- Net Sales Decreased 0.4% to $3.9 Billion; Organic Growth1 was
0.9%
- Gross Profit Margin Expansion and Our Vue Forward Savings Fuel
Increased Marketing Investment
- Diluted EPS was $0.20; Adjusted Diluted EPS1 was $0.28
Kenvue Inc. (NYSE: KVUE) (“Kenvue”), today announced financial
results for the fiscal third quarter ended September 29, 2024.
“During the third quarter, we continued to drive strong
productivity and realize efficiency benefits from Our Vue Forward,
which we are reinvesting behind our iconic brands to unleash the
full potential of our business and fulfill our commitment to create
long-term shareholder value,” said Thibaut Mongon, Chief Executive
Officer. “This reinvestment is enabling us to continue to drive
share gains in Self Care, deliver broad-based growth across the
Essential Health categories, and build the right foundation in Skin
Health and Beauty, where we are seeing early signs of recovery. As
we continue to advance our new Kenvue playbook, our team is making
strong progress toward transforming into a leaner, more efficient
and agile consumer health organization driving sustainable and
profitable growth.”
Third Quarter 2024 Financial
Results
Net Sales and Organic
Growth
Third quarter Net sales decreased 0.4%, reflecting Organic
growth1 of 0.9% and foreign currency headwind of 1.3%. Both Net
sales and Organic growth were composed of 2.5% value realization
(price and mix) and (1.6)% volume.
Value realization was driven by a combination of carry-over
pricing and price actions taken this year. The volume decline was
driven primarily by Skin Health and Beauty and Self Care, partially
offset by growth in Essential Health.
Gross Profit Margin and Operating
Income Margin
Third quarter Gross profit margin expanded 100 basis points to
58.5% from 57.5% in the prior year period. Adjusted gross profit
margin1 expanded 130 basis points to 60.7% from 59.4% in the prior
year period. The year-over-year improvement in both measures
primarily reflects productivity gains attributable to our global
supply chain efficiency initiatives and benefits from value
realization.
Third quarter Operating income margin was 16.8% vs 18.1% in the
prior year period. Third quarter Adjusted operating income margin1
was 22.1% vs 23.3% in the prior year period. The year-over-year
change in both measures reflects the impact of the year-over-year
increase in brand investment, which more than offset the benefit
from Gross profit margin expansion and savings from Our Vue
Forward.
Interest Expense, Net and
Taxes
Third quarter Interest expense, net was $96 million.
The third quarter Effective tax rate was 33.6% vs 25.1% in the
prior year period. The Adjusted effective tax rate1 was 28.9% vs.
25.3% in the prior year period. Both measures were driven by
changes to the jurisdictional mix of income and reduced benefits
derived from the Separation from our former parent company.
Net Income Per Share (“Earnings Per
Share”)
Third quarter Diluted earnings per share were $0.20 vs. $0.23 in
the prior year period and Adjusted diluted earnings per share1 were
$0.28 vs. $0.31 in the prior year period. The year-over-year
declines were primarily due to increased brand investment as
compared to last year, as well as the aforementioned increased tax
rate, which more than offset the benefit from stronger Gross profit
margin and savings from Our Vue Forward.
2024 Outlook
For 2024, assuming an approximately 1% currency headwind, the
Company expects Net sales growth and Organic growth toward the low
end of its outlook of 1.0%-3.0% and 2.0%-4.0%, respectively. The
Company reaffirms its outlook for Adjusted diluted earnings per
share in the range of $1.10-$1.20, which continues to reflect
strong productivity and efficiency gains that are funding sustained
incremental investment in brand activation.
