Net Sales Increased 3.3% to $3.9 billion with
Organic Growth1 of 3.6%
Reported Diluted EPS of $0.23 and Adjusted
Diluted EPS1 of $0.31
Declares Quarterly Cash Dividend of $0.20 Per
Share
Kenvue Inc. (NYSE: KVUE) (“Kenvue”), the world’s largest
pure-play consumer health company by revenue, today announced
financial results for the fiscal third quarter ended October 1,
2023.
“We continued to execute on our commitment to delivering
sustainable and profitable growth this quarter. Our operating
results and strong cash generation underscore the strength of our
leadership position in consumer health, and reflect the strong
foundation of the company we are building with durable advantage
over the long-term,” said Thibaut Mongon, Chief Executive Officer
and Director.
Third Quarter 2023 Financial
Results
Net Sales & Organic Growth Net
sales increased 3.3% vs the prior year period. Organic growth1
increased 3.6%. Increases in Net sales and Organic growth were
comprised of 7.1% value realization (defined as price including
mix), partially offset by 3.5% volume declines. Portfolio
rationalization initiatives in 2022 and market softness in China
impacted volume growth by approximately two percentage points.
Organic growth was fueled by Self Care where successful brand
activation and innovation continue to expand usage occasions,
driving volume growth and strength across all product categories,
despite a slow start to the cold cough and flu season. In Skin
Health & Beauty, value realization, recovered service levels, a
strong finish to the sun season and strength across Latin America
(“LATAM”) and Europe, Middle East and Africa (“EMEA”) were offset
by the impact of 2022 portfolio rationalization in the United
States and market softness in China. Momentum in Essential Health
continued as value realization and premiumization initiatives took
hold.
Gross Profit Margin & Adjusted
Operating Income Margin On a reported basis, Gross profit
margin was 57.5% vs 56.1% in the prior year period. Adjusted gross
profit margin1 was 59.4% vs 58.6% in the prior year period.
Favorable value realization, global supply chain efficiency
initiatives and non-recurring separation-related benefits during
the quarter more than offset the impact of sustained higher cost
inflation and approximately 130 basis points of negative foreign
currency fluctuations.
Adjusted operating income margin1 was 23.3% vs 24.5% in the
prior year period. Adjusted operating income margin includes
incremental ongoing public company costs not incurred last year and
the impact of higher foreign currency fluctuations during the
quarter.
Interest expense, net & Taxes
Interest expense, net was $100 million, reflecting a full quarter
of interest expense. On a reported basis, the Effective tax rate
was 25.1% vs 20.6% in the same period last year. The Adjusted
effective tax rate1 was 25.3% vs 22.3% in the same period last
year. The increase in reported and Adjusted effective tax rate is
the result of higher U.S. tax on foreign sourced income and
limitations on the Company’s ability to utilize foreign tax credits
in the third quarter of 2023.
Net income & Net income per share
(“Earnings per share”) Net income was $438 million vs $586
million in the same period last year. Adjusted net income1 was $590
million vs prior year of $702 million, primarily driven by the
items discussed above.
On a reported basis, diluted earnings per share was $0.23.
Adjusted diluted earnings per share1 was $0.31.
2023 Outlook
Sales and Adjusted Net Income (“earnings
per share”) Based on current spot rates, foreign exchange is
now expected to be a headwind to reported Net sales growth of
approximately one to two percentage points vs one percentage point
previously expected. Reflecting a softer than anticipated start to
the cough, cold and flu season and increased impact of foreign
exchange, Kenvue tightened its net sales outlook expecting fiscal
2023 reported Net sales growth to be in the range of 4.0% to 4.5%
and Organic growth to be in the range of 5.5% to 6.0%.
Kenvue expects fiscal 2023 Adjusted diluted earnings per share
to be in the range of $1.26 to $1.28, reflecting increased foreign
exchange headwinds vs prior outlook as well as a softer start to
the cold, cough and flu season.
