affect the amount of GILTI inclusion in future years upon reversal (i.e., “deferred method”). The Company has elected to account for GILTI under the deferred method. The deferred tax amounts recorded are based on the evaluation of temporary differences that are expected to reverse as GILTI is incurred in future periods. See Note 11 to the Combined Financial Statements for further information regarding income taxes. Stock-Based Compensation Certain employees of the Company participate in the Parent’s stock-based compensation plans. Stock-based compensation expense related to these plans is recognized based on specific identification of cost related to the Company’s employees. The Company also receives allocated stock-based compensation expense relating to employees of central support functions provided by the Parent. Foreign Currency Translation For translation of its international operations, the Company has determined that the local currencies are the functional currencies except those in highly inflationary economies, which are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years, or where a substantial portion of its cash flows are not in the local currency. For the majority of the Company’s international operations the local currency is the functional currency. The net assets of international operations where the local currencies have been determined to be the functional currencies are translated into U.S. dollars, the reporting currency, using period-end exchange rates and at the average exchange rates for the reporting period for revenue and expense accounts. The cumulative foreign currency translation adjustment is recorded as a component of Accumulated other comprehensive loss in equity. Foreign currency translation recorded in these Combined Financial Statements is based on currency movements specific to the Company’s assets and liabilities included on the Combined Balance Sheets during the periods presented. Foreign currency exchange gains and losses on transactions occurring in a currency other than an operation’s functional currency are recognized as a component of Other expense (income), net in the Combined Statements of Operations. Net currency transaction losses (gains) were $105 million, $(16) million and $16 million in fiscal years 2022, 2021 and 2020, respectively. Recently Issued Accounting Standards, Not Adopted as of January 1, 2023 ASU 2022-04: Liabilities-Supplier Finance Programs (Topic 405-50) – Disclosure of Supplier Finance Program Obligations This update requires that a buyer in a supplier finance program disclose additional information about the program to allow financial statement users to better understand the effect of the programs on an entity’s working capital, liquidity, and cash flows. This update will be effective for the Company for fiscal years beginning after December 15, 2022, except for the amendment on roll forward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company is currently assessing the impact of this update on its disclosures and will adopt this standard in the fiscal first quarter of 2023. Reclassifications Certain prior period amounts have been reclassified to conform to current year presentation. Description of the Company and Business Segments Kenvue Inc. (“Kenvue” or the “Company”) was formed as a wholly owned subsidiary of Johnson & Johnson (“J&J” or the “Parent”) and sells a broad range of products used in the baby care, oral care, skin health and beauty, over-the-counter pharmaceutical, sanitary protection, and wound care markets. These products are marketed to the general public through e-commerce, direct-to-consumer channels, and to retail outlets and distributors throughout the world. The Company is organized into three business segments: Self Care, Skin Health and Beauty, and Essential Health. The Self Care segment includes a broad product range such as cough, cold and allergy, pain care, as well as digestive health, smoking cessation, and other products. The Skin Health and Beauty segment is focused on face and body care and hair, sun, and other products. The Essential Health segment includes oral care, baby care, as well as women’s health, wound care, and other products. In November 2021, the Parent 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 (as defined below in “—Variable Interest Entities and Net Economic Benefit Arrangements”). The registration statement related to the initial public offering of Kenvue’s common stock was declared effective on May 3, 2023, and Kenvue’s common stock began trading on the New York Stock Exchange under the ticker symbol “KVUE” on May 4, 2023 (the “Kenvue IPO”). On May 8, 2023, the Kenvue IPO was completed through the sale of 198,734,444 shares of common stock, par value $0.01 per share, including the underwriters’ full exercise of their option to purchase 25,921,884 shares to cover over-allotments, at an initial public offering price of $22 per share for net proceeds of $4.2 billion after deducting underwriting discounts and commissions of $131 million. On May 8, 2023, in conjunction with the Consumer Health Business Transfer, the Company distributed $13.8 billion to J&J from the (1) net proceeds received from the sale of the common stock in the Kenvue IPO and (2) net proceeds received from the Debt Financing Transactions as defined in Note 4, “Borrowings”, and (3) any cash and cash equivalents in excess of the $1.17 billion in cash and cash equivalents retained by the Company immediately following the Kenvue IPO. As of the closing of the Kenvue IPO, J&J owned 1,716,160,000 shares of Kenvue common stock, or approximately 89.6% of the total outstanding shares of Kenvue common stock. On July 24, 2023, J&J initiated an exchange offer under which its shareholders can exchange shares of J&J common stock for shares of Kenvue Inc. common stock owned by J&J. Basis of Presentation Effective April 4, 2023, the Company’s financial statements are presented on a consolidated basis, as J&J completed the Consumer Health Business Transfer on such date. The unaudited financial statements for all periods presented, including the historical results of the Company prior to April 4, 2023, are now referred to as the “Condensed Consolidated Financial Statements”. Prior to April 4, 2023, the Company operated as a segment of the Parent and not as a separate entity. The Company’s financial statements prior to April 4, 2023 were prepared on a combined basis and were derived from the Parent’s historical consolidated financial statements for interim financial reporting, which do not conform in all respects to the requirements of accounting principles generally accepted in the United States of America (“U.S. GAAP” |
Inventories_2
Inventories | 6 Months Ended |
Jul. 02, 2023 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories At the end of fiscal years 2022 and 2021, inventories were comprised of: (Dollars in Millions) 2022 2021 Raw materials and supplies $ 351 $ 264 Goods in process 123 99 Finished goods 1,752 1,339 Total inventories $ 2,226 $ 1,702 As of July 2, 2023 and January 1, 2023, inventories were comprised of: (Dollars in Millions) July 2, 2023 January 1, 2023 Raw materials and supplies $ 299 $ 351 Goods in process 134 123 Finished goods 1,593 1,752 Total inventories $ 2,026 $ 2,226 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill | 6 Months Ended |
Jul. 02, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | Intangible Assets and Goodwill At the end of fiscal years 2022 and 2021, the gross and net amounts of intangible assets were: 2022 2021 (Dollars in Millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Patents and trademarks $ 4,400 $ (1,485) $ 2,915 $ 4,705 $ (1,350) $ 3,355 Customer relationships 2,127 (1,063) 1,064 2,265 (1,021) 1,244 Other intangibles 1,343 (650) 693 1,377 (628) 749 Total definite-lived intangible assets 7,870 (3,198) 4,672 8,347 (2,999) 5,348 Indefinite-lived intangible assets: Trademarks 5,122 — 5,122 5,291 — 5,291 Other 59 — 59 62 — 62 Total intangible assets, net $ 13,051 $ (3,198) $ 9,853 $ 13,700 $ (2,999) $ 10,701 The weighted average amortization period for patents and trademarks is 20 years. The weighted average amortization period for customer relationships is 31 years and is driven by large established distributors in various regional markets. These customers have been operating in these markets for many years and are expected to continue to operate in these markets for the foreseeable future. The weighted average amortization period for other intangible assets is 34 years. A majority of the other intangible assets relates to the Parent’s acquisition of Pfizer Consumer Health in 2006. The amortization expense of amortizable assets included in Cost of sales was $348 million, $414 million and $415 million, for the fiscal years 2022, 2021 and 2020 respectively. Amortization of intangible assets is inclusive of amortization on trademarks of $187 million, $213 million, and $197 million for the fiscal years 2022, 2021, and 2020, respectively. Amortization on the remaining intangible assets is $161 million, $201 million, and $218 million for the fiscal years 2022, 2021, and 2020, respectively. Carrying amount changes from fiscal year 2021 to fiscal year 2022 are primarily driven by currency translation. The Company recognized an intangible impairment of $12 million related to certain definite-lived trademarks deemed as irrecoverable in Other (income) expense, net, operating for the fiscal year ended January 1, 2023. The estimated amortization expense before tax for the five succeeding years is approximately: (Dollars in Millions) 2023 2024 2025 2026 2027 $ 314 $ 304 $ 280 $ 276 $ 272 During 2022, the Company realigned and began managing its operations differently, and as a result the Company reallocated its goodwill to align with the new operating segments during 2022. This realignment in segment structure resulted in a change in the Company’s former reporting units, which are now divided between: (i) Self Care, (ii) Skin Health and Beauty and (iii) Essential Health. which are also the Company’s reportable segments. As a result of this realignment, goodwill was reassigned to each of the reporting units using a relative fair value approach. The Company estimates the fair values of a reporting unit using a discounted cash flow model. Goodwill by reportable segment is as follows: (Dollars in Millions) Consumer Health Business Self Care Skin Health and Beauty Essential Health Total Goodwill at January 3, 2021 $ 10,326 $ — $ — $ — $ 10,326 Currency translation/other (516) — — — (516) Goodwill at January 2, 2022 $ 9,810 $ — $ — $ — $ 9,810 Currency translation/other (664) — — — (664) Goodwill at July 3, 2022 $ 9,146 $ — $ — $ — $ 9,146 Realignment of segment goodwill (9,146) 5,193 2,334 1,619 — Currency translation/other — 1 31 7 39 Goodwill at January 1, 2023 $ — $ 5,194 $ 2,365 $ 1,626 $ 9,185 A majority of the goodwill relates to the Parent’s acquisition of Pfizer Consumer Health in 2006. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants. The Company estimates the fair values of a reporting unit using a discounted cash flow model. The discounted cash flow model relies on assumptions regarding revenue and net income growth rates, projected working capital needs, capital expenditures, and discount rates. To estimate fair value, the Company discounts the forecasted cash flows of each reporting unit. The discount rate the Company uses represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return a market participant would expect to earn. The quantitative fair value test is performed utilizing long-term growth rates and discount rates applied to the estimated cash flows in estimation of fair value. To forecast a reporting unit’s cash flows the Company takes into consideration economic conditions and trends, estimated future operating results, management’s projections, and a market participant’s view of growth rates and product lives, and anticipates future economic conditions. Revenue growth rates inherent in these forecasts are based on input from internal and external market research that compare factors such as growth in global economies, recent industry trends and product life-cycles. Macroeconomic factors such as changes in economies, changes in the competitive landscape, changes in government legislation, product life-cycles, industry consolidations and other changes beyond the Company’s control could have a positive or negative impact on achieving its targets. Accordingly, if market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the future. Re-segmentation Goodwill Impairment Test Following the change in reporting units during 2022, the Company performed a quantitative impairment test on each of the reporting units: (i) Self Care, (ii) Skin Health and Beauty and (iii) Essential Health. After completing the testing, the fair value of each of these reporting units exceeded its carrying value, and, therefore, there was no impairment to goodwill. Annual Goodwill Impairment Tests The Company completed its annual goodwill impairment tests for fiscal years 2022, 2021, and 2020 and concluded that no impairment to goodwill was necessary as the fair value of each reporting unit was in excess of its respective carrying value. As of July 2, 2023 and January 1, 2023, the gross and net amounts of intangible assets were: July 2, 2023 January 1, 2023 (Dollars in Millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Patents and trademarks $ 4,383 $ (1,583) $ 2,800 $ 4,400 $ (1,485) $ 2,915 Customer relationships 2,099 (1,087) 1,012 2,127 (1,063) 1,064 Other intangibles 1,348 (671) 677 1,343 (650) 693 Total definite-lived intangible assets $ 7,830 $ (3,341) $ 4,489 $ 7,870 $ (3,198) $ 4,672 Indefinite-lived intangible assets: Trademarks 5,128 — 5,128 5,122 — 5,122 Other 61 — 61 59 — 59 Total intangible assets, net $ 13,019 $ (3,341) $ 9,678 $ 13,051 $ (3,198) $ 9,853 The weighted average amortization period for patents and trademarks is 20 years. The weighted average amortization period for customer relationships is 31 years and is driven by large established distributors in various regional markets. These customers have been operating in these markets for many years and are expected to continue to operate in these markets for the foreseeable future. The weighted average amortization period for other intangible assets is 34 years. A majority of the other intangible assets relates to the Parent’s acquisition of Pfizer Consumer Health in 2006. Carrying amount changes for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were primarily driven by currency translations. The Company recognized an intangible impairment of $12 million related to certain definite-lived trademarks deemed as irrecoverable in Other operating expense (income), net for the fiscal three and six months ended July 3, 2022. Amortization expense, which was included in Cost of Sales, for the Company’s amortizable assets was as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Trademarks $ 53 $ 48 $ 94 $ 98 Other intangible assets 26 41 66 84 Total Amortization expense $ 79 $ 89 $ 160 $ 182 The estimated amortization expense before tax for the remainder of 2023 and the five succeeding years is approximately: (Dollars in Millions) Remainder of 2023 2024 2025 2026 2027 2028 $ 157 $ 306 $ 282 $ 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 (39) (76) 11 (104) Goodwill at July 2, 2023 $ 5,155 $ 2,289 $ 1,637 $ 9,081 |
Borrowings
Borrowings | 6 Months Ended |
Jul. 02, 2023 | |
Debt Disclosure [Abstract] | |
Borrowings | Borrowings The components of the Company’s debt as of July 2, 2023 and January 1, 2023 were as follows: (Dollars in Millions) July 2, 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 6 — Discounts and debt issuance costs (72) — Total long-term debt $ 7,684 $ — Commercial paper 754 — Discounts and debt issuance costs (2) — Total loans and notes payable 752 — Total debt $ 8,436 $ — Senior Notes On March 22, 2023, the Company issued eight series of senior unsecured notes (the “Senior Notes”) in an aggregate principal amount of $7.75 billion in a private placement. The net proceeds to the Company from the Senior Notes were approximately $7.7 billion after deductions of discounts and issuance costs of $75 million. Upon release from escrow, these funds were loaned to J&J through a facility agreement (the “Facility Agreement”) dated April 5, 2023. See “—Facility Agreement” below for additional details. The unamortized debt issuance costs related to the Senior Notes at July 2, 2023 were approximately $72 million. Amortization of debt issuance costs related to the Senior Notes for both of the fiscal three and six months ended July 2, 2023 was $3 million. The weighted average effective interest rate of the Company’s long-term debt as of July 2, 2023 was 5.1%. The interest payments are due on March 22 and September 22 of each year, commencing on September 22, 2023. The Senior Notes were initially fully and unconditionally guaranteed on a senior unsecured basis by the Parent. Such guarantees of the Senior Notes were automatically and unconditionally terminated upon the completion of the Consumer Health Business Transfer and the occurrence of the initial registration of the Company’s equity securities. In connection with the issuance of the Senior Notes, the Company entered into a registration rights agreement with the initial purchasers, pursuant to which the Company is 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. The Company may redeem the notes of a series of 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 The Company’s Senior Notes are governed by an indenture and supplemental indenture between the Company and a trustee (collectively, the “indenture”). The indenture contains certain covenants, including limitations on the Company and certain of its subsidiaries’ ability to incur liens or engage in sale leaseback transactions. The indenture also contains restrictions on the Company’s ability to consolidate, merge or sell substantially all of its assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which, the Senior Notes may be declared immediately due and payable. Facility Agreement On April 5, 2023, the Company and J&J entered into the Facility Agreement, allowing the Company to lend the proceeds from the issuance of debt (including commercial paper) in an aggregate amount of $8.9 billion to J&J. Interest on loans made from the Facility Agreement was charged at an interest rate equal to the Secured Overnight Financing Rate (“SOFR”) less an adjusted margin of 15 basis points, with a floor of 0% (a weighted average interest rate of 4.7%) to be paid monthly in arrears. The Company recognized interest income of $33 million for both of the fiscal three and six months ended July 2, 2023 in relation to the Facility Agreement. Upon completion of the Kenvue IPO on May 8, 2023, the Facility Agreement was terminated and the balance of the loans, and all accrued interest, were repaid by J&J, for a total cash inflow of $9.0 billion. The Company remitted this cash back to J&J as a distribution back to J&J in connection with the Separation. The cash flows for the lending, and repayment, of the principal balance of the Facility Agreement are presented within cash flows from investing activities within the Statement of Cash Flows. Cash inflows from the interest earned on the Facility Agreement are presented within Interest expense, net on the Company’s Condensed Consolidated Statements of Operations and are presented as cash inflows from operations within the Statement of Cash Flows. Revolving Credit Facility On March 6, 2023, the Company entered into a credit agreement providing for a five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $4.0 billion to be made available in U.S. dollars and Euros. Interest is payable on the loans under the Revolving Credit Facility at (1) in the case of borrowings denominated in U.S. dollars, adjusted Term Secured Overnight Financing Rate (“Term SOFR”) (or, at the Company’s option, the adjusted base rate), (2) in the case of borrowings denominated in Euros, adjusted Euro Interbank Offered Rate (“EURIBOR”) and (3) in the case of swingline borrowings, the daily simple Euro Short-Term Rate (“ESTR”), plus, in each case, a margin determined pursuant to a pricing grid based on the Company’s credit ratings. The Revolving Credit Facility fees and letter of credit fees are determined based upon the same grid. Interest payments are due (1) in the case of Term SOFR or EURIBOR borrowings, on the last day of each interest period applicable to the borrowing (or, in the case of any borrowing with an interest period of more than three months’ duration, every three months), (2) in the case of an adjusted base rate borrowing, on the last day of each March, June, September, and December and (3) in the case of swingline borrowings, on the fifth business day after the borrowing. In connection with entering the Revolving Credit Facility, the Company paid an immaterial amount of debt issuance costs. These costs related to securing the Revolving Credit Facility are presented within Prepaid expenses and other receivables on the Condensed Consolidated Balance Sheets. The Revolving Credit Facility contains representations and warranties, covenants and events of default that are customary for this type of financing, including covenants restricting the incurrence of liens and the entry into certain merger transactions. The Parent initially unconditionally guaranteed all of the obligations of the borrowers under the Revolving Credit Facility on an unsecured basis. Such guarantees of the Revolving Credit Facility were automatically terminated upon the completion of the Consumer Health Business Transfer and the occurrence of the initial registration of the Company’s equity securities. Kenvue will unconditionally guarantee all of the obligations of the borrowers (other than itself) under the Revolving Credit Facility on an unsecured basis. As of July 2, 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 aggregate principal amount of commercial paper under the Commercial Paper Program. Any such issuance will mature within 364 days from date of issue. The Commercial Paper Program contains representations and warranties, covenants and default that are customary for this type of financing. The commercial paper notes issued under the Commercial Paper Program are unsecured notes ranking at least pari passu with all of the Company’s other senior unsecured indebtedness. Prior to the Kenvue IPO, the Company issued $1.25 billion under its Commercial Paper Program which, collectively with the Senior Notes, are referred to as the “Debt Financing Transactions”. In aggregate, inclusive of amounts issued as a part of the Debt Financing Transactions, the Company issued $2.3 billion of commercial paper notes and repaid $1.6 billion, in line with its stated maturities during the fiscal three months ended July 2, 2023. As of July 2, 2023, the Company had $754 million of outstanding balances under its Commercial Paper Program, net of a related discount of $2 million. Interest expense incurred as a result of the Commercial Paper Program for both of the fiscal three and six months ended July 2, 2023 totaled $9 million. The weighted average effective interest rate of the Company’s commercial paper as of July 2, 2023 was 5.2% and the weighted average maturities as of July 2, 2023 were less than 90 days. Interest Expense, Net The amount included in Interest expense, net on the Company’s Condensed Consolidated Statements of Operations consists of the following: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Interest expense $ 118 $ — $ 129 $ — Interest income (1) (65) — (75) — Interest expense, net $ 53 $ — $ 54 $ — __________________ (1) Includes interest income of $33 million for both of the fiscal three and six months ended July 2, 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 fol lows: (Dollars in Millions) Remainder of 2023 2024 2025 2026 2027 Thereafter $ — $ — $ 750 $ 750 $ — $ 6,250 Fair Value of Debt The Company’s debt was recorded at the carrying amount. The estimated fair value of the Company’s Senior Notes was $7.8 billion as of July 2, 2023. Fair value was estimated using market prices, which were corroborated by quoted broker prices and significant other observable inputs and would be considered Level 2 in the fair value hierarchy. The carrying value of the commercial paper notes approximated the fair value as of July 2, 2023 due to the nature and short term duration of the instrument. Compliance with Covenants As of July 2, 2023, the Company was in compliance with all financial and non-financial covenants and no default or event of default has occurred. |
Pensions
Pensions | 6 Months Ended |
Jul. 02, 2023 | |
Retirement Benefits [Abstract] | |
Pensions | Employee Related Obligations At the end of fiscal years 2022 and 2021, employee related obligations recorded on the Combined Balance Sheets were: (Dollars in Millions) 2022 2021 Pension benefits $ 216 $ 303 Postretirement benefits 5 5 Total employee obligations 221 308 Less: current benefits in Accrued liabilities (7) (6) Employee related obligations - non-current $ 214 $ 302 Single Employer Plans The Company is the plan sponsor for certain defined benefit retirement plans and other benefit plans and these Combined Financial Statements reflect the periodic benefit costs and funded status of such plans. The Company uses December 31 as the fiscal year-end measurement date for these plans. The Company’s defined benefit retirement plans are located outside the United States. Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans sponsored by the Company for 2022, 2021 and 2020 include the following components: Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2020 2022 2021 2020 Service cost $ 8 $ 7 $ 6 $ — $ — $ — Interest cost 4 2 3 — 1 — Recognized actuarial losses (gain) 4 6 5 — (1) — Curtailments and settlements — — 1 — — — Expected return on plan assets (1) — — — — — Net periodic benefit cost $ 15 $ 15 $ 15 $ — $ — $ — The service cost component of net periodic benefit cost is presented in the same line items on the Combined Statements of Operations where other employee compensation costs are reported, including Cost of sales and Selling, general, and administrative expenses. All other components of net periodic benefit costs are presented as part of Other expense (income), net on the Combined Statements of Operations. The following table represents the weighted-average actuarial assumptions: Retirement Plans Other Benefit Plans Worldwide Benefit Plans 2022 2021 2020 2022 2021 2020 Net Periodic Benefit Cost Service cost discount rate 2.3 % 1.2 % 1.5 % — % — % — % Interest cost discount rate 3.1 % 0.7 % 1.0 % — % — % — % Rate of increase in compensation levels 2.5 % 2.7 % 2.7 % — % — % — % Expected long-term rate of return on plan assets 2.9 % 2.1 % 2.5 % — % — % — % Benefit Obligation Discount rate 4.2 % 1.4 % 1.1 % 12.3 % 11.5 % 13.3 % Rate of increase in compensation levels 2.7 % 2.7 % 2.7 % — % — % — % The Company’s discount rates are determined by considering current yield curves representing high quality, long-term fixed income instruments. The resulting discount rates are consistent with the duration of plan liabilities. The Company’s methodology in determining service and interest cost uses duration specific spot rates along that yield curve to the plans’ liability cash flows. The expected rates of return on plan asset assumptions represent the Company’s assessment of long-term returns on diversified investment portfolios globally. The assessment is determined using projections from external financial sources, long-term historical averages, actual returns by asset class and the various asset class allocations by market. The healthcare cost trend rates have reached the ultimate trend rates of 8.3% and 8.3% for fiscal years 2022 and 2021 respectively. The following table sets forth information related to the benefit obligation and the fair value of plan assets at fiscal year-end 2022 and 2021 for the defined benefit retirement plans and other benefit plans sponsored by the Company: Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2022 2021 Change in Benefit Obligation Projected benefit obligation - beginning of year $ 303 $ 347 $ 5 $ 5 Service cost 8 7 — — Interest cost 4 2 — 1 Actuarial gain (1) (82) (21) — — Curtailments, settlements & restructuring — — — — Benefits paid from plan (8) (9) — — Effect of exchange rates (19) (23) — (1) Other (2) 29 — — — Projected benefit obligation - end of year $ 235 $ 303 $ 5 $ 5 Change in Plan Assets Plan assets at fair value - beginning of year $ — $ — $ — $ — Company contributions 9 9 — — Benefits paid from plan assets (8) (9) — — Actual return on plan assets (1) — — — Effect of exchange rates (2) — — — Transfers 21 — — Plan assets at fair value - end of year 19 — — — Funded status - end of year (216) (303) — — Amounts Recognized in the Company’s Balance Sheet consist of the following: Accrued liabilities (7) (6) — — Employee related obligations - non-current (209) (297) (5) (5) Total recognized in the Combined Balance Sheets - end of year (216) (303) (5) (5) Amounts Recognized in Accumulated Other Comprehensive Income consist of the following: Net actuarial (gain) loss (15) 79 (4) (4) Prior service cost 4 2 — — Total before tax effects (11) 81 (4) (4) Accumulated Benefit Obligations - end of year $ 204 $ 262 $ 3 $ 3 __________________ (1) The actuarial gain for retirement plans in 2022 was primarily related to increases in discount rates (2) This amount includes $25 million related to new unfunded pension plans included in the balance during 2022 from the Parent and other pension plans. See Note 9. Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2022 2021 Amounts Recognized in Net Periodic Benefit Cost and Other Comprehensive Income Net periodic benefit cost $ 15 $ 15 $ — $ — Net actuarial gain (1) (82) (21) — — Amortization of net actuarial loss (4) (6) — — Effect of exchange rates (6) (7) — 1 Total (income)/loss recognized in other comprehensive income, before tax $ (92) $ (34) $ — $ 1 Total recognized in net periodic benefit cost and other comprehensive income $ (77) $ (19) $ — $ 1 _________________ (1) The actuarial gain for retirement plans in 2022 was primarily related to increases in discount rates The Company’s pension plans are funded in accordance with local regulations. Additional discretionary contributions are made when deemed appropriate to meet the long-term obligations of the plans. For certain plans, funding is not a common practice, as funding provides no economic benefit. Consequently, the Company’s pension plans are not funded. The following table displays the projected future benefit payments from the Company’s defined benefit retirement plans and other benefit plans: (Dollars in Millions) 2023 2024 2025 2026 2027 2028- 2032 Projected future benefit payments Retirement plans $ 10 $ 11 $ 12 $ 12 $ 13 $ 80 Other benefit plans $ — $ — $ — $ — $ — $ 2 The Company currently has no projected benefit plan contributions. The Company’s retirement plan assets at the end of 2022 were primarily comprised of debt, equity and insurance contracts. The Company’s retirement plan asset allocation at the end of 2022 and 2021 and target allocations for 2023 are as follows: Percent of Plan Assets Target Allocation Worldwide Retirement Plans 2022 2021 2023 Equity securities 42 % — % 42 % Debt securities 56 % — % 56 % Other assets 2 % 100 % 2 % Total plan assets 100 % 100 % 100 % Determination of Fair Value of Plan Assets The Plan has an established and well-documented process for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon models that primarily use, as inputs, market-based or independently sourced market parameters, including yield curves, interest rates, volatilities, equity or debt prices, foreign exchange rates and credit curves. While the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Valuation Hierarchy The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy are described in the table below with Level 1 having the highest priority and Level 3 having the lowest. The Net Asset Value (NAV) is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for the investments measured at fair value. • Debt instruments — A limited number of these investments are valued at the closing price reported on the major market on which the individual securities are traded. Where quoted prices are available in an active market, the investments are classified as Level 1. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are classified as Level 2. Level 3 debt instruments are priced based on unobservable inputs. • Equity securities — Equity securities are valued at the closing price reported on the major market on which the individual securities are traded. Substantially all equity securities are classified within Level 1 of the valuation hierarchy. • Other assets — Other assets are primarily related to insurance contracts. The instruments are issued by insurance companies. The fair value is based on negotiated value and the underlying investments held in separate account portfolios as well as considering the credit worthiness of the issuer. The underlying investments are government, asset-backed and fixed income securities. In general, insurance contracts are classified as Level 3 as there are no quoted prices nor other observable inputs for pricing. The following table sets forth the Retirement Plans' investments measured at fair value as of January 1, 2023 and January 2, 2022: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs Significant Unobservable Inputs Total Assets (Dollars in Millions) 2022 2021 2022 2021 2022 2021 2022 2021 Debt instruments $ — $ — $ 9 $ — $ — $ — $ 9 $ — Equity securities 9 — — — — — 9 — Other assets — — — — 1 — 1 — Investments at fair value $ 9 $ — $ 9 $ — $ 1 $ — $ 19 $ — Multiemployer Plans The Parent has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The Parent also provides medical benefits, principally to its U.S. retirees and their dependents through its other postretirement benefit plans. The participation of the Company’s employees and retirees in these plans is reflected as though the Company participated in a multiemployer plan with the Parent. Liabilities associated with these plans are not reflected in the Company’s Combined Balance Sheets. The Combined Statements of Operations includes expense allocations for these benefits which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company amounted to $54 million, $93 million and $94 million for fiscal years 2022, 2021 and 2020, respectively. Savings Plan In the United States, the Parent has voluntary 401(k) savings plans designed to enhance the existing retirement programs covering eligible employees. The Parent matches a percentage of each employee’s contributions consistent with the provisions of the plan for which he/she is eligible. Total Parent matching contributions attributable to the Company’s employees were $14 million, $14 million and $12 million in fiscal years 2022, 2021 and 2020, respectively. Post-Employment Benefit Plans Additionally, the Parent maintains a post-employment benefit plan to provide limited benefits to its former employees, including former employees of the Company, if they are involuntarily terminated. The duration of these benefits are generally based on the employee’s term of service with the Parent, and includes both severance compensation and other benefits, including medical coverage. The post-employment plan is published and is considered a benefit to employees which is earned over the employee’s term of service. As a result, the Parent recognizes the cost of this benefit as it is earned by the employee as required by ASC 712: Compensation - non-retirement post-employment benefits. The cost of this benefit allocated to the Company in fiscal years 2022, 2021 and 2020 was approximately $46 million, $49 million and $53 million, respectively, and is reflected as an expense in the Combined Statements of Comprehensive Income (Loss). Single Employer Plans Net periodic benefit costs for the Company’s defined benefit retirement plans sponsored by the Company for the fiscal three and six months ended July 2, 2023 and July 3, 2022, included the following components: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Service cost $ 5 $ 2 $ 10 $ 4 Interest cost 7 1 10 2 Recognized actuarial gain — 1 — 2 Expected return on plan assets (7) — (10) — Net periodic benefit cost $ 5 $ 4 $ 10 $ 8 The service cost component of net periodic benefit cost is presented in the same line items on the Company’s Condensed Consolidated Statements of Operations where other employee compensation costs are reported, including Cost of sales and Selling, general, and administrative expenses. All other components of net periodic benefit costs are presented as part of Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations. Multiemployer Plans The Parent has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The Parent also provides medical benefits, principally to its U.S. retirees and their dependents through its other postretirement benefit plans. The participation of the Company’s employees and retirees in these plans is reflected as though the Company participated in a multiemployer plan with the Parent. Assets and liabilities associated with these plans are not reflected in the Company’s Condensed Consolidated Balance Sheets. The Condensed Consolidated Statements of Operations include expense allocations for these benefits, which were determined using a proportional allocation method. Total benefit plan expense allocated to the Company amounted to $1 million and $15 million for the fiscal three months ended July 2, 2023 and July 3, 2022, respectively, and $17 million and $27 million for the fiscal six months ended July 2, 2023 and July 3, 2022, respectively. |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss | 6 Months Ended |
Jul. 02, 2023 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Components of other comprehensive (loss) income consist of the following: (Dollars in Millions) Foreign Currency Translation Employee Benefit Plans Gain/ (Loss) On Derivatives & Hedge Total Accumulated Other Comprehensive (Loss) Income December 29, 2019 $ (4,350) $ (65) $ (2) $ (4,417) Net 2020 changes 855 (11) 1 845 January 3, 2021 (3,495) (76) (1) (3,572) Net 2021 changes (926) 25 — (901) January 2, 2022 (4,421) (51) (1) (4,473) Net 2022 changes (1,053) 63 10 (980) January 1, 2023 $ (5,474) $ 12 $ 9 $ (5,453) 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 Combined Statements of Comprehensive Income (Loss). Components of other comprehensive loss consisted of the following: (Dollars in Millions) Foreign Currency Translation (1) Employee Benefit Plans (2) Gain On Cash Flow Hedges (3) Total Accumulated Other Comprehensive Loss April 2, 2023 $ (5,313) $ 26 $ 48 $ (5,239) Net change (177) (83) (8) (268) July 2, 2023 $ (5,490) $ (57) $ 40 $ (5,507) April 3, 2022 $ (4,701) $ (48) $ (5) $ (4,754) Net change (835) 1 1 (833) July 3, 2022 $ (5,536) $ (47) $ (4) $ (5,587) _________________ (1) Foreign currency translation adjustments for the fiscal three months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $30 million and $65 million, respectively. Income taxes on foreign currency translation relate to tax impact on prior earnings that are not permanently reinvested and will be repatriated in the future. (2) Employee benefit plans for the fiscal three months ended July 2, 2023 were net of benefit from taxes of $18 million. Net change for the fiscal three months ended July 2, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pensions plans by the Parent to the Company. (3) Gain on derivatives and hedges for the fiscal three months ended July 2, 2023 were net of benefit from taxes of $4 million. (Dollars in Millions) Foreign Currency Translation (1) Employee Benefit Plans (2) Gain On Cash Flow Hedges (3) Total Accumulated Other Comprehensive Loss January 1, 2023 $ (5,474) $ 12 $ 9 $ (5,453) Net change (16) (69) 31 (54) July 2, 2023 $ (5,490) $ (57) $ 40 $ (5,507) January 2, 2022 $ (4,421) $ (51) $ (1) $ (4,473) Net change (1,115) 4 (3) (1,114) July 3, 2022 $ (5,536) $ (47) $ (4) $ (5,587) _________________ (1) Foreign currency translation adjustments for the fiscal six months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $9 million and $77 million, respectively. Income taxes on foreign currency translation relate to tax impact on prior earnings that are not permanently reinvested and will be repatriated in the future. (2) Employee benefit plans for the fiscal six months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $17 million and $1 million, respectively. Net change for the fiscal six months ended July 2, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pensions plans by the Parent to the Company. (3) Gain on derivatives and hedges for the fiscal six months ended July 2, 2023 were net of provision for taxes of $9 million. 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). |
Stock-Based Compensation_2
Stock-Based Compensation | 6 Months Ended |