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 third quarter results on Thursday,
November 7, 2024 at 8:00 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 (income) expense, losses on investments, and tax
indemnification releases. 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 of intangible assets, 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
(income) expense, losses on investments, interest income from a
related party note, and tax indemnification releases. 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 (also referred to as “Adjusted
gross margin”) as U.S. GAAP Gross profit margin adjusted for
amortization of intangible assets, 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 of intangible assets, 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 (income)
expense, losses on investments, interest income from a related
party note, tax indemnification releases, 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 of intangible assets, 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 (income) 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 (also referred to as
“Adjusted operating 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 (also referred to as “Organic sales 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;
inflation and other 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
or cost-saving 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; Dollars In
Millions, Except Per Share Data; Shares In Millions)
Fiscal Three Months
Ended
Fiscal Nine Months
Ended
September 29, 2024
October 1, 2023
September 29, 2024
October 1, 2023
Net sales
$
3,899
$
3,915
$
11,793
$
11,778
Cost of sales
1,617
1,665
4,904
5,178
Gross profit
2,282
2,250
6,889
6,600
Selling, general and administrative
expenses
1,590
1,531
4,804
4,555
Restructuring expenses
31
—
120
—
Impairment charges
—
—
578
—
Other operating expense (income), net
7
9
29
(7
)
Operating income
654
710
1,358
2,052
Other (income) expense, net
(19
)
25
6
65
Interest expense, net
96
100
283
154
Income before taxes
577
585
1,069
1,833
Provision for taxes
194
147
332
496
Net income
$
383
$
438
$
737
$
1,337
Net income per share
Basic
$
0.20
$
0.23
$
0.38
$
0.73
Diluted
$
0.20
$
0.23
$
0.38
$
0.73
Weighted average number of shares
outstanding
Basic
1,915
1,916
1,915
1,823
Diluted
1,924
1,920
1,921
1,827
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
September 29, 2024 vs October 1, 2023(1)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
12
0.7
%
$
1
$
11
0.7
%
Skin Health and Beauty
(47
)
(4.2
)
(17
)
(30
)
(2.7
)
Essential Health
19
1.6
(34
)
53
4.5
Total
$
(16
)
(0.4
)%
$
(50
)
$
34
0.9
%
Fiscal Three Months Ended
September 29, 2024 vs October 1, 2023(1)
(Unaudited)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
0.7
%
—
%
1.8
%
(1.1
)%
Skin Health and Beauty
(4.2
)
(1.5
)
2.0
(4.7
)
Essential Health
1.6
(2.9
)
3.7
0.8
Total
(0.4
)%
(1.3
)%
2.5
%
(1.6
)%
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
September 29, 2024 vs October 1, 2023(1)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
(Unaudited; Dollars in
Millions)
Amount
Percent
Amount
Amount
Percent
Self Care
$
44
0.9
%
$
(32
)
$
76
1.5
%
Skin Health and Beauty
(148
)
(4.4
)
(41
)
(107
)
(3.2
)
Essential Health
119
3.4
(80
)
199
5.7
Total
$
15
0.1
%
$
(153
)
$
168
1.4
%
Fiscal Nine Months Ended
September 29, 2024 vs October 1, 2023(1)
(Unaudited)
Reported Net sales
change
Impact of foreign
currency
Organic growth(2)
Price/Mix(3)
Volume
Self Care
0.9
%
(0.6
)%
2.8
%
(1.3
)%
Skin Health and Beauty
(4.4
)
(1.2
)
2.0
(5.2
)
Essential Health
3.4
(2.3
)
4.8
0.9
Total
0.1
%
(1.3
)%
3.1
%
(1.7
)%
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 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 Nine Months
Ended
(Unaudited; Dollars in
Millions)
September 29, 2024
October 1, 2023
September 29, 2024
October 1, 2023
Self Care
$
1,625
$
1,613
$
4,958
$
4,914
Skin Health and Beauty
1,072
1,119
3,229
3,377
Essential Health
1,202
1,183
3,606
3,487
Total segment net sales
$
3,899
$
3,915
$
11,793
$
11,778
Adjusted Operating
Income
Fiscal Three Months
Ended
Fiscal Nine Months
Ended
(Unaudited; Dollars in
Millions)
September 29, 2024
October 1, 2023
September 29, 2024
October 1, 2023
Self Care Adjusted operating income
$
557
$
604
$
1,692
$
1,762
Skin Health and Beauty Adjusted operating
income
191
180
502
530
Essential Health Adjusted operating
income
291
275
914
736
Total(1)(2)
$
1,039
$
1,059
$
3,108
$
3,028
Depreciation(3)
(94
)
(72
)
(238
)
(211
)
General corporate/unallocated expenses
(82
)
(76
)
(258
)
(219
)
Other operating (expense) income, net
(7
)
(9
)
(29
)
7
Other—impact of Deferred Markets(4)
8
12
47
33
Litigation (income) expense
(4
)
—
(4
)
20
Adjusted operating income
(non-GAAP)
$
860
$
914
$
2,626
$
2,658
Reconciliation to Income before taxes:
Amortization of intangible assets
66
81
212
242
Separation-related costs(5)
85
133
231
333
Restructuring and operating model
optimization initiatives
38
3
146
3
Conversion of stock-based awards
6
(25
)
34
(25
)
Other—impact of Deferred Markets(4)
8
12
47
33
Founder Shares
7
—
24
—
Litigation (income) expense
(4
)
—
(4
)
20
Impairment charges
—
—
578
—
Operating income
$
654
$
710
$
1,358
$
2,052
Other (income) expense, net
(19
)
25
6
65
Interest expense, net
96
100
283
154
Income before taxes
$
577
$
585
$
1,069
$
1,833
(1)
Effective in the fiscal three months ended
September 29, 2024, the Company adjusted the allocation for certain
brand marketing expenses 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)
Effective in the fiscal three months ended
June 30, 2024, the Company adjusted the allocation for certain
Research and development costs within Selling, general, and
administrative expenses 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.
