- Net Sales of $4.0 Billion decreased 0.3%; Organic Growth1 was
+1.5%
- Diluted EPS was $0.03; Adjusted Diluted EPS1 was $0.32
- Productivity gains fuel accelerated investment in brands for
future growth
- Reaffirms Outlook for FY24 Net Sales Growth and Adjusted
Diluted EPS
Kenvue Inc. (NYSE: KVUE) (“Kenvue”), today announced financial
results for the fiscal second quarter ended June 30, 2024.
“We are on track to deliver the financial targets we set for
2024, and while we are in the early days, our work to transform
Kenvue into a bolder, more agile organization focused on profitable
growth is producing results,” said Thibaut Mongon, Chief Executive
Officer. “With the progress we have made in the first half of the
year to increase productivity and free up resources, we are
accelerating investment behind our global portfolio of iconic
brands to reach more consumers and deliver on our long-term value
creation algorithm.”
Second Quarter 2024 Financial
Results
Net Sales and Organic
Growth
Second quarter Net sales decreased 0.3% following a 5.4%
increase in the prior year period. Organic growth1 was 1.5% over
7.7% Organic growth in the prior year period. Organic growth was
comprised of 2.1% value realization (price and mix) and (0.6)%
volume.
Value realization was driven by a combination of both carry-over
pricing and new price actions. The slight volume declines were
driven primarily by Skin Health and Beauty and Self Care, partially
offset by growth in Essential Health.
Gross Profit Margin and Operating
Income Margin
Second quarter Gross profit margin expanded 360 basis points to
59.1% from 55.5% in the prior year period. Adjusted gross profit
margin1 expanded 410 basis points to 61.6% from 57.5% in the prior
year period. The year-over-year improvement primarily reflects
productivity gains attributable to our global supply chain
efficiency initiatives, including commodity pricing, and to value
realization.
Second quarter Operating income margin was 3.9% vs 17.5% in the
prior year period. Charges related to Dr.Ci:Labo® asset impairment
(see details below), brand investment, and restructuring charges,
were partially offset by efficiency gains.
Second quarter Adjusted operating income margin1 was 22.8% vs
23.1% in the prior year period as significant year-over-year margin
expansion was more than offset by increased brand investment.
Interest expense, net and
Taxes
Second quarter Interest expense, net was $92 million.
The second quarter Effective tax rate was 10.8% vs 32.7% in the
prior year period, driven by the reversal of a deferred tax
liability related to the Dr.Ci:Labo® non-cash asset impairment. The
Adjusted effective tax rate1 was 25.7% vs. 30.8% in the prior year
period, primarily due to the remeasurement of state deferred
taxes.
Net income per share (“Earnings per
share”)
Second quarter Diluted earnings per share was $0.03 vs. $0.23 in
the prior year period and Adjusted diluted earnings per share1 was
$0.32 vs. $0.31 in the prior year period. The Diluted earnings per
share decline was primarily due to the aforementioned asset
impairment charge. Adjusted diluted earnings per share was slightly
higher year-over-year as profit growth and normalizing taxes were
offset by accelerated investment in our brands and an increase in
weighted average share count.
Long-Lived Asset Impairment
Charge
In the second quarter, the Company took a non-cash charge of
$488 million ($337 million after-tax) to adjust the carrying value
of long-lived assets related to the Dr.Ci:Labo® business. The
impairment was a result of updates in our strategy to reach more
consumers and appropriately address evolving market dynamics,
including shifts in consumer sentiment in China as well as changing
shopping patterns in the region. The Company continues to believe
in the strength of the brand and is investing in its long-term
growth opportunities.
2024 Outlook
Based on current spot rates, the Company reaffirms its outlook
for 2024, including Net sales growth of 1.0%-3.0% (2.0%-4.0%
Organic growth), and Adjusted diluted earnings per share in the
range of $1.10-$1.20.
Kenvue is not able to provide the most directly comparable GAAP
measures or reconcile Adjusted diluted earnings per share or
Organic growth to comparable GAAP measures on a forward-looking
basis without unreasonable efforts given the unpredictability of
the timing and amounts of discrete items such as foreign exchange,
acquisitions, or divestitures.
Webcast Information
As previously announced, Kenvue will host a conference call with
investors to discuss its second quarter results on Tuesday, August
6, 2024 at 8:30 a.m. Eastern Time. The conference call can be
accessed by dialing 877-407-8835 from the U.S. or +1 201-689-8779
from international locations. A live webcast of the conference call
can also be accessed at investors.kenvue.com, with a replay made
available 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, 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 calculates 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
Adjusted net income divided by the weighted average number of
diluted shares outstanding. Management views this non-GAAP measure
as useful to investors as it provides a supplemental measure of the
Company’s performance over time.
