Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in the section of our final prospectus (the “IPO Prospectus”) filed on May 4, 2023 with the U.S. Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Act”) relating to our Registration Statement on Form S-1 entitled “Risk Factors” and the section entitled “Cautionary Note Regarding Forward-Looking Statements” included herein.

Our accompanying Condensed Combined Financial Statements as of April 2, 2023 and for the fiscal three months ended April 2, 2023 and April 3, 2022 have been prepared in accordance with U.S. GAAP and the rules and regulations of the SEC for interim financial statements, and should be read in conjunction with our audited combined financial statements for the year ended January 1, 2023, which are included in the IPO Prospectus, and in conjunction with our unaudited Condensed Combined Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. In our opinion, the Condensed Combined Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair statement of the financial condition, results of operations and cash flows for the periods indicated. All currency amounts are expressed in U.S. dollars unless otherwise noted.

Overview

Company Overview

At Kenvue, our purpose is to realize the extraordinary power of everyday care. As a global leader at the intersection of healthcare and consumer goods, we are the world’s largest pure-play consumer health company by revenue with $15.0 billion in Net sales in 2022. By combining the power of science with meaningful human insights and digital-first approach, we empower consumers to live healthier lives every day. Trusted by generations, our differentiated portfolio of iconic brands—including Tylenol, Neutrogena, Listerine, Johnson’s, BAND-AID®, Aveeno, Zyrtec, and Nicorette—is backed by science and recommended by healthcare professionals, which further reinforces our consumers’ connections to our brands.

Our portfolio includes Self Care, Skin Health and Beauty, and Essential Health products, allowing us to connect with consumers globally—in their daily rituals and the moments that matter most.

Our well-known portfolio represents a combination of global and regional brands, many of which hold leading positions in their respective categories. In 2022, we held seven #1 brand positions across major categories globally, in addition to many #1 brand positions locally across our four regions. Our global footprint is also well balanced geographically with approximately half of our Net sales generated outside North America in 2022.

Our global scale and the breadth of our brand portfolio are complemented by our well-developed capabilities and accelerated through our digital-first approach, allowing us to dynamically capitalize on and respond to current trends impacting our categories and geographic markets.

With a sole focus on consumer health, our marketing organization operates efficiently leveraging our precision marketing, e-commerce, and broader digital capabilities to develop unique consumer insights and further enhance the relevance of our brands. Similarly, our research and development organization combines these consumer insights with deep, multi-disciplinary scientific expertise, and engagement with healthcare professionals, to drive innovative new products, solutions and experiences centered around consumer health.

Our Business Segments

We operate our business through the following three reportable business segments:

• Self Care. Our Self Care product categories include: Cough, Cold and Allergy; Pain Care; and Other Self Care (Digestive Health, Smoking Cessation and Other). Major brands in the segment include Tylenol, Nicorette, and Zyrtec.

• Skin Health and Beauty. Our Skin Health and Beauty product categories include: Face and Body Care and Hair, Sun and Other. Major brands in the segment include Neutrogena, Aveeno, and OGX.

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

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

Separation from Johnson & Johnson

In November 2021, Johnson & Johnson (“J&J” or the “Parent”), our parent company, announced its intention to separate its Consumer Health segment (the “Consumer Health Business”) into a new, publicly traded company (the “Separation”). We were incorporated in Delaware on February 23, 2022 in connection with the Separation and were formed to ultimately hold, directly or indirectly, and conducted certain operational activities in anticipation of the planned separation of, the Consumer Health Business. Prior to the Kenvue IPO (as defined below), we were wholly owned by J&J and primarily represented the Consumer Health Business. We also included certain other product lines previously reported in another segment of J&J. On April 4, 2023, in connection with the Separation, J&J completed in all material respects the transfer of the assets and liabilities of the Consumer Health Business to us and our subsidiaries, other than the transfer of assets and liabilities in certain jurisdictions where we and J&J will defer the transfer of such assets and assumption of liabilities and other immaterial assets (such transfer, the “Consumer Health Business Transfer”).

The registration statement related to the initial public offering of Kenvue’s common shares was declared effective on May 3, 2023, and our common shares began trading on the New York Stock Exchange under the ticker symbol “KVUE” on May 4, 2023 (the “Kenvue IPO”).

On May 8, 2023, the Kenvue IPO was completed through the sale of 198,734,444 shares of common stock, par value $0.01 per share, including the underwriters’ full exercise of their option to purchase 25,921,884 shares to cover over-allotments, at an initial public offering price of $22 per share for net proceeds of $4.2 billion after deducting underwriting discounts and commissions of $131 million. On May 8, 2023, as partial consideration for the Consumer Health Business Transfer, we paid $13.2 billion to J&J from the (1) net proceeds received from the sale of the common shares in the Kenvue IPO and (2) net proceeds received from the Debt Financing Transactions as defined in Note 4, “Borrowings,” to our Condensed Combined Financial Statements included herein. As of the closing of the Kenvue IPO, J&J owned 1,716,160,000 shares of Kenvue

common stock, or approximately 89.6% of the total outstanding shares of Kenvue common stock and, as such, will continue to consolidate the financial results of Kenvue until the Separation is complete.

J&J has informed us that it intends to make a tax-free distribution to its shareholders of all or a portion of its remaining equity interest in us, but J&J has no obligation to complete such distribution. We are incurring certain costs in connection with our establishment as a standalone public company (the “Separation-related costs”). We expect the non-recurring Separation-related costs will continue through at least fiscal year 2024. For additional information about the Separation, see “The Separation and Distribution Transactions—The Separation” and “Certain Relationships and Related Person Transactions—Agreements to be Entered into in Connection with the Separation” in the IPO Prospectus.

Relationship with J&J

In connection with the Separation, we have entered into the Separation Agreement and various other agreements with J&J for the purpose of effecting the Separation. These agreements provide a framework for our relationship with J&J and govern various interim and ongoing relationships between us and J&J that follows the completion of the Kenvue IPO. These agreements with J&J are described in Note 16, “Subsequent Events,” to our Condensed Combined Financial Statements included herein.