(3)
Depreciation includes the amortization of
integration and development costs capitalized in connection with
cloud computing arrangements.
(4)
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.
(5)
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
September 29, 2024
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
3,899
—
$
3,899
Gross profit
$
2,282
86
(a)
$
2,368
Gross profit margin
58.5
%
60.7
%
Operating income
$
654
206
(a)-(c)
$
860
Operating income margin
16.8
%
22.1
%
Net Income
$
383
159
(a)-(e)
$
542
Net income margin
9.8
%
13.9
%
Interest expense, net
$
96
Provision for taxes
$
194
Depreciation and amortization
$
160
EBITDA (non-GAAP)
$
833
119
(b)-(d), (f)
$
952
EBITDA margin
21.4
%
24.4
%
Detail of
Adjustments
Cost of sales
SG&A/Restructuring
expenses
Other operating expense
(income), net
Other (income) expense,
net
Provision for taxes
Total
Amortization of intangible assets
$
66
$
—
$
—
$
—
$
—
$
66
Restructuring expenses
—
31
—
—
—
31
Operating model optimization
initiatives
4
3
—
—
—
7
Separation-related costs (including
conversion of stock-based awards and Founder Shares)
16
82
—
—
—
98
Impact of Deferred Markets—minority
interest expense
—
—
4
—
—
4
Impact of Deferred Markets—provision for
taxes
—
—
4
—
(4
)
—
Litigation income
—
—
(4
)
—
—
(4
)
Tax indemnification release
—
—
—
(21
)
—
(21
)
Tax impact on special item adjustments
—
—
—
—
(22
)
(22
)
Total
$
86
$
116
$
4
$
(21
)
$
(26
)
$
159
(a)
(b)
(c)
(d)
(e)
Cost of sales less amortization
$
20
(f)
Fiscal Three Months Ended
October 1, 2023
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
3,915
—
$
3,915
Gross profit
$
2,250
75
(a)
$
2,325
Gross profit margin
57.5
%
59.4
%
Operating income
$
710
204
(a)-(c)
$
914
Operating income margin
18.1
%
23.3
%
Net Income
$
438
152
(a)-(d)
$
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)-(c), (e)
$
961
EBITDA margin
21.4
%
24.5
%
Detail of
Adjustments
Cost of sales
SG&A/Restructuring
expenses
Other operating expense
(income), net
Provision for taxes
Total
Amortization of intangible assets
$
81
$
—
$
—
$
—
$
81
Operating model optimization
initiatives
1
2
—
—
3
Separation-related costs (including
conversion of stock-based awards)
(7
)
115
—
—
108
Impact of Deferred Markets—minority
interest expense
—
—
4
—
4
Impact of Deferred Markets—provision for
taxes
—
—
8
(8
)
—
Tax impact on special item adjustments
—
—
—
(44
)
(44
)
Total
$
75
$
117
$
12
$
(52
)
$
152
(a)
(b)
(c)
(d)
Cost of sales less amortization
$
(6
)
(e)
Fiscal Nine Months Ended
September 29, 2024
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
11,793
—
$
11,793
Gross profit
$
6,889
288
(a)
$
7,177
Gross profit margin
58.4
%
60.9
%
Operating income
$
1,358
1,268
(a)-(d)
$
2,626
Operating income margin
11.5
%
22.3
%
Net Income
$
737
963
(a)-(f)
$
1,700
Net income margin
6.2
%
14.4
%
Interest expense, net
$
283
Provision for taxes
$
332
Depreciation and amortization
$
450
EBITDA (non-GAAP)
$
1,802
1,066
(b)-(e), (g)
$
2,868
EBITDA margin
15.3
%
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 of intangible assets
$
212
$
—
$
—
$
—
$
—
$
—
$
212
Restructuring expenses
—
120
—
—
—
—
120
Operating model optimization
initiatives
19
7
—
—
—
—
26
Separation-related costs (including
conversion of stock-based awards and Founder Shares)
57
232
—
—
—
—
289
Impairment charges
—
—
578
—
—
(151
)
427
Impact of Deferred Markets—minority
interest expense
—
—
—
20
—
—
20
Impact of Deferred Markets—provision for
taxes
—
—
—
27
—
(27
)
—
Litigation income
—
—
—
(4
)
—
—
(4
)
Losses on investments
—
—
—
—
31
—
31
Tax indemnification release
—
—
—
—
(21
)
—
(21
)
Tax impact on special item adjustments
—
—
—
—
—
(137
)
(137
)
Total
$
288
$
359
$
578
$
43
$
10
$
(315
)
$
963
(a)
(b)
(c)
(d)
(e)
(f)
Cost of sales less amortization
$
76
(g)
Fiscal Nine Months Ended
October 1, 2023
(Unaudited; Dollars in
Millions)
As Reported
Adjustments
Reference
As Adjusted