This range assumes a full year 2023 diluted weighted average
share count of 1.852 billion.
Reported and Adjusted Interest expense,
net For fiscal year 2023, Kenvue continues to expect
reported Interest expense, net to be approximately $270 million and
Adjusted interest expense, net1 to be approximately $300
million.
Reported and Adjusted effective tax
rate Kenvue expects reported Effective tax rate to be
between 25.5% to 26.5% and continues to expect Adjusted effective
tax rate1 to be between 24.5% to 25.5%.
Kenvue is not able to provide GAAP measures or reconcile certain
non-GAAP financial measures, other than Adjusted interest expense,
net, to comparable GAAP measures on a forward-looking basis without
unreasonable efforts given the unpredictability of the timing and
amounts of discrete items such as acquisitions or divestitures.
Quarterly Cash Dividend
In line with the Company’s commitment to a disciplined capital
allocation strategy to deliver long-term sustainable shareholder
value, Kenvue paid a third quarter cash dividend of $0.20 per
share, totaling $383 million.
Today Kenvue announced that the Board of Directors declared a
$0.20 cash dividend payable in the fourth quarter. The fourth
quarter dividend of $0.20 per share on the common stock of the
Company will be payable on November 22, 2023 to shareholders of
record as of the close of business on November 8, 2023.
Authorization of Share Repurchase
Program
Kenvue’s Board of Directors has authorized a share repurchase
program, under which Kenvue is authorized to repurchase up to 27
million shares of its outstanding common stock in open market or
privately negotiated transactions. The program has no expiration
date and may be suspended or discontinued at any time. The intent
of this repurchase program is to offset dilution from the vesting
or exercise of equity awards under Kenvue’s equity incentive
plan.
Webcast Information
As previously announced, Kenvue will host a conference call with
investors to discuss its third quarter results at 8:30 a.m. Eastern
Time. The conference call can be accessed by dialing 877-407-8835
from the United States or 201-689-8779 from international
locations. A simultaneous webcast of the call for investors and
other interested parties may be accessed by visiting the Investors
section of the Company’s website. A replay will be available
approximately two hours after the live event.
About Kenvue
Kenvue is the world’s largest pure-play consumer health company
by revenue. Built on more than a century of heritage, our iconic
brands, including Aveeno®, BAND-AID® Brand Adhesive Bandages,
Johnson’s®, Listerine®, Neutrogena® and Tylenol®, are
science-backed and recommended by healthcare professionals around
the world. At Kenvue, we believe in the extraordinary power of
everyday care and our teams work every day to put that power in
consumers’ hands and earn a place in their hearts and homes. Learn
more at www.kenvue.com.
1Non-GAAP
Financial Measures
The Company uses certain non-GAAP financial measures to
supplement the financial measures prepared in accordance with U.S.
GAAP. There are limitations to the use of the non-GAAP financial
measures presented herein. These non-GAAP financial measures are
not prepared in accordance with U.S. GAAP nor do they have any
standardized meaning under U.S. GAAP. In addition, other companies
may use similarly titled non-GAAP financial measures that are
calculated differently from the way the Company calculate such
measures. Accordingly, the non-GAAP financial measures may not be
comparable to such similarly titled non-GAAP financial measures
used by other companies. The Company cautions you not to place
undue reliance on these non-GAAP financial measures, but instead to
consider them with the most directly comparable U.S. GAAP measure.
These non-GAAP financial measures have limitations as analytical
tools and should not be considered in isolation. These non-GAAP
financial measures should be considered supplements to, not
substitutes for, or superior to, the corresponding financial
measures calculated in accordance with U.S. GAAP.
The Company believes the presentation of these measures is
relevant and useful for investors because it allows investors to
view performance in a manner similar to the method used by
Management. The Company believes these measures help improve
investors’ ability to understand the Company’s operating
performance and makes it easier to compare the Company’s results
with other companies. In addition, the Company believes these
measures are also among the primary measures used externally by the
Company’s investors, analysts and peers in its industry for
purposes of valuation and comparing the operating performance of
the Company to other companies in our industry.