Jul. 02, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation At January 1, 2023, the Parent had three stock-based compensation plans. The shares outstanding are for contracts under the Parent's 2005 Long-Term Incentive Plan and the 2012 Long-Term Incentive Plan. The 2005 Long-Term Incentive Plan expired on April 26, 2012. On March 7, 2022, the Parent's Board of Directors approved the 2022 Long-Term Incentive Plan (the “2022 Plan”) providing the grant of non-qualified stock options, incentive stock options, stock appreciation rights, RSUs, performance shares, PSUs, other stock-based awards and cash awards to employees and directors including the Company’s personnel. The 2022 Plan became effective in April 2022. All options and restricted shares granted subsequent to that date were under this plan. The components and classification of stock-based compensation expense related to stock options, Restricted Stock Units (“RSUs”), and Performance Stock Units (“PSUs”) directly attributable to those employees specifically identified as employees of the Company and allocations from the Parent for fiscal years 2022, 2021 and 2020 were as follows: (Dollars in Millions) 2022 2021 2020 Stock options $ 43 $ 41 $ 37 RSUs 74 73 67 PSUs 20 27 11 Stock-based compensation expense 137 141 115 Cost of sales 30 33 29 Selling, general and administrative expenses 107 108 86 Stock-based compensation expense $ 137 $ 141 $ 115 Stock-based compensation expense includes $26 million, $38 million and $28 million for fiscal years 2022, 2021 and 2020 respectively, of allocated charges from the Parent, based on percentage attribution related to Parent employees providing services to the Company. The following quantitative stock option, RSU and PSU information relates to awards to those employees specifically identified as employees of the Company. Stock Options Stock options expire 10 years from the date of grant and vest over service periods that range from 6 months to 4 years. All options were granted at the average of the high and low prices of t he Parent’s common stock on the New York Stock Exchange on the date of grant. The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. For fiscal years 2022, 2021 and 2020 grants, expected volatility represents a blended rate of 10-year weekly historical overall volatility rate, and a 5-week average implied volatility rate based on at-the-money traded Parent options w ith a life of 2 years. For all grants, the Parent’s historical data is used to determine the expected life of the option. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant. The average fair value of options granted was $23.23, $20.86 and $16.42, in fiscal years 2022, 2021 and 2020, respectively. The fair value was estimated based on the weighted average assumptions of: 2022 2021 2020 Risk-free rate 2.0 % 0.8 % 1.5 % Expected volatility 18.0 % 18.6 % 15.3 % Expected life (in years) 7 7 7 Expected dividend yield 2.7 % 2.5 % 2.6 % A summary of option activity under the Plans as of January 1, 2023, and changes during the year is presented below: Aggregate Intrinsic Value (Shares in Thousands) Outstanding Shares Weighted Average Exercise Price (Dollars in Millions) Shares at January 2, 2022 8,657 132.58 $ 333 Options granted 1,783 165.89 Options exercised (1,018) 112.53 Options canceled/forfeited/adjusted (1) (1,201) 114.19 Shares at January 1, 2023 8,221 $ 144.03 $ 268 Options vested and expected to vest at January 1, 2023 8,017 $ 143.55 $ 265 __________________ (1) Includes employee transfers in and out. The total intrinsic value of options exercised was $64 million, $56 million and $50 million in fiscal years 2022, 2021 and 2020, respectively. The weighted-average remaining contractual term of options vested and expected to vest was 6.6 years at January 1, 2023. The following table summarizes stock options outstanding and exercisable at January 1, 2023: (Shares in Thousands) Outstanding Exercisable Exercise Price Range Options Average Life (1) Weighted Average Exercise Price Options Weighted Average Exercise Price $72.54-$100.48 475 1.6 $ 94.95 476 $ 94.95 $101.87-$115.67 1,062 3.7 109.51 1,062 109.51 $129.51-$141.06 1,766 5.7 130.94 1,753 130.93 $151.41-$164.62 3,139 7.6 158.11 — — $164.63-$165.89 1,779 7.6 165.89 — — 8,221 6.7 $ 144.03 3,291 $ 118.83 __________________ (1) Average contractual life remaining in years Stock options outstanding at January 1, 2023 and January 2, 2022 were 8,221 and an average life of 6.7 years, and 8,657 and an average life of 6.4 years, respectively. Stock options exercisable at January 1, 2023 and January 2, 2022 were 3,291 at an average exercise price of $118.83 and 3,693 at an average exercise price of $109.21, respectively. Restricted Share Units and Performance Share Units The Parent granted restricted share units which vest over service periods that range from 6 months to 3 years. The Parent also granted performance share units, which are paid in shares of Parent common stock after the end of a three-year performance period. Whether any performance share units vest, and the amount that does vest, is tied to the completion of service periods that range from 6 months to 3 years and the achievement, over a three-year period, of three equally-weighted goals that directly align with or help the Parent drive long-term total shareholder return: operational sales, adjusted operational earnings per share, and relative total shareholder return. Beginning in fiscal year 2020, performance shares were granted with two equally-weighted goals that directly align with or help drive Parent’s long-term total shareholder return: adjusted operational earnings per share and relative total shareholder return. The number of shares actually earned at the end of the three-year period will vary, based only on actual performance, from 0% to 200% of the target number of performance share units granted. A summary of the unvested restricted share units and performance share units activity under the Plans as of January 1, 2023 is presented below: (Shares in Thousands) Outstanding Restricted Share Units Outstanding Performance Share Units Shares at January 2, 2022 1,206 198 Granted 475 85 Issued (364) (28) Canceled/forfeited/adjusted (1) (87) (34) Shares at January 1, 2023 1,230 221 __________________ (1) Includes employee transfers in and out. The weighted average grant date fair value of the restricted share units granted was $153.69, $152.73 and $139.88 in fiscal years 2022, 2021 and 2020, respectively, using the fair market value at the date of grant. The fair value of restricted share units was discounted for dividends, which are not paid on the restricted share units during the vesting period. The aggregate fair value of restricted share units issued was $44 million, $45 million and $43 million in 2022, 2021 and 2020, respectively. The weighted average per unit grant date fair value of the performance share units granted was $178.45, $187.50 and $177.16 in fiscal years 2022, 2021 and 2020, calculated using the weighted average grant date fair market value for each of the component goals at the date of grant. The fair value for the relative total shareholder return goal of each performance share unit was estimated on the date of grant using a Monte Carlo valuation model. The aggregate fair value of performance share units issued was $4 million, $5 million and $4 million in fiscal years 2022, 2021 and 2020, respectively. For fiscal years 2022, 2021 and 2020, the total remaining unrecognized compensation cost for stock options, RSUs, and PSUs was $105 million, $90 million and $75 million, respectively. The weighted-average remaining requisite service period is approximately 1.79 years, 1.76 years and 1.74 years for fiscal years 2022, 2021 and 2020, respectively. The Parent’s 2012 Long-Term Incentive Plan (the “J&J 2012 Plan”) expired on April 26, 2022. Prior to that expiration, on March 7, 2022, the Parent’s Board of Directors approved the 2022 Long-Term Incentive Plan (the “J&J 2022 Plan”, together with the J&J 2012 Plan, the “J&J Plans”). The J&J Plans provide the grant of non-qualified stock options, incentive stock options, stock appreciation rights, Restricted Stock Units (“RSUs”), performance shares, Performance Stock Units (“PSUs”), other stock-based awards, and cash awards to employees and directors including the Company’s personnel. Stock-based compensation granted pursuant to the J&J Plans are based on the Parent’s common stock. The J&J 2022 Plan became effective in April 2022. All options and restricted shares granted subsequent to that date were under this plan. As of July 2, 2023, there are shares outstanding for contracts under each of the J&J Plans. In March 2023, the Company’s Board of Directors approved the 2023 Long-Term Incentive Plan (the “Kenvue 2023 Plan”) providing for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, RSUs, performance shares, PSUs, other stock-based awards, and cash awards to eligible employees, non-employee directors, independent contractors, and consultants of the Company and its subsidiaries and affiliated entities. Stock-based compensation granted pursuant to the 2023 Plan is based on our common stock. The Kenvue 2023 Plan was approved by the Parent, as sole stockholder of the Company, prior to the Kenvue IPO and became effective in May 2023 and no awards have been granted under this plan. The maximum aggregate number of shares of Common Stock that may be issued under the Plan is 188,897,256. The components and classification of stock-based compensation expense related to stock options, RSUs, and PSUs directly attributable to those employees specifically identified as employees of the Company and allocations from the Parent for the fiscal three and six months ended July 2, 2023 and July 3, 2022, were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cost of sales $ 12 $ 10 $ 16 $ 18 Selling, general, and administrative expenses 26 31 57 58 Stock-based compensation expense $ 38 $ 41 $ 73 $ 76 |
Related Parties_2
Related Parties | 6 Months Ended |
Jul. 02, 2023 | |
Related Party Transactions [Abstract] | |
Related Parties | Related Parties The Company has not historically operated as a standalone business and the Combined Financial Statements are derived from the consolidated financial statements and accounting records of the Parent. The following disclosure summarizes activity between the Company and Parent. Cost Allocations from Parent Parent provides significant support functions to the Company. The Combined Financial Statements reflect an allocation of these costs. Similarly, certain of the Company’s operations provide support to the Parent’s affiliates and related costs for support are charged to the Parent’s affiliates. Allocated costs included in Cost of sales relate to enterprise-wide support primarily consisting of facilities, insurance, logistics, quality and compliance which are predominantly allocated based on net sales. Allocated costs included in Selling, general, and administrative expenses primarily relate to finance, human resources, benefits administration, procurement support, information technology, legal, corporate strategy, corporate governance, other professional services and general commercial support functions and are predominantly allocated based on net sales or headcount. See Note 1 for a discussion of these costs and the methodology used to allocate them. These allocations (excluding stock-based compensation expense), net of costs charged to the Parent’s affiliates are reflected in the Combined Statements of Operations as follows: (Dollars in Millions) 2022 2021 2020 Cost of sales $ 149 $ 182 $ 166 Selling, general, and administrative expenses 679 649 652 Total $ 828 $ 831 $ 818 Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented. The allocations may not, however, be indicative of the actual expenses that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone public company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company’s employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology and infrastructure. Net Transfers (to) from the Parent Net transfers (to) from the Parent are included within Net Investment from Parent in the Combined Balance Sheets and Combined Statement of Equity and within financing activities in the Combined Statement of Cash Flows and represent the net effect of transactions between the Company and Parent. The components of Net transfers from (to) the Parent are as follows: (Dollars in Millions) 2022 2021 2020 Cash pooling and general financing activities $ (2,568) $ (832) $ (4,414) Corporate cost allocations 828 831 818 Taxes deemed settled with the Parent 78 44 151 Allocated derivative and hedging gain (losses) 65 (36) (1) Net transfers (to) from the Parent as reflected in the Combined Statements of Cash Flows (1,597) 7 (3,446) Stock-based compensation expense 137 141 115 Talc liability transferred to Parent, net of related deferred taxes ($0, $251, $0) — 765 — Pension liabilities transferred from the Parent (25) — — Net transfers (to) from the Parent as reflected in the Combined Statements of Equity $ (1,485) $ 913 $ (3,331) During the fiscal year 2022, transfers between the Company and the Parent were recognized in Net transfers from (to) the Parent in the Combined Statement of Equity at the Parent’s historical cost and consisted primarily of $25 million of pension liabilities related to the Consumer Health Business from the Parent. See Note 6. Cost Allocations from Parent Prior to Kenvue IPO Prior to the Kenvue IPO, the Parent provided significant support functions to the Company. The Condensed Consolidated Financial Statements reflect an allocation of these costs. Similarly, certain of the Company’s operations provided support to the Parent’s affiliates and related costs for support are charged to the Parent’s affiliates. Allocated costs included in Cost of sales on the Company’s Condensed Consolidated Statements of Operations relate to enterprise-wide support primarily consisting of facilities, insurance, logistics, quality, and compliance which are predominantly allocated based on Net sales. Allocated costs included in Selling, general, and administrative expenses primarily relate to finance, human resources, benefits administration, procurement support, information technology, legal, corporate strategy, corporate governance, other professional services, and general commercial support functions and are predominantly allocated based on Net sales or headcount. See Note 1, “Description of the Company and Summary of Significant Accounting Policies,” for a discussion of these costs and the methodology used to allocate them. These allocations (excluding stock-based compensation expense), net of costs charged to the Parent’s affiliates reflected on the Company’s Condensed Consolidated Statements of Operations for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cost of sales $ 16 $ 40 $ 25 $ 76 Selling, general, and administrative expenses 33 173 120 330 Total $ 49 $ 213 $ 145 $ 406 Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented. The allocations may not, however, be indicative of the actual expenses that would have been incurred had the Company operated as a standalone public company. Actual costs that may have been incurred if the Company had been a standalone public company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company’s employees, and strategic decisions made in areas such as manufacturing, selling and marketing, research and development, information technology, and infrastructure. As of January 2, 2023, the Company began operating independently and received a lower degree of support functions from the Parent during the current period and therefore the allocations decreased significantly from the comparable period. Net Transfers (to) from the Parent Net transfers (to) from the Parent are included within Net investment from Parent on the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Equity and within financing activities on the Condensed Consolidated Statements of Cash Flows and represent the net effect of transactions between the Company and Parent. The components of Net transfers (to) from the Parent for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cash pooling and general financing activities $ (37) $ (916) $ (446) $ (1,324) Corporate cost allocations 49 213 145 406 Taxes deemed settled with the Parent — 1 27 1 Allocated derivative and hedging gains — 26 — 25 Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Cash Flows $ 12 $ (676) $ (274) $ (892) Stock-based compensation expense (1) — 41 — 76 Other (2) — (34) — Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Equity $ 10 $ (635) $ (308) $ (816) __________________ (1) Stock-based compensation expense is separately shown within the Condensed Consolidated Statement of Equity in fiscal year 2023, and therefore no longer a reconciling item between the Condensed Consolidated Statement of Equity and the Condensed Consolidated Statement of Cash Flows. Separation Agreement and Other Related Party Transactions with J&J In connection with the Separation, Kenvue entered into various agreements with the Parent, including the Separation Agreement. In connection with the terms of the Separation Agreement, certain assets and liabilities included in the pre-Separation balance sheet were retained by the Parent and certain assets and liabilities not included in the pre-Separation balance sheet were transferred to Kenvue. Separation related adjustments have been recognized in Net investment from Parent, net impact of which resulted in an increase in net assets and total equity by $95 million. The impact on net assets primarily represent (i) recognition of balances with J&J including indemnification matters, (ii) changes to income tax assets and liabilities as a result of change in the basis of presentation, (iii) contribution of certain liabilities including pension and employee related obligations from the Parent, (iv) the retention of assets and liabilities by J&J of certain Deferred Local Businesses (as defined in Note 1, “Description of the Company and Summary of Significant Accounting Policies”), and (v) other assets and liability transfers between Kenvue and J&J in connection with the Separation. The Separation Agreement sets forth certain agreements between the Parent and Kenvue regarding, among other matters: • the principal corporate actions and internal reorganization pursuant to which the Parent transferred the Consumer Health Business to Kenvue; • the allocation of assets and liabilities to the Parent and Kenvue; • the Parent’s and Kenvue’s respective rights and obligations with respect to the Kenvue IPO; • certain matters with respect to any subsequent distribution or other disposition by the Parent of the shares of Kenvue Common Stock owned by the Parent following the Kenvue IPO (the “Distribution”); and • other agreements governing aspects of Kenvue’s relationship with the Parent following the Kenvue IPO. In connection with the Kenvue IPO, the Parent and Kenvue also entered into various other material agreements. These agreements were entered into on May 3, 2023, unless otherwise indicated, and consist of the following: • a tax matters agreement (the “Tax Matters Agreement”), which governs the Parent’s and Kenvue’s respective rights, responsibilities and obligations with respect to all tax matters, including tax liabilities, tax attributes, tax contests, and tax returns (See “Tax Indemnification” below); • an employee matters agreement, which addresses certain employment, compensation, and benefits matters, including the allocation and treatment of certain assets and liabilities relating to Kenvue’s employees and compensation and benefit plans and programs in which Kenvue’s employees participate prior to the date of the Distribution, if pursued; • an intellectual property agreement, which governs the Parent’s and Kenvue’s respective rights, responsibilities and obligations with respect to intellectual property matters, excluding certain intellectual property matters with respect to trademarks; • a trademark phase-out license agreement, dated as of April 3, 2023, and pursuant to which the Parent granted to Kenvue a license to use certain trademarks owned by the Parent on a transitional basis following the completion of the Kenvue IPO; • a transition services agreement (the “Transition Services Agreement”), pursuant to which the Parent will provide to Kenvue certain services for terms of varying duration following the Kenvue IPO; • a transition manufacturing agreement (the “Transition Manufacturing Agreement”), pursuant to which the Parent will provide to Kenvue certain manufacturing services for terms of varying duration following the Kenvue IPO; and • a registration rights agreement, pursuant to which Kenvue granted to the Parent certain registration rights with respect to the shares of Kenvue common stock owned by the Parent following the completion of the Kenvue IPO. In connection with the Kenvue IPO, the Parent and Kenvue also entered into various related party lease agreements, in which the Company subleased properties from the Parent. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Leases” for more information. Related Party Transactions The Company had the following balances and transactions with J&J and its affiliates, primarily in connection with the Tax Matters Agreement, Transition Services Agreement and the Transition Manufacturing Agreement, reported on the Company’s Condensed Consolidated Financial Statements: (Dollars in Millions) July 2, 2023 Accounts payable $ 537 Prepaid expenses and other receivables $ 346 Other assets $ 94 Other liabilities $ 193 Fiscal Three Months Ended (Dollars in Millions) July 2, 2023 Cost of sales $ 39 Selling, general, and administrative expenses $ 47 Tax Indemnification We entered into a Tax Matters Agreement with J&J on May 3, 2023 that governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and other matters regarding taxes. Allocation of Taxes With respect to taxes other than those incurred in connection with the Separation and the Distribution, the Tax Matters Agreement provides that Kenvue will generally indemnify J&J for (1) any taxes of Kenvue for all periods after the Distribution and (2) any taxes of Kenvue or J&J for periods prior to the Distribution to the extent attributable to the Consumer Health Business. J&J will generally indemnify Kenvue for (1) any taxes of J&J for all periods after the Distribution and (2) any taxes of Kenvue or J&J for periods prior to the Distribution to the extent attributable to the business and operations conducted by J&J other than the Consumer Health Business. Furthermore, subject to certain exceptions, the Company is required to reimburse J&J for certain tax refunds it receives with respect to taxes paid prior to the effective date of the Tax Matters Agreement. Preservation of the Intended Tax Treatment of Certain Steps of the Separation and the Distribution With respect to taxes incurred in connection with the Separation and the Distribution, Kenvue will generally be required to indemnify J&J for any taxes resulting from the failure of certain steps of the Separation and the Distribution to qualify for their intended tax treatment, where such taxes are attributable to actions or omissions by Kenvue. In addition, during the time period ending two years after the date of the Distribution, covenants will be in place that will limit or restrict certain actions, including share issuances, business combinations, sales of assets, and similar transactions by Kenvue. The Company does not believe that the above covenants have a material impact to the Company to date. The Company reclassified approximately $246 million of net income tax payables and refunds, unrecognized tax benefits and associated interest as indemnifications reported to Prepaid expenses and other receivables and Accounts payable for current assets and liabilities and Other assets and Other liabilities for noncurrent assets and liabilities within the Company’s Parent on the Condensed Consolidated Balance Sheet as of July 2, 2023. Debt Financing Transactions and IPO Consideration During the fiscal six months ended July 2, 2023, the Company received debt proceeds of $7.7 billion from the issuance of the Senior Notes, earned $13 million of interest on the proceeds of these bonds from investments in money market accounts, and received initial proceeds from its Commercial Paper Program of $1.2 billion. The Company loaned the total proceeds to J&J through the Facility Agreement. Upon the completion of the Kenvue IPO on May 8, 2023, the balance of the loans and all accrued interest were repaid by J&J for a total cash inflow of $9.0 billion. The Company remitted this cash back to J&J as a distribution back to J&J in connection with the Separation. |
Other Operating Expense (Income
Other Operating Expense (Income), Net and Other Expense (Income), Net | 6 Months Ended |
Jul. 02, 2023 | |
Other Income and Expenses [Abstract] | |
Other Operating Expense (Income), Net and Other Expense (Income), Net | Other (income) expense, net, operating and Other expense (income), net Other (income) expense, net, operating consisted of: (Dollars in Millions) 2022 2021 2020 Litigation (income) expense (1) $ (7) $ 92 $ 3,967 Royalty income (2) (39) (89) (100) Other (3) 23 12 4 Total Other (income) expense, net, operating $ (23) $ 15 $ 3,871 __________________ (1) Litigation expense includes $154 million and 4,029 million of Talc-Related costs for the fiscal year 2021 and 2020, respectively, as well as $74 million of beneficial settlements for Brazil VAT legal resolution for fiscal year 2021. (2) In connection with the Old JJCI corporate restructuring starting in October 2021, rights of Old JJCI and its affiliates to receive four streams of royalties payable from certain third parties were transferred to Royalty A&M LLC, an indirect wholly owned subsidiary of the Parent. (3) Other consists primarily of (gains) losses on asset disposals, certain restructuring expenses (Note 16), intangible impairment (Note 4), and miscellaneous (income) expenses. Other expense (income), net consisted of: (Dollars in Millions) 2022 2021 2020 Currency losses on transactions $ 42 $ 20 $ 40 Other (1) (4) (25) (3) Total Other expense (income), net $ 38 $ (5) $ 37 __________________ (1) Other consists primarily of business disposals, gains and losses on investments, other than service cost components of net periodic benefit costs, and miscellaneous non-operating (income) expenses. Other operating expense (income), net for the fiscal three and six months ended July 2, 2023 and July 3, 2022 consisted of: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Litigation expense $ 21 $ 7 20 $ 7 Royalty income (1) (13) (8) (20) (Gain)/loss on disposal of fixed assets — — (9) 2 Net economic benefits from deferred markets (1) 24 — 24 — Contingent liability reversal (2) (43) — (43) — Other — 19 — 19 Total Other operating expense (income), net $ 1 $ 13 $ (16) $ 8 __________________ (1) Includes income taxes and service fees to be paid to J&J under the net economic benefit arrangements. (2) Includes the reversal of a contingent liability that was no longer considered to be probable. Other expense (income), net for the fiscal three and six months ended July 2, 2023 and July 3, 2022 consisted of: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Currency (gains)/losses on transactions $ 12 $ 5 $ 28 $ (2) Other (1) (2) (10) 12 (4) Total Other expense (income), net $ 10 $ (5) $ 40 $ (6) __________________ (1) Other consists primarily of gains and losses on investments, other than service cost components of net periodic benefit costs, and miscellaneous non-operating (income) expenses. |
Income Taxes_2
Income Taxes | 6 Months Ended |
Jul. 02, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes During the periods presented in the Combined Financial Statements, the Company operated as part of the Parent and did not file income tax returns on a standalone basis in all jurisdictions in which it operates. However, for the purposes of the Combined Financial Statements, the income taxes and related income tax accounts have been calculated using the separate return method as if the Company filed income tax returns on a standalone basis. In the future, as a standalone company, the income taxes and related income tax accounts of the Company may differ from those presented in the Combined Financial Statements. The provision for taxes on income consists of: (Dollars in Millions) 2022 2021 2020 Currently payable: U.S. taxes $ 75 $ 8 $ 308 International taxes 318 318 356 Total current taxes 393 326 664 Deferred: U.S. taxes 205 627 (741) International taxes (48) (59) (60) Total deferred 157 568 (801) Provision (benefit) for taxes on income $ 550 $ 894 $ (137) A comparison of income tax expense at the U.S. statutory rate of 21% in fiscal years 2022, 2021 and 2020, to the Company’s effective tax rate is as follows: (Dollars in Millions) 2022 2021 2020 U.S. $ 1,238 $ 1,367 $ (2,614) International 1,399 1,558 1,598 Earnings before taxes on income: $ 2,637 $ 2,925 $ (1,016) Tax rates: U.S. statutory rate 21.0 % 21.0 % 21.0 % U.S. taxes on international income (1) (3.8) 9.5 (3.8) International operations (2) (1.6) (2.1) (14.0) State 3.1 1.7 10.2 Change in valuation allowance 2.2 1.4 (2.7) Tax benefits on share-based compensation (0.2) (0.3) 1.0 All other 0.1 (0.6) 1.8 Effective Rate 20.8 % 30.6 % 13.5 % _________________ (1) Includes the impact of the tax on GILTI and other foreign income that is taxable under the U.S. tax code. (2) For all periods presented the Company has subsidiaries operating in Singapore under various tax incentives. International operations reflect the impacts of operations in jurisdictions with statutory tax rates different than the U.S. The Company’s largest international operations are in Canada, Japan, Singapore and Switzerland. The effective tax rate for the fiscal year 2022 is 20.8% and is lower than the U.S. corporate tax rate primarily due to the following: • U.S. incremental taxes on foreign earnings. Talc settlement payments gave rise to an overall domestic loss in the U.S. in fiscal year 2021 preventing the Company from claiming a Section 250 deduction and utilizing U.S. foreign tax credits against the Company’s U.S. tax on foreign earnings. The overall domestic loss is being recaptured in the U.S. in fiscal year 2022 allowing the Company to claim additional U.S. foreign tax credits against the Company’s U.S. tax on foreign earnings. The additional U.S. foreign tax credit benefit is reflected in U.S. taxes on international income within the rate reconciliation. The effective tax rate for the fiscal year 2021 is 30.6% and is higher than the U.S. corporate tax rate primarily due to the following: • U.S. incremental taxes on foreign earnings. As a result of Talc settlement payments, there is a taxable loss in the U.S. preventing the Company from claiming a Section 250 deduction and utilizing U.S. foreign tax credits against the Company’s U.S. tax on foreign earnings. The incremental U.S. tax on foreign earnings is reflected in U.S. taxes on international income within the rate reconciliation. The effective tax rate for the fiscal year 2020 is 13.5% and is lower than the U.S. corporate tax rate applied to the pre-tax loss in 2020 primarily due to the following: • An increase in unrecognized tax benefits of $166 million due to the final settlement of the 2010 – 2012 IRS audit. This reduced the effective tax rate benefit on the pre-tax loss by approximately 16.3% and is included in “International Operations” in the Company’s effective tax rate reconciliation. • An increase in the valuation allowance due to additional U.S. foreign tax credits generated that were not utilized. This reduced the effective tax rate benefit on the pre-tax loss by approximately 4.7%. • These effects are partially offset by the larger benefit of state taxes on the U.S. pre-tax loss as a proportion of the consolidated pre-tax loss. Temporary differences and carryforwards at the end of fiscal years 2022 and 2021 were as follows: 2022 2021 (Dollars in Millions) Asset Liability Asset Liability Employee related obligations $ 20 $ — $ 56 $ — Stock based compensation 75 — 68 — Depreciation of property, plant and equipment — (38) — (41) Goodwill and intangibles — (2,652) — (2,689) Reserves & liabilities 120 — 93 — Net operating loss and tax credit carryforward 261 — 521 — Undistributed foreign earnings 99 (89) 52 (82) Global intangible low-taxed income 51 — — (92) Miscellaneous international 28 — 46 — R&D Capitalized for tax 55 — — — Miscellaneous U.S. 39 — 13 — Subtotal 748 (2,779) 849 (2,904) Valuation allowance (250) — (186) — Total deferred income taxes $ 498 $ (2,779) $ 663 $ (2,904) The Company has wholly-owned international subsidiaries that have cumulative net losses. The Company believes that it is more likely than not that these subsidiaries will generate future taxable income sufficient to utilize these deferred tax assets. However, in certain jurisdictions, valuation allowances have been recorded against deferred tax assets for loss carryforwards that are not more likely than not to be realized. The Company has recognized $110 million and $365 million of deferred tax assets related to U.S. and foreign net operating loss (“NOL”) carryforwards and $151 million and $156 million of deferred tax assets related to foreign, U.S. federal and state credit carryforwards as January 1, 2023 and January 2, 2022 respectively. Federal and foreign NOLs generally do not expire, state NOLs generally expire between 2028 and 2041 and tax credit carryforwards generally expire between 2030 and 2032. The Company assessed net operating losses, credit carryforwards and other deferred tax assets for realizability and, based upon available evidence, recorded valuation allowances against deferred tax assets that are not more likely than not to be realized. As of fiscal years 2022, 2021, and 2020, valuation allowances of $250 million, $186 million, and $144 million have been recorded against certain net operating losses and foreign tax credit carryforwards respectively. The Company recognized a net change in valuation allowance of $64 million, $42 million, and $20 million in fiscal years 2022, 2021 and 2020 respectively. The net change in valuation allowance is primarily attributable to NOLs and tax attributes in Brazil, Puerto Rico, and U.S. Federal, state, and local jurisdictions. The Company has recorded deferred tax liabilities on all undistributed earnings prior to December 31, 2017 and certain undistributed earnings arising after December 31, 2017 from its international subsidiaries. For all other undistributed earnings from our subsidiaries organized outside the United States, the Company has not recorded deferred taxes where the earnings are considered to be indefinitely reinvested. The Company intends to continue to reinvest these earnings in those international operations. If the Company decides at a later date to repatriate these earnings to the United States, the Company would be required to provide for the net tax effects on these amounts. The Company estimates that the tax effect of this repatriation would be approximately $114 million under currently enacted tax laws and regulations and at current currency exchange rates. This amount does not include the possible benefit of U.S. foreign tax credits, which may substantially offset this cost. The following table summarizes the activity related to unrecognized tax benefits: (Dollars in Millions) 2022 2021 2020 Beginning of year $ 469 $ 519 $ 465 Increases related to current year tax positions 32 31 40 (Dollars in Millions) 2022 2021 2020 Increases related to prior period tax positions 7 2 270 Decreases related to prior period tax positions (49) (40) (87) Settlements (5) (15) (136) Lapse of statute of limitations (17) (28) (33) End of year $ 437 $ 469 $ 519 The unrecognized tax benefits of $437 million at January 1, 2023, if recognized, would affect the Company’s annual effective tax rate. The Company conducts business and files tax returns in numerous countries and currently has tax audits in progress with a number of tax authorities. With respect to the United States, the IRS has completed its audit for the tax years through 2012 and is currently auditing tax years 2013 through 2016. In the fiscal year 2020, the Parent made its final tax payments, which included approximately $165 million related to the final settlement of 2010-2012 tax audit liability attributable to the Company. In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go back to the year 2008. The Company believes it is possible that tax audits may be completed over the next twelve months by taxing authorities in some jurisdictions outside of the United States. However, the Company is not able to provide a reasonably reliable estimate of the timing of any future tax payments or the amount of possible changes to the total unrecognized tax benefits associated with any audit closures or other events. The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities which is included in other liabilities on the Combined Balance Sheets. Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense. The Company recognized after tax interest expense of $13 million, $16 million and $46 million in fiscal years 2022, 2021 and 2020, respectively. The total amount of accrued interest was $147 million and $134 million in fiscal years 2022 and 2021, respectively. For interim financial statement purposes, U.S. GAAP income tax expense/benefit related to ordinary income is determined by applying an estimated annual effective income tax rate against a company’s ordinary income, subject to certain limitations on the benefit of losses. Income tax expense/benefit related to items not characterized as ordinary income is recognized as a discrete item when incurred. The estimation of the Company’s income tax provision requires the use of management forecasts and other estimates, application of statutory income tax rates, and an evaluation of valuation allowances. The Company’s estimated annual effective income tax rate may be revised, if necessary, in each interim period. During the periods presented in the Condensed Consolidated Financial Statements, the Company operated as part of the Parent and did not file income tax returns on a standalone basis in all jurisdictions in which it operates. However, for the purposes of the Condensed Consolidated Financial Statements, the income taxes and related income tax accounts have been calculated using the separate return method as if the Company filed income tax returns on a standalone basis. Prior to the Kenvue IPO, the Company’s operations were calculated on a carve-out basis and included certain hypothetical foreign tax credit benefits. Post-Kenvue IPO, these hypothetical foreign tax credit benefits are not available for future utilization by the Company and were removed from the tax provision during the fiscal three months ended July 2, 2023. In the future, as a standalone company, the income taxes and related income tax accounts of the Company may differ from those presented in the Condensed Consolidated Financial Statements. The worldwide effective income tax rates for the fiscal three months ended July 2, 2023 and July 3, 2022 were 32.7% and 22.1%, respectively, and for the fiscal six months ended July 2, 2023 and July 3, 2022 were 39.1% and 18.4%, respectively. The increase for the fiscal three months ended July 2, 2023 as compared to the fiscal three months ended July 3, 2022 was primarily the result of higher U.S. taxes on foreign income and reduced benefits for foreign tax credits. With the issuance of debt in the first quarter of 2023, the resulting increase in annual interest reduced the Company’s capacity to utilize foreign tax credits against U.S. foreign source income. As a result, the Company recorded a $188 million valuation allowance against a deferred tax asset related to future foreign tax credit benefits thus increasing the reported rate for the fiscal six months ended July 2, 2023 as compared to the fiscal six months ended July 3, 2022. This was partially offset by additional discrete tax benefits. The effective income tax rate for the fiscal six months ended July 3, 2022 was lower due to the recognition of discrete foreign tax credit benefits. As of July 2, 2023, the Company had approximately $235 million of liabilities from unrecognized tax benefits. The Company conducts business and will file tax returns in numerous countries. The Parent currently has tax audits in progress in several jurisdictions. With respect to the United States, the IRS is currently conducting the 2013-2016 IRS Audit of the Parent. The Parent currently expects completion of this audit and settlement of the related tax liabilities in the next 12 months. Per the Tax Matters Agreement between the Parent and the Company, the Parent remains liable for all liability related to the final settlement of this audit and any U.S. federal income tax audits in which the Company is part of the Parent’s federal consolidated tax return. During fiscal three months ended July 2, 2023, the Parent made a payment to the U.S. Treasury for the estimated liability related to the 2013-2016 IRS Audit, which included $200 million related to the Consumer Health Business. In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go back to the year 2008. The Company believes it is possible that tax audits may be completed over the next 12 months by taxing authorities in some jurisdictions outside of the United States. However, the Company is not able to provide a reasonably reliable estimate of the timing of any future tax payments or the amount of possible changes to the total unrecognized tax benefits associated with any audit closures or other events. The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities on the Condensed Consolidated Balance Sheets. Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense on the Company’s Condensed Consolidated Statements of Operations. As part of the transition from Condensed Combined Financial Statements to Condensed Consolidated Financial Statements, the Company reclassified $221 million of unrecognized tax benefits related to indemnifications with the Parent to Accounts payable and Other liabilities within the Company’s Condensed Consolidated Financial Statements. On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 (“IRA”), which, among other things, introduces a 15% corporate alternative minimum tax based on adjusted financial statement income of certain large corporations with a three-year average adjusted financial statement income in excess of $1.0 billion, an excise tax on corporate stock buybacks, and several tax incentives to promote clean energy. Based on the Company’s preliminary analysis, the IRA is not expected to have a material impact on the Company’s Condensed Consolidated Financial Statements. The Company will continue to evaluate the impact of this law as additional guidance and clarification becomes available. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jul. 02, 2023 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per SharePrior to the completion of the Kenvue IPO, the Company had 1,716,160,000 of common stock authorized, of which 1,716,159,990 shares were issued to Johnson & Johnson through a subscription agreement in May 2023. On May 8, 2023, the Kenvue IPO was completed through the sale of 198,734,444 shares of common stock including the underwriters’ full exercise of their option to purchase 25,921,884 shares to cover over-allotments. As of July 2, 2023, the Company had 1,914,894,444 shares of common stock issued and outstanding. For the purposes of the Company’s earnings per share calculations, the shares issued through the subscription agreement are being treated akin to shares attributable to a stock split and, as a result, are being retrospectively presented for all of the periods. For all periods presented, there were no dilutive equity instruments or equity awards of the Company outstanding. Net income per share for the fiscal three and six months ended July 2, 2023 and July 3, 2022 was calculated as follows: Fiscal Three Months Ended Fiscal Six Months Ended (In Millions, Except Per Share Data) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Net income $ 430 $ 604 $ 760 $ 1,132 Basic and diluted weighted-average common stock 1,838 1,716 1,777 1,716 Basic and diluted net income per share $ 0.23 $ 0.35 $ 0.43 $ 0.66 |
Fair Value Measurements_2
Fair Value Measurements | 6 Months Ended |