Adjusted EBITDA margin: We define
the non-GAAP measure EBITDA as 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 restructuring expenses and operating model
optimization initiatives, costs incurred in connection with our
establishment as a standalone public company (“Separation-related
costs”), conversion of stock-based awards, stock-based awards
granted to individuals employed by Kenvue as of October 2, 2023
(“Founder Shares”), impairment charges, the impact of the deferred
transfer of certain assets and liabilities from Johnson &
Johnson in certain jurisdictions (the “Deferred Markets”),
litigation expense, and losses on investments. 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 the tax effects on special item adjustments including
amortization, restructuring expenses and operating model
optimization initiatives, Separation-related costs, conversion of
stock-based awards, Founder Shares, impairment charges other than
the Dr.Ci:Labo® asset impairment, litigation expense, losses on
investments, and interest income from a related party note. We also
exclude taxes related to the Deferred Markets, taxes related to the
Dr.Ci:Labo® asset impairment charges, certain one-time tax only
adjustments which includes the removal of tax effects from the
carve-out methodology and 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. 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 amortization, Separation-related costs,
conversion of stock-based awards, Founder Shares, and operating
model optimization initiatives. 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 net income: We define
Adjusted net income as U.S. GAAP Net income adjusted for
amortization, restructuring expenses and operating model
optimization initiatives, Separation-related costs, conversion of
stock-based awards, Founder Shares, impairment charges, the impact
of the Deferred Markets, litigation expense, losses on investments,
interest income from a related party note, and their related tax
impacts (i.e. special items). 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 U.S. GAAP Operating income
adjusted for amortization, restructuring expenses and operating
model optimization initiatives, Separation-related costs,
conversion of stock-based awards, Founder Shares, impairment
charges, the impact of the Deferred Markets, and litigation
expense. Management believes this non-GAAP measure is useful to
investors as management uses Adjusted operating income to assess
the Company’s financial performance.
Adjusted operating income margin:
We define Adjusted operating income margin as Adjusted operating
income as a percentage of Net sales. Management believes this
non-GAAP measure is useful to investors as it provides a
supplemental perspective to the Company’s operating efficiency over
time.
Free cash flow: We define Free cash
flow as U.S. GAAP Net cash flows from operating activities adjusted
for Purchases of property, plant, and equipment. Management
believes this non-GAAP measure is useful to investors as it
provides a view of the Company’s liquidity after deducting capital
expenditures, which are considered a necessary component of our
ongoing operations.
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, 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;
economic factors, such as interest rate and currency exchange rate
fluctuations; the ability to successfully manage local, regional or
global economic volatility, including reduced market growth rates,
and to generate sufficient income and cash flow to allow Kenvue to
effect any expected share repurchases and dividend payments;
Kenvue’s ability to access capital markets and maintain
satisfactory credit ratings, which could adversely affect its
liquidity, capital position and borrowing costs; competition,
including technological advances, new products and intellectual
property attained by competitors; challenges inherent in new
product research and development; uncertainty of commercial success
for new and existing products and digital capabilities; challenges
to intellectual property protections including counterfeiting; the
ability of Kenvue to successfully execute strategic plans,