Key Factors Affecting Our Results

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of our IPO Prospectus entitled “Risk Factors”.

Our Brands and Product Portfolio

We have a world class, global portfolio of iconic and modern brands that has been built over the last 135 years and is trusted by generations of consumers. Our business is balanced and resilient with leading brands across categories and geographic markets. Our brands are widely recognized and represents a combination of global powerhouses and regional brands, many of which hold leading positions in their respective categories. Our brands are built for moments that uniquely matter; these moments of care create an emotional connection to our products that creates deep bonds between consumers and our brands.

Our ability to compete successfully depends on the strength of these brands. The vast majority of our Net sales are derived from products bearing proprietary trademarks and trade names, and these trademarks and trade names convey that the products we sell are “brand name” products. Developing and maintaining the reputation of our brands is a critical component of our relationship with consumers, customers, manufacturers, suppliers, distributors, and other third-party partners, including healthcare professionals, influencers and other individuals with whom we have relationships. We recognize that our reputation and our brands could be damaged by negative publicity, whether or not valid, related to our company, our brands, our products, our supply chain, our ingredients, our packaging, our environmental, social, and governance practices, our employees, or any other aspect of our business.

Consumers, customers, and third-party partners value and trust the reputation, reliability, and status of our brands and the quality, performance, and functionality of our products, and we believe there are significant opportunities to further increase our category and brand penetration by continuing to deepen our brand relevance and salience across our portfolio, continually earning a place for our products in consumers’ hearts and homes.

Shifting Consumer Preferences

Everyday care has never been a more essential part of the consumer health journey. Globally, people’s preferences and expectations for consumer health products continue to evolve, with a heightened focus on preventative care and science-backed solutions. While the focus on consumer health was already on the rise before the COVID-19 pandemic, this focus has further accelerated since the start of the pandemic. Consumers are also shifting the paradigm of beauty towards health. Other recent trends that have affected consumer preferences include an aging population, premiumization (where consumers switch their purchases to premium alternatives), a growing middle class in emerging markets and the rise of digital ecosystems that create new opportunities for personalized health solutions. We expect these trends to continue and that consumers will continue to seek solutions that meet their health goals, creating growth opportunities across our product portfolio.

Consumer preferences and purchasing patterns are difficult to predict and may fluctuate rapidly. Our success is dependent on our ability to anticipate, understand, and respond appropriately to market trends and changing consumer preferences more

quickly than our competitors. Accordingly, we increasingly leverage our digital capabilities and data analytics to gain new commercial insights and develop targeted marketing and advertising initiatives to reach consumers. Moreover, market trends and consumer preferences and purchasing patterns may vary by geographic region, and we seek to complement our portfolio of iconic global brands with strong regional brands that are uniquely tailored to local preferences and trends.

Innovation

We rely on science. We have always prioritized science as the core of how we provided care, and we remain committed to this approach. Our ability to quickly develop new products and technologies and to adapt and market our products on an ongoing basis to meet evolving consumer preferences is an essential component of our business strategy. Several of our products have a long history of life-enhancing, first-to-market innovations. In many situations, we have driven the innovation and clinical compendium of entire categories. By leveraging world-class research and development capabilities and a team of research and development professionals, we have a multi-disciplinary and differentiated approach to innovation.

We have a successful track record of driving innovation across our categories with a science-based approach centered around human empathy and leveraging our long-standing relationships with healthcare professionals and academic institutions. Nonetheless, developing new products and technologies is a complex, time-consuming and costly process, and a new product may not achieve a successful launch or may not generate sufficient consumer interest and sales to become a profitable product. In order to remain competitive within the product markets we currently service, enter new product markets, and expand into adjacent categories, channels of distribution or geographies, we must continue to invest in innovation and develop, promote, and bring to market new high-quality products.

Expansion of e-Commerce and Digital Capabilities

Our digital-first mindset cuts across all we do. Over the last several years, our digital acceleration has transformed our ability to deliver better consumer health experiences. Today, we apply a digital-first mindset to all aspects of our operations, including research and development, supply chain, go-to-market, and marketing, by prioritizing digital investments, and we intend to continue to accelerate our implementation of this strategy in the future. Effective implementation of our digital-first approach, including effective integration of our digital and physical channels, is integral to the continued growth of our business but involves significant operational changes. We have gradually increased our investment focus into enhancing our digital capabilities, including data science, data analytics, artificial intelligence, machine learning, and natural language processing.

Our pursuit of this strategy has led us in recent years to promote new services, including e-commerce and direct-to-consumer (“DTC”) services, and introduce innovative new products and connected health offerings beyond the traditional services and products we have historically provided to our consumers and customers. Our investments in our digital capabilities are improving data quality and access, fostering innovation, driving e-commerce success, and enabling us to manage our supply chain more effectively while enhancing our marketing and commercial capabilities. However, expanding our service and product offerings through digital initiatives will also create additional risks and uncertainties associated with conducting business digitally, including the speed with which technology changes, technical failures, information security or cybersecurity incidents, consumer privacy and data protection concerns, ethical concerns, changes in state tax regimes, and government regulation of internet activities.

Geographic Expansion

We have a global footprint through which we sold and distributed our broad product portfolio in more than 165 countries across our four regions in 2022. In recent years, we have grown, and we intend to continue to grow, our business by expanding our global operations. Given our global scale, including in the United States and China, we are well positioned to work with our retail partners to meet increasing consumer health demands and develop new product adjacencies for evolving consumer needs globally. In addition to prioritizing expansion in our existing markets where we have identified the most attractive opportunities, we also intend to invest in other sizable, growing, and underpenetrated geographic markets throughout the world.