Net sales
$
11,778
—
$
11,778
Gross profit
$
6,600
236
(a)
$
6,836
Gross profit margin
56.0
%
58.0
%
Operating income
$
2,052
606
(a)-(c)
$
2,658
Operating income margin
17.4
%
22.6
%
Net Income
$
1,337
460
(a)-(f)
$
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)-(d), (g)
$
2,811
EBITDA margin
20.7
%
23.9
%
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 of intangible assets
$
242
$
—
$
—
$
—
$
—
$
—
$
242
Operating model optimization
initiatives
1
2
—
—
—
—
3
Separation-related costs (including
conversion of stock-based awards)
(7
)
315
—
—
—
—
308
Impact of Deferred Markets—minority
interest expense
—
—
10
—
—
—
10
Impact of Deferred Markets—provision for
taxes
—
—
23
—
—
(23
)
—
Litigation expense
—
—
20
—
—
—
20
Losses on investments
—
—
—
7
—
—
7
Interest income from related party
note
—
—
—
—
(33
)
—
(33
)
Tax impact on special item adjustments
—
—
—
—
—
(97
)
(97
)
Total
$
236
$
317
$
53
$
7
$
(33
)
$
(120
)
$
460
(a)
(b)
(c)
(d)
(e)
(f)
Cost of sales less amortization
$
(6
)
(g)
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)
September 29, 2024
October 1, 2023
September 29, 2024
October 1, 2023
Effective tax rate
33.6
%
25.1
%
31.1
%
27.1
%
Adjustments:
Tax-effect on special item adjustments
(5.2
)
(3.1
)
(4.8
)
(3.0
)
Dr.Ci:Labo® Impairment
—
—
0.8
—
Removal of tax benefits from carve out
methodology
—
—
—
2.3
Taxes related to Deferred Markets
0.5
1.1
0.5
1.1
Valuation allowance on foreign tax credits
due to interest expense
—
0.9
—
(2.8
)
Other
—
1.3
—
0.8
Adjusted Effective tax rate
(non-GAAP)
28.9
%
25.3
%
27.6
%
25.5
%
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
28.5% - 29.0%
Adjustments:
Tax-effect on special item adjustments
(2.5)
Taxes related to Deferred Markets
0.5
Adjusted Effective tax rate
(non-GAAP)
26.5% - 27.0%
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 Nine Months
Ended
(Unaudited)
September 29, 2024
October 1, 2023
September 29, 2024
October 1, 2023
Diluted earnings per share
$
0.20
$
0.23
$
0.38
$
0.73
Adjustments:
Separation-related costs
0.04
0.07
0.12
0.18
Conversion of stock-based awards
—
(0.01
)
0.02
(0.01
)
Restructuring and operating model
optimization initiatives
0.02
—
0.08
—
Impairment charges
—
—
0.30
—
Amortization of intangible assets
0.03
0.04
0.11
0.13
Losses on investments
—
—
0.02
—
Interest income from related party
note
—
—
—
(0.02
)
Tax impact on special item adjustments
(0.01
)
(0.02
)
(0.15
)
(0.05
)
Other
—
—
—
0.02
Adjusted diluted earnings per share
(non-GAAP)
$
0.28
$
0.31
$
0.88
$
0.98
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 Nine Months
Ended
(Unaudited; Dollars in
Billions)
September 29, 2024
October 1, 2023
Net cash flows from operating
activities
$
1.0
$
2.2
Purchases of property, plant, and
equipment
(0.3
)
(0.2
)
Free cash flow (non-GAAP)
$
0.7
$
2.0
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)
September 29, 2024
October 1, 2023
September 29, 2024
October 1, 2023
Net sales by geographic region
North America
$
1,844
$
1,879
$
5,737
$
5,848
Europe, Middle East, and Africa
913
864
2,696
2,566
Asia Pacific
793
808
2,339
2,357
Latin America
349
364
1,021
1,007
Total Net sales by geographic
region
$
3,899
$
3,915
$
11,793
$
11,778
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 Nine Months
Ended
(Unaudited; Dollars in
Millions)
September 29, 2024
October 1, 2023
September 29, 2024
October 1, 2023
Research & Development
$
97
$
78
$
302
$
266
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)
September 29, 2024
December 31, 2023
Cash and cash equivalents
$
1.1
$
1.4
Total debt
(8.7
)
(8.3
)
Net debt
$
(7.6
)
$
(6.9
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241107068321/en/
Investor Relations: Sofya Tsinis Kenvue_IR@kenvue.com
Media Relations: Melissa Witt media@kenvue.com
Kenvue (NYSE:KVUE)
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Kenvue (NYSE:KVUE)
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