including Our Vue Forward and other restructuring initiatives; 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; changes
in behavior and spending patterns of consumers; natural disasters,
acts of war (including the Russia-Ukraine War and conflicts in the
Middle East) or terrorism, catastrophes, or epidemics, pandemics,
or other disease outbreaks; financial instability of international
economies and legal systems and sovereign risk; the inability to
realize the benefits of the separation from Kenvue’s former parent,
Johnson & Johnson; and the risk of disruption or unanticipated
costs in connection with the separation. 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 Annual Report on Form 10-K for the fiscal
year ended December 31, 2023 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 Six Months
Ended
June 30, 2024
July 2, 2023
June 30, 2024
July 2, 2023
Net sales
$
4,000
$
4,011
$
7,894
$
7,863
Cost of sales
1,635
1,786
3,287
3,513
Gross profit
2,365
2,225
4,607
4,350
Selling, general and administrative
expenses
1,641
1,522
3,214
3,024
Restructuring expenses
48
—
89
—
Impairment charges
510
—
578
—
Other operating expense (income), net
12
1
22
(16
)
Operating income
154
702
704
1,342
Other (income) expense, net
(3
)
10
25
40
Interest expense, net
92
53
187
54
Income before taxes
65
639
492
1,248
Provision for taxes
7
209
138
349
Net income
$
58
$
430
$
354
$
899
Net income per share
Basic
$
0.03
$
0.23
$
0.18
$
0.51
Diluted
$
0.03
$
0.23
$
0.18
$
0.51
Weighted average number of shares
outstanding
Basic
1,915
1,838
1,915
1,777
Diluted
1,920
1,838
1,920
1,777
Non-GAAP Financial Information
Organic Growth
The following tables present a reconciliation of the change in
Net sales, as reported, to Organic growth for the periods
presented:
Fiscal Three Months Ended June
30, 2024 vs July 2, 2023(1)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
(26
)
(1.6
)%
$
(22
)
$
(4
)
(0.2
)%
Skin Health and Beauty
(44
)
(3.8
)
(17
)
(27
)
(2.4
)
Essential Health
59
4.9
(33
)
92
7.6
Total
$
(11
)
(0.3
)%
$
(72
)
$
61
1.5
%
Fiscal Three Months Ended June
30, 2024 vs July 2, 2023(1)
(Unaudited)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
(1.6
)%
(1.4
)%
1.1
%
(1.3
)%
Skin Health and Beauty
(3.8
)
(1.4
)
1.5
(3.9
)
Essential Health
4.9
(2.7
)
4.1
3.5
Total
(0.3
)%
(1.8
)%
2.1
%
(0.6
)%
Fiscal Three Months Ended July
2, 2023 vs July 3, 2022(1)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
180
12.2
%
$
(30
)
$
210
14.2
%
Skin Health and Beauty
21
1.9
(17
)
38
3.4
Essential Health
6
0.5
(40
)
46
3.8
Total
$
207
5.4
%
$
(87
)
$
294
7.7
%
Fiscal Three Months Ended July
2, 2023 vs July 3, 2022(1)
(Unaudited)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
12.2
%
(2.0
)%
10.6
%
3.6
%
Skin Health and Beauty
1.9
(1.5
)
6.6
(3.2
)
Essential Health
0.5
(3.3
)
10.7
(6.9
)
Total
5.4
%
(2.3
)%
9.4
%
(1.7
)%
Fiscal Six Months Ended June
30, 2024 vs July 2, 2023(1)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
32
1.0
%
$
(33
)
$
65
2.0
%
Skin Health and Beauty
(101
)
(4.5
)
(24
)
(77
)
(3.4
)
Essential Health
100
4.3
(46
)
146
6.3
Total
$
31
0.4
%
$
(103
)
$
134
1.7
%
Fiscal Six Months Ended June
30, 2024 vs July 2, 2023(1)
(Unaudited)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
1.0
%
(1.0
)%
3.4
%
(1.4
)%
Skin Health and Beauty
(4.5
)
(1.1
)
1.9
(5.3
)
Essential Health
4.3
(2.0
)
5.4
0.9
Total
0.4
%
(1.3
)%
3.5
%
(1.8
)%
Fiscal Six Months Ended July
2, 2023 vs July 3, 2022(1)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
355
12.1
%
$
(80
)
$
435
14.8
%
Skin Health and Beauty
120
5.6
(52
)
172
8.0
Essential Health
(6
)
(0.3
)
(97
)
91
3.9
Total
$
469
6.3
%
$
(229
)
$
698
9.4
%
Fiscal Six Months Ended July
2, 2023 vs July 3, 2022(1))
(Unaudited)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
12.1
%
(2.7
)%
9.4
%
5.3
%
Skin Health and Beauty
5.6
(2.4
)
7.6
0.4
Essential Health
(0.3
)
(4.2
)
10.1
(6.1
)
Total
6.3
%
(3.1
)%
9.1
%
0.3
%
(1) Acquisitions and divestitures did not
materially impact the reported Net sales change.
(2) Non-GAAP financial measure. Excludes
the impact of foreign currency exchange and the impact of
Acquisitions and divestitures.
(3) Price/Mix reflects value
realization.