We expect competition to intensify in the geographic markets where we plan to expand our operations. Local companies based in markets outside the United States may have substantial competitive advantages because of their greater understanding of, and focus on, those local markets. Meanwhile, some of our multinational competitors may develop and grow in certain geographic markets more quickly than we will. Our ability to successfully expand our business globally will depend on a number of factors, including our marketing efforts and consumer acceptance of our products.

Increased Competition

Our products are sold in a highly competitive global marketplace, which, in recent years, has experienced increased retail trade concentration, the emergence of retail buying alliances, the rapid growth of e-commerce and the integration of traditional and digital operations at key retail trade customers. For each of the fiscal three months ended April 2, 2023 and April 3, 2022, one of our customers accounted for approximately 14% of our total Net sales, and our top ten customers represented approximately 42% and 43% of our total Net sales, respectively. Nonetheless, as a result of these trends, we are increasingly dependent on certain large-format retail trade customers in each of our business segments and some of these retail trade customers have significant bargaining strength.

We face substantial competition in each of our business segments and product lines and across all geographic markets in which we operate. We compete with companies of all sizes on the basis of cost-effectiveness, product performance, real or perceived product advantages, intellectual property rights, advertising, and promotional activities, brand recognition and loyalty, consumer convenience, pricing, and geographic reach. Our competitors include multinational corporations, smaller companies that often operate on a regional basis, retailers’ private-label brands, and generic non-branded products. Many of these competitors have benefited from the substantial growth in e-commerce and focus extensively on DTC or other non-traditional, digital business models. Competitive factors impacting our business also include market dynamics and evolving consumer preferences, brand image, a broad product portfolio, new product innovations and product development, pricing that is attractive to consumers, cost inputs, and the ability to attract and retain talented employees. We expect that the continued attractiveness of the categories and geographic markets in which we operate will encourage the entry of new competitors of all sizes, which could increase these and other competitive pressures in the future.

Sourcing, Manufacturing and Supply Chain Management

Our ability to meet the needs of our consumers and customers depends on the proper functioning of our manufacturing and supplier operations. Our manufacturing operations require the timely delivery of sufficient amounts of complex, high-quality components and materials. We have built our supply chain network to deploy resources across the globe where they are most needed. Our extensive distribution network and sales organization enable us to establish strategic partnerships with key suppliers and retailers across multiple markets and channels, where we further leverage our scale to drive flexible manufacturing capacity and supply chain optimization. We believe this approach builds and supports our resilience across economic cycles and allows us to prioritize or expand our geographic focus based on our strategic priorities. Nonetheless, we have in the past faced, and may in the future face, unanticipated interruptions and delays in manufacturing through our internal and external supply chain. For example, since 2021 we have experienced, and we continue to experience, higher than expected inflation, including escalating transportation, commodity and other supply-chain costs and disruptions that have adversely affected, and continue to adversely affect, our results of operations. Manufacturing or supplier disruptions could result in product shortages, declining sales, reputational damage or significant costs.

Supply Chain Optimization Initiatives

Since 2019, we have taken significant steps to meet consumer demand and mitigate supply chain constraints. We have redesigned our manufacturing and distribution network, optimizing both in-house and external manufacturing and distribution footprints to improve lead time and reliability across the globe. We selectively invested in specific technologies and expanded our capacity in different geographic markets with the intent to increase competitiveness by improving cost, speed, compliance, and customer service. A series of different initiatives were deployed including (1) improving inter-region agility through end-to-end collaboration and shipping optimization, (2) distribution network redesign to manage the surge of e-commerce volume and mitigate constraints, (3) product offering optimization that eliminated a significant number of small external manufacturers and discontinued unprofitable SKUs, and (4) investments in technology, automation, and digital capabilities that modernized our supply chain operations and enabled inventory optimization, which improved profitability, quality control, and shipping container loading and utilization while reducing consumer complaints. As a result, our historical results of operations reflect savings delivered through these end-to-end supply chain optimization initiatives.

Macroeconomic Trends

Macroeconomic factors affect consumer spending patterns and thereby our results of operations. These factors include general economic conditions, inflation, consumer confidence, employment rates, business conditions, the availability of credit, interest rates, tax rates, and fuel and energy costs. Factors that impact consumer discretionary spending, which remains volatile globally, continue to create a complex and challenging retail environment for us and our third-party partners. We intend to continue to evaluate and adjust our operating strategies and cost management opportunities to help mitigate any impacts on our

results of operations resulting from broader macroeconomic conditions and policy changes, while remaining focused on the long-term growth of our business.

Foreign Currency Exposure

We report our combined financial results in U.S. dollars but have significant non-U.S. operations. A large portion of our business is conducted in currencies other than U.S. dollars, and generally the applicable local currency is our functional currency in that locality. As a result, we face foreign currency exposure on the translation into U.S. dollars of our results of operations in numerous jurisdictions primarily in the European Union, the United Kingdom, Japan, China, Canada, Brazil, and India. In addition, as we continue to expand our global operations, our exposure to foreign currency risk could become more significant, particularly if the U.S. Dollar strengthens in the future.

Where possible, we manage foreign currency exposure through a variety of methods. We may adopt natural hedging strategies whereby favorable and unfavorable foreign currency impacts to our foreign currency-denominated operating expenses are mitigated to a certain extent by the natural, opposite impact on our foreign currency-denominated Net sales. During 2022, in anticipation of operating as a standalone entity, we started to use derivative financial instruments to mitigate our foreign currency exposure and not for trading or speculative purposes. For example, we hedged a portion of forecasted foreign currency revenue and forecasted inventory purchases. Nonetheless, it is not practical for us to mitigate all of our foreign currency exposure, nor are we able to accurately predict the possible impact of future foreign currency exchange rate fluctuations on our results of operations, due to our constantly changing exposure to various foreign currencies, difficulty in predicting fluctuations in foreign currency exchange rates relative to the U.S. Dollar, and the significant number of foreign currencies involved.