Jul. 02, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 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 outputs • Level 3 – Significant unobservable outputs If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis: 2022 2021 (Dollars in Millions) Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3 Cash and cash equivalents: Time deposits $ — — — — $ 32 — 32 — Derivatives designated as cash flow hedges: Assets: Forward foreign exchange contracts 39 — 39 — — — — — Interest rate swaps 29 — 29 — — — — — Total $ 68 $ — $ 68 $ — $ — $ — $ — $ — Liabilities: Forward foreign exchange contracts (15) — (15) — — — — — Interest rate swaps (39) — (39) — — — — — Total $ (54) $ — $ (54) $ — $ — $ — $ — $ — Net amount presented in Prepaid expenses and other receivables: $ 14 $ — 14 $ — $ — $ — $ — $ — The carrying amount of Cash and cash equivalents, trade receivable, Prepaid expenses and other receivables, and loans and notes payable approximated fair value as of January 1, 2023 and January 2, 2022. The fair value of forward foreign exchange contracts is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. Dollar at the current spot foreign exchange rate. The interest rate swaps are recorded at fair value that is derived from observable market data, including yield curves. All derivative instruments are classified as level 2 securities. The Company does not believe that fair values of these derivative instruments materially differ from the amounts that could be realized upon settlement or maturity, or that the changes in fair value will have a material effect on the Company’s results of operations, cash flows or financial position. There were no transfers between Level 1, Level 2 or Level 3 during the fiscal years ended January 1, 2023 and January 2, 2022. In certain jurisdictions, the Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows which are designated as cash flow hedges with changes in the fair value recorded in Accumulated other comprehensive loss. To protect gross margins from fluctuations in foreign currency exchange rates, the Parent on behalf of its affiliates enter into forward foreign currency exchange contracts on behalf of the Company to hedge a portion of forecasted foreign currency assets and forecasted liabilities. Changes in the fair value of derivatives are recorded each period in earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction. The contracts that have been designated in hedging relationships are designated as cash flow hedges on the date of contract inception, in accordance with the appropriate accounting guidance. The terms of these contracts are generally 12 months to 18 months. At inception, all designated hedging relationships are expected to be highly effective. Foreign exchange contracts designated as cash flow hedges are accounted for under the forward method and all gains/losses associated with these contracts are recorded in other comprehensive income. The Company recognizes its portion of the net allocated gains and losses when the amounts are reclassified to income, which is at the time the inventory is sold to the customer. The gains and losses relating to these contracts have been allocated to the Company based on the amount of forecasted purchases and included in Net sales or Cost of sales. The Parent on behalf of its affiliates also enters into forward currency exchange contracts to offset the foreign currency exposure related to the settlement of intercompany payables and receivables of the Company. The net allocated gains and losses related to these contracts are recognized within Other expense (income), net. During 2022 and in anticipation of the Company operating as a standalone entity, it has started entering into forward foreign currency exchange contracts to hedge a portion of forecasted foreign currency assets and forecasted liabilities. 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. In the fourth quarter of 2022, the Company entered into forward starting interest rate swaps in contemplation of securing long-term financing for the Separation or for other long-term financing purposes in the event the Separation does 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 expects to issue in 2023. Changes in the fair value of the forward interest swaps are currently recorded in Accumulated other comprehensive loss and will be reclassified into Other expense (income), net when the hedged interest payments affect earnings. The fair value of the Company’s foreign currency exchange contracts and interest rate swaps as of January 1, 2023, are included in Prepaid expenses and other receivables within the Combined Balance Sheets. As of January 1, 2023, the balance of deferred net gain on derivatives included in accumulated other comprehensive income was $10 million after-tax. The following table sets forth the notional amounts of the Company’s outstanding derivative instruments: January 1, 2023 Forward foreign exchange contracts Interest rate swaps Total Cash Flow Hedges $ 1,768 $ 2,400 $ 4,168 On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. If and when a derivative is no longer expected to be highly effective, hedge accounting is discontinued. Cash flows from derivatives designated in hedging relationships are reflected in the Combined Statement of Cash Flows consistent with the presentation of the hedged item. The following table is a summary of the activity related to derivatives and hedges for fiscal years 2022, 2021 and 2020, net of tax. 2022 2021 2020 Net Sales Cost of sales Other expense (income), net Net Sales Cost of sales Other expense (income), net Net Sales Cost of sales Other expense (income), net Gain (loss) on cash flow hedges $ 21 12 30 11 (23) (21) (2) (3) 10 Gain (loss) on forward currency exchange contracts not designated as hedges $ — — 33 — — (15) — — (34) Credit Risk The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material as it is the Company’s policy to contract with diverse, credit-worthy counterparties based upon both strong credit ratings and other credit considerations. Fair value measurements are estimated based on valuations techniques and inputs categorized as follows: • Level 1 – Quoted prices in active markets for identical assets or liabilities • Level 2 – Significant other observable inputs • Level 3 – Significant unobservable inputs If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis: July 2, 2023 January 1, 2023 (Dollars in Millions) Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3 Assets: Forward foreign exchange contracts $ 66 $ — $ 66 $ — $ 39 $ — $ 39 $ — Interest rate swaps — — — — 29 — 29 — Total 66 — 66 — 68 — 68 — Liabilities: Forward foreign exchange contracts $ (48) — (48) — (15) — (15) — Interest rate swaps — — — — (39) — (39) — Total (48) — (48) — (54) — (54) — Net amount presented in Prepaid expenses and other receivables: $ 18 $ — $ 18 $ — $ 14 $ — $ 14 $ — The carrying amount of Cash and cash equivalents, Trade receivables, Prepaid expenses and other receivables, and Loans and notes payable approximated fair value as of July 2, 2023 and January 1, 2023. The fair value of forward foreign exchange contracts is the aggregation by currency of all future cash flows discounted to its present value at the prevailing market interest rates and subsequently converted to the U.S. dollar at the current spot foreign exchange rate. The interest rate swaps are recorded at fair value that is derived from observable market data, including yield curves. All derivative instruments are classified as Level 2 securities. There were no transfers between Level 1, Level 2, or Level 3 during the fiscal three and six months ended July 2, 2023 and fiscal year ended January 1, 2023. The following table sets forth the notional amounts of the Company’s outstanding derivative instruments: July 2, 2023 January 1, 2023 (Dollars in Millions) Forward foreign exchange contracts Interest rate swaps Total Forward foreign exchange contracts Interest rate swaps Total Cash flow hedges $ 3,307 $ — $ 3,307 $ 1,768 $ 2,400 $ 4,168 Undesignated forward foreign exchange contracts $ 578 $ — $ 578 $ — $ — $ — Net investment hedges $ 10 $ — $ 10 $ — $ — $ — For the three and six months ended July 2, 2023, the Company recorded after-tax deferred net gain (loss) on derivatives of $(8) million and $31 million, respectively, in Accumulated other comprehensive loss. For the three and six months ended July 3, 2022, the Company recorded after-tax deferred net gain (loss) on derivatives of $1 million and $(3) million, respectively, in Accumulated other comprehensive loss. Forward Foreign Exchange Contracts In certain jurisdictions, the Company uses forward foreign exchange contracts to manage its exposures to the variability of foreign exchange rates. Changes in the fair value of derivatives are recorded each period in earnings or Other comprehensive income (loss), depending on whether the derivative is designated as part of a hedge transaction, and if so, the type of hedge transaction. Since 2022, the Company has entered into forward foreign exchange contracts to hedge a portion of forecasted cash flows denominated in foreign currency. The terms of these contracts are generally 12 months to 18 months. These contracts are designated as cash flow hedging relationships at the date of contract inception, in accordance with the appropriate accounting guidance. At inception, all designated hedging relationships are expected to be highly effective. These contracts are accounted for using the forward method and all gains/losses associated with these contracts are recorded in Other comprehensive income (loss). The Company reclassifies the gains and losses related to these contracts at the time the inventory is sold to the customer into Net sales or Cost of sales and Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations, as applicable. The following table is a summary of gains and losses on forward foreign exchange contracts designated as cash flow hedges within Other comprehensive income (loss) and amount reclassified into earnings: Fiscal Three Months Ended Fiscal Six Months Ended July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Gain (loss) recognized in Other comprehensive income (loss) $ (17) $ 1 $ — $ (2) Gain (loss) reclassified from Other comprehensive income (loss) to earnings $ (6) $ (1) $ 5 $ — The following tables are a summary of the reclassifications to Net Income related to the Company’s forward foreign exchange contracts for the fiscal three and six months ended July 2, 2023 and July 3, 2022: Fiscal Three Months Ended July 2, 2023 July 3, 2022 (Dollars in Millions) Net Sales Cost of Sales Other (income) expense, net Net Sales Cost of Sales Other (income) expense, net Gain (loss) on cash flow hedges $ (1) $ (3) $ (2) $ 8 $ 3 $ 12 Gain (loss) on forward currency exchange contracts not designated as hedges $ — $ — $ (2) $ — $ — $ (1) Fiscal Six Months Ended July 2, 2023 July 3, 2022 (Dollars in Millions) Net Sales Cost of Sales Other (income) expense, net Net Sales Cost of Sales Other (income) expense, net Gain (loss) on cash flow hedges $ — $ 7 $ (2) 11 3 10 Gain on forward currency exchange contracts not designated as hedges $ — $ — $ 4 — — 7 The fair value of the Company’s foreign currency exchange contracts as of July 2, 2023 was included in Prepaid expenses and other receivables, on the Company’s Condensed Consolidated Balance Sheets. Since 2022, the Company has entered into forward currency exchange contracts to offset the foreign currency exposure related to the settlement of payables and receivables of the Company. These contracts are not designated as cash flow hedging relationships, and the net allocated gains and losses related to these contracts were recognized within Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations. As of July 2, 2023 and January 1, 2023, respectively, the Company held forward foreign exchange contracts that were not designated in cash flow hedging relationships of $1 million and $0 million, respectively. Forward Starting Interest Rate Swaps Beginning in the fourth quarter of 2022, the Company entered into forward starting interest rate swaps in contemplation of securing long-term financing for the Separation or for other long-term financing purposes in the event the Separation did not occur. The Company designated these derivatives as cash flow hedges to reduce future interest rate exposure related to changes in the benchmark interest rate on forecasted 5-year, 10-year, and 30-year bonds that the Company issued in 2023. During the fiscal six months ended July 2, 2023, the Company recorded a gain of approximately $48 million in Accumulated other comprehensive loss. Upon the issuance of the forecasted debt, the Company settled its forward starting interest rate swaps and received $38 million in cash. The gain in Accumulated other comprehensive loss will be amortized and recorded in Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations over the life of the 5-year, 10-year, and 30-year bonds. For the fiscal three and six months ended July 2, 2023, we reclassified $1 million and $2 million, respectively, from Other comprehensive income (loss) to the Condensed Consolidated Statements of Operations. Net Investment Hedges The Company designated certain forward currency exchange contracts as net investment hedges to mitigate foreign exchange exposure related to non-U.S. dollar net investments in certain foreign subsidiaries against changes in foreign exchange rates. During the fiscal three and six months ended July 2, 2023 and July 3, 2022, the Company designated as a net investment hedge a forward currency exchange contract to sell foreign currency (denominated in the local currency of the affiliate) at specified forward rates. These contracts are accounted for using the spot method with changes in the fair value of the contracts attributable to changes in spot rates recorded in Other comprehensive income (loss) (CTA). Changes in the fair value attributable to time value (“excluded components”) are initially recorded to Other comprehensive income (loss) (CTA) and are recognized within Other expense (income), net on the Company’s Condensed Consolidated Statements of Operations ratably over the life of the contract. The fair value of the contracts designated in net investment hedges in liabilities position at July 2, 2023 and January 1, 2023 were $2 million and $0 million, respectively. Effectiveness On an ongoing basis, the Company assesses whether each derivative continues to be highly effective in offsetting changes of hedged items. When a derivative is no longer expected to be highly effective, hedge accounting is discontinued. Statement of Cash Flows Cash flows from derivatives designated in hedging relationships are reflected in the Condensed Consolidated Statements of Cash Flows consistent with the presentation of the hedged item. Cash flows from derivatives that were not accounted for as designated hedging relationships reflect the classification of the cash flows associated with the activities being economically hedged. Credit Risk The Company is exposed to the risk of credit loss in the event of nonperformance by counterparties to financial instrument contracts; however, nonperformance is considered unlikely and any nonperformance is unlikely to be material as it is the Company’s policy to contract with diverse, credit-worthy counterparties based upon both strong credit ratings and other credit considerations. The Company has negotiated International Swaps and Derivatives Association, Inc. master agreements with its counterparties, which contain master netting provisions providing the legal right and ability to offset exposures across trades with each counterparty. Given the rights provided by these contracts, the Company presents derivative balances based on its “net” counterparty exposure. These agreements do not require the posting of collateral. Investments in Equity Securities The Company measures equity investments without readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. As of July 2, 2023 and January 1, 2023, such investments totaled $78 million and $56 million, respectively, and were included in Other assets on the Condensed Consolidated Balance Sheets. |
Commitments and Contingencies_2
Commitments and Contingencies | 6 Months Ended |
Jul. 02, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company, and its Parent, are involved in various lawsuits and claims relating to intellectual property, commercial contracts, product liability, labeling, marketing, advertising, pricing, foreign exchange controls, antitrust and trade regulation, labor and employment, pension, indemnification, data privacy and security, environmental, health and safety and tax matters; governmental investigations; and other legal proceedings that arise from time to time 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 will be incurred, and the amount of the loss can be reasonably estimated. As of January 1, 2023, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has accrued for these matters 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 ASC 450-20-25. 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, among other things, whether damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are significant facts in dispute; procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; ability to achieve comprehensive multi-party settlements; complexity of related cross-claims and counterclaims; and/or there are numerous parties involved. To the extent adverse awards, judgments or verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated. In the Company’s opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued in the Company’s 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 Johnson & Johnson and 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 has established accruals for product liability claims and lawsuits in compliance with ASC 450-20 based on currently available information, which in some cases may be limited. The Company accrues 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 has accrued 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. A significant number of personal injury claims alleging that talc causes cancer were made against Johnson & Johnson Consumer Inc. and Johnson & Johnson arising out of the use of body powders containing talc, primarily JOHNSON’S Baby Powder. The number of these personal injury lawsuits, filed in state and federal courts in the United States as well as outside the United States, continued to increase. In talc cases that previously have gone to trial, the Company and/or its Parent have obtained a number of defense verdicts, but there also have been verdicts against the Company, many of which have been reversed on appeal. In June 2020, the Missouri Court of Appeals reversed in part and affirmed in part a July 2018 verdict of $4,700 million in Ingham v. Johnson & Johnson, et al., No. ED 207476 (Mo. App.), reducing the overall award to $2,100 million. An application for transfer of the case to the Missouri Supreme Court was subsequently denied. As such, the Company accrued approximately $2,500 million (including interest) to Other (income) expense, net, operating in the fourth quarter of 2020 (the “Ingham decision”). In June 2021 a petition for certiorari, seeking a review of the Ingham decision by the United States Supreme Court, was denied. As such, the Company paid the award, which, including interest, totaled approximately $2,500 million. The facts and circumstances, including the terms of the award, were unique to the Ingham decision and not representative of other claims brought against the Company. The Company and its Parent continue to believe that it has strong legal grounds to contest the other talc verdicts that it has appealed. Notwithstanding the Company’s confidence in the safety of its talc products, in certain circumstances the Company has settled cases. In addition to the Ingham decision, the costs associated with certain other settlements, primarily related to mesothelioma cases, and defense costs are reflected in the Company’s accruals noted above. In 2021 and 2020, the Company recorded litigation expense primarily associated with talc-related reserves and certain settlements offset by legal fees and other costs paid. Prior to 2020, the accruals and payments primarily related to defense costs. In October 2021, Johnson & Johnson Consumer Inc. (“Old JJCI”), a former subsidiary of the Parent and the Company, implemented a corporate restructuring (the “2021 Corporate Restructuring”). As a result of that restructuring, Old JJCI ceased to exist and three new entities were created: (a) LTL Management LLC, a North Carolina limited liability company (“LTL” or “Debtor”); (b) Royalty A&M LLC, a North Carolina limited liability company and a direct subsidiary of LTL (“RAM”); and (c) the Debtor’s direct parent, Johnson & Johnson Consumer Inc., a New Jersey company (“New JJCI”). The operations, assets and liabilities of New JJCI will be transferred to the Company as part of the Separation, while LTL and RAM will be retained by the Parent. The Debtor received certain of Old JJCI’s assets and became solely 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 old JJCI’s talc or talc-containing products sold in the United States and Canada (the “Talc-Related Liabilities”). Pursuant to the Separation, Johnson & Johnson will retain the Talc-Related Liabilities and, as a result, will agree to indemnify the Company for the Talc-Related Liabilities and any costs associated with resolving such claims. Such claims represent the vast majority of claims 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. 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. After and in connection with the 2021 Corporate Restructuring, LTL commenced a chapter 11 case (the “LTL Bankruptcy Case”), which is pending before the United States Bankruptcy Court, District of New Jersey (“Bankruptcy Court”). Through its intermediary position between the Parent and LTL, New JJCI has agreed to provide funding to LTL for the payment of amounts the Bankruptcy Court determines are owed by LTL through the establishment of a trust in furtherance of this purpose. In October 2021 and in conjunction with the creation of LTL as part of the 2021 Corporate Restructuring, New JJCI’s liability of $1,016 million was transferred to the Parent and settled through Net Investment from Parent as all legal expenses and liabilities subsequent to October 2021 will be settled by LTL and ultimately the Parent. As such, there are no remaining Talc-Related Liabilities in the Company’s financial statements as of the end of fiscal year 2021 and no activity during 2022. A summary of the talc liabilities from 2020 to 2021 is included below: (Dollars in Millions) 2021 2020 Beginning Balance $ 4,043 $ 462 Accruals 154 4,029 Payments (3,181) (448) Transfer of liability to Parent (1,016) — Ending Balance $ — $ 4,043 In February 2019, Old JJCI’s talc supplier, Imerys Talc America, Inc. and two of its affiliates, Imerys Talc Vermont, Inc. and Imerys Talc Canada, Inc. (collectively, “Imerys”) filed a voluntary petition under chapter 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Imerys Bankruptcy”). The Imerys Bankruptcy relates to Imerys’s potential liability for personal injury from exposure to talcum powder sold by Imerys (“Talc Claims”). In its bankruptcy, Imerys alleges it has claims against the Parent and Old JJCI for indemnification and rights to joint insurance proceeds. In May 2020, Imerys, its parent Imerys S.A., the Tort Claimants’ Committee (“TCC”), and the Future Claimants’ Representative (“FCR”) (collectively, the “Plan Proponents”) filed their Plan of Reorganization (the “Plan”) and the Disclosure Statement related thereto. The Plan Proponents have since filed numerous amendments to the Plan and Disclosure Statement. A hearing on the Plan Proponent’s Disclosure Statement was held in January 2021, and the Court entered an order approving the Disclosure Statement, allowing Imerys to proceed with soliciting votes on the Plan. In March 2021, the Parent voted to reject the Plan and opted out of the consensual releases in the Plan. In April 2021, the Plan Proponents announced the Plan had received the requisite number of accepting votes to confirm the Plan. The Parent challenged certain improprieties with respect to portions of the vote and sought to disqualify those votes. In October 2021, the Bankruptcy Court issued a ruling deeming thousands of votes as withdrawn. In October 2021, Imerys cancelled the confirmation hearing on the Plan. Imerys, the TCC, the FCR, and certain of Imerys’s insurers, and certain parties in the Cyprus Mines chapter 11 case (described below) (collectively the “Mediation Parties”) have since agreed to engage in mediation. The most recent term of the mediation ended on December 31, 2022. In July 2021, Imerys commenced an adversary proceeding against the Parent and Old JJCI in the Imerys Bankruptcy (the “Imerys Adversary Proceeding”). The Imerys Adversary Proceeding sought, among other things, certain declarations with respect to the indemnification obligations allegedly owed by the Parent and Old JJCI to Imerys. The TCC and FCR simultaneously filed a motion for temporary restraining order and preliminary injunction seeking to enjoin the Parent and Old JJCI from undergoing a corporate restructuring that would separate the Parent and Old JJCI’s talc liabilities from its other assets. The Bankruptcy Court denied the motion. The Parent and Old JJCI thereafter filed a motion to dismiss the adversary proceeding. The Bankruptcy Court has not yet decided the motion to dismiss. In October 2021, the Parent and Old JJCI filed a Notice of Bankruptcy Filing and Stay of Proceedings clarifying that the automatic stay arising upon the filing of the LTL Bankruptcy Case should apply to the Imerys Adversary Proceeding. In June 2020, Cyprus Amax Mines Corporation (CAMC) and its parent (together, “Cyprus”), which had owned certain Imerys talc mines, filed an adversary proceeding against the Parent and Old JJCI and Imerys in the Imerys Bankruptcy seeking a declaration of indemnity rights under certain contractual agreements (the “Cyprus Adversary Proceeding”). The Parent and Old JJCI deny such indemnification is owed, and filed a motion to dismiss the adversary complaint. In February 2021, Cyprus filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code and filed its Disclosure Statement and Plan. The Plan contemplates a settlement with Imerys and talc claimants where Cyprus would make a monetary contribution to a trust established under the Imerys Plan in exchange for an injunction against Talc Claims asserted against it. Cyprus has not yet sought approval of its Disclosure Statement and Plan. Cyprus, along with the TCC and FCR appointed in the Cyprus chapter 11 case, have agreed to participate in the mediation with the Mediation Parties. In October 2021, the Parent and Old JJCI filed a Notice of Bankruptcy Filing and Stay of Proceedings clarifying that the automatic stay arising upon the filing of the LTL Bankruptcy Case should apply to the Cyprus Adversary Proceeding. In June 2022, Cyprus commenced an Adversary Proceeding in its chapter 11 case seeking an order enforcing the automatic stay by enjoining parties from commencing or continuing “talc-related claims” against CAMC. In June 2022, the court entered a preliminary injunction order enjoining claimants from pursuing talc-related claims against CAMC through January 2023. In February 2021, several of the Parent’s insurers involved in coverage litigation in New Jersey State Court (the “Coverage Action”) filed a motion in the Imerys Bankruptcy Court proceeding seeking a determination that the automatic stay does not apply to the Coverage Action and, in the alternative, seeking relief from the automatic stay to allow them to continue to litigate their claims in the Coverage Action. In March 2021, the Parent filed a limited response and reservation of rights with respect to the motion. The Court entered an agreed order modifying the stay to allow the litigation in the Coverage Action to continue. In October 2021, LTL filed a Notice of Bankruptcy Filing and Stay of Proceedings clarifying that the automatic stay arising upon the filing of the LTL Bankruptcy Case should apply to the Coverage Action. In March 2022, the Bankruptcy Court for the District of New Jersey ruled that the automatic stay in the LTL Bankruptcy Case applied to the Coverage Action, but, in August and September 2022, the Bankruptcy Court issued two rulings providing that the insurers involved in the Coverage Action could pursue third-party discovery in connection with the Coverage Action. In addition, Johnson & Johnson has received inquiries, subpoenas and requests to produce documents regarding talc matters from various U.S. governmental authorities and is also subject to consumer protection cases and investigations from state attorneys general. The Company has produced documents and responded to inquiries, and will continue to cooperate with government inquiries. Claims for personal injury have been made against Johnson and Johnson Consumer Inc. (JJCI), arising out of the use of TYLENOL, an over-the-counter pain medication, alleging that prenatal exposure to acetaminophen is associated with the development of autism spectrum disorder and/or attention-deficit/hyperactivity disorder. In October 2022, lawsuits filed in federal courts in the United States were organized as a multi-district litigation in the United States District Court for the Southern District of New York. 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, lawsuits have been filed in Canada against our Canadian affiliate. General Litigation In 2006, Johnson & Johnson acquired Pfizer’s 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 after 2006. Johnson & Johnson received indemnification from BI and gave Pfizer indemnification in connection with the transfer of the Zantac business to BI from Pfizer, through Johnson & Johnson. In November 2019, Johnson & Johnson received a demand for indemnification from Pfizer, pursuant to the 2006 Stock and Asset Purchase Agreement between Johnson & Johnson and Pfizer. In January 2020, Johnson & Johnson received a demand for indemnification from BI, pursuant to the 2006 Asset Purchase Agreement among Johnson & Johnson, Pfizer and BI. Pursuant to the agreements, Pfizer and BI have asserted indemnification claims against Johnson & Johnson ostensibly related to Zantac sales by Pfizer. In November 2022, Johnson & Johnson received a demand for indemnification from GlaxoSmithKline LLC (“GSK”), pursuant to the 2006 Stock and Asset Purchase Agreement between Johnson & Johnson and Pfizer, and certain 1993, 1998, and 2002 agreements between Glaxo Wellcome and Warner-Lambert entities. The notices seek indemnification for legal claims related to over-the-counter Zantac (ranitidine) products. Plaintiffs in the underlying actions allege that Zantac and other over-the-counter medications that contain ranitidine may degrade and result in unsafe levels of NDMA (N-nitrosodimethylamine) and can cause or have caused various cancers in patients using the products and seek declaratory and monetary relief. Johnson & Johnson has rejected all the demands for indemnification relating to the underlying actions. No Johnson & Johnson entity sold Zantac in the United States and no Johnson & Johnson entity is a party to the U.S. Zantac litigation. In 2016, Johnson & Johnson Inc. (Canadian affiliate) (“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 related recalls, withdrawals, replacements or related market actions, and JJI is required to indemnify Sanofi for certain other excluded liabilities. In November 2019, JJI received notice reserving rights to claim indemnification from Sanofi pursuant to the 2016 Purchase Agreement. The notice refers to indemnification for legal claims in two class actions with similar allegations to the U.S. litigation related to over-the-counter Zantac (ranitidine) products. Johnson & Johnson and JJI have also been named in putative class actions filed in Canada with similar allegations regarding Zantac or ranitidine use. These actions are pending before the courts of Alberta, British Columbia, Quebec and Ontario. 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. It is not possible, at this stage, to assess reliably the outcome of these lawsuits or the potential financial impact on the Company. Beginning in May 2021, multiple putative class actions were filed in state and federal courts (California, Florida, New York, and New Jersey) against various Johnson & Johnson 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 a strict liability manufacturing defect and failure to warn claims, asserting that the named plaintiffs suffered unspecified injuries as a result of alleged exposure to benzene. The Judicial Panel on Multi-District Litigation has consolidated all pending actions, except one case pending in New Jersey state court, in the United States District Court for the Southern District of Florida, Fort Lauderdale Division. In October 2021, 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. The settlement was preliminarily approved by the court in March 2022. On February 28, 2023, an order granting final approval of the settlement, certifying the settlement class and awarding attorney’s fees was entered. Johnson & Johnson (subsequently substituted by 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 United States District Court for the District of New Jersey, related to the clean-up of a section of the Lower Passaic River in New Jersey. The Company and/or certain of its subsidiaries are involved from time to time in various lawsuits and claims relating to intellectual property, commercial contracts, product liability, labeling, marketing, advertising, pricing, antitrust and trade regulation, labor and employment, indemnification, data privacy and security, environmental, health and safety, and tax matters, governmental investigations, and other legal proceedings that arise in the ordinary course of their business. The Company records accruals for loss contingencies associated with these legal matters when it is probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. As of July 2, 2023, the Company has determined that the liabilities associated with certain litigation matters are probable and can be reasonably estimated. The Company has accordingly accrued for those contingent liabilities that are material and will continue to monitor each related legal issue and adjust accruals as might be warranted based on new information and further developments in accordance with Accounting Standards Codification (“ASC”) 450-20-25. Accrued liabilities related to litigation matters are included in Accrued liabilities and Other liabilities on the Condensed Consolidated Balance Sheets. For these and other litigation and regulatory matters discussed below for which a loss is probable or reasonably possible, the Company is unable to estimate the possible loss or range of loss beyond the amounts accrued. Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. The ability to make such estimates and judgments can be affected by various factors including whether, among other things, damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has commenced or is complete; proceedings are in early stages; matters present legal uncertainties; significant facts are in dispute; procedural or jurisdictional issues exist; the number of potential claims is certain or predictable; comprehensive multi-party settlements are achievable; there are complex related cross-claims and counterclaims; and/or there are numerous parties involved. In the Company’s opinion, based on its examination of these matters, its experience to date and discussions with counsel, the ultimate outcome of legal proceedings, net of liabilities accrued in the Company’s Condensed Consolidated Balance Sheets, is not expected to have a material adverse effect on the Company’s financial position. However, the resolution of, or increase in accruals for, one or more of these matters in any reporting period may have a material adverse effect on the Company’s results of operations and cash flows for that period. Product Liability The Company and/or certain of its subsidiaries are involved in numerous product liability claims and lawsuits involving multiple products. Claimants in these cases seek substantial compensatory and, where available, punitive damages. While the Company believes it has substantial defenses, it is not feasible to predict the ultimate outcome of litigation. From time to time, even if it has substantial defenses, the Company considers isolated settlements based on a variety of circumstances. The Company may accrue an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated. For certain of these matters, the Company may accrue additional amounts such as estimated costs associated with settlements, damages, and other losses. Product liability accruals can represent projected product liability for thousands of claims around the world, each in different litigation environments and with different fact patterns. Changes to the accruals may be required in the future as additional information becomes available. Claims for personal injury have been made against our subsidiary Johnson & Johnson Consumer Inc. (“JJCI”) in federal court arising out of the use of Tylenol, an over-the-counter pain medication, alleging that in utero exposure to acetaminophen (the active ingredient in Tylenol) is associated with the development of autism spectrum disorder and/or attention-deficit/hyperactivity disorder in children. In October 2022, lawsuits filed in federal courts in the United States were organized as a multi-district litigation in the U.S. District Court for the Southern District of New York. No trial dates have been set in these actions. Product liability lawsuits continue to be filed, and the Company continues to receive information with respect to potential costs and the anticipated number of cases. In addition, a lawsuit has been filed in state court against JJCI, the Company and J&J, and lawsuits have been filed in Canada against our subsidiary Johnson & Johnson Inc. (Canadian affiliate) (“JJI”) and J&J. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out these claims and lawsuits. General Litigation In 2006, J&J acquired Pfizer’s over-the-counter (“OTC”) business including the U.S. rights to OTC Zantac, which were on-sold to Boehringer Ingelheim (“BI”) as a condition to merger control approval such that BI assumed product liability risk for U.S. sales after 2006. J&J received indemnification from BI and gave Pfizer indemnification in connection with the transfer of the Zantac business to BI from Pfizer, through J&J. In November 2019, J&J received a demand for indemnification from Pfizer, pursuant to the 2006 Stock and Asset Purchase Agreement between J&J and Pfizer. In January 2020, J&J received a demand for indemnification from BI, pursuant to the 2006 Asset Purchase Agreement among J&J, Pfizer and BI. Pursuant to the agreements, Pfizer and BI have asserted indemnification claims against J&J ostensibly related to Zantac sales by Pfizer. In November 2022, J&J received a demand for indemnification from GlaxoSmithKline LLC (“GSK”), pursuant to the 2006 Stock and Asset Purchase Agreement between J&J and Pfizer, and certain 1993, 1998, and 2002 agreements between Glaxo Wellcome and Warner-Lambert entities. The notices seek indemnification for legal claims related to over-the-counter Zantac (ranitidine) products. Plaintiffs in the underlying actions allege that Zantac and other over-the-counter medications that contain ranitidine may degrade and result in unsafe levels of NDMA (N-nitrosodimethylamine) and can cause or have caused various cancers in patients using the products and seek declaratory and monetary relief. J&J has rejected all the demands for indemnification relating to the underlying actions. No J&J entity sold Zantac in the United States. In 2016, JJI sold the Canadian Zantac business to Sanofi Consumer Health, Inc. (“Sanofi”). Under the 2016 Asset Purchase Agreement between JJI and Sanofi (the “2016 Purchase Agreement”), Sanofi assumed certain liabilities including those pertaining to Zantac (ranitidine) product sold by Sanofi after closing and losses arising from or relating to recalls, withdrawals, replacements or related market actions or post-sale warning in respect of products sold by Sanofi after the closing, and JJI is required to indemnify Sanofi for certain other excluded liabilities. In November 2019, JJI received a notice reserving rights to claim indemnification from Sanofi pursuant to the 2016 Purchase Agreement. The notice refers to indemnification for legal claims in class actions and various individual personal injury actions with similar allegations to the U.S. litigation related to over-the-counter Zantac (ranitidine) products. J&J and/or JJI have also been named in four of the seven putative class actions filed in Canada with similar allegations regarding Zantac or ranitidine use. Of the four putative class actions naming J&J and/or JJI, the British Columbia action has been stayed, the Alberta action has been discontinued, and the Quebec action has been stayed. The Ontario action is pending, but not currently active. JJI was also named as a defendant, along with other manufacturers, in various personal injury actions in Canada related to Zantac products. JJI has provided Sanofi notice reserving rights to claim indemnification pursuant to the 2016 Purchase Agreement related to the class actions and personal injury actions. At this stage in these proceedings, the Company is unable to reasonably estimate either the likelihood or the magnitude of its potential liability arising out these claims and lawsuits. Beginning in May 2021, multiple putative class actions were filed in state and federal courts (California, Florida, New York, and New Jersey) against various J&J entities alleging violations of state consumer fraud statutes based on nondisclosure of alleged benzene contamination of certain Neutrogena and Aveeno sunscreen products and the affirmative promotion of those products as “safe”; and, in at least one case, alleging strict liability manufacturing defect and failure to warn claims, asserting that the named plaintiffs suffered unspecified injuries as a result of alleged exposure to benzene. The Judicial Panel on Multi-District Litigation has consolidated all pending actions, except one case pending in New Jersey state court, in the U.S. District Court for the Southern District of Florida, Fort Lauderdale Division. In October 2021, an affiliate of the Company reached an agreement in principle for the settlement of a nationwide class, encompassing the claims of the consolidated actions, subject to approval by the Florida federal Court. In December 2021, plaintiffs in the consolidated actions filed a motion for preliminary approval of a nationwide class settlement. In February 2023, an order granting final approval of the settlement, certifying the settlement class and awarding attorney’s fees was entered. A Notice of Appeal was filed in April 2023. J&J (subsequently substituted by JJCI) 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 law |
Segments of Business
Segments of Business | 6 Months Ended |
Jul. 02, 2023 | |
Segment Reporting [Abstract] | |