Below are definitions and the reconciliation to the most closely
related GAAP measures for the non-GAAP measures used in this press
release and the related prepared materials and webcast.
Adjusted diluted earnings per
share: We define Adjusted diluted earnings per share as U.S.
GAAP diluted earnings per share adjusted for Separation-related
costs, restructuring expense, unrealized gain on securities,
amortization of intangible assets, conversion of share-based
awards, litigation expense, impairment of intangible assets,
interest income earned on the related party note receivable from
Johnson & Johnson and their related tax impacts. Management
views this non-GAAP measure is useful to investors as it provides a
supplemental measure of the Company’s performance over time.
Adjusted EBITDA margin: We define
the non-GAAP measure EBITDA as U.S. GAAP Net income adjusted for
interest, provision for taxes, and depreciation and amortization.
We define Adjusted EBITDA, another non-GAAP financial measure, as
EBITDA adjusted for Separation-related costs, restructuring
expense, conversion of share-based awards, litigation expense,
impairment of intangible assets and unrealized gain on securities.
We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage
of Net sales. Management believes this non-GAAP measure is useful
to investors as it provides a supplemental perspective to the
Company’s operating efficiency over time.
Adjusted effective tax rate: We
define Adjusted effective tax rate as U.S. GAAP Effective tax rate
adjusted for tax effects of Separation-related costs, restructuring
expense, unrealized gain on securities, amortization of intangible
assets, conversion of share-based awards, interest income earned on
the related party note receivable from Johnson & Johnson (i.e.,
special items). We also exclude certain one-time tax only
adjustments which include the removal of tax effects from the
carve-out methodology, the impact of the interest expense from the
debt issuance, which reduced the Company’s capacity to utilize
foreign tax credits against U.S. foreign source income and other
one-time items. Management believes this non-GAAP measure is useful
to investors as it provides a supplemental measure of the Company’s
performance over time.
Adjusted gross profit margin: We
define Adjusted gross profit margin as U.S. GAAP Gross profit
margin adjusted for restructuring expense, amortization of
intangible assets and conversion of share-based awards. Management
believes this non-GAAP measure is useful to investors as it
provides a supplemental perspective to the Company’s operating
efficiency over time.
Adjusted interest expense, net: We
define Adjusted interest expense, net as U.S. GAAP interest
expense, net, adjusted to exclude the interest income earned on the
related party note receivable from Johnson & Johnson.
Management believes this non-GAAP measure is useful to investors in
providing period-to-period comparisons of the results of the
Company’s ongoing operational performance.
Adjusted net income: We define
Adjusted net income as U.S. GAAP Net income adjusted for
Separation-related costs, restructuring expense, unrealized gain on
securities, amortization of intangible assets, conversion of
share-based awards, litigation expense, impairment of intangible
assets, interest income earned on the related party note receivable
from Johnson & Johnson and their related tax impacts. Adjusted
net income excludes the impact of items that may obscure trends in
our underlying performance. Management believes this non-GAAP
measure is useful to investors as the Company uses Adjusted net
income for strategic decision making, forecasting future results
and evaluating current performance.
Adjusted operating income: We
define Adjusted operating income as Total operating income
excluding the following items: amortization expense,
Separation-related costs, restructuring expenses, conversion of
share-based awards, long-lived asset impairment and litigation
expense. Management believes this non-GAAP measure is useful to
investors as Management uses Total adjusted operating income to
assess the Company’s financial performance. In the third quarter of
2023, the Company adjusted its definition of Total adjusted
operating income in order to align more closely with the financial
measures used to evaluate performance by the Company’s peers.
Adjusted operating income margin:
We define Adjusted operating income margin as Adjusted operating
income as a percentage of Net sales. Management believes this
non-GAAP measure is useful to investors as it provides a
supplemental perspective to the Company’s operating efficiency over
time.