Acquisitions and Divestitures

We actively refine our portfolio through acquisitions towards high growth, high margin businesses as well as divestitures of assets that we do not believe are well integrated into our product portfolio and strategic direction. We have demonstrated an ability to successfully integrate and scale acquired businesses to further build upon our market leadership across our product portfolio. We did not complete any significant acquisitions or divestitures during the fiscal three months ended April 2, 2023 and April 3, 2022.

We intend to continue to pursue a disciplined and prudent approach to acquisitions and partnership opportunities that accelerate growth within our business. We believe our strong balance sheet will allow us to strategically make acquisitions and divestitures while maintaining our disciplined approach to capital allocation. However, the pursuit of acquisitions and divestitures of businesses, brands, assets, and technologies involves numerous potential risks.

Impacts of the COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. We have assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of the COVID-19 pandemic.

Our Net sales in our Self Care segment and within certain product categories in our Essential Health segment were accelerated by changes in consumer behavior during the COVID-19 pandemic, which helped to offset the adverse impact on our Net sales from the remainder of the business, primarily Skin Health and Beauty products and the Baby Care and Women’s Health products within our Essential Health segment, due to lockdown-driven lost usage occasions, including the inability of consumers to purchase our products due to financial hardship, government actions imposing travel or movement restrictions, shifts in demand and consumption away from more discretionary or higher-priced products to lower-priced products and consumer pantry-loading activity. However, as governments began lifting restrictions, this negative trend began to level off and stabilize in the fourth quarter of 2021 while momentum in Self Care and Essential Health products continued due to a rising focus on consumer health. The extent to which the COVID-19 pandemic will continue to impact our business and financial results will depend on many factors that cannot be predicted with certainty, including the duration of the outbreak and the impact of new variants. Any resurgence in the spread of COVID-19 or its variants could result in the imposition of new governmental directives and the implementation of prolonged restrictive measures that could further disrupt our operations.

We have considered various internal and external factors in assessing the potential impact of the COVID-19 pandemic on our business and financial results based upon information available at this time, as follows:

• Operating Model. We have an agile business model across the consumer health industry with flexibility designed into our manufacturing, research and development, and commercial capabilities.

• Supply Chain. We continue to leverage our global manufacturing footprint while closely monitoring and maintaining critical inventory at major distribution centers away from high-risk areas to ensure adequate and effective distribution.

• Business Continuity. The robust, active business continuity plans across our network were instrumental in preparing us for the COVID-19 pandemic and enabling us to continue to meet the majority of consumer needs without significant interruption.

• Workforce. We put procedures in place to protect our essential workforce in manufacturing, distribution, commercial, and research operations while ensuring appropriate remote working protocols were established for other employees.

*•*Liquidity. We expect to have an investment grade credit rating as we seek access to the financial capital markets in the foreseeable future.

*•*Legislation. We will continue to assess and evaluate the ongoing global legislative efforts to combat the impact of the COVID-19 pandemic on the categories and geographic markets in which we participate. Currently, the laws and regulations enacted in response to the COVID-19 pandemic are not expected to have a material impact on our operations.

The impact of the COVID-19 pandemic on our results of operations, including changes in our segment net sales and segment profits, is discussed in further detail below. See “—Results of Operations”.

Legal Proceedings

We and/or certain of our subsidiaries are involved in various lawsuits and claims relating to intellectual property, commercial contracts, product liability, labeling, marketing, advertising, pricing, antitrust and trade regulation, labor and employment, indemnification, data privacy and security, environmental, health and safety, and tax matters, governmental investigations, and other legal proceedings that arise from time to time in the ordinary course of our business. See Note 13, “Commitments and Contingencies,” to our Condensed Combined Financial Statements included herein for additional information regarding our current legal proceedings.

A significant number of personal injury claims alleging that talc causes cancer were made against J&J and certain of its affiliates arising out of the use of body powders containing talc, primarily Johnson’s Baby Powder. These personal injury suits were filed primarily in state and federal courts in the United States and in Canada.

Pursuant to the Separation Agreement, J&J has retained all liabilities on account of or relating to harm arising out of, based upon or resulting from, directly or indirectly, the presence of or exposure to talc or talc-containing products sold by J&J or its affiliates in the United States and Canada (the “Talc-Related Liabilities”) and, as a result, has agreed to indemnify us for the Talc-Related Liabilities and any costs associated with resolving such claims. We will, however, remain responsible for all liabilities on account of or relating to harm arising out of, based upon or resulting from, directly or indirectly, the presence of or exposure to talc or talc-containing products sold outside the United States or Canada.

Other Information

Baby Powder Transition

On August 11, 2022, we announced the commercial decision to transition to an all cornstarch-based baby powder portfolio. As a result of this transition, talc-based Johnson’s Baby Powder will be discontinued globally in 2023. Talc-based Johnson’s Baby Powder was previously discontinued during 2020 in certain markets including the United States and Canada. We do not expect the impact of this change to be material.

Russia-Ukraine War

Although the long-term implications of the ongoing military conflict between Russia and Ukraine (the “Russia-Ukraine War”) are difficult to predict at this time, the financial impact of the conflict to us during the fiscal three months ended April 2, 2023 and April 3, 2022 was not material. For both the fiscal three months ended April 2, 2023 and April 3, 2022, our Ukrainian

business represented 0.1% of our Net sales. As of April 2, 2023 and January 1, 2023, our Ukrainian business represented 0.1% of our net assets. For the fiscal three months ended April 2, 2023 and April 3, 2022, our Russian business represented 1.2% and 1.4% of our Net sales, respectively. As of April 2, 2023 and January 1, 2023, our Russian business represented 0.2% and 0.4% of our assets, respectively.

In the fiscal three months ended April 3, 2022, we suspended supply of all of our products into Russia other than our OTC medicines within our Self Care segment, which we continued to supply through the fiscal three months ended April 2, 2023. We also suspended all advertising in Russia, all clinical trials in Russia and any additional investment in Russia. We will continue to monitor the geopolitical situation in Russia and to evaluate our activities and future operations in Russia.