Segments of Business | Segments of Business and Geographic Areas The Company has historically operated as part of the Parent, reported under the Parent’s segment structure and historically the Chief Operating Decision Maker (“CODM”) was the Consumer Health Segment Operating Committee. As the Company is transitioning into an independent, publicly traded company, the Company’s CODM was determined to be the Company’s Executive Committee as they will be 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 realigned its historical segment structure and determined it is organized as three operating segments, which are also its reportable segments: (i) Self Care, (ii) Skin Health and Beauty, and (iii) Essential Health. Prior period presentations conform to the current segment reporting structure. Segment profit is based on Operating income (loss) excluding depreciation and amortization, restructuring, Separation-related costs, Other (income) expense, net, operating, and unallocated general corporate administrative expenses (referred to herein as “Adjusted Operating Income”) as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which includes treasury and legal operations and certain expenses, gains and losses related to the overall management of the Company, are not allocated to the segments. In assessing segment performance and managing operations, management does not review segment assets. The Company operates the business through the following three reportable business segments: Reportable Segments Product Categories Self Care Cough, Cold and Allergy Pain Care Other Self Care (Digestive Health, Smoking Cessation and Other) Skin Health and Beauty Face and Body Care Hair, Sun and Other Essential Health Oral Care Baby Care Other Essential Health (Women’s Health and Wound Care) The Company’s product categories as a percentage of Net sales for the fiscal years 2022, 2021 and 2020 were as follows: 2022 2021 2020 Cough, Cold and Allergy 13 % 12 % 12 % Pain Care 13 % 11 % 10 % Other Self Care 14 % 15 % 14 % Face and Body Care 20 % 22 % 22 % Hair, Sun and Other 9 % 8 % 9 % Oral Care 10 % 11 % 11 % Baby Care 10 % 10 % 11 % Other Essential Health 11 % 11 % 11 % Total 100 % 100 % 100 % Segment Net Sales and Adjusted Operating Income Segment net sales and adjusted operating income for the fiscal years 2022, 2021 and 2020 were as follows: Net Sales (Dollars in Millions) 2022 2021 2020 Self Care $ 6,030 $ 5,643 $ 5,235 Skin Health and Beauty 4,350 4,541 4,450 Essential Health 4,570 4,870 4,782 Total $ 14,950 $ 15,054 $ 14,467 Adjusted Operating Income (Dollars in Millions) 2022 (4) 2021 (1)(4) 2020 (1)(4) Self Care $ 2,088 $ 1,952 $ 1,858 Skin Health and Beauty 708 878 889 Essential Health 1,111 1,224 1,250 Total adjusted operating income 3,907 4,054 3,997 Reconciliation to income (loss) before taxes: General corporate/unallocated expenses (298) (272) (277) Other (income) expense, net, operating (Note 10) 23 (15) (3,871) Restructuring (2) (100) (116) (82) Depreciation and amortization (644) (731) (746) Separation-related costs (3) (213) — — Total operating income (loss) 2,675 2,920 (979) Other expense (income), net (Note 10) 38 (5) 37 Income (loss) before taxes $ 2,637 $ 2,925 $ (1,016) __________________ (1) For the fourth quarter of 2022, the Company updated the methodology of allocation for certain selling expenses to align with segment financial results as measured by the Company, including the Chief Operating Decision Maker. All prior periods have been recast to conform to current presentation. Total adjusted operating income did not change as a result of this change. (2) Exclusive of the restructuring expense included in other (income) expense, net, operating. See Note 16. (3) For the fourth quarter of 2022, the Company updated methodology to no longer allocate non-recurring Separation-related costs to align with segment financial results as measured by the Company, including the Chief Operating Decision Maker. This change only impacted fiscal year 2022 given there were no non-recurring Separation-related costs in any other period presented. (4) 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 Chief Operating Decision Maker. Accordingly, the Company has updated its segment disclosures in all prior periods. Total adjusted operating income did not change as a result of this update. Depreciation & Amortization Depreciation and amortization by segment for the fiscal years 2022, 2021 and 2020 were as follows: Depreciation and Amortization (Dollars in Millions) 2022 (1) 2021 2020 Self Care $ 202 $ 212 $ 205 Skin Health and Beauty 247 305 325 Essential Health 195 214 216 Total $ 644 $ 731 $ 746 __________________ (1) 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 Chief Operating Decision Maker. Accordingly, the Company has updated its depreciation and amortization disclosures in the impacted period. Total depreciation and amortization did not change as a result of this update. Geographic Information Net sales are attributed to a geographic region based on the location of the customer and for the fiscal years 2022, 2021 and 2020 were as follows: Net Sales (Dollars in Millions) 2022 2021 2020 North America (1) $ 7,418 $ 7,284 $ 7,095 Europe, Middle East, and Africa 3,188 3,436 3,332 Asia-Pacific 3,146 3,276 3,013 Latin America 1,198 1,058 1,027 Total $ 14,950 $ 15,054 $ 14,467 __________________ (1) Includes U.S. net sales in fiscal years 2022, 2021 and 2020 of $6,599 million, $6,516 million and $6,357 million, respectively. Long-lived assets consisting of property, plant and equipment, net of accumulated depreciation, intangible assets, net and goodwill are attributed to geographic locations as of January 1, 2023 and January 2, 2022 as follows: Long Lived Assets (2) (Dollars in Millions) 2022 2021 North America (1) $ 9,582 $ 9,687 Europe, Middle East, and Africa 8,244 9,169 Asia-Pacific 2,736 3,204 Latin America 296 278 Total $ 20,858 $ 22,338 __________________ (1) Includes U.S. long lived assets in fiscal years 2022, 2021 and 2020 of $7,469 million, $7,527 million and $7,631 million, respectively. (2) Long-lived assets include property, plant and equipment, net for fiscal years 2022, and 2021 of $1,820 million and $1,827 million, respectively, and intangible assets and goodwill, net for fiscal years 2022 and 2021 of $19,038 million and $20,511 million, respectively. Major Customers One customer accounted for approximately 13%, 14% and 14% of total net sales in fiscal years 2022, 2021 and 2020, respectively. The Company has historically operated as part of the Parent, reported under the Parent’s segment structure and historically the Chief Operating Decision Maker (“CODM”) was the Consumer Health Segment Operating Committee. As the Company transitioned into an independent, publicly traded company, the Company’s CODM was determined to be the Kenvue Leadership Team as they are responsible for allocating resources and assessing performance. Based on how the CODM assesses operating performance on a regular basis, makes resource allocation decisions, and designates responsibilities of their direct reports, the Company is organized as three operating segments, which are also its reportable segments: (i) Self Care, (ii) Skin Health and Beauty, and (iii) Essential Health. Prior period presentations conform to the current segment reporting structure. Segment profit is based on Operating income, excluding depreciation and amortization, non-recurring Separation-related costs, restructuring expense, Other operating expense (income), net, and unallocated general corporate administrative expenses (referred to herein as “Adjusted operating income”), as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which include treasury and legal operations and certain expenses, gains and losses related to the overall management of the Company, are not allocated to the segments. In assessing segment performance and managing operations, management does not review segment assets. The Company operates the business through the following three reportable business segments: Reportable Segments Product Categories Self Care Cough, Cold and Allergy Pain Care Other Self Care (Digestive Health, Smoking Cessation, and Other) Skin Health and Beauty Face and Body Care Hair, Sun and Other Essential Health Oral Care Baby Care Other Essential Health (Women’s Health and Wound Care) The Company’s product categories as a percentage of Net sales for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cough, Cold and Allergy 13 % 13 % 14 % 12 % Pain Care 12 11 13 13 Other Self Care 16 15 15 15 Face and Body Care 19 20 19 20 Hair, Sun and Other 10 10 10 9 Oral Care 10 10 10 10 Baby Care 9 10 9 10 Other Essential Health 11 11 10 11 Total 100 % 100 % 100 % 100 % Segment Net Sales and Adjusted Operating Income Segment Net sales and Adjusted operating income for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Net Sales Net Sales Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Self Care $ 1,661 $ 1,481 $ 3,301 $ 2,946 Skin Health and Beauty 1,147 1,126 2,258 2,138 Essential Health 1,203 1,197 2,304 2,310 Total $ 4,011 $ 3,804 $ 7,863 $ 7,394 Adjusted Operating Income Adjusted Operating Income Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Self Care $ 576 $ 524 $ 1,158 $ 998 Skin Health and Beauty 201 243 350 370 Essential Health 250 314 461 560 Total Adjusted operating income (1)(2) $ 1,027 $ 1,081 $ 1,969 $ 1,928 Reconciliation to Income before taxes: Depreciation and amortization 148 161 300 326 Separation-related costs 102 49 200 59 Restructuring (3) — 24 — 38 Other operating expense (income), net 1 13 (16) 8 General corporate/unallocated expenses 74 64 143 116 Total operating income $ 702 $ 770 $ 1,342 $ 1,381 Other expense (income), net 10 (5) 40 (6) Interest expense, net 53 — 54 — Income before taxes $ 639 $ 775 $ 1,248 $ 1,387 __________________ (1) For the first quarter of 2023, the Company adjusted the allocation for certain intangible asset amortization costs within Cost of Sales to align with segment financial results as measured by the Company, including the CODM. Accordingly, the Company has updated its segment disclosures to reflect the updated presentation in all prior periods. Total Adjusted operating income did not change as a result of this update. (2) We define Adjusted operating income as U.S. GAAP Operating income excluding depreciation and amortization, Separation-related costs, restructuring expense, Other operating expense (income), net, and general corporate unallocated expenses that are not part of our measurement of segment performance. Management uses 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. |
Accrued and Other Liabilities_2
Accrued and Other Liabilities | 6 Months Ended |
Jul. 02, 2023 | |
Other Liabilities Disclosure [Abstract] | |
Accrued and Other Liabilities | Accrued and Other Liabilities Accrued liabilities consisted of: (Dollars in Millions) 2022 2021 Accrued expenses $ 447 $ 535 Accrued compensation and benefits 272 266 Lease liability 35 47 Other accrued liabilities 152 176 Accrued liabilities $ 906 $ 1,024 Other liabilities consisted of: (Dollars in Millions) 2022 2021 Accrued income taxes - noncurrent (Note 11) $ 584 $ 603 Noncurrent lease liability 81 82 Other noncurrent accrued liabilities 62 71 Other liabilities $ 727 $ 756 Accrued liabilities consisted of: (Dollars in Millions) July 2, 2023 January 1, 2023 Accrued expenses $ 470 $ 447 Accrued compensation and benefits 275 272 Lease liability 47 35 Other accrued liabilities (1) 409 152 Accrued liabilities $ 1,201 $ 906 Other liabilities consisted of: (Dollars in Millions) July 2, 2023 January 1, 2023 Accrued income taxes - noncurrent $ 234 $ 584 Noncurrent lease liability 120 81 Other noncurrent accrued liabilities (1) 239 62 Other liabilities $ 593 $ 727 __________________ |
Subsequent Events_2
Subsequent Events | 6 Months Ended |
Jul. 02, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Combined Financial Statements of the Company are derived from the consolidated financial statements of the Parent, which issued its financial statements for the year ended January 1, 2023 on February 16, 2023. Accordingly, the Company has evaluated transactions or other events for consideration as recognized subsequent events in the annual financial statements through February 16, 2023. Additionally, the Company has evaluated transactions and other events that occurred through March 3, 2023, the date these Combined Financial Statements were issued, for purposes of disclosure of unrecognized subsequent events. Events Subsequent to Original Issuance of Financial Statements (Unaudited) In connection with the reissuance of the financial statements, the Company has evaluated subsequent events through April 24, 2023, the date the financial statements were reissued. On April 20, 2023, the Company entered into a long-term lease for a newly renovated office building and a newly constructed R&D building in Summit, New Jersey that, when completed, will encompass a total of approximately 290,000 square feet and serve as the Company’s new global corporate headquarters. The 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 R&D. The relocation to this campus is expected to commence in 2025 for the office building and continue through 2026 for occupancy into the new R&D building. The Company will continue to operate from our interim corporate headquarters in Skillman, New Jersey until that time. On March 22, 2023, the Company issued eight series of senior unsecured notes (the “Notes”) in an aggregate principal amount of $7.75 billion in a private placement. The net proceeds to the Company from the Notes offering was $7.69 billion after deductions of discounts and commissions payable of $65 million. The Notes will initially be fully and unconditionally guaranteed on a senior unsecured basis by the Parent. Such guarantees will terminate upon (1) the completion in all material respects of the transfer of the assets and liabilities of Johnson & Johnson’s Consumer Health Business to the Company, other than the transfer of the assets and liabilities of the Company’s businesses in certain jurisdictions where the Company and the Parent will defer the transfer of such assets and liabilities (such transfer, the “Consumer Health Business Transfer”) and (2) the occurrence of the initial registration of the Company’s equity securities. The Company intends to use the proceeds from the offering of the Notes as partial consideration to the Parent for the Consumer Health Business that the Parent will transfer to the Company. The net proceeds of the Notes offering were placed in segregated escrow accounts pending the occurrence of the Consumer Health Business Transfer. On April 4, 2023, the net proceeds of the Notes offering were released from escrow upon the completion of the Consumer Health Business Transfer. After completion of the Notes offering on March 22, 2023, the Long-term debt outstanding was $7.69 billion. 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 billion to be made available in U.S. dollars and Euros. The Revolving Credit Facility contains representations and warranties, covenants and events of default that are customary for this type of financing, including covenants restricting the incurrence of liens and the entry into certain merger transactions. The company does not expect the Revolving Credit Facility to be drawn from or used in connection with the Separation. Following the original issuance of the financial statements, 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 billion in aggregate principal amount of commercial paper under the Commercial Paper Program. The Commercial Paper Program contains representations and warranties, covenants and default that are customary for this type of financing. Dividend Declaration 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 will be payable on September 7, 2023 to shareholders of record as of the close of business on August 28, 2023. Proposed Exchange Offer |
Description of the Company an_3
Description of the Company and Summary of Significant Accounting Policies (Policies) | 3 Months Ended | 6 Months Ended |
Apr. 02, 2023 | Jul. 02, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Reportable Segments | The Company is organized into three business segments: Self Care, Skin Health and Beauty, and Essential Health. The Self Care segment includes a broad product range such as cough, cold and allergy, pain care, and other Self Care (digestive health, smoking cessation, and other) products. The Skin Health and Beauty segment is focused on face and body care and hair, sun, and other products. The Essential Health segment includes oral care, baby care, and other Essential Health (women’s health and wound care) products. | Reportable Segments Commencing in fiscal year 2022, the Company began operating in the following reportable segments: (i) Self Care, (ii) Skin Health and Beauty and (iii) Essential Health. Prior to 2022, the Company operated as one reportable segment. All periods have been presented to conform to the current segment reporting structure. |
Basis of Presentation | Basis of Presentation The Company has historically operated as part of the Parent and not as a separate entity. These Combined Financial Statements of the Company have been derived from the consolidated financial statements of the Parent to present the Combined Balance Sheets as of January 1, 2023 and January 2, 2022 and the related Combined Statements of Operations, Comprehensive Income (Loss), Equity and Cash Flows for fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021 as if the Company had been operated on a standalone basis for the periods presented. The Combined Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the Parent’s historical accounting policies, by aggregating financial information from the components of the Company and the Parent’s accounting records directly attributable to the Company. All intercompany transactions and balances within the Company have been eliminated. All transactions between the Company and the Parent are considered to be effectively settled for cash in the Combined Financial Statements at the time the transaction is recorded. The effects of the settlement of these transactions between the Company and the Parent are reflected in the Combined Statements of Cash Flows as “Net transfers from (to) the Parent” within the financing activities, and in the Combined Balance Sheets and Combined Statements of Equity as “Net Investment from Parent”. The Combined Financial Statements of the Company include the assets, liabilities, revenues and expenses that management has determined are specifically or primarily identifiable to the Company, as well as direct and indirect costs that are attributable to the operations of the Company. Indirect costs are the costs of support functions that are provided on a centralized or geographic basis by the Parent and its affiliates, which include, but are 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 have been allocated to the Company for the purposes of preparing the Combined Financial Statements based on a specific identification basis or, when specific identification is not practicable, a proportional cost allocation method, primarily net sales, headcount, or other allocation methodologies that are 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 have been 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. The Company is incurring certain non-recurring Separation-related costs in its establishment as a standalone public company and those costs determined to be for the benefit of the Company are included in the Combined Financial Statements. These non-recurring Separation-related costs were $213 million for fiscal year 2022 and are included within Selling, general, and administrative expenses. The Company did not incur Separation-related costs in fiscal year 2021 or 2020. A significant number of personal injury claims alleging that talc causes cancer have been made against Johnson & Johnson Consumer Inc. (“Old JJCI”) and the Parent arising out of the use of body powders containing talc, primarily Johnson’s Baby Powder. Upon the 2021 Corporate Restructuring (as defined below), the Company no longer reflects the impact of the Talc-Related Liabilities (as defined below). See Note 13. Cash generated from the Company’s operations is generally managed by the Parent’s centralized treasury function and is swept into the Parent’s and its affiliates’ bank accounts. Cash and cash equivalents on the Combined Balance Sheets represent balances in accounts specifically identifiable to the Company that are not swept into the Parent’s and its affiliates’ bank accounts. The Parent’s third-party interest expense has not been allocated for any of the periods presented 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’s equity balance in these financial statements represents the excess of total assets over total liabilities. Equity is impacted by changes in comprehensive income, contributions from or to the Parent which are the result of treasury activities and net funding provided by or distributed to the Parent. The Parent calculates foreign currency translation on its consolidated assets and liabilities, which include assets and liabilities of the Company. Foreign currency translation recorded during the fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021 is based on currency movements specific to the Company’s Combined Financial Statements. The income tax amounts in the Combined Financial Statements have been calculated based on a separate return methodology and presented as if the Company’s operations were reported by separate taxpayers in the jurisdictions in which the Company operates. Following the Separation, the Company’s operating footprint as well as tax return elections and assertions are expected to be different and therefore, the Company’s hypothetical income taxes, as presented in the Combined Financial Statements, are not expected to be indicative of the Company’s future income taxes, which will also be impacted by the Tax Matters Agreement with the Parent. Certain current income tax liabilities related to the Company’s activities included in the Parent’s income tax returns were assumed to be immediately settled with Parent through Net Investment from Parent on the Combined Balance Sheets and reflected in the Combined Statements of Cash Flows as a financing activity. Basis of Presentation Effective April 4, 2023, the Company’s financial statements are presented on a consolidated basis, as J&J completed the Consumer Health Business Transfer on such date. The unaudited financial statements for all periods presented, including the historical results of the Company prior to April 4, 2023, are now referred to as the “Condensed Consolidated Financial Statements”. Prior to April 4, 2023, the Company operated as a segment of the Parent and not as a separate entity. The Company’s financial statements prior to April 4, 2023 were prepared on a combined basis and were derived from the Parent’s historical consolidated financial statements for interim financial reporting, which do not conform in all respects to the requirements of accounting principles generally accepted in the United States of America (“U.S. GAAP”) for annual financial statements. The Condensed Consolidated Balance Sheet as of January 1, 2023 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Accordingly, the accompanying Condensed Consolidated Financial Statements and related notes should be read in conjunction with the audited combined financial statements and related notes as contained in the Company’s final prospectus (the “IPO Prospectus”) filed on May 4, 2023 with the U.S. Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Act,”) relating to the Company’s Registration Statement on Form S-1. The Condensed Consolidated Financial Statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year. Prior to the Kenvue IPO, the Company relied on the Parent’s corporate and other support functions. Therefore, certain corporate and shared costs were allocated to the Company including the assets, liabilities, revenues, and expenses that J&J’s management determined were specifically or primarily identifiable to the Company, as well as direct and indirect costs that were attributable to the operations of the Company. Indirect costs are the costs of support functions that were provided on a centralized or geographic basis by the Parent and its affiliates, which included, but were not limited to, facilities, insurance, logistics, quality, compliance, finance, human resources, benefits administration, procurement support, information technology, legal, corporate strategy, corporate governance, other professional services, and general commercial support functions. Indirect costs were allocated to the Company for the purposes of preparing condensed combined financial statements prior to the Kenvue IPO, based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method, primarily net sales, headcount, or other allocation methodologies that were considered to be a reasonable reflection of the utilization of services provided or benefit received by the Company during the periods presented, depending on the nature of the services received. Management considers that such allocations were made on a reasonable basis consistent with benefits received but may not necessarily be indicative of the costs that would have been incurred if the Company had been operated on a standalone basis for the periods presented. Kenvue’s practice is to establish actual quarterly closing dates using a predetermined fiscal calendar, which allows the business to close its books on Sunday at the end of the period. The Company and the Parent incurred certain non-recurring Separation-related costs in the establishment of Kenvue as a standalone public company. Costs incurred by the Company and those costs incurred by the Parent determined to be for the benefit of the Company are included in the Condensed Consolidated Financial Statements. These non-recurring Separation-related costs were $102 million and $49 million for the fiscal three months ended July 2, 2023 and July 3, 2022, respectively, and $200 million and $59 million for the fiscal six months ended July 2, 2023 and July 3, 2022, respectively. The non-recurring Separation-related costs are included within Selling, general, and administrative expenses. | |
Use of Estimates | Use of Estimates The preparation of Combined Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, trade promotions, rebates, allowances and incentives, product liabilities, income taxes, withholding taxes, depreciation, amortization, employee benefits, contingencies, allocations of cost and expenses from the Parent and its affiliates, and intangible asset and liability valuations. Actual results may or may not differ from those estimates. Use of Estimates The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, trade promotions, rebates, allowances and incentives, product liabilities, income taxes and related valuation allowance, withholding taxes, depreciation, amortization, employee benefits, contingencies, allocations of cost and expenses from the Parent and its affiliates, and intangible asset and liability valuations. Actual results may or may not differ from those estimates. | |
Annual Closing Date | Annual Closing Date The Company follows the concept of a fiscal year, which ends on the Sunday nearest to the end of the month of December. Normally each fiscal year consists of 52 weeks, but every five or six years the fiscal year consists of 53 weeks, and therefore includes additional shipping days, as was the case in fiscal year 2020, and will be the case again in fiscal year 2026. Fiscal year 2022 refers to the fiscal year ended January 1, 2023. Fiscal year 2021 refers to the fiscal year ended January 2, 2022. Fiscal year 2020 refers to the fiscal year ended January 3, 2021. | |
Cash Equivalents | Cash EquivalentsThe Company classifies highly liquid investments with stated maturities of three months or less from date of purchase as cash equivalents. | |
Trade Receivable and Allowance for Credit Losses | Trade Receivable and Allowance for Credit Losses Trade receivables, net are stated net of certain sales provisions and the allowance for credit losses. The Company estimates the current expected credit loss on its receivables based on various factors, including historical credit loss experience, customer credit worthiness, value of collaterals (if any), and any relevant current and reasonably supportable future economic factors. Trade receivable balances are written off against the allowance when it is deemed probable that the trade receivable will not be collected. | |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value and are accounted for using the first-in, first-out method. | |
Property, Plant and Equipment and Depreciation | Property, Plant and Equipment and Depreciation Property, plant and equipment are stated at cost less accumulated depreciation. The Company utilizes the straight-line method of depreciation over the estimated useful lives. Building and building equipment 20 - 30 years Land and leasehold improvements 10 - 20 years Machinery and equipment 2 - 13 years Software 3 - 8 years The Company capitalizes certain computer software and development costs when incurred in connection with developing or obtaining computer software for internal use. Upon retirement or other disposal of property, plant and equipment, the costs and related amounts of accumulated depreciation or amortization are eliminated from the asset and accumulated depreciation accounts, respectively. The difference, if any, between the net asset value and the proceeds are recorded in Other (income) expense, net, operating. | |
Intangible Assets and Goodwill | Intangible Assets Intangible assets are reported at cost, less accumulated amortization and impairments. The Company amortizes intangible assets with a finite life over their respective useful lives on a straight-line basis. The estimated useful lives of patents, trademarks and customer relationships range from 3 years to 40 years and for other intangibles ranges from 20 years to 40 years. The useful lives for customer relationships are estimated based on various customer attributes including customer type, size, geography, length of relationships and nature of relationships. Intangible assets deemed to have indefinite lives are not amortized but are subjected to annual tests of impairment. See Note 4 for further details on Intangible Assets. Goodwill Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. The Combined Balance Sheets reflect goodwill established based on past transactions of the Consumer Health segment allocated to the Company’s operations by the Parent. Goodwill is not amortized but is tested for impairment at least annually in the fourth quarter at the reporting unit level, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If the Company concludes it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed. If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). See Note 4 for further details on Goodwill. | |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, the asset group is tested for recoverability by comparing the carrying value of the asset group to the related estimated undiscounted future cash flows expected to be derived from the asset group, which include the amount and timing of the projected future cash flows. If the expected undiscounted cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value. If quoted market prices are not available, the Company will estimate fair value using a discounted value of estimated future cash flows. No indicators of impairment were present for fiscal years 2021 and 2020. See Note 4 for impairment recorded in fiscal year 2022. | |
Financial Instruments | Financial Instruments The Parent and Company use derivative financial instruments to manage exposure to foreign currency fluctuations. The Company participates in the Parent’s centralized hedging and offsetting programs. The effects of foreign currency derivatives are allocated to the Company based on the portion that is deemed to be associated with the Company’s operations. Additionally, in certain jurisdictions, the Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily related to the foreign exchange rate changes of future intercompany product sales and third-party purchases of materials denominated in a foreign currency. The Company uses interest rate swaps as an instrument to manage interest rate risk related to forecasted fixed rate borrowings. As required by U.S. GAAP, all derivative instruments held by the Company are recorded on the balance sheet at fair value. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement determined using assumptions that market participants would use in pricing an asset or liability. The authoritative literature establishes a three-level hierarchy to prioritize the inputs used in measuring fair value, with Level 1 having the highest priority and Level 3 having the lowest. Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction. Any changes in the fair value of derivatives designated as fair value hedges are recorded in net income. The Parent and Company document all relationships between hedged items and derivatives. The overall risk management strategy includes reasons for undertaking hedge transactions and entering into derivatives. The objectives of this strategy are: (1) minimize foreign currency exposure’s impact on the Company’s financial performance; (2) protect the Company’s cash flow from adverse movements in foreign exchange rates; (3) ensure the appropriateness of financial instruments; (4) manage the enterprise risk associated with financial institutions; and (5) reduce exposure to fluctuation in variable interest rates. See Note 12 to the Combined Financial Statements for further information on fair value instruments. | |
Revenue Recognition and Shipping and Handling | Shipping and Handling Shipping and handling costs incurred were $322 million, $305 million and $295 million in fiscal years 2022, 2021 and 2020, respectively, and are included in Selling, general, and administrative expenses. | Revenue Recognition The Company’s revenue contracts represent a single performance obligation to sell its products to customers. Revenue from the sale of products to customers is recognized at a single point in time when control transfers, which can be on the date of shipment or the date of receipt by the customer depending on the terms of the contract. Net sales exclude taxes collected by the Company on behalf of governmental authorities. In addition, the Company has elected to account for shipping and handling activities as fulfillment costs and includes the shipping and handling fees charged to the customers as a part of the transaction price to be recognized when control of the product transfers. The Company’s global payment terms are typically between 30 to 90 days. Trade promotions, comprised of coupons, product listing allowances, cooperative advertising arrangements, volume-based incentive programs, as well as discounts to customers, rebates, sales incentives, and product returns, are accounted for as variable consideration and recorded as a reduction in sales in the same period as the related sale. To estimate variable consideration, the Company may apply both the “expected value” method and the “most likely amount” method based on the form of variable consideration, after considering which method would provide the best prediction of consideration to be received from the Company’s customers. The redemption cost of consumer coupons is based on historical redemption experience by product and value. Volume-based incentive programs are based on the estimated sales volumes for the incentive period. The related liability is recognized within Accrued rebates, returns and promotions on the Combined Balance Sheets. Sales returns are almost exclusively not resalable, the related reserves are recorded at full sales value and estimated based on historical sales and returns information. See Note 15 to the Combined Financial Statements for further disaggregation of net sales. |
Leases | Leases The Company determines whether an arrangement is a lease at contract inception by establishing if the contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Right of Use (“ROU”) assets and lease liabilities for operating leases are included in Other assets, Accrued liabilities, and Other liabilities on the Combined Balance Sheets. The ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. | |
Advertising | AdvertisingCosts associated with advertising are expensed in the year incurred and are included in Selling, general, and administrative expenses. | |
Product Liability | Product Liability Accruals for product liability claims are recorded, on an undiscounted basis, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on existing information and actuarially determined estimates where applicable. The accruals are adjusted periodically as additional information becomes available. The Company accrues an estimate of the legal defense costs needed to defend each matter when those costs are probable and can be reasonably estimated. To the extent adverse verdicts have been rendered against the Company, the Company does not record an accrual until a loss is determined to be probable and can be reasonably estimated. | |
Research and Development | Research and DevelopmentResearch and development expenses are expensed as incurred and included within Selling, general, and administrative expenses.Research and DevelopmentResearch and development expenses are expensed as incurred and included within Selling, general, and administrative expenses. | |
Income Taxes | Income Taxes Income taxes are recorded based on amounts refundable or payable for the current fiscal year and include the results of any differences between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. The Company estimates deferred tax assets and liabilities based on enacted tax regulations and rates. Future changes in tax laws and rates may affect recorded deferred tax assets and liabilities. U.S. federal, state and foreign income tax payables and receivables are recognized in the Combined Balance Sheets for entities that file separate income tax returns and make direct payments to taxing authorities. U.S. federal, state and foreign income tax payables and receivables for entities that file a combined, consolidated or group income tax return with the Parent are deemed settled with the Parent and are included in the “Net Investment from Parent.” Management establishes valuation allowances on deferred tax assets when it is determined “more likely than not” that some portion or all of the deferred tax assets may not be realized. Management considers positive and negative evidence in evaluating the Company’s ability to realize its deferred tax assets, including its historical results and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. The Company has unrecognized tax benefits for uncertain tax positions. The Company follows U.S. GAAP which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The estimates for these positions are regularly assessed based upon all available information. These estimates may be revised in the future and such changes may have a material additional expense or benefit to the Company’s financial results or its effective tax rate. In the United States, the Tax Cuts and Jobs Act of 2017 (the “TCJA”) enacted in 2017 includes provisions for a tax on global intangible low-taxed income (“GILTI”). GILTI is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets, as provided by the TCJA. In January 2018, the FASB issued guidance that allowed companies to elect as an accounting policy whether to record the tax effects of GILTI in the period the tax liability is generated (i.e., “period cost”) or to provide for deferred tax assets and liabilities related to basis differences that exist at the balance sheet date and are expected to affect the amount of GILTI inclusion in future years upon reversal (i.e., “deferred method”). The Company has elected to account for GILTI under the deferred method. The deferred tax amounts recorded are based on the evaluation of temporary differences that are expected to reverse as GILTI is incurred in future periods. See Note 11 to the Combined Financial Statements for further information regarding income taxes. | |
Stock-Based Compensation | Stock-Based CompensationCertain employees of the Company participate in the Parent’s stock-based compensation plans. Stock-based compensation expense related to these plans is recognized based on specific identification of cost related to the Company’s employees. The Company also receives allocated stock-based compensation expense relating to employees of central support functions provided by the Parent. | |
Foreign Currency Translation | Foreign Currency Translation For translation of its international operations, the Company has determined that the local currencies are the functional currencies except those in highly inflationary economies, which are defined as those which have had compound cumulative rates of inflation of 100% or more during the past three years, or where a substantial portion of its cash flows are not in the local currency. For the majority of the Company’s international operations the local currency is the functional currency. | |
Recently Issued Accounting Standards, Not Adopted as of January 1, 2023 | Recently Issued Accounting Standards, Not Adopted as of January 1, 2023 ASU 2022-04: Liabilities-Supplier Finance Programs (Topic 405-50) – Disclosure of Supplier Finance Program Obligations Recently Adopted Accounting Standards Accounting Standards Update 2022-04: Liabilities-Supplier Finance Programs (Topic 405-50) – Disclosure of Supplier Finance Program Obligations The Company adopted the standard as of the beginning of fiscal year 2023, which requires that a buyer in a supplier finance program disclose additional information about the program for financial statement users. The Company has facilitated a voluntary supply chain financing program to provide some of its suppliers with the opportunity to sell receivables due from the Company (the Company’s accounts payables) to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. The Company is not a party to the arrangements between the suppliers and the third-party financial institutions. The Company’s obligations to its suppliers, including amounts due, and scheduled payment dates (which have general payment terms of 90 days), are not affected by a participating supplier’s decision to participate in the program. Prior to the establishment of the Company’s supplier financing program in the second quarter of 2023, the Company participated in the Parent’s supplier financing program. The terms of the Company’s supplier financing program are substantially the same as the Parent’s program. As of July 2, 2023 and January 1, 2023, the Company’s accounts payable balances included $265 million and $293 million, respectively, related to invoices from suppliers participating in the supplier finance program. Recently Issued Accounting Standards Not Yet Adopted There were no new accounting standards issued during the fiscal six months ended July 2, 2023 that have had a material impact on the Company’s Condensed Consolidated Financial Statements. | |
Reclassifications | Reclassifications Certain prior period amounts have been reclassified to conform to current year presentation. Reclassifications Certain prior period amounts have been reclassified to conform to current year presentation. For additional information on the realignment of certain allocations in segment financial results, see Note 14, “Segments of Business”. |
Description of the Company an_4
Description of the Company and Summary of Significant Accounting Policies (Policies) | 3 Months Ended | 6 Months Ended |
Apr. 02, 2023 | Jul. 02, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Business Segments | The Company is organized into three business segments: Self Care, Skin Health and Beauty, and Essential Health. The Self Care segment includes a broad product range such as cough, cold and allergy, pain care, and other Self Care (digestive health, smoking cessation, and other) products. The Skin Health and Beauty segment is focused on face and body care and hair, sun, and other products. The Essential Health segment includes oral care, baby care, and other Essential Health (women’s health and wound care) products. | Reportable Segments Commencing in fiscal year 2022, the Company began operating in the following reportable segments: (i) Self Care, (ii) Skin Health and Beauty and (iii) Essential Health. Prior to 2022, the Company operated as one reportable segment. All periods have been presented to conform to the current segment reporting structure. |
Basis of Presentation | Basis of Presentation The Company has historically operated as part of the Parent and not as a separate entity. These Combined Financial Statements of the Company have been derived from the consolidated financial statements of the Parent to present the Combined Balance Sheets as of January 1, 2023 and January 2, 2022 and the related Combined Statements of Operations, Comprehensive Income (Loss), Equity and Cash Flows for fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021 as if the Company had been operated on a standalone basis for the periods presented. The Combined Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the Parent’s historical accounting policies, by aggregating financial information from the components of the Company and the Parent’s accounting records directly attributable to the Company. All intercompany transactions and balances within the Company have been eliminated. All transactions between the Company and the Parent are considered to be effectively settled for cash in the Combined Financial Statements at the time the transaction is recorded. The effects of the settlement of these transactions between the Company and the Parent are reflected in the Combined Statements of Cash Flows as “Net transfers from (to) the Parent” within the financing activities, and in the Combined Balance Sheets and Combined Statements of Equity as “Net Investment from Parent”. The Combined Financial Statements of the Company include the assets, liabilities, revenues and expenses that management has determined are specifically or primarily identifiable to the Company, as well as direct and indirect costs that are attributable to the operations of the Company. Indirect costs are the costs of support functions that are provided on a centralized or geographic basis by the Parent and its affiliates, which include, but are 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 have been allocated to the Company for the purposes of preparing the Combined Financial Statements based on a specific identification basis or, when specific identification is not practicable, a proportional cost allocation method, primarily net sales, headcount, or other allocation methodologies that are 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 have been 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. The Company is incurring certain non-recurring Separation-related costs in its establishment as a standalone public company and those costs determined to be for the benefit of the Company are included in the Combined Financial Statements. These non-recurring Separation-related costs were $213 million for fiscal year 2022 and are included within Selling, general, and administrative expenses. The Company did not incur Separation-related costs in fiscal year 2021 or 2020. A significant number of personal injury claims alleging that talc causes cancer have been made against Johnson & Johnson Consumer Inc. (“Old JJCI”) and the Parent arising out of the use of body powders containing talc, primarily Johnson’s Baby Powder. Upon the 2021 Corporate Restructuring (as defined below), the Company no longer reflects the impact of the Talc-Related Liabilities (as defined below). See Note 13. Cash generated from the Company’s operations is generally managed by the Parent’s centralized treasury function and is swept into the Parent’s and its affiliates’ bank accounts. Cash and cash equivalents on the Combined Balance Sheets represent balances in accounts specifically identifiable to the Company that are not swept into the Parent’s and its affiliates’ bank accounts. The Parent’s third-party interest expense has not been allocated for any of the periods presented 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’s equity balance in these financial statements represents the excess of total assets over total liabilities. Equity is impacted by changes in comprehensive income, contributions from or to the Parent which are the result of treasury activities and net funding provided by or distributed to the Parent. The Parent calculates foreign currency translation on its consolidated assets and liabilities, which include assets and liabilities of the Company. Foreign currency translation recorded during the fiscal years ended January 1, 2023, January 2, 2022 and January 3, 2021 is based on currency movements specific to the Company’s Combined Financial Statements. The income tax amounts in the Combined Financial Statements have been calculated based on a separate return methodology and presented as if the Company’s operations were reported by separate taxpayers in the jurisdictions in which the Company operates. Following the Separation, the Company’s operating footprint as well as tax return elections and assertions are expected to be different and therefore, the Company’s hypothetical income taxes, as presented in the Combined Financial Statements, are not expected to be indicative of the Company’s future income taxes, which will also be impacted by the Tax Matters Agreement with the Parent. Certain current income tax liabilities related to the Company’s activities included in the Parent’s income tax returns were assumed to be immediately settled with Parent through Net Investment from Parent on the Combined Balance Sheets and reflected in the Combined Statements of Cash Flows as a financing activity. Basis of Presentation Effective April 4, 2023, the Company’s financial statements are presented on a consolidated basis, as J&J completed the Consumer Health Business Transfer on such date. The unaudited financial statements for all periods presented, including the historical results of the Company prior to April 4, 2023, are now referred to as the “Condensed Consolidated Financial Statements”. Prior to April 4, 2023, the Company operated as a segment of the Parent and not as a separate entity. The Company’s financial statements prior to April 4, 2023 were prepared on a combined basis and were derived from the Parent’s historical consolidated financial statements for interim financial reporting, which do not conform in all respects to the requirements of accounting principles generally accepted in the United States of America (“U.S. GAAP”) for annual financial statements. The Condensed Consolidated Balance Sheet as of January 1, 2023 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Accordingly, the accompanying Condensed Consolidated Financial Statements and related notes should be read in conjunction with the audited combined financial statements and related notes as contained in the Company’s final prospectus (the “IPO Prospectus”) filed on May 4, 2023 with the U.S. Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Act,”) relating to the Company’s Registration Statement on Form S-1. The Condensed Consolidated Financial Statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair statement of the results for the periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year. Prior to the Kenvue IPO, the Company relied on the Parent’s corporate and other support functions. Therefore, certain corporate and shared costs were allocated to the Company including the assets, liabilities, revenues, and expenses that J&J’s management determined were specifically or primarily identifiable to the Company, as well as direct and indirect costs that were attributable to the operations of the Company. Indirect costs are the costs of support functions that were provided on a centralized or geographic basis by the Parent and its affiliates, which included, but were not limited to, facilities, insurance, logistics, quality, compliance, finance, human resources, benefits administration, procurement support, information technology, legal, corporate strategy, corporate governance, other professional services, and general commercial support functions. Indirect costs were allocated to the Company for the purposes of preparing condensed combined financial statements prior to the Kenvue IPO, based on a specific identification basis or, when specific identification was not practicable, a proportional cost allocation method, primarily net sales, headcount, or other allocation methodologies that were considered to be a reasonable reflection of the utilization of services provided or benefit received by the Company during the periods presented, depending on the nature of the services received. Management considers that such allocations were made on a reasonable basis consistent with benefits received but may not necessarily be indicative of the costs that would have been incurred if the Company had been operated on a standalone basis for the periods presented. Kenvue’s practice is to establish actual quarterly closing dates using a predetermined fiscal calendar, which allows the business to close its books on Sunday at the end of the period. The Company and the Parent incurred certain non-recurring Separation-related costs in the establishment of Kenvue as a standalone public company. Costs incurred by the Company and those costs incurred by the Parent determined to be for the benefit of the Company are included in the Condensed Consolidated Financial Statements. These non-recurring Separation-related costs were $102 million and $49 million for the fiscal three months ended July 2, 2023 and July 3, 2022, respectively, and $200 million and $59 million for the fiscal six months ended July 2, 2023 and July 3, 2022, respectively. The non-recurring Separation-related costs are included within Selling, general, and administrative expenses. | |