Organic growth: We define Organic
growth as the period-over-period change in U.S. GAAP Net sales
excluding the impact of changes in foreign currency exchange rates
and the impact of acquisitions and divestitures. Management
believes Organic growth provides investors with additional,
supplemental information that is useful in assessing the Company’s
results of operations by excluding the impact of certain items that
we believe do not directly reflect our underlying operations.
The non-GAAP measures as presented herein have been prepared as
if our operations had been conducted independently from Johnson
& Johnson prior to May 4, 2023, the date Kenvue’s common stock
began trading on the New York Stock Exchange (“Kenvue IPO”), and
therefore they include certain Johnson & Johnson corporate and
shared costs allocated to us. Management believes the cost
allocations are a reasonable reflection of the utilization of
services provided to, or the benefit derived by, us during the
periods presented, though the allocations may not be indicative of
the actual costs that would have been incurred if we had been
operating as a standalone company.
Cautions Concerning Forward-Looking
Statements
This press release contains “forward-looking statements” as
defined in the Private Securities Litigation Reform Act of 1995
regarding, among other things, statements about management’s
expectations of Kenvue’s future operating and financial
performance, product development, market position and business
strategy. Forward-looking statements may be identified by the use
of words such as “plans,” “expects,” “will,” “anticipates,”
“estimates” and other words of similar meaning. The reader is
cautioned not to rely on these forward-looking statements. These
statements are based on current expectations of future events. If
underlying assumptions prove inaccurate or known or unknown risks
or uncertainties materialize, actual results could vary materially
from the expectations and projections of Kenvue and its affiliates.
Risks and uncertainties include, but are not limited to: the
inability to execute on Kenvue’s business development strategy or
realize the benefits of the separation from Johnson & Johnson;
the risk of disruption or unanticipated costs in connection with
the separation; Kenvue’s ability to succeed as a standalone
publicly traded company; economic factors, such as interest rate
and currency exchange rate fluctuations; the ability to
successfully manage local, regional or global economic volatility,
including reduced market growth rates, and to generate sufficient
income and cash flow to allow Kenvue to effect any expected share
repurchases and dividend payments; Kenvue’s ability to maintain
satisfactory credit ratings, which could adversely affect its
liquidity, capital position, borrowing costs and access to capital
markets; competition, including technological advances, new
products and intellectual property attained by competitors;
challenges inherent in new product research and development;
uncertainty of commercial success for new and existing products and
digital capabilities; challenges to intellectual property
protections including counterfeiting; the ability of Kenvue to
successfully execute strategic plans; the impact of business
combinations and divestitures, including any ongoing or future
transactions; manufacturing difficulties or delays, internally or
within the supply chain; product efficacy or safety concerns
resulting in product recalls or regulatory action; significant
adverse litigation or government action, including related to
product liability claims; changes to applicable laws and
regulations and other requirements imposed by stakeholders;
challenges to intellectual property; changes in behavior and
spending patterns of consumers; natural disasters, acts of war or
terrorism or disease outbreaks; financial instability of
international economies and legal systems and sovereign risk; and
risks related to the impact of the COVID-19 global pandemic, such
as the scope and duration of the outbreak, government actions and
restrictive measures implemented in response, supply chain
disruptions and other impacts to the business, or on Kenvue’s
ability to execute business continuity plans, as a result of the
COVID-19 pandemic. A further list and descriptions of these risks,
uncertainties and other factors can be found in Kenvue’s filings
with the Securities and Exchange Commission, including its
registration statement on Form S-1 and subsequent Quarterly Reports
on Form 10-Q and other filings, available at www.kenvue.com or on
request from Kenvue. Any forward-looking statement made in this
release speaks only as of the date of this release. Kenvue
undertakes no obligation to update any forward-looking statements,
whether as a result of new information, future events or
developments or otherwise.
Kenvue Inc.