Deferred Markets

In order to ensure compliance with applicable law, to obtain necessary governmental approvals and other consents and for other business reasons, we deferred the transfer of certain assets and liabilities of businesses in certain non-U.S. jurisdictions, including China, Malaysia, and Russia, until after the completion of the Kenvue IPO. The Condensed Combined Financial Statements included herein include businesses in all jurisdictions in which we will operate following the completion of the Separation, including any Deferred Local Business (as defined in “Certain Relationships and Related Person Transactions—Agreements to be Entered into in Connection with the Separation—Separation Agreement—Deferred Markets” in the IPO Prospectus). For more information regarding Deferred Local Businesses, see “Risk Factors—Risks Related to the Separation and the Distribution—The transfer of certain assets and liabilities from Johnson & Johnson to us contemplated by the Separation will not be complete prior to the completion of this offering” and “Certain Relationships and Related Person Transactions—Agreements to be Entered into in Connection with the Separation—Separation Agreement—Deferred Markets” in the IPO Prospectus.

Provision For Taxes

On December 15, 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development Pillar Two Framework that was supported by over 130 countries worldwide. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. A significant number of other countries are also implementing similar legislation. We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries, including those within the European Union. The global implementation of the minimum tax could have a material impact on our combined financial statements in future periods.

Results of Operations

Our results for the fiscal three months ended April 2, 2023 and April 3, 2022 were as follows:

						Fiscal Three Months Ended
						April 2, 2023						April 3, 2022						Change 2022 to 2023
(Dollars in Millions)																		Amount						Percent
Net sales						$	3,852					$	3,590					$	262					7.3		%
Cost of sales						1,727						1,634						93						5.7		%
Gross profit						$	2,125					$	1,956					$	169					8.6		%
Selling, general, and administrative expenses						1,502						1,350						152						11.3		%
Other income, net, operating						(17)						(5)						(12)						*
Operating income						$	640					$	611					$	29					4.7		%
Other expense (income), net						31						(1)						32						*
Income before taxes						$	609					$	612					$	(3)					(0.5)		%
Provision for taxes						279						84						195						*
Net income						$	330					$	528					$	(198)					(37.5)		%

• Calculation not meaningful (>100%).

Fiscal Three Months Ended April 2, 2023 Compared with Fiscal Three Months Ended April 3, 2022

Net Sales

Net sales were $3.9 billion and $3.6 billion for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively, an increase of $262 million, or 7.3%. Excluding the impact of unfavorable changes in currency rates of $141 million, organic net sales increased by $403 million as compared to the prior year, primarily attributable to (1) price actions, (2) increased demand for Cough, Cold, and Allergy products due to greater instances of respiratory illness, primarily in Europe, (3) one-time supply replenishment, and (4) an easing of supply chain constraints.

Cost of Sales

Cost of sales were $1.7 billion and $1.6 billion for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively, an increase of $93 million, or 5.7% primarily due to organic growth in Net sales, as noted above. In addition, Cost of sales was further impacted by higher costs of key ingredients and freight and packaging materials, due to commodity inflation. The increase was partially offset by the realization of benefits associated with our supply chain optimization initiatives and favorable currency impacts of $66 million. Cost of sales as a percentage of Net sales decreased 70 basis points to 44.8% as compared to the prior year, due to organic growth in Net sales and the realization of benefits associated with our supply chain optimization initiatives.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) were $1.5 billion and $1.4 billion for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively, an increase of $152 million, or 11.3%. SG&A as a percentage of Net sales increased 140 basis points to 39.0%, as compared to the prior year, primarily attributable to higher costs in enterprise functions as we prepared to operate on a standalone basis, higher advertising and promotion expenses, higher selling and distribution costs, and an increase in non-recurring Separation-related costs of $88 million. These cost increases were partially offset by favorable currency impacts of $44 million.

Other Income, Net, Operating

Other income, net, operating was $17 million and $5 million for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively, an increase of $12 million. The increase was primarily driven by the gain recognized on the sale of a manufacturing facility in Lancaster, Pennsylvania of $9 million.

Other Expense (Income), Net

Other expense, net, was $31 million compared to Other income, net of $1 million for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively, an increase in expense of $32 million, primarily driven by higher foreign currency losses and losses on equity securities.

Provision For Taxes

Provision for taxes was $279 million and $84 million for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively, an increase income tax expense of $195 million. As a result of the issuance of debt in the first quarter of 2023, the resulting increase in annual interest reduced our capacity to utilize foreign tax credits against U.S. foreign source income. As a result, we recorded a valuation allowance against a deferred tax asset related to future foreign tax credit benefits thus increasing the reported tax expense in the first quarter of 2023 as compared to the first quarter of 2022.

Fiscal Three Months Ended April 2, 2023 Compared with Fiscal Three Months Ended April 3, 2022 – Segment Results

Segment profit is based on Operating income excluding depreciation and amortization, non-recurring Separation-related costs, restructuring expense, Other income, net, operating, and unallocated general corporate administrative expenses (referred to herein as “Adjusted operating income”) as management excludes these items in assessing segment financial performance. General corporate/unallocated expenses, which includes treasury and legal operations and certain expenses, gains and losses related to the overall management of our company, are not allocated to the segments. In assessing segment performance and managing operations, management does not review segment assets.

For the first quarter of 2023, we adjusted the allocation for certain intangible asset amortization costs within Cost of sales to align with segment financial results as measured by us, including the CODM. Accordingly, we updated our segment disclosures to reflect the updated presentation in all prior periods. Total Adjusted operating income did not change as a result of this update.

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

The following table presents segment Adjusted operating income and the period-over-period changes in segment Adjusted operating income for the fiscal three months ended April 2, 2023 and April 3, 2022. See Note 14, “Segments of Business,” to our Condensed Combined Financial Statements included herein for further details regarding segment net sales and segment Adjusted operating income.