Use of Estimates | Use of Estimates The preparation of Combined Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, trade promotions, rebates, allowances and incentives, product liabilities, income taxes, withholding taxes, depreciation, amortization, employee benefits, contingencies, allocations of cost and expenses from the Parent and its affiliates, and intangible asset and liability valuations. Actual results may or may not differ from those estimates. Use of Estimates The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when accounting for sales discounts, trade promotions, rebates, allowances and incentives, product liabilities, income taxes and related valuation allowance, withholding taxes, depreciation, amortization, employee benefits, contingencies, allocations of cost and expenses from the Parent and its affiliates, and intangible asset and liability valuations. Actual results may or may not differ from those estimates. | |
Debt Discounts and Premiums, Issuance Costs, and Deferred Financing Costs | Debt Discounts and Premiums, Issuance Costs, and Deferred Financing Costs Debt issuance costs and discounts are presented as a reduction of Long-term debt and are amortized as a component within Interest expense, net on the Company’s Condensed Consolidated Statements of Operations over the term on the related debt using the effective interest method. | |
Research and Development | Research and DevelopmentResearch and development expenses are expensed as incurred and included within Selling, general, and administrative expenses.Research and DevelopmentResearch and development expenses are expensed as incurred and included within Selling, general, and administrative expenses. | |
Variable Interest Entities and Net Economic Benefit Arrangements | Variable Interest Entities and Net Economic Benefit Arrangements When the Company makes an initial investment in or establishes other variable interests in an entity, the entity is first evaluated to determine if it is a Variable Interest Entity (“VIE”) and if the Company is the primary beneficiary of the VIE, and therefore subject to consolidation regardless of percentage ownership. The primary beneficiary of a VIE is a party that meets both of the following criteria: (1) it has the power to direct the activities that most significantly impact the economic performance of the VIE; and (2) it has the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. Periodically, the Company assesses whether any change in its interest in or relationship with the entity affects the determination as to whether the entity is a VIE, and, if so, whether the Company is the primary beneficiary. In connection with the Kenvue IPO, the Parent 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 | |
Reclassifications | Reclassifications Certain prior period amounts have been reclassified to conform to current year presentation. Reclassifications Certain prior period amounts have been reclassified to conform to current year presentation. For additional information on the realignment of certain allocations in segment financial results, see Note 14, “Segments of Business”. | |
Recently Adopted Accounting Standards and Recently Issued Accounting Standards Not Yet Adopted | Recently Issued Accounting Standards, Not Adopted as of January 1, 2023 ASU 2022-04: Liabilities-Supplier Finance Programs (Topic 405-50) – Disclosure of Supplier Finance Program Obligations Recently Adopted Accounting Standards Accounting Standards Update 2022-04: Liabilities-Supplier Finance Programs (Topic 405-50) – Disclosure of Supplier Finance Program Obligations The Company adopted the standard as of the beginning of fiscal year 2023, which requires that a buyer in a supplier finance program disclose additional information about the program for financial statement users. The Company has facilitated a voluntary supply chain financing program to provide some of its suppliers with the opportunity to sell receivables due from the Company (the Company’s accounts payables) to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. The Company is not a party to the arrangements between the suppliers and the third-party financial institutions. The Company’s obligations to its suppliers, including amounts due, and scheduled payment dates (which have general payment terms of 90 days), are not affected by a participating supplier’s decision to participate in the program. Prior to the establishment of the Company’s supplier financing program in the second quarter of 2023, the Company participated in the Parent’s supplier financing program. The terms of the Company’s supplier financing program are substantially the same as the Parent’s program. As of July 2, 2023 and January 1, 2023, the Company’s accounts payable balances included $265 million and $293 million, respectively, related to invoices from suppliers participating in the supplier finance program. Recently Issued Accounting Standards Not Yet Adopted There were no new accounting standards issued during the fiscal six months ended July 2, 2023 that have had a material impact on the Company’s Condensed Consolidated Financial Statements. |
Description of the Company an_5
Description of the Company and Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Trade Receivable and Allowance for Credit Losses | (Dollars in Millions) 2022 2021 2020 Allowance for credit losses, beginning of period $ (32) $ (37) $ (35) Provision (9) (4) (9) Utilization 5 8 6 Currency translation adjustment 1 1 1 Allowance for credit losses, end of period $ (35) $ (32) $ (37) |
Property, Plant and Equipment | Property, plant and equipment are stated at cost less accumulated depreciation. The Company utilizes the straight-line method of depreciation over the estimated useful lives. Building and building equipment 20 - 30 years Land and leasehold improvements 10 - 20 years Machinery and equipment 2 - 13 years Software 3 - 8 years At the end of fiscal years 2022 and 2021, property, plant and equipment at cost and accumulated depreciation were: (Dollars in Millions) 2022 2021 Machinery and equipment $ 2,280 $ 2,416 Buildings and building equipment 1,709 1,744 Software 1,329 1,303 Construction in progress 307 228 Land and land improvements 75 79 Total property, plant and equipment, gross $ 5,700 $ 5,770 Less: accumulated depreciation (3,880) (3,943) Total property, plant and equipment, net $ 1,820 $ 1,827 |
Schedule of Lease Maturity | The estimated operating lease future payments before tax for the five succeeding years and thereafter is approximately: (Dollars in Millions) 2023 $ 31 2024 25 2025 14 2026 12 2027 9 Thereafter 63 Total 154 Less: Imputed Interest (38) Total current and non-current lease liability $ 116 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Inventory Disclosure [Abstract] | |
Summary of Inventories | At the end of fiscal years 2022 and 2021, inventories were comprised of: (Dollars in Millions) 2022 2021 Raw materials and supplies $ 351 $ 264 Goods in process 123 99 Finished goods 1,752 1,339 Total inventories $ 2,226 $ 1,702 As of July 2, 2023 and January 1, 2023, inventories were comprised of: (Dollars in Millions) July 2, 2023 January 1, 2023 Raw materials and supplies $ 299 $ 351 Goods in process 134 123 Finished goods 1,593 1,752 Total inventories $ 2,026 $ 2,226 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, plant and equipment are stated at cost less accumulated depreciation. The Company utilizes the straight-line method of depreciation over the estimated useful lives. Building and building equipment 20 - 30 years Land and leasehold improvements 10 - 20 years Machinery and equipment 2 - 13 years Software 3 - 8 years At the end of fiscal years 2022 and 2021, property, plant and equipment at cost and accumulated depreciation were: (Dollars in Millions) 2022 2021 Machinery and equipment $ 2,280 $ 2,416 Buildings and building equipment 1,709 1,744 Software 1,329 1,303 Construction in progress 307 228 Land and land improvements 75 79 Total property, plant and equipment, gross $ 5,700 $ 5,770 Less: accumulated depreciation (3,880) (3,943) Total property, plant and equipment, net $ 1,820 $ 1,827 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | At the end of fiscal years 2022 and 2021, the gross and net amounts of intangible assets were: 2022 2021 (Dollars in Millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Patents and trademarks $ 4,400 $ (1,485) $ 2,915 $ 4,705 $ (1,350) $ 3,355 Customer relationships 2,127 (1,063) 1,064 2,265 (1,021) 1,244 Other intangibles 1,343 (650) 693 1,377 (628) 749 Total definite-lived intangible assets 7,870 (3,198) 4,672 8,347 (2,999) 5,348 Indefinite-lived intangible assets: Trademarks 5,122 — 5,122 5,291 — 5,291 Other 59 — 59 62 — 62 Total intangible assets, net $ 13,051 $ (3,198) $ 9,853 $ 13,700 $ (2,999) $ 10,701 As of July 2, 2023 and January 1, 2023, the gross and net amounts of intangible assets were: July 2, 2023 January 1, 2023 (Dollars in Millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Patents and trademarks $ 4,383 $ (1,583) $ 2,800 $ 4,400 $ (1,485) $ 2,915 Customer relationships 2,099 (1,087) 1,012 2,127 (1,063) 1,064 Other intangibles 1,348 (671) 677 1,343 (650) 693 Total definite-lived intangible assets $ 7,830 $ (3,341) $ 4,489 $ 7,870 $ (3,198) $ 4,672 Indefinite-lived intangible assets: Trademarks 5,128 — 5,128 5,122 — 5,122 Other 61 — 61 59 — 59 Total intangible assets, net $ 13,019 $ (3,341) $ 9,678 $ 13,051 $ (3,198) $ 9,853 |
Intangible Asset Amortization Expense | The estimated amortization expense before tax for the five succeeding years is approximately: (Dollars in Millions) 2023 2024 2025 2026 2027 $ 314 $ 304 $ 280 $ 276 $ 272 Amortization expense, which was included in Cost of Sales, for the Company’s amortizable assets was as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Trademarks $ 53 $ 48 $ 94 $ 98 Other intangible assets 26 41 66 84 Total Amortization expense $ 79 $ 89 $ 160 $ 182 |
Goodwill | Goodwill by reportable segment is as follows: (Dollars in Millions) Consumer Health Business Self Care Skin Health and Beauty Essential Health Total Goodwill at January 3, 2021 $ 10,326 $ — $ — $ — $ 10,326 Currency translation/other (516) — — — (516) Goodwill at January 2, 2022 $ 9,810 $ — $ — $ — $ 9,810 Currency translation/other (664) — — — (664) Goodwill at July 3, 2022 $ 9,146 $ — $ — $ — $ 9,146 Realignment of segment goodwill (9,146) 5,193 2,334 1,619 — Currency translation/other — 1 31 7 39 Goodwill at January 1, 2023 $ — $ 5,194 $ 2,365 $ 1,626 $ 9,185 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 (39) (76) 11 (104) Goodwill at July 2, 2023 $ 5,155 $ 2,289 $ 1,637 $ 9,081 |
Compensation Related Costs, Ret
Compensation Related Costs, Retirement Benefits (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Retirement Benefits [Abstract] | |
Schedule of Costs of Retirement Plans | At the end of fiscal years 2022 and 2021, employee related obligations recorded on the Combined Balance Sheets were: (Dollars in Millions) 2022 2021 Pension benefits $ 216 $ 303 Postretirement benefits 5 5 Total employee obligations 221 308 Less: current benefits in Accrued liabilities (7) (6) Employee related obligations - non-current $ 214 $ 302 |
Pensions and Other Benefit Pl_2
Pensions and Other Benefit Plans (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Retirement Benefits [Abstract] | |
Components of Net Periodic Benefit Cost | Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans sponsored by the Company for 2022, 2021 and 2020 include the following components: Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2020 2022 2021 2020 Service cost $ 8 $ 7 $ 6 $ — $ — $ — Interest cost 4 2 3 — 1 — Recognized actuarial losses (gain) 4 6 5 — (1) — Curtailments and settlements — — 1 — — — Expected return on plan assets (1) — — — — — Net periodic benefit cost $ 15 $ 15 $ 15 $ — $ — $ — Net periodic benefit costs for the Company’s defined benefit retirement plans sponsored by the Company for the fiscal three and six months ended July 2, 2023 and July 3, 2022, included the following components: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Service cost $ 5 $ 2 $ 10 $ 4 Interest cost 7 1 10 2 Recognized actuarial gain — 1 — 2 Expected return on plan assets (7) — (10) — Net periodic benefit cost $ 5 $ 4 $ 10 $ 8 |
Defined Benefit Plan, Assumptions | The following table represents the weighted-average actuarial assumptions: Retirement Plans Other Benefit Plans Worldwide Benefit Plans 2022 2021 2020 2022 2021 2020 Net Periodic Benefit Cost Service cost discount rate 2.3 % 1.2 % 1.5 % — % — % — % Interest cost discount rate 3.1 % 0.7 % 1.0 % — % — % — % Rate of increase in compensation levels 2.5 % 2.7 % 2.7 % — % — % — % Expected long-term rate of return on plan assets 2.9 % 2.1 % 2.5 % — % — % — % Benefit Obligation Discount rate 4.2 % 1.4 % 1.1 % 12.3 % 11.5 % 13.3 % Rate of increase in compensation levels 2.7 % 2.7 % 2.7 % — % — % — % |
Schedule of Amounts Recognized in Other Comprehensive Income (Loss) | Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2022 2021 Amounts Recognized in Net Periodic Benefit Cost and Other Comprehensive Income Net periodic benefit cost $ 15 $ 15 $ — $ — Net actuarial gain (1) (82) (21) — — Amortization of net actuarial loss (4) (6) — — Effect of exchange rates (6) (7) — 1 Total (income)/loss recognized in other comprehensive income, before tax $ (92) $ (34) $ — $ 1 Total recognized in net periodic benefit cost and other comprehensive income $ (77) $ (19) $ — $ 1 _________________ (1) The actuarial gain for retirement plans in 2022 was primarily related to increases in discount rates |
Schedule of Expected Benefit Payments | The following table displays the projected future benefit payments from the Company’s defined benefit retirement plans and other benefit plans: (Dollars in Millions) 2023 2024 2025 2026 2027 2028- 2032 Projected future benefit payments Retirement plans $ 10 $ 11 $ 12 $ 12 $ 13 $ 80 Other benefit plans $ — $ — $ — $ — $ — $ 2 |
Defined Benefit Plan, Plan Assets, Allocation | The Company’s retirement plan asset allocation at the end of 2022 and 2021 and target allocations for 2023 are as follows: Percent of Plan Assets Target Allocation Worldwide Retirement Plans 2022 2021 2023 Equity securities 42 % — % 42 % Debt securities 56 % — % 56 % Other assets 2 % 100 % 2 % Total plan assets 100 % 100 % 100 % |
Schedule of Allocation of Plan Assets | The following table sets forth the Retirement Plans' investments measured at fair value as of January 1, 2023 and January 2, 2022: Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs Significant Unobservable Inputs Total Assets (Dollars in Millions) 2022 2021 2022 2021 2022 2021 2022 2021 Debt instruments $ — $ — $ 9 $ — $ — $ — $ 9 $ — Equity securities 9 — — — — — 9 — Other assets — — — — 1 — 1 — Investments at fair value $ 9 $ — $ 9 $ — $ 1 $ — $ 19 $ — |
Defined Benefit Plan, Plan with Projected Benefit Obligation in Excess of Plan Assets | The following table sets forth information related to the benefit obligation and the fair value of plan assets at fiscal year-end 2022 and 2021 for the defined benefit retirement plans and other benefit plans sponsored by the Company: Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2022 2021 Change in Benefit Obligation Projected benefit obligation - beginning of year $ 303 $ 347 $ 5 $ 5 Service cost 8 7 — — Interest cost 4 2 — 1 Actuarial gain (1) (82) (21) — — Curtailments, settlements & restructuring — — — — Benefits paid from plan (8) (9) — — Effect of exchange rates (19) (23) — (1) Other (2) 29 — — — Projected benefit obligation - end of year $ 235 $ 303 $ 5 $ 5 Change in Plan Assets Plan assets at fair value - beginning of year $ — $ — $ — $ — Company contributions 9 9 — — Benefits paid from plan assets (8) (9) — — Actual return on plan assets (1) — — — Effect of exchange rates (2) — — — Transfers 21 — — Plan assets at fair value - end of year 19 — — — Funded status - end of year (216) (303) — — Amounts Recognized in the Company’s Balance Sheet consist of the following: Accrued liabilities (7) (6) — — Employee related obligations - non-current (209) (297) (5) (5) Total recognized in the Combined Balance Sheets - end of year (216) (303) (5) (5) Amounts Recognized in Accumulated Other Comprehensive Income consist of the following: Net actuarial (gain) loss (15) 79 (4) (4) Prior service cost 4 2 — — Total before tax effects (11) 81 (4) (4) Accumulated Benefit Obligations - end of year $ 204 $ 262 $ 3 $ 3 __________________ (1) The actuarial gain for retirement plans in 2022 was primarily related to increases in discount rates (2) This amount includes $25 million related to new unfunded pension plans included in the balance during 2022 from the Parent and other pension plans. See Note 9. |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Equity [Abstract] | |
Components of Accumulated Other Comprehensive Income | Components of other comprehensive (loss) income consist of the following: (Dollars in Millions) Foreign Currency Translation Employee Benefit Plans Gain/ (Loss) On Derivatives & Hedge Total Accumulated Other Comprehensive (Loss) Income December 29, 2019 $ (4,350) $ (65) $ (2) $ (4,417) Net 2020 changes 855 (11) 1 845 January 3, 2021 (3,495) (76) (1) (3,572) Net 2021 changes (926) 25 — (901) January 2, 2022 (4,421) (51) (1) (4,473) Net 2022 changes (1,053) 63 10 (980) January 1, 2023 $ (5,474) $ 12 $ 9 $ (5,453) Components of other comprehensive loss consisted of the following: (Dollars in Millions) Foreign Currency Translation (1) Employee Benefit Plans (2) Gain On Cash Flow Hedges (3) Total Accumulated Other Comprehensive Loss April 2, 2023 $ (5,313) $ 26 $ 48 $ (5,239) Net change (177) (83) (8) (268) July 2, 2023 $ (5,490) $ (57) $ 40 $ (5,507) April 3, 2022 $ (4,701) $ (48) $ (5) $ (4,754) Net change (835) 1 1 (833) July 3, 2022 $ (5,536) $ (47) $ (4) $ (5,587) _________________ (1) Foreign currency translation adjustments for the fiscal three months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $30 million and $65 million, respectively. Income taxes on foreign currency translation relate to tax impact on prior earnings that are not permanently reinvested and will be repatriated in the future. (2) Employee benefit plans for the fiscal three months ended July 2, 2023 were net of benefit from taxes of $18 million. Net change for the fiscal three months ended July 2, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pensions plans by the Parent to the Company. (3) Gain on derivatives and hedges for the fiscal three months ended July 2, 2023 were net of benefit from taxes of $4 million. (Dollars in Millions) Foreign Currency Translation (1) Employee Benefit Plans (2) Gain On Cash Flow Hedges (3) Total Accumulated Other Comprehensive Loss January 1, 2023 $ (5,474) $ 12 $ 9 $ (5,453) Net change (16) (69) 31 (54) July 2, 2023 $ (5,490) $ (57) $ 40 $ (5,507) January 2, 2022 $ (4,421) $ (51) $ (1) $ (4,473) Net change (1,115) 4 (3) (1,114) July 3, 2022 $ (5,536) $ (47) $ (4) $ (5,587) _________________ (1) Foreign currency translation adjustments for the fiscal six months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $9 million and $77 million, respectively. Income taxes on foreign currency translation relate to tax impact on prior earnings that are not permanently reinvested and will be repatriated in the future. (2) Employee benefit plans for the fiscal six months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $17 million and $1 million, respectively. Net change for the fiscal six months ended July 2, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pensions plans by the Parent to the Company. (3) Gain on derivatives and hedges for the fiscal six months ended July 2, 2023 were net of provision for taxes of $9 million. |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | The components and classification of stock-based compensation expense related to stock options, Restricted Stock Units (“RSUs”), and Performance Stock Units (“PSUs”) directly attributable to those employees specifically identified as employees of the Company and allocations from the Parent for fiscal years 2022, 2021 and 2020 were as follows: (Dollars in Millions) 2022 2021 2020 Stock options $ 43 $ 41 $ 37 RSUs 74 73 67 PSUs 20 27 11 Stock-based compensation expense 137 141 115 Cost of sales 30 33 29 Selling, general and administrative expenses 107 108 86 Stock-based compensation expense $ 137 $ 141 $ 115 The components and classification of stock-based compensation expense related to stock options, RSUs, and PSUs directly attributable to those employees specifically identified as employees of the Company and allocations from the Parent for the fiscal three and six months ended July 2, 2023 and July 3, 2022, were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cost of sales $ 12 $ 10 $ 16 $ 18 Selling, general, and administrative expenses 26 31 57 58 Stock-based compensation expense $ 38 $ 41 $ 73 $ 76 |
Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions | The fair value was estimated based on the weighted average assumptions of: 2022 2021 2020 Risk-free rate 2.0 % 0.8 % 1.5 % Expected volatility 18.0 % 18.6 % 15.3 % Expected life (in years) 7 7 7 Expected dividend yield 2.7 % 2.5 % 2.6 % |
Share-Based Payment Arrangement, Option, Activity | A summary of option activity under the Plans as of January 1, 2023, and changes during the year is presented below: Aggregate Intrinsic Value (Shares in Thousands) Outstanding Shares Weighted Average Exercise Price (Dollars in Millions) Shares at January 2, 2022 8,657 132.58 $ 333 Options granted 1,783 165.89 Options exercised (1,018) 112.53 Options canceled/forfeited/adjusted (1) (1,201) 114.19 Shares at January 1, 2023 8,221 $ 144.03 $ 268 Options vested and expected to vest at January 1, 2023 8,017 $ 143.55 $ 265 __________________ (1) Includes employee transfers in and out. |
Share-Based Payment Arrangement, Option, Exercise Price Range | The following table summarizes stock options outstanding and exercisable at January 1, 2023: (Shares in Thousands) Outstanding Exercisable Exercise Price Range Options Average Life (1) Weighted Average Exercise Price Options Weighted Average Exercise Price $72.54-$100.48 475 1.6 $ 94.95 476 $ 94.95 $101.87-$115.67 1,062 3.7 109.51 1,062 109.51 $129.51-$141.06 1,766 5.7 130.94 1,753 130.93 $151.41-$164.62 3,139 7.6 158.11 — — $164.63-$165.89 1,779 7.6 165.89 — — 8,221 6.7 $ 144.03 3,291 $ 118.83 __________________ (1) Average contractual life remaining in years |
Share-Based Payment Arrangement, Activity | A summary of the unvested restricted share units and performance share units activity under the Plans as of January 1, 2023 is presented below: (Shares in Thousands) Outstanding Restricted Share Units Outstanding Performance Share Units Shares at January 2, 2022 1,206 198 Granted 475 85 Issued (364) (28) Canceled/forfeited/adjusted (1) (87) (34) Shares at January 1, 2023 1,230 221 __________________ (1) Includes employee transfers in and out. |
Related Parties (Tables)
Related Parties (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | These allocations (excluding stock-based compensation expense), net of costs charged to the Parent’s affiliates are reflected in the Combined Statements of Operations as follows: (Dollars in Millions) 2022 2021 2020 Cost of sales $ 149 $ 182 $ 166 Selling, general, and administrative expenses 679 649 652 Total $ 828 $ 831 $ 818 (Dollars in Millions) 2022 2021 2020 Cash pooling and general financing activities $ (2,568) $ (832) $ (4,414) Corporate cost allocations 828 831 818 Taxes deemed settled with the Parent 78 44 151 Allocated derivative and hedging gain (losses) 65 (36) (1) Net transfers (to) from the Parent as reflected in the Combined Statements of Cash Flows (1,597) 7 (3,446) Stock-based compensation expense 137 141 115 Talc liability transferred to Parent, net of related deferred taxes ($0, $251, $0) — 765 — Pension liabilities transferred from the Parent (25) — — Net transfers (to) from the Parent as reflected in the Combined Statements of Equity $ (1,485) $ 913 $ (3,331) These allocations (excluding stock-based compensation expense), net of costs charged to the Parent’s affiliates reflected on the Company’s Condensed Consolidated Statements of Operations for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cost of sales $ 16 $ 40 $ 25 $ 76 Selling, general, and administrative expenses 33 173 120 330 Total $ 49 $ 213 $ 145 $ 406 The components of Net transfers (to) from the Parent for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cash pooling and general financing activities $ (37) $ (916) $ (446) $ (1,324) Corporate cost allocations 49 213 145 406 Taxes deemed settled with the Parent — 1 27 1 Allocated derivative and hedging gains — 26 — 25 Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Cash Flows $ 12 $ (676) $ (274) $ (892) Stock-based compensation expense (1) — 41 — 76 Other (2) — (34) — Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Equity $ 10 $ (635) $ (308) $ (816) __________________ (1) Stock-based compensation expense is separately shown within the Condensed Consolidated Statement of Equity in fiscal year 2023, and therefore no longer a reconciling item between the Condensed Consolidated Statement of Equity and the Condensed Consolidated Statement of Cash Flows. The Company had the following balances and transactions with J&J and its affiliates, primarily in connection with the Tax Matters Agreement, Transition Services Agreement and the Transition Manufacturing Agreement, reported on the Company’s Condensed Consolidated Financial Statements: (Dollars in Millions) July 2, 2023 Accounts payable $ 537 Prepaid expenses and other receivables $ 346 Other assets $ 94 Other liabilities $ 193 Fiscal Three Months Ended (Dollars in Millions) July 2, 2023 Cost of sales $ 39 Selling, general, and administrative expenses $ 47 |
Other (income) expense, net, _2
Other (income) expense, net, operating and Other expense (income), net (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Other Income and Expenses [Abstract] | |
Schedule of Other Operating Cost and Expense, by Component | Other (income) expense, net, operating consisted of: (Dollars in Millions) 2022 2021 2020 Litigation (income) expense (1) $ (7) $ 92 $ 3,967 Royalty income (2) (39) (89) (100) Other (3) 23 12 4 Total Other (income) expense, net, operating $ (23) $ 15 $ 3,871 __________________ (1) Litigation expense includes $154 million and 4,029 million of Talc-Related costs for the fiscal year 2021 and 2020, respectively, as well as $74 million of beneficial settlements for Brazil VAT legal resolution for fiscal year 2021. (2) In connection with the Old JJCI corporate restructuring starting in October 2021, rights of Old JJCI and its affiliates to receive four streams of royalties payable from certain third parties were transferred to Royalty A&M LLC, an indirect wholly owned subsidiary of the Parent. (3) Other consists primarily of (gains) losses on asset disposals, certain restructuring expenses (Note 16), intangible impairment (Note 4), and miscellaneous (income) expenses. Other operating expense (income), net for the fiscal three and six months ended July 2, 2023 and July 3, 2022 consisted of: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Litigation expense $ 21 $ 7 20 $ 7 Royalty income (1) (13) (8) (20) (Gain)/loss on disposal of fixed assets — — (9) 2 Net economic benefits from deferred markets (1) 24 — 24 — Contingent liability reversal (2) (43) — (43) — Other — 19 — 19 Total Other operating expense (income), net $ 1 $ 13 $ (16) $ 8 __________________ (1) Includes income taxes and service fees to be paid to J&J under the net economic benefit arrangements. (2) Includes the reversal of a contingent liability that was no longer considered to be probable. |
Schedule of Other Nonoperating Income (Expense) | Other expense (income), net consisted of: (Dollars in Millions) 2022 2021 2020 Currency losses on transactions $ 42 $ 20 $ 40 Other (1) (4) (25) (3) Total Other expense (income), net $ 38 $ (5) $ 37 __________________ (1) Other consists primarily of business disposals, gains and losses on investments, other than service cost components of net periodic benefit costs, and miscellaneous non-operating (income) expenses. Other expense (income), net for the fiscal three and six months ended July 2, 2023 and July 3, 2022 consisted of: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Currency (gains)/losses on transactions $ 12 $ 5 $ 28 $ (2) Other (1) (2) (10) 12 (4) Total Other expense (income), net $ 10 $ (5) $ 40 $ (6) __________________ (1) Other consists primarily of gains and losses on investments, other than service cost components of net periodic benefit costs, and miscellaneous non-operating (income) expenses. |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Income Tax Disclosure [Abstract] | |
Provision For Taxes on Income | The provision for taxes on income consists of: (Dollars in Millions) 2022 2021 2020 Currently payable: U.S. taxes $ 75 $ 8 $ 308 International taxes 318 318 356 Total current taxes 393 326 664 Deferred: U.S. taxes 205 627 (741) International taxes (48) (59) (60) Total deferred 157 568 (801) Provision (benefit) for taxes on income $ 550 $ 894 $ (137) |
Schedule of Effective Income Tax Rate Reconciliation | A comparison of income tax expense at the U.S. statutory rate of 21% in fiscal years 2022, 2021 and 2020, to the Company’s effective tax rate is as follows: (Dollars in Millions) 2022 2021 2020 U.S. $ 1,238 $ 1,367 $ (2,614) International 1,399 1,558 1,598 Earnings before taxes on income: $ 2,637 $ 2,925 $ (1,016) Tax rates: U.S. statutory rate 21.0 % 21.0 % 21.0 % U.S. taxes on international income (1) (3.8) 9.5 (3.8) International operations (2) (1.6) (2.1) (14.0) State 3.1 1.7 10.2 Change in valuation allowance 2.2 1.4 (2.7) Tax benefits on share-based compensation (0.2) (0.3) 1.0 All other 0.1 (0.6) 1.8 Effective Rate 20.8 % 30.6 % 13.5 % _________________ (1) Includes the impact of the tax on GILTI and other foreign income that is taxable under the U.S. tax code. |
Schedule of Deferred Tax Assets and Liabilities | Temporary differences and carryforwards at the end of fiscal years 2022 and 2021 were as follows: 2022 2021 (Dollars in Millions) Asset Liability Asset Liability Employee related obligations $ 20 $ — $ 56 $ — Stock based compensation 75 — 68 — Depreciation of property, plant and equipment — (38) — (41) Goodwill and intangibles — (2,652) — (2,689) Reserves & liabilities 120 — 93 — Net operating loss and tax credit carryforward 261 — 521 — Undistributed foreign earnings 99 (89) 52 (82) Global intangible low-taxed income 51 — — (92) Miscellaneous international 28 — 46 — R&D Capitalized for tax 55 — — — Miscellaneous U.S. 39 — 13 — Subtotal 748 (2,779) 849 (2,904) Valuation allowance (250) — (186) — Total deferred income taxes $ 498 $ (2,779) $ 663 $ (2,904) |
Schedule of Unrecognized Tax Benefits Roll Forward | The following table summarizes the activity related to unrecognized tax benefits: (Dollars in Millions) 2022 2021 2020 Beginning of year $ 469 $ 519 $ 465 Increases related to current year tax positions 32 31 40 (Dollars in Millions) 2022 2021 2020 Increases related to prior period tax positions 7 2 270 Decreases related to prior period tax positions (49) (40) (87) Settlements (5) (15) (136) Lapse of statute of limitations (17) (28) (33) End of year $ 437 $ 469 $ 519 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | 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: 2022 2021 (Dollars in Millions) Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3 Cash and cash equivalents: Time deposits $ — — — — $ 32 — 32 — Derivatives designated as cash flow hedges: Assets: Forward foreign exchange contracts 39 — 39 — — — — — Interest rate swaps 29 — 29 — — — — — Total $ 68 $ — $ 68 $ — $ — $ — $ — $ — Liabilities: Forward foreign exchange contracts (15) — (15) — — — — — Interest rate swaps (39) — (39) — — — — — Total $ (54) $ — $ (54) $ — $ — $ — $ — $ — Net amount presented in Prepaid expenses and other receivables: $ 14 $ — 14 $ — $ — $ — $ — $ — The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis: July 2, 2023 January 1, 2023 (Dollars in Millions) Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3 Assets: Forward foreign exchange contracts $ 66 $ — $ 66 $ — $ 39 $ — $ 39 $ — Interest rate swaps — — — — 29 — 29 — Total 66 — 66 — 68 — 68 — Liabilities: Forward foreign exchange contracts $ (48) — (48) — (15) — (15) — Interest rate swaps — — — — (39) — (39) — Total (48) — (48) — (54) — (54) — Net amount presented in Prepaid expenses and other receivables: $ 18 $ — $ 18 $ — $ 14 $ — $ 14 $ — |
Schedule of Notional Amounts of Outstanding Derivative Instruments | The following table sets forth the notional amounts of the Company’s outstanding derivative instruments: January 1, 2023 Forward foreign exchange contracts Interest rate swaps Total Cash Flow Hedges $ 1,768 $ 2,400 $ 4,168 The following table sets forth the notional amounts of the Company’s outstanding derivative instruments: July 2, 2023 January 1, 2023 (Dollars in Millions) Forward foreign exchange contracts Interest rate swaps Total Forward foreign exchange contracts Interest rate swaps Total Cash flow hedges $ 3,307 $ — $ 3,307 $ 1,768 $ 2,400 $ 4,168 Undesignated forward foreign exchange contracts $ 578 $ — $ 578 $ — $ — $ — Net investment hedges $ 10 $ — $ 10 $ — $ — $ — |
Summary of Derivative Activity | The following table is a summary of the activity related to derivatives and hedges for fiscal years 2022, 2021 and 2020, net of tax. 2022 2021 2020 Net Sales Cost of sales Other expense (income), net Net Sales Cost of sales Other expense (income), net Net Sales Cost of sales Other expense (income), net Gain (loss) on cash flow hedges $ 21 12 30 11 (23) (21) (2) (3) 10 Gain (loss) on forward currency exchange contracts not designated as hedges $ — — 33 — — (15) — — (34) The following table is a summary of gains and losses on forward foreign exchange contracts designated as cash flow hedges within Other comprehensive income (loss) and amount reclassified into earnings: Fiscal Three Months Ended Fiscal Six Months Ended July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Gain (loss) recognized in Other comprehensive income (loss) $ (17) $ 1 $ — $ (2) Gain (loss) reclassified from Other comprehensive income (loss) to earnings $ (6) $ (1) $ 5 $ — The following tables are a summary of the reclassifications to Net Income related to the Company’s forward foreign exchange contracts for the fiscal three and six months ended July 2, 2023 and July 3, 2022: Fiscal Three Months Ended July 2, 2023 July 3, 2022 (Dollars in Millions) Net Sales Cost of Sales Other (income) expense, net Net Sales Cost of Sales Other (income) expense, net Gain (loss) on cash flow hedges $ (1) $ (3) $ (2) $ 8 $ 3 $ 12 Gain (loss) on forward currency exchange contracts not designated as hedges $ — $ — $ (2) $ — $ — $ (1) Fiscal Six Months Ended July 2, 2023 July 3, 2022 (Dollars in Millions) Net Sales Cost of Sales Other (income) expense, net Net Sales Cost of Sales Other (income) expense, net Gain (loss) on cash flow hedges $ — $ 7 $ (2) 11 3 10 Gain on forward currency exchange contracts not designated as hedges $ — $ — $ 4 — — 7 |
Commitment and Contingencies (T
Commitment and Contingencies (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Product Liability Contingencies | A summary of the talc liabilities from 2020 to 2021 is included below: (Dollars in Millions) 2021 2020 Beginning Balance $ 4,043 $ 462 Accruals 154 4,029 Payments (3,181) (448) Transfer of liability to Parent (1,016) — Ending Balance $ — $ 4,043 |
Accrued and Other Liabilities (
Accrued and Other Liabilities (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Accrued Liabilities | Accrued liabilities consisted of: (Dollars in Millions) 2022 2021 Accrued expenses $ 447 $ 535 Accrued compensation and benefits 272 266 Lease liability 35 47 Other accrued liabilities 152 176 Accrued liabilities $ 906 $ 1,024 Accrued liabilities consisted of: (Dollars in Millions) July 2, 2023 January 1, 2023 Accrued expenses $ 470 $ 447 Accrued compensation and benefits 275 272 Lease liability 47 35 Other accrued liabilities (1) 409 152 Accrued liabilities $ 1,201 $ 906 |
Schedule of Other Liabilities | Other liabilities consisted of: (Dollars in Millions) 2022 2021 Accrued income taxes - noncurrent (Note 11) $ 584 $ 603 Noncurrent lease liability 81 82 Other noncurrent accrued liabilities 62 71 Other liabilities $ 727 $ 756 Other liabilities consisted of: (Dollars in Millions) July 2, 2023 January 1, 2023 Accrued income taxes - noncurrent $ 234 $ 584 Noncurrent lease liability 120 81 Other noncurrent accrued liabilities (1) 239 62 Other liabilities $ 593 $ 727 __________________ |
Segments of Business and Geog_2
Segments of Business and Geographic Areas (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Segment Reporting [Abstract] | |
Schedule of Reportable Business Segments | The Company operates the business through the following three reportable business segments: Reportable Segments Product Categories Self Care Cough, Cold and Allergy Pain Care Other Self Care (Digestive Health, Smoking Cessation and Other) Skin Health and Beauty Face and Body Care Hair, Sun and Other Essential Health Oral Care Baby Care Other Essential Health (Women’s Health and Wound Care) The Company operates the business through the following three reportable business segments: Reportable Segments Product Categories Self Care Cough, Cold and Allergy Pain Care Other Self Care (Digestive Health, Smoking Cessation, and Other) Skin Health and Beauty Face and Body Care Hair, Sun and Other Essential Health Oral Care Baby Care Other Essential Health (Women’s Health and Wound Care) |
Schedule of Product Categories as a Percent of Net Sales | The Company’s product categories as a percentage of Net sales for the fiscal years 2022, 2021 and 2020 were as follows: 2022 2021 2020 Cough, Cold and Allergy 13 % 12 % 12 % Pain Care 13 % 11 % 10 % Other Self Care 14 % 15 % 14 % Face and Body Care 20 % 22 % 22 % Hair, Sun and Other 9 % 8 % 9 % Oral Care 10 % 11 % 11 % Baby Care 10 % 10 % 11 % Other Essential Health 11 % 11 % 11 % Total 100 % 100 % 100 % The Company’s product categories as a percentage of Net sales for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cough, Cold and Allergy 13 % 13 % 14 % 12 % Pain Care 12 11 13 13 Other Self Care 16 15 15 15 Face and Body Care 19 20 19 20 Hair, Sun and Other 10 10 10 9 Oral Care 10 10 10 10 Baby Care 9 10 9 10 Other Essential Health 11 11 10 11 Total 100 % 100 % 100 % 100 % |