Condensed Consolidated
Statement of Operations
(Unaudited; in Millions Except
Per Share Data)
Fiscal Three Months
Ended
Fiscal Nine Months
Ended
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Net sales
$
3,915
$
3,789
$
11,778
$
11,183
Cost of sales
1,665
1,664
5,178
4,944
Gross profit
2,250
2,125
6,600
6,239
Selling, general and administrative
expenses
1,531
1,376
4,555
4,101
Other operating expense (income), net
9
(14
)
(7
)
(6
)
Operating income
710
763
2,052
2,144
Other expense, net
25
25
65
19
Interest expense, net
100
—
154
—
Income before taxes
585
738
1,833
2,125
Provision for taxes
147
152
496
422
Net income
$
438
$
586
$
1,337
$
1,703
Net income per share
Basic
$
0.23
$
0.34
$
0.73
$
0.99
Diluted
$
0.23
$
0.34
0.73
$
0.99
Weighted average common stock
Basic
1,916
1,716
1,823
1,716
Diluted
1,920
1,716
1,827
1,716
Non-GAAP Financial Information
Organic Growth
The following tables present a reconciliation of the change in
Net sales, as reported, to Organic growth for the periods
presented:
Fiscal Three Months Ended
October 1, 2023 vs October 2, 2022(1)
Reported Net Sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
97
6.4
%
$
(4
)
$
101
6.7
%
Skin Health and Beauty
(5
)
(0.4
)
—
(5
)
(0.4
)
Essential Health
34
3.0
(9
)
43
3.8
Total
$
126
3.3
%
$
(13
)
$
139
3.6
%
Fiscal Three Months Ended
October 1, 2023 vs October 2, 2022(1)
(Unaudited)
Reported Net Sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
6.4
%
(0.3
)%
5.5
%
1.2
%
Skin Health and Beauty
(0.4
)
—
6.4
(6.8
)
Essential Health
3.0
(0.8
)
10.0
(6.2
)
Total
3.3
%
(0.3
)%
7.1
%
(3.5
)%
Fiscal Nine Months Ended
October 1, 2023 vs October 2, 2022 (1)
Reported Net Sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
452
10.1
%
$
(84
)
$
536
12.0
%
Skin Health and Beauty
115
3.5
(52
)
167
5.1
Essential Health
28
0.8
(106
)
134
3.9
Total
$
595
5.3
%
$
(242
)
$
837
7.5
%
Fiscal Nine Months Ended
October 1, 2023 vs October 2, 2022(1)
(Unaudited)
Reported Net Sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
10.1
%
(1.9
)%
8.1
%
3.9
%
Skin Health and Beauty
3.5
(1.6
)
7.2
(2.1
)
Essential Health
0.8
(3.1
)
10.0
(6.1
)
Total
5.3
%
(2.2
)%
8.4
%
(0.9
)%
(1) Acquisitions and divestitures did not
materially impact Net sales for the fiscal three and nine months
ended October 1, 2023 or October 2, 2022.
(2) Non-GAAP financial measure. Excludes
the impact of foreign currency exchange.
(3) Price/Mix reflects value
realization.
Organic Growth by Segment
Self Care:
- Organic growth of 6.7% was comprised of
5.5% value realization and 1.2% volume increase. Self Care
continued to outperform with value realization alongside
innovation-based volume growth fueling strength with all Self Care
product categories growing mid to high single digits. Standout
performance was led by Digestive Health, as Imodium® and Pepcid®
brands gained share with successful brand activations fueling
growth. Consumer affinity for and trust in Tylenol® remains as the
brand holds its position as the number one global pain brand while
continuing to gain share.
Skin Health and Beauty:
- Organic growth decreased 0.4%, comprised of
6.4% value realization offset by 6.8% volume declines. The impact
of portfolio rationalization initiatives in 2022 coupled with
market softness in China accounted for approximately two-thirds of
the volume decline. Excluding this impact volume would have been
down low-single digits. A strong finish to the sun season in the
United States with Neutrogena® regaining its Sun Care leadership
position, and strength across LATAM and EMEA led by pricing and
premiumization supported growth as supply recovery continued in the
United States.