			Fiscal Three Months Ended
			April 2, 2023												April 3, 2022												Change 2022 to 2023
(Dollars in Millions)			Amount						Percent						Amount						Percent						Amount						Percent
Segment Net Sales
Self Care			$	1,640					42.6		%				$	1,465					40.8		%				$	175					11.9		%
Skin Health and Beauty			1,111						28.8		%				1,012						28.2		%				99						9.8		%
Essential Health			1,101						28.6		%				1,113						31.0		%				(12)						(1.1)		%
Total segment net sales			$	3,852					100.0		%				$	3,590					100.0		%				$	262					7.3		%
Income before taxes			$	609											$	612
Interest expense			1												—
Other expense (income), net			30												(1)
Total operating income			$	640											$	611
Reconciliation to Adjusted operating income:
Depreciation and amortization			152												165
Separation-related costs			98												10
Restructuring(1)			—												14
Other income, net, operating			(17)												(5)
General corporate/unallocated expenses			69												52
Total Adjusted operating income			$	942											$	847
Segment Adjusted operating income
Self Care			$	582											$	474											$	108					22.8		%
Skin Health and Beauty			150												127												23						18.1		%
Essential Health			210												246												(36)						(14.6)		%
Total Adjusted operating income			$	942											$	847											$	95					11.2		%

(1) Exclusive of the restructuring expense included in Other income, net, operating.

• Calculation not meaningful (>100%)

Organic Growth

We assess our Net sales performance by measuring Organic growth, a non-GAAP financial measure, which measures the period-over-period change in Net sales excluding the impact of changes in foreign currency exchange rates and the impact of acquisitions and divestitures. Management believes Organic growth provides investors with additional, supplemental information that they may find useful in assessing our results of operations by excluding the impact of certain items that we believe do not directly reflect our underlying operations.

The following tables present a reconciliation of the change in U.S. GAAP Net sales to Organic growth for the fiscal three months ended April 2, 2023 compared to the fiscal three months ended April 3, 2022:

			Fiscal Three Months Ended April 2, 2023 vs April 3, 2022**(1)**
			Reported Net sales change												Impact of foreign currency												Organic growth
(Dollars in Millions)			Amount						Percent						Amount												Amount						Percent
Self Care			$	175					11.9		%				$	(50)											$	225					15.3		%
Skin Health and Beauty			99						9.8		%				(34)												133						13.2		%
Essential Health			(12)						(1.1)		%				(57)												45						4.0		%
Total			$	262					7.3		%				$	(141)											$	403					11.2		%

(1) Acquisitions and divestitures did not impact Net sales for the fiscal three months ended April 2, 2023 or April 3, 2022.

The following tables present a reconciliation of the change in U.S. GAAP Net sales to Organic growth for the fiscal three months ended April 2, 2023 compared to the fiscal three months ended April 3, 2022:

			Fiscal Three Months Ended April 2, 2023 vs April 3, 2022**(1)**
			Reported Net sales change						Impact of foreign currency												Organic growth
												Price						Volume
Self Care			11.9		%				(3.4)		%										8.2		%				7.1		%
Skin Health and Beauty			9.8		%				(3.4)		%										8.9		%				4.3		%
Essential Health			(1.1)		%				(5.1)		%										9.4		%				(5.4)		%
Total			7.3		%				(3.9)		%										8.7		%				2.5		%

(1) Acquisitions and divestitures did not impact Net sales for the fiscal three months ended April 2, 2023 or April 3, 2022.

Self Care Segment

Self Care Segment Net Sales

The Self Care segment net sales were $1.6 billion and $1.5 billion for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively, an increase of $175 million, or 11.9%. Excluding the unfavorable impact of foreign currency translation, organic net sales increased by $225 million or 15.3% primarily driven by price actions of 8.2% and volume related increases of 7.1% driven by increased demand for Cough, Cold, and Allergy products due to greater instances of respiratory illness, primarily in Europe, and one-time supply replenishment, primarily in the United States related to low inventory levels at the start of the year due to demand associated with greater instances of respiratory illness at the end of the prior year.

Self Care Segment Adjusted Operating Income

The Self Care segment Adjusted operating income increased by $108 million, or 22.8% to $582 million for the fiscal three months ended April 2, 2023, primarily driven by price actions, portfolio optimization, and favorable product mix, partially offset by higher costs of raw materials.

Skin Health and Beauty Segment

Skin Health and Beauty Segment Net Sales

The Skin Health and Beauty segment net sales were $1.1 billion and $1.0 billion for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively, an increase of $99 million, or 9.8%. Excluding the unfavorable impact of foreign currency translation, organic net sales increased by $133 million, or 13.2%, primarily driven by price actions of 8.9% and volume related increases of 4.3% driven by strong e-commerce and club channel performance primarily in the United States driven by new product innovations, an easing of supply chain constraints, one-time supply replenishment, and sun season pipeline fill.

Skin Health and Beauty Segment Adjusted Operating Income

The Skin Health and Beauty segment Adjusted operating income increased by $23 million, or 18.1% to $150 million driven by price actions as discussed above, optimization of marketing spend, and favorable product mix, partially offset by the impact of higher costs of raw materials.

Essential Health Segment

Essential Health Segment Net Sales

The Essential Health segment net sales were $1.1 billion for both the fiscal three months ended April 2, 2023 and April 3, 2022 with a decrease of $12 million, or 1.1%. Excluding the unfavorable impact of foreign currency translation, organic net sales increased by $45 million, or 4.0%, primarily driven by price actions of 9.4%, most notably in Baby Care, partially offset by volume declines of 5.4%. Overall volume declines were driven primarily by our supply suspension of certain personal care products in Russia since March 2022 and lapping prior year increased demand outside of the United States, partially offset by one-time supply replenishment during the first quarter of 2023.