Schedule of Segment Net Sales and Adjusted Operating Income | Segment net sales and adjusted operating income for the fiscal years 2022, 2021 and 2020 were as follows: Net Sales (Dollars in Millions) 2022 2021 2020 Self Care $ 6,030 $ 5,643 $ 5,235 Skin Health and Beauty 4,350 4,541 4,450 Essential Health 4,570 4,870 4,782 Total $ 14,950 $ 15,054 $ 14,467 Adjusted Operating Income (Dollars in Millions) 2022 (4) 2021 (1)(4) 2020 (1)(4) Self Care $ 2,088 $ 1,952 $ 1,858 Skin Health and Beauty 708 878 889 Essential Health 1,111 1,224 1,250 Total adjusted operating income 3,907 4,054 3,997 Reconciliation to income (loss) before taxes: General corporate/unallocated expenses (298) (272) (277) Other (income) expense, net, operating (Note 10) 23 (15) (3,871) Restructuring (2) (100) (116) (82) Depreciation and amortization (644) (731) (746) Separation-related costs (3) (213) — — Total operating income (loss) 2,675 2,920 (979) Other expense (income), net (Note 10) 38 (5) 37 Income (loss) before taxes $ 2,637 $ 2,925 $ (1,016) __________________ (1) For the fourth quarter of 2022, the Company updated the methodology of allocation for certain selling expenses to align with segment financial results as measured by the Company, including the Chief Operating Decision Maker. All prior periods have been recast to conform to current presentation. Total adjusted operating income did not change as a result of this change. (2) Exclusive of the restructuring expense included in other (income) expense, net, operating. See Note 16. (3) For the fourth quarter of 2022, the Company updated methodology to no longer allocate non-recurring Separation-related costs to align with segment financial results as measured by the Company, including the Chief Operating Decision Maker. This change only impacted fiscal year 2022 given there were no non-recurring Separation-related costs in any other period presented. (4) 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 Chief Operating Decision Maker. Accordingly, the Company has updated its segment disclosures in all prior periods. Total adjusted operating income did not change as a result of this update. Depreciation and amortization by segment for the fiscal years 2022, 2021 and 2020 were as follows: Depreciation and Amortization (Dollars in Millions) 2022 (1) 2021 2020 Self Care $ 202 $ 212 $ 205 Skin Health and Beauty 247 305 325 Essential Health 195 214 216 Total $ 644 $ 731 $ 746 __________________ (1) 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 Chief Operating Decision Maker. Accordingly, the Company has updated its depreciation and amortization disclosures in the impacted period. Total depreciation and amortization did not change as a result of this update. Net sales are attributed to a geographic region based on the location of the customer and for the fiscal years 2022, 2021 and 2020 were as follows: Net Sales (Dollars in Millions) 2022 2021 2020 North America (1) $ 7,418 $ 7,284 $ 7,095 Europe, Middle East, and Africa 3,188 3,436 3,332 Asia-Pacific 3,146 3,276 3,013 Latin America 1,198 1,058 1,027 Total $ 14,950 $ 15,054 $ 14,467 __________________ (1) Includes U.S. net sales in fiscal years 2022, 2021 and 2020 of $6,599 million, $6,516 million and $6,357 million, respectively. Long-lived assets consisting of property, plant and equipment, net of accumulated depreciation, intangible assets, net and goodwill are attributed to geographic locations as of January 1, 2023 and January 2, 2022 as follows: Long Lived Assets (2) (Dollars in Millions) 2022 2021 North America (1) $ 9,582 $ 9,687 Europe, Middle East, and Africa 8,244 9,169 Asia-Pacific 2,736 3,204 Latin America 296 278 Total $ 20,858 $ 22,338 __________________ (1) Includes U.S. long lived assets in fiscal years 2022, 2021 and 2020 of $7,469 million, $7,527 million and $7,631 million, respectively. (2) Long-lived assets include property, plant and equipment, net for fiscal years 2022, and 2021 of $1,820 million and $1,827 million, respectively, and intangible assets and goodwill, net for fiscal years 2022 and 2021 of $19,038 million and $20,511 million, respectively. Segment Net sales and Adjusted operating income for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Net Sales Net Sales Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Self Care $ 1,661 $ 1,481 $ 3,301 $ 2,946 Skin Health and Beauty 1,147 1,126 2,258 2,138 Essential Health 1,203 1,197 2,304 2,310 Total $ 4,011 $ 3,804 $ 7,863 $ 7,394 Adjusted Operating Income Adjusted Operating Income Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Self Care $ 576 $ 524 $ 1,158 $ 998 Skin Health and Beauty 201 243 350 370 Essential Health 250 314 461 560 Total Adjusted operating income (1)(2) $ 1,027 $ 1,081 $ 1,969 $ 1,928 Reconciliation to Income before taxes: Depreciation and amortization 148 161 300 326 Separation-related costs 102 49 200 59 Restructuring (3) — 24 — 38 Other operating expense (income), net 1 13 (16) 8 General corporate/unallocated expenses 74 64 143 116 Total operating income $ 702 $ 770 $ 1,342 $ 1,381 Other expense (income), net 10 (5) 40 (6) Interest expense, net 53 — 54 — Income before taxes $ 639 $ 775 $ 1,248 $ 1,387 __________________ (1) For the first quarter of 2023, the Company adjusted the allocation for certain intangible asset amortization costs within Cost of Sales to align with segment financial results as measured by the Company, including the CODM. Accordingly, the Company has updated its segment disclosures to reflect the updated presentation in all prior periods. Total Adjusted operating income did not change as a result of this update. (2) We define Adjusted operating income as U.S. GAAP Operating income excluding depreciation and amortization, Separation-related costs, restructuring expense, Other operating expense (income), net, and general corporate unallocated expenses that are not part of our measurement of segment performance. Management uses 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. |
Restructuring (Tables)
Restructuring (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Restructuring and Related Activities [Abstract] | |
Restructuring and Related Costs | The program was completed in the fiscal fourth quarter of 2022. These costs have been recognized in the Combined Statement of Operations as follows: (Dollars in Millions) 2022 2021 2020 Cost of sales $ 55 $ 48 $ 34 Selling, general, and administrative expenses 45 68 48 Other (income) expense, net, operating — 1 (16) Total $ 100 $ 117 $ 66 |
Description of the Company an_6
Description of the Company and Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Assets And Liabilities, Lessee | Right of Use assets (“ROU assets”) and lease liabilities associated with the Company's operating leases are included in the Condensed Consolidated Balance Sheets as of July 2, 2023 and January 1, 2023 as follows: (Dollars in Millions) July 2, 2023 (1) January 1, 2023 ROU assets included in: Other non-current assets $ 164 $ 110 Lease liabilities included in: Accrued and other current liabilities 47 35 Other non-current liabilities 120 81 Total lease liabilities $ 167 $ 116 _________________ (1) Includes related party leases of $73 million of ROU assets, $13 million of current lease liabilities, and $56 million of non-current lease liabilities. |
Schedule of Variable Interest Entities | The amounts represented in this table are only those assets of the VIEs that can be used to settle only the VIE’s obligations and the VIE’s creditors (or beneficial interest holders) have no recourse against the general credit of the primary beneficiary. (Dollars in Millions) July 2, 2023 Assets Current assets Cash and cash equivalents $ 228 Trade receivables, less allowances for credit losses 91 Inventories 79 Prepaid expenses and other receivables 10 Total current assets 408 Property, plant, and equipment, net 126 Intangible assets, net 37 Goodwill 249 Deferred taxes on income 34 Other assets 20 Total assets $ 874 Liabilities Current liabilities Accounts payable $ 81 Accrued liabilities 80 Accrued rebates, returns, and promotions 98 Accrued taxes on income 23 Total current liabilities 282 Deferred taxes on income 4 Other liabilities 18 Total liabilities $ 304 |
Inventories (Tables)_2
Inventories (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Inventory Disclosure [Abstract] | |
Summary of Inventories | At the end of fiscal years 2022 and 2021, inventories were comprised of: (Dollars in Millions) 2022 2021 Raw materials and supplies $ 351 $ 264 Goods in process 123 99 Finished goods 1,752 1,339 Total inventories $ 2,226 $ 1,702 As of July 2, 2023 and January 1, 2023, inventories were comprised of: (Dollars in Millions) July 2, 2023 January 1, 2023 Raw materials and supplies $ 299 $ 351 Goods in process 134 123 Finished goods 1,593 1,752 Total inventories $ 2,026 $ 2,226 |
Intangible Assets and Goodwil_3
Intangible Assets and Goodwill (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | At the end of fiscal years 2022 and 2021, the gross and net amounts of intangible assets were: 2022 2021 (Dollars in Millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Patents and trademarks $ 4,400 $ (1,485) $ 2,915 $ 4,705 $ (1,350) $ 3,355 Customer relationships 2,127 (1,063) 1,064 2,265 (1,021) 1,244 Other intangibles 1,343 (650) 693 1,377 (628) 749 Total definite-lived intangible assets 7,870 (3,198) 4,672 8,347 (2,999) 5,348 Indefinite-lived intangible assets: Trademarks 5,122 — 5,122 5,291 — 5,291 Other 59 — 59 62 — 62 Total intangible assets, net $ 13,051 $ (3,198) $ 9,853 $ 13,700 $ (2,999) $ 10,701 As of July 2, 2023 and January 1, 2023, the gross and net amounts of intangible assets were: July 2, 2023 January 1, 2023 (Dollars in Millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Definite-lived intangible assets: Patents and trademarks $ 4,383 $ (1,583) $ 2,800 $ 4,400 $ (1,485) $ 2,915 Customer relationships 2,099 (1,087) 1,012 2,127 (1,063) 1,064 Other intangibles 1,348 (671) 677 1,343 (650) 693 Total definite-lived intangible assets $ 7,830 $ (3,341) $ 4,489 $ 7,870 $ (3,198) $ 4,672 Indefinite-lived intangible assets: Trademarks 5,128 — 5,128 5,122 — 5,122 Other 61 — 61 59 — 59 Total intangible assets, net $ 13,019 $ (3,341) $ 9,678 $ 13,051 $ (3,198) $ 9,853 |
Intangible Asset Amortization Expense | The estimated amortization expense before tax for the five succeeding years is approximately: (Dollars in Millions) 2023 2024 2025 2026 2027 $ 314 $ 304 $ 280 $ 276 $ 272 Amortization expense, which was included in Cost of Sales, for the Company’s amortizable assets was as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Trademarks $ 53 $ 48 $ 94 $ 98 Other intangible assets 26 41 66 84 Total Amortization expense $ 79 $ 89 $ 160 $ 182 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The estimated amortization expense before tax for the remainder of 2023 and the five succeeding years is approximately: (Dollars in Millions) Remainder of 2023 2024 2025 2026 2027 2028 $ 157 $ 306 $ 282 $ 273 $ 274 $ 270 |
Goodwill | Goodwill by reportable segment is as follows: (Dollars in Millions) Consumer Health Business Self Care Skin Health and Beauty Essential Health Total Goodwill at January 3, 2021 $ 10,326 $ — $ — $ — $ 10,326 Currency translation/other (516) — — — (516) Goodwill at January 2, 2022 $ 9,810 $ — $ — $ — $ 9,810 Currency translation/other (664) — — — (664) Goodwill at July 3, 2022 $ 9,146 $ — $ — $ — $ 9,146 Realignment of segment goodwill (9,146) 5,193 2,334 1,619 — Currency translation/other — 1 31 7 39 Goodwill at January 1, 2023 $ — $ 5,194 $ 2,365 $ 1,626 $ 9,185 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 (39) (76) 11 (104) Goodwill at July 2, 2023 $ 5,155 $ 2,289 $ 1,637 $ 9,081 |
Borrowings (Tables)
Borrowings (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Long-Term Debt Instruments | The components of the Company’s debt as of July 2, 2023 and January 1, 2023 were as follows: (Dollars in Millions) July 2, 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 6 — Discounts and debt issuance costs (72) — Total long-term debt $ 7,684 $ — Commercial paper 754 — Discounts and debt issuance costs (2) — Total loans and notes payable 752 — Total debt $ 8,436 $ — The amount included in Interest expense, net on the Company’s Condensed Consolidated Statements of Operations consists of the following: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Interest expense $ 118 $ — $ 129 $ — Interest income (1) (65) — (75) — Interest expense, net $ 53 $ — $ 54 $ — __________________ |
Schedule of 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 fol lows: (Dollars in Millions) Remainder of 2023 2024 2025 2026 2027 Thereafter $ — $ — $ 750 $ 750 $ — $ 6,250 |
Pensions (Tables)
Pensions (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Retirement Benefits [Abstract] | |
Components of Net Periodic Benefit Cost | Net periodic benefit costs for the Company’s defined benefit retirement plans and other benefit plans sponsored by the Company for 2022, 2021 and 2020 include the following components: Retirement Plans Other Benefit Plans (Dollars in Millions) 2022 2021 2020 2022 2021 2020 Service cost $ 8 $ 7 $ 6 $ — $ — $ — Interest cost 4 2 3 — 1 — Recognized actuarial losses (gain) 4 6 5 — (1) — Curtailments and settlements — — 1 — — — Expected return on plan assets (1) — — — — — Net periodic benefit cost $ 15 $ 15 $ 15 $ — $ — $ — Net periodic benefit costs for the Company’s defined benefit retirement plans sponsored by the Company for the fiscal three and six months ended July 2, 2023 and July 3, 2022, included the following components: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Service cost $ 5 $ 2 $ 10 $ 4 Interest cost 7 1 10 2 Recognized actuarial gain — 1 — 2 Expected return on plan assets (7) — (10) — Net periodic benefit cost $ 5 $ 4 $ 10 $ 8 |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Equity [Abstract] | |
Components of Accumulated Other Comprehensive Income | Components of other comprehensive (loss) income consist of the following: (Dollars in Millions) Foreign Currency Translation Employee Benefit Plans Gain/ (Loss) On Derivatives & Hedge Total Accumulated Other Comprehensive (Loss) Income December 29, 2019 $ (4,350) $ (65) $ (2) $ (4,417) Net 2020 changes 855 (11) 1 845 January 3, 2021 (3,495) (76) (1) (3,572) Net 2021 changes (926) 25 — (901) January 2, 2022 (4,421) (51) (1) (4,473) Net 2022 changes (1,053) 63 10 (980) January 1, 2023 $ (5,474) $ 12 $ 9 $ (5,453) Components of other comprehensive loss consisted of the following: (Dollars in Millions) Foreign Currency Translation (1) Employee Benefit Plans (2) Gain On Cash Flow Hedges (3) Total Accumulated Other Comprehensive Loss April 2, 2023 $ (5,313) $ 26 $ 48 $ (5,239) Net change (177) (83) (8) (268) July 2, 2023 $ (5,490) $ (57) $ 40 $ (5,507) April 3, 2022 $ (4,701) $ (48) $ (5) $ (4,754) Net change (835) 1 1 (833) July 3, 2022 $ (5,536) $ (47) $ (4) $ (5,587) _________________ (1) Foreign currency translation adjustments for the fiscal three months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $30 million and $65 million, respectively. Income taxes on foreign currency translation relate to tax impact on prior earnings that are not permanently reinvested and will be repatriated in the future. (2) Employee benefit plans for the fiscal three months ended July 2, 2023 were net of benefit from taxes of $18 million. Net change for the fiscal three months ended July 2, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pensions plans by the Parent to the Company. (3) Gain on derivatives and hedges for the fiscal three months ended July 2, 2023 were net of benefit from taxes of $4 million. (Dollars in Millions) Foreign Currency Translation (1) Employee Benefit Plans (2) Gain On Cash Flow Hedges (3) Total Accumulated Other Comprehensive Loss January 1, 2023 $ (5,474) $ 12 $ 9 $ (5,453) Net change (16) (69) 31 (54) July 2, 2023 $ (5,490) $ (57) $ 40 $ (5,507) January 2, 2022 $ (4,421) $ (51) $ (1) $ (4,473) Net change (1,115) 4 (3) (1,114) July 3, 2022 $ (5,536) $ (47) $ (4) $ (5,587) _________________ (1) Foreign currency translation adjustments for the fiscal six months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $9 million and $77 million, respectively. Income taxes on foreign currency translation relate to tax impact on prior earnings that are not permanently reinvested and will be repatriated in the future. (2) Employee benefit plans for the fiscal six months ended July 2, 2023 and July 3, 2022 were net of benefit from taxes of $17 million and $1 million, respectively. Net change for the fiscal six months ended July 2, 2023 includes Separation adjustments of $73 million in connection with transfers of certain pensions plans by the Parent to the Company. (3) Gain on derivatives and hedges for the fiscal six months ended July 2, 2023 were net of provision for taxes of $9 million. |
Stock-Based Compensation (Tab_2
Stock-Based Compensation (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount | The components and classification of stock-based compensation expense related to stock options, Restricted Stock Units (“RSUs”), and Performance Stock Units (“PSUs”) directly attributable to those employees specifically identified as employees of the Company and allocations from the Parent for fiscal years 2022, 2021 and 2020 were as follows: (Dollars in Millions) 2022 2021 2020 Stock options $ 43 $ 41 $ 37 RSUs 74 73 67 PSUs 20 27 11 Stock-based compensation expense 137 141 115 Cost of sales 30 33 29 Selling, general and administrative expenses 107 108 86 Stock-based compensation expense $ 137 $ 141 $ 115 The components and classification of stock-based compensation expense related to stock options, RSUs, and PSUs directly attributable to those employees specifically identified as employees of the Company and allocations from the Parent for the fiscal three and six months ended July 2, 2023 and July 3, 2022, were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cost of sales $ 12 $ 10 $ 16 $ 18 Selling, general, and administrative expenses 26 31 57 58 Stock-based compensation expense $ 38 $ 41 $ 73 $ 76 |
Related Parties (Tables)_2
Related Parties (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Related Party Transactions [Abstract] | |
Schedule of Related Party Transactions | These allocations (excluding stock-based compensation expense), net of costs charged to the Parent’s affiliates are reflected in the Combined Statements of Operations as follows: (Dollars in Millions) 2022 2021 2020 Cost of sales $ 149 $ 182 $ 166 Selling, general, and administrative expenses 679 649 652 Total $ 828 $ 831 $ 818 (Dollars in Millions) 2022 2021 2020 Cash pooling and general financing activities $ (2,568) $ (832) $ (4,414) Corporate cost allocations 828 831 818 Taxes deemed settled with the Parent 78 44 151 Allocated derivative and hedging gain (losses) 65 (36) (1) Net transfers (to) from the Parent as reflected in the Combined Statements of Cash Flows (1,597) 7 (3,446) Stock-based compensation expense 137 141 115 Talc liability transferred to Parent, net of related deferred taxes ($0, $251, $0) — 765 — Pension liabilities transferred from the Parent (25) — — Net transfers (to) from the Parent as reflected in the Combined Statements of Equity $ (1,485) $ 913 $ (3,331) These allocations (excluding stock-based compensation expense), net of costs charged to the Parent’s affiliates reflected on the Company’s Condensed Consolidated Statements of Operations for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cost of sales $ 16 $ 40 $ 25 $ 76 Selling, general, and administrative expenses 33 173 120 330 Total $ 49 $ 213 $ 145 $ 406 The components of Net transfers (to) from the Parent for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cash pooling and general financing activities $ (37) $ (916) $ (446) $ (1,324) Corporate cost allocations 49 213 145 406 Taxes deemed settled with the Parent — 1 27 1 Allocated derivative and hedging gains — 26 — 25 Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Cash Flows $ 12 $ (676) $ (274) $ (892) Stock-based compensation expense (1) — 41 — 76 Other (2) — (34) — Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Equity $ 10 $ (635) $ (308) $ (816) __________________ (1) Stock-based compensation expense is separately shown within the Condensed Consolidated Statement of Equity in fiscal year 2023, and therefore no longer a reconciling item between the Condensed Consolidated Statement of Equity and the Condensed Consolidated Statement of Cash Flows. The Company had the following balances and transactions with J&J and its affiliates, primarily in connection with the Tax Matters Agreement, Transition Services Agreement and the Transition Manufacturing Agreement, reported on the Company’s Condensed Consolidated Financial Statements: (Dollars in Millions) July 2, 2023 Accounts payable $ 537 Prepaid expenses and other receivables $ 346 Other assets $ 94 Other liabilities $ 193 Fiscal Three Months Ended (Dollars in Millions) July 2, 2023 Cost of sales $ 39 Selling, general, and administrative expenses $ 47 |
Other Operating Expense (Inco_2
Other Operating Expense (Income), Net and Other Expense (Income), Net (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Other Income and Expenses [Abstract] | |
Schedule of Other Operating Cost and Expense, by Component | Other (income) expense, net, operating consisted of: (Dollars in Millions) 2022 2021 2020 Litigation (income) expense (1) $ (7) $ 92 $ 3,967 Royalty income (2) (39) (89) (100) Other (3) 23 12 4 Total Other (income) expense, net, operating $ (23) $ 15 $ 3,871 __________________ (1) Litigation expense includes $154 million and 4,029 million of Talc-Related costs for the fiscal year 2021 and 2020, respectively, as well as $74 million of beneficial settlements for Brazil VAT legal resolution for fiscal year 2021. (2) In connection with the Old JJCI corporate restructuring starting in October 2021, rights of Old JJCI and its affiliates to receive four streams of royalties payable from certain third parties were transferred to Royalty A&M LLC, an indirect wholly owned subsidiary of the Parent. (3) Other consists primarily of (gains) losses on asset disposals, certain restructuring expenses (Note 16), intangible impairment (Note 4), and miscellaneous (income) expenses. Other operating expense (income), net for the fiscal three and six months ended July 2, 2023 and July 3, 2022 consisted of: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Litigation expense $ 21 $ 7 20 $ 7 Royalty income (1) (13) (8) (20) (Gain)/loss on disposal of fixed assets — — (9) 2 Net economic benefits from deferred markets (1) 24 — 24 — Contingent liability reversal (2) (43) — (43) — Other — 19 — 19 Total Other operating expense (income), net $ 1 $ 13 $ (16) $ 8 __________________ (1) Includes income taxes and service fees to be paid to J&J under the net economic benefit arrangements. (2) Includes the reversal of a contingent liability that was no longer considered to be probable. |
Schedule of Other Nonoperating Income (Expense) | Other expense (income), net consisted of: (Dollars in Millions) 2022 2021 2020 Currency losses on transactions $ 42 $ 20 $ 40 Other (1) (4) (25) (3) Total Other expense (income), net $ 38 $ (5) $ 37 __________________ (1) Other consists primarily of business disposals, gains and losses on investments, other than service cost components of net periodic benefit costs, and miscellaneous non-operating (income) expenses. Other expense (income), net for the fiscal three and six months ended July 2, 2023 and July 3, 2022 consisted of: Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Currency (gains)/losses on transactions $ 12 $ 5 $ 28 $ (2) Other (1) (2) (10) 12 (4) Total Other expense (income), net $ 10 $ (5) $ 40 $ (6) __________________ (1) Other consists primarily of gains and losses on investments, other than service cost components of net periodic benefit costs, and miscellaneous non-operating (income) expenses. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Earnings Per Share [Abstract] | |
Reconciliation of Basic Net Earnings per Share to Diluted Net Earnings per Share | Net income per share for the fiscal three and six months ended July 2, 2023 and July 3, 2022 was calculated as follows: Fiscal Three Months Ended Fiscal Six Months Ended (In Millions, Except Per Share Data) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Net income $ 430 $ 604 $ 760 $ 1,132 Basic and diluted weighted-average common stock 1,838 1,716 1,777 1,716 Basic and diluted net income per share $ 0.23 $ 0.35 $ 0.43 $ 0.66 |
Fair Value Measurements (Tabl_2
Fair Value Measurements (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | 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: 2022 2021 (Dollars in Millions) Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3 Cash and cash equivalents: Time deposits $ — — — — $ 32 — 32 — Derivatives designated as cash flow hedges: Assets: Forward foreign exchange contracts 39 — 39 — — — — — Interest rate swaps 29 — 29 — — — — — Total $ 68 $ — $ 68 $ — $ — $ — $ — $ — Liabilities: Forward foreign exchange contracts (15) — (15) — — — — — Interest rate swaps (39) — (39) — — — — — Total $ (54) $ — $ (54) $ — $ — $ — $ — $ — Net amount presented in Prepaid expenses and other receivables: $ 14 $ — 14 $ — $ — $ — $ — $ — The following fair value hierarchy table presents the components and classification of the Company’s financial assets and liabilities measured at fair value on a recurring basis: July 2, 2023 January 1, 2023 (Dollars in Millions) Carrying Value Level 1 Level 2 Level 3 Carrying Value Level 1 Level 2 Level 3 Assets: Forward foreign exchange contracts $ 66 $ — $ 66 $ — $ 39 $ — $ 39 $ — Interest rate swaps — — — — 29 — 29 — Total 66 — 66 — 68 — 68 — Liabilities: Forward foreign exchange contracts $ (48) — (48) — (15) — (15) — Interest rate swaps — — — — (39) — (39) — Total (48) — (48) — (54) — (54) — Net amount presented in Prepaid expenses and other receivables: $ 18 $ — $ 18 $ — $ 14 $ — $ 14 $ — |
Schedule of Notional Amounts of Outstanding Derivative Instruments | The following table sets forth the notional amounts of the Company’s outstanding derivative instruments: January 1, 2023 Forward foreign exchange contracts Interest rate swaps Total Cash Flow Hedges $ 1,768 $ 2,400 $ 4,168 The following table sets forth the notional amounts of the Company’s outstanding derivative instruments: July 2, 2023 January 1, 2023 (Dollars in Millions) Forward foreign exchange contracts Interest rate swaps Total Forward foreign exchange contracts Interest rate swaps Total Cash flow hedges $ 3,307 $ — $ 3,307 $ 1,768 $ 2,400 $ 4,168 Undesignated forward foreign exchange contracts $ 578 $ — $ 578 $ — $ — $ — Net investment hedges $ 10 $ — $ 10 $ — $ — $ — |
Summary of Derivative Activity | The following table is a summary of the activity related to derivatives and hedges for fiscal years 2022, 2021 and 2020, net of tax. 2022 2021 2020 Net Sales Cost of sales Other expense (income), net Net Sales Cost of sales Other expense (income), net Net Sales Cost of sales Other expense (income), net Gain (loss) on cash flow hedges $ 21 12 30 11 (23) (21) (2) (3) 10 Gain (loss) on forward currency exchange contracts not designated as hedges $ — — 33 — — (15) — — (34) The following table is a summary of gains and losses on forward foreign exchange contracts designated as cash flow hedges within Other comprehensive income (loss) and amount reclassified into earnings: Fiscal Three Months Ended Fiscal Six Months Ended July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Gain (loss) recognized in Other comprehensive income (loss) $ (17) $ 1 $ — $ (2) Gain (loss) reclassified from Other comprehensive income (loss) to earnings $ (6) $ (1) $ 5 $ — The following tables are a summary of the reclassifications to Net Income related to the Company’s forward foreign exchange contracts for the fiscal three and six months ended July 2, 2023 and July 3, 2022: Fiscal Three Months Ended July 2, 2023 July 3, 2022 (Dollars in Millions) Net Sales Cost of Sales Other (income) expense, net Net Sales Cost of Sales Other (income) expense, net Gain (loss) on cash flow hedges $ (1) $ (3) $ (2) $ 8 $ 3 $ 12 Gain (loss) on forward currency exchange contracts not designated as hedges $ — $ — $ (2) $ — $ — $ (1) Fiscal Six Months Ended July 2, 2023 July 3, 2022 (Dollars in Millions) Net Sales Cost of Sales Other (income) expense, net Net Sales Cost of Sales Other (income) expense, net Gain (loss) on cash flow hedges $ — $ 7 $ (2) 11 3 10 Gain on forward currency exchange contracts not designated as hedges $ — $ — $ 4 — — 7 |
Segments of Business (Tables)
Segments of Business (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Segment Reporting [Abstract] | |
Schedule of Reportable Business Segments | The Company operates the business through the following three reportable business segments: Reportable Segments Product Categories Self Care Cough, Cold and Allergy Pain Care Other Self Care (Digestive Health, Smoking Cessation and Other) Skin Health and Beauty Face and Body Care Hair, Sun and Other Essential Health Oral Care Baby Care Other Essential Health (Women’s Health and Wound Care) The Company operates the business through the following three reportable business segments: Reportable Segments Product Categories Self Care Cough, Cold and Allergy Pain Care Other Self Care (Digestive Health, Smoking Cessation, and Other) Skin Health and Beauty Face and Body Care Hair, Sun and Other Essential Health Oral Care Baby Care Other Essential Health (Women’s Health and Wound Care) |
Schedule of Product Categories as a Percent of Net Sales | The Company’s product categories as a percentage of Net sales for the fiscal years 2022, 2021 and 2020 were as follows: 2022 2021 2020 Cough, Cold and Allergy 13 % 12 % 12 % Pain Care 13 % 11 % 10 % Other Self Care 14 % 15 % 14 % Face and Body Care 20 % 22 % 22 % Hair, Sun and Other 9 % 8 % 9 % Oral Care 10 % 11 % 11 % Baby Care 10 % 10 % 11 % Other Essential Health 11 % 11 % 11 % Total 100 % 100 % 100 % The Company’s product categories as a percentage of Net sales for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Fiscal Three Months Ended Fiscal Six Months Ended July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Cough, Cold and Allergy 13 % 13 % 14 % 12 % Pain Care 12 11 13 13 Other Self Care 16 15 15 15 Face and Body Care 19 20 19 20 Hair, Sun and Other 10 10 10 9 Oral Care 10 10 10 10 Baby Care 9 10 9 10 Other Essential Health 11 11 10 11 Total 100 % 100 % 100 % 100 % |
Schedule of Segment Net Sales and Adjusted Operating Income | Segment net sales and adjusted operating income for the fiscal years 2022, 2021 and 2020 were as follows: Net Sales (Dollars in Millions) 2022 2021 2020 Self Care $ 6,030 $ 5,643 $ 5,235 Skin Health and Beauty 4,350 4,541 4,450 Essential Health 4,570 4,870 4,782 Total $ 14,950 $ 15,054 $ 14,467 Adjusted Operating Income (Dollars in Millions) 2022 (4) 2021 (1)(4) 2020 (1)(4) Self Care $ 2,088 $ 1,952 $ 1,858 Skin Health and Beauty 708 878 889 Essential Health 1,111 1,224 1,250 Total adjusted operating income 3,907 4,054 3,997 Reconciliation to income (loss) before taxes: General corporate/unallocated expenses (298) (272) (277) Other (income) expense, net, operating (Note 10) 23 (15) (3,871) Restructuring (2) (100) (116) (82) Depreciation and amortization (644) (731) (746) Separation-related costs (3) (213) — — Total operating income (loss) 2,675 2,920 (979) Other expense (income), net (Note 10) 38 (5) 37 Income (loss) before taxes $ 2,637 $ 2,925 $ (1,016) __________________ (1) For the fourth quarter of 2022, the Company updated the methodology of allocation for certain selling expenses to align with segment financial results as measured by the Company, including the Chief Operating Decision Maker. All prior periods have been recast to conform to current presentation. Total adjusted operating income did not change as a result of this change. (2) Exclusive of the restructuring expense included in other (income) expense, net, operating. See Note 16. (3) For the fourth quarter of 2022, the Company updated methodology to no longer allocate non-recurring Separation-related costs to align with segment financial results as measured by the Company, including the Chief Operating Decision Maker. This change only impacted fiscal year 2022 given there were no non-recurring Separation-related costs in any other period presented. (4) 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 Chief Operating Decision Maker. Accordingly, the Company has updated its segment disclosures in all prior periods. Total adjusted operating income did not change as a result of this update. Depreciation and amortization by segment for the fiscal years 2022, 2021 and 2020 were as follows: Depreciation and Amortization (Dollars in Millions) 2022 (1) 2021 2020 Self Care $ 202 $ 212 $ 205 Skin Health and Beauty 247 305 325 Essential Health 195 214 216 Total $ 644 $ 731 $ 746 __________________ (1) 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 Chief Operating Decision Maker. Accordingly, the Company has updated its depreciation and amortization disclosures in the impacted period. Total depreciation and amortization did not change as a result of this update. Net sales are attributed to a geographic region based on the location of the customer and for the fiscal years 2022, 2021 and 2020 were as follows: Net Sales (Dollars in Millions) 2022 2021 2020 North America (1) $ 7,418 $ 7,284 $ 7,095 Europe, Middle East, and Africa 3,188 3,436 3,332 Asia-Pacific 3,146 3,276 3,013 Latin America 1,198 1,058 1,027 Total $ 14,950 $ 15,054 $ 14,467 __________________ (1) Includes U.S. net sales in fiscal years 2022, 2021 and 2020 of $6,599 million, $6,516 million and $6,357 million, respectively. Long-lived assets consisting of property, plant and equipment, net of accumulated depreciation, intangible assets, net and goodwill are attributed to geographic locations as of January 1, 2023 and January 2, 2022 as follows: Long Lived Assets (2) (Dollars in Millions) 2022 2021 North America (1) $ 9,582 $ 9,687 Europe, Middle East, and Africa 8,244 9,169 Asia-Pacific 2,736 3,204 Latin America 296 278 Total $ 20,858 $ 22,338 __________________ (1) Includes U.S. long lived assets in fiscal years 2022, 2021 and 2020 of $7,469 million, $7,527 million and $7,631 million, respectively. (2) Long-lived assets include property, plant and equipment, net for fiscal years 2022, and 2021 of $1,820 million and $1,827 million, respectively, and intangible assets and goodwill, net for fiscal years 2022 and 2021 of $19,038 million and $20,511 million, respectively. Segment Net sales and Adjusted operating income for the fiscal three and six months ended July 2, 2023 and July 3, 2022 were as follows: Net Sales Net Sales Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Self Care $ 1,661 $ 1,481 $ 3,301 $ 2,946 Skin Health and Beauty 1,147 1,126 2,258 2,138 Essential Health 1,203 1,197 2,304 2,310 Total $ 4,011 $ 3,804 $ 7,863 $ 7,394 Adjusted Operating Income Adjusted Operating Income Fiscal Three Months Ended Fiscal Six Months Ended (Dollars in Millions) July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022 Self Care $ 576 $ 524 $ 1,158 $ 998 Skin Health and Beauty 201 243 350 370 Essential Health 250 314 461 560 Total Adjusted operating income (1)(2) $ 1,027 $ 1,081 $ 1,969 $ 1,928 Reconciliation to Income before taxes: Depreciation and amortization 148 161 300 326 Separation-related costs 102 49 200 59 Restructuring (3) — 24 — 38 Other operating expense (income), net 1 13 (16) 8 General corporate/unallocated expenses 74 64 143 116 Total operating income $ 702 $ 770 $ 1,342 $ 1,381 Other expense (income), net 10 (5) 40 (6) Interest expense, net 53 — 54 — Income before taxes $ 639 $ 775 $ 1,248 $ 1,387 __________________ (1) For the first quarter of 2023, the Company adjusted the allocation for certain intangible asset amortization costs within Cost of Sales to align with segment financial results as measured by the Company, including the CODM. Accordingly, the Company has updated its segment disclosures to reflect the updated presentation in all prior periods. Total Adjusted operating income did not change as a result of this update. (2) We define Adjusted operating income as U.S. GAAP Operating income excluding depreciation and amortization, Separation-related costs, restructuring expense, Other operating expense (income), net, and general corporate unallocated expenses that are not part of our measurement of segment performance. Management uses 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. |
Accrued and Other Liabilities_3
Accrued and Other Liabilities (Tables) | 6 Months Ended |
Jul. 02, 2023 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Accrued Liabilities | Accrued liabilities consisted of: (Dollars in Millions) 2022 2021 Accrued expenses $ 447 $ 535 Accrued compensation and benefits 272 266 Lease liability 35 47 Other accrued liabilities 152 176 Accrued liabilities $ 906 $ 1,024 Accrued liabilities consisted of: (Dollars in Millions) July 2, 2023 January 1, 2023 Accrued expenses $ 470 $ 447 Accrued compensation and benefits 275 272 Lease liability 47 35 Other accrued liabilities (1) 409 152 Accrued liabilities $ 1,201 $ 906 |
Schedule of Other Liabilities | Other liabilities consisted of: (Dollars in Millions) 2022 2021 Accrued income taxes - noncurrent (Note 11) $ 584 $ 603 Noncurrent lease liability 81 82 Other noncurrent accrued liabilities 62 71 Other liabilities $ 727 $ 756 Other liabilities consisted of: (Dollars in Millions) July 2, 2023 January 1, 2023 Accrued income taxes - noncurrent $ 234 $ 584 Noncurrent lease liability 120 81 Other noncurrent accrued liabilities (1) 239 62 Other liabilities $ 593 $ 727 __________________ |
Description of the Company an_7
Description of the Company and Summary of Significant Accounting Policies - Narrative (Details) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||
Jul. 02, 2023 USD ($) | Apr. 02, 2023 USD ($) | Jul. 03, 2022 USD ($) | Apr. 03, 2022 USD ($) | Apr. 04, 2021 USD ($) | Jul. 02, 2023 USD ($) Segment | Jul. 03, 2022 USD ($) | Jan. 01, 2023 USD ($) Employee Segment | Jan. 02, 2022 USD ($) | Jan. 03, 2021 USD ($) | |
Property, Plant and Equipment [Line Items] | ||||||||||
Number of employees | Employee | 22,000 | |||||||||
Number of business segments | Segment | 3 | 3 | ||||||||
Separation-related costs | $ 102 | $ 49 | $ 200 | $ 59 | $ 213 | $ 0 | $ 0 | |||
Other non-current assets | 164 | 164 | 110 | 126 | ||||||
Total lease liabilities | 167 | 167 | 116 | 129 | ||||||
Operating lease costs | 42 | 54 | 63 | |||||||
Lease payments | $ 43 | $ 55 | 63 | |||||||
Remaining lease term (in years) | 7 years | 6 years | ||||||||
Weighted average discount rate, percent | 2.30% | 3% | ||||||||
Advertising expense | $ 1,356 | $ 1,461 | 1,230 | |||||||
Shipping and handling costs | $ 322 | $ 305 | $ 295 | |||||||
Research and development costs | $ 99 | $ 94 | $ 188 | $ 182 | 375 | 355 | 320 | |||
Currency transaction losses (gains) | $ 105 | $ (16) | $ 16 | |||||||
Other intangibles | ||||||||||
Property, Plant and Equipment [Line Items] | ||||||||||
Finite-lived intangible asset, useful life (in years) | 34 years | 34 years | 34 years | |||||||
Minimum | Patents, Trademarks and Customer Relationships | ||||||||||
Property, Plant and Equipment [Line Items] | ||||||||||
Finite-lived intangible asset, useful life (in years) | 3 years | |||||||||
Minimum | Other intangibles | ||||||||||
Property, Plant and Equipment [Line Items] | ||||||||||
Finite-lived intangible asset, useful life (in years) | 20 years | |||||||||
Maximum | Patents, Trademarks and Customer Relationships | ||||||||||
Property, Plant and Equipment [Line Items] | ||||||||||
Finite-lived intangible asset, useful life (in years) | 40 years | |||||||||
Maximum | Other intangibles | ||||||||||
Property, Plant and Equipment [Line Items] | ||||||||||
Finite-lived intangible asset, useful life (in years) | 40 years |
Description of the Company an_8
Description of the Company and Summary of Significant Accounting Policies - Allowance for Credit Loss (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Financing Receivable, Allowance For Credit Loss [Roll Forward] | |||
Allowance for credit losses, beginning of period | $ 32 | $ 37 | $ 35 |
Provision | (9) | (4) | (9) |
Utilization | 5 | 8 | 6 |
Currency translation adjustment | 1 | 1 | 1 |
Allowance for credit losses, end of period | $ 35 | $ 32 | $ 37 |
Description of the Company an_9
Description of the Company and Summary of Significant Accounting Policies - Property, Plant, and Equipment (Details) | Jan. 01, 2023 |
Building and building equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 20 years |
Building and building equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 30 years |
Land and leasehold improvements | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 10 years |
Land and leasehold improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 20 years |
Machinery and equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 2 years |
Machinery and equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 13 years |
Software | Minimum | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 3 years |
Software | Maximum | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Useful Life | 8 years |
Description of the Company a_10
Description of the Company and Summary of Significant Accounting Policies - Operating Lease Future Payments (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
2023 | $ 31 | ||
2024 | 25 | ||
2025 | 14 | ||
2026 | 12 | ||
2027 | 9 | ||
Thereafter | 63 | ||
Total | 154 | ||
Less: Imputed Interest | (38) | ||
Total lease liabilities | $ 167 | $ 116 | $ 129 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Inventory Disclosure [Abstract] | |||
Raw materials and supplies | $ 299 | $ 351 | $ 264 |
Goods in process | 134 | 123 | 99 |
Finished goods | 1,593 | 1,752 | 1,339 |
Total inventories | $ 2,026 | $ 2,226 | $ 1,702 |
Property, Plant, and Equipment
Property, Plant, and Equipment (Details) - USD ($) $ in Millions | Jan. 01, 2023 | Jan. 02, 2022 |
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, gross | $ 5,700 | $ 5,770 |
Less: accumulated depreciation | (3,880) | (3,943) |
Total property, plant and equipment, net | 1,820 | 1,827 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, gross | 2,280 | 2,416 |
Buildings and building equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, gross | 1,709 | 1,744 |
Software | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, gross | 1,329 | 1,303 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, gross | 307 | 228 |
Land and land improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total property, plant and equipment, gross | $ 75 | $ 79 |
Property, Plant and Equipment -
Property, Plant and Equipment - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Property, Plant and Equipment [Abstract] | |||
Depreciation expense | $ 296 | $ 317 | $ 331 |
Intangible Assets and Goodwil_4
Intangible Assets and Goodwill - Intangible Assets (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Finite-Lived Intangible Assets, Net [Abstract] | |||
Gross Carrying Amount | $ 7,830 | $ 7,870 | $ 8,347 |
Accumulated Amortization | (3,341) | (3,198) | (2,999) |
Net Carrying Amount | 4,489 | 4,672 | 5,348 |
Indefinite-Lived Intangible Assets (Excluding Goodwill) [Abstract] | |||
Intangible Assets, Gross (Excluding Goodwill) | 13,019 | 13,051 | 13,700 |
Intangible assets, net (Notes 1 and 4) | 9,678 | 9,853 | 10,701 |
Trademarks | |||
Indefinite-Lived Intangible Assets (Excluding Goodwill) [Abstract] | |||
Gross Carrying Amount | 5,128 | 5,122 | 5,291 |
Intangible assets, net (Notes 1 and 4) | 5,128 | 5,122 | 5,291 |
Other | |||
Indefinite-Lived Intangible Assets (Excluding Goodwill) [Abstract] | |||
Gross Carrying Amount | 61 | 59 | 62 |
Intangible assets, net (Notes 1 and 4) | 61 | 59 | 62 |
Patents and trademarks | |||
Finite-Lived Intangible Assets, Net [Abstract] | |||
Gross Carrying Amount | 4,383 | 4,400 | 4,705 |
Accumulated Amortization | (1,583) | (1,485) | (1,350) |
Net Carrying Amount | 2,800 | 2,915 | 3,355 |
Customer relationships | |||
Finite-Lived Intangible Assets, Net [Abstract] | |||
Gross Carrying Amount | 2,099 | 2,127 | 2,265 |
Accumulated Amortization | (1,087) | (1,063) | (1,021) |
Net Carrying Amount | 1,012 | 1,064 | 1,244 |
Other | |||
Finite-Lived Intangible Assets, Net [Abstract] | |||
Gross Carrying Amount | 1,348 | 1,343 | 1,377 |
Accumulated Amortization | (671) | (650) | (628) |
Net Carrying Amount | $ 677 | $ 693 | $ 749 |
Intangible Assets and Goodwil_5
Intangible Assets and Goodwill - Narrative (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Finite-Lived Intangible Assets [Line Items] | |||||||
Impairment of intangible assets | $ 12,000,000 | ||||||
Amortization of intangible assets | $ 79,000,000 | $ 89,000,000 | $ 160,000,000 | $ 182,000,000 | 348,000,000 | $ 414,000,000 | $ 415,000,000 |
Goodwill, impairment loss | $ 0 | 0 | 0 | ||||
Patents and trademarks | |||||||
Finite-Lived Intangible Assets [Line Items] | |||||||
Useful life (in years) | 20 years | 20 years | 20 years | ||||
Customer relationships | |||||||
Finite-Lived Intangible Assets [Line Items] | |||||||
Useful life (in years) | 31 years | 31 years | 31 years | ||||
Other intangibles | |||||||
Finite-Lived Intangible Assets [Line Items] | |||||||
Useful life (in years) | 34 years | 34 years | 34 years | ||||
Amortization of intangible assets | $ 26,000,000 | 41,000,000 | $ 66,000,000 | 84,000,000 | |||
Trademarks | |||||||
Finite-Lived Intangible Assets [Line Items] | |||||||
Amortization of intangible assets | $ 53,000,000 | $ 48,000,000 | $ 94,000,000 | $ 98,000,000 | $ 187,000,000 | 213,000,000 | 197,000,000 |
Patents, Customer Relationships And Other Intangible Assets | |||||||
Finite-Lived Intangible Assets [Line Items] | |||||||
Amortization of intangible assets | $ 161,000,000 | $ 201,000,000 | $ 218,000,000 |
Intangible Assets and Goodwil_6
Intangible Assets and Goodwill - Intangible Asset Amortization Expense (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2024 | $ 306 | $ 314 |
2025 | 282 | 304 |
2026 | 273 | 280 |
2027 | 274 | 276 |
2028 | $ 270 | $ 272 |
Intangible Assets and Goodwil_7
Intangible Assets and Goodwill - Goodwill By Segment (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended | ||
Jul. 02, 2023 | Jan. 01, 2023 | Jul. 03, 2022 | Jan. 02, 2022 | |