Essential Health:
- Organic growth of 3.8% was comprised of
10.0% value realization and 6.2% volume decline. Value realization
and strong momentum in Listerine® globally was led by product
innovation and healthcare professional endorsement of recent
clinical claims. Value realization with brand activation drove
strong results across the Women’s Health product category. Global
leadership in Baby Care remains strong with healthy growth in the
United States partially offset by category and competitive dynamics
in Asia Pacific (“APAC”).
Total Segment Net Sales and Total Adjusted Operating
Income
Segment net sales and Adjusted operating income1 for the periods
presented were as follows:
Net Sales
Net Sales
Fiscal Three Months
Ended
Fiscal Nine Months
Ended
(Unaudited; Dollars in
Millions)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Self Care
$
1,613
$
1,516
$
4,914
$
4,462
Skin Health and Beauty
1,119
1,124
3,377
3,262
Essential Health
1,183
1,149
3,487
3,459
Total segment net sales
$
3,915
$
3,789
$
11,778
$
11,183
Adjusted Operating
Income
Adjusted Operating
Income
Fiscal Three Months
Ended
Fiscal Nine Months
Ended
(Unaudited; Dollars in
Millions)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Self Care Adjusted operating income
$
583
$
556
$
1,741
$
1,554
Skin Health and Beauty Adjusted operating
income
167
246
517
616
Essential Health Adjusted operating
income
309
261
770
821
Total
$
1,059
$
1,063
$
3,028
$
2,991
Depreciation
(72
)
(69
)
(211
)
(213
)
General corporate/unallocated expenses
(76
)
(81
)
(219
)
(197
)
Other operating (expense) income, net
(9
)
14
7
6
Other - impact of deferred markets(1)
12
—
33
—
Litigation expense
—
—
20
—
Impairment of intangible assets
—
—
—
12
Total adjusted operating income
(non-GAAP)
$
914
$
927
$
2,658
$
2,599
Reconciliation to Income before taxes:
Amortization
81
83
242
265
Separation-related costs(2)
133
50
333
109
Restructuring expense
3
31
3
69
Conversion of share-based awards
(25
)
—
(25
)
—
Other - impact of deferred markets
12
—
33
—
Litigation expense
—
—
20
—
Impairment of intangible assets
—
—
—
12
Total operating income
$
710
$
763
$
2,052
$
2,144
Other expense, net
25
25
65
19
Interest expense, net
100
—
154
—
Income before taxes
$
585
$
738
$
1,833
$
2,125
(1) Includes tax expense and minority
interest expense related to Deferred Markets recognized within
Other operating expense (income), net, which are payable to Johnson
& Johnson through interim related-party agreements until these
Deferred Markets can be transferred to the Company. Deferred
Markets are local businesses in certain non-U.S. jurisdictions in
which the transfer from Johnson & Johnson of certain assets and
liabilities were deferred in order to ensure compliance with
applicable law, to obtain necessary governmental approvals and
other consents and for other business reasons.
(2) Costs incurred in connection with our
establishment as a standalone public company are defined as
“Separation-related costs.”