Essential Health Segment Adjusted Operating Income

The Essential Health segment Adjusted operating income decreased by $36 million, or 14.6% to $210 million. The decrease was primarily attributable to higher costs of raw materials, partially offset by price actions and favorable product mix.

Supplemental—Non-GAAP Financial Information

We had previously provided preliminary estimates and ranges of certain non-GAAP financial measures, including Adjusted gross profit, Adjusted operating income, Adjusted EBITDA, and Adjusted net income, in our IPO Prospectus because our closing procedures for the fiscal three months ended April 2, 2023 were not yet complete. Set forth below are the results of such unaudited financial and other information for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively.

There are limitations to the use of the non-GAAP financial measures presented herein. These non-GAAP financial measures were 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 we calculated such measures. Accordingly, our non-GAAP financial measures may not be comparable to such similarly titled non-GAAP financial measures used by other companies. We caution 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 non-GAAP financial measures as presented herein were prepared as if our operations had been conducted independently from the Parent, and therefore they include certain J&J 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 or are expected to be incurred, if we were to operate as a standalone company.

Adjusted Gross Profit

We define Adjusted gross profit, a non-GAAP financial measure, as U.S. GAAP gross profit adjusted for restructuring expense and amortization of intangible assets recorded as a component of Cost of sales on our Combined Statements of Operations. The reconciliation of gross profit, a U.S. GAAP measure, to Adjusted gross profit is presented below:

						Fiscal Three Months Ended
(Dollars in Millions)						April 2, 2023						April 3, 2022
Gross profit						$	2,125					$	1,956
Adjustments to components of Cost of sales:
Restructuring expense						—						5
Amortization of intangible assets						81						93
Adjusted gross profit						$	2,206					$	2,054

Adjusted Operating Income

We define Adjusted operating income, a non-GAAP financial measure, as U.S. GAAP operating income excluding depreciation and amortization, Separation-related costs, restructuring expense, other income, net, operating, and general corporate unallocated expenses that are not part of our measurement of segment performance. Management uses Adjusted operating income to assess segment financial performance.

For the first quarter of 2023, we adjusted the allocation for certain intangible asset amortization costs within Cost of Sales to align with segment financial results as measured by us, including the CODM. Accordingly, we updated our segment disclosures to reflect the updated presentation in all prior periods. Total Adjusted operating income did not change as a result of this update.

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

Adjusted EBITDA

We define EBITDA, a non-GAAP financial measure, as net income adjusted for interest, provision for taxes, and depreciation and amortization. We define Adjusted EBITDA, a non-GAAP financial measure, as EBITDA adjusted for Separation-related costs, restructuring expense, and unrealized gain on securities. Adjusted EBITDA is used to show our unleveraged, pre-tax operating results and reflects our financial performance based on operational factors. The reconciliation of net income, a U.S. GAAP measure, to Adjusted EBITDA is presented below:

						Fiscal Three Months Ended
(Dollars in Millions)						April 2, 2023						April 3, 2022
Net income						$	330					$	528
Interest						1						—
Provision for taxes						279						84
Depreciation and amortization						152						165
EBITDA						$	762					$	777
Adjustments:
Separation-related costs						98						10
Restructuring expense						—						14
Unrealized gain on securities						7						—
Adjusted EBITDA						$	867					$	801

Adjusted Net Income

We define Adjusted net income, a non-GAAP financial measure, as U.S. GAAP net income adjusted for Separation-related costs, restructuring expense, unrealized gain on securities, amortization of intangible assets and their related tax impacts.

Adjusted net income excludes the impact of items that may obscure trends in our underlying performance. Management uses Adjusted net income for strategic decision making, forecasting future results and evaluating current performance. The reconciliation of net income, a U.S. GAAP measure, to Adjusted net income is presented below:

						Fiscal Three Months Ended
(Dollars in Millions)						April 2, 2023						April 3, 2022
Net income						$	330					$	528
Adjustments:
Separation-related costs						98						10
Restructuring expense						—						14
Unrealized gain on securities						7						—
Amortization of intangible assets						81						93
Tax Adjustments:
Tax impact on special item adjustments						114						(32)
Adjusted net income						$	630					$	613

Liquidity and Capital Resources

Historically, we have generated annual cash flow from operating activities. However, our working capital requirements and capital expenditures have historically been satisfied as part of the Parent’s corporate-wide cash management and centralized funding programs, and a substantial portion of our cash has been transferred to the Parent. This arrangement is not reflective of the way we would have financed our operations had we been a standalone public company during the periods presented.

The cash and cash equivalents held by the Parent at the corporate level are not specifically identifiable to us and, therefore, have not been reflected on our Condensed Combined Balance Sheets included herein. Cash and cash equivalents on the Condensed Combined Balance Sheets represent balances in accounts specifically identifiable to the Consumer Health Business. The Parent’s third-party long-term debt and the related interest expense have not been allocated to us for any of the periods presented as we were not the legal obligor of such debt.

Cash Flows

Summarized cash flow information for the fiscal three months ended April 2, 2023 and April 3, 2022 were as follows:

						Fiscal Three Months Ended												Change
(Dollars in Millions)						April 2, 2023						April 3, 2022						Amount						Percent
Net income						$	330					$	528					$	(198)					(37.5)		%
Net changes in assets and liabilities						$	118					$	(408)					$	526					*
Net cash flows from operating activities						$	802					$	338					$	464					*
Net cash flows used in investing activities						$	(41)					$	(42)					$	1					(2.4)		%
Net cash flows from (used in) financing activities						$	7,388					$	(210)					$	7,598					*

*Calculation not meaningful.

Operating Activities

Net cash flows from operating activities were $802 million and $338 million for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively, an increase of $464 million. The increase was primarily attributable to changes in working capital balances driven by increases in accounts payable and accrued liabilities due to the timing of payments and a decrease in inventories compared to the prior year period due to increased demand and the rebuilding of inventory levels by customers following supply shortages in the prior year.