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | $ 9,185 | $ 9,146 | $ 9,810 | $ 10,326 |
Currency translation/other | (104) | 39 | (664) | (516) |
Realignment of segment goodwill | 0 | |||
Goodwill, ending balance | 9,081 | 9,185 | 9,146 | 9,810 |
Johnson & Johnson | ||||
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | 0 | 9,146 | 9,810 | 10,326 |
Currency translation/other | 0 | (664) | (516) | |
Realignment of segment goodwill | (9,146) | |||
Goodwill, ending balance | 0 | 9,146 | 9,810 | |
Self Care | ||||
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | 5,194 | 0 | 0 | 0 |
Currency translation/other | (39) | 1 | 0 | 0 |
Realignment of segment goodwill | 5,193 | |||
Goodwill, ending balance | 5,155 | 5,194 | 0 | 0 |
Skin Health and Beauty | ||||
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | 2,365 | 0 | 0 | 0 |
Currency translation/other | (76) | 31 | 0 | 0 |
Realignment of segment goodwill | 2,334 | |||
Goodwill, ending balance | 2,289 | 2,365 | 0 | 0 |
Essential Health | ||||
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | 1,626 | 0 | 0 | 0 |
Currency translation/other | 11 | 7 | 0 | 0 |
Realignment of segment goodwill | 1,619 | |||
Goodwill, ending balance | $ 1,637 | $ 1,626 | $ 0 | $ 0 |
Compensation Related Costs, R_2
Compensation Related Costs, Retirement Benefits (Details) - USD ($) $ in Millions | Jan. 01, 2023 | Jan. 02, 2022 |
Retirement Benefits [Abstract] | ||
Pension benefits | $ 216 | $ 303 |
Postretirement benefits | 5 | 5 |
Total recognized in the Combined Balance Sheets - end of year | 221 | 308 |
Accrued liabilities | (7) | (6) |
Employee related obligations - non-current | $ 214 | $ 302 |
Pensions and Other Benefit Pl_3
Pensions and Other Benefit Plans - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Retirement Plans | |||||||
Components of net periodic benefit cost | |||||||
Service cost | $ 5 | $ 2 | $ 10 | $ 4 | $ 8 | $ 7 | $ 6 |
Interest cost | 7 | 1 | 10 | 2 | 4 | 2 | 3 |
Recognized actuarial losses (gain) | (4) | (6) | (5) | ||||
Curtailments and settlements | 0 | 0 | 1 | ||||
Expected return on plan assets | (7) | 0 | (10) | 0 | (1) | 0 | 0 |
Net periodic benefit cost | $ 5 | $ 4 | $ 10 | $ 8 | 15 | 15 | 15 |
Other Benefit Plans | |||||||
Components of net periodic benefit cost | |||||||
Service cost | 0 | 0 | 0 | ||||
Interest cost | 0 | 1 | 0 | ||||
Recognized actuarial losses (gain) | 0 | 1 | 0 | ||||
Curtailments and settlements | 0 | 0 | 0 | ||||
Expected return on plan assets | 0 | 0 | 0 | ||||
Net periodic benefit cost | $ 0 | $ 0 | $ 0 |
Pensions and Other Benefit Pl_4
Pensions and Other Benefit Plans - Plan Assets Allocation (Details) | 3 Months Ended | |||||
Apr. 02, 2023 | Apr. 03, 2022 | Apr. 04, 2021 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Retirement Plans | ||||||
Net Periodic Benefit Cost | ||||||
Rate of increase in compensation levels | 2.50% | 2.70% | 2.70% | |||
Expected long-term rate of return on plan assets | 2.90% | 2.10% | 2.50% | |||
Benefit Obligation | ||||||
Discount rate | 4.20% | 1.40% | 1.10% | |||
Rate of increase in compensation levels | 2.70% | 2.70% | 2.70% | |||
Retirement Plans | Service Cost | ||||||
Net Periodic Benefit Cost | ||||||
Discount Rate | 2.30% | 1.20% | 1.50% | |||
Retirement Plans | Interest Cost | ||||||
Net Periodic Benefit Cost | ||||||
Discount Rate | 3.10% | 0.70% | 1% | |||
Other Benefit Plans | ||||||
Net Periodic Benefit Cost | ||||||
Rate of increase in compensation levels | 0% | 0% | 0% | |||
Expected long-term rate of return on plan assets | 0% | 0% | 0% | |||
Benefit Obligation | ||||||
Discount rate | 12.30% | 11.50% | 13.30% | |||
Rate of increase in compensation levels | 0% | 0% | 0% | |||
Other Benefit Plans | Service Cost | ||||||
Net Periodic Benefit Cost | ||||||
Discount Rate | 0% | 0% | 0% | |||
Other Benefit Plans | Interest Cost | ||||||
Net Periodic Benefit Cost | ||||||
Discount Rate | 0% | 0% | 0% |
Pensions and Other Benefit Pl_5
Pensions and Other Benefit Plans - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Retirement Benefits [Abstract] | |||
Ultimate health care cost trend rate | 8.30% | 8.30% | |
Benefit plan expense | $ 54 | $ 93 | $ 94 |
Total parent matching contributions | 14 | 14 | 12 |
Cost of providing special benefits | $ 46 | $ 49 | $ 53 |
Pensions and Other Benefit Pl_6
Pensions and Other Benefit Plans - Plan with Projected Benefit Obligation in Excess of Plan Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Change in Plan Assets | |||||||
Plan assets at fair value - beginning of year | $ 19,000 | $ 0 | $ 0 | ||||
Plan assets at fair value - end of year | 19,000 | $ 0 | |||||
Amounts Recognized in the Company’s Balance Sheet consist of the following: | |||||||
Accrued liabilities | (7,000) | (6,000) | |||||
Employee related obligations - non-current | (214,000) | (302,000) | |||||
Total recognized in the Combined Balance Sheets - end of year | (221,000) | (308,000) | |||||
Retirement Plans | |||||||
Change in Benefit Obligation | |||||||
Projected benefit obligation - beginning of year | 235,000 | 303,000 | 303,000 | 347,000 | |||
Service cost | $ 5,000 | $ 2,000 | 10,000 | 4,000 | 8,000 | 7,000 | $ 6,000 |
Interest cost | $ 7,000 | $ 1,000 | 10,000 | 2,000 | 4,000 | 2,000 | 3,000 |
Actuarial gain | (82,000) | (21,000) | |||||
Curtailments, settlements & restructuring | 0 | 0 | |||||
Benefits paid from plan | (8,000) | (9,000) | |||||
Effect of exchange rates | (19,000) | (23,000) | |||||
Other | 29,000 | 0 | |||||
Projected benefit obligation - end of year | 235,000 | 303,000 | 347,000 | ||||
Change in Plan Assets | |||||||
Plan assets at fair value - beginning of year | 19,000 | 0 | 0 | 0 | |||
Company contributions | 9,000 | 9,000 | |||||
Benefits paid from plan assets | (8,000) | (9,000) | |||||
Actual return on plan assets | (1,000) | 0 | |||||
Effect of exchange rates | (2,000) | 0 | |||||
Transfers | 21,000 | 0 | |||||
Plan assets at fair value - end of year | 19,000 | 0 | 0 | ||||
Funded status - end of year | (216,000) | (303,000) | |||||
Amounts Recognized in the Company’s Balance Sheet consist of the following: | |||||||
Accrued liabilities | (7,000) | (6,000) | |||||
Employee related obligations - non-current | (209,000) | (297,000) | |||||
Total recognized in the Combined Balance Sheets - end of year | (216,000) | (303,000) | |||||
Amounts Recognized in Accumulated Other Comprehensive Income consist of the following: | |||||||
Net actuarial (gain) loss | (15,000) | 79,000 | |||||
Prior service cost | 4,000 | 2,000 | |||||
Total before tax effects | (11,000) | 81,000 | |||||
Accumulated Benefit Obligations - end of year | 204,000 | 262,000 | |||||
Retirement Plans | Defined Benefit Plan, Unfunded Plan | |||||||
Change in Benefit Obligation | |||||||
Other | 25,000 | ||||||
Other Benefit Plans | |||||||
Change in Benefit Obligation | |||||||
Projected benefit obligation - beginning of year | $ 5,000 | 5,000 | 5,000 | 5,000 | |||
Service cost | 0 | 0 | 0 | ||||
Interest cost | 0 | 1,000 | 0 | ||||
Actuarial gain | 0 | 0 | |||||
Curtailments, settlements & restructuring | 0 | 0 | |||||
Benefits paid from plan | 0 | 0 | |||||
Effect of exchange rates | 0 | (1,000) | |||||
Other | 0 | 0 | |||||
Projected benefit obligation - end of year | 5,000 | 5,000 | 5,000 | ||||
Change in Plan Assets | |||||||
Plan assets at fair value - beginning of year | $ 0 | 0 | 0 | ||||
Company contributions | 0 | 0 | |||||
Benefits paid from plan assets | 0 | 0 | |||||
Actual return on plan assets | 0 | 0 | |||||
Effect of exchange rates | 0 | 0 | |||||
Transfers | 0 | ||||||
Plan assets at fair value - end of year | 0 | $ 0 | |||||
Funded status - end of year | 0 | 0 | |||||
Amounts Recognized in the Company’s Balance Sheet consist of the following: | |||||||
Accrued liabilities | 0 | 0 | |||||
Employee related obligations - non-current | (5,000) | (5,000) | |||||
Total recognized in the Combined Balance Sheets - end of year | (5,000) | (5,000) | |||||
Amounts Recognized in Accumulated Other Comprehensive Income consist of the following: | |||||||
Net actuarial (gain) loss | (4,000) | (4,000) | |||||
Prior service cost | 0 | 0 | |||||
Total before tax effects | (4,000) | (4,000) | |||||
Accumulated Benefit Obligations - end of year | $ 3,000 | $ 3,000 |
Pensions and Other Benefit Pl_7
Pensions and Other Benefit Plans - Amounts Recognized in Net Periodic Benefit Cost and Other Comprehensive Income (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Retirement Plans | |||||||
Defined Benefit Plan Disclosure [Line Items] | |||||||
Net periodic benefit cost | $ 5 | $ 4 | $ 10 | $ 8 | $ 15 | $ 15 | $ 15 |
Net actuarial (gain) loss | (82) | (21) | |||||
Amortization of net actuarial loss | (4) | (6) | |||||
Effect of exchange rates | (6) | (7) | |||||
Total before tax effects | (92) | (34) | |||||
Total recognized in net periodic benefit cost and other comprehensive income | (77) | (19) | |||||
Other Benefit Plans | |||||||
Defined Benefit Plan Disclosure [Line Items] | |||||||
Net periodic benefit cost | 0 | 0 | $ 0 | ||||
Net actuarial (gain) loss | 0 | 0 | |||||
Amortization of net actuarial loss | 0 | 0 | |||||
Effect of exchange rates | 0 | 1 | |||||
Total before tax effects | 0 | 1 | |||||
Total recognized in net periodic benefit cost and other comprehensive income | $ 0 | $ 1 |
Pensions and Other Benefit Pl_8
Pensions and Other Benefit Plans - Schedule of Expected Benefit Payments (Details) $ in Millions | Jan. 01, 2023 USD ($) |
Retirement Plans | |
Defined Benefit Plan Disclosure [Line Items] | |
2023 | $ 10 |
2024 | 11 |
2025 | 12 |
2026 | 12 |
2027 | 13 |
2028- 2032 | 80 |
Other Benefit Plans | |
Defined Benefit Plan Disclosure [Line Items] | |
2023 | 0 |
2024 | 0 |
2025 | 0 |
2026 | 0 |
2027 | 0 |
2028- 2032 | $ 2 |
Pensions and Other Benefit Pl_9
Pensions and Other Benefit Plans - Retirement Plan Asset Allocation (Details) | Jan. 01, 2023 | Jan. 02, 2022 |
Defined Benefit Plan Disclosure [Line Items] | ||
Percent of Plan Assets | 100% | 100% |
Target Allocation | 100% | |
Debt instruments | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Percent of Plan Assets | 56% | 0% |
Target Allocation | 56% | |
Equity securities | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Percent of Plan Assets | 42% | 0% |
Target Allocation | 42% | |
Other assets | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Percent of Plan Assets | 2% | 100% |
Target Allocation | 2% |
Pensions and Other Benefit P_10
Pensions and Other Benefit Plans - Retirement Plans' Investments Measured At Fair Value (Details) - USD ($) $ in Thousands | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 |
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | $ 19,000 | $ 0 | |
Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 19,000 | 0 | $ 0 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 9,000 | 0 | |
Significant Other Observable Inputs (Level 2) | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 9,000 | 0 | |
Significant Unobservable Inputs (Level 3) | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 1,000 | 0 | |
Debt instruments | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 9,000 | 0 | |
Debt instruments | Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 0 | 0 | |
Debt instruments | Significant Other Observable Inputs (Level 2) | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 9,000 | 0 | |
Debt instruments | Significant Unobservable Inputs (Level 3) | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 0 | 0 | |
Equity securities | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 9,000 | 0 | |
Equity securities | Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 9,000 | 0 | |
Equity securities | Significant Other Observable Inputs (Level 2) | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 0 | 0 | |
Equity securities | Significant Unobservable Inputs (Level 3) | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 0 | 0 | |
Other assets | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 1,000 | 0 | |
Other assets | Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 0 | 0 | |
Other assets | Significant Other Observable Inputs (Level 2) | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | 0 | 0 | |
Other assets | Significant Unobservable Inputs (Level 3) | Fair Value, Recurring | Retirement Plans | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Investments at fair value | $ 1,000 | $ 0 |
Accumulated Other Comprehensi_5
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||||
Beginning balance | $ 20,282 | $ 20,465 | $ 20,021 | $ 20,399 | $ 20,399 | $ 18,356 | $ 21,721 |
Net change | (980) | (901) | 845 | ||||
Ending balance | 11,040 | 19,601 | 11,040 | 19,601 | 20,021 | 20,399 | 18,356 |
Foreign Currency Translation | |||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||||
Beginning balance | (5,313) | (4,701) | (5,474) | (4,421) | (4,421) | (3,495) | (4,350) |
Net change | (177) | (835) | (16) | (1,115) | (1,053) | (926) | 855 |
Ending balance | (5,490) | (5,536) | (5,490) | (5,536) | (5,474) | (4,421) | (3,495) |
Employee Benefit Plans | |||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||||
Beginning balance | 26 | (48) | 12 | (51) | (51) | (76) | (65) |
Net change | (83) | 1 | (69) | 4 | 63 | 25 | (11) |
Ending balance | (57) | (47) | (57) | (47) | 12 | (51) | (76) |
Gain On Cash Flow Hedges | |||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||||
Beginning balance | 48 | (5) | 9 | (1) | (1) | (1) | (2) |
Net change | (8) | 1 | 31 | (3) | 10 | 0 | 1 |
Ending balance | 40 | (4) | 40 | (4) | 9 | (1) | (1) |
Total Accumulated Other Comprehensive Loss | |||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||||
Beginning balance | (5,239) | (4,754) | (5,453) | (4,473) | (4,473) | (3,572) | (4,417) |
Net change | (268) | (833) | (54) | (1,114) | |||
Ending balance | $ (5,507) | $ (5,587) | $ (5,507) | $ (5,587) | $ (5,453) | $ (4,473) | $ (3,572) |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Stock-based compensation expense | $ 38 | $ 41 | $ 73 | $ 76 | $ 137 | $ 141 | $ 115 |
Stock options | |||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Stock-based compensation expense | 43 | 41 | 37 | ||||
RSUs | |||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Stock-based compensation expense | 74 | 73 | 67 | ||||
PSUs | |||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Stock-based compensation expense | 20 | 27 | 11 | ||||
Cost of sales | |||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Stock-based compensation expense | 12 | 10 | 16 | 18 | 30 | 33 | 29 |
Selling, general, and administrative expenses | |||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Stock-based compensation expense | $ 26 | $ 31 | $ 57 | $ 58 | $ 107 | $ 108 | $ 86 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jul. 02, 2023 USD ($) | Apr. 02, 2023 | Jul. 03, 2022 USD ($) | Jul. 02, 2023 USD ($) | Jul. 03, 2022 USD ($) | Jan. 01, 2023 USD ($) performanceGoal $ / shares shares | Jan. 02, 2022 USD ($) $ / shares shares | Jan. 03, 2021 USD ($) performanceGoal $ / shares | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Stock-based compensation expense | $ 38 | $ 41 | $ 73 | $ 76 | $ 137 | $ 141 | $ 115 | |
Service period | 1 year 9 months 14 days | 1 year 9 months 3 days | 1 year 8 months 26 days | |||||
Average fair value of options granted (usd per share) | $ / shares | $ 23.23 | $ 20.86 | $ 16.42 | |||||
Intrinsic value of options exercised | $ 64 | $ 56 | $ 50 | |||||
Weighted average remaining contractual term | 6 years 7 months 6 days | |||||||
Options outstanding (in shares) | shares | 8,221,000 | 8,657,000 | ||||||
Average life | 6 years 8 months 12 days | 6 years 8 months 12 days | 6 years 4 months 24 days | |||||
Shares outstanding, exercisable (in shares) | shares | 3,291 | 3,693 | ||||||
Weighted-average exercise price, exercisable (in usd per share) | $ / shares | $ 118.83 | $ 109.21 | ||||||
Unrecognized compensation | $ 105 | $ 90 | 75 | |||||
Stock options | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Stock-based compensation expense | $ 43 | 41 | 37 | |||||
Expiration period | 10 years | |||||||
Historical volatility rate, period | 10 years | |||||||
Average implied volatility rate | 35 days | |||||||
Options, life | 2 years | |||||||
Stock options | Minimum | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Service period | 6 months | |||||||
Stock options | Maximum | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Service period | 4 years | |||||||
RSUs | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Stock-based compensation expense | $ 74 | $ 73 | $ 67 | |||||
Weighted average grant date fair value (in usd per share) | $ / shares | $ 153.69 | $ 152.73 | $ 139.88 | |||||
Aggregate fair value | $ 44 | $ 45 | $ 43 | |||||
RSUs | Minimum | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Service period | 6 months | |||||||
RSUs | Maximum | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Service period | 3 years | |||||||
PSUs | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Stock-based compensation expense | $ 20 | $ 27 | $ 11 | |||||
Achievement period (in years) | 3 years | |||||||
Number of goals | performanceGoal | 3 | 2 | ||||||
Weighted average grant date fair value (in usd per share) | $ / shares | $ 178.45 | $ 187.50 | $ 177.16 | |||||
Aggregate fair value | $ 4 | $ 5 | $ 4 | |||||
PSUs | Minimum | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Service period | 6 months | |||||||
Performance payout | 0% | |||||||
PSUs | Maximum | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Service period | 3 years | |||||||
Performance payout | 200% | |||||||
Parent | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Stock-based compensation expense | $ 0 | $ 8 | $ 2 | $ 18 | $ 26 | $ 38 | $ 28 |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Valuation Assumptions (Details) - Stock options - USD ($) | 12 Months Ended | ||
Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Risk-free rate | 2% | 0.80% | 1.50% |
Expected volatility | 18% | 18.60% | 15.30% |
Expected life (in years) | 7 years | 7 years | 7 years |
Expected dividend yield | $ 0.027 | $ 0.025 | $ 0.026 |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | |
Jan. 01, 2023 | Jan. 02, 2022 | |
Outstanding Shares | ||
Beginning balance (in shares) | 8,657,000 | |
Granted (in shares) | 1,783,000 | |
Exercised (in shares) | (1,018,000) | |
Canceled (in shares) | (1,201,000) | |
Ending balance (in shares) | 8,221,000 | |
Outstanding Shares, Options vested and expected to vest (in shares) | 8,017,000 | |
Weighted Average Exercise Price | ||
Beginning balance (in usd per share) | $ 132.58 | |
Granted (in usd per share) | 165.89 | |
Exercised (in usd per share) | 112.53 | |
Canceled (in usd per share) | 114.19 | |
Ending balance (in usd per share) | 144.03 | |
Weighted-Average Exercise Price, Options vested and expected to vest (in usd per share) | $ 143.55 | |
Aggregate Intrinsic Value | ||
Outstanding | $ 268 | $ 333 |
Options vested and expected to vest | $ 265 |
Stock-Base Compensation - Summa
Stock-Base Compensation - Summary of Stock Options Outstanding and Exercisable (Details) - $ / shares | 3 Months Ended | 12 Months Ended | |
Apr. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |||
Outstanding, Options (in shares) | 8,221,000 | ||
Outstanding, Average Life | 6 years 8 months 12 days | 6 years 8 months 12 days | 6 years 4 months 24 days |
Outstanding, Weighted Average Exercise Price (usd per share) | $ 144.03 | ||
Exercisable, Options (in shares) | 3,291,000 | ||
Exercisable, Weighted Average Exercise Price (usd per share) | $ 118.83 | $ 109.21 | |
$72.54-$100.48 | |||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |||
Outstanding, Options (in shares) | 475,000 | ||
Outstanding, Average Life | 1 year 7 months 6 days | ||
Outstanding, Weighted Average Exercise Price (usd per share) | $ 94.95 | ||
Exercisable, Options (in shares) | 476,000 | ||
Exercisable, Weighted Average Exercise Price (usd per share) | $ 94.95 | ||
$101.87-$115.67 | |||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |||
Outstanding, Options (in shares) | 1,062,000 | ||
Outstanding, Average Life | 3 years 8 months 12 days | ||
Outstanding, Weighted Average Exercise Price (usd per share) | $ 109.51 | ||
Exercisable, Options (in shares) | 1,062,000 | ||
Exercisable, Weighted Average Exercise Price (usd per share) | $ 109.51 | ||
$129.51-$141.06 | |||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |||
Outstanding, Options (in shares) | 1,766,000 | ||
Outstanding, Average Life | 5 years 8 months 12 days | ||
Outstanding, Weighted Average Exercise Price (usd per share) | $ 130.94 | ||
Exercisable, Options (in shares) | 1,753,000 | ||
Exercisable, Weighted Average Exercise Price (usd per share) | $ 130.93 | ||
$151.41-$164.62 | |||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |||
Outstanding, Options (in shares) | 3,139,000 | ||
Outstanding, Average Life | 7 years 7 months 6 days | ||
Outstanding, Weighted Average Exercise Price (usd per share) | $ 158.11 | ||
Exercisable, Options (in shares) | 0 | ||
Exercisable, Weighted Average Exercise Price (usd per share) | $ 0 | ||
$164.63-$165.89 | |||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |||
Outstanding, Options (in shares) | 1,779,000 | ||
Outstanding, Average Life | 7 years 7 months 6 days | ||
Outstanding, Weighted Average Exercise Price (usd per share) | $ 165.89 | ||
Exercisable, Options (in shares) | 0 | ||
Exercisable, Weighted Average Exercise Price (usd per share) | $ 0 |
Stock-Based Compensation - Su_2
Stock-Based Compensation - Summary of Restricted Stock Unit Activity and Performance Stock Units (Details) | 12 Months Ended |
Jan. 01, 2023 shares | |
RSUs | |
Number of Shares Outstanding | |
Outstanding, beginning balance (in shares) | 1,206,000,000 |
Granted (in shares) | 475,000,000 |
Issued (in shares) | (364,000,000) |
Canceled/forfeited/adjusted (in shares) | (87,000,000) |
Outstanding, ending balance (in shares) | 1,230,000,000 |
PSUs | |
Number of Shares Outstanding | |
Outstanding, beginning balance (in shares) | 198,000,000 |
Granted (in shares) | 85,000,000 |
Issued (in shares) | (28,000,000) |
Canceled/forfeited/adjusted (in shares) | (34,000,000) |
Outstanding, ending balance (in shares) | 221,000,000 |
Related Parties - Cost Allocati
Related Parties - Cost Allocations from Parent (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Related Party Transaction [Line Items] | |||||||
Cost of sales | $ 1,786 | $ 1,646 | $ 3,513 | $ 3,280 | $ 6,665 | $ 6,635 | $ 6,619 |
Selling, general, and administrative expenses | $ 1,522 | $ 1,375 | $ 3,024 | $ 2,725 | 5,633 | 5,484 | 4,956 |
Parent's Affiliate | |||||||
Related Party Transaction [Line Items] | |||||||
Cost of sales | 149 | 182 | 166 | ||||
Selling, general, and administrative expenses | 679 | 649 | 652 | ||||
Total | $ 828 | $ 831 | $ 818 |
Related Parties - Net Transfers
Related Parties - Net Transfers To the Parent (Details) - Parent - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | $ 1,016 | ||||||
Deferred taxes on income | $ 0 | $ 251 | $ 0 | ||||
Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Cash Flows | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | $ 12 | (676) | $ (274) | $ (892) | (1,597) | 7 | (3,446) |
Cash pooling and general financing activities | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | (37) | (916) | (446) | (1,324) | (2,568) | (832) | (4,414) |
Corporate cost allocations | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | 49 | 213 | 145 | 406 | 828 | 831 | 818 |
Taxes deemed settled with the Parent | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | 0 | 1 | 27 | 1 | 78 | 44 | 151 |
Allocated derivative and hedging gains | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | 0 | 26 | 0 | 25 | 65 | (36) | (1) |
Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Equity | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | 10 | (635) | (308) | (816) | (1,485) | 913 | (3,331) |
Stock-based compensation expense | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | $ 0 | $ 41 | $ 0 | $ 76 | 137 | 141 | 115 |
Talc liability transferred to Parent, net of related deferred taxes ($0, $251, $0) | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | 0 | 765 | 0 | ||||
Pension liabilities transferred from the Parent | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | $ (25) | $ 0 | $ 0 |
Related Parties - Narrative (De
Related Parties - Narrative (Details) - Parent - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Related Party Transaction [Line Items] | ||||
Related party transaction, amounts of transaction | $ (1,016) | |||
Pension liabilities transferred from the Parent | ||||
Related Party Transaction [Line Items] | ||||
Related party transaction, amounts of transaction | $ 25 | $ 0 | $ 0 |
Other (income) expense, net, _3
Other (income) expense, net, operating and Other expense (income), net (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Other Operating Income (Expense), Net [Abstract] | |||||||
Litigation (income) expense | $ (7) | $ 92 | $ 3,967 | ||||
Royalty Income | $ (1) | $ (13) | $ (8) | $ (20) | (39) | (89) | (100) |
Other | 23 | 12 | 4 | ||||
Total Other operating expense (income), net | 1 | 13 | (16) | 8 | (23) | 15 | 3,871 |
Other Nonoperating Income (Expense) [Abstract] | |||||||
Currency losses on transactions | 12 | 5 | 28 | (2) | 42 | 20 | 40 |
Other | 4 | 25 | 3 | ||||
Total Other expense (income), net | $ 10 | $ (5) | $ 40 | $ (6) | $ 38 | (5) | 37 |
Brazil VAT | |||||||
Other Operating Income (Expense), Net [Abstract] | |||||||
Litigation (income) expense | (74) | ||||||
Talc-Related Costs | |||||||
Other Operating Income (Expense), Net [Abstract] | |||||||
Litigation (income) expense | $ (154) | $ (4,029) |
Income Taxes - Provision For Ta
Income Taxes - Provision For Taxes on Income (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Currently payable: | |||||||
U.S. taxes | $ 75 | $ 8 | $ 308 | ||||
International taxes | 318 | 318 | 356 | ||||
Total current taxes | 393 | 326 | 664 | ||||
Deferred: | |||||||
U.S. taxes | 205 | 627 | (741) | ||||
International taxes | (48) | (59) | (60) | ||||
Total deferred | $ 155 | $ 62 | 157 | 568 | (801) | ||
Provision (benefit) for taxes on income | $ 209 | $ 171 | $ 488 | $ 255 | $ 550 | $ 894 | $ (137) |
Income Taxes - Effective Income
Income Taxes - Effective Income Tax Rate Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Income Tax Expense (Benefit), Effective Income Tax Rate Reconciliation, Amount [Abstract] | |||||||
U.S. | $ 1,238 | $ 1,367 | $ (2,614) | ||||
International | 1,399 | 1,558 | 1,598 | ||||
Income (Loss) before taxes | $ 639 | $ 775 | $ 1,248 | $ 1,387 | $ 2,637 | $ 2,925 | $ (1,016) |
Tax rates: | |||||||
U.S. statutory rate | 21% | 21% | 21% | ||||
U.S. taxes on international income | (3.80%) | 9.50% | (3.80%) | ||||
International operations | (1.60%) | (2.10%) | (14.00%) | ||||
State | 3.10% | 1.70% | 10.20% | ||||
Change in valuation allowance | 2.20% | 1.40% | (2.70%) | ||||
Tax benefits on share-based compensation | (0.20%) | (0.30%) | 1% | ||||
All other | 0.10% | (0.60%) | 1.80% | ||||
Effective Rate | 32.70% | 22.10% | 39.10% | 18.40% | 20.80% | 30.60% | 13.50% |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Income Tax Examination [Line Items] | |||||||
Effective tax rate, percent | 32.70% | 22.10% | 39.10% | 18.40% | 20.80% | 30.60% | 13.50% |
Unrecognized tax benefits, increase | $ 166 | ||||||
Decrease to effective tax rate benefit from increase in unrecognized tax benefits, percent | 16.30% | ||||||
Change in deferred tax assets valuation due to credits not utilized | 4.70% | ||||||
Deferred tax assets, net operating loss, US | $ 110 | ||||||
Deferred tax assets, net operating loss, foreign | $ 365 | ||||||
Deferred tax assets, tax credit carryforwards | 151 | 156 | |||||
Valuation allowance | 250 | 186 | $ 144 | ||||
Change in valuation allowance | $ 188 | 64 | 42 | 20 | |||
Repatriation tax effect | 114 | ||||||
Unrecognized tax benefits that would impact effective tax rate | 437 | ||||||
After tax interest expense | 13 | 16 | 46 | ||||
Accrued interest | $ 147 | $ 134 | |||||
Johnson & Johnson | |||||||
Income Tax Examination [Line Items] | |||||||
Adjustment from settlement | $ 165 |
Income Taxes - Temporary Differ
Income Taxes - Temporary Differences and Carryforwards (Details) - USD ($) $ in Millions | Jan. 01, 2023 | Jan. 02, 2022 |
Asset | ||
Employee related obligations | $ 20 | $ 56 |
Stock based compensation | 75 | 68 |
Depreciation of property, plant and equipment | 0 | 0 |
Goodwill and intangibles | 0 | 0 |
Reserves & liabilities | 120 | 93 |
Net operating loss and tax credit carryforward | 261 | 521 |
Undistributed foreign earnings | 99 | 52 |
Global intangible low-taxed income | 51 | 0 |
Miscellaneous international | 28 | 46 |
R&D Capitalized for tax | 55 | 0 |
Miscellaneous U.S. | 39 | 13 |
Subtotal | 748 | 849 |
Valuation allowance | (250) | (186) |
Total deferred income taxes | 498 | 663 |
Liability | ||
Employee related obligations | 0 | 0 |
Stock based compensation | 0 | 0 |
Depreciation of property, plant and equipment | (38) | (41) |
Goodwill and intangibles | (2,652) | (2,689) |
Reserves & liabilities | 0 | 0 |
Net operating loss and tax credit carryforward | 0 | 0 |
Undistributed foreign earnings | (89) | (82) |
Global intangible low-taxed income | 0 | (92) |
Miscellaneous international | 0 | 0 |
R&D Capitalized for tax | 0 | 0 |
Miscellaneous U.S. | 0 | 0 |
Subtotal | (2,779) | (2,904) |
Valuation allowance | 0 | 0 |
Total deferred income taxes | $ (2,779) | $ (2,904) |
Income Taxes - Unrecognized Tax
Income Taxes - Unrecognized Tax Benefits (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Beginning of year | $ 469 | $ 519 | $ 465 |
Increases related to current year tax positions | 32 | 31 | 40 |
Increases related to prior period tax positions | 7 | 2 | 270 |
Decreases related to prior period tax positions | (49) | (40) | (87) |
Settlements | (5) | (15) | (136) |
Lapse of statute of limitations | (17) | (28) | (33) |
End of year | $ 437 | $ 469 | $ 519 |
Fair Value Measurements - Finan
Fair Value Measurements - Financial Assets and Liabilities at Fair Value (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | $ 66 | $ 68 | |
Derivatives designated as cash flow hedges : Liabilities | (48) | (54) | |
Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 68 | $ 0 | |
Derivatives designated as cash flow hedges : Liabilities | (54) | 0 | |
Net amount presented in Prepaid expenses and other receivables: | 14 | 0 | |
Level 1 | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | |
Level 1 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | |
Net amount presented in Prepaid expenses and other receivables: | 0 | 0 | |
Level 2 | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 66 | 68 | |
Derivatives designated as cash flow hedges : Liabilities | (48) | (54) | |
Level 2 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 68 | 0 | |
Derivatives designated as cash flow hedges : Liabilities | (54) | 0 | |
Net amount presented in Prepaid expenses and other receivables: | 14 | 0 | |
Level 3 | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | |
Level 3 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | |
Net amount presented in Prepaid expenses and other receivables: | 0 | 0 | |
Forward foreign exchange contracts | |||
Financial assets and liabilities at fair value | |||
Net amount presented in Prepaid expenses and other receivables: | 18 | 14 | |
Forward foreign exchange contracts | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 66 | 39 | 0 |
Derivatives designated as cash flow hedges : Liabilities | (48) | (15) | 0 |
Forward foreign exchange contracts | Level 1 | |||
Financial assets and liabilities at fair value | |||
Net amount presented in Prepaid expenses and other receivables: | 0 | 0 | |
Forward foreign exchange contracts | Level 1 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | 0 |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | 0 |
Forward foreign exchange contracts | Level 2 | |||
Financial assets and liabilities at fair value | |||
Net amount presented in Prepaid expenses and other receivables: | 18 | 14 | |
Forward foreign exchange contracts | Level 2 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 66 | 39 | 0 |
Derivatives designated as cash flow hedges : Liabilities | (48) | (15) | 0 |
Forward foreign exchange contracts | Level 3 | |||
Financial assets and liabilities at fair value | |||
Net amount presented in Prepaid expenses and other receivables: | 0 | 0 | |
Forward foreign exchange contracts | Level 3 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | 0 |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | 0 |
Interest rate swaps | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 29 | 0 |
Derivatives designated as cash flow hedges : Liabilities | 0 | (39) | 0 |
Interest rate swaps | Level 1 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | 0 |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | 0 |
Interest rate swaps | Level 2 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 29 | 0 |
Derivatives designated as cash flow hedges : Liabilities | 0 | (39) | 0 |
Interest rate swaps | Level 3 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | 0 |
Derivatives designated as cash flow hedges : Liabilities | $ 0 | 0 | 0 |
Time deposits | |||
Financial assets and liabilities at fair value | |||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 32 | |
Time deposits | Level 1 | |||
Financial assets and liabilities at fair value | |||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 0 | |
Time deposits | Level 2 | |||
Financial assets and liabilities at fair value | |||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 32 | |
Time deposits | Level 3 | |||
Financial assets and liabilities at fair value | |||
Cash and Cash Equivalents, Fair Value Disclosure | $ 0 | $ 0 |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||||
Jul. 02, 2023 | Jan. 01, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | Apr. 02, 2023 | Apr. 03, 2022 | Dec. 29, 2019 | |
Derivative [Line Items] | |||||||||||
Deferred net gain on derivatives included in accumulated other comprehensive income | $ 11,040 | $ 20,021 | $ 19,601 | $ 11,040 | $ 19,601 | $ 20,021 | $ 20,399 | $ 18,356 | $ 20,282 | $ 20,465 | $ 21,721 |
Equity investments without readily determinable fair values | 66 | 66 | 74 | ||||||||
Net change | (980) | (901) | 845 | ||||||||
Gain On Cash Flow Hedges | |||||||||||
Derivative [Line Items] | |||||||||||
Deferred net gain on derivatives included in accumulated other comprehensive income | 40 | $ 9 | (4) | 40 | (4) | 9 | (1) | (1) | $ 48 | $ (5) | $ (2) |
Net change | $ (8) | $ 1 | $ 31 | $ (3) | $ 10 | $ 0 | $ 1 | ||||
Minimum | |||||||||||
Derivative [Line Items] | |||||||||||
Contract term | 12 months | ||||||||||
Maximum | |||||||||||
Derivative [Line Items] | |||||||||||
Contract term | 18 months | ||||||||||
Tranche 1 | |||||||||||
Derivative [Line Items] | |||||||||||
Contract term | 5 years | ||||||||||
Tranche 2 | |||||||||||
Derivative [Line Items] | |||||||||||
Contract term | 10 years | ||||||||||
Tranche 3 | |||||||||||
Derivative [Line Items] | |||||||||||
Contract term | 30 years | ||||||||||
Interest rate swaps | Tranche 1 | |||||||||||
Derivative [Line Items] | |||||||||||
Contract term | 5 years | 5 years | |||||||||
Interest rate swaps | Tranche 2 | |||||||||||
Derivative [Line Items] | |||||||||||
Contract term | 10 years | 10 years | |||||||||
Interest rate swaps | Tranche 3 | |||||||||||
Derivative [Line Items] | |||||||||||
Contract term | 30 years | 30 years |
Fair Value Measurements - Notio
Fair Value Measurements - Notional Amount (Details) - Designated as Hedging Instrument - Cash flow hedges - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 |
Derivative [Line Items] | ||
Derivative, notional amount | $ 3,307 | $ 4,168 |
Forward foreign exchange contracts | ||
Derivative [Line Items] | ||
Derivative, notional amount | 3,307 | 1,768 |
Interest rate swaps | ||
Derivative [Line Items] | ||
Derivative, notional amount | $ 0 | $ 2,400 |
Fair Value Measurements - Activ
Fair Value Measurements - Activity (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Net Sales | |||||||
Derivative [Line Items] | |||||||
Gain (loss) on cash flow hedges | $ (1) | $ 8 | $ 0 | $ 11 | $ 21 | $ 11 | $ (2) |
Gain (loss) on forward currency exchange contracts not designated as hedges | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Cost of sales | |||||||
Derivative [Line Items] | |||||||
Gain (loss) on cash flow hedges | (3) | 3 | 7 | 3 | 12 | (23) | (3) |
Gain (loss) on forward currency exchange contracts not designated as hedges | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Other (income) expense, net | |||||||
Derivative [Line Items] | |||||||
Gain (loss) on cash flow hedges | (2) | 12 | (2) | 10 | 30 | (21) | 10 |
Gain (loss) on forward currency exchange contracts not designated as hedges | $ (2) | $ (1) | $ 4 | $ 7 | $ 33 | $ (15) | $ (34) |
Commitments and Contingencies-
Commitments and Contingencies- Narrative (Details) | Jan. 01, 2023 company |
Commitments and Contingencies Disclosure [Abstract] | |
Number of other companies | 120 |
Commitments and Contingencies -
Commitments and Contingencies - Summary of Talc Liabilities (Details) - USD ($) $ in Millions | 12 Months Ended | |
Jan. 02, 2022 | Jan. 03, 2021 | |
Loss Contingency Accrual [Roll Forward] | ||
Beginning Balance | $ 4,043 | $ 462 |
Accruals | 154 | 4,029 |
Payments | (3,181) | (448) |
Transfer of liability to Parent | (1,016) | 0 |
Ending Balance | $ 0 | $ 4,043 |
Accrued and Other Liabilities -
Accrued and Other Liabilities - Accrued Liabilities (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Other Liabilities Disclosure [Abstract] | |||
Accrued expenses | $ 447 | $ 535 | |
Accrued compensation and benefits | $ 275 | 272 | 266 |
Lease liability | 47 | 35 | 47 |
Other accrued liabilities | 409 | 152 | 176 |
Accrued liabilities | $ 1,201 | $ 906 | $ 1,024 |
Accrued and Other Liabilities_4
Accrued and Other Liabilities - Other Liabilities (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Other Liabilities Disclosure [Abstract] | |||
Accrued income taxes - noncurrent (Note 11) | $ 234 | $ 584 | $ 603 |
Noncurrent lease liability | 120 | 81 | 82 |
Other noncurrent accrued liabilities | 239 | 62 | 71 |
Other liabilities | $ 593 | $ 727 | $ 756 |
Acquisitions and Divestitures -
Acquisitions and Divestitures - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | |
Jan. 02, 2022 | Jan. 03, 2021 | |
Business Combination and Asset Acquisition [Abstract] | ||
Gain from divestiture of business | $ 25 | $ 50 |
Segments of Business and Geog_3
Segments of Business and Geographic Areas - Schedule of Reportable Business Segments (Details) - Segment | 6 Months Ended | 12 Months Ended |
Jul. 02, 2023 | Jan. 01, 2023 | |
Segment Reporting [Abstract] | ||
Number of business segments | 3 | 3 |
Segments of Business and Geog_4
Segments of Business and Geographic Areas - Product Categories as a Percent of Net Sales (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
Product Concentration Risk | Revenue Benchmark | Cough, Cold and Allergy | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 13% | 13% | 14% | 12% | 13% | 12% | 12% |
Product Concentration Risk | Revenue Benchmark | Pain Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 12% | 11% | 13% | 13% | 13% | 11% | 10% |
Product Concentration Risk | Revenue Benchmark | Other Self Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 16% | 15% | 15% | 15% | 14% | 15% | 14% |
Product Concentration Risk | Revenue Benchmark | Face and Body Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 19% | 20% | 19% | 20% | 20% | 22% | 22% |
Product Concentration Risk | Revenue Benchmark | Hair, Sun and Other | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 10% | 10% | 10% | 9% | 9% | 8% | 9% |
Product Concentration Risk | Revenue Benchmark | Oral Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 10% | 10% | 10% | 10% | 10% | 11% | 11% |
Product Concentration Risk | Revenue Benchmark | Baby Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 9% | 10% | 9% | 10% | 10% | 10% | 11% |
Product Concentration Risk | Revenue Benchmark | Other Essential Health | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 11% | 11% | 10% | 11% | 11% | 11% | 11% |
Segments of Business and Geog_5
Segments of Business and Geographic Areas - Segment Net Sales (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Sales by segment of business | |||||||
Total | $ 4,011 | $ 3,804 | $ 7,863 | $ 7,394 | $ 14,950 | $ 15,054 | $ 14,467 |
Self Care | |||||||
Sales by segment of business | |||||||
Total | 1,661 | 1,481 | 3,301 | 2,946 | 6,030 | 5,643 | 5,235 |
Skin Health and Beauty | |||||||
Sales by segment of business | |||||||
Total | 1,147 | 1,126 | 2,258 | 2,138 | 4,350 | 4,541 | 4,450 |
Essential Health | |||||||
Sales by segment of business | |||||||
Total | $ 1,203 | $ 1,197 | $ 2,304 | $ 2,310 | $ 4,570 | $ 4,870 | $ 4,782 |
Segments of Business and Geog_6
Segments of Business and Geographic Areas - Adjusted Operating Income (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Segment Reporting Information [Line Items] | |||||||
Total adjusted operating income | $ 1,027 | $ 1,081 | $ 1,969 | $ 1,928 | $ 3,907 | $ 4,054 | $ 3,997 |
General corporate/unallocated expenses | 74 | 64 | 143 | 116 | 298 | 272 | 277 |
Other (income) expense, net, operating (Note 10) | (1) | (13) | 16 | (8) | 23 | (15) | (3,871) |
Restructuring | 0 | 24 | 0 | 38 | (100) | (116) | (82) |
Depreciation and amortization | 148 | 161 | 300 | 326 | 644 | 731 | 746 |
Separation-related costs | (102) | (49) | (200) | (59) | (213) | 0 | 0 |
Total operating income (loss) | 702 | 770 | 1,342 | 1,381 | 2,675 | 2,920 | (979) |
Other Nonoperating Income (Expense) | (2) | (10) | 12 | (4) | 38 | (5) | 37 |
Income (Loss) before taxes | 639 | 775 | 1,248 | 1,387 | 2,637 | 2,925 | (1,016) |
Self Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Total adjusted operating income | 576 | 524 | 1,158 | 998 | 2,088 | 1,952 | 1,858 |
Depreciation and amortization | 202 | 212 | 205 | ||||
Skin Health and Beauty | |||||||
Segment Reporting Information [Line Items] | |||||||
Total adjusted operating income | 201 | 243 | 350 | 370 | 708 | 878 | 889 |
Depreciation and amortization | 247 | 305 | 325 | ||||
Essential Health | |||||||
Segment Reporting Information [Line Items] | |||||||
Total adjusted operating income | $ 250 | $ 314 | $ 461 | $ 560 | 1,111 | 1,224 | 1,250 |
Depreciation and amortization | $ 195 | $ 214 | $ 216 |
Segments of Business and Geog_7
Segments of Business and Geographic Areas - Depreciation and Amortization (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Segment Reporting Information [Line Items] | |||||||
Depreciation and amortization | $ 148 | $ 161 | $ 300 | $ 326 | $ 644 | $ 731 | $ 746 |
Self Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Depreciation and amortization | 202 | 212 | 205 | ||||
Skin Health and Beauty | |||||||
Segment Reporting Information [Line Items] | |||||||
Depreciation and amortization | 247 | 305 | 325 | ||||
Essential Health | |||||||
Segment Reporting Information [Line Items] | |||||||
Depreciation and amortization | $ 195 | $ 214 | $ 216 |
Segments of Business and Geog_8
Segments of Business and Geographic Areas - Net Sales by Geographic Area (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Segment Reporting Information [Line Items] | |||||||
Net sales | $ 4,011 | $ 3,804 | $ 7,863 | $ 7,394 | $ 14,950 | $ 15,054 | $ 14,467 |
North America | |||||||
Segment Reporting Information [Line Items] | |||||||
Net sales | 7,418 | 7,284 | 7,095 | ||||
Europe, Middle East, and Africa | |||||||
Segment Reporting Information [Line Items] | |||||||
Net sales | 3,188 | 3,436 | 3,332 | ||||
Asia-Pacific | |||||||
Segment Reporting Information [Line Items] | |||||||
Net sales | 3,146 | 3,276 | 3,013 | ||||
Latin America | |||||||
Segment Reporting Information [Line Items] | |||||||
Net sales | 1,198 | 1,058 | 1,027 | ||||
U.S. | |||||||
Segment Reporting Information [Line Items] | |||||||
Net sales | $ 6,599 | $ 6,516 | $ 6,357 |
Segments of Business and Geog_9
Segments of Business and Geographic Areas - Long Lived Assets by Geographic Area (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total | $ 20,858 | $ 22,338 | ||
Property, plant and equipment, net (Notes 1 and 3) | $ 1,832 | 1,820 | 1,827 | |
Intangible assets, net | 19,038 | 20,511 | ||
North America | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total | 9,582 | 9,687 | ||
Europe, Middle East, and Africa | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total | 8,244 | 9,169 | ||
Asia-Pacific | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total | 2,736 | 3,204 | ||