The following tables present reconciliations of GAAP to Non-GAAP
for the periods presented:
Fiscal Three Months Ended
October 1, 2023
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
As Adjusted
Net sales
$
3,915
—
$
3,915
Gross profit
$
2,250
$
75
(a),(b),(c)
$
2,325
Gross profit margin
57.5
%
59.4
%
Operating income
$
710
$
204
(a)-(h)
$
914
Operating income margin
18.1
%
23.3
%
Net Income
$
438
$
152
(a)-(g),(i)
$
590
Net income margin
11.2
%
15.1
%
Interest expense, net
$
100
Provision for taxes
$
147
Depreciation and amortization
$
153
EBITDA (non-GAAP)
$
838
$
123
(b)-(h)
$
961
EBITDA margin
21.4
%
24.5
%
Detail of
Adjustments
(a)
Amortization (COGS)
$
81
(b)
Restructuring expense (COGS)
$
1
(c)
Conversion of share-based awards
(COGS)
$
(7
)
(d)
Separation-related costs (SG&A)
$
133
(e)
Restructuring expense (SG&A)
$
2
(f)
Conversion of share-based awards
(SG&A)
$
(18
)
(g)
Other - Impact of deferred markets
(minority interest expense) (OOI&E)
$
4
(h)
Other - Impact of deferred markets (tax
expense) (OOI&E)
$
8
(i)
Tax impact on special item adjustments
$
(44
)
Fiscal Three Months Ended
October 2, 2022
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
As Adjusted
Net sales
$
3,789
—
$
3,789
Gross profit
$
2,125
$
96
(a)-(b)
$
2,221
Gross profit margin
56.1
%
58.6
%
Operating income
$
763
$
164
(a)-(d)
$
927
Operating income margin
20.1
%
24.5
%
Net Income
$
586
$
116
(a)-(e)
$
702
Net income margin
15.5
%
18.5
%
Provision for taxes
$
152
Depreciation and amortization
$
152
EBITDA (non-GAAP)
$
890
$
81
(b)-(d)
$
971
EBITDA margin
23.5
%
25.6
%
Detail of
Adjustments
(a)
Amortization (COGS)
$
83
(b)
Restructuring expense (COGS)
$
13
(c)
Separation-related costs (SG&A)
$
50
(d)
Restructuring expense (SG&A)
$
18
(e)
Tax impact on special item adjustments
$
(48
)
Fiscal Nine Months Ended
October 1, 2023
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
As Adjusted
Net sales
$
11,778
—
$
11,778
Gross profit
$
6,600
$
236
(a)-(c)
$
6,836
Gross profit margin
56.0
%
58.0
%
Operating income
$
2,052
$
606
(a)-(i)
$
2,658
Operating income margin
17.4
%
22.6
%
Net Income
$
1,337
$
460
(a)-(g),(i)-(l)
$
1,797
Net income margin
11.4
%
15.3
%
Interest expense, net
154
Provision for taxes
496
Depreciation and amortization
453
EBITDA (non-GAAP)
$
2,440
$
371
(b)-(j)
$
2,811
EBITDA margin
20.7
%
23.9
%
Detail of
Adjustments
(a)
Amortization (COGS)
$
242
(b)
Restructuring expense (COGS)
$
1
(c)
Conversion of share-based awards
(COGS)
$
(7
)
(d)
Separation-related costs (SG&A)
$
333
(e)
Restructuring expense (SG&A)
$
2
(f)
Conversion of share-based awards
(SG&A)
$
(18
)
(g)
Other - Impact of deferred markets
(minority interest expense) (OOI&E)
$
10
(h)
Other - Impact of deferred markets (tax
expense) (OOI&E)
$
23
(i)
Litigation expense (OOI&E)
$
20
(j)
Unrealized gain on securities
(OI&E)
$
7
(k)
Interest income from related party note
(Interest expense, net)
$
(33
)
(l)
Tax impact on special item adjustments
$
(97
)
Fiscal Nine Months Ended
October 2, 2022
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
As Adjusted
Net sales
$
11,183
—
$
11,183
Gross profit
$
6,239
$
292
(a)-(b)
$
6,531
Gross profit margin
55.8
%
58.4
%
Operating income
$
2,144
$
455
(a)-(e)
$
2,599
Operating income margin
19.2
%
23.2
%
Net Income
$
1,703
$
316
(a)-(f)
$
2,019
Net income margin
15.2
%
18.1
%
Provision for taxes
$
422
Depreciation and amortization
$
478
EBITDA (non-GAAP)
$
2,603
$
190
(b)-(e)
$
2,793
EBITDA margin