Investing Activities

Net cash flows used in investing activities were $41 million and $42 million for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively. Cash used by investing activities in both the fiscal three months ended April 2, 2023 and April 3, 2022 was primarily driven by purchases of property, plant, and equipment.

Financing Activities

Net cash flows from (used in) financing activities were $7.4 billion and $(210) million for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively. Cash flows from financing activities for the fiscal three months ended April 2, 2023 primarily reflect $7.7 billion of proceeds from the issuance of senior unsecured notes (as defined below), net of issuance costs. In addition, we recognized Net transfer to the Parent of $286 million and $216 million for the fiscal three months ended April 2, 2023 and April 3, 2022, respectively. Net transfers to the Parent were driven by cash pooling and general financing activities, indirect corporate cost allocations from the Parent, and taxes deemed settled with the Parent. For further details regarding Net transfer to the Parent, see Note 8, “Related Parties,” to our Condensed Combined Financial Statements included herein.

Sources of Liquidity

In connection with the Separation, our capital structure and sources of liquidity have changed from our historical capital structure because of our issuances of shares, the Kenvue IPO, and the Debt Financing Transactions. We will no longer participate in the Parent’s corporate-wide cash management and centralized funding programs. Our ability to fund our operating needs will depend on our ability to continue to generate positive cash flow from operations, and on our ability to obtain debt financing on acceptable terms or to issue additional equity or equity-linked securities. Based upon our history of generating positive cash flows, we believe our existing cash and cash generated from operations will be sufficient to service our current obligations for at least the next 12 months. Management believes that our cash balances and funds provided by operating activities, along with expected borrowing capacity and access to capital markets, taken as a whole, provide adequate liquidity to meet all of our current and long-term obligations when due, including third-party debt that we incurred in connection with the Separation, adequate liquidity to fund capital expenditures, and flexibility to meet investment opportunities that may arise. However, we cannot assure you that we will be able to obtain additional debt or equity financing on acceptable terms in the future.

On March 22, 2023, we issued eight series of senior unsecured notes (the “Senior Notes”) in an aggregate principal amount of $7.75 billion in a private placement. The net proceeds to us from the Senior Notes offering was $7.7 billion after deductions of discounts and issuance costs of $75 million. This amount is reflected as Restricted cash on our Condensed Combined Balance Sheets. The unamortized debt issuance costs related to the Senior Notes as of April 2, 2023 were approximately $75 million. The interest payments are due on March 22 and September 22 of each year, commencing September 22, 2023.

Our Senior Notes are governed by an indenture and supplemental indenture between us and a trustee (collectively, the “indenture”). The indenture contains certain covenants, including limitations on us and certain of our subsidiaries’ ability to incur liens or engage in sale leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which, the Senior Notes may be declared immediately due and payable.

On March 6, 2023, we entered into a credit agreement providing for a five-year senior unsecured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $4.0 billion to be made available in U.S. dollars and Euros. As such, no issuance costs/commitment fees are expected. As of April 2, 2023, we had no outstanding balances under its Revolving Credit Facility.

On March 3, 2023, we entered into a commercial paper program (the “Commercial Paper Program”). Our Board of Directors has authorized the issuance of up to $4.0 billion in aggregate principal amount of commercial paper under the Commercial Paper Program. Any such issuance will mature within 364 days from date of issue. The Commercial Paper Program contains representations and warranties, covenants and default that are customary for this type of financing. The commercial paper notes issued under the Commercial Paper Program are unsecured notes ranking at least pari passu with all of our other senior unsecured indebtedness. As of April 2, 2023, we had no outstanding balances under our Commercial Paper Program. Subsequent to April 2, 2023 and prior to the Kenvue IPO, we issued $1.25 billion under the program, which, collectively with the Senior Notes, are referred to as the “Debt Financing Transactions”.

We accrued interest expense of $11 million for the three months ended April 2, 2023 related to our Senior Notes included in Other expense (income), net and Accrued liabilities on our Condensed Combined Statements of Operations. We recognized

$10 million of interest income earned on the money market accounts the Senior Notes proceeds were held in and amortization of the gain on the settlement of interest rate swaps related to the debt instruments. See Note 12, “Fair Value Measurements,” to our Condensed Combined Statements of Operations included herein.

As of April 2, 2023, we were in compliance with all financial covenants and no default or event of default has occurred.

We expect to utilize our cash flows to continue to invest in our brands, digital capabilities, talent and growth strategies, to repay our indebtedness over time and for general corporate purposes.

Future Cash Requirements

On May 8, 2023, as partial consideration for the Consumer Health Business Transfer, we paid $13.2 billion to J&J from the net proceeds received from the sale of the common shares in the Kenvue IPO and net proceeds received from the Debt Financing Transactions.

We expect our future cash requirements will relate to working capital, capital expenditures, restructuring and integration, benefit obligations, interest expense and debt service obligations, litigation costs and the return of capital to shareholders, including through the payment of any dividend. In addition, we may use cash to enter into business development transactions, such as licensing arrangements or strategic acquisitions.

In addition to our working capital requirements, as of April 2, 2023, we expect our primary cash requirements for 2023 to include capital expenditures. In addition to lease payments (see Note 1, “Description of the Company and Summary of Significant Accounting Policies,” to our audited combined financial statements included in our IPO Prospectus for further details), we have made payments of $55 million for property, plant, and equipment for fiscal three months ended April 2, 2023.

Future Litigation

In the ordinary course of business, we are involved in litigation, claims, government inquiries, investigations, charges, and proceedings. See Note 13, “Commitments and Contingencies,” to our Condensed Combined Financial Statements included herein for further details regarding certain matters that are currently pending. Our ability to successfully resolve pending and future litigation may adversely impact our financial condition, results of operations, or cash flows.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements (as defined under the rules and regulations of the SEC) or any relationships with unconsolidated entities that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, net sales or expenses, results of operations, liquidity, cash requirements, or capital resources.