Total Segment Net Sales and Adjusted Operating Income
Segment Net sales and Adjusted operating income for the periods
presented were as follows:
Net Sales
Fiscal Three Months
Ended
Fiscal Six Months
Ended
(Unaudited; Dollars in
Millions)
June 30, 2024
July 2, 2023
June 30, 2024
July 2, 2023
Self Care
$
1,635
$
1,661
$
3,333
$
3,301
Skin Health and Beauty
1,103
1,147
2,157
2,258
Essential Health
1,262
1,203
2,404
2,304
Total segment net sales
$
4,000
$
4,011
$
7,894
$
7,863
Adjusted Operating
Income
Fiscal Three Months
Ended
Fiscal Six Months
Ended
(Unaudited; Dollars in
Millions)
June 30, 2024
July 2, 2023
June 30, 2024
July 2, 2023
Self Care Adjusted operating income
$
534
$
576
$
1,135
$
1,158
Skin Health and Beauty Adjusted operating
income
165
201
311
350
Essential Health Adjusted operating
income
359
250
623
461
Total(1)
$
1,058
$
1,027
$
2,069
$
1,969
Depreciation
(69
)
(68
)
(144
)
(139
)
General corporate/unallocated expenses
(89
)
(74
)
(176
)
(143
)
Other operating (expense) income, net
(12
)
(1
)
(22
)
16
Other—impact of Deferred Markets(2)
23
21
39
21
Litigation expense
—
20
—
20
Adjusted operating income
(non-GAAP)
$
911
$
925
$
1,766
$
1,744
Reconciliation to Income before taxes:
Amortization
72
80
146
161
Separation-related costs(3)
79
102
146
200
Restructuring and operating model
optimization initiatives
58
—
108
—
Conversion of stock-based awards
6
—
28
—
Other—impact of Deferred Markets(2)
23
21
39
21
Founder Shares
9
—
17
—
Litigation expense
—
20
—
20
Impairment charges
510
—
578
—
Operating income
$
154
$
702
$
704
$
1,342
Other (income) expense, net
(3
)
10
25
40
Interest expense, net
92
53
187
54
Income before taxes
$
65
$
639
$
492
$
1,248
(1) For the second fiscal quarter of 2024,
the Company adjusted the allocation for certain Research &
development costs within Selling, general, and administrative
expenses to align with segment financial results as measured by the
Company, including the chief operating decision maker (the “CODM”).
Accordingly, the Company has updated its segment disclosures to
reflect the updated presentation in all prior periods. Total
Adjusted operating income did not change as a result of this
update.
(2) Includes the provision for taxes and
minority interest expense related to Deferred Markets recognized
within Other operating expense (income), net, which are payable to
Johnson & Johnson through interim agreements until these
Deferred Markets can be transferred to the Company. Deferred
Markets are local businesses in certain non-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.
(3) Costs incurred in connection with our
establishment as a standalone public company are defined as
“Separation-related costs.”
The following tables present reconciliations of GAAP to Non-GAAP
for the periods presented:
Fiscal Three Months Ended June
30, 2024
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
4,000
—
$
4,000
Gross profit
$
2,365
99
(a)
$
2,464
Gross profit margin
59.1
%
61.6
%
Operating income
$
154
757
(a)-(d)
$
911
Operating income margin
3.9
%
22.8
%
Net Income
$
58
553
(a)-(e)
$
611
Net income margin
1.5
%
15.3
%
Interest expense, net
$
92
Provision for taxes
$
7
Depreciation and amortization
$
141
EBITDA (non-GAAP)
$
298
685
(b)-(d), (f)
$
983
EBITDA margin
7.5
%
24.6
%
Detail of
Adjustments
Cost of sales
SG&A/Restructuring
expenses
Impairment charges
Other operating expense
(income), net
Provision for taxes
Total
Amortization
$
72
$
—
$
—
$
—
$
—
$
72
Restructuring expenses
—
48
—
—
—
48
Operating model optimization
initiatives
9
1
—
—
—
10
Separation-related costs (including
conversion of stock-based awards and Founder Shares)
18
76
—
—
—
94
Impairment charges
—
—
510
—
(151
)
359
Impact of Deferred Markets—minority
interest expense
—
—
—
9