23.3
%
25.0
%
Detail of
Adjustments
(a)
Amortization (COGS)
$
265
(b)
Restructuring expense (COGS)
$
27
(c)
Separation-related costs (SG&A)
$
109
(d)
Restructuring expense (SG&A)
$
42
(e)
Impairment of intangible assets
(OOI&E)
$
12
(f)
Tax impact on special item adjustments
$
(139
)
The following tables present reconciliations of the Effective
tax rate, as reported, to Adjusted effective tax rate for the
periods presented:
Fiscal Three Months
Ended
Fiscal Nine Months
Ended
(Unaudited)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Effective tax rate
25.1
%
20.6
%
27.1
%
19.9
%
Adjustments:
Tax-effect on special item adjustments
(3.1
)
1.8
(3.0
)
1.6
Removal of tax benefits from carve out
methodology
—
—
2.3
—
Taxes related to Deferred Market taxes
1.1
—
1.1
—
Valuation allowance on foreign tax credits
due to interest expense
0.9
—
(2.8
)
—
Other
1.3
(0.1
)
0.8
0.2
Adjusted Effective tax rate
(non-GAAP)
25.3
%
22.3
%
25.5
%
21.7
%
The following table presents a reconciliation of Effective tax
rate, as forecasted on a U.S. GAAP basis, to forecasted Adjusted
effective tax rate for fiscal year 2023:
Fiscal Year 2023
(Unaudited)
Forecast
Effective tax rate
25.5% - 26.5%
Adjustments:
Tax-effect on special item adjustments
(2.3
)
Removal of tax benefits from carve out
methodology
2.3
Taxes related to deferred markets
1.1
Valuation allowance on foreign tax credits
due to interest expense
(2.8
)
Other
0.7
Adjusted Effective tax rate
(non-GAAP)
24.5% - 25.5%
The following table presents a reconciliation of Interest
expense, net, as forecasted on a U.S. GAAP basis, to forecasted
Adjusted interest expense, net for fiscal year 2023:
Fiscal Year 2023
(Unaudited; Dollars in
Millions)
Forecast
Interest expense, net
$ 267
Adjustment:
Interest income from related party
note
(33
)
Adjusted interest expense, net
(non-GAAP)
$ 300
The following table presents a reconciliation of Diluted
earnings per share, as reported, to Adjusted diluted earnings per
share:
Fiscal Three Months
Ended
Fiscal Nine Months
Ended
(Unaudited)
October 1, 2023
October 1, 2023
Diluted earnings per share
$
0.23
$
0.73
Adjustments:
Separation-related costs
0.07
0.18
Amortization and impairment of intangible
assets
0.04
0.13
Conversion of share-based awards
(0.01
)
(0.01
)
Interest income from related party
note
—
(0.02
)
Tax impact on special item adjustments
(0.02
)
(0.05
)
Other
—
0.02
Adjusted diluted earnings per share
(non-GAAP)
$
0.31
$
0.98
Other Supplemental Financial Information
The following table presents the Company’s Net sales by
Geographic Region for the periods presented:
Fiscal Three Months
Ended
Fiscal Nine Months
Ended
(Unaudited; Dollars in
Millions)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Net sales by geographic region
North America
$
1,879
$
1,858
$
5,848
$
5,512
Europe, Middle East and Africa
864
790
2,566
2,392
Latin America
364
303
1,007
888
Asia Pacific
808
838
2,357
2,391
Total Net sales by geographic
region
$
3,915
$
3,789
$
11,778
$
11,183
The following table presents the Company’s Cash and cash
equivalents, Total debt and Net debt balance as of October 1,
2023:
(Unaudited; Dollars in
Millions)
October 1, 2023
Cash and cash equivalents
$
1,100
Total debt
8,200
Net debt
$
7,100
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231026997685/en/
Investor Relations: Tina Romani Kenvue_IR@kenvue.com
Media Relations: Melissa Witt media@kenvue.com
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