Latin America | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total | 296 | 278 | ||
U.S. | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total | $ 7,469 | $ 7,527 | $ 7,631 |
Segments of Business and Geo_10
Segments of Business and Geographic Areas - Narrative (Details) - Segment | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Segment Reporting Information [Line Items] | |||||||
Number of operating segments | 3 | 3 | |||||
Product categories, percentage of net of sales | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
Customer A | Revenue Benchmark | Customer Concentration Risk | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 13% | 14% | 14% |
Restructuring - Schedule of Res
Restructuring - Schedule of Restructuring and Related Costs (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Restructuring Cost and Reserve [Line Items] | |||
Total | $ 100 | $ 117 | $ 66 |
Cost of sales | |||
Restructuring Cost and Reserve [Line Items] | |||
Total | 55 | 48 | 34 |
Selling, general, and administrative expenses | |||
Restructuring Cost and Reserve [Line Items] | |||
Total | 45 | 68 | 48 |
Other (income) expense, net | |||
Restructuring Cost and Reserve [Line Items] | |||
Total | $ 0 | $ 1 | $ (16) |
Subsequent Events (Details)
Subsequent Events (Details) ft² in Thousands, $ in Millions | 6 Months Ended | ||||||
Apr. 20, 2023 USD ($) ft² | Mar. 22, 2023 USD ($) numberOfNotes | Mar. 06, 2023 USD ($) | Mar. 03, 2023 USD ($) | Jul. 02, 2023 USD ($) | Jul. 03, 2022 USD ($) | Jan. 01, 2023 USD ($) | |
Subsequent Event [Line Items] | |||||||
Proceeds from issuance of Senior Notes, net of issuance cost | $ 7,686 | $ 0 | |||||
Unamortized debt issuance costs | 72 | $ 0 | |||||
Long-term debt | $ 7,684 | $ 0 | |||||
Maturity term | 364 days | ||||||
Commercial Paper | |||||||
Subsequent Event [Line Items] | |||||||
Maturity term | 90 days | ||||||
Credit facility | $ 4,000 | ||||||
Senior notes | |||||||
Subsequent Event [Line Items] | |||||||
Number of series of senior unsecured notes | numberOfNotes | 8 | ||||||
Debt instrument, face amount | $ 7,750 | ||||||
Proceeds from issuance of Senior Notes, net of issuance cost | $ 7,700 | ||||||
Unamortized debt issuance costs | 75 | ||||||
The Revolving Credit Facility | Revolving Credit Facility | |||||||
Subsequent Event [Line Items] | |||||||
Maturity term | 5 years | ||||||
Credit facility | $ 4,000 | ||||||
Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Approximate number of square feet to be leased (in sq ft) | ft² | 290 | ||||||
Expected lease expense | $ 10 | ||||||
Initial lease term (in years) | 15 years | ||||||
Long-term debt | $ 7,690 | ||||||
Subsequent Event | Commercial Paper | |||||||
Subsequent Event [Line Items] | |||||||
Credit facility | $ 4,000 | ||||||
Subsequent Event | Senior notes | |||||||
Subsequent Event [Line Items] | |||||||
Number of series of senior unsecured notes | numberOfNotes | 8 | ||||||
Debt instrument, face amount | $ 7,750 | ||||||
Proceeds from issuance of Senior Notes, net of issuance cost | 7,690 | ||||||
Unamortized debt issuance costs | $ 65 | ||||||
Subsequent Event | The Revolving Credit Facility | Revolving Credit Facility | |||||||
Subsequent Event [Line Items] | |||||||
Maturity term | 5 years | ||||||
Credit facility | $ 4,000 |
Description of the Company a_11
Description of the Company and Summary of Significant Accounting Policies - Narrative (Details) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||||
May 08, 2023 USD ($) $ / shares shares | Apr. 20, 2023 USD ($) ft² | Jul. 02, 2023 USD ($) $ / shares shares | Jul. 03, 2022 USD ($) | Jul. 02, 2023 USD ($) Segment $ / shares shares | Jul. 03, 2022 USD ($) | Jan. 01, 2023 USD ($) Segment $ / shares | Jan. 02, 2022 USD ($) | Jan. 03, 2021 USD ($) | May 09, 2023 USD ($) | May 04, 2023 $ / shares | |
Business Acquisition [Line Items] | |||||||||||
Number of business segments | Segment | 3 | 3 | |||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | |||||||
Sales price per share (in CHF per share) | $ / shares | $ 22 | ||||||||||
Cash and cash equivalents | $ 1,231 | $ 1,231 | $ 1,231 | $ 740 | $ 1,170 | ||||||
Common stock, shares outstanding (in shares) | shares | 1,914,894,444 | 1,914,894,444 | |||||||||
Separation-related costs | $ 102 | $ 49 | $ 200 | $ 59 | 213 | 0 | $ 0 | ||||
Research and development costs | 99 | 94 | 188 | 182 | 375 | 355 | 320 | ||||
Net income | 430 | $ 604 | 760 | $ 1,132 | 2,087 | $ 2,031 | $ (879) | ||||
Obligations | 265 | 265 | $ 293 | ||||||||
Variable Interest Entity, Primary Beneficiary | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Net income | 32 | ||||||||||
Research And Development Facility, Summit, NJ | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Area (in sq ft) | ft² | 290,000 | ||||||||||
Expected lease expense | $ 10 | ||||||||||
Expected lease expense term (in years) | 15 years | ||||||||||
Net Economic Benefit Arrangements | Parent | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Net income | 16 | ||||||||||
Accounts payable | $ 43 | $ 43 | |||||||||
Consumer Health Business | Consumer Health Spinoff | Parent | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Cash and cash equivalents | $ 13,800 | ||||||||||
Over-Allotment Option | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Shares issued in transaction (in shares) | shares | 25,921,884 | ||||||||||
IPO | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Shares issued in transaction (in shares) | shares | 198,734,444 | ||||||||||
Proceeds from sale of stock | $ 4,200 | ||||||||||
Stock issuance costs | $ 131 | ||||||||||
Kenvue | Johnson & Johnson | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Common stock, shares outstanding (in shares) | shares | 1,716,160,000 | ||||||||||
Percentage ownership after transaction | 89.60% |
Description of the Company a_12
Description of the Company and Summary of Significant Accounting Policies - Lease Assets and Liabilities (Q2) (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Lessee, Lease, Description [Line Items] | |||
Other non-current assets | $ 164 | $ 110 | $ 126 |
Total lease liabilities | 167 | 116 | 129 |
Lease liability | 47 | 35 | 47 |
Noncurrent lease liability | 120 | 81 | $ 82 |
Related Party | |||
Lessee, Lease, Description [Line Items] | |||
Other non-current assets | 73 | ||
Lease liability | 13 | ||
Noncurrent lease liability | 56 | ||
Accrued and other current liabilities | |||
Lessee, Lease, Description [Line Items] | |||
Total lease liabilities | 47 | 35 | |
Other non-current liabilities | |||
Lessee, Lease, Description [Line Items] | |||
Total lease liabilities | $ 120 | $ 81 |
Description of the Company a_13
Description of the Company and Summary of Significant Accounting Policies - Consolidated Assets and Liabilities of Deferred Legal Entities (Q2) (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jul. 03, 2022 | Jan. 02, 2022 | Jan. 03, 2021 | Dec. 29, 2019 |
Variable Interest Entity [Line Items] | ||||||
Cash and cash equivalents | $ 1,231 | $ 1,231 | $ 838 | $ 740 | $ 618 | $ 752 |
Inventories | 2,026 | 2,226 | 1,702 | |||
Prepaid expenses and other receivables | 643 | 175 | 257 | |||
Total current assets | 6,219 | 5,877 | 4,927 | |||
Property, plant and equipment, net (Notes 1 and 3) | 1,832 | 1,820 | 1,827 | |||
Intangible assets, net | 19,038 | 20,511 | ||||
Goodwill (Notes 1 and 4) | 9,081 | 9,185 | $ 9,146 | 9,810 | $ 10,326 | |
Total assets | 27,542 | 27,316 | 27,929 | |||
Accounts payable | 2,354 | 1,829 | 1,827 | |||
Accrued liabilities | 1,201 | 906 | 1,024 | |||
Accrued rebates, returns, and promotions | 753 | 862 | ||||
Total current liabilities | 5,299 | 3,926 | 4,042 | |||
Other liabilities (Note 17) | 593 | 727 | 756 | |||
Total liabilities | 16,502 | $ 7,295 | $ 7,530 | |||
Variable Interest Entity, Primary Beneficiary | ||||||
Variable Interest Entity [Line Items] | ||||||
Cash and cash equivalents | 228 | |||||
Trade receivables, less allowances for credit losses | 91 | |||||
Inventories | 79 | |||||
Prepaid expenses and other receivables | 10 | |||||
Total current assets | 408 | |||||
Property, plant and equipment, net (Notes 1 and 3) | 126 | |||||
Intangible assets, net | 37 | |||||
Goodwill (Notes 1 and 4) | 249 | |||||
Deferred taxes on income | 34 | |||||
Other assets | 20 | |||||
Total assets | 874 | |||||
Accounts payable | 81 | |||||
Accrued liabilities | 80 | |||||
Accrued rebates, returns, and promotions | 98 | |||||
Accrued taxes on income | 23 | |||||
Total current liabilities | 282 | |||||
Deferred taxes on income | 4 | |||||
Other liabilities (Note 17) | 18 | |||||
Total liabilities | $ 304 |
Inventories (Details)_2
Inventories (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Inventory Disclosure [Abstract] | |||
Raw materials and supplies | $ 299 | $ 351 | $ 264 |
Goods in process | 134 | 123 | 99 |
Finished goods | 1,593 | 1,752 | 1,339 |
Total inventories | $ 2,026 | $ 2,226 | $ 1,702 |
Intangible Assets and Goodwil_8
Intangible Assets and Goodwill - Intangible Assets (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Finite-Lived Intangible Assets, Net [Abstract] | |||
Gross Carrying Amount | $ 7,830 | $ 7,870 | $ 8,347 |
Accumulated Amortization | (3,341) | (3,198) | (2,999) |
Net Carrying Amount | 4,489 | 4,672 | 5,348 |
Indefinite-Lived Intangible Assets (Excluding Goodwill) [Abstract] | |||
Net Carrying Amount | 9,678 | 9,853 | 10,701 |
Trademarks | |||
Indefinite-Lived Intangible Assets (Excluding Goodwill) [Abstract] | |||
Gross Carrying Amount | 5,128 | 5,122 | 5,291 |
Net Carrying Amount | 5,128 | 5,122 | 5,291 |
Other | |||
Indefinite-Lived Intangible Assets (Excluding Goodwill) [Abstract] | |||
Gross Carrying Amount | 61 | 59 | 62 |
Net Carrying Amount | 61 | 59 | 62 |
Patents and trademarks | |||
Finite-Lived Intangible Assets, Net [Abstract] | |||
Gross Carrying Amount | 4,383 | 4,400 | 4,705 |
Accumulated Amortization | (1,583) | (1,485) | (1,350) |
Net Carrying Amount | 2,800 | 2,915 | 3,355 |
Customer relationships | |||
Finite-Lived Intangible Assets, Net [Abstract] | |||
Gross Carrying Amount | 2,099 | 2,127 | 2,265 |
Accumulated Amortization | (1,087) | (1,063) | (1,021) |
Net Carrying Amount | 1,012 | 1,064 | 1,244 |
Other | |||
Finite-Lived Intangible Assets, Net [Abstract] | |||
Gross Carrying Amount | 1,348 | 1,343 | 1,377 |
Accumulated Amortization | (671) | (650) | (628) |
Net Carrying Amount | $ 677 | $ 693 | $ 749 |
Intangible Assets and Goodwil_9
Intangible Assets and Goodwill - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 03, 2022 | Jul. 03, 2022 | Jul. 02, 2023 | Jan. 01, 2023 | |
Patents and trademarks | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life (in years) | 20 years | 20 years | ||
Customer relationships | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life (in years) | 31 years | 31 years | ||
Other intangibles | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life (in years) | 34 years | 34 years | ||
Trademarks | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Impairment of intangible assets | $ 12 | $ 12 |
Intangible Assets and Goodwi_10
Intangible Assets and Goodwill - Intangible Asset Amortization Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||
Amortization of intangible assets | $ 79 | $ 89 | $ 160 | $ 182 | $ 348 | $ 414 | $ 415 |
Trademarks | |||||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||
Amortization of intangible assets | 53 | 48 | 94 | 98 | $ 187 | $ 213 | $ 197 |
Other | |||||||
Acquired Finite-Lived Intangible Assets [Line Items] | |||||||
Amortization of intangible assets | $ 26 | $ 41 | $ 66 | $ 84 |
Intangible Assets and Goodwi_11
Intangible Assets and Goodwill - Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Q2) (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Remainder of 2023 | $ 157 | |
2024 | 306 | $ 314 |
2025 | 282 | 304 |
2026 | 273 | 280 |
2027 | 274 | 276 |
2028 | $ 270 | $ 272 |
Intangible Assets and Goodwi_12
Intangible Assets and Goodwill - Goodwill By Segment (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended | ||
Jul. 02, 2023 | Jan. 01, 2023 | Jul. 03, 2022 | Jan. 02, 2022 | |
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | $ 9,185 | $ 9,146 | $ 9,810 | $ 10,326 |
Currency translation/other | (104) | 39 | (664) | (516) |
Goodwill, ending balance | 9,081 | 9,185 | 9,146 | 9,810 |
Self Care | ||||
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | 5,194 | 0 | 0 | 0 |
Currency translation/other | (39) | 1 | 0 | 0 |
Goodwill, ending balance | 5,155 | 5,194 | 0 | 0 |
Skin Health and Beauty | ||||
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | 2,365 | 0 | 0 | 0 |
Currency translation/other | (76) | 31 | 0 | 0 |
Goodwill, ending balance | 2,289 | 2,365 | 0 | 0 |
Essential Health | ||||
Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | 1,626 | 0 | 0 | 0 |
Currency translation/other | 11 | 7 | 0 | 0 |
Goodwill, ending balance | $ 1,637 | $ 1,626 | $ 0 | $ 0 |
Borrowings - Long-Term Debt (De
Borrowings - Long-Term Debt (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 |
Debt Instrument [Line Items] | ||
Discounts and debt issuance costs | $ (72) | $ 0 |
Total long-term debt | 7,684 | 0 |
Commercial paper | 754 | 0 |
Discounts and debt issuance costs | (2) | 0 |
Total loans and notes payable | 752 | 0 |
Total debt | 8,436 | 0 |
Other | ||
Debt Instrument [Line Items] | ||
Long-term debt | 6 | 0 |
5.50% Senior Notes due 2025 | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 750 | 0 |
Stated interest rate (as a percent) | 5.50% | |
5.35% Senior Notes due 2026 | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 750 | 0 |
Stated interest rate (as a percent) | 5.35% | |
5.05% Senior Notes due 2028 | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 1,000 | 0 |
Stated interest rate (as a percent) | 5.05% | |
5.00% Senior Notes due 2030 | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 1,000 | 0 |
Stated interest rate (as a percent) | 5% | |
4.90% Senior Notes due 2033 | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 1,250 | 0 |
Stated interest rate (as a percent) | 4.90% | |
5.10% Senior Notes due 2043 | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 750 | 0 |
Stated interest rate (as a percent) | 5.10% | |
5.05% Senior Notes due 2053 | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 1,500 | 0 |
Stated interest rate (as a percent) | 5.05% | |
5.20% Senior Notes due 2063 | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 750 | $ 0 |
Stated interest rate (as a percent) | 5.20% |
Borrowings - Narrative (Details
Borrowings - Narrative (Details) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||
May 08, 2023 USD ($) | Mar. 22, 2023 USD ($) numberOfNotes | Mar. 06, 2023 USD ($) | Mar. 03, 2023 USD ($) | May 03, 2023 USD ($) | Jul. 02, 2023 USD ($) | Jul. 03, 2022 USD ($) | Jul. 02, 2023 USD ($) | Jul. 03, 2022 USD ($) | Jan. 01, 2023 USD ($) | Jan. 02, 2022 USD ($) | Jan. 03, 2021 USD ($) | Apr. 05, 2023 USD ($) | |
Debt Instrument [Line Items] | |||||||||||||
Proceeds from issuance of Senior Notes, net of issuance cost | $ 7,686,000,000 | $ 0 | |||||||||||
Unamortized debt issuance costs | $ 72,000,000 | 72,000,000 | $ 0 | ||||||||||
Interest expense | 118,000,000 | $ 0 | 129,000,000 | 0 | |||||||||
Interest income | 65,000,000 | $ 0 | 75,000,000 | 0 | |||||||||
Long-term debt, fair value | $ 7,800,000,000 | $ 7,800,000,000 | |||||||||||
Maturity term | 364 days | ||||||||||||
Weighted average interest rate | 5.10% | 5.10% | |||||||||||
Interest income | $ 33,000,000 | ||||||||||||
Proceeds from J&J upon repayment of the Facility Agreement | 8,941,000,000 | $ 0 | |||||||||||
Repayments of debt | $ 7,000,000 | $ 11,000,000 | |||||||||||
Senior notes | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Number of series of senior unsecured notes | numberOfNotes | 8 | ||||||||||||
Debt instrument, face amount | $ 7,750,000,000 | ||||||||||||
Proceeds from issuance of Senior Notes, net of issuance cost | 7,700,000,000 | ||||||||||||
Unamortized debt issuance costs | $ 75,000,000 | ||||||||||||
Interest income | $ 13,000,000 | ||||||||||||
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed | 100% | ||||||||||||
Amortization of Debt Issuance Costs | $ 3,000,000 | $ 3,000,000 | |||||||||||
Senior notes | Minimum | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Maturity term | 0 months | ||||||||||||
Senior notes | Maximum | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Maturity term | 6 months | ||||||||||||
Senior notes | Subsequent Event | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Number of series of senior unsecured notes | numberOfNotes | 8 | ||||||||||||
Debt instrument, face amount | $ 7,750,000,000 | ||||||||||||
Proceeds from issuance of Senior Notes, net of issuance cost | 7,690,000,000 | ||||||||||||
Unamortized debt issuance costs | $ 65,000,000 | ||||||||||||
Facility Agreement | Johnson & Johnson | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Proceeds from J&J upon repayment of the Facility Agreement | $ 9,000,000,000 | ||||||||||||
Facility Agreement | Johnson & Johnson | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Debt instrument, face amount | $ 8,900,000,000 | ||||||||||||
Weighted average interest rate | 4.70% | ||||||||||||
Facility Agreement | Johnson & Johnson | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Derivative, Basis Spread on Variable Rate | 0.15% | ||||||||||||
Debt Instrument, Interest Rate, Floor | 0% | ||||||||||||
Revolving Credit Facility | The Revolving Credit Facility | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Maturity term | 5 years | ||||||||||||
Credit facility | $ 4,000,000,000 | ||||||||||||
Outstanding balance | 0 | $ 0 | |||||||||||
Revolving Credit Facility | The Revolving Credit Facility | Subsequent Event | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Maturity term | 5 years | ||||||||||||
Credit facility | $ 4,000,000,000 | ||||||||||||
Commercial Paper | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Interest expense | 9,000,000 | $ 9,000,000 | |||||||||||
Maturity term | 90 days | ||||||||||||
Credit facility | $ 4,000,000,000 | ||||||||||||
Outstanding balance | 754,000,000 | $ 754,000,000 | |||||||||||
Proceeds from issuance | $ 1,250,000,000 | 1,200,000,000 | |||||||||||
Debt Instrument, Unamortized Discount | $ (2,000,000) | $ (2,000,000) | |||||||||||
Weighted average interest rate | 5.20% | 5.20% | |||||||||||
Commercial Paper | Subsequent Event | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Credit facility | $ 4,000,000,000 | ||||||||||||
Commercial Paper | Debt Financing Transactions | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Proceeds from issuance | $ 2,300,000,000 | ||||||||||||
Repayments of debt | $ 1,600,000,000 |
Borrowings - Interest Income an
Borrowings - Interest Income and Interest Expense (Q2) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | |
Debt Disclosure [Abstract] | ||||
Interest expense | $ 118 | $ 0 | $ 129 | $ 0 |
Interest income | 65 | 0 | 75 | 0 |
Interest expense, net | $ 53 | $ 0 | 54 | $ 0 |
Interest income | $ 33 |
Borrowings - Long-Term Debt Mat
Borrowings - Long-Term Debt Maturities (Details) $ in Millions | Jul. 02, 2023 USD ($) |
Maturities of Long-Term Debt [Abstract] | |
Remainder of 2023 | $ 0 |
2024 | 0 |
2025 | 750 |
2026 | 750 |
2027 | 0 |
Thereafter | $ 6,250 |
Pensions (Details)
Pensions (Details) - Retirement Plans - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Components of net periodic benefit cost | |||||||
Service cost | $ 5 | $ 2 | $ 10 | $ 4 | $ 8 | $ 7 | $ 6 |
Interest cost | 7 | 1 | 10 | 2 | 4 | 2 | 3 |
Recognized actuarial gain | 0 | 1 | 0 | 2 | |||
Expected return on plan assets | (7) | 0 | (10) | 0 | (1) | 0 | 0 |
Net periodic benefit cost | $ 5 | $ 4 | $ 10 | $ 8 | $ 15 | $ 15 | $ 15 |
Pensions - Narrative (Details)
Pensions - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | |
Retirement Benefits [Abstract] | ||||
Total benefit plan expense allocated | $ 1 | $ 15 | $ 17 | $ 27 |
Transfer of net pension assets | 86 | |||
Transfer of net pension liabilities | $ 21 |
Accumulated Other Comprehensi_6
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||||
Beginning balance | $ 20,282 | $ 20,465 | $ 20,021 | $ 20,399 | $ 20,399 | $ 18,356 | $ 21,721 |
Net change | (980) | (901) | 845 | ||||
Ending balance | 11,040 | 19,601 | 11,040 | 19,601 | 20,021 | 20,399 | 18,356 |
Foreign currency translation adjustment, taxes | 30 | 65 | (9) | (77) | 99 | 94 | (120) |
Separation adjustments | (22) | (22) | |||||
Employee benefit plans, taxes | 18 | (17) | (1) | (29) | (8) | 2 | |
Income tax provision, tax | (4) | 9 | 3 | 0 | 0 | ||
Foreign Currency Translation | |||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||||
Beginning balance | (5,313) | (4,701) | (5,474) | (4,421) | (4,421) | (3,495) | (4,350) |
Net change | (177) | (835) | (16) | (1,115) | (1,053) | (926) | 855 |
Ending balance | (5,490) | (5,536) | (5,490) | (5,536) | (5,474) | (4,421) | (3,495) |
Employee Benefit Plans | |||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||||
Beginning balance | 26 | (48) | 12 | (51) | (51) | (76) | (65) |
Net change | (83) | 1 | (69) | 4 | 63 | 25 | (11) |
Ending balance | (57) | (47) | (57) | (47) | 12 | (51) | (76) |
Gain On Cash Flow Hedges | |||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||||
Beginning balance | 48 | (5) | 9 | (1) | (1) | (1) | (2) |
Net change | (8) | 1 | 31 | (3) | 10 | 0 | 1 |
Ending balance | 40 | (4) | 40 | (4) | 9 | (1) | (1) |
Total Accumulated Other Comprehensive Loss | |||||||
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |||||||
Beginning balance | (5,239) | (4,754) | (5,453) | (4,473) | (4,473) | (3,572) | (4,417) |
Net change | (268) | (833) | (54) | (1,114) | |||
Ending balance | $ (5,507) | $ (5,587) | (5,507) | $ (5,587) | $ (5,453) | $ (4,473) | $ (3,572) |
Separation adjustments | $ 73 |
Stock-Based Compensation - St_2
Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Stock-based compensation expense | $ 38 | $ 41 | $ 73 | $ 76 | $ 137 | $ 141 | $ 115 |
Cost of sales | |||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Stock-based compensation expense | 12 | 10 | 16 | 18 | 30 | 33 | 29 |
Selling, general, and administrative expenses | |||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||||||
Stock-based compensation expense | $ 26 | $ 31 | $ 57 | $ 58 | $ 107 | $ 108 | $ 86 |
Stock-Based Compensation - Na_2
Stock-Based Compensation - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | Mar. 31, 2023 | |
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Stock-based compensation expense | $ 38 | $ 41 | $ 73 | $ 76 | $ 137 | $ 141 | $ 115 | |
2023 Plan | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Maximum shares to be issued (in shares) | 188,897,256 | |||||||
Parent | ||||||||
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||||||
Stock-based compensation expense | $ 0 | $ 8 | $ 2 | $ 18 | $ 26 | $ 38 | $ 28 |
Related Parties - Cost Alloca_2
Related Parties - Cost Allocations from Parent (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Related Party Transaction [Line Items] | |||||||
Cost of sales | $ 1,786 | $ 1,646 | $ 3,513 | $ 3,280 | $ 6,665 | $ 6,635 | $ 6,619 |
Selling, general, and administrative expenses | 1,522 | 1,375 | 3,024 | 2,725 | $ 5,633 | $ 5,484 | $ 4,956 |
Related Party | |||||||
Related Party Transaction [Line Items] | |||||||
Total | 49 | 213 | 145 | 406 | |||
Related Party | Cost of sales | |||||||
Related Party Transaction [Line Items] | |||||||
Cost of sales | 16 | 40 | 25 | 76 | |||
Related Party | Selling, general, and administrative expenses | |||||||
Related Party Transaction [Line Items] | |||||||
Selling, general, and administrative expenses | $ 33 | $ 173 | $ 120 | $ 330 |
Related Parties - Narrative (_2
Related Parties - Narrative (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
May 08, 2023 | May 03, 2023 | Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | |
Related Party Transaction [Line Items] | ||||||
Separation adjustments | $ 22 | $ 22 | ||||
Net income tax payables and refunds | 221 | |||||
Proceeds from issuance of Senior Notes, net of issuance cost | 7,686 | $ 0 | ||||
Interest income | 65 | $ 0 | 75 | 0 | ||
Proceeds from J&J upon repayment of the Facility Agreement | 8,941 | $ 0 | ||||
Net Investment from Parent | ||||||
Related Party Transaction [Line Items] | ||||||
Separation adjustments | $ 95 | 95 | ||||
Senior notes | ||||||
Related Party Transaction [Line Items] | ||||||
Proceeds from issuance of Senior Notes, net of issuance cost | 7,700 | |||||
Interest income | 13 | |||||
Facility Agreement | Johnson & Johnson | ||||||
Related Party Transaction [Line Items] | ||||||
Proceeds from J&J upon repayment of the Facility Agreement | $ 9,000 | |||||
Commercial Paper | ||||||
Related Party Transaction [Line Items] | ||||||
Proceeds from issuance | $ 1,250 | 1,200 | ||||
Reclassification, Other | ||||||
Related Party Transaction [Line Items] | ||||||
Net income tax payables and refunds | $ 246 |
Related Parties - Net Transfe_2
Related Parties - Net Transfers To the Parent (Details) - Parent - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | $ 1,016 | ||||||
Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Cash Flows | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | $ 12 | (676) | $ (274) | $ (892) | $ (1,597) | $ 7 | $ (3,446) |
Cash pooling and general financing activities | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | (37) | (916) | (446) | (1,324) | (2,568) | (832) | (4,414) |
Corporate cost allocations | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | 49 | 213 | 145 | 406 | 828 | 831 | 818 |
Taxes deemed settled with the Parent | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | 0 | 1 | 27 | 1 | 78 | 44 | 151 |
Allocated derivative and hedging gains | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | 0 | 26 | 0 | 25 | 65 | (36) | (1) |
Net transfers (to) from the Parent as reflected in the Condensed Consolidated Statements of Equity | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | 10 | (635) | (308) | (816) | (1,485) | 913 | (3,331) |
Stock-based compensation expense | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | 0 | 41 | 0 | 76 | $ 137 | $ 141 | $ 115 |
Other | |||||||
Related Party Transaction [Line Items] | |||||||
Transfer of liability to Parent | $ (2) | $ 0 | $ (34) | $ 0 |
Related Parties - Schedule of B
Related Parties - Schedule of Balances with J&J Affiliates (Q2) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Related Party Transaction [Line Items] | |||||||
Accounts payable | $ 2,354 | $ 2,354 | $ 1,829 | $ 1,827 | |||
Prepaid expenses and other receivables | 643 | 643 | 175 | 257 | |||
Other Assets, Noncurrent | 589 | 589 | 434 | 475 | |||
Other liabilities (Note 17) | 593 | 593 | 727 | 756 | |||
Cost of sales | 1,786 | $ 1,646 | 3,513 | $ 3,280 | 6,665 | 6,635 | $ 6,619 |
Selling, general, and administrative expenses | 1,522 | $ 1,375 | 3,024 | $ 2,725 | $ 5,633 | $ 5,484 | $ 4,956 |
Affiliated Entity | |||||||
Related Party Transaction [Line Items] | |||||||
Accounts payable | 537 | 537 | |||||
Prepaid expenses and other receivables | 346 | 346 | |||||
Other Assets, Noncurrent | 94 | 94 | |||||
Other liabilities (Note 17) | 193 | $ 193 | |||||
Cost of sales | 39 | ||||||
Selling, general, and administrative expenses | $ 47 |
Other Operating Expense (Inco_3
Other Operating Expense (Income), Net and Other Expense (Income), Net - Schedule of Other Operating Cost and Expense, by Component (Q2) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Other Income and Expenses [Abstract] | |||||||
Litigation expense | $ 21 | $ 7 | $ 20 | $ 7 | |||
Royalty Income | (1) | (13) | (8) | (20) | $ (39) | $ (89) | $ (100) |
(Gain)/loss on disposal of fixed assets | 0 | 0 | (9) | 2 | |||
Net economic benefits from deferred markets | 24 | 0 | 24 | 0 | |||
Contingent liability reversal | (43) | 0 | (43) | 0 | |||
Other | 0 | 19 | 0 | 19 | |||
Total Other operating expense (income), net | $ 1 | $ 13 | $ (16) | $ 8 | $ (23) | $ 15 | $ 3,871 |
Other Operating Expense (Inco_4
Other Operating Expense (Income), Net and Other Expense - Schedule of Other Nonoperating Income (Expense) (Income), Net (Q2) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Other Income and Expenses [Abstract] | |||||||
Currency losses on transactions | $ 12 | $ 5 | $ 28 | $ (2) | $ 42 | $ 20 | $ 40 |
Other | (2) | (10) | 12 | (4) | 38 | (5) | 37 |
Total Other expense (income), net | $ 10 | $ (5) | $ 40 | $ (6) | $ 38 | $ (5) | $ 37 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | Dec. 29, 2019 | |
Income Tax Disclosure [Abstract] | ||||||||
Effective Rate | 32.70% | 22.10% | 39.10% | 18.40% | 20.80% | 30.60% | 13.50% | |
Valuation allowance | $ 188 | $ 64 | $ 42 | $ 20 | ||||
Unrecognized tax benefits | $ 235 | 235 | 437 | 469 | 519 | $ 465 | ||
Net income tax payables and refunds | 221 | |||||||
Cash paid for income taxes | $ 200 | $ 316 | $ 363 | $ 448 |
Earnings Per Share - Narrative
Earnings Per Share - Narrative (Details) - shares | 3 Months Ended | 6 Months Ended | |||||
May 08, 2023 | May 08, 2023 | Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | |
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||||
Common stock issued (in shares) | 1,914,894,444 | 1,914,894,444 | |||||
Common stock, shares outstanding (in shares) | 1,914,894,444 | 1,914,894,444 | |||||
Dilutive equity instruments (in shares) | 0 | 0 | 0 | 0 | |||
Common stock, shares authorized (in shares) | 1,716,160,000 | 1,716,160,000 | 12,500,000,000 | 12,500,000,000 | 12,500,000,000 | ||
Kenvue IPO | |||||||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||||
Shares issued in transaction (in shares) | 1,716,159,990 | ||||||
IPO | |||||||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||||
Shares issued in transaction (in shares) | 198,734,444 | ||||||
Over-Allotment Option | |||||||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||||
Shares issued in transaction (in shares) | 25,921,884 |
Earnings Per Share - Net Earnin
Earnings Per Share - Net Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Reconciliation of basic net earnings per share to diluted net earnings per share | |||||||
Net income | $ 430 | $ 604 | $ 760 | $ 1,132 | $ 2,087 | $ 2,031 | $ (879) |
Basic weighted-average common shares (in shares) | 1,838 | 1,716 | 1,777 | 1,716 | |||
Diluted weighted-average common shares (in shares) | 1,838 | 1,716 | 1,777 | 1,716 | |||
Diluted net income per share (in usd per share) | $ 0.23 | $ 0.35 | $ 0.43 | $ 0.66 | |||
Basic net income per share (in usd per share) | $ 0.23 | $ 0.35 | $ 0.43 | $ 0.66 |
Fair Value Measurements - Nar_2
Fair Value Measurements - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jul. 02, 2023 | Jan. 01, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | |
Derivative [Line Items] | ||||||
Deferred net gain on derivatives included in accumulate other comprehensive loss, after tax | $ (8) | $ 1 | $ 31 | $ (3) | ||
Interest rate cash flow hedge gain reclassified to earnings | 1 | 2 | ||||
Fair value of contracts designated in net investments hedges in liabilities position | 48 | $ 54 | 48 | $ 54 | ||
Equity securities without readily determinable fair value, amount, cost method investment | 78 | $ 56 | $ 78 | $ 56 | ||
Minimum | ||||||
Derivative [Line Items] | ||||||
Contract term (in years) | 12 months | |||||
Maximum | ||||||
Derivative [Line Items] | ||||||
Contract term (in years) | 18 months | |||||
Tranche 1 | ||||||
Derivative [Line Items] | ||||||
Contract term (in years) | 5 years | |||||
Tranche 2 | ||||||
Derivative [Line Items] | ||||||
Contract term (in years) | 10 years | |||||
Tranche 3 | ||||||
Derivative [Line Items] | ||||||
Contract term (in years) | 30 years | |||||
Interest rate swaps | ||||||
Derivative [Line Items] | ||||||
Gain on derivative | $ 48 | |||||
Forward starting interest rate swap, amount received | $ 38 | |||||
Interest rate swaps | Tranche 1 | ||||||
Derivative [Line Items] | ||||||
Contract term (in years) | 5 years | 5 years | ||||
Interest rate swaps | Tranche 2 | ||||||
Derivative [Line Items] | ||||||
Contract term (in years) | 10 years | 10 years | ||||
Interest rate swaps | Tranche 3 | ||||||
Derivative [Line Items] | ||||||
Contract term (in years) | 30 years | 30 years | ||||
Foreign Exchange Contract | ||||||
Derivative [Line Items] | ||||||
Forward foreign exchange contracts not designated in cash flow hedging relationships | 18 | $ 14 | $ 18 | $ 14 | ||
Foreign Exchange Contract | Net investment hedges | ||||||
Derivative [Line Items] | ||||||
Fair value of contracts designated in net investments hedges in liabilities position | 2 | 0 | 2 | 0 | ||
Foreign Exchange Contract | Not Designated as Hedging Instrument | ||||||
Derivative [Line Items] | ||||||
Deferred net gain on derivatives included in accumulate other comprehensive loss, after tax | $ 1 | |||||
Forward foreign exchange contracts not designated in cash flow hedging relationships | $ 1 | $ 0 | $ 1 | $ 0 |
Fair Value Measurements - Fin_2
Fair Value Measurements - Financial Assets and Liabilities at Fair Value (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | $ 66 | $ 68 | |
Derivatives designated as cash flow hedges : Liabilities | (48) | (54) | |
Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 68 | $ 0 | |
Derivatives designated as cash flow hedges : Liabilities | (54) | 0 | |
Net amount presented in Prepaid expenses and other receivables: | 14 | 0 | |
Level 1 | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | |
Level 1 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | |
Net amount presented in Prepaid expenses and other receivables: | 0 | 0 | |
Level 2 | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 66 | 68 | |
Derivatives designated as cash flow hedges : Liabilities | (48) | (54) | |
Level 2 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 68 | 0 | |
Derivatives designated as cash flow hedges : Liabilities | (54) | 0 | |
Net amount presented in Prepaid expenses and other receivables: | 14 | 0 | |
Level 3 | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | |
Level 3 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | |
Net amount presented in Prepaid expenses and other receivables: | 0 | 0 | |
Forward foreign exchange contracts | |||
Financial assets and liabilities at fair value | |||
Net amount presented in Prepaid expenses and other receivables: | 18 | 14 | |
Forward foreign exchange contracts | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 66 | 39 | 0 |
Derivatives designated as cash flow hedges : Liabilities | (48) | (15) | 0 |
Forward foreign exchange contracts | Level 1 | |||
Financial assets and liabilities at fair value | |||
Net amount presented in Prepaid expenses and other receivables: | 0 | 0 | |
Forward foreign exchange contracts | Level 1 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | 0 |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | 0 |
Forward foreign exchange contracts | Level 2 | |||
Financial assets and liabilities at fair value | |||
Net amount presented in Prepaid expenses and other receivables: | 18 | 14 | |
Forward foreign exchange contracts | Level 2 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 66 | 39 | 0 |
Derivatives designated as cash flow hedges : Liabilities | (48) | (15) | 0 |
Forward foreign exchange contracts | Level 3 | |||
Financial assets and liabilities at fair value | |||
Net amount presented in Prepaid expenses and other receivables: | 0 | 0 | |
Forward foreign exchange contracts | Level 3 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | 0 |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | 0 |
Interest rate swaps | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 29 | 0 |
Derivatives designated as cash flow hedges : Liabilities | 0 | (39) | 0 |
Interest rate swaps | Level 1 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | 0 |
Derivatives designated as cash flow hedges : Liabilities | 0 | 0 | 0 |
Interest rate swaps | Level 2 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 29 | 0 |
Derivatives designated as cash flow hedges : Liabilities | 0 | (39) | 0 |
Interest rate swaps | Level 3 | Cash flow hedges | |||
Financial assets and liabilities at fair value | |||
Derivatives designated as cash flow hedges : Assets | 0 | 0 | 0 |
Derivatives designated as cash flow hedges : Liabilities | $ 0 | $ 0 | $ 0 |
Fair Value Measurements - Not_2
Fair Value Measurements - Notional Amount (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 |
Designated as Hedging Instrument | Cash flow hedges | ||
Derivative [Line Items] | ||
Derivative, notional amount | $ 3,307 | $ 4,168 |
Designated as Hedging Instrument | Cash flow hedges | Forward foreign exchange contracts | ||
Derivative [Line Items] | ||
Derivative, notional amount | 3,307 | 1,768 |
Designated as Hedging Instrument | Cash flow hedges | Interest rate swaps | ||
Derivative [Line Items] | ||
Derivative, notional amount | 0 | 2,400 |
Designated as Hedging Instrument | Net investment hedges | ||
Derivative [Line Items] | ||
Derivative, notional amount | 10 | 0 |
Designated as Hedging Instrument | Net investment hedges | Forward foreign exchange contracts | ||
Derivative [Line Items] | ||
Derivative, notional amount | 10 | 0 |
Designated as Hedging Instrument | Net investment hedges | Interest rate swaps | ||
Derivative [Line Items] | ||
Derivative, notional amount | 0 | 0 |
Not Designated as Hedging Instrument | ||
Derivative [Line Items] | ||
Derivative, notional amount | 578 | 0 |
Not Designated as Hedging Instrument | Forward foreign exchange contracts | ||
Derivative [Line Items] | ||
Derivative, notional amount | 578 | 0 |
Not Designated as Hedging Instrument | Interest rate swaps | ||
Derivative [Line Items] | ||
Derivative, notional amount | $ 0 | $ 0 |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Gains and Losses on Forward Foreign Exchange Contracts (Q2) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Fair Value Disclosures [Abstract] | |||||||
Gain (loss) recognized in Other comprehensive income (loss) | $ (17) | $ 1 | $ 0 | $ (2) | $ 10 | $ 0 | $ 1 |
Gain (loss) reclassified from Other comprehensive income (loss) to earnings | $ (6) | $ (1) | $ 5 | $ 0 |
Fair Value Measurements - Act_2
Fair Value Measurements - Activity (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Net Sales | |||||||
Derivative [Line Items] | |||||||
Gain (loss) on cash flow hedges | $ (1) | $ 8 | $ 0 | $ 11 | $ 21 | $ 11 | $ (2) |
Gain (loss) on forward currency exchange contracts not designated as hedges | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Cost of sales | |||||||
Derivative [Line Items] | |||||||
Gain (loss) on cash flow hedges | (3) | 3 | 7 | 3 | 12 | (23) | (3) |
Gain (loss) on forward currency exchange contracts not designated as hedges | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Other (income) expense, net | |||||||
Derivative [Line Items] | |||||||
Gain (loss) on cash flow hedges | (2) | 12 | (2) | 10 | 30 | (21) | 10 |
Gain (loss) on forward currency exchange contracts not designated as hedges | $ (2) | $ (1) | $ 4 | $ 7 | $ 33 | $ (15) | $ (34) |
Commitments and Contingencies (
Commitments and Contingencies (Details) | Jul. 02, 2023 lawsuit company | Jan. 01, 2023 company | May 31, 2021 vote |
Loss Contingencies [Line Items] | |||
Number of other companies | company | 120 | ||
Zantac Related Class Action | CANADA | |||
Loss Contingencies [Line Items] | |||
Number of pututive class action lawsuits, named | lawsuit | 4 | ||
Number of pututive class action lawsuits | lawsuit | 7 | ||
Alleged Violations Of State Consumer Fraud Statutes | |||
Loss Contingencies [Line Items] | |||
Number of cases | vote | 1 | ||
Occidental Chemical Corporation | |||
Loss Contingencies [Line Items] | |||
Number of other companies | company | 120 |
Segments of Business - Narrativ
Segments of Business - Narrative (Q2) (Details) - Segment | 6 Months Ended | 12 Months Ended |
Jul. 02, 2023 | Jan. 01, 2023 | |
Segment Reporting [Abstract] | ||
Number of operating segments | 3 | 3 |
Number of business segments | 3 | 3 |
Segments of Business - Product
Segments of Business - Product Categories as a Percent of Net Sales (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
Product Concentration Risk | Revenue Benchmark | Cough, Cold and Allergy | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 13% | 13% | 14% | 12% | 13% | 12% | 12% |
Product Concentration Risk | Revenue Benchmark | Pain Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 12% | 11% | 13% | 13% | 13% | 11% | 10% |
Product Concentration Risk | Revenue Benchmark | Other Self Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 16% | 15% | 15% | 15% | 14% | 15% | 14% |
Product Concentration Risk | Revenue Benchmark | Face and Body Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 19% | 20% | 19% | 20% | 20% | 22% | 22% |
Product Concentration Risk | Revenue Benchmark | Hair, Sun and Other | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 10% | 10% | 10% | 9% | 9% | 8% | 9% |
Product Concentration Risk | Revenue Benchmark | Oral Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 10% | 10% | 10% | 10% | 10% | 11% | 11% |
Product Concentration Risk | Revenue Benchmark | Baby Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 9% | 10% | 9% | 10% | 10% | 10% | 11% |
Product Concentration Risk | Revenue Benchmark | Other Essential Health | |||||||
Segment Reporting Information [Line Items] | |||||||
Product categories, percentage of net of sales | 11% | 11% | 10% | 11% | 11% | 11% | 11% |
Segments of Business - Segment
Segments of Business - Segment Net Sales (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Sales by segment of business | |||||||
Total | $ 4,011 | $ 3,804 | $ 7,863 | $ 7,394 | $ 14,950 | $ 15,054 | $ 14,467 |
Self Care | |||||||
Sales by segment of business | |||||||
Total | 1,661 | 1,481 | 3,301 | 2,946 | 6,030 | 5,643 | 5,235 |
Skin Health and Beauty | |||||||
Sales by segment of business | |||||||
Total | 1,147 | 1,126 | 2,258 | 2,138 | 4,350 | 4,541 | 4,450 |
Essential Health | |||||||
Sales by segment of business | |||||||
Total | $ 1,203 | $ 1,197 | $ 2,304 | $ 2,310 | $ 4,570 | $ 4,870 | $ 4,782 |
Segments of Business - Adjusted
Segments of Business - Adjusted Operating Income (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jul. 02, 2023 | Jul. 03, 2022 | Jul. 02, 2023 | Jul. 03, 2022 | Jan. 01, 2023 | Jan. 02, 2022 | Jan. 03, 2021 | |
Segment Reporting Information [Line Items] | |||||||
Total adjusted operating income | $ 1,027 | $ 1,081 | $ 1,969 | $ 1,928 | $ 3,907 | $ 4,054 | $ 3,997 |
Depreciation and amortization | 148 | 161 | 300 | 326 | 644 | 731 | 746 |
Separation-related costs | 102 | 49 | 200 | 59 | 213 | 0 | 0 |
Restructuring | 0 | 24 | 0 | 38 | (100) | (116) | (82) |
Other operating expense (income), net | 1 | 13 | (16) | 8 | (23) | 15 | 3,871 |
General corporate/unallocated expenses | 74 | 64 | 143 | 116 | 298 | 272 | 277 |
Total operating income (loss) | 702 | 770 | 1,342 | 1,381 | 2,675 | 2,920 | (979) |
Other expense (income), net | 10 | (5) | 40 | (6) | 38 | (5) | 37 |
Interest expense, net | 53 | 0 | 54 | 0 | |||
Income (Loss) before taxes | 639 | 775 | 1,248 | 1,387 | 2,637 | 2,925 | (1,016) |
Self Care | |||||||
Segment Reporting Information [Line Items] | |||||||
Total adjusted operating income | 576 | 524 | 1,158 | 998 | 2,088 | 1,952 | 1,858 |
Depreciation and amortization | 202 | 212 | 205 | ||||
Skin Health and Beauty | |||||||
Segment Reporting Information [Line Items] | |||||||
Total adjusted operating income | 201 | 243 | 350 | 370 | 708 | 878 | 889 |
Depreciation and amortization | 247 | 305 | 325 | ||||
Essential Health | |||||||
Segment Reporting Information [Line Items] | |||||||
Total adjusted operating income | $ 250 | $ 314 | $ 461 | $ 560 | 1,111 | 1,224 | 1,250 |
Depreciation and amortization | $ 195 | $ 214 | $ 216 |
Accrued and Other Liabilities_5
Accrued and Other Liabilities - Accrued Liabilities (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Other Liabilities Disclosure [Abstract] | |||
Accrued expenses | $ 470 | $ 447 | |
Accrued compensation and benefits | 275 | 272 | $ 266 |
Lease liability | 47 | 35 | 47 |
Other accrued liabilities | 409 | 152 | 176 |
Accrued liabilities | $ 1,201 | $ 906 | $ 1,024 |
Accrued and Other Liabilities_6
Accrued and Other Liabilities - Other Liabilities (Details) - USD ($) $ in Millions | Jul. 02, 2023 | Jan. 01, 2023 | Jan. 02, 2022 |
Other Liabilities Disclosure [Abstract] | |||
Accrued income taxes - noncurrent (Note 11) | $ 234 | $ 584 | $ 603 |
Noncurrent lease liability | 120 | 81 | 82 |
Other noncurrent accrued liabilities | 239 | 62 | 71 |
Other liabilities | $ 593 | $ 727 | $ 756 |
Subsequent Events (Details)_2
Subsequent Events (Details) | Jul. 20, 2023 $ / shares |
Subsequent Event | |
Subsequent Event [Line Items] | |
Dividends payable (in dollars per share) | $ 0.20 |