—
9
Impact of Deferred Markets—provision for
taxes
—
—
—
14
(14
)
—
Tax impact on special item adjustments
—
—
—
—
(39
)
(39
)
Total
$
99
$
125
$
510
$
23
$
(204
)
$
553
(a)
(b)
(c)
(d)
(e)
Cost of sales less amortization
$
27
(f)
Fiscal Three Months Ended July
2, 2023
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
4,011
—
$
4,011
Gross profit
$
2,225
80
(a)
$
2,305
Gross profit margin
55.5
%
57.5
%
Operating income
$
702
223
(a)-(c)
$
925
Operating income margin
17.5
%
23.1
%
Net Income
$
430
144
(a)-(e)
$
574
Net income margin
10.7
%
14.3
%
Interest expense, net
$
53
Provision for taxes
$
209
Depreciation and amortization
$
148
EBITDA (non-GAAP)
$
840
143
(b)-(c)
$
983
EBITDA margin
20.9
%
24.5
%
Detail of
Adjustments
Cost of sales
SG&A/Restructuring
expenses
Other operating expense
(income), net
Interest expense, net
Provision for taxes
Total
Amortization
$
80
$
—
$
—
$
—
$
—
$
80
Separation-related costs
—
102
—
—
—
102
Impact of Deferred Markets—minority
interest expense
—
—
6
—
—
6
Impact of Deferred Markets—provision for
taxes
—
—
15
—
(15
)
—
Litigation expense
—
—
20
—
—
20
Interest income from related party
note
—
—
—
(33
)
—
(33
)
Tax impact on special item adjustments
—
—
—
—
(31
)
(31
)
Total
$
80
$
102
$
41
$
(33
)
$
(46
)
$
144
(a)
(b)
(c)
(d)
(e)
Fiscal Six Months Ended June
30, 2024
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
7,894
—
$
7,894
Gross profit
$
4,607
202
(a)
$
4,809
Gross profit margin
58.4
%
60.9
%
Operating income
$
704
1,062
(a)-(d)
$
1,766
Operating income margin
8.9
%
22.4
%
Net Income
$
354
804
(a)-(f)
$
1,158
Net income margin
4.5
%
14.7
%
Interest expense, net
$
187
Provision for taxes
$
138
Depreciation and amortization
$
290
EBITDA (non-GAAP)
$
969
947
(b)-(e), (g)
$
1,916
EBITDA margin
12.3
%
24.3
%
Detail of
Adjustments
Cost of sales
SG&A/Restructuring
expenses
Impairment charges
Other operating expense
(income), net
Other (income) expense,
net
Provision for taxes
Total
Amortization
$
146
$
—
$
—
$
—
$
—
$
—
$
146
Restructuring expenses
—
89
—
—
—
—
89
Operating model optimization
initiatives
15
4
—
—
—
—
19
Separation-related costs (including
conversion of stock-based awards and Founder Shares)
41
150
—
—
—
—
191
Impairment charges
—
—
578
—
—
(151
)
427
Impact of Deferred Markets—minority
interest expense
—
—
—
16
—
—
16
Impact of Deferred Markets—provision for
taxes
—
—
—
23
—
(23
)
—
Losses on investments
—
—
—
—
31
—
31
Tax impact on special item adjustments
—
—
—
—
—
(115
)
(115
)
Total
$
202
$
243
$
578
$
39
$
31
$
(289
)
$
804
(a)
(b)
(c)
(d)
(e)
(f)
Cost of sales less amortization
$
56
(g)
Fiscal Six Months Ended July
2, 2023
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
7,863
—
$
7,863
Gross profit
$
4,350
161
(a)
$
4,511
Gross profit margin
55.3
%
57.4
%
Operating income
$
1,342
402
(a)-(c)
$
1,744
Operating income margin
17.1
%
22.2
%
Net Income
$
899
308
(a)-(f)
$
1,207
Net income margin
11.4
%
15.4
%
Interest expense, net
$
54
Provision for taxes
$
349
Depreciation and amortization
$
300
EBITDA (non-GAAP)
$
1,602
248
(b)-(d)
$
1,850
EBITDA margin
20.4
%
23.5
%
Detail of
Adjustments
Cost of sales
SG&A/Restructuring
expenses
Other operating expense
(income), net
Other (income) expense,
net
Interest expense, net
Provision for taxes
Total
Amortization
$
161
$
—
$
—
$
—
$
—
$
—
$
161
Separation-related costs
—
200
—
—
—
—
200
Impact of Deferred Markets—minority
interest expense
—
—
6
—
—
—
6
Impact of Deferred Markets—provision for
taxes
—
—
15
—
—
(15
)
—
Litigation expense
—
—
20
—
—
—
20
Losses on investments
—
—
—
7
—
—
7
Interest income from related party
note
—
—
—
—
(33
)
—
(33
)
Tax impact on special item adjustments
—
—
—
—
—
(53
)
(53
)
Total
$
161
$
200
$
41
$
7
$
(33
)
$
(68
)
$
308
(a)
(b)
(c)
(d)
(e)
(f)
The following tables present reconciliations of the Effective
tax rate, as reported, to Adjusted effective tax rate for the
periods presented:
Fiscal Three Months
Ended
Fiscal Six Months
Ended
(Unaudited)
June 30, 2024
July 2, 2023
June 30, 2024
July 2, 2023
Effective tax rate
10.8
%
32.7
%
28.0
%
28.0
%
Adjustments:
Tax-effect on special item adjustments
(2.9
)
(10.6
)
(3.1
)
(2.4
)
Dr.Ci:Labo® Impairment
17.3
—
1.4
—
Removal of tax benefits from carve out
methodology
—
6.8
—
3.5
Taxes related to Deferred Markets
0.5
1.8
0.5
0.9
Valuation allowance on foreign tax credits
due to interest expense
—
—
—
(4.3
)
Other
—
0.1
0.1
—
Adjusted Effective tax rate
(non-GAAP)
25.7
%
30.8
%
26.9
%
25.7
%
The following table presents a reconciliation of Effective tax
rate, as forecasted on a U.S. GAAP basis, to forecasted Adjusted
effective tax rate for fiscal year 2024:
Fiscal Year 2024
(Unaudited)
Forecast
Effective tax rate
26.5% - 27.5%
Adjustments:
Tax-effect on special item adjustments
(1.5)
Taxes related to Deferred Markets
0.5
Adjusted Effective tax rate
(non-GAAP)
25.5% - 26.5%
The following table presents a reconciliation of Diluted
earnings per share, as reported, to Adjusted diluted earnings per
share for the periods presented:
Fiscal Three Months
Ended
Fiscal Six Months
Ended
(Unaudited)
June 30, 2024
July 2, 2023
June 30, 2024
July 2, 2023
Diluted earnings per share
$
0.03
$
0.23
$
0.18
$
0.51
Adjustments:
Separation-related costs
0.04
0.06
0.08
0.11
Restructuring and operating model
optimization initiatives
0.03
—
0.06
—
Impairment charges
0.27
—
0.30
—
Amortization
0.04
0.04
0.08
0.09
Losses on investments
—
—
0.02
—
Interest income from related party
note
—
(0.02
)
—
(0.02
)
Tax impact on special item adjustments
(0.10
)
(0.02
)
(0.14
)
(0.03
)
Other
0.01
0.02
0.02
0.02
Adjusted diluted earnings per share
(non-GAAP)
$
0.32
$
0.31
$
0.60
$
0.68
The following table presents a reconciliation of Net cash flows
from operating activities, as reported, and Purchases of property,
plant, and equipment, as reported, to Free cash flow for the
periods presented:
Fiscal Six Months
Ended
(Unaudited; Dollars in
Billions)
June 30, 2024
July 2, 2023
Net cash flows from operating
activities
$
0.7
$
1.5
Purchases of property, plant, and
equipment
(0.2
)
(0.1
)
Free cash flow (non-GAAP)
$
0.5
$
1.4
Other Supplemental Financial Information
The following table presents the Company’s Net sales by
Geographic Region for the periods presented:
Fiscal Three Months
Ended
Fiscal Six Months
Ended
(Unaudited; Dollars in
Millions)
June 30, 2024
July 2, 2023
June 30, 2024
July 2, 2023
Net sales by geographic region
North America
$
2,020
$
2,028
$
3,893
$
3,969
Europe, Middle East and Africa
878
864
1,783
1,702
Asia Pacific
780
781
1,546
1,549
Latin America
322
338
672
643
Total Net sales by geographic
region
$
4,000
$
4,011
$
7,894
$
7,863
The following table presents the Company’s Research and
development expenses for the periods presented. Research and
development expenses are included within Selling, general, and
administrative expenses.
Fiscal Three Months
Ended
Fiscal Six Months
Ended
(Unaudited; Dollars in
Millions)
June 30, 2024
July 2, 2023
June 30, 2024
July 2, 2023
Research & Development
$
105
$
99
$
205
$
188
The following table presents the Company’s Cash and cash
equivalents, Total debt and Net debt balance as of the periods
presented:
(Unaudited; Dollars in
Billions)
June 30, 2024
December 31, 2023
Cash and cash equivalents
$
1.0
$
1.4
Total debt
(8.5
)
(8.3
)
Net debt
$
(7.5
)
$
(6.9
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240806423161/en/
Investor Relations: Jim Giannakouros, CFA
Kenvue_IR@kenvue.com
Media Relations: Melissa Witt media@kenvue